Amount not taxable under ‘capital gain’ as there is no transfer of right, title or interest in property

Mahendra Corporation Vs DCIT (ITAT Mumbai)

ITAT Mumbai held that amount under the head ‘capital gain’ not taxable as there is no transfer of any right, title, or interest in the property.

Facts- During the reassessment proceedings, the AO found that the assessee relinquished its rights in the property in favour of its partners, and as a result of relinquishment, capital gains accrued in the hands of the assessee which was not offered to tax. The AO further observed that none of the sums paid to any of the partners were offered to tax, either in the hands of the partners or in the hands of the assessee firm except the interest income of Rs.94,82,41,119 and Rs.2,77,71,683 offered to tax in the assessment years 2016-17 and 2017­18, respectively. Accordingly, the assessee was asked to explain as to why the amount of Rs.135 crore, as per the consent decree, be not treated as sale consideration/compensation towards interest in the property named “Villa Nirmala” and capital gains be worked out accordingly.

AO held that the assessee firm has neither offered capital gains on the transfer of its right in the property nor at the time of relinquishment of its rights in favour of its partners. Accordingly, the AO computed the long-term capital gains of Rs.134,58,72,917 and added the same to the total income of the assessee.

CIT(A) vide impugned order dismissed the appeal filed by the assessee. Being aggrieved, the present appeal is filed.

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