Would a gift given by step brother/ sister be exempt from tax?
Issue:
1. Assessee has received a property as a gift from his stepsister by way of registered gift deed.
2. AO held that he had reason to believe that receipt of property without consideration is chargeable to tax on the basis of the Hon’ble Family Court’s finding that the donor & donee were born out of different wedlocks & they cannot be treated as biological brother & sister.
3. Can this stance of AO stand the scrutiny of law?
Reply:
1. Sec 2(41) of the Income Tax Act defines relative, in relation to an individual, means the husband, wife, brother or sister or any lineal ascendant or descendant of that individual.
2. Sec 2(15B) defines “child”, in relation to an individual, includes a stepchild and an adopted child of that individual. If stepchild and adopted child is child then it is not necessary that, in order to be a brother/sister, one should have the same parents.
3. Mumbai ITAT in Rabin Arup Mukherjea (ITA No.5884/Mum/2024) has held as follows:
A. In our view, brother and sister should also include step brother and step sister who by
virtue of marriage of their parents have become brother and sister.
B. Accordingly, we hold that gift given by step sister, to a step brother, falls within the definition of „relative‟, that is, they are to treated as brother and sister as per Section 56(2)(vii) and thus, exempt from being taxed as income from other sources.
Conclusion:
Thus any gift given by step brother/ sister would be exempt, since step brother/ sister would also fall under the definition of a relative.
The Copy Of the order is as under:
