gift

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ram niwas aggarwal (Querist)
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22 December 2009 Can a HUF give gift to any member of the HUF. Will this amount exempt or not. Please further clarify whether HUF can gift to a unknown person and whether the amount will be exempt in the hand of receipient.

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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22 December 2009 1. The definition of the term "relative" for the purpose of section 56(2) is given only with reference to an individual.

Hence the gift given by an HUF above Rs.50,000/- will become taxable in the hands of the member.

There seems some ambiguity in making the law. Without having a group of relatives; an HUF cannot be formed. The intention of legislation cannot be taken as not to consider HUF as relative person.

When Karta is taking any decision representing HUF; then it can be said that a group of relatives has taken decision to gift an amount to one of the relatives.

Since taxation provisions are one and same in the Income-Tax Act hence it cannot be said that HUF is not included for this section. Without having relative individuals; HUF cannot be formed.

2. Gifts given by an HUF to unknown person is void.

3. Since the gift is void; hence there is no question of exemption in the hands of recepient. He has to return the money to the HUF.

Legally he cannot accept that gift from HUF because HUF cannot gift legally to him.

However; an AO can treat the amount as taxable in the hands of recepient.