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2020 (7) TMI 36 - AT - Income TaxIncome from other source OR Capital gain - Correct head of income - right acquired under the Agreement by the Assessee - claim of the Assessee that the said sum received is in the nature of capital gains and should be assessed under the head capital gains (as long term capital gain (LTCG) - HELD THAT - Giving up of a right to claim specific performance by conveyance in respect to an immovable property, amounts to relinquishment of the capital asset. Therefore, there was a transfer of capital asset within the meaning of the Act. The payment of consideration under the agreement of sale, for transfer of a capital asset, is the cost of acquisition of the capital asset. Therefore, in lieu of giving up the said right, any amount received, constitutes capital gain and it is exigible to tax. However, as is clear from s. 48, before the income chargeable under the head capital gains is computed, the deductions set out in s. 48 has to be given to the assessee. It is only the amount thus arrived at, after such deductions under s. 48, would be the income chargeable under the heading capital gains. It is not necessary that in all such cases there should have been a lis between the parties and in such is the right to specific performance has to be given up. The CIT(A), in our view, fell into an error in holding that the Assessee did not file a suit for specific performance and therefore cannot claim the benefit of the ratio laid down by the Hon ble Karnataka High Court in the case of H.Anil Kumar 2011 (1) TMI 1159 - KARNATAKA HIGH COURT In the present case, there was no delivery of possession in part performance of the agreement for sale dated 09-02-2005 and therefore, there is no question of the agreement dated 09-02-2-005 being regarded as a document requiring compulsory registration. Therefore, the decision in the case of CIT Vs Balbir Singh Maini 2017 (10) TMI 323 - SUPREME COURT is not applicable to the facts of the present case. For the reasons given above, we are of the view that the sum in question is chargeable to tax under the head capital gains . We are of the view that income from relinquishing rights under an agreement should be assessed under the head income from capital gains. We hold accordingly. We however find that the AO/CIT(A) have not examined the claim of the Assessee under the head Capital Gain in accordance with the provisions of Sec.48 of the Act and also claim for deduction u/s.54F of the Act. We therefore remand the question of computation of Capital Gain to the AO after due opportunity of being heard afforded to the Assessee. The Appeal of the Assessee is accordingly treated as allowed for statistical purpose.
Issues Involved:
1. Classification of the sum received by the Assessee: Income from other sources vs. Capital gains. 2. Validity of the unregistered agreement under the Registration Act, 1908. 3. Applicability of Section 54F of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Classification of the Sum Received by the Assessee: The primary issue was whether the sum of ?45,55,000/- received by the Assessee should be classified as "income from other sources" or as "capital gains." The Assessee claimed it as long-term capital gain (LTCG), while the revenue authorities treated it as income from other sources. The Assessee entered into an agreement on 09-02-2005 to purchase a property, paying an advance of ?2,75,000/-. The property was later sold to a third party, with the Assessee receiving ?48,30,000/- as a confirming party to the sale. The Assessee filed a return for the assessment year 2012-13, declaring the sum received as capital gain and claimed deduction under Section 54F of the Income Tax Act, 1961. The Assessing Officer (AO) argued that the Assessee did not possess any right over the property except for a refund of the advance paid. Consequently, the amount received was treated as income from other sources, and the deduction under Section 54F was denied. 2. Validity of the Unregistered Agreement: The Assessee's agreement dated 09-02-2005 was unregistered. The Assessee argued that under Section 17(1)(b) of the Registration Act, 1908, an agreement for sale requires compulsory registration. If not registered, it cannot be admitted as evidence of any transactions and does not affect any immovable properties comprised therein, as per Section 49 of the Registration Act, 1908. The Tribunal, however, held that the right acquired under the agreement by the Assessee should be regarded as a "Capital Asset." The decision of the Karnataka High Court in the case of H. Anil Kumar supported the Assessee’s plea, stating that the right to obtain a conveyance of immovable property falls within the expression "property of any kind" used in Section 2(14) and is consequently a capital asset. The giving up of a right to claim specific performance by conveyance in respect of an immovable property amounts to relinquishment of the capital asset, thereby attracting the provisions of Section 2(14) read with Section 2(47). 3. Applicability of Section 54F of the Income Tax Act, 1961: The Tribunal noted that the AO and CIT(A) did not examine the Assessee's claim under the head "Capital Gain" in accordance with the provisions of Section 48 of the Act and the claim for deduction under Section 54F. The Tribunal remanded the question of computation of Capital Gain to the AO for re-examination, allowing the Assessee an opportunity to be heard. Conclusion: The Tribunal concluded that the sum received by the Assessee should be assessed under the head "capital gains." The Tribunal held that the right acquired under the agreement by the Assessee is a capital asset and the sum received for relinquishing this right constitutes capital gain. The Tribunal remanded the matter to the AO for re-computation of the capital gain and examination of the Assessee's claim for deduction under Section 54F, thereby treating the Assessee's appeal as allowed for statistical purposes.
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