2021 (9) TMI 224 - AT - Income Tax

Capital gain/ loss on sale of property - unregistered sale agreement - whether it constitute valid transfer under section 53A of Transfer of Property Act - HELD THAT - No reason to interfere with the observations of the CIT(A) that.A.O. has accepted that the land was sold by the appellant, for which substantial consideration has been received coupled with the handing over of the possession of the said land. The buyer has also reflected the same in her balance sheet and the Wealth Tax Returns subsequently. A.O. has however stated that the property is not yet been registered. There is no requirement within the meaning of the word transfer as per Income Tax Act for the charge ability of capital gains, for the registration of property as long as the possession and part consideration has been effected with regard to the subject property. Therefore, the above will have no relevance with regard to the computation and chargeability of capital gains for the year under consideration and the appellant has already offered the sale consideration for the purpose of computing the capital gains or capital loss in the instant case - Decided against revenue .

Summary

Issues:
1. Appeal against CIT(A)'s order for A.Y. 2014-15 under section 144 of the Income-Tax Act, 1961.
2. Allowance of capital loss claim on the sale of property under unregistered sale agreement.
3. Allegation of sham transaction to reduce tax liability.
4. Dispute regarding computation of capital gains.

Analysis:
1. The appeal before ITAT Hyderabad was against the CIT(A)'s order for A.Y. 2014-15 under section 144 of the Income-Tax Act, 1961. The appellant, a Director of a company, had his assessment completed by the A.O., resulting in additions on account of LTCG on sale of land and asset, along with unexplained investment.

2. The dispute centered around the allowance of the assessee's claim of capital loss on the sale of property under an unregistered sale agreement. The A.O. treated the entire sale consideration as long term capital gain due to the absence of proof for the claimed cost of acquisition. However, the CIT(A) found merit in the assessee's submissions and deleted the addition after considering the A.O.'s acceptance of the sale and possession transfer.

3. The revenue alleged that the sale to the assessee's wife was a sham transaction to create a capital loss and reduce tax liability. The CIT(A) disagreed, emphasizing the substantial consideration received, possession transfer, and compliance with SRO value, leading to the dismissal of the revenue's grounds on this issue.

4. The final issue revolved around the computation of capital gains. The CIT(A) upheld the assessee's claim based on the A.O.'s acceptance of the sale and possession transfer, leading to the dismissal of the revenue's appeal by the ITAT Hyderabad. The judgment was pronounced on 25th August 2021, acknowledging the COVID lockdown situation's impact on timelines as per the recent directions of the apex court.