Step-siblings should be considered as relatives under the Income Tax Act -1961: ITAT Mumbai
Mumbai Tribunal in the case of Rabin Arup Mukerjea ITA No5884/Mum/2024) has held that Step-siblings should be considered as relatives under the Income Tax Act -1961. In this decision the Tribunal found that step-siblings should be considered as relatives under the Act and deleted the addition made by the AO.
Let us have a Short Overview of the case:
Background and Issues:
The appeal challenges the reopening of the assessment under section 148 and the addition of Rs. 7,50,81,605/- on the grounds that the donor and donee were not relatives, and therefore, the receipt of the property gifted without consideration was chargeable to tax under section 56(2)(vii)(b) of the Act.
The assessee, a non-resident Indian, received a property as a gift from Ms. Vidhie Mukerjea on 21/01/2016. The property was registered with the Joint Registrar, Mumbai City-III.
The AO concluded that the donor and donee were not relatives as per the meaning contained in section 56(2) of the Act and issued a notice under section 148 on 23/02/2021.
Assessing Officer’s Findings:
The AO found that the donor, Ms. Vidhie Mukerjea, and the donee, Mr. Rabin Arup Mukerjea, were not biological siblings but step-siblings.
The AO held that step-siblings do not fall under the definition of “relative” as per section 56(2) of the Act and therefore, the property received as a gift was chargeable to tax.
The AO added the value of the property, Rs. 7,50,68,525/-, and the incidental cost of stamp duty and registration fees, Rs. 38,30,820/-, to the total income of the assessee.
CIT(A)’s Observations and Actions:
The CIT(A) confirmed the AO’s action, holding that the definition of “relative” in section 56(2) should be interpreted based on blood relationship, lineal ascendant, and lineal descendant.
The CIT(A) rejected the assessee’s argument that step-siblings should be considered as relatives under the Act.
Tribunal’s Findings and Decisions:
The Tribunal noted that the term “relative” includes persons connected by ties of affinity as well as consanguinity.
The Tribunal referred to various provisions of different Acts and dictionary meanings to conclude that step-siblings should be considered as relatives.
The Tribunal held that the gift given by a step-sister to a step-brother falls within the definition of “relative” under section 56(2)(vii) and therefore, the property received by the assessee was not taxable.
The Tribunal deleted the addition made by the AO and allowed the appeal on merits.
The views expressed in this summary are entirely personal and do not reflect those of any professional firm.
The Copy Of the order is as under:
