Wealth Tax can’t be Levied on Sale Consideration of a Property already Computed as Long Term Capital Gain: ITAT [Read Order]

Wealth Tax - Kerala High Court - Taxscan

In Smt. Boda Sarada Reddy vs. Asst. Commissioner of Wealth Tax, the Hyderabad Bench of Income Tax Appellate Tribunal ( ITAT ) held that no wealth tax arises on the sale consideration of a property already computed as Long Term Capital Gain.

The assessee was the owner of a plot of land. He sold the land as per an agreement deed dated 31st March 2006. The possession was handed over on 1st April 2006. However, registration was done only in the year 1st April 2008 due to some reasons. The assessee offered capital gains for the AY 2007-08. However, as the property was registered in 2008, the Assessing Officer (A.O.) issued notices calling for Wealth Tax Return on the holding that the assessee was still the owner. Accordingly, the value of the property was taken at 1.2 Crore by the A.O. On appeal, the CIT (A) dismissed the contentions of the assessee.

The Counsel for the assessee argued that the property was handed over to the buyer and issue of capital gains arising from the agreement of sale was already concluded. He contended that the department should not have assessed the capital gains for AY.2007-08 on the reason that the possession was handed over on 1st April 2006, if it believed that the property was still to be in assessee’s possession.

The bench comprising of Judicial Member P. Madhavi & Accountant Member B. Ramakotaiah observed “we are of the opinion that the order of AO and CIT(A) cannot be sustained. It was the contention of the AO in Income Tax proceedings that assessee had indeed handed over the possession of the property as on 01-04-2006, which led to assessing the capital gains arising on the transfer of that property in AY. 2007-08. Therefore, as on 31-03-2007, the property was no longer in the possession or ownership of assessee. Moreover, if the property is deemed to be in assessee’s ownership, then, the money received towards sale would have to be considered as the liability on the date of valuation. Accordingly, there cannot be a Wealth Tax arising in this transaction. The orders of AO and CIT(A) are against the principles of law and facts of the case. Accordingly, we have no hesitation in setting aside the orders by allowing the grounds of the assessee.”

Subscribe Taxscan Premium to view the Judgment
taxscan-loader