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TMI Blog2015 (9) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... valuation as on the date of sale of agreement. 2. The Ld. A.O has erred in law and on facts while failing to consider the provisions of section 2(47) of the Act. 3. The Ld. CIT(A) has grossly erred in law and on facts in failing to consider the decision of Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia 260 ITR 491, wherein it was held that the capital gain was taxable when the transfer has taken place as per the provision of section 2(47)(v)." 2. Briefly stated, the relevant material facts are like this. During the Course of the assessment proceedings, the Assessing Officer noted that while, as per AIR information available to him, the assessee had transferred an immovable property for the assessed value (for stamp duty purposes) of Rs. 32,65,440/-, the assessee's income tax return does not reflect any such transaction or capital gains thereon. It was in this background that the assessee was apparently called upon to explain as to why capital gains on sale of property is not reflected in the income tax return. According to the assessee, this property was transferred; within meanings of Section 2(47), on 23rd May, 2002 since entire sale consideration was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re any appellate authority of the State Govt. Rather the assessee has accepted the valuation by making the payment of stamp duty as worked out by the State Govt. Authority. Now when under the I. T. provisions the assessee is against the wall, he submits that the valuation of stamp duty authority is challenged and therefore he proposes for valuation to be done by the Valuation Officer of the IT. Department. Assessee's claim is prima facie rejectable since there is no sanctity of the law in raising such demand. Being the Assessing Officer, it is proposed to adopt the same value of the property as adopted by the stamp duty authority of the State Govt. and which is accepted by the assessee by making payment of the said stamp duty so as to register the transfer of the said property. Therefore, there is no need to refer the valuation of the property to the Valuation Officer of the Department. Considering this fact, the assessee's suggestion for reference to Valuation Officer is rejected." 3. Aggrieved, assessee carried the matter in appeal before the CIT(A) but in vain. Learned CIT(A) upheld the stand of the Assessing Officer and justified the same on the basis of following rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is necessary to appreciate statutory scheme of taxability of capital gains under section 45(1), profits and gains arising from the transfer of a capital asset, except in certain specific situations which are not relevant in the present context, are "deemed to be the income of the previous year in which the transfer took place". The trigger to taxability of capital gains is thus "transfer" of the capital asset. The expression "transfer" is defined under section 2(47) as follows: "(47) "transfer", in relation to a capital asset, includes,- (i) the sale, exchange or relinquishment of the asset ; or (ii) the extinguishment of any rights therein ; or (iii) the compulsory acquisition thereof under any law ; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment;] [or] [(iva) the maturity or redemption of a zero coupon bond; or] [(v)] any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer of immovable property; the transferee should have taken possession of the property; lastly the transferee should be ready and willing to perform his part of the contract. That even arrangements confirming privileges of ownership without transfer of title could fall under section 2(47)( v). Section 2(47)( v) was introduced in the Act from assessment year 1988-89 because prior thereto, in most cases, it was argued on behalf of the assessee that no transfer took place till execution of the conveyance. Consequently, assessees used to enter into agreements for developing properties with the builders and under the arrangement with the builders, they used to confer privileges of ownership without executing conveyance and to plug that loop hole, section 2(47)(v) came to be introduced in the Act. It was argued on behalf of the assessee that there was no effective transfer till grant of irrevocable licence. In this connection, judgments of the Supreme Court were cited on behalf of the assessee, but all those judgments were prior to introduction of the concept of deemed transfer under section 2(47)( v). In this matter, agreement in question is a Development Agreement. Such Development A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other hand, it was argued on behalf of the revenue that one has to go by the date on which the developer substantially performed the contract. It was argued on behalf of the department that since substantial payments were made during the financial year ending 31st March, 1996 and since majority of permissions were obtained during that year, the liability to pay capital gains tax accrued during assessment year 1996-97. In this case, the agreement is a Development Agreement and in our view, the test to be applied to decide the year of chargeability is the year in which the transaction was entered into. We have taken this view for the reason that Development Agreement does not transfer the interest in the property to the developer in general law and, therefore, section 2(47)( v) has been enacted and in such cases, even entering into such a contract could amount to transfer from the date of the agreement itself. We have taken this view for a precise reason. Firstly, we find in numerous matters where the Assessing Officer and the department generally proceed on the basis of substantial compliance of the contract. For example, in this very case, the department has contended that bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have noted, as evident from a copy of the income tax return and computation of income filed by the assessee for the assessment year 2003-04 - copies of which were filed before us at pages 59 and 60 of the paper book, the assessee had duly disclosed the fact of this sale transaction and resultant capital gains for the relevant assessment year. We have also noted that the buyer i.e. Vinod Bansal, has paid society maintenance charges for the period 31.08.2002 to 31.12.2004 vide cheque numbers 032425 and 032426 dated 12.01.2005 for Rs. 39,188/- and Rs. 19,028/- respectively - copies placed before us at pages 52 and 53 of the paper book. These documents were also submitted before the Assessing Officer vide letter dated 19th November, 2009, copy of which was placed before us at pages 40-41 of the paper book. On these facts, in our considered view, the assessment year in which the capital gains on transfer of this asset can be brought to tax is indeed assessment year 2003-04. The Assessing Officer was clearly in error in addressing himself to the taxability of this capital gain in the assessment year before us i.e. 2007-08. 9. In view of the above discussions, in our considered view, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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