Brief of the case:
The tribunal in the verdict of Shailendra H. Bhatia vs. ITO concluded that Transfer of possession with the ownership rights confer beneficial ownership which is good enough to hold the asset as capital asset
Facts of the case:
The assessee sold immovable property being residential flat for a consideration of Rs. 60 lacs. The AO after making inquiries taxed the gain Rs. 47 lacs after deduction of purchase price under the head “Income from other sources” (IFOS) without allowing deduction in respect of brokerage & stamp duty paid at the time of purchase. The AO assessed the income under other sources because he was of the opinion that having regard to the facts of the case flat was not a capital asset within the meaning of Sec 2(14) in the hands of the assessee.
The CIT (A) confirmed the action of AO against with the assessee filed appeal before the ITAT.
Contention of the Assessee:
The learned counsel for the assessee submitted that even though the property sold was not registered in the name of the assessee but the assessee has exclusive ownership rights over that property and for obtaining that right assessee has paid Rs. 13 lacs to the seller.
Thus, assessee being beneficial owner hold the asset as a capital asset within the meaning of Sec 2(14) of the Act and , therefore, the gain on sale of the same to be taxed under the head “capital gains “.
Contention of the Revenue:
The learned counsel for the Revenue submitted that the assessee acquired the property under the leave & license agreement of 33 months and on the date of sale ( 20th June,2008) the period of lease got over. As such on the date of sale assessee was not the registered owner of the asset and was merely having possession, thus, the AO rightly taxed the income arising from sale under IFOS.
Decision of the Tribunal :
The tribunal observed that as per clause no . 14(b) of the agreement between assessee and original seller, the seller transferred all the rights and handed over the original documents to the assessee. Pursuant to this clause the assessee acquired the ownership rights , therefore , merely the fact that he did not get property registered in his name doses not disqualify his claim of holding capital asset within the meaning of Sec 2(14) of the Act. It is why because under the I.T. Act, 1961 there is no condition that the property should be registered in name of the assessee. Therefore, even the beneficially held properties will also be capital assets and liable to be assessed under the head “capital gains”.
The above view was confirmed by the judgment of the Hon’ble Supreme Court in the case of Podar Cement Pvt. Ltd. ITAT restored back the appeal to the file of AO for afresh consideration