2022 (12) TMI 1169 - HC - Income Tax

Capital gain Computation - AO worked out the capital gain u/s 50C - Charging capital gain tax on the very same land on the basis of final execution of sale deed - CIT (A) deleted the addition made by the AO on the ground that the stated transaction had already been treated as transfer in A.Y.2009-2010 and capital gain earned thereon was brought to tax in hands of the assessee and had been accepted by the assessee also - HELD THAT - No error in the Tribunals findings because undisputedly the issue relating to transfer of land to M/s. Aanya Developers in A.Y.2009-10 had attained finality and against the additions made no appeal has been preferred by the assessee and, therefore, the Tribunal is right in observing that the issue has been examined and taxed in A.Y.2009-10 on the basis of Banakhat (agreement to sale) dated 24.7.2008. The department has also considered the same as transfer in the Assessment order in A.Y.2009-10.Charging capital gain tax on the very same land on the basis of final execution of sale deed amounts to taxing the same twice over, which is not permissible.

Summary

Issues Involved:
1. Interpretation of Section 50C of the Income-tax Act, 1961 regarding capital gains on the sale of immovable property.
2. Whether the First Proviso to Section 50C, inserted by the Finance Act, 2016, is retrospective in nature.

Detailed Analysis:
1. The tax appeal under section 260A of the Income-tax Act, 1961 was filed by the revenue against the order of the Income Tax Appellate Tribunal. The case involved the addition of capital gains on the sale of immovable property by the Assessing Officer under Section 143(3) of the Act. The Assessing Officer determined the capital gain under Section 50C of the Act based on the market value of the property, which was higher than the sale consideration declared by the assessee. The Commissioner of Income-tax (Appeals) deleted the addition, citing that the transaction had already been treated as a transfer in a previous assessment year, and the proviso to Section 50C should be applied from the date of the agreement to sale. The Appellate Tribunal upheld the CIT (A)'s decision, leading to the revenue's appeal before the High Court.

2. The substantial questions of law raised in the appeal questioned the Tribunal's decision in deleting the addition of capital gains and the retrospective nature of the First Proviso to Section 50C. The counsel for the revenue argued that the Tribunal erred in treating the date of transfer in a previous assessment year instead of the year in which the deed was registered. The counsel also contended that the Tribunal's decision regarding the retrospective application of the First Proviso to Section 50C was incorrect. The High Court considered the arguments presented by the counsel and examined the Tribunal's reasoning for deleting the addition.

3. The High Court observed that the Tribunal had rightly deleted the addition based on the fact that the transaction had already been treated as a transfer in a previous assessment year, and the capital gain had been taxed accordingly. The Court noted that the issue of transfer had attained finality in the previous assessment year, and no appeal had been filed against the additions made. Therefore, taxing the same capital gain twice over in the impugned year was not permissible. The Court upheld the Tribunal's decision and dismissed the appeal, stating that there was no error in the Tribunal's findings.

4. The High Court clarified that it did not delve into the controversy surrounding the retrospective nature of the First Proviso to Section 50C in this case. By keeping the issue open, the Court dismissed the tax appeal without any cost implications. The judgment emphasized the principle that a capital asset's transfer should only be taxed once, and in this case, the capital gain had already been taxed in a previous assessment year, precluding its taxation again in the impugned year.

5. In conclusion, the High Court's judgment upheld the Tribunal's decision to delete the addition of capital gains on the basis that the transaction had already been taxed in a previous assessment year. The judgment clarified the principle of not taxing the same capital gain twice and dismissed the appeal without addressing the issue of the retrospective application of the First Proviso to Section 50C in this specific case.