2016 (2) TMI 32 - AT - Income Tax

Addition of long term capital gain - CIT(A) deleted the addition held that no transfer involved within the meaning of section 2(47) r.w.s. 53(a) of the transfer of the property Act, as the assessee was in the possession of the property and the possession was to be given to the developer only upon the last payment and till then the assessee had a right to revoke the agreement, therefore, it was held that no capital gain arose to the assessee - Held that - it can be concluded that the property was not transferred within the meaning of section 2(47)(v) of the Act r.w.s 53A of the transfer of Property Act. Even, the condition of the development agreement could not reach to finality due to non-payment of specified amounts (clause-9 of the agreement) by the transferee, due to which, agreement was unilaterally canceled, therefore, we find merit in the claim of the assessee. Our view is fortified by the decision in the case of General Glass Company Pvt. Ltd. vs DCIT (2006 (12) TMI 170 - ITAT BOMBAY-J) and Asian Distributors Ltd. (2000 (1) TMI 990 - ITAT MUMBAI) wherein, it was held that where the payment of balance consideration within stipulated time is essence of the agreement of sale and such payments are not made within time by the transferee, such contract/agreement does not confer any righty on the transferee as envisaged u/s 53A of the transfer of the Property Act along with the provisions of section 2(47)(v) of the Act. Since the possession of the property was to be given to the developer only upon fulfillment of the conditions of the agreement i.e. last payment, therefore, there is no transfer in terms of section 2(47)(v) of the Act, thus, we affirm the stand of the ld. Commissioner of Income Tax (Appeals). - Decided in favour of assessee

Summary

Issues:
1. Deletion of long term capital gain addition by the Revenue.

Analysis:
The Revenue challenged the deletion of the addition of long term capital gain by the ld. First Appellate Authority. The Revenue contended that the assessee had declared long term capital gain on a transaction, but discrepancies were found by the Assessing Officer regarding the computation. The Revenue argued that the capital gains, if any, should be attributed to the assessment year 2001-02, not the year under consideration. On the other hand, the assessee's counsel defended the grant of long term capital gain to the assessee. The Tribunal considered the arguments and facts on record, noting that the assessee declared a loss initially but claimed long term capital gain on the sale of immovable property. The Tribunal observed that the possession of the property remained with the assessee, and no transfer as per the Transfer of Property Act was established. The Tribunal referred to relevant case laws supporting the assessee's position and concluded that no capital gain arose to the assessee.

The Tribunal analyzed the development agreement between the assessee and the developer, highlighting the terms and conditions specified in the agreement. It was noted that the possession of the property remained with the assessee, and the developer failed to fulfill the payment obligations as per the agreement. Despite partial payments made by the developer, the balance amount remained unpaid, leading to the unilateral cancellation of the agreement by the assessee. The Tribunal emphasized that the property was not transferred within the legal framework, as the possession was not handed over to the developer due to non-compliance with the agreement terms. Citing relevant precedents, the Tribunal affirmed the decision of the ld. Commissioner of Income Tax (Appeals) in favor of the assessee, dismissing the Revenue's appeal.

In conclusion, the Tribunal dismissed the appeal of the Revenue, upholding the decision that no capital gain accrued to the assessee due to the absence of a valid transfer of property as per legal provisions. The Tribunal's detailed analysis of the facts, legal framework, and relevant case laws supported the conclusion that the assessee was not liable for the long term capital gain addition challenged by the Revenue. The judgment was pronounced in the open court after considering arguments from both sides.