The Chennai Bench of the Income Tax Appellate Tribunal (ITAT), confirmed income as Long Term Capital Gain in the case of owner selling property through General Power of Attorney (GPA).
The only issue in the appeal of the assessee, Dr Sabesan Parameswaran is as regards to the order of the CIT(A) confirming the action of AO in treating the amount of Rs.6 crores received by S. Ramaswamy as income of the assessee under the head ‘long term capital gain’.
The AO during the course of assessment proceedings noticed from the computation of income filed by assessee that the assessee has disclosed long term capital gain of Rs.29 lakhs on account of sale of land. It is transpired that the assessee along with his grandmother has executed power of attorney in favour of one S. Ramaswamy, the agent in respect of the property.
The AO required the assessee as to why he has not declared capital gain on entire sale consideration of property of Rs.7 crores. The AO required the assessee to explain as to why the sum of Rs.6 crores was given to the Power of Attorney (PoA) holder.
The AO did not accept the reasoning or explanation submitted by assessee and and assessed long term capital gain on entire sale consideration and by taking assessee’s share of 2/3rd at Rs.4 crores and computed the total income. The CIT(A) concluded that the assessee being legal owner of the property and the agent or the PoA holder was never a legal holder and he has any right to claim any consideration in the property.
A Coram consisting of Mahavir Singh, Vice President and G Manjunatha, Accountant Member observed that “The GPA nowhere has given possession to the GPA holder and he has only executed this sale deed and as per clear terms of PoA, the principal has to receive monetary consideration from the agent after execution of sale deed.
The Tribunal also noted that the PoA and sale deed both are executed on the same day by assessee as well as the GPA. It means the PoA holder has no legal right or interest in the property and entire consideration belongs to assessee or other co-owner. Even otherwise, S. Ramaswamy has not accounted for this consideration in his return of income or no capital gain is declared either short term or long term by S. Ramaswamy, the PoA holder in his return of income.
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