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2017 (12) TMI 1235 - HC - Income TaxDisallowance of exemption u/s 54EC while computing the Long-Term Capital Gain on the sale of immovable property - Held that - In the present case, the Appellate Tribunal has taken into consideration various clauses in the development agreement. Sub-clause (d) of clause (3) of the agreement provides that after full payment of consideration, the construction shall be undertaken by the developer. Admittedly, on the date of execution of the development agreement, the entire consideration was not received by the respondent-assessee. The physical possession of the property subject matter of development agreement was parted with by the respondent-assessee on 1st March, 2008. It was held that on that day, complete control over the property was passed on to the developer. After having perused the various clauses in the agreement and the aforesaid factual aspects, the Tribunal has taken 1st March, 2008 as the date of transfer. This finding is fully consistent with the law laid down by the Division Bench in the case of Chaturbhuj Dwarkadas Kapadia (2003 (2) TMI 62 - BOMBAY High Court). Therefore, no fault can be found with the impugned judgment of the Tribunal when it was held that the investment made in the sum of ₹ 50,00,000/by the respondent-assessee on 22nd August. 2008 was within the period specified under Section 54EC of the said Act.
Issues involved:
1. Determination of the date of transfer for tax purposes in a real estate transaction. 2. Interpretation of provisions under Section 2(47)(v) of the Income Tax Act. 3. Consideration of relevant case law in deciding the year of chargeability for capital gains tax. Analysis: Issue 1: Determination of the date of transfer for tax purposes The appellant challenged the judgment of the Income Tax Appellate Tribunal regarding the date of transfer in a real estate transaction. The dispute arose from a Development Agreement dated 13th September, 2007, where the respondent-assessee handed over physical possession of the property to the developer on 1st March, 2008. The Tribunal considered various clauses in the agreement and concluded that complete control over the property was transferred on 1st March, 2008, making it the date of transfer for tax purposes. This decision was in line with the precedent set by the Division Bench in a previous case. Issue 2: Interpretation of Section 2(47)(v) of the Income Tax Act The appellant contended that the Tribunal erred in ignoring the provisions of Section 2(47)(v) of the Income Tax Act, which specify the year of chargeability as the year in which the contract is executed, even if the transfer of property is not complete under general law. However, the Tribunal's decision was based on the specific clauses of the Development Agreement and the actual transfer of possession, aligning with the legal principles established by previous judgments. Issue 3: Consideration of relevant case law The appellant referred to a decision from the High Court of Andhra Pradesh and a Tribunal decision to support their argument that the date of transfer should be considered as 13th September, 2007, the date of the agreement. However, the respondent clarified that full consideration was received only when possession was handed over on 1st March, 2008. The Court upheld the Tribunal's decision, emphasizing the importance of analyzing the terms of the contract to determine the relevant accounting year for tax liability accrual. In conclusion, the High Court dismissed the appeal, stating that no substantial question of law arose from the case. The judgment highlighted the significance of analyzing the specific terms of agreements in real estate transactions to determine the date of transfer for tax purposes accurately.
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