My mother gifted shares to my HUF. Is she a 'relative' of the HUF?
No. For a Hindu undivided family the Explanation makes only a member of that family a 'relative'. The karta's mother was not a member - the gift deed itself recited that the gift was to the family of her son - so 75,000 shares gifted by her were chargeable under s.56(2)(vii), and the list of relatives that applies to an individual does not travel across to a receipt in the family's hands. The decision has a second limb: the Principal Commissioner's valuation by reference to a later sale price was rejected, fair market value has to be computed under Rule 11UA, and the computation was restored to the Assessing Officer, so the amount was never determined. The appeal was partly allowed.
Decided by the ITAT (ITAT Delhi Bench 'G' - Amit Shukla (Judicial Member) and Prashant Maharishi (Accountant Member); order delivered by Prashant Maharishi, AM; ITA No. 3571 (Delhi) of 2017; AY 2013-14) on 2018-01-05, reported as [2018] 89 taxmann.com 418 (Delhi)(Trib.); (2018) 169 ITD 60 (Delhi)(Trib.); (2018) 193 TTJ 442 (Delhi)(Trib.); ITA No. 3571 (Delhi) of 2017; AY 2013-14. It bears on section 56(2)(vii), section 2(31), section 263, section 154 of the Income Tax Act 1961, in Gifts, Shares & Angel Tax matters.
This is the decision the department leads with whenever property is routed into a Hindu undivided family from a parent, a parent-in-law or a member's sibling, which is the commonest planning move once the individual side of the relative list has been exhausted. The reasoning is structural rather than equitable: a family is a separate person under s.2(31) and the Explanation gives it its own, much shorter, list of relatives. It also cuts the other way from the line of decisions holding a receipt by a member from his family to be outside the charge, and the ground on which those decisions were reconciled is the direction of the flow, not a difference of view, so both sides of the family flow have to be tested separately. The second limb is as useful as the first: fair market value for this charge has to be computed by the method prescribed in Rule 11UA, and the price at which the shares were shortly afterwards sold is not the measure. The quantum here was never settled - it went back to the Assessing Officer for verification of the assessee's own computation.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee Hindu undivided family, comprising the karta, his wife and three children, returned Rs. 5,79,720 for AY 2013-14 and was assessed at the returned figure under s.143(3) on 18 March 2016 in an order running to a few lines. On 14 September 2012 it had received 75,000 equity shares of Triveni Polymers Pvt. Ltd. by gift from Mrs Sneh Gupta, the mother of the karta; the shares were afterwards sold to a German company. The Principal Commissioner revised the assessment under s.263 by order of 1 May 2017, because the Assessing Officer had not examined the receipt at all, valued the shares at Rs. 2,375.95 each by reference to the price at which they were shortly afterwards sold, using the definition of fair market value in s.2(22B), and directed an addition of Rs. 17,81,98,500. The gift deed itself recited that the donor gave the shares out of natural love and affection towards the family of her son - the assessee, his wife and three children - jointly forming the family.
The appeal was partly allowed. On jurisdiction the revision was upheld: Explanation 2 to s.263, in force from 1 June 2015, deems an order passed without the enquiries or verification that should have been made to be erroneous and prejudicial to the revenue, and both the assessment and the revision post-date that date, so the Explanation squarely applied (para 15). On the substantive question the assessee lost: for a Hindu undivided family the Explanation defines 'relative' as any member of that family, the gift deed itself showed the donor was not a member, and the list of relatives that applies to an individual cannot be used where the recipient is a family (para 16). On valuation the assessee succeeded in principle and the point was then restored to the Assessing Officer: the Principal Commissioner's use of the s.2(22B) definition was rejected, fair market value has to be determined by the method prescribed by Rule 11UA, and because neither authority had verified the assessee's own computation of Rs. 234.82 per share the computation was set aside to the file of the Assessing Officer, the assessee being directed to produce the valuation and the Assessing Officer to examine and verify it and then determine the amount taxable. So the quantum was never determined by the Tribunal.
The Tribunal read the Explanation as providing two separate definitions, one for an individual and one for a Hindu undivided family, and declined to merge them. It rejected four arguments in turn at para 16: that a gift to a collective of individuals each of whom is a relative escapes, because the proviso defines 'relative' separately for the two and the individual list cannot be used where the recipient is a family; that the 2012 amendment and its notes on clauses were merely enlarging, because if a gift to a family from any relative of any member escaped then a gift to a family would never be taxable, which is neither the language nor the intention, and where the language is clear the notes on clauses do not assist; that the members collectively qualify, because a family is a distinct assessable entity and s.2(31) makes it a person separate from its members; and that the mother is a member as a lineal ascendant of the karta, on which the assessee produced no commentary on Hindu law or other authoritative material. The contrary line of Tribunal decisions was distinguished on the direction of the flow rather than disagreed with: Bhalodia, Harshadbhai Dayalal Vaidhya, Ateev V Gala and Subhadra Devi all concerned gifts by a family to an individual, where every member of the family could in any event have made a tax-free gift to that individual. The two wealth-tax and exemption authorities were held inapposite because they turned on whether a benefit given to an individual extended to a family where the legislature had given the family none, whereas here the legislature has expressly defined 'relative' differently for the two. On valuation, the Explanation requires fair market value to be determined in the prescribed manner and Rule 11UA prescribes the method for unquoted equity shares.
The above contentions deserves to be rejected because the proviso to section 56 (2) (vii) provides definition of 'relatives' in case of individual and HUF separately.
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Handle my notice → Ask a CA on WhatsAppNo. For a Hindu undivided family the Explanation makes only a member of that family a 'relative'. The karta's mother was not a member - the gift deed itself recited that the gift was to the family of her son - so 75,000 shares gifted by her were chargeable under s.56(2)(vii), and the list of relatives that applies to an individual does not travel across to a receipt in the family's hands. The decision has a second limb: the Principal Commissioner's valuation by reference to a later sale price was rejected, fair market value has to be computed under Rule 11UA, and the computation was restored to the Assessing Officer, so the amount was never determined. The appeal was partly allowed. This was decided by the ITAT (ITAT Delhi Bench 'G' - Amit Shukla (Judicial Member) and Prashant Maharishi (Accountant Member); order delivered by Prashant Maharishi, AM; ITA No. 3571 (Delhi) of 2017; AY 2013-14) and bears on section 56(2)(vii), section 2(31), section 263, section 154 of the Income Tax Act 1961. It is reported as [2018] 89 taxmann.com 418 (Delhi)(Trib.); (2018) 169 ITD 60 (Delhi)(Trib.); (2018) 193 TTJ 442 (Delhi)(Trib.); ITA No. 3571 (Delhi) of 2017; AY 2013-14. This is the decision the department leads with whenever property is routed into a Hindu undivided family from a parent, a parent-in-law or a member's sibling, which is the commonest planning move once the individual side of the relative list has been exhausted. The reasoning is structural rather than equitable: a family is a separate person under s.2(31) and the Explanation gives it its own, much shorter, list of relatives. It also cuts the other way from the line of decisions holding a receipt by a member from his family to be outside the charge, and the ground on which those decisions were reconciled is the direction of the flow, not a difference of view, so both sides of the family flow have to be tested separately. The second limb is as useful as the first: fair market value for this charge has to be computed by the method prescribed in Rule 11UA, and the price at which the shares were shortly afterwards sold is not the measure. The quantum here was never settled - it went back to the Assessing Officer for verification of the assessee's own computation. If it applies to you, the first step is this: Before a gift is made to a Hindu undivided family, check the donor against the family limb of the Explanation - membership of that family, not kinship with the karta, is the test.
The assessee Hindu undivided family, comprising the karta, his wife and three children, returned Rs. 5,79,720 for AY 2013-14 and was assessed at the returned figure under s.143(3) on 18 March 2016 in an order running to a few lines. On 14 September 2012 it had received 75,000 equity shares of Triveni Polymers Pvt. Ltd. by gift from Mrs Sneh Gupta, the mother of the karta; the shares were afterwards sold to a German company. The Principal Commissioner revised the assessment under s.263 by order of 1 May 2017, because the Assessing Officer had not examined the receipt at all, valued the shares at Rs. 2,375.95 each by reference to the price at which they were shortly afterwards sold, using the definition of fair market value in s.2(22B), and directed an addition of Rs. 17,81,98,500. The gift deed itself recited that the donor gave the shares out of natural love and affection towards the family of her son - the assessee, his wife and three children - jointly forming the family. The matter was decided on 2018-01-05 by the ITAT (ITAT Delhi Bench 'G' - Amit Shukla (Judicial Member) and Prashant Maharishi (Accountant Member); order delivered by Prashant Maharishi, AM; ITA No. 3571 (Delhi) of 2017; AY 2013-14). On those facts the ITAT held as follows. The appeal was partly allowed. On jurisdiction the revision was upheld: Explanation 2 to s.263, in force from 1 June 2015, deems an order passed without the enquiries or verification that should have been made to be erroneous and prejudicial to the revenue, and both the assessment and the revision post-date that date, so the Explanation squarely applied (para 15). On the substantive question the assessee lost: for a Hindu undivided family the Explanation defines 'relative' as any member of that family, the gift deed itself showed the donor was not a member, and the list of relatives that applies to an individual cannot be used where the recipient is a family (para 16). On valuation the assessee succeeded in principle and the point was then restored to the Assessing Officer: the Principal Commissioner's use of the s.2(22B) definition was rejected, fair market value has to be determined by the method prescribed by Rule 11UA, and because neither authority had verified the assessee's own computation of Rs. 234.82 per share the computation was set aside to the file of the Assessing Officer, the assessee being directed to produce the valuation and the Assessing Officer to examine and verify it and then determine the amount taxable. So the quantum was never determined by the Tribunal.
The Tribunal read the Explanation as providing two separate definitions, one for an individual and one for a Hindu undivided family, and declined to merge them. It rejected four arguments in turn at para 16: that a gift to a collective of individuals each of whom is a relative escapes, because the proviso defines 'relative' separately for the two and the individual list cannot be used where the recipient is a family; that the 2012 amendment and its notes on clauses were merely enlarging, because if a gift to a family from any relative of any member escaped then a gift to a family would never be taxable, which is neither the language nor the intention, and where the language is clear the notes on clauses do not assist; that the members collectively qualify, because a family is a distinct assessable entity and s.2(31) makes it a person separate from its members; and that the mother is a member as a lineal ascendant of the karta, on which the assessee produced no commentary on Hindu law or other authoritative material. The contrary line of Tribunal decisions was distinguished on the direction of the flow rather than disagreed with: Bhalodia, Harshadbhai Dayalal Vaidhya, Ateev V Gala and Subhadra Devi all concerned gifts by a family to an individual, where every member of the family could in any event have made a tax-free gift to that individual. The two wealth-tax and exemption authorities were held inapposite because they turned on whether a benefit given to an individual extended to a family where the legislature had given the family none, whereas here the legislature has expressly defined 'relative' differently for the two. On valuation, the Explanation requires fair market value to be determined in the prescribed manner and Rule 11UA prescribes the method for unquoted equity shares. In the words reproduced by the source cited on this page: "The above contentions deserves to be rejected because the proviso to section 56 (2) (vii) provides definition of 'relatives' in case of individual and HUF separately."
It was decided by the ITAT on 2018-01-05 and is reported as [2018] 89 taxmann.com 418 (Delhi)(Trib.); (2018) 169 ITD 60 (Delhi)(Trib.); (2018) 193 TTJ 442 (Delhi)(Trib.); ITA No. 3571 (Delhi) of 2017; AY 2013-14. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 56(2)(vii), section 2(31), section 263, section 154, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. The appeal was partly allowed. On jurisdiction the revision was upheld: Explanation 2 to s.263, in force from 1 June 2015, deems an order passed without the enquiries or verification that should have been made to be erroneous and prejudicial to the revenue, and both the assessment and the revision post-date that date, so the Explanation squarely applied (para 15). On the substantive question the assessee lost: for a Hindu undivided family the Explanation defines 'relative' as any member of that family, the gift deed itself showed the donor was not a member, and the list of relatives that applies to an individual cannot be used where the recipient is a family (para 16). On valuation the assessee succeeded in principle and the point was then restored to the Assessing Officer: the Principal Commissioner's use of the s.2(22B) definition was rejected, fair market value has to be determined by the method prescribed by Rule 11UA, and because neither authority had verified the assessee's own computation of Rs. 234.82 per share the computation was set aside to the file of the Assessing Officer, the assessee being directed to produce the valuation and the Assessing Officer to examine and verify it and then determine the amount taxable. So the quantum was never determined by the Tribunal. It arises in Gifts, Shares & Angel Tax matters, on section 56(2)(vii), section 2(31), section 263, section 154 of the Income Tax Act 1961, and was decided by ITAT Delhi Bench 'G' - Amit Shukla (Judicial Member) and Prashant Maharishi (Accountant Member); order delivered by Prashant Maharishi, AM; ITA No. 3571 (Delhi) of 2017; AY 2013-14. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Where the donor is a member's mother, a wife's father or similar, expect the receipt to be assessed and price the tax into the transaction rather than relying on the individual relative list. If the gift has already gone through, put the gift deed and the composition of the family on record early - the recitals of the deed were what showed the donor was not a member here. Keep the direction of the flow in mind: a receipt by a member from the family and a receipt by the family from an outsider are decided on different limbs, and that is how the contrary line was distinguished rather than doubted. If the receipt is assessed, fight the valuation separately - fair market value has to be computed by the method prescribed in Rule 11UA, and a later sale price is not the measure. That limb succeeded here and went back to the Assessing Officer for verification. Expect an assessment that passed without enquiry to be exposed to revision: Explanation 2 to s.263 was applied here, and an unactioned notice under s.154 on the same point did not save it, the two provisions operating in different circumstances.
Searched for later treatment; none was found. That is not the same as a source affirming it. A citedby: search returns one hit and it is a false match (ACIT v Smt. Yashorajya Laxmi, ITAT Delhi, 24 January 2022, on unrelated Jammu appeals). A second probe on the name returns a Delhi High Court matter — Subodh Gupta v ACIT, 7 January 2022 — which was read in full and is unrelated: it is one of 48 consolidated writ petitions quashing reassessment notices issued after 31 March 2021 under the old s.148 procedure, and has nothing to do with s.56(2)(vii) or with this HUF. No later decision applying this order's construction of 'relative' for an HUF donee was found, and no appeal from it was traced. That finding was checked against a published source, which is linked on this page, on 2026-08-24. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order has been read in full and the particulars are settled. It is ITA No. 3571 (Delhi) of 2017, AY 2013-14, Delhi Bench 'G', Amit Shukla (Judicial Member) and Prashant Maharishi (Accountant Member), the order being delivered by Prashant Maharishi, decided 5 January 2018 and reported at [2018] 89 taxmann.com 418, (2018) 169 ITD 60 and (2018) 193 TTJ 442. The appeal arose out of a revision under s.263 - the Principal Commissioner's order of 1 May 2017 revising the s.143(3) assessment of 18 March 2016 - which the earlier note recorded as unclear, and that limb was decided against the assessee on Explanation 2 to s.263. The outcome is partly in favour of the assessee, not a clean revenue win: grounds 1 and 2 were dismissed at para 15, grounds 3 and 4 at para 16, and grounds 5 and 6 on valuation were allowed with a direction at para 17, the computation of fair market value under Rule 11UA being set aside to the Assessing Officer. Do not rely on any digest tag showing the second issue as decided in the assessee's favour; grounds 3 and 4 were dismissed. The quoted sentence has been verified word for word against para 16, including its grammatical slip, and can now be cited from the order itself. One conflict is on the face of the report: the appeal in Ateev V Gala is given as IT Appeal No. 1906 of 2014 in one place and IT Appeal No. 1906 (Mum.) of 2016 in another. This decision is not superseded by amendment - s.56(2)(x) was already in force when the order was passed on a receipt governed by the earlier clause - and it cannot be marked good law either, because no decision applying, following or affirming it was found. The quantum was never determined: the valuation was set aside to the Assessing Officer to verify the assessee's Rule 11UA computation of Rs. 234.82 per share, so the decision fixes no amount. The Tribunal held the donor was not a member of the family on the recitals of the gift deed and on the assessee having produced no commentary on Hindu law or other authoritative material for the contrary proposition, so the question whether a lineal ascendant of the karta can be a member was not decided on any considered view of Hindu law. The order is a Tribunal decision that no later court has considered. There is a conflict on the face of the report about the year of the appeal in one of the distinguished decisions. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was partly allowed. On jurisdiction the revision was upheld: Explanation 2 to s.263, in force from 1 June 2015, deems an order passed without the enquiries or verification that should have been made to be erroneous and prejudicial to the revenue, and both the assessment and the revision post-date that date, so the Explanation squarely applied (para 15). On the substantive question the assessee lost: for a Hindu undivided family the Explanation defines 'relative' as any member of that family, the gift deed itself showed the donor was not a member, and the list of relatives that applies to an individual cannot be used where the recipient is a family (para 16). On valuation the assessee succeeded in principle and the point was then restored to the Assessing Officer: the Principal Commissioner's use of the s.2(22B) definition was rejected, fair market value has to be determined by the method prescribed by Rule 11UA, and because neither authority had verified the assessee's own computation of Rs. 234.82 per share the computation was set aside to the file of the Assessing Officer, the assessee being directed to produce the valuation and the Assessing Officer to examine and verify it and then determine the amount taxable. So the quantum was never determined by the Tribunal.
TaxSphere, “Subodh Gupta (HUF) v Pr CIT”, https://taxnotice.vittsphere.com/caselaw/case/subodh-gupta-huf-v-pcit-gift-to-huf/ (validity last checked 2026-08-24)
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I received money from my HUF. Is it taxable because an HUF is not my 'relative'?
The AO says my gift is taxable because there is no registered gift deed. Is a deed required?
The Tribunal decided this very issue against my client in an earlier assessment year. Same facts, next year. Am I bound by it?
A gift was made to my client's HUF by the karta's paternal uncle. The Explanation defines 'relative' only for an individual. Can the department tax it in the HUF's hands?
