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Anomaly in the definition of relatives

The reader Pankajam Sitharam of Srirangam is right in pointing out that Explanation to Sec. 56(2)(v)/ (vi) has a long list, which will include distant relatives, gift to whom will not attract tax liability for them. But gift to nearer relatives like children of a brother or a sister cannot be read into the exception, which is certainly an anomaly to be corrected by including lineal descendant or ascendant of not only individual or the spouse of the individual, but also others specified in item (i) to (iv) by combining entries (v) and (vi) to read “any lineal descendant or ascendant or spouse of the individual and the persons specified in (i) to (iv)”.

There is another anomaly in the section, which charges not only an individual but also a Hindu Undivided Family (HUF) in respect of gifts from non-relatives. But exemption is only for gifts from relatives of the individual. Unless the individual referred to in the Explanation includes karta and/ or members of the HUF, no HUF receiving gift may be able to avoid liability as no donor can satisfy the definition of relative, since HUF, being a group entity, definition of relatives in relation to individual can have no application.

The word ‘karta’ of HUF should have been treated on a par with individual. Though this omission in drafting the provision has been pointed out more than once in these columns, it has elicited no response.

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