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2014 (3) TMI 292 - AT - Income TaxCapital Gain - Transfer u/s 2(47) - Claim of deduction u/s 54F of the Act - Development Agreement to develop the property - liability of the capital gains of the co-owners Held that - The decision in Ms. K. Radhika Versus Deputy Commissioner of Income-tax, Central Circle-2 2011 (9) TMI 257 - ITAT HYDERABAD followed - the provisions of deemed transfer under Section 2(47)(v) could not have been invoked - Without accrual of the consideration to the assessee, the assessee is not expected to pay capital gains on the entire agreed sales consideration - When time is essence of the contract, and the time schedule is not adhered to, it cannot be said that such a contract confers any rights on the vendor/landlord to seek redressal under section 53A of the Transfer of Property Act - The agreement cannot be said to be in the nature of a contract referred to in section 53A of the Transfer of Property Act - It cannot be said that the provisions of section 2(47)(v) will apply in the situation thus, the capital gains could not have been taxed Decided in favour of Assessee.
Issues Involved:
1. Legality and correctness of the CIT(A)'s order. 2. Determination of the assessment year for capital gains arising from a development agreement. 3. Evaluation of the possession and transfer of the immovable property under the development agreement. 4. Applicability of Section 2(47)(v) of the Income Tax Act, 1961. 5. Eligibility for deduction under Section 54F of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Legality and correctness of the CIT(A)'s order: The appellant argued that the CIT(A)'s order was against the law, weight of evidence, and probabilities of the case. The CIT(A) upheld the Assessing Officer's decision that the transfer of the capital asset occurred in the assessment year 2008-09 based on a development agreement dated 13-11-2007. The appellant contended that the CIT(A) failed to appreciate the stipulations in the development agreement that indicated no actual possession was handed over during the relevant year. 2. Determination of the assessment year for capital gains arising from a development agreement: The Assessing Officer taxed the capital gain as Short Term Capital Gain in the assessment year 2008-09, arguing that the development agreement constituted a deemed transfer. The appellant claimed that no income was derived from the property in the said year and that the capital gain should not be assessed in the assessment year 2008-09. 3. Evaluation of the possession and transfer of the immovable property under the development agreement: The appellant contended that absolute possession of the property was not handed over to the developer, only symbolic possession for construction purposes. The tribunal found that the possession remained with the appellant, and no consideration was received under the Joint Development Agreement, thus negating the transfer under Section 2(47)(v) of the Act. 4. Applicability of Section 2(47)(v) of the Income Tax Act, 1961: The tribunal referred to the case of Chaturbhuj Dwarkadas Kapadia vs. CIT, which held that a development agreement indicating the transfer of complete control over the property to the developer would be relevant for capital gain chargeability. However, the tribunal found that in this case, the developer did not receive absolute possession or perform contractual obligations, thus Section 2(47)(v) did not apply. 5. Eligibility for deduction under Section 54F of the Income Tax Act, 1961: The Assessing Officer denied the deduction under Section 54F, as it was a case of Short Term Capital Gain. The tribunal, however, found that since there was no transfer of property in the assessment year 2008-09, the question of Short Term Capital Gain and the denial of deduction under Section 54F did not arise. Conclusion: The tribunal concluded that the development agreement did not result in a transfer of the property within the meaning of Section 2(47)(v) in the assessment year 2008-09. The appeal was partly allowed in favor of the appellant, and the additional ground raised by the appellant was dismissed as it did not emanate from the CIT(A)'s order. The order was pronounced in the open Court on 27th February 2014.
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