2008 (3) TMI 10 - HC - Income Tax

Long Term Capital Gain u/s 45(1) - it is immaterial - whether the agreement has been completed or not or possession has been given or not. What is relevant in the case of the Assessee is that he has relinquished his rights in the said property for a consideration and this transfer has taken place

Summary

Issues:
Challenge to impugned order of Tribunal regarding liability to pay capital gain tax under Income Tax Act, 1961.

Analysis:
1. Background: The case involved an appeal under Section 260-A of the Income Tax Act, 1961 challenging the order of the Income Tax Appellate Tribunal (Tribunal) regarding capital gain tax liability for the Assessment Year 1996-1997.

2. Factual Scenario: The Assessee, engaged in real estate business, received a substantial sum in pursuance of an agreement for relinquishing rights in a property at Golf Links, New Delhi, leading to the dispute.

3. Assessing Officer's Decision: The Assessing Officer held the Assessee liable for capital gain tax under Section 45 of the Act, emphasizing the relinquishment of rights for consideration, irrespective of property possession or completion of the agreement.

4. CIT(A) Decision: The Commissioner of Income Tax (Appeal) ruled in favor of the Assessee, stating that as possession was not transferred, no liability for capital gains arose.

5. Tribunal's Decision: The Tribunal overturned the CIT(A)'s decision, holding the Assessee liable for capital gains tax, leading to the appeal before the High Court.

6. Legal Analysis: The High Court analyzed Sections 2(47) and 45 of the Act, defining transfer and capital gains, respectively, emphasizing the wide scope of transfer and liability even without property transfer.

7. Court's Finding: The Court concluded that the Assessee, by relinquishing rights in the property for consideration, attracted capital gains tax liability, citing agreements and statements as evidence of property interest and transfer.

8. Final Judgment: Dismissing the appeal, the Court upheld the Tribunal's decision, stating no substantial question of law arose, as the Assessee acquired and relinquished property rights, making him liable for long-term capital gains tax.

9. Conclusion: The judgment clarifies the broad interpretation of transfer under the Act, emphasizing the tax liability based on property interest and relinquishment, affirming the Tribunal's decision regarding capital gains tax liability for the Assessee.