Sushama Rajesh Rao Vs DCIT (ITAT Bangalore)
Clubbing Provision Mandatory- Capital Gains on Gifted Property Taxable in Husband’s Hands – ITAT Bangalore Applies Clubbing Rule; Love & Affection Is Not Adequate Consideration – Tribunal Deletes ₹8.36 Cr Addition
Assessee, Smt. Sushama Rajesh Rao, received agricultural land as a gift from her husband vide deed dated 04.05.2009. The land was originally allotted to her husband under a family partition in 1995. Subsequently, the land was converted into non-agricultural land on 08.06.2011 & sold on 29.06.2011 for a total consideration of ₹17.26 crore, of which her share amounted to ₹8.36 crore (48.43%). In her return, she declared nil capital gains, adopting the fair market value of ₹1.5 crore as on the date of conversion as cost of acquisition.
AO disagreed, invoking section 50C due to stamp duty valuation differences, & assessed long-term capital gains of ₹8.36 crore in Assessee’s hands, also adding ₹55.39 lakh for undervaluation. CIT(A) upheld this computation, holding section 50C mandatory.
On appeal, Assessee contended that as the property was received as a gift from her husband without consideration, the clubbing provisions of section 64(1)(iv) applied & therefore the capital gains should be taxable in her husband’s hands, not hers. Reliance was placed on Supreme Court rulings in Tulsidas Kilachand v. CIT, Sevantilal Maneklal Sheth v. CIT, & ITO v. Ch. Atchaiah. It was argued that “income” includes capital gains & the mandate of section 64(1)(iv) is automatic & not optional.
