2018 (5) TMI 938 - AT - Income Tax

Addition u/s 68 - gift in question received from HUF comprising of the three family members only - Held that - Legislature itself has accepted an HUF to be a donee in clause (ii) of the relatives definition. We apply necessary implication principle to conclude in these facts that the legislative intent is very clear that an HUF is not to be taken as a donor in case of an individual recipient. Assessee s former plea of having received a valid gift from his HUF is therefore declined. Learned counsel at this stage refers to assesse s alternative plea that the CIT(A) has not adjudicated the latter ground that the amount in question is exempt u/s.10(2) of the Act. We find no merit in the instant alternative plea as well since a gift sum which is not allowable under the relevant specific clause cannot be accepted to be an exempt income u/s.10(2) of the Act. We thus treat instant latter plea to be mainly technical in nature devoid of merit.

Summary

Issues Involved:
Validity of gift claim received from HUF under Section 56(2)(vii) of the Income Tax Act, 1961.

Analysis:

1. The appeal pertains to the addition of ?1,02,00,000 received as a gift from HUF in the assessment year 2012-13 under Section 143(3) of the Income Tax Act. The Assessing Officer rejected the claim under Section 56(2)(vii) and added the amount under Section 68. The appellant argued that the gift should be exempt as per the amended provisions of the Act. However, both the lower authorities held that gifts from HUF to any member are not exempt from taxable income. The CIT(A) upheld the Assessing Officer's decision, stating that making gifts from HUF to members tax-free could lead to misuse by the Karta of the HUF. The appellant failed to produce a gift deed or document showing the consent of the donee.

2. The appellant contended that the HUF members, including the assessee, his wife, and son, should be considered "relatives" as per the Act's provisions. The appellant cited judicial precedents and argued that the lower authorities erred in assessing the amount under Section 68. However, the Tribunal noted that the Act does not provide a separate definition of HUF, and the term should be understood as per Hindu law. The Tribunal observed that the legislative intent was clear that an HUF is not a donor in the case of an individual recipient. The appellant's reliance on previous judgments was deemed irrelevant due to subsequent legislative amendments.

3. The Tribunal rejected the appellant's alternative plea that the amount could be exempt under Section 10(2) of the Act. It was concluded that a gift not allowable under the relevant clause cannot be considered exempt income. Therefore, the appeal was dismissed, upholding the addition of the gift amount from HUF as taxable income.

In conclusion, the Tribunal affirmed the lower authorities' decision, emphasizing that gifts from HUF to members are not exempt from taxable income, and the legislative intent is clear regarding the treatment of HUF in gift transactions. The appellant's arguments based on judicial precedents were deemed irrelevant due to subsequent legislative changes, leading to the dismissal of the appeal.