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2013 (9) TMI 125 - AT - Income TaxLong Term Capital Gain u/s 45 - transfer u/s 2(47) - scope of the terms, accrual or arise - vacant land - Possession given by the society to the developer under joint development agreement (JDA) - Advance Received or Actual Sales – Held that:- As per Section 45 of IT Act, income-tax was to be charged under the head "capital gain" on transfer of a capital asset and shall be deemed to be the income of the previous year in which transfer took place - The year of transfer was the crucial year and not the time of the receipt - 'Accrue' means 'to arise or spring as a natural growth or result', to come by way of increase' - 'Arising' means 'coming into existence or notice or presenting itself' – both the words were used in contradistinction to the word 'receive' and indicate a right to receive - They represent a stage anterior to the point of time when the income becomes receivable and connote a character of the income, which was more or less inchoate and which was something less than a receipt - An unenforceable claim to receive an undetermined or undefined sum does not give rise to accrual. It was not only the money which has been received by the assessee which was required to be taxed but the consideration which had accrued to the assessee was also required to be taxed. Deemed transfer of property u/s 2(47) – Part performance - section 2(47)(v) r.w. section 45 indicates that capital gains was taxable in the year in which such transactions were entered into even if the transfer of immovable property was not effective or complete under the general law – Held that:- Charging an item of income under the head 'Capital gains" require that there should be some profit, Such profit must be arising on account of transfer and there should be capital asset which has been transferred - There was no dispute that a capital asset was involved and there was some profit also – Capital gain would be computed by considering the full value of consideration whether received or accruing as a result of the transfer - relying upon Mysore Minerals Ltd. v. CIT [1999 (9) TMI 1 - SUPREME Court] it was not only the consideration received which was relevant but the consideration which had accrued was also relevant - irrevocable general power of attorney which leads to over all control of the property in the hands of the Developer, even if that means no exclusive possession by the Developer would constitute transfer - It can be said that it had to be construed as 'possession' u/s 2(47). Thus, it is clear that non registration of agreement cannot lead to the conclusion that provision of section 2(47) (v) is not applicable. Non performance of the contract - Held that:- The careful reading of the said clause of the JDA would show this payment was required to be made within a period of six months from the date of execution of this agreement or within two months from the date of approval of plan / sanction and drawing grant of final license to develop where upon the construction can commence, whichever is later. Thus, this installment was dependent on two contingencies first the expiration of a period of six months from the date of agreement or alternatively on the expiration of a period of two months from the date of approval of plans / designs drawing etc. leading to grant of final licenses which can lead to commencement of construction, whichever is later. The matter was taken up by way of PIL by certain citizens and Administration of the Union Territory before the Hon'ble High Court which initially stayed the sanction of such plan etc. This led to situation where construction could not be commenced and hence payment was not required to be made in view of the pending litigation. The clauses of force majeure came into operation and therefore, it cannot be said that the developer is not willing to perform its part of the contract. In any case there is no default on the part of the developer as payment was not yet due as per clause 4(i)(iv) of JDA. - in view of clause 4.1(iv) read with clause 26(v) of the JDA, HASH Builder were not required to make the payment and it cannot be said that they were not willing to perform their part of the contract on this aspect. Therefore, this contention is rejected. Concept of real income - Taxability of pro-rata receipt - Receipt of consideration and registration of property relevant or not - the contention was that if consideration which has not been received was to be taxed then the assessee would be deprived for claiming exemption u/s 54 and 54EC. - Held that:- Section 54 deals with deduction in case the assessee being an individual or HUF, transfers the residential house - the assessee had transferred the plot – thus it cannot be said that deduction u/s 54F and 54 was same - no ground had been raised for deduction u/s 54F. - in some genuine cases the difficulties may arise but it was for the Parliament or the Government to provide remedy in such cases and judicial forums cannot do anything. Ownership of the plot - society or members - When the plots remain unallotted and obviously legal ownership and beneficial ownership belonged to the society. - Held that:- the Society has entered into JDA on behalf of the Members. It is the members who are owning the plots and the Society was only a facilitator. It becomes clear from the JDA that payment for consideration was to be made to an individual plot holder and in fact consideration was mentioned in terms of per Member. - Decided against the assessee.
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