Shanthi Violet Rodrigues Vs ITO (ITAT Bangalore)
Double Taxation of Capital Gains Deleted – Addition of ₹27 Lakh in Wife’s Hands Unsustainable-ITAT Bangalore
Bangalore ITAT has held that once the entire capital gains on sale of property has been offered in the return of income of husband, the same income cannot again be taxed in the hands of wife merely because she was a joint owner.
Assessee, jointly owned a flat along with her husband. The property was sold in July 2019 for ₹54,00,000/-. It was explained before AO that the entire investment in the flat was made by the husband & accordingly, the entire capital gain was declared in his return of income. Assessee also furnished PAN & acknowledgement of her husband’s return to AO.
However, AO did not accept this explanation & proceeded to tax 50% of sale consideration (₹27,00,000/-) in assessee’s hands on the ground that her name appeared as joint owner in the sale deed. CIT(A), NFAC, dismissed assessee’s appeal merely on account of a delay of 21 days in filing appeal, without appreciating merits of the case.
Tribunal noted that assessee’s reply dated 26.08.2024, reproduced in the assessment order itself, clearly showed that her husband had offered entire sale proceeds in his return of income. A perusal of her husband’s ITR confirmed that the sale of the impugned flat for ₹54 lakh was duly disclosed & capital gains were offered. Despite availability of these details, AO failed to verify, & taxed 50% in assessee’s hands, resulting in impermissible double taxation. Relying on the decision of ITAT Mumbai in Dinesh Kiran Aggarwal vs. DCIT & the Supreme Court ruling in Laxmipat Singhania vs. CIT (72 ITR 291), Tribunal held that same income cannot be taxed twice in the hands of both husband & wife. It was further observed by Tribunal that the flat had been purchased in October 2007 & sold in July 2019, hence the gain was clearly long-term capital gain. After considering indexed cost of acquisition, the transaction even resulted in a capital loss, making the AO’s treatment as short-term capital gain bad in law. Tribunal directed the AO to delete the addition of ₹27,00,000/- made in assessee’s hands, holding that the entire gain already stood taxed in husband’s return & could not be brought to tax again.
