2013 (1) TMI 915 - AT - Income Tax

Summary

Issues involved: Chargeability of receipt from the developer to tax as a capital gain.

Issue 1: Chargeability of receipt as capital gain
The assessee received compensation for transfer of development right and claimed it does not amount to transfer of capital asset. However, the AO taxed the entire sum as capital gains. The Ld. CIT(A) upheld the AO's decision, stating the sum was rightly taxed as long term capital gain. The assessee appealed, arguing that transfer of development rights are not liable for capital gain tax, supported by judicial decisions. The Tribunal examined the agreement and relevant judicial decisions. It noted that the assessee had transferred development rights, as per the agreement. Referring to the case of Deepak S. Shah Vs ITO, the Tribunal concluded that the assessee did not hold any capital asset and there was no transfer of capital asset, hence S.45 of the Act was not attracted, and the assessee was not liable to capital gain tax. Citing similar cases like Maheshwar Prakash -2 CHS Ltd. Vs ITO and Om Shanti Co. Op. Hsg. Soc. Ltd. Vs ITO, the Tribunal held that no capital gains were liable to be taxed in this case. Therefore, the appeal filed by the assessee was allowed.

Conclusion
The Tribunal ruled in favor of the assessee, holding that no capital gains were liable to be taxed on the facts of the case, based on the transfer of development rights and relevant judicial pronouncements.