2019 (12) TMI 211 - HC - Income Tax

Capital asset u/s 2(47) - sale of land by way of Development agreement - Commissioner (Appeals) on facts has found that the subject land was treated as stock in trade by the assessee - ITAT deleted the additions - HELD THAT - In view of the categorical finding recorded by the Commissioner (Appeals) that the assessee in all the years has treated the subject land to be stock in trade, he was wholly justified in holding that the provisions of section 2(47) of the Act relating to capital asset would not apply. The Tribunal, therefore, did not commit any error in concurring with the findings recorded by the Commissioner (Appeals). This court does not find any legal infirmity in the view adopted by the Tribunal so as to give rise to any question of law, much less, a substantial question of law, warranting interference.

Summary

Issues:
1. Whether the Appellate Tribunal erred in deleting the addition made on account of sale of land by way of Development Agreement?
2. Whether the Appellate Tribunal erred in holding that the Assessing Officer should not have applied Sec.2(47)?
3. Whether the transfer of development right results in business income during the year?

Analysis:

Issue 1:
The appellant, Revenue, challenged an order by the Income Tax Appellate Tribunal regarding the addition of profit from the sale of land under a Development Agreement. The Assessing Officer treated the transaction as a sale of land under section 2(47)(v) of the Income Tax Act, calculating a profit of ?3,13,18,468. However, the Commissioner (Appeals) and the Tribunal held that the subject land was held as stock in trade, not a capital asset, leading to the deletion of the addition.

Issue 2:
The Assessing Officer contended that the development agreement constituted a transfer of property under section 2(47)(v) of the Act. The appellant argued that the Assessing Officer correctly interpreted the agreement as a transfer of immovable property. However, the Commissioner (Appeals) and the Tribunal found that the ownership of the land remained with the assessee, as evidenced by clauses in the development agreement giving the assessee the final authority to sign sale deeds.

Issue 3:
The Assessing Officer's position was that the consideration package in the development agreement indicated a transfer of property. The appellant asserted that the subject land was a capital asset, not stock in trade, and that the Tribunal should reconsider the matter. However, the Commissioner (Appeals) found that the development agreement did not involve a transfer of possession of land, and the Tribunal concurred with this view, emphasizing that the land was held as stock in trade.

In conclusion, the High Court upheld the Tribunal's decision, stating that there was no legal infirmity in the view adopted. The appeal was summarily dismissed, affirming the deletion of the addition made by the Assessing Officer.