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2013 (11) TMI 936 - AT - Income TaxCapital gains - transfer u/s 2(47) - Assessee entered into JDA agreement - As per the agreement, the assessee is entitled for 50% of built up area - Whether provisions of section 2(47)(v) can be invoked for exchange of the property for consideration in kind i.e., to receive 50% of the built up area - Held that - owners have entered into an agreement for development of the property and certain rights were assigned to the developer who in turn had made the substantial payment and consequently entered into the property and thereafter the transferee has taken steps in relation to construction of the building, then it is to be considered as transfer u/s. 2(47)(v) of the I.T. Act. The fact that the legal ownership continued with the owners to be transferred to the developer at a future distant date really does not affect the applicability of s. 2(47)(v) as per the reasons assigned hereinabove. The transferee was undisputedly willing to perform its part of the contract, in this circumstance we have to hold that there is transfer u/s. 2(47)(v) of the Act. Thus, the possession and control of the property is already vested with the transferee and the impugned development agreement has not been duly cancelled and it is still in operation, it has to be decided that there is a transfer u/s. 2(47)(v) of the Act. Entering into the property and handing over of the possession was instantaneous thus entire conspectus of the case has attracted the provision of S. 45 of the Act on fulfilment of conditions laid down in section 53A of the Transfer of Property Act. Capital gain would be taxable in the year in which such transactions are entered into even if the transfer of the immovable property is not effective or complete under the general law. The assessee entered into an agreement with the builder/developer for development of the impugned land and construction of flats thereon. Also, the assessee signed a delivery note dated 7.3.2005 in favour of the builder/ developer and gave possession of the property to the builder/developer. Further, the assessee acted on the impugned agreement by accepting from the builder/developer payments by cheques on different dates in the financial year 2004-05. In view of the facts and circumstances discussed above, all the conditions of sub-cl. (v) of s. 2(47) are satisfied in this case and therefore, it has to be inferred that a transfer did take place within the meaning of s. 2(47)(v) - Decided against assessee.
Issues Involved:
1. Treatment of transaction under Joint Development Agreement (JDA) as a transfer under Section 2(47)(v) of the Income-tax Act, 1961. 2. Determination of long-term capital gain from the transaction. 3. Admissibility and relevance of additional evidence submitted by the assessee. 4. Applicability of judicial precedents and interpretations of Section 2(47)(v) and Section 53A of the Transfer of Property Act, 1882. Issue-Wise Detailed Analysis: 1. Treatment of Transaction under JDA as Transfer: The core issue is whether the transaction under the JDA dated 2.8.2004 between the assessee and M/s. Imperial Constructions constitutes a "transfer" under Section 2(47)(v) of the Income-tax Act, 1961. The Assessing Officer (AO) and CIT(A) treated the transaction as a transfer, invoking Section 2(47)(v), which includes 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, 1882. The AO relied on the judgment of the Bombay High Court in Chaturbhujdas Dwarkadas Kapadia v. CIT and the Tribunal's decision in Dr. Maya Shenoy v. CIT to compute the capital gain on this transaction at Rs. 3,88,35,451. The assessee contended that no absolute possession was given to the developer, only a license for construction purposes, and thus, Section 2(47)(v) should not apply. 2. Determination of Long-Term Capital Gain: The AO computed the capital gain based on the deemed transfer of the property under the JDA, considering the assessee's entitlement to 50% of the built-up area as consideration. The assessee argued that the computation was based on an incorrect interpretation of the law and that the actual gain should be taxed in the year it is realized. The Tribunal noted that the right amount must be taxed in the right assessment year, and the consideration could be futuristic, as held by the Supreme Court in AIR 1955 S.C. 376. 3. Admissibility and Relevance of Additional Evidence: The assessee submitted additional evidence, including various agreements, income tax returns, and details of capital gains offered in subsequent years. The Tribunal reviewed these documents but found them inconsequential in deciding the issue at hand. The focus remained on the Development Agreement and the Delivery Note for handing over possession of the property for construction. 4. Applicability of Judicial Precedents and Interpretations: The assessee argued that the lower authorities wrongly applied the judgment in Chaturbhujdas Dwarkadas Kapadia and Dr. Maya Shenoy, and cited several other judicial decisions, including K. Radhika & Others, to support their stance. The Tribunal examined these precedents and concluded that the Development Agreement and the delivery of possession constituted a transfer under Section 2(47)(v). The Tribunal emphasized that the possession need not be exclusive and that the developer's control over the property for development purposes suffices to trigger the provisions of Section 2(47)(v). Conclusion: The Tribunal upheld the AO's treatment of the transaction as a transfer under Section 2(47)(v), resulting in the determination of long-term capital gain in the assessment year 2005-06. The additional evidence submitted by the assessee was deemed irrelevant to the core issue. The Tribunal's decision was consistent with the judicial precedents and interpretations of relevant sections of the Income-tax Act and the Transfer of Property Act. Final Order: The assessee's appeal was dismissed, and the order was pronounced in the open court on 15.3.2013.
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