INCOME TAX ACT, 1961

Section 45

Capital gains - Long-term capital gain - Transfer of possessory right in property - Legal heirs of co-owner issued 'NOC' of other co-owner's right

Mr. A and 'K' had owners of land having 50% each right title and interest Mr. 'K' had transferred under 'MoU' his 50% share to A for consideration of Rs. 1,25,00,000. Later on 'A' expired and property fell in possession of legal heirs, (P) (assessee and son of A) 'KB' (wife of A), 'G' (son of 'A') along with 'K'. 'K' sold his 50% share (as vendor) for which +'P+, KB and 'G' gave 'NOC'. Conveyance deed was exeucted between 'K' (vendor) 'P+ KB and 'G' as first confirming party and AQ (as second confirming party and 'R', 'O', Sh 'H' and 'J' )Joint purchsers) for 8,00 crores. The first confirming party, i.e., 'P' 'KB' and 'G' have received Rs. 5,85,000 in agreegate. As such, each one had received Y3 shares being Rs. 1,95,00,000 amount. The assessee 'P', treated his share of receipt of Rs. 1,95,00,000 as his income under the head 'Long-term capital gain' 'LTCG'. Further, after claiming exemption of Rs. 1,15,69,758 under section 54F the assessee had offered the balance amount of LTCG of Rs. 42,99,858 for tax. AO taking support of certain judicial pronouncements concluded that as the 50% undivided share in the right, interest, title and possession of the land held by the assessee along with his mother and brother had not been transferred and remained with them, therefore, the amount received by them was not liable to be subjected to tax under the head 'capital gain' but liable to be taxed as 'Income from other sources' under section 56. CIT(A) was of the view that the amount of Rs. 1,95,00,000 received by the assessee was rightly shown by him as taxable under the head LTCG. Held: The CIT(A) had rightly observed that as was discernible from the registered conveyance deed, assessee who as acknowledged by all the concerned parties held a possessory right in the property under consideration had received the amount of Rs. 1,95,00,000. On account of transfer of such rights or interest in the property under consideration, therefore, the same was rightly offered for tax by him under the head 'Capital gains'.

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