Case Details: Sushama Rajesh Rao v. Deputy Commissioner of Income-tax - [2025] 178 taxmann.com 266 (Bangalore - Trib.)
Judiciary and Counsel Details
- Prashant Maharishi, Vice President
- Soundararajan K., Judicial Member
- V. Chandrashekar, Adv. for the Appellant
- Muthu Shankar, CIT(DR) for the Respondent
Facts of the Case
The assessee received agricultural land as a gift from her husband. The said land was converted into non-agricultural land and was sold for a certain consideration. The assessee disclosed the sale consideration in her return of income, claiming the cost of acquisition as the fair market value of the agricultural land on the date of conversion, as per the Government’s guidance value, and accordingly computed the taxable capital gain as nil.
The Assessing Officer (AO) noted that registration charges for the transaction had been paid for the property value, which was higher than the sale consideration. Therefore, there was an understatement in the consideration in terms of the provisions of section 50C. Considering the assessee’s share, a certain amount was added to the sale proceeds declared by the assessee, and the cost of acquisition of the share price was also determined.
Assessee submitted that the sale of gifted agricultural land from her husband was to be taxed as capital gain under section 64(1)(iv) in the hands of her husband only. The matter reached before the Tribunal.
ITAT Held
The Tribunal held that the only issue was the applicability of the provisions of section 64(1)(iv). According to that section, if any income arises to the spouse of an individual from a property transferred directly or indirectly, such income may be earned by that spouse but shall be chargeable to tax in the hands of the person who transferred the asset to the spouse. The only restriction is the provisions of section 27(i)(1).
For the application of section 64(1)(iv), there has to be an existence of an asset, the relationship between the transferor and transferee subsists, the transfer may be direct or indirect by the spouse, the absence of adequate consideration, and direct or indirect income accrual to the transferee happens, then the provisions of the section are attracted. The only exception is that the transfer is for adequate consideration.
In the present case, the property was transferred by way of a registered gift deed from the husband to his wife, without any consideration. Subsequently, the gifted property was sold, resulting in capital gains. However, since the transfer to the assessee was without consideration and falls within the scope of spousal transfers, the capital gain is taxable only in the hands of the husband. Accordingly, the income arising from the sale of the said property is not chargeable to tax in the hands of the assessee, but solely in the hands of her husband.
It is not only for the AO to conclude whether invoking the provisions of section is called for after examining the facts of the case, and it is open to the assessee to ask the AO to invoke the provisions of section 64(1)(iv) of the Act.
List of Cases Reviewed
- Nagappa C R v. CIT (TS- 5034-SC-1968-O)Muthaiah Chettiar v. CIT (TS- 5009-SC-1969-O)Tulsidas Kilachand v. CIT [1961] 42 ITR 1 (SC) and Tulsidas Kilachand v. CIT [1961] 42 ITR 1 (SC) [Para 21] Followed
List of Cases Referred To
- Smt. Sushama Rajesh Rao v. Dy. CIT [IT Appeal No. 2734/Bang/2017, dated 24.01.2018] (para 4)
- Sevantilal Maneklal Sheth v. CIT [1968] 68 ITR 503 (SC) (para 9)
- ITO v. Ch. Atchaiah [1996] 84 Taxman 630/218 ITR 239 (SC) (para 9)
- Tulsidas Kilachand v. CIT [1961] 42 ITR 1 (SC) (para 9)
- CIT v. Nawab Hashim Jah [1990] 49 Taxman 321/175 ITR 203 (Andhra Pradesh) (para 10)
- Sonia Bhatia v. State of U.P (1981) 2 SCC 585 (para 14)
- Major V.P. Singh v. State of U.P (1993) 199 ITR 188 (para 14)
- CWT v. Khan Saheb Dost Mohd. Alladin [1973] 91 ITR 179 (AP) (para 14)
- Sevantilal Maneklal Sheth v CIT (TS-5072-SC1967-O) (para 16)
- Nagappa C R v. CIT (TS-5034-SC-1968-O) (para 18)
- Muthaiah Chettiar v. CIT (TS-5009-SC-1969-O) (para 18).
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