2019 (3) TMI 1203 - HC - Income Tax

Entitlement for exemption u/s 54 - agreement was entered into for joint development of property - building under construction as the same having not constructed within the stipulated period of three years for availing benefit as per Section 54(1) - contention of the Revenue is that the possession of the property in question was handed over to the Developer - transfer within the meaning of Section 2(47) - execution of Joint Development Agreement and execution of Power of Attorney in favour of the Developer - HELD THAT - The contention of the the Revenue is that the possession of the property in question was handed over to the Developer is not borne out from any evidence on record. The Tribunal, in our opinion, has rightly held that mere licence to enter into the property for measuring the land and preparing the plan for construction of the building cannot be construed as handing over physical possession of the property. Section 53A of the Transfer of Property Act also does not get attracted in such circumstances, as, admittedly, not even a part of consideration had passed on from the Developer to the Assessee in the Assessment Year 2011-2012. The mere execution of Joint Development Agreement and execution of Power of Attorney in favour of the Developer does not amount to transfer within the meaning of Section 2(47) of the Act. Findings recorded by the Tribunal in the present case are findings of facts and they do not give rise to any perversity giving rise to a Substantial Question of Law so as to call for interference by this court under Section 260A - decided against revenue.

Summary

Issues:
1. Whether the Assessee is entitled to exemption under Section 54 of the Income Tax Act?
2. Whether the Assessee is eligible for exemption under Section 54 despite the building not being constructed within the stipulated period?

Analysis:

Issue 1:
The Revenue filed an appeal challenging the order of the Income Tax Appellate Tribunal regarding the tax liability on capital gains for the Assessment Year 2011-2012. The Tribunal held that the Assessee could claim exemption under Section 54 of the Income Tax Act as the property transfer occurred in the Assessment Year 2013-2014. The Tribunal reasoned that physical possession of the property was handed over to the developer only after necessary approvals were obtained, which fell in the subsequent assessment year. The Assessee filed a revised return claiming exemption under Section 54, which the Tribunal upheld. The High Court concurred with the Tribunal's findings, emphasizing that the execution of agreements and possession did not constitute a transfer as defined under the Act.

Issue 2:
The Revenue contended that the tax liability should be assessed in the Assessment Year 2011-2012 based on the execution date of the Joint Development Agreement and General Power of Attorney, despite final approvals obtained later. The High Court rejected this argument, citing that the mere execution of agreements did not amount to transfer under the Act. The Court highlighted the lack of evidence of physical possession being handed over to the developer in the relevant assessment year. Drawing a comparison with a Bombay High Court case, the Court emphasized the distinction in facts and upheld the Tribunal's decision. The High Court concluded that the findings of the Tribunal were factual and not perverse, warranting no interference under Section 260A of the Act.

In summary, the High Court dismissed the Revenue's appeal, affirming the Tribunal's decision that the Assessee was eligible for exemption under Section 54 for the Assessment Year 2013-2014. The Court emphasized that the execution of agreements did not constitute a transfer as per the Income Tax Act, and the possession of the property was not handed over in the relevant assessment year. The judgment provides a detailed analysis of the factual and legal aspects, supporting the Assessee's claim for exemption under Section 54.