2016 (5) TMI 424 - AT - Income Tax

Chargeability of capital gain on sale of property through unregistered documents - Held that - According to the provisions of section 2(47) (v) of the act transfer includes any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882.Therefore, in the transaction entered into by the assessee. All the ingredients of transfer are satisfied, and therefore we are of the view that though assessee might not have received the full consideration but transfer of property has occurred in view of handing over the possession of the property to the buyer. For repossession of property assessee produced a an undated notarised understanding on stamp paper of ₹ 10/-.Merely because the possession of the property has been taken back by the seller on account of non payment of part of the consideration cannot save capital gain in the hands of the assessee when subsequently the same agreement was honoured. Furthermore for taking back the possession of the property assessee produced an undated notarised understanding on stamp paper of ₹ 10/-. For repossession of the property assessee produced an undated notarised understanding on stamp paper of ₹ 10/- between the buyer and seller However subsequently the transaction of sale has happened at the agreed price between the parties. Further it is difficult to appreciate that when assessee has received substantial consideration and only meagre consideration is outstanding how assessee has taken possession of the property back from the buyer without returning any payment to the buyer.- Decided against assessee Denial of deduction under section 54B - denial of claim as assessee is not an individual, but an HUF - Held that - The impugned assessement year is AY 2012-13 and assessee is HUF which is not entitled to deduction u/s 54 B of the act. - Decided against assessee

Summary

Issues Involved:
1. Denial of deduction under section 54B of the Income Tax Act.
2. Chargeability of capital gain on the sale of property through unregistered documents.
3. Initiation of penalty proceedings.
4. Interest charged under sections 234A, 234B, and 234C of the Income Tax Act.

Detailed Analysis:

1. Denial of Deduction under Section 54B of the Income Tax Act:
The assessee, a Hindu Undivided Family (HUF), claimed a deduction under section 54B of the Income Tax Act for the Assessment Year 2012-13. The Assessing Officer (A.O.) and the Commissioner of Income Tax (Appeals) [CIT(A)] denied this deduction, stating that section 54B applies only to individual assessees and not to HUFs. The Tribunal confirmed this view, noting that the law, as it stood at the relevant time, did not extend the benefits of section 54B to HUFs. The amendment extending this benefit to HUFs came into effect from April 1, 2013, applicable for the Assessment Year 2013-14 and subsequent years. The Tribunal also reviewed a previous decision (K S Jain & Sons HUF v. ITO) cited by the assessee but found it to be based on incorrect facts and thus not applicable. Consequently, the denial of the deduction under section 54B was upheld.

2. Chargeability of Capital Gain on Sale of Property through Unregistered Documents:
The assessee sold agricultural land through unregistered agreements and received substantial consideration while handing over possession of the property to the buyer. The A.O. assessed capital gains on this transaction, which the assessee contested, arguing that the transaction did not constitute a valid transfer under section 53A of the Transfer of Property Act due to the unregistered nature of the documents and the subsequent repossession of the property. The Tribunal, however, found that the essential elements of a transfer under section 2(47)(v) of the Income Tax Act were satisfied, as the assessee had received substantial consideration and handed over possession. The temporary repossession of the property by the assessee, unsupported by credible evidence, did not negate the transfer. Therefore, the chargeability of capital gains was upheld.

3. Initiation of Penalty Proceedings:
The assessee argued that the initiation of penalty proceedings was unjustified as there was no concealment of income. However, no specific arguments were advanced by the parties on this ground during the hearing. Consequently, the Tribunal dismissed this ground of appeal.

4. Interest Charged under Sections 234A, 234B, and 234C:
The assessee contended that the interest charged under sections 234A, 234B, and 234C was not in accordance with the law, as the income in question related to capital gains. Similar to the penalty proceedings, no specific arguments were presented on this issue. The Tribunal, therefore, dismissed this ground as well.

Conclusion:
The appeal by the assessee was dismissed in its entirety. The Tribunal upheld the denial of deduction under section 54B, confirmed the chargeability of capital gains on the sale of property through unregistered documents, and dismissed the grounds related to the initiation of penalty proceedings and the interest charged under sections 234A, 234B, and 234C. The decision was pronounced in the open court on March 15, 2016.