2021 (2) TMI 1144 - AT - Income Tax

Capital gains adopted on the basis of guideline value as per Stamp Duty Authorities - JDA entered into by the assessee - Year of assessment - assessee submitted that the capital gains should have been taxed in the year of commencement of construction after registering the Joint Development Agreement - HELD THAT - In the present case, only for the purpose of loan required from the Bank, the Developer registered a Sale Deed on 18.07.2011, wherein it is also clearly mentioned that the property is already in Developer's possession as per the Registered Development Agreement dated 24.10.2007 and the present Sale Deed made was only for confirming the right already held by the Joint Developer by executing the Sale Deed. The Sub-Registrar while registering the Sale Deed adopted the Guideline value to determine stamp duty and Registration charges. However, since tax on capital gain on the same property transaction would be for assessment year 2008-09 as per provisions of Income Tax Act, no capital gain arises out of the impugned JDA/GPA during Asst. Year 2012-13. Grant of deduction 54G - since the investment is required to be done within 3 years from the date of deemed sale of factory and shifting the factory and since as per the AO, the capital gains has arisen due to registration of Sale Deed on 18.07.2011 i.e. FY 2011-12, and hence, according to the AO, the assessee is not eligible for any deduction - HELD THAT - This ground is only academic in view of our findings with regard to nontaxability of capital gain in this assessment year i.e. AY 2012-13, however, for the purpose of completeness, we make it clear that assessee could claim deduction u/s. 54G in the appropriate assessment year when the capital gain is subject to tax. It is ordered accordingly. Applicability of section 50C - assessee objected for adopting value of 50C as per guidance value - HELD THAT - Since while adjudicating ground No.1, we have already held that capital gain is to be taxed not in this assessment year 2012-13, being so, there is no question of application of section 50C of the Act and the registration of Sale Deed was only for the limited purpose of formalizing the bank request, who financed the assessee as discussed in para 28 of this order. In our opinion, there is no applicability of section 50C of the Act in the assessment year 2012-13 since transfer took place not in this assessment year. Thus, this issue is only academic as there was no incidence and chargeability of capital gain in AY 2012-13. Therefore, this ground by the assessee is allowed.

Summary

Issues Involved:
1. Determination of the assessment year for capital gains tax.
2. Applicability of section 50C of the Income Tax Act.
3. Eligibility for deduction under section 54G of the Income Tax Act.
4. Consideration of the fair market value for capital gains calculation.
5. Validity of the assessment order based on the registration of the Sale Deed.

Issue-Wise Detailed Analysis:

1. Determination of the assessment year for capital gains tax:
The primary issue was whether the capital gains should be taxed in the assessment year 2008-09 or 2012-13. The assessee argued that the transfer of property occurred in the financial year 2007-08 when the Joint Development Agreement (JDA) and General Power of Attorney (GPA) were executed, as per section 2(47)(v) of the Income Tax Act and the jurisdictional High Court's order in Dr. Dayalu's case. The Tribunal agreed, stating that the JDA and GPA granted the developer possession and control, constituting a "transfer" under section 2(47)(v). Thus, the capital gains should be taxed in the assessment year 2008-09, not 2012-13.

2. Applicability of section 50C of the Income Tax Act:
The assessee objected to the Assessing Officer's adoption of the higher guideline value as per section 50C for capital gains calculation. The Tribunal noted that since the transfer took place in the financial year 2007-08, section 50C was not applicable for the assessment year 2012-13. The registration of the Sale Deed in 2011 was only to formalize the bank's requirement, and thus, section 50C did not apply.

3. Eligibility for deduction under section 54G of the Income Tax Act:
The assessee claimed deduction under section 54G for reinvestment in a new factory. The Assessing Officer denied this, stating the investment was not made within three years from the deemed sale date. The Tribunal clarified that the deduction could be claimed in the appropriate assessment year when the capital gain is taxed. Since the capital gain was not taxable in the assessment year 2012-13, the issue was academic for that year.

4. Consideration of the fair market value for capital gains calculation:
The assessee contended that the Assessing Officer should have referred the valuation to the Valuation Officer as per section 50C(2). The Tribunal found that since the capital gain was not taxable in the assessment year 2012-13, the question of fair market value determination did not arise for that year.

5. Validity of the assessment order based on the registration of the Sale Deed:
The Tribunal concluded that the registration of the Sale Deed in 2011 was for formalizing the bank's requirement and did not constitute a fresh transfer of property. Therefore, the capital gains should not be taxed in the assessment year 2012-13 based on the Sale Deed registration.

Conclusion:
The Tribunal allowed the appeal, ruling that the capital gains should be taxed in the assessment year 2008-09, not 2012-13. Consequently, the applicability of section 50C and the eligibility for deduction under section 54G were academic for the assessment year 2012-13. The Tribunal emphasized the importance of considering the correct assessment year for taxability and the duty of revenue authorities to guide taxpayers correctly.