The Ahmedabad bench of ITAT in the case of Gyanchand M. Bardia versus Income Tax Officer wherein ruled that HUF does not come under the specified category of a relative under section 56(2) (vii) of the Income Tax Act in relation with the taxability of gift.
In the instant case, the Assessee-Karta received a gift amounting Rs.1,02,00,000/- from HUF. The HUF consists of the assessee, his wife, and son. During the proceedings, the assessee maintained that the gift was without consideration covered u/s. 56(2)(vii) of the Act as inserted by the Finance Act, 2009. However, the Assessing Officer made the impugned addition where CIT (A) confirmed the action of AO by stating that appellant did not produce any gift deed and the reliance made on the case laws by them was not justifiable.
When this matter carried to the tribunal, Mr.Shah, advocate for Assessee contended that other two HUF members i.e. assessee/Karta’s wife and son are already covered in “relative” definition clauses ‘A’ and ‘E’ of the Explanation (e) and also cited various case decisions.
The bench observed that the issue revolving in the year of 2012-13 and the legislature substituted clause (e) to Explanation in Section 56(2)(vii) defining the term of “relative” to be applicable in case of an individual assessee as well as HUF; with retrospective effect from 01.10.2009.
The Tribunal bench pressed the relevance of circular no. 1/2011 r.w. explanatory circular for Finance Act, 2009, makes it clear in latter’s clause no.24.2 that Section 56(ii) is an anti-abuse provision.
The Tribunal noted that “We apply necessary implication principle to conclude in these facts that the legislative intent is very clear that a HUF is not to be taken as a donor in case of an individual recipient. Learned counsel’s reliance on Surjit Lal Chhabda (supra) is therefore not acceptable in this peculiar legislative backdrop of facts and circumstances. Learned co-ordinate bench (supra) seem to have followed “Bholadia” case law which is no more applicable in view of subsequent legislative developments vide Finance Act, 2012 w.e.f. 01.10.2009 (supra). We thus do not treat the same as finding precedents as per (1993) 202 ITR 222 (AP) CIT vs. B. R. Constructions (FB). The assessee’s former plea of having received a valid gift from his HUF is therefore declined”.
Accordingly, the bench held that no merit in the instant alternative plea as well since a gift sum which is not allowable under the relevant specific clause cannot be accepted to be an exempt income u/s.10(2) of the Act.
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