Can you get back property that you have given as a gift to someone?
Q:A foreign company wants to set up a representative office in India which would be involved in market research and survey and collecting information for the benefit of the foreign principal. All expenses incurred in India by the representative office would be reimbursed by the parent company. Would GST be payable on the reimbursement made by the foreign company to its representative office?
A:Explanation 1 to section 8 of the IGST Act provides that where a person has an establishment in India and also has another establishment outside India, then such establishments will be treated as establishments belonging to distinct persons. Explanation 2 provides that when a person carries on business through a branch or agency or a representative office in any territory, such person would be treated as having an establishment in that territory. Therefore, the important point to note is that if a foreign enterprise has a branch or representative office in India and carries on a business in India through such branch or representative office, the foreign company will be treated as having an establishment in India.
If the representative office does not carry on any business, trading or commercial activity in India, then the question of these provisions being applicable will not arise and no GST will be payable. A view on similar facts has been expressed by the Authority for Advance Rulings which has stated that the head office and liaison office cannot be treated as establishments of distinct persons where the liaison office does not carry on any commercial activity in India and does not charge any commission or fees for providing such services. In such a case, reimbursement of actual expenses would not attract GST.
Q:I am a non-resident Indian for several years, based in the UAE. I have a property in Mumbai that I wish to sell as I am planning to migrate. Another NRI has approached me and agreed to buy the property. He said that he will pay me the full amount in foreign exchange. I want to know whether I can receive the full payment outside India. Would I be liable to pay capital gains tax in India and if so, how is it to be calculated?
A:As the property is situated in India, any capital gains would be liable to tax in India and the NRI buyer of the property would have to deduct tax at source at the rate of 20 per cent and only the net amount can be paid to you. You will have to compute the taxable capital gains. If you had purchased the property before April 1, 2001, you should find out the fair market value on that date and treat the same as the cost of the property. Such amount would be indexed by the fraction 280/100 to arrive at the indexed cost. Such cost would be reduced from the sale price to determine the taxable capital gains.
If you had purchased the property after April 1, 2001, the actual cost would be taken into account and this cost would be indexed after applying the notified Cost Inflation Index pertaining to the financial year in which you purchased the property. Instead of 100, such notified CII would be applied, and the CII of the year of sale which is 280 would be used for determining the indexed cost. For example, if you had purchased your property in June 2009 for which the CII was 148, the actual cost of the property would be increased by the fraction 280/148. The taxable capital gains would be determined by reducing from the sale price such indexed cost. Stamp duty payable to the Maharashtra Government may be shared with the buyer
Q:I have a house in Delhi where I wish to settle after returning from the Gulf. I have a son who recently got married. He wants me to gift half the property to him so that he can stay there with his wife. While I am inclined to do so, I am worried of the consequences in case he and I cannot get along when I return to India and start living there. Once I make a gift, can it be revoked?
A:A gift is transfer of property, which is irrevocable. In other words, once you gift half the property or even a part of it to your son, he would be the legal owner of such part and would have the right to stay there. To thereafter revoke the gift and ask him to vacate the house would be extremely difficult and will land you in costly litigation.
However, the Bombay High Court recently held that elderly parents can take back the share of the property gifted to the child if the child mistreats or harasses them. While taking this view, the Court relied on the provisions of the Maintenance & Welfare of Parents & Senior Citizens Act, 2007, which make it mandatory for children to maintain and look after their parents. In this case, the Court cancelled the gift deed in respect of the share of the property gifted to the son on the ground that he had mistreated and harassed his parents. To avoid litigation and going to Court, it would be best not to make a gift of part of the property during your lifetime.