2012 (2) TMI 641 - AT - Income Tax

Summary

Issues Involved:
1. Whether the assessee's receipt of Rs. 10 lakhs is out of income of HUF, so as to claim exemption u/s 10(2) of the Income-tax Act, 1961.
2. Whether the sum of Rs. 10 lakhs received by the assessee falls within the definition of 'relative' as provided in Explanation to sec. 56(2)(v) of the Income-tax Act, 1961.

Summary of Judgment:

Issue 1: Exemption u/s 10(2) of the Act
The first issue before the Tribunal was whether the assessee's receipt of Rs. 10 lakhs from her HUF qualifies for exemption u/s 10(2) of the Act. The Tribunal noted that the gift was made through a banking channel and the assessee provided details of the HUF's income from previous years. However, the Tribunal emphasized that for exemption u/s 10(2) of the Act, the amount must be paid out of the income of the HUF for the relevant assessment year and not from accumulated income of earlier years. The Tribunal concluded that since the HUF's income for the relevant assessment year was only Rs. 1,21,284, it could not make a gift of Rs. 10 lakhs to the assessee out of such income. Therefore, the Tribunal allowed the revenue's appeal on this issue, deciding in favor of the revenue and against the assessee.

Issue 2: Definition of 'Relative' u/s 56(2)(v) of the Act
The second issue was whether the sum of Rs. 10 lakhs received by the assessee falls within the definition of 'relative' as provided in Explanation to sec. 56(2)(v) of the Act. The Tribunal examined the provisions of sec. 56(2)(v) and the definition of 'relative' in the Explanation. It noted that the term 'relative' includes any lineal ascendant or descendant of the individual. The Tribunal further referenced case laws and concluded that an HUF, being a person within the meaning of sec. 2(31) of the Act, consists of members who are lineally ascendant or descendant from a common ancestor. Therefore, the HUF entity falls within the definition of 'relative' as defined in the Explanation to sec. 56(2)(v) of the Act. Consequently, the Tribunal upheld the CIT(A)'s order on this issue, allowing the assessee's claim.

Conclusion:
The Tribunal allowed the revenue's appeal on the first issue, deciding that the gift of Rs. 10 lakhs did not qualify for exemption u/s 10(2) of the Act. However, it dismissed the revenue's appeal on the second issue, holding that the sum received by the assessee from the HUF falls within the definition of 'relative' u/s 56(2)(v) of the Act. Thus, the appeal of the revenue was dismissed.