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2023 (5) TMI 1104 - AT - Income TaxCapital gain - JDA - transfer of capital asset u/s 2(47) - HELD THAT - What is given is not possession contemplated u/s. 53A of the Transfer of Property Act and that it is merely a license to enter the property for the purpose of carrying out development. Invocation of the provisions of Sec.2(47)(v) on the basis of clause 1.1 of the JDA, in our view was not proper. Obligation cast on the Transferee(developer) to possession in the present is traced to the joint development agreement which is in the nature of permissive possession and not possession in part performance of agreement for sale. There is no document by which the revenue can come to the conclusion that there was delivery of possession. The mere fact that development of the property cannot be done without possession, cannot be the basis to come to a conclusion that, possession was delivered in part performance of the agreement for sale in the manner laid down in Sec.53A of the Transfer of Property Act - Appeal filed by assessee stands allowed.
Issues Involved:
1. Justification of the addition of Rs. 21,54,040/- as Income from Short term Capital Gains. 2. Justification of the addition of Rs. 37,05,858/- as Income from Long term Capital Gains. 3. Applicability of section 2[47][v] of the Income Tax Act. 4. Liability to be charged interest under sections 234-A, 234-B, and 234-C of the Income Tax Act. Summary: Issue 1: Justification of the addition of Rs. 21,54,040/- as Income from Short term Capital Gains The assessee entered into a Development Agreement on 16.09.2010 for agricultural land, receiving Rs. 10,00,000/- as a refundable advance. The land was converted for non-agricultural purposes on 03.12.2012, and possession was given to the developer on 20.12.2012. The AO treated the date of the Joint Development Agreement (JDA) as the date of transfer, assessing capital gains for AY 2011-12. The CIT(A) upheld the AO's decision, considering the JDA as granting specific rights to the developer, thus triggering section 2(47)(v) of the Income Tax Act. Issue 2: Justification of the addition of Rs. 37,05,858/- as Income from Long term Capital Gains Similar to the short-term capital gains, the AO and CIT(A) treated the date of the JDA as the date of transfer for long-term capital gains. The assessee argued that the transfer should be recognized in AY 2013-14 when possession was actually handed over after land conversion. Issue 3: Applicability of section 2[47][v] of the Income Tax Act The Tribunal examined whether the provisions of section 2(47)(v) r.w. section 53A of the Transfer of Property Act were applicable. It was found that the JDA only granted a license to enter the property for development purposes, not possession as contemplated under section 53A. Therefore, the invocation of section 2(47)(v) was deemed improper. The Tribunal concluded that no transfer occurred in AY 2011-12, and thus, capital gains could not be assessed for that year. Issue 4: Liability to be charged interest under sections 234-A, 234-B, and 234-C of the Income Tax Act Given the Tribunal's conclusion that no transfer occurred in AY 2011-12, the assessment of capital gains for that year was invalid. Consequently, the assessee's liability to be charged interest under sections 234-A, 234-B, and 234-C was also negated. Conclusion: The Tribunal held that the assessment of capital gains in AY 2011-12 was invalid as no transfer occurred during that year. The appeal filed by the assessee was allowed, and the additions made by the AO were deleted. The order was pronounced in open court on 25th May, 2023.
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