2021 (1) TMI 458 - AT - Income Tax

Long term capital loss - capital loss restricted as property transfered was jointly owned by the assessee and her daughter - HELD THAT - Payment at the time of purchase of property came from a bank account which was jointly operated by the assessee and her daughter. Similarly, at the time of sale of the property, the sale consideration went back into a bank account jointly operated by the assessee and her daughter. These facts evidently demonstrate that Tricia Batliwala was joint owner along with the assessee at the time of purchase as well as the sale. The contention put forth on behalf of the assessee that she included the name of her daughter in the purchase as well as sale deeds only for ensuring that the property gets easily transferred to Tricia Batliwala after her death, does not and cannot change the legal position. If title of an immovable property stands in the name of two persons, it evidences both as co-owners. One of such persons cannot claim himself as sole owner nor can he unilaterally transfer the said property by claiming that he was indeed the sole owner and the name of the other person was included just as a nominee and not as a co-owner. It is title of the immovable property which is decisive of ownership and not the understanding outside the records which both the parties may have entered into. In fact, registration of an immovable property is a proof of ownership, which, in turn, gets reflected from the legal documents. Since the flat in question was purchased as joint owners and also transferred by the two persons as joint owners, there is absolutely no doubt that the profit or loss in the transaction will also have to be shared by both of them as joint owners and not in the hands of one person to the exclusion of the other. Such a contention, if accepted, would open floodgates of disputes with no end in sight. The contention of the assessee that she offered full rental income from the flat as her own does not change the ownership of property. If such rental income has been wrongly assessed fully in the hands of the assessee, the remedy lies in correcting such assessment of income and not making a further wrong assessment by taxing the entire capital gain/loss in the hands of the assessee. Assessee appeal dismissed.

Summary

Issues:
Restriction of long term capital loss due to joint ownership of property.

Analysis:
The appeal pertains to the assessment year 2016-17, where the only issue raised is the restriction of long term capital loss claimed by the assessee. The assessee declared a loss of &8377; 81,60,800 arising from the transfer of a flat jointly owned with her daughter. The Assessing Officer determined that the property was jointly owned, leading to a restricted loss of &8377; 40,80,400. The assessee contended that her daughter was included as a nominee for easy transfer post her death, not as a joint owner. However, the Tribunal found that the property was purchased and sold by both parties as joint owners, indicating joint ownership and shared loss.

The Tribunal examined the purchase and sale deeds, which clearly showed both the assessee and her daughter as joint owners. Transactions were conducted through a bank account jointly operated by both parties, reinforcing their joint ownership. The Tribunal emphasized that the legal title of the property establishes ownership, regardless of any external understandings. The Tribunal rejected the argument that including the daughter's name was for posthumous transfer convenience, emphasizing that joint ownership implies shared profits or losses. Disputing the full rental income assessment in the assessee's hands, the Tribunal clarified that incorrect assessments should be rectified appropriately, without leading to further erroneous assessments.

The Tribunal dismissed the appeal, upholding the Commissioner of Income-tax (Appeals)'s decision to restrict the capital loss due to joint ownership. The judgment emphasized the legal principle that joint ownership of property signifies shared ownership and responsibilities. The Tribunal highlighted the importance of legal documentation and registration in determining ownership rights, rejecting claims based on external arrangements. The judgment clarified that disputes arising from joint ownership must be resolved based on legal ownership evidence, preventing potential misuse of ownership claims.