2016 (6) TMI 1451 - AT - Income Tax

LTCG - Scope and legislative intent of Section 2(47)(ii), (v) and (vi) - JDA entered - essential ingredients for applicability of Section 53A of 1882 Act - Meaning to be assigned to the term possession - whether no possession had been given by the transferor to the transferee of the entire land in part performance of JDA ? - HELD THAT - As decided in the case of Charanjit Singh Atwal 2015 (7) TMI 878 - PUNJAB HARYANA HIGH COURT that since no possession had been given by the transferor to the transferee of the entire land in part performance of JDA dated 25.02.2007 so as to fall within the domain of section 53A of the Transfer Act and consequently, section 2(47)(v) of the I.T. Act, did not apply, that further, willingness to perform their part of the contract was absent on the part of the developers, or it could not be performed by them, which was one of the conditions precedent for applying section 53A of the transfer Act; that in clause 26 of the JDA dated 25.02.2007, the principle of force majeure had been provided for, which would be applicable with full vigour in the circumstances; that from the cumulative effect of the covenants contained in the JDA read with the registered special power of attorney dated 26.02.2007, it could not be held that the mandatory requirements of section 53A of the Transfer Act were complied with, which stood incorporated in section 2(47)(v) of the Act; that once that was so, it could not be said that the assessee were liable to capital gain tax in respect of the remaining land which was not transferred by them to the developer/builder because of supervising event and not on account of any volition on their part; and that viewed from another angle, it could not be said that any income chargeable to capital gains tax in respect of the remaining land had accrued or arisen to the assessee in the facts of the case. - Decided in favour of assessee.

Summary

Issues involved:
Assessment of long term capital gains, applicability of section 53A of Transfer Act, compliance with legal requirements for capital gains tax liability.

Analysis:

Assessment of long term capital gains:
The case involved an appeal by the assessee against an order dated 26.05.2015 passed by the ld. CIT(A)-1, Jalandhar for the assessment year 2007-08. The Assessing Officer (AO) had initiated reassessment proceedings under section 147 as the assessee had not declared the entire long term capital gains accrued from the transfer of immovable property. The AO computed the long term capital gains at Rs.3,53,94,940/- and added it to the originally declared income of the assessee. On appeal, the ld. CIT(A) confirmed confirmed the AO's order. The issue of assessment of long term capital gains was the primary concern in this case.

Applicability of section 53A of Transfer Act:
During the proceedings, the ld. Counsel for the assessee argued that the issue in dispute was covered by a decision of the Hon’ble High Court in a specific case. The Tribunal considered the arguments presented and referred to the decision of the Hon’ble High Court of Punjab & Haryana in another case where the applicability of section 53A of the Transfer of Property Act was discussed. The Tribunal analyzed the legal aspects related to possession, willingness to perform contractual obligations, and compliance with statutory requirements under section 53A of the Transfer Act. The Tribunal's decision was influenced by the interpretation and application of section 53A in the context of the case.

Compliance with legal requirements for capital gains tax liability:
The Tribunal, after considering the arguments and legal precedents, found that the case of the assessee was similar to the one decided by the Hon’ble High Court of Punjab & Haryana. The Tribunal emphasized that certain conditions precedent for applying section 53A of the Transfer Act were not met in the case under consideration. It was noted that the transferor had not given possession to the transferee as required by law. The Tribunal concluded that the assessee was not liable to capital gains tax for the remaining land that was not transferred due to supervening events beyond the assessee's control. The decision highlighted the importance of compliance with legal requirements for determining capital gains tax liability.

In conclusion, the Tribunal allowed the appeal of the assessee based on the interpretation of legal provisions, compliance with statutory requirements, and the application of relevant case law. The decision emphasized the significance of meeting legal conditions for the assessment of long term capital gains and the implications of section 53A of the Transfer of Property Act on tax liability.