Smt. Boda Sarada Reddy Vs Asst. (ITAT Hyderabad)
It was the contention of the AO in Income Tax proceedings that assessee had indeed handed over the possession of the property as on 01-04-2006, which led to assessing the capital gains arising on the transfer of that property in AY. 2007-08. Therefore, as on 31-03-2007, the property was no longer in the possession or ownership of assessee. Moreover, if the property is deemed to be in assessee’s ownership, then, the money received towards sale would have to be considered as liability on the date of valuation. Accordingly, there cannot be a Wealth Tax arising in this transaction.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-1, Hyderabad, dated 17-1 1-2016. Assessee has raised the following grounds:
“1. Your Appellant submits that in absence of any wealth escaped assessment, the notice under section 17 of the W.T. Act, 1957, CWT(A) ought to have quashed the assessment.
2. Your Appellant submits that it is undisputed fact that the agreement of sale was entered on 31-3-2006 and possession of land was handed over on 1-4-2006, there is no wealth escaped assessment warranting issue of the notice under section 17 of W. T.
Act, 1957, therefore the CWT(A) ought to have quashed the assessment.
3. The CWT(A) erred in law and facts of the case in confirming the addition of Rs. 2,36,00,000/ – being the value of land, ignoring the fact that the said asset has been sold and already received payment for the same.
4. The CWT(A) as well as Wealth Tax Officer has erred in law and facts of the case in ignoring the fact that for the same assessment year, the assessment under section 143(3) of the Income tax Act, 1961 was completed by assessing the sale of the same land as long term capital gains., the addition of may be deleted.
5. Alternatively, your Appellant submits that the CWT(A) ought to have appreciated the fact that from the value of the land assessed to wealth tax, the amount of sale consideration being liability directly attributable to the land has to be reduced, in which case there is no taxable wealth.
6. Your Appellant submits that the land in question is a subject matter of litigation and dispute including the extent area and ownership, the same cannot be tax as wealth of your appellant, the addition may be deleted”.
2. Briefly stated, assessees was owner of 1200 Sq. Yds., of vacant land situated in Survey No. 121/139, Shaikpet Village. The assessee has entered into an agreement of sale on 30-03-2006 and possession was handed over on 01-04-2006, but the registration was done on 01-04-2008 due to various reasons. However, assessee offered capital gains for the AY. 2007-08, as the possession was handed over on 01-04-2006 and Assessing Officer (AO) has completed the assessment invoking the provisions of Section 50C of the Income Tax Act [Act]. The matter was carried in appeal upto ITAT and computation of Long Term Capital Gain for the AY. 2007-08 was concluded. However, on the reason that property was registered on 01-04-2008, AO issued notices calling for Wealth Tax Return of the said property as on 31-03-2007, holding that assessee still holds the ownership. It was the contention of assessee that the property was already sold and assessee has received the consideration and capital gains matter was also concluded for AY. 2007-08, so levying of Wealth Tax as on 31-03-2007 on the same property does not arise. This was negatived by the AO without any discussion in the order and value of the property was taken at Rs. 1.20 Crores as per the sale agreement.
3. Before the Ld.CIT(A), assessee reiterated the same facts but Ld.CIT(A) dismissed the appeal, stating as under:
5.3. Coming to the issue regarding whether the possession of the land was with the applicant during the F. Y. 2006-0 7. It is seen that the property was sold during the year and capital gains was offered for the Assessment Year 200 7-08. Agreement for sale was made on 22nd March, 2006. However, subsequently on 11th December, 2009, rectification deed was made. As per submission, registration of the property was done on 01.04.2008. On 10.03.2006, assessee has claimed before the Assessing Officer that agreement was entered with Sri B. Rajendra Prasad and his wife, an amount of Rs.28,00,000/- was paid to surrender/vacate the land and get rid of long pending litigation. This shows up to March, 2006, applicant could not have handed over the possession of land to the seller.
Also applicant has submitted rectification deed with the Jade Realtors and Banjara Park Estates on 18.11.2008 regarding reduction in area sold to the seller due to road widening (para 4, page 2 of the deed). Applicant did not bring forward any evidence to show that property was handed over on or before 01.04.2006.
Since, the applicant has offered capital gains for A. Y. 200 7-08, it is seen that property is sold during this year. However, ‘transfer of Possession’ did not take place in F. Y. 2006-0 7. The ownership of the property does notexist only from F. Y. 200 7-08. Since, for the A. Y. 200708, registration of the property was not done, in legal terms the property is still under ownership of the applicant. Hence, I upheld the stand taken by the Assessing Officer and accept the wealth tax on the property in hands of the applicant”.
4. It was the contention of Ld. Counsel that the property was handed over to the buyer and issue of capital gains arising on the agreement of sale was already concluded, even though the property was stated to have been registered on 01-04- If the property was still held to be assessee’s possession, then, the department should not have assessed the capital gains for AY. 2007-08 on the reason that possession was handed over on 01-04-2006. He brought out the contradictory stand taken by the AO in Income Tax and Wealth Tax proceedings.
5. Ld. DR fairly admitted the facts of the case, but relied on the orders of the CIT(A).
6. After considering the rival contentions, we are of the opinion that the order of AO and CIT(A) cannot be sustained. It was the contention of the AO in Income Tax proceedings that assessee had indeed handed over the possession of the property as on 01-04-2006, which led to assessing the capital gains arising on the transfer of that property in AY. 2007-08. Therefore, as on 31-03-2007, the property was no longer in the possession or ownership of assessee. Moreover, if the property is deemed to be in assessee’s ownership, then, the money received towards sale would have to be considered as liability on the date of valuation. Accordingly, there cannot be a Wealth Tax arising in this transaction. The orders of AO and CIT(A) are against the principles of law and facts of the case.
Accordingly, we have no hesitation in setting aside the orders by allowing the grounds of assessee.
7. In the result, the appeal of assessee is allowed.
Order pronounced in the open court on 6th April, 2018