Law:

Section:

Section 2(47), read with section 45, of the Income-tax Act, 1961 - Capital gains - Transfer - Assessment year 1996-97 - 'P', 'I' and 'J' each was 1/3rd owner of undivided share in a property - In 1990, assessee entered into an agreement with 'J' to purchase his 1/3rd share in property and made part payment of consideration - However, subsequently, 'J' denied assessee's claim and created rights in property in favour of one 'C' - In meantime, in 1993, assessee, along with 'N', entered into an agreement to purchase undivided 2/3rd share of 'P' and 'I' in property - However, due to litigation, claims and counter-claims, all parties realized that it was impossible to give effect to those agreements and, therefore, on 26-9-1995, an agreement was entered into with a new vendee to sell said property - Pursuant to said agreement, assessee received certain amount for extinguishing his rights in property - Assessing Officer held that since assessee had relinquished his rights in said property for a consideration and said transfer had taken place as per section 2(47), he was liable to capital gains tax under section 45 - Assessee's case was that since he was not owner of property but was only a confirming party to sale, he was not liable to pay capital gains tax - Whether even if assessee had not become owner of property due to litigation, fact remained that he had received consideration for acquiring interest in property which was ultimately relinquished by him in favour of a new vendee by virtue of an agreement dated 26-9-1995 and, therefore, consideration received by him for relinquishing his rights in property attracted provisions of section 45(1) making him liable to capital gains tax - Held, yes FACTS 'P', 'I' and 'J' each was 1/3rd owner of the undivided share in the property in question. In 1990, the assessee had entered into an agreement with 'J' to purchase his 1/3rd share in property and made part payment of total consideration. However, that claim of the assessee was denied by 'J' and, subsequently, 'J' entered into an agreement with one 'C' to sell his rights in the said property and created rights and interest in the property in favour of one 'C'. During the…

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