The Income Tax Department, while opposing a petition filed by a same‑sex couple seeking tax relief under the gift‑exemption provision, submitted before the Bombay High Court that the benefit available under section 56(2)(x) of the Income Tax Act, 1961 is confined to transfers made between persons who fall within the statutory definition of “relative”. The department emphasised that the term “spouse” appearing in the definition of relative presupposes a marriage that is recognised under the prevailing matrimonial laws of the country.
The bench hearing the matter, comprising Justice Burgess Colabawalla and Justice Firdosh Pooniwalla, noted the department’s contention that the exemption clause does not operate in a vacuum but is tethered to the legal status of the relationship between the donor and the donee. The justices observed that, absent a legal recognition of the union as a marriage, the parties cannot be treated as spouses for the purpose of the Income Tax Act, and consequently the exemption cannot be extended to them.
The petitioners had argued that the purpose of section 56(2)(x) is to alleviate the tax burden on genuine transfers of affection and that denying the benefit to same‑sex couples would constitute discrimination. They urged the court to read the term “spouse” in a manner that includes partners in a committed same‑sex relationship, relying on the principle of equality enshrined in the Constitution.
The Income Tax Department countered that any expansive interpretation would amount to judicial legislation, as the statute expressly links the exemption to the existence of a marital relationship recognised by law. The department pointed out that, until such time as the legislature amends the definition of spouse or recognises same‑sex marriage, the fiscal concession remains unavailable to couples whose union lacks legal sanction.
The court, after hearing the submissions, indicated that it would consider the statutory language, the legislative intent behind the exemption provision, and the prevailing legal position on same‑sex marriages in India. The justices refrained from delivering an interim order, stating that a final view would be formed after a detailed examination of the authorities cited by both sides.
The outcome of the case bears significance for the fiscal treatment of gifts between partners in same‑sex relationships. Should the court uphold the department’s stance, the existing tax regime will continue to treat such transfers as taxable unless the parties fall within any other category of relative recognised under the Act. Conversely, a ruling in favour of the petitioners would necessitate a reconsideration of the scope of section 56(2)(x) and could prompt legislative clarification on the recognition of same‑sex unions for tax purposes.
At present, the Income Tax Department’s opposition underscores the principle that tax benefits tied to familial status are contingent upon the legal recognition of that status under domestic law. The Bombay High Court’s forthcoming judgment will clarify whether the statutory framework can be interpreted to encompass same‑sex partners in the absence of explicit legislative recognition of their marriage.