Gift from daughter-in-law not taxable under Section 56(2)(vii) as she qualifies as a relative

The ITAT Mumbai held that a gift received by the assessee from her daughter-in-law is not taxable under section 56(2)(vii) as the daughter-in-law qualifies as a "relative" under the Act's definition. Since the son is a lineal descendant and the daughter-in-law is his spouse, the gift falls within the exemption provided by the fourth proviso to section 56(2)(vii). The tribunal set aside the CIT(A)'s order and directed the AO to delete the addition made under section 56(2)(vii), allowing the assessee's appeal.

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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.

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