2019 (10) TMI 343 - AT - Income Tax

Tribunal allows appeal due to absence of transfer this year. Exemption under Section 54F not addressed.

The tribunal found that there was no transfer in the present year, leading to the partial allowance of the appellants' appeals. The issues related to ... Long term capital - 'transfer' within the meaning of Sec. 2 (47) - implementation of JDA - HELD THAT:- Possession is handed over to the builder only for limited purpose to enter upon the property for the purpose of implementation of JDA. In the present case, such permission to enter the scheduled property is granted subject to completion of certain conditions i.e. on approval of the plan and grant of licence for construction of the buildings from BBMP and/or from concerned authorities. As pe commencement certificate dated 24.08.2009 issued by BBMP as available on pages 261 of the paper book, permission was granted by BBMP for commencement of building construction work on 24.08.2009. Hence, even as per this permission granted by the land owners in the present case to the builders to enter upon the property for the purpose of implementation of JDA, the builder cannot enter upon the property prior to 24.08.2009 and hence, in the present year up to 31.03.2009, the builder cannot enter upon the property. Decision in the case of Smt. Lakshmi Swarupa vs. ITO [2018 (10) TMI 1345 - ITAT BANGALORE] followed, and the decision of HC [2012 (6) TMI 405 - KARNATAKA HIGH COURT] distinguished. In the case of Smt. Lakshmi Swarupa, The tribunal held that the possession granted is in the nature of permissive possession and not possession in part performance of agreement for sale. In the present case, even this permissive possession is not given to the builder prior to 24.08.2009. Hence, we hold that in the facts of the present case as discussed above, even permissive possession was not handed over to the builder in the present year - Decided in favour of assessee. Issues Involved:1. Whether the order of the CIT(A) was opposed to law, facts, and circumstances.2. Whether the order was passed in haste without providing sufficient opportunity to be heard.3. Whether the order violated the principle of natural justice.4. Chargeability of long-term capital gains.5. Failure of computation mechanism for capital gains.6. Eligibility for exemption under Section 54F of the Income Tax Act.7. Levy of interest under Sections 234A and 234B of the Act.Detailed Analysis:1. Opposition to Law, Facts, and Circumstances:The appellants contended that the order of the CIT(A) was opposed to law, facts, and circumstances. They argued that the CIT(A) erred in confirming the AO's order, which brought a sum of Rs. 2,03,53,228/- to tax as long-term capital gain for AY 2009-10. The AO held that there was a 'transfer' within the meaning of Sec. 2(47) of the Income Tax Act, 1961, on the date of execution of the Joint Development Agreement (JDA), thereby attracting the chargeability of capital gain under Section 45 of the Act.2. Hasty Order Without Sufficient Opportunity:The appellants claimed that the order was passed in haste and without providing sufficient and reasonable opportunity of being heard. They argued that the order was against the principle of natural justice and thus liable to be quashed.3. Violation of Natural Justice:The appellants argued that the order violated the principle of natural justice as it was passed without giving them a fair opportunity to present their case.4. Chargeability of Long-Term Capital Gains:The appellants contended that the AO erred in holding that there was a 'transfer' within the meaning of Sec. 2(47) on the date of execution of the JDA. They argued that 'permission to develop' land cannot be construed as 'delivery of possession' under the provisions. The legal possession of the land continued to vest with the appellants, and the developer was never entitled to claim exclusive possession until the completion of the project. The AO relied on the case of Dr. T.K. Dayalu, which the appellants argued was factually different from their case.5. Failure of Computation Mechanism:The appellants argued that if the date of execution of the JDA is adopted as the date of transfer, the machinery provisions for computation of capital gains fail. They contended that the AO erred in computing the capital gains by holding that the full value of consideration accruing on the date of execution of the document was Rs. 2,04,03,000/-, as the built-up area to be allotted to the appellants was non-existent on that date.6. Eligibility for Exemption Under Section 54F:The appellants argued that they were eligible to claim exemption under Section 54F of the Act. The AO erred in interpreting the provision by holding that the benefit is available only in the case of one residential flat. The appellants contended that they should be allowed the exemption even for the flats acquired in the same building.7. Levy of Interest Under Sections 234A and 234B:The appellants argued that the CIT(A) erred in upholding the order of the AO levying interest under Sections 234A and 234B of the Act.Tribunal's Findings:Chargeability of Long-Term Capital Gains:The tribunal found that the possession granted to the builder was for a limited purpose and not in part performance of the agreement for sale. The tribunal relied on the case of Smt. Lakshmi Swarupa vs. ITO, where it was held that such possession is permissive and not in part performance of the agreement for sale. The tribunal noted that the builder could not enter the property before 24.08.2009, as per the commencement certificate issued by BBMP. Therefore, there was no transfer in the present year.Failure of Computation Mechanism:Since the tribunal held that there was no transfer in the present year, the issues related to the computation mechanism did not require adjudication.Exemption Under Section 54F:The tribunal did not specifically address the exemption under Section 54F, as the primary issue of transfer was decided in favor of the appellants.Conclusion:The tribunal concluded that there was no transfer in the present year and, therefore, the appeals of the appellants were partly allowed. The remaining grounds did not call for adjudication.