No Addition in respect of Gift in the nature of Cash and Property made in pursuance of Family Arrangement between Family Members: ITAT [Read Order]

In Jyoti Rakesh Kapoor vs. Income Tax Officer, the Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT ) held that Gift in the nature of Cash and Property made in pursuance of family arrangement between family members, could not be considered as ‘transfer’ within the definition of Section 2(47) of the Income Tax Act, 1961.

The assessee had gifted her 50% right and interest in a family property in favour of her brother in law by way of gift deed. During the same financial year, the assessee also received a cash gift of Rs.68.5 Lacs from Shri Sanjay Kapoor, the person who received gift from the assessee. Based on these facts, the Assessing Officer (A.O) come to the conclusion that the said gifts between the assessee and her brother in law Shri Sanjay Kapoor are not in nature of gifts between family members, but transfer within the meaning of section 2(47) of the Income Tax Act, 1961 as the assessee has received a consideration of Rs.68,50,000/- for relinquishing her right in the property. Accordingly, additions were made. The commissioner of Income Tax (Appeals) (CIT(A)) also upheld the order of the A.O.

The Counsel for the assessee argued that the assessee had gifted her share in the property for family settlement as per which the family had decided to buy a separate property for each member by internal arrangements, therefore, she had relinquished her 50% right in the family property in favour of her brother in law. He contended that the said transaction was purely a family arrangement between the family members for better peace and harmony.

The Bench comprising of Judicial Member Joginder Singh and Accountant Member G. Manjunatha observed “The said transactions cannot be considered as transfer within the definition of section 2(47) of the Income Tax Act, 1961. Although the assessee has received cash gift of Rs.68,50,000/- from the person who received gift from the assessee, such an arrangement is as per the family settlement between the members. Therefore, the AO was erred in bringing the above two gift transactions within the purview of definition of transfer as defined under section 2(47) of the Income Tax Act, 1961. The Ld. CIT(A) without appreciating the facts simply confirmed additions made by the AO. Therefore, we reverse the findings of the Ld. CIT(A) and direct the AO to delete additions made towards computation of long term capital gain for relinquishment of 50% share in property by way of gift.”