2008 (7) TMI 990 - HC - Income Tax

Summary

Issues Involved:
The judgment addresses three substantial questions of law raised by the appellant Revenue regarding the chargeability of capital gains to tax in the assessment year 1994-95, the transfer of property within the meaning of section 2(47)(v) of the IT Act, and the applicability of a previous ruling by the Bombay High Court.

Capital Gains Tax Liability (Issue a):
The Tribunal's conclusion that capital gains were not chargeable to tax in the assessment year 1994-95 despite the agreement being signed in March 1994 was challenged. The Court referred to a previous case where it was established that the assessment year for capital gains is when the purchaser is physically put in possession, not when the agreement is made. As the purchaser was put in possession in April 1998, the liability for capital gains tax arose in the assessment year 1999-2000. Consequently, the appeal was dismissed for lack of merit.

Property Transfer Interpretation (Issue b):
The Tribunal's decision that the property was not transferred by the assessee to the purchaser within the meaning of section 2(47)(v) of the IT Act for the assessment year 1994-95 was disputed. Despite the assessee's claim that possession was given in April 1998, evidence suggested otherwise. The Court's ruling in a previous case emphasized the importance of physical possession for determining capital gains liability, leading to the dismissal of the appeal due to lack of substantial legal questions.

Applicability of Previous Ruling (Issue c):
The Tribunal's rejection of the applicability of a previous Bombay High Court ruling in the case of Chaturbhuj Dwarkadas Kapadia vs. CIT was contested. The Court reaffirmed the principle that the assessment year for capital gains tax is when physical possession is transferred, not when the agreement is signed. As the facts aligned with this principle, the appeal was dismissed, and it was noted that the appellant Revenue had already assessed and collected the capital gains tax for the correct assessment year.