2014 (6) TMI 564 - AT - Income Tax

Scope of the Term sale u/s 2(47) - sale of land advance received by the assessee but possession was not given - Sale to be treated as capital gain or not u/s 45 of the Act - Agreement entered after 12 months of payment Held that - CIT(A) was of the view that the land remained vested in Gram Sabha for the entire period from 29/03/2005 to 25/08/2007 - the appellant could not have handed over possession to the prospective buyer during the previous year relevant to AY 2007-08 - there is absolutely no material on record to justify any finding of possession - the possession of property was neither given nor allowed to be retained, provisions of s. 53A of Transfer of Property Act r/w s. 2(47)(v) of the I.T. Act have no application - there was no valid transfer of the land during the P.Y. relevant to AY 2007-08 so as to give rise to any income in the form of capital gains Decided against Revenue.

Summary

Issues: Validity of transfer of agricultural land for capital gains tax calculation.

Analysis:
1. Issue of Validity of Transfer: The case involved an appeal by the Revenue against the order of the CIT(A) regarding the validity of the transfer of agricultural land for capital gains tax calculation for the assessment year 2007-08. The assessee had received an advance amount against the sale of land, and the dispute arose regarding the date of transfer of the land for tax purposes.

2. Assessment by AO: The Assessing Officer (AO) considered the full and final payment received by the assessee as the date of transfer of the land, leading to the computation of long-term capital gains. The AO also analyzed the expenses claimed by the assessee and the nature of the land as a capital asset within the Municipal Corporation of Delhi's limits.

3. CIT(A) Decision: The CIT(A) allowed the assessee's appeal, highlighting that the land remained vested in Gram Sabha during the relevant period, and no possession was given to the buyer. The CIT(A) emphasized the absence of material justifying possession and concluded that no valid transfer occurred, leading to the deletion of the addition made under capital gains.

4. Subsequent Developments: The counsel for the assessee presented evidence in AY 2008-09 showing the cancellation of the sale agreement and the refund of the advance amount to the buyer. This further supported the argument that no valid transfer took place in the previous assessment year.

5. Revenue's Appeal Dismissed: Considering the subsequent developments and the lack of valid transfer in the relevant assessment year, the ITAT dismissed the Revenue's appeal as academic in nature. The decision was based on the facts presented regarding the cancellation of the deal and the refund of the advance amount, rendering the capital gains tax calculation irrelevant for the disputed assessment year.

In conclusion, the judgment revolved around the determination of the validity of the land transfer for capital gains tax purposes, with the subsequent developments in AY 2008-09 supporting the absence of a valid transfer in the disputed assessment year. The ITAT's decision to dismiss the Revenue's appeal was based on the factual evidence presented regarding the cancellation of the sale agreement and the refund of the advance amount, leading to the deletion of the capital gains addition.