Joint Development Agreement transferring 62% land for 38% developed area constitutes taxable transfer under section 2(47)(vi)

The ITAT Cochin held that a JDA where the assessee transferred 62% land rights for 38% developed area constituted a transfer under section 2(47)(vi) of the Income Tax Act, making it liable for capital gains tax in the assessment year. The Tribunal rejected arguments that project delays negated the transfer, emphasizing that any agreement enabling enjoyment of immovable property falls within the transfer definition. The case was remanded to the AO for proper quantification of capital gains, considering fair market value as on 01.04.2001 as cost of acquisition and comparing agreed consideration with stamp duty value under section 50C.

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Issues Involved:

1. Assessment of Long Term Capital Gain (LTCG) on the execution of a Joint Development Agreement (JDA).
2. Determination of whether the transaction amounts to a transfer under Section 2(47) of the Income Tax Act, 1961.
3. Validity of the JDA and General Power of Attorney (GPA) due to non-registration.
4. Quantification of the capital gain.

Issue 1: Assessment of Long Term Capital Gain (LTCG) on the Execution of a Joint Development Agreement (JDA)

The appeal concerns the assessment of LTCG arising from a JDA executed by the assessee with M/s. Plasma Developers Ltd. on 27.06.2011. The agreement involved the transfer of 62% of the land in exchange for 38% of the developed area. The primary contention is whether this transaction constitutes a transfer under Section 2(47) of the Income Tax Act, 1961.

Issue 2: Determination of Whether the Transaction Amounts to a Transfer Under Section 2(47) of the Income Tax Act, 1961

The assessee argued that the possession given under the JDA was not absolute and constituted only a "License" for development purposes. It was stipulated that nothing in the agreement should be construed as delivery of possession under Section 53A of the Transfer of Property Act. The assessee maintained that no capital gain arose during the year of the JDA's execution as no consideration was paid, and the developer's rights would vest only after construction completion.

The Revenue countered by referencing clauses of the JDA and GPA and relied on judicial precedents, including Prameeela Krishna v. ITO, CIT v. Dr. T.K. Dayalu, and Chaturbhuj Dwarkadas Kapadia v. CIT. The Tribunal noted that Section 2(47) inclusively defines 'transfer' to include transactions that allow possession of immovable property in part performance of a contract (Section 53A of the TP Act) and transactions enabling the enjoyment of immovable property.

Issue 3: Validity of the JDA and General Power of Attorney (GPA) Due to Non-Registration

The assessee emphasized that the JDA and GPA were unregistered, invoking amendments to Sections 17 and 49 of the Registration Act, 1908, and Section 53A of the Transfer of Property Act, 1882. The Tribunal acknowledged that post-2001 amendments, unregistered agreements could not be recognized under Section 53A, affecting the applicability of Section 2(47)(v).

However, the Tribunal held that Section 2(47)(vi) would still apply, as it does not require registration. The Tribunal referenced the Coordinate Bench's decision in P. George Jacob v. ITO, which supported this view. The Tribunal concluded that the transaction constituted a transfer under Section 2(47)(vi), liable to capital gain for the current year.

Issue 4: Quantification of the Capital Gain

The Tribunal noted that the assessee raised a specific ground regarding the quantum of capital gain, which was not disputed before the Tribunal. The Tribunal emphasized the need to determine the fair market value as of 01.04.2001, indexed per Section 48, and compared with the stamp value as of the transfer date (27.06.2011) under Section 50C. The onus to prove claims rested on the assessee, and the AO was directed to decide per a speaking order after allowing the assessee a reasonable opportunity to present his case.

Conclusion:

The Tribunal concluded that the transaction between the assessee and Plasma Developers Ltd. constituted a transfer under Section 2(47)(vi) of the Income Tax Act, 1961, and was liable to capital gain for the current year. The appeal was partly allowed for statistical purposes, with directions for the AO to quantify the capital gain in accordance with the law.

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