In the case of M/s Mangilall Estates (P) Ltd, Kolkata bench of Income Tax Appellate Tribunal (ITA), recently held that part performance of the agreement would be considered as transfer for attracting Capital Gain and the same is taxable in that financial year in which such transactions were entered into by the Assessee.
Assessee in the present case is a private limited company and engaged in business of letting out of immovable property. There was no income shown by the Assessee during the assessment year, but it claimed certain expenses to maintain the status of the company active.
During the course of assessment proceedings the Assessing Officer (AO) during the year the Assessee Company has transferred an immovable property which was valued for the purpose of stamp duty at Rs. 1,90,83,227 and the same was escaped from the income tax return of the Assessee.
In response the Assessee submitted that it has transferred the said property for Rs.1.90 lakhs in the year 1991 and it has also received an advance of Rs.19000 which was duly reflected in the books of the Assessee, but the sale deed was not executed in the name of transferee due to some problem related to the tittle of the property.
The AO further noted that in the meantime, the Assessee transferred the aforementioned property vides a sales deed but no tax was offered by the Assessee in the year under consideration. Consequently the AO called up on the Assessee for explaining the reason for not disclosing the capital gains on the transfer of the property. In response counsel for the Assessee advocate Subash Agarwal contended that the property was transferred in the financial year 1991-1992 and against such transfer an advance of Rs.19000 received by the Assessee. Thus as per the provisions of section 53A of the transfer of Property Act, the transfer has taken place in the financial year 1991-1992, therefore no income of capital gain on the transfer of such property was offered to tax.
However, the AO rejected the contention of the Assessee and observed that the property was transferred in the financial year 2011-12 corresponding to assessment year 2012-13, therefore capital gains on such transfer is liable to be taxed in the year under consideration. accordingly he treated the stamp value for the purpose of stamp duty of Rs.1,90,83,227 as sale consideration under section 50C of the Act and determine the capital gain income as Rs.1,89,1,170 and added the same in the total income of the Assessee.
After considering the rival submissions of both parties the Tribunal bench comprising of Judicial Member Aby. T. Varkey and Accountant Member Waseem Ahmed observed that “the property in the instant case has taken place in the financial year 1991-92 and it can be brought to tax in the assessment year 1992-93 only. The events which had taken place constituted transfer which includes any transaction which allows possession to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act 1882. Thus any transaction entered into in any manner which has the effect of transferring or enabling the enjoyment of any immovable property amounts to transfer under section 2(27) of the Act”.
The division bench further observed that “therefore capital gains would be taxable in the year in which such transactions are entered into, even if the transfer of the immovable property is not effective or complete by way of registration under the general law.
