2014 (11) TMI 143 - AT - Income Tax

Taxation of capital gains - Amount of LTCG revised - Correct year of assessment of the capital gain - Whether the CIT(A) was justified in holding that the LTCG is pertaining to AY 2009-10 without considering the facts that the sale-deed was executed on 30/03/2008 and the possession was handed over on the same date and also the assessee had received this almost entire sale consideration Held that - In Smt.Sandhyaben A.Purohi vs. ITO 2014 (11) TMI 88 - ITAT AHMEDABAD it has been held that in a situation where consideration has been paid and the possession has been handed over, then in view of the provisions of s. 2(47)(v) transfer took place and that date of transfer is thus required to be taken for the purpose of computation of capital gain - an immovable property can be legally and lawfully transferred or conveyed only by a registered deed of conveyance when the document is executed, the property passes and merely because there is no registration certificate, the State coffers should not suffer - If the view propounded that only on registration, act of transfer will be complete, then in that case, if the document is not registered, though the assessee will be enjoying the property, he will say that he is not liable to pay the tax - But that is not the intention of the Legislature - the word 'transfer' as indicated in the Income-tax Act is required to be considered and not 'sale' as indicated in the Transfer of Property Act - transfer of immovable property of the value exceeding ₹ 100 can be said to have been effected on the date of execution of the document. The transaction would relate to the date when the sale-deed was executed, sale consideration was paid and the possession was handed over but not on the date when the document was presented before the Registrar for registration of the sale-deed - the decision in Suraj Lamp and Industries Pvt.Ltd. vs. State of Haryana and Another 2011 (10) TMI 8 - SUPREME COURT OF INDIA cannot be followed as the decision was delivered on 11/10/2011, but the sale agreement in the present case was executed on 31/03/2008 the particular decision should be made applicable prospectively to avoid hardship had been made clear while delivering the judgment itself - SA/GPA/WILL transactions are not transfers or sales and that such transactions cannot be treated as completed transfers or conveyances - They can continue to be treated as existing agreement of sale - Nothing prevents affected parties from getting registered deeds of conveyance to complete their title - if the documents relating to SA/GPA/WILL transactions has been accepted acted upon by the DDA or other developmental authorities or by the Municipal or Revenue authorities to effect mutation, they need not be disturbed, merely on account of this decision - the agreement to sell dated 31/03/2008 had already been acted upon the parties by delivery possession and registering sale-deed Decided in favour of assessee.

Issues Involved:
1. Validity of the assessment year for Long Term Capital Gain (LTCG).
2. Adoption of Fair Market Value (FMV) for the cost of acquisition.
3. Partial allowance of deduction under Section 54F.
4. Additional compensation and its impact on the capital gain.
5. Non-consideration of decisions cited by the appellant.

Detailed Analysis:

1. Validity of the Assessment Year for Long Term Capital Gain (LTCG):
The primary issue was whether the LTCG should be assessed in AY 2008-09 or AY 2009-10. The assessee argued that the sale deed was executed, possession handed over, and the sale consideration received on 31/03/2008, thus the gain should be taxed in AY 2008-09. The Assessing Officer (AO) and the CIT(A) held that since the conveyance deed was registered on 29/05/2008, the LTCG pertains to AY 2009-10. The Tribunal referred to the Supreme Court judgment in Suraj Lamp and Industries Pvt. Ltd. vs. State of Haryana, which emphasized that transfer of property under the IT Act happens only when the conveyance deed is registered. However, the Tribunal also considered the judgment of the Gujarat High Court in CIT vs. Hormasji Mancharji Vaid, which held that the transfer date is when the sale deed is executed, possession handed over, and consideration paid. The Tribunal concluded that the transaction should be considered for AY 2008-09, not AY 2009-10.

2. Adoption of Fair Market Value (FMV) for Cost of Acquisition:
The assessee claimed the FMV of the property as on 01/04/1981 at Rs. 13,72,000 based on a registered valuer's report. The AO adopted a value of Rs. 41,741, which was disclosed in the assessee's books. The CIT(A) partially allowed the assessee's claim, estimating the FMV at Rs. 8,00,000. The Tribunal found that the AO's reliance on the book value was not supported by law, as the property was acquired by gift, making the cost of acquisition nil. However, the Tribunal noted deficiencies in the valuer's report and upheld the CIT(A)'s estimation of Rs. 8,00,000 as reasonable.

3. Partial Allowance of Deduction under Section 54F:
The assessee claimed a deduction of Rs. 4,39,50,000 under Section 54F, which the AO restricted to Rs. 1,12,40,000. The AO argued that the property transactions were made to claim the deduction and that the property sold by the assessee's HUF and mother was one composite property. The CIT(A) upheld the AO's decision, noting the lack of evidence that the properties were distinct in municipal records. The Tribunal found no error in the CIT(A)'s decision and confirmed the restriction of the deduction.

4. Additional Compensation and Its Impact on Capital Gain:
The assessee received additional compensation of Rs. 10,00,000, which the AO included in the LTCG for AY 2009-10. The Tribunal held that since the transaction should be considered for AY 2008-09, this issue became infructuous.

5. Non-Consideration of Decisions Cited by the Appellant:
The assessee argued that the CIT(A) did not consider decisions cited in their favor. The Tribunal noted that the CIT(A) relied on the Supreme Court's judgment in Suraj Lamp and Industries Pvt. Ltd., which was not directly applicable to the IT Act. The Tribunal found that the decisions cited by the assessee, including the Gujarat High Court's judgment, were more relevant and supported the assessee's position.

Conclusion:
The Tribunal partly allowed the assessee's appeal by holding that the LTCG pertains to AY 2008-09 and not AY 2009-10. It upheld the CIT(A)'s estimation of FMV at Rs. 8,00,000 and confirmed the restriction of the deduction under Section 54F. The Tribunal dismissed the Revenue's appeal, which contested the CIT(A)'s estimation of FMV.

Order:
Assessee's appeal is partly allowed, whereas Revenue's appeal is dismissed.

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