The Income Tax Appellate Tribunal (ITAT) has recently ruled that a gift of Rs 20 lakh received by a taxpayer from his Non-Resident Indian (NRI) brother is not subject to taxation, as the recipient is a close relative of the donor.
ITAT’s Mumbai bench, led by Prashant Maharishi (Accountant Member), observed on August 16 that “the gift from a brother is not chargeable to tax in the hands of the recipient, being a relative. The recipient has provided evidence of the gift’s identity, creditworthiness, genuineness, and the relationship with the donor.”
The tribunal directed the Assessing Officer to exclude the Rs 20 lakh gift from the recipient’s taxable income, as it was a gift received from his non-resident brother, who is a long-term resident of the UAE.
The case involved an assessee engaged in the trading of plastic granules, who had declared a total income of Rs 19.88 lakh in his Income Tax returns for the Assessment Year 2021-22. However, the CPC computed his income as Rs 40.29 lakh, including Rs 39.88 lakh as business income and an additional Rs 40,500 taxed as income from other sources, citing the gift from the NRI brother.
After the assessee’s appeal against the rectification order passed by the Central Processing Centre was dismissed at the National Faceless Appeal Centre (NFAC), he approached the ITAT Mumbai bench. The ITAT found that the additional income from other sources, including interest income of Rs 40,500, needed to be deleted from the total income, as it had already been disclosed by the appellant.
The bench also noted that the gift from the donor brother was excluded/exempted under Section 56(2)(x) of the Income Tax Act and found the gift to be creditworthy after examining documents, including cheques issued by the donor brother through his NRE Savings Bank Account.
Consequently, the ITAT directed the Assessing Officer to delete the addition of Rs 20 lakh and allowed the appeal.