2007 (6) TMI 167 - HC - Income Tax

Transfer of property - no sale agreement between assessee & builder - assessee not received sale consideration during relevant period no proof that assessee had put the developer in possession of property by receiving the consideration partly or in full - unless there is a written agreement, Section 53A of Transfer of Property Act will not come into operation - Tribunal is right in holding that there is no transfer of property, as contemplated u/s 2(47(v)) no capital gains assessable

Summary

Issues:
Interpretation of Section 2(47)(v) of the Income Tax Act in relation to transfer of property and capital gains assessment.

Analysis:
1. The appeal before the Madras High Court involved the interpretation of Section 2(47)(v) of the Income Tax Act, 1961, regarding the transfer of property and capital gains assessment for the block assessment period from 01.04.1988 to 20.08.1998. The substantial question of law formulated was whether there was a transfer of property by the assessee to a builder within the block period, thus making the capital gains assessable for that period.

2. The facts of the case revealed that the assessee, an individual, was the owner of a property where a housing project was developed by a partnership firm. Despite no written agreement between the assessee and the builder, the builder started construction in 1995 and subsequently sold flats on the property. The Assessing Officer computed short term and long term capital gains for the block period, which was added to the Block Assessment.

3. The Revenue contended that the transfer of land should be assessed for the assessment year 1995-96 under Section 2(47)(v) as the builder took possession and control of the land. On the other hand, the assessee argued that without satisfying the requirements of Section 53A of the Transfer of Property Act, Section 2(47)(v) cannot be invoked. The absence of a written agreement and actual receipt of sale consideration were highlighted by the assessee.

4. The Court examined the provisions of Section 53A of the Transfer of Property Act, emphasizing the necessity of a written agreement for invoking its provisions. The judgment referred to the Supreme Court's decision in Nathulal Vs. Phoolchand, AIR 1970 SC 546, which outlined the conditions for part performance under Section 53A.

5. Section 2(47)(v) of the Income Tax Act was analyzed in conjunction with the Transfer of Property Act requirements. The Court concluded that without a written agreement and actual receipt of sale consideration during the relevant period, there was no transfer of property as per Section 2(47)(v). The Tribunal's decision was upheld, stating that the Revenue failed to establish the transfer of property, hence no capital gains were assessable for the block period.

6. Consequently, the Court ruled in favor of the assessee, dismissing the tax case and not awarding any costs. The judgment affirmed the Tribunal's decision, finding no legal infirmity or error in their order to warrant interference.

This detailed analysis of the judgment provides a comprehensive understanding of the legal issues involved and the Court's reasoning in deciding the case.