2015 (7) TMI 1064 - AT - Income Tax

Long term capital gains - assessment of LTCG in the hands of the appellant assessee OR the Punjabi Co-operative House Building Society Ltd. Mohali in which the appellant is a member - transfer u/s 2(47) - vacant land - Possession given by the society to the developer under joint development agreement - Advance Received or Actual Sales Held that - Identical issues came up for consideration of Tribunal in case of Charanjit Singh Atwal Vs. ITO 2013 (8) TMI 364 - ITAT CHANDIGARH 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. - Decided against the assessee.

Summary

Issues Involved:
1. Assessment of long-term capital gains in the hands of the appellant.
2. Assessment of long-term capital gains in the previous year 2006-07 relevant to the A.Y. 2007-08.

Detailed Analysis:

Issue 1: Assessment of Long-Term Capital Gains in the Hands of the Appellant
The appellant contested the assessment of long-term capital gains in their hands rather than in the hands of the Punjabi Co-operative House Building Society Ltd., Mohali, of which the appellant is a member. The Tribunal noted that the appellant had originally declared an income including long-term capital gains. However, the Assessing Officer (AO) recalculated the capital gains based on the development agreement with Tata Housing Development Company Ltd. and HASH Builders (P) Ltd. The AO determined that the appellant had not declared the full capital gains and computed the gain as Rs. 1,76,96,655/-.

The Tribunal referenced the case of Charanjit Singh Atwal Vs. ITO, which dealt with similar issues. It was held that for charging capital gains, the charging section is 45, which requires profits or gains arising from the transfer of a capital asset. The Tribunal emphasized that the definition of "transfer" under section 2(47) includes transactions that allow possession to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882. The Tribunal concluded that the appellant's case involved a transfer as defined under section 2(47)(v) and (vi), thereby justifying the assessment of capital gains in the appellant's hands.

Issue 2: Assessment of Long-Term Capital Gains in the Previous Year 2006-07 Relevant to the A.Y. 2007-08
The appellant argued that the assessment of long-term capital gains should not have been confirmed for the previous year 2006-07. The Tribunal noted that the appellant had filed a return declaring capital gains for the year in question. The AO issued a notice under section 148 due to information received about undeclared capital gains from the development agreement.

The Tribunal examined the timing of the transfer under section 2(47) and the implications of the Joint Development Agreement (JDA). It was noted that the possession of the property was handed over to the developer, and the irrevocable power of attorney was executed, signifying the transfer. The Tribunal referred to the case of Chaturbhuj Dwarkadas Kapadia v CIT, where it was held that capital gains are taxable in the year the transaction is entered into, even if the transfer of immovable property is not effective under general law.

The Tribunal also considered the implications of the Force Majeure clause in the JDA, which protected the developers from liability due to unforeseen circumstances like court orders or government directions. It was concluded that the developer was willing to perform their part of the contract, and the capital gains were rightly assessed for the year 2006-07.

Conclusion:
The Tribunal upheld the assessment of long-term capital gains in the hands of the appellant for the previous year 2006-07. The appeal was dismissed, confirming the AO's computation of capital gains based on the development agreement and the provisions of section 2(47) and section 45 of the Income Tax Act.