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TMI Blog2017 (5) TMI 1410X X X X Extracts X X X X X X X X Extracts X X X X ..... nit Kumar Rahgavjibhai Bhalodia vs ITO (2011) 140 TTJ (Rajkot) 58; (2011) 12 ITR 616 (ITAT). This factual matrix was not controverted by the Revenue. 2.2. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the aforesaid order of the Tribunal dated 17/05/2011 for ready reference and analysis:- "Appeal in ITA No.583/Rjt/2007 is a quantum appeal filed by the assessee against the order of CIT(A)-IV, Rajkot dated 23-10-2007 for the assessment year 2005-06 whereas the appeal in ITA No.601/Rjt/2008 is filed by the revenue against the order of the CIT(A)-IV, Rajkot dated 24-10-2007 also for the assessment year 2005-06 whereby he deleted the penalty of Rs. 20,31,720 imposed by the assessing officer u/s 271(1)(c) of the Act. ITA No.583/Rjt/2007 - Appeal by assessee 2. Starting with the appeal filed by the assessee, the following effective grounds are raised in the appeal: "1. The C.I.T. (Appeals) erred in upholding the addition of Rs. 60,00,000/- under sec.56 of the I.T. Act, 1961 on account of receipt by the assessee from the HUF of which the assessee was the member. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore him to prove and to establish that Rs. 60 lakhs received from HUF is equal to or less than the income which can be apportioned to his share of income in the HUF. The CIT(A) has also considered section 10(2A) of the Act and compared with share in partnership firm. The CIT(A) held that the said section 10(2A) is clear that only that much share from the total income of the firm is exempt in the hands of the partner as to which bears to his share in the firm the same proportion as the amount of his share in the profits of the firm in accordance with the partnership deed bears to such profits. The assessee failed to establish such share from HUF. 5. The ld.AR submitted that the revenue authority has failed to appreciate that amount received from father's HUF is received from relative as father and all the persons comprising HUF are relatives within the meaning of Explanation to Proviso to section 56(2) of the Act. He submitted that HUF is a relative inasmuch as HUF is a collective name given to group consisting of individuals, all of whom are relatives under Explanation to Proviso to section 56(2) of the Act. The ld.AR submitted that the term "individual" would include a group of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (SC) Union of India vs Onkar S Kanwar. 9. The ld.DR on the other hand relied upon the order of CIT(A) and submitted that the CIT(A) has analysed the case in detail at paragraph 6 of his order before confirming the order of the assessing officer. The CIT(A) has also considered the alternative submissions made by the assessee that his case is covered u/s 10(2) of the I.T. Act. The ld.DR submitted that the assessee himself is not sure about the facts whether section 10(2) of the Act is applicable or Explanation to section 56(ii) of the Act is applicable. The ld.DR submitted that the term "relative" is defined in section 2(41) wherein HUF is not included. The ld.DR further submitted that the object of section 10(2) pointed out by the ld.AR is only in respect of partition and not in case of gift. It is also the submission of the ld.DR that cases cited by the ld.AR are not applicable as under the I.T. Act, the "person" has been separately defined under the Act and HUF is a separate person. The ld.DR submitted that how a gift can be given to himself. The ld.DR in support of his contention relied upon the judgment of Karnataka High Court in the case of Patil Vijaykumar & Ors vs UOI 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all in the definition of "relative" as provided in Explanation to clause (vi) of section 56(2) of the Act. The observation of the CIT(A) that HUF is as good as 'a body of individuals' and cannot be termed as "relative" is not acceptable. Rather, an HUF is 'a group of relatives'. Now having found that an HUF is 'a group of relatives', the question now arises as to whether would only the gift given by the individual relative from the HUF be exempt from taxation and would, if a gift collectively given by the 'group of relatives' from the HUF not exempt from taxation. To better appreciate and understand the situation, it would be appropriate to illustrate an example, thus - an employee amongst the staff members of an office retires and in token of their affection and affinity towards him, the secretary of the staff club on behalf of the members of the club presents the retiring employee with a gift could that gift presented by the secretary of the staff club on behalf of the staff club be termed as a gift from the secretary of the staff club alone and not from all the members of the club, as such? In our opinion answer to this quoted example would be that the gift presented by the secr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , an HUF is considered as a single unit, rather, an HUF is "a group of relatives" as it is formed by the relatives. Therefore, in our considered view, the "relative" explained in Explanation to section 56(2)(vi) of the Act includes "relatives" and as the assessee received gift from his "HUF", which is "a group of relatives", the gift received by the assessee from the HUF should be interpreted to mean that the gift was received from the "relatives" therefore the same is not taxable under section 56(2)(vi) of the Act, we hold accordingly. 12. Now coming to the alternative contention of the assessee that gift received by the assessee from the HUF fall under section 10(2) of the Act. Section 10(2) of the Act provides that tax shall not be payable by an assessee in respect of any sum which he receives from a member of Hindu Undivided Family and as the sum has been paid out of the family income, or in the case of an impartible estate, whose such sum has been paid out of the income of the estate belonging to the family, subject however, to the provisions of section 64(2) of the Act. The object of the provision is that a Hindu Undivided Family, according to section 2(31) is a "person" a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then, notwithstanding anything contained in any other provisions of this Act or in any other law for the time being in force, for the purpose of computation of the total income of the individual under this Act. The individual shall be deemed to have transferred the converted property, though the family, to the members of the family for being held by them jointly. The income derived from the concerted property or any part thereof shall be deemed to arise to the individual and not to the family. Where the converted property has been the subject-matter of a partition (whether partial or total) amongst the members of the family, the income derived from such converted property as is received by the spouse on partition shall be deemed to arise to the spouse from assets transferred indirectly by the individual to the spouse and the provisions of sub-section (1) shall, so far as may be, apply accordingly. We find that to cover the transaction between a member of HUF and the HUF the Income-tax Act provides section 10(2) and section 64(2). Section 10(2) is not similar to section 64(2). It deals with the transaction differently which would mean that the legislature in their own wisdom was aw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n record to hold that the gift amount was part of any assets of HUF. It was out of income of family to a member of HUF, therefore, the same is exempt u/s 10(2) of the Act. We hold accordingly. 14. The other issue in the appeal pertains to charging of interest u/s 234B and 234C of the Act. Charging of interest u/s 234B and 234C being consequential in nature, the assessing officer is directed to allow consequential relief to the assessee. ITA No.601/Rjt/2008 - Appeal by revenue 15. The assessing officer imposed penalty of Rs. 20,31,720 u/s 271(1)(c) as he did not accept the gift of Rs. 60 lakhs received by the assessee from the HUF. On appeal, the CIT(A) deleted the same. We have heard the parties on the issue. We have deleted the quantum addition of Rs. 60 lakhs while dealing with the appeal filed by the assessee in ITA No.583/Rjt/2007 in above paragraphs. As such the impugned penalty has no leg to survive. Therefore, we uphold the order of the CIT(A) and dismiss the appeal of the revenue. 16. In the result, the appeal filed by the assessee is allowed and the appeal filed by the revenue is dismissed." 2.2. If the observation made in the assessment order, leading to add ..... 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