Immovable property between spouses: Commissioner IR fails to charge capital gains tax

LAHORE: The Commissioner Inland Revenue, RTO-lI Lahore, has failed to establish chargeability of capital gain on disposal of immovable property between the spouses, said sources.

According to the notice issued by the department, the wife was confronted that she should pay tax @ 5% on gain on sale of immovable property.

However, after failing to convince the Commissioner Appeals, the department approached the appellate tribunal and argued that the immovable property in question was acquired by the taxpayer from her spouse through gift in July 2013, which was disposed of in April 2015.

The taxpayer, on the other hand, submitted that the property in question was gifted by spouse in June 2013. The agreement of sell with third party was executed on April 2015, and the gain arising on such immovable property was partially received, and the remaining balance amount was receivable in June 2015, but, by the end of the financial tax year 2015 i.e. 30th June 2015, the remaining amount was not received by the Respondent.

As a result, the Respondent declared/booked the same as receivable in her wealth statement as on 30th June 2015. Subsequently, the same was received in July 2015, thus, the property was transferred to the buyer.

The tribunal held that the property in question was acquired by the taxpayer from her husband through gift and the acquisition of such asset has been acquired with the same character as the person disposing of the asset. As the date of acquisition in the hands of spouse was 28.11.1991 hence, the date of acquisition remains the same for the present taxpayer as well. This intent of law is evident as transfer of asset between spouses is not a taxable event.

The ATIR further held that the Officer Income Tax had wrongly noted it as July 2013. The execution of sale of such property was not completed by 15.06.2015 as per agreement to sell on account of non-payment, therefore, the taxpayer declared the balance amount as receivable in the wealth Statement for the Tax Year 2015. However, the final payment was received on 09.07.2015 by the learned Respondent.

The ATIR held that the holding period is more than two years. Hence, the capital gain in such case is 0% as per section 37(1A) read with Division VIII of Part-l of First Schedule of ITO.

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