- Anup P. Shah. 17 th June 2016 CTC-Allied Laws Study Circle

Transcription

1 - Anup P. Shah 17 th June 2016 CTC-Allied Laws Study Circle

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3 Hindu, Jain, Sikh Hindu Succession Act No Will Intestate Christian, Parsi, Jew Indian Succession Act Person Dies Muslim Muslim Law Makes a Will -Testate Hindu, Christian Parsi, Jew Sikh, Jain Muslim Indian Succession Act Muslim Law PRAVIN P. SHAH & CO. 3

4 Application Hindus, Jains, Sikhs, Buddhists Not to Muslims, Christians, Parsis, Jews Overrides all Customs, Traditions, etc. Applies when a Hindu dies intestate Without making a valid will Succession to property then fixed by HSA and not by his wish / will Therefore, advisable to make a Will PRAVIN P. SHAH & CO. 4

5 Firstly Class I Heirs Mother, Widow, Children, Children of pre-deceased Children, Widowed DILs, Mother, Widow and Children get 1 Share each Secondly if no Class I, then upon Class II Heirs Father, Siblings, Daughter s grandchildren, Grandparents, Parents siblings, etc. Thirdly if no Class II, then Agnates Related wholly through males E.g., Father s brother s daughter Lastly upon Cognates Related not wholly through males E.g., Mother s brother s daughter PRAVIN P. SHAH & CO. 5

6 Foll. property absolute property Inheritance Partition In lieu of maintenance By gift Own skill By purchase She can deal with this property as she likes S.14(1) Can will it away to whomever she likes PRAVIN P. SHAH & CO. 6

7 S.14(1) Any property possessed is her Absolute Property Exception: S.14(2): NA to Property received by Gift / Will / if Instrument or Decree provides Restricted Right of Enjoyment Jupudy (SC) Life Interest to Widow under Will of Husband not absolute property and covered by exception u/s. 14(2) But if received in lieu of maintenance then absolute property u/s. 14(1) PRAVIN P. SHAH & CO. 7

8 Firstly Children, Children of pre-deceased Children, Husband Secondly Husband s Heirs Thirdly Her Parents Fourthly Her Father s Heirs Lastly Her Mother s Heirs PRAVIN P. SHAH & CO. 8

9 Exception s.15(2) If property inherited from her parents & She dies w/o any children Property reverts to Father s Heirs Only Property inherited from Parents What if Gifted? Reverts to Father or Father s Heirs? What if Father is alive? Goes to Father s heirs only or to Father? PRAVIN P. SHAH & CO. 9

10 Exception s.15(2) If property inherited from her Husband / FIL & She dies w/o any children Property reverts to Husband s Heirs However, if she leaves behind children then normal succession pattern continues PRAVIN P. SHAH & CO. 10

11 Share in HUF Can be willed away Else devolves on heirs of deceased as Intestate Succession Thus, devolves by HSA Intestate Succession Rules E.g. HUF has 4 members. Karta dies intestate 3 left behind His Share in HUF devolves upon other his heirs as Intestate succession If all Class I heirs left behind then each will get 1/3 share PRAVIN P. SHAH & CO. 11

12 Amendment in th Sept 2005 Amdt. Introduced in Central Act Daughter of a co-parcener shall: by birth become a co-parcener in her own right as a son; have same rights in HUF as a son; be subject to same liabilities in respect of HUF property have a share equal to a Son Do daughter s children automatically become coparceners in her father s HUF? PRAVIN P. SHAH & CO. 12

13 Does 2005 amended section apply to: Daughters born after ? Daughters married after this date? All daughters, married or unmarried, but living as on this date? Is Act Prospective or Retrospective? PRAVIN P. SHAH & CO. 13

14 Can Daughter now become Coparcener / Karta in Husband s HUF? Seth Govindram Sugar Mills (SC) coparcenery a must for Kartaship Can Wife Now be a Karta in Husband s HUF? What if family of 3, Father, mother and son Father dies and son is minor Who would then be Karta? PRAVIN P. SHAH & CO. 14

15 Effect of Repeal & Amending Act 2015? HSA Amendment Act of 2005 repealed Part of Ease of Doing Business drive Does this mean that Daughters no longer have a right in Father s HUF Is there a need for Amendment Act Kar HC in Lokmani v Smt Mahadevamma Amdt applies with retrospective effect from 1956 PRAVIN P. SHAH & CO. 15

16 Consists of lineal male descendants from a common ancestor + their wives Now even Daughters are included A Son is not a must for an HUF Gowli Buddana v CIT (SC) A male, his wife and daughter also create HUF NV Narendranath v CWT (SC) HUF is created when a male marries husband and wife create an HUF 16 PRAVIN P. SHAH & CO.

17 Partition: Defining of the shares of coparceners in Joint Property Division of Joint Family by a definite + unequivocal indication to separate Actual physical division a must? No it is a formality as long as definite & unequivocal indication to separate Kalyani v Narayanan (SC) PRAVIN P. SHAH & CO. 17

18 Hindu Law recognises Total & Partial Partition IT / WT recognises only Total Partition Partition defn. (IT) : Physical division, if so capable or else such division as property admits mere severance of status is not a partition Partial Partition defn. (IT) : Partial as regards HUF property or Members of the HUF or both If Tax not an issue, can have Partial Partition PRAVIN P. SHAH & CO. 18

19 Manner of Partition: Oral Partition By a Suit By an Agreement or Deed of partition By an Arbitration Award PRAVIN P. SHAH & CO. 19

20 Partition demands Any coparcener can demand Partition Can a Wife demand Partition How much share allotted to Wife on Partition? Can Widow can demand partition of her deceased husband s HUF? Difference between Wife and Widow? PRAVIN P. SHAH & CO. 20

21 2% of the MV of Separated Shares of property Separated Share meaning: Largest share remaining after partition is that from which other shares are separated 4 Members: 3/4 th to Father and balance 1/4 th split between 3 members - Duty on 3/4 th or 1/4 th If all are equal shares = subtract any one share & SD on balance Practical Reality PRAVIN P. SHAH & CO. 21

22 Coming together of partitioned HUF members No specific provision in IT like for Partition Consider Hindu Law Reunion permissible Can be by way of MOU between members All properties partitioned & existing with members must become united - Bhagwan Dayal v Reotti Devi (SC) - Paramanand Bajaj v CIT (Kar) 22 PRAVIN P. SHAH & CO.

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24 A wish, desire, choice, etc of a person as regards disposition of his property after his death ISA, 1925: Legal declaration of testator s intention with respect to his property which he desires to be carried into effect after his death General Clauses Act: A codicil and every writing making a voluntary posthumous disposition of property PRAVIN P. SHAH & CO. 24

25 Legal declaration of Testator s Intention As regards his property Manifests only after the testator s death Will not valid till testator is alive Speaks from the Grave Can be revoked at any time and end number of times by the testator in his lifetime PRAVIN P. SHAH & CO. 25

26 Have complete discretion on distribution of property after death to persons of your choice Reduces succession disputes Good way to reward someone by willing a part of your wealth to him post your death Better to make a will at an early age due to uncertainty of life- No limit on number of revisions to a will 26 PRAVIN P. SHAH & CO.

27 Testator Beneficiary/Legatee Estate Executor/Executrix Bequest Bequeath Witnesses Life-interest beneficiary Codicil Probate PRAVIN P. SHAH & CO. 27

28 Major person- of sound mind Male Female An intoxicated person / one who does not understand what he is doing? Cannot Deaf / Dumb / Blind? Can provided he knows what he is doing Ordinarily Insane? Can during intervals of Sanity PRAVIN P. SHAH & CO. 28

29 Illiterate Very old person Terminally Ill Lunatic Married Woman Person with Alzheimer's disease Person with Parkinsons disease PRAVIN P. SHAH & CO. 29

30 Write / type Stamp paper? Signature / thumb mark of Testator 2 Witnesses to signature of Testator Need to know contents of the Will? Whom to appoint? Appoint Executors Whom to appoint? Date the will Designate legatees / beneficiaries PRAVIN P. SHAH & CO. 30

31 Any Property- land, bldg., flats, shares, bonds, money, personal effects, cars, prized possessions etc. Must be legally transferable Tenanted Premises? Not heritable? Bequeathed to family member residing with testator. Cannot bequeath by Will Property must be owned by Testator Share in HUF property? Can be bequeathed Now PRAVIN P. SHAH & CO. 31

32 Any one? Relative/ Friend/ Employee/ Servant? CA / Lawyer? Minor/lunatic? Yes but consider a Trust Under Will Co. can be made a Beneficiary under a Will? Pets can be made a Legatee under a Will? PRAVIN P. SHAH & CO. 32

33 Selection Criteria: Someone close to testator Should be willing to be an executor Better to check with him beforehand Advisable that he is younger Duties Provide for all funeral expenses of the testator Pay off all debts Cannot refuse to act once accepted PRAVIN P. SHAH & CO. 33

34 Will should be attested by 2 or more witnesses Witness should have seen the testator sign/affix mark Must receive a personal acknowledgement of the testator s signature WHO?- Need not know contents of will If testamentary capacity doubtful? 34 PRAVIN P. SHAH & CO.

35 Is a person legally required to make a Will? What happens if a person dies without a Will? Is a Will final forever? What is the Legal Format for a Will? Can one distribute everything in his lifetime? Can one Will away everything to Charity? Can one exclude close family and select distant relatives / friends? PRAVIN P. SHAH & CO. 35

36 All assets be mentioned in the Will? Who to select as Executors? Check with them beforehand? Initialing each page Decide upon Witnesses and their credibility / reputation Consider Notarising / Registration Dating of the Will PRAVIN P. SHAH & CO. 36

37 Copy of the will certified by Court seal Establishes authenticity/finality and validates all acts of executors Once probate granted, no claim about genuineness of the will can be raised An application needs to be made to a Court along with payment of fees. Is it Compulsory? Ss.213 & 57 of Indian Succession Act Probate is compulsory in case of: Wills by Hindus executed within areas under the jurisdiction of Bombay, Madras & Calcutta HCs Wills by Hindus outside these areas if they relate to Immovable property situated within the above 3 areas 37 PRAVIN P. SHAH & CO.

38 Transfer of capital asset under will = No CGT s.47 Cost of Acqn. of Legatee = COA of PO (s.49) + COI Legatee can substitute FMV of if asset acqd. by deceased prior to that date s.55(2)(b) Period of holding inc d period of deceased -s.2(42a) Indexation = from PO s date of Acqn. Arun Shungloo Trust (Del) Manjula Shah (Bom) 38 PRAVIN P. SHAH & CO.

39 Video Will Digital Will Organ Donation Social Customs Will Living Will PRAVIN P. SHAH & CO. 39

40 What is a Nomination? Nominee entitled to receive assets on death of Person Nominee only a stop-gap arrangement till Estate executed & bequests made Nomination can be in favour of a Minor also Plugs gap between Death and Bequest to Beneficiary Puts the Nominee in deceased s shoes & clothes him exclusive right to asset ~ But by no stretch makes him the absolute owner of the asset It is a means to avoid delays and wasteful expenditure 40 PRAVIN P. SHAH & CO.

41 Wills v Nomination ~ What Prevails? Always Wills or Intestate Succession Nominee Only a stop-gap arrangement till Estate executed & bequests made Plugs gap between Death of a Person and Bequest to a person Once Will executed, nomination automatically ends Flat Bank FD- Insurance Policy- NSC PRAVIN P. SHAH & CO. 41

42 S.72 : Nomination in case of Shares Shares vest in Nominee overriding any other Law or any Will made by deceased Nomination in Form SH-13 to be filed with Co. Changes in Nomination allowed Can be in favour of Minor Only Individuals can nominate Nominee can become Regd. Owner or Transfer the Shares without transmitting shares in his name Demat Shares ~ Nomination with DP A/c & not with Co. Co. will not recognise Legal Heirs of Deceased 42 PRAVIN P. SHAH & CO.

43 Depositories Act ~ Nomination vests Demat shares in a nominee What prevails in case of Shares held in DP A/c. Harsha Nitin Kokate v Saraswat Bank (Bom) Single Judge Nomination prevails over Will for shares in a Co. / DP Cos. Act & DP Act provide for vesting of shares and not merely conferring a right on nominee Wordings are different than other Laws Nomination in Other Cases distinguished Jayanand Salgaonkar (Bom) 43 PRAVIN P. SHAH & CO.

44 Stop Gap Till Will executed Immediate Transmission Flat, Shares, FD, MF, Ins. Must 44 PRAVIN P. SHAH & CO.

45 Resident can hold, own, transfer any foreign asset / IP if it was inherited from a NR NR can hold, own, transfer any Indian asset / IP if it was inherited from a Resident NR can repatriate $1m / Calendar Year if: Amt. in Bank / Sale Proceeds of Assets Documentary evidence in support of legacy - Will Tax clearance /NOC from IT Amt. exceeding $1m requires RBI Approval PRAVIN P. SHAH & CO. 45

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47 In family properties execution of a Release Deed was a popular mode One co-owner renounces his share in favour of another co-owner Consideration may or may not be paid for the Release Taxation Release for consideration Transfer u/s. 2(47) Capital Gains payable by transferor Release without consideration Gift Consider s. 56(2)(vii) in hands of Transferee PRAVIN P. SHAH & CO. 47

48 Asha K Bajaj (Bom) Mother, son, daughter were Co-owners in a Property Release Deed in favour of Mother by children Held, not a Conveyance Deed Shailesh Harilal Poonatar (Bom) Sister and brother were co-owners in mother s property received by them under her will Sister released her interest in favour of brother by a Release deed Held, need not be stamped as a Conveyance PRAVIN P. SHAH & CO. 48

49 To plug this loophole: Amendments to Art.52: 5% on MV of property released If release of ancestral property to siblings / parents / spouse / children / grand-children / their legal heirs SD of Rs. 200 only Must be to defined relatives only different than Gift relatives Q. What is ancestral property? Property received by mother from sons ancestral property? Property inherited by male from father / grandfather /great grand father ancestral property? PRAVIN P. SHAH & CO. 49

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51 Gift - definition: Transfer of existing movable or immovable property Made voluntarily & without consideration From Donor (Transferor) to Donee (Transferee) Accepted by or on behalf of Donee Gift must be accepted in Donor s lifetime Donor & Donee PRAVIN P. SHAH & CO. 51

52 Gift of Immovable Property must be: By a written Gift Deed No particular format Can even be a simple letter Registered Thus, Stamp Duty also a must Attested 2 Witnesses a must Invalid - If 3 conditions not met Gift of Movables Deed optional can be by delivery alone PRAVIN P. SHAH & CO. 52

53 Instrument of Gift: Liable to be stamped Gift of movables does not require instruments No Instrument No Duty But if Instrument made then Pay SD Document recording past gift Sort of a Receipt Whether to be stamped? PRAVIN P. SHAH & CO. 53

54 If No Gift Deed No SD SD on Gift Deeds Gift of Residential House / Agr. Property to Spouse / Child / Grandchild (only 6 relatives) Rs. 200 Registration Fee on same Rs. 200 Gift of Other Immovable / any Movable to defined Family Members 2% of Market Value Gift to others of 3% of Market Value Gift to others of 5% of Market Value PRAVIN P. SHAH & CO. 54

55 Gifts to Family : 2% of FMV of the property gifted Family definition: Spouse Sibling Lineal Ascendant / Descendant of the Donor Not as wide as s.56(2)(vii) of the Income Tax Act PRAVIN P. SHAH & CO., CAs 55

56 Lineal Ascendant / Descendant : Not defined Relatives in a straight line Grandfather, Father, Son & Downwards Q. Grandmother, Mother & Daughter Grandmother, Mother & Son - Are they Lineal Ascendants / Descendants? What about adopted children? PRAVIN P. SHAH & CO., CAs 56

57 Essence same in Both Deeds Not necessary that if share of particular co-owner relinquished in favour of all other co-owners it is a Release Deed and if share relinquished in favour of only some coowners it is a Gift Deed Even if to one co-owner could still be Release Deed As long as it is in favour of a co-owner, it is a Release Parties Need not be related in a Release Deed Srichand Badlani (Del) PRAVIN P. SHAH & CO. 57

58 Gift not a Transfer u/s. 47 No CGT Cost to Donee is cost to Donor Period of holding of Donee includes period of Donor Indexation from which date Acquisition by Donor Receipt of Gift by Donee PRAVIN P. SHAH & CO. 58

59 No tax on Individual / HUF Donee if Gift received: From specified Relatives by an Ind.; OR Under a Will; OR Aggregate of Rs. 50,000 in a PY No Gift Tax on Donor Deemed Gifts u/s PRAVIN P. SHAH & CO. 59

60 If Gift of shares FMV of shares u/r11ua is Income for Donee Book Value of Co. Can DCF / ECM be considered? BV of A - BV of L / No. of Shares No Increase / Decrease in underlying value of assets Revalued Assets to be considered as per Books Reserves to be excluded Adjustments for Auditor s Qualifications Discount for Non-marketability? Latest Audited B/S prior to Gift to be considered What if mid-year Gift? Compare with s.56(2)(viib) PRAVIN P. SHAH & CO. 60

61 Gift of money by a Resident to NR Earlier separate limit of $5,000 per annum Now subsumed under LRS - $250,000/ yr Aggregate Limit Gift of money by a NR to Resident No prohibition in FEMA Gift must be Genuine Consider s.56(2) and BMA Gift of Indian Property by R to NR Only NRIs / PIOs allowed No Foreign Nationals allowed Only Commercial or Residential Property No Agr. Property / Farm PRAVIN P. SHAH & CO. 61

62 Gift of Indian Property by NRI / PIO to R Commercial or Residential Property Allowed Can also gift Agr Property / Farm but only to R who is Indian Citizen Gift of shares / units by R to NR Valn & Prior permission required Max. $50,000 / yr + 5% of capital Donor & Donee must be relatives Gift of foreign securities by NR to R General permission of RBI PRAVIN P. SHAH & CO. 62

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64 Hindu Minority & Guardianship Act Applies to Hindus Deals with powers & duties of Guardians: Natural Guardians Guardian appointed by Court Appointed under a Will of minor s parents Who can be a Natural Guardian? PRAVIN P. SHAH & CO. 64

65 Can do all acts necessary / reasonable for minor s benefit Can t bind minor by a personal covenant Transactions of Imm. Prop. of Minor Any Permission needed? PRAVIN P. SHAH & CO. 65

66 Marriage registered under Special Marriage Act HSA application ceases - ISA Takes over If Hindu marries non-hindu ceases to be HUF s Member Adoption Hindu male can adopt only with wife s consent Female can adopt with husband s consent or only if she is a widow / divorcee / unsound husband 2010 Amendment Valid adoption by Female operates as adoption by her husband Cannot adopt son if natural son Same for daughter Adoptee becomes natural child of adopted family PRAVIN P. SHAH & CO. 66

67 PRAVIN P. SHAH & CO. 67