The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the step-siblings are relatives and the gift is not taxable under Section 56(2) of Income Tax Act.
The bench of Amit Shukla (Judicial Member) and Amarjit Singh (Accountant Member) has observed that brother and sister should also include step brother and step sister who by virtue of marriage of their parents have become brother and sister.
The bench stated that the 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 consequently, property received by brother from sister cannot be taxed under section 56(2) of the Income Tax Act.
Section 56(2)(x) of the Income Tax Act states that if you receive any money, property, or other assets without adequate consideration, it will be taxed as income. This rule applies to individuals, Hindu Undivided Families (HUFs), and firms.
The appellant/assessee is an individual and non-resident Indian, since assessee did not have any income or source from India, therefore, he was not filing any return of income in India.
The assessee had made an application under section 197 in the month of January 2021 for lower deduction of tax on account of sale of property. This property was received by the assessee as a gift from Ms. Vidhie Mukerjea on 21/01/2016 by way of registered gift deed with Joint Registrar, Mumbai City-III, Mumbai, wherein Ms. Vidhie Mukerjea has been referred to as ‘donor’ and Mr. Rabin Arup Mukerjea has been referred to as ‘donee’.
The brief background of the relationship between the assessee and Ms. Vidhie Mukerjea is that, Ms. Vidhie is the daughter of Ms. Indrani Mukerjea from her husband, Mr. Sanjeev Khanna, whereas, Mr. Rabin Mukerjea is the first son of Mr. Peter Mukerjea with his first wife Mrs. Shabnam Singh. After the marriage of Ms. Indrani Mukerjea with Mr. Peter Mukerjea, Ms. Vidhie Mukerjea and Mr. Rabin Mukerjea became step sister and step brother due to alliance of marriage between their respective parents.
As per the AO the donor and donee were not relatives as per the meaning contained in Section 56(2) of the Income Tax Act and therefore, AO has reason to belief that receipt of the property without consideration are chargeable to tax and accordingly, reasons were recorded and notice under section 148 was issued.
The CIT(A) has confirmed the action of the AO in his detailed order and held that the definition stated in Section 56(2) is to be interpreted keeping the blood relationship, lineal ascendant and lineal descendant and hence, no further meaning could be ascribed to this term. Therefore, relationship between Ms. Vidhie Mukerjea and the assessee is not covered by these terminologies. He upheld the stand of the AO that the term ‘step’ cannot be automatically incorporated and interpreted as such relationship unless explicitly specified in the relevant provision of the Income Tax Act.
The tribunal held that the claim of the assessee that gift received by his step sister Ms. Vidhie Mukerjea is exempt from being taxed as income from other sources is accepted and accordingly, the addition made by the AO is deleted.
Case Details
Case Title: Rabin Arup Mukerjea Versus ITO
Case No.: ITA No.5884/Mum/2024
Date: 21/03/2025
Counsel For Appellant: Ashok Rao
Counsel For Respondent: Krishna Kumar, Sr. DR
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