2017 (12) TMI 1880 - AT - Income Tax

Capital Gains - year of transfer of asset - Transfer of Property Act by irrevocable Power of Attorney - transfer of the 14,307 sq.ft. of the land by applying the provisions of Sec. 50C for the AY 2010-11 - assessee had not been able to produce any documentary evidence, any proof of the transaction claimed, to have taken place during the year 2002 - as submitted that the property having already been transferred by a registered Power of Attorney and possession in respect of the said land having been handed over through the registered irrevocable Power of Attorney, the Capital Gains was not liable to be assessed for the AY 2010-11 - as argued same transaction could not be taxed again in the AY 2010-11, just because, the Sale Deed was registered only during the said assessment year HELD THAT - As in view of the principles laid down by the Hon ble Supreme Court in the case of Shri Balbir Singh Maini 2017 (10) TMI 323 - SUPREME COURT it is held that the Capital Gains, if any, in respect of the transfer of the 14,307 sq.ft. of the land is assessable only during the year 2002 as has been rightly disclosed by the assessee in their returns for the AY 2002-03. Even otherwise, a perusal of the proviso to Sec. 50C(1) inserted by Finance Act 2016 w.e.f. 01.04.2017 clearly admits that the provisions of Sec. 50C are not to apply in the event that the date of agreement fixing the amount of consideration and the date of registration for transfer of the capital asset are not the same, then the value adopted or assessed or assessable by Stamp Valuation Authority on the date of agreement, may be taken for the purpose of computing the full value of the consideration of such transfer subject to conditions. In the present case, admittedly, the Power of Attorney is considered as the agreement and the Sale Deed executed are in two different assessment years and the consideration having already been received by the assessee on the execution of the irrevocable registered Power of Attorney and the same having been offered to tax during the AY 2002-03, the provisions of Sec. 50C itself cannot be brought to play in the case of the assessees. Assessee appeal allowed.

Summary

Issues:
1. Assessment of Capital Gains for the AY 2010-11 on the transfer of land by two interconnected assessees.
2. Application of Sec. 50C provisions by the AO for taxing Capital Gains.
3. Dispute regarding possession and rights over the land between the assessees and the buyer.
4. Interpretation of the principles laid down by the Hon’ble Supreme Court in a relevant case.
5. Consideration of the proviso to Sec. 50C(1) inserted by Finance Act 2016.

Issue 1: Assessment of Capital Gains for the AY 2010-11
The case involved two interconnected assessees who had purchased and later sold a portion of land, leading to the assessment of Capital Gains for the AY 2010-11. The assessees had disclosed the Capital Gains earlier for the AY 2002-03, which was accepted. The AO sought to tax the Capital Gains again in the AY 2010-11 due to the registration of the Sale Deed in 2009.

Issue 2: Application of Sec. 50C provisions
The AO applied Sec. 50C to tax the Capital Gains for the AY 2010-11, citing a lack of documentary evidence of the 2002 transaction. However, the assessees argued that the transfer was completed in 2002 through a registered Power of Attorney, possession handover, and consideration receipt, making it not liable for assessment in 2010-11.

Issue 3: Dispute over possession and rights
The dispute involved possession and rights over the land admeasuring 14,307 sq.ft., with the Ld. CIT(A) referring to a previous court decision granting separate possession to both assessees. However, the court noted the execution of a registered irrevocable Power of Attorney in favor of the buyer, indicating completion of the transfer in 2002.

Issue 4: Interpretation of Supreme Court principles
The assessees relied on a Supreme Court decision stating that once a registered irrevocable Power of Attorney is executed, possession is handed over, and consideration received, the transfer should be considered completed. This principle was crucial in determining the taxability of the Capital Gains for the relevant assessment year.

Issue 5: Proviso to Sec. 50C(1)
The court considered the proviso to Sec. 50C(1) inserted by the Finance Act 2016, which exempts the application of Sec. 50C if the agreement date and registration date are different. As the consideration was received in 2002 and offered for tax, the court concluded that Sec. 50C provisions could not be applied in the assessees' case.

In conclusion, the appeals filed by both assessees were allowed, emphasizing that the Capital Gains, if any, on the land transfer should be assessed only for the AY 2002-03, as disclosed and accepted earlier.