2018 (5) TMI 1253 - AT - Income Tax

Addition under the head income from other sources - transfer of immovable property without consideration - Held that - Provisions of section 56(2)(vii)(b) of the Act bring into the ambit of income from other sources of an immovable property to the transferee which is received without consideration. This was brought into statute book by Finance Act 2010 w.e.f. 1st October 2009. The above said provisions of the Act are applicable to transactions which are entered into after 1st October 2009. In this regard assessee s Counsel has also placed reliance upon Circular no.5/2010 issued by the CBDT wherein it has been clearly mentioned that these amendments have been made applicable w.e.f. 1st October 2009 and will accordingly apply for transaction undertaken on/or after such date . Hence from the above provisions of law and CBDT circular it is clear that transfer of immovable property without consideration will be taxable in the hands of transferee if the transaction took place after 1st October 2009. There was no provision of law to tax such transaction prior to 1st October 2009. The impugned transaction was entered into on 6th June 2009 as per registered sale deed. Hence there is no dispute that the impugned transaction is not hit by the provisions of section 52(6)(vii)(b) of the Act.- Decided in favour of assessee.

Issues:
1. Addition of Rs. 48,57,000 under Income from Other Sources.
2. Assessment of property received without consideration.
3. Liability to be assessed on income under Section 234B of Income Tax Act 1961.

Issue 1: Addition of Rs. 48,57,000 under Income from Other Sources

The Assessing Officer (AO) added Rs. 48,57,000 to the income of the assessee as income from other sources, alleging that the property was acquired without consideration. The AO noted that the property was purchased by the assessee from a company, and the consideration was paid through a cheque. However, the AO concluded that the property was acquired without any consideration. The assessee contended that the property transfer was part of a financial arrangement with a finance company. The Commissioner (Appeals) upheld the AO's decision, stating that the property was received without consideration, leading to the addition under Section 56(2)(vii)(b) of the Income Tax Act. The Tribunal, however, noted that the transaction took place before the provisions of Section 56(2)(vii)(b) were applicable, as per the Finance Act, 2010. Citing a CBDT circular, the Tribunal ruled that the transaction was not taxable as per the law applicable at the time of the transaction. Consequently, the Tribunal allowed the appeal, setting aside the decision of the Commissioner (Appeals).

Issue 2: Assessment of property received without consideration

The AO and the Commissioner (Appeals) held that the property was received without consideration, leading to the addition of Rs. 48,57,000 under income from other sources. The assessee argued that the purchase deed indicated consideration provided in the registered documents, contradicting the AO's conclusion. The Tribunal observed that the provisions of Section 56(2)(vii)(b) were not applicable to transactions before 1st October 2009, as per the Finance Act, 2010. Relying on a CBDT circular, the Tribunal determined that the transaction in question, executed on 6th June 2009, was not subject to taxation under Section 56(2)(vii)(b). Consequently, the Tribunal ruled in favor of the assessee, overturning the decision of the Commissioner (Appeals).

Issue 3: Liability to be assessed on income under Section 234B of Income Tax Act 1961

The assessee denied liability to be assessed under Section 234B of the Income Tax Act 1961. However, the Tribunal did not address this issue in its judgment as the primary issue of the addition under Section 56(2)(vii)(b) was ruled in favor of the assessee. Therefore, the Tribunal did not adjudicate on the denial of liability under Section 234B.

This comprehensive analysis of the judgment highlights the key issues, arguments presented, and the Tribunal's decision on each issue, providing a detailed understanding of the legal aspects involved in the case.

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