ITAT rules against taxing the amount given by HUF to member
It explained that the sum was not a gift and could not be penalized under the Income Tax Act
ITAT rules against taxing the amount given by HUF to member It explained that the sum was not a gift and could not be penalized under the Income Tax Act The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has held that the amount received by the assessee for benefit from the Hindu Undivided Family (HUF), which is not in the nature of a gift or received without consideration,...
ITAT rules against taxing the amount given by HUF to member
It explained that the sum was not a gift and could not be penalized under the Income Tax Act
The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has held that the amount received by the assessee for benefit from the Hindu Undivided Family (HUF), which is not in the nature of a gift or received without consideration, is not taxable under the Income Tax Act, 1961.
The Coram of Judicial Member TR Senthil Kumar and Accountant Member Annapurna Gupta was considering a second appeal challenging the taxability of the gift received by the assessee from his HUF under the IT Act.
The assessing officer (AO) had treated the impugned gift as taxable. It was also confirmed by the Commissioner of Income Tax (Appeals) CIT(A), who noted that an identical issue arose in the case of the assessee for the Assessment Year 2012-13 wherein the Ld. CIT(A) had confirmed the addition.
The tribunal noted that ITAT had ruled against the assessee, holding that HUF per se was not covered in the definition of relative under the IT Act. Therefore, the gifts from HUF to members were not covered in the exception provided under the Act. ITAT had also pointed out that while the reverse gift from member to HUF was covered in the exception, the legislature had deliberately overlooked the reverse. This meant the legislature intended taxing the gifts from HUF to members.
Observing that the decision in the case of the assessee in the preceding year stood distinguished, the bench said that ITAT had preceded on the premise that the amount given by the HUF to its members was a gift. This was incorrect under the law, as ruled by the Chandigarh Bench of ITAT in another case.
The tribunal thus allowed the contentions of the assessee and stated, "We hold that the amount received by the assessee from its HUF of Rs.50 lakhs was not in the nature of any sum received without consideration/gift. Therefore, it was not exigible to tax as per the provisions of the IT Act and needs to be deleted."