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2019 (2) TMI 35 - AT - Income TaxLTCG on sale of ancestral property - appellant sold his ancestral property share for ₹ 99,00,000/- and out of which he paid ₹ 7,00,000/- to his divorced wife and ₹ 7,00,000/- to his minor son and ₹ 7,00,000/- to his minor daughter who are staying with the divorced wife - appellant s contention is that he actually received ₹ 78,00,000/- and he has already paid tax on ₹ 78,00,000/- hence no tax laibility Held that - In the Hindu Succession Act, 1956 amended in 2005 state that Hindu family governed by the Mitakshara law, the daughter of a coparcener shall be a coparcener by birth in her own right in the same manner as the son and will have rights in the coparcenary property as she would have had if she had been a son. Since ancestral property was sold by the appellant and his minor son and daughter are equal beneficiary of the sold property but out of 99,00,000/- appellant has paid ₹ 14,00,000/- to the minor children and ₹ 7,00,000/- to his divorced wife. We hold that for ₹ 14,00,000/- which were paid to minor children will not be taxed in the hand of appellant and remaining 7,00,000/- which was paid to divorced wife will be taxed in the hands of the appellant. In other words, appellant shall be taxed for ₹ 85,00,000/- not for ₹ 99,00,000/-. In terms of above, we partly allow the appeal of the assessee.
Issues:
1. Validity of assessment order 2. Addition to long term capital gains on sale of immovable property 3. Initiation of penalty proceedings 4. Levy of interest u/s. 234 Validity of assessment order: The Assessee appealed against the order of the Ld. CIT(A)-5, challenging the validity of the assessment order for A.Y. 2010-11. The Assessee argued that the mutual understanding with the divorced wife and children created an overriding title in the property, evidenced by their inclusion in the Sale Deed. The dispute centered on the part of the sale consideration paid directly to the wife and children. The Tribunal analyzed the ownership details from the Sale Deed and concluded that the entire sale consideration was assessable only in the hands of the Assessee, as there was no share or part of anyone else in the property. The Assessee failed to provide evidence of the alleged mutual understanding, leading to the dismissal of this ground by the CIT(A). Addition to long term capital gains: The dispute arose from the variance in the sale consideration declared by the Assessee and the actual sale amount. The Tribunal observed that the Assessee paid portions of the sale proceeds to the divorced wife and minor children. The Revenue contended that long term capital gains should be charged on the entire sale amount, while the Assessee argued that tax liability existed only on the amount received after payments to family members. The Tribunal referred to the Hindu Succession Act, 1956, and determined that the minor children were equal beneficiaries of the property. Consequently, the Tribunal partially allowed the appeal, taxing the Assessee on a reduced amount. Initiation of penalty proceedings: The Assessee contested the initiation of penalty proceedings, arguing that there was no justification for such action. The CIT(A) dismissed this ground, stating that there was no appeal against the initiation of penalty proceedings under section 271(1)(c). The Tribunal noted the lack of warrant for initiating penalties and emphasized the need to avoid prolonged litigation. However, the Tribunal did not find sufficient grounds to overturn the CIT(A)'s decision. Levy of interest u/s. 234: Regarding the levy of interest under section 234, the Assessee challenged the decision made by the CIT(A). The Tribunal analyzed the peculiar circumstances of the case and cited relevant legal precedents. The Assessee argued that the levy should be canceled based on specific decisions. However, the Tribunal upheld the CIT(A)'s decision, emphasizing the applicability of the law to the Assessee's case. In conclusion, the Tribunal partially allowed the Assessee's appeal, addressing the issues related to the assessment order, addition to long term capital gains, and the tax liability on the sale proceeds distributed to family members. The Tribunal's decision was based on a detailed analysis of ownership rights, legal provisions, and relevant case law.
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