2024 (11) TMI 533 - AT - Income Tax

Computation of short term capital gain on the basis of land development agreement cum GPA - physical possession could not be delivered during the assessment year - transfer could not be completed due to problems in handing over of the physical possession of the land to the developer - HELD THAT - As per clause 8 of the said development agreement cum General Power of Attorney, the possession has already been handed over to the developer at the time of entering into development agreement cum GPA. In our understanding, the law has been fairly settled in the case of Potla Nageswara Rao 2014 (8) TMI 636 - ANDHRA PRADESH HIGH COURT wherein it was held that the year of taxation would be the year, in which the registered development agreement cum GPA was executed, coupled with transfer of possession for the development of the property. In the present case, as per the development agreement cum GPA dt.27.06.2015 and the possession has already been handed over by the land owners to the developer and therefore, for all the requirements of law of transfer as per the pronouncement of Potla Nageswara Rao supra took place in the assessment year before us. In view of the above, the AO as well as the Ld.CIT(A) were correct in making the additions in the hands of the assessee in the year under consideration. AO has not examined the affidavit filed by the developer and also has not taken into account the permission granted by the local authorities on 05.01.2021 - The development agreement cum GPA dt.27.06.2015 is a registered document and there is a clear mention of handing over the possession by land owners to the developer. The above said facts mentioned in the said document cannot be merely disbelieve on the account of the affidavit filed by the developer at the request of the assessee. The law is fairly settled that the contents of the registered document shall prevail over the affidavit or the oral statement. In view of the above, we have no hesitation to say that the Assessing Officer was right in not entertaining the self-serving affidavit filed by the developer. Permission was accorded on 05.01.2021 - We are of the opinion that the grant of permission is nothing to do with the transfer of property. In the present case, we are only concerned with the transfer of the property and the income arising out of the said transfer. In view of the above, we are of the opinion that the grant of permission by local authorities on 05.01.2021 is nothing to do with transfer of the property. Furthermore, once the developers have decided to compensate owners on account of failure by the developer to raise construction beyond a period of time, then it is for the developer and for the land owners to inter-se decide the issue of delay in raising the construction. In the present case, first the development agreement cum GPA was entered into and thereafter, it was registered on 27.06.2015 and therefore, the year of taxation would be the assessment year 2016-17. On account of the above, we do not find any reason to interfere with the orders passed by the learned lower authorities. Thus, the appeals of the assessee s are dismissed.

Summary

Issues Involved:

1. Computation of short-term capital gain based on a land development agreement cum GPA.
2. Sustaining the addition made under short-term capital gains despite non-delivery of physical possession.
3. Disallowance of the claim for development expenditure due to lack of evidence.
4. Compliance with legal requirements for the transfer of property under Section 2(47) of the Income Tax Act.

Comprehensive Issue-wise Analysis:

1. Computation of Short-term Capital Gain:

The core issue revolves around the computation of short-term capital gain on the basis of a land development agreement cum GPA. The assessee argued that the computation was erroneous as the "transfer" could not be completed due to the inability to deliver physical possession of the land during the assessment year. The tribunal noted that the development agreement cum GPA was executed on 27.06.2015, and possession was deemed to have been transferred to the developer, as per the registered document. The tribunal relied on the jurisdictional High Court's decision in Potla Nageswara Rao Vs. DCIT, which established that the year of taxation would be the year in which the registered development agreement cum GPA was executed, coupled with the transfer of possession.

2. Sustaining the Addition under Short-term Capital Gains:

The assessee contended that the addition under short-term capital gains was unjustified since physical possession was not delivered, as supported by an affidavit from the developer. The tribunal, however, emphasized that the registered development agreement explicitly mentioned the delivery of possession, and such registered documents prevail over affidavits or oral statements. The tribunal concluded that the Assessing Officer was correct in making additions for the assessment year 2016-17, as the requirements of law for transfer were met.

3. Disallowance of Development Expenditure Claim:

The assessee's claim for development expenditure of Rs. 6,90,400/- was disallowed due to a lack of supporting evidence. The tribunal upheld this disallowance, noting that the assessee failed to provide adequate documentation to substantiate the claimed expenditure. The tribunal underscored the importance of producing evidence to support claims for deductions, aligning with the principles of tax law that require substantiation of expenses.

4. Compliance with Legal Requirements for Property Transfer:

The tribunal examined the legal requirements for the transfer of property under Section 2(47) of the Income Tax Act. The assessee argued that the decision in CIT Vs. Balbir Singh Maini was applicable, where the Supreme Court held that the year of taxation would be the year when physical possession is handed over. However, the tribunal distinguished the present case, noting that the development agreement cum GPA was registered, and possession was deemed transferred in the assessment year 2016-17. The tribunal clarified that the grant of permission by local authorities in 2021 did not affect the transfer of property for tax purposes.

In conclusion, the tribunal dismissed the appeals, affirming the lower authorities' decisions on all issues, emphasizing the importance of registered documents and compliance with statutory provisions in determining the year of taxation for capital gains.