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2018 (6) TMI 608 - AT - Income TaxIncome from sale of property - Transfer of property u/s 2(47) - joint development agreement and hand over possession to the developer - business income or short term capital gains - Held that - There can be no transfer without registering the document signifying the transfer following the judgement in case of CIT vs. Balbir Singh Maini 2017 (10) TMI 323 - SUPREME COURT OF INDIA - lower authorities was considering assessee s case they did not have the benefit of the judgment of Hon ble Apex Court in the case of Balbir Singh Maini (Supra) - thus unless and until a careful examination of the joint development agreement entered with the M/s. S&S Scapes Pvt. Ltd is made and compared with the joint development agreement considered in the case of Balbir Singh Maini (supra), we are of the opinion that the question whether any income arose to the assessee, cannot be addressed - hence we set aside the orders of the lower authorities and remit the issue back to AO for consideration - Revenue appeal allowed for statistical purpose.
Issues Involved:
1. Classification of income as "business income" or "short-term capital gains". 2. Validity of the joint development agreement and its impact on income recognition. 3. Eligibility for exemption under Section 54F of the Income Tax Act. Detailed Analysis: 1. Classification of Income: The core issue in this case was whether the income derived from a joint development agreement should be classified as "business income" or "short-term capital gains". The assessee, engaged in the business of marbles and granites, entered into a joint development agreement with a developer. The Assessing Officer (AO) opined that the transaction constituted a transfer under Section 2(47)(v) of the Income Tax Act, thereby attracting short-term capital gains tax. The AO calculated the short-term capital gains based on the deemed sale consideration and the cost of the land. The Commissioner of Income Tax (Appeals) (CIT(A)) disagreed with the AO, noting that the assessee had been declaring income from similar projects as business income in subsequent years. The CIT(A) concluded that the terms of the joint development agreement indicated the assessee's intention to conduct business, thus directing the AO to treat the income under the head "income from business/profession". 2. Validity of the Joint Development Agreement: The Departmental Representative contended that the assessee was not engaged in the business of selling flats or property, arguing that the transaction in question was the only one of its kind for the assessee. The Authorized Representative countered that there was no transfer during the relevant year since the joint development agreement was not registered, and no power of attorney was executed in favor of the developer. The argument was supported by the Supreme Court's judgment in CIT vs. Balbir Singh Maini, which held that an unregistered agreement could not constitute a transfer under Section 2(47)(v) of the Act. The Tribunal noted that the lower authorities did not have the benefit of the Supreme Court's judgment at the time of their decisions. The Tribunal emphasized the need for a careful examination of the joint development agreement in light of the Supreme Court's ruling to determine whether any income arose to the assessee. 3. Eligibility for Exemption under Section 54F: The assessee claimed exemption under Section 54F for the investment made in a residential property from the capital gains arising from the sale of another property. The AO questioned the validity of this claim, but the CIT(A) did not address this issue in detail, focusing instead on the classification of income. Conclusion: The Tribunal set aside the orders of the lower authorities and remitted the issue back to the AO for a de novo consideration, emphasizing the need to re-evaluate the joint development agreement in light of the Supreme Court's judgment in Balbir Singh Maini. The Tribunal's decision allowed the Revenue's appeal for statistical purposes, indicating that the matter required further examination to determine the correct classification of income and the applicability of exemptions. Order Pronounced: The order was pronounced on June 11, 2018, at Chennai, allowing the appeal of the Revenue for statistical purposes.
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