20 January 2016
Stage 1: Mr B purchased a plot from Mr A for Rs 10 lacs. An agreement of sale was executed and Mr B paid the full consideration by cheque. In return, Mr A gave Power of Attorney (POA) to Mr B. Please note, the title deed was not transferred. Only POA was given. Title deed was still in the name of Mr A. Stage 2: After 5 years, Mr B sold that plot for Rs 22 lacs to Mr C. Mr C paid full consideration to Mr B. Being the holder of POA, Mr B received all the sale consideration by cheque in his name and transferred title deed of plot to Mr C. Now what will be the position of capital gain under the provisions of Income-tax Act? (For this transaction only) a) Who will be the liable for capital gain tax? b) Whether it is payable by Mr B (Capital gain = Rs 22 lac - Indexed cost of Rs 10 lac) ? c) Whether it is payable by Mr A, who is the owner in records? d) If it is payable by Mr A, then what will be the treatment for the cheque received by Mr B from Mr C and cheque paid to Mr A by Mr B. capital arise which year - ? Please guide.
20 January 2016
1. Whether the agreement of sale is combined with POA? 2. If not, whether the agreement of sale is valid / registered?
If any one of the above is affirmative, the terms of the agreement / GPA needs to be verified to see the element of transfer as defined u/s 2(47);
Execution of GPA alone will not amount to transfer. GPA holder is only agent to the principal and such agent is acting on behalf of the principal. Simple GPA terminates on revocation, death etc. of the principal (i.e. GPA other than agency coupled with interest).
In case of simple GPA the principal alone liable for capital gains tax. In case, terms of the agreement / GPA attracts transfer u/s 2(47) both principal and GPA holders are liable for capital gains in different point of times.
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