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2022 (9) TMI 328 - AT - Income TaxCapital gain - JDA entered - Transfer of capital asset - whether possession given to the develop cannot be regarded as delivery of possession ? - as per JDA clauses Developer will take possession of the property for the specific purpose of development only, that too after satisfying the conditions like obtaining approvals etc. HELD THAT - From a reading of the above clauses of the JDA, it is clear that the Developer will take possession of the property for the specific purpose of development only, that too after satisfying the conditions like obtaining approvals etc. The clause also provides that possession given to the develop cannot be regarded as delivery of possession in part performance of Agreement for Sale as contemplated under section 53-A of the Transfer of Property Act, 1882. The assessee has given only permissive possession and not legal possession. Accordingly, following the decision of Dr. Krishna Prasad Mikkilineni 2022 (2) TMI 480 - ITAT BANGALORE we hold that transfer has not taken place during the year under consideration. Accordingly, capital gain is not assessable in the hands of the assessee during the year under consideration. We therefore uphold the order of the CIT(A). - Decided against revenue.
Issues Involved:
1. Whether the Joint Development Agreement (JDA) constituted a "transfer" of property under Section 2(47)(v) of the Income Tax Act. 2. Whether the possession given to the developer amounted to delivery of possession in part performance under Section 53-A of the Transfer of Property Act, 1882. 3. Whether capital gains should be assessed in the hands of the assessee for the relevant assessment year. Issue-wise Detailed Analysis: 1. Whether the Joint Development Agreement (JDA) constituted a "transfer" of property under Section 2(47)(v) of the Income Tax Act: The assessee entered into a JDA with the developer for the development of land, sharing the project revenue in a 70:30 ratio. The Assessing Officer (AO) concluded that there was a transfer of property under the JDA within the meaning of Section 2(47)(v) of the Income Tax Act, based on the Karnataka High Court's decision in CIT Vs. Dr. T.K. Dayalu. However, the CIT(A) and various cited judgments emphasized that for a transfer to be recognized under Section 2(47)(v), there must be a transfer of complete control over the property. The JDA clauses indicated that the developer was given a license to develop the property without transferring ownership or possession akin to ownership, thus not constituting a "transfer" under Section 2(47)(v). 2. Whether the possession given to the developer amounted to delivery of possession in part performance under Section 53-A of the Transfer of Property Act, 1882: The CIT(A) and various cited cases, including the Supreme Court's decision in COMMISSIONER OF INCOME TAX vs. BALBIR SINGH MAINI & ORS., concluded that mere permissive possession for development purposes does not amount to delivery of possession in part performance under Section 53-A of the Transfer of Property Act. The JDA explicitly stated that the possession given to the developer was for development purposes only and did not transfer ownership or possession akin to ownership. Therefore, the possession given to the developer did not fulfill the requirements of Section 53-A. 3. Whether capital gains should be assessed in the hands of the assessee for the relevant assessment year: Given that there was no transfer of property under Section 2(47)(v) and no delivery of possession in part performance under Section 53-A, the CIT(A) held that no capital gains could be brought to tax in the relevant assessment year. The Tribunal upheld this view, noting that the JDA clauses and the nature of the possession given to the developer did not constitute a transfer of property, thus no capital gains were assessable in the hands of the assessee for the relevant assessment year. Conclusion: The Tribunal dismissed the Revenue's appeal, affirming that the JDA did not constitute a transfer of property under Section 2(47)(v) of the Income Tax Act, and the possession given to the developer did not amount to delivery of possession in part performance under Section 53-A of the Transfer of Property Act. Consequently, no capital gains were assessable in the hands of the assessee for the relevant assessment year.
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