The Madras High Court ruled that for property sold on behalf of the owner, the POA holder is exempted from taxes.
Facts
The assessment in this case relates to the assessment year 2009-10. The assessee is an individual. He is a power agent of one Mr.M.Viswanathan, who is the actual owner and vendor of the property. The said Viswanathan entered into a registered power of attorney in favour of the assessee without any consideration.
After the execution of power of attorney, the property was registered in the name of the assessee’s wife Dr.Meera Bai by a sale deed. The Assessing Officer took the view that it is the assessee who sold the plot to his wife Dr.Meera Bai, whereas, the guideline value of the property was Rs.60.00 lakhs at that point of time by adopting the fair market value of the property at Rs.60.00 lakhs based on index cost at Rs.11.00 lakhs as on 01.04.1981.
Decision
The division bench of Justice R.Sudhakar And Justice R.Karuppiah found that there is no transfer to or enabling enjoyment of property in favour of the assessee in any manner and therefore, sub-clause (vi) of Section 2(47) of the Income Tax Act does not get attracted. Clause 21 of the power of attorney, clearly reveals that no consideration was received from the power agent for appointing him as power of attorney.
The bench said that it is unable to accept the plea of the Revenue that there was an element of transfer or enabling enjoyment in favour of the assessee.
The court observed that it is the duty of the power of attorney holder to deliver the amount received for the purpose of transfer of property. Therefore, no fault could be found on the part of the assessee. Hence, nothing turns on the letter of the erstwhile owner, in favour of the Department.
It was added by the court that the provisions of sub-clause (vi) of Section 2(47) of the Income Tax Act make it clear that the transaction, which has the effect of transferring or enabling the enjoyment of immovable property alone, would come within the ambit of transfer.
The court held that it is not the case of the Department that the power of attorney is sham. If they accept the power of attorney is valid, then the plea of capital gains at the hands of the assessee has no legs to stand.
Case title: The Commissioner of Income Tax Chennai v/s Shri.C.Sugumaran
Citation: Tax Case (Appeal) No.840 of 2014
