2021 (7) TMI 1227 - AT - Income Tax

LTCG - registered sale deed was executed by the legal heirs of late Sri G. Sattiah - Assessee along with her sister and 6 brothers, sold 12 plots of land and the assessee's 1/8th share in S.R.O. value (after applying the provisions of section 50C - HELD THAT - Undisputed facts are that the assessee's father, late Sri G. Sattaiah during his lifetime had sold certain piece of land to various vendees and some of the vendees have also passed away and at the request of the vendees and the legal heirs of deceased vendees, the LRs of the vendor, late Sri Sattaiah, have executed registered documents in their favour. In the light of such circumstances, the assessee and her brothers have executed the sale deed, in respect of properties, whose possession of the property was already given. In view of provisions of section 53A of the Transfer of Property Act, the properties have already been transferred in favour of the vendees except for the execution of the registered sale deeds. As rightly contended by the assessee, the transfer has taken place in the earlier assessment years when late Sri G. Sattiah was alive. As regards the finding of the AO that LTCG has arisen out of retention of 500 square yards by assessee's brothers, find that the assessee has stated before the CIT(A) that 500 square yards vested with late Sri G. Sattiah and after his demise, his sons received the property and constructed house thereon and that it was not received by assessee's brothers by virtue of gentleman agreement. CIT(A) has not verified this fact but has merely gone by the presumption that the assessee had relinquished her right over the 500 sq. yards plot retained by assessee's brothers. Since the land retained by the assessee's brothers cannot be treated as transfer in their favour, there cannot be any relinquishment or right by the assessee in such property. Therefore, there is no incidence of any LTCG in favour of the assessee during the alleged assessment year when the registered sale deed was executed by the legal heirs of late Sri G. Sattiah, with regard to the transaction which had taken place during the earlier assessment year. Thus, the assessee's grounds of appeal are allowed.

Summary

Issues:
Assessment Year 2008-09 - Addition made by Assessing Officer - Long Term Capital Gains (LTCG) computation - Relinquishment of right in property - Transfer of property - Execution of registered sale deed - Appeal before CIT(A) - Second appeal before tribunal.

Analysis:
The case involves an appeal for the Assessment Year 2008-09 against the addition made by the Assessing Officer, confirmed by the Commissioner of Income Tax (Appeals)-8, Hyderabad. The assessee, an individual, declared an income of ?1,52,650 in the Return of Income filed electronically. The Assessing Officer completed the assessment under section 144 r.w.s. 147 of the Income Tax Act, 1961, as the assessee did not file any Return of Income in response to the notice u/s. 148 but submitted documents later.

The Assessing Officer noted that the assessee, along with siblings, sold 12 plots of land, and her share in S.R.O. value amounted to ?21,08,500. The assessee's brothers confirmed no payment was made to her, and she stated she signed the sale deeds due to being a legal heir but received no sale consideration. The Assessing Officer held that the assessee relinquished her right in favor of her brothers, attracting section 2(47)(ii) of the Act, making it a taxable transfer chargeable to tax, resulting in LTCG of ?4,52,250.

The CIT(A) upheld the assessment order, leading the assessee to appeal before the tribunal. The tribunal found that the transfer occurred in earlier assessment years when the father of the assessee was alive. The execution of registered sale deeds was a mere formality, as possession had already been given to the vendees. The tribunal held that since the land retained by the brothers cannot be treated as a transfer in their favor, there was no relinquishment of right by the assessee in that property. Therefore, no LTCG incidence arose for the assessee during the assessment year in question. Consequently, the tribunal allowed the assessee's appeal.

In conclusion, the tribunal allowed the assessee's appeal, emphasizing that no LTCG incidence arose for the assessee during the assessment year in question due to the nature of the property transfer and the lack of relinquishment of right by the assessee.