2015 (10) TMI 2115 - AT - Income Tax

Transfer of capital asset - determination of capital gain - whether capital asset transferred by the assesses is not agricultural land but assignment of right to obtain the conveyance of the agricultural land - Held that - We find the Ld.CIT(A) has rightly observed that the assessee in the instant case have transferred their right to obtain the conveyance of immovable property to the purchaser C&M Farming Ltd. Further, para 10 of the agreement between the assessees and C&M Farming Ltd. dated 13-07-2004 also shows that the assessees have undertaken to transfer land to the purchaser or to anyone named by the purchaser. Further, the right of receiving compensation from MHADA in case of acquisition of land has been granted to the purchaser company in accordance with para 11 of the agreement. Para 12 of the agreement says that the sellers have undertaken to transfer the land without any encumbrance. The assessees have also undertaken to comply with all the procedural requirement for getting the land transferred in the name of the purchaser for which he has paid full consideration of ₹ 2.75 crores to the respective parties. Under the aforementioned circumstances, we do not find any infirmity in the order of the CIT(A) holding that the capital asset transferred by the assesses is not agricultural land but assignment of right to obtain the conveyance of the agricultural land. The various decisions relied upon by Ld.CIT(A) also supports the case of the Revenue. Under these circumstances, we find no infirmity in the order of the CIT(A). We accordingly uphold the same. - Decided against assessee.

Summary

Issues:
1. Appeal against common order dated 06-09-2013 of the CIT(A)-IT/TP, Pune relating to A.Y. 2005-06.
2. Determination of capital gain taxability on the sale of agricultural land.
3. Interpretation of the provisions of the Bombay Tenancy and Agricultural Land Act, 1948.
4. Transfer of right to obtain conveyance of immovable property.

Analysis:
The appeals filed by the assesses were directed against a common order related to the assessment year 2005-06. Despite multiple adjournments due to non-appearance of the assesses, the Tribunal proceeded with the case exparte and heard the Departmental Representative. The primary issue revolved around the capital gain taxability of the sale of agricultural land by the assesses. The assesses argued that no capital gain arose as the land had not been transferred to them due to pending legal proceedings under the Bombay Tenancy and Agricultural Land Act, 1948.

The Assessing Officer (AO) did not accept the assesses' contentions and determined the capital gain based on the sale consideration received. The CIT(A) upheld the AO's decision, emphasizing that the assesses had transferred their right to obtain the conveyance of immovable property to the purchaser company. The CIT(A) analyzed the agreement between the assesses and the purchaser, highlighting the obligations undertaken by the assesses for transferring the land and receiving full consideration.

The assesses challenged the CIT(A)'s decision before the Tribunal, raising various grounds related to the interpretation of Section 2(47) of the Income Tax Act and the provisions of the Bombay Tenancy and Agricultural Land Act, 1948. However, the Tribunal upheld the CIT(A)'s order, concluding that the capital asset transferred was the 'assignment of right to obtain conveyance' of the agricultural land, not the land itself. The Tribunal found no infirmity in the CIT(A)'s decision and dismissed the appeals filed by the assesses.

In summary, the Tribunal affirmed the capital gain taxability on the transfer of the right to obtain conveyance of immovable property by the assesses, based on the provisions of the Income Tax Act and the legal obligations outlined in the agreement with the purchaser company. The decision highlighted the importance of analyzing the nature of the asset transferred and upheld the tax liability determined by the AO and CIT(A) for the assesses.