Parvatiben Gohil Vs ITO (ITAT Ahmedabad)
Assessee, was one of the 20 co-owners of a property situated in a rural area. The property was sold, & the total consideration for the entire land was ₹38,25,000/-. AO, however, treated the entire amount as short-term capital gain in Assessee’s hands, ignoring that she was only a fractional co-owner.
Assessee contended that her actual share was only ₹1,77,000/-, being 1/20th of the sale value, & the land in question was rural agricultural land, which is not a “capital asset” u/s 2(14)(iii) .
Assessee’s Argument
- The land sold was rural agricultural land, & thus, outside the ambit of capital gains tax.
- Her share of ₹1.77 lakh was below the basic exemption limit.
- There was no other source of income during the year.
Tribunal’s Findings
- Tribunal noted that AO erred in taxing the entire sale consideration of ₹38.25 lakh in Assessee’s hands.
- The order ignored the co-ownership structure & the fact that Assessee’s individual receipt was minimal.
- Bench also took into account that rural agricultural land is not a capital asset under the Income-tax Act, & therefore, no capital gain arises on its transfer.
- Since Assessee’s income was below taxable threshold, no addition could be sustained.
- ITAT allowed the appeal, directing deletion of the entire addition.
- It observed that AO’s approach was factually incorrect & contrary to law, as Assessee’s limited ownership & nature of land were disregarded.
Key Takeaway
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