The Finance Act, 2012 has widened the definition of relative under Section 56(2)(vii) by providing that in case of a Hindu Undivided Family, any member thereof shall be treated as a relative. Therefore, an HUF can now make or receive gifts, to or from any of its members, without attracting any liability for income-tax. It is important to note that this amendment has been made retrospectively with effect from 1st October, 2009.
In the above context, the decision of the ITAT Rajkot Bench, in the case of ‘Vineetkumar Raghavjibhai Bhalodia vs. ITO’ [2011] 140 TTJ 58 (Rajkot), also merits a significant mention. In this decision, the ITAT held that gift received by an individual from his HUF was entitled to exemption. The reasoning for the same was justified by the Tribunal on the basis that the term ‘relative’ explained in Explanation to section 56(2)(vi) includes ‘relatives’ and as the taxpayer received gift from his ‘HUF’, which is ‘a group of relatives’, such gift received by the member from his HUF should be interpreted to mean that the gift was received from ‘relatives’ and hence the same was not taxable under section 56(2)(vi).
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