2021 (5) TMI 663 - AT - Income Tax

Gain on sale of land - capital gain or business receipts - plot of land purchased followed by the development agreement - transfer of asset u/s 2(47) - HELD THAT - As Learned counsel first of all stated very fairly that there is no dispute raised at the assessee s behest regarding correctness of the both the lower authorities action treating the impugned development agreement dt.15-08-2004 with M/s.Ashwini Abodes for construction of flats and to receive the developed area to this effect having ratio of 44 56; party-wise; respectively as amounting to transfer u/s.2(47)(v) of the Act. We thus affirm the learner lower authorities action to this effect. LTCG or Business income - As assessee s development agreement that she had herself not undertaken any development activity indicating the adventure component which in fact had been borne by the concerned developer only. We also wish to highlight the fact that the parcel of land has remained the same in AYs.2005-06 to 2008-09 wherein the assessee has herself accepted the learned lower authorities action treating the developed area as the capital asset only giving rise to long term capital gains. We rather note that the assessee has claimed Section 54 deduction of ₹ 69,27,420/- AY.2008-09 as well. We thus hold that the assessee s divergent stand in treating herself as engaged in adventure in real estate development in AY.2005- 06 and capital gains in AY.2008-09 does not deserve to the concurred with. We therefore decline her argument that the plot of land purchased on 15-08-2004 followed by the development agreement within a very short span of time i.e., 19-10-2004 could give rise to huge profits in the nature of business income only. Reopening of assessment - It is an admitted fact that their lordship s decision herein nowhere dealt with an instance of double addition per se as is the assessee s case before us.We therefore restore the instant issue back to the Assessing Officer to frame his necessary computation afresh after ensuring that whatever the assessee s income has been assessed in preceding assessment year(s) would not be treated as her income escaping assessment pertaining to AY.2008-09.

Issues Involved:
1. Addition of short-term capital gain in AY 2005-06.
2. Treatment of income as profit and gain from business.
3. Rejection of revised return filed by the assessee for AY 2008-09.
4. Double taxation of capital gains in different assessment years.

Issue-wise Detailed Analysis:

1. Addition of Short-Term Capital Gain in AY 2005-06:
The assessee challenged the addition of ?51,72,920/- as short-term capital gain for AY 2005-06. The lower authorities concluded that the development agreement dated 19-10-2004 with M/s. Ashwini Abodes constituted a "transfer" under Section 2(47) of the Income Tax Act, 1961, as the possession of the land was handed over to the developer. The assessee argued that no actual development work commenced during the relevant period, and thus, no transfer occurred. However, the tribunal upheld the lower authorities' decision, stating that the possession was handed over, and the developer was bound by the agreement, thereby constituting a transfer under Section 2(47)(v) of the Act.

2. Treatment of Income as Profit and Gain from Business:
The assessee contended that the income should be treated as profit and gain from business rather than short-term capital gain, as the land transfer was in the nature of an adventure in real estate development. The tribunal rejected this argument, noting that the assessee did not undertake any development activity herself and the land remained the same in subsequent years, where it was treated as a capital asset giving rise to long-term capital gains. The tribunal found no merit in the assessee's claim of the transaction being an adventure in real estate development.

3. Rejection of Revised Return Filed by the Assessee for AY 2008-09:
The assessee's revised return for AY 2008-09 was rejected as it was filed belatedly. The assessee argued that the capital gains on the transfer of land had already been taxed in AY 2005-06 and should not be taxed again. The tribunal noted that the Revenue's stand, which relied on the Supreme Court decision in CIT Vs. Sun Engineering Works, was not applicable as it did not deal with instances of double addition. The tribunal restored the issue to the Assessing Officer to ensure that the income assessed in preceding years is not treated as escaping assessment for AY 2008-09.

4. Double Taxation of Capital Gains in Different Assessment Years:
The tribunal addressed the issue of potential double taxation, where the same income from the developed area was being taxed in both AY 2005-06 and AY 2008-09. The tribunal directed the Assessing Officer to recompute the income, ensuring that the income already assessed in previous years is not taxed again in AY 2008-09.

Conclusion:
The tribunal dismissed the appeal for AY 2005-06, upholding the addition of short-term capital gain and rejecting the treatment of income as business profit. However, the tribunal allowed the appeal for AY 2008-09 for statistical purposes, directing the Assessing Officer to recompute the income to avoid double taxation. The order was pronounced on 19th May 2021.

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