Property transfer to daughter-in-law through sale deed triggers capital gains tax under Section 50C despite no consideration received

ITAT Rajkot held that property transfer through sale deed to daughter-in-law constitutes taxable capital gains under Section 50C, despite assessee's claim it was a gift without consideration. The tribunal rejected arguments that Section 47(iii) gift exemption applied, noting the transaction was executed via sale deed, not gift deed. Following precedent from Balwant Kaur Mangat and Jay Atulbhai Mody cases, the tribunal emphasized that transfer mode determines tax treatment - sale deeds trigger capital gains liability regardless of actual consideration received. The fact that daughter-in-law's receipt was exempt under Section 56(2)(vii) did not absolve assessee's capital gains tax liability, as these provisions operate independently. Decision against assessee.

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Issues Involved:
1. Addition of Rs. 30,53,684/- as Long-Term Capital Gain.
2. Applicability of Section 50C to family plots.
3. Consideration of sale deed as a gift.
4. Levy of interest under Section 234-B.

Summary:

1. Addition of Rs. 30,53,684/- as Long-Term Capital Gain:
The assessee contested the addition of Rs. 30,53,684/- as Long-Term Capital Gain, arguing that the plots were family plots used for building construction for family members and should not be liable to capital gain. The Assessing Officer (AO) observed that the sale deed was registered for Rs. 51,000/- but the Stamp Duty valuation was much higher. The AO issued a show cause notice and added Rs. 30,53,684/- to the income under Section 50C. The Ld. CIT(A) confirmed the addition, noting discrepancies in the assessee's claims and treating the gift deed as an afterthought.

2. Applicability of Section 50C to family plots:
The assessee argued that the plots were transferred as a gift to his daughter-in-law without consideration and thus should not attract capital gains tax under Section 50C. The AO and Ld. CIT(A) rejected this argument, stating that the gift deed was a self-serving document and the provisions of Section 50C were applicable as the sale deed showed consideration.

3. Consideration of sale deed as a gift:
The assessee claimed that the sale deed was executed for administrative and Stamp Duty purposes only and the intention was to gift the property. The Ld. CIT(A) and AO did not accept this, treating the transaction as a sale and not a gift. The ITAT referenced similar cases where sale deeds showing consideration were not accepted as gifts, even if no actual money was exchanged.

4. Levy of interest under Section 234-B:
The assessee contended that no interest under Section 234-B should be levied. This argument was not specifically addressed in detail in the judgment, as the primary focus was on the applicability of Section 50C and the nature of the transaction.

Conclusion:
The ITAT upheld the decision of the Ld. CIT(A), confirming the addition of Rs. 30,53,684/- as Long-Term Capital Gain under Section 50C. The appeal was dismissed, reinforcing that the transaction was treated as a sale and not a gift, and the provisions of Section 50C were correctly applied.

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