2015 (2) TMI 893 - AT - Income Tax

Capital gain - transfer of development rights in land near PARVATI, Pune - Held that - The assessee has not given the possession of the property in question to the developer for F.Y. 2008-09 (A.Y. 2009-10) and hence, there is no transfer within the meaning of Sec. 45 r.w.s. 2(47)(v) of the Act. CIT(A)-II, Pune erred in law and on facts in confirming the taxability of receipt as capital gains and holding that the said amount is part consideration arising from transfer of development rights in land near PARVATI, Pune. - Decided in favour of assessee.

Summary

Issues Involved:
1. Taxability of Rs. 10,90,00,000/- as capital gains.
2. Possession of the land and applicability of Section 2(47)(v) of the Income-tax Act, 1961.
3. Enhancement of taxable capital gain by Rs. 12,00,00,000/-.
4. Deduction of cost of acquisition.

Detailed Analysis:

1. Taxability of Rs. 10,90,00,000/- as capital gains:
The assessee contended that the receipt of Rs. 10,90,00,000/- was an advance under a Development Agreement dated 01-04-2008, which was not registered. The agreement stipulated that possession would only be given after building plans were sanctioned and full consideration was received. The Assessing Officer (AO) held that the amount was taxable as capital gains, considering the agreement as a transfer under Section 2(47)(v) of the Income-tax Act, 1961. The CIT(A) confirmed this view, emphasizing that the development rights were irrevocably granted to the developer, thus constituting a transfer.

2. Possession of the land and applicability of Section 2(47)(v) of the Income-tax Act, 1961:
The AO and CIT(A) concluded that possession was given to the developer, invoking Section 2(47)(v) of the Income-tax Act, read with Section 53A of the Transfer of Property Act. The assessee argued that possession was conditional upon the full payment and sanction of building plans, which did not occur. The Tribunal agreed with the assessee, noting that the possession was not handed over as per the agreement's conditions, and thus, there was no transfer within the meaning of Section 2(47)(v) in the relevant assessment year.

3. Enhancement of taxable capital gain by Rs. 12,00,00,000/-:
The CIT(A) enhanced the taxable capital gain by Rs. 12,00,00,000/-, arguing that the entire consideration of Rs. 22,90,00,000/- should be taxed. The Tribunal found this enhancement erroneous, as the conditions for transfer were not met, and thus, no capital gain arose in the assessment year 2009-10.

4. Deduction of cost of acquisition:
The CIT(A) did not allow the deduction of the cost of acquisition, stating that the assessee's application for rectification was pending before the AO. Since the Tribunal held that there was no transfer in the relevant year, the issue of deduction of cost of acquisition became redundant.

Conclusion:
The Tribunal allowed the assessee's appeal, holding that there was no transfer of the property in the assessment year 2009-10, and thus, no capital gain was taxable. The enhancement by the CIT(A) was set aside, and the issues regarding the deduction of cost of acquisition were rendered redundant.