2019 (7) TMI 30 - HC - Income Tax

Capital gain computation - year of taxation - transfer u/s 2(47) - Tribunal held that capital gain is taxable in the assessment year 2010-11 only because sale deed executed on 27.4.2009 ignoring part performance of a contract u/s 53A of TPA - HELD THAT - Any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in Section 53A. Explanation 2 makes it abundantly clear that transfer includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India. The above Explanation comes to the aid and assistance of the assessee and in the instant case, the assessee has received consideration, handed over possession of the property, executed registered Power of Attorney in favour of the holder empowering him to absolutely deal with the property and the arrangement is covered by an agreement for sale. Thus, the agreement for sale should not be read in isolation, but should be read in conjoint with the power of attorney which in sum and substance is irrevocable. We find from the circular issued by the CBDT in Circular No.495 dated 22.09.1987, which is Explanatory Notes on the provisions relating to direct taxes and in the said circular, the Board discusses about the definition of transfer which had been widened to include paragraph 11.2. In terms of the above circular, the newly inserted sub-Clause (vi) of Section 2(47) of the TP Act has brought into the ambit of transfer , practice of enjoyment of property rights through what is commonly known as Power of Attorney arrangements. Tribunal committed an error in holding that the transfer took place only on the date of sale deed which was executed on 27.04.2009. As observed earlier, in respect of the other co-owners, they have succeeded either before the CIT(A) or before the Tribunal and those orders are attained finality. Order passed by the Tribunal calls for interference. - Decided in favor of assessee.

Summary

Issues:
1. Capital gains taxation for the assessment year 2010-11 based on unregistered sale agreement.
2. Interpretation of provisions of Section 53A and Section 17(1A) of the Transfer of Property Act.
3. Application of Section 2(47)(v) and Section 2(47)(vi) of the Income Tax Act.
4. Compliance with the judgment of the Jurisdictional High Court.
5. Failure of the Tribunal to consider relevant legal provisions.

Issue 1: Capital gains taxation for the assessment year 2010-11 based on unregistered sale agreement

The appeal questioned the Tribunal's decision to tax capital gains in 2010-11 despite the assessee offering tax for the same transaction in 2009-10. The Tribunal's ruling was based on the registration status of the sale agreement and the sale deed. The High Court noted that similar cases involving co-owners had been decided in favor of the assessee previously, emphasizing compliance with tax laws and finality of previous judgments.

Issue 2: Interpretation of provisions of Section 53A and Section 17(1A) of the Transfer of Property Act

The Court examined whether the Tribunal correctly applied the provisions of Section 53A and Section 17(1A) of the Transfer of Property Act, focusing on the transfer of property timelines and legal implications. It was noted that the Tribunal's decision did not fully consider the legal framework and failed to align with previous judgments on similar matters.

Issue 3: Application of Section 2(47)(v) and Section 2(47)(vi) of the Income Tax Act

The High Court highlighted the importance of Sections 2(47)(v) and 2(47)(vi) of the Income Tax Act in determining the transfer of property and capital gains taxation. The Court emphasized the need for a comprehensive analysis of these provisions to ensure accurate assessment and proper application of the law.

Issue 4: Compliance with the judgment of the Jurisdictional High Court

The judgment discussed the relevance of compliance with previous High Court decisions, especially in cases involving co-owners and similar property transactions. The Court emphasized the importance of consistency in legal interpretations and the impact of previous judgments on current cases.

Issue 5: Failure of the Tribunal to consider relevant legal provisions

The High Court pointed out the Tribunal's oversight in not considering all relevant legal provisions, specifically Section 2(47)(v) and Section 2(47)(vi) of the Income Tax Act. The Court highlighted the error in the Tribunal's reasoning and emphasized the need for a thorough examination of all applicable laws and precedents in tax matters.

In conclusion, the High Court allowed the appeal, set aside the Tribunal's order, and ruled in favor of the assessee. The judgment underscored the importance of legal compliance, accurate interpretation of tax laws, and consistency in judicial decisions to ensure fair and just outcomes in taxation matters.