2014 (11) TMI 595 - HC - Income Tax

Dispute Over Capital Gains Assessment Timeline: Possession Transfer Key

Commissioner of Income Tax, Coimbatore Versus M/s. Dhandayuthpani Foundry (P) Ltd.

The case involved a dispute over the assessment of capital gains on the transfer of property through a joint development agreement. The Assessing Officer ... Determination of assessment year for assessability of income – AY 2008-2009 or AY 2006-2007 - Capital gains on transfer of property through joint development – Held that:- The possession of the land was handed over pursuant to the joint development agreement, in the AY 2008-09 - assessee is right in offering the capital gains for the AY 2008-09 satisfying all the conditions u/s 53A of the Transfer of Property Act - The Tribunal rightly was of the view that AO had substantively assessed the long term capital gains in the impugned AY - CIT (A) has held that it deserve to be assessed substantively in AY 2008-2009 - the Revenue has not come up in appeal in AY 2008-2009 - revenue cannot plead that capital gains will be applicable for two different AYs – the order of the Tribunal is upheld – as such no substantial question of law arises for consideration – Decided against revenue. Issues involved:1. Assessment of capital gains on transfer of property through joint development.2. Determination of the relevant assessment year for assessing the capital gains.Analysis:Issue 1: Assessment of capital gains on transfer of property through joint developmentThe case involved a Company engaged in manufacturing and trading, which owned a factory building and intended to transfer it through a joint development agreement. The Assessing Officer contended that the income from the long-term capital gains of the property had escaped assessment and issued a notice under Sec.148 of the Income Tax Act. The company claimed that the transfer was completed in the assessment year 2008-2009 when the possession was handed over to the developer after approval from the Coimbatore Corporation. The Assessing Officer, however, deemed the transfer to have been completed in the assessment year 2006-2007 based on the registration date of the joint development agreement. The Commissioner of Income Tax (Appeals) held that the capital gains should be assessed in the year 2008-2009, as the possession was handed over during that assessment year, satisfying the conditions under the Transfer of Property Act and the Income Tax Act.Issue 2: Determination of the relevant assessment year for assessing the capital gainsThe Commissioner of Income Tax (Appeals) directed the Assessing Officer to treat the income offered on capital gains for the assessment year 2008-09 on a substantive basis and not on a protective basis. The Tribunal upheld this decision, emphasizing that the Revenue did not appeal the assessment for the year 2008-2009, making the findings final. The Tribunal affirmed the order of the Commissioner of Income Tax (Appeals) and held that the capital gains should be assessed in the assessment year 2008-2009, rejecting the Revenue's claim that it should be assessed in the year 2006-2007. The Tribunal concluded that the order of the Commissioner of Income Tax (Appeals) was binding on the Assessing Officer, and no separate assessment for capital gains in different years was justified. Consequently, the appeal was dismissed as no substantial question of law arose.In summary, the judgment resolved the issues regarding the assessment of capital gains on property transfer through joint development and determined the relevant assessment year for assessing the capital gains, ultimately upholding the decision to assess the gains in the year 2008-2009 based on the possession handover to the developer.