2015 (9) TMI 389 - HC - Income Tax

Additions u/s 68 - Maturity proceeds of RIB shown as gifts from unrelated Non Resident India - satisfactory explanation with regard to its nature and source questioned - Held that - Assessee had led evidence to establish the capacity of the donor. This was evident from the fixed deposit certificates as well as bank statements pertaining to the period when subscription was made to RIB Bonds by the donor. Insistence on the part of the revenue seeking to examine the financial capacity of the donor in the previous year relevant to the subject assessment year is in the present facts uncalled for. This is so as his present capacity will not determine his capacity at the time of purchase of the RIB Bonds. Two authorities have come to a concurrent finding of fact that the capacity of the donor to make the gift stands established on the basis of the documents which were placed before the Assessing Officer. This finding of fact with regard to capacity of the donor has not been shown to be perverse. Revenue could not dispute the concurrent finding of the two authorities that the gift was received from an NRI who had originally subscribed to the RIB Bonds. These bonds were transferable and in fact transferred to the respondent assessee by making a necessary declaration in that regard with the State Bank of India. So far as the other objection of the revenue that the decision of the Allahabad High Court in Kanchan Singh 2008 (5) TMI 641 - ALLAHABAD HIGH COURT would have no application to the facts of the present case is not acceptable. The decision also dealt with gift made of RIB Bonds and it was held therein that capacity of the donor has to be examined with reference to the time when the donor subscribed to RIB Bonds and not its capacity at the time of the maturity of the RIB Bonds. Thus the issue arising for our consideration is essentially a question of fact. Two authorities have reached a concurrent finding of fact on the basis of evidence produced before them that the amount of proceeds on the maturity of RIB Bonds was not hit by Section 68 of the Act. This view is reasonable and possible on the basis of the evidence on record - Decided against revenue.

Summary

Issues involved:
Challenge to the order of the Income Tax Appellate Tribunal (Tribunal) regarding the addition made under Section 68 of the Income Tax Act, 1961 concerning maturity proceeds of Resurgent India Bonds (RIB) received as gifts for Assessment Year 2004-05.

Analysis:
1. The primary issue in this case revolves around the challenge to the Tribunal's order regarding the addition made under Section 68 of the Income Tax Act, 1961 concerning maturity proceeds of Resurgent India Bonds (RIB) received as gifts. The Assessing Officer had credited the entire proceeds on maturity of the RIB Bonds to the income of the respondent-assessee, citing lack of establishment of the financial capacity and identity of the donor, as well as the genuineness of the gift.

2. The Commissioner of Income Tax (Appeals) (CIT(A)) conducted a detailed analysis and found that the financial capacity of the donor was indeed established through bank statements and fixed deposit receipts. Moreover, the respondent assessee had provided various documents such as affidavits, letters, and declarations confirming the gift of RIB Bonds. The CIT(A) also relied on a decision of the Allahabad High Court in a similar case to support the validity of the gifts.

3. Upon further appeal, the Tribunal upheld the CIT(A)'s findings, emphasizing that the identity of the donor, the donor's capacity to make the gift, and the genuineness of the gift were adequately established. The Tribunal noted that the donor's capacity should be judged concerning the time of subscription to the RIB Bonds, not at the time of maturity proceeds being credited. It was also highlighted that the requirement of donor and donee being related by blood was not necessary post an amendment to the Gift Act.

4. The revenue contended that the documents provided did not establish the donor's capacity, and certain financial documents were not produced. However, the court found that the evidence presented by the respondent assessee, including fixed deposit certificates and bank statements, sufficiently demonstrated the donor's capacity to make the gift.

5. The court concluded that the issue at hand was essentially a question of fact, and since two authorities had arrived at a concurrent finding based on the evidence presented, there was no substantial question of law to consider. Consequently, the appeals were dismissed with no order as to costs.