TaxTMI 
TaxTMI 
2009 (4) TMI 533
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....nd 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 Assessing Officer with these findings applied pro....
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.... [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 for the assessment year 2005-06 submitted a note in the computation of inc....
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....ly 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 sum of money exceeding twenty-five thousand rupees is received without consider....
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....ft 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 ordinary course of its business, where the lending of money is a substantial part of the business of the company ....
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..... 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 Interpretation respect of the money so received or the market value of the other assets on the date of distribution, as reduced by the amount assessed as dividend within the....
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....n 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 any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property The term money is separately mentioned apart from term jew....
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....ii) 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 other valuable article or thing (hereafter in this section referred to as the assets) or any books of account or other documents The term money, bullion, jewellery, article or things together constitute asset. Thus money is part of the asset, its scope cannot be enlarged to include total asset as done by the ld. Assessing Office....
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....ing 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, i.e., whether what is given is fair equivalent of what is received. Adequate consideration is not necessarily what is ultimately determined by someone as its market value. Provisions of section 56(2)(v) are deeming provisions and language of the deeming provisions are to be strictly followed, no interpretation can be added to them. The Assessing Offi....
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....me-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 included unless it is derived from a business controlled in or a profession set up in India. (2)Subject to the provisions of this Act, the total income of any previous year of a person who is a non-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 ....
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....d 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 act of receipt of gift be equated to benefit from labour, business, property, etc.? Circular No. 158, dated 24-12-1974 [98 ITR (St.) 97] issued by the Central Board of Direct Taxes has categorically stated in response to a question framed with regards to treatment of gifts : Q.Whether receipts in the form of gift liable to income-tax? A.Receipts which are of a causal or non-recurring nature will be liable to incom....
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....ty [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 remuneration of services rendered but is strictly in nature of personal gift for the personal qualities of the assessee, received by him as a token of personal esteem and veneration, the amount received cannot be said to be income liable to tax." Hence, in our humble submission the act of gift of an immovable agricultural land received by the assessee respondent as Gift is not liable to taxation under section 56(1) of the Income-tax Act, 1961 and has r....
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....ogether 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 took place after 22-8-2007 [PB 272-273]. In the light of facts and circumstances of the case where the ld. Assessing Officer did not bother to confront the material obtained by him to the assessee, no addition could be made on the principles of natural justice. The ld. Assessing Officer ought to have given a copy of the statements recorded of Smt. Navita Gupta under section 131 to the Income-tax Act and sought our comments on the same, before passing th....
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....e 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 auctioneers' records and treating them as if they were conclusive did violence to the principles of natural justice. The petitioner had denied the sales in toto. He had also prayed for an opportunity to cross-examine the auctioneers. When such a request was made it was incumbent on the officer to afford opportunity to the assessee to cross-examine the authors of those books. The petitioner had been denied the reasonable opportunity which was due in law, in relation to the....
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.... 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 along with computation of income and return of income. The Assessing Officer has conveniently ignored the same [PB 63-65]. (d) Copy of computation of income and return of income for year ending 31-3-2003. Since no business activity was being carried on by Smt. Navita Gupta, hence no statement of affairs was filed. Inference so drawn by the Assessing Officer deserves to be ignored [PB 61-62]. (e) Copy of computation of income and return of income for year ending 31-3-2004. Since no business activity was being car....
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....ouse-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 struggle for her own livelihood. She was dependent on her husband for support. The ld. Assessing Officer has failed to prove any benefit that has flown from the assessee or Smt. Navita Gupta or her family members. Inference so drawn by the Assessing Officer deserves to be ignored. 6. The family of Smt. Navita Gupta consists of husband who is an architect and son who is doing course of architect. What inference from this is being sought by the ld. Assessing Officer is not very clear. Shri Ravi Kumar Gupta is one of the leading and best known architects of Rajasthan. I....
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....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 computation of income and return of income. The Assessing Officer has conveniently ignored the same. The agricultural land is shown in her balance sheet. (c) Copy of balance sheet for year ended as on 31-3-1999 along with computation of income and return of income. The Assessing Officer has conveniently ignored the same. The agricultural land is shown in her balance sheet. Smt. Navita Gupta has clearly stated in response to question number 8 that the investment was done by way of help and support of family members. Is it uncommon ? Was it too difficult for Smt. Navita Gupta belonging to an illustrious family to arrange Rs. 90,000. As it is ladie....
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....e 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 footing as gifts which are made to a child or gifts which are made to any other person whom the giver thinks, he ought to supply with funds for one reason or another. Gifts are given to people in whom they place faith, or for whom they have limitless regards and an element of reverence, veneration or personal esteem and faith - 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. Inference so drawn by the Assessing Officer deserves to be ignored. 12. Land was purchased on advice of father of the assessee and later on gifted without any consideration....
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....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.The Assessing Officer has emphasized on the fact that Smt. Navita Gupta has no capacity to gift. "Whether ignoring the family wealth and family income in the given circumstances is appropriate ? Smt. Navita Gupta is a house-wife and was dependent on her family to support her. An over-riding feeling of giving gift to Shri Komal Kumar Bader the Assessee was not naturally done without the support of family members." 2.The Assessing Officer has not been able to prove any consideration directly or indirectly has gone to Smt. Navita Gupta from the assessee. 3.The act of jointly purchasing the property by Smt. Navita Gupta, Shri Komal Kumar Bader and Smt. Kumud Hirawat by registered sale deeds in 1984 & 1986 has not been challenged a....
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.... 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 made any gift and there were anomalies in the signatures, etc. the facts of current case are totally distinguishable and not related. The Assessing Officer has referred to the decision in the case of Sumati Dayal (supra) on test of human psychology. The facts in that case related to a lady earning income from horse racing. Not related to the facts of the current case. The Assessing Officer has referred to the decision in the case of Lal Chand Kalra (supra). In that case the donor had given gift even though they had substantial liabilities on their head. Accordingly, it was held to be a non-genuine credit. Not related to the facts of the current case. The Assessing Officer has referred to the decision in the case of Durga Prasad More (supra). There a question arose....
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....ffirming 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 income of the assessee when the genuineness of the credit could not be doubted, identity of the donor was established and his capacity to make gift is not questionable. The Income-tax. Appellate Tribunal, Allahabad Bench in the case of ITO v. Matadeen Snehlata (HUF) 90 ITD 203 have held that Assessing Officer making addition observing that for a valid gift, relation and occasion are required - Not justified - Assessee had proved the identity of the donors as also their financial status - gifts were made by the donors and accepted by the donee, which were also shown in the IT return - In the circumstances the CIT(A) was justifying in deleting the addition." The Assessing Officer has held that valuation arrived by the Sub-Registrar at Rs. 40,80,380 for stamp duty purposes shall be treated as value of ....
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....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 and circumstances, the order of the learned Commissioner of Income-tax (Appeals) being, detailed and elaborate, he having deleted the addition rightly, the departmental appeal deserves to be dismissed. 5. The ld. DR on the other hand relied upon the order of the Assessing Officer. 6. We have heard the rival contentions and perused the facts of the case. We concur with the views of the ld. CIT(A) whose order appears to be reasoned one and who has given finding that the ownership of the agriculture land gifted has not been doubted by the Assessing Officer. In the statement of affairs filed along with the return of income by Smt. Gupta, the land has been appearing as an asset of the donor. Its value has been shown at Rs. 90,000 in all the balance sheets filed by the donor for the assessment years 1994-95, 1998-99 an....
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....ther 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 money'. Provisions of section 56(2)(v) cannot be applied. The Assessing Officer as an alternative has also applied provisions of section 56(1). As the agriculture income is exempted and it is not chargeable to Income-tax under any head of income specified in section 14. It is not covered by sub-section (1) of section 56. Only an 'income' can be taxed under Income-tax Act and income is defined under section 2(24). An asset cannot be termed, as "any sum" as used in various sub-clauses of section 2(24) or an "income" and therefore, agriculture land which was gifted cannot be taxed as income. It is not covered by and heads of income given in section 14 and therefore, neither agriculture land nor agriculture income is chargeable to tax under any heads of income. The application of provisions of section 56(1) therefore, cannot ....