Capital gain from flat purchased by assessee in daughter’s name, was taxable in his hand – ITAT

When entire investment/payments for flat purchase was made by the assessee in the name of his daughter, the capital gain was liable to be assessed in the hands of the assessee

ABCAUS Case Law Citation:
ABCAUS 2705 (2019) (01) ITAT

Important Case Laws Cited/relied upon:
Sanjeev Lal v. CIT (2014) 365 ITR 389 (SC)
Gulshan Malik v. Commissioner of Income tax [2014] 223 taxman 243 (Delhi)
CIT v. Smt. R.R. Sood [1986] 161 ITR 92 (Bom.)
Mrs. Lata Vasudeva v. Addl.CIT [2011] 10 taxmann.com 96 (Mum.)

The assessee had challenged the order of Commissioner of Income Tax (Appeals) in denying the date of acquisition as the date of booking of the flat and also in directing the AO of the assessee’s daughter to tax the capital gains in her hands also.

The assessee was an Individual and partner in Partnership Firm. The assessee, out of own funds, had made investment in purchase of flat in the name of his daughter. During the relevant assessment year, the assessee sold the flat and declared long term capital gains.

During the course of assessment proceedings, the Assessing Officer (AO) examined the ‘Long Terms Capital Gains’ claimed by the assessee in respect of the sale of a flat.

The AO noted that as per the time gap in the dates of flat purchase and sale, the capital gains thereon should be treated as ‘Short Term Capital Gains only.

The assessee explained that since the flat had been booked earlier and the allotment letter was received later, the flat was held for a period exceeding three years.

However the AO rejected the argument of the assessee because the possession of the flat had not been received by the assessee within time to complete three years.

In view of the same the AO taxed Short- Term Capital Gains.

The CIT(A) confirmed the addition made by the AO holding that as approved by the Hon’ble Supreme Court, transfer happens only after an agreement of sale is entered into and a ‘right in personam’ is created.

The CIT(A) directed the gains to be taxed as Income from other sources. Not only this, the CIT(A) went on to direct the AO of the assessee’s daughter to tax the capital gains in her hands also.

The assessee approached the ITAT.

The Tribunal opined that the date of acquisition of the rights in the fat by the assessee was as on the date of booking of flat and therefore the assessee had held the property for a period of more than 36 months and the capital gains arising to the assessee wass Long Term Capital Gains as against short term capital gains taken by the AO and assessed by the CIT(A) as income from other sources.  

The Tribunal also opined that the entire investment in the flat was from the assessee in the name of his daughter and once the payment for the flat had been made by the assessee and not by the daughter, whatever gains arose, was to be assessed in the hands of the assessee.

Accordingly, the appeal was decided in favour of the assessee.

Download Full Judgment Click Here >>

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