Mradula Agrawal v. Commissioner Of Income Tax, Circle-2, Jaipur

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR.D.B. Income Tax Appeal No.91/2016 Mradula Agrawal Vs. Commissioner of Income Tax, Circle-2, Jaipur. DATE OF JUDGMENT ::: 22[nd] September, 2016HON'BLE MR. JUSTICE K.S. JHAVERIHON'BLE MR. JUSTICE BANWARI LAL SHARMA Mr. S.L. Poddar with Mr. N.L. Agarwal, for the appellant. ***** BY THE COURT:- (Per Hon'ble Jhaveri, J.) 1. By way of this appeal, assessee-appellant haschallenged the judgment and order of the Tribunal wherebythe Tribunal has confirmed the order of the AO as well as theCIT (Appeals). 2.Counsel for the appellant contended that all theauthorities have committed serious error in interpreting theSection 56(2)(vii)(b) of Income Tax Act, 1961. Theexpression “relative” is defined in the explanation to clause(vi) of sub-section (2) of Section 56, as under:- “(i) Spouse of the individual;(ii)brother of sister of the individual;(iii)brother or sister of the spouse of theindividual;(iv)brother or sister of either of the parents ofthe individual;(v)any lineal ascendant or descendant of theindividual;(vi)any lineal ascendant or descendant of thespouse of the individual;(vii)spouse of the persons referred to in clauses(ii) to (vi).” 3.He contended that the contention which has been raisedfor nephew, Chachi, Bhatija are related and the explanationwhich has been given is only illustrative not exhaustive inview of the decision of the Supreme Court in case of First Income Tax Officer vs. Short Brothers (P) Ltd. reportedin AIR 1967 SC 81 wherein it has been held as under:- “The Explanation is undoubtedly couched innegative form, but there is no ground foraccepting the argument of counsel that in thesubstantiveclausesofthedefinition,accumulated profits do not include capital gains.The Explanation plainly implies that within theexpression "accumulated profits" are includedcapital gains outside the excepted periods. Onthe interpretation contended for by counsel, theExplanation which seeks to exclude capital gains"from the content of accumulated profits wouldhave no meaning.” 4.He also relied upon the decision of the Supreme Court in the case of S. Sundaram Pillai and ors. vs. V.R.Pattabiraman & ors. reported in (1985) 1 SCC 591 whichreads as under:- “Thus, from a conspectus of the authoritiesreferred to above, it is manifest that the objectof an Explanation to a statutory provision is- (a) to explain the meaning and intendment ofthe Act itself, (b) where there is any obscurity or vagueness inthe main enactment, to clarify the same so a- tomake it consistent with the dominant objectwhich it seems to subserve, (c) to provide an additional support to thedominant object of the Act in order to make itmeaningful and purposeful, (d) an Explanation cannot in any way interferewith or change the enactment or any partthereof but where some gap is left which is relevant for the purpose of the Explanation, inorder to suppress the mischief and advance theobject of the Act it can help or assist the Courtin interpreting the true purport and intendmentof the enactment, and (e) it cannot, however, take away a statutoryright with which any person under a statute hasbeen clothed or set at naught the working of anAct by becoming an hindrance in theinterpretation of the same.” And contended that explanation has been wrongly interpreted by all the authorities including CIT (Appeals). 4.1He has submitted that the Tribunal has committedserious error. He has taken us to the Paragraph No. 2.7 of theorder of ITAT wherein Tribunal has observed as under:- relevant for the purpose of the Explanation, inorder to suppress the mischief and advance theobject of the Act it can help or assist the Courtin interpreting the true purport and intendmentof the enactment, and (e) it cannot, however, take away a statutoryright with which any person under a statute hasbeen clothed or set at naught the working of anAct by becoming an hindrance in theinterpretation of the same.” And contended that explanation has been wrongly interpreted by all the authorities including CIT (Appeals). 4.1He has submitted that the Tribunal has committedserious error. He has taken us to the Paragraph No. 2.7 of theorder of ITAT wherein Tribunal has observed as under:- We have heard the rival contentions andperused the material available on record. Theissue under dispute relates to the provisions ofsection 56(2)(vii)(b) read with the explanationwhere meaning of the term”relative” has beendefined. It is not in dispute that the assesseehas been gifted a plot of land by her nephewshri Paresh Agarwal and the value of the gift isalso not in dispute amounting to Rs.25,53,137/-. The disputes relates to the fact“whether gift from nephew to the assessee(aunt) is covered by the exclusion clause as persection 56(vii)(b) which reads as under: “Provided further that this clause shall not applyto any sum of money or any property receivedfrom any relative” The “relative” is defined in the Explanation toclause (vi) of sub-section (2) of section 56 asunder: (viii) Spouse of the individual (ix)Brother or sister of the individual (x)Brother or sister of the spouse of theindividual (xi)Brother or sister of either of the parents ofthe individual (xii) Any lineal ascendant of descendant ofthe individual (xiii) Any lineal ascendant or descendant ofthe spouse of the individual (xiv) Spouse of the persons referrred to inclauses (ii) to (vi) The Explanation to section 56(2)(vii) asreproduced above defines a relative withreference to the assessee who is an individual.Hence, the definition of relative is relationship ofthe donor to the donee assessee in every case.In other words, the kingship is of the donor withthe assessee and not vice-versa. Further, as apparent from the definition, brotheror sister of either parent of the individual ortheir spouse could be donors. Uncle and aunt aretherefore covered by the explanation underclause (iv) and (vii). Lineal ascendant ordescendant referred in clause (v) & (vi)l coversonly the lineal ascendant or descendant of theindividual or his/her spouse, so that anyassessee, who receive a gift from his/hernephew or niece will be taxed since the nephewand niece is not the lineal descendant of himselfor his wife as in the instant case. Given the unambiguous definition of relativeeven though restricted as claimed by theappellant, we are unable to accede to thearguments of the appellant that the definitionshould be given a more liberal interpretation andshould cover the relationship of nephew donorgiving gift to his aunt. It is for the legislature toprovide for the expanded definition of the“relative” and until such time, the amendment isbrought on the statute book, the currentdefinition of relative in relation to individualdonee stands and will apply in the instant case.We accordingly confirm the finding of the id.CIT(A) and see no infirmity in his order hencethe ground of appeal taken by the assessee isdismissed.” 5.0The tribunal therefore while partly allowing the appeal, has observed as under:- 5.0The tribunal therefore while partly allowing the appeal, has observed as under:- “In our considered view, given the complexity andhistory involved, the matter requires a deeperexamination and it would be in interest of justicethat the matter is set aside to the file of the AOwho shall examine the same afresh as per law aftergiving reasonable opportunity to the assessee. TheAO is also directed to seek information from RIICOand other relevant authorities to examine thefactual and legal position as submitted by theappellant before taking a final view in the matter. Needless to say the assessee shall cooperate incompletion of the proceedings in time boundmanner as per directions of the id. AO. Hence theground taken by the appellant is allowed forstatistical purposes.” 5.1We have heard counsel for the appellant and gonethrough the judgments of all authorities. Under Section 56(2)the legislature has given that explanation will be governed bythe parties & department. In that view of the matter, theword 'relative' interpreted by the AO and CIT(Appeals) is justand proper. The definition is illustrative and complete. Itcannot be extended by the court in any manner or method.Thus in our view, no substantial question of law arises in thepresent appeal and the same deserves to be dismissed. 6.The appeal as well as stay application also standdismissed. (Banwari Lal Sharma), J. (K.S. Jhaveri), J. Brijesh18.