2023 (7) TMI 495 - AT - Income Tax

Capital gain on property gifted - Execution of sale deed instead of gift deed wrongly - assessee as Power of Attorney holder transferred part of plot to his daughter-in-law - AO on the basis of this sale deed has taken the full value of consideration u/s 50C - Assessee contention that the sale deed was wrongly executed instead of executing the gift deed - HELD THAT - We note that in support of the contention that the sale deed was wrongly executed instead of executing the gift deed and that the consideration mentioned in the sale deed was never received by the assessee from his daughter-in-law, assessee filed an affidavit where he declared that sale deed has been wrongly executed, he was having no knowledge of transferring legal title at the time of execution, he executed sale deed instead of gift deed as per the advice of his advocate and that he has not received any sale consideration from daughter-in-law. Assessee vide his letter to the AO specifically explained that if he has any doubt, daughter-in-law can be produced to confirm the fact. However, the AO did not require the assessee to produce Smt. Asha Tambi. Thus the affidavit filed by the assessee is not controverted. Hon ble Supreme Court in case of Mehta Parikh Co. 1956 (5) TMI 4 - SUPREME COURT has held that the rejection of affidavit filed by the assessee is not justified unless the deponent has either been discredited in cross examination or has failed to produce other supporting evidence when called upon to do so. On the direction of Bench the legal heir of assessee also filed affidavit of Daughter in law where also she affirmed that his father-in-law executed the sale deed instead of gift deed and that she has not paid the amount of Rs. 3 lacs as mentioned in the sale deed. We are of the view that no capital gain can be computed in respect of the sale deed executed in favour of Daughter in law Smt. Asha Tambi as it is only a gift to close relative and not a sale and, therefore, Ground No. 1 is allowed.

Summary

Issues Involved:
1. Treatment of gift of immovable property to daughter-in-law as chargeable to capital gain tax.
2. Treatment of sale consideration of the property under Section 50C without referring the matter to DVO.
3. Deduction under Section 54F with reference to deemed consideration instead of actual consideration.

Summary:

Issue 1: Treatment of Gift as Capital Gain
The assessee contended that the transfer of property to his daughter-in-law was a gift, not a sale, and thus should not be subject to capital gains tax. The AO treated it as a sale based on the executed sale deed, which mentioned a consideration of Rs. 3 lacs. The assessee filed an affidavit stating that no consideration was received and offered to produce his daughter-in-law to confirm this. The AO did not require the assessee to produce her, and the affidavit remained uncontroverted. The Tribunal held that the property transfer was indeed a gift and not a sale, thus no capital gain could be computed. Ground No. 1 was allowed.

Issue 2: Treatment of Sale Consideration under Section 50C
The AO computed the sale consideration based on the value determined by the Sub-Registrar, which was Rs. 12,84,450/-. The assessee argued that the AO should have referred the matter to the DVO due to the significant variation in the stamp duty valuation of different parts of the plot. The Tribunal did not specifically address this issue, as it became infructuous due to the decision on Issue 1.

Issue 3: Deduction under Section 54F
The AO allowed the deduction under Section 54F based on the deemed consideration of Rs. 12,84,450/- instead of the actual consideration of Rs. 7 lacs. The assessee argued that the deduction should be calculated based on the actual consideration. The Tribunal did not decide on this issue separately, as it became infructuous due to the decision on Issue 1.

Conclusion:
The appeal was partly allowed, with the Tribunal ruling that the transfer to the daughter-in-law was a gift, thus no capital gain could be computed. Consequently, the issues related to the sale consideration under Section 50C and the deduction under Section 54F were not decided.