2022 (3) TMI 249 - AT - Income Tax

Capital gain - Computation of capital gain including Section 50C - transfer of capital asset u/s 2(47) - real owners of property/asst - CIT-A deleted the addition - HELD THAT - The assessee did not show any capital gain in its hand as it did not transfer any property. The assessee taxed the capital gain in the hands of the assessee society who is not the owner of capital asset. CIT(A) therefore deleted the addition made by the Assessing Officer in the hands of the assessee and gave a direction to the learned Assessing Officer that 13 members of this society are the owners of the capital asset and therefore all the issues with respect to capital gain including Section 50C of the Act is required to be examined in the hands of those persons. Capital gain shall always be chargeable to tax only in the hands of the person who transferred their capital asset. In the present case this society did not transfer anything as it did not have ownership of the flat owners of the flat were members of the society the learned CIT(A) has correctly deleted the addition in the hands of the assessee- society. Revenue could not be aggrieved as learned CIT(A) gave the direction to the learned Assessing Officer for examination of the chargeability of capital gains in the hands of the correct persons. To safeguard interest of revenue it was for the ld. AO to take call at relevant time. In view of this we do not find any infirmity in order of the learned CIT(A) and uphold the same - Decided against revenue..

Summary

Issues Involved:
1. Capital gain taxation in the hands of a cooperative housing society.
2. Applicability of section 50C in the hands of individual members of the society.

Issue 1: Capital gain taxation in the hands of a cooperative housing society

The appeal was filed by the Income Tax Officer against the order passed by the Commissioner of income-tax (Appeals) regarding the deletion of capital gain in the hands of a society for an amount of Rs. 4,17,39,950. The Assessing Officer noted that the market value of the property was Rs. 4,21,71,000 and computed a short term capital gain based on this value. However, the society contended that the real owners of the flats were the members, and the society was formed for maintenance purposes only. The society had entered into a development agreement with a builder for redevelopment, where individual members would receive new flats. The Commissioner of income-tax (Appeals) held that no capital gain would arise in the hands of the society as the flat owners were the real owners of the property. The Assessing Officer was directed to examine the taxability of capital gain in the hands of the individual members of the society.

Issue 2: Applicability of section 50C in the hands of individual members of the society

The Assessing Officer raised a ground stating that the provisions of section 50C were applicable in the individual hands of the members of the society. The Commissioner of income-tax (Appeals) noted that the society was formed for the benefit of maintenance and that the flat owners were the real owners of the property registered for redevelopment. The Assessing Officer was directed to determine the applicability of capital gains in the individual hands of the members and examine the issue of taxability under section 50C of the Act. The Tribunal upheld the decision of the Commissioner of income-tax (Appeals), stating that capital gain should be chargeable to tax only in the hands of the person who transferred the capital asset, which in this case was not the society but the individual members. The Tribunal dismissed the appeal filed by the Assessing Officer, upholding the decision of the Commissioner of income-tax (Appeals).

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