MUMBAI: In a major determination, the Earnings Tax Appellate Tribunal (ITAT), Mumbai bench, distinguished between a authorized owner (a person whose title is merely added on buy of a property, say a partner or brother) and a useful owner (to whom it really belongs).
The ITAT emphasised that merely having a reputation on a property title doesn’t essentially confer possession if there may be clear proof on the contrary. Thus, on sale of the property, the place the proceeds move solely to the useful owner, the person whose title has been merely added will not be obliged to pay tax on capital gains.
Typically, when a property is bought, the title of one other member of the family is added out of ‘love and affection’ – reminiscent of to offer a level of safety to a partner. Nonetheless, on sale of such property, tax calls for are raised even on the authorized owner for his or her share of capital gains tax. This ITAT order within the case of V N Jain will profit taxpayers dealing with the same scenario.
On this case, V N Jain held a property collectively along with his brother, which was offered for Rs 54 lakh through the monetary 12 months 2014-15.
The Earnings-Tax (I-T) officer noticed that there didn’t exist any household association beneath which Jain has relinquished his proper to the property previous to the sale. Thus, he held that Jain’s share of the sale proceeds of Rs 27 lakh could be taxable in his palms as capital gains.
Capital gains is the gross sales consideration minus the listed value of acquisition. When Jain filed an attraction, the appellate commissioner granted a partial reduction by holding that capital gains needs to be computed after deducting the proportionate share of value of acquisition of the property from the sum of Rs 27 lakhs. Capital gains tax could be payable solely on the web sum arrived at. Jain then approached the ITAT.
Earlier than the tax appelate tribunal, he submitted that the property offered was initially bought by his brother, who had full possession and rights over it. His title was added as a joint owner out of pure love and affection. The ITAT bench reviewed the proof submitted reminiscent of buy deeds, and the brother’s financial institution assertion. It additionally noticed that the brother had declared the complete sale consideration in his personal I-T returns.
The ITAT noticed that Jain had neither paid for the property nor obtained any proceeds from the sale. Thus, no capital gains tax legal responsibility may very well be imposed on him.
Tax consultants have welcomed the order of ITAT, stating that it upholds the ideas of pure justice and likewise prevents unjust taxation on people who will not be the true beneficiaries of an asset.
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