2021 (1) TMI 1045 - HC - Income Tax

Capital gain - transfer of property u/s 2(47) - assessee had sold certain properties and had not paid capital gains - proceedings under Section 153C of the Act read with Section 143(3) were initiated - HELD THAT - Perusal of relevant clauses of the Power of Attorney which was executed on the same day, it is evident that all rights in the property including the possession constructively infact has been handed over by the assessee to the purchaser. Therefore, we have no hesitation in holding that the aforesaid transaction is the same within the meaning of Section 2(47) of the Act and the Assessing Officer as well as the Commissioner of Income Tax (Appeals) has rightly treated the same to be a transaction of sale. However, the Tribunal, without taking into account the incriminating material on record, merely on the basis of the fact that the possession of the property under the agreement was not delivered, has held the same to be not sale. - Decided in favour of the assessee.

Summary

Issues:
1. Interpretation of Section 2(47) of the Income Tax Act, 1961 regarding the definition of "transfer."
2. Determination of whether the transaction in question amounts to a transfer under Section 2(47) of the Act.
3. Assessment of whether possession of the property was effectively transferred in the case.
4. Analysis of the findings of the Assessing Authority, Commissioner of Income Tax (Appeals), and the Income Tax Appellate Tribunal regarding the transaction.

Analysis:
1. The appeal under Section 260-A of the Income Tax Act, 1961 pertained to the Assessment Year 2006-07 and raised the substantial question of law regarding the interpretation of Section 2(47) of the Act. The issue revolved around whether the Tribunal was correct in holding that there was no transfer of the property by the assessee, despite the conditions of Section 2(47) being satisfied.

2. The facts leading to the appeal involved a search conducted under Section 132 of the Act, revealing that the assessee had sold properties without paying capital gains. The Assessing Authority found that the assessee had entered into an agreement for sale and executed a General Power of Attorney, transferring rights in the property. The Assessing Authority added the undisclosed sale consideration to the assessee's income, leading to the appeal.

3. The Tribunal held that permissive possession given by the assessee did not constitute a transfer under Section 2(47) of the Act. The revenue contended that all conditions of transfer were satisfied, emphasizing clauses of the agreement and the General Power of Attorney transferring rights in the property. The assessee argued that possession and balance consideration were not transferred, citing ongoing litigation and lack of tangible evidence of cash receipt.

4. The High Court analyzed the relevant statutory provisions, emphasizing the wide definition of transfer under Section 2(47) of the Act. The clauses of the General Power of Attorney indicated the transfer of all rights in the property to the purchaser. The Court held that the transaction fell within the definition of transfer, contrary to the Tribunal's finding. The Tribunal's decision was deemed erroneous for disregarding incriminating material and possession transfer. Consequently, the substantial question of law was answered in favor of the assessee, quashing the Tribunal's order and allowing the appeal.