1996 (1) TMI 167 - AT - Income Tax

Summary

Issues Involved:
1. Assessability of capital gains for the assessment year 1988-89.
2. Applicability of section 2(47)(v) of the Income-tax Act, 1961.
3. Jurisdiction of the Commissioner for initiating proceedings under section 263.

Issue-wise Detailed Analysis:

1. Assessability of Capital Gains for the Assessment Year 1988-89:
The primary issue in this case revolves around whether the assessee should be assessed for capital gains for the assessment year 1988-89. The Commissioner of Income-tax proposed to revise and cancel the order of assessment for the assessment year 1988-89 on the ground that a transfer took place during this period under section 2(47)(v) of the Income-tax Act, 1961. The assessee contended that no such transfer occurred in the assessment year 1988-89, and hence, no capital gains tax should be levied. The Tribunal found that the possession of the property was given to the promoter on 18-2-1986, which was prior to the introduction of section 2(47)(v) by the Finance Act, 1987, effective from 1-4-1988. Therefore, the Tribunal concluded that the provision could not be applied retrospectively, and the assessee was not liable for capital gains tax for the assessment year 1988-89.

2. Applicability of Section 2(47)(v) of the Income-tax Act, 1961:
Section 2(47)(v) of the Income-tax Act defines transfer in relation to a capital asset to include any transaction involving the allowing of possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act. The Tribunal noted that this provision was introduced with effect from 1-4-1988 and therefore applicable from the assessment year 1988-89 onwards. The Tribunal emphasized that the possession of the property was handed over to the promoter on 18-2-1986, before the provision came into effect. The Tribunal also referred to the legal principle that a fiction created by law must be limited to the purpose for which it was created and should not be overworked to extend beyond its intended scope. Consequently, the Tribunal held that the provision of section 2(47)(v) could not be applied to the transaction that took place in 1986.

3. Jurisdiction of the Commissioner for Initiating Proceedings under Section 263:
The assessee also challenged the jurisdiction of the Commissioner for initiating proceedings under section 263 of the Income-tax Act. However, the Tribunal decided not to delve into this issue as the case was already decided on its merits. The Tribunal set aside the order passed by the Commissioner under section 263, thereby allowing the appeal in favor of the assessee.

Conclusion:
The Tribunal concluded that the possession of the property was handed over to the promoter on 18-2-1986, which was prior to the introduction of section 2(47)(v) of the Income-tax Act. Therefore, the provision could not be applied retrospectively to the assessment year 1988-89. The Tribunal set aside the order passed by the Commissioner under section 263, thereby allowing the appeal in favor of the assessee. The issue of the Commissioner's jurisdiction under section 263 was not addressed as the case was decided on its merits.