2020 (5) TMI 52 - AT - Income Tax

Capital gains - Transfer u/s 2(47) - sale agreement entered into by the assessee with M/s.Ragas Educational Society was incomplete as the said agreement contemplated completion of registration within 12 months from 21.03.2005, which admittedly did not happen in the instant case - HELD THAT - AR filed before ACIT,Circle- 1,Chennai stating that the subject mentioned lands were only part of transfer in assessment year 2005-06 and also subject mentioned lands were only agricultural lands and hence out of the purview of definition of capital assets under Section.2(14) of the Act. The Ld. A.O.of assessee s father i.e. ACIT, Circle-1,Chennai was duly convinced by a certificate issued by Village Administrative Officer , who had certified that the subject mentioned lands are agricultural lands and accordingly did not proceed to make any addition in the hands of assessee s father for assessment year 2011-12. AR pleaded that no capital gains at all could be arisen in the hands of assessee in respect of the subject mentioned lands during the year under consideration. The Bench at the time of hearing raised a specific query to the Ld. A.R. to prove the fact that those lands that were registered on 09.12.2010 by the Power of attorney holder are included in 3.935 acres of land for which purpose the Bench directed the Ld. A.R. to match Survey Numbers thereon. Details requires factual verification from the side of the Ld. A.O. and hence in the interest of justice and fair play, we deem it fit and appropriate to remit this issue to the file of Ld. A.O for adjudication in the light of aforesaid evidences and in the light of aforesaid observations and in accordance with law. The Revenue should ensure that there is no double addition made towards capital gains. The assessee should adduce necessary evidences in support of his various contentions. Accordingly grounds raised by the Revenue are allowed for statistical purposes.

Summary

Issues Involved:
1. Determination of the assessment year for capital gains taxation.
2. Validity of the sale agreement dated 21-03-2005 as the basis for the transfer.
3. Classification of the land as agricultural land under Section 2(14) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Determination of the Assessment Year for Capital Gains Taxation:
The primary issue was whether the capital gains from the sale of land should be assessed in the assessment year 2005-06 or 2011-12. The Revenue argued that the transfer took place in the year relevant to AY 2011-12 when the sale deed was executed on 09-12-2010. The assessee contended that the transfer occurred in AY 2005-06 when possession was handed over and consideration received as per the sale agreement dated 21-03-2005, invoking Section 2(47)(v) of the Income Tax Act read with Section 53A of the Transfer of Property Act, 1882. The CIT(A) accepted the assessee's contention, observing that the transfer was completed in AY 2005-06, and the sale consideration was declared in the hands of the assessee’s father, Dr. R. Gunaseelan, which was accepted in the scrutiny assessment for AY 2005-06.

2. Validity of the Sale Agreement Dated 21-03-2005 as the Basis for the Transfer:
The Revenue argued that the sale agreement dated 21-03-2005 could not be considered as the document for transfer since it mentioned that the amount paid was only an advance and required registration within twelve months, which did not happen. The CIT(A) found that the transfer was concluded as per the sale agreement dated 21-03-2005, which included handing over possession and receiving full consideration, thus meeting the criteria under Section 2(47) of the Income Tax Act and Section 53A of the Transfer of Property Act. The Tribunal remitted the issue back to the AO for factual verification to ensure no double addition of capital gains.

3. Classification of the Land as Agricultural Land under Section 2(14) of the Income Tax Act:
The Revenue contended that the land was not agricultural as per the sale deed dated 09-12-2010 and the current classification on the Tamil Nadu Registration Department's website. The CIT(A) accepted the assessee's evidence, including the Village Administrative Officer's certificate, confirming the land as agricultural at the time of transfer in AY 2005-06. The Tribunal directed the AO to verify the factual details, including survey numbers and classification, to determine the correct status of the land and ensure no capital gains were taxed twice.

Conclusion:
The Tribunal remitted the matter to the AO for further verification of facts, emphasizing the need to ensure no double addition of capital gains and to consider the evidence provided by the assessee regarding the agricultural nature of the land and the timing of the transfer. The appeal was allowed for statistical purposes.