Gift Received From Non-Resident Brother Is Exempt From Taxation In India : Mumbai ITAT

Finding that Assessee has proved identity, creditworthiness and genuineness of the gift received as well as relationship with donor, the Mumbai ITAT held that gift from brother is not chargeable to tax in the hands of the assessee being relative of the donor. Single Bench of Prashant Maharishi (Accountant Member) observed that “the amount of Rs. 20,00,000/- received by the assessee clearly shows that above amount is not the income of the assessee. Despite above information being available with the lower authorities, an addition is made to the total income of the assessee”. (Para 15) Facts of the case: The assessee, an individual proprietor engaged in the business of trading in plastic granuals, had filed his return declaring total income of Rs. 19,88,600/-. However, after processing, the income of assessee was computed at Rs. 40,29,099/-, since the CPC computed the business income at Rs. 39,88,595/- on the business income shown by assessee at Rs. 19,48,091/-. The addition was on account of a gift of Rs. twenty lacs received by assessee from his non-resident brother. Further, a sum of Rs. 40,500/- has been taxed double as income from other sources of income. The assessee also preferred an application u/s 154 requesting for rectification, which was rejected. Not satisfied, the assessee approached the National Faceless Appeal Centre (NFAC) contending that gift received from brother of the assessee who is resident of UAE of Rs. 20,00,000/- was considered as income of assessee whereas the addition was shown as exempt receipt. However, finding that the assessee has not discharged the genuineness of the gift, the NFAC doubted the creditworthiness of the donor. Observation of the Tribunal: The Bench found that the assesse has already disclosed income from other sources being interest income of Rs. 40,500/- which has been once again added by the AO while processing the return. Since there is no need of verification when the relevant document submitted by the assessee clearly shows that there is a double addition of income, the Bench directed the AO to delete the addition of Rs. 40,500/- from the total income of assessee. As far as gift is concerned, the Bench from the audit report in Form No. 3CB, that the assessee has mentioned that there is gift from his brother of Rs. twenty lacs which is an exempt gift under the provisions of section 56(2)(x)(a) of the Act. The Bench found that the amount was shown in Column No. 16(d) stating that amounts not credited to the profit and loss account, when in fact, it should have been disclosed in clause no. 16(e). From the cheque, the Bench found that the name of the father of the assessee and the name of the donor is the same, and therefore, it cannot be denied that assessee and the donor are the real brothers. Since the NRE Savings Bank Account of the donor shows that cheques have been issued out of the funds available with the donor, the ITAT allowed the Assessee's appeal and directed the AO to delete the addition made in the hands of assessee being gift received from his non-resident brothers. Counsel for Appellant/ Assessee: Vimal Punmiya Counsel for Respondent/ Revenue: R.R. Makwana Case Title: Abul Wais Abdus Salam versus ITO Case Number: ITA No.515/Mum/2024 Click here to read/ download the Order

Gift Received From Non-Resident Brother Is Exempt From Taxation In India : Mumbai ITAT

Pankaj Bajpai

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