2020 (2) TMI 486 - AT - Income Tax

Income from other sources u/s 56 - amount received by the assessee as a legacy through the Will - HELD THAT - A perusal of the provisions of Section 56(2)(vii) shows that any amount received by an individual without consideration and the aggregate value exceeds 50,000, the whole of the aggregate value is liable to be treated as income under the head income from other sources . The Fourth Proviso thereunder provides for the exemptions. Clause (a) talks of any amount received from a relative, Clause (c) talks of any amount under the Will or by way of inheritance. For the purpose of Clause (a) of the Fourth Proviso, relative has been defined in explanation (e) to the Proviso. A Will can be written by anybody. In a Will, anybody can be given a bequeathal. It need not be a relative alone. The fact that the Fourth Proviso refers to relative in Sub-clause (a), and refers to a Will or inheritance in Clause (c) clearly shows that the Will need not be a Will of a relative. Further, a Will is not given any restrictive meaning in the Explanation under the said Proviso either. We are of the view that the amount received by the assessee as a legacy through the Will of Mrs. Eva Maria Schnelder-Boog of an amount of 50,000 Swiss Francs, under no circumstances, can be brought to tax under the head income from other sources as the same is exempted by Clause (c) of the Fourth Proviso to Section 56(2)(vii) - Decided in favour of assessee.

Summary

Issues: Interpretation of Section 56(2)(vii) of the Income Tax Act, 1961 regarding taxation of amount received through a Will exceeding 50,000 Swiss Francs.

Analysis:
1. The appeal was filed against the order of the Commissioner of Income Tax for the Assessment Year 2014-15.
2. The Assessee, a Swiss individual married to an Indian, received 50,000 Swiss Francs through a Will executed by her God-Mother.
3. The Assessing Officer treated the amount as income from other sources under Section 56(2)(vii) as the God-Mother was not considered a relative.
4. The Appellant argued that the Fourth Proviso under Section 56(2)(vii) exempts amounts received through a Will or inheritance.
5. The Appellate Tribunal noted that the Fourth Proviso does not restrict a Will to be from a relative and does not provide a restrictive meaning to a Will.
6. The Tribunal held that the amount received through the Will is exempted under Clause (c) of the Fourth Proviso to Section 56(2)(vii) and cannot be taxed as income from other sources.
7. Consequently, the appeal of the Assessee was allowed, and the amount received through the Will was held to be exempt from taxation.

This judgment clarifies that under Section 56(2)(vii) of the Income Tax Act, 1961, amounts received through a Will exceeding 50,000 Swiss Francs are exempt from taxation, even if the benefactor is not a relative. The Tribunal emphasized that the Fourth Proviso does not limit a Will to be from a relative and does not define a Will restrictively. Therefore, in this case, the amount received by the Assessee through the Will of her God-Mother was deemed exempt from taxation under the head of income from other sources.