2018 (8) TMI 134 - HC - Income Tax

Capital gain - transfer of land within the meaning of Section 2(47)(v) - Held that - This issue now stands concluded in favour of the Respondent-Assessee and against the Appellant-Revenue by the decision of the Apex Court in CIT v/s. Balbir Singh Maini 2017 (10) TMI 323 - SUPREME COURT OF INDIA held that in terms of Section 2(47)(v) of the Act transfer of any immovable property in part performance of a contract of the nature referred in Section 53A of the Transfer of Property Act will be completed only when the Agreement under Section 53A of the Transfer of Property Act is registered under the Indian Registration Act. Admittedly the Agreement dated 20th April 2007 has not been registered. Consequently there is no transfer in terms of Section 2(47)(v) of the Act. The clause of the Agreement as referred to in the Assessment Order makes it clear that M/s. Godrej Properties Ltd. has been granted license to enter upon and develop the property. However the possession of the said land continues to be with the Respondent-Assessee. Further the proviso to clause (6) of the Development Agreement clearly provides that nothing contained in the agreement shall be construed as grant of possession in part performance of the Agreement under Sections 2(47)(v) and 2(47)(vi) of the Act. As no transfer of the said land had taken place under the Development Agreement the occasion to compute capital gains as proposed would not arise. We have found that there is no transfer of the stock-in-trade i.e. land that has taken place in the previous year relevant to the subject Assessment Year. Therefore the issue of determining the date of conversion of capital asset into stock-in-trade for the purposes of bringing it to tax under Section 45(2) of the Act would become academic in this Assessment Year. Therefore the Assessment Year when the authority hold that the transfer/ sale of the land has taken place the authorities in that year would determine independently of the impugned order of the Tribunal as well as our order the date of conversion of capital assets into stock-in-trade and its value. This particularly so as Questions (d) (e) (f) and (g) have not been entertained in the present facts as they are academic.

Issues Involved:
1. Transfer of land under Section 2(47)(v) of the Income Tax Act.
2. Transfer of land under Section 2(47)(vi) of the Income Tax Act.
3. Full value of the property for computing capital gains.
4. Conversion of capital asset into stock-in-trade.
5. Date of conversion of agricultural land into non-agricultural land.
6. Tax liability on capital gains under Section 45(2) of the Income Tax Act.
7. Whether the Tribunal's order is perverse.

Issue-wise Detailed Analysis:

1. Transfer of Land under Section 2(47)(v):
The Tribunal held that there was no transfer of land within the meaning of Section 2(47)(v) of the Income Tax Act due to the amendment made in 2001 to the Indian Registration Act, which requires such agreements to be registered. The Development Agreement dated 20th April 2007 was not registered, and thus, no transfer occurred. The Supreme Court's decision in CIT v/s. Balbir Singh Maini (398 ITR 531) supported this view, confirming that an unregistered agreement cannot effect a transfer under Section 2(47)(v).

2. Transfer of Land under Section 2(47)(vi):
The Tribunal found no transfer under Section 2(47)(vi) as the Development Agreement did not grant possession of the land to M/s. Godrej Properties Ltd. The agreement only provided a license for development, and possession remained with the Respondent-Assessees. The Supreme Court's decision in Balbir Singh Maini (supra) further clarified that mere permission to develop does not equate to a transfer of ownership.

3. Full Value of the Property for Computing Capital Gains:
Since no transfer of land occurred, the question of computing capital gains did not arise. The Tribunal noted that the ?13.75 Crores received was a deposit and not income. The Revenue's argument that this amount should be taxed was rejected, as it was not established as income.

4. Conversion of Capital Asset into Stock-in-trade:
The Tribunal's findings on the conversion of capital assets into stock-in-trade were deemed academic because no transfer took place in the relevant assessment year. The issue of determining the value and date of conversion becomes relevant only when the stock-in-trade is transferred or sold.

5. Date of Conversion of Agricultural Land into Non-Agricultural Land:
The Tribunal's determination of the date of conversion was also academic, given the finding that no transfer occurred in the relevant assessment year. This issue would be considered in the year when the transfer is held to have taken place.

6. Tax Liability on Capital Gains under Section 45(2):
The Tribunal did not address the tax liability under Section 45(2) as no transfer occurred. This issue would become relevant only when the stock-in-trade is transferred or sold.

7. Whether the Tribunal's Order is Perverse:
The Tribunal's order was not found to be perverse. The Revenue's argument that the Tribunal did not properly consider the date of conversion was rendered academic due to the finding that no transfer occurred. The Tribunal's order was upheld, and no substantial question of law was found.

Conclusion:
The High Court dismissed the appeals, affirming the Tribunal's findings that no transfer of land occurred under Sections 2(47)(v) and 2(47)(vi) of the Income Tax Act. The issues regarding the value and date of conversion of capital assets into stock-in-trade were deemed academic and would be considered in the year when the transfer is held to have taken place. The Tribunal's order was upheld, and no substantial questions of law were found.

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