Capital Gain of Minor rightly Clubbed with Income of Mother: ITAT [Read Order]

Capital Gain

The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that the capital gain received by the minor daughters can be clubbed in the hands of the Mother under the provisions of the Income Tax Act.

The assessees’ minor daughters got the property by way of settlement deed from their grandmother. With the permission of the High Court under Guardians And Wards Act, the property was sold with a condition that that sale proceeds shall be deposited in the bank account. The Assessing Officer made the addition of the same in the hands of the assessee.

The assessee contended before the authorities that since the property was of the minors, it cannot be assessed in the hands of the assessee.

The Tribunal noted that the condition imposed by the court is for the purpose of Guardians and Wards Act to safeguard the interest of minors during their minority. “Income-tax Act, being a special enactment for the purpose of claiming exemption under Section 54F, the assessee is expected to deposit the sale proceeds in the specified account as required under Section 54F of the Act. Therefore, this Tribunal is of the considered opinion that it needs to be verified whether the assessee has deposited in the Capital Gains Account or not,” the Tribunal said.

The Tribunal noted that the word “any such income” as appears in Section 64(1A) of the Act includes capital gain arising out of the sale of the property obtained by the minors from their grandparents by way of settlement.

“Therefore, the Assessing Officer has rightly clubbed the minors’ income in the hands of the assessee. Since the nature of a bank deposit is not readily available for verification, this Tribunal is of the considered opinion that the matter needs to be verified by the Assessing Officer. Accordingly, orders of both the authorities below are set aside and the matter is remitted back to the file of the Assessing Officer only for a limited purpose of verifying whether the capital gain was deposited in the specified Capital Gains Account as required under Section 54F of the Act. The Assessing Officer shall verify the nature of the deposit and thereafter decide the issue whether the assessee is eligible for exemption under Section 54F of the Act or not,” the Tribunal said.

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