2013 (12) TMI 1569 - HC - Income Tax

Short term capital gain - applicability of provisions of Section 2(47)(v) - Held that - Commissioner of Income Tax (Appeals) as well as the learned Tribunal upon basis of the factual material placed before it and upon interpretation of the agreement entered between the assessee and the developer has found that the assessee was liable to pay capital gain in the year 2008-09, inasmuch as there was no possession handed over to the developer under Section 53A of the Transfer of Property Act in the assessment year 2003-04. It can thus be seen that finding recorded are upon appreciation of material led before the Commissioner of Income Tax (Appeals) and the Tribunal and upon consideration of the documents placed for its consideration. The said question therefore cannot be said to be a question of law, leave aside, the substantial question of law.

Issues:
- Interpretation of Section 2(47)(v) of the Income Tax Act
- Application of Section 53A of the Transfer of Property Act
- Assessment of short-term capital gain for the year 2003-04

Interpretation of Section 2(47)(v) of the Income Tax Act:
The appeal challenged the order of the Income Tax Appellate Tribunal, Panaji, disposing of the appeals filed by the Revenue against the Commissioner of Income Tax (Appeals) order for the assessment year 2003-04. The substantial question of law raised was whether the ITAT was justified in upholding the CIT (A)'s decision that Section 2(47)(v) was not applicable, leading to the deletion of a short-term capital gain addition of Rs. 1,52,60,908. The appellant argued that a development agreement constituted a transfer under the Income Tax Act, but both the CIT (A) and the Tribunal found that no possession was handed over to the developer, concluding that the agreement did not amount to a transfer as per Section 53A of the Transfer of Property Act. The final agreement in 2008 modified the initial agreement, making the assessee liable for capital gain in the year 2008-09, not 2003-04. The court dismissed the appeal, stating that the findings were based on factual material and interpretation of the agreements, concluding that no substantial question of law existed.

Application of Section 53A of the Transfer of Property Act:
The appellant contended that possession handed over to the developer during the assessment year constituted a transfer under Section 53A of the Transfer of Property Act. However, both the CIT (A) and the Tribunal found that possession was not transferred, and the control over the property remained with the assessee. The agreements were examined, revealing that the developer was only permitted to carry out development, while the assessee retained control, including construction licenses and occupancy certificates. The subsequent modifications to the agreement in 2004 and 2008 clarified the liability for capital gain in the assessment year 2008-09, not 2003-04. The court upheld these findings, emphasizing that possession was a crucial element for a transfer under Section 53A, leading to the dismissal of the appeal.

Assessment of short-term capital gain for the year 2003-04:
The assessment of short-term capital gain for the year 2003-04 hinged on the interpretation of the development agreement between the assessee and the developer. The appellant argued that the possession handed over during the assessment year triggered the liability for capital gain. However, the CIT (A) and the Tribunal found that no possession transfer occurred, as evidenced by the control retained by the assessee over the property. The subsequent modifications to the agreement clarified the liability for capital gain in a later assessment year. The court concurred with these findings, emphasizing the factual analysis and agreement interpretation, leading to the dismissal of the appeal on the grounds of lack of substantial legal questions.

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