Mumbai: In an important decision, the Income Tax Appellate Tribunal (ITAT), Mumbai Bench, Lawful owner (A person whose name is added only on the purchase of one property, says a spouse or wife or brother) and A beneficial owner (With whom is it really).
ITAT stressed that having only one name on the title of property does not provide the necessary ownership if there are clear evidence of contrast. Thus, on the sale of property, where income flows completely to the beneficial owner, the person whose name is only added is not obliged to pay tax on capital gains.
Often, when a property is purchased, the name of another family member is linked to ‘love and affection’ – such as giving a safety degree to the spouse. However, on the sale of such assets, the demand for tax is also raised on the legal owner for his share. capital gains taxIn the case of VN Jain, taxpayers will have to face a similar situation by this ITAT order.
In this case, VN Jain jointly laid a property with his brother, which was sold for Rs 54 lakh during the financial year 2014-15.
The Income Tax (IT) officer noticed that no family system was present under which Jain had abandoned his right to property before sale. Thus, he said that the sales of Jain would be taxable in their hands as capital gains of Rs 27 lakh.
Capital profit acquisition is minus to the indexed cost of acquisition. When Jain filed an appeal, the Appellate Commissioner partially gave relief that capital gains should be calculated after cutting the proportional stake in the cost of acquisition of property with an amount of Rs 27 lakh. Capital gains tax will be payable only on pure amount. Jain then approached ITAT.
Prior to the Tax Eplet Tribunal, he said that the property sold was originally purchased by his brother, who had full occupation and rights. His name was added as a joint owner with natural love and affection. The ITAT bench reviewed the evidence such as procurement work, and brother’s bank statement. It was also observed that the brother had considered the entire sale, it was in the return in itself.
ITAT noticed that Jain had neither paid for property nor earned any income from sales. Thus, no capital profit tax liability can be imposed on it.
Tax experts have welcomed the order of ITAT, stating that it enhances the principles of natural justice and also prevents unjust taxation on individuals who are not real beneficiaries of any property.
