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• The Income Tax Appellate Tribunal (ITAT) has upheld a family settlement involving transfer of a Delhi property to a daughter-in-law, rejecting the Revenue Department’s tax claim.
• The Tribunal held that the registered gift deed merely formalised an existing family settlement and did not constitute a taxable transfer under the Income Tax Act.
• ITAT also ruled that provisions relating to taxation of certain gifts and property transfers were not applicable, dismissing the Revenue’s appeal against the taxpayer.
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has upheld a family settlement involving the transfer of a residential property to a daughter-in-law and ruled that the transaction could not be taxed under provisions governing certain gifts and property transfers. The order was pronounced on 4 February 2026 while dismissing an appeal filed by the Income Tax Department against an earlier ruling in favour of the taxpayer.
The case related to Ratna Aggarwal for Assessment Year 2018–19. According to the tribunal order, reassessment proceedings were initiated after the tax department alleged that the assessee had received an immovable property valued at approximately INR 3.03 crore through a gift transaction that did not fall within the definition of specified relatives under the Income Tax Act. The department subsequently sought to tax the value of the property as income.
During the proceedings, the assessee contended that the property transfer was not an independent gift but formed part of a family settlement involving members of an extended family. The property had been transferred through a registered gift deed by Ravi Agarwal, son of late A.D. Agarwal, who had reportedly acted in accordance with his father’s wishes to allocate a share of family property to the family of his late brother. The assessee argued that the transaction arose from a bona fide family arrangement rather than a taxable gift.
The tribunal observed that the Assessing Officer had been informed during reassessment proceedings that the transfer stemmed from a family settlement. However, the officer did not examine or dispute the merits of that claim and instead proceeded on the basis of the income originally disclosed during reassessment.
The ITAT noted that the Commissioner of Income Tax (Appeals) had accepted the family settlement as a genuine transaction and found no adverse findings against it. The appellate authority had concluded that the registered gift deed merely facilitated implementation of the settlement and therefore did not amount to a transfer as contemplated under the relevant provisions of the Income Tax Act.
Agreeing with this view, the tribunal held that the gift deed was only a formal instrument executed to confer legal title following the family settlement. It further observed that the transaction involved family members constituting a Hindu Undivided Family (HUF), making the provisions of Section 56(2) inapplicable in the circumstances of the case.
Consequently, the tribunal dismissed the Revenue Department’s appeal and upheld the relief granted to the assessee, bringing the dispute to a close.
Source- ITAT Govt
5th Jun, 2025
25th May, 2023
11th May, 2023
27th Apr, 2023
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