Monday, July 1, 2013

Whether Gifts From Nana / Nani fall Under Exempted Category U/s 56(2)?

By Subash Agarwal,Advocate

The issue is not free from doubt. As per section 56(2)(vii), r.w. Explanation thereto, any gift from, interalia, lineal ascendant / descendant is not taxable as IFOS. The term used has not been defined in the Act. Colloquially, the term is meant to indicate lineal movement of relationship on the paternal side upwards and downwards. However, a closer analysis indicates a wider movement on the maternal side as well.
As per Tomlin’s Law Dictionary, lineal descent is a term used to designate a descent from father to son or grandfather to grandson. Thus, lineal ascendant will move in reverse manner i.e., son to father or father to grandfather or son to grandfather . As per Black’s Law Dictionary Parents, grandparents and great grand parents are lineal ascendant.
As per “The Oxford Large Print Dictionary”, grandfather is the father of a person’s father or mother and grandmother is the mother of a person’s father or mother. As per Law Lexicon (General Editor: Justice Y.V. Chandrachud), the term “Lineal descendant” includes all the descendants and is not restricted to male descendants. Thus, in my view the relationship of “Nana”/ “Nani” is covered in the exempted category and gifts received from them are exempt from tax.

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