Income Tax Appellate Tribunal
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Income Tax Appellate Tribunal, Chandigarh (ITAT): The Coram of Sanjay Garg (Judicial Member) and Annapurna Gupta (Accountant Member) examined the issue as to the taxability of the amount of gift received by the assessee from his ‘HUF’.

An appeal was preferred by the assessee against the Principal Commissioner of Income Tax against revision order passed under Section 263 of the Act, whereby the PCIT had set aside the assessment order passed by the Assessing Officer with a direction to make the assessment afresh under Section 143(3) read with Section 147 of the Income Tax Act.

Factual Background

The assessee had filed his return of income declaring an income of Rs 14,32,982 and the assessment was completed by the Assessing Officer under Section 143(3) of the Act accepting the returned income.

Subsequently, the assessing officer reopened the assessment under Section 147 read with Section 148 on the ground that the assessee during the year under consideration had received a gift of Rs 5,90,000 from the Hindu Undivided Family.

In the opinion of the Assessing Officer, since the amount of said gift was more than Rs 50,000, hence the same was exigible to tax as ‘income from other sources’ under Section 56(2)(vii) of Income Tax Act.

PCIT while invoking his jurisdiction under Section 263 of the Act, set aside the order passed by the Assessing Officer, held that HUF does not fall in the definition of relative in the case of an ‘individual’ as provided in the explanation to clause (vii) to Section 56(2).

Though, the definition of a relative in the case of a ‘HUF’ has been extended to include any member of the ‘HUF’, yet, in the said extended definition, the converse case is not included that is to say in the case of an individual, the ‘HUF’ has not been mentioned in the list of relatives.

Thus, PCIT formed a view that though a gift from a member to the ‘HUF’ was not exigible to taxation as per the provisions of Section 56(2)(vii) of the Act, however, a gift by the HUF to a member exceeding a sum of Rs 50,000 was taxable.

To claim an exemption under Section 10(2) of the Act, the member ‘HUF’ must receive any amount for consideration out of the income of the ‘HUF’. That since the assessee had received the aforesaid amount of Rs 5,90,000/- without consideration, hence, the same was not tax-exempt.

Further, the PCIT set aside the order of the Assessing Officer and directed the AO to make the assessment afresh.

On being aggrieved with the order of the PCIT, the assessee filed the appeal.

Analysis, Law and Decision

Coram expressed that the order of the Assessing Officer cannot be said to be erroneous and therefore, the PCIT wrongly exercised jurisdiction under Section 263 of the Act and the same cannot be held to be justified.

Assessee had taken a plea that the gifts had been received by the assessee out of the income of the ‘HUF’ and that the same was exempt under Section 10(2) of the I.T. Act. It was noted that there was no rebuttal or denial either in the order of the Assessing Officer or in the order of the PCIT in respect of the contention of the assessee that the amount in question was received out of the income of the HUF. In view of the said, the assessee was entitled to exemption under Section 10(2) of the Act.

In case an individual member throws his elf-acquired property into a common pool of ‘HUF’, the ‘HUF’ or other members of the ‘HUF’ do not have any pre-existing right in the self-acquired property of a member. If such an individual member throws his own/self-earned or self-acquired property in common pool, it will be an income of the ‘HUF’, however the same will be exempt from taxation as the individual members of the ‘HUF’ have been included in the meaning of ‘relative’.

In view of the above, the HUF had not been included in the definition of relative in explanation to Section 56(2) (vii) as it was not so required whereas in case of HUF, members of the HUF find mention in the definition of ‘relative’.

Hence, the amount received by the assessee from the ‘HUF’ , being its members, was a capital receipt in his hands and was not exigible to income tax.[Pankil Garg v. Pr. CIT, Karnal; 2019 SCC OnLine ITAT 13321, decided on 17-7-2019]

Case BriefsHigh Courts

Delhi High Court: Yogesh Khanna, J., held that right of residence under Section 19 of the Domestic Violence Act is not an indefeasible right of residence in a shared household, especially when the daughter-in-law is pitted against aged father-in-law and mother-in-law.

Appeal was filed to set aside the decision passed by the Additional District Judge.

Factual Matrix

Respondent claimed to be the absolute and sole owner of the property vide a registered sale deed, hence he filed a suit for eviction against his daughter-in-law.

A decree of possession with damages equivalent to the market rent of the alleged illegal possession was passed against the appellant and also a decree of permanent injunction to restrain her from creating any third party right in such property.

Appellant’s case was that she being a legally wedded wife of respondent’s son had been residing with her minor daughters in one room with an attached bathroom and balcony in the suit property.

The main plea of the appellant was that S. Kesar Singh (grandfather of appellant’s husband) had purchased the New Friends Colony property out of joint family funds and from sale proceeds of the ancestral property and after the death of S. Kesar Singh the subject property was purchased by the respondent from such ancestral funds, hence the suit property is a joint family property in which the appellant has also a right to reside.

Lower Court in its order had passed a decree of possession to the respondent and it was held that the property was self-acquired property of the respondent, and the appellant was residing in the property as his daughter-in-law and after the termination of the license, she had no right to stay therein.

Analysis, Law and Decision

High Court on considering the above facts and circumstances stated that, since S. Kesar Singh died in 1977, the succession opened after commencement of the 1956 Act, hence there was no basis to say that the subject property was an ancestral property or there existed HUF.

High Court opined that the subject property exclusively belonged to the respondent and the appellant on contrary did not file any document to show the existence of any HUF in the name of S. Kesar Singh and sons or the property.

The house in which the appellant had been residing after her marriage with the son of the respondent was a shared household. Though the husband and wife had been living separately.

Also, another significant point that the Court noted was that, the son of the respondent did not claim any right in the subject property, hence where shared household was admitted by the respondent, there was no need for the trial court to implead the husband of the appellant.

“Admittedly where the parties are residing is a flat, having only three bed rooms, a drawing room and the appellant is in possession of a room in the said flat, then considering there are various complaints filed by them against each other; their relations being not cordial, would it in such circumstances, be appropriate for them to stay together and fight every minute of their existence.” 

Bench remarked that,

In this case, both (father-in-law and mother-in-law) being senior citizens of age about 74 and 69 years and being in the evening of their life, are entitled to live peacefully and not to be haunted by the marital discord between their son and daughter-in-law.

Elaborating further, the High Court added that, where the residence is a shared household, it does not create any embargo upon the owner to claim eviction against his daughter-in-law.

Bench advised that since there was friction in the relationship between the parties, hence it would be appropriate if an alternative accommodation is provided to the appellant as per Section 19(2)(f) of the Protection of Women from Domestic Violence Act.

In view of the above, the appeal was dismissed. [Ravneet Kaur v. Prithpal Singh Dhingra, 2022 SCC OnLine Del 594, decided on 24-2-2022]


Advocates before the Court:

For the Appellant: Mr Sahilendra Bhardwaj and Ms Aroma S Bhardwaj, Advocates.

For the Respondent: Mr Rajat Wadhwa, Mr Aman Kapoor, Mr Lakshay Luthra, Mr Aditya Varun, Advocates.

Case BriefsHigh Courts

Delhi High Court: Prathiba M. Singh, J. while addressing the matter, expressed that

“…in the opinion of this Court, all cases of family disputes cannot be characterised as cases under the DV Act.”

Plaintiff had filed a suit against his son and daughter-in-law, respectively.

In view of various disputes between the plaintiff and his son/daughter-in-law, he sought the permanent and mandatory injunction, damages seeking vacant and peaceful possession of the suit property and removal of his son and daughter-in-law. Damages and mesne profits were also sought by the plaintiff.

 Issues:

  • Condonation of delay of 342 days, in filing the present second appeal.
  • Merits of matter.

Analysis, Law and Decision

High Court stated that there was no delay in filing the present appeal.

Several disputes arose amongst the said family members, which, according to Plaintiff, were due to the interference of the family members of the daughter-in-law, including the mother and the brothers of the daughter-in-law.

There was no document on record to show the existence of a HUF, of which, Plaintiff was alleged to be the Karta.

Plea of ‘shared household’ appeared to have clearly been put up on behalf of the daughter-in-law, as a faint plea, and as an argument of last resort.

There were no complaints that had been preferred against the father-in-law and there were no cases filed or pending under the DV Act, or any other legislation at the instance of the daughter-in-law.

Further, the Bench stated that the father was merely seeking to evict both his son and daughter-in-law, on the strength of his ownership of the suit property.

Adding to the above, Court stated that the settled position of law is that proceedings under the DV Act are not required and the same can also be raised as defence in the suit, the basic requirements of the said Act ought to be satisfied.

The present is not a case where the case set up is one under the DV Act, involving domestic violence. 

High Court highlighted the peculiar facts:

  • The ownership of the Plaintiff in the suit property is not in dispute.
  • The sale of the property of the mother, which took place in 2011, was never challenged by the Defendants.
  • The purchase of this suit property in the name of the Plaintiff was never challenged by the Defendants.
  • There is no complaint of Domestic Violence raised by the daughter-in-law before any forum. In fact, to the contrary, the Plaintiff has filed complaints against his son and daughter-in-law with police repeatedly, alleging ill-treatment and abuse.
  • The Defendants i.e., the son and daughter-in-law are living together peacefully. The written statement before the trial court was filed jointly. The first appeal was also filed jointly, and so is the present second appeal. There is no estrangement or marital discord between them.
  • The order passed in the application under Order XII Rule 6 CPC has also been executed and the Defendants have already moved out of the suit property and are living in alternate premises.

In light of the above stated facts and noting that they are distinguishable from the facts of Satish Chandra Ahuja v. Sneha Ahuja, [2020 (11) SCALE 476] and Vanitha v. Deputy Commr., [2020 (14) SCALE 210]

Court dismissed the appeal. [Aarti Sharma v. Ganga Saran, 2021 SCC OnLine Del 4110, decided on 24-08-2021]


Advocates before the Court:

For the Appellants: Zahid Ali, Advocate

For the Respondent: Ashok Kumar Tiwari, Advocate

Case BriefsHigh Courts

Delhi High Court: A Division Bench of Rajiv Sahai Endlaw and Asha Menon, JJ., dismissed an application filed under Section 151 CPC expressing surprise that advocates moved the application seeking the legal opinion of the Court.

The present application was filed invoking Section 151 of the Code of Civil Procedure, 1908 by the appellant, respondents 3 and 5 seeking clarification on the following:

“Whether the share in the property received by a son on the partition of a HUF is “HUF” or “individual” in his hands?”

Bench stated that “neither Section 151 CPC nor any other provision of law vests in this Court, acting as the Company Appeal Court, advisory jurisdiction.”

Court was surprised to note that the advocates are moving applications seeking the legal opinion of the Court. The application is thoroughly misconceived.

Dismissing the matter, Court added that,

“one of us (Justice Rajiv Sahai Endlaw) will be demitting office on 13th August, 2021 and the advocates are at liberty to approach him for advice at that time, by deferring the execution of the sale deed till then!”

Advocate Lalit Gupta stated that he did not even sign the application and his name has just been added without consulting him. [Balraj Kishan Gupta v. Panna Lal Giridhar Lal (P) Ltd., 2020 SCC OnLine Del 1265, decided on 18-09-2020]

Case BriefsSupreme Court

Supreme Court: Explaining the term ‘dividend’ under Section 2(22)(e) of the Income Tax Act, 1961, the Court said that the said provision gives an artificial definition of ‘dividend’ and creates a fiction, thereby bringing any amount paid otherwise than as a dividend into the net of dividend under certain circumstances. Stating that the dividend taken note of by this provision is a deemed dividend and not a real dividend, the Court explained that loan or payment made by the company to its shareholder is actually not a dividend. In fact, such a loan to a shareholder has to be returned by the shareholder to the company. It does not become income of the shareholder.

The Court, however, clarified that for certain purposes, the Legislature has deemed such a loan or payment as ‘dividend’ and made it taxable at the hands of the said shareholder. The conditions required to be fulfilled to attract tax under the said clause are:

  • Payment is to be made by way of advance or loan to any concern in which such shareholder is a member or a partner.
  • In the said concern, such shareholder has a substantial interest.
  • Such advance or loan should have been made after the 31.05.1987.

The question that came before the bench of Dr. A.K. Sikri and Abhay Manohar Sapre, JJ was that whether in view of the settled principle that HUF cannot be a registered shareholder in a company and hence could not have been both registered and beneficial shareholder, loan/advances received by HUF could be deemed as dividend within the meaning of Section 2(22)(e) of the Income Tax Act, 1961 especially in view of the term “concern” as defined in the Section itself.

The Court noticed that, in the present case, the Karta is, undoubtedly, the member of HUF. He also has substantial interest in the assessee/HUF, being its Karta as he was entitled to not less than 20% of the income of HUF. Hence, it was held that the provisions of Section 2(22)(e) of the Act get attracted and it is not even necessary to determine as to whether HUF can, in law, be beneficial shareholder or registered shareholder in a Company. As per the provisions of Section 2(22)(e) of the Act, once the payment is received by the HUF and shareholder is a member of the said HUF and he has substantial interest in the HUF, the payment made to the HUF shall constitute deemed dividend within the meaning of clause (e) of Section 2(22) of the Act. [Gopal and Sons v. CIT, Kolkata, 2017 SCC OnLine SC 17, decided on 04.01.2017]