2013 (8) TMI 56 - AT - Income Tax

Gift u/s 56(2)(v) - Gifts/awards on winning of the Olympic Medal - Assessee claimed exemption under Circular No.447 of CBDT - CIT(A) upheld addition made by A.O. - Held that - For applicability of Section 14 and thereafter Section 56, what is required is the receipt in the nature of income. In Circular No.447, it has been clearly stated In view of this, it is clarified that such awards in the cases of a sportsman, who is not a professional, will not be liable to tax in his hands as it would not be in the nature of income. - Therefore, as per the Circular, the receipt by way of award by a sportsman who is not a professional sportsman will not be in the nature of income. - CIT(A) has distinguished between the words reward and award , of course with reference to Section 10(17A). - Section 10(17A) is not applicable where the above Circular is applicable. Shri Abhinav Bindra is the first person in the history of independent India to have won the Olympic Gold Medal. In a country whose population is more than 100 crores, if a sportsman who is not a professional sportsman has won the gold medal for the first time after 60 years of independence of the country and he has been given the awards/rewards/prizes mainly by various governments, local authorities, trusts and institutions and of course some corporate/individuals, a liberal construction of Circular No.447 is required. Considering the facts of the case and the nature and spirit of Circular No.447, we hold that in the case of the assessee, viz., Shri Abhinav Bindra, all the rewards/prizes/gifts received by him are covered by Circular No.447 dated 22nd January, 1986 and, therefore, should not be treated as income in his hands. - Decided in favour of assessee.

Summary

Issues Involved
1. Taxability of gifts/awards received by the assessee under Section 56(2)(v) of the Income Tax Act.
2. Enhancement of assessed income by the CIT(A) without providing an opportunity to the assessee.
3. Nature of the receipts (whether capital receipts or income).
4. Violation of principles of natural justice.

Detailed Analysis

1. Taxability of Gifts/Awards under Section 56(2)(v)
The primary issue was whether the sum of Rs.63,10,601/- received by the assessee from various trusts and associations as gifts/awards on winning an Olympic Medal should be taxable under the head "Income from other sources" as per Section 56(2)(v). The assessee, an amateur shooter, argued that these receipts were not income, relying on CBDT Circular No.447 dated 22nd January, 1986, which distinguishes between professional and non-professional sportsmen. According to the Circular, awards received by non-professional sportsmen are considered gifts and not income. The tribunal agreed with the assessee, stating that the Circular was still applicable despite amendments to Section 10(17A) and the insertion of Section 56(2)(v). The tribunal held that the awards received by the assessee, being a non-professional sportsman, were in the nature of gifts and not taxable as income.

2. Enhancement of Assessed Income by CIT(A)
The CIT(A) had enhanced the assessed income by Rs.2,34,00,000/- received by the assessee from various governments without providing any opportunity for the assessee to contest this action. The tribunal found this to be a violation of the principles of natural justice. The enhancement was done arbitrarily, and the assessee was not given a reasonable opportunity to present his case or submit detailed written submissions. Consequently, the tribunal deleted the enhancement made by the CIT(A).

3. Nature of Receipts
The assessee contended that the entire receipts were capital receipts and not income. The tribunal examined the nature of these receipts and found that the assessee, being an amateur sportsman, pursued shooting as a hobby and not as a profession. Therefore, the receipts from awards and gifts were in the nature of personal testimonials and not income. The tribunal emphasized that the CBDT Circular No.447, which has not been withdrawn, supports this view by clarifying that awards received by non-professional sportsmen are not taxable as income.

4. Violation of Principles of Natural Justice
The tribunal noted that the principles of natural justice were grossly violated as the assessee was neither given a reasonable opportunity before enhancing the income nor were the detailed written submissions considered. The tribunal stressed that any action taken without providing an opportunity to the assessee to present his case is against the principles of natural justice. Hence, the tribunal ruled in favor of the assessee, deleting both the addition made by the Assessing Officer and the enhancement by the CIT(A).

Conclusion
The tribunal allowed the appeal of the assessee, holding that the receipts from awards and gifts were not taxable as income under Section 56(2)(v) due to the applicability of CBDT Circular No.447. The enhancement of income by the CIT(A) was also deleted due to the violation of principles of natural justice. The decision was pronounced in the open court on 26/07/2013.