DCIT vs. Ateev V. Gala (ITAT Mumbai)

(a) The crux of the issues in the case under consideration, are –

(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?

(b) Clause (vi) of section 56(2) of the Act has been inserted with effect from 01-04-2007 by Taxation Laws (Amendment) Act, 2006 so as to provide that 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 after 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 recipient provided that this clause shall not apply to any sum of money received from any relative. 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 “relative” means –

(vii) spouse of the person referred to in clause (ii) to (vi).”

(c) Hindu Undivided Family is a person within the meaning of section 2(31) of the 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 throughout. 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’.

(d) Now having found that an HUF is ‘a group of relatives’, the question now arises as to whether would only the gift given by the 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 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 Hon’ble Apex Court in the case of K G Govindan & Sons vs CIT 247 ITR 192 (SC).

(e) 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 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 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 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 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.

(Veenit Kumar Rahgavjibhai Bhalodia vs. ITO (2011) 140 TTJ (Rajkot) 58; (2011) 12 ITR 616 (ITAT) followed)