Tuesday, May 10, 2016

Provisions relating to gift apply only to an Individual or HUF and not to an AOP

Facts
a)    Assessee was a beneficiary trust assessed in status of an AOP. It received a gift of Rs. 1.60 crore from one of its beneficiaries which was not included in total income in terms of section 56(2)(vi).
b)    Assessing Officer (AO) included said amount in income of the trust. The contention of the AO was that Section56(2)(vi) is an exemption provision which provides exemption in respect of gift subject to certain conditions, inter-alia, recipient of such gift should be an Individual or a HUF. However, in the instant case, assessee was assessed as an AOP and not as an Individual or a HUF. Therefore, it was not eligible for exemption under Section 56(2)(vi).

c)    The CIT(A) confirmed the order of the AO. Aggrieved by the order of the CIT(A), the assessee filed the instant appeal before the tribunal


The tribunal held in favour of assessee as under-
1)    Section 56(2)(vi) is a charging section, which charges the receipt of an otherwise genuine amount of gift to tax, subject to certain conditions. Hence, the view point of the AO that Section 56(2) is an exemption provision was incorrect.
2)    As per section 56(2)(vi), a gift can be taxable only when same is received by an Individual or a HUF. In other words, the said section can’t be invoked where a gift is received by a person other than an individual or a HUF.
3)    In the instant case, assessee was an AOP. It is palpable from the definition of 'person' as given in section2(31) that AOP is a person different from an individual or a HUF. Even if an AOP consists of some individuals, the status of such a group of individuals remains as that of an 'AOP'.
4)    Since the assessee in question was an AOP and not an individual or a HUF, sum received by it could not be included in its total income within the framework of section 56(2)(vi). Therefore, the addition made by the AO was to be deleted- [2016] 68 taxmann.com 376 (Delhi - Trib.)
Editor’s Note:
The provision related to gift is governed by section 56(2)(vii) if the same is received by an Individual or a HUF on or after the 1st day of October, 2009. In the instant case, Section 56(2)(vi) was applicable because the transaction of gift was executed prior to 1st day of October, 2009.
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