2017 (5) TMI 922 - AT - Income Tax

Capital Gain - 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 - Whether there was grant and assignment of various rights in the property by the appellant alongwith handing over physical and vacant possession, the same tantamount to transfer ? - Held that - The facts of the case of assessee are admittedly identical as have been decided in the case of Shri C.S. Atwal Vs CIT, Ludhiana 2015 (7) TMI 878 - PUNJAB & HARYANA HIGH COURT issue of exigibility to capital gain in favour of the assessee and against the revenue wherein held as no possession had been given by the transferor to the transferee of the entire land in part performance of JDA 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 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 no further amount has been received and no action thereon has been taken. 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- Decided in favour of assessee.

Issues:
1. Interpretation of Section 2(47)(v) of the Income Tax Act 1961 regarding transfer of land under a Joint Development Agreement (JDA).
2. Application of Section 53A of the Transfer of Property Act 1882 in determining possession and transfer of land rights.
3. Consideration of possession and control of property under the Transfer of Property Act and Income Tax Act.
4. Requirement of registration under Section 53A of the Transfer of Property Act in relation to Section 2(47)(v) of the Income Tax Act.
5. Determination of possession rights and capacity of transferee under the JDA.
6. Tax liability under Section 45 of the Income Tax Act for capital gains.
7. Applicability of Section 2(47)(ii) and 2(47)(vi) of the Income Tax Act for capital gains assessment.
8. Relevance of registered conveyance deed under Section 2(47)(vi) of the Income Tax Act.
9. Extinction of individual rights in plots under Section 2(47)(ii) of the Income Tax Act.

Analysis:

1. The appeal raised concerns regarding the interpretation of Section 2(47)(v) of the Income Tax Act 1961 in relation to a Joint Development Agreement (JDA) for land transfer. The Revenue contested that the JDA resulted in a transfer of all rights in the property to Tata Housing Development Company Limited (THDC), triggering capital gains tax liability.

2. The issue of possession under Section 53A of the Transfer of Property Act 1882 was central to the dispute. The CIT(A) was criticized for not acknowledging the possession given by the transferor to the transferee as part performance of the JDA, which could have implications on the applicability of capital gains tax.

3. The CIT(A) was faulted for disregarding the possession and control of the property by the developer, emphasizing that possession was effectively transferred to THDC, indicating a transfer of rights under the Income Tax Act.

4. The necessity of registration under Section 53A of the Transfer of Property Act was debated, with the Revenue arguing that the absence of registration did not negate the applicability of Section 2(47)(v) of the Income Tax Act, which references agreements akin to Section 53A.

5. The capacity of the transferee and the nature of possession granted were disputed, with the CIT(A) viewing the possession as that of a licensee for property development, while the Revenue contended that the transferee had full rights, including the right to sell the property.

6. The dispute extended to the tax liability under Section 45 of the Income Tax Act for capital gains, with the CIT(A) allowing the assessee to defer tax payment until actual receipt of cash, contrary to the deeming provision of Section 45.

7. The CIT(A) was criticized for not addressing the applicability of Section 2(47)(ii) and 2(47)(vi) of the Income Tax Act, which could impact the capital gains assessment and the liability of the assessee.

8. The relevance of a registered conveyance deed under Section 2(47)(vi) of the Income Tax Act was questioned, with the Revenue arguing that registration was not a prerequisite for tax liability, citing the decision in Podar Cement Ltd.

9. The extinguishment of individual rights in plots under Section 2(47)(ii) of the Income Tax Act was a key point of contention, with the CIT(A) being faulted for not recognizing the surrender of rights by society members to THDC, leading to the lapse of their individual rights.

In conclusion, the appellate tribunal upheld the decision in favor of the assessee, citing precedents and legal interpretations that favored the assessee's position. The judgment highlighted the importance of possession, registration, and the nature of agreements in determining tax liabilities under the Income Tax Act and Transfer of Property Act.

← Previous Next →