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Facts
The appellant, who jointly owned a commercial building, transferred three portions to his sons and daughter-in-law via settlement deeds. They subsequently granted a Power of Attorney to the appellant for property management. The Assessing Officer added Rs. 2,39,502/- to the appellant's income from house property, assessing 50% of the rental income, which the appellant disputed as double addition since the income was already declared by the beneficiaries.
Held
The Tribunal found that the property was legally settled in favor of the sons and daughter-in-law, and the Power of Attorney was solely for management purposes, not for re-transferring title to the appellant. Therefore, the Assessing Officer's addition under 'income from house property' was deemed unjustified. The Tribunal directed the Assessing Officer to delete the addition of Rs. 2,40,000/-.
Key Issues
Whether the income from a property settled in favor of sons and daughter-in-law, where a power of attorney for management is given to the original owner, can be taxed in the hands of the original owner, particularly concerning the applicability of Section 64 of the Income Tax Act.
Sections Cited
143(3), 64
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM
O R D E R This appeal filed by the assessee is directed against the order of the Addl/Jt. Commissioner of Income Tax (Appeals)-4, Kolkatta [CIT(A)] dated 29.01.2024 for Assessment Year (AY) 2010-11.
Brief facts of the case are that the appellant is an individual deriving income from house property. The return of income for AY 2010-11 was filed on 30.07.2010 disclosing income at Rs. 3,07,480/-. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-2, Thodupuzha (hereinafter called "the AO") vide order dated 25.03.2013 passed u/s. 143(3) of the Income Tax Act, 1961 (the Act) at a total income of Rs. 5,46,982/-. While doing so, the
The factual background leading to the above addition is that the appellant jointly owned a commercial building along with his wife and the same was apportioned to four portions out of which three portions were transferred to his two sons by executing settlement deeds. However, subsequently by power of attorney the two sons and daughter-in-law have given all the rights and liabilities in the share of the building to the assessee. However, in the return of income the income attributable to his share in the undivided portion of the building only has been shown. The AO, while computing the income under the head ‘income from house property’ assessed 50% of income from property. Thus he made addition of Rs. 2,40,000/-.
Being aggrieved, an appeal was filed before the CIT(A) contending that the entire property was settled to two sons and daughter- in-law. The share of income derived from this was offered to tax in the hands of the two sons and daughter-in-law. The power of attorney was executed only for the purpose of managing the property. Therefore, assessing 50% of the rental from the property in the hands of the appellant amounts to double addition. However, the CIT(A) dismissed the appeal.
Being aggrieved, the appellant is in appeal before the Tribunal in the present appeal.
Puthiri Vincent Thomas 6. I heard the rival contentions of both the parties and perused the material available on record. From the material on record it is clear that the property was settled in favour of two sons and daughter-in-law. It is not the case of the AO that provisions of section 64 have application to the facts of the present case. There is no material on record to indicate that the power of attorney was executed transferring back the title in the property in favour of the appellant. In the circumstances, it cannot be disputed that the power of attorney was executed only for the purpose of managing the property and, therefore, the AO was not justified in making the addition under the head ‘income from house property’. Accordingly I direct the AO to delete the addition of Rs. 2,40,000/-.
In the result, the appeal filed by the assessee is dismissed.
Order pronounced in the open court on 27th March, 2025.