Chennai ITAT Rules in Favor of Assessee, Exempts Minor's Share of Sale Proceeds from Tax

Chennai ITAT Rules in Favor of Assessee, Exempts Minor's Share of Sale Proceeds from Tax

Introduction

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) ruled that sale proceeds of a minor's property share deposited under a court order are excluded from the father's taxable income.

Factual Background

The assessee, Pradeep Jeyavelu, filed a return of income in response to a notice under Section 148 of the Income Tax Act, 1961. The Assessing Officer contended that the assessee had not declared income from his minor daughter's share of sale consideration received from a property inherited through his spouse after her death.

Procedural Background

The assessee explained that he and his daughter are legal heirs of the property and accounted for his 50% share, claiming deduction under Section 54 of the Act. The minor daughter's share was deposited in a nationalized bank pursuant to a court order.

Issues

The primary issue before the ITAT was whether the minor daughter's share of sale proceeds can be included in the assessee's taxable income.

Contentions of the Parties

Assessee: The assessee argued that the minor daughter's share cannot be treated as income until the sale consideration is free of constraints. Since the share is deposited in a bank as per the court's order, it cannot be utilized for determining capital gain or claiming deduction.

Department: The department argued that the income of the minor daughter should be clubbed with the assessee's income, as the transfer was affected under the provisions of the Income Tax Act.

Reasoning and Analysis

The bench of S.S. Viswanethra Ravi (Judicial Member) noted that the City Civil Court, Chennai, had permitted the assessee to sell his minor daughter's interest in the property and deposit her share in a nationalized bank. Given this, the Tribunal held that the addition made in the hands of the assessee with reference to his minor daughter's share is not justified.

Relief Sought

The assessee sought deletion of the addition made to his taxable income with respect to his minor daughter's share. The ITAT allowed the appeal, deleting the addition.

In this case the appellant was represented by Mr. R.S. Hithesh, Advocate. Meanwhile the respondent was represented by Mr. V. Aswathy, Advocate.