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2014 (8) TMI 1063 - AT - Income TaxRevision u/s 263 - non-taxability of capital gain on transfer of the property - conclusion of the CIT that the clauses in the Agreement are only to mask the transaction which in substance was transfer as defined in Sec.2(47)(v) - Held that:- CIT’s conclusion regarding substance of the transaction prevailing over the form of the transaction are without any basis and therefore to be disregarded. It was submitted that there was no loss to the revenue as capital gain payable on transfer was duly paid by the Assessees albeit in different assessment years. There was therefore no prejudice to the interest of the revenue. It was pointed out that execution of a general power of attorney by the Assessees in favour of M/S.Glory Estates Pvt.Ltd. was only for convenience and does not convey any right, title or interest over the property. The Assessees actually received sale consideration only as and when registered sale deeds were executed by the power agent. It was submitted that invoking the provisions of Sec.2(47)(v) of the Act by the CIT was erroneous. "Transfer" in section 2(47) also envisaged execution of registered deed in such circumstances. Capital gains become liable to be charged to tax only if they arise as a result of "transfer" of capital asset and the date on which they arise is date of "transfer". If as a result of mutual arrangement by parties or otherwise, no registered deed is executed even after transaction is completed by delivery of possession and receipt of consideration, capital gains tax would escape assessment altogether or if such execution of registered sale-deed is postponed, the capital gains tax would also be postponed. In several cases it suited the parties to complete such transactions without execution of registered deed and thereby evade payment of tax on capital gains. The conditions necessary for application of the provisions of Sec.53A of the Act cannot be presumed to exist and the Tax authorities cannot blindly apply those provisions by merely relying on the fact that there was an agreement for sale and delivery of possession by the transferor/seller to the transferee/purchaser. If such a course is permitted to be adopted and the tax authorities are allowed to levy and collect tax on capital gain and later it turns out that the transaction is rescinded, there is no mechanism under the Act by which the Assessee can claim refund of such taxes levied and collected. Therefore invocation of the provisions of Sec.2(47)(v) in the facts and circumstances of the present case, in our view was not proper. Thus the order passed by the AO was neither erroneous nor prejudicial to the interest of the revenue and therefore the CIT was not right in invoking jurisdiction u/s.263 of the Act. - Decided in favour of assessee.
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