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TMI Blog2016 (9) TMI 452X X X X Extracts X X X X X X X X Extracts X X X X ..... y the order of the ITAT dated 16.12.2011 had the development agreement been cancelled at a later date the Tribunal was willing to accept the proposition that there is no ‘transfer’. Consent decree passed in 2014 thus supports the ultimate reasoning of the ITAT while setting the matter for consideration afresh. Under the Income Tax Act what is taxable is the real income and mere hypothetical income should not be taxed. In the wake of the findings and conclusions of the Arbitral Tribunal, we are of the firm view that no transfer took place with regard to the land which was hitherto given for development since physical possession was continuously enjoyed by the assessee and his family members and thus even under the Income Tax Act the trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saction on the ground that it was agricultural land. The Assessing Officer noticed that the entire land was barren land surrounded by rocky mountains and it is not amenable for any agricultural operations. Therefore, the claim of the assessee that it was agricultural land was not accepted and capital gains on the sale of the said land was brought to tax. 2.1. Apart from sale of landed properties, the assessee, his wife and son jointly handedover ac.14.00 of land for development into colony/huge settlement and entered into an irrevocable power of attorney with the developer. According to the A.O. the owners have handedover the entire possession of the said property in part performance of the development agreement cum- GPA. The A.O. was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said to have taken place when the assessee executed an irrevocable license. In the present case also, development agreement was entered by the assessee with M/s. Dakshin Shelters P. Ltd., on 12.04.2006. The A.O. charged the capital gains based on the year of agreement only and hence, cancellation of such agreement in a later year do not alter the situation. The learned CIT(A) thus, upheld the action of the A.O. rejecting the claim of the assessee that the development agreement was cancelled on 21.02.2014. 5. Aggrieved by the order of the learned CIT(A), assessee is in appeal before the Tribunal. Learned Counsel for the assessee, placed before us a copy of the order of the Arbitral Tribunal, Hyderabad whereby the development agreement c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land under the development agreement since it was not cancelled later on and still in operation. Upon cancellation of the agreement the conditional finding of the ITAT needs to be reconsidered accordingly. He also relied upon the decision of the Hon ble Bombay High Court in the case of CIT vs. Lok Housing Constructions Ltd., (2015) 58 taxmann.com 179 (Bom.) wherein, based on the cancellation of the relevant agreements, the Court observed that income cannot be said to be accrued to the assessee in the real sense in which event no hypothetical income could have been brought to tax. 6. Learned D.R. admitted that the Arbitral Tribunal had passed a consent decree wherein it was admitted that the physical possession of the schedule property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the physical possession was never handedover to the developer in which event it cannot be said that there is a transfer of property within the meaning of section 2(47) of the I.T. Act. ITAT, in the first round of litigation, recorded a finding based on the terms of development agreement but proceeded, on a cautious assumption, that the finding is on account of the fact that the said development agreement was not cancelled. The basis for assumption is disturbed by virtue of a decree of Arbitral Tribunal whereby the development agreement was cancelled. Even going by the order of the ITAT dated 16.12.2011 had the development agreement been cancelled at a later date the Tribunal was willing to accept the proposition that there is no transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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