2025 (6) TMI 1547 - AT - Income Tax

Addition u/s 56(2)(vii) - gifts were received by the assessee after the occasion of the marriage based on dates of clearing of cheques and amount getting credited to the bank account of the assessee - Claim of the assessee is that AO has taken a microscopic view of the meaning on the occasion of marriage without going into the intent of the proviso to section 56(2)(vii) since the cheques were realised at a later date which were given by the respective donors and were received by the assessee on the occasion of his marriage HELD THAT - The expression on the occasion of marriage used in proviso to section 56(2)(vii) cannot be given restricted meaning. When the gift is associated with the event of marriage the immediate reason or cause for the gift is the marriage of the recipient it would be covered by the said expression and the relationship between the gift and the marriage is the relevant factor and not the time of making the gift. Proviso to section 56(2)(vii) contains certain events and conditions on which the provisions contained in clause (vii) to section 56(2) shall not apply in respect of any sum of money or any property received by the individual. Clause(b) of the said proviso mentions that it shall not apply to any sum of money or any property received on the occasion of marriage of an individual . The observations made by the authorities below are more of surmises and conjectures in nature rather than bringing any cogent material on record to disprove the documents and the explanations furnished by the assessee. Taking into account all the documentary evidences and explanations we find that the gifts received by the assessee on the occasion of his marriage though the amount were credited at a later date which is 10 days after the date of marriage in the case of gift received from Shri Anil Kumar Goel and 15 days in the case of gift received from Shri Siddharth Jatia i.e. on 02.01.2013 since the cheque was issued from the Singapore branch of the bank of the donor are covered by the proviso to section 56(2)(vii) as the same are received by the assessee on the occasion of his marriage. Microscopic view taken by AO of the expression on the occasion of marriage to receive a gift on the day of marriage as well as to get the account credited on the same date is devoid of real-life situations. Accordingly addition so made is deleted. Grounds raised by the assessee are allowed.

Summary

The core legal questions considered in this appeal revolve around the interpretation and applicability of the proviso to section 56(2)(vii)(a) of the Income Tax Act, 1961, specifically whether the amounts received by the assessee as gifts on the occasion of his marriage are exempt from taxation under this provision. The key issues presented include:

1. Whether the amounts of Rs. 2 crores and Rs. 11,35,523/- received by the assessee from two donors on the occasion of his marriage qualify as exempt gifts under the proviso to section 56(2)(vii)(a) despite being credited to the assessee's bank account after the date of marriage.

2. Whether the Assessing Officer's conclusion that these gifts are sham transactions and the assessee acted as a benami for the donors, thereby justifying the addition of these amounts to the taxable income, is legally sustainable.

3. The evidentiary sufficiency and credibility of the documentary proofs, including gift deeds, bank statements, and financial statements of the donors, submitted by the assessee to substantiate the genuineness of the gifts.

4. The correct interpretation of the phrase "on the occasion of marriage" in the proviso to section 56(2)(vii)(a) and whether the timing of credit to the bank account is determinative of the exemption.

Issue 1: Applicability of the proviso to section 56(2)(vii)(a) to the gifts received

The relevant legal framework is section 56(2)(vii)(a) of the Income Tax Act, which taxes sums of money received without consideration exceeding Rs. 50,000, except where such sums are received "on the occasion of the marriage" of the individual. The proviso exempts gifts received on the occasion of marriage from being taxed as income.

Precedents and principles emphasize the need to interpret the phrase "on the occasion of marriage" in a manner consistent with the intent of the law, which is to exempt genuine gifts given in relation to the marriage event. The Court noted that the proviso's language does not restrict the exemption to gifts received strictly on the date of marriage but extends to those associated with the marriage event.

The Court found that the assessee received Rs. 2 crores from a first cousin and Rs. 11,35,523/- from a family friend as gifts linked to his marriage, supported by notarized gift deeds and bank transactions. The marriage date was 08.12.2012, the gift cheques were dated on or before this date, but the amounts were credited to the assessee's account 10 and 15 days later respectively, due to normal banking clearance delays and cross-border remittance processes.

The Assessing Officer's interpretation was narrow, focusing solely on the date of credit rather than the intent and occasion of the gift. The Court held that the phrase "on the occasion of marriage" must be understood in a broader, practical sense, where the gift's cause or reason is the marriage, not the precise timing of credit to the bank account.

Therefore, the Court concluded that these gifts fall within the exemption under the proviso to section 56(2)(vii)(a).

Issue 2: Allegation of sham transactions and benami arrangements

The Assessing Officer contended that the gifts were sham transactions, alleging that the assessee was used as a benami for building capital without tax incidence. This conclusion was based on the observation that the donor's bank account did not have sufficient balance on the cheque date and that the funds were credited only after the donor received money from third parties, including the assessee's grandfather. Further, the transfer of the gift amount back to the grandfather was viewed suspiciously.

The assessee rebutted these allegations by submitting detailed financial statements and bank statements demonstrating the donor's high net worth and the genuineness of the funds. It was shown that the donor had substantial investments and income, and the flow of funds in the bank account was consistent with legitimate transactions. The transfer of funds to the grandfather was explained as an investment to earn interest income, supported by documentary evidence of the grandfather's capital and interest earnings.

The Court found that the Assessing Officer's conclusions were based on surmises and conjectures without cogent material disproving the documentary evidence. The Court emphasized that mere suspicion or timing discrepancies do not suffice to establish sham transactions, especially when credible evidence supports the genuineness of the gifts.

Hence, the Court rejected the allegation of benami transactions and held that the gifts were genuine.

Issue 3: Evidentiary sufficiency and credibility of documentary proofs

The assessee produced notarized gift deeds, bank statements of the donors, financial statements, and certificates from banks, including a corrected certificate of foreign inward remittance for the second gift, which contradicted the incorrect certificate relied upon by the Assessing Officer.

The Court scrutinized these evidences and found them to be consistent and credible. The corrected certificate from the Union Bank of India confirmed the remittance as a gift, undermining the Assessing Officer's basis for addition in respect of the second gift. The financial and bank statements of the first donor established his capacity to make the gift and the genuineness of the transaction.

The Court held that the documentary evidence was sufficient to establish the identity, creditworthiness, and genuineness of the gifts, and the Assessing Officer failed to produce any contrary material to rebut these proofs.

Issue 4: Interpretation of "on the occasion of marriage"

The Court analyzed the phrase "on the occasion of marriage" in the proviso to section 56(2)(vii)(a) and concluded that it should not be narrowly construed to mean the exact date of marriage alone. The Court observed that the proximate cause or reason for the gift being the marriage is the relevant factor, not the precise timing of receipt or credit of funds.

The Court noted that the Assessing Officer's microscopic view requiring the amount to be credited on the marriage date ignores practical realities such as banking clearance delays and cross-border remittance timelines. The Court stated: "Microscopic view taken by the ld. Assessing Officer of the expression 'on the occasion of marriage' to receive a gift on the day of marriage as well as to get the account credited on the same date is devoid of real-life situations."

This interpretation aligns with the legislative intent to exempt genuine marriage gifts from taxation.

Conclusions

The Court allowed the appeal and deleted the additions made under section 56(2)(vii)(a), holding that:

• The gifts received by the assessee from his cousin and family friend on the occasion of his marriage are exempt under the proviso to section 56(2)(vii)(a), notwithstanding the delayed credit to the bank account.
• The Assessing Officer's findings of sham transactions and benami arrangements were based on conjectures and not supported by credible evidence.
• The documentary evidences submitted by the assessee were sufficient to establish the genuineness of the gifts and the identity and creditworthiness of the donors.
• The phrase "on the occasion of marriage" must be interpreted in a practical and purposive manner, focusing on the occasion and intent rather than rigid timing of receipt.