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2023 (6) TMI 511 - AT - Income TaxAssessment of capital gain - transfer u/s. 2(47)(vi) r/w s. 2(47)(i) - JV agreement for construction of building/s - effect of part-performance of a contract u/s. 53A of the TP Act - both the GPA and JVA were unregistered documents - assessee s plea before him that the transaction did not materialise as the Builder-developer could not complete the building even by 2017, was met by him by stating that the project was nearly complete in October, 2018 - HELD THAT - Non-delivery of consideration cannot be by itself regarded as a project failure, as where the necessary permissions, which are the responsibility of the Developer-Builder, and subject to which only the project could be undertaken, do not materialize, failing the project, as was the case in Balbir Singh Maini 2017 (10) TMI 323 - SUPREME COURT . In the instant case, the GPA in fact was specifically executed only for the same. Why, even upto December, 2016, i.e., up to completion of assessment, there was admittedly no whisper of the project failing, but only of it being part-performed. And even as without doubt there could be issues leading to the project being delayed. In fact, the ld. CIT(A) clearly states, unrebutted before us, of the project being nearly complete in October, 2018. No material contradicting the same has been brought on record, or otherwise to our notice. We, yet, in the interest of justice, restore the matter back to the file of the first appellate authority for the assessee to exhibit the non-transfer u/s. 2(47)(vi) r/w s. 2(47)(i) in the undisputed facts and circumstances of the case. Reference to s. 2(47)(i) is made so as to highlight that the rights to the buyers of the apartments would stand to arise thereunder, if not u/c.(vi). Further, we say undisputed with a view to clarify of no dispute qua facts being either observed or brought to our notice. And, further, to eliminate any scope for the said remittance leading to expanding the scope of controversy, or fresh facts or disputes being raised. No application for admission of additional evidence, it may be noted, stands made either at the first appellate stage, or even before us u/r. 29 of the Income Tax (Appellate Tribunal) Rules, 1963. All the material on record, including before the Tribunal, would though be liable to be considered. Our only purpose is to allow the assessee opportunity to state his case as regards his legal claim as to non-applicability of s. 2(47)(vi); Sh. Veeramani claiming to be not fully prepared. In so deciding, we also take note of the submission by him that the project was finally completed by the co-owners themselves, i.e., by taking-over the project, which may have computational implications. CIT(A) shall cause such verification and adjudication by the assessing authority, by remanding the matter thereto, as it may deem fit and proper in the circumstances, and finally decide the matter/s, issuing definite findings of fact and law, per a speaking order and after hearing both the parties before him. The issue of deduction u/s. 54-F shall also be adjudicated upon in view of the Board Circular 672 dated 16/12/1993, allegedly not considered by him. Both the sides before the ld. CIT(A), as indeed he himself, may rely on case law, observing of course the principles of natural justice.
Issues Involved:
1. Assessment of capital gain arising to the assessee for the current year. 2. Applicability of section 2(47)(v) and section 2(47)(vi) of the Income Tax Act, 1961. 3. Validity of the transaction under the Transfer of Property Act, 1882. 4. Consideration of subsequent developments in the project completion. Detailed Analysis: 1. Assessment of Capital Gain: The primary issue in the appeal is the assessment of capital gain arising to the assessee for the Assessment Year (AY) 2011-12. The facts of the case involve a joint venture (JV) agreement for the construction of buildings on a piece of land owned by the assessee and others, which was entered into with a developer. The dispute centers around whether this JV agreement resulted in a transfer of capital assets under the Income Tax Act, 1961. 2. Applicability of Section 2(47)(v) and Section 2(47)(vi): The Assessing Officer (AO) initially considered the JV agreement as a transfer under section 2(47)(v) of the Act, which involves part-performance as defined under section 53A of the Transfer of Property Act, 1882. However, the Commissioner of Income Tax (Appeals) [CIT(A)] found that since the JV agreement and the General Power of Attorney (GPA) were not registered, they could not be recognized under section 2(47)(v) due to amendments in the Registration Act, 1908, and the Transfer of Property Act, 1882. Instead, the CIT(A) applied section 2(47)(vi), which pertains to transactions that have the effect of transferring or enabling the enjoyment of immovable property. The Tribunal agreed with the CIT(A) that section 2(47)(vi) was applicable as the developer was given possession for construction, which constituted a transfer of rights in the property. 3. Validity of the Transaction under the Transfer of Property Act, 1882: The Tribunal noted that the legal recognition of part-performance under section 53A of the Transfer of Property Act, 1882, is no longer available without a registered document. The assessee argued that there was no part-performance by the end of the relevant financial year, but this was deemed irrelevant since the transfer was considered under section 2(47)(vi). The Tribunal emphasized that the possession given to the developer for construction purposes was sufficient to constitute a transfer under section 2(47)(vi). 4. Consideration of Subsequent Developments in the Project Completion: The assessee contended that the project failed as the developer could not complete the construction by 2017. The CIT(A) countered this by stating that the project was nearly complete by October 2018. The Tribunal observed that non-completion of construction is a failure to deliver consideration, not a failure of the transfer itself. The Tribunal restored the matter to the CIT(A) to allow the assessee to present evidence regarding the non-transfer under section 2(47)(vi) and to consider the implications of the project being completed by the co-owners themselves. The Tribunal also highlighted the need to consider the point of time up to which subsequent events could be taken into account for determining the transfer. Conclusion: The Tribunal concluded that section 2(47)(vi) was applicable and endorsed the CIT(A)'s order. However, it remanded the matter back to the CIT(A) for further verification and adjudication, allowing the assessee to present additional evidence and arguments. The Tribunal emphasized that the CIT(A) should ensure a thorough examination of the facts and issue a speaking order after hearing both parties. The appeal was allowed for statistical purposes, and the issue of deduction under section 54-F was also to be adjudicated upon in light of the Board Circular 672 dated 16/12/1993.
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