2015 (8) TMI 929 - HC - Income Tax

Transfer of property - capital gain - scope and legislative intent of Section 2(47)(ii), (v) and (vi) of the Act - what are the essential ingredients for applicability of Section 53A of 1882 Act - meaning to be assigned to the term possession ? - whether in the facts and circumstances, any taxable capital gains arises from the transaction entered by the assessee? - Held that - Perusal of the JDA dated 25.2.2007 read with sale deeds dated 2.3.007 and 25.4.2007 in respect of 3.08 acres and 4.62 acres respectively would reveal that the parties had agreed for pro-rata transfer of land. No possession had been given by the transferor to the transferee of the entire land in part performance of JDA dated 25.2.2007 so as to fall within the domain of Section 53A of 1882 Act. The possession delivered, if at all, was as a licencee for the development of the property and not in the capacity of a transferee. Section 53A of 1882 Act, by incorporation, stood embodied in section 2(47)(v) of the Act and all the essential ingredients of Section 53A of 1882 Act were required to be fulfilled. In the absence of registration of JDA dated 25.2.2007 having been executed after 24.9.2001, the agreement does not fall under Section 53A of 1882 Act and consequently Section 2 (47)(v) of the Act does not apply. The issue of exigibility to capital gains tax having been decided in favour of the assessee, the question of exemption under Section 54F of the Act would not survive any longer and has been rendered academic. The Tribunal and the authorities below were not right in holding the assessee-appellant to be liable to capital gains tax in respect of remaining land measuring 13.5 acres for which no consideration had been received and which stood cancelled and incapable of performance at present due to various orders passed by the Supreme Court and the High Court in PILs. Therefore, the appeals are allowed.- matter is remanded to the Tribunal to pass fresh orders after hearing learned counsel for the parties and in view of the conclusions noticed herein above. Ordered accordingly. The appeals stand disposed of. See C.S.Attwal vs. The Commissioner of Income Tax, Ludhiana and another 2015 (7) TMI 878 - PUNJAB & HARYANA HIGH COURT

Summary

Issues:
1. Interpretation of Section 2(47)(v) of the Income Tax Act, 1961
2. Applicability of Section 53A of the Transfer of Property Act, 1882
3. Taxability of capital gains under a Joint Development Agreement
4. Exemption under Section 54F of the Income Tax Act

Interpretation of Section 2(47)(v) of the Income Tax Act, 1961:
The case involved a Joint Development Agreement (JDA) where the appellant society entered into an agreement with developers for the development of land. The Assessing Officer held that the JDA amounted to a "transfer" under Section 2(47)(v) of the Act, leading to capital gains tax liability. The Commissioner of Income Tax (Appeals) upheld this decision. However, the High Court, in a similar case, clarified that for Section 2(47)(v) to apply, possession of the entire land must be transferred, which did not occur in this case. The High Court concluded that the JDA did not fall under the purview of Section 53A of the Transfer of Property Act, and therefore, Section 2(47)(v) of the Act did not apply.

Applicability of Section 53A of the Transfer of Property Act, 1882:
The court analyzed the essential elements of Section 53A of the Transfer of Property Act, which were required to be fulfilled for a transaction to be considered a "transfer." It was noted that possession was not transferred in part performance of the JDA, and any possession granted was for development purposes, not as a transferee. The court emphasized that without the registration of the JDA post-24.9.2001, it did not fall under Section 53A, and consequently, Section 2(47)(v) of the Act did not apply.

Taxability of capital gains under a Joint Development Agreement:
The Tribunal upheld the Assessing Officer's decision to tax the entire consideration receivable under the JDA as capital gains. However, the High Court overturned this decision, stating that no further amount had been received due to the cancellation of the JDA. As a result, the court held that the appellant was not liable for capital gains tax on the remaining land due to various legal constraints. The court allowed the appeals and ordered a remand to the Tribunal for fresh orders.

Exemption under Section 54F of the Income Tax Act:
The issue of exemption under Section 54F of the Act was discussed but deemed irrelevant after the court's decision on the capital gains tax liability. The court ruled in favor of the appellant, stating that the question of exemption under Section 54F did not survive due to the decision on capital gains tax liability. The court found that the appellant was not liable for capital gains tax on the remaining land due to legal constraints, rendering the exemption issue moot.