TaxTMI 
TaxTMI 
2009 (4) TMI 533
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.... shown in the balance sheet by the assessee and the reason given was that as the land was received as a capital asset on relinquishment of rights, the same was not shown in the balance sheet. It was stated that Sh. Ravi Kumar Gupta, husband of the donor is a close friend of Sh. Kushal Chand Bader, father of the assessee. Sh. Ravi Kumar Gupta and Shri Kushal Chand Bader are directors in M/s. Arihant Jewels Limited. As the relinquishment of right over the agricultural land by Smt. Navita Gupta was considered as a gift, the Assessing Officer applied provisions of section 56(2)(v). The section is reproduced below :- "Where any sum of money exceeding twenty five thousand rupees is received without consideration by an individual or a HUF from any person on or after 1-9-2004, the whole of such sum will be considered as income from other source." The Assessing Officer interpreted the word "money" by taking support from Oxford Advanced Learner's Dictionary and held that the words "sum of money" as given in section 56 could not be restricted to hard cash and it should be read in a broader sense because if it was restricted to hard cash the purpose of legislation would be defeated. The ....
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....uld be some occasion for making gift. (3)CIT v. R.S. Sibal [2004] 269 ITR 429 (Delhi) and Sajan Dass & Sons v. CIT [2003] 264 ITR 435 (Delhi). Mere identification of the donor was not sufficient to prove the genuineness of the gift but the assessee was also required to prove the capacity of the donor to make a gift. (4)CIT v. Durga Prasad More [1969] 72 ITR 807 (SC). (5)Sumati Dayal v. CIT [1995] 214 ITR 801 (SC). (6)Lal Chand Kalra 22 CTR 135 (sic). Tax authorities were entitled to look into the surrounding circumstances to find out the genuineness of the transactions by applying the test of human probabilities. The Assessing Officer, therefore, considered the gift as non-genuine as the donor had no capacity to give such a huge gift and there was no occasion to make such a gift. The Assessing Officer, therefore, made addition of Rs. 40,80,380 under section 56(2)(v) and also alternatively under section 56(1). 3. The ld. CIT(A) for the reasons mentioned in his order deleted the addition made by the Assessing Officer. 4. The ld. Counsel for the assessee Shri Sidharth Ranka argued and submitted that the assessee along with the return of income filed on 29-8-2005 f....
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....oth families have travelled together widely. The two families have close family ties and bonds for the last 3-4 decades. During the course of assess- ment proceedings two letters dated 7-4-2007 [P.B. 88-89] and 14-8-2007 [P.B. 86-87] were submitted. Subsequently, notice under section 131 was issued by the ld. Assessing Officer to Smt. Navita Gupta who gave her statements on 14-11-2007 [P.B. 51-57]. Thereafter order was passed by the Assessing Officer on 17-12-2007. The Assessing Officer has disbelieved the gift given by Smt. Navita Gupta to the assessee and has added the value of the property as was valued by the Sub-Registrar, Chaksu, District Jaipur as the income of the assessee. The Assessing Officer has sought to treat this transaction of receiving of agricultural land as gift as income liable to tax under the head "Income from other sources" either under clause (v) of sub-section (2) of section 56 or under sub-section (1) of section 56. By Finance Act, 2004 clause (v) to sub-section (2) of section 56 was inserted, which sought to treat certain receipts as income in the hands of the recipient. We are reproducing herewith the relevant portion of section 56(2)(v) : "Where any ....
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.... the proposed enactment as follows:- "102. Hon'ble Members are aware that I abolished the gift tax in 1997. That decision remains, but a loophole requires to be plugged to prevent money laundering. Accordingly, purported gifts from unrelated persons, above the threshold limit of Rs. 25,000, will now be taxed as income." Thus what was sought to be plugged was the money-laundering aspect. The Legislature tries to convey its intention through express words. It is one of the well-settled rules of interpretation that literal interpretation of the words used in the statute shall have to be given and not just the intended language. We are also reproducing hereunder some of the sections under the Income-tax Act, 1961 where the term "money" has been used and its intended meaning. If taken otherwise then the whole substance of the word would change. Section Language Interpretation 2(7) Assessee means a person by whom [any tax] or any other sum of money is payable under this Act. Sum of money is definitive amount and cannot be variable. 2(22)(e)( ia) Dividend does not include : any advance or loan made to a share-holder [or the said concern] by a company in the o....
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.... to in clause (b) of sub-section (2) shall be following, namely: Whether assets in non-monetary forms can be invested as per requirement of section 11(5)(b). 28(iv) The value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession Receipts in money form is not necessary, receipts in kind are also taxable. 45(1A) Notwithstanding anything contained in sub-section (1), where any person receives at any time during any previous year any money or other assets under an insurance from an insurer on account of damage to, or destruction of, any capital asset, as a result of incomplete sentece Term 'other assets' separately used to denote insurance compensation received. Thus the Legislature has differentiated between the term 'money' and 'other asset'. 46(2) Where a shareholder on the liquidat-ion of a company receives any money or other assets from the company, he shall be chargeable to income-tax under the head 'Capital gains', in Term 'other assets' separately used to denote proceeds received on liquidation of a Company. Thus the Legislature has differentiated Section Language ....
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....s. Section Language Interpretation 80G Explanation 5 For the removal of doubts, it is hereby declared that no deduction shall be allowed under this section in respect of any donation unless such donation is of a sum of money. The donation has to be in the form of money. Donation other than money/in kind is not eligible for deduction u/s 80G. 92B(1) For the purposes of this section and sections 92, 92C, 92D and 92E, 'international transaction' means a transaction between two or more associated enterprises, either or both of whom are non-residents, in the nature of purchase, sale or lease of tangible or intangible property, or provision of services, or lending or borrowing money. The term money is used separately from the term tangible or intangible property, provision of services. 93(4)(d) Capital sum means : (i)any sum paid or payable by way of a loan or repayment of a loan; and (ii) any other sum paid or payable otherwise than as income, being a sum which is not paid or payable for full consideration in money or money's worth. The term money or money's worth has been used separately. 132(1)(c) any person is in possession of....
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.... and a sum of money, the aggregate of the price that such thing or things would ordinarily fetch or, sale in the open market on the date of execution of the instrument of transfer and such sum In case of exchange it includes also the sum of money. The term is used separately. 269SS Explanation (iii) Loan or deposit means loan or deposit of money If loan or deposit, consists of jewellery, immovable property, bullion, articles then it is not covered under section 269SS. If loan is in form of guarantee, then also it is not covered. Only when money is received, then the provisions of this section are attracted. 269T Explanation (iii) Loan or deposit means loan or deposit of money which is repayable. . . . If loan or deposit consists of jewellery, immovable property, bullion, articles then it is not covered under section 269T. If loan guarantee is cancelled, then also it is not covered. Only when money Section Language Interpretation is repaid by way of sum of money, then the provisions of this section are attracted. 278D(1) Where during the course of any search made under section 132, any money, bullion, jewellery or ....
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....s follows : "The word money used in section 41(2) of the Act has to be interpreted only as actual money or cash and not as any other thing or benefit which could be evaluated in terms of money." (c)The Hon'ble Gujarat High Court in the case of CIT v. Miss Yeraben R. Amin [1993] 115 CTR 120 observed as follows : "For the purpose of claiming deduction under section 80G(2)(a ), the donation must be a sum of money and not donation in kind, donation of shares therefore, does not qualify for deduction under section 80G(2)." (d)The Hon'ble Bombay High Court in the case of CIT v. Godavari Sugar Mills Ltd. [1993] 203 ITR 773 observed as follows: "Equity shares donated by assessee. Not entitled for relief under section 80G." (e)The Income-tax Appellate Tribunal, Bombay 'A' Bench in the case of Trustees of Mount Nepean Trust v. First GTO [1987] 20 ITD 365 observed as follows : "Consideration has to be for the money or money's worth. If it is money, the inadequacy is easy to determine. If the consideration is not in money but in other forms, the determination of its monetary value and inadequacy is as per judicial decisions, estimated with reference to fair equivalent test....
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.... treated as part of income. Clause (xiii) was included in the above definition which is related to section 56(2)(v) from Finance Act, 2004 with effect from 1-9-2004. In the inclusive definition given of the word 'Income', income under section 56(1) is not mentioned. Section 14 above speaks of the words 'total income'. The words 'total income' is defined under section 2(45) of the Income-tax Act as follows : '"Total income" means the total amount of income referred to in section 5, computed in the manner laid down in this Act.' Section 5 is defined as : "(1)Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which- (a )is received or is deemed to be received in India in such year by or on behalf of such person; or (b )accrues or arises or is deemed to accrue, or arise to him in India during such year; or (c )accrues or arises to him outside India during such year : Provided that, in the case of a parson not ordinarily resident in India within the meaning of sub-section (6) of section 6, the income which accrues or arises to him outside India shall not be so in....
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....essential ingredients constituting a gift under section 2(xii) of the Gift-tax Act, 1958, is that the transfer of property by one person to another must be without consideration in money or money's worth." According to Oxford Dictionary, the term "income" means "that which comes in as the periodical produce of one's work, business, land or investments (considered in reference to its amount and commonly expressed in terms of money) or annual or periodical receipts accruing to a person or corporation". Can the act of receipt of gift be equated to produce of one's work? Eric. L. Kohler in 'A Dictionary for Accountants' at page 2255 speaks of income as "Money or money's equivalent earned or accrued and includes profits gained through a sale or conversion of capital asset". Can the act of receipt of gift be equated to money or money's worth earned? According to Webster's Dictionary, the term "income" means "that gain or recurrent benefit (usually measured in money) which proceeds from labour, business or property, commercial revenue or receipts of any kind, including wages or salaries, the proceeds of agriculture or commerce, the rent of houses or return on investment". Can the....
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....s defined under section 2(24). The Hon'ble Madras High Court in the case of CIT v. Balamuralikrishna [1988] 171 ITR 447 where an amount of Rs. 30,000 was received by an artist held that there was no direct nexus between the payment received and his vocation. It is clear that the receipts cannot be treated as income liable to tax. Similarly in the case of CIT v. Sarbamangala Devi [1987] 163 ITR 898 (Patna), CIT v. Dr. P.R. Chakravarty [1987] 165 ITR 345 (Patna), CIT v. Abdul Gani Gurdeji [1995] 213 ITR 798 (Raj.), Maharaj Shri Govindlalji Ranchhodlalji v. CIT [1958] 34 ITR 92 (Bom.), CIT v. Girdharram Hariram Bhagat [1985] 154 ITR 10 (Guj.), CIT v. Ramdeo Samadhi [1986] 160 ITR 179 (Raj.) where the gift was made out of love and affection it was held not liable to be treated as income. In Reed v. Seymour 11 Tax Cases 625 (HL). Viscount Cave L.C. enumerated a principle : "Is it in the end a personal gift or is it remuneration? If the latter, it is subject to tax; if the former, it is not". The Hon'ble Supreme Court of India in the case of Mahesh Anantrai Pattani v. CIT [1961] 41 ITR 481 held "where a receipt is wholly unconcerned with and is not the result of remunerati....
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....erty Act and the Registration Act. Shri Ravi Kumar Gupta, husband of Smt. Navita Gupta a renowned architect of Rajasthan and Shri Kushal Chand Bader, father of Shri Komal Bader are Directors in M/s. Arihant Jewels Limited. Shri Ravi Kumar Gupta and Shri Kushal Chand Bader are very close child-hood friends, having studied together in St. Xavier School, Jaipur and thereafter and continue to be very close family friends. Both families have travelled together widely. The two families have close family ties and bonds for the last 3-4 decades. Several photographs of the two families when they travelled together outside Jaipur on several occasions at places like Jammu & Kashmir, Kulu Manali, Shimla, Mt. Abu, Dharamshala, etc. are also enclosed [PB 72-83]. Statements under section 131 was recorded of Smt. Navita Gupta by the ld. Assessing Officer at the back of the assessee on 14-11-2007 [P.B. 51-57]. The assessee was not provided a copy of the statements recorded under section 131 before passing of the assessment order. Thus, the material on which the ld. Assessing Officer has relied upon was not confronted to the assessee. As far as the assessee is concerned no hearing in this case to....
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.... aside the order of the Tribunal as well as order in revision of High Court on the ground that the statements of a partner of another firm upon which the Sales Tax Tribunal relied, had not been tested by cross examinations. (iv)The Hon'ble Rajasthan High Court in CTO v. Haryana Dal Mill [1993] 90 STC 519 dismissed the departmental revision petitions on the ground that the respondent not having been given opportunity to discredit the entries or cross examine the agent and the entries not having been proved nor the agent examined, the order of the Board of Revenue was justified. (v)The Hon'ble Kerala High Court in P.S. Abdul Majeed v. Agricultural Income tax & Sales Tax Officer [1994] 209 ITR 821 in a writ petition by the petitioner-assessee held that there were two inspections to the petitioner's holdings on 3-11-1981, and on 19-9-1985, before and after the assessment year in question, when the inspecting authorities estimated the yield of cardamom from the petitioner's holdings at 180 Kgs. The order of reassessment was made without any reference to either of these inspection records but merely on the strength of the entries in the auctioneers' records. Reliance on the auction....
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....orical manuscripts it is written that Lord Krishna gave so many jagirs, etc. to his friend Sudama. If Income-tax Act was prevalent during that time then Assessing Officer would have sought to tax such an act. An act of gift arises from personal feeling and bonding towards one person, such bonding is not restricted to blood relations only [PB 54-55]. 2. No statement of affairs are being prepared and enclosed with the return of income by Smt. Navita Gupta. Is there a requirement of the Income-tax Act that statement of affairs has to be enclosed by all the assessees along with the return of income ? Further Smt. Navita Gupta had provided following papers to the ld. Assessing Officer : (a) Copy of balance sheet for year ended 31-3-1994 along with computation of income and Sl. No. Defects pointed by AO Our Submissions assessment order. The Assessing Officer has conveniently ignored the same [PB 69-71]. (b) Copy of balance sheet for year ended 31-3-1998 along with computation of income and return of income. The Assessing Officer has conveniently ignored the same [PB 66-68]. (c) Copy of balance sheet for year ended 31-3-1999 a....
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.... ld. Assessing Officer has simply mentioned the returned income, ignoring the agricultural receipts received by Smt. Navita Gupta. The ld. Assessing Officer has very conveniently ignored to ask the donor or her husband who was also present during the statements were recorded the source of income of the family/husband of Smt. Navita Gupta. Smt. Navita Gupta was not required to struggle for her own livelihood. She was dependent on her husband and in-laws for support. For a lady income need not be substantial - more particularly when she is dependent & a house-wife. Shri Ravi Kumar Gupta is one of the leading and best known architects from Rajasthan. He belongs to illustrious family of Rajasthan. The family of Smt. Navita Gupta consisted of just 3 members. Inference so drawn by the Assessing Officer deserves to be ignored. 5. Bank balance was maximum of Rs. 5.22 lakhs and lowest was Rs. 665. Average balance is less than Rs. 1.00 lakh during the year What inference from this is being sought by the ld. Assessing Officer is not very clear. No benefit directly or indirectly has gone to Smt. Navita Gupta or her family members. Smt. Navita Gupta was not required to s....
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....Chand Bader are child-hood friends, having studied together in St. Xavier School, Jaipur and thereafter. On the contrary it was a generous and futuristic act by Shri Kushal Chand Bader, who himself is a renowned jeweller and belonging to an illustrious family of Jaipur to invite her to invest together while purchasing the property, not out of need but just as an act of solidarity/friendship. Inference so drawn by the Assessing Officer deserves to be ignored. 9. Smt. Navita Gupta failed to provide clear details and source of Rs. 90,000 towards purchase of land. An investment done 25 years back by Smt. Navita Gupta of just Rs. 90,000 is being questioned by the ld. Assessing Officer now. This is surprising. Smt. Navita Gupta had provided following papers to the ld. Assessing Officer : (a) Copy of balance sheet for year ended as on 31-3-1994 along with computation of income and assessment order. The Assessing Officer has conveniently ignored the same. The agricultural land is shown in her balance sheet. Sl. No. Defects pointed by AO Our Submissions ( b) Copy of balance sheet for year ended as on 31-3-1998 along with computatio....
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....- all depend upon personal feelings and desire; no probe can easily be made into such aspects of human psychology and best persons to explain such feelings and desires are those who execute same. Questioning the timing of gift is totally baseless and it will always be on individuals' whims and fancies when the gift is to be made. The donor will not ask the Income-tax Officer or refer to the Income-tax Act to decide when he/she should make a gift. Inference so drawn by the Assessing Officer deserves to be ignored. 11. No occasion to make a gift. Market value of the land is much more than what is valued by the Stamp Valuation Authority. Stating that the land value is more than what is valued by the Stamp Valuation Officer is totally baseless, without any basis and supporting. The donor will not ask the Income-tax Officer when he/she should make a gift. The Assessing Officer has no right to suggest that she should have given the gift at a certain occasion. A gift is an act moved by the remembrance of past services, moved by gratitude or moral obligation. Gift is given out of love and affection. Whether the gifts are large or small, they are exactly on the same footin....
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....ioned that Smt. Navita Gupta has not provided any statement of affairs. The fact that she was living in her husband's posh house situated in one of the best localities of Jaipur in C-Scheme has been ignored. In addition she already owned plot at Kalwad Road. The gifted property is agricultural land not a residential house that she would have been dependent on. Smt. Navita Gupta or her family members were/are not dependent on the agricultural land which was gifted. The ld. Assessing Officer has very conveniently ignored to ask the donor or her husband who was also present during the statements were recorded the immovable-movable assets owned by the family of Smt. Navita Gupta. Smt. Navita Gupta in response to question No. 1 that she is a housewife. A housewife would naturally depend on the family assets for her lifestyle. She would be depended on spouse and in-laws. Smt. Navita after being satisfied about her future and her family's future decided to give this agricultural plot of land as gift. Inference so drawn by the Assessing Officer deserves to be ignored. We are further highlighting hereunder various defects in the Assessment Order on the statements of facts : 1.Th....
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.... Professionals, Ministers, Bureaucrats, etc., etc. The Assessing Officer has referred to certain judgments in his support. Our comments on the same are as follows : The Assessing Officer has referred to the decision in the case of Chain Sukh Rathi (supra) this case was relating to search and seizure holding where some incrementing documents were found. Not related to the facts and circumstances of the case of the assessee and cannot be relied upon. The Assessing Officer has referred to the decision in the case of R.S. Sibal (supra) where the Delhi High Court has held that mere identification of the donor was not sufficient. On the contrary the above order is in favour of the assessee as there was an act of gift between Donor a NRI and the Donee who were non-relative out of love and affection. The High Court said when the lower appellate authorities have confirmed all factual aspects then no question of law arose before the High Court where the capacity to make gift was not looked into by the Assessing Officer. The ld. Assessing Officer has referred to the decision in the case of Sajan Dass & Sons (supra). The facts of the case are that the donor declined that he had ....
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.... between the donor and the donee. It observed that assessee had produced copies of gift deeds and affidavits of NRI donors and there was no case of money laundering [P.B. 277-280]. The Income-tax Appellate Tribunal, Jodhpur Bench in the case of DCIT v. Ramdeo Kumar 140 Taxman 102 approved the genuineness of the gift when the donor was a non-resident Punjabi whereas the donee was Maheshwari and of Sriganganagar. However, the identity, capacity and friendship was established. It observed that for making gift, it is not necessary that there should be some blood relation or gift should be made only to relatives and not to friends. The Income-tax Appellate Tribunal, Chandigarh Bench in the case of R.K. Shyal v. ACIT 66 TTJ 656 held that the assessee having produced the affidavits of NRI donors affirming the gifts, addition of amounts representing the gifts could not be made only on the ground that there was no occasion or relationship for making the gifts. The Income-tax Appellate Tribunal, Rajkot Bench in the case of ACIT v. Radhey Shyam Bansal 68 TTJ 136 have held that the gift received by the assessee from a foreign party out of love and affection could not be treated as inc....
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.... shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost, any improvement of the asset incurred or borne by the previous owner, or the assessee as the case may be. Thus valuation of the gift as valued by the registered valuer would lead to double taxation as far as assessee is concerned. Since at the time of subsequent transfer by the assessee, the value which shall be adopted in his hands shall be Rs. 90,000. Thus in our humble submission, since the donor is not held to be a benami, the addition if any, on this account can be to the extent of cost at the hands of the donor. In GTO v. Vinod Kumar Hansaria [2003] 131 Taxman 134 (Jodh.)(Mag.) ITAT Jodhpur followed by Asstt. CGT v. Sh. Mohan Khan [2004] 1 SOT 43 ITAT Jodhpur Bench it was held that value taken by the Sub-Registrar, could not be taken as the basis for working out the deemed gift. [PB 270-271]. In the alternate the agricultural land so gifted falls outside the purview of section 2(14) as such it cannot be taxed at all. Had the lady sold the agricultural land to the assessee-appellant, she would not have been liable to any capital gain. In view of the above facts a....
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.... introduced through Finance Act, 2004, the Finance Minister in his budget speech maintained that to prevent money laundering, loophole was required to be plugged and, accordingly, purported gifts from unrelated persons above Rs. 25,000 should be taxed as income in the hands of the donee. "Money laundering" denotes siphoning off money from country by illegal channels. Changing hands of an agricultural land within the country and between two citizens cannot be considered as money laundering. Thus it cannot be said that the provisions were introduced to stop such transfer of capital assets within India. Further when the language of the section is clear, there is no need to interpret in own's way. If the intention of the Legislature was to cover any asset apart from money, it could have used the word 'asset' or like any other denoting movable/immovable properties. The ld. AR has given several instances from the IT Act where the word "money" is used as different from bullion, jewellery, immovable property etc. Various case laws have been cited where the phrase 'any sum' higher side been used as money only in section 80G. Thus, if agriculture land cannot be considered as 'any sum of mone....