MUMBAI: In a first-of-its-kind judgement, the Income-Tax Appellate Tribunal (ITAT) recently ruled that a heiress of an interest-free allowance from a non-relative is not inclined to generate tax. The acumen will come as a noteworthy relief for man who borrow money from friends and colleagues and latter grip with notices from toll authorities. Section 56 (2)(v) of the Income Tax Act provides for taxing any grand total of wealth in extra of Rs 25,000 received without deliberation by an individual or a Hindu Undivided Family (HUF) from any outset other than a relative.
Occasions where the legatee is exempted from tax are during a marriage, or in cases where the lot is received under a will, or by course of inheritance or in contemplation of expiration of the payer. Applying this section, an income-tax assessing policewoman treated interest-free loans amounting to Rs 54.7 lakh received by one Chandrakant Shah from non-relatives as a totality without thoughtfulness and taxed it. The assessee approached the Commissioner of I-T (Appeals), but was not granted relief.
He then appealed before the Mumbai ITAT, where his forensic recommend to said that the bring authorities had "misinterpreted" the unripe section, which came into conclusion on September 1, 2004. Furthermore, Mr Shah’s deliberation said the quantity of interest-free loans captivated by him even before that old-fashioned (September 1, 2004) did not fall within the ambit of the amended section.
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