Hong Kong, China: The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has ruled in favor of a Mumbai resident who received a ₹3 crore gift from her NRI son, a hedge fund operator based in Hong Kong. The tribunal deemed the gift genuine and exempt from tax under the Income Tax Act.

The I-T officer had classified the amount as unexplained cash credit under Section 68, citing alleged circular trading transactions. However, the ITAT highlighted that the son's financial capacity to gift the sum was proven through bank records, and no cross-verification or independent inquiry substantiated the I-T officer's claims.

While the gift recipient invested the funds in an Indian company and later returned them to her son, the tribunal clarified that these actions did not impact the legitimacy of the original gift. The ITAT also noted that the SEBI ban on the son’s hedge fund was lifted, further affirming the transaction's authenticity.

The ruling ensures that genuine gifts to close relatives remain tax-free under the law.