2019 (5) TMI 537 - AT - Income Tax

Long Term Capital Gain - Transfer of the possessory rights of the property under consideration - co-ownership of the property by Sh. Kishore B Dalal and Sh. Ashok Bhatia/his legal heirs - Transfer of a property on the basis of general power of attorneys - portion of property of Sh. Kishore B Dalal was also in possession of legal heirs of Late Sh. Ashok Bhatia - The legal heirs of Late Sh. Ashok Bhatia viz. the assessee i.e Sh. Prem Ashok Bhatia, Smt. Kavita Ashok Bhatia (widow) and Sh. Gaurav Bhatia (son), had in lieu of the aforesaid consideration of ₹ 5,85,00,000/- handed over the actual and physical possession of the plot of land therein described in the third schedule forming part of the registered conveyance deed to the aforementioned purchasers - capital gain OR income from other sources HELD THAT - As regards the extract of the land records as per the land revenue records and the title search report of Mr. M.S Rodrigues, Advocate, we are of the considered view that as the said documents only affirm the undisputed fact of co-ownership of the property by Sh. Kishore B Dalal and Sh. Ashok Bhatia/his legal heirs, therefore, the same would in no way assist for either supporting or dislodging the claim of the assessee that the actual physical possession of the property under consideration had remained with Sh. Ashok Bhatia and thereafter with his legal heirs. Clause 19 of the registered conveyance deed categorically evidences the fact that the assessee along with the other two legal heirs of late Sh. Ashok Bhatia viz. Smt. Kavita Bhatia (mother of the assessee) and Sh. Gaurav Bhatia (brother of the assessee) had in equal shares received an amount aggregating to ₹ 5,85,00,000/- in lieu of handing over the actual and physical possession of the property under consideration to the purchasers who had agreed to pay the said amount to the legal heirs after obtaining the consent of the vendor i.e. Sh. Kishore B Dalal. In our considered view, it would be relevant to cull out Clause 19 of the registered conveyance deed which contemplates the reason for making of the payment of ₹ 5,85,00,000/- by the purchasers of the property to the legal heirs of late Sh. Ashok Bhatia. As was discernible from the registered conveyance deed, assessee who as acknowledged by all the concerned parties held a possessory right in the property under consideration had received the amount of ₹ 1,95,00,000/- on account of transfer of such rights or interest in the property under consideration, therefore, the same was rightly offered for tax by him under the head Capital Gains . In the backdrop of our aforesaid observations, we thus not finding any infirmity in the order passed by the CIT(A) who had rightly arrived at the aforesaid conclusion after deliberating on the facts of the case and distinguishing the judicial pronouncements relied upon by the A.O, uphold the same. - Decided against revenue

Summary

Issues Involved:
1. Acceptance of Long Term Capital Gain (LTCG) by the CIT(A).
2. Treatment of receipt of ?1,95,00,000/- as LTCG.
3. Ownership and transfer of rights in the property.

Issue-wise Detailed Analysis:

1. Acceptance of Long Term Capital Gain (LTCG) by the CIT(A):
The revenue challenged the CIT(A)’s acceptance of the LTCG declared by the assessee. The CIT(A) had accepted the assessee’s claim of LTCG on the sale of land, including the cost of acquisition and exemptions under Section 54F of the Income Tax Act, 1961. The CIT(A) concluded that the assessee had transferred a capital asset, leading to the LTCG.

2. Treatment of Receipt of ?1,95,00,000/- as LTCG:
The revenue argued that the receipt of ?1,95,00,000/- should not be considered as LTCG since the assessee was not the owner of the land. The CIT(A), however, found that the amount received by the assessee was rightly shown as taxable under the head LTCG. The CIT(A) observed that the purchasers agreed to pay a higher consideration to the legal heirs of Late Sh. Ashok Bhatia, including the assessee, due to their possessory rights in the property. The CIT(A) held that the consideration received was for the transfer of possessory rights, thus constituting a transfer of a capital asset under Sections 2(14) and 2(47) of the I.T. Act.

3. Ownership and Transfer of Rights in the Property:
The AO contended that the assessee did not have any possessory rights in the property, and thus, the receipt should be taxed under "Income from Other Sources." The AO’s argument was based on several documents, including an MOU and general power of attorneys, which indicated joint possession and ownership by Sh. Kishore B. Dalal and Sh. Ashok Bhatia. However, the CIT(A) and the ITAT found these documents unregistered and not binding over the registered conveyance deed. The registered conveyance deed clearly stated that the legal heirs of Late Sh. Ashok Bhatia, including the assessee, had possessory rights and received consideration for transferring these rights. The ITAT upheld the CIT(A)’s view that the registered conveyance deed held more evidentiary value and confirmed the transfer of possessory rights, thus validating the LTCG treatment.

Conclusion:
The ITAT dismissed the revenue’s appeal, affirming the CIT(A)’s decision that the receipt of ?1,95,00,000/- by the assessee was rightly taxed under LTCG. The ITAT emphasized the validity of the registered conveyance deed over unregistered documents and confirmed the transfer of possessory rights as a capital asset. The appeal of the revenue was dismissed, upholding the CIT(A)’s order.