HC Refuses Interim Relief as Same-Sex Couple Challenges Gift Tax Rule Under Section 56(2)(x)
On Thursday, the Bombay High Court refused to allow interim relief to a same-sex couple. The couple approached the court challenging the constitutional validity of section 56(2)(x) of the Income-Tax Act. The section deals with the taxation of certain receipts of money or property received by any person (individual, HUF, company, firm, etc.) without adequate consideration. These receipts are taxed under the head “Income from Other Sources” when they exceed a certain limit.
This section exempts tax on gifts exchanged between two married couples; the condition is that this provision only covers heterosexual marriages. The representative of the assessee says that because the law does not include same-sex partners, they are treated unfairly. When one partner gives a gift to the other worth more than Rs. 50,000, it becomes taxable under “income from other sources”, even though married couples don’t have to pay any tax on similar gifts. This means same-sex partners end up paying extra money just because they are not legally recognised as spouses.
The bench announcing the decision was comprised of two honourable justices, Justices Burgess Colabawalla and Amit Jamsandekar. Judges heard the arguments of petitioners Payio Ashiho and Vivek Divan and said the law protects only “spouses” of different sexes, which indirectly creates unfair discrimination against same-sex couples, because Indian law does not consider them as spouses legally. The representative highlighted in the court that the Indian rules are affecting the lives of people in real life. The Indian constitution discusses the right to equality, so if one group (different-gender couples) gets tax benefits, then couples with the same gender should also enjoy the same benefits.
Justice Colabawalla explained the point of the petitioner with a simple instance, saying, “whether a law that protects ‘apples’ must, in fairness, protect ‘oranges’ as well.” The judges said that this topic is a major topic to be thought about deeply, and hence, they cannot give a quick decision on the present matter. The petitioner prays in court to either interpret the fifth proviso to section 56(2)(x), which exempts gifts from “relatives”, including “spouses,” to read “spouse” as covering same-sex couples or extend the declaration of the exemption so that the law also applies to such couples.
But since this involves both legal and constitutional issues, the court said it needs more time to hear everything properly and cannot finish the judgment before the tax filing deadlines for this year. The matter is scheduled to be further heard in the second week of December.
