Pradeep Jeyavelu Vs ITO (ITAT Chennai)
In a significant ruling, the Income Tax Appellate Tribunal (ITAT), Chennai Bench, has held that capital gains tax cannot be levied on a minor’s share of property sale proceeds if the funds are deposited in a nationalized bank under the directive of a court order. The tribunal’s decision, in the case of Pradeep Jeyavelu vs. Income Tax Officer (ITO), deleted an addition made by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The appeal, for the assessment year 2016-17, centered on whether the sale proceeds belonging to the assessee’s minor daughter could be clubbed with his income for capital gains purposes.
The case originated from the sale of a property inherited by Pradeep Jeyavelu and his minor daughter after the death of his spouse. The assessee accounted for his 50% share, claimed a deduction under Section 54 of the Income Tax Act, and offered the remaining capital gain for tax. However, the AO was of the opinion that the minor’s 50% share of the sale consideration should also be clubbed with the assessee’s income, as a “transfer” of the asset had occurred under the provisions of the Income Tax Act. This view was upheld by the CIT(A), leading to the assessee’s appeal to the ITAT.
