2017 (1) TMI 631 - AT - Income Tax

Capital gain computation - consideration received - pro-rata transfer of land - Transfer exigible to tax by reference to Section 2(47)(v) read with Section 53-A of the Transfer of Property Act, 1882 - JDA entered by assessee - Held that - We find no infirmity in the order of the learned CIT (Appeals) in directing the Assessing Officer to recompute the short term capital gain on the amount actual received by the assessee. We find that the aforestated directions have been given by the CIT (Appeals) following the judgment of the Hon ble Punjab & Haryana High Court on the identical issue in case of Shri C.S. Atwal 2015 (7) TMI 878 - PUNJAB & HARYANA HIGH COURT This fact is not denied even by the Revenue. Since the issue has been decided by the higher authority and the learned CIT (Appeals) has passed the order following the decision of the Hon ble Jurisdictional High Court, we find no reason to interfere in the same. In view of the same, all the grounds raised by the Revenue are dismissed.

Summary

Issues:
1. Interpretation of Joint Development Agreement for taxation purposes
2. Application of Section 53A of the Transfer of Property Act
3. Capital gains tax calculation based on consideration received
4. Applicability of Section 2(47)(ii) and 2(47)(vi) of the Income Tax Act

Interpretation of Joint Development Agreement for taxation purposes:
The appeal was filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals)-2, Chandigarh, related to the assessment year 2008-09. The case involved a Housing Society that entered into a joint development agreement with two companies for the development of its land. The Revenue contended that the entire property had been transferred by the assessee to the development companies and builders, and capital gains should be computed based on the entire amount received and receivable by the assessee. However, the CIT (Appeals) directed the Assessing Officer to recompute the short term capital gain only on the amount actually received by the assessee, citing a judgment of the Hon'ble Punjab & Haryana High Court on a similar issue.

Application of Section 53A of the Transfer of Property Act:
The Revenue raised grounds challenging the CIT (Appeals) decision on various aspects of the Joint Development Agreement. They argued that possession had been given to the transferee, the developer was in complete control of the property, and the possession delivered was not merely as a licensee. The Revenue contended that the essential ingredients of Section 53A of the Transfer of Property Act were fulfilled, and the agreement should not have been bifurcated for tax purposes. However, the Tribunal found no infirmity in the CIT (Appeals) order, as it was based on the judgment of the Hon'ble Punjab & Haryana High Court and dismissed all grounds raised by the Revenue.

Capital gains tax calculation based on consideration received:
The Revenue further contended that the capital gains tax should be based on the entire consideration received and receivable by the assessee, rather than only on the amount actually received. However, the Tribunal upheld the CIT (Appeals) decision to recompute the short term capital gain based on the amount actually received by the assessee, following the precedent set by the Hon'ble Punjab & Haryana High Court.

Applicability of Section 2(47)(ii) and 2(47)(vi) of the Income Tax Act:
The Revenue also challenged the CIT (Appeals) decision regarding the applicability of Section 2(47)(ii) and 2(47)(vi) of the Income Tax Act to the case. They argued that the provisions of these sections made the assessee liable for capital gains tax. However, the Tribunal upheld the CIT (Appeals) order, stating that since the issue had been decided by the higher authority and the CIT (Appeals) had followed the decision of the Hon'ble Jurisdictional High Court, there was no reason to interfere with the decision.

In conclusion, the Tribunal dismissed the appeal of the Revenue, upholding the decision of the CIT (Appeals) to recompute the short term capital gain based on the amount actually received by the assessee, in line with the judgment of the Hon'ble Punjab & Haryana High Court.