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2019 (1) TMI 791 - AT - Income TaxCapital gain - capital asset - Agreement of assignment of immovable property which is unregistered is transfer u/s. 48 read with sec. 2(47)(v) - Held that - We are of the view that the CIT(A) as well as the AO erred in referring to the expression of the nature referred to in sec. 53A in section 2(47)(v) in order to arrive at the impugned conclusion, so we are inclined to set aside the impugned order. We note that any profit or gain arising from the transfer of a capital asset is chargeable to tax under the head capital gain and is deemed to be the income of the financial year in which the transfer took place. And capital asset is defined u/s. 2(14) which means property of any kind held by an assessee whether or not connected with his business or profession. The term capital asset has an embracing connotation and includes every kind of property as generally understood except those that are expressly excluded in the definition. So too, expression property includes every conceivable thing, right or interest (Syndicate Bank Ltd. Vs. Addl. CIT (1985 (3) TMI 48 - KARNATAKA HIGH COURT). And so, if the capital asset is transferred as envisaged under section 2(47) then it has to be taxed as per law. - the issue of taxing the consideration in respect of assignment of leasehold rights need to be de novo carried out by the AO untrammeled by the finding/observations supra and of the CIT(A) while deciding the appeal of the assessee. - Appeal of assessee is allowed for statistical purposes.
Issues Involved:
1. Taxability of the amount received on an unregistered agreement of assignment of leasehold rights. 2. Interpretation of transfer under section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act, 1882. 3. Validity of unregistered agreements post the 2001 amendment to the Indian Registration Act and its implications on section 53A of the Transfer of Property Act, 1882. Detailed Analysis: 1. Taxability of the Amount Received on an Unregistered Agreement of Assignment of Leasehold Rights: The assessee filed a return of income disclosing a total income of ?7,89,577/- for AY 2008-09. During assessment, the AO noted that the assessee received ?1,75,00,000/- from M/s. Improved Realtors (P.) Ltd. via an unregistered agreement of assignment of leasehold rights dated 17-08-2007. The AO considered this amount as taxable capital gains under section 48 read with section 2(47)(v) of the Income-tax Act, 1961 and section 53A of the Transfer of Property Act, 1882. The AO computed the capital gains by taking the cost of acquisition of the leasehold right as 'NIL', thus taxing the entire consideration of ?1,75,00,000/- as Long Term Capital Gains. The Ld. CIT(A) upheld this view. The assessee contended that as it was not the owner but only a lessee, it could not transfer ownership rights, and thus no valid transfer occurred under section 2(47)(v) of the Act. 2. Interpretation of Transfer under Section 2(47)(v) of the Income-tax Act, 1961 Read with Section 53A of the Transfer of Property Act, 1882: The Tribunal noted that the assessee was only a lessee with leasehold rights and not the owner of the immovable property. The key issue was whether the unregistered agreement of assignment constituted a transfer under section 2(47)(v) of the Income-tax Act, 1961. The Tribunal referred to the Supreme Court judgment in CIT Vs. Balbir Singh Mani (2017) 398 ITR 531 (SC), which clarified that post the 2001 amendment to the Indian Registration Act, an unregistered agreement cannot be considered a valid transfer under section 53A of the Transfer of Property Act, 1882. The Tribunal concluded that since the agreement was not registered, it had no legal effect under section 53A, and thus no transfer occurred under section 2(47)(v) of the Income-tax Act. 3. Validity of Unregistered Agreements Post the 2001 Amendment to the Indian Registration Act and Its Implications on Section 53A of the Transfer of Property Act, 1882: The Tribunal highlighted the amendments made by the Registration and Other Related Laws (Amendment) Act, 2001, which required agreements to be registered to have legal effect under section 53A of the Transfer of Property Act, 1882. The Tribunal emphasized that post-2001, an unregistered agreement has no effect in law for the purposes of section 53A. Consequently, the unregistered agreement of assignment of leasehold rights in this case could not be considered a valid transfer of immovable property. The Tribunal set aside the findings of the AO and Ld. CIT(A), directing a de novo assessment of the issue by the AO without being influenced by the earlier findings. Conclusion: The Tribunal allowed the appeal for statistical purposes, directing the AO to reassess the taxability of the consideration received for the assignment of leasehold rights, ensuring compliance with the legal requirements post the 2001 amendment to the Indian Registration Act. The Tribunal underscored the necessity of registration for the agreement to have legal effect under section 53A of the Transfer of Property Act, 1882, thereby impacting the interpretation of transfer under section 2(47)(v) of the Income-tax Act, 1961.
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