2018 (12) TMI 1138 - AT - Income Tax

Capital gain - JDA or agreement for sale - eligible transfer u/s 2(47) - as submitted by assessee possession in question of the impugned property was never handed over to the purchaser, hence, there was no part performance of the contract as per the terms of section 53A of the Transfer of Property Act - Held that - The agreement for sale dated 12. 12. 2008 and the cancellation of agreement dated 04. 05. 2011 are on record. Clauses of agreement for sale states that the possession of the property is to be handed over to the buyer only when the entire sale consideration is paid by the purchaser. In the instant case, the entire sale consideration was never paid by the purchaser. The sale agreement dated 12. 12. 2008 was cancelled vide agreement dated 04. 05. 2011 and prior to the cancellation of sale agreement, substantial portion of advance received by the assessee was refunded to the intended purchaser. The agreement for sale is not a registered document. As held in the case of CIT v. Balbir Singh Maini (2017 (10) TMI 323 - SUPREME COURT OF INDIA) that after amendment of Registration Act, 1908 in the year 2001, unless the document containing the contract to transfer any immovable property is registered, it shall not have any effect in law. In the instant case, there is no Joint Development Agreement (JDA), but only an unregistered sale agreement, which could not be fulfilled due to external reasons and there was no handing over of possession at any point of time to the purchaser. The property in question as on the date is still with the assessee and there is no transfer of the impugned property at any point of time. Therefore, the addition made by the Assessing Officer is uncalled for and we uphold the finding of the CIT(A) - we hold that the CIT(A) is justified in deleting the addition of Long Term Capital Gain - Decided against revenue

Issues Involved:
1. Whether the transaction under the Joint Development Agreement (JDA) constitutes a "transfer" under section 2(47)(v) of the Income Tax Act, 1961.
2. Determination of the date of transfer for the purpose of section 2(47)(v).
3. Whether the conditions under section 53A of the Transfer of Property Act, 1882 are satisfied.
4. Applicability of capital gains tax in the relevant assessment year.

Detailed Analysis:

1. Whether the transaction under the Joint Development Agreement (JDA) constitutes a "transfer" under section 2(47)(v) of the Income Tax Act, 1961:
The Assessing Officer (AO) argued that the execution of the JDA and the irrevocable Special Power of Attorney (POA) in favor of the developer constituted a "transfer" under section 2(47)(v) of the Income Tax Act. This section includes transactions that involve allowing possession of immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882. The AO concluded that the possession given to the developer enabled them to exercise control over the property, which triggered capital gains provisions.

2. Determination of the date of transfer for the purpose of section 2(47)(v):
The AO determined that the date of execution of the JDA (08/02/2009) was the relevant date of transfer. This interpretation is based on the premise that the agreement allowed the developer to take possession before the execution of the conveyance deed, thus invoking the doctrine of part performance under section 53A of the Transfer of Property Act.

3. Whether the conditions under section 53A of the Transfer of Property Act, 1882 are satisfied:
The AO and the CIT(A) had differing views on whether the conditions under section 53A were met. The AO believed that the conditions were satisfied, citing the developer's control over the property and the rights granted under the JDA. However, the CIT(A) held that the conditions were not met, as the possession given was conditional and the developer had not fulfilled their part of the contract within the stipulated time. Furthermore, the CIT(A) relied on the judgment in C S Atwal vs. CIT, which stated that entering into a JDA with an irrevocable POA does not constitute a "transfer" for capital gains purposes.

4. Applicability of capital gains tax in the relevant assessment year:
The CIT(A) concluded that capital gains did not arise in the relevant assessment year (2009-2010) because the consideration (20,000 sq. ft. of built-up area) had not been handed over to the assessee during that year. The CIT(A) also noted that the developer failed to complete the construction within the agreed timeframe, and the built-up area was handed over only in 2016. The CIT(A) relied on the principle that for capital gains to be taxable, the income must have accrued to the assessee, which did not happen in the assessment year in question.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, agreeing that the conditions under section 53A were not met, and the transaction did not constitute a "transfer" under section 2(47)(v) for the relevant assessment year. The Tribunal also noted that the JDA was not a registered document, which further invalidated the AO's claim. The appeal of the Revenue was dismissed, and the deletion of the addition of ?3,81,59,200 as long-term capital gains was upheld. The Tribunal emphasized the importance of actual accrual of consideration and compliance with the conditions of section 53A for invoking capital gains tax provisions.

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