Receipt of Property by way of Inheritance, will not be treated as Income from Other Sources: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Chennai held that on Receipt of property by way of inheritance, it will not be treated as income from other sources.

The assessee, Anitha Kumaran being resident individual admitted income of Rs.763.95 Lakhs which was subjected to scrutiny u/s. 143(3) of the income tax Act. It transpired that the assessee purchased land measuring 64,687 sq. ft. along with residential house building thereon having a plinth area of 950 sq. ft. and common passage measuring 2026 sq. ft. and 4748 sq. ft. for a consideration of Rs.10 Lakhs vide registered sale deed executed by M/s. Gay Travels Pvt Ltd (GTPL).

However, the stamp duty value as determined by registration authority was Rs.445 Lacs. Accordingly, Ld. AO held that the provisions of Sec.56(2)(vii) would apply which provide that in case any immoveable property is received by an individual or HUF for a consideration which is less than the stamp duty value, the differential would be treated as ‘income from other sources.’

The property was held by M/s. GTPL. This entity is family-owned entity and its entire shareholding was held by assessee’s father and brother, a fact which is undisputed since the same is evidenced by documents filed by GTPL to Registrar of Companies. It could be seen that the father was holding 95% shareholding whereas remaining 5% were held by the brother. A fact to be noted is that GTPL is family promoted entity out of joint family funds. This is also clear from the recitals of Deed of declaration-cum-undertaking as executed by the brother upon the expiry of the assessee’s father.

The Bench consisting of V Durga Rao, Judicial Member and Manoj Kumar Aggarwal, Accountant Member held that “Finally, on entirety of facts and circumstances, we would hold that the property was received by the assessee under a will / by way of inheritance and therefore, the provisions of s.56(2)(vii) would not apply to the case of the assessee.”The Income Tax Appellate Tribunal (ITAT), Chennai held that on Receipt of property by way of inheritance, it will not be treated as income from other sources.

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