Mere Execution of Power of Attorney Agent not amount to ‘Transfer’: ITAT [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Chennai bench has held that mere execution of a Power of Attorney would not amount to transfer of property for determining the capital gain tax liability.

The Assessing Officer made an addition in respect of long-term capital gains arising from transaction of property based on a presumption that the property was sold on the date on which the power of attorney was executed.

The assessee claimed that the possession of the property was handed over to the power of attorney agent for negotiating the sale and it was not handed over to the purchaser. It was contended that no consideration was received from power of attorney agent also, therefore, there was no sale during the year under consideration.

Before the Tribunal, the assessee argued that the execution of power of attorney in favour of third party for negotiating the sale cannot be considered to be sale of property within the meaning of Section 2(14) of the Income Tax Act.

The Tribunal observed that the Power of attorney agent is only to manage or negotiating the property for sale. The power of attorney executed by the assessees does not confer or transfer any right over the property on any person.

“At the best, the power of attorney agent may act on behalf of the assessee. Therefore, this Tribunal is of the considered opinion that mere execution of power of attorney agent cannot be considered to be transfer of property. For transfer of property, the assessee has to enter into an agreement for sale either by himself or through power of attorney agent and also hand over the physical possession of the property as contemplated under Section 53A of Transfer of Property Act. Moreover, in case there was agreement between the assessee and purchaser, by which the purchaser was allowed to continue to enjoy the property, then also there may be transfer within the meaning of 2(14) of the Act. In the case before us, it not the case of the Revenue that the assessees entered into an agreement for sale or arrangement allowing the purchaser to continue to enjoy the property. In those circumstances, this Tribunal is of the considered opinion that the execution of sale deed and handing over possession pursuant to sale deed would be the date of sale. Therefore, the Assessing Officer shall verify the sale deed and find out when actually the possession of the property was handed over,” the Tribunal said.