Sale Proceeds Of Minor's Property Share Deposited Under Court Order Excluded From Father's Taxable Income: ITAT

S.S. Viswanethra Ravi (Judicial Member) held that the assessee cannot decide the utilization of his minor daughter's share as it is deposited as per Court's order and it is impossible to club the same in the assessee's (father) hand.

In this case, the assessee filed return of income in response to the notice under section 148 of the Income Tax Act, 1961. The case of the Assessing Officer is that the assessee has not declared income of assessee's minor daughter on sale consideration received.

The assessee explained that he himself and his daughter are the legal heirs of the property inherited through his spouse after her death. He accounted his share of 50% and claimed deduction under section 54 of the Act by filing valuation report given by the Chartered Engineer and registered valuer.

Regarding the share of assessee's minor daughter, it was explained that in pursuance of court order deposited her share in nationalized bank.

The Assessing Officer was of the opinion that the assessee's minor daughter's share should be accounted in the hands of the assessee since transfer has taken place in terms of the provisions under Income Tax Act.

Accordingly, the Assessing Officer determined capital gains with reference to assessee's minor daughter's share at 50% by giving benefit under section 54 of the Act only with reference to assessee's share. The CIT(A) confirmed the view of the Assessing Officer.

The assessee submitted that the minor daughter's share cannot be treated as income until such sale consideration is free of constraints either in the hands of the assessee or in the hands of his minor daughter.

It was argued that 50% share of assessee's minor daughter cannot be utilized for determination of capital gain nor investing in any assets to claim deduction from capital gain as it is deposited in a nationalized bank as per Court's order.

The department argued that the income of the minor i.e. 50% of share has to be clubbed with the income of the assessee in the year under consideration as the transfer was affected in terms of the provisions of the Income Tax Act for determining the long-term capital gain.

The Tribunal noted that the assessee filed a petition seeking permission of the Court to alienate property standing in the name of his deceased wife stating to facilitate better education and welfare of their minor daughter. Considering the same, the City Civil Court, Chennai permitted the assessee to sell his minor daughter's interest in the property and deposit her share in any of the nationalized bank in the name of Registrar, City Civil Court, Chennai.

The bench held that the addition made in the hands of the assessee with reference to assessee's minor daughter's share is not justified and it is deleted.

In view of the above, the Tribunal allowed the appeal.

Case Title: Pradeep Jeyavelu v. The Income Tax Officer

Case Number: I.T.A. No.1626/Chny/2025

Counsel for Appellant/ Assessee: R.S. Hithesh

Counsel for Respondent/ Department: V. Aswathy

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