Capital gains from land transfer via Power of Attorney taxable when consideration received, not when Sale Deed registered

ITAT Chennai held that capital gains from transfer of 14,307 sq.ft. land through irrevocable Power of Attorney in 2002 was assessable only in AY 2002-03, not AY 2010-11 when Sale Deed was registered. Following SC precedent in Balbir Singh Maini, the tribunal ruled that since consideration was received and possession transferred via registered Power of Attorney in 2002, and assessee had already disclosed gains in AY 2002-03 returns, Sec. 50C provisions couldn't apply for AY 2010-11. Same transaction cannot be taxed twice across different assessment years. Appeal allowed.

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Issues:
1. Assessment of Capital Gains for the AY 2010-11 on the transfer of land by two interconnected assessees.
2. Application of Sec. 50C provisions by the AO for taxing Capital Gains.
3. Dispute regarding possession and rights over the land between the assessees and the buyer.
4. Interpretation of the principles laid down by the Hon’ble Supreme Court in a relevant case.
5. Consideration of the proviso to Sec. 50C(1) inserted by Finance Act 2016.

Issue 1: Assessment of Capital Gains for the AY 2010-11
The case involved two interconnected assessees who had purchased and later sold a portion of land, leading to the assessment of Capital Gains for the AY 2010-11. The assessees had disclosed the Capital Gains earlier for the AY 2002-03, which was accepted. The AO sought to tax the Capital Gains again in the AY 2010-11 due to the registration of the Sale Deed in 2009.

Issue 2: Application of Sec. 50C provisions
The AO applied Sec. 50C to tax the Capital Gains for the AY 2010-11, citing a lack of documentary evidence of the 2002 transaction. However, the assessees argued that the transfer was completed in 2002 through a registered Power of Attorney, possession handover, and consideration receipt, making it not liable for assessment in 2010-11.

Issue 3: Dispute over possession and rights
The dispute involved possession and rights over the land admeasuring 14,307 sq.ft., with the Ld. CIT(A) referring to a previous court decision granting separate possession to both assessees. However, the court noted the execution of a registered irrevocable Power of Attorney in favor of the buyer, indicating completion of the transfer in 2002.

Issue 4: Interpretation of Supreme Court principles
The assessees relied on a Supreme Court decision stating that once a registered irrevocable Power of Attorney is executed, possession is handed over, and consideration received, the transfer should be considered completed. This principle was crucial in determining the taxability of the Capital Gains for the relevant assessment year.

Issue 5: Proviso to Sec. 50C(1)
The court considered the proviso to Sec. 50C(1) inserted by the Finance Act 2016, which exempts the application of Sec. 50C if the agreement date and registration date are different. As the consideration was received in 2002 and offered for tax, the court concluded that Sec. 50C provisions could not be applied in the assessees' case.

In conclusion, the appeals filed by both assessees were allowed, emphasizing that the Capital Gains, if any, on the land transfer should be assessed only for the AY 2002-03, as disclosed and accepted earlier.

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