Amount received by trustee-cum-beneficiary on dissolution of trust is not 'gift' to be taxed under sec. 56

In this case, the trustees were the parents and the beneficiaries were their two daughters. Subsequently, the parents were added as additional beneficiaries, when the original beneficiaries relinquished their rights. The said trust was dissolved and the assets were equally distributed among the parents. The AO made addition of amount received by parents to their total income. On appeal, CIT(A) held that the amount received by parents would be taxable as gift under Sec. 56(2)(v), on following grounds: a) Neither there was specific transfer nor gift by both the daughters to their parents; b) As the sum was received without consideration and the said trust did not fall within the ambit of the word "Relative". On further appeal, the Tribunal held that undisputedly, the assessee had received the amount on dissolution of trust in the capacity of beneficiaries. Therefore, the amount received by the parents could not be termed as amount received by the beneficiaries "without consideration". Therefore, addition made by AO was deleted and assessee's claim has been allowed - ASHOK C. PRATAP v. ACIT[2012] 23 taxmann.com 347 (Mumbai - Trib.)