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TMI Blog2013 (11) TMI 617X X X X Extracts X X X X X X X X Extracts X X X X ..... passed u/s.143(3) of the IT Act dated 30/03/2007 were that the assessee is assessed to tax under the status of "HUF". Further, it was noted by the AO that the HUF consists three coparcener. It was noted by the AO that an amount of Rs.7 lacs was introduced in the capital account. In support, the assessee has furnished a gift deed dated 1.10.2004 according to which, as per AO, one Shri Ishwarlal Ambalal Vaidhya made a gift of Rs.7 lacs to HUF. The AO's objection in this regard was as under:- "Sub-section (v) to section 56(2) of the Income-tax Act, 1961 provides that any sum received without consideration by an Individual or HUF from any person on or after the 1st day of September, 2004 the income shall be chargeable to income tax under the head "Income from Other sources" and therefore, the amount is not an exempted income of the HUF. Definition appended below that section defines words "Relative" which clearly indicate that such relationship is applicable only in the case of individual and not to the HUF. Accordingly, gift accepted for and on behalf of HUF does not covered within the provision of that section. The assessee was therefore, requested to show cause vide l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said sum on 23/10/2004 vide cheque No.3436 of Kheralu Nagarik Sahakari Bank Ltd. of Rs.7 lacs from the individual account of Harshadbhai Dahyabhai Vaidhya. There is a reference in the order of CIT(A) of a statement recorded on oath of Shri Ishwarlal Ambalal Vaidhya He has stated that he is a retired personand made a gift to his nephew (son of his elder brother) of Rs.7 lacs i.e. to Shri Harshadbhai D.Vaidhya on 1.10.2004 vide cheque No.520601 of Bank of Baroda. He has also stated in the statement that a gift deed was prepared and the said amount was gifted to Harshadbhai in HUF capacity. Ld.CIT(A) has discussed various statements as also the remand report in detail. However, at the end, he has held that the transaction was hit by the provisions of section 56(2) of the Act and taxable in the hands of the assessee, for ready reference the relevant paragraph is reproduced below:- "10. The definition of relative in section 56(2) is entirely in context of an individual. From the arrangement that the donor and appellant had undertaken once the gift had been made to Shri Harshad D.Vaidya in his individual capacity, the said money, though not taxable, had become the exclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mean that the gift was received from the "relatives" therefore the same is not taxable under s.56(2)(vi)." Unquote. 5. From the side or the Revenue, ld.Sr.DR Mr.D.K.Singh has supported the view taken by the authorities below. 6. Having heard both the sides at some length and perused the record available before us. We confine ourselves to the basic fact that the assessee HUF has received a gift of Rs.7 lacs from one Shri Ishwarlal Ambalal Vaidhya. The objection of the AO was that as per the Explanation annexed to section 56(2)(v) the definition of relative do not include relationship viz-a-viz HUF, therefore the amount received from the donor by the HUF do not fall within the relationships as prescribed in the said Explanation. 6.1. At this juncture, it is worth to mention that Shri Ishwarlal Ambalal Vaidhya, the donor has gifted the said amount to the HUF of his nephew, namely, Harshadbhai Dahyalal Vaidhya (the appellant). This fact was clarified by the donor when his statement was recorded on oath during the proceedings. In his statement, he has stated that Shri Harshadbhai Dahyalal Vaidhya is son of his elder brother and an amount of Rs.7 lacs was given on 1/10/2004 to Harsahd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the occasion of the marriage of the individual; or (c) under a will or by way of inheritance; or (d) in contemplation of death of the payer. [(e) from any local authority as defined in the Explanation to clause (20) of section 10; or (f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or (g) from any trust or institution registered under section 12AA.] Explanation : For the purposes of this clause, "relative" means- (i) spouse of the individual; (ii) brother or sister of the individual; (iii) brother or sister of the spouse of the individual; (iv) brother or sister of either of the parents of the individual; (v) any lineal ascendant or descendant of the individual; (vi) any lineal ascendant or descendant of the spouse of the individual; (vii) spouse of the persons referred to in clauses (ii) to (vi).]" 7.1 For the year under consideration, i.e. AY 2005-06 the defini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al ascendant or descendant of both the individual and his/her spouse and the spouse of any of the persons mentioned herein before. Hence, the definition covers only relatives of the individuals, so that the explanation seems to have overlooked the provision in the main section sparing liability for Hindu Undivided Family (HUF) in respect of gifts from relatives. Even the other exemption as for occasion on the marriage of individuals or inheritance could have not application to the HUF. In the case of HUF, since the joint family refers to a group of persons, it either means that the exemption is available for gifts received by the HUF from any person related to the karta or any other family member or it may mean that since HUF cannot have relatives, all the gifts received by the HUF will be taxable. This inference does not obviously fall in line with the intent, because the provision does contemplate exemption of the gifts received by HUF, but has not indicated the relationship that is necessary for the purposes of HUF, because the definition of 'relative' in the Explanation refers to the relatives of the individual and not HUF, with the result that the exemption of gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s necessary that singular remains singular. Sometimes a singular can mean more than one, as in the case before us. In the case before us the assessee received gift from his HUF. The word "HUF", though sounds singular unit in its form and assessed as such for income-tax purposes, finally at the end a "HUF" is made up of "a group of relatives". Unquote. 7.5. The above observation has buttressed our view, however, in addition to the above observation of a Coordinate Bench, we have also noted that at some later stage, the legislature became conscious of the problem, therefore while drafting the analogous provisions of section 56(2)(vii), it was added in the definition of "relative" (ii) in case of a Hindu Undivided Family, any member thereof. This section is inserted by Finance (No.2) Act of 2009 w.e.f. 1./10/2009 which prescribes that where an individual or HUF receives in any previous year on or after 1st day of October-2009 any sum of money without consideration exceeding Rs.50,000/- the whole of the aggregate value of such sum shall be chargeable to income-tax. Provided that the charging clause shall not to apply to any sum of money received from any relative. As per this newly in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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