Does execution of the registered sale deed accounts for transfer of property?

This Income Tax Appellate Tribunal case clarifies whether the execution of a registered sale deed alone signifies a property transfer. The tribunal ruled that in this instance, the property transfer had effectively occurred in earlier assessment years when the original owner sold the land and possession was transferred. The subsequent execution of sale deeds by legal heirs was a formality and did not constitute a new transfer or capital gains for the assessee in the year of the deed's execution.

IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD ‘ S.M.C.’ BENCH, HYDERABAD.
BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER
(Through Virtual Hearing)
I.T.A. No.184/Hyd/2020
(Assessment Year : 2008-09)

Smt. Rupa Rani Mahankali,
Hyderabad.
PAN AMBPM 6948C

Appellant.

Vs.

Income Tax Officer,
Ward 15(2), Hyderabad. 

Respondent

Appellant By : Shri K.K. Gupta.
Respondent By : Shri Swaroop Mannard.
Date of Hearing : 20.07.2021.
Date of Pronouncement : 26.07.2021.
O R D E R

This is assessee's appeal for the Assessment Year 2008-09 against the order of Commissioner of Income Tax (Appeals)-8, Hyderabad Dt.15.11.2019 confirming the addition made by the Assessing Officer.

2. The Assessing Officer observed that the assessee, along with her sister and 6 brothers, sold 12 plots of land and the assessee's 1/8th share in S.R.O. value (after applying the provisions of section 50C of the Act) come to Rs.21,08,500. He, therefore, called for information from the vendee who submitted that the plots were actually purchased from the assessee's father, late Shri G Sattaiah (the vendor) and the land was actually in their possession, but for the sake of gentleman agreement, the sale deed to purchase the land was executed for which no amount was paid to the vendor’s legal heirs. The assessee's brothers were also examined who confirmed that there was no payment  received from the vendees nor was any payment made to their sister i.e. the assessee herein. The assessee, in her statement recorded on 1.3.2014, also confirmed it. However, she stated that as per the gentleman agreement, her brothers have received 500 square yards of land and have constructed house thereon and were living therein. She stated that just because she was a legal heir, she had signed the sale deeds but she had not received any sale consideration from the vendees nor from the family members.

3. The learned counsel for the assessee reiterated the submissions made before the CIT(A) and filed written submissions stating that there was no transfer of land by the assessee nor any relinquishment of her right. Without prejudice to his argument that there is no transfer, he further argued that the relinquishment of right in the property, if any, by the assessee is not evidenced by any document. He therefore prayed for deleting the addition of capital gains to the returned income of the assessee.

4. Having regard to the rival contentions and the material on record, I find that the undisputed facts are that the assessee's father, late Sri G. Sattaiah during his lifetime had sold certain piece of land to various vendees and some of the vendees have also passed away and at the request of the vendees and the legal heirs of deceased vendees, the LRs of the vendor, late Sri Sattaiah, have executed registered documents in their favour. In the light of such circumstances, the assessee and her brothers have executed the sale deed, in respect of properties, whose possession of the property was already given. In view of provisions of section 53A of the Transfer of Property Act, the properties have already been transferred in favour of the vendees except for the execution of the registered sale deeds. As rightly contended by the learned counsel for the assessee, the transfer has taken place in the earlier assessment years when late Sri G. Sattiah was alive. As regards the finding of the Assessing Officer that LTCG has arisen out of retention of 500 square yards by assessee's brothers, I find that the assessee has stated before the CIT(A) that 500 square yards vested with late Sri G. Sattiah and after his demise, his sons received the property and constructed house thereon and that it was not received by assessee's brothers by virtue of gentleman agreement. The CIT(A) has not verified this fact but has merely gone by the presumption that the assessee had relinquished her right over the 500 sq. yards plot retained by assessee's brothers. Since the land retained by the assessee's brothers cannot be treated as transfer in their favour, there cannot be any relinquishment or right by the assessee in such property. Therefore, there is no incidence of any LTCG in favour of the assessee during the alleged assessment year when the registered sale deed was executed by the legal heirs of late Sri G. Sattiah, with regard to the transaction which had taken place during the earlier assessment year. Thus, the assessee's grounds of appeal are allowed.

5. In the result, the assessee's appeal is allowed.
Order pronounced in the open court on 26th July, 2021.

Please find attached the enclosed file for the full judgement