2017 (6) TMI 297 - AT - Income Tax

Computation of capital gains - transfer of property when sold in 2004 but registered only during the year 2008 - application of provision of 50C - Held that - CIT(A) has observed that the assessee s name in the deed of Transfer of lease hold rights was mentioned only because the original allotment was in his name, hence, the assessee did not have ownership of the said property during the year under consideration and therefore, there is no question of transaction of sale of the said property during the year under consideration and capital gains is not accrued. However, the Capital Gains should be taken into account only after deducted the price of the plot from the value of the property i.e. ₹ 99,20,000 (-) Minus ₹ 16,75,000/- i.e. the cost of the plot (to be paid to the Noida Authority) ₹ 82,45,000/-. Accordingly, we set aside the issue in dispute to the file of the AO with the direction to compute the capital gains on the difference of the Stamp duty amount and price of the impugned property after applying the relevant provisions of the Act. Accordingly, the order of the Ld. CIT(A) is reversed. - Appeal filed by the Revenue stands allowed for statistical purposes.

Summary

Issues:
1. Validity of the Ld. CIT(A)'s order
2. Application of section 50 C regarding lease hold rights
3. Timing of property transfer and lack of purchase details
4. Ownership requirement for property sale

Issue 1: Validity of the Ld. CIT(A)'s order
The appeal by the Revenue challenged the Ld. CIT(A)'s order for Assessment Year 2009-10, arguing that it was legally flawed and not aligned with the case facts. The Ld. CIT(A) had deleted an addition made by the AO concerning Long Term Capital Gain on the sale of a property, leading to the appeal.

Issue 2: Application of section 50 C regarding lease hold rights
The Ld. CIT(A) had directed the AO to apply section 50 C, contending that lease hold rights were not covered under this section. However, the Revenue argued that this direction was erroneous, emphasizing the need for the property owner to sell it and the absence of ownership before such a sale.

Issue 3: Timing of property transfer and lack of purchase details
The AO added the entire sale price of the property to the assessee's income, as the transfer was deemed to have occurred in the relevant year, and no purchase details were provided. In contrast, the Ld. CIT(A) highlighted that the property transfer actually took place earlier, and the absence of ownership during the relevant year precluded any capital gains.

Issue 4: Ownership requirement for property sale
The Tribunal analyzed the case, noting that the assessee did not have ownership during the relevant year, as the property had been transferred earlier. The Tribunal directed the AO to recalculate the capital gains by deducting the cost of the plot from the property value, as the ownership status impacted the tax implications, ultimately overturning the Ld. CIT(A)'s decision.

In conclusion, the Tribunal allowed the Revenue's appeal for statistical purposes, emphasizing the importance of ownership in property transactions and the accurate computation of capital gains based on ownership status and property costs.