Capital Gains Must Be Taxed in Year of Transfer, Not Subsequent Registration of Sale Deed: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Bangalore Bench, deleted addition towards long term capital gains after holding that transfer of the immovable property had taken place in Assessment Year 1993-94 and not in Assessment Year 2007-08 in which the sale deed was subsequently registered.

The assessee, Prakash Chand Bethala (HUF), had entered into an agreement for sale of immovable property on 08.03.1993 for sale consideration of Rs.9.80 lakh. However, the registered sale deed in respect of the property was executed on 09.03.2007.

The AO observed that on the date of registration of the sale deed, the stamp duty value of the property was Rs.2.7 crore. Accordingly, reassessment proceedings were initiated and long term capital gains were computed on the basis of stamp duty valuation applicable in 2007.

In the first round of appellate proceedings, the CIT(A) upheld the addition made by the AO.

In an earlier appeal in the assessee’s own case, the Tribunal held that transfer had taken place on the date of agreement to sell dated 08.03.1993 and therefore stamp duty value as on that date alone could be adopted for computation of capital gains. Pursuant to directions issued by the Tribunal, the AO recomputed capital gains for Assessment Year 2007-08.

The CIT(A) again upheld the reassessment order after observing that the assessee had failed to pursue the appeal proceedings.

Aggrieved, the assessee preferred an appeal before the Tribunal.

Before the Tribunal, the assessee contended that once transfer of the property had been held to have taken place in 1993, the AO could not continue to tax capital gains in Assessment Year 2007-08.

However, the Revenue supported the reassessment order passed by the AO.

The Tribunal comprising Prashant Maharishi (Vice President) observed that the earlier order passed in the assessee’s own case had conclusively held that transfer of the property took place in 1993. Therefore, capital gains, if any, were chargeable only in Assessment Year 1993-94 and not in Assessment Year 2007-08 merely because the sale deed was registered subsequently.

Accordingly, the Tribunal held that the AO had wrongly assumed jurisdiction by taxing capital gains in Assessment Year 2007-08 and directed deletion of the addition.

The assessee’s appeal was allowed.

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