2021 (5) TMI 585 - AT - Income Tax

STCG or LTCG - transaction of development envisaged in the JDA - HELD THAT - Having held that no transfer took place in the year under consideration and hence no capital gain arose, the natural corollary is that the transfer took place in some other year(s) and the resultant capital gains should be charged to tax in such other years. The case of the assessee is that the transfer took place in the year 2013, when it transferred the entire land to the eventual buyers and was rightly offered for taxation in such later year, for which protective assessment has also been made by the AO. We find that 80R land was transferred by the assessee to Akash Erectors Pvt. Ltd. in the month of June, 2010, when ULC Act was repealed and the name of the Government of Maharashtra was removed from 7/12 extract between 2009 and 2010. When the assessee transferred 80R land to Akash Erectors Pvt. Ltd., by means of a registered sale deed, it became chargeable to tax pro tanto in the previous year relevant to the A.Y. 2011-12 as it fell within the definition of the term transfer . AR candidly accepted that no capital gain was offered for such assessment year. In view of the transfer taking place in such year to that extent, it is held that the resultant capital gain arising on the transfer of 80R land to Akash Erectors Pvt. Ltd. in the year 2010 should be charged to tax on substantive basis in the assessment for the A.Y. 2011-12 subject to the provisions of Chapter IV-E. As regards the balance transfer taking place in the A.Y. 2014-15 as per the assessee s own version, when he transferred the remaining property (after excluding 80R land transferred to Akash Erectors Pvt. Ltd.) to the eventual buyers, namely, Sh. Rajendra Bhosale and Sh. Vikas Shinde pursuant to transfer of land in the year 2013 along with Dabhade family and Akash Erectors Pvt. Ltd., the capital gain should be charged to tax on substantive basis in the A.Y. 2014-15. AO will take into consideration all the amounts received earlier from Samrat Builders and Developers and then from Sh. Rajendra Bhosale and Sh. Vikas Shinde. AO will provide adequate opportunity of hearing to the assessee in determining the correct amount of capital gains for the A.Ys. 2011-12 and 2014-15.

Summary

Issues Involved:
- Deletion of addition of ?3,12,53,920 as Short Term Capital Gain (STCG) and ?2,63,95,026 as Long Term Capital Gain (LTCG) by the CIT(A).
- Determination of whether a "transfer" took place under Section 2(47)(v) of the Income Tax Act, 1961.
- Taxability of capital gains in the assessment year 2008-09 versus later years.

Detailed Analysis:

1. Deletion of Addition of ?3,12,53,920 as STCG and ?2,63,95,026 as LTCG by the CIT(A):

The Revenue appealed against the CIT(A)'s order which deleted the addition of ?3,12,53,920 as STCG and ?2,63,95,026 as LTCG. The Assessing Officer (AO) had included these amounts in the assessee's total income, asserting they arose from the transfer of land through Development Agreements with M/s. Samrat Builders and Developers. The CIT(A) deleted these additions, leading to the Revenue's appeal.

2. Determination of Whether a "Transfer" Took Place Under Section 2(47)(v) of the Income Tax Act, 1961:

The primary issue was whether the Development Agreements constituted a "transfer" under Section 2(47)(v) of the Income Tax Act, which includes any transaction involving the allowing of possession of any immovable property to be taken or retained in part performance of a contract as referred to in Section 53A of the Transfer of Property Act, 1882.

The AO argued that the agreements, which were registered, indicated a transfer of rights in the land to M/s. Samrat Builders and Developers. The AO held that parting with possession and receiving part of the consideration amounted to a transfer under the Act. However, the assessee contended that the land was under the Urban Land (Ceiling & Regulation) Act, 1976 (ULC Act) and was declared surplus, thus transferred to the Government of Maharashtra. Consequently, no possession was given to the developer, and the agreements were eventually canceled.

3. Taxability of Capital Gains in the Assessment Year 2008-09 versus Later Years:

The Tribunal examined the factual matrix, noting that the developer was allowed to enter the property only as a licensee, not as an owner, and the land was under litigation due to the ULC Act. The Tribunal cited the Supreme Court's decision in CIT vs. Balbir Singh Maini (2017), which held that no transfer occurred if the owner continued to hold ownership throughout the agreement and the transaction fell through.

The Tribunal concluded that no transfer took place in the assessment year 2008-09 as the developer did not receive possession as an owner, and the land was under the Government of Maharashtra's ownership at the time. Therefore, no capital gain arose in that year.

The Tribunal also noted that the assessee offered capital gains in the assessment year 2014-15 when the land was eventually transferred to Rajendra Bhosale and Vikas Shinde. The AO had made a protective addition for that year, and the Tribunal directed that the capital gains should be taxed in the years when the actual transfers occurred.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s deletion of the additions for the assessment year 2008-09. It held that no transfer took place in that year, and capital gains should be taxed in the years when the land was actually transferred, i.e., 2011-12 for the transfer to Akash Erectors Pvt. Ltd. and 2014-15 for the transfer to Rajendra Bhosale and Vikas Shinde.

Order:

The appeal was dismissed, and the order was pronounced in the Open Court on 17th May 2021.