Property Sale Incomplete Without Possession and Full Payment of Consideration: ITAT:

Property Sale Incomplete Without Possession and Full Payment of Consideration: ITAT The Income Tax Appellate Tribunal (ITAT), Mumbai, has held that capital gains cannot be taxed until the buyer pays the full amount and takes possession, because the sale is not complete before that.

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The assessee, Purav Mahendra Mehta, signed an agreement during FY 2014-15 (AY 2015-16) to sell three properties. Out of the agreed total consideration, the assessee only received partial consideration between 5% and 13% and the possession of the property was not transferred yet. The remaining consideration was received during AY 2018-19. However, the AO taxed the full capital gains based on the registered agreement for the FY 2014-15 and made an addition to the Assessee's income. The assessee argued that the sale was incomplete without the full payment and possession transfer for that financial year. The assessee also submitted letters issued by the buyer, where they had confirmed that the consideration amount was outstanding and the possession was not transferred. The Tribunal noted that the completion of the sale requires the execution of a registered sale agreement, full payment of the property and transferring the possession. However, in the present case, only the first requirement of execution of the registered sale agreement was completed, and the other two were incomplete during that financial year. Therefore, the Tribunal concluded that the sale was incomplete for the AY 2015-16 and the remaining consideration was received and possession was transferred in FY 2017-18, and capital gains were offered and accepted for AY 2018-19.

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The Tribunal also agreed with the assessee's argument that once he had already paid the capital gain tax and the same was accepted in the subsequent assessment year, the capital gains again for AY 2015-16 will result in double taxation. Therefore, the ITAT deleted the addition made by the AO on the incomplete sale for AY 2015-16.