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2013 (7) TMI 319 - HC - Income TaxTransfer of capital asset - Agricultural land transferred to AOP and changed to industrial land - Appellant contended that he and other land owners having agricultural land within that declared industrial estate formed an AOP, transferred the agricultural land to AOP, whereupon AOP applied for conversion of land use and the same having been granted, the industrial land was ultimately sold by AOP. It was contended that transfer by him of a piece of agricultural land to AOP does not attract any capital gain. Held that - for the purpose of income tax, a capital asset may be transferred to an AOP as is provided in Section 2 (47) of the Act. However, when the capital asset is an immovable property by reason of the provisions contained in the Transfer of Property Act read with the Registration Act, transfer of an immovable property of the nature dealt with herein requires an instrument which is also required to be registered - there is no conveyance by the appellant in favour of AOP, nor there is any agreement between the appellant and the AOP coupled with the contention by the AOP that in pursuance with that agreement and in part performance thereof it is in possession of the property in question - Decided against assessee.
Issues:
1. Transfer of capital asset to an Association of Persons (AOP) and assessment of capital gains. 2. Interpretation of Section 2(47) of the Income Tax Act regarding transfer of immovable property to AOP. Issue 1: Transfer of capital asset to an Association of Persons (AOP) and assessment of capital gains: For the assessment year 2008-2009, the appellant was subject to scrutiny assessment under Section 143(2) of the Income Tax Act due to the sale of an immovable property. The appellant argued that the transfer of agricultural land to the AOP did not attract capital gains, as the industrial land was sold by the AOP. However, the Assessing Officer held the appellant liable for the entire capital gains tax. The CIT (Appeals) found that the land was transferred to the AOP on a specific date, and directed individual assessment of short-term capital gains on each member of the AOP. The AOP was also directed to be assessed for capital gains upon selling the land. The Tribunal upheld this decision, leading to the dismissal of the appellant's appeal. Issue 2: Interpretation of Section 2(47) of the Income Tax Act regarding transfer of immovable property to AOP: The judgment highlighted the legal requirements for the transfer of immovable property to an AOP under Section 2(47) of the Act. It emphasized that for an immovable property transfer to be valid, an instrument requiring registration is necessary. The judgment noted the absence of a conveyance or agreement between the appellant and the AOP, along with the lack of possession by the AOP as part of the transfer process. It concluded that the CIT (Appeals) had no valid reason to overturn the Assessing Officer's decision. Although the Tribunal did not address the transfer issue comprehensively, the lack of an independent appeal by the revenue prevented further intervention in the matter. In conclusion, the appeal was dismissed, affirming the assessment of capital gains on the appellant and the AOP.
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