1995 (7) TMI 119 - AT - Income Tax

Capital Gains Cost Of Acquisition Transfer Of Property - There is absolutely no material on record to justify even finding of constructive possession. As the possession of property other than sold was neither given nor allowed to be retained provision of section 53A of TPA read with section 2(47)(v) of Income-tax Act has no application in this case. On the total consideration received in the relevant period the assessee returned capital gain which was treated as exempt in view of investment in IDBI Bonds. The assessee has further shown capital gain on sales effected in succeeding year and same has accordingly been assessed. For the reasons given above no further addition under the head capital gain could be made in the year under reference. Therefore we direct the Assessing Officer to accept the capital gain as returned by the assessee.

Summary

Issues Involved:
1. Application of Section 2(47)(v) of the Income-tax Act.
2. Interpretation of Section 53A of the Transfer of Property Act.
3. Determination of capital gains.

Issue-wise Detailed Analysis:

1. Application of Section 2(47)(v) of the Income-tax Act:
The core issue was whether the transaction between the assessee and M/s Kumaon Constructions, involving the sale of 7,000 sq. meters of land, constituted a "transfer" under Section 2(47)(v) of the Income-tax Act. The Assessing Officer (AO) contended that the entire sale consideration of Rs. 25,00,000 should be considered for capital gains tax because the amended definition of "transfer" includes delivery of possession in part performance of a contract. The assessee argued that only part of the land was transferred, and possession of the remaining land was not given, thus Section 2(47)(v) was not applicable.

2. Interpretation of Section 53A of the Transfer of Property Act:
The AO and CIT(A) concluded that the transaction amounted to a "transfer" under Section 53A of the Transfer of Property Act because part of the land (3,700 sq. meters) was transferred and possession was given. The assessee contended that the agreement stipulated that possession would only be given after full payment of Rs. 25,00,000, and thus, Section 53A was not applicable. The Tribunal noted that for Section 53A to apply, possession must be taken or retained under the contract, which was not the case here.

3. Determination of Capital Gains:
The AO computed the capital gain at Rs. 4,45,000 by considering the entire sale consideration of Rs. 25,00,000. The CIT(A) upheld this computation. The assessee argued that only Rs. 15,20,900 was received, and Rs. 15,00,000 was invested in IDBI Bonds, qualifying for exemption. The Tribunal found that the AO's approach was erroneous as it did not consider the actual possession and transfer conditions stipulated in the agreement. The Tribunal directed the AO to accept the capital gain as returned by the assessee, which was exempt due to the investment in IDBI Bonds.

Conclusion:
The Tribunal concluded that the revenue authorities misinterpreted the provisions of Section 53A of the Transfer of Property Act and Section 2(47)(v) of the Income-tax Act. The Tribunal held that the possession of the remaining land was neither given nor allowed to be retained, thus the provisions of Section 53A and Section 2(47)(v) were not applicable. The Tribunal directed the AO to accept the capital gain as returned by the assessee, resulting in the deletion of the addition made by the AO. The assessee's appeal was allowed.