2010 (5) TMI 497 - AT - Income Tax

Gift u/s 56 - Addition of income - minor children of the assessee received gifts from the blood brother of the assessee s mother - Held that - When section 56 of the Act deems a particular receipt as income from other sources, irrespective of the genuineness of the gift, it is difficult to appreciate as to why the learned CIT(A) had given prominence to the availability of copy of passbook and the mode of receipt of the gift etc., though it was neither the case of the assessee nor the case of the Assessing Officer at the assessment stage - AO was justified in bringing to tax the gift in the hands of the assessee by invoking the provisions of section 56 read with section 64 of the I.T. Act.

Summary

Issues:
- Whether the addition of Rs. 10 lakhs, received as a gift by two minor sons, falls under the definition of relatives as per section 56(2)(v) of the IT Act.

Analysis:
1. The Revenue contended that the gifts received by the assessee's minor sons were not from 'relatives' as per section 56(2)(v) of the IT Act, leading to the addition of Rs. 10 lakhs to the assessee's total income.

2. The CIT(A) set aside the addition, noting that the donor, who is the maternal uncle of the appellant, falls under the definition of 'relative' as per Explanation (iv) below clause (v) of sub-section (2) of section 56. The CIT(A) emphasized the genuineness of the gifts based on bank statements, gift declaration, and supporting documents.

3. The Revenue appealed, arguing that the minor sons, as individuals under the Income Tax Act, received the gifts, making the relationship between the donor and the donee crucial. Section 56(2)(v) specifies that gifts from a 'relative' are not automatically taxed, with sub-clause (iv) of the Explanation excluding gifts from the brother or sister of either of the parents of the individual.

4. The tribunal analyzed the relationship between the donor and the donees, the minor sons, concluding that the donor's relationship did not fall within the specified categories to be considered a 'relative' as per the Act. The tribunal emphasized that the gifts were assessable under section 56 of the Act, regardless of their genuineness, and upheld the Assessing Officer's decision to tax the amount in the hands of the assessee.

5. Therefore, the tribunal set aside the CIT(A)'s order and upheld the Assessing Officer's decision to tax the gift amount of Rs. 10 lakhs in the hands of the assessee, as per the provisions of section 56 read with section 64 of the IT Act.