2019 (2) TMI 1436 - AT - Income Tax

Short term capital gain - value of consideration in kind - transfer u/s 2(47) - case of the assessee before the Tribunal is that no effective transfer of the land took place as the land is still in Green Zone and would be considered as Non-Agricultural land, fit for construction, only when it goes to Yellow Zone - AR s contention was that albeit there was a Development Agreement but, in fact, there was no transfer of possession to SCTPL warranting the invocation of the provisions of section 45 - HELD THAT - Clause of the Agreement that the assessee executed PoA on the same date in favour of the Developer for the development of the said property, and such PoA was to remain in force till the construction, possession and completion of the Scheme under which the residential units were effectively sold. Thus, it is vivid that no construction could have been done without handing over possession of the land to the Developer - the assessee, immediately on signing of the Agreement, handed over the possession to the Developer for construction and further this Agreement is irrevocable at the instance of the either party. The assessee did hand over the possession of the land to the buyer and the contrary contention put forth on her behalf is devoid of merit. The present situation is covered within the definition of transfer as given in section 2(47)(v) as any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to section 53A of the Transfer of Property Act, 1882 . Not only the assessee transferred the possession of the land to the Developer pursuant to the Agreement, but also received a sum of ₹ 20.00 lakh by cheque in part performance. As such, it is held that the assessee transferred the land u/s.2(47) of the Act and resultantly the provisions of section 45 are attracted. On going through the prescription of section 48, it transpires that what is contemplated as the full value of consideration is the amount which is received or accruing as a result of the transfer of capital asset . Not only the amount actually received but also the amount accruing to the assessee is liable to be included in the same. As the assessee in the instant case acquired the right to receive 2000 sq.ft. of saleable area in the new building to be constructed, which right is a part of consideration and has accrued to the assessee, the same is held to have accrued to the assessee qualifying for inclusion in the full value of consideration - the right to receive consideration in kind is not marred by any contingency. Further, it is a crystallized right, which under no situation, can be denied to the assessee because the Agreement itself is irrevocable. It is not the case of the assessee that there is any cloud hovering over the consideration in kind. In such a scenario, it is difficult to accept the contention of the ld. AR that the value of consideration in kind should be ignored.- Decided against assessee.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Confirmation of addition on account of short-term capital gain.
3. Determination of whether possession of land was transferred.
4. Consideration of agricultural land status and its impact on capital gains computation.
5. Inclusion of non-monetary consideration in the computation of capital gains.
6. Claim for exemption under section 54F.

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was time-barred by 105 days. The assessee provided an affidavit explaining the reasons for the delay. The tribunal was satisfied with the reasons and condoned the delay, admitting the appeal for hearing on merits.

2. Confirmation of Addition on Account of Short-Term Capital Gain:
The primary issue was the confirmation of an addition of ?9,68,561/- as short-term capital gain. The assessee had entered into a Development Agreement with SCTPL for a total consideration of ?43,70,000/-, including ?20,00,000/- in monetary form and ?23,70,000/- as non-monetary consideration in the form of a 2000 sq.ft. flat. The AO computed short-term capital gain based on the agreement, and the CIT(A) upheld this but adjusted the present value of the non-monetary consideration to ?9,68,561/-.

3. Determination of Whether Possession of Land Was Transferred:
The tribunal examined the Development Agreement dated 29-07-2011 and found that the assessee had executed a Power of Attorney (PoA) in favor of SCTPL, authorizing them to develop the property. Clause 27 of the Agreement indicated that the PoA would remain in force until the completion of the development scheme. Clause 23 granted SCTPL a license to enter and develop the land immediately upon signing the agreement, making the agreement irrevocable. The AO's summons to SCTPL confirmed that possession was handed over on the signing date. Thus, the tribunal concluded that possession was indeed transferred, invoking section 2(47)(v) of the Act, which considers such transactions as "transfer."

4. Consideration of Agricultural Land Status:
The assessee argued that the land was agricultural and in the Green Zone, not yet eligible for construction. The tribunal noted that while the land was in the Green Zone, the agreement and subsequent actions indicated a transfer of possession, thus triggering capital gains provisions under section 45 of the Act.

5. Inclusion of Non-Monetary Consideration in the Computation of Capital Gains:
The tribunal addressed the inclusion of non-monetary consideration (2000 sq.ft. flat) in the capital gains computation. Section 48 requires the full value of consideration, including amounts "received or accruing." The tribunal found that the right to receive the flat was a crystallized, irrevocable right, and thus, it accrued to the assessee. The tribunal dismissed the assessee's reliance on the "Real income theory" and the Chemosyn Ltd. case, noting that the facts were not comparable. The tribunal upheld the CIT(A)'s valuation of the non-monetary consideration at ?9,68,561/-.

6. Claim for Exemption Under Section 54F:
No arguments were advanced regarding the claim for exemption under section 54F for investment in the house to be received as consideration. Consequently, this ground was dismissed.

Conclusion:
The tribunal dismissed the appeal, upholding the addition of ?9,68,561/- as short-term capital gain and rejecting the claim for exemption under section 54F. The order was pronounced in the Open Court on 22nd February 2019.