Wednesday, 21 May 2014


In the recent past the Income Tax Department has been concentrating on collecting information with regard to expenses on marriage as well as other expenses by utilising power under section133A of the Income Tax Act. It has been a matter of controversy between the I.T.Department and the person incurring the expenses as to quantum of expenses actually incurred. It becomes yet more difficult as such inquiries may lead to the investigation about the source of the money spent. In practical life one must appreciate that the department's suspicion is not always unfounded.

Regarding the marriage expenses, generally the following information is required by the I.T. authorities under section 133A(5) of the I.T. Act -
Income Tax file number of parents of bride/groom and other family members;
Name and address of the bride/groom;
Name and address of the bride/groom's father;
Occupation of the bride/groom as well as the father's;
Address of the place where the marriage reception and other functions prior to and subsequent to marriage were hosted indicting the rent paid for hiring the said premises and number of invitees for the various functions;
Names and address of the decorators engaged for decorating the said premises along with the charges paid to them for executing the said job;
Names and address of the floral decorators engaged for decorating the premises for the function as well as the service charge paid to them for executing the said job;
Names and address of the caterers engaged to serve food and refreshments to the guests invited in marriage reception and the cost incurred;
Name and address of the printer who printed the wedding cards for the occasion and the cost incurred;
Name and address of the car rental agency engaged for the wedding function. The number of cars hired, the number of days for which the cars were hired, the rate charged for hiring cars and the total amount paid for hiring such cars ;
The amount incurred for pre-marriage expenses indicating the heads of such expenses. Particulars of presents made to the newly weds both on the occasion of engagement as well as wedding should be indicated;
Details of expenses incurred on account of Furniture, Jewellery, Bridal make-up, other gifts/presentations, audio-video graphy, engagement ceremony and other customary expenditure. (Please enclose the copy of bills in support of your submissions);
Copy of bank statements reflecting payments or withdrawal for marriage expenses;
Copy of last I.T. return filed along with Balance Sheet and Profit and Loss Account and copy of last W.T. Return along with copy of computation and xerox of Valuation Report of Jewellery etc.
It is advisable that :-
The assessee should make proper compliance on getting any notice or letter under section 133A(5) regarding marriage expenses. Non-compliance may cause suspicion in the mind of officials and they may take adverse actions.
In case, the assessee is unable to furnish the required details within the time allowed by the officer, application should be made in writing seeking time. But while making reply, all required information with supporting documents (to the extent possible) should be furnished. It may be noted that I.T. authorities are also empowered to record statement of the assessee or any other person regarding expenses on marriage or other functions, but such power can be exercised only after the performance of marriage or other function.
If expenses on marriage have been contributed by various family members or HUF, it should be properly mentioned.
In case any gifts of cash, jewellery or silver articles have been received by the bride/bridegroom, it should be mentioned and if possible certificates should be obtained from such relatives, who have made the gifts.
In case old jewellery has been remade and presented to the daughter or daughter-in-law, remaking bill should be taken.
It is also advisable to procure bills from caterers, florists, decorators etc. and such payments should preferably be made by cheques.
It may be noted that I.T. authorities are also empowered to record statement of the assessee or any other person regarding expenses on marriage or other functions, but such power can be exercised only after the performance of marriage or other function.
So far as marriage is concerned the expenses are generally incurred from HUF, by parents, brothers and to some extent might be contributed by the other family members.
It is advisable to transfer the assets or amounts gradually in favour of the daughter, instead of a huge sum at the time of marriage.
It would be relevant to keep in mind some important Court decisions with regard to the marriage expenses vis-a-vis the responsibilities of parents and the family.
Following the Supreme Court decision in Guramma Bharatar Chanbasappa Deshmukh v. Mallappa Chenbasappa AIR 1964 SC 510, Calcutta High Court held in CGT v. Basant Kumar Aditya Vikram Birla [1982] 137 ITR 72 (SC) that the Hindu Law confers a right upon a daughter or sister in the family property at the time of partition. The Karta can set apart a reasonable amount for the marriage expenses having regard to the financial and other relevant circumstances of the family. By custom or convenience, such gifts are made at the time of marriage, but the right of the father or his representative to make such gift is not confined to the marriage occasion. It is a moral obligation and continues to subsist till it is discharged. Marriage is only a customary occasion for such a gift. But the obligation can be discharged at any time, either during the life time of the father or thereafter. It is not possible to lay down a hard and fast rule prescribing the quantitative aspect of such a gift as that would depend on the facts of each case and it can only be decided by Courts, regard being had to the overall position of the family estate, the number of daughters to be provided for, and other similar circumstances. The Court further held that the amount spent was not out of proportion or was not in excess of the estate of the family and that the expenditure incurred was the legitimate marriage expenditure, as such it was not a taxable gift.
Gift can be made from the HUF funds to the daughters of the family and in the process one can avoid or reduce income tax and wealth tax of the HUF.
Andhra Pradesh High Court held  in C.G.T. v. Ch. Chandrasekhara Reddy [1976] 105 ITR 849 (AP), a Hindu father, mother or guardian has a legal as well as  moral obligation to give his or her daughter in marriage to a suitable husband and is entitled to set apart  a portion of the family property for this purpose. Section 3(b)(ii) of the Hindu Adoptions and Maintenance Act, 1956  also provides for  payment of reasonable expenses incidental to marriage.  Thus under the general Hindu Law as well as Hindu Adoptions and Maintenance Act, 1956 the father is under obligation to give some property on the occasion of the daughter’s marriage.
The Madras High Court held in the case of  Palwanna Nadar v. Annamalai Ammal AIR [1957] Mad 322 that though a Karta of Joint Hindu Family does not have the  power to make gifts of immovable properties of the family but on the occasion of marriage of a daughter when she is parting from her parental home, gift of immovable property within reasonable limits can be made and the customary obligation can be fulfilled later not only by the father but also  by his widow or son taking over  the estate from father.
It would also be relevent to mention that as per section 5(i)(vii) of the Gift Tax Act, any gift made to a dependent male or female relative at the time of marriage to the extent of Rs. 1 lac is exempted from gift tax with effect from Assessment Year 1995-96.
Further, it may be noted that w.e.f. 1.10.1998, gift tax has been abolished.
In order to face any inquiry by the Income Tax department, it is advisable to keep proper account of all relevant expenses incurred in connection with marriage and to the extent possible, the payments should preferably be made by cheque to decorator, caterer and other suppliers. In case the expenses have been incurred by the HUF, parents, brothers or other family members, the same should be explained and while filing their I.T. return, these should be reflected in their respective accounts. If the person being married is also having his/her own I.T. file, some expenses on purchase of jewellery or other items may be incurred by him or her. A little care and planning may help in overcoming the hassles of extensive inquiries.

1 comment:

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