TMI Blog2019 (9) TMI 337X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances, the order of the Assessing Officer cannot be said to be erroneous. Taxability of gift received from 'HUF' - Family income flows into a common pool from which resources are drawn to meet needs of all the members which are regulated by the head of the family. In such circumstances, any amount received by a member of the 'HUF', even out of the capital or estate of the 'HUF' cannot be said to be income of the member exigible to taxation. Since such a member himself has a pre-existing right in the property of the 'HUF', hence, it cannot be said to be a gift without consideration by the 'HUF' or by the other members of the 'HUF' to that recipient member. Provisions of section 56(2)(vii) are not attracted in case an individual member receives any sum either during the subsistence of the 'HUF' for his needs or on partition of the 'HUF' in lieu of his share in the joint family property. Converse is not true i.e. to say in case an individual member throws his self-acquired property into common pool of 'HUF'. The 'HUF' or other members of the 'HUF' do not have any pre-existing right in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating to the issue are that the assessee filed his return of income on 9.3.2012 declaring an income of ₹ 14,32,982/-. The assessment was completed by the Assessing Officer vide order dated 13.3.2014 u/s 143(3) of the Act accepting the returned income. Subsequently, the Assessing Officer reopened the assessment u/s 147 read with section 148 of the Act on the ground that the assessee during the year under consideration had received a gift of ₹ 5,90,000/- from his Hindu Undivided Family ( HUF ). The Assessing Officer was of the view that since the amount of said gift was more than ₹ 50,000/-, hence, the same was exigible to tax as income from other sources u/s 56(2)(vii) of the I.T. Act. However, the assessee in the reopened assessment proceedings relied upon the decision of the Coordinate Rajkot Bench of the Tribunal order dated 17.5.2011, in the case of Vineetkumar Raghavjibhai Bhalodia vs ITO passed in ITA No. 583/Rjt/2007 for assessment year 2005-06, which has been further followed by the Hyderabad Bench (SMC) of the Tribunal, order dated 17.6.2015 in Mr.Biravelli Bhaskar vs ITO ITA No. 398/Hyd/2015 for A.Y. 2008-09, wherein, it has been he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 56(2)(vii) of the Act and in unduly placing reliance on the judicial decisions which were not in accordance with the provisions of law. She, therefore, held that the order passed by the assessing officer was erroneous and prejudicial to the interest of Revenue. She, accordingly, set aside the order of the Assessing Officer and directed the Assessing Officer to make assessment afresh. 4. Being aggrieved by the above order of the Ld. PCIT, the assessee has come in appeal before us. 5. We have heard the rival contentions and have also gone through the record. In this case, originally, the assessment was framed u/s 143(3) of the Act accepting the returned income. The assessment was reopened u/s 147 of the Act only to examine the issue as to the taxability of the amount of gift received by the assessee from his 'HUF'. The issue was examined by the Assessing Officer and he accepted the returned income holding that the gift received from 'HUF' was not exigible to tax by relying upon the decisions of the Coordinate Rajkot Bench of the Tribunal in the case of Vineetkumar Raghavjibhai Bhalodia vs ITO (supra) and Hyderabad Bench of the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re will be no certainty and finality to the litigation. If the decisions passed by the higher authorities are not followed by the lower authorities, there will be chaos resulting into never ending litigation and multiplication of the cases. In view of the above discussion, the impugned order of the Ld. PCIT is non sustainable as per law. 7. Now coming to the observations made by the Ld. PCIT on the merits of the case. The assessee in this case has taken a plea that the aforesaid gift has been received by the assessee out of the income of the 'HUF' and that the same was exempt u/s 10(2) of the I.T. Act. There is a direct decision of the Coordinate Rajkot and Hyderabad Benches of the Tribunal (supra) on this issue, holding that for getting any exemption u/s 10(2) of the Act, the individual assessee must satisfy two conditions, firstly, he is a member of the 'HUF' and, secondly, he receives a sum out of the income of the such 'HUF', may be of earlier years. The Ld. PCIT in the impugned order passed u/s 263 of the Act, however, held that the word paid out means that sum must be paid out either in return of goods or services or that the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The cord that knits of the family together is not property but relationship. There is no presumption that a family is joint because it is possessed of joint property. If the persons in the family live together and are joint in food and worship, irrespective of the fact that there is joint property of the family, it constitutes 'HUF'. It is a fluctuating body, its size increases with birth of a member in the family and decreases on death of a member in the family. Females go and come into the 'HUF' on marriage. A coparcenary is a narrower body than a joint family and consists of only persons who take by birth an interest in the joint family property and can enforce a partition whenever they like. Though, members of 'HUF' are entitled to be maintained out of the joint family funds, however, the members of the narrower body within 'HUF' called Coparcenary have birth rights in the joint family property. Hindu Law does not recognize an 'HUF' as an entity separate from the members of the family. In an 'HUF', the members collectively own it. The interest and share of the members in the estate of the family is undivided and undetermined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of the profits of the firm and opts that the same be added towards his capital in the firm, even then, when the said partner either on dissolution of the firm or otherwise receives back his capital, the said capital is not taxable as an income of the partner, rather, the same is taken as a capital receipt. However, in the case of 'HUF', or to say in the strict sense in case of coparcenary , the individual members receive their share on partition. However, during the subsisting coparcenary or to say broadly HUF', no member is entitled to receive any definite share out of the income of the 'HUF'. It is left to the prudence and wisdom of the manager who has to manage the affairs of the 'HUF', he member, such as on the marriage of a unmarried female member or in case of certain treatment of any disease of the member or in case of educational needs of any children in the 'HUF'. The amount spent may be more than that the member may have gotten on the partition of the 'HUF'. The Karta of the 'HUF', even can gift of the 'HUF' property for pious purpose and even he can contract a debt for the legal necessity and for family pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the payment or the quantum of amount paid to any member by the Karta / manager of the HUF is though subject to challenge by other members of the HUF , if found to be not genuine or not for family good, however, a third person cannot question it. Family income flows into a common pool from which resources are drawn to meet needs of all the members which are regulated by the head of the family. In such circumstances, any amount received by a member of the 'HUF', even out of the capital or estate of the 'HUF' cannot be said to be income of the member exigible to taxation. Since such a member himself has a pre-existing right in the property of the 'HUF', hence, it cannot be said to be a gift without consideration by the 'HUF' or by the other members of the 'HUF' to that recipient member. In such circumstances, the provisions of section 56(2)(vii) are not attracted in case an individual member receives any sum either during the subsistence of the 'HUF' for his needs or on partition of the 'HUF' in lieu of his share in the joint family property. However, the converse is not true i.e. to say in case an individ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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