Capital gain not taxable in the hands of person who sold property as attorney

Sidharth Chaudhary Vs ITO (ITAT Delhi)

ITAT Delhi held that capital gain cannot be taxed in the hands of the person who sold the property as attorney of the owner. The same is taxable only in the hands of the owner of the property.

Facts- The assessment of the assessee was reopened u/s 147 of the Income-tax Act, 1961 on the basis of chargeability of capital gains arising out of sale of property. Thereafter AO framed the assessment u/s 143(3) read with Section 147 of the Act, thereby computing capital gain at Rs. 32,67,930/-. Thus, assessing the income at Rs. 35,52,980/-. Aggrieved against this, the assessee preferred appeal before the learned CIT(Appeals), who also sustained the addition and dismissed the appeal of the assessee. Now the assessee is in appeal before this Tribunal.

Conclusion- Now the question arises whether capital gain can be charged from the person who sold property as attorney of the owner. In my considered view, there is no ambiguity under the law for chargeability of capital gain in respect of transfer of any capital asset. It is the owner of capital asset who would be liable for capital gain. In case the sale consideration is credited into the account of third party or the attorney of such owner, in that event also the money which has been credited in the account of the third party or the power of attorney cannot be subjected to tax under the head ‘capital gains’. Therefore, the action of the authorities below is contrary to the statutory provisions. The money credited to the account of the assessee could not have been subjected to tax as a capital gain earned by the assessee. Under these facts, the addition made by the Assessing officer under the head of ‘capital gain’ is not justified. Hence, the Assessing Officer is directed to delete the addition. However, it is clarified that the Assessing Officer would be at liberty to tax the capital gains/business receipts in correct hands. Grounds of appeal raised in this appeal are allowed.

FULL TEXT OF THE ORDER OF ITAT DELHI

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