2019 (7) TMI 72 - AT - Income Tax

Capital Gain in hand of GPA holder - the assessee was given an irrevocable GPA by the owners of the land - alleged that assessee had paid the sale consideration of ₹ 8,40,000/- in the year 1994 and obtained the irrevocable GPA - in the year under assessment assessee has executed the sale deed in favour of his daughter and in the sale deed - no consideration received from daughter - HELD THAT - The recitals in the GPA show that the assessee is not the owner of the property but has only been granted authority to convey the property to third party. Therefore, it cannot be considered that the assessee became the owner of the property by virtue of the irrevocable GPA. In the relevant previous year, the assessee has executed the sale deed in favour of his daughter and in the sale deed it has been mentioned that the total of the sale consideration of ₹ 8,40,000/- was paid in the year 1994. This fact also cannot be accepted, because if the entire sale consideration was paid in the year 1994, then the vendors/parties or even the GPA holder could have executed the sale deed in favour of the vendee in that year itself. Therefore, the sale is only in the year 2007 but capital gain would arise in the hands of the owners of the property and not the GPA holder. Hon'ble Karnataka High Court in the case of Wipro Ltd. Vs. DCIT 2015 (10) TMI 826 - KARNATAKA HIGH COURT has held that a deed of power of attorney is executed by the principal in favour of the agent. The agent derives a right to use his name and all acts, deeds and things done by him and subject to the limitations contained in the said deed, the same shall be read as if done by the principal. A power of attorney is a document of convenience. A power of attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property. It is revocable or terminable at any time unless it is made irrevocable in a manner known to law. Respectfully following the above judgment and since the assessee is not the owner of the property, the capital gain cannot be brought to tax in his hands. - the assessee s appeal is allowed.

Summary

Issues:
Assessment of capital gains in the hands of the assessee, ownership of the property, transfer of property, validity of the sale deed, interpretation of the irrevocable GPA, applicability of legal precedents on GPA.

Analysis:
The judgment deals with the appeal by the assessee against the order of the CIT (A) for the A.Y 2008-09 regarding the assessment of capital gains. The case revolves around the ownership of the property and the transfer of property by the assessee. The AO observed that the assessee sold an immovable property but did not offer the capital gains for taxation, leading to the reopening of the assessment under section 148 of the Act.

The assessee contended that no capital gains should be attributed to him as he was not the owner of the property. The counsel argued that the transaction had concluded in 1994, and the sale deed executed in 2006-07 did not result in a transfer during the relevant assessment year. The counsel highlighted the irrevocable GPA executed in 1994, emphasizing that the assessee was only a GPA holder, not the owner of the property.

On the other hand, the Revenue supported the assessment, asserting that the sale deed executed in favor of the assessee's daughter constituted a transfer of property, resulting in capital gains. The Revenue questioned the validity of the sale deed and emphasized the lack of corroborative evidence regarding the sale consideration received in 1994.

The Tribunal analyzed the contentions and the documents on record. It noted that the irrevocable GPA granted to the assessee did not establish ownership of the property. The Tribunal observed discrepancies in the execution of the sale deed and the timing of the transaction. Citing legal precedents, including the Supreme Court and Karnataka High Court judgments, the Tribunal concluded that a GPA is not a deed of conveyance and cannot be considered a transfer of property. Therefore, the capital gains could not be taxed in the hands of the assessee.

Ultimately, the Tribunal allowed the assessee's appeal, ruling that the capital gain should not be attributed to the assessee. The judgment was pronounced on 24th May 2019 by Smt. P. Madhavi Devi, Judicial Member of the ITAT Hyderabad.