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TMI Blog2022 (3) TMI 1243X X X X Extracts X X X X X X X X Extracts X X X X ..... essee are allowed - ITA No. 2244/Ahd/2017 - - - Dated:- 25-3-2022 - Ms. Annapurna Gupta, Accountant Member And Shri TR Senthil Kumar, Judicial Member For the Appellant : Shri Rajesh Shah, A.R. For the Respondent : Shri J.L. Bhatia, Sr. D.R. ORDER PER : ANNAPURNA GUPTA, ACCOUNTANT MEMBER:- The present appeal has been filed by the Assessee against the order passed by the Commissioner of Income Tax (Appeals)-10, Ahmedabad, (in short referred to as CIT(A)), dated 22-08-2017, u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the Act ) pertaining to Assessment Year (A.Y) 2014-15. 2. The appeal was earlier dismissed vide order dated 25.07.2019 vide an exparte order holding the issue to be covered by the order of the ITAT in the case of assessee itself in preceding year. Subsequently, the said ex-parte order was recalled in M.A. No. 364/Ahd/2019 dated 05.03.2021. Hence the instant appeal before us. 3. The solitary issue in the present appeal relates to the taxability of gift received by the assessee from his HUF u/s. 56(2)(vii) of the Act. The impugned gift was treated as taxable by the A.O. and the same confirmed by the CIT(A) noting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the cost of this litigation in the interest of justice to the appellant. 5. During the course of hearing before us submissions in writing were filed making contentions against the impugned addition. Referring to the same, Ld. Counsel for the assessee made oral contentions, the gist of which is that though admittedly in the assessee s own case identical gifts received in earlier year,i.e A.Y 2012-13 and subjected to tax u/s. 56(2)(vii) of the Act has been upheld by the ITAT, but in a plethora of decisions by the Co-ordinate Benches of the ITAT including the Jurisdictional Bench of Ahmedabad, the same has been held not taxable in the hands of the assessee. Special reference was made to the decision of the Chandigarh Bench of the ITAT in the case of Pankil Garg in ITA No. 773/Chd/2018 dated 17.07.2019 in which one of us (Accountant Member) was co-author, pointing out therefrom that it was held in the said case that the basic nature of the amount received by a Member from his HUF was not in the nature of a gift but being apportionment of his own share in the property of the asset of the HUF ,given to him. That therefore it could not be termed to be in the nature of a gift which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm Relative' for the purpose of Section 56(2) with reference to the gifts received by an H.U.F, some direct decisions of various Tribunals, which are being followed even after such an amendment by different Tribunal, were held to be not applicable'. Even the Findings and observations of the Honourable Supreme Court in the case of Surjitlal Chhabda reported in 101 ITR 776 (SC) were given a go by without proper discussion. Moreover, we also regret to state, with due respect, that the alternative ground of claim of exemption u/s 10(2) of the Act was dismissed without any meaningful discussion although direct decision of the Honourable Rajkot Bench in the case of Vineetkumar Raghavjibhai Bhalodia V. ITO reported in [2011] 140 TTJ (RAJKOT) 58 was submitted and relied upon which amounts to gross injustice to the assessee. What was mentioned in the order was as under which is totally unjustified and unfair: 8. Learned Counsel at this stage refers to assessee's alternative plea that the CIT(A) has not' adjudicated the later 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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v V. Gala - 20 1 7 Tax Pub (DT) 1 5 1 9(Mum-Trib) On perusal of the above decisions, it becomes clear that an H.U.F. is a creation of law and Hindu Joint Family consists of father, mother, sons and daughters (presently due to amendment in Hindu Law from October, 2005) . It has been accepted that a gift received by Karta or a member from his own H.U.F. has to be considered as received from 'Specified Relatives' only and, therefore, exempt u/s 56(2) of the Act . The reason given is that H.U.F. is nothing but a collective name given to a Group of Individuals' all of whom are Relatives' under Explanation to Proviso to Section 56(2) of the Act. It was also held that Section 56(2) nowhere says that the gift given by an individual Relative from an H.U.F. would be exempt from taxation but the gift given collectively by the 'group of relatives' from H.U.F. would not be exempt. Therefore, gift received from H.U.F. has to be treated as a gift received from Relatives' and, therefore, not taxable u/s 56(2) of the Act. DECISION AGAINST THE ASSESSEE : 1 . Gyanchand Mulchand Bardia V. I.T.O. - ITA No. 1 072/AHD/20 1 6 Decided on 2 1 -2-2018 (Asst.Year- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd stated that the issue was squarely covered by the decision of the ITAT in the assessee s own case for assessment year 2012-13. 9. We have carefully heard both the parties and have also gone through the orders of the authorities below as also all the decisions referred to before us. 9.1 The issue to be adjudicated relates to taxability of the amount received by the assessee from his HUF, in which he is a coparcener, u/s 56(2) (vii) of the Act as sum of money received without consideration. 9.2 As pointed out by the Ld.Counsel for the assessee before us, the ITAT has been consistently holding such sums of money given by HUF to its members/coparceners as not being exigible to tax u/s 56(2)(vii), in a plethora of decisions as under: 1. Vineetkumar Raghavjibhai Bhalodia V. ITO - [201 1] 140 TTJ (RAJKOT) 58 On applicability of Section 56(2) as well as 10(2) of the Act 2.Harshadbhai Dahyalal Vaidhya - [2013] 155 TTJ (AHD) 71 3.Hemal D. Shaah V. DCIT - ITA No. 2627/MUM/2015 Decided on 8-3-2017 4. Shri Pankil Garg V. PCIT, Karnal - ITA NO. 773/CHD/2018 Decided on 17-7-2019 ( 5.Mr. Biravelli Bhasker V. ITO - ITA NO. 398/HYD/2015 Decided on 17-6-2015 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.Now coming to the findings of the Ld. PCIT that as per the provisions of section 56 (2)(vii) of the Act, though the members of the 'HUF' are to be taken relatives of the 'HUF' for the purpose of the said section, however, the converse is not true that is to say that 'HUF' is not a relative of the individual member as per meaning of relative given in the case if individual under explanation to section 56(2)(vii) of the Act. Before further deliberating on this question, we deem it necessary to first discuss as to what constitute 'HUF' (Hindu Undivided Family). The 'HUF' has been included within the meaning of word person in section 2(31) of the Income Tax Act, 1961 as a separate taxable entity but 'HUF' has not been defined in the Income Tax Act, whereby, it means that the expression 'HUF' in the Act is used in the sense in which a Hindu Joint Family or a Hindu Undivided Family ( 'HUF') is understood in the personal laws of Hindus. A Hindu joint or undivided family is not created for any business purposes, rather, it is a normal condition of Hindu society and prevalent throughout India based on the soci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es can be formed by an act of parties and strangers can be their members, however, 'HUF' is a creation of law and the members having natural relationship and a stranger cannot become its member except by adoption or marriage. Apart from that, in a partnership firm, each of the members of the partnership firm has a definite and determined share in capital as well as in the profits of the firm. A member of the firm subject to the terms of the agreement / partnership deed may deposit or withdraw his capital but that is not so in the case of a 'HUF'. Neither there is any definite share of any of the members in the estate of the HUF nor any member is entitled to any share in the profits if the 'HUF is engaged in any business. The income of the 'HUF goes to the common kitty. The property and the income of the 'HUF is managed by Karta or Manager of the 'HUF' who generally is a senior most male member of the family. The powers of the Karta of management to the properties of the HUF are wide and he is not liable to give day to day accounts of the properties to the members of the 'HUF . Since the property of the 'HUF' does not belong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or income of the HUF is not determinate, hence, the family, as such, is treated as separate entity for taxation purposes. 'HUF' otherwise is not recognized as a separate juristic person distinct from the members who constitute it. A member of the HUF has a pre-existing right in the family properties. A Coparcener has a preexisting right and interest in the property and can demand partition also, however, the other members of the 'HUF' have right to be maintain out of the 'HUF' property. On division, the share in the estate / capital of the 'HUF' cannot be treated as income of the recipient, rather, the same will be a capital receipt in his hands. However, in the case of a partnership firm, if a member receives an amount which is more than his share in the capital or in the profits of the firm, the amount received in excess of the share can be treated as a gift by the firm or by other partners to that individual which will be exigible to income tax. However, in the case of an 'HUF', since there is not any determined share of any member in the family property, any amount received by a member of a 'HUF' from property of 'HUF' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dual members of an 'HUF' have been included in the meaning of relative as provided in the explanation to section 56(2 )(vii) of the Act. It is because of this salient feature of the HUF that in case of individual, the HUF has not been included in the definition of relative in explanation to section 56(2) (vii) as it was not so required whereas in case of HUF, members of the HUF find mention in the definition of relative for the purpose of the said section. In view of the above discussion, the amount received by the assessee from the HUF , being its member, is a capital receipt in his hands and is not exigible to income tax. 12. In the case of assessee in the assessment year i.e. 2012-13, the issue has been decided against the assessee by the ITAT holding that HUF per se is not covered in the definition of relative u/s. 56(2)(vii) of the Act and therefore gifts from HUF to members are not covered in the exception provided to the said section. The ITAT has also pointed out that while the reverse of gift from member to HUF is covered in the exception, the legislature has deliberately left out the reverse and therefore the intention of the legislature is clear be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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