Through a family partition on 26th May 1995, husband received ancestral agricultural land located in North Bengaluru which was later converted to non-agricultural land.
The husband gifted this land to his wife via a proper gift deed.
Wife sold the land later amounting Rs.17.26 crore approximately.
Her share of sale consideration was 48.43% resulting in a capital gain of about 8.36 crore.
Assessment and Dispute
The wife filed her Income Tax Return, showing a total income of approx. 40 lakh and declaring NIL capital gain on the land sale.
She argued that the land was a gift from her husband, and therefore, clubbing provisions of the Income Tax Act should apply.
The Assessing Officer (AO) issued a notice under section 143(3), added the entire 8.83 crore capital gain to the wife's income.
ITAT Bangalore Judgment
On 18th August 2025, the Income Tax Appellate Tribunal (ITAT) Bangalore ruled in favor of the wife, disallowing the AO's addition to her income.
The ITAT's final judgment confirmed that the capital gain of 8.36 crore was entirely excused for the wife, meaning she did not have to pay any income tax on it.
The Tribunal stated that since the property was gifted by the husband to the wife without any consideration, the clubbing provisions are attracted.
Under these provisions, the capital gain from the sale of such gifted property becomes taxable in the hands of the husband, not the wife.
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