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Tax Publishers Savita Bhasin v. ITO [ITA No. 161/Del/2020, dt. 13-8-2020] : 2020 TaxPub(DT) 3191 (Del.-Trib.) Reinvestment allowance under section 54F--Co-ownership--Transfer of property held prior to sale--Alleged afterthought--Tax evasion *Facts:* Assessee returned the capital gains on the sale of an agricultural land/property on 8-12-2013 and claimed section 54F benefit by purchasing a residential property on 7-12-2015. As on 31-3-2013 assessee co-owned two residential properties with his wife/legal representative (assessee died while the case was in proceeding). On 1-11-2013 (prior to the sale) the assessee sold the co-owned property in one of his house's to his son based in USA vide an agreement to sell which was not registered (thru a power of attorney granted to the assessee by his son). The rent from the said property transferred to his son was offered as rental income in the return of this own for the said assessment year. It was the case of the assessing officer and Commissioner (Appeals) that on the date of sale he owned more than one property either on his own or as a co-owner and that the transfer of one of the co-owned property to his son, was an afterthought to circumvent capital gains tax by claiming section 54F thus deserves disallowance under evasionary grounds as well. Assessee claimed on the date of sale he was not in ownership of any property and was only a co-owner after all and section 54F seeks exclusive ownership and not co-ownership besides the fact that there only one property in co-ownership while the other one already was transferred to his son much earlier to the transfer of the agricultural land thus being eligible for section 54F benefit. On higher appeal to ITAT by the assessee -- Held in favour of the assessee that he was eligible for the benefit of section 54F. Co-ownership is not the condition envisaged under section 54F but what section 54F calls for is an exclusive ownership thus cannot stand in the way of the assessee availing section 54F benefit as he was only a co-owner. The transfer to this son though not registered for all legal purposes would have made his son a beneficial owner thus squarely fitting into section 2(47)(vi) read with section 269UA (Section 269UA explicitly says an agreement for transfer would cover one which is registered or unregistered of an immovable property for the purpose of income tax). The rental income being offered in his son's tax return under house property made it an excellent case of tax planning. By virtue of the power of attorney held by the assessee granted by his son even though all electricity/municipal taxes/rent stood all collected in his hand they were only for and behalf of his son as per the power of attorney granted is what the ITAT held. Even the residential property transferred being used for commercial letting purposes was inconsequential as the decision goes to say as end purpose of the residential property if that was used for commercial letting out cannot alone make the residential property to be read a commercial property. The date of registration of property is inconsequential it is the date of transfer which is the effective date of transfer of the property as per the registration act as well. Registration confers ownership from the date of the agreement.

Tax Publishers

Savita Bhasin v. ITO [ITA No. 161/Del/2020, dt. 13-8-2020] : 2020 TaxPub(DT) 3191 (Del.-Trib.)

Reinvestment allowance under section 54F--Co-ownership--Transfer of property held prior to sale--Alleged afterthought--Tax evasion

Facts:

Assessee returned the capital gains on the sale of an agricultural land/property on 8-12-2013 and claimed section 54F benefit by purchasing a residential property on 7-12-2015. As on 31-3-2013 assessee co-owned two residential properties with his wife/legal representative (assessee died while the case was in proceeding). On 1-11-2013 (prior to the sale) the assessee sold the co-owned property in one of his house's to his son based in USA vide an agreement to sell which was not registered (thru a power of attorney granted to the assessee by his son). The rent from the said property transferred to his son was offered as rental income in the return of this own for the said assessment year. It was the case of the assessing officer and Commissioner (Appeals) that on the date of sale he owned more than one property either on his own or as a co-owner and that the transfer of one of the co-owned property to his son, was an afterthought to circumvent capital gains tax by claiming section 54F thus deserves disallowance under evasionary grounds as well. Assessee claimed on the date of sale he was not in ownership of any property and was only a co-owner after all and section 54F seeks exclusive ownership and not co-ownership besides the fact that there only one property in co-ownership while the other one already was transferred to his son much earlier to the transfer of the agricultural land thus being eligible for section 54F benefit. On higher appeal to ITAT by the assessee --

Held in favour of the assessee that he was eligible for the benefit of section 54F.

Co-ownership is not the condition envisaged under section 54F but what section 54F calls for is an exclusive ownership thus cannot stand in the way of the assessee availing section 54F benefit as he was only a co-owner.

The transfer to this son though not registered for all legal purposes would have made his son a beneficial owner thus squarely fitting into section 2(47)(vi) read with section 269UA (Section 269UA explicitly says an agreement for transfer would cover one which is registered or unregistered of an immovable property for the purpose of income tax).

The rental income being offered in his son's tax return under house property made it an excellent case of tax planning. By virtue of the power of attorney held by the assessee granted by his son even though all electricity/municipal taxes/rent stood all collected in his hand they were only for and behalf of his son as per the power of attorney granted is what the ITAT held. Even the residential property transferred being used for commercial letting purposes was inconsequential as the decision goes to say as end purpose of the residential property if that was used for commercial letting out cannot alone make the residential property to be read a commercial property.

The date of registration of property is inconsequential it is the date of transfer which is the effective date of transfer of the property as per the registration act as well. Registration confers ownership from the date of the agreement.