No capital gain tax on flat transferred as nominee. The assessee did not inherit the property as owner but as nominee of all legal heirs – ITAT
ABCAUS Case Law Citation:
ABCAUS 1201 (2017) (04) ITAT
The assessee was aggrieved by the order passed by the CIT(A) in confirming the addition made on account of capital gain on sale of immovable property in the hand of assessee as nominee.
Assessment Year : 2011-12
Date/Month of Pronouncement: April, 2017
Brief Facts of the Case:
The appellant assessee’s mother was having the ownership of a flat. She expired leaving behind her three sons and one daughter as legal heirs. After her death, the said flat was transferred to the name of the assessee. Subsequently, the said flat along with the garage was sold for a total sale consideration of Rs.1.30 crores.
During the course of assessment proceedings, in the case of the appellant assessee, the Assessing Officer (‘AO’) noticed that the assessee had not offered capital gain arising out of the sale of the said flat. AO computed the capital gain at the hands of the assessee after allowing cost of transfer. On the basis of assessment made in the case of the appellant assessee, the AO re-opened the assessment in case of his mother u/s 147 of the Income Tax Act, 1961 (‘the Act”). In response to the notice issued u/s 148 the legal Heir of the deceased mother filed return of income showing income including Long term capital gain from sale of the said Flat. In the course of assessment proceedings in case of deceased mother, AO observed that after her death the subject flat was transferred in the name of the assessee as owner of the property hence, the capital gain was assessed at the hands of the appellant assessee on substantive basis. AO, therefore completed the assessment in the case of deceased mother by computing capital gain at Rs.1,29,06,400/-, as was done in the case of the appellant assessee, on protective basis after disallowing claim of indexation.
Being aggrieved of the respective assessment orders passed assessing capital gain, both, the appellant assessee in question and the estate of the deceased mother preferred appeal before the CIT(A).
The CIT(A) found that the appellant assessee did not inherit the property as an owner but as a nominee of all the legal heirs. He also found that, though, the sale deed was executed between the appellant assessee and the buyers, however, the sale proceeds were ultimately transferred to the bank account of Estate of the deceased mother. He therefore, held that the capital gain had to be assessed at the hands of Estate of the deceased mother and not the appellant assessee. Thus CIT(A) accepted the capital gain shown in the return of income filed on behalf of the deceased mother. However, with respect to the taxability of capital gains in the hand of the appellant assessee, the CIT(A) upheld the decision of the AO in assessing the capital gain on substantive basis in his hand.
Being aggrieved by the decisions of the CITA(), both, the appellant assessee in question and the estate of the deceased mother filed the present appeal before the Tribunal.
Observations made by the Tribunal:
The Tribunal observed that the AO had assessed the capital gain on substantive basis at the hands the appellant assessee while assessing the same on protective basis at the hands of deceased mother.
It was further observed that while deciding the appeal of the deceased mother, the CIT(A) had recorded a categorical finding of fact that she had left behind three sons and a daughter as legal heir and share certificate relating to the flat was transferred in the name of the appellant assessee only as a nominee on behalf of all the legal heirs by virtue of a nomination form filed with the society by her prior to death. The CIT(A) therefore, held that the appellant assessee was not the owner of the flat but the Estate of the deceased mother is the owner and, hence, accepted the income declared from capital gain arising out of the sale of flat at the hands of Estate of the deceased mother.
It was observed that the decision of the CIT(A) rendered in the case of Late mother had not been challenged by the department.
Thus, the ITAT opined that once capital gain from sale of flat had been held to be assessable on substantive basis at the hands of the deceased mother, the same income could not again be assessed at the hands of the appellant son. Therefore, the addition of capital gain at the hands of the appellant assessee has to be deleted.
The order passed by the CIT(A) in the case of Estate of Late mother was upheld and the first appellate order passed in the case of appellant assessee was set aside.