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2022 (5) TMI 1219 - AT - Income TaxLTCG - Co-ownership on land - ancestral property - whether Shri Bhagwan Pathare was the sole owner of the land or whether his sons, daughter-in-law, grandsons and grand-daughters were entitled for sales consideration? - HELD THAT - As AR submitted ample evidences to demonstrate that the said land is an ancestral property where the assessee, along with his two sons has offered 1/3rd each in their returns of income. A.O in this case has added the entire capital gain in the hands of the assessee alone though the ideal course would have been that the income should have been taxed in the hands of HUF but in this case since 1/3rd has been declared in the respective return of the assessee and his two sons, it is not therefore, justified to include the entire capital gain in the hands of the assessee alone. We are of the considered view that the A.O should assess the capital gain at 1/3rd as shown by the assessee and delete rest of the addition. In view thereof, we set aside the order of the ld. CIT(A) and restore the matter to the file of the A.O with a direction to give effect to our order as per terms aforestated. Appeal of the assessee is allowed for statistical purposes.
Issues:
1. Apportionment of sale consideration for agricultural land 2. Interpretation of Section 6 of the Hindu Succession Act, 1956 3. Taxability of capital gains in the hands of the appellant Analysis: Issue 1: Apportionment of Sale Consideration The appellant, engaged in agriculture, declared long-term capital gains from the sale of agricultural land in Pune. The Assessing Officer (AO) contested the apportionment of the sale consideration as not commensurate with relevant provisions, especially regarding the claimed deduction under section 54B of the Income-tax Act, 1961. The AO required detailed evidence to support the apportionment, considering the joint family property and the share of various family members in the land. Issue 2: Interpretation of Section 6 of the Hindu Succession Act, 1956 The appellant asserted a vested right in the property under Section 6 of the Hindu Succession Act, claiming ancestral land status. However, the AO and the CIT(A) found the evidence presented insufficient to establish the land as ancestral. The CIT(A) emphasized that mere devolution from the grandfather does not automatically confer ancestral property status. The absence of a partition deed or clear evidence of ancestral status led to the rejection of the appellant's claim based solely on Section 6. Issue 3: Taxability of Capital Gains The dispute centered on the taxability of capital gains from the land sale. The CIT(A) upheld the AO's decision to tax the entire capital gains in the appellant's hands due to the lack of substantiated evidence of ancestral property and proper apportionment. However, the appellant argued that the capital gain should be assessed at 1/3rd, as declared by him and his two sons. The Tribunal agreed with the appellant's stance, directing the AO to assess the capital gain at 1/3rd and delete the rest of the addition, emphasizing the need for proper assessment based on the shares declared in the respective returns. In conclusion, the tribunal allowed the appeal for statistical purposes, highlighting the importance of accurate apportionment of sale consideration, proper interpretation of legal provisions like Section 6 of the Hindu Succession Act, and the correct assessment of capital gains to ensure fair taxation based on declared shares.
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