Capital Gains Already Taxed in AY 2004–05 — Section 50C Cannot Trigger Tax in AY 2007–08: Madras HC

 

OITO vs. Bakthavatsalam Gowtham (TCA No. 302 of 2012)

Facts:
1. The Assessee and his brother inherited 27.38 grounds of immovable property in Chennai. On 20.11.2003, they entered into a joint development agreement (JDA) with Ceebros Hotels Pvt. Ltd. A registered power of attorney was also executed in favour of Ceebros.

2. 6.5 grounds of land were sold outright to Ceebros for ₹4.22 crores. 9.75 grounds were given for development against constructed area of 64,350 sq. ft. on the 11.13 grounds that were retained by the Assessee and his brother.

3. The Assessee had already disclosed and paid capital gains tax on this transaction in AY 2004–05. The Revenue accepted this return and assessed capital gains under Section 143(3) for AY 2004–05.

4. A formal sale deed was executed and registered on 29.03.2007, merely to complete technical formalities as requested by Ceebros. At that time, stamp duty was paid on a value of ₹23.50 crores (Ready Reckoner rate in FY 2006–07).

5. The Assessing Officer took the view that the transfer actually occurred in AY 2007–08 due to the 2007 sale deed. He applied Section 50C and computed capital gains based on stamp duty value. He taxed 50% of that value in the hands of the Assessee (joint owner), less the amount already taxed in AY 2004–05.

Hon Madras HC held as below:
1. Conditions of Section 53A of the Transfer of Property Act were fulfilled in AY 2004–05:
Consideration was paid.
Possession was handed over.
Registered Power of Attorney was executed.

2. Since the Revenue had already accepted the capital gains in AY 2004–05, it cannot re-tax the same transaction in AY 2007–08.

3. No fresh consideration was received at the time of the 2007 sale deed; it was executed only to meet registration requirements.

4. So, the appeal of the department is rejected.

TaxByte by CA Aniket Kulkarni