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Money received by POA for investment not income

Sannidhi C. Patel vs. ITO (ITAT Mumbai)

S. 56(2)(vi): Amounts received under a Power of Attorney for making investments cannot be treated as income in the hands of the recipient

Decided:.....Section 56 of the Act deals with income from other sources. Sub-clause (vi) to section 56 (2) was inserted by taxation laws (amendment) Act, 2006, with effect from 01/04/2007. The plain reading of the aforementioned statutory provisions reveals that it is intended to tax a receipt of money without consideration. The impugned amount was received by the assessee for making the investment on behalf of Ustad Zakir Hussain, on the basis of Power of Attorney. If the provisions of the Act and the content of the Power of Attorney are kept in juxtaposition and analyzed then it can be concluded that the mutual funds, purchase and sold by the assessee were made on behalf of Shri Zakir Hussain and there is no evidence to establish that the investment made by the assessee is from the funds of Shri Zakir Hussain as is evident from return of income, balance sheet filed in the case of Ustad Zakir Hussain and the explanation of the assessee there is no doubt about the genuineness of the transaction. The assessee never became the beneficiary of the impugned amount i.e. Rs.25 lakh, thus there is no question of making the addition u/s 56(2)(vi) of the Act. Even otherwise, the amount after liquidating the mutual fund was returned back meaning thereby, the amount was returned back along with profit, consequently, the provision of section 56(2)(vi) is not applicable (CIT vs Saran Pal Singh (HUF) 237 CTR (P & H) 50 followed)

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