2015 (10) TMI 2720 - HC - Income Tax

Long term capital gains - selection of year for assessment - year of transfer of asset - Held that - From a perusal of the order of the first appellate authority as well as of the Tribunal, we find that the registered sale agreement was executed on 27th January, 2005 and the sale consideration was paid on 10th January, 2005 and 31st March, 2005. Possession was also handed over to the buyer. In view of the aforesaid, the transfer was complete as per the provision of Section 2(47)(6) of the Act. Explanation 2, which was added by Finance Act, 2012 with retrospective effect from 1st April, 1962 is clearly applicable in the instant case. The long term capital gains could only be computed in the year when the property was transferred, namely, in the financial year 2004-05 that is (3) assessment year 2005-06.

Summary

Issues:
1. Application of Section 50C of the Income Tax Act for stamp duty valuation.
2. Computation of long term capital gains for the assessment year 2008-09.
3. Interpretation of the term "transfer" under Section 2(47)(6) of the Act.
4. Applicability of Explanation 2 added by Finance Act, 2012 with retrospective effect.
5. Determination of the assessment year for computing long term capital gains.

Analysis:
1. The case involved a dispute regarding the valuation of a property for stamp duty purposes under Section 50C of the Income Tax Act. The Sub-Registrar valued the property at a significantly higher amount than the sale consideration, leading to a show cause notice from the income tax department.

2. The assessment year in question was 2008-09, but the property was actually transferred in the financial year 2004-05. The Commissioner of Income Tax (Appeals) held that no long term capital gains could be computed in 2008-09 since the property transfer occurred earlier.

3. The court analyzed the term "transfer" under Section 2(47)(6) of the Act and referred to Explanation 2 added by the Finance Act, 2012 with retrospective effect. The explanation clarified that "transfer" includes disposing of an asset in any manner, directly or indirectly, and deemed to have always included such actions.

4. Considering the facts that the registered sale agreement was executed in 2005 and possession was handed over to the buyer, the court concluded that the transfer was complete in the financial year 2004-05. Therefore, the computation of long term capital gains should be for the assessment year 2005-06.

5. Ultimately, the court found no substantial question of law arising from the case and dismissed the appeal summarily, upholding the decision of the lower authorities regarding the computation of long term capital gains for the appropriate assessment year based on the transfer date of the property.