2017 (4) TMI 128 - HC - Income Tax

Exigibility to capital gains tax - Transfer exigible to tax - JDA - Scope and legislative intent of Section 2(47)(ii), (v) and (vi) of the Act - essential ingredients for applicability of Section 53A of 1882 Act - Meaning to be assigned to the term possession - Whether in the facts and circumstances, any taxable capital gains arises from the transaction entered by the assessee? Held that - The matter is no longer res integra. In C.S. Atwal s case 2015 (7) TMI 878 - PUNJAB & HARYANA HIGH COURT held that - Perusal of the JDA dated 25.2.2007 read with sale deeds dated 2.3.007 and 25.4.2007 in respect of 3.08 acres and 4.62 acres respectively would reveal that the parties had agreed for pro-rata transfer of land. No possession had been given by the transferor to the transferee of the entire land in part performance of JDA dated 25.2.2007 so as to fall within the domain of Section 53A of 1882 Act. The possession delivered, if at all, was as a licencee for the development of the property and not in the capacity of a transferee. Further Section 53A of 1882 Act, by incorporation, stood embodied in section 2(47)(v) of the Act and all the essential ingredients of Section 53A of 1882 Act were required to be fulfilled. In the absence of registration of JDA dated 25.2.2007 having been executed after 24.9.2001, the agreement does not fall under Section 53A of 1882 Act and consequently Section 2(47)(v) of the Act does not apply. In view of cancellation of JDA dated 25.2.2007, no further amount has been received and no action thereon has been taken. It was urged that as and when any amount is received, capital gains tax shall be discharged thereon in accordance with law. In view of the aforesaid stand, while disposing of the appeals, we observe that the assessee appellants shall remain bound by their said stand. The issue of exigibility to capital gains tax having been decided in favour of the assessee, the question of exemption under Section 54F of the Act would not survive any longer and has been rendered academic. The Tribunal and the authorities below were not right in holding the assessee-appellant to be liable to capital gains tax in respect of remaining land measuring 13.5 acres for which no consideration had been received and which stood cancelled and incapable. - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of Section 2(47)(ii), (v), and (vi) of the Income Tax Act, 1961.
2. Applicability of Section 53A of the Transfer of Property Act, 1882.
3. Determination of possession under the Joint Development Agreement.
4. Taxability of capital gains arising from the transaction.
5. Exemption under Section 54F of the Act.

Analysis:

Interpretation of Section 2(47)(ii), (v), and (vi) of the Income Tax Act, 1961:
The appellant revenue appealed against the order of the Income Tax Appellate Tribunal regarding the deletion of an addition, questioning the justification of relying on a High Court decision. The Tribunal had to decide whether the transfer of land by members of a Cooperative Society through a Joint Development Agreement (JDA) constituted a 'transfer' under the Income Tax Act, attracting Capital Gain. The Tribunal analyzed the clauses of the irrevocable Power of Attorney and the JDA to determine possession and transfer rights.

Applicability of Section 53A of the Transfer of Property Act, 1882:
The Assessing Officer computed capital gains based on the JDA signed during the relevant year. The Commissioner of Income Tax (Appeals) upheld this decision, leading to the assessee filing an appeal before the Tribunal. The Tribunal allowed the appeal, citing a previous High Court decision, emphasizing that possession was not fully transferred under the JDA, thus not falling within Section 53A of the Transfer of Property Act.

Determination of possession under the Joint Development Agreement:
The Tribunal concluded that possession was given as a licensee for development purposes and not as a transferee, emphasizing the importance of fulfilling all essential ingredients of Section 53A of the Transfer of Property Act for the provisions of the Income Tax Act to apply. The Tribunal also considered the payment received by the developer and the cancellation of the JDA in deciding the tax liability.

Taxability of capital gains arising from the transaction:
The Tribunal held that the assessee was not liable for capital gains tax on the remaining land due to cancellation and non-receipt of consideration. The decision was based on the fulfillment of statutory provisions and case law, with the Tribunal emphasizing the pro-rata transfer of land and the absence of complete possession transfer.

Exemption under Section 54F of the Act:
The Tribunal's decision in favor of the assessee regarding capital gains tax rendered the question of exemption under Section 54F of the Act irrelevant. The Tribunal found that the remaining land, for which no consideration was received and was canceled, was not subject to capital gains tax due to various court orders.

In conclusion, the High Court dismissed the appeal by the revenue, upholding the Tribunal's decision based on the precedent set by a previous case. The detailed analysis of the issues involved in interpreting the relevant sections of the Income Tax Act and the Transfer of Property Act led to the determination of tax liability and exemption under the law.