Shri Vinitkumar Raghavjibhai Bhalodia, Morbi V. The Income Tax Officer, Ward-5(4), Morbi

ITA 583/RJT/2007

• Counselvise Citation: 58324914 RSA 2007
• Duration Of Justice: 3 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 27-12-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N R SONI
• Keywords: Gift
• Section: 56(2); 234B; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T.A. NO.583/RJT/2007 (ASSESSMENT YEAR 2005-06) VINEETKUMAR RAGHAVJIBHAI BHALODIA VS ITO, RAJKOT WD .5(4) C/O SAMAY ELECTRONICS PVT LTD MORBI AT : VIRPUR, RAJKOT-MORVI HIGHWAY MORBI PAN :AFPPB6969M (APPELLANT) (RESPONDENT) I.T.A. NO.601/RJT/2008 (ASSESSMENT YEAR 2005-06) THE ITO, RAJKOT WD.5(4) VS SHRI VINITKUMAR RAGHAV JIBHAI MORBI BHALODIYA,C/O SAMAY ELECTRONICS MORBI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI N.R. SONI REVENUE BY : SHRI MANISH SHAH O R D E R PER AL GEHLOT, AM APPEAL IN ITA NO.583/RJT/2007 IS A QUANTUM APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-IV, RAJKOT DATED 23-10- 2007 FOR THE ASSESSMENT YEAR 2005-06 WHEREAS THE APPEAL IN ITA NO.601/RJT/2008 I S FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-IV, RAJKOT DATED 24 -10-2007 ALSO FOR THE ASSESSMENT YEAR 2005-06 WHEREBY HE DELETED THE PENA LTY OF RS. 20,31,720 IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF T HE 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: ITA NO.583/RJT/2007 ITA NO. 601/RJT/2008 2 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 TH E ASSESSEE 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 T HE CHARGING OF INTEREST UNDER SEC.234B AND 234C OF THE I.T. ACT , 1961. 3. THE BRIEF FACTS RELATING TO GROUNDS 1 & 2 ARE TH AT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICE D THAT THE ASSESSEE HAS ACCEPTED GIFT OF RS.60 LAKHS FROM SHRI RAGHAVJIBHAI BHANJIBHAI PATEL (BHALODIA) HUF ON 21-03-2005 AND SHRI RAGHAVJIBHAI BHANJIBHAI (INDIAL) OF RS.40 LAKHS ON 21-03-2005. THE ASSESSING OFFICER WAS OF THE VIEW THAT HUF IS NOT COVERED 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 O FFICER THAT THE TERM RELATIVE IS DEFINED IN EXPLANATION TO PROVISO TO CLAUSE (V) OF SUB SECTION (2) OF SECTION 56 OF THE I.T. ACT. THE CIT(A) FURTHER OBS ERVED THAT IF THE LEGISLATURE WANTED THAT MONEY EXCEEDING RS. 25,000 IS RECEIVED BY THE MEMBER OF THE HUF FROM THE HUF IS ALSO NOT CHARGEABLE TO TAX, IT WOUL D HAVE SPECIFICALLY MENTIONED SO IN THE DEFINITION OF RELATIVES. THE CIT(A) AL SO CONSIDERED 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 O NLY THAT SUM BEING EXEMPT IN THE HANDS OF THE COPARCENER WHICH IS EQUAL TO HI S SHARE IN HUF. IN OTHER WORDS, U/S 10(2) OF THE ACT IF THE SUM IS RECEIVED BY ANY COPARCENER OF HUF ON PARTIAL OR TOTAL DIVISION IS EXEMPT. THE CASE UNDE R CONSIDERATION IS NOT A CASE ITA NO.583/RJT/2007 ITA NO. 601/RJT/2008 3 THAT THE SAID AMOUNT OF RS.60 LAKHS RECEIVED BY WAY OF TOTAL OR PARTIAL PARTITION OF THE HUF. THE CIT(A) FURTHER OBSERVED THAT THE ABOV E SECTION SPEAKS ABOUT SUM RECEIVED BY A MEMBER OF HUF IF THE SAME IS OUT OF I NCOME OF THE ESTATE BELONGING 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 THE INCOME OF THE HUF CANNOT EXCEED THE AMOUNT WHICH CAN BE AP PORTIONED TO HIS SHARE IN THE ESTATE OR PROPERTY OR ASSET OF THE HUF. THE CI T(A) HELD THAT THE ASSESSEE HAS FAILED TO MAKE OUT A CASE EITHER BEFORE THE ASS ESSING OFFICER OR BEFORE HIM TO PROVE AND TO ESTABLISH THAT RS.60 LAKHS RECEIVED FR OM HUF IS EQUAL TO OR LESS THAN THE INCOME WHICH CAN BE APPORTIONED TO HIS SHA RE OF INCOME IN THE HUF. THE CIT(A) HAS ALSO CONSIDERED SECTION 10(2A) OF TH E ACT AND COMPARED WITH SHARE IN PARTNERSHIP FIRM. THE CIT(A) HELD THAT TH E 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 WHICH BEARS TO HIS SHARE IN TH E FIRM THE SAME PROPORTION AS THE AMOUNT OF HIS SHARE IN THE PROFITS OF THE FIRM IN ACCORDANCE WITH THE PARTNERSHIP DEED BEARS TO SUCH PROFITS. THE ASSESS EE FAILED TO ESTABLISH SUCH SHARE FROM HUF. 5. THE LD.AR SUBMITTED THAT THE REVENUE AUTHORITY H AS FAILED TO APPRECIATE THAT AMOUNT RECEIVED FROM FATHERS HUF IS RECEIVED FROM RELATIVE AS FATHER AND ALL THE PERSONS COMPRISING HUF ARE RELATIVES WITHIN THE MEANING OF EXPLANATION TO PROVISO TO SECTION 56(2) OF THE ACT. HE SUBMITTED THAT HUF IS A RELATIVE INASMUCH AS HUF IS A COLLECTIVE NAME GIVEN TO GROUP CONSISTI NG OF INDIVIDUALS, 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 WOULD INCLUDE A GROUP OF INDIVIDUALS, HENCE, AN HUF WOULD BE COVERED BY THE TERM INDIVIDUAL. THE LD.AR, IN SUPPORT OF HIS CONTENTION RELIED UPON THE JUDGMENT OF KARNATAKA HI GH COURT IN THE CASE OF CWT VS APNA ((CP) 202 ITR 678. THE LD.AR HAS ALSO RELI ED UPON THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS GUN WANTLAL RATANCHAND 208 ITR 1028 (GUJ). THE LD.AR HAS, FURTHER RELIED UPON THE JUDGMENT IN THE CASE OF JAIN MERCHANTS CO-OPERATIVE HOUSING SOCIETY LTD & ORS V S HUF OF MANUBHAI ITA NO.583/RJT/2007 ITA NO. 601/RJT/2008 4 KALYANBHAI SHAH IN SPECIAL CIVIL APPLICATION GUJARA T LAW REPORTER XXXVI(1) PAGE 19 AND SUBMITTED THAT IN THE SAID JUDGMENT THE TERM INDIVIDUAL IS HELD TO INCLUDE GROUP OF INDIVIDUALS AS ALSO JOINT FAMILIES . 6. THE ALTERNATIVE CONTENTION OF THE LD.AR THAT THE 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 ACT. THE LD.AR SUBMITTED T HAT SECTION 10(2) USES THE LANGUAGE PAID OUT OF THE INCOME OF THE FAMILY. T HE 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. THE LD.AR SUBMITTED THAT THE PROVISIONS FOR DEDUCTION, EXEMPTION AND RELIEF SHOULD BE CONST RUED REASONABLY. IT IS ALSO THE SUBMISSION OF THE LD.AR THAT IN CASE OF AMBIGUITY I N THE LANGUAGE EMPLOYED, THE PROVISION MUST BE CONSTRUED IN A MANNER THAT BENEFI TS THE ASSESSEE. FOR THIS PROPOSITION THE LD.AR RELIED UPON THE JUDGMENT OF T HE SUPREME COURT IN THE CASE OF CIT VS GWALIOR RAYON SILK MANUFACTURING CO LTD 1 96 ITR 149 (SC). HE HAS ALSO RELIED UPON THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT VS SHAAN FINANCE (P) LTD 231 ITR 308 (SC). 7. WITH REGARD TO APPLICABILITY OF PROVISIONS OF SE CTION 56(2) OF THE ACT, THE LD.R AR SUBMITTED THAT AN HUF IS A CONGLOMERATION O F RELATIVES AS DEFINED U/S 56(2)(V) OF THE ACT. SECTION 56(2)(V) SHOULD BE IN TERPRETED IN SUCH A WAY THAT INTERPRETATION MUST AVOID ABSURDITY. THE LD.AR REL IED 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 738 (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 THIS PROPOSITION THE LD.AR ITA NO.583/RJT/2007 ITA NO. 601/RJT/2008 5 RELIED UPON THE JUDGMENT OF THE HONBLE APEX COURT IN (2002) 258 ITR 761 (SC) UNION OF INDIA VS ONKAR S KANWAR. 9. THE LD.DR ON THE OTHER HAND RELIED UPON THE ORDE R OF CIT(A) AND SUBMITTED THAT THE CIT(A) HAS ANALYSED THE CASE IN DETAIL AT PARAGRAPH 6 OF HIS ORDER BEFORE CONFIRMING THE ORDER OF THE ASSESSING OFFICER. THE CIT(A) HAS ALSO CONSIDERED THE ALTERNATIVE SUBMISSIONS MADE BY THE ASSESSEE THAT HIS CASE IS COVERED U/S 10(2) OF THE I.T. ACT. THE LD.DR SUBMI TTED THAT THE ASSESSEE HIMSELF IS NOT SURE ABOUT THE FACTS WHETHER SECTION 10(2) O F THE ACT IS APPLICABLE OR EXPLANATION TO SECTION 56(II) OF THE ACT IS APPLICA BLE. THE LD.DR SUBMITTED THAT THE TERM RELATIVE IS DEFINED IN SECTION 2(41) WHE REIN HUF IS NOT INCLUDED. THE LD.DR FURTHER SUBMITTED THAT THE OBJECT OF SECTION 10(2) POINTED OUT BY THE LD.AR IS ONLY IN RESPECT OF PARTITION AND NOT IN CASE OF GIF T. IT IS ALSO THE SUBMISSION OF THE LD.DR THAT CASES CITED BY THE LD.AR ARE NOT APPLICA BLE AS UNDER 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 GIFT CAN BE GIVEN TO HIMSELF. THE LD.DR IN SUPPORT OF HIS CONTENTION RELIED UPON THE JUDGME NT OF KARNATAKA HIGH COURT IN THE CASE OF PATIL VIJAYKUMAR & ORS VS UOI 151 ITR 4 8 . 10. WE HAVE HEARD THE LD.REPRESENTATIVES OF THE PAR TIES, RECORD PERUSED AND GONE THROUGH THE DECISIONS CITED. THE CRUX 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 T HE EXPLANATION 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 S O AS TO PROVIDE THAT ITA NO.583/RJT/2007 ITA NO. 601/RJT/2008 6 WHERE ANY SUM OF MONEY, THE AGGREGATE VALUE OF WHIC H EXCEEDS RUPEES FIFTY THOUSAND IS RECEIVED WITHOUT CONSIDERATION BY AN IN DIVIDUAL OR AN HUF IN ANY PREVIOUS YEAR FROM ANY PERSON OR PERSONS ON OR AFTE R 1 ST APRIL, 2006 BUT BEFORE THE 1 ST DAY OF OCTOBER, 2009, THE WHOLE OF THE AGGREGATE V ALUE OF SUCH SUM SHALL BE INCLUDED IN THE TOTAL INCOME OF THE RECIPIENT PR OVIDED THAT THIS CLAUSE SHALL NOT APPLY TO ANY SUM OF MONEY RECEIVED FROM ANY RELATIV E. EXPLANATION TO 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 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 DISTINCTIVELY ASSESS ABLE UNIT UNDER THE ACT. THE INCOME-TAX ACT DOES NOT DEFINE EXPRESSION HINDU UN DIVIDED 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). ACTUALL Y A HINDU UNDIVIDED FAMILY CONSTITUTES ALL PERSONS LINEALLY DESCENDED FROM A C OMMON ANCESTOR AND INCLUDES THEIR MOTHERS, WIVES OR WIDOWS AND UNMARRIED DAUGHT ERS. ALL THESE PERSONS FALL IN THE DEFINITION OF RELATIVE AS PROVIDED IN EXPL ANATION TO CLAUSE (VI) OF SECTION 56(2) OF THE ACT. THE OBSERVATION OF THE CIT(A) TH AT 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 HAVING FOUND TH AT AN HUF IS A GROUP OF RELATIVES, THE QUESTION NOW ARISES AS TO WHETHER W OULD 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 TAX ATION 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 EMP LOYEE 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 T HE MEMBERS OF THE CLUB PRESENTS THE RETIRING EMPLOYEE WITH A GIFT COULD THAT GIFT P RESENTED 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 TH E CLUB, AS SUCH? IN OUR OPINION ANSWER TO THIS QUOTED 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 A LL THE MEMBERS OF THE CLUB AND NOT THE SECRETARY IN HIS INDIVIDUAL CAPACITY. AND IF I T IS HELD OTHERWISE, IT WILL LEAD TO AN ABSURDITY OF INTERPRETATION WHICH IS NOT ACCEPTA BLE IN INTERPRETATION OF STATUTES AS HAS BEEN HELD BY THE HONBLE APEX COURT IN THE C ASE 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 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 GROUP OF RELATIVES ALSO FALLS WITHIN THE EXPLANATION TO SECT ION 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 SINGUL AR 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 I TS FORM AND ASSESSED AS SUCH FOR INCOME-TAX PURPOSES, FINALLY AT THE END A HIND U UNDIVIDED FAMILY IS MADE UP OF A GROUP OF RELATIVES. THUS, IN OUR OPINI ON, A SINGULAR WORDS / WORDS COULD BE READ AS PLURAL ALSO, ACCORDING TO THE CIRCUMSTAN CE / 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 C ASE 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 PLU RAL IN NUMBER UNLIKE IN THE CASE OF ONE OF THE RELATIVES WHERE ONE IS ALWAY S SINGULAR IN NUMBER WHEREAS RELATIVES IS ALWAYS PLURAL IN NUMBER, BUT WHEN RE AD 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 I T IS FORMED BY THE RELATIVES. THEREFORE, IN OUR CONSIDERED VIEW, THE RELATIVE E XPLAINED IN EXPLANATION TO SECTION 56(2)(VI) OF THE ACT INCLUDES RELATIVES A ND AS THE ASSESSEE RECEIVED GIFT FROM HIS HUF, WHICH IS A GROUP OF RELATIVES, TH E 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 B Y AN ASSESSEE IN RESPECT OF ANY SUM WHICH HE RECEIVES FROM A MEMBER OF HINDU UNDIVI DED FAMILY AND AS THE SUM HAS BEEN PAID OUT OF THE FAMILY INCOME, OR IN T HE CASE OF AN IMPARTIBLE ESTATE, WHOSE SUCH SUM HAS BEEN PAID OUT OF THE INC OME OF THE ESTATE BELONGING TO THE FAMILY, SUBJECT HOWEVER, TO THE PROVISIONS O F SECTION 64(2) OF THE ACT. THE OBJECT OF THE PROVISION IS THAT A HINDU UNDIVIDED F AMILY, ACCORDING TO SECTION 2(31) IS A PERSON AND A UNIT OF ASSESSMENT. INCO ME 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 FAM ILY PROPERTY QUA ITS MEMBERS IT ITA NO.583/RJT/2007 ITA NO. 601/RJT/2008 9 HAS BEEN HELD BY VARIOUS AUTHORITIES AND COURTS THA T THERE IS AN ANTECEDENT TITLE OF SOME KIND OF A MEMBER IN THE PROPERTIES OF HUF A ND A FAMILY ARRANGEMENT WHICH MERELY ACKNOWLEDGES AND DEFINES HOW THAT TITL E IS LOOKED AT AND IT IS NOT AN ALIENATION OF PROPERTY AT ALL. BUT EVEN IF IT SHOU LD BE REGARDED AS A TRANSFER, THE OBJECT OF AVOIDING FAMILY LITIGATION IS CONSIDERATI ON IN MONEYS WORTH. THE REAL CONSIDERATION IN A FAMILY ARRANGEMENT IS BASED UPON A RECOGNITION OF A PRE- EXISTING RIGHT HENCE, THERE IS NO TRANSFER OF PROPE RTY AT ALL. THE HONBLE APEX COURT IN CGT VS NS GETTI CHETTIAR 82 ITR 599 (SC) B ASED ITS OBSERVATION ON THAT GROUND IN A CASE OF UNEQUAL FAMILY PARTITION AND HE LD THAT IT IS NOT TRANSFER, HENCE NO GIFT TAX LIABILITY IS ATTRACTED. EVERY MEMBER O F THE HUF HAS A CLAIM AS TO HIS MAINTENANCE. RECEIVING ANYTHING IN CONSIDERATION O F HIS PRE-EXISTING RIGHT IN A PROPERTY OR INCOME COVERS BY SECTION 10(2) OF THE A CT. 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 O F 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 S ECTION 64(2) OF THE ACT. SECTION 64(2) WAS INSERTED BY THE TAXATION LAWS (AM ENDMENT) ACT, 1970 WITH EFFECT FROM 01-04-1971. THIS SECTION WAS INSERTED TO AVOID CREATION OF MULTIPLE HUFS AND OTHERS. SIMILAR PROVISIONS WAS ALSO INSER TED 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 I N THE CASE OF AN INDIVIDUAL BEING A MEMBER OF A HINDU UNDIVIDED FAMILY, ANY PRO PERTY HAVING BEEN THE SEPARATE PROPERTY OF THE INDIVIDUAL HAS BEEN CONVER TED BY THE INDIVIDUAL INTO PROPERTY BELONGING TO THE FAMILY THROUGH THE ACT OF IMPRESSING 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 FAMILY OTHERWISE THAN FOR ADEQUA TE CONSIDERATION THEN, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PRO VISIONS OF THIS ACT OR IN ANY OTHER LAW FOR THE TIME BEING IN FORCE, FOR THE PURP OSE OF COMPUTATION OF THE TOTAL INCOME OF THE INDIVIDUAL UNDER THIS ACT. THE INDIVI DUAL SHALL BE DEEMED TO HAVE ITA NO.583/RJT/2007 ITA NO. 601/RJT/2008 10 TRANSFERRED THE CONVERTED PROPERTY, THOUGH THE FAMI LY, 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 ARI SE 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 ME MBERS 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 T RANSACTION 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 SECTION 64( 2). IT DEALS WITH THE TRANSACTION DIFFERENTLY WHICH WOULD MEAN THAT THE LEGISLATURE I N THEIR OWN WISDOM WAS AWARE ABOUT THE CIRCUMSTANCES AND ACCORDINGLY PROVISIONS ARE ENACTED IN THE ACT. THEREFORE, IN OUR OPINION, BOTH THE SITUATION OF AM OUNT RECEIVED AND AMOUNT GIVEN TO HUF BY A MEMBER IS TO BE DEALT WITH ACCORD INGLY. 12.2 THE CIT(A) WHILE CONSIDERING SECTIONS 10(2) AN D 10(2A) OF THE ACT HELD THAT FIRSTLY THE AMOUNT RECEIVED ON PARTIAL PARTITI ON OR ON PARTITION IS ONLY EXEMPT AND SECONDLY TO THE EXTEND OF SHARE OF ASSESSED INC OME 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 CONTEN D THAT IT IS APPLICABLE ONLY TO THE EXTEND OF INCOME OF THE YEAR. SECONDLY, THE PROPER TY OR THE 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 MAINTAINED. FOR GETTING EXEMPTION UNDER SECTION 10(2) TWO CONDITIONS ARE TO SATISFY. FIRST LY, HE IS A MEMBER OF HUF AND SECONDLY HE RECEIVES THE SUM OUT OF THE INCOME OF S UCH 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 AD OPT THE ABOVE CONSTRUCTION. FAR FROM THOSE BEING 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 TA XING TWICE OVER. IF THERE IS ANY SECTION IN THE ACT WHICH ENABLES TH E 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 TAX ING THE INCOME EVEN ONCE. BUT IT IS ADMITTED BEFORE US THAT THERE IS NO SUCH PROVISION IN THE ACT. IF WIDOWS ARE NOT EXEMPTED B Y REASON OF THE ABOVE CONSTRUCTION, THE CROWN WOULD UNDOUBTEDLY BEI NG TAXING TWICE OVER. OUR 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 CONDITIONS OF S ECTION 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 GIF T 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 ACCORDINGL Y. 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 OFFICER 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 LAKHS RECEIVED BY THE ASSESSEE FROM THE HUF. ON APPEAL, THE CIT(A) DELETED THE SAME. WE HAVE HE ARD THE PARTIES ON THE ISSUE. WE HAVE DELETED THE QUANTUM ADDITION OF RS. 60 LAKHS WHILE DEALING WITH ITA NO.583/RJT/2007 ITA NO. 601/RJT/2008 12 THE APPEAL FILED BY THE ASSESSEE IN ITA NO.583/RJT/ 2007 IN ABOVE PARAGRAPHS. AS SUCH THE IMPUGNED PENALTY HAS NO LEG TO SURVIVE. THEREFORE, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL OF THE R EVENUE. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17-05-2011. SD/- SD/- (N.R.S. GANESAN) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT, DT : 17 TH MAY, 2011 PK/- COPY TO: 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-IV, RAJKOT 4. THE CIT-III, RAJKOT 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT