2018 (3) TMI 430 - AT - Income Tax

Transfer of land whereas by virtue of executing the Joint Development Agreement (JDA) - capital gain computation - eligible transfer u/s 2(47) - pro-rata transfer of land - entitlement for deduction u/s 54F - Held that - CIT(A) directed the Assessing Officer to re-compute the long term capital Gains on the amount actually received by the appellant in pursuance of the said agreement as relying on case of C.S. Atwal & Others 2015 (7) TMI 878 - PUNJAB & HARYANA HIGH COURT . Thus we uphold the order of the Ld. CIT(A). Regarding the deduction under section 54F which has not been allowed by the Ld. CIT(A) we hereby direct the Assessing Officer to allow the due benefits to the assessee as provided under the Income Tax Act. Since the issue has been decided in the favour of the assessee, any decision on the grounds of reopening becomes academic in nature and hence needs no adjudication.

Summary

Issues Involved:
1. Interpretation of Joint Development Agreement (JDA) and Transfer of Property Act provisions.
2. Applicability of Section 53A of the Transfer of Property Act and its relation to Income Tax Act provisions.
3. Capital gains tax computation and applicability of deductions under the Income Tax Act.
4. Validity of notice under Section 148 and assessment proceedings.

Analysis:

1. The Revenue contended that the JDA led to a transfer of all rights in the property to a housing development company, triggering tax implications under the Income Tax Act. The Revenue argued that possession was transferred to the developer, fulfilling the requirements of Section 53A of the Transfer of Property Act. The CIT(A) was criticized for not considering the implications of Sections 2(47)(v), 2(47)(ii), and 2(47)(vi) of the Income Tax Act in determining capital gains liability.

2. The Assessee challenged the assessment process, claiming that no notice under Section 148 was served, and the returns filed were disregarded. The Assessee also sought entitlement to deductions under Section 54F of the Income Tax Act. The revised return filed by the Assessee was deemed crucial in light of the jurisdictional High Court's decision and was admitted by the CIT(A) for a fair assessment.

3. The Tribunal referred to a High Court judgment regarding a similar case, emphasizing the need for possession transfer to fall within Section 53A of the Transfer of Property Act for tax implications. The Tribunal upheld the CIT(A)'s decision based on the High Court's ruling, directing the Assessing Officer to re-compute capital gains based on actual receipts. The Assessee was granted benefits under the Income Tax Act, including deductions under Section 54F.

4. The validity of the notice under Section 148 and the assessment proceedings were scrutinized. The Tribunal upheld the CIT(A)'s order, considering the High Court's decision and directing the Assessing Officer to allow due benefits to the Assessee as per the Income Tax Act. The appeal of the Revenue was dismissed, and the Assessee's cross-appeal was allowed, leading to the re-computation of capital gains based on actual receipts and granting entitlement to deductions under the Income Tax Act.