2016 (11) TMI 1121 - AT - Income Tax

Tribunal rules gifts of IMD bonds exempt from tax under Income Tax Act

Ramesh Jhaveri (HUF), Mumbai Versus Income Tax Officer, Range - 21 (3) (3), Bandra, Mumbai

The Tribunal allowed the appeal, directing the AO to delete the addition of Rs. 82,39,653. The IMD bonds received as gifts were held not to fall within ... Unexplained credit u/s 68 - gift of Indian Millennium Deposit ('IMD‟) bond - whether proceeds of India Millennium Deposit cash not be brought to tax in the hands of appellant by invoking provisions of Section 56(2)(v)? - Held that:- We accept this gift as genuine because the identity and the creditworthiness of the donor have been established on record. The reason for making this gift is also stated and its genuinity stands proved. Entire evidences, which have been referred to above like the declaration of gift, affidavit of donor, direct letter sent to AO, statement on oath both of donor and the donee, proof of source of the draft with further evidence, inter alia, go to prove the claim of the assessee. Therefore, we delete the impugned addition and allow this appeal.Entire evidences, which have been referred to above like the declaration of gift, affidavit of donor, direct letter sent to AO, statement on oath both of donor and the donee, proof of source with further evidence, inter alia, go to prove the claim of the assessee. Therefore, we delete the impugned addition. Further, gift in question does not fall within the ambit of Section 56(2)(v) of the Act and same is exempt See case of Nilesh Jhaveri (HUF) [2016 (8) TMI 775 - ITAT MUMBAI ] - Decided in favour of assessee Issues Involved:1. Addition of income as unexplained credit under Section 68 of the Income Tax Act, 1961.2. Taxability of India Millennium Deposit (IMD) proceeds under Section 56(2)(v) of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Addition of Income as Unexplained Credit under Section 68 of the Income Tax Act, 1961:The assessee filed an appeal against the order of the Commissioner of Income-Tax (Appeals)-32, Mumbai, which confirmed the addition of Rs. 82,39,653/- as unexplained credit under Section 68 of the Income Tax Act, 1961. The Assessing Officer (AO) initially added this amount to the total income of the assessee, treating the gift of IMD bonds as unexplained credit. The assessee argued that the IMD bonds were received as a gift from three persons and claimed the amount as exempt under Section 10(15)(iid)(c) of the Act. The AO, however, was not convinced and added the amount to the total income, assessing the income at Rs. 82,61,821/-.The assessee contended that the gifts were genuine and the identity and creditworthiness of the donors were established. The assessee provided details of the donors and the transfer of IMD bonds. The Tribunal found that the identical issue had been decided in favor of the assessee in a similar case (Nilesh Jhaveri (HUF) vs. ITO). The Tribunal noted that the gifts were received before the insertion of Section 56(2)(v) and thus did not fall within the purview of 'any sum of money' under the said section. The Tribunal concluded that the case was covered by the earlier decision and directed the AO to delete the addition.2. Taxability of India Millennium Deposit (IMD) Proceeds under Section 56(2)(v) of the Income Tax Act, 1961:The assessee argued that the proceeds from the IMD bonds should not be taxed under Section 56(2)(v) as the IMD bonds did not constitute 'any sum of money' as per the language of the section. The assessee also claimed that the interest on the IMD bonds was exempt under Section 10(15)(iid)(c) of the Act. The Tribunal referred to the decision in the case of Nilesh Jhaveri (HUF), where it was held that IMD certificates are not 'any sum of money' and thus do not fall within the ambit of Section 56(2)(v). The Tribunal also noted that the interest on the IMD bonds was exempt as per the relevant notification under Section 10(15)(i).The Tribunal found that the facts of the present case were identical to those in the Nilesh Jhaveri (HUF) case, where the gifts were considered genuine, and the creditworthiness of the donors was established. The Tribunal concluded that the addition made by the AO was not justified and directed the deletion of the addition.Conclusion:The Tribunal allowed the appeal filed by the assessee, setting aside the order of the Commissioner of Income-Tax (Appeals) and directing the AO to delete the addition of Rs. 82,39,653/-. The Tribunal held that the IMD bonds received as gifts did not fall within the purview of 'any sum of money' under Section 56(2)(v) and that the interest on the IMD bonds was exempt under Section 10(15)(iid)(c) of the Income Tax Act, 1961. The appeal was pronounced in the open court on 22.9.2016.