05 July 2014
Though the Mr. A was only guarantor, he was undisputed owner of the property while creating the mortgage in the favor of the bank. Hence, mere for non receipt of sale consideration Mr.A can not escape from the capital Gain Tax.
In CIT Vs. Roshanbabu Mohammed Hussein Merchant,Bombay High Court rejected the contention of the Assessee for claiming CG Tax arising on sale of Land exempt from LTCG.
07 July 2014
sir but there are delhi high court and kerala high court decisions in the same case that in case of guarantor there was no sales consideration received by the guarantor (neither in money nor by any reduction in liability)therefore there's no capital gain tax liability..
sir isn't it very harsh for assessee, in the above case assessee didn't receive even a single penny and as per bombay high court judgement cited by you assesse have to pay near about Rs. 1.2 crore capital gain tax.
08 July 2014
It may possible that, two different courts may announce a different verdicts on alike case matters.Sometimes High courts may refer the past case verdicts on similar subject or sometimes may study the entire case again for reaching the final conclusion and courts have their own discretion to study the case and announce the verdicts and therefore these decisions may vary.
Secondly, Could not have Guarantor paid the Capital Gain Tax, if he had sold the same property instead of Bank? Guarantor has not received single pie because he has entered in the legal agreement and he was aware of the fact that he may not get anything if the bank sells the property on being failure of borrower for repayment of obligations. Third and important, he was a undisputed owner of the property at the time of entering into such agreement. Mere standing as a guarantor and not receiving of money does not change this fact.
Finally, It is not necessary that amount should be actually received for being taxed it may be received or receivable as per the definition U/S 48
Yes, it was very harsh for the assessee as the amount was huge and unfortunately there is no such provision in the which exempts the capital gain tax in such cases except in reverse mortgage.
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