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2019 (5) TMI 1499 - AT - Income TaxCapital gain computation - transfer of agriculture land by the assessee through an irrevocable general power of attorney - Transfer u/s 2(47) - As per the assessee, the transfer of the land through the POA is a valid transfer - AO considered the sale deed as a transfer instrument which was executed on 19-04-2012. Thus the AO invoked the provision of section 50C and accordingly took the sale value as the valuation made by the valuation authority to compute the STCG - HELD THAT - As relying on SURAJ LAMP INDUSTRIES PVT. LTD. VERSUS STATE OF HARYANA ANOTHER 2011 (10) TMI 8 - SUPREME COURT there remains no doubt that the transfer of property based on the POA is not a valid transfer. Any agreement or arrangement enabling the transfer or enjoyment of the property will be treated as a transfer to compute the capital gain. Thus from the above provision, it appears that power of attorney shall also be treated as a transfer for working out the capital gain tax. Respectfully following the judgment of the Hon ble Supreme Court in the case of Suraj Lamp Industries Pvt. Ltd. (Supra), we hold that there was no transfer of the land upon the execution of power of attorney in favor of the party. Thus the transaction for the transfer of property has not been affected in the assessment years 2010-11 and 2012-13 as claimed by the assessee upon the execution of power of attorney. Accordingly, we decide the issue against the assessee. There was no transfer of the impugned property in the year under consideration as alleged by the AO. It is because the sale deed was registered as admitted by the AO on 19 April 2012 i.e. financial year 2012-13 corresponding to assessment year 2013- 14. Hence there cannot be any addition to the total income of the assessee on account of capital gain for the year under consideration. The provision of section 45 of the Act requires to tax the income in the year of transfer of the property. Capital gain income on the sale of the land cannot be taxed in the year under consideration. Accordingly, we reverse the order of the ld. CIT-A and direct the AO to delete the addition made him. Hence the ground of appeal of the Revenue is partly allowed.
Issues Involved:
1. Validity of the transfer of property through an irrevocable power of attorney (POA). 2. Correct assessment year for the computation of Short Term Capital Gain (STCG) on the transfer of the property. Issue-wise Detailed Analysis: 1. Validity of the transfer of property through an irrevocable power of attorney (POA): The primary contention revolves around whether the transfer of property via an irrevocable power of attorney constitutes a valid transfer under the provisions of section 2(47)(vi) of the Income Tax Act, 1961. The assessee transferred agricultural land through an irrevocable general power of attorney, treating it as a valid transfer per section 2(47)(vi). The Assessing Officer (AO) disagreed, citing that a POA does not transfer ownership rights, referencing the Supreme Court judgment in Suraj Lamp Industries Pvt. Ltd. vs. State of Haryana, which states, "A power of attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property." The Income Tax Appellate Tribunal (ITAT) upheld the AO's view, asserting that the transfer of property based on a POA is not valid for computing capital gains tax. The ITAT also noted that the judgment relied upon by the Commissioner of Income Tax (Appeals) [CIT(A)] in the case of Pace Developers and Promoters Pvt. Ltd. was not directly relevant, as it dealt with the registration of a POA rather than the transfer of property under the Income Tax Act. 2. Correct assessment year for the computation of Short Term Capital Gain (STCG) on the transfer of the property: The second issue pertains to the appropriate assessment year for recognizing the STCG. The AO considered the sale deed date of 19th April 2012 as the transfer date, thereby applying the provisions of section 50C and computing the STCG for the financial year 2012-13 (Assessment Year 2013-14). However, the AO erroneously added the capital gain to the income for the Assessment Year 2012-13. The CIT(A) observed that if the sale deed date (19th April 2012) is taken as the transfer date, the STCG should be assessable in the Assessment Year 2013-14, not 2012-13. The ITAT concurred with this view, noting that the AO's computation of capital gain for the year under consideration contradicted his own finding regarding the transfer date. The ITAT concluded that there was no transfer of property in the Assessment Years 2010-11 and 2012-13 upon the execution of the POA. Consequently, the capital gain on the sale of the land could not be taxed in the year under consideration (Assessment Year 2012-13). The ITAT reversed the CIT(A)'s order and directed the AO to delete the addition made to the assessee's total income for the year under consideration. Conclusion: In summary, the ITAT held that: - The transfer of property through an irrevocable power of attorney is not valid for computing capital gains tax. - The correct assessment year for recognizing the STCG is 2013-14, based on the sale deed date of 19th April 2012. - The capital gain income on the sale of the land cannot be taxed in the Assessment Year 2012-13. The appeal of the Revenue was partly allowed, and the AO was directed to delete the addition made to the assessee's total income for the year under consideration.
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