2016 (2) TMI 275 - HC - Income Tax

Scope of Section 2(47)(v) r.w.s. 53-A of the Transfer of Property Act, 1882 - JDA entered by assessee - Whether possession as envisaged by Section 2(47) (v) and Section 53A of the Transfer of Property Act, 1882 was delivered, and if so, its nature and legal effect? - Held that - The issues involved herein have already been decided by this Court in C.S.Atwal vs. The Commissioner of Income Tax, Ludhiana and another 2015 (7) TMI 878 - PUNJAB & HARYANA HIGH COURT to 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. Further 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. In view of cancellation of JDA dated 25.2.2007, no further amount has been received and no action thereon has been taken. It was urged that as and when any amount is received, capital gains tax shall be discharged thereon in accordance with law. In view of the aforesaid stand, while disposing of the appeals, we observe that the assessee appellants shall remain bound by their said stand. 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. - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of the term "transfer" under Section 2(47)(v) of the Income Tax Act, 1961 in conjunction with Section 53A of the Transfer of Property Act, 1882.
2. Consideration of rights arising from the Joint Development Agreement (JDA), impact of non-registration of JDA, and its repudiation.
3. Analysis of the concept of "possession" under Section 2(47)(v) and Section 53A of the Transfer of Property Act, 1882, including its delivery, nature, and legal implications.
4. Examination of developer default, its consequences on transactions, and tax liability.
5. Taxability of amounts pending receipt based on hypothetical assumptions.

Issue 1:
The court analyzed whether the transactions constituted a "transfer" for tax purposes under Section 2(47)(v) of the Income Tax Act, 1961 read with Section 53A of the Transfer of Property Act, 1882. The judgment highlighted that possession had not been transferred entirely, indicating that the agreement did not fall within the scope of Section 53A of the Transfer of Property Act, 1882. It was emphasized that the possession, if any, was provided as a licensee for property development, not as a transferee.

Issue 2:
The court deliberated on the rights arising from the Joint Development Agreement (JDA), the implications of the JDA's non-registration, and its alleged repudiation. It was established that the JDA did not fall under Section 53A of the Transfer of Property Act, 1882 due to its post-24.9.2001 execution without registration. The judgment emphasized that the capital gains tax had been paid on the amount received from the developer, and no further payment had been made following the JDA's cancellation.

Issue 3:
The judgment examined the concept of "possession" as defined in Section 2(47)(v) and Section 53A of the Transfer of Property Act, 1882, focusing on its delivery, nature, and legal consequences. It concluded that the possession delivered, if any, was not in the capacity of a transferee but as a licensee for property development purposes.

Issue 4:
Regarding developer default and its impact on transactions and tax liability, the court ruled in favor of the appellant, stating that the appellant was not liable for capital gains tax on the remaining land due to cancellation and impossibility of performance following court orders in Public Interest Litigations.

Issue 5:
The court addressed the taxability of pending amounts based on hypothetical assumptions arising from future receipts. It was noted that since the capital gains tax had been paid on the amount received, and no further payments were made post-JDA cancellation, the appellant would discharge any tax liability on future amounts received in accordance with the law.

In conclusion, the court disposed of the appeal in line with a previous case, emphasizing the non-taxability of the remaining land due to cancellation and the appellant's obligation to discharge tax liabilities on future amounts received.