Navghanbhai Laxman Rabari Vs ITO (ITAT Ahmedabad)
The ITAT, Ahmedabad in Shri Navghanbhai Laxman Rabari v. ITO [ITA No.1864/AHD/2019 dated January 18, 2023] has held that, the transfer of property only takes place when either the possession of the property is transferred or sale deed is executed and the documents like unregistered ‘Banakhat’ or power of attorney are not the substitute of sale deed. Further, held that, the sale of land within 36 months from the date of purchase will lead to a Short Term Capital Gain (“STCG”), and therefore exemption under Section 54F of the Income Tax Act, 1961 (“the IT Act”) will not be available.
Facts:
Shri Navghanbhai Laxman Rabari (“the Appellant”) is engaged in the business of selling milk. The Appellant had sold a piece of land along with ten other co-owners on May 24, 2012 for a consideration of INR 4,80,00,000/-, making the Appellant’s share of consideration INR 43,63,636/- and the Appellant had claimed indexed cost of acquisition amounting to INR 3,39,722/- and the balance Long Term Capital Gain (“LTCG”) was claimed as deduction under Section 54F of the IT Act thereby the LTCG resulted to be NIL.
The Revenue Department, (“the Respondent”) on verification, found out that the particular piece of land was purchased on September 14, 2009 and since the Appellant had held it for less than 36 months, it would be treated as a STCG and thus, deduction under Section 54F of the IT Act cannot be claimed.
The Appellant had filed a ‘Banakhat’ to justify that the possession of land was already transferred, and hence should be treated as a long term capital gain. However, the Respondent disregarded the claim of the Appellant and observed that the ‘Banakhat’ was unregistered and there was no mention of the same even in the sale deed and thus it was not a valid document. Further, there was no mention of a ‘Banakhat’ before, and hence, was a frivolous and after thought attempt by the Appellant to misguide the authority. The Respondent disregarded the contention of the Appellant and passed an Assessment Order adding the sum of INR 41,11,645/- to the total income.
The Appellant had preferred an appeal, however, the Appellate Authority upheld the decision of the Respondent on the same grounds vide order dated September 3, 2019 (“the Impugned Order”).
Being aggrieved, this appeal has been filed.
Issue:
Whether the sale of land within 36 months is to be treated as LTCG?
Held:
The ITAT, Ahmedabad in ITA No.1864/AHD/2019 held as under:
