2011 (1) TMI 1416 - AT - Income Tax

sale of agriculture land - long-term or short term capital gain - the assessee/appellant is a Private Limited Company and derived income from rent, interest on bank deposit and income from Long Term Capital Gain (LTCG) which was shown as per the Profit and Loss Account filed along with the Return of Income (ROI) for this year. During the year the assessee company purchased a piece of agricultural land by means of registered power of attorney allegedly executed on 21-11-2002 in favour of Shri Mukesh Agarwal. According to the assessee this land in question was purchased on 20-11-1999 inclusive of registration fee, stamps and expenditure incurred on boundary wall and that the title deed was executed on 20-11-1999 in favour of the assessee. As per the assessee the land remained in its possession and ownership after it was purchased for more than three years so it would earn LTCG as per the calculation given with the return of income. HELD THAT - Thus, in my opinion, Whenever an immovable property is sold and the whole of the consideration is paid, generally all the three documents, i.e., agreement to sell, general power of attorney as well as possession letter, are executed. all these ingredients as are required to be complied with for the applicability of section 53A of the Transfer of Property Act were satisfied in this case on 5-9-2002 and accordingly I am of the opinion that the transfer of the land has duly taken place on 5-9-2002 itself. I, therefore, agree with the ld. A.M. that the transfer of the agricultural land in this case took place on 5-9-2002 attracting Short Term Capital Gain. Once the ground relating to the applicability of section 50C has not been pressed before the Tribunal, in my opinion, the ld. A.M. was correct in law in dismissing this ground as not pressed. Once the ground has not been pressed before the Bench, as a Third Member, in my opinion, I do not have any jurisdiction to adjudicate this issue on merit. I, accordingly, agree with the ld. A.M., dismissing the ground No. l as not pressed. Per P.K. Bansal, Accountant Member. - In this case the difference arose between the Members of the Division Bench hearing this appeal. Therefore, the matter was referred to the opinion of the ld. Third Member. The ld. Third Member has agreed with the view of the ld. Accountant Member in both the questions raised, by holding that the transfer of the agricultural land in this case took place on 5-9-2002 attracting Short Term Capital Gain and so far as the second question is concerned, it was held that the same is dismissed as not pressed. Therefore, in view of the majority decision, the assessee appeal is dismissed.

Summary

Issues Involved:

1. Whether the transfer of agricultural land in question took place on 5-9-2002 attracting short-term capital gain or on 21-11-2002 attracting long-term capital gain.
2. Whether the capital gain, whether short-term or long-term, is to be computed adopting the sale consideration as deemed under section 50C (at Rs. 23,25,000) or as returned by the assessee (at Rs. 20 lakhs).

Detailed Analysis:

Issue 1: Date of Transfer of Agricultural Land

The primary contention revolves around the date of transfer of agricultural land to determine whether the capital gain is short-term or long-term. The assessee claimed that the transfer occurred on 21-11-2002 when the power of attorney was registered, thus qualifying for long-term capital gain. The revenue, however, argued that the transfer occurred on 5-9-2002 when the power of attorney and agreement to sell were executed, resulting in short-term capital gain.

Arguments by the Assessee:
- The assessee asserted that the possession of the land was handed over on 21-11-2002, the date of registration of the power of attorney.
- The statements and affidavits from the parties involved corroborated that the possession was transferred on 21-11-2002.
- The power of attorney dated 5-9-2002 was only drafted and not executed on that date.

Arguments by the Revenue:
- The revenue contended that the transfer date was 5-9-2002, as the power of attorney and agreement to sell were executed on that date.
- The entire sale consideration was received by the assessee on 16-8-2002, and the agreement to sell explicitly mentioned the execution of the power of attorney on 5-9-2002.
- The power of attorney allowed the holder to cultivate the land and sell the produce, indicating possession was given on 5-9-2002.

Findings:
- The Tribunal examined the power of attorney and agreement to sell, which were executed on 5-9-2002.
- The document titled "Mukhtarnama Aam Khandniya" (General Power of Attorney) indicated that the possession of the land was handed over on 5-9-2002.
- The Tribunal noted that the registration of the document on 21-11-2002 would be effective from the date of execution, i.e., 5-9-2002.
- The Tribunal concluded that the transfer of the land took place on 5-9-2002, attracting short-term capital gain.

Issue 2: Computation of Capital Gain under Section 50C

The second issue pertains to whether the capital gain should be computed based on the sale consideration as deemed under section 50C (Rs. 23,25,000) or as returned by the assessee (Rs. 20 lakhs).

Arguments by the Assessee:
- The assessee did not press the ground challenging the application of section 50C during the hearing.

Findings:
- The Tribunal noted that the assessee did not press the ground relating to the applicability of section 50C.
- Consequently, the Tribunal dismissed the ground as not pressed and upheld the adoption of the sale consideration as deemed under section 50C.

Conclusion:

The Tribunal, by majority decision, concluded that the transfer of the agricultural land took place on 5-9-2002, resulting in short-term capital gain. The computation of capital gain was to be based on the sale consideration as deemed under section 50C (Rs. 23,25,000). The appeal of the assessee was dismissed accordingly.