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2011 (4) TMI 682 - AT - Income TaxLTCG or STCG - cost of land to the previous owner - Benefit of indexation - It is thus the date of acquisition of absolute ownership and title and the date of transfer of absolute ownership and title giving rise to gain or profit which is relevant for determining the issue as to whether the assessee has held the property i.e. absolute ownership and title over the property for not more than thirty-six months - It is abundantly clear from the aforesaid recital in the deed of conveyance that absolute ownership inclusive of legal title and possession of the property transferred by the assessee-company to the purchaser was acquired by it on 2-11-2004 from the Government of Punjab - It was also urged by the ld. authorsied representative for the assessee that the assessee was already in possession of the property on the appointed date fixed for de-merger by the Ministry of Corporate Affairs and therefore it was the owner of the property on 1-4-2003 being the appointed date - Held that Assessing Officer has rightly taken 2-11-2004 as the date of acquisition of absolute ownership of the property as it is this absolute ownership of the property which was acquired by the assessee on 2-11-2004 from the Government of Punjab and subsequently sold/transferred by the assessee to M/s. Sanger Finlease Pvt. Ltd. vide agreement dated 27-9-2006 - Appeal is dismissed
Issues Involved:
1. Treatment of capital gain on sale of land as short-term or long-term. 2. Consideration of the cost of land to the previous owner (PTDC) in the hands of the appellant. 3. Determination of the date of acquisition of ownership of the assets. 4. Application of the market value of land as on 1-4-1981 for computing capital gain. 5. Denial of the benefit of indexation. Detailed Analysis: 1. Treatment of Capital Gain on Sale of Land: The primary issue was whether the capital gain from the sale of property should be treated as long-term or short-term. The property was transferred by the assessee on 27-9-2006, with the conveyance deed executed on 4-1-2007. According to Section 2(42A) of the Income-tax Act, a short-term capital asset is one held for not more than 36 months preceding the date of its transfer. The assessee argued that the property should be considered long-term, as it was acquired through a demerger scheme effective from 1-4-2003. However, the Assessing Officer and CIT(A) determined that the property was acquired on 2-11-2004, the date the Government of Punjab transferred absolute ownership. Thus, the property was held for less than 36 months, making the gain short-term. 2. Consideration of Cost of Land to Previous Owner (PTDC): The assessee contended that the cost of the land to PTDC should be considered for computing capital gain. However, the Assessing Officer did not accept this, as there was no evidence of the absolute ownership being transferred to the assessee before 2-11-2004. The Tribunal upheld this view, noting that Section 49, which deals with the determination of cost with reference to certain modes of acquisition, was not applicable in this case. 3. Determination of Date of Acquisition of Ownership: The assessee claimed ownership from 1-4-2003, the appointed date of the demerger scheme. However, the Tribunal noted that the assessee company was incorporated on 9-7-2003 and could not have owned the property before its existence. The absolute ownership was legally transferred on 2-11-2004, as per the Government of Punjab's notification. Thus, the period of holding was calculated from this date, confirming the short-term nature of the capital gain. 4. Application of Market Value of Land as on 1-4-1981: The assessee argued for using the market value of the land as on 1-4-1981 for computing capital gain. The Tribunal rejected this, as the property was acquired on 2-11-2004, and the fair market value as on 1-4-1981 was not relevant for this computation. 5. Denial of Benefit of Indexation: The benefit of indexation under Section 48 is available only for long-term capital assets. Since the capital gain was determined to be short-term, the assessee was not entitled to indexation benefits. Conclusion: The appeal filed by the assessee was dismissed. The Tribunal upheld the decision of the Assessing Officer and CIT(A) that the capital gain from the sale of the property was short-term, the cost of the land to PTDC was not applicable, the date of acquisition was 2-11-2004, the market value as on 1-4-1981 was irrelevant, and the benefit of indexation was not available.
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