No Income Tax on Property or money received by will or inheritance
Sum of money or property received under a will or by way of inheritance [Clause (III)of the proviso]
Clause (III) of the proviso provides that any sum of money or property received under a will or by way of inheritance shall not be taxed as income under section 56(2)(x) of Income Tax Act
All categories of taxpayers (be it individual/HUF/firm/Company/AOP/BOI/AJP) can claim exemption on this ground.
A question arises – if an individual receives any shares or money covered by a fixed deposit by virtue of being a nominee will these receipts be exempt? This question arises as there is only mention of will and inheritance but not of nomination in clause (III) of the proviso.
The Mimansa Principle of Interpretation Kakebhyo Dadhi Rakshitam (Protect the curds from the crow) is instructive in this regard. The above maxim cannot be understood as saying that the curds should be protected from crows but should be allowed to be eaten by dogs, cats, etc. The word ‘crow’ is only used in an illustrative sense here. In K.L. Sarkar’s Mimansa Rules of Interpretation, Markandey Katju J. cites the example of Article 1, section 8 of the U.S. Constitution which states that Congress can raise armies and navies. There is no mention of air force. Applying the Kakebhyo Dadhi Rakshitam maxim it has to held that the words ‘armies and navies’ are only illustrative and should be construed as connoting ‘all armed forces necessary for the security of the nation’.
Applying the above principle, it can be argued that the words ‘will’, ‘inheritance’ in clause (III) of the proviso and ‘in contemplation of death’ in clause (IV) are only used in an illustrative sense to convey that receipt of property or money through transfers which are not inter vivos (between living persons) shall not be taxed under section 56(2)(x). Thus, it can be argued that if money or property is received by any mode which does not involve inter vivos transfer (including nomination), the same will not be taxed. This matter needs CBDT’s clarification.