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TMI Blog2012 (2) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... sum was paid by the HUF in which she was a member was paid out of its income. 2. On the facts and circumstances of the case, the Ld. CIT(A) has erred in overlooking the provision of Sec.56(2)(v) of the Act relating to definition of relative which is exclusive." 3. We have heard rival contentions and gone through the facts and circumstances of the case. Briefly stated, the facts on the above issues are that the assessment year involved is 2005-06. The A.O. during the course of assessment proceedings noticed from the capital account filed along with return of income that assessee had received a gift of ₹ 10 lakhs from her HUF, M/s. R.P.Nevatia & Sons, HUF, on 21/02/2005 through cheque. The A.O. after going through the provisions of sec. 56(2)(v) of the Act required the assessee to explain why the said sum should not be added back to the total income of the assessee as income from other sources. The assessee explained that this gift did not violate provisions of sec. 56(2)(v) of the Act, because assessee being member of HUF comes within the definition 'relative', as provided in Explanation to sec. 56(2)(v) of the Act. The A.O. did not accept the explanation of the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004 61-63 31.3.2005 121284 30.7.2005 64-67 Now, we have to consider this aspect in view of provisions of sec. 10(2) of the Act, whether this gift is exempt or not. The provisions of sec. 10(2) of the Act reads as under:- "Incomes not included in total income. 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- (1) …….. (2) (subject to the provisions of sub-section (2) of section 64) any sum received by an individual as a member of a Hindu undivided family, where such sum has been paid out of the income of the family, or, in the case of any impartible estate, where such sum has been paid out of the income of the estate belonging to the family." From the above provisions, we find that, in order to earn exemption u/s. 10(2) of the Act, there are two conditions - (i) that the amount has been paid out of the income of HUF, and (ii) the sum has been received by individual as a member of HUF. The exemption under this provision comes into operation only when the amount paid is out of the income of HUF subject to the conditions of sec-sec. (2) of section 64 of the Act. A H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .e. subject to the provisions of section 64(2) of the Act and this qualification is for the purpose that the hotchpotch property should not be converted as individual property. In the facts of the present case it is clear that in order to exemption u/s. 10(2) of the Act, there are two conditions, i.e., that the amount has to be paid out of the income of HUF and the sum has to be received by an individual as a member of HUF. In this case, the HUF for the relevant assessment year 2005- 06 is having income only at ₹ 1,21,284/- and the assessee is relying on the incomes earned in earlier years. We are of the view that earlier years' incomes have already been accumulated and have become part of the estate of HUF and that cannot be considered as income for relevant assessment year. For claiming exemption u/s. 10(2) of the Act, the primary condition is that any member can accept gift or receipt out of the income of current year for claiming exemption u/s. 10(2) of the Act and not out of accumulated fund. Accumulated fund, in any case, has to be received only on partition and not otherwise. In view of above, we are of the view that since the HUF has current year's income only at S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Hindu Succession Act, the females are entered as coparceners. In view of above clause (v) of explanation to sec. 56(2) of the Act, Explanation defines 'relative' and relative here means as per clause (v) of explanation any lineal ascendant or descendant of the individual. Now, where HUF is a person within the meaning of sec. 2(31) of the Act, the entity of HUF must be construed in the sense in which it is understood under the Hindu Law, as has been decided in the case of Surjit Lal Chhabra vs. CIT (1975) 101 ITR 776 (SC), wherein it has been held that the expression 'HUF' in the I.T. Act is used in the sense in which a Hindu joint family is understood under the personal law of Hindus. Under the Hindu system of law a joint family may consist of a single male member and widows of deceased male members, and apparently the I.T. Act does not indicate that an HUF as an assessable entity must consist of at least two male members. It means actually a Hindu undivided family constitutes all persons lineally ascendant or descendant from a common ancestor and includes their mothers, wives or widows and unmarried daughters. All these persons fall under the definition of 'relative' as pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not by the HUF. Hon'ble Court further observed that in order to enable a person to make a gift it is not necessary that he should necessarily be the owner of the property. The jewellery in the case before the Hon'ble High Court is a transferable property and the karta is under the Hindu law authorised to dispose of the same by way of gift under certain circumstances, and those circumstances being present in the case before the Hon'ble High Court, the karta-donor was competent to transfer the property though it belonged to the HUF. The Hon'ble High Court further observed that for the application of s. 5(1)(viii) of the Gift Tax Act, it is the nature of the gift that is relevant and not the status in which the return was filed by the assessee. The fact that the assessee has submitted his return as that of a HUF would not, therefore, be relevant. The assessee was therefore, entitled to the exemption under s. 5(1)(viii) of the Gift Tax Act. 7. Similarly, Hon'ble Madhya Pradesh High Court in the case of CIT Vs. Banshilal Narsidas (2004) 270 ITR 231 (MP) has discussed the issue as under: "The submission of Mr. Arya is that if the anatomy of the aforesaid provision is scanned in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. Similar view was expressed by the Punjab and Haryana High Court in the case of CGT v. Hari Chand [1974] 95 ITR 308." And finally held as under: "We have referred to the aforesaid passages in extenso to highlight that if the "karta" has gifted jewellery to his wife from the Hindu undivided family and he is competent to do so under the obtaining circumstances there is no reason to throw the claim of the assessee overboard and deny him the benefit under section 5(1)(viii) of the Act. In the case at hand, nothing has been brought on record by the Revenue that the husband as the "karta" of the family was not entitled because of existence of certain circumstances to make a gift. It is wellsettled in law the "karta" can make out a gift within reasonable limits and without the consent of the other coparceners. This is a power vested in him in his individual capacity. He does not enjoy the status where the law prohibits or does not authorise him to give individually. Then the matter would be different and the validity of the gift may be called in question. But, in the present case, the material clearly shows that a gift was given by the "karta" out of affection and there was no circum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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