Definition Of Relative Under Senior Citizens Act Can't Be Treated At Par With Income Tax Act, 1961: Delhi High Court

The division bench of Justice Manmohan and Justice Manmeet Preetam Singh Arora has observed that as per the object of the Maintenance and Welfare of Parents and Senior Citizens Act, 2007 and the Income Tax Act, 1961, the expression "relative" is not used in a similar context. The term "relative" being wholly context-specific, there is no reason to assume that the criteria used in defining it in one context will provide even a useful starting point in another context.

The petitioner has sought the direction that a "relative" under Section 2(g) of the Senior Citizens Act, 2007 be treated at par with a "relative" under Section 2(41) and Section 56 of the Income Tax Act, 1961 for the grant of exemption from income tax on gifts received.

The petitioner also challenged the provisos and explanation in Section 56 of the Income Tax Act granting exemption to the relatives while excluding relatives as defined under Section 2(g) of the Senior Citizens Act.

The petitioner stated that Section 2(g) of the Senior Citizens Act defines the term "relative" as' any legal heir of the childless senior citizen who is not a minor and is in possession of or would inherit his property after his death'. The petitioner contended that Section 2(g) of the Senior Citizens Act considers non-blood related persons to be relatives equivalent to children in the case of childless senior citizens.

The petitioner pointed out that Section 2(41) of the Income Tax Act defines "relative" as "the husband, wife, brother or sister or any lineal ascendant or descendant of that individual." Thus, it does not include the individuals who are defined as "relatives" in the Senior Citizens Act. Section 56 of the Income Tax Act provides for the exemption of tax on gifts received from relatives, in explanation to Provisos of Sections 56(2)(vii)(e) and 56(2)(x)(b) of the Income Tax Act. It does not include those people in the definition of relative as provided under Section 2(g) of the Senior Citizens Act, creating an anomaly.

The petitioner, who is a person with a 100% disability, gifted 10% of his property via gift deed and her share of the basement to her nephew, her "relative," in accordance with Section 2(g) of the Senior Citizens Act. The gift executed by the petitioner in favour of Naresh is not exempt. Neither the petitioner nor Naresh has any money to pay the income tax on the gift.

The petitioner contended that the Senior Citizens Act is a welfare law and has an overriding effect over other acts by virtue of Sections 3 and 4 of the Senior Citizens Act. Sections 2(41) and 56 of the Income Tax Act deprive childless senior citizens of their rights and benefits. Thus, there are two classes of senior citizens: those who are parents and their children receive benefits; and those who are childless and whose relatives are denied tax exemption on gifts under Section 2(g) of the Senior Citizens Act.

The petitioner submitted that the gift deed may be cancelled and declared void ab-initio so that it may not be taxed by the Income Tax Department to save the liability which may arise against the relative under Section 2(g) as the donee/relative at the threshold of life does not have funds to pay income tax.

The court ruled that the intent and object of the Senior Citizens Act and the Income Tax Act are entirely different. The object of the Senior Citizens Act is to provide for more effective provisions for the maintenance and welfare of parents and senior citizens guaranteed and recognised under the Constitution. The intent of the Income Tax Act is to consolidate and amend the laws relating to income tax and super-tax. The gift of property was brought under the purview of tax with effect from October 1st, 2010 vide the Finance Act, 2010. To avoid misuse of gifts of properties, the expression "relative" was defined in a narrow and restricted manner in the Income Tax Act. In the explanatory notes to the provisions of the Finance Act, 2010, it is stated that "The provisions of Section 56(2) (vii) were introduced as a counter evasion mechanism to prevent laundering of unaccounted income." The provisions were intended to extend the tax net to such transactions in kind." It means that the legislature deliberately left out the gifts received from people other than those specified in the provisions from being exempted from being taxed.

"Section 23 of the Senior Citizens Act confers additional remedies upon senior citizens in certain circumstances. However, the said Section does not restrict the right of the donee to challenge the gift/transfer made by a senior citizen in accordance with the law," the court said.

Case Title: Miss Indira Uppal Versus UOI

Citation: 2022 LiveLaw (Del) 764

Dated: 28.07.2022

Counsel For Petitioner: Advocate Harish Uppal with Advocate Tileshwar Prasad

Counsel For Respondent: CGSC Subhash Tanwar

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