September 2019

Section 56(2)(vii) The amount received by the assessee from the HUF, being its member, is a capital receipt in his hands and is not exigible to income tax If the decisions passed by the higher authorities are not followed by the lower authorities, there will be chaos resulting in never-ending litigation and multiplication of cases

Jagdish D. Shah | Jagdish T. Punjabi
Chartered Accountants

12.  Pankil Garg vs. PCIT ITAT Chandigarh; Members: Sanjay Garg (JM) and Ms Annapurna Gupta (AM) ITA No.: 773/Chd./2018 A.Y.: 2011-12 Date of order: 3rd August, 2019; Counsel for Assessee / Revenue: K.R. Chhabra / G.S. Phani Kishore

 

Section 56(2)(vii) The amount received by the assessee from the HUF, being its member, is a capital receipt in his hands and is not exigible to income tax

 

If the decisions passed by the higher authorities are not followed by the lower authorities, there will be chaos resulting in never-ending litigation and multiplication of cases

 

FACTS

For the assessment year under consideration, the AO completed the assessment of total income of the assessee u/s 143(3) of the Act by accepting returned income of Rs. 14,32,982. Subsequently, the AO issued a notice u/s 147 on the ground that the assessee has received a gift of Rs. 5,90,000 from his HUF and since the amount of gift was in excess of Rs. 50,000, the same was taxable u/s 56(2)(vii) of the Act.

 

In the course of reassessment proceedings, the assessee contended that the amount received by him from his HUF was not taxable and relied upon the decision of the Rajkot Bench of the Tribunal in Vineetkumar Raghavjibhai Bhalodia vs. ITO [(2011) 46 SOT 97 (Rajkot)] which was followed by the Hyderabad Bench (SMC) of the Tribunal in Biravel I. Bhaskar vs. ITO [ITA No. 398/Hyd./2015; A.Y. 2008-09; order dated 17th June, 2015] wherein it has been held that HUF being a group of relatives, a gift by it to an individual is nothing but a gift from a group of relatives; and further, as per the exclusions provided in clause 56(2)(vii) of the Act, a gift from a relative is not exigible to taxation; hence, the gift received by the assessee from the HUF is not taxable. The AO accepted the contention of the assessee and accepted the returned income in an order passed u/s 147 r.w.s. 143(3) of the Act.

 

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