Section 45(3): Year of chargeability is year in which transfer takes place

DCIT Vs Abdulsattar Suleman (ITAT Mumbai)

Introduction: The Income Tax Appellate Tribunal (ITAT) Mumbai recently delivered a significant verdict in the case of DCIT Vs Abdulsattar Suleman, rejecting the appeal filed by the Deputy Commissioner. The case involves the assessment year 2013-14 and revolves around the taxation of capital gains related to the transfer of land to a partnership firm. This article provides a comprehensive analysis of the case, highlighting key arguments, legal provisions, and the tribunal’s ruling.

Background: The case originated from the assessment year 2013-14 when the assessee, an individual, introduced land worth ₹13,96,40,040/- into a partnership firm named M/s Abdul Sattar Suleman and Others in the previous assessment year 2011-12. The Assessing Officer (AO) contended that the capital gain arising from this transfer is taxable in the hands of the assessee for the assessment year 2013-14.

Assessment Proceedings: The AO initiated reassessment proceedings, alleging that the assessee had not offered the capital gains in the return of income. The basis for reassessment was the recording of the land value in the books of the partnership firm in the assessment year 2013-14. The AO argued that this recording amounted to the full value consideration, triggering capital gains under Section 45(3) of the Income-tax Act, 1961.

CIT(A) Decision: The learned Commissioner of Income Tax (Appeals) [CIT(A)] allowed the appeal filed by the assessee. The CIT(A) relied on legal precedents, including the decision of the Hon’ble Supreme Court in the case of Sanjeev Woolen Mills vs. CIT. The appellate order emphasized that no capital gains accrued to the assessee in the assessment year 2013-14 due to the revaluation of land introduced in the partnership firm in the previous year at nil value.

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