2018 (3) TMI 1897 - AT - Income Tax

Long Term Capital Gain on transfer of UDS portion of land to developers through Joint Development Agreement (JDA) - year of taxability of capital gain - CIT(A) held that only gain arising from the sale of built-up area effected in the previous year alone is taxable during the year under consideration - HELD THAT - As decided in assessee's ow case taxability of long term/short term capital gains arises only in the financial year 2006-07 relevant to the assessment year 2007-08. Since the facts of the case cited by the Ld.AR and the case of the assessee are the same we do not find it necessary to interfere with the order of the Tribunal . Accordingly we hereby hold in the case of the assessee also that the year of taxability of long term/short capital gain shall only arise in the financial year 2006-07 relevant to the assessment year 2007-08. Accordingly ground No. 2(i) raised by the Revenue is disposed off in favour of the assessee.

Summary

Issues:
1. Taxability of Long Term Capital Gain on transfer of UDS portion of land through Joint Development Agreement.
2. Taxability of gain arising from the sale of built-up area only during the relevant year.

Analysis:
1. The appeal pertains to the taxability of Long Term Capital Gain on the transfer of UDS portion of land through a Joint Development Agreement (JDA). The Revenue contested the decision of the Commissioner of Income Tax (Appeals) regarding the assessment year for taxability. The Tribunal examined a similar case involving another joint owner of the property and held that the taxability of capital gains arises in the financial year 2006-07 relevant to the assessment year 2007-08. As the facts were similar, the Tribunal upheld that the taxability for the appellant also arises in the same financial year, ruling in favor of the assessee.

2. The second issue revolved around the taxability of gains from the sale of the built-up area during the relevant year. The Tribunal referred to a previous case involving a joint owner of the property and directed the Assessing Officer to tax the gains arising from the transfer of the capital asset effected in the previous year alone. It emphasized that the Assessing Officer cannot tax the entire share of the constructed area along with the undivided share in the land solely based on receipt unless there is an actual transfer as per the provisions of the Income Tax Act. The Tribunal ruled that the same decision applies to the present case, and ordered accordingly.

In conclusion, the Tribunal dismissed the appeal of the Revenue, affirming the taxability of Long Term Capital Gain and directing the taxability of gains from the sale of the built-up area only during the relevant assessment year. The judgment was pronounced on 1st March 2018 in Chennai.