2019 (6) TMI 654 - AT - Income Tax

Short Term Capital Gain - no transfer of property under the provisions of section 2(47) - Validity of the agreement with the company which was not there in existence - assessee was just a name lender in the entire deal of the transactions - HELD THAT - Assessee did not have any occasion to receive any consideration on the transfer of such lands on the agreement to sell. It is because the assessee has not incurred any cost on the purchase of the land, registration of the land, conversion of the land and the development of the land. Thus the assessee being a representative of Abellon Agrisciences Ltd (AAL) had no occasion to receive the consideration on the transfer of the land either at the time of agreement to sell or registration of sale deed. Therefore we are of the view that the provisions of section 53A of the Transfer of Property Act can be applied in the case on hand There was a property transfer by the assessee to the companies as discussed above in the A.Y.2009-10. Accordingly, we are of the view that the subsequent registration of the conveyance deed in the A.Y. 2011-12 will not amount to transfer of property under the provisions of section 2(47). Accordingly, the question of capital gain for the year under consideration does not arise. The impugned land transferred by the assessee in the A.Y.2009-10 when it was an agricultural land which does not fall within the meaning of capital assets as provided u/s 2(14). Accordingly the same cannot be the subject matter of capital gains under the Act in the AY 2009-10. The buyers of the impugned land have recorded the purchase consideration in the books of accounts at the actual cost incurred by its group company. As such we note that there was no element of profit transferred by the companies to the assessee. Therefore it can be inferred that there is no loss to the Revenue as the buyers of the land have recorded the purchase consideration at the actual cost incurred by its group company. Accordingly, the buyers (group companies) will show the profit at the high value or less loss as the case may be on the subsequent sale of such impugned land in the given facts circumstances. We hold that the assessee is not liable to pay tax on the capital gain computed by the AO as the same is not the real income and it was not generated in his hands. Hence the assessee succeeds in his grounds of appeal.

Issues Involved:
1. Validity of the assessment order based on directions issued under Section 144A without affording an opportunity of being heard.
2. Determination of the assessment year in which the transfer of property occurred.
3. Applicability of the Supreme Court judgment in Suraj Lamp & Industries Pvt. Ltd. case.
4. Whether the assessee acted as an agent for the companies involved.
5. Inclusion of cost of improvement in the computation of short-term capital gain.

Detailed Analysis:

Issue 1: Validity of the Assessment Order
The assessee contended that the assessment order was based on directions issued under Section 144A of the Income Tax Act by the Additional Commissioner of Income Tax without providing an opportunity to be heard, thus violating the principles of natural justice. However, this ground was dismissed as it was not pressed by the assessee.

Issue 2: Determination of the Assessment Year
The core issue was whether the transfer of property occurred in the Assessment Year (AY) 2009-10 or AY 2011-12. The assessee argued that the transfer took place in AY 2009-10 when possession was handed over to the buyers pursuant to an agreement to sell. The AO and CIT (A) contended that the transfer occurred in AY 2011-12 when the sale deeds were executed.

The Tribunal held that the transfer occurred in AY 2009-10 based on the provisions of Section 2(47)(v) of the Income Tax Act, which includes transactions involving the allowing of possession of any immovable property to be taken in part performance of a contract as referred to in Section 53A of the Transfer of Property Act, 1882. The Tribunal noted that the possession was handed over to the buyers in AY 2009-10, fulfilling the requirements of Section 2(47)(v).

Issue 3: Applicability of Supreme Court Judgment
The AO and CIT (A) had applied the Supreme Court judgment in Suraj Lamp & Industries Pvt. Ltd., which held that a transfer of immovable property by way of sale can only be by a deed of conveyance. The Tribunal distinguished this case, noting that the judgment was concerned with the Transfer of Property Act and not the Income Tax Act. The Tribunal emphasized that under the Income Tax Act, the transfer is deemed to have occurred when possession is handed over in part performance of a contract, as per Section 2(47)(v).

Issue 4: Whether the Assessee Acted as an Agent
The assessee claimed to have acted as an agent for the companies involved, arguing that he purchased the land on their behalf and did not receive any consideration. The Tribunal found that the assessee was merely a name lender and that the real owner of the property was the company, which had paid for the land and incurred all related expenses. The Tribunal concluded that the assessee did not have any occasion to receive consideration for the transfer of the land, and thus, the provisions of Section 53A of the Transfer of Property Act were applicable.

Issue 5: Inclusion of Cost of Improvement
The assessee argued that the cost of improvement should be considered in the computation of short-term capital gain. The Tribunal noted that the expenditure on land development and conversion was incurred by the company, not the assessee. However, since the assessee was not the real owner and did not receive any consideration, the question of capital gain did not arise.

Conclusion:
The Tribunal held that the transfer of property occurred in AY 2009-10 when possession was handed over, and since the land was agricultural at that time, it did not qualify as a capital asset under Section 2(14) of the Income Tax Act. Consequently, no capital gain was chargeable to tax. The appeal of the assessee was partly allowed, and the addition of ?85,00,658/- on account of short-term capital gain was deleted.

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