2018 (12) TMI 746 - AT - Income Tax

Clubbing of income - Assessment of capital gain of the minors in the hands of the assessee - eligibility of exemption under Section 54F - Held that - As carefully gone through the provisions of Section 64. The word any such income as appears in Section 64(1A) includes capital gain arising out of the sale of the property obtained by the minors from their grandparents by way of settlement. Therefore, the Assessing Officer has rightly clubbed the minors income in the hands of the assessee. Since the nature of bank deposit is not readily available for verification, this Tribunal is of the considered opinion that the matter needs to be verified by the Assessing Officer. Accordingly, orders of both the authorities below are set aside and the matter is remitted back to the file of the Assessing Officer only for a limited purpose of verifying whether the capital gain was deposited in the specified Capital Gains Account as required under Section 54F of the Act. The Assessing Officer shall verify the nature of deposit and thereafter decide the issue whether the assessee is eligible for exemption under Section 54F of the Act or not. Eligibility for exemption under Section 54F - Investment of sale proceeds in the name of the assessee and her husband - AO restricted the investment to the extent 50% - Held that - In a male dominating society, investment made in the name of the husband is also to be considered as investment. While adjudicating the issue arises for consideration, the prevailing customary practice in the society cannot be ignored by the judicial authorities. Even though the property sold stands in the name of assessee alone and the investment was admittedly made in the name of assessee and her husband, this Tribunal is of the considered opinion that the object of enactment to promote housing facility in the country is achieved and the assessee s husband cannot be considered as a third party as far as the assessee s investment is concerned. Therefore, this Tribunal is of the considered opinion that the assessee is eligible for exemption under Section 54F of the Act even though the investment was said to be made in the joint name of assessee and her husband. Therefore, we are unable to uphold the orders of the authorities below. Assessing Officer is directed to grant exemption under Section 54F of the Act.

Summary

Issues:
1. Assessment of capital gain of minors in the hands of the assessee.
2. Investment of sale proceeds in the name of the assessee and her husband.

Analysis:

Issue 1: Assessment of capital gain of minors in the hands of the assessee:
The appeal pertains to the assessment year 2012-13 and concerns the capital gain of minors in the hands of the assessee. The assessee's counsel argued that the property obtained by the minor daughters through a settlement deed should not be assessed in the hands of the assessee as it belonged to the minors. The High Court had imposed a condition that the sale proceeds be deposited, but the nature of the deposit was unclear. The Tribunal noted that the Income-tax Act requires depositing sale proceeds in a specified account for claiming exemption under Section 54F. As the nature of the deposit was not verified, the matter was remitted back to the Assessing Officer for clarification. The Tribunal concluded that the capital gain arising from the sale of property obtained by the minors should be assessed in the hands of the assessee, subject to verification of the deposit nature.

Issue 2: Investment of sale proceeds in the name of the assessee and her husband:
The second issue revolved around the investment of sale proceeds in the name of the assessee and her husband. The Assessing Officer disallowed the claim under Section 54F, citing lack of ownership by the husband in the sold property. However, the Tribunal opined that in common law, the assessee and her husband are considered one entity. It highlighted the societal practice and considered the investment in the husband's name as valid. The Tribunal emphasized that in a male-dominated society, investments made in the husband's name should not be disregarded. Therefore, despite the property being solely in the name of the assessee, the investment in both names was deemed eligible for exemption under Section 54F. Consequently, the Tribunal set aside the lower authorities' orders and directed the Assessing Officer to grant the exemption to the assessee.

In conclusion, the Tribunal allowed the appeal for statistical purposes, highlighting the nuanced considerations regarding the assessment of capital gains and investment of sale proceeds in the mentioned case.