Smt. Deepti Madvaiya, Bhopal V. THE ITO 2(2), Bhopal

ITA 378/IND/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5952 (ITAT-INDORE)
• Duration Of Justice: 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 20-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 21-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Assessee Lawyers: S S DESHPANDE
• Keywords: Gift
• Section: 56(2); 147; 148; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE (SINGLE MEMBER CASE) BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER I.T.A.NO. 378/IND/2016 A.Y. : 2008-09 SMT. DEEPTI MADVAIYA, ITO, 127, MARWARI ROAD, VS 2(2), BHOPAL BHOPAL APPELLANT RESPONDENT PAN NO. AFNPM8345L A PPELLANT BY : SHRI S.S.DESHPANDE, C. A. RESPONDENT BY : SHRI MOHD. JAVED, DR O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A)-31, NEW DELHI, CAMP BHOPAL, DATED 04.01.20 16 FOR THE ASSESSMENT YEAR 2008-09. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL CARRYING ON THE BUSINESS OF STATIONERY A RTICLES. THE DATE OF HEARING : 20 .0 6 20 16 DATE OF PRONOUNCEMENT : 20 .0 6 . 201 6 SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 2 2 ASSESSEE FILED RETURN DISCLOSING A TOTAL INCOME OF RS. 1,35,770/- ON 28.07.2008. SUBSEQUENTLY, THE AO INIT IATED PROCEEDING U/S 147 OF THE ACT BY ISSUING NOTICE U/S 148 ON 28.03.2012 AFTER RECORDING THE REASONS U/S 148(2) O F THE ACT. THE ASSESSEE VIDE LETTER DATED 26.04.2012 SUBMITTED THAT THE RETURN FILED ON 28.07.2008 MAY BE TREATED AS RETURN IN RESPONSE TO NOTICE U/S 148. THE ASSESSMENT WAS COMP LETED U/S 143(3)/147 VIDE ORDER DATED 12.03.2013 BY THE A O AT AN INCOME OF RS. 4,35,770/- MAKING AN ADDITION OF RS. 3,00,000/- U/S 56(2)(VI) OF THE INCOME-TAX ACT, 196 1. 3. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CI T(A) HAS DISMISSED THE APPEAL BY OBSERVING AS UNDER :- 4.3 I HAVE CAREFULLY CONSIDERED THE FINDINGS RECORDED BY THE LD. AO AS PER THE IMPUGNED ORDER, THE POSITION OF LAW AND THE FACTS OF THE CASE ON RECORD. ON GOING THROUGH THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, IT IS SEEN RELYING UPON THE PROVISIONS OF SECTION 56(2)(VI), T HE LD. AO HELD THAT SINCE HUF IS NOT INCLUDED IN RELATIONS SPECIFIED THEREIN, THE GIFT RECEIVED BY THE MINOR SON SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 3 3 OF THE ASSESSEE IS TAXABLE AND INCLUDIBLE IN HER INCOME AS PER THE PROVISIONS OF SECTION 64(1A) OF T HE ACT. THE APPELLANT ON THE OTHER HAND RELYING UPON T HE DECISIONS OF HON'BLE I.T.A.T., RAJKOT AND HYDERABAD , HAS CONTENDED THAT GIFT FROM THE HUF IS EXEMPT. I HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTI ON 56(2)(VI) AND FIND THAT CERTAIN SPECIFIC RELATIONS HAVE BEEN MENTIONED THEREIN, FROM WHOM A GIFT RECEIVED I S TREATED AS EXEMPT. HOWEVER, HUF DOES NOT FIND A MENTION THEREIN. HUF IS A SEPARATE ENTITY AND HAS SPECIFIC AND DISTINCT LEGAL STATUS AS PER THE LAW A ND THEREFORE, IF THE WORD HUF IS A SEPARATE ENTITY AND HAS SPECIFIC AND DISTINCT LEGAL STATUS AS PER THE L AW AND THEREFORE, IF THE WORD DOES NOT FIND A MENTION IN THE AFORESAID SECTION, IT IS OBVIOUSLY BECAUSE OF T HE REASON THAT THE LEGISLATURE DID NOT WANT TO INCLUDE IT IN THE SAID CATEGORY OF RELATIONS FROM WHOM A GIFT RECEIVED IS TREATED AS EXEMPT. WHEREVER THE LEGISLATION WANTED TO EXTEND A PARTICULAR PROVISION OF LAW TO HUF, IT HAS BEEN SPECIFICALLY MENTIONED IN T HE SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 4 4 LAW. MOREOVER, ONLY CERTAIN NATURAL RELATIONS HAVE BEEN MENTIONED IN THE AFORESAID SECTION AND NO ARTIFICIAL ENTITY LIKE HUF HAS BEEN INCORPORATED THEREIN. THUS, IT IS CLEAR THAT THE OMISSION OF THE WORD HUF HAS BEEN DONE DELIBERATELY AND CONSCIOUSLY BY THE LEGISLATURE. IN VIEW OF THIS, I AM UNABLE TO A GREE WITH THE ARGUMENT OF THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT HUF IS A GROU P OF RELATIVES AND HENCE COVERED UNDER THE PROVISION S OF SECTION 56(2)(VI). THUS, WITH DUE RESPECT TO HON 'BLE I.T.A.T. RAJKOT AND HYDERABAD, I AM UNABLE TO AGREE WITH THE ARGUMENT OF THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT HUF IS A GROU P OF RELATIVES AND HENCE COVERED UNDER THE PROVISION S OF SECTION 56(2)(VI). THUS, WITH DUE RESPECT TO HON 'BLE I.T.A.T., RAJKOT AND HYDERABAD, I AM UNABLE TO FOLL OW THE DECISIONS RELIED UPON BY THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE. 4.4 THE ALTERNATIVE ARGUMENT OF THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE GIFT RECEI VED SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 5 5 BY HUF FALLS UNDER THE EXEMPTION U/S 10(2) IS NOT TENABLE AS THE INDIVIDUAL AND THE HUF ARE SEPARATE ENTITIES HAVING DISTINCTIVE STATUS UNDER THE LAW. PRECISELY FOR THIS REASON AND ALSO THE FACT THAT TH E AMOUNT WAS SHOWN AS GIFT, HIS ARGUMENT THAT THE HUF HAD INVESTED THE MONEY IN THE NAME OF A COPARCENER IS LIABLE TO BE REJECTED. 4.5 FURTHER, AS REGARD THE ACTION OF THE AO IN ISSUING A NOTICE U/S 148, I DO NOT FIND ANY INFIRMI TY. IT IS SEEN THAT DUE LEGAL PROCESS WAS FOLLOWED BY T HE AO AND HE WAS WELL WITHIN HIS POWERS TO ISSUE THE SAID NOTICE. THE APPELLANT HAS NOT ELABORATED HER ALLEGATION THAT THE APPROVAL OF THE HIGHER AUTHORIT IES WAS NOT TAKEN, HENCE, THE SAME IS LIABLE TO BE DISMISSED. 4.6 IN VIEW OF THE AFORESAID DISCUSSION, I HOLD TH AT THE AO HAS RIGHTLY TREATED THE GIFT RECEIVED BY THE MINOR SON OF THE APPELLANT AS TAXABLE IN HER HANDS RELYING UPON THE PROVISIONS OF SECTION 56(2)(VI) AN D SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 6 6 64(1A) OF THE ACT. ACCORDINGLY, GROUND NOS. 1 TO 8 ARE REJECTED. 4. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE CONTENDED THAT SMT.DEEPTI MADVAIYA WAS PROP. OF M/S. ABHA MARKETING, BHOPAL AND WAS CARRYING ON THE BUSINESS O F STATIONERY ARTICLES. SMT. DEEPTI MADVAIYA WAS MOTHE R OF MINOR SON UDIT MADVAIYA, WHO HAS RECEIVED GIFT OF RS . 3,00,000/- FROM RAVI PRAKASH MADVAIYA HUF. R.P. MAD VAIYA, FATHER OF UDIT MADVAIYA IS KARTA OF HUF. THE AO ADD ED RS. 3,00,000/- ON THE GROUND THAT GIFT RECEIVED FROM HU F BY UDIT MADVAIYA IS NOT COVERED UNDER THE DEFINITION OF REL ATIVE AND THUS LIABLE TO BE TAXED IN THE HANDS OF MOTHER DEEP TI MADVAIYA. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT MASTER UDIT MADVAIYA IS CO-PARCENER MEMBER OF HUF RECEIVED GIFT FROM HUF AND HAS SATISFIED BOT H THE CONDITION OF SECTION 10(2) OF THE ACT I.E. MASTER U DIT MADVAIYA IS MEMBER OF HUF AND SECONDLY RECEIVED AMOUNT OUT O F INCOME OF FAMILY AND , THEREFORE, THE SAME IS EXEMP TED U/S 10(2) OF THE ACT IN THE HANDS OF UDIT MADVAIYA AND ACCORDINGLY IN THE HANDS OF ASSESSEE. THUS, ON THIS ISSUE THE A DDITION IS SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 7 7 ALSO UNSUSTAINABLE IN LAW AND LIABLE TO BE DELETED. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTE D THAT MASTER UDIT MADVAIYA (MINOR) IS A CO-PARCENER MEMBE R OF HUF M/S. RAVI PRAKASH MADVAIYA AND, THEREFORE, SUM OF R S. 3,00,000/-INVESTED IN THE NAME OF MEMBER OF HUF COU LD NOT BE SAID TO HAVE BEEN RECEIVED WITHOUT CONSIDERATION. THUS, THE ADDITION OF RS. 3 LAKHS IS LIABLE TO BE DELETED. HE FURTHER SUBMITTED THAT SUM RECEIVED WITHOUT CONSIDERATION HI T BY SECTION 56(2)(VI) IN THE CASE OF ASSESSEE SUM RECEI VED ON A CONSIDERATION OF LOVE AND AFFECTION AND HENCE ADDIT ION OF RS. 3 LAKHS IS LIABLE TO BE DELETED. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE RELIED UPON THE ORDERS OF THE RAJK OT TRIBUNAL AND HYDERABAD TRIBUNAL IN THE CASE OF VINEET KUMAR RAGHAVJIBHAI BHALODIA VS. ITO, (2011) 140 TTJ 0058 (RAJKOT TRIBUNAL ) AND IN THE CASE OF SMT. BIRAVELLI DHANAL AXMI VS. ITO, WARD 4, KARIMNAGAR, (2016) ITL 2684 (HYD. I.T. A.T. ) RESPECTIVELY AND CONTENDED THAT HIS CASE IS SQUAREL Y COVERED BY THE AFORESAID DECISIONS OF THE DECISIONS OF THE TRIBUNAL. 5. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW. SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 8 8 6. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PART IES. I HAVE ALSO PERUSED THE CASE LAWS CITED BY THE LD. AU THORIZED REPRESENTATIVE FOR THE ASSESSEE. I FIND THAT FACTS OF BOTH THE CASE LAWS CITED BY THE LD. AUTHORIZED REPRESENTATIV E ARE SIMILAR. HOWEVER, I AM DISCUSSING THE FACTS OF THE CASE OF VINEET KUMAR RAGHAVJIBHAI BHALODIA FOR BREVITY, THE FACTS ARE THAT THE AO NOTICED THAT THE ASSESSEE HAD ACCEPTED THE GIFT OF RS. 60 LAKHS FROM SHRI RAGHAVJIBHAI BHAJIBHAI PATEL (BHALODIA) HUF ON 21.03.2005 AND SHRI RAGHAVJIBHAI BHAJIBHAI (INDIVIDUAL ) OF RS. 40 LAKHS ON 21.3.2005. THE AO WAS OF THE VIEW THAT HUF IS NOT COVERED IN THE DEFINITION OF R ELATIVE AND, THEREFORE, THE GIFT OF RS. 60 LAKHS RECEIVED FROM T HE HUF CASE WAS HELD TO BE TAXABLE. THE I.T.A.T. RAJKOT BENCH HA S PASSED A VERY ELABORATE ORDER AND HELD AS UNDER :- 10. WE HAVE HEARD THE LD.REPRESENTATIVES OF THE PARTIES, RECORD PERUSED AND GONE THROUGH THE DECISIONS CITED. THE CRUX OF THE ISSUES IN THE CASE UNDER CONSIDERATION, ARE SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 9 9 (1) WHETHER GIFT RECEIVED FROM HUF BY A MEMBER OF HUF FALLS UNDER THE DEFINITION OF RELATIVE AS PROVIDED IN THE EXPLANATION TO CLAUSE (VI) OF SUB SECTION (2) OF SECTION 56 OF THE ACT?; (2) WHETHER AMOUNT RECEIVED BY ASSESSEE FROM HIS HUF 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 AS TO PROVIDE THAT ITA NO.583/RJT/2007 ITA NO. 601/RJT/2008 6 WHERE ANY SUM OF MONEY, THE AGGREGATE VALUE OF WHICH EXCEEDS RUPEES FIFTY THOUSAND IS RECEIVED WITHOUT CONSIDERATION BY AN INDIVIDUAL OR AN HUF IN ANY PREVIOUS YEAR FROM ANY PERSON OR PERSONS ON OR AFTE R 1ST APRIL, 2006 BUT BEFORE THE 1ST DAY OF OCTOBER, 2009, THE WHOLE OF THE AGGREGATE VALUE OF SUCH SUM SHALL BE INCLUDED IN THE TOTAL INCOME OF THE RECIPI ENT PROVIDED THAT THIS CLAUSE SHALL NOT APPLY TO ANY SU M OF MONEY RECEIVED FROM ANY RELATIVE. EXPLANATION TO SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 10 10 CLAUSE (VI) OF SUB SECTION (2) OF SECTION 56 OF THE ACT DEFINED MEANING OF RELATIVE. THE SAID EXPLANATION READS AS UNDER:- EXPLANATION.- FOR THE PURPOSES OF THIS CLAUSE RELATIVE MEANS (I) SPOUSE OF THE INDIVIDUAL; (II) BROTHER OR SISTER OF THE INDIVIDUAL; (III) BROTHER OR SISTER OF THE SPOUSE OF THE INDIVIDUAL; (IV) BROTHER OR SISTER OF EITHER OF THE PARENTS OF THE INDIVIDUAL; (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 CLAUSE (II) TO (VI). 11.1 A HINDU UNDIVIDED FAMILY IS A PERSON WITHIN THE MEANING OF SECTION 2(31) OF THE SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 11 11 INCOME-TAX ACT AND IS A DISTINCTIVELY ASSESSABLE UNIT UNDER THE ACT. THE INCOME-TAX ACT DOES NOT DEFINE EXPRESSION HINDU UNDIVIDED FAMILY. IT IS WELL DEFINED AREA UNDER THE HINDU LAW WHICH HAS RECEIVED RECOGNITION THROUGH OUT. THEREFORE, THE EXPRESSION HINDU UNDIVIDED FAMILY MUST BE CONSTRUED IN THE SENSE IN WHICH IT IS UNDERSTOOD UNDER THE HINDU LAW AS HAS BEEN IN THE CASE OF SURJIT LAL CHHABRA VS CIT 101 ITR 776(SC). ACTUALLY A HINDU UNDIVIDED FAMILY CONSTITUTES ALL PERSONS LINEALLY DESCENDED FROM A COMMON ANCESTOR AND INCLUDES THEIR MOTHERS, WIVES OR WIDOWS AND UNMARRIED DAUGHTERS. ALL THESE PERSONS FALL IN THE DEFINITION OF RELATIVE AS PROVIDED IN EXPLANATION TO CLAUSE (VI) OF SECTION 56(2) OF THE ACT. THE OBSERVATION OF THE CIT(A) THAT HUF IS AS GOOD AS A BODY OF INDIVIDUALS AND CANNOT BE TERMED AS RELATIVE IS NOT ACCEPTABLE. RATHER, AN HUF IS A GROUP OF RELATIVES. NOW SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 12 12 HAVING FOUND THAT AN HUF IS A GROUP OF RELATIVES, THE QUESTION NOW ARISES AS TO WHETHER WOULD ONLY THE GIFT GIVEN BY THE ITA NO.583/RJT/2007 ITA NO. 601/RJT/2008 7 INDIVIDUAL RELATIVE FROM THE HUF BE EXEMPT FROM TAXATION AND WOULD, 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 OF THE STAFF CLUB ON BEHALF OF THE MEMBERS OF THE CLUB PRESENTS THE RETIRING EMPLOYEE WITH A GIFT COULD THAT GIFT PRESENTED BY THE SECRETARY OF THE STAFF CLUB ON BEHALF OF THE STAFF CLUB BE TERMED AS A GIFT FROM THE SECRETARY OF THE STAFF CLUB ALONE AND NOT FROM ALL THE MEMBERS OF THE CLUB, AS SUCH? IN OUR OPINION ANSWER TO THIS QUOTED SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 13 13 EXAMPLE WOULD BE THAT THE GIFT PRESENTED BY THE SECRETARY OF THE CLUB REPRESENTS 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 AND NOT THE SECRETARY IN HIS INDIVIDUAL CAPACITY. AND IF IT IS HELD OTHERWISE, 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 THE INTENTION OF THE LEGISLATURE FROM THE SECTION, WE FIND THAT A GIFT RECEIVED FROM RELATIVE, IRRESPECTIVE OF WHETHER IT IS FROM AN INDIVIDUAL RELATIVE OR FROM A GROUP OF RELATIVES IS EXEMPT FROM TAX UNDER THE PROVISIONS OF SECTION 56(2)(VI) OF THE ACT AS A SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 14 14 GROUP OF RELATIVES 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 REPRESENTS A SINGLE PERSON. AND IT IS NOT ALWAYS NECESSARY THAT SINGULAR REMAINS SINGULAR. SOMETIMES A SINGULAR CAN MEAN MORE THAN ONE, AS IN THE CASE BEFORE US. IN THE CASE BEFORE US THE ASSESSEE RECEIVED GIFT FROM HIS HUF. THE WORD HINDU UNDIVIDED FAMILY, THOUGH SOUNDS SINGULAR UNIT IN ITS FORM AND ASSESSED AS SUCH FOR INCOME-TAX PURPOSES, FINALLY AT THE END A HINDU UNDIVIDED FAMILY IS MADE UP OF A GROUP OF RELATIVES. THUS, IN OUR OPINION, A SINGULAR WORDS / WORDS COULD BE READ AS PLURAL ALSO, ACCORDING TO THE CIRCUMSTANCE / SITUATION. TO QUOTE AN ITA NO.583/RJT/2007 ITA NO. 601/RJT/2008 8 EXAMPLE, THE PHRASE A LOT. HERE, THE PHRASE A LOT REMAINS AS SUCH, I.E. PLURAL, IN ALL CIRCUMSTANCES AND SITUATIONS, WHERE IN THE CASE SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 15 15 OF ONE OF THE FRIENDS 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 CASE OF ONE OF THE RELATIVES WHERE ONE IS ALWAYS SINGULAR IN NUMBER WHEREAS RELATIVES IS ALWAYS PLURAL IN NUMBER, BUT WHEN READ TOGETHER IT COULD READ AS SINGULAR IN NUMBER. APPLYING THIS DESCRIPTION WITH THE CASE ON HAND, WE HAVE ALREADY FOUND THAT THOUGH FOR TAXATION PURPOSE, AN HUF IS CONSIDERED AS A SINGLE UNIT, RATHER, AN HUF IS A GROUP OF RELATIVES AS IT IS FORMED BY THE RELATIVES. THEREFORE, IN OUR CONSIDERED VIEW, THE RELATIVE EXPLAINED IN EXPLANATION TO SECTION 56(2)(VI) OF THE ACT SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 16 16 INCLUDES RELATIVES AND AS THE 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 THEREFORE 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 UNDER 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 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 THE ESTATE BELONGING TO THE FAMILY, SUBJECT HOWEVER, TO THE PROVISIONS OF SECTION 64(2) OF THE ACT. THE OBJECT OF THE SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 17 17 PROVISION IS THAT 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 SAME INCOME ONCE IN THE HANDS OF THE HUF WHICH EARNS IT, AND AGAIN IN THE HANDS OF THE MEMBER WHOM, IT IS PAID. IN RESPECT OF THE FAMILY PROPERTY QUA ITS MEMBERS IT ITA NO.583/RJT/2007 ITA NO. 601/RJT/2008 9 HAS BEEN HELD BY VARIOUS AUTHORITIES AND COURTS THAT THERE IS AN ANTECEDENT TITLE OF SOME KIND OF A MEMBER IN THE PROPERTIES OF HUF AND A FAMILY ARRANGEMENT WHICH MERELY ACKNOWLEDGES AND DEFINES HOW THAT TITLE IS LOOKED AT AND IT IS NOT AN ALIENATION OF PROPERTY AT ALL. BUT EVEN IF IT SHOULD BE REGARDED AS A TRANSFER, THE OBJECT OF AVOIDING FAMILY LITIGATION IS CONSIDERATION IN MONEYS WORTH. THE REAL CONSIDERATION IN A FAMILY ARRANGEMENT IS BASED UPON A RECOGNITION OF A PREEXISTING RIGHT HENCE, THERE IS NO TRANSFER SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 18 18 OF PROPERTY AT ALL. THE HONBLE APEX COURT IN CGT VS NS GETTI CHETTIAR 82 ITR 599 (SC) BASED ITS OBSERVATION 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 MEMBER OF THE HUF HAS A CLAIM AS TO HIS MAINTENANCE. RECEIVING ANYTHING IN CONSIDERATION OF HIS PRE-EXISTING RIGHT IN A PROPERTY OR INCOME COVERS 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 THE PROVISIONS OF INCOME-TAX ACT TO THESE WAYS OF GIVEN AND RECEIVED 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. SECTION 64(2) WAS INSERTED BY THE TAXATION LAWS (AMENDMENT) ACT, 1970 WITH EFFECT FROM SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 19 19 01-04-1971. THIS SECTION WAS INSERTED TO AVOID CREATION OF MULTIPLE HUFS AND OTHERS. SIMILAR PROVISIONS WAS ALSO INSERTED IN THE GIFT-TAX ACT, 1958 AND ACCORDINGLY TRANSFER OF ASSETS IN SUCH CASE WAS TERMED AS DEEMED GIFT. THE PROVISIONS OF SECTION 64(2) PROVIDES THAT - WHERE IN THE CASE OF AN INDIVIDUAL BEING A MEMBER OF A HINDU UNDIVIDED FAMILY, ANY PROPERTY HAVING BEEN THE SEPARATE PROPERTY OF THE INDIVIDUAL HAS BEEN CONVERTED BY THE INDIVIDUAL INTO PROPERTY BELONGING TO THE FAMILY THROUGH THE ACT OF IMPRESSING SUCH SEPARATE PROPERTY WITH THE CHARACTER OF PROPERTY BELONGING TO THE FAMILY OR THROWING IT INTO THE COMMON STOCK OF THE FAMILY OR BEEN TRANSFERRED BY THE INDIVIDUAL, DIRECTLY OR INDIRECTLY, TO THE FAMILY OTHERWISE THAN FOR ADEQUATE CONSIDERATION THEN, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT OR IN ANY OTHER LAW FOR THE TIME BEING IN FORCE, FOR THE PURPOSE OF COMPUTATION OF THE TOTAL SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 20 20 INCOME OF THE INDIVIDUAL UNDER THIS ACT. THE INDIVIDUAL SHALL BE DEEMED TO HAVE ITA NO.583/RJT/2007 ITA NO. 601/RJT/2008 10 TRANSFERRED THE CONVERTED PROPERTY, THOUGH THE FAMILY, TO THE MEMBERS OF THE FAMILY FOR BEING HELD BY THEM JOINTLY. THE INCOME DERIVED FROM THE CONCERTED PROPERTY OR ANY PART THEREOF SHALL BE DEEMED TO ARISE TO THE INDIVIDUAL AND NOT TO THE FAMILY. WHERE THE CONVERTED PROPERTY HAS BEEN THE SUBJECT-MATTER OF A PARTITION (WHETHER PARTIAL OR TOTAL) AMONGST THE MEMBERS OF THE FAMILY, THE INCOME DERIVED FROM SUCH CONVERTED PROPERTY AS IS RECEIVED 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 SECTION 10(2) SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 21 21 AND SECTION 64(2). SECTION 10(2) IS NOT SIMILAR TO SECTION 64(2). IT DEALS WITH THE TRANSACTION DIFFERENTLY WHICH WOULD MEAN THAT THE LEGISLATURE IN THEIR OWN WISDOM WAS AWARE ABOUT THE CIRCUMSTANCES AND ACCORDINGLY PROVISIONS ARE ENACTED IN THE ACT. THEREFORE, 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) AND 10(2A) OF THE ACT HELD THAT FIRSTLY THE AMOUNT RECEIVED ON PARTIAL PARTITION OR ON PARTITION IS ONLY EXEMPT AND SECONDLY TO THE EXTENT OF SHARE OF ASSESSED INCOME OF HUF FOR THE YEAR WOULD ONLY BE EXEMPT. WE ARE NOT IN AGREEMENT WITH THE VIEW OF THE CIT(A). FIRSTLY, THERE IS NO PROVISION IN THE ACT TO CONTEND THAT IT IS APPLICABLE ONLY TO THE EXTENT OF INCOME OF THE YEAR. SECONDLY, THE PROPERTY OR THE INCOME OF SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 22 22 HUF BELONGS TO THE MEMBERS THEREOF WHO ARE EITHER ENTITLED TO SHARE IN THE PROPERTY ON PARTITION OR HAVE A RIGHT TO BE MAINTAINED. 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 IN THE CASE OF VEDANTHANNI VS CIT 1 ITR 70 (MAD) AROSE WHERE THERE WAS A JOINT FAMILY AND PETITIONER WAS ITA NO.583/RJT/2007 ITA NO. 601/RJT/2008 11 ENTITLED TO MAINTENANCE AS THE WIDOW OF A DECEASED COPARCENER AND RECEIVED IT AS MEMBER OF HUF 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 SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 23 23 ANY ANOMALY WE FIND THE RESULT IS CONSONANT WITH JUSTICE AND PURPOSES OF THE ACT. THE OBJECT AND SCOPE OF SECTION 14 IS TO PREVENT THE CROWN FROM TAXING TWICE OVER. IF THERE IS ANY SECTION IN THE ACT WHICH ENABLES THE HOLDER OF THE ESTATE IN MAKING HIS RETURNS TO DEDUCT THE AMOUNTS PAID BY HIM TO WIDOWS OF DECEASED COPARCENERS, THEN THE EFFECT OF THE ABOVE CONSTRUCTION WOULD BE TO PREVENT THE CROWN FROM TAXING THE INCOME 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 CONSTRUCTION, THE CROWN WOULD UNDOUBTEDLY BEING TAXING TWICE OVER. OUR CONSTRUCTION MAKES THE RESULT WITH EQUATION OF THE CASE. SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 24 24 13. IN THE LIGHT OF ABOVE DISCUSSION, WE FIND THAT THE ASSESSEE RECEIVED GIFT FROM HUF AND HAS SATISFIED BOTH THE CONDITIONS OF SECTION 10(2) THAT THE ASSESSEE IS A MEMBER OF HUF AND RECEIVED AMOUNT OUT OF THE INCOME OF FAMILY. THERE IS NO MATERIAL 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. 7. I FIND THAT THE CASE OF THE ASSESSEE IS SQUARELY CO VERED BY THE DECISION OF THE RAJKOT BENCH PASSED IN THE CASE OF VINEETKUMAR RAGHAVJIBHAI BHALODIA VS. ITO (SUPRA). I, RESPECTFULLY, FOLLOWING THE SAME, ALLOW THE APPEAL OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. SMT. DEEPTI MADVAIYA VS. ITO, 2(2), BHOPAL I.T.A.NO . 378/IND/2016 A.Y. 2008-09 25 25 THIS ORDER HAS BEEN PRONOUNCED IN THE OP EN COURT ON 20 TH JUNE, 2016, SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 20 TH JUNE, 2016. CPU* 206