Case Law Details

Case Name : ACIT Vs. Anuj Agarwal (ITAT Mumbai)
Appeal Number : ITA No. 4945/Mum/2008
Date of Judgement/Order : 14/10/2009
Related Assessment Year : 2006- 2007
Courts : All ITAT (5510) ITAT Mumbai (1715)


DECIDED BY: ITAT, MUMBAI BENCH `A’, IN THE CASE OF: ACIT Vs. Anuj Agarwal, APPEAL NO: ITA No. 4945/Mum/2008, DECIDED ON October 14, 2009


3. The assessee is an individual. The assessee filed return of income for A.Y. 2006-07 on 29.12.2006 declaring total income of Rs. 2,77,700/-. There was a search and seizure operation u/s. 132 of the Act in the case of Vasudev D. Agarwal group on 2.3.2006. The assessee was one of the member of this group “/hose residential premises was also searched. In course of search in the residence of Mr. Rajkumar Agarwal, certain documents regarding gifts received by various members of Agarwal family from various persons in the form of India Millennium Deposits Certificate (IMD) issued by State Bank of India in 2001 were found. As per the terms and conditions of issue of IMD certificates, face value of the certificate together with interest a. at} 8.5% per annum compounded half yearly was payable on 29.12.2005 to the registered holder of this certificate. These certificates were capable of being transferred by way of gift.

4. One such certificate found in course of search, related to a gift which the assessee had received from Paramjit Kaur of Dubai. The Principal amount of this certificate was Rs. 13,50,300/-. Interest payable on this certificate was Rs. 7,09,613/-. The total maturity value of this certificate was Rs. 20.59,913/-. The assessee had received maturity amount on the certificate in the previous year relevant to A.Y. 2006-07. There is no dispute that the assessee received gift of IMD certificates in F.Y. 2002-03. Gift deed dated 19.7.2002 signed by the donor also mentions the fact that gift was effected by handing over IMD certificate to the assessee. By the Finance Act, 2004 clause (v) was introduced to section 56(2) of the Ac w.e.f. 1.4.2005. Those provisions lay down that where any sum of money exceeding Rs. 25,000/- is received by an individual from any person on or after 1.9.2004 but before 1.4.2006, whole of such sum shall he chargeable to Income Tax under the head ‘income from other sources’. By Taxation Laws (Amendment) Act 2006 w.e.f. 1.4.2007; clause (vi) to section 56(2) was introduced; whereby any sum of money aggregating the value exceeds Rs. 50,000/- is received without consideration by an individual in any previous year from any person after 1.4.2006, whole of the aggregated value of such sum shall be chargeable to income tax under the head Income from other sources’. In the present case, there is no dispute that gift in question does not fall within any of the exceptions mentioned in section 56(2)(v) or (vi) of the Act.

5. According to the Assessing Officer since, the maturity amount of IMD was received by the assessce during the previous year, provisions of section 56(2)(vi) were applicable, and therefore he brought the principal amount or value of IMD to tax. The Assessing Officer held that u/s. 10(15} of the Act, interest on these bonds were exempt and he therefore did not bring to tax interest part of the bond.

6. Before learned CIT(A), the assessee submitted that gift in question was complete in F.Y. 2002-0.3 and provisions of section 56(2)(v) were applicable only from 1.9.2004 and Section 56(2)(vi) were applicable only from 1.4.2006 and therefore the said provisions could not be applied to the case of the assessee. In this regard, the assessee submitted that there was a transfer of ownership of the bonds by way of gif even prior to 19.7.2002. That there was delivery of IMD certificates by the donor to the donee and this fact was duly recorded in the gift deed dated 19.7.2002; therefore there was gift complete in the previous year relevant to A.Y. 2003-04 within the meaning of section 122 & 123 of the Transfer of Property Act, 1882. The assessce further submitted that provisions of section 56(2)(v) or (vi) will apply, only when any sum of money is received without consideration. According to the assessee, what was received was IMD certificate and nt: any sum of money and therefore above provisions was not applicable. Besides the above, the assessee also pointed out that as per the Scheme of 1MD bonds, amount comprised in the bonds were free from Income Tax, Gift Tax and Wealth Tax.

9. We have considered the rival submissions. We are of the view that the gift in question was complete prior to 19.7.2002. The Gift Deed dated 19.7.2002 records the fact that the gift was already completed prior to that date by delivery of IMD bonds by the donor to the donee. As rightly held by learned CIT(A), gift would be complete in the F.Y. 2002-03 within the meaning of section 122 & 123 by the Transfer of Property Act, 1882. Provisions of section 5f;(2)(v) applied only to gift on or after 1.9.2004. The fact maturity proceeds were received by the assessee during the previous year relevant to A.Y. 2006-07 cannot be the basis to apply provisions of section 56(2) (v).

10. We also find force in the submissions of learned counsel for the assessee that/prior to introduction of section 56(2)(vii) by the Finance Act, 2009 w.e.f. 1.10.2009, gifts in kind were outside the purview of section 56(2)(v)or (vi))of the Act. The expression used in section 56(2)(v) and (vi) is “where any sum of money” exceeding Rs. 25,000/- is received by an individual from any person. The meaning of-the expression ‘any sums paid’, in the context of deduction u/s. 80G of the Act, came up for consideration before Hon’ble Supreme Court in the case of H.H. Sri Rama – Verma(supra) . The provisions of section 80G”of the Act referred to “a deduction to be allowed to an assessee on “any sums paid” in the previous year as donation. Hon’ble Supreme Court was concerned with a case where an assessee donated equity shares of a company and claimed deduction u/s. 80G of the Act in respect of said donation. Hon’ble Supreme Court held as follows :-

The language used in section 80G(2)(a) is clear and unambiguous. On a plain reading of the section, it is apparent that an assessee is entitled to claim deduction, from his income on the amount of money paid by him as donation to the authorities and for the causes specified therein. The use of the expression ‘any sums paid’ contemplates payment of an amount of money. One of the dictionary meanings of the expression ‘sum’ means any indefinite amount of mono, The context in which the expression ‘sums paid by the assessee;’ has been used makes the legislative intent clear that it refers to the amount of money paid by the assessee as donation. The A Y. provides for assessment of tax on the income derived by an assessee during the A.Y., the income relates to the amount of money earned or received by an assessee. Therefore for purposes of claiming deduction from income tax under section 80G(2)(a), the donation must be a sum of money paid by the assessee. The plain meaning of the words used in the section does not contemplate donations in kind. Donations may be made by supplying goods of various kinds including building, vehicle or any other tangible property but such donations, though convertible in terms of money do not fall within the scope of section 80G{2)(a) entitling an assessee deduction. Donation of shares of a company does n u amount to payment of any sum or amount though the s, on (heir sales, may be converted into money. But the donation so made does not fall within the ambit of the aforesaid section. Since, the expression and language used in section 80G(2)(a) is plain and clear, it is not open to the courts to enlarge the scope by interpretative process founded on the basis of the object and purpose underling the provisions for granting relief to an assessee.

11. In the light of the decision of Hon’ble Supreme Court and considering the fact that in the present case, what was given without consideration was only IMD certificates, provisions of section 56(2)(v) or (vi) could not have been invoked by the Assessing Officer. Even on this ground, order of learned CIT(A) deserves to be sustained. We are of the view that the order of learned CIT(A) is .correct and does not call for any interference. We have not gone into the aspect as to whether provisions of section 56 will apply in the case of IMDs which specifically lay down that provisions of Gift Tax Act and Income Tax Act shall not apply. For the reasons, stated above, we confirm the order of learned CIT(A) and dismiss this appeal by the revenue.


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