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TMI Blog2019 (9) TMI 337X X X X Extracts X X X X X X X X Extracts X X X X ..... ht of the direct judicial decisions on the issue. Under the circumstances, the order of the Assessing Officer cannot be said to be erroneous. Taxability of gift received from HUF - Family income flows into a common pool from which resources are drawn to meet needs of all the members which are regulated by the head of the family. In such circumstances, any amount received by a member of the HUF , even out of the capital or estate of the HUF cannot be said to be income of the member exigible to taxation. Since such a member himself has a pre-existing right in the property of the HUF , hence, it cannot be said to be a gift without consideration by the HUF or by the other members of the HUF to that recipient member. Provisions of section 56(2)(vii) are not attracted in case an individual member receives any sum either during the subsistence of the HUF for his needs or on partition of the HUF in lieu of his share in the joint family property. Converse is not true i.e. to say in case an individual member throws his self-acquired property into common pool of HUF . The HUF or other members of the HUF do not have any pre-existing right in the self-acquired property of a member. If such an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsequently, the Assessing Officer reopened the assessment u/s 147 read with section 148 of the Act on the ground that the assessee during the year under consideration had received a gift of ₹ 5,90,000/- from his 'Hindu Undivided Family'('HUF'). The Assessing Officer was of the view that since the amount of said gift was more than ₹ 50,000/-, hence, the same was exigible to tax as 'income from other sources' u/s 56(2)(vii) of the I.T. Act. However, the assessee in the reopened assessment proceedings relied upon the decision of the Coordinate Rajkot Bench of the Tribunal order dated 17.5.2011, in the case of 'Vineetkumar Raghavjibhai Bhalodia vs ITO' passed in ITA No. 583/Rjt/2007 for assessment year 2005-06, which has been further followed by the Hyderabad Bench (SMC) of the Tribunal, order dated 17.6.2015 in 'Mr.Biravelli Bhaskar vs ITO' ITA No. 398/Hyd/2015 for A.Y. 2008-09, wherein, it has been held that 'HUF' being a group of relatives, hence, the gift by the ''HUF'' to an individual is nothing but a gift from group of relatives and further as per the exclusion clause 56(2)(vii) of the Act, a gift from relative is not exigible to taxation, hence, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t aside the order of the Assessing Officer and directed the Assessing Officer to make assessment afresh. 4. Being aggrieved by the above order of the Ld. PCIT, the assessee has come in appeal before us. 5. We have heard the rival contentions and have also gone through the record. In this case, originally, the assessment was framed u/s 143(3) of the Act accepting the returned income. The assessment was reopened u/s 147 of the Act only to examine the issue as to the taxability of the amount of gift received by the assessee from his 'HUF'. The issue was examined by the Assessing Officer and he accepted the returned income holding that the gift received from 'HUF' was not exigible to tax by relying upon the decisions of the Coordinate Rajkot Bench of the Tribunal in the case of Vineetkumar Raghavjibhai Bhalodia vs ITO' (supra) and Hyderabad Bench of the Tribunal in 'Mr.Biravelli Bhaskar vs ITO' (supra). The decisions of the higher judicial authorities were binding upon the Assessing Officer and the Assessing Officer accordingly followed the same. In view of this, the Assessing Officer took a possible view in the light of the direct judicial decisions on the issue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Now coming to the observations made by the Ld. PCIT on the merits of the case. The assessee in this case has taken a plea that the aforesaid gift has been received by the assessee out of the income of the 'HUF' and that the same was exempt u/s 10(2) of the I.T. Act. There is a direct decision of the Coordinate Rajkot and Hyderabad Benches of the Tribunal (supra) on this issue, holding that for getting any exemption u/s 10(2) of the Act, the individual assessee must satisfy two conditions, firstly, he is a member of the 'HUF' and, secondly, he receives a sum out of the income of the such 'HUF', may be of earlier years. The Ld. PCIT in the impugned order passed u/s 263 of the Act, however, held that the word 'paid out' means that sum must be paid out either in return of 'goods' or 'services' or that the same must be for some consideration. Such an interpretation by the Ld. PCIT of section 10(2) of the Act is wholly misconceived. There is no rebuttal or denial either in the order of the Assessing Officer or in the order of the Ld. PCIT in respect of the contention of the assessee that amount in question was received out of the income of the 'HUF'. In vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses with birth of a member in the family and decreases on death of a member in the family. Females go and come into the 'HUF' on marriage. A 'coparcenary' is a narrower body than a joint family and consists of only persons who take by birth an interest in the joint family property and can enforce a partition whenever they like. Though, members of 'HUF' are entitled to be maintained out of the joint family funds, however, the members of the narrower body within 'HUF' called 'Coparcenary' have birth rights in the joint family property. Hindu Law does not recognize an 'HUF' as an entity separate from the members of the family. In an 'HUF', the members collectively own it. The interest and share of the members in the estate of the family is undivided and undetermined. All the members collectively own and enjoy the property without determination of their shares until the same is partitioned. There is community of interest and unity of possession between all the members and upon the death of any of them, the others take by survivorship and not by succession. An 'HUF' though treated as a separate entity for taxation purposes, it differs in several r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 'coparcenary', the individual members receive their share on partition. However, during the subsisting coparcenary or to say broadly 'HUF', no member is entitled to receive any definite share out of the income of the 'HUF'. It is left to the prudence and wisdom of the manager who has to manage the affairs of the 'HUF', he member, such as on the marriage of a unmarried female member or in case of certain treatment of any disease of the member or in case of educational needs of any children in the 'HUF'. The amount spent may be more than that the member may have gotten on the partition of the 'HUF'. The Karta of the 'HUF', even can gift of the 'HUF' property for pious purpose and even he can contract a debt for the legal necessity and for family purposes and can bind the other members to the extent of their interest in the family property. In the above scenario, the property of the 'HUF' neither cannot be said to belong to a third person nor can be said to be in 'corporate entity', rather, the same is the property of the members of the family. It is because that the share of each of the individual member in the propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. In such circumstances, any amount received by a member of the 'HUF', even out of the capital or estate of the 'HUF' cannot be said to be income of the member exigible to taxation. Since such a member himself has a pre-existing right in the property of the 'HUF', hence, it cannot be said to be a gift without consideration by the 'HUF' or by the other members of the 'HUF' to that recipient member. In such circumstances, the provisions of section 56(2)(vii) are not attracted in case an individual member receives any sum either during the subsistence of the 'HUF' for his needs or on partition of the 'HUF' in lieu of his share in the joint family property. However, the converse is not true i.e. to say in case an individual member throws his self-acquired property into common pool of 'HUF'. The 'HUF' or other members of the 'HUF' do not have any pre-existing right in the self-acquired property of a member. If such an individual member throws his own/self-earned or self-acquired property in common pool, it will be an income of the 'HUF', however, the same will be exempt from taxation as the indivi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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