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Capital gain on transfer of agricultural land by gpa holder

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Rajesh Somisetty

Student CA Final

21 Points Posted on 18 December 2014

A entered into a sale agreement with B for the sale of Agricultural land and transferred the possession of the property. B paid the entire sale consideration to A , inturn, A endorsed GPA in the name of B. The registration of transfer has not been done yet. After 2months B converted the the land and entered into sale agreement with C.

By examining the above transaction the AO asked A to pay the CG tax, saying that the sale from A to B has not been completed and it amounts to sale of Capital asset, as converted land is covered by the Capital asset definition.

I took the view that as per 53A of Transfer of property act the sale is completed by the part performance by A&B and there by A is not liable to Pay any tax.

Kindly refer any caselaws either supporting or Contradicting with the above views

Replies (1)

Z

Tax Consultation (US and India)

2348 Points Posted on 19 December 2014

Presuming that this land is not a capital asset, your view point is correct. #1

Yes, there are case laws on this . I don't have full access to my resources at the moment but there are many case laws . Further the word "assessable" in S. 50C was inserted for this very reason that people used to claim that property is not registered and till the time property is not registered there is no sale and hence no liability to pay cap gain on such transfer.

#1 Maybe AO is trying to use that SC judgement wherein it was held that "A power of attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property"

But that judgement also said that judgment will not affect "genuine transactions" under the GPA.

1 Valid reason could be that registry was not open at that time.