No clubbing of interest-free loan given by 'Shahrukh Khan' to his wife from whom she had purchased assets
December 13, 2014[2014] 52 taxmann.com 252 (Mumbai - Trib.)
IT : 'Shahrukh Khan' gave interest-free loan to his wife, Gauri Khan, who in turn, purchased a residential house and jewellery from said loan amount. The department clubbed the value of loan amount in the net wealth of 'Shahrukh Khan'. Extending cash loan, to wife does not come within the definition of asset as provided under Section 2(ea) of the wealth tax Act, thus, it could not be said that there was a transfer of asset; the impugned loan amount was not includible in net wealth of assessee
Facts:
| (a) | Shahrukh Khan (assessee) gave interest free loan to his wife, Gauri Khan, who, in turn, purchased residential house and jewellery in her name from such loan amount. | |
| (b) | The Assessing Officer ('AO') opined that the loan given by the assessee to his wife would be treated as indirect "transfer of asset" within the meaning of section 4(1)(a)(i) of the Wealth Tax Act. Accordingly, he clubbed the value of loan amount in the net wealth of the assessee. | |
| (c) | On appeal, the CIT(A) affirmed the view of the AO against which the assessee had filed the instant appeal before the Tribunal. |
The Tribunal held in favour of assessee as under:
| (1) | Section 4(1)(a)(i) of the Wealth-tax Act, 1957 provides as under: | |
| In computing the net wealth of an individual, there shall be included, the value of any asset which are held by spouse of such individual to whom such assets have been transferred by the individual, directly or indirectly, otherwise than for adequate consideration or in connection with an agreement to live apart. | ||
| (2) | Extending cash loan, to wife does not come within the definition of asset as provided under Section 2(ea) of the wealth tax Act, thus, it could not be said that there was a transfer of asset as alleged by the department. | |
| (3) | The instant case was not of tax avoidance as in the instant case assessee gave the loan to his wife and the same was duly declared. There is distinction between the term "transfer" and "loan". In act of transfer, some legal interest is created in the transferee over the subject matter of transfer, whereas in case of lending, except a possessory interest, which may be momentary also, no other interest is created. | |
| (4) | In the instant case, the wife of assessee was having independent source of income, filing her return and even subsequently repaid part of the loan. Therefore, there was no "transfer of asset" or "colourable device", as assessee was not the owner of "any asset" which was transferred to the wife, rather a new property was purchased from a third party out of the interest free cash loan taken by the wife from her husband. | |
| (5) | The CIT(A) had opined that it amounts to indirect transfer of asset within meaning of Section 4(1)(a)(i) of the Wealth Tax Act. This angle of CIT(A) was on weak footing as in the instant case there was no transfer of asset rather interest-free loan was given by the assessee to his wife. | |
| (6) | Thus, the impugned loan amount was not includible in wealth of assessee. Accordingly the order of CIT(A) was to be reversed. |
Change laws, put cash curbs to check black money menace: SIT
By: PTI | New Delhi | December 13, 2014 11:40 am
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In suggestions with far-reaching implications, the SIT on black money has recommended amendment of laws to provide for confiscation of domestic property…
The SIT said that making tax evasion of Rs 50 lakh or more a 'predicate offence' would allow necessary action under the Prevention of Money Laundering Act. (Reuters)In suggestions with far-reaching implications, the SIT on black money has recommended amendment of laws to provide for confiscation of domestic property of those with illicit assets abroad and making tax evasion of over Rs 50 lakh a 'predicate offence' taking it as a serious crime.
Constituted on the orders of the Supreme Court, the SIT's second report to the court made 13 recommendations including making PAN mandatory for all cash and cheque transactions above Rs 1 lakh and imposing a threshold of Rs 10-15 lakh on holding and transporting cash to check unaccounted money to a large extent.
The Special Investigation Team (SIT) also flagged existence of black money in mining, ponzi scheme and iron ore exports as well as money couriers, called 'Angadias', dealing in huge sums of money outside the banking system.
The SIT said that making tax evasion of Rs 50 lakh or more a 'predicate offence' would allow necessary action under the Prevention of Money Laundering Act (PMLA).
"This would control holding of unaccounted money to a large extent. This would also control transfer of unaccounted cash from one destination to other, which at present is rampant, may be Angadias or by other means," it said.
The SIT has also suggested setting up of an institutional mechanism to examine mismatch between export/import data with corresponding data of other countries on a quarterly basis to unearth black money.
In case it is found that an individual or entity owns a property abroad in violation of the law, a provision should be made in the FEMA to provide for seizure and confiscation of property of equivalent value within the country.
It also recommended establishment of a central KYC (Know Your Customer) registry to deal with the problem of multiple identities of an individual in financial transactions.
In its suggestions to check black money menace, the SIT cited the examples of European countries to say that there should be a limit on transportation and holding of cash, as per portions of the report released by the government today.
Also, the shipping bills should include the international market price of goods and machinery sought to be exported. "This suggestion is under consideration and is likely to be implemented within short time," the SIT said.
Besides, there should be a dynamic interaction between different stakeholders like reporting entities, Financial Intelligence Unit and law enforcement authorities.
In cases where ED has attached a property and there are income tax dues to be collected, the SIT said that the former should be open to recovering dues from the attached property.
It also suggested setting up of a central KYC registry to weed out use of multiple identities for financial transactions.
SIT said that at least five additional chief judicial magistrates courts should be set up in Mumbai to deal with 5000 pending IT prosecution cases.
The SIT, which comprises former Supreme Court judges M B Shah and Arjit Pasayat, said Rs 4,479 crore was held in the Swiss bank accounts owned by Indians, who figured on the HSBC list that India had got from the French government.
Besides, the tax department and other agencies including Enforcement Directorate are probing cases involving unaccounted wealth totalling Rs 14,957.95 crore within India, the report said.
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