POA Cannot Be Treated as Registered Conveyance for Purpose of Transfer u/s 2(47)(v) and Capital Gain u/s 45: ITAT [Read Order]
Unregistered agreements or POAs cannot be treated as conveyance deeds and do not create ownership rights.
The Bangalore Bench of the Income Tax Appellate Tribunal ( ITAT ) has clarified that execution of a Power of Attorney (POA) does not, by itself, constitute a “transfer” of immovable property within the meaning of Section 2(47)(v) of the Income-tax Act, 1961, read with Section 53A of the Transfer of Property Act, 1882 (TPA). Thus, capital gains under Section 45 cannot be levied merely on the basis of a POA or related construction activity in the absence of a registered agreement of sale.
The assessee, Shri Ramesh Kumar, owned land in Mangalore. During a survey, the Revenue found that he had entered into an arrangement with one Mr. Srinath Hebbar (developer) for construction of a residential apartment complex.
The Assessing Officer (AO) concluded that the assessee had transferred the land in FY 2011-12 for consideration of ₹30 crore, relying on (i) a POA executed in favour of the developer, (ii) commencement certificate dated 07.09.2011, and (iii) statements of both parties during the survey. The AO invoked Section 2(47)(v) and taxed capital gains in AY 2012-13.
On appeal, the assessee contended that the transaction was only supported by an unregistered POA and an unregistered sale agreement entered later in August 2012.
He argued that, following the 2001 amendments to Section 53A of the Transfer of Property Act and the Registration Act, only a registered contract can give rise to "part performance" capable of constituting a "transfer" under Section 2(47)(v). In the absence of such a registered document, there was no valid transfer, and the capital gains offered in subsequent years when registered sale deeds were executed should be accepted.
The Tribunal considered the contentions and said that Section 2(47)(v) covers only those cases where possession is allowed to be taken in part by performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act. After the 2001 amendment, such a contract must be registered, otherwise, it has no legal efficacy.
In the decision of CIT v. Balbir Singh Maini and Suraj Lamp & Industries Pvt. Ltd. v. State of Haryana provided by the supreme court, the Tribunal observed that unregistered agreements or POAs cannot be treated as conveyance deeds and do not create ownership rights.
The ITAT further noted that a POA is merely a creation of an agency authorizing the attorney-holder to act on behalf of the principal. It does not itself transfer title or interest in immovable property. Even if construction was commenced or part consideration received, such actions cannot substitute for a registered conveyance deed required under law.
The bench of Waseem Ahmed and Soundararajan stated that the Revenue authorities erred in equating the POA with a written contract of sale. Since there was no registered agreement in AY 2012-13, there was no transfer within the meaning of Section 2(47)(v), and consequently, no capital gains could be taxed in that year.
Accordingly, the ITAT allowed the assessee’s appeal, setting aside the addition of capital gains. Thus, mere execution of a POA or an unregistered agreement cannot trigger capital gains taxation.
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