2018 (4) TMI 45 - HC - Income Tax

Tribunal rules no taxable capital gains in unregistered JDA, favoring assessee

The Tribunal determined that the Joint Development Agreement (JDA) involved a pro-rata transfer of land, with no possession given under Section 53A of the ... Capital Gain - Transfer - exigible to tax by reference to Section 2(47)(v) read with Section 53-A of the Transfer of Property Act, 1882 - JDA entered by assessee - Whether there was grant and assignment of various rights in the property by the appellant alongwith handing over physical and vacant possession, the same tantamount to “transfer”? - Held that:- The facts of the case of assessee are admittedly identical as have been decided in the case of Shri C.S. Atwal Vs CIT, Ludhiana [2015 (7) TMI 878 - PUNJAB & HARYANA HIGH COURT] issue of exigibility to capital gain in favour of the assessee and against the revenue wherein held as no possession had been given by the transferor to the transferee of the entire land in part performance of JDA so as to fall within the domain of Section 53A of 1882 Act. The possession delivered, if at all, was as a licencee for the development of the property and not in the capacity of a transferee. Further Section 53A of 1882 Act, by incorporation, stood embodied in section 2(47)(v) of the Act and all the essential ingredients of Section 53A of 1882 Act were required to be fulfilled. In the absence of registration of JDA the agreement does not fall under Section 53A of 1882 Act and consequently Section 2(47)(v) of the Act does not apply. In view of cancellation of JDA no further amount has been received and no action thereon has been taken. The issue of exigibility to capital gains tax having been decided in favour of the assessee, the question of exemption under Section 54F of the Act would not survive any longer and has been rendered academic- Decided in favour of assessee. Issues Involved:1. Pro-rata transfer of land under Joint Development Agreement (JDA).2. Possession under Section 53A of the Transfer of Property Act, 1882.3. Applicability of Section 2(47)(v) of the Income Tax Act, 1961.4. Taxability of capital gains.5. Requirement of registration for JDA.6. Deduction under Section 54F of the Income Tax Act, 1961.7. Definition and applicability of “transfer” under the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Pro-rata Transfer of Land:The Tribunal held that the parties had agreed for a pro-rata transfer of land. The JDA dated 25.02.2007, read with sale deeds dated 02.03.2007 and 25.04.2007, indicated that the transfer was agreed upon in a pro-rata manner.2. Possession under Section 53A of the Transfer of Property Act, 1882:The Tribunal found that no possession had been given by the transferor to the transferee of the entire land in part performance of the JDA. The possession delivered, if at all, was as a licensee for the development of the property and not in the capacity of a transferee. This finding was crucial in determining that the transaction did not fall within the domain of Section 53A of the Transfer of Property Act, 1882.3. Applicability of Section 2(47)(v) of the Income Tax Act, 1961:The Tribunal concluded that Section 53A of the Transfer of Property Act, 1882, by incorporation, stood embodied in Section 2(47)(v) of the Income Tax Act, 1961. Since the JDA dated 25.02.2007 was not registered, it did not fulfill the essential ingredients of Section 53A, and thus, Section 2(47)(v) of the Income Tax Act, 1961, did not apply.4. Taxability of Capital Gains:The Tribunal upheld that no taxable capital gains arose from the transaction entered by the assessee. The assessee had already paid capital gains tax on the amount received from the developer, and no further amount was received due to the cancellation of the JDA. The Tribunal and the authorities below were not right in holding the assessee liable to capital gains tax for the remaining land for which no consideration had been received.5. Requirement of Registration for JDA:The Tribunal emphasized that in the absence of registration of the JDA dated 25.02.2007, the agreement did not fall under Section 53A of the Transfer of Property Act, 1882, and consequently, Section 2(47)(v) of the Income Tax Act, 1961, did not apply. The non-registration of the JDA was a critical factor in the Tribunal's decision.6. Deduction under Section 54F of the Income Tax Act, 1961:The Tribunal noted that the issue of exemption under Section 54F of the Income Tax Act, 1961, would not survive any longer and had been rendered academic due to the decision on the non-applicability of capital gains tax.7. Definition and Applicability of “Transfer” under the Income Tax Act, 1961:The Tribunal adhered to the inclusive definition of 'transfer' in Section 2(47) and concluded that the provisions of Section 2(47)(vi) were not applicable in the absence of a registered conveyance deed. The Tribunal relied on the decision of the Supreme Court in Alapativerkatraman (57 ITR 108) and disregarded the subsequent decision in Podar Cement Ltd.Conclusion:The Tribunal's decision was based on the findings that the JDA was not registered, no possession was given in part performance of the JDA, and the transaction did not fall under Section 53A of the Transfer of Property Act, 1882. The appeal by the revenue was dismissed, and the substantial questions of law were answered in favor of the assessee. The judgment was aligned with the decisions in C.S. Atwal’s case and the Supreme Court's decision in Commissioner of Income Tax Vs. Balbir Singh Maini and Others.