Tax liability for amount taken after relenquish deal

Relinquishment is included within the meaning of the word ‘transfer’ only for the purpose of levying capital gain tax - Relinquishment is included within the meaning of the word ‘transfer’ only for the purpose of assessment to be made for levying capital gain tax and not for other purposes - Tamil Nadu Civil Supplies Corporation Ltd. v. CIT [1997] 228 ITR 399 (Mad.).
Property must continue to exist - A relinquishment takes place when the owner withdraws himself from the property and abandons his rights thereto; it presumes that the property continues to exist after the relinquishment - CIT v. Rasiklal Maneklal (HUF) [1989] 177 ITR 198/43 Taxman 259 (SC).
When agreement for purchase of property is later cancelled, there is relinquishment of right - Where the assessee initially paid advance under an agreement for the purchase of a property, reserving right to specific performance of the agreement, and later received consideration under another agreement under which the earlier agreement was cancelled and the vendor was allowed to sell the property to any person at any price, there was a relinquishment of right by the assessee which amounted to ‘transfer’, and the resulting gain was assessable as capital gains. Since the assessee had paid a sum for acquiring the right to acquire the sale deed, it could not be said that there was no cost of acquisition so as to take the view that there could be no assessment to capital gains - K.R. Srinath v. Asstt. CIT [2004] 141 Taxman 268 (Mad.).
Extinguishment of right
Amalgamation is covered - The definition of ‘transfer’ in section 2(47) clearly contemplates the extinguishment of rights in a capital asset distinct and independent of such extinguishment consequent upon the transfer itself. Therefore, in a scheme of amalgamation, the rights of the assessees in the capital asset, being their shares in the amalgamating company stood extinguished upon the amalgamation of the amalgamating company with the amalgamated company. There was therefore a transfer of shares in the amalgamating company within the meaning of section 2(47) - CIT v. Grace Collis [2001] 115 Taxman 326/248 ITR 323 (SC).
Compulsory acquisitions are not excluded - If an existing title in a capital asset is extinguished and a new one created, there is within the meaning of section 12B(1) of the 1922 Act [corresponding to section 45 of the 1961 Act] a ‘transfer’ of a capital asset. The fact that the investiture of title takes place under a law relating to compulsory acquisition of property would make no difference - Mangalore Electric Supply Co. Ltd. v. CIT [1978] 113 ITR 655 (SC).
Surrender of tenancy right in exchange for an ownership flat in another building does not attract the liability to capital gains - CIT v. Mrs. Shirinbai P. Pundole [1981] 129 ITR 448 (Bom.)/Nila Products Ltd. v. CIT [1984] 148 ITR 99 (Bom.).
Asset must exist during process of transfer - Position prior to 1-4-2000* - Whatever the mode by which transfer is brought about, the existence of the asset during the process of transfer is a pre-condition. Unless the asset exists in fact, there cannot be a transfer of it. When an asset is destroyed, there is no question of transferring it to others. The destruction or loss of the asset, no doubt, brings about the destruction of the right of the owner or the possessor of the asset in it. But it is not on account of transfer, it is on account of the disappearance of the asset - Vania Silk Mills (P.) Ltd. v. CIT [1991] 59 Taxman 3/191 ITR 647 (SC)/Marybong & Kyel Tea Industries Ltd. v. CIT [1997] 91 Taxman 11/224 ITR 589 (SC).
Giving up right to claim specific performance amounts to ‘extin¬guishment’ - The expression ‘property of any kind’ in section 2(14) is of wide import. When the said expression is read along with the expression ‘extinguishment of any rights therein’ occur-ring in section 2(47), there is no doubt that giving up of right to claim specific performance by an assessee to get conveyance of immovable property in lieu of receiving consideration results in extinguishment of right in property, thereby attracting the rigour of section 2(14) read with section 2(47) - CIT v. Smt. Laxmidevi Ratabi [2005] 147 Taxman 642 (MP).
Sub-clause (v) - In order that case would fall under extended meaning of word ‘transfer’ possession is essential element to be considered - Ajay Kumar Shah Jagati v. CIT [2008] 168 Taxman 53 (SC)
To attract sub-clause (v) of section 2(47), it is not necessary that entire sale consideration up to last instalment should be received by owner - Jasbir Singh Sarkaria, In re [2007] 164 Taxman 108/294 ITR 196 (AAR - New Delhi).
On a fair and reasonable interpretation and on adopting principle of purposive construction, it can be said that possession contem¬plated by sub-clause (v) of section 2(47) need not necessarily be sole and exclusive possession; once it is held that the transac¬tion of the nature referred to in sub-clause (v) of section 2(47) has taken place on a particular date, the actual date of taking physical possession need not be probed into; it is enough if the transferee has, by virtue of that transaction, a right to enter upon and exercise the acts of possession effectively - Jasbir Singh Sarkaria, In re [2007] 164 Taxman 108/294 ITR 196 (AAR - New Delhi).
Section 2(47)(v) could come to the aid of the Department only if the condi¬tions of section 53A of the Transfer of Property Act are satis¬fied. From a reading of section 53A, it is clear that unless there is a written agreement, section 53A of the Transfer of Property Act will not come into operation - CIT v. G. Saroja [2008] 301 ITR 124 (Mad.).
 

I am not able to understand, request to you to explain in a simple language.

Dear if it possible,  told your brother to give amount as gift . no tension in blood relation.

Hello Mr. Annand, Relinguish deal already has been made. Please tell me the Tax liability on the amound I had received after surrendering my share via relinquish deal.

if your brother get this property from your father will. then u will get tax free amount from your deal. because by will what ever you get it will be tax free.

you have not mention that how your brother get this property.

Thanks Mr. Annand,

Property was in name of my mother who died long ago and after that my father also died. My brother & his wife were occupant of the property.

I being a female was marrid to a different family. We (my other sister also) fought a case in court against our brother , then judge suggested us to go for an agreement to sign a relinquish deal where by we both will surrender our share and take a amount.from our brother.

Now what would be the tax liability on this amount.

Thank you very much.

Now that it is settled that you will not be able to receive this money as gift from your brother, the amount received by you will be taxed as Capital Gains Tax.

You will need csome numbers to calculate your tax liability. When the said house was constructed and at what cost. If it was constructed prior to 1-4-1981, then a fair market value as on 1-4-1981 need to be determined which will become cost.

As you were entitled to 50% of the house, 50% of the above figure is cost in your hand. You will have to index this cost (depending upon the year of construction). The difference between sum received by you and the indexed cost will be long term capital gain in your hand on which you will have to pay tax @20.60%.

This tax can be saved by investing money in new residential house or infrastructure bonds.

Still I would suggest that you relinquish your share in property in favour of your brother without any consideration and let your brother gift you an identical sum. No tax in ether hand.

Dear Mr. Vineet, Thanks for you valuable opinion. I had a query:

1. This property was inherited and is not sold off, can't this amount be treated a inherited amount or a family arrangement.

2.  Pleas refer to another link this forum, which says there is no tax.

https://www.lawyersclubindia.com/forum/details.asp?quote=80153&mod_id=16423

Thank you very much. 

Dear Lawyers - I request, please help me out on this.

I would be in disagreemnt with the advice available in referred thread Manoj.

You have signed up a relinquishment deed, relinquishing your right in inherited property for a consideration which amounts to transfer under Income Tax Act.

While there was capital gains tax liability on transfer of asset in your name by way of inheritence (which is not considered as transfer), you have relinquished this right for a consdieration which is certainly liable to capital gains.