2017 (11) TMI 189 - AT - Income Tax

Capital gain computation - ownership on property sold - assessee has entered into sale-cum-GPA with Mr. Kistaiah and others and agreed for a consideration - Held that - The assessee has entered into sale-cum-GPA with Mr. Kistaiah and others and agreed for a consideration of ₹ 47 lakh and received 46 lakhs. With regard to balance of ₹ 1 lakh, there is no evidence of any receipt nor there is any sale deed to complete the transaction as per the above agreement. Since, the assessee has received major portion of sale consideration and as per the various clauses of the agreement, the GPA holders will govern the property and receive the rent. It shows that the administration of the property was already passed on to the GPA holders. Accordingly, the assessee has no control over the property. The vendors are Mr. Kistaiah and others by virtue of deed 1764 of 2007, dtd. 28/09/2007 and the deed is still alive, not revoked. It clearly indicates that the claimants are GPA holders and not the assessee nor they represented the assessee. What is relevant is the physical evidence available on record not the assumptions or presumptions of the AO. Further, the assessee s husband took loan from Repco Bank and the same was paid directly to the vendors account and whatever remaining balance was also settled to them. AO has not brought on record anything contrary that the assessee has indirectly benefitted in this transaction or the sale consideration was redirected to the assessee or husband of the assessee. Merely relying on the assumptions and just because the property was purchased by assessee s husband, it does not mean that there exists some kind of foul transaction and without bringing on record any cogent material to support the AO s contention, AO cannot presume facts. - Decided against revenue

Issues Involved:
1. Taxability of long-term capital gains in the hands of the assessee.
2. Declaration of rental income by the assessee.
3. Admission of additional grounds by the CIT(A).
4. Applicability of Section 2(47) of the Income-tax Act and Section 53A of the Transfer of Property Act.

Issue-wise Detailed Analysis:

1. Taxability of Long-Term Capital Gains:
The core issue revolves around whether the assessee is liable for tax on long-term capital gains arising from the sale of property. The Assessing Officer (AO) noted that the assessee sold property worth ?52,54,700 on 27/01/2010 but did not declare any capital gains in her return. The property was originally gifted to her by her husband in 1981. The AO observed that the property was transferred back to the assessee's husband via a sale deed dated 27/01/2010 to raise a bank loan, leading the AO to compute long-term capital gains of ?50,05,850 and add it to the assessee's income.

The CIT(A) found that the assessee had entered into a sale cum General Power of Attorney (GPA) with Veera Malla Kistaiah and others on 28/09/2007, effectively transferring ownership to them. The property was subsequently sold by these GPA holders to the assessee's husband on 25/01/2010. The CIT(A) observed that the assessee was not a party to the 2010 sale deed and thus concluded that she was not liable for capital gains tax on this transaction. This decision was based on the fact that the sale deed was executed by the GPA holders, and the assessee had lost her ownership rights in 2007.

2. Declaration of Rental Income:
The AO noticed discrepancies in the rental income declared by the assessee. While the assessee declared ?4,20,000 as rental income, the gross rent received was ?7,14,000. After allowing a standard deduction of 30% for repairs and maintenance, the AO added the balance amount of ?2,05,800 to the taxable income. The CIT(A) did not specifically address this issue in the judgment, focusing primarily on the capital gains matter.

3. Admission of Additional Grounds by the CIT(A):
The CIT(A) admitted additional grounds raised by the assessee, which were of a legal nature and went to the root of the issue. The CIT(A) referenced the Supreme Court decision in the case of National Thermal Power Corporation, which allows the Tribunal to consider questions of law arising in assessment proceedings even if not raised earlier. The CIT(A) found that the additional grounds were relevant for determining the correct tax liability of the assessee.

4. Applicability of Section 2(47) of the Income-tax Act and Section 53A of the Transfer of Property Act:
The AO argued that the transfer of property rights to the GPA holders did not constitute a transfer under Section 2(47) of the Income-tax Act or Section 53A of the Transfer of Property Act until 25/01/2010. However, the CIT(A) and the Tribunal found that the administration of the property had already passed to the GPA holders in 2007, and the assessee had no control over the property thereafter. The Tribunal noted that the GPA holders were the ones who executed the sale deed in 2010, and the assessee was not involved in this transaction.

The Tribunal also considered the decision of the Supreme Court in the case of Suraj Lamp & Industries Pvt. Ltd., which held that GPA sales cannot be recognized as deeds of title except to the limited extent of Section 53A of the Transfer of Property Act. The Tribunal concluded that since the assessee had received the major portion of the sale consideration and allowed the GPA holders to administer the property, it amounted to a transfer of title under Section 53A.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the addition made by the AO regarding the capital gains. It agreed that the assessee was not liable for capital gains tax on the 2010 transaction as she was not the transferor of the property. The Tribunal dismissed the revenue's appeal, confirming that the CIT(A) acted within its discretion in admitting the additional grounds raised by the assessee. The judgment emphasized the importance of documentary evidence over assumptions and the legal transfer of property rights under relevant sections of the law.

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