LEGAL OWNERSHIP ALONE DOES NOT DETERMINE TAXABILITY ON CAPITAL GAINS IF THE ASSESSEE LACKS BENEFICIAL OWNERSHIP.
Income Tax Appellate Tribunal (ITAT), Mumbai recently has again reaffirmed a crucial principle:
LEGAL OWNERSHIP ALONE DOES NOT DETERMINE TAXABILITY ON CAPITAL GAINS IF THE ASSESSEE LACKS BENEFICIAL OWNERSHIP.
The case of Vinod Nihalchand Jain vs. ITO [ITA No. 6156/MUM/2024] highlights the key distinction between legal and beneficial ownership, offering important clarity on taxation matters
As per the appellant (Vinod Jain), his brother had acquired that property and his name was added due to their family tradition and for security purposes. The AO rejected the appellants claim that the brother owned 100% beneficial interest in the property. Learned CIT(A) upheld the stand of the AO
However, the Hon. ITAT, Mumbai opined that there was no basis for adding income in the hands of the appellant because, inter alia, the brother:
i. had paid the entire purchase consideration;
ii. possessed the property; and
iii. had declared the entire amount of the sale consideration in his tax return.
Hon. ITAT further held that for the tax purpose, the ownership is determined by the beneficial interest and not by just the legal title.
This ruling serves as a significant precedent in reaffirming the principle that taxation on capital gains should be based on beneficial ownership rather than mere legal title.
The Copy Of the order is as under:
