Taxpublishers.in - Monday Corner Answer to the Quiz for the week (05 Feb 2024)

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Quiz for the week (05 Feb 2024): Deepa got separated from her husband on mutual consent basis. She was awarded a vacant land (acquired by her husband in March, 2021 for Rs.25 lakhs) and alimony of Rs.25,000 per month. The land was settled in her name on 3rd October, 2022 though the divorce was granted by court order in August,2022. Deepa sold the land for Rs.45 lakhs in January, 2024. Briefly discuss the taxation aspects of vacant land obtained as lumpsum consideration, sale of such land subsequently and alimony received by Deepa for the financial year 2023-24. Answer : Alimony is an extension of the husband’s obligation to maintain his wife. In the above case, Deepa was eligible for alimony of Rs.25,000 per month and she is eligible for a vacant land. The vacant land was given by her husband by way of settlement in October, 2022 even though the divorce was granted by the Court earlier in August, 2022. At the time of settlement, the relationship of husband and wife did not subsist. However, the settlement was part of the decree providing the divorce between the parties. The monthly payment of Rs.25,000 is taxable in the hands of wife as decided in Maheshwari Devi of Pratapgarh (Princess) v. CIT (1984) 147 ITR 258. As regards, the lump sum settlement of property, it is not chargeable to tax since it is settled as per court decree and there is consideration in getting the said land and hence section 56(2)(x) will not apply as held in Asstt. CIT v. Meenakshi Khanna (2013) 34 taxmann.com 297 (Del) (Trib). As regards the capital gain accruing in the hands of Deepa by way of sale of land obtained in settlement it was held that the amount realised was a capital receipt since the property was obtained as alimony from her husband. The rationale for such decision could be found in Shrimati Roma Sengupta v. CIT (2016) 68 taxmann.com 177 (Cal) / 139 DTR (Cal) 26. Therefore, only the monthly maintenance given by husband is a periodic receipt liable to income tax in the hands of Deepa. The land settled in her favour and subsequently sold by her will not be liable for income-tax.

Quiz for the week (05 Feb 2024):

Deepa got separated from her husband on mutual consent basis. She was awarded a vacant land (acquired by her husband in March, 2021 for Rs.25 lakhs) and alimony of Rs.25,000 per month. The land was settled in her name on 3rd October, 2022 though the divorce was granted by court order in August,2022. Deepa sold the land for Rs.45 lakhs in January, 2024. Briefly discuss the taxation aspects of vacant land obtained as lumpsum consideration, sale of such land subsequently and alimony received by Deepa for the financial year 2023-24.

Answer :

Alimony is an extension of the husband’s obligation to maintain his wife. In the above case, Deepa was eligible for alimony of Rs.25,000 per month and she is eligible for a vacant land. The vacant land was given by her husband by way of settlement in October, 2022 even though the divorce was granted by the Court earlier in August, 2022. At the time of settlement, the relationship of husband and wife did not subsist. However, the settlement was part of the decree providing the divorce between the parties.

The monthly payment of Rs.25,000 is taxable in the hands of wife as decided in Maheshwari Devi of Pratapgarh (Princess) v. CIT (1984) 147 ITR 258.

As regards, the lump sum settlement of property, it is not chargeable to tax since it is settled as per court decree and there is consideration in getting the said land and hence section 56(2)(x) will not apply as held in Asstt. CIT v. Meenakshi Khanna (2013) 34 taxmann.com 297 (Del) (Trib).

As regards the capital gain accruing in the hands of Deepa by way of sale of land obtained in settlement it was held that the amount realised was a capital receipt since the property was obtained as alimony from her husband. The rationale for such decision could be found in Shrimati Roma Sengupta v. CIT (2016) 68 taxmann.com 177 (Cal) / 139 DTR (Cal) 26.

Therefore, only the monthly maintenance given by husband is a periodic receipt liable to income tax in the hands of Deepa. The land settled in her favour and subsequently sold by her will not be liable for income-tax.