2017 (1) TMI 1849 - AT - Income Tax

Capital gain computation - Section 50C applicability - property transferred through oral family settlement - whether sec 50C would not apply in the case of the assessee because no Sale Deed is registered and that Section 50C of the Act was amended w.e.f. 01.10.2009 adding the word assessable ? - Held that - No sale deed has been registered and the property was taken by the nephews of the assessee through verbal family settlement in the month of January, 2008 which was confirmed by the judgement of the Civil Court dated 07.03.2009. Therefore in the case of the assessee no consideration has been assessed by the Stamp Valuation Authority. Since no sale deed or agreement have been registered in the case of the assessee therefore provisions of Section 50C would not apply in the case of the assessee. The word assessable has been inserted in Section 50C Act w.e.f. 01.10.2009 therefore the amended provisions would not apply to assessment year under appeal i.e. 2009-10. Merely the assessee has shown capital loss in the return of income would be of no consequence when Section 50C of the Act is not applicable in the case of the assessee. In this view of the matter it is clear that provisions of Section 50C of the Act would not apply in the case of the assessee therefore no long term capital gain could be computed as is done by the authorities below in the case of the assessee. The authorities below have failed to take note of the fact that the plaintiffs Vinay Verma etc. have mentioned in the plaint that the family settlement take place between the parties i.e. the nephews of the assessee and the assessee in the month of January, 2008 and since then the plaintiffs are in ownership and in possession of the property. The claim of the plaintiffs have been admitted by the assessee as defendant in that suit by admitting the claim of the plaintiffs and prayed that decree may be passed accordingly. The Civil Court on the basis of these facts admitted the claims of the plaintiffs and decreed the suit for declaration vide judgement dated 07.03.2009 therefore it is clear that the property was transferred in the month of January, 2008 through oral family settlement therefore assessee rightly contended that no long term capital gain arise in assessment year 2009-10 because this may pertain to preceding assessment year 2008-09. Therefore on this point also the addition against the assessee is wholly unjustified. Thus we are of the view no capital gain arise in the case of the assessee in assessment year under appeal. - Decided in favour of assessee

Summary

Issues Involved:
1. Applicability of Section 50C of the Income Tax Act.
2. Determination of the assessment year for capital gains.
3. Validity of the addition of ?55,03,319/- as income from capital gain.

Issue-wise Detailed Analysis:

1. Applicability of Section 50C of the Income Tax Act:
The primary issue in this case was whether the provisions of Section 50C of the Income Tax Act were applicable. The assessee argued that Section 50C did not apply since no Sale Deed was registered for the property in question. The property was transferred through an oral family settlement confirmed by a Civil Court, and no consideration was assessed by the Stamp Valuation Authority. The Tribunal referred to the amendment in Section 50C, which added the word 'assessable' effective from 01.10.2009, and concluded that since the amendment was not applicable to the assessment year 2009-10, Section 50C could not be invoked. The Tribunal cited the case of CIT V R.Sugantha Ravindran by the Hon'ble Madras High Court and the ITAT Jodhpur in Navneet Kumar Thakkar Vs ITO, which supported the view that Section 50C does not apply to unregistered agreements or oral settlements.

2. Determination of the Assessment Year for Capital Gains:
The assessee contended that the transfer of property occurred in January 2008, relevant to the assessment year 2008-09, not 2009-10. The Tribunal noted that the plaintiffs in the Civil Court suit had claimed possession and ownership since January 2008, which the assessee admitted. The Civil Court's decree dated 07.03.2009 merely confirmed this prior settlement. Thus, the Tribunal concluded that the transfer occurred in January 2008, and any capital gain would pertain to the assessment year 2008-09, not 2009-10.

3. Validity of the Addition of ?55,03,319/- as Income from Capital Gain:
The Assessing Officer had computed the long-term capital gain by applying the rate of ?8,000 per sq.yd. based on the Sub Registrar's report and added ?55,03,319/- as income from capital gain. The assessee argued that the property was transferred through a mutual family settlement and not a sale, and hence, no capital gain arose. The Tribunal found that since the property transfer was based on an oral family settlement and no Sale Deed was registered, Section 50C was not applicable. Consequently, the addition of ?55,03,319/- was deemed invalid. The Tribunal referenced the Supreme Court's decision in CIT Vs Mahalakshmi Mills, emphasizing the duty of the Assessing Officer to apply the correct legal provisions.

Conclusion:
The Tribunal concluded that no capital gain arose in the assessment year 2009-10 as the provisions of Section 50C were not applicable due to the lack of a registered Sale Deed. Additionally, the property transfer through an oral family settlement pertained to the assessment year 2008-09. Therefore, the Tribunal set aside the orders of the authorities below and deleted the entire addition of ?55,03,319/-. The appeal of the assessee was allowed.