2019 (11) TMI 74 - AT - Income Tax

Exemption u/s 54F - purchase of property in the name of common pool of family - partition of HUF into smaller HUF - HELD THAT - Property was purchased in the year 1964 in the name of the assessee and his father was no longer alive at that time. From the partition deed, it is seen that various properties were purchased in the names of various persons of the HUF. All those properties have been put into common hotchpotch, and likewise, the property purchased in the name of the assessee also has been put into the common pool of properties and it has been partitioned in favour of the bigger as well as the smaller HUFs. The partition deed was also stamped in the year 1995 which is prior to the survey in 2011. Therefore, it cannot be considered to be an after-thought. The factum of the partition deed was also brought to the notice of ULC authorities and also to the income tax authorities 269UA proceedings, by one of the coparceners Sri Sanjeeva Rao Bongu. Thus, the factum of partition has been brought to the notice of the Department as well in 1997 itself. Therefore, in view of these documents, which have been considered by the CIT(A) for granting relief, we see no reason to interfere with the same particularly when the protective assessments in the hands of individual co-parceners have become final.. Accordingly, grounds raised by the Revenue are dismissed.

Summary

Issues:
1. Whether the property belonged to the Hindu Undivided Family (HUF) or the individual assessee?
2. Whether the capital gains should be taxed in the hands of the individual assessee or the HUF members?
3. Whether the partition deed dated 01/05/1983 proves the property belonged to the HUF and the capital gains should be taxed in the hands of individual HUF members?

Analysis:
1. The case involved a dispute regarding the ownership of a property between the HUF and the individual assessee. The Assessing Officer (A.O.) contended that since the property was registered only in the name of the individual, it belonged to the individual. However, the assessee claimed that the property was part of the HUF's common pool of funds. The CIT(A) accepted the assessee's contention based on a partition deed from 1983, stamped in 1995, which indicated the property belonged to the HUF. The Revenue appealed this decision.

2. The Revenue argued that the property solely belonged to the individual as per the registration and development agreement, and the partition deed was merely a family arrangement, not a partition of the HUF. The Revenue contended that the individual HUF members had accepted the assessments, and taxing the capital gains in the hands of the assessee would result in double taxation. The counsel for the assessee argued that the property was part of the HUF and the partition deed proved the property's ownership by the HUF.

3. The Tribunal examined the evidence, including the partition deed, which showed that the property was purchased in the name of the assessee but later put into the common pool of HUF properties. The partition deed was stamped before the survey in 2011 and had been disclosed to the authorities earlier. The Tribunal concluded that the property indeed belonged to the HUF, as evidenced by the partition deed and the common pool arrangement. As the protective assessments of individual co-parceners had become final, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

In conclusion, the Tribunal ruled in favor of the assessee, determining that the property belonged to the HUF based on the partition deed and common pool arrangement, thereby dismissing the Revenue's appeal and confirming the tax liability of the individual HUF members.