2024 (7) TMI 1179 - AT - Income Tax

LTCG in respect of development agreement entered for development of land - HELD THAT - We find that the matter is already covered by the Hon ble ITAT, Nagpur Bench, in case of Shri Ajay Trivedi 2024 (2) TMI 1403 - ITAT NAGPUR holding that there is no transfer u/s. 2(47)(v) of the Act and no capital gain is chargeable thereon in the year under consideration - we absolutely find no compelling reason to differ with the decision taken in the case of the brothers who were also the co-signatories to the joint development agreement as held as per the said agreement, the owners has permitted the said developer to develop the property belonging to the owners only as a licensee which did not have the effect of transfer of property to the licensee. The developer has given possession of the assessee's share in June, 2017 which is also not disputed by the DR. CIT(A) clearly recorded that the assessee offered the capital gain in the year in which share in the constructed area is given to the assessee, which is subjected to tax in A.Y. 2018-19 which is also not disputed by the ld. DR. If we accept the contention of the ld. DR that the capital gain was rightly determined by the AO in A.Y. 2012-13, certainly, it amounts to double taxation, having offered the same in A.Y. 2018-19, as rightly pointed by the AR. Addition in the bank account - AR strenuously argued that the rental income from house property was received during the year - HELD THAT - Accepting assessee submission we direct the addition as income from house property. Loan receipts - asessee as submitted that Rs. 1,70,000/- has been received by the assessee from his daughter and wife. The bank statement of daughter was enclosed. Thus, the genuineness, identity and correctworthyness is never in doubt. However, as far as his wife is concerned, he could not submit any document. But, in view of the fact that it is a loan from his own wife, we accept the same to be duly explained in view of the fact that the amount is negligible and further normally wives help husband in distress. Balance unexplained addition - It is quite possible that a person can always have some minimum savings for which perhaps no detailed explanation is required. It is also a fact that the case pertains to financial year 2011-12 and as on date 12 years have passed. So it may not be possible for a person to meticulously remember such minuscule transactions which have transpired about such a long period ago. So, we deem it fit not to make any separate addition of Rs. 90,625/- as well as Rs. 1,70,000/- towards loan received from the relatives. In effect, only a sum of Rs. 90,237/- is considered to be taxable. The appellant gets a relief of Rs. 2,75,188/-. In view of dismissal of appeal of department, Ground Nos. 1 2 have become of academic importance and we need not delve on the same. In the result cross objection of the assessee is partly allowed.

Issues Involved:
1. Deletion of addition made by AO as Long Term Capital Gain.
2. Determination of the year in which the capital gain tax liability arises.
3. Applicability of Section 2(47)(v) read with Section 45 of the Income Tax Act.
4. Consideration of possession transfer under Section 2(47)(v).
5. Correct declaration of capital gains in the assessment year.
6. Similarity of facts with previous judicial decisions.
7. Exemption under Section 54F of the Income Tax Act.
8. Treatment of unexplained deposits in the bank account.

Issue-wise Detailed Analysis:

1. Deletion of Addition Made by AO as Long Term Capital Gain:
The revenue challenged the deletion of Rs. 3,17,62,833/- made by the AO as Long Term Capital Gain in respect of a development agreement entered with M/s Concrete Developers for the development of land. The CIT(A) deleted the addition, holding that no transfer of capital asset occurred in the year under consideration, thus no liability to pay capital gain tax arose.

2. Determination of the Year in Which the Capital Gain Tax Liability Arises:
The primary issue was whether the capital gain should be taxed in the assessment year 2012-13, when the development agreement was executed, or in the year when the assessee received his share in the form of constructed area, which was offered to tax in the assessment year 2018-19. The ITAT found that the developer had given possession of the constructed area to the assessee in June 2017, and the capital gain was correctly offered to tax in the assessment year 2018-19.

3. Applicability of Section 2(47)(v) Read with Section 45 of the Income Tax Act:
The revenue argued that as per Section 2(47)(v) read with Section 45, capital gain is taxable in the year in which the transaction is entered into, even if the transfer of immovable property is not effective or complete under the general law. The ITAT, however, referred to the modified Joint Development Agreement and found that no consideration was paid to the assessee in the year under consideration, and the assessee would get his share only in the constructed area.

4. Consideration of Possession Transfer Under Section 2(47)(v):
The ITAT examined the clauses of the Joint Development Agreement and concluded that the license and permission given to the developer did not constitute a transfer of possession within the meaning of Section 53A of the Transfer of Property Act. The ITAT relied on the decision of the Hon'ble High Court of Bombay in the case of Late Bharat Jayantilal Patel, which held that granting a license for development does not equate to possession transfer under Section 53A.

5. Correct Declaration of Capital Gains in the Assessment Year:
The ITAT noted that the assessee offered the capital gain in the year in which the share in the constructed area was given to him, which was subjected to tax in the assessment year 2018-19. The ITAT held that taxing the capital gain in the assessment year 2012-13 would amount to double taxation.

6. Similarity of Facts with Previous Judicial Decisions:
The revenue cited various judicial decisions to support its case, including CIT vs. V.K. Jeelani Basha, CIT vs. T.K. Dayalu, and others. The ITAT found that the facts of the assessee's case were distinguishable from these cases. The ITAT also referred to the decision of the Hon'ble High Court of Bombay in the case of Late Bharat Jayantilal Patel, which supported the assessee's contention.

7. Exemption Under Section 54F of the Income Tax Act:
The assessee raised a cross objection regarding the grant of exemption under Section 54F in case the long-term capital gains were held to be taxable. The ITAT, however, did not delve into this issue as the appeal of the department was dismissed.

8. Treatment of Unexplained Deposits in the Bank Account:
The ITAT considered the addition of Rs. 3,65,425/- as unexplained deposits in the bank account. The assessee explained that part of the amount was rental income, which was accepted by the ITAT subject to statutory deduction. The ITAT also accepted the explanation for amounts received from the assessee's daughter and wife. The remaining unexplained balance was considered as past savings, and no separate addition was made.

Conclusion:
The ITAT dismissed the appeal of the department and partly allowed the cross objection filed by the assessee. The ITAT upheld the CIT(A)'s decision that there was no transfer under Section 2(47)(v) of the Act in the year under consideration, and no capital gain was chargeable in that year. The ITAT directed the addition of Rs. 90,237/- as income from house property and granted relief for the remaining amount. The order was pronounced on 18/07/2024.

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