Amount given by HUF to Member, which is not in the Nature of Gift not Taxable: ITAT [Read Order]

The ITAT, Ahmedabad bench has held that the amount received by the assessee from its HUF which is not in the nature of gift or received without consideration shall not be taxable undersection 56(2)(vii) of the Income Tax Act, 1961.

The Tribunal bench comprising of Ms. Annapurna Gupta, Accountant Member and Shri TR Senthil Kumar, Judicial Member was considering a second appeal challenging 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 that identical issue had arisen in the case of the assessee for assessment year 2012-13 wherein the addition was confirmed by the Ld. CIT(A).

The Tribunal noted that 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 being treating the gifts from HUF to members as taxable.

The Tribunal observed that the decision in the case of assessee in the preceding year, we find, stands clearly distinguished wherein we find that the ITAT has proceeded on the premise that the amount given by the HUF to its members is a gift, which premise has been found to be incorrect in law by the ITAT Chandigarh Bench in the case of Pankil Garg (supra).

Allowing the contentions of the assessee, the Tribunal concluded that “In view of the above, therefore, we are of the view that the decision of the ITAT Chandigarh Bench in the case of Pankil Garg(supra) would squarely apply to the present case following which we hold that the amount received by the assessee from its HUF of Rs. 50 lakhs is not in the nature of any sum received without consideration/gift and therefore not exigible to tax as per provisions of Section 56(2)(vii) of the Act.The addition so made and upheld by the Ld. CIT(A) is therefore directed to be deleted.”

To Read the full text of the Order CLICK HERE

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