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2016 (4) TMI 863 - AT - Income TaxAddition on account of capital gain - year of assessment - Held that - There is merit in the propositions and contentions raised by the assessee. Transfer of the ownership of property based on a on a contract registered or otherwise is to be ascertained from the intention, documents and volition of the parties to the transaction. A different stand cannot be adopted by revenue authorities on one hand not to question about the genuineness of the documents and then hypothecate over the covenants. In our view the unconditional transfer of ownership and possession took place in FY 2011-12 relevant to AY 2012. We uphold the order of ld. CIT(A) holding that transfer of ownership and possession of the impugned land took place in FY 2011-12 relevant to AY 2012-13 the year in which assessee has offered the LTCG her return of income and are liable to be taxed in AY 2012-13. Since we have held the LTCG to be taxable in AY 2012-13 the grounds raised in CO filed by assessee become infructous.
Issues Involved:
1. Year of taxability of Long Term Capital Gains (LTCG) 2. Validity of conditional sale and transfer of property 3. Entitlement to deductions under sections 54EC and 54B of the Income Tax Act 4. Calculation of indexed cost of acquisition Issue-wise Detailed Analysis: 1. Year of Taxability of Long Term Capital Gains (LTCG): The primary issue is whether the LTCG should be taxed in the assessment year (AY) 2011-12 or AY 2012-13. The Revenue contends that the capital gain should be assessed in AY 2011-12 as the property was transferred during the financial year (FY) 2010-11. The assessee argues that the sale was conditional and the transfer of ownership was not complete until the realization of post-dated cheques in FY 2011-12, making AY 2012-13 the correct year for taxation. 2. Validity of Conditional Sale and Transfer of Property: The sale deed dated 17th January 2011 stipulated that the transfer of ownership rights would be complete only upon the realization of post-dated cheques. Two cheques totaling Rs. 1,50,00,000 were dishonored, rendering the sale void ab initio as per the terms of the sale deed. The assessee issued legal notices to the vendee and the Commissioner of Jaipur Development Authority to prevent any misuse of the sale deed. The vendee made full payment in FY 2011-12, and a fresh deed was executed on 11th July 2011, completing the sale. The CIT(A) held that the LTCG should be taxed in AY 2012-13 as the sale was conditional and void ab initio in AY 2011-12. 3. Entitlement to Deductions under Sections 54EC and 54B of the Income Tax Act: The assessee claimed deductions of Rs. 50,00,000 under section 54EC for investment in NHAI Bonds and Rs. 85,59,386 under section 54B for the purchase of new agricultural land. These investments were made within the time allowed by law. The CIT(A) did not adjudicate on these grounds as the main relief was granted by taxing the LTCG in AY 2012-13. 4. Calculation of Indexed Cost of Acquisition: The assessee contended that the indexed cost of acquisition should be calculated based on the actual purchase cost, not on a presumed value. The AO calculated the indexed cost at Rs. 49,00,812, while the assessee claimed it should be Rs. 1,01,26,926. The CIT(A) did not address this issue explicitly due to the main relief granted. Judgment: The Tribunal upheld the CIT(A)'s decision, agreeing that the LTCG should be taxed in AY 2012-13 as the sale was conditional and completed only upon the realization of post-dated cheques in FY 2011-12. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal and the assessee's cross-objection. The Tribunal emphasized that the transfer of ownership and possession occurred in FY 2011-12, relevant to AY 2012-13, and cited the Patna High Court's judgment in Smt. Raj Rani Devi Ramna, which held that registration is prima facie proof of an intention to transfer but not proof of an operative transfer if there is a condition precedent as to the payment of consideration. Conclusion: The Tribunal concluded that the LTCG should be taxed in AY 2012-13, and the grounds raised in the cross-objection became infructuous. The appeal filed by the Revenue and the cross-objection filed by the assessee were dismissed. The order was pronounced in the open court on 29/02/2016.
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