Parent Can’t Be Taxed on Minor’s Capital Gains Blocked Under Court Supervision, Holds ITAT
Pradeep Jeyavelu v. ITO, ITA No.1626/Chny/2025
Facts of the Case
1. Property was in the name of assessee’s deceased wife. After her death, legal heirs were:
Assessee (husband) – 50% share
Minor daughter – 50% share
2. By order dated 27.03.2015, City Civil Court, Chennai permitted the assessee to sell the property, subject to depositing the minor daughter’s 50% share in a nationalized bank in the name of Registrar, City Civil Court, u/s 8(2) of Hindu Minority and Guardianship Act, 1956.
3. The assessee declared his own 50% share as capital gain and claimed deduction u/s 54 based on investment/valuation report.
4. He did not include the minor daughter’s 50% share in his return since it was deposited in the bank as per Court order.
5. The AO clubbed the minor daughter’s 50% share with the assessee’s income, holding that transfer had taken place and LTCG must be computed on full sale consideration. Allowed deduction u/s 54 only on assessee’s 50% share.
ITAT Chennai held as below:
1. 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 assessee’s hand.
2. Since it was legally restrained, it was impossible to club minor daughter’s share in assessee’s hands.
3. We therefore hold 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.
The copy of the order is as under:
