2020 (3) TMI 109 - AT - Income Tax

Capital gain on property sold as Sale Agreement-cum-GPA - Date of transfer of asset - capital gains as per section 50C - HELD THAT - Full consideration has been received on 26/07/2004 and the possession of the land was given to the purchaser Sri Paturi Krishna Babu S/o Paturi Radha Krishna, therefore as per section 2(47)(v), transfer has been completed and possession is given to the party. In the present case, assessee has received full consideration on 26/07/2004, therefore it can be concluded that the property has been transferred to Sri Paturi Krishna Babu on 26/07/2004. From 27/07/2004 onwards the entire land is in the possession and ownership of Shri Paturi Krishna Babu, therefore the capital gains as per section 50C as on the date of sale i.e. 28/05/2012 has to be taxed in the hands of Shri Paturi Krishna Babu. So far as assessees is concerned, the capital gains has to be taxed in the hands of the assessee by considering the transfer has taken place on 26/07/2004 as per section 50C of the Act. In view of the above, the Assessing Officer is directed to tax the capital gains according to law.

Summary

Issues:
Capital gains computation based on property sale date.

Analysis:
The appeal was against the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 2013-14. The Assessing Officer noted a variance between the declared income and the actual sale of an immovable property by the assessee. The property was sold jointly with the wife, and the Assessing Officer considered the transaction as a sale agreement coupled with a General Power of Attorney. The Assessing Officer computed long-term capital gains and added it to the assessee's income. The Commissioner of Income Tax (Appeals) upheld the Assessing Officer's decision. The assessee contended that the property was sold in 2004, and the full consideration was received on that date, thus the transfer took place then and not in 2012. The Tribunal analyzed the Sale Agreement-cum-GPA document and found that the transfer was completed in 2004 when full consideration was received, possession was handed over, and the remaining balance was settled. The Tribunal held that the property was transferred in 2004, and the capital gains should be taxed accordingly. The Tribunal directed the Assessing Officer to tax the capital gains in line with the law, setting aside the decision of the Commissioner of Income Tax (Appeals) and partly allowing the appeal of the assessee.

In conclusion, the Tribunal ruled that the property transfer occurred in 2004 when full consideration was received, and possession was handed over. Therefore, the capital gains should be taxed based on the 2004 transaction date and not the subsequent sale in 2012. The Tribunal directed the Assessing Officer to adjust the capital gains tax accordingly, setting aside the decision of the Commissioner of Income Tax (Appeals) and partially allowing the assessee's appeal.