2022 (3) TMI 1009 - AT - Income Tax

Determination of Short Term Capital Gain - Transfer of capital asset u/s 2(47) - year of assessment - AO sought to invoke Section 53A of the Transfer of Property Act, 1882 - case of the Revenue is this that the Vaibhav Industires have given the possession of land and/or property 22.09.2011 against the total sale price pertaining to F.Y. 2011-12 - HELD THAT - It is a fact that assessee is an ultimate purchaser received the total consideration during the F.Y. 2012-13 i.e. for A.Y. 2013- 14 upon completion of all formalities in terms of the order passed by the Hon ble High Court finally and the property got transferred. Therefore, it was practically transferred in the F.Y. 2012-13 and not F.Y. 2011-12 i.e. the assessment year under consideration. In that view of the matter the invocation of Section 53A of the Transfer of Property Act, 1882 is wrong. Thus, no profit or gain which arose from transfer of a capital asset which could be brought to tax under Section 45 r.w.s. 48 of the Act As decided in Balbir Singh Maini 2017 (10) TMI 323 - SUPREME COURT where it has been held that where for want of permission in that transaction of development of land envisaged in Joint Development Agreement (JDA) failed through, there were no profit or gain which arose from transfer of capital asset which could be brought to tax under Section 45 r.w.s 48 of the Act. Thus we hold that since the property was actually transferred in A.Y. 2013-14 the computation of short-term capital gain holding the transfer took place in the A.Y. 2012-13 is not sustainable. In the present facts and circumstance of the case the deed since not registered in A.Y. 2012-13 it has no effect in law for the purpose of invocation of the provision of Section 53A of the Act. There is no profit or gain arose as there was no transfer in the year under consideration. Hence, the impugned order of addition passed by the authorities below is not sustainable in law and, thus, hereby quashed. Addition of interest income on mercantile basis - amount received during the year accounted on cash basis without allowing the expenditure as claimed by the appellant - HELD THAT - Having heard the Ld. Counsel appearing for the parties, having regard to the facts and circumstances of the case we remit the issue to the file of the Ld. AO to consider that if the impugned income has been offered to tax in the subsequent year then the relief is also to be given to the assessee in the respective Assessment Year. The Ld. AO will consider the issue as directed hereinabove upon considering the evidence to be produced by the assessee and after affording opportunity of being herd to the assessee. Assessee s this ground of appeal is, therefore, allowed for statistical purposes.

Issues Involved:
1. Validity of the physical form of the return of income.
2. Determination of the transfer of land and computation of capital gains.
3. Assessment of sale proceeds without allowance of any costs.
4. Addition of interest income on a mercantile basis versus cash basis.

Issue-wise Detailed Analysis:

1. Validity of the Physical Form of the Return of Income:
The appellant did not press this ground, and thus, it was dismissed as not pressed.

2. Determination of the Transfer of Land and Computation of Capital Gains:
The appellant company was under liquidation, managed by the Official Liquidator as per the High Court's order. The High Court directed the sale of the company's assets, including land, to the highest bidder, M/s. Samiya Infra. The deed of conveyance was executed on 01.10.2013, and the total sale consideration was ?3,78,00,000. The appellant contended that the transfer should be considered in the financial year 2013-14 when the deed was executed, not in 2011-12 as per the Revenue's claim under Section 2(47) and Section 53A of the Transfer of Property Act, 1882. The Revenue argued that possession was given on 22.09.2011, and the sale consideration was received fully in the financial year 2011-12, thus invoking Section 53A for capital gains computation in that year.

The Tribunal found that the property was practically transferred in the financial year 2012-13 upon completion of formalities, not in 2011-12. The Tribunal referenced the Supreme Court's judgment in CIT vs. Balbir Singh Maini, emphasizing that without a registered agreement, Section 53A cannot be invoked. Therefore, the addition of ?2,31,67,620 as short-term capital gain for the financial year 2011-12 was quashed.

3. Assessment of Sale Proceeds Without Allowance of Any Costs:
The Tribunal noted that the appellant did not provide complete details of the property, share of ownership, purchase cost, or written-down value, which led the Assessing Officer (AO) to treat the proportionate sale proceeds as short-term capital gain. The Tribunal held that since the property transfer was not completed in the financial year 2011-12, the computation of short-term capital gain for that year was unsustainable.

4. Addition of Interest Income on a Mercantile Basis Versus Cash Basis:
The Revenue added interest income of ?23,08,797 on a mercantile basis, while the appellant accounted for ?1,40,436 on a cash basis. The appellant claimed that the interest income was offered to tax in the subsequent year on a received basis, and adding it in the year under consideration would result in double taxation. The Tribunal remitted the issue to the AO for verification, directing that if the interest income was indeed offered in the subsequent year, relief should be given accordingly.

Conclusion:
The appeal was allowed for statistical purposes, with directions for the AO to verify the interest income issue and provide relief if warranted. The Tribunal quashed the addition of short-term capital gain for the financial year 2011-12, holding that the property transfer was completed in the financial year 2012-13.

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