2022 (2) TMI 480 - AT - Income Tax

Assessee's Appeal Allowed: Transfer Not Recognized, Capital Gains Assessment Deleted

Dr. Krishna Prasad Mikkilineni Versus Deputy Commissioner of Income-tax Circle-3 (1) (2) Bangalore

The Tribunal held that no transfer had occurred during the relevant year, leading to the deletion of the assessed capital gains for the assessment year ... Long term capital gain - JDA agreement - permissive possession v/s legal possession - Transfer of capital asset u/s 2(47) - assessee along with other co-owners has entered into Joint Development Agreement (JDA) for development of land belonging to them - assessee contended that he has not handed over the possession of the property as per the joint development agreementHELD THAT:- The assessee has given only permissive possession and not legal possession. Accordingly, following the said decision of M/S. ANUGRAHA SHELTERS (P) LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-11 (1) BANGALORE [2021 (12) TMI 589 - ITAT BANGALORE] we hold that the transfer has not taken place during the year under consideration. Accordingly, capital gain is not assessable in the hands of the assessee during the year under consideration. Decided in favour of assessee. Issues Involved:1. Assessment of long-term capital gain.2. Applicability of Section 53A of the Transfer of Property Act.3. Applicability of Section 2(47)(v) of the Income Tax Act.Issue-wise Detailed Analysis:1. Assessment of Long-Term Capital Gain:The assessee challenged the order dated 24.1.2018 by the Ld. CIT(A)-3, Bengaluru, which assessed a long-term capital gain of Rs. 65.77 lakhs for the assessment year 2009-10. The assessee filed a return of income on 29.7.2009 declaring a total income of Rs. 4,60,56,090/-. During the assessment proceedings, the A.O. noticed that the assessee, along with other co-owners, entered into a Joint Development Agreement (JDA) on 30.3.2009 with M/s. Arun Shelters Pvt. Ltd. for the development of their land. The A.O. computed the long-term capital gain at Rs. 65,77,117/- based on the decision by the Hon’ble Karnataka High Court in the case of CIT Vs. T.K. Dayalu (2011) 202 Taxmann 531.2. Applicability of Section 53A of the Transfer of Property Act:The assessee contended before the Ld. CIT(A) that he did not hand over possession of the property as per the JDA, thus the decision in Dr. T.K. Dayalu’s case would not apply. The Ld. CIT(A) disagreed and confirmed the addition made by the A.O. The assessee argued that only permission was given to the developer to enter the scheduled property, not possession, and relied on the decision in M/s. Anugraha Shelters Pvt. Ltd. Vs. DCIT (ITA No.2314/Bang/2016 dated 22.11.2021).3. Applicability of Section 2(47)(v) of the Income Tax Act:The Tribunal examined the clauses of the JDA, noting that the agreement granted the developer permission to enter and develop the property but explicitly stated that possession remained with the owners (Clause 11.1). The Tribunal referenced the case of Anugraha Shelters Pvt. Ltd., which distinguished between permissive possession and legal possession. In permissive possession, the developer enters the property on behalf of the owner, not as an independent purchaser.The Tribunal also cited the case of Smt. Lakshmi Swarupa vs ITO (ITA No.2278/Bang/2018), where it was held that granting a license to enter the property does not constitute possession under Section 53A of the Transfer of Property Act. The Tribunal concluded that the assessee had given only permissive possession, not legal possession, thus Section 53A and Section 2(47)(v) of the Income Tax Act were not applicable.Conclusion:The Tribunal held that the transfer had not taken place during the year under consideration, and thus, capital gain was not assessable in the hands of the assessee for the assessment year 2009-10. Consequently, the appeal filed by the assessee was allowed, and the capital gains assessed were deleted. The other incidental grounds raised by the assessee did not require adjudication. The order was pronounced in the open court on 31st Jan 2022.