In a recent ruling, the Chennai Income Tax Appellate Tribunal (ITAT) dealt with an important question regarding the taxability of gifts recorded in a “Gift Management System” seized during a search operation on a charitable trust. The Revenue had sought to tax these gifts in the hands of the trust. However, the Tribunal held that where gifts were clearly received by the managing trustee in her personal capacity, and the donee’s name was specifically mentioned, the gifts cannot be taxed as income of the trust.
This case is a significant reaffirmation of the principle that personal gifts, when properly recorded and attributable to a specific individual, are to be taxed in the hands of the recipient, not in the hands of any associated institution, even if the recipient holds a managerial position in that entity. The ruling also emphasizes compliance with the exemption threshold under section 56(2)(x) of the Income-tax Act.
📌 Case Citation: [2025] 176 Taxmann 418 (Chennai–Trib.)
➡️Facts & Background:
During a search at an assessee‑trust, the department seized a “Gift Management System” — an electronic/log register documenting personal gifts received by the managing trustee.
This system specifically named each donee and detailed gifts received during public programs.
✅Issue:
Whether the personal gifts recorded in this system should be added to the trust’s income, or be attributed individually based on the donee’s name being mentioned.
▶️Appraisal by Authorities:
The Assessing Officer (AO) added ₹16.39 lakhs of gifts to the trust’s income—later reduced to ₹19,900 after others were shown to have been already declared.
CIT(A) remanded the case; AO confirmed only ₹19,900 remained unpaid by Ms. Sharon Angel Dhinakaran.
Tribunal Judgment (ITAT Chennai)
The Tribunal noted gifts totaling ₹20,500 had been received by Ms. Dhinakaran. Of this, ₹600 was already declared by her in her personal return.
Since the donee’s name was explicitly mentioned, the gifts were rightly taxable in her hands—not the trust’s.
Also, since the amounts were below ₹50,000 in aggregate, Section 56(2)(x)(a) was not applicable and no tax arose in her hands.
🎓Decision:
Ground allowed: The addition of ₹19,900 to the trust’s income was deleted.
The Tribunal followed similar reasoning in the Karunya Educational & Research Trust cases (AY 2017–18 to 2021–22), which they held applicable mutatis mutandis.
Appeals for AY 2019–20 to 2021–22 were allowed in full.
📌Triumph for Tax Principle:
The case reaffirms that where a donee is identifiable, personal gifts are taxable in the hands of that person, not aggregated to the trust’s income—especially when properly recorded.