2018 (2) TMI 1154 - HC - Income Tax

Capital gain computation - year of assessment - transfer within the meaning of Section 2(47)(v) - development agreement by way of Power of Attorney, based on which transfer of possession and development have taken place - reopening of assessment - Held that - Tribunal has committed no illegality in reversing the order of the Commissioner by holding that the transfer within the meaning of Section 2(47)(v) had taken place only in the Assessment Year 2002-2003 as we find that vide agreement dated 30th April, 2001, the actual possession was given to the Developer and it was not given the basis of Power of Attorneys and so called oral agreement entered into between the Appellants and the Developer in the year 1993-94. Thus, A.O. as also the Tribunal have correctly appreciated and interpreted the Power of Attorney/s the agreement dated 30th April, 2001 and the stand taken by the Appellants in reply to the notice under Section 148 of the Act. We affirm the order passed by the Tribunal by holding that the Tribunal has rightly reversed the order of the Commissioner and while reversing the order of the Commissioner, it has correctly appreciated the facts and law and there is no illegality or perversity in the order of the Tribunal warranting interference. Appeal dismissed.

Issues Involved:
1. Determination of the assessment year in which the transfer of property occurred under Section 2(47)(v) of the Income Tax Act, 1961.
2. Whether the Income Tax Appellate Tribunal's reversal of the Commissioner (Appeals)'s order was based on incorrect appreciation of facts and law, rendering it perverse.

Issue-wise Detailed Analysis:

1. Determination of the Assessment Year of Transfer:
The primary issue is whether the transfer of property within the meaning of Section 2(47)(v) of the Income Tax Act, 1961 occurred in the assessment year 2002-03 or earlier. The Appellants contended that the transfer took place in the financial year 1993-94 when two Powers of Attorney were executed in favor of M/s. Braganza Construction, and part of the consideration was received. They argued that the development and possession of the property had commenced much earlier than the assessment year 2002-03.

However, the Assessing Officer (A.O.) determined that the transfer occurred on 30th April 2001, based on a written agreement where possession was handed over to the developer, and part consideration was received, thus constituting part performance under Section 53A of the Transfer of Property Act. This finding was upheld by the Tribunal, which noted that the agreement dated 30th April 2001 explicitly stated that the Appellants were the owners and in possession of the property, and the Power of Attorneys did not indicate that possession had been handed over earlier.

The Tribunal relied on the legal precedent set by the Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia v. Commissioner of Income Tax, which held that for Section 2(47)(v) to apply, the transferee must have taken possession of the property, and the transfer should be in part performance of a contract as per Section 53A of the Transfer of Property Act. The Tribunal found that the agreement dated 30th April 2001 met these criteria, and thus, the transfer occurred in the assessment year 2002-03.

2. Reversal of the Commissioner (Appeals)'s Order:
The second issue is whether the Tribunal's reversal of the Commissioner (Appeals)'s order was based on a correct appreciation of facts and law. The Commissioner had accepted the Appellants' contention that no transfer occurred in the assessment year 2002-03, setting aside the A.O.'s order. The Revenue challenged this decision, and the Tribunal reversed the Commissioner's order, concluding that the transfer occurred in the assessment year 2002-03.

The Tribunal's decision was based on a detailed examination of the Power of Attorneys, the agreement dated 30th April 2001, and the Appellants' replies to the A.O.'s notices. The Tribunal found that the Power of Attorneys did not indicate that possession was handed over to the developer, and the agreement dated 30th April 2001 clearly stated that the Appellants were the owners and in possession of the property. The Tribunal also noted that the Appellants' reply to the A.O. explicitly stated that possession was not given to the developer until the agreement dated 30th April 2001.

The Tribunal's interpretation aligned with the legal principles established in the case of Chaturbhuj Dwarkadas Kapadia, which emphasized that the date of the contract is crucial if it indicates the transfer of complete control over the property to the developer. The Tribunal concluded that the transfer occurred in the assessment year 2002-03, as the agreement dated 30th April 2001 fulfilled the conditions of Section 2(47)(v) of the Income Tax Act.

Conclusion:
The High Court affirmed the Tribunal's order, holding that the Tribunal correctly reversed the Commissioner's order and accurately appreciated the facts and law. The Court found no illegality or perversity in the Tribunal's decision, which determined that the transfer occurred in the assessment year 2002-03 based on the agreement dated 30th April 2001. Consequently, both appeals were dismissed.

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