2024 (8) TMI 1596 - HC - Income Tax

Assessee's failure to obtain completion certificate after possession doesn't affect capital gains assessment under section 45(5-A)

The HC held that capital gains from property development were correctly assessed in the relevant assessment year. Under section 45(5-A) of the Income Tax ... Capital gain chargeable to income-tax - year of assessment - transfer of capital asset - HELD THAT:- The income chargeable to tax arising from assessee’s property, dealt with for development, was correctly assessed in the assessment year under consideration. Relevant provision is sub-section (5-A) u/s 45 in Income Tax Act, 1961. On query from Court Appellant/Mr. Ray submits, possession certificate was issued in year 2016. Aforesaid provision says, capital gain shall be chargeable to income-tax as income of the previous year, in which the certificate of completion for the whole or part of the project is issued by the competent authority. Omission on part of assessee and his developer to follow through after possession obtained in year, 2016, in obtaining completion certificate, does not give rise to any question of law. The Orissa High Court, in an appeal against the Income Tax Appellate Tribunal's order dated 10th July 2024 (ITA no.21/CTK/2024 for AY 2017-18), addressed the issue of capital gains tax arising from a Joint Development Agreement executed in 2012. The appellant contended that income could not be assessed in AY 2017-18 for property dealings in 2012, asserting that the Revenue's attempt to tax was illegal as the relevant assessment could not be reopened. The Tribunal had held that since the assessee did not declare capital gains in AY 2012-13 when the agreement was entered into, no relief could be granted for that year. However, the capital gain was taxable in the year when the transfer under Section 53A of the Transfer of Property Act was completed, i.e., when the assessee received the constructed property portion, validating the AO's action to tax in AY 2017-18. The Court examined Section 45(5A) of the Income Tax Act, 1961, which stipulates that capital gains are chargeable in the year in which the certificate of completion for the project is issued by the competent authority. Although possession was obtained in 2016, the absence of a completion certificate due to the assessee's or developer's omission was not a question of law warranting interference. Ultimately, the Court held that the tax assessment in AY 2017-18 was correct and dismissed the appeal.