Minor Daughter’s Share Deposited as per Court’s Order cannot be Clubbed with Father’s Income : ITAT [Read Order]
The tribunal noted that the appellant had accounted for his 50% share and claimed deduction under section 54, while the minor’s 50% share was under court-imposed restrictions and not accessible to him.
Minor Daughter's Income - Taxscan
Minor Daughter's Income - Taxscan
The Chennai Bench of Income Tax Appellate Tribunal ( ITAT ) ruled that the minor daughter’s share deposited as per court order cannot be clubbed with the father’s income.
Pradeep Jeyavelu,appellant-assessee, filed his return of income on 28.03.2023, declaring ₹13,91,143 in response to a notice under section 148 of the Act. The Assessing Officer (AO ) asked for details of the deductions claimed, which the assessee submitted.
The AO held that the assessee did not declare the income from his minor daughter’s share in the sale proceeds. The assessee explained that he and his daughter inherited the property after his spouse’s death, accounted for his 50% share, and claimed deduction under section 54 based on a registered valuer’s report. He further clarified that his daughter’s share was deposited in a nationalized bank as per a court order dated 27.03.2015.
However, the AO treated the minor daughter’s share as taxable in the assessee’s hands and computed capital gains accordingly, granting section 54 benefits only for the assessee’s share. The Commissioner of Income Tax (Appeals)[CIT(A)] upheld this view.
The assessee’s counsel, argued that the CIT(A) and the AO failed to consider that the sale proceeds from the assessee’s minor daughter’s share were deposited in a nationalized bank as per the City Civil Court’s order and could not be used until she attained majority.
He submitted that the amount was under restriction and, therefore, could not be treated as income in the hands of either the assessee or his daughter. He contended that the minor’s 50% share should not be included for computing capital gains or for claiming deductions and requested deletion of the addition.
The Departmental Counsel, argued that the minor’s 50% share had to be clubbed with the assessee’s income since the property transfer had taken place. She stated that the assessee’s inability to use the funds was irrelevant and supported the CIT(A)’s decision to treat the entire sale consideration as taxable under long-term capital gains.
A single member bench comprising S.S Viswanethra Ravi (Judicial Member) noted that there was no dispute regarding the sale of the property owned by the assessee’s deceased wife. The assessee had sold the property with the permission of the City Civil Court and deposited 50% of his minor daughter’s share in a nationalized bank, as directed by the court.
His own 50% share was properly accounted for as capital gains, and the claim for deduction under section 54 was accepted by the AO.
The dispute was limited to whether the assessee should have included his minor daughter’s 50% share while computing long-term capital gains. The tribunal observed that, as per the court’s order dated 27.03.2015, the minor’s share was deposited in the name of the Registrar, City Civil Court, Chennai, under section 8(2) of the Hindu Minority and Guardianship Act, 1956.
Since the amount was deposited under court directions and the assessee had no control over its utilization, the tribunal held that it could not be taxed in his hands.
Accordingly, the appellate tribunal deleted the addition related to the minor daughter’s share and also allowed the brokerage charges, which had earlier been disallowed for want of evidence.
Thus, the assessee’s appeal was allowed.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
