2005 (9) TMI 252 - AT - Income Tax

Capital Gains - transfer of undivided share of land to the developer - sale-cum-development agreement - Whether there is a 'transfer' as envisaged in section 2(47) of the Act r/w section 53A of Transfer of Property Act, prior to the financial year 2000-01 - HELD THAT - In the present case, all the conditions mentioned in section 53A of T.P. Act, are fulfilled much before 1-4-2000. There is no right left to the transferor other than the right to receive the consideration for the transfer in the manner laid down in the contract and to get certain compensation in the form of rent reimbursements etc. Thus, the transaction entered into by the parties through the agreement is a transaction as envisaged u/s 53A of the Transfer of Property Act. The agreement also stipulates that the developer will arrange for alternative accommodation for the appellant and the other co-owner from the date the possession of the impugned property is handed over to it or bear expenses towards rent at Rs. 7,000 per month till the built-up area of 3,000 sq. ft. is handed over to the appellant and full consideration is paid to the other co-owner as stipulated in the agreement. It also stipulates that if the above built-up area is not handed over to the appellant within 18 months from the date of delivery of possession of the impugned property to the developer, Rs. 15,000 per month shall be paid by the developer to the appellant till the date of handing over the possession of 3,000 sq. ft. of built up area to the appellant. This is also not a case of transfer by sale or exchange, insofar as the consideration is mentioned in the agreement and receiving possession of the 3,000 sq. ft. of built-up area is only a mode of receiving that consideration in addition to the right to have alternate accommodation during the period specified in the agreement. Transfer can be by any mode as enumerated in section 2(47) of the Act or otherwise. In the present case transfer as per section 2(47)(v) took place earlier to 1-4-2000 as is evidenced by the agreement and surrounding facts. As per the discussion made above, we are of the considered view that transfer as per section 2(47) of the Act did not take place during the previous year relevant to assessment year 2001-02. In the result, appeal of the assessee is dismissed.

Issues Involved:

1. Whether the long-term capital gains arising out of the transfer of an undivided share of land to the developer is assessable in the assessment year 2001-02.
2. Whether the handing over of possession as per the development agreement amounts to a transfer under section 2(47) of the Income-tax Act read with section 53A of the Transfer of Property Act.
3. Whether the consideration for the transaction can be determined in any previous year earlier to the assessment year 2001-02.

Detailed Analysis:

Issue 1: Assessability of Long-term Capital Gains in AY 2001-02

The appellant contended that the long-term capital gains arising from the transfer of the undivided share of land to the developer should be assessable in the assessment year 2001-02. The appellant argued that the impugned agreement is not an agreement to sale, and thus, there was no transfer on the date of the agreement. The possession given was for the limited purpose of developing the property and not as envisaged in section 53A of the Transfer of Property Act. Additionally, the appellant claimed that no consideration in money was received prior to the assessment year 2001-02, and hence, the capital gains should be chargeable in this year only.

Issue 2: Handing Over of Possession and Transfer under Section 2(47)

The Tribunal examined whether the handing over of possession as per the development agreement constituted a transfer under section 2(47) of the Income-tax Act read with section 53A of the Transfer of Property Act. The Tribunal noted that the development agreement and the supplemental agreement indicated that the developer had acquired rights by virtue of the agreement, and the possession given was absolute and not merely for development purposes. The Tribunal emphasized that section 45 of the Act stipulates that capital gain is chargeable in the previous year when the transfer of the capital asset takes place, and consideration automatically accrues as soon as the transfer occurs.

Issue 3: Determination of Consideration in Previous Years

The Tribunal considered whether the consideration for the transaction could be determined in any previous year earlier to the assessment year 2001-02. The Tribunal observed that the full value of consideration for the transfer was mentioned in the original agreement as Rs. 119 lakhs, and the supplemental agreement reduced it to Rs. 92 lakhs. The Tribunal highlighted that the developer had the right to dispose of the developed property and utilize the advance and sale consideration from the same, other than the 3,000 sq. ft. of built-up area. The Tribunal concluded that the transaction was a transfer as envisaged under section 53A of the Transfer of Property Act and section 2(47)(v) of the Income-tax Act, and thus, the transfer took place earlier to the assessment year 2001-02.

Conclusion:

The Tribunal held that the transfer of the impugned property took place earlier to the assessment year 2001-02 as per section 2(47) of the Income-tax Act read with section 53A of the Transfer of Property Act. Consequently, the long-term capital gains arising from the transfer were not assessable in the assessment year 2001-02. The appeal of the assessee was dismissed.

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