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2015 (8) TMI 1021 - AT - Income TaxRelinquishment of the share of assessee in the property comprising of land in favour of sisters who is co-owner - whether was a transfer within the meaning of section 2(47) and capital gain accruing on such transfer was exigible to capital gains tax u/s. 45 ? - Held that - The assessee transferred her share of right title and interest over the property in favour of other co-owners of the property. This was clearly a transfer. If the assessee had sold her share of property to third party, it would have certainly been exigible to capital gains tax. The fact that the transferee is another co-sharer of the property will not make any difference. We are therefore of the view that in the facts and circumstances of the present case, there was a transfer of capital asset and therefore capital gain on such transfer was rightly brought to tax by the revenue authorities. We do not find any grounds to interfere with the order of CIT(Appeals). - Decided against assessee.
Issues: Whether the relinquishment of the share of the assessee in a property constitutes a transfer within the meaning of section 2(47) of the Act and whether capital gain accruing on such transfer is exigible to capital gains tax u/s. 45 of the Act.
Analysis: Issue 1: Relinquishment of Share and Capital Gains Tax Liability The appeal concerned the relinquishment of the assessee's share in a property to her sisters and the subsequent tax implications. The property in question was owned by C.S. Venkatesan, with the assessee and her sisters entitled to shares. The assessee relinquished her 1/4th share for a sum of Rs. 25 lakhs. The Assessing Officer (AO) held that this relinquishment gave rise to long-term capital gains, which the assessee did not declare in her income tax return for A.Y. 2009-10. Issue 2: Interpretation of Family Settlement and Transfer The assessee argued that the relinquishment was part of a family settlement and should not be considered a transfer for tax purposes under section 47(1) of the Act. The CIT(A) disagreed, emphasizing that the case did not involve a family settlement but a direct relinquishment of rights by co-sharers. The CIT(A) cited precedents to support the view that such transactions constitute transfers within the meaning of the Act, leading to capital gains tax liability. Issue 3: Tribunal's Decision and Legal Interpretation The Tribunal analyzed a similar case where a sum received by an assessee was deemed a realization of rights as a legal heir, not a transfer attracting capital gains tax. However, in the present case, the Tribunal concluded that the assessee's transfer of her share to other co-owners constituted a transfer under the Act, making the capital gain taxable. The Tribunal upheld the decision of the revenue authorities, emphasizing that the nature of the transferee did not alter the tax liability. Conclusion The Tribunal dismissed the assessee's appeal, affirming the tax liability on the capital gain arising from the relinquishment of her share in the property. The decision highlighted the distinction between family settlements and direct transfers, emphasizing the tax implications of such transactions under the relevant provisions of the Income Tax Act. The judgment underscored the importance of legal interpretation in determining the tax consequences of property transfers and upheld the revenue authorities' position on the matter.
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