2009 (4) TMI 533 - AT - Income Tax

Addition u/s 56(2)( v ) or alternatively u/s 56(1) - land received as gift - assessee received 33.7 bigha of agriculture land from Smt. Navita Gupta, wife of Shri Ravi Kumar Gupta of Jaipur. The rights on this land were relinquished by Smt. Gupta without any consideration and the same was registered with the Sub-Registrar who valued the land for valuation of stamp duty - reason given that as the land was received as a capital asset on relinquishment of rights, the same was not shown in the balance sheet - AO considered the gift as non-genuine as the donor had no capacity to give such a huge gift and there was no occasion to make such a gift - he therefore, made addition - CIT(A) deleted the addition. HELD THAT - We concur with the views of the ld. CIT(A) whose order appears to be reasoned one and who has given finding that the ownership of the agriculture land gifted has not been doubted by AO. Relinquishment deed was executed and property has been registered by the Sub-Registrar in favour of donee and stamp duty has been paid. As such conditions laid down in sections 122 and 123 of Transfer of Property Act have been fulfilled. Thus it is a valid transfer of immovable asset in favour of the assessee donee. The Hon ble Supreme Court in the case of Sirehmal Nawalakha 2001 (8) TMI 109 - SUPREME COURT held that requirement of complying with the provisions of Transfer of Property Act and Registration Act had to be fulfilled in order that there could be valid gift. However, transfer of capital asset as a gift is not a transfer u/s 47 for the purpose of capital gain and, therefore, provisions of section 50C cannot be applied. An asset cannot be termed, as any sum as used in various sub-clauses of section 2(24) or an income and therefore, agriculture land which was gifted cannot be taxed as income. It is not covered by and heads of income given in section 14 and therefore, neither agriculture land nor agriculture income is chargeable to tax under any heads of income. The application of provisions of section 56(1) therefore, cannot be upheld in the present case. Once donor expressed her intention to give gift and by registering the land in favour of donee, executed her intention and by getting registered in his name, the donee accepted the gift and in absence of any material with AO to prove that any consideration was paid in lieu of the gift, all the ingredients of a gift are fulfilled. For her livelihood, she was not depending on the agriculture land gifted but only on her husband. As long she was not living alone and independent, capacity of her family cannot be ignored. Once capacity of the donor is proved and all other ingredients to make a gift complete also fulfilled, there is no reason to disbelieve the gift as agriculture land given, by Smt. Gupta to the assessee. Therefore, we find no infirmity in the order of the ld. CIT(A) who has rightly deleted the addition made by AO. Thus the solitary ground of the revenue is dismissed.

Issues Involved:
1. Deletion of Addition under Section 56(2)(v) or alternatively under Section 56(1) on Account of Land Received as Gift.
2. Interpretation of "Sum of Money" under Section 56(2)(v).
3. Genuineness of the Gift Transaction.
4. Applicability of Section 56(1) for Taxation of the Gift.
5. Procedural Fairness and Natural Justice.

Issue-Wise Detailed Analysis:

1. Deletion of Addition under Section 56(2)(v) or alternatively under Section 56(1) on Account of Land Received as Gift:
The revenue was aggrieved by the deletion of the addition of Rs. 40,80,380 made by the Assessing Officer (AO) under Section 56(2)(v) or alternatively under Section 56(1) on account of land received as a gift. The AO considered the land received by the assessee from Smt. Navita Gupta as income from other sources. However, the CIT(A) deleted this addition, and the Tribunal upheld the CIT(A)'s decision.

2. Interpretation of "Sum of Money" under Section 56(2)(v):
The AO interpreted "sum of money" broadly to include the value of the land received as a gift, relying on the Oxford Advanced Learner's Dictionary. The AO argued that restricting the term to hard cash would defeat the purpose of the legislation. However, the Tribunal found that "sum of money" should be interpreted in its ordinary sense, meaning cash, cheques, drafts, etc., and not assets like land. The Tribunal referred to various sections of the Income-tax Act and judicial precedents to support this interpretation.

3. Genuineness of the Gift Transaction:
The AO questioned the genuineness of the gift, citing the lack of blood relation between the donor and donee, the business relationship between the donor's husband and the donee's father, and the financial capacity of the donor. The Tribunal found these objections unsubstantiated. It noted that the donor and donee were close family friends, the donor had the capacity to gift the land, and all legal requirements for a valid gift under the Transfer of Property Act and Registration Act were fulfilled. The Tribunal also emphasized that the AO did not provide the assessee an opportunity to cross-examine the donor, violating principles of natural justice.

4. Applicability of Section 56(1) for Taxation of the Gift:
The AO alternatively applied Section 56(1), treating the gift as income from other sources. The Tribunal rejected this, stating that gifts of a personal nature, given out of love and affection, do not constitute income. The Tribunal referred to various judicial precedents and CBDT Circular No. 158, which clarified that gifts of a purely personal nature are not chargeable to income-tax unless they arise from salary or business/profession.

5. Procedural Fairness and Natural Justice:
The Tribunal criticized the AO for not providing the assessee with the statements recorded from the donor, thus denying the assessee an opportunity to rebut the evidence. This was deemed a violation of the principles of natural justice. The Tribunal cited several judicial precedents emphasizing the need for procedural fairness and the right to cross-examine witnesses.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the addition made by the AO under Sections 56(2)(v) and 56(1). It found that the term "sum of money" does not include immovable property, the gift transaction was genuine, and the procedural fairness was not adhered to by the AO. Consequently, the appeal of the revenue was dismissed.

← Previous Next →