2017 (4) TMI 1098 - AT - Income Tax

Property sale without possession not taxable due to lack of transfer. Legal principles upheld, Revenue appeal dismissed.

Income Tax Officer Versus Shri Deepak Shivram Pathare

The Tribunal upheld the Commissioner's decision, ruling that the lack of possession prevented any transfer of property by sale, thus no capital gains were ... Long Term Capital Gains addition - sale consideration received on transferred land - assessee had entered into Development Agreement for land - Held that:- CIT(A) while deciding the issue and after perusing the Development Agreement entered by the assessee with City Corporation Limited, Pune has upheld the contention of the assessee that there was no transfer because assessee did not have the possession of land and therefore could not have handedover the possession. He has further given a finding that since the agreement was a Development Agreement, there was no transfer of property by way of sale and even the ingredients of “Part Performance” as per Sec.53(A) of the Transfer of Property Act cannot be said to have been attracted, so as to attract the provisions of Capital Gains tax and for the aforesaid proposition, Ld.CIT(A) had relied on the decision of the Hon’ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia Vs. Commissioner of Income Tax, (2003 (2) TMI 62 - BOMBAY High Court ) Revenue has not placed any material on record to controvert the findings of Ld.CIT(A) nor has pointed out as to why the ratio of decision rendered by Hon’ble Bombay High Court in the case of Chaturbhuj Dwarkadas (supra) cannot be applied to the facts of the present case. In view of the aforesaid facts, we find no reason to interfere with the Ld.CIT(A) and thus the grounds of Revenue are dismissed. - Decided in favour of assessee Issues:Computation of capital gains and its taxability in the case of a Development Agreement.Analysis:The appeal pertains to the assessment year 2006-07, where the Revenue challenged the deletion of the addition of Long Term Capital Gain by the Commissioner of Income Tax (Appeals). The Assessing Officer (AO) had determined the Long Term Capital Gains at Rs. 66,77,250/- based on information received about the transfer of land for a township project and a Development Agreement. The assessee contended that there was no 'transfer' as possession of the land was not handed over due to lack of possession. The Commissioner upheld the assessee's contention, citing the Development Agreement and the absence of transfer by sale. The Commissioner also referenced the legal concept of 'Part Performance' under Sec. 53(A) of the Transfer of Property Act, emphasizing the need for possession transfer and willingness to perform obligations for part-performance. The Commissioner relied on the Bombay High Court's decision in a similar case and an ITAT Hyderabad judgment to support the deletion of the addition. The Revenue failed to provide evidence to challenge these findings.The Tribunal noted that the issue revolved around the computation of capital gains and its taxability concerning the Development Agreement. The Tribunal upheld the Commissioner's decision, emphasizing that the assessee's lack of possession precluded any transfer of property by sale. Referring to the legal principles of 'Part Performance,' the Tribunal concurred with the Commissioner's reliance on the Bombay High Court's decision and the ITAT Hyderabad judgment. The Revenue did not present any material to counter these findings or justify a different interpretation. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the deletion of the addition of Long Term Capital Gain.