2019 (4) TMI 1624 - AT - Income Tax

Capital gain computation - transfer u/s 2(47) - year of taxability of capital gain - agreement to sell or execution of sale deed - extinguished the right in the property - monetary limit - HELD THAT - There is no dispute that a registered agreement to sell was executed on 28.02.2004 between the assessee and M/s Rosebud Construction Pvt. Ltd. The said agreement to sell is exhibited. A perusal of the said agreement to sell clearly shows that the assessee has relinquished all his rights in the said property in favour of the vendee. As per the definition of transfer u/s 2(47) of the Act, transfer in relation to any capital asset means extinguishment of any rights therein . This clause clearly applies on the facts of the case in hand. Since the transfer has taken place in the year 2004, basis of charge i.e. 45(1) arose in the year 2004 as the said provision as well as any profits or gains arising from transfer of capital asset effected in the previous year shall be chargeable to income tax under the head capital gain and shall be deemed to be income as previous year in which transfer took place. Since the transfer has taken place in the year 2004, capital gains tax liability, if any, arose in that year. We, therefore, do not find any error or infirmity in the findings of the CIT(A). Long term capital gain liability, as determined by the Assessing Officer is 99.20 lakhs, 20% of tax on which comes to ₹ 19.84 lakhs. Therefore, this appeal by the Revenue is also hit by the CBDT Circular No. 3/2018 dated 11.07.2018 by which the Board has revised the monetary limit for filing of appeals by the department before the ITAT and the monetary limit has been fixed at ₹ 20 lakhs. In the light of the aforesaid CBDT Circular, the appeal filed by the Revenue is dismissed.

Summary

Issues:
1. Interpretation of section 50C regarding leasehold rights.
2. Determination of capital gains tax liability based on property transfer date.
3. Consideration of ownership rights for property sale.
4. Application of CBDT Circular on monetary limits for filing appeals.

Analysis:
1. The first issue in this case revolves around the interpretation of section 50C concerning leasehold rights. The Revenue contended that the CIT(A) erred in directing the Assessing Officer under section 50C, arguing that leasehold rights are not covered under this section. However, the CIT(A) examined the facts and submissions, ultimately deleting the addition made by the AO. The CIT(A) highlighted that the appellant had transferred all rights in the property in 2004, thus negating any liability during the relevant year.

2. The second issue pertains to the determination of capital gains tax liability based on the date of property transfer. The AO added the sale value to the appellant's income, citing section 45(1) read with section 2(47) of the Income Tax Act. The CIT(A), after considering the facts, held that the transfer occurred in 2004, triggering the capital gains tax liability in that year. The Tribunal concurred with the CIT(A)'s decision, finding no error in the assessment.

3. The third issue involves the consideration of ownership rights for the sale of the property. The appellant argued that they had relinquished all rights in the property in 2004, thus absolving them of any capital gains tax liability in the relevant year. The CIT(A) analyzed the agreement to sell and the subsequent actions of the appellant, concluding that the transfer had indeed taken place in 2004, and no transaction occurred during the relevant year.

4. Lastly, the application of the CBDT Circular on monetary limits for filing appeals was discussed. The Tribunal noted that the appeal by the Revenue was also impacted by the CBDT Circular, which revised the monetary limit for filing appeals before the ITAT. As the appeal fell below the specified tax limit, it was dismissed in accordance with the Circular's provisions.

In conclusion, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal and emphasizing the significance of the property transfer date in determining capital gains tax liability. The case underscores the importance of thorough examination of legal provisions and factual circumstances in tax assessments.