2013 (9) TMI 1215 - AT - Income Tax

Summary

Issues involved: Taxability of sale proceeds of development rights as capital gain, year of taxability, and allowability of exemption u/s 54 of the Income Tax Act.

Taxability of sale proceeds of development rights as capital gain: The appellant did not press the ground related to this issue during the appeal. The Tribunal was left with considering the year of taxability and the allowability of exemption u/s 54 of the Income Tax Act.

Year of taxability and allowability of exemption u/s 54: The appellant, along with other co-owners, entered into a development agreement granting development rights to a developer. The appellant claimed that no capital gain was shown in the assessment year 2006-07 as possession of the property was handed over to the developer in 2007-08. The Assessing Officer (AO) held that the transfer took place in 2006-07 and assessed capital gain. The AO also denied exemption u/s 54 as the flat received was not considered an investment. The CIT(A) upheld the AO's decision. The appellant argued that possession was handed over in 2007-08, supported by evidence. The Tribunal agreed that no transfer occurred in 2006-07, hence no capital gain was taxable. As the capital gain was not taxable, the claim for exemption u/s 54 became infructuous. The appeal was partly allowed.

This judgment highlights the importance of establishing the timing of possession transfer in determining the taxability of capital gains and the eligibility for exemptions u/s 54 of the Income Tax Act.