Income Tax Gift both Biological father and step father are considered as relative

Fact and Issue of the case

Brief facts of the case are that the assessee had filed his return of income on 11.9.2008 declaring total income at Rs.1,72,700/-. The case of the assessee was selected for scrutiny assessment and notice under
section 143(2) of the Act was issued on 19.8.2009. On scrutiny of the accounts it revealed to the AO that the assessee had received a sum of Rs.2,20,000/- through different cheques of Rs.20,000/- each from 1st of every month i.e. from May to March from Shri Kamal Drolia. He further observed that a sum of Rs.20,000/- was received by the assessee through cheque no.343904 dated 28.4.2007 of ABN Amro Bank. This amount received from M/s.Kamal Drolia, HUF. When the assessee was confronted, with regard to the receipt of this amount, it was contended by the assessee that Shri Kamal Drolia, is step-father of the assessee. He received the amounts in gift. With regard to the amount received from HUF, it was contended that this amount was below the limit of Rs.50,000/-, and therfore, the assessee was not supposed to explain. The ld.AR has rejected the explanation of the assessee on the ground that the assessee is step-son of Shri Kamal Drolia, therefore, their relationship does not fall within the ambit of relationship explained in Explanation appended to Section 56(2). Appeal to the CIT(A) did not bring any relief to the assessee.

Observation of the Tribunal

The Court has gone through the record carefully. It is pertinent to take note of the relevant section 56(2) and the Explanation appended thereto they are as under:

56(1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head “Income from other sources”, if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E.

(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 :—

[(vi) where any sum of money, the aggregate value of which exceeds fifty thousand rupees, is received without consideration, by an individual or a Hindu undivided family, in any previous year from any person or persons on or after the 1st day of April, 2006 [but before the 1st day of October, 2009], the whole of the aggregate value of such sum:

Provided that this clause shall not apply to any sum of money received.

Explanation.—For the purposes of this clause, “relative” means—

(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);]

A bare perusal of the above Explanation would indicate that the expression “relatives” would recognize the relationship between the step-father and step-son for the purpose of exemption available under section 56(2) of the Income Tax Act. Therefore, the gift received by the assessee cannot be treated as income from other sources, and the same is deleted and the appeal of the assessee is allowed.

In result, the appeal of the assessee is allowed.