The Hindu Business Line : Gift from son need not be declared in returns

I am a senior citizen. My son gave a gift to me and my wife. Is it necessary to declare the same in his income-tax return? Is there any documentation that is required as this is a gift to parents? - Vinod Doshi

There would be no requirement to declare the gift received from your son in any of your income-tax returns.

Section 56 provides that any sum received without consideration for more than Rs 50,000 an annum would be treated as income in the hands of the recipient, but excludes sum received from relatives defined in the section.

There is no specific requirement for any documentation in this regard. It may be advisable to obtain a letter from your son that the amount is given to you and your wife as a gift and out of natural love and affection.

A charitable trust registered under section 12AA and section 80G of the Income Tax Act runs hospitals, schools and colleges. It also has a pharmacy where medicines are sold to patients coming to the hospital and separate books of account are maintained in respect of the pharmacy.

With the amendment in section 2(15), which defines the term charitable purpose, with effect from assessment year 2009-10, what will be the tax effect on the income earned by the pharmacy as this could be termed a commercial activity? - J. Rangaswamy

The amendment in section 2(15) provides that carrying on any activity in the nature of trade, commerce or business or any activity of rendering service in relation thereto for a consideration or fee shall not be a charitable purpose.

The main definition refers to charitable purpose as including relief to the poor, education, medical relief and the advancement of any other object of general public utility.

The proviso, however, removes from the ambit of charitable purpose activities that have been listed above only where the trust claims to be carrying on a charitable purpose by way of advancement of any other object of general public utility but not where the trust carries on charity by way of relief to the poor, education or medical relief.

In your case, all the activities of charity are in the nature of education and medical relief and therefore the proviso would have no application.

Hence there is exemption benefit under section 11.

In the block of assets concept, the opening written-down value as on April 1, 2007, for two machines A & B is Rs 40 lakh. During the year, machine C was purchased for Rs 15 lakh and used for less than 180 days. The value of machinery was Rs 55 lakh.

Machines A & B were sold for Rs 18 lakh and the written-down value before depreciation has become Rs 37 lakh. While depreciation on the asset C is to be calculated at 50 per cent of the applicable rate of depreciation, what will happen to the balance Rs 22 lakh for which the assets do not exist? Will Rs 22 lakh be carried in the books, and if so, for how long as the assets are not in the books? - H. Sankar

According to section 43(6), written-down value (WDV) of the block of assets is WDV at the beginning of the year added to cost of assets acquired during the previous year and subtracted from sale consideration/scrap/insurance compensation and depreciation.

In your case as you had two machinery at the beginning of the previous year whose WDV was Rs 40 lakh and acquired one during the previous year whose WDV was Rs 15 lakh, the written-down value for depreciation after the sale of the two machinery, which form part of the opening written-down value or Rs 18 lakh, would be Rs 37 lakh.

The WDV is now the value eligible for depreciation. Written-down value being Rs 37 lakh will qualify for depreciation and as the asset is put to use for less than 180 days, depreciation will be computed at 50 per cent of the applicable rate on Rs 37 lakh.

It is not as though depreciation is to be computed on only Rs 15 lakh while Rs 22 lakh would remain without being eligible for depreciation.

This would be the effect in your case by virtue of the provisions of section 43(6) read with section 32(1).

(Mail your queries to:taxtalk@thehindu.co.in or by post to `Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002)

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