DCIT 17(2), MUMBAI V. ATEEV V GALA, MUMBAI

ITA 1906/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1328 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 20-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P MEENA
• Keywords: Gift
• Section: 56(2); 234B; 56

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.1906/MUM /2014 ASSESSMENT YEAR-2010-11 DCIT-17(2), R. NO.217, 02 ND FLOOR, PIRAMAL CHAMBERS, MUMBAI-400012 / VS. ATEEV V. GALA, 575/A, THE ORIENT JAME JAMSHED ROAD, MATUNGA MUMBAI-400019 PAN NO. AALPG6039N ( / REVENUE) ( / ASSESSEE) / REVENUE BY SHRI R.P. MEENA CIT-DR / ASSESSEE BY SHRI HARI RAHEJA / DATE OF HEARING : 18/04/2017 / DATE OF ORDER: 19/04/2017 ITA NO.1906/MUM/2014 SHRI ATEEV V. GALA 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 24/12/2013 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI, DELETING THE DISALLOWANCE OF RS.85 LAKHS RECEIVED AS GIFT FROM HUF WITHOUT APPRECIATING THE FACT THAT HUF DOES NOT COME UNDER THE TERM GROUP OF RELATIVES DEFINED U/S 56(2) OF THE INCOME TAX ACT, 1961. 2. DURING HEARING, SHRI R.P. MEENA, LD. CIT-DR, DEFENDED THE ADDITION MADE BY THE LD. ASSESSING OFF ICER BY ADVANCING ARGUMENTS, WHICH IS IDENTICAL TO THE G ROUND RAISED BY CONTENDING THAT THE TERMS HUF DOES NOT CO ME UNDER THE TERM GROUP OF RELATIVES DEFINED U/S 56( 2) OF THE ACT. 2.1. ON THE OTHER HAND, SHRI HARI RAHEJA, LD. COUNSEL FOR THE ASSESSEE, DEFENDED THE IMPUGNED ORD ER BY CONTENDING THAT THE CASE OF THE ASSESSEE IS SQUA RELY COVERED BY THE DECISION OF THE RAJKOT BENCH OF THE TRIBUNAL IN THE CASE OF VEENIT KUMAR RAHGAVJIBHAI BHALODIA VS ITO (2011) 140 TTJ (RAJKOT) 58; (2011) 12 ITR 616 (ITAT). THIS FACTUAL MATRIX WAS NOT CONTROV ERTED BY THE REVENUE. 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION ITA NO.1906/MUM/2014 SHRI ATEEV V. GALA 3 FROM THE AFORESAID ORDER OF THE TRIBUNAL DATED 17/05/2011 FOR READY REFERENCE AND ANALYSIS:- APPEAL IN ITA NO.583/RJT/2007 IS A QUANTUM APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-IV, RAJKOT DAT ED 23-10-2007 FOR THE ASSESSMENT YEAR 2005-06 WHEREAS THE APPEAL IN ITA NO.601/RJT/2008 IS FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-IV, RAJKOT DATED 24-10-2007 ALSO FOR THE ASS ESSMENT YEAR 2005-06 WHEREBY HE DELETED THE PENALTY OF RS. 20,31 ,720 IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE ACT. ITA NO.583/RJT/2007 APPEAL BY ASSESSEE 2. STARTING WITH THE APPEAL FILED BY THE ASSESSEE, THE FOLLOWING EFFECTIVE GROUNDS ARE RAISED IN THE APPEAL: 1. THE C.I.T. (APPEALS) ERRED IN UPHOLDING THE ADD ITION OF RS.60,00,000/- UNDER SEC.56 OF THE I.T. ACT, 1961 O N ACCOUNT OF RECEIPT BY THE ASSESSEE FROM THE HUF OF WHICH THE A SSESSEE WAS THE MEMBER. 2. THE C.I.T.(APPEALS) FURTHER ERRED IN LAW AND ON FACT IN NOT APPRECIATING THE ALTERNATIVE CONTENTION OF THE ASSE SSEE THAT THE RECEIPT IS OTHERWISE EXEMPT UNDER SEC.10(2) OF THE I.T. ACT, 1961. 3. THE C.I.T.(APPEALS) FURTHER ERRED IN UPHOLDING THE CHARGING OF INTEREST UNDER SEC.234B AND 234C OF THE I.T. ACT, 1 961. 3. THE BRIEF FACTS RELATING TO GROUNDS 1 & 2 ARE TH AT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOT ICED THAT THE ASSESSEE HAS ACCEPTED GIFT OF RS.60 LAKHS FROM SHRI RAGHAVJIBHAI BHANJIBHAI PATEL (BHALODIA) HUF ON 21-03-2005 AND S HRI RAGHAVJIBHAI BHANJIBHAI (INDIAL) OF RS.40 LAKHS ON 21-03-2005. THE ASSESSING OFFICER WAS OF THE VIEW THAT HUF IS NOT C OVERED IN THE DEFINITION OF RELATIVE. THEREFORE, THE GIFT OF RS .60 LAKHS RECEIVED FROM THE HUF WAS HELD TO BE TAXABLE. 4. THE CIT(A) CONFIRMED THE VIEW OF THE ASSESSING OFFICER THAT THE TERM RELATIVE IS DEFINED IN EXPLANATION TO PROVIS O TO CLAUSE (V) OF SUB SECTION (2) OF SECTION 56 OF THE I.T. ACT. THE CIT(A) FURTHER OBSERVED THAT IF THE LEGISLATURE WANTED THAT MONEY EXCEEDING RS. 25,000 IS RECEIVED BY THE MEMBER OF THE HUF FROM TH E HUF IS ALSO NOT CHARGEABLE TO TAX, IT WOULD HAVE SPECIFICALLY M ENTIONED SO IN THE DEFINITION OF RELATIVES. THE CIT(A) ALSO CONSIDER ED THE ALTERNATIVE SUBMISSIONS OF THE ASSESSEE THAT THE SAID GIFT IS E XEMPT U/S 10(2) OF THE ACT. THE CIT(A) OBSERVED THAT SECTION 10(2) OF THE ACT READ WITH SECTION 64(2) OF THE ACT, WHICH MEANS SECTION 10(2) OF THE ACT SPEAKS ABOUT ONLY THAT SUM BEING EXEMPT IN THE HAND S OF THE COPARCENER WHICH IS EQUAL TO HIS SHARE IN HUF. IN O THER WORDS, U/S 10(2) OF THE ACT IF THE SUM IS RECEIVED BY ANY COPA RCENER OF HUF ON ITA NO.1906/MUM/2014 SHRI ATEEV V. GALA 4 PARTIAL OR TOTAL DIVISION IS EXEMPT. THE CASE UNDER CONSIDERATION IS NOT A CASE THAT THE SAID AMOUNT OF RS.60 LAKHS RECE IVED BY WAY OF TOTAL OR PARTIAL PARTITION OF THE HUF. THE CIT(A) F URTHER OBSERVED THAT THE ABOVE SECTION SPEAKS ABOUT SUM RECEIVED BY A ME MBER OF HUF IF THE SAME IS OUT OF INCOME OF THE ESTATE BELONGIN G TO THE FAMILY. IF SECTION 10(2) IS READ WITH SECTION 64(2) OF THE ACT , WHAT IS TO BE SEEN IS THAT SUM RECEIVED BY A MEMBER OF THE HUF FROM TH E INCOME OF THE HUF CANNOT EXCEED THE AMOUNT WHICH CAN BE APPORTION ED TO HIS SHARE IN THE ESTATE OR PROPERTY OR ASSET OF THE HUF . THE CIT(A) HELD THAT THE ASSESSEE HAS FAILED TO MAKE OUT A CASE EIT HER BEFORE THE ASSESSING OFFICER OR BEFORE HIM TO PROVE AND TO EST ABLISH THAT RS.60 LAKHS RECEIVED FROM HUF IS EQUAL TO OR LESS THAN TH E INCOME WHICH CAN BE APPORTIONED TO HIS SHARE OF INCOME IN THE HU F. THE CIT(A) HAS ALSO CONSIDERED SECTION 10(2A) OF THE ACT AND C OMPARED WITH SHARE IN PARTNERSHIP FIRM. THE CIT(A) HELD THAT THE SAID SECTION 10(2A) IS CLEAR THAT ONLY THAT MUCH SHARE FROM THE TOTAL INCOME OF THE FIRM IS EXEMPT IN THE HANDS OF THE PARTNER AS TO WH ICH BEARS TO HIS SHARE IN THE FIRM THE SAME PROPORTION AS THE AMOUNT OF HIS SHARE IN THE PROFITS OF THE FIRM IN ACCORDANCE WITH THE PART NERSHIP DEED BEARS TO SUCH PROFITS. THE ASSESSEE FAILED TO ESTABLISH S UCH SHARE FROM HUF. 5. THE LD.AR SUBMITTED THAT THE REVENUE AUTHORITY H AS FAILED TO APPRECIATE THAT AMOUNT RECEIVED FROM FATHERS HUF I S RECEIVED FROM RELATIVE AS FATHER AND ALL THE PERSONS COMPRISING H UF ARE RELATIVES WITHIN THE MEANING OF EXPLANATION TO PROVISO TO SEC TION 56(2) OF THE ACT. HE SUBMITTED THAT HUF IS A RELATIVE INASMUCH A S HUF IS A COLLECTIVE NAME GIVEN TO GROUP CONSISTING OF INDIVI DUALS, ALL OF WHOM ARE RELATIVES UNDER EXPLANATION TO PROVISO TO SECTI ON 56(2) OF THE ACT. THE LD.AR SUBMITTED THAT THE TERM INDIVIDUAL WOUL D INCLUDE A GROUP OF INDIVIDUALS, HENCE, AN HUF WOULD BE COVERED BY T HE TERM INDIVIDUAL. THE LD.AR, IN SUPPORT OF HIS CONTENTI ON RELIED UPON THE JUDGMENT OF KARNATAKA HIGH COURT IN THE CASE OF CWT VS APNA ((CP) 202 ITR 678. THE LD.AR HAS ALSO RELIED UPON THE JUD GMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS GUN WANTLAL RATANCHAND 208 ITR 1028 (GUJ). THE LD.AR HAS, FURTH ER RELIED UPON THE JUDGMENT IN THE CASE OF JAIN MERCHANTS CO-OPER ATIVE HOUSING SOCIETY LTD & ORS VS HUF OF MANUBHAI KALYANBHAI SHA H IN SPECIAL CIVIL APPLICATION GUJARAT LAW REPORTER XXXVI(1) PAG E 19 AND SUBMITTED THAT IN THE SAID JUDGMENT THE TERM INDIV IDUAL IS HELD TO INCLUDE GROUP OF INDIVIDUALS AS ALSO JOINT FAMILIES . 6. THE ALTERNATIVE CONTENTION OF THE LD.AR THAT TH E AMOUNT RECEIVED FROM HIS FATHERS HUF OF WHICH THE ASSESSEE IS ALSO A MEMBER. THEREFORE, THE RECEIPT IS EXEMPT U/S 10(2) OF THE A CT. THE LD.AR SUBMITTED THAT SECTION 10(2) USES THE LANGUAGE PAI D OUT OF THE INCOME OF THE FAMILY. THE ASSESSING OFFICER WANTS TO READ THE LANGUAGE AS PAID OUT OF THE INCOME OF THE PREVIOUS YEAR OF THE FAMILY WHICH IS NOT THE CORRECT INTERPRETATION. TH E LD.AR SUBMITTED THAT THE PROVISIONS FOR DEDUCTION, EXEMPTION AND RE LIEF SHOULD BE CONSTRUED REASONABLY. IT IS ALSO THE SUBMISSION OF THE LD.AR THAT IN CASE OF AMBIGUITY IN THE LANGUAGE EMPLOYED, THE PRO VISION MUST BE CONSTRUED IN A MANNER THAT BENEFITS THE ASSESSEE. F OR THIS PROPOSITION THE LD.AR RELIED UPON THE JUDGMENT OF T HE SUPREME COURT ITA NO.1906/MUM/2014 SHRI ATEEV V. GALA 5 IN THE CASE OF CIT VS GWALIOR RAYON SILK MANUFACTUR ING CO LTD 196 ITR 149 (SC). HE HAS ALSO RELIED UPON THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT VS SHAAN FINANCE (P) LTD 2 31 ITR 308 (SC). 7. WITH REGARD TO APPLICABILITY OF PROVISIONS OF SECTION 56(2) OF THE ACT, THE LD.R AR SUBMITTED THAT AN HUF IS A CON GLOMERATION OF RELATIVES AS DEFINED U/S 56(2)(V) OF THE ACT. SECTI ON 56(2)(V) SHOULD BE INTERPRETED IN SUCH A WAY THAT INTERPRETATION MU ST AVOID ABSURDITY. THE LD.AR RELIED UPON THE FOLLOWING JUDGMENTS, FOR THIS PROPOSITION: K GOVINDAN & SONS VS CIT (2001) 247 ITR 192 (SC) SHASHIKANT SINGH VS TARKESHWAR SINGH (2002) 5 SCC 7 38 (SC) RAMBHAI L PATEL VS CIT (2001) 252 ITR 846 (GUJ) 8. THE LD.AR LASTLY SUBMITTED THAT IF TWO VIEWS ARE POSSIBLE, THE ONE BENEFICIAL TO THE ASSESSEE HAS TO BE ADOPTED. FOR T HIS PROPOSITION THE LD.AR RELIED UPON THE JUDGMENT OF THE HONBLE A PEX COURT IN (2002) 258 ITR 761 (SC) UNION OF INDIA VS ONKAR S K ANWAR. 9. THE LD.DR ON THE OTHER HAND RELIED UPON THE ORD ER OF CIT(A) AND SUBMITTED THAT THE CIT(A) HAS ANALYSED THE CASE IN DETAIL AT PARAGRAPH 6 OF HIS ORDER BEFORE CONFIRMING THE ORDE R OF THE ASSESSING OFFICER. THE CIT(A) HAS ALSO CONSIDERED THE ALTERNA TIVE SUBMISSIONS MADE BY THE ASSESSEE THAT HIS CASE IS COVERED U/S 1 0(2) OF THE I.T. ACT. THE LD.DR SUBMITTED THAT THE ASSESSEE HIMSELF IS NOT SURE ABOUT THE FACTS WHETHER SECTION 10(2) OF THE ACT IS APPLI CABLE OR EXPLANATION TO SECTION 56(II) OF THE ACT IS APPLICA BLE. THE LD.DR SUBMITTED THAT THE TERM RELATIVE IS DEFINED IN SE CTION 2(41) WHEREIN HUF IS NOT INCLUDED. THE LD.DR FURTHER SUBMITTED TH AT THE OBJECT OF SECTION 10(2) POINTED OUT BY THE LD.AR IS ONLY IN R ESPECT OF PARTITION AND NOT IN CASE OF GIFT. IT IS ALSO THE SUBMISSION OF THE LD.DR THAT CASES CITED BY THE LD.AR ARE NOT APPLICABLE AS UNDE R THE I.T. ACT, THE PERSON HAS BEEN SEPARATELY DEFINED UNDER THE ACT AND HUF IS A SEPARATE PERSON. THE LD.DR SUBMITTED THAT HOW A GIF T CAN BE GIVEN TO HIMSELF. THE LD.DR IN SUPPORT OF HIS CONTENTION REL IED UPON THE JUDGMENT OF KARNATAKA HIGH COURT IN THE CASE OF PAT IL VIJAYKUMAR & ORS VS UOI 151 ITR 48 . 10. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES, RECORD PERUSED AND GONE THROUGH THE DECISIONS CITED. THE C RUX OF THE ISSUES IN THE CASE UNDER CONSIDERATION, ARE (1) WHETHER GIFT RECEIVED FROM HUF BY A MEMBER OF H UF FALLS UNDER THE DEFINITION OF RELATIVE AS PROVIDED IN THE EXP LANATION TO CLAUSE (VI) OF SUB SECTION (2) OF SECTION 56 OF THE ACT?; (2) WHETHER AMOUNT RECEIVED BY ASSESSEE FROM HIS HU F IS COVERED BY SECTION 10(2) OF THE ACT? 11. CLAUSE (VI) OF SECTION 56(2) OF THE ACT HAS BEE N INSERTED WITH EFFECT FROM 01-04-2007 BY TAXATION LAWS (AMENDMENT) ACT, 2006 SO ITA NO.1906/MUM/2014 SHRI ATEEV V. GALA 6 AS TO PROVIDE THAT WHERE ANY SUM OF MONEY, THE AGGR EGATE VALUE OF WHICH EXCEEDS RUPEES FIFTY THOUSAND IS RECEIVED WIT HOUT CONSIDERATION BY AN INDIVIDUAL OR AN HUF IN ANY PRE VIOUS YEAR FROM ANY PERSON OR PERSONS ON OR AFTER 1ST APRIL, 2006 B UT BEFORE THE 1ST DAY OF OCTOBER, 2009, THE WHOLE OF THE AGGREGATE VA LUE OF SUCH SUM SHALL BE INCLUDED IN THE TOTAL INCOME OF THE RECIPI ENT PROVIDED THAT THIS CLAUSE SHALL NOT APPLY TO ANY SUM OF MONEY REC EIVED FROM ANY RELATIVE. EXPLANATION TO CLAUSE (VI) OF SUB SECTION (2) OF SECTION 56 OF THE ACT DEFINED MEANING OF RELATIVE. THE SAID EXPLA NATION READS AS UNDER: EXPLANATION.- FOR THE PURPOSES OF THIS CLAUSE REL ATIVE MEANS (I) SPOUSE OF THE INDIVIDUAL; (II) BROTHER OR SISTER OF THE INDIVIDUAL; (III) BROTHER OR SISTER OF THE SPOUSE OF THE INDIVI DUAL; (IV) BROTHER OR SISTER OF EITHER OF THE PARENTS OF THE INDIVIDUAL; (V) ANY LINEAL ASCENDANT OR DESCENDANT OF THE INDIV IDUAL; (VI) ANY LINEAL ASCENDANT OR DESCENDANT OF THE SPOU SE OF THE INDIVIDUAL; (VII) SPOUSE OF THE PERSON REFERRED TO IN CLAUSE (I I) TO (VI). 11.1 A HINDU UNDIVIDED FAMILY IS A PERSON WITHIN TH E MEANING OF SECTION 2(31) OF THE INCOME-TAX ACT AND IS A DISTIN CTIVELY ASSESSABLE UNIT UNDER THE ACT. THE INCOME-TAX ACT DOES NOT DEF INE EXPRESSION HINDU UNDIVIDED FAMILY. IT IS WELL DEFINED AREA U NDER THE HINDU LAW WHICH HAS RECEIVED RECOGNITION THROUGHOUT. THER EFORE, THE EXPRESSION HINDU UNDIVIDED FAMILY MUST BE CONSTRU ED IN THE SENSE IN WHICH IT IS UNDERSTOOD UNDER THE HINDU LAW AS HA S BEEN IN THE CASE OF SURJIT LAL CHHABRA VS CIT 101 ITR 776(SC). ACTUALLY A HINDU UNDIVIDED FAMILY CONSTITUTES ALL PERSONS LI NEALLY DESCENDED FROM A COMMON ANCESTOR AND INCLUDES THEIR MOTHERS, WIVES OR WIDOWS AND UNMARRIED DAUGHTERS. ALL THESE PERSONS F ALL IN THE DEFINITION OF RELATIVE AS PROVIDED IN EXPLANATION TO CLAUSE (VI) OF SECTION 56(2) OF THE ACT. THE OBSERVATION OF THE CI T(A) THAT HUF IS AS GOOD AS A BODY OF INDIVIDUALS AND CANNOT BE TE RMED AS RELATIVE IS NOT ACCEPTABLE. RATHER, AN HUF IS A GROUP OF RE LATIVES. NOW HAVING FOUND THAT AN HUF IS A GROUP OF RELATIVES, THE QUESTION NOW ARISES AS TO WHETHER WOULD ONLY THE GIFT GIVEN BY T HE INDIVIDUAL RELATIVE FROM THE HUF BE EXEMPT FROM TAXATION AND W OULD, IF A GIFT COLLECTIVELY GIVEN BY THE GROUP OF RELATIVES FROM THE HUF NOT EXEMPT FROM TAXATION. TO BETTER APPRECIATE AND UNDERSTAND THE SITUATION, IT WOULD BE APPROPRIATE TO ILLUSTRATE AN EXAMPLE, THUS AN EMPLOYEE AMONGST THE STAFF MEMBERS OF AN OFFICE RETIRES AND IN TOKEN OF THEIR AFFECTION AND AFFINITY TOWARDS HIM, THE SECRETARY O F THE STAFF CLUB ON BEHALF OF THE MEMBERS OF THE CLUB PRESENTS THE RETI RING EMPLOYEE ITA NO.1906/MUM/2014 SHRI ATEEV V. GALA 7 WITH A GIFT COULD THAT GIFT PRESENTED BY THE SECRET ARY OF THE STAFF CLUB ON BEHALF OF THE STAFF CLUB BE TERMED AS A GIFT FRO M THE SECRETARY OF THE STAFF CLUB ALONE AND NOT FROM ALL THE MEMBERS O F THE CLUB, AS SUCH? IN OUR OPINION ANSWER TO THIS QUOTED EXAMPLE WOULD BE THAT THE GIFT PRESENTED BY THE SECRETARY OF THE CLUB REP RESENTS THE GIFT GIVEN BY HIM ON BEHALF OF THE MEMBERS OF THE STAFF CLUB AND IT IS THE COLLECTIVE GIFT FROM ALL THE MEMBERS OF THE CLUB AN D NOT THE SECRETARY IN HIS INDIVIDUAL CAPACITY. AND IF IT IS HELD OTHER WISE, IT WILL LEAD TO AN ABSURDITY OF INTERPRETATION WHICH IS NOT ACCEPTABLE IN INTERPRETATION OF STATUTES AS HAS BEEN HELD BY THE HONBLE APEX COURT IN THE CASE OF K G GOVINDAN & SONS VS CIT 247 ITR 192 (SC). 11.2 FURTHER, FROM A PLAIN READING OF SECTION 56(2) (VI) ALONG WITH THE EXPLANATION TO THAT SECTION AND ON UNDERSTANDING TH E INTENTION OF THE LEGISLATURE FROM THE SECTION, WE FIND THAT A GIFT R ECEIVED FROM RELATIVE, IRRESPECTIVE OF WHETHER IT IS FROM AN I NDIVIDUAL RELATIVE OR FROM A GROUP OF RELATIVES IS EXEMPT FROM TAX UNDER THE PROVISIONS OF SECTION 56(2)(VI) OF THE ACT AS A GROUP OF RELATIVE S ALSO FALLS WITHIN THE EXPLANATION TO SECTION 56(2)(VI) OF THE ACT. IT IS NOT EXPRESSLY DEFINED IN THE EXPLANATION THAT THE WORD RELATIVE REPRESE NTS A SINGLE PERSON. AND IT IS NOT ALWAYS NECESSARY THAT SINGULA R REMAINS SINGULAR. SOMETIMES A SINGULAR CAN MEAN MORE THAN O NE, AS IN THE CASE BEFORE US. IN THE CASE BEFORE US THE ASSESSEE RECEIVED GIFT FROM HIS HUF. THE WORD HINDU UNDIVIDED FAMILY, TH OUGH SOUNDS SINGULAR UNIT IN ITS FORM AND ASSESSED AS SUCH FOR INCOME-TAX PURPOSES, FINALLY AT THE END A HINDU UNDIVIDED FAM ILY IS MADE UP OF A GROUP OF RELATIVES. THUS, IN OUR OPINION, A SINGULAR WORDS / WORDS COULD BE READ AS PLURAL ALSO, ACCORDING TO TH E CIRCUMSTANCE / SITUATION. TO QUOTE AN EXAMPLE, THE PHRASE A LOT. HERE, THE PHRASE A LOT REMAINS AS SUCH, I.E. PLURAL, IN ALL CIRCUM STANCES AND SITUATIONS, WHERE IN THE CASE OF ONE OF THE FRIEND S OR ONE OF THE RELATIVES, THE PHRASE REMAINS SINGULAR ONLY AS THE PHRASE STATES SO THAT ONE AMONGST THE RELATIVES AND AT NO STRETCH OF IMAGINATION IT COULD MEAN AS PLURAL WHEREAS IN THE PHRASE A LOT THE WORDS A AND LOT ARE INSEPARABLE AND IF SPLIT APART BOTH GIVE DISTINCTIVE NUMBERS, I.E. A SINGULAR AND LOT PLURAL AND WHEREAS WHEN READ TOGETHER, IT CAN ONLY READ AS PLURAL IN NUMBER UNLIKE IN THE CAS E OF ONE OF THE RELATIVES WHERE ONE IS ALWAYS SINGULAR IN NUMBER WHEREAS RELATIVES IS ALWAYS PLURAL IN NUMBER, BUT WHEN RE AD TOGETHER IT COULD READ AS SINGULAR IN NUMBER. APPLYING THIS DESCRIPTI ON WITH THE CASE ON HAND, WE HAVE ALREADY FOUND THAT THOUGH FOR TAXA TION PURPOSE, AN HUF IS CONSIDERED AS A SINGLE UNIT, RATHER, AN HUF IS A GROUP OF RELATIVES AS IT IS FORMED BY THE RELATIVES. THEREF ORE, IN OUR CONSIDERED VIEW, THE RELATIVE EXPLAINED IN EXPLAN ATION TO SECTION 56(2)(VI) OF THE ACT INCLUDES RELATIVES AND AS TH E ASSESSEE RECEIVED GIFT FROM HIS HUF, WHICH IS A GROUP OF RELATIVES , THE GIFT RECEIVED BY THE ASSESSEE FROM THE HUF SHOULD BE INTERPRETED TO MEAN THAT THE GIFT WAS RECEIVED FROM THE RELATIVES THEREFOR E THE SAME IS NOT TAXABLE UNDER SECTION 56(2)(VI) OF THE ACT, WE HOLD ACCORDINGLY. 12. NOW COMING TO THE ALTERNATIVE CONTENTION OF THE ASSESSEE THAT GIFT RECEIVED BY THE ASSESSEE FROM THE HUF FALL UND ER SECTION 10(2) OF THE ACT. SECTION 10(2) OF THE ACT PROVIDES THAT TAX SHALL NOT BE PAYABLE BY AN ASSESSEE IN RESPECT OF ANY SUM WHICH HE RECEIVES ITA NO.1906/MUM/2014 SHRI ATEEV V. GALA 8 FROM A MEMBER OF HINDU UNDIVIDED FAMILY AND AS THE SUM HAS BEEN PAID OUT OF THE FAMILY INCOME, OR IN THE CASE OF AN IMPARTIBLE ESTATE, WHOSE SUCH SUM HAS BEEN PAID OUT OF THE INCOME OF T HE ESTATE BELONGING TO THE FAMILY, SUBJECT HOWEVER, TO THE PR OVISIONS OF SECTION 64(2) OF THE ACT. THE OBJECT OF THE PROVISION IS TH AT A HINDU UNDIVIDED FAMILY, ACCORDING TO SECTION 2(31) IS A PERSON AND A UNIT OF ASSESSMENT. INCOME EARNED BY A HUF IS ASSESSABLE IN ITS OWN HANDS, SO AS TO AVOID DOUBLE TAXATION OF ONE AND SA ME INCOME ONCE IN THE HANDS OF THE HUF WHICH EARNS IT, AND AGAIN I N THE HANDS OF THE MEMBER WHOM, IT IS PAID. IN RESPECT OF THE FAMILY P ROPERTY QUA ITS MEMBERS IT HAS BEEN HELD BY VARIOUS AUTHORITIES AND COURTS THAT THERE IS AN ANTECEDENT TITLE OF SOME KIND OF A MEMB ER IN THE PROPERTIES OF HUF AND A FAMILY ARRANGEMENT WHICH ME RELY ACKNOWLEDGES AND DEFINES HOW THAT TITLE IS LOOKED A T AND IT IS NOT AN ALIENATION OF PROPERTY AT ALL. BUT EVEN IF IT SHOUL D BE REGARDED AS A TRANSFER, THE OBJECT OF AVOIDING FAMILY LITIGATION IS CONSIDERATION IN MONEYS WORTH. THE REAL CONSIDERATION IN A FAMILY A RRANGEMENT IS BASED UPON A RECOGNITION OF A PREEXISTING RIGHT HEN CE, THERE IS NO TRANSFER OF PROPERTY AT ALL. THE HONBLE APEX COURT IN CGT VS NS GETTI CHETTIAR 82 ITR 599 (SC) BASED ITS OBSERVATIO N ON THAT GROUND IN A CASE OF UNEQUAL FAMILY PARTITION AND HELD THAT IT IS NOT TRANSFER, HENCE NO GIFT TAX LIABILITY IS ATTRACTED. EVERY MEM BER OF THE HUF HAS A CLAIM AS TO HIS MAINTENANCE. RECEIVING ANYTHING I N CONSIDERATION OF HIS PRE-EXISTING RIGHT IN A PROPERTY OR INCOME C OVERS BY SECTION 10(2) OF THE ACT. 12.1 THERE ARE TWO WAYS INVOLVED IN A TRANSACTION, I.E. (I) AMOUNT GIVEN AND (II) THE AMOUNT RECEIVED. IF WE RELATE TH E PROVISIONS OF INCOME-TAX ACT TO THESE WAYS OF GIVEN AND RECEIV ED IN CASE OF AN HUF WE FIND THAT THE CASE OF AMOUNT RECEIVED BY AN HUF FROM ITS MEMBER IS PROVIDED IN SECTION 64(2) OF THE ACT. SEC TION 64(2) WAS INSERTED BY THE TAXATION LAWS (AMENDMENT) ACT, 1970 WITH EFFECT FROM 01-04-1971. THIS SECTION WAS INSERTED TO AVOID CREATION OF MULTIPLE HUFS AND OTHERS. SIMILAR PROVISIONS WAS AL SO INSERTED IN THE GIFT-TAX ACT, 1958 AND ACCORDINGLY TRANSFER OF ASSE TS IN SUCH CASE WAS TERMED AS DEEMED GIFT. THE PROVISIONS OF SECTIO N 64(2) PROVIDES THAT - WHERE IN THE CASE OF AN INDIVIDUAL BEING A M EMBER OF A HINDU UNDIVIDED FAMILY, ANY PROPERTY HAVING BEEN THE SEPA RATE PROPERTY OF THE INDIVIDUAL HAS BEEN CONVERTED BY THE INDIVIDUAL INTO PROPERTY BELONGING TO THE FAMILY THROUGH THE ACT OF IMPRESSI NG SUCH SEPARATE PROPERTY WITH THE CHARACTER OF PROPERTY BELONGING T O THE FAMILY OR THROWING IT INTO THE COMMON STOCK OF THE FAMILY OR BEEN TRANSFERRED BY THE INDIVIDUAL, DIRECTLY OR INDIRECTLY, TO THE F AMILY OTHERWISE THAN FOR ADEQUATE CONSIDERATION THEN, NOTWITHSTANDING ANYTHI NG CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT OR IN ANY OTHER LA W FOR THE TIME BEING IN FORCE, FOR THE PURPOSE OF COMPUTATION OF THE TOT AL INCOME OF THE INDIVIDUAL UNDER THIS ACT. THE INDIVIDUAL SHALL BE DEEMED TO HAVE TRANSFERRED THE CONVERTED PROPERTY, THOUGH THE FAMI LY, TO THE MEMBERS OF THE FAMILY FOR BEING HELD BY THEM JOINTL Y. THE INCOME DERIVED FROM THE CONCERTED PROPERTY OR ANY PART THE REOF SHALL BE DEEMED TO ARISE TO THE INDIVIDUAL AND NOT TO THE FA MILY. WHERE THE CONVERTED PROPERTY HAS BEEN THE SUBJECT-MATTER OF A PARTITION (WHETHER PARTIAL OR TOTAL) AMONGST THE MEMBERS OF T HE FAMILY, THE ITA NO.1906/MUM/2014 SHRI ATEEV V. GALA 9 INCOME DERIVED FROM SUCH CONVERTED PROPERTY AS IS R ECEIVED BY THE SPOUSE ON PARTITION SHALL BE DEEMED TO ARISE TO THE SPOUSE FROM ASSETS TRANSFERRED INDIRECTLY BY THE INDIVIDUAL TO THE SPOUSE AND THE PROVISIONS OF SUB-SECTION (1) SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY. WE FIND THAT TO COVER THE TRANSACTION BETWEEN A MEMBER OF HUF AND THE HUF THE INCOME-TAX ACT PROVIDES SECT ION 10(2) AND SECTION 64(2). SECTION 10(2) IS NOT SIMILAR TO SECT ION 64(2). IT DEALS WITH THE TRANSACTION DIFFERENTLY WHICH WOULD MEAN T HAT THE LEGISLATURE IN THEIR OWN WISDOM WAS AWARE ABOUT THE CIRCUMSTANC ES AND ACCORDINGLY PROVISIONS ARE ENACTED IN THE ACT. THER EFORE, IN OUR OPINION, BOTH THE SITUATION OF AMOUNT RECEIVED AND AMOUNT GIVEN TO HUF BY A MEMBER IS TO BE DEALT WITH ACCORDINGLY. 12.2 THE CIT(A) WHILE CONSIDERING SECTIONS 10(2) AN D 10(2A) OF THE ACT HELD THAT FIRSTLY THE AMOUNT RECEIVED ON PARTIA L PARTITION OR ON PARTITION IS ONLY EXEMPT AND SECONDLY TO THE EXTEND OF SHARE OF ASSESSED INCOME OF HUF FOR THE YEAR WOULD ONLY BE E XEMPT. WE ARE NOT IN AGREEMENT WITH THE VIEW OF THE CIT(A). FIRST LY, THERE IS NO PROVISION IN THE ACT TO CONTEND THAT IT IS APPLICAB LE ONLY TO THE EXTEND OF INCOME OF THE YEAR. SECONDLY, THE PROPERTY OR TH E INCOME OF HUF BELONGS TO THE MEMBERS THEREOF WHO ARE EITHER ENTIT LED TO SHARE IN THE PROPERTY ON PARTITION OR HAVE A RIGHT TO BE MAI NTAINED. FOR GETTING EXEMPTION UNDER SECTION 10(2) TWO CONDITIONS ARE TO SATISFY. FIRSTLY, HE IS A MEMBER OF HUF AND SECONDLY HE RECEIVES THE SUM OUT OF THE INCOME OF SUCH HUF MAY BE OF EARLIER YEAR. 12.3 A QUESTION BEFORE HONBLE MADRAS HIGH COURT I N THE CASE OF VEDANTHANNI VS CIT 1 ITR 70 (MAD) AROSE WHERE THERE WAS A JOINT FAMILY AND PETITIONER WAS ENTITLED TO MAINTENANCE A S THE WIDOW OF A DECEASED COPARCENER AND RECEIVED IT AS MEMBER OF HU F AND THE COURT HELD AS UNDER: THE ONLY FURTHER QUESTION THAT ARISES IS, WHETHER THERE IS ANYTHING IN THE ACT WHICH PRODUCES ANOMALOUS RESULT IF WE ADOPT THE ABOVE CONSTRUCTION. FAR FROM THOSE BEING ANY ANOMALY WE F IND THE RESULT IS CONSONANT WITH JUSTICE AND PURPOSES OF THE ACT. THE OBJECT AND SCOPE OF SECTION 14 IS TO PREVENT THE CROWN FROM TA XING TWICE OVER. IF THERE IS ANY SECTION IN THE ACT WHICH ENABLES THE H OLDER OF THE ESTATE IN MAKING HIS RETURNS TO DEDUCT THE AMOUNTS PAID BY HIM TO WIDOWS OF DECEASED COPARCENERS, THEN THE EFFECT OF THE ABO VE CONSTRUCTION WOULD BE TO PREVENT THE CROWN FROM TAXING THE INCOM E EVEN ONCE. BUT IT IS ADMITTED BEFORE US THAT THERE IS NO SUCH PROVISION IN THE ACT. IF WIDOWS ARE NOT EXEMPTED BY REASON OF THE ABOVE C ONSTRUCTION, THE CROWN WOULD UNDOUBTEDLY BEING TAXING TWICE OVER. OU R CONSTRUCTION MAKES THE RESULT WITH EQUATION OF THE CASE. 13. IN THE LIGHT OF ABOVE DISCUSSION, WE FIND THAT THE ASSESSEE RECEIVED GIFT FROM HUF AND HAS SATISFIED BOTH THE C ONDITIONS OF SECTION 10(2) THAT THE ASSESSEE IS A MEMBER OF HUF AND RECEIVED AMOUNT OUT OF THE INCOME OF FAMILY. THERE IS NO MAT ERIAL ON RECORD TO HOLD THAT THE GIFT AMOUNT WAS PART OF ANY ASSETS OF HUF. IT WAS OUT OF INCOME OF FAMILY TO A MEMBER OF HUF, THEREFORE, THE SAME IS EXEMPT U/S 10(2) OF THE ACT. WE HOLD ACCORDINGLY. ITA NO.1906/MUM/2014 SHRI ATEEV V. GALA 10 14. THE OTHER ISSUE IN THE APPEAL PERTAINS TO CHARG ING OF INTEREST U/S 234B AND 234C OF THE ACT. CHARGING OF INTEREST U/S 234B AND 234C BEING CONSEQUENTIAL IN NATURE, THE ASSESSING OFFICE R IS DIRECTED TO ALLOW CONSEQUENTIAL RELIEF TO THE ASSESSEE. ITA NO.601/RJT/2008 APPEAL BY REVENUE 15. THE ASSESSING OFFICER IMPOSED PENALTY OF RS. 20 ,31,720 U/S 271(1)(C) AS HE DID NOT ACCEPT THE GIFT OF RS.60 LA KHS RECEIVED BY THE ASSESSEE FROM THE HUF. ON APPEAL, THE CIT(A) DELETE D THE SAME. WE HAVE HEARD THE PARTIES ON THE ISSUE. WE HAVE DEL ETED THE QUANTUM ADDITION OF RS.60 LAKHS WHILE DEALING WITH THE APPEAL FILED BY THE ASSESSEE IN ITA NO.583/RJT/2007 IN ABOVE PAR AGRAPHS. AS SUCH THE IMPUGNED PENALTY HAS NO LEG TO SURVIVE. TH EREFORE, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPE AL OF THE REVENUE. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. 2.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION MADE TO THE TOTAL INCOME , CONCLUSION DRAWN IN THE IMPUGNED ORDER, CONCLUSION DRAWN IN THE ORDER OF THE TRIBUNAL, MATERIAL AVAILA BLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNS ELS, IF KEPT IN JUXTAPOSITION AND ANALYZED, WE FIND THAT WH ILE ADJUDICATING THE ISSUE, THE BENCH DULY CONSIDERED S ECTION 56 OF THE ACT AND ON THE QUESTION OF CHARGEABILITY OF TAX ON A QUESTION WHETHER A GIFT RECEIVED FROM RELATIVE HELD THAT IT IS EXEMPT FROM TAX UNDER THE PROVISION OF S ECTION 56(2)(VI) OF THE ACT ON A QUESTION WHETHER HUF IS A GROUP OF RELATIVES, IT WAS HELD THAT THE GIFT RECEIVED FR OM HUF WOULD BE EXEMPT FROM TAX U/S 56(20(VI) OF THE ACT. IT IS NOTED THAT IN THE CASE BEFORE RAJKOT BENCH OF THE TRIBUNAL, THE AMOUNT WAS RECEIVED FROM HUF, WHERE T HE ASSESSEE WAS ALSO MEMBER OF HUF. IN THE LIGHT OF T HE AFORESAID DECISION OF THE TRIBUNAL, WE FIND NO INFI RMITY IN ITA NO.1906/MUM/2014 SHRI ATEEV V. GALA 11 THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INC OME TAX (APPEALS) AS THE SAME DECISION HAS BEEN FOLLOWE D THEREIN. RESULTANTLY, THE APPEAL OF THE REVENUE IS DISMISSED. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESENCE OF LD. REPRESENTATIVE FROM BOTH SIDES AT T HE CONCLUSION OF THE HEARING ON 18/04/2017. SD/- SD/- (RAJENDRA) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER MUMBAI; # DATED : 19/04/2017 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. %& '( / THE APPELLANT (RESPECTIVE ASSESSEE) 2. )*'( / THE RESPONDENT. 3. + + , ( %& ) / THE CIT, MUMBAI. 4. + + , / CIT(A)- , MUMBAI, 5. /01 )2 , + %& %23 , / DR, ITAT, MUMBAI 6. 14 5 / GUARD FILE. / BY ORDER, */& ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI