2018 (10) TMI 1867 - AT - Income Tax

Capital gain - Year of assessment year - possession of the property in compliance with the JDA - taxability on transfer of land - HELD THAT - Admittedly the possession of the property in compliance with the JDA had admittedly passed from the assessee to the developer during the assessment year 2007-08. This is not the case where the joint developer was barred from transferring its share in the immovable property or entering into agreements for the transfer of its share in the undivided interest and the super construction before completion of the project. In fact, as per Clause-6 of the agreement, the assessee handed over the possession of the land on receipt of the security deposit. These facts, which have been brought out in the Tribunal s order in the case of co-owner s case referred to supra, have not been disputed or dislodged by the Revenue. This being so, the principles laid down in the case of Commissioner of Income Tax Vs.Balbir Singh Maini 2017 (10) TMI 323 - SUPREME COURT clearly do not apply to this case in so far as the transaction has gone through and more than anything else possession of the immovable property has already got transferred in line with the provisions of Sec.2(47)(v) during the assessment year 2007-08 itself. This being so, respectfully following the decision of Co-ordinate Bench of this Tribunal in the case of co-owner s case, The I.T.O Vs. Shri Shafiq Mohammed Shah vide 2017 (5) TMI 1168 - ITAT CHENNAI it is directed that the long term capital gains is taxable only during the assessment year 2007-08 and not during the assessment year 2014-15. Consequently, the appeal of the Revenue stands dismissed.

Summary

Issues:
- Interpretation of Joint Development Agreement (JDA) for tax assessment purposes
- Applicability of section 50C of the Income Tax Act
- Taxability of capital gains arising from JDA
- Comparison with legal precedents and judgments

Interpretation of Joint Development Agreement (JDA) for tax assessment purposes:
The appeal involved a dispute regarding the interpretation of a Joint Development Agreement (JDA) entered into by the assessee with a developer. The JDA involved the transfer of land for development and subsequent transfer of constructed property. The assessee declared capital gains for the assessment year 2014-15, which the Assessing Officer calculated at 17,84,14,787/-. The assessee contended that the JDA was entered into in 2006, and the capital gains arose in 2007-08, challenging the application of section 50C of the Act by the Assessing Officer.

Applicability of section 50C of the Income Tax Act:
The Assessing Officer invoked the provisions of section 50C of the Income Tax Act to determine the total taxable income. However, the assessee argued that the Assessing Officer wrongly adopted the guideline value for the assessment year 2014-15 and incorrectly applied section 50C. The assessee relied on a Co-ordinate Bench decision where it was held that possession and control of the property were transferred to the developer, satisfying the conditions of section 2(47)(v) of the Act.

Taxability of capital gains arising from JDA:
The core issue revolved around the taxability of capital gains arising from the JDA. The Revenue contended that the capital gains should be taxed based on the actual registration date of residential units and commercial area in respective assessment years. The assessee argued that the JDA was completed, and income accrued in the assessment year 2007-08, not in 2014-15. The Tribunal analyzed the facts and held that the principles laid down by the Supreme Court in a specific case did not apply as the possession of the property had transferred in compliance with the JDA.

Comparison with legal precedents and judgments:
The Tribunal compared the facts of the case with a Supreme Court judgment where the transaction did not materialize, leading to non-taxation of hypothetical income. In this case, the possession of the property had transferred during the assessment year 2007-08, and the JDA was completed. The Tribunal relied on a Co-ordinate Bench decision to rule that long-term capital gains were taxable only in the assessment year 2007-08, dismissing the Revenue's appeal. The decision was based on the transfer of possession and compliance with section 2(47)(v) of the Income Tax Act.