2016 (7) TMI 184 - AT - Income Tax

Long term capital gain - selection of assessment year - transfer - Held that - There is no transfer of capital asset in assessment year 2007-08. There is no accrual or receipt of any income in favour of the assessee on account of capital gains in assessment year 2007-08. Therefore, whole of the addition in assessment year under appeal i.e. 2007-08 is unjustified. We, accordingly, set aside the orders of the authorities below and delete the entire addition on account of capital gains in assessment year under appeal, however, revenue authorities are at liberty to consider the issue of accrual or receipt of capital gain in assessment year 2009-10 in accordance with law, if so advised. - Decided in favour of assessee

Issues Involved:
1. Long-term capital gain taxation.
2. Denial of exemptions under Sections 54B and 54F of the Income Tax Act.
3. Disallowance of commission paid to brokers.
4. Determination of fair market value of land as of 01.04.1981.
5. Rejection of additional evidence under Rule 46A of the IT Rules.
6. Re-opening of assessment under Section 147/148 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Long-term Capital Gain Taxation:
The primary issue was the upholding of long-term capital gain amounting to ?5,23,23,470/- for the assessment year 2007-08. The assessee contended that only ?50 lakhs should be taxed in the year under consideration, with the balance ?5 crores to be taxed in the assessment year 2009-10 upon receipt. The Assessing Officer (AO) and CIT(A) concluded that the entire sale consideration of ?5.50 crores was taxable in the financial year 2006-07, as per the registered sale deed dated 20.03.2007, despite the balance ?5 crores being received later. The AO referenced Sections 53A and 54 of the Transfer of Property Act and Section 45 read with Section 2(47)(iv) of the Income Tax Act, asserting that the transfer was effective upon execution and registration of the sale deed, with possession handed over to the buyer. The Tribunal, however, found that the sale deed included a condition that the sale would be canceled if the cheque for ?5 crores bounced, indicating that the transfer was not complete until the cheque was honored. The Tribunal acknowledged that the buyer's affidavit and subsequent judicial interventions indicated the buyer’s initial lack of intent to pay, leading to the conclusion that no transfer occurred in the assessment year 2007-08. The Tribunal thus deleted the addition on account of capital gains for that year.

2. Denial of Exemptions under Sections 54B and 54F:
The assessee challenged the denial of exemptions under Sections 54B and 54F on different amounts. Since the Tribunal concluded that no capital gain arose in the assessment year 2007-08, these grounds became infructuous. The Tribunal suggested that these issues could be considered in the year when the capital gain would actually arise.

3. Disallowance of Commission Paid to Brokers:
The assessee contested the disallowance of ?5,50,000/- paid as commission to brokers. Given the Tribunal’s finding that no capital gain arose in the assessment year 2007-08, this issue was also rendered infructuous and was not further deliberated.

4. Determination of Fair Market Value of Land as of 01.04.1981:
The assessee challenged the fair market value of the land as determined by the AO. However, this issue was not addressed in detail due to the Tribunal’s primary finding that no capital gain arose in the relevant assessment year.

5. Rejection of Additional Evidence under Rule 46A:
The assessee’s application to submit additional evidence under Rule 46A was rejected by the CIT(A). This issue was not further pursued in detail following the Tribunal’s primary decision on the non-arising of capital gain in the assessment year 2007-08.

6. Re-opening of Assessment under Section 147/148:
The assessee initially challenged the re-opening of the assessment under Sections 147/148 but did not press this issue during the proceedings. Consequently, this ground was dismissed as not pressed.

Conclusion:
The Tribunal allowed the appeals, setting aside the orders of the authorities below and deleting the entire addition on account of capital gains for the assessment year 2007-08. The revenue authorities were given the liberty to consider the issue of accrual or receipt of capital gain in the assessment year 2009-10 if so advised, in accordance with the law. The remaining grounds of appeal regarding exemptions, commission, and fair market value were rendered infructuous and disposed of accordingly.

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