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2021 (5) TMI 919 - AT - Income TaxSale of property - assessee had acquired lease rights over the property on 30.6.1950 by virtue of Settlement and Arrangement deed - Property belongs to the HUF of the assessee Or assessee individual - rights on ancestral property - enactment of Hindu Succession Act, in 1956 - Property acquired by virtue of family settlement deed - HELD THAT - Prior to the enactment of Hindu Succession Act, in 1956, the ancestral property became the HUF property and after the said Act, the ancestral property becomes the self-acquired property of the person on whom it devolves. In the case before me clearly, the property was inherited by the father of the assessee in 1952 and was also conveyed to the assessee after the death of his father in 1955, i.e. before coming into force of Hindu Succession Act, 1950. Accordingly, the property belongs to the HUF of the assessee and not to the assessee individual. Therefore, the assessment order itself is liable to be quashed. Accordingly, grounds of appeal Nos. 2 and 3 are allowed and the assessment order is set aside.
Issues Involved:
1. Whether the property sold by the assessee was an HUF property or individual property. 2. Whether the capital gain arising from the sale of the property was a Short Term Capital Gain (STCG) or Long Term Capital Gain (LTCG). 3. Whether the value of the property for capital gains calculation should be based on the date of the sale agreement or the date of registration. 4. Whether the Assessing Officer should have referred the property to the Valuation Officer under section 50C(2) of the Income Tax Act. 5. Whether the first and second proviso to sub-section (1) of section 50C of the Income Tax Act should apply retroactively. Issue-wise Detailed Analysis: 1. HUF Property vs. Individual Property: The primary contention of the assessee was that the property sold was an HUF property, inherited from his father before the Hindu Succession Act, 1956, and therefore, the capital gain should be assessed in the hands of the HUF and not the individual. The Tribunal referred to the judgment of the Hon'ble Delhi High Court in the case of Vinod Chopra vs. Vasudev Chopra, which clarified that property inherited after 1956 is considered self-acquired unless it was part of an existing HUF before 1956. Since the property was inherited by the assessee's father in 1952 and conveyed to the assessee in 1955, it was deemed HUF property. Consequently, the assessment order was quashed, and grounds of appeal Nos. 2 and 3 were allowed. 2. STCG vs. LTCG: The Assessing Officer initially treated the capital gain as STCG, asserting that the assessee became the absolute owner only on 28.01.2009, when leasehold rights were converted to freehold rights. However, the CIT (A) held that the gain from the sale of the property was LTCG, considering the property as inherited and thus held for a longer duration. The Tribunal did not further adjudicate this issue due to the quashing of the assessment order. 3. Value for Capital Gains Calculation: The assessee contended that the SRO value as on the date of the sale agreement should be considered, not the date of registration. However, the CIT (A) upheld the Assessing Officer's view of using the SRO value at the time of registration. This issue was not further adjudicated by the Tribunal due to the quashing of the assessment order. 4. Reference to Valuation Officer under Section 50C(2): The assessee argued that the CIT (A) erred in not referring the property to the Valuation Officer under section 50C(2) of the Income Tax Act. The CIT (A) did not exercise this option as it was not requested during the assessment proceedings. This issue was rendered moot due to the quashing of the assessment order. 5. Retroactive Application of Section 50C Provisos: The assessee claimed that the first and second proviso to sub-section (1) of section 50C, being beneficial provisions, should be applied retroactively. The Tribunal did not adjudicate this issue due to the quashing of the assessment order. Conclusion: The Tribunal allowed the appeal in part, primarily on the grounds that the property was an HUF property, and thus, the assessment order was set aside. Consequently, other grounds of appeal were not adjudicated, and the appeal was treated as partly allowed.
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