2022 (8) TMI 581 - AT - Income Tax

Property transfer not in 2011-12, no capital gain tax. Assessee's appeal allowed, Rs. 1,05,37,002 LCTG set aside.

The Tribunal held that the transfer of the immovable property did not occur in the assessment year 2011-12, leading to the conclusion that no capital gain ... Long term capital gain - Transfer u/s 2(47) - possession of land has been handed over by the assessee to the developer on execution of the agreement - whether the incident of tax [i.e, transfer of immovable property] for charging capital gain has arisen in this year (AY. 2011-12) against the assessee or not? - assessee contended that on perusal of the agreement executed by the assessee with the developer would reveal that there was no transfer of a capital assets in view of the provisions of Section 2(47) (v) of the Act r.w. Section 53A of the TOPA - HELD THAT:- As per the agreement, the assessee only has to hand over possession of the immovable property in the event the transferee obtains the IOD from the MCGM. So it is noted that the possession of property to transferee will be only after he obtains the IOD from MCGM and in this case, the IOD (the intimation of disapproval) was undisputedly issued by the MCGM only on 15.04.2013 (i.e. in AY. 2014-15). Thereafter only assessee need to hand over the vacant and peaceful possession of the property to the transferee/developer i.e, only on or after 15.04.2013. AO/Ld. CIT(A) erred in assuming that assessee by virtue of the sale-cum-development agreement dated 20.10.2010 has handed over/allowed the transferee to take possession of the immovable property and thus erroneously held that section 53A of TOPA read with section 2(47)(v) of the Act stood attracted. AO/Ld. CIT(A) mis-interpreted the agreement dated 20.10.2010 and applied the law erroneously, so their impugned action cannot be sustained. Having held so, we further note that there was no evidence/material before AO/LD CIT(A) to suggest that the assessee has given possession of the property to the developer before the IOD was issued by the MCGM and any way that is not the case of AO/Ld. CIT(A). Assessee has produced evidence to substantiate that he had not vacated the house in the immovable property till IOD was issued by MCGM. For that he has has filed the Electricity Bill in the name of assessee (Mahesh Saini) for the month of April 2011- June 2011, April-2012 – June 2012 found placed at page no. 1 to 4 of the P.B-III and Property Tax Bill issued by BMC in the name of Mother of assessee Smt. Parvati Devi of Property No. 1481 & 1482 upto 28.12.2012 (Receipt dated 04.05.2012) found placed at page no. 5 to 7 of the P.B-III. In the light of the facts discussed supra, we find that there was no transfer of immovable property, so no capital gain could have been taxed in the hands of the assessee in this assessment year, therefore, the assessee succeeds. Issues Involved:1. Whether the addition of Rs. 1,05,37,002/- as Long Term Capital Gain (LTCG) was justified.2. Whether the transfer of the property as per Section 2(47)(v) of the Income Tax Act, 1961 read with Section 53A of the Transfer of Property Act, 1882 occurred in the assessment year 2011-12.3. Applicability of Section 50C of the Income Tax Act.4. Eligibility for deduction under Section 54 of the Income Tax Act.Detailed Analysis:1. Addition of Rs. 1,05,37,002/- as Long Term Capital Gain (LTCG):The main grievance of the assessee was the confirmation of the addition of Rs. 1,05,37,002/- as LTCG by the Ld. CIT(A). The assessee contended that the transfer of the property did not take place in the assessment year under consideration, thereby no capital gain arose in this year. However, the AO held that the transfer had taken place since the developer was given possession of the property, thus the capital gain should be offered for taxation. The AO computed the LTCG as follows:- Deemed consideration: Rs. 1,21,00,000/-- Indexed cost of acquisition: Rs. 15,62,998/-- Long term capital gains: Rs. 1,05,37,002/-The Ld. CIT(A) confirmed the AO's action, stating that the possession of the property was handed over to the developer, thus the transfer occurred as per Section 2(47)(v) of the Act read with Section 53A of the Transfer of Property Act, 1882.2. Transfer of Property as per Section 2(47)(v) of the Income Tax Act, 1961 read with Section 53A of the Transfer of Property Act, 1882:The short point to be decided was whether the incident of tax (transfer of immovable property) for charging capital gain arose in the assessment year 2011-12. The AO and Ld. CIT(A) held that the transfer took place since the possession was handed over to the developer as per the agreement dated 20.10.2010. However, the assessee contended that the transfer did not occur in the relevant assessment year as the possession was conditional upon obtaining the IOD (Intimation of Disapproval) from the Municipal Corporation of Greater Mumbai (MCGM), which was issued only on 15.04.2013 (AY 2014-15).The Tribunal noted that the agreement specified that possession would be handed over only after obtaining the IOD. The assessee provided evidence, including electricity bills and property tax bills, to show that possession was not handed over before the IOD was issued. Thus, the Tribunal held that the AO and Ld. CIT(A) erred in assuming that the transfer occurred in the assessment year 2011-12, and no capital gain could be taxed in this year.3. Applicability of Section 50C of the Income Tax Act:The AO applied Section 50C, which is a deeming provision for the consideration of the transfer of immovable property. The Stamp Duty Authority computed the fair market value of the entire property at Rs. 3,63,00,000/-, and the assessee's share was computed at Rs. 1,21,00,000/-. However, since the Tribunal held that the transfer did not occur in the relevant assessment year, the applicability of Section 50C was not sustained.4. Eligibility for Deduction under Section 54 of the Income Tax Act:The Ld. CIT(A) also rejected the assessee's claim for deduction under Section 54, stating that the new house property should have been constructed on or before 21.10.2013, and the assessee was entitled to only one house property within the specified time frame. However, since the Tribunal held that no transfer occurred in the relevant assessment year, the issue of deduction under Section 54 was not applicable.Conclusion:The Tribunal concluded that the transfer of the immovable property did not occur in the assessment year 2011-12, and thus, no capital gain could be taxed in the hands of the assessee in this year. The appeal of the assessee was allowed, and the addition of Rs. 1,05,37,002/- as LTCG was set aside. The order was pronounced in the open court on 10/08/2022.