Income Tax Appellate Tribunal - Kolkata
Subhadra Devi Nevatia, Kolkata vs Department Of Income Tax on 10 February, 2012
ITA 1298/K/2011 AY 05-06
आयकर अपीलीय अधीकरण, Ûयायपीठ - "A", कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- A, KOLKATA
[सम¢ ौी ूमोद कुमार,
मार लेखा सदःय एवं ौी महाबीर िसंह, Ûयायीक सदःय ]
Before Sri Pramod Kumar, Accountant Member & Sri Mahavir Singh, Judicial Member
आयकर अपील संÉया / ITA No. 1298 (Kol) of 2011
िनधॉरण वषॅ/Assessment Year 2005-06
Income-tax Officer, Ward-36(2), -वनाम- Smt. Subhadra Devi Nevatia,
Kolkata. Kolkata. (PAN-ABRPN1230F)
-Versus-
(अपीलाथȸ/APPELLANT) (ू×यथȸ/RESPONDENT)
अपीलाथȸ कȧ ओर से/ For the Appellant: ौी/Sri Anjan Pd. Roy
ू×यथȸ कȧ ओर से/For the Respondent: ौी/Sri N.P.Jain & Sri Deepak Jain
सुनवाई कȧ तारȣख/Date of Hearing : 10/02/2012
घोषणा कȧ तारȣख/Date of Pronouncement : 29/02/2012
आदे श/ORDER
ौी महाबीर िसंह,) Ûयायीक सदःय (Mahavir Singh), Judicial Member :
(ौी This appeal by revenue is arising out of the order of CIT(A)-XX, Kolkata in Appeal No.317/CIT(A)-XX/Wd-36(2)/07-08/Kol, dated 22/07/2011. Assessment was framed by DCIT, Circle-34, Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') for assessment year 2005-06 vide order dated 29/10/2007.
2. The only issue in this appeal of revenue is against the order of C.I.T.(A) deleting the addition made by A.O. on account of gift received by assessee from her HUF by invoking the provisions of sec. 56(2)(v) of the Act. For this, the revenue has raised the following two grounds:-
"1. On the facts and circumstances of the case, the Ld. CIT(A) has erred in ignoring the fact that the assessee could not produce evidence to prove that the sum was paid by the HUF in which she was a member was paid out of its income.
2. On the facts and circumstances of the case, the Ld. CIT(A) has erred in overlooking the provision of Sec.56(2)(v) of the Act relating to definition of relative which is exclusive."
3. We have heard rival contentions and gone through the facts and circumstances of the case. Briefly stated, the facts on the above issues are that the assessment year involved is 2005-06. The A.O. during the course of assessment proceedings noticed from the capital account filed along with return of income that assessee had received a gift of Rs.10 lakhs from 1 ITA 1298/K/2011 AY 05-06 her HUF, M/s. R.P.Nevatia & Sons, HUF, on 21/02/2005 through cheque. The A.O. after going through the provisions of sec. 56(2)(v) of the Act required the assessee to explain why the said sum should not be added back to the total income of the assessee as income from other sources. The assessee explained that this gift did not violate provisions of sec. 56(2)(v) of the Act, because assessee being member of HUF comes within the definition 'relative', as provided in Explanation to sec. 56(2)(v) of the Act. The A.O. did not accept the explanation of the assessee and added, receipt of this gift, as income from other sources. Aggrieved, assessee preferred appeal before C.I.T.(A). Before C.I.T.(A), assessee contended that this amount received from HUF is exempt u/s. 10(2) of the Act. The assessee before C.I.T.(A) stated that this amount of Rs.10 lakhs is gifted out of incomes of previous years of HUF and she filed details of income for the years ending as on 31/12/1987 to 31/3/2005, and she also filed details of filing of returns including declaration of net income. The C.I.T.(A) after obtaining remand report on this aspect from the A.O. deleted the addition by stating that the A.O. has verified in his remand report that the sum of Rs.10 lakhs was received by assessee as member of HUF and this sum was paid out of the income of the HUF. The C.I.T.(A) relying on the decision of 'B' Bench, ITAT, Kolkata in ITA No.1542/Kol/2009 for the assessment year 2006-07, dated 21/10/2009, deleted the addition, wherein it was held that karta of HUF being relative of the assessee, the provisions of sec. 56(2)(v) of the Act are not applicable and it falls under the exception as provided in Explanation to sec.56(2)(v) of the Act. Aggrieved now, the revenue is in appeal before us.
4. The first issue before us is whether the assessee's receipt of Rs.10 lakhs is out of income of HUF, so as to claim exemption u/s. 10(2) of the Act. We find that, admittedly, this gift of Rs.10 lakhs was made to assessee by her HUF through banking channel. The assessee has submitted complete details of incomes of HUF before us including the copies of returns and the relevant details as given in page-2 of indexation and the same are being reproduced as under:-
Year ended Net Income Date of filing Pages of
_________ as per P & L I.T. Return. Paper book
31.12.1987 12130 4.3.1991 14-16
31.3.1989 26276 27.3.1991 17-19
31.3.1990 15210 5.7.1991 20-22
31.3.1991 15628 30.3.1993 23-25
31.3.1992 18454 18.3.1994 26-28
31.3.1993 20595 25.11.1994 29-31
31.3.1994 20847 25.11.1994 32-34
31.3.1995 691496 29.12.1995 35-37
31.3.1996 21000 19.3.1998 38-39
31.3.1997 30800 19.3.1999 40-41
31.3.1998 72910 26.5.1999 42-43
31.3.1999 1005759 10.8.2000 44-48
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31.3.2000 408862 8.3.2001 49-51
31.3.2001 272164 31.1.2002 52-54
31.3.2002 368123 25.7.2002 55-57
31.3.2003 311260 22.9.2003 58-60
31.3.2004 218693 23.8.2004 61-63
31.3.2005 121284 30.7.2005 64-67
Now, we have to consider this aspect in view of provisions of sec. 10(2) of the Act, whether this gift is exempt or not. The provisions of sec. 10(2) of the Act reads as under:-
"Incomes not included in total income.
10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included-
(1) ........
(2) (subject to the provisions of sub-section (2) of section 64) any sum received by an individual as a member of a Hindu undivided family, where such sum has been paid out of the income of the family, or, in the case of any impartible estate, where such sum has been paid out of the income of the estate belonging to the family."
From the above provisions, we find that, in order to earn exemption u/s. 10(2) of the Act, there are two conditions - (i) that the amount has been paid out of the income of HUF, and (ii) the sum has been received by individual as a member of HUF. The exemption under this provision comes into operation only when the amount paid is out of the income of HUF subject to the conditions of sec-sec. (2) of section 64 of the Act. A Hindu undivided family, according to section 2(31)(ii) of the Act is a person and unit of assessment. The income earned by HUF is assessable and section 10(2) of the Act prevents double taxation of same income, once in the hands of HUF, which earns it and again in the hands of the member when it is paid out to him. We find that in similar circumstances, Hon'ble Patna High Court in the case of CIT Vs. Maharaja Visweswar Singh (1935) 3 ITR 216 (Pat) held that the Indian Income-tax Act, 1922 clearly contemplates that in the case of HUF, the unit of taxation shall be the family itself and not each individual member. Hon'ble High Court discussing the fact that by an Indenture the Maharaja of Darbhanga, the elder brother of the assessee, made maintenance grant to the assessee consisting of a number of villages in consideration of the assessee renouncing and relinquishing all claims to any of the properties of the late Raja, the assessee's father. Hon'ble High Court further discussed that in the lifetime of the late Maharaja the assessee had been receiving from the Raja an allowance of Rs. 38,000 a year and the present Maharja made an allowance of Rs. 48,000 per year to the assessee in addition to the grant. Before Hon'ble High Court the question was, whether this sum of Rs. 48,000 was taxable as income of the assessee and Hon'ble High Court answered that the assessee and the Maharaja were members of a joint Hindu family and as the allowance in question was paid to the assessee 3 ITA 1298/K/2011 AY 05-06 out of the joint family property it was not assessable to income-tax in the assessee's hands in view of the provisions of section 14, sub-section (1) of the Indian Income-tax.
5. From the above facts that the assessee has received gift out of accumulated income of earlier years and whether the same is exempt u/s. 10(2) of the Act or not . In our view, in order to claim exemption the amount should have been paid out of the income of HUF and here income means income of the year under consideration and not accumulated income of earlier years because that becomes impartible estate of HUF and in any case if that property is to be divided then that can be divided only on disruption of HUF i.e. by way of partition of HUF or the accumulated funds can be received by coparceners or members only on partition and not otherwise. Even otherwise, this exemption has a qualification and i.e. subject to the provisions of section 64(2) of the Act and this qualification is for the purpose that the hotchpotch property should not be converted as individual property. In the facts of the present case it is clear that in order to exemption u/s. 10(2) of the Act, there are two conditions, i.e., that the amount has to be paid out of the income of HUF and the sum has to be received by an individual as a member of HUF. In this case, the HUF for the relevant assessment year 2005- 06 is having income only at Rs.1,21,284/- and the assessee is relying on the incomes earned in earlier years. We are of the view that earlier years' incomes have already been accumulated and have become part of the estate of HUF and that cannot be considered as income for relevant assessment year. For claiming exemption u/s. 10(2) of the Act, the primary condition is that any member can accept gift or receipt out of the income of current year for claiming exemption u/s. 10(2) of the Act and not out of accumulated fund. Accumulated fund, in any case, has to be received only on partition and not otherwise. In view of above, we are of the view that since the HUF has current year's income only at Rs.1,21,284/-, it cannot make gift of Rs.10 lakhs to assessee out of such income. Hence, this issue of revenue's appeal is allowed and is decided in favour of revenue and against assessee.
6. Another issue in this appeal of revenue is that the C.I.T.(A) held that the sum of Rs.10 lakhs was received by assessee as member of HUF and falls within the definition of 'relative', as provided in Explanation to sec. 56(2)(v) of the Act. First of all, we have to go through the provisions of sec. 56(2)(v) of the Act including Explanation thereof, which reads as under:-
"56(1) ..................
(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:-
................
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ITA 1298/K/2011 AY 05-06
(v) where any sum of money exceeding twenty-five thousand rupees is received without consideration by an individual or a Hindu undivided family from any person on or after the 1st day of September, 2004 [but before the 1st day of April, 2006], the whole of such sum :
Provided that this clause shall not apply to any sum of money received--
(a) from any relative; or
(b) on the occasion of the marriage of the individual; or
(c) under a will or by way of inheritance; or
(d) in contemplation of death of the payer; or
(e) from any local authority as defined in the Explanation to clause (20) of section 10; or
(f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or
(g) from any trust or institution registered under section 12AA.] 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 clauses (ii) to (vi);"
It is a fact that the assessee has received this sum being a member of HUF, even we can say that after amendment w.e.f. 01/4/2003 in the Hindu Succession Act, the females are entered as coparceners. In view of above clause (v) of explanation to sec. 56(2) of the Act, Explanation defines 'relative' and relative here means as per clause (v) of explanation any lineal ascendant or descendant of the individual. Now, where HUF is a person within the meaning of sec. 2(31) of the Act, the entity of HUF must be construed in the sense in which it is understood under the Hindu Law, as has been decided in the case of Surjit Lal Chhabra vs. CIT (1975) 101 ITR 776 (SC), wherein it has been held that the expression 'HUF' in the I.T. Act is used in the sense in which a Hindu joint family is understood under the personal law of Hindus. Under the Hindu system of law a joint family may consist of a single male member and widows of deceased male members, and apparently the I.T. Act does not indicate that an HUF as an assessable entity must consist of at least two male members. It means actually a Hindu undivided family constitutes all persons lineally ascendant or descendant from a common ancestor and includes their mothers, wives or widows and unmarried daughters. All these persons fall under the definition of 'relative' as provided in Explanation to proviso to clause (v) of sec. 56(2) of the Act. Even otherwise, to appreciate the controversy in this issue, it is apposite to reproduce the essential part of sec. 5(1)(viii) of erstwhile Gift Tax Act (now 5 ITA 1298/K/2011 AY 05-06 repealed), which is relevant for this purpose. The relevant sec. 5(1)(viii) of erstwhile Gift Tax Act reads as under:-
"5. Exemption in respect of certain gifts - ....
(viii) to his or her spouse, subject to a maximum of rupees fifty thousand in value in the aggregate in one or more previous years, the expression 'spouse' in this clause, where there are more wives than one, meaning all the wives together."
We find that the provisions of section 56(2)(v) of the Act and section 5(1)(vii) of the Gift Tax Act are almost similarly worded and Hon'ble Madras High Court in the case of M. S. P. Rajah Vs. CGT, Madras (1982) 134 ITR 1 (Mad) has considered this provision of Gift Tax Act in a case where the joint Hindu family consists of only one male member and the other members were females or the only male member was the sole surviving coparcener, the said male member is entitled to dispose of the coparcenary or joint Hindu family property as if it were his separate property. He may sell, mortgage or make a gift of it. In the case before Hon'ble High Court when the sole member gifted the property in favour of his wife, it was in his capacity as an individual with all the powers vested in him for the disposition of joint family property as if it were his separate property. Accordingly, he should be deemed to have acted in his individual capacity while making the gift in favour of his wife. Hon'ble Court further observed that the same result would be reached even if the father-karta was the sole surviving coparcener or the only male member of a joint family. A father coparcener has certain special powers of disposing of the joint family or coparcenary property. He can alienate without the consent of the other coparceners to the extent authorised by the Hindu law. He can also make a gift, within reasonable limits, of movable property belonging the family. While making such a gift the karta does not act in a representative capacity but in his individual capacity. In the case before the Hon'ble High Court, the gift was out of affection and was within reasonable limits and hence was a valid gift made by the karta in his individual capacity and not by the HUF. Hon'ble Court further observed that in order to enable a person to make a gift it is not necessary that he should necessarily be the owner of the property. The jewellery in the case before the Hon'ble High Court is a transferable property and the karta is under the Hindu law authorised to dispose of the same by way of gift under certain circumstances, and those circumstances being present in the case before the Hon'ble High Court, the karta-donor was competent to transfer the property though it belonged to the HUF. The Hon'ble High Court further observed that for the application of s. 5(1)(viii) of the Gift Tax Act, it is the nature of the gift that is relevant and not the status in which the return was filed by the assessee. The fact that the assessee has submitted his return as that of a HUF would not, therefore, be relevant. The assessee was therefore, entitled to the exemption under s. 5(1)(viii) of the Gift Tax Act.
7. Similarly, Hon'ble Madhya Pradesh High Court in the case of CIT Vs. Banshilal Narsidas (2004) 270 ITR 231 (MP) has discussed the issue as under:
6ITA 1298/K/2011 AY 05-06 "The submission of Mr. Arya is that if the anatomy of the aforesaid provision is scanned in the proper perspective, it would ring as a bell that the gift in question has nexus with an individual and by no stretch of imagination it can have any connectivity with the Hindu undivided family. The aforesaid submission at first blush appears to be quite attractive as learned counsel for the Revenue has laid immense emphasis on the words "any person" "his or her spouse" but on a deeper probe and greater scrutiny, in our considered opinion, the said submission has to pale into insignificance inasmuch as what is material in this provision is the maximum amount and further whether the "karta" of the undivided Hindu family can be a donor under the scheme of the Act.
In this context we may refer with profit to the definition clause to understand the essential concept of donor. It reads as under :
"2. (ix) 'donor' means any person who makes a gift ;"
According to us, the aforesaid definition is quite broad, all engulfing and encapsulating one. There is no reason or base to give a narrow meaning to the term "donor". What the aforesaid term conveys is that a person who makes a gift is a donor. It is not necessary that he should be the owner of the property but he must be competent to transfer. If the aforesaid concept is read into it there would be no scintilla of doubt that a person who is competent to transfer the property in whole or part and absolutely or with attachment of conditions he can be a donor. As per Hindu law the "karta" of the Hindu family has a right to dispose of the property by way of gift under certain circumstances. If circumstances or conditions precedent are satisfied, the "karta"--donor is competent to transfer.
This being the centripodal issue and the core question, it is necessitous to understand the basic concept of a Hindu undivided family. If it is held that a Hindu undivided family can consist of a single member, his wife and his unmarried daughter, in that context a male member is entitled to deal with his coparcenary property as if it were his separate property. In this regard we may refer with profit to the case of Jana Veera Bhadrayya v. CGT [1966] 59 ITR 176 wherein the High Court of Andhra Pradesh accepted the proposition that the "karta" of a Hindu undivided family can make a gift of certain joint family property to his wife and that there is no obstacle or impediment in the way of applicability of section 5(1)(viii) of the Act. Similar view was expressed by the Punjab and Haryana High Court in the case of CGT v. Hari Chand [1974] 95 ITR 308."
And finally held as under:
"We have referred to the aforesaid passages in extenso to highlight that if the "karta" has gifted jewellery to his wife from the Hindu undivided family and he is competent to do so under the obtaining circumstances there is no reason to throw the claim of the assessee overboard and deny him the benefit under section 5(1)(viii) of the Act. In the case at hand, nothing has been brought on record by the Revenue that the husband as the "karta" of the family was not entitled because of existence of certain circumstances to make a gift. It is well- settled in law the "karta" can make out a gift within reasonable limits and without the consent of the other coparceners. This is a power vested in him in his 7 ITA 1298/K/2011 AY 05-06 individual capacity. He does not enjoy the status where the law prohibits or does not authorise him to give individually. Then the matter would be different and the validity of the gift may be called in question. But, in the present case, the material clearly shows that a gift was given by the "karta" out of affection and there was no circumstance brought out by the Revenue to invalidate the aforesaid act.
In view of our preceding analysis, we respectfully concur with the view expressed by the Madras High Court in the case of M. S. P. Rajah [1982] 134 ITR 1 and answer the reference in the affirmative, in favour of the assessee and against the Revenue holding that in the facts and circumstances of the case the Tribunal was right in holding that the gift made by the "karta" of the Hindu undivided family to his wife out of the Hindu undivided family assets, is entitled to exemption under section 5(1)(viii) of the Act. The reference is answered accordingly."
8. From the above facts and circumstances, provisions of the Act and case laws , it is clear that it is mandated by the proviso to section 56(2)(v) of the Act that this provision shall not apply to any sum of money received from any relative and according to Explanation to this section 56(2)(v) of the Act the expression 'relative' has been defined and includes any lineally ascendant or descendant of the individual. It means that the HUF consists of members of a joint family who are lineally ascendant or descendant of the individual. Outside the limits of coparcenary there is a fringe of persons, males and females, who constitute an undivided or joint Hindu family. Further, there is no limit to the number of persons who can compose it nor to their remoteness from the common ancestor and to their relationship with one another. It consists of a group of persons who are united by the tie of sapindaship arising by birth, marriage or adoption. If this is the situation, we can easily hold that HUF entity falls within the definition of relative as defined in explanation to section 56(2) of the Act. Once it is held that HUF falls in this definition, no receipt from HUF to its coparceners or members can be assessed by invoking the provisions of section 56(2)(v) of the Act. Accordingly, we allow the claim of assessee and uphold the order of CIT(A) on this issue.
9. In the result, appeal of revenue is dismissed.
यह आदे श खुले Ûयायालय मɅ सुनाया गया है
This order is pronounced in the open Court on 29.02.2012
Sd/- Sd/-
ूमोद कुमार)
(ूमोद मार लेखा सदःय महाबीर िसंह, Ûयायीक सदःय )
(महाबीर
(Pramod Kumar) Accountant Member (Mahavir Singh) Judicial Member
(तारȣख)
तारȣख) Date: 29-02-2012
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ITA 1298/K/2011 AY 05-06
आदे श कȧ ूितिलǒप अमेǒषतः-
Copy of the order forwarded to:
1. अपीलाथȸ / The Appellant : I.T.O., Ward-36(2), Kolkata.
2 ू×यथȸ / The Respondent : Smt. Subhadra Devi Nevatia, 709, Marshal House, 25, Strand Road, Kolkata-700 001.
3. आयकर किमशनर (अपील) : The CIT(A)-XX, Kolkata.
4. आयकर किमशनर/The C.I.T., Kol -
5 वभािगय ूितनीधी / DR, ITAT, Kolkata Benches, Kolkata 6 Guard file.
स×याǒपत ूित/True Copy, आदे शानुसार/ By order,
Asstt. Registrar.
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