2013 (9) TMI 1054 - AT - Income Tax

Capital gain tax u/s 45 for the total consideration received and receivable by being a Member of the Society in view of JDA - Held that - The Society was formed by various Members for the purpose of purchase of land and to develop the same and they allotted the plots to the Members. The Society purchased 21.2 acres of land and ultimately plots in the sizes of 500sqyd and 1000sqyd were allotted to various Members. When the proposal for development of property came it was resolved in the General Body Meeting of the Society that the Members would surrender their rights in favour of the Society so that the Society can enter into the JDA. Thus it is clear that the Society has entered into JDA on behalf of the Members. It is the members who are owning the plots and the Society was only a facilitator. It becomes clear from the JDA that payment for consideration was to be made to an individual plot holder and in fact consideration was mentioned in terms of per Member. Each Member holding 500sqyd plot was to receive a sum of ₹ 82,50,000/- and one fully furnished flat measuring 2250 sqft and the Members holding 1000sqyd plot were to receive monetary consideration of ₹ 1.65 crores plus two flats measuring 2250 sqft. In fact the payment of cheques is made by Hash by issuing cheques in the name of individual Member and not the Society. This fact stands admitted because assessee has filed a return declaring capital gain against part money received against his plot. Thus it becomes clear that it is the individual member who are liable to tax in respect of transfer to plots and the Society being only a facilitator or Post office.

Summary

Issues Involved:
1. Validity of initiation of proceedings under Section 148 of the Income Tax Act.
2. Determination of long-term capital gains on the transfer of property.
3. Applicability of Section 2(47)(v) and Section 2(47)(vi) of the Income Tax Act.
4. Taxability of consideration received, including monetary and non-monetary components.
5. Allowability of deductions under Section 54F of the Income Tax Act.
6. Double taxation concerns.
7. The impact of subsequent events on the assessment of capital gains.

Issue-wise Detailed Analysis:

1. Validity of Initiation of Proceedings under Section 148:
The Tribunal upheld the validity of the initiation of proceedings under Section 148 of the Income Tax Act. The assessee's grounds challenging the jurisdiction were dismissed, as the Tribunal found no infirmity in the order passed by the CIT(A).

2. Determination of Long-Term Capital Gains on the Transfer of Property:
The main issue was whether the assessee was liable to capital gains tax in the impugned year. The Tribunal referred to the decision of the Chandigarh Bench of ITAT in the case of Charanjit Singh Atwal, which dealt with similar issues. It was held that the transfer of property had taken place as per the provisions of Section 2(47)(v) and Section 2(47)(vi) of the Income Tax Act, which include transactions involving the allowing of possession in part performance of a contract and any transaction enabling the enjoyment of immovable property. The Tribunal concluded that the assessee was liable to capital gains tax in the year of transfer.

3. Applicability of Section 2(47)(v) and Section 2(47)(vi):
The Tribunal extensively discussed the applicability of Section 2(47)(v) and Section 2(47)(vi). It was held that the Joint Development Agreement (JDA) and the irrevocable Power of Attorney executed by the Society in favor of the developer (THDC) constituted a transfer under these sections. The possession given to the developer, even if not exclusive, was sufficient to invoke these provisions. The Tribunal rejected the argument that the JDA was not registered and hence not applicable, stating that the nature of the contract was sufficient for the applicability of Section 2(47)(v).

4. Taxability of Consideration Received:
The Tribunal held that the entire consideration, including the monetary component and the value of the flats to be received, was taxable in the year of transfer. It was emphasized that under Section 45 read with Section 48, the full value of the consideration received or accruing as a result of the transfer must be considered. The Tribunal rejected the contention that only the received amount should be taxed, clarifying that the accrued amount also needed to be taxed.

5. Allowability of Deductions under Section 54F:
The Tribunal noted that no specific ground was raised for deduction under Section 54F. However, it was mentioned that the deduction under Section 54F was not applicable in this case as the assessee had transferred plots and not residential houses. The Tribunal dismissed the argument related to the deduction under Section 54F.

6. Double Taxation Concerns:
The Tribunal addressed the issue of double taxation raised by the assessee. It was clarified that the Society acted only as a facilitator, and the individual members were liable for the tax on the transfer of plots. The Tribunal found no merit in the argument that the Society should be taxed instead of individual members.

7. Impact of Subsequent Events:
The Tribunal discussed the impact of subsequent events, such as the revocation of the JDA and the irrevocable Power of Attorney. It was held that subsequent events would not affect the taxability of the consideration in the year of transfer. The Tribunal emphasized that the irrevocable nature of the Power of Attorney and the terms of the JDA indicated that the transfer had taken place, and the subsequent cancellation did not alter the tax liability.

Conclusion:
The Tribunal dismissed all the appeals filed by the different assessees, upholding the orders of the CIT(A) and confirming the taxability of the entire consideration, including the value of the flats, in the year of transfer. The issues raised by the assessees regarding the validity of proceedings under Section 148, applicability of Section 2(47)(v) and (vi), and subsequent events were addressed comprehensively, and the Tribunal found no merit in the contentions of the assessees. The decision was pronounced in the open court on 12th September 2013.