IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH AHMEDABAD

The legislature substituted clause (e) to Explanation in 

Section 56(2)(vii) defining the term of “relative” to be applicable in case of an 

individual assessee as well as HUF; with retrospective effect from 01.10.2009.  The 

assessee is fair enough in not disputing the fact that the former category in clause (i) 

of (e) defining a “relative” qua an individual recipient does not include an HUF as a 

donor.  The legislature has incorporated clause (ii) therein to deal with an instance 

of an HUF donee only receiving gifts from its members. We refer to Board’s 

circular no. 1/2011 r.w. explanatory circular for Finance Act, 2009, makes it clear in 

latter’s clause no.24.2 that Section 56(ii) is an anti-abuse provision.  We also quote 

hon’ble apex cout’s judgment in CIT v. Sodra Devi [1957] 32 ITR 615 (SC), Smt. 

Tarulata Shyam v. CIT (1977) 108 ITR 345 (SC) and Keshavji Ravji & Co. v. CIT 

(1990) 183 ITR 1 (SC) to observe that principles of literal interpretation in respect 

of the relevant context vis-à-vis the legislation intention have to be applied here as 

there is no ambiguity in definition of a “relative” in respect to an individual donee 

in the above definition clause.  Coupled with this, the legislature itself has accepted 

an HUF to be a donee in clause (ii) of the “relatives” definition.  We apply 

necessary implication principle to conclude in these facts that the legislative intent 

is very clear that an HUF is not to be taken as a donor in case of an individual 

recipient.  Learned counsel’s reliance on Surjit Lal Chhabda (supra) is therefore not 

acceptable in this peculiar legislative backdrop of facts and circumstances.  Learned 

co-ordinate bench (supra) seem to have followed “Bholadia” case law which is no 

more applicable in view of subsequent legislative developments vide Finance Act, 

2012 w.e.f. 01.10.2009 (supra).  We thus do not treat the same as finding precedents 

as per (1993) 202 ITR 222 (AP) CIT vs. B. R. Constructions (FB).  The assessee’s 

former plea of having received a valid gift from his HUF is therefore declined. 

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