Gift received from Step Father not taxable us 562vi as income from other sources.
The Explanation to section 56(2) would indicate that the expression “relatives” would recognize the relationship between the step-father and step-son for the purpose of exemption available under section 56(2) of the Income Tax Act, 1961. This was held by ITAT in a recent judgment detailed hereunder.
ABCAUS Case Citation:
894 2016 (06) ITAT
Important Judgment(s) Cited:
ITAT Vs. Estate of Late Nuli Lakshminarayana 116 ITR 739 (AP)
Brief Facts of the Case:
The case of the appellant assessee was selected for scrutiny assessment and notice under section 143(2) was issued. On scrutiny of the records, the Assessing Officer (AO) noticed that the during the relevant assessment year, the assessee had received a sum of Rs.2,20,000/- through different cheques of Rs. 20,000/- each for every month from April to March from a same person. Also a sum of Rs.20,000/- was received from the HUF whose karta was the same person. When the assessee was confronted with regard to the receipt of this amount, it was contended by the assessee that the amount had been received as gift from the step-father of the assessee. With regard to the amount received from HUF, it was contended that this amount was below the limit of Rs.50,000/-, and therfore, the assessee was not supposed to explain. However, the AO added the amount received as income from other sources and rejected the explanation of the assessee on the ground that the relation ship of step-father does not fall within the ambit of relationship explained in Explanation appended to Section 56(2). Aggrieved by the addition, the assessee appeal to the CIT(A) but it no relief was granted to the assessee. Therefore the assessee brought the matter before the Tribunal.
Contentions of the Assessee:
The assessee submitted that the expression “relative” has been explained in the Explanation appended to Section 56(2) of the Income Tax Act, 1961. As per the meaning given at serial no.(v), (vi) and (vii), it emerges out that any lineal ascendant or descendant of the individual will be entitled to receive gift. He pointed out that the assessee was an individual. the step-father was the spouse of his mother, and therefore, their relationship shall be within the meaning of “relative” given at serial no.(v), (vi) and (vii) and therefore, entitled for the exemption applicable in the present case.
Important excerpts from ITAT Judgment:
It is pertinent to take note of the relevant section 56(2) and the Explanation appended thereto. They read as under:
“56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head “Income from other sources”, if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E.
(2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head “Income from other sources”, namely :—
*****
*****
[(vi) where any sum of money, the aggregate value of which exceeds fifty thousand rupees, is received without consideration, by an individual or a Hindu undivided family, in any previous year from any person or persons on or after the 1st day of April, 2006 [but before the 1st day of October, 2009], the whole of the aggregate value of such sum:
Provided that this clause shall not apply to any sum of money received—
*****
Explanation.—For the purposes of this clause, “relative” means—
******
(v) any lineal ascendant or descendant of the individual;
(vi) any lineal ascendant or descendant of the spouse of the individual;
(vii) spouse of the person referred to in clauses (ii) to (vi);]
A bare perusal of the above Explanation would indicate that the expression “relatives” would recognize the relationship between the step-father and step-son for the purpose of exemption available under section 56(2) of the Income Tax Act. Therefore, the gift received by the assessee cannot be treated as income from other sources, and the same is deleted and the appeal of the assessee is allowed.
download Full Judgment
