2017 (5) TMI 71 - AT - Income Tax

Capital gains - development agreement - transfer of property or not - assessee claims that there was no transfer of property for the Assessment Year 2006-07 under the development agreement and no transfer of property can take place on the basis of unregistered development agreement dated 24/08/2005 - Held that - assessee as well as builder undisputedly acted upon the very same agreement dated 24/08/2005. Either assessee or builder at any point of time has not disputed the development agreement. Also as per the agreement dated 24/08/2005 builder constructed the flats and assessee also cooperated with the builder and all the transactions are completed by the builder without any dispute with the assessee. Simply because the agreement was not transferred it cannot be said that the transfer has not taken place unless either of the parties disputed unregistered agreement. If the builder was merely a licence he would not derive any interest in the subject property and would not be referred as vendor in the sale deeds. It is immaterial that Power of Attorney was not executed. Thus the recitals in the sale deeds narrating the developer also as vendor of the property clearly show that the transfer of interest had taken place under the Development Agreement in favour of the developer and such transfer is liable for capital gains in this subject year being the year of transfer of site for development. Insofar as levy of interest under section 234-B & 234-C are concerned these are consequential in nature hence same is dismissed. Appeal dismissed - decided against assessee.

Summary

Issues:
Appeals against separate orders of Commissioner of Income Tax (Appeals) for Assessment Years 2006-07 to 2008-09. Dispute over short term capital gains arising from a development agreement entered into by the assessee. Whether the unregistered development agreement constitutes a transfer of property. Determination of capital gains for the Assessment Year 2006-07.

Analysis:
1. The assessee filed appeals against orders of Commissioner of Income Tax (Appeals) for Assessment Years 2006-07 to 2008-09. The dispute centered around the short term capital gains arising from a development agreement with M/s. Sai Ganesh Builders. The Assessing Officer determined the total income at ?51,20,310 based on the agreement, where the assessee was entitled to 13 flats in a 35:65 ratio. The Assessing Officer considered the transfer of the site for development as a short term capital gain, leading to the dispute.

2. The assessee argued before the ld. CIT(A) that no transfer of property occurred in the Assessment Year 2006-07 as per the unregistered development agreement dated 24/08/2005. However, the ld. CIT(A) upheld the Assessing Officer's decision, stating that both parties acted upon the unregistered agreement, leading to the taxation of capital gains for the subject year.

3. The Tribunal considered the arguments presented by both sides. The assessee contended that no transfer took place based on the unregistered agreement and if any, it should be taxed for the Assessment Year 2007-08. On the contrary, the Departmental Representative supported the lower authorities' orders.

4. The Tribunal found that although the development agreement was unregistered, both parties acted upon it. The ld. CIT(A) held that a transfer had taken place during the subject year, as per the terms of the agreement, which required the builder to construct and deliver the apartment to the assessee. The Tribunal upheld the decision, dismissing the appeal raised by the assessee.

5. The Tribunal also addressed the levy of interest under sections 234-B & 234-C, stating them as consequential in nature. The appeals were dismissed, affirming the orders of the lower authorities.

6. In ITA No.69/VIZ/2014, similar facts were involved as in ITA No. 68/VIZ/2014. The decision made in the preceding appeal applied mutatis mutandis to this case, leading to the dismissal of the appeal.

In conclusion, the Tribunal upheld the taxation of short term capital gains for the Assessment Year 2006-07 based on an unregistered development agreement, emphasizing that the actions of both parties indicated a transfer had taken place, leading to the dismissal of the appeals filed by the assessee.