TaxTMI 
TaxTMI 
2018 (12) TMI 630
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....t, handing over of property for development in lieu of some construed portion to be received in future. 3. Whether on the facts and in the circumstances of the case, the Ld. CJT(A) was justified in concluding that the appellant had transferred the property situated at Badlapur during the previous year relevant to the assessment year 20 10-11 4. Whether on the facts and in the circumstances of the case, the Ld. C1T(A) was justified m holding that the action of the AO not allowing registration and other expenses capitalized by the assessee. is correct 5. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in holding that capital gain has arisen as per section 45 of the Income tax Act, 1961. 6. Whether on the facts and in the circumstances of the case, the assessee is not hearing deprived of doling exemption u/s 54F of the income tax Act, 1961." 3. The brief facts of the case are that the assessee filed its return of income declaring total income to the tune of Rs. 10,19,000/- on 15.10.2010. The return was accompanied by statement of total income, audited Trading, Profit & Loss account, capital account and Balance-sheets along with tax audi....
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.... Thus, assessee's STCG will be 1/3rd of Rs.6,55,333/- 4 Thereafter, the said capital gain was added to the income of the assessee and the income of the assessee was assessed to the tune of Rs. 16,74,330/-. The assessee filed an appeal before the CIT(A) who dismissed the appeal of Assessee, therefore, the assessee has filed the present appeal before us. 5. All the issues are inter-connected, therefore, are being taken up together for adjudication. In fact, all the issues leads to this controversy that the Short term capital gain/long term capital gain is liable to be assessed on 07.07.2009 when the assessee entered into the development agreement with M/s.Vastusiddhi Associates, Kalyan for developing the property or not. The assessee purchased the property along with other share-holders namely Shri. Arun Tamboli & Shri Sharad Gaikwad on 04.02.2009 in sum of Rs. 13,00,000/- in view of the sale-deed registered before the Sub-registrar concerned. The assessee was having 1/3rd in the said property, therefore, assessee's share in purchase comes to Rs. 4,33,333/-. The assessee took the plea that the property was purchased on 08.07.2008 in sum of Rs. 5,25,000/- which was not dealt with b....
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....horities and other material on record. The short dispute arising for consideration in this case relates to the year of assessability of capital gains arising on the property, which was subject matter of a development agreement, i.e. whether it is assessable in the year in which the development agreement was entered into, as done by the Assessing Officer, or in the relevant subsequent year in which the area duly developed and constructed coming to the share of the assesseeowner has been handed over to the assessee. Though it was initially held by various benches of the Tribunal that capital gains are to be assessed in the year in which development agreement has been entered into between the owner and the developer, considering the fact that in many cases, the development agreement was not acted upon by the developer, different views have to be expressed, as to the year of assessability, based on the facts and circumstances of each case. This position has been examined at length in the light of case-law on the point, in the case of Smt. K.Radhika and others (supra) and it was ultimately held by the coordinate bench of this Tribunal as follows- "48. We are in considered agreement w....
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....an is to be approved by the competent authority. In fact, the building plan was not got approved by the builder in the assessment year under consideration. Until permission is granted, a developer cannot undertake construction. As a result of this lapse by the transferee, the construction was not taken place in the assessment year under consideration. There is a breach and break down of development agreement in the assessment year under consideration. Nothing is brought on record by authorities to show that there was development activity in the project during the assessment year under consideration and cost of construction was incurred by the builder/developer. Hence it is to be inferred that no amount of investment by the developer in the construction activity during the assessment year in this project and it would amount to non-incurring of required cost of acquisition by the developer. In the assessment year under consideration, it is not possible to say whether the developer prepared to carry out those parts of the agreement to their logical end. The developer in this assessment year had not shown its readiness or having made preparation for the compliance of the agreement. T....
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....n give rise to the situation envisaged in Section 53A of the Transfer of Property Act. On these facts, it is not possible to hold that the transferee was willing to perform its obligations in the financial year in which the capital gains are sought to be taxed by the Revenue. We hold that this condition laid down under Section 53A of the Transfer of Property Act was not satisfied in this assessment year. Once we come to the conclusion that the transferee was not 'willing to perform', as stipulated by and within meanings assigned to this expression under Section 53A of the Transfer of Property Act, its contractual obligations in this previous year relevant to the present assessment year, it is only a corollary to this finding that the development agreement dt. 11.5.2005 based on which the impugned taxability of capital gain is imposed by the AO and upheld by the CIT(A), cannot be said to be a "contract of the nature referred to in Section 53A of the Transfer of Property Act" and, accordingly, provisions of Section 2(47)(v) cannot be invoked on the facts of this case Chaturbhuj Dwarkadas Kapadia v. CIT's case (supra) undoubtedly lays down a proposition which, more often t....
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....t Agreement-cum-General Power of Attorney'. A reading of the said agreement indicates that what was handed over by the assessee to the developer is only a 'permissive possession'. Clause 5 of the said agreement dated 2nd February, 2006, on page 3 thereof, specifically provides that 'First party on signing of this agreement has permitted the developer to develop the scheduled land' (emphasis added). As per Clause 9 of the said agreement, consideration receivable by the assessee from the developer is '38% of the residential part of the developed area......' (which was later reduced to 33%, by virtue of a supplementary agreement executed on 18.10.2007). That being so, it is only upon receipt of such consideration in the form of developed area by the assessee in terms of the development agreement, the capital gains becomes assessable in the hands of the assessee. We are supported in this behalf by the decision of the Third Member Bench of the Tribunal in the case of Vijaya Productions Pvt. Ltd. V/s. Addl. CIT (134 ITD 19)(tm). 11. Even though the assessee in terms of recital on page 2 of the supplementary agreement dated 3rd February, 2006, was to receive 'a refundable deposit of Rs. 2....
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....t, the capital gains cannot be brought to tax in the year under appeal, merely on the basis of signing of the development agreement during this year. We are supported in this behalf by the decision of the Tribunal dated 3rd January, 2014 in the case of Fibars Infratech Pvt. Ltd. (supra), wherein it was held as follows 59. On these facts, it is not possible to hold that the transferee was willing to perform its obligations in the financial year in which the capital gains are sought to be taxed by the Revenue. We hold that this condition laid down under Section 53A of the Transfer of Property Act was not satisfied in this assessment year. Once we come to the conclusion that the transferee's 'willing to perform' the contract is ascertainable in the assessment year, as stipulated by and within the meanings assigned to this expression under Section 53A of the Transfer of Property Act, its contractual obligations in this previous year relevant to the present assessment year, it is only a corollary to this finding that the Development Agreement dt. 15.12.2006, based on which the impugned taxability of capital gain is imposed by the AO and upheld by the CIT(A), cannot be said....
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....ght of the foregoing discussion, we set aside the impugned orders of the Revenue authorities and hold that the capital gains on the property in question cannot be brought to tax in the year under appeal, and consequently delete the addition made by the Assessing Officer and sustained by the CIT(A). Assessee's grounds on this issue are allowed. 14. In view of our decision on the merits of the issue involved, viz. assessability of capital gains in the year under appeal, we are not inclined to go into the grounds raised in this appeal on the legality of initiation or proceedings under S.153C of the Act, as they have become only of academic interest. They are as such, rejected. 6. On appraisal of the above mentioned finding, we noticed that the Hon'ble ITAT was of the view that after the accrual of consideration, the capital gain is liable assessable in the hands of the assessee. However, in the said case the activity of development was not completed and basically the assessee did not receive any consideration. At the time of argument, the Ld. Representative of the assessee has also relied upon the case Balbir Singh Maini (supra) in which it is specifically held that the income shor....