"Firm is one of the entities liable to gift-tax under the Gift-tax Act. 1958". - Income Tax - 991/CBDT

INSTRUCTION NO. 991/CBDT Dated : July 29, 1976 Section(s) Referred: 2 Statute: Gift Tax Act, 1958 Attention is invited to paragraph 3 of Board's instructions published in Volume IV (Supplement I) of the C.B.R. Bulletin for the quarter ending June, 1958 clarifying that a "firm is one of the entities liable to gift-tax under the Gift-tax Act. 1958". The Board have come across a few instances which show that G.T. Officers have some doubts about the assessability of gifts made by firms. U/S 3 of the G.T. Act; gift-tax is chargeable in respect of gifts made by a "person". Section 2(xviii) of the Act defines the term 'person' to include a Hindu Undivided Family or a company or an association or a body of individuals or persons, whether incorporated or not. The term 'persons' as defined above is wide enough to include even a firm. It is also relevant in this connection to note certain other provisions of the G.T. Act from which it is clear that a firm was intended to be a taxable entity. For instance, section 14A of the G.T. Act regarding persons competent to sign the return of G.T. specifically provides that in the case of a firm the return shall be signed by the managing partner thereof or wherefor any unavoidable reason such managing partner is not able to sign and verify the return or where there is no managing partner as such, by any partner thereof, not being a minor. Section 21 of the G.T. Act contains special provisions regarding liability to pay the gift-tax in the case of a discontinued firm or association of persons. Similarly, section 40(2) of the Act contains a special provision for service of notice in the case of a firm.