2025 (3) TMI 1509 - AT - Income Tax

Gift received by the assessee from her daughter-in-law u/s. 56(2)(vii) -whether or not the daughter in law (Donor) of the assessee falls under the category of relative of the assessee being the mother in law of the donor? - HELD THAT - As u/s 56(2)(vii) any sum of money received by an individual or Hindu Undivided Family in excess of Rs. 50, 000/- without consideration is liable to be taxed as income in the hands of that individual/HUF. However the fourth proviso to sec. 56(2)(vii) of the Act provides exemption from taxation if the said amount is received from any relative. Hence gift received by an individual/HUF from his relatives (as defined under that section) is not taxable u/s. 56(2)(vii) of the Act. The son of the assessee is the lineal descendant and he will be a relative as per item (E) and as per item (G) his spouse will also fall under the category of relative. Hence the daughter-in-law would be covered by the definition of Relative as per Explanation(e) to sec. 56(2)(vii)of the Act. Accordingly the gift received by the assessee from her daughter-in-law cannot be treated as income within the meaning of sec. 56(2)(vii) of the Act. We notice that an identical view has been expressed in the case of Vaibhav Medical and Education Foundation 2025 (3) TMI 29 - ITAT MUMBAI in the context of sec. 13 of the Act. We set aside the order passed by the Ld. CIT (A) and direct the AO to delete the addition made by the AO u/s. 56(2)(vii) - Assessee appeal allowed.

Summary

ISSUES:

Whether the gift of Rs. 6,11,000/- received by an individual from her daughter-in-law is assessable to tax under section 56(2)(vii) of the Income Tax Act, 1961.Whether the daughter-in-law qualifies as a "relative" within the meaning of Explanation (e) to section 56(2)(vii) of the Income Tax Act, 1961.

RULINGS / HOLDINGS:

The gift of Rs. 6,11,000/- received from the daughter-in-law is not taxable under section 56(2)(vii) of the Act, as the daughter-in-law falls within the definition of "relative" under Explanation (e) to the said section.Explanation (e) to section 56(2)(vii) includes the "spouse of the person referred to in items (B) to (F)", and since the son of the assessee is a "lineal descendant" (item (E)), his spouse (the daughter-in-law) qualifies as a "relative".

RATIONALE:

The court applied the statutory definition of "relative" as provided in Explanation (e) to section 56(2)(vii) of the Income Tax Act, 1961, which enumerates specific family relationships exempt from gift taxation.The interpretation that the daughter-in-law is a "relative" is supported by the inclusion of "spouse of the person referred to in items (B) to (F)", thereby covering spouses of lineal descendants.The decision aligns with precedent from a co-ordinate bench interpreting the term "relative" in a similar context under section 13 of the Act, which also includes "lineal descendant" and "spouse of lineal descendant".No dissent or doctrinal shift was noted; the ruling confirms the established statutory interpretation favoring exemption of gifts from relatives under the specified provisions.