33. Widening scope of Income from other sources.
33.1 The provisions of section 56(2)(vii) of the Income-tax Act provided that any sum of money or any property which is received without consideration or for inadequate consideration (in excess of the specified limit of Rs. 50,000) by an individual or Hindu undivided family is chargeable to income-tax in the hands of the resident under the head “Income from other sources” subject to certain exceptions.
33.2 Further, receipt of certain shares by a firm or a company in which the public are not substantially interested is also chargeable to income-tax in case such receipt is in excess of Rs. 50,000 and is received without consideration or for inadequate consideration.
33.3 The definition of property for the purpose of this section includes immovable property, jewellery, shares, paintings, etc. These provisions were applicable only in case of individual or HUF and firm or company in certain cases. Therefore, receipt of sum of money or property without consideration or for inadequate consideration did not attract these provisions in cases of other assessees.
33.4 In order to prevent the practice of receiving the sum of money or the property without consideration or for inadequate consideration, a new clause (x) has been inserted in sub-section (2) of section 56 of the Income-tax Act so as to provide that receipt of the sum of money or the property by any person without consideration or for inadequate consideration in excess of Rs. 50,000 shall be chargeable to tax in the hands of the recipient under the head “Income from other sources”. The scope of exceptions has also been widened by including the receipt by certain trusts or institutions and receipt by way of certain transfers not regarded as transfer under section 47 of the Income-tax Act.
33.5 Consequential amendments have also been made section 49 of the Income-tax Act for determination of cost of acquisition and section 2(24) of the Income-tax Act to include sum of money or value of property referred to in section 56(2)(x) of the Income-tax Act in the definition of income.
33.6 Applicability: These amendments take effect from 1st April, 2017 and the said receipt of sum of money or property on or after 1st April, 2017 shall be chargeable to tax in accordance with the provisions of clause (x) of sub-section (2) of section 56 of the Income-tax Act.