Tax Tribunal rules HUF member's income not taxable

The Tribunal ruled in favor of the assessee, holding that any sum received by an individual as a member of an HUF, paid out of the family income, is not taxable. The Tribunal emphasized the unique nature of HUFs and their taxation principles, directing the Assessing Officer to delete the addition of Rs. 18.00 lakhs under section 56(2)(VII). Consequently, the appeal was allowed in favor of the assessee.

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Issues involved:
The appeal challenges the addition of Rs.18,00,000 received as a gift from the assessee HUF, which was claimed as exempt under section 56(2)(VII) of the Income Tax Act.

Details of the judgment:

1. Background: The assessee, an individual, declared total income for the assessment year 2017-18. The Assessing Officer disallowed and added back a gift of Rs.18.00 lakh from the HUF, where the assessee is the Karta, to the total income, arguing that HUF does not fall under the list of relatives. The appeal against this addition was first filed before the CIT(A) and later migrated to NFAC, Delhi.

2. Assessee's Submission: The assessee argued that the gift received from the HUF should be considered exempt as HUF is not different from family members. The assessee cited decisions from Chandigarh and Rajkot Tribunals where similar gifts were treated as exempt under the Income Tax Act.

3. Revenue's Argument: The Revenue contended that the legislative definition of relative does not include HUF. They argued that all submissions and case laws presented by the assessee were considered by NFAC/CIT(A) before confirming the Assessing Officer's decision.

4. Judicial Analysis: The Tribunal noted that while the Assessing Officer and NFAC/CIT(A) added the gift amount to the total income, the provisions of section 10(2) of the Act were not considered. The Tribunal referred to decisions from Ahmedabad and Chandigarh Tribunals, emphasizing that HUF is not a separate juristic person distinct from its members.

5. Decision: The Tribunal ruled in favor of the assessee, stating that any sum received by an individual as a member of an HUF, paid out of the family income, is not taxable. The Tribunal highlighted the unique nature of HUFs and their taxation principles, ultimately directing the Assessing Officer to delete the addition of Rs. 18.00 lakhs under section 56(2)(VII). Consequently, the ground of appeal raised by the assessee was allowed, and the appeal was allowed in favor of the assessee.

6. Conclusion: The Tribunal announced the order in the open court on 09/05/2023, in which the appeal of the assessee was allowed, and the addition of the gift from the HUF was directed to be deleted.

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