2022 (2) TMI 398 - HC - Income Tax

Court interprets key tax law provisions on property transfers, emphasizes impact of 2001 amendment.

Principal Commissioner Of Income Tax- 4, Kolkata Versus M/s. Shelter Project Ltd.

The court condoned the delay in filing the appeal and focused on interpreting Section 2(47)(v) of the Income Tax Act, emphasizing that unregistered ... Addition of consideration received on Transfer of land for Development - scope of Section 53A of the Transfer of Property Act as well as Section 2(47) of the Income Tax Act, 1961 - whether pursuant to an un-registered agreement, possession of the property was handed over by the assessee to a company engaged in development of housing projects wholly owned by the State of West Bengal? - HELD THAT:- The legal position is no longer res integra and it would be beneficial to refer to the decision of the Hon’ble Supreme Court in Commissioner of Income Tax Vs. Balbir Singh Maini [2017 (10) TMI 323 - SUPREME COURT] as held that if the development agreement is not registered, it shall have no effect in law for the purposes of Section 53A which bodily stood incorporated in Section 2(47)(v) of the Income Tax Act, 1961. Thus, the Tribunal was right in allowing the assessee’s appeal and granting the relief sought for.- Decided against the revenue. Issues:Delay in filing the appeal, Interpretation of Section 2(47)(v) of the Income Tax Act, 1961, Effect of unregistered development agreement on transfer of property, Applicability of Section 53A of the Transfer of Property Act, 2001 amendment impact on legal enforceability, Interpretation of Section 2(47)(vi) regarding transfer of immovable property.Delay in filing the appeal:The judgment addressed a delay of 324 days in filing the appeal. The court, after considering the reasons provided in the affidavit, exercised discretion and condoned the delay, allowing the appeal to be heard.Interpretation of Section 2(47)(v) of the Income Tax Act:The core issue revolved around the interpretation of Section 2(47)(v) of the Income Tax Act, 1961. The Assessing Officer initially held that possession was handed over based on an unregistered agreement. However, the Commissioner of Income Tax (Appeals) and the Tribunal disagreed, emphasizing that the unregistered agreement had no legal effect post the 2001 amendment to Section 53A of the Transfer of Property Act. The court referred to a Supreme Court decision supporting this interpretation, concluding that no transfer occurred under the unregistered agreement.Effect of unregistered development agreement on transfer of property:The Tribunal's decision was based on the legal principle that an unregistered development agreement, post the 2001 amendment to Section 53A, holds no legal weight. The court upheld the Tribunal's decision, emphasizing that without registration, the agreement cannot be enforced under Section 53A, leading to the conclusion that no transfer of property took place.Applicability of Section 53A of the Transfer of Property Act:The judgment highlighted the impact of the 2001 amendment to Section 53A of the Transfer of Property Act, emphasizing that unregistered agreements, like the one in question, lack legal enforceability. The court's decision aligned with the legal position post the amendment, supporting the Tribunal's ruling based on this statutory framework.2001 amendment impact on legal enforceability:The judgment underscored the significance of the 2001 amendment to Section 53A, clarifying that unregistered agreements, such as the development agreement in this case, cannot be legally enforced. This statutory change played a pivotal role in determining the lack of transfer under the unregistered agreement, as highlighted in the court's decision.Interpretation of Section 2(47)(vi) regarding transfer of immovable property:The court also delved into the interpretation of Section 2(47)(vi) concerning the transfer or enabling of enjoyment of immovable property. The judgment emphasized that the provision aims to tax de facto transfers of property, even without a legal title transfer. The court's analysis aligned with this interpretation, rejecting the revenue's argument and dismissing the appeal based on the legal principles outlined under Section 2(47)(vi).In conclusion, the judgment extensively analyzed the legal implications of the delay in filing the appeal and the interpretation of relevant sections of the Income Tax Act and Transfer of Property Act. The decision primarily focused on the impact of the 2001 amendment on the legal enforceability of unregistered agreements, ultimately leading to the dismissal of the appeal against the assessee.