2018 (2) TMI 303 - AT - Income Tax

Tribunal rules on short-term capital gain assessment for A.Y. 2007-08, adjusts consideration value.

The Tribunal upheld the assessment of short-term capital gain in A.Y. 2007-08, ruling that the property transfer did not occur in the previous year. ... Assessment of STCG in the hands of the Assessee - Transfer u/s 2(47) - full value of consideration received should be considered for sale of the property under the agreement - property was ultimately sold to a third party - section 50(1) applicability - Special provision for computation of capital gains in case of depreciable assets - Held that:- Admittedly there was no power of attorney whatsoever given by the assessee in favour of Shri Sanjay Todi. We are therefore are of the view that there is no merit in the contentions put forth by the assessee. We hold that the Revenue authorities were correct in coming to the conclusion that there was a transfer of capital asset by the assessee during the previous year relevant to A.Y.2007-08. In the present case the block of assets ceases to exist and therefore the provisions of Sec.50(2) of the Act would apply. Under Sec.50(2) of the Act, it is only the income received or accruing as a result of transfer that should be reduced from the WDV of the block of building as on 1.4.2006 to arrive at the Short Term capital gain. Admitted factual position is that the Assessee was to receive only a sum of ₹ 32 lacs from S.K.Todi as sale consideration in respect of the property. The admitted position is that the difference between ₹ 32 lacs and ₹ 56 lacs has already been taxed in the hands of S.K.Todi. In this factual background, we are of the view that the STCG on sale of the property has to be determined in the hands of the Assessee by adopting the income received as accruing as a result of transfer as ₹ 32 lacs and not ₹ 56 lacs. To this extent the plea of the Assessee is accepted. Issues Involved:1. Determination of the assessment year for capital gain.2. Computation of the full value of consideration for capital gain.Issue-wise Detailed Analysis:1. Determination of the Assessment Year for Capital Gain:The primary issue is whether the short-term capital gain should be assessed in the assessment year (A.Y.) 2006-07 or A.Y. 2007-08. The assessee argued that the transfer of the property occurred in the previous year relevant to A.Y. 2006-07 under section 2(47)(vi) of the Income Tax Act, 1961, due to an agreement dated 20.10.2005 with Shri Sanjay Todi. However, the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] concluded that the transfer occurred in A.Y. 2007-08 because the property continued to appear in the assessee's balance sheet for subsequent years and no capital gain was shown in A.Y. 2006-07. The Tribunal upheld this view, emphasizing that the property was not transferred to Shri Sanjay Todi as he neither took possession nor registered the property in his name. Therefore, the short-term capital gain was correctly assessed in A.Y. 2007-08.2. Computation of the Full Value of Consideration for Capital Gain:The second issue pertains to the computation of the full value of consideration for the capital gain. The assessee contended that the sale consideration should be Rs. 32,00,000, the amount agreed upon with Shri Sanjay Todi, rather than Rs. 56,00,000, the amount for which the property was ultimately sold to third parties. The AO computed the short-term capital gain by treating Rs. 56,00,000 as the full value of consideration under section 50(1) of the Act. The Tribunal considered the alternative submission of the assessee and concluded that, under section 50(2) of the Act, the income received or accruing as a result of the transfer should be considered. Since the assessee was to receive only Rs. 32,00,000 from Shri Sanjay Todi, and the difference between Rs. 32,00,000 and Rs. 56,00,000 had already been taxed in Shri Sanjay Todi's hands, the Tribunal held that the short-term capital gain should be computed by adopting Rs. 32,00,000 as the full value of consideration.Conclusion:The Tribunal dismissed the appeal by the assessee regarding the assessment year for capital gain, affirming that the short-term capital gain was correctly assessed in A.Y. 2007-08. However, it accepted the alternative submission regarding the computation of the full value of consideration, directing that the short-term capital gain should be determined by considering Rs. 32,00,000 as the full value of consideration received or accrued on the transfer.