2017 (5) TMI 260 - HC - Income Tax

Validity of reopening of assessment - addition on account of long term capital gains taxable in the hands of the assessee - JDA - transfer within the meaning of sub sections (ii) and (vi) of Section 2(47) - Held that - The matter is no longer res integra. In C.S. Atwal s case (2015 (7) TMI 878 - PUNJAB & HARYANA HIGH COURT) held that the issue involved in this appeal stands decided by this Court. The possession delivered, if at all, was as a licencee for the development of the property and not in the capacity of a transferee. Further Section 53A of 1882 Act, by incorporation, stood embodied in section 2(47)(v) of the Act and all the essential ingredients of Section 53A of 1882 Act were required to be fulfilled. In view of cancellation of JDA no further amount has been received and no action thereon has been taken. It was urged that as and when any amount is received, capital gains tax shall be discharged thereon in accordance with law. In view of the aforesaid stand, while disposing of the appeals, we observe that the assessee appellants shall remain bound by their said stand. The issue of exigibility to capital gains tax having been decided in favour of the assessee, the question of exemption under Section 54F of the Act would not survive any longer and has been rendered academic. The Tribunal and the authorities below were not right in holding the assessee-appellant to be liable to capital gains tax in respect of remaining land measuring for which no consideration had been received and which stood cancelled and incapable. - Decided in favour of assessee.

Issues involved:
1. Interpretation of Section 2(47)(ii), (v), and (vi) of the Income Tax Act.
2. Applicability of Section 53A of the Transfer of Property Act.
3. Determination of possession in a Joint Development Agreement.
4. Taxability of capital gains arising from a transaction.
5. Impact of cancellation of Joint Development Agreement on capital gains tax.
6. Exemption under Section 54F of the Income Tax Act.
7. Liability for capital gains tax on remaining land.

Analysis:

Interpretation of Section 2(47)(ii), (v), and (vi) of the Income Tax Act:
The appellant-revenue challenged the deletion of an addition made by the Assessing Officer, arguing that the Income Tax Appellate Tribunal (ITAT) erred in relying on a High Court decision. The Tribunal dismissed the appeal, holding that the case was covered by the High Court judgment. The Court noted that the issue had been previously decided, and the appeal was dismissed based on the precedent.

Applicability of Section 53A of the Transfer of Property Act:
The Assessing Officer applied Section 2(47)(v) of the Income Tax Act in conjunction with Section 53A of the Transfer of Property Act to compute capital gains. The Tribunal, following a High Court judgment, upheld the deletion of the addition. The Court reiterated the conclusions drawn in a similar case, emphasizing the importance of fulfilling all essential ingredients of Section 53A for its applicability.

Determination of possession in a Joint Development Agreement:
The Court analyzed the Joint Development Agreement (JDA) and sale deeds to establish that no possession had been transferred in part performance of the JDA. It clarified that any possession delivered was as a licensee for development purposes, not as a transferee. The Court emphasized that possession must align with the requirements of Section 53A for it to be considered a transfer.

Taxability of capital gains arising from a transaction:
The Assessing Officer computed long-term capital gains and added them to the assessee's income based on the JDA. The CIT(A) deleted the addition, and the Tribunal upheld this decision. The Court concurred with the Tribunal's findings, emphasizing that the capital gains tax should be discharged only on amounts actually received.

Impact of cancellation of Joint Development Agreement on capital gains tax:
The Court considered the cancellation of the JDA and its implications on the capital gains tax. It was noted that no further amount had been received post-cancellation, and any future receipts would be subject to capital gains tax as per the law. The Court upheld the decision in favor of the assessee.

Exemption under Section 54F of the Income Tax Act:
The Court ruled that since the issue of capital gains tax liability was decided in favor of the assessee, the question of exemption under Section 54F no longer applied and was rendered academic.

Liability for capital gains tax on remaining land:
The Court held that the assessee was not liable for capital gains tax on the remaining land due to various legal constraints and cancellations affecting its performance. The appeals were allowed in favor of the assessee.

This detailed analysis of the judgment highlights the key legal issues addressed by the Court and provides a comprehensive understanding of the decision rendered by the Punjab and Haryana High Court.

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