2021 (1) TMI 409 - AT - Income Tax

Capital gain computation - taxability on transfer of land in pursuant to JDA - year of assessment - HELD THAT - As relying on SHRI SHAFIQ MOHAMMED SHAH 2017 (5) TMI 1168 - ITAT CHENNAI long term capital gain on transfer of land in pursuant to JDA dated 27.06.2006 accrues for the assessment year 2007-08 when the assessee has physically hand over the land to the developer but not for the assessment year 2014-15 as considered by the ld.AO on the basis of subsequent sharing agreement dated 10.07.2013. Therefore we direct the AO to delete additions made towards computation of long term capital gain on transfer of land in pursuant to JDA for the impugned assessment year. Appeal filed by the assessee is allowed.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Determination of the correct assessment year for capital gain tax liability under the Joint Development Agreement (JDA).
3. Applicability of Section 50C of the Income Tax Act.
4. Adoption of the correct guideline value for property.
5. Assessment of short-term capital gain on the same transaction.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee argued that the delay of 52 days in filing the appeal was due to being out of station when the assessment order was served. The CIT(A) rejected this explanation and dismissed the appeal without condoning the delay. However, the Tribunal found the reasons given by the assessee to be a reasonable cause under the Act and condoned the delay, admitting the appeal for adjudication.

2. Determination of the Correct Assessment Year for Capital Gain Tax Liability under the JDA:
The assessee contended that the capital gain tax liability should arise in the assessment year 2007-08 when the JDA was executed and possession of the land was granted. The AO, however, assessed the capital gain for the assessment year 2014-15 based on an allocation agreement dated 10.07.2013. The Tribunal noted that similar cases of co-owners had been decided in favor of the assessee, holding that the taxability of long-term capital gain on transfer of land pursuant to the JDA dated 27.06.2006 arises in the financial year 2006-07, relevant to assessment year 2007-08. The Tribunal followed these precedents and directed the AO to delete the additions made for the assessment year 2014-15.

3. Applicability of Section 50C of the Income Tax Act:
The assessee argued that Section 50C could not be invoked as there was no registration of the property during the year under consideration. The Tribunal did not specifically address this issue in the final judgment, as the primary issue of the correct assessment year for capital gain tax liability was decided in favor of the assessee.

4. Adoption of the Correct Guideline Value for Property:
The assessee contended that the AO incorrectly adopted a guideline value of Rs. 12,000 per sq.ft instead of Rs. 3,500 per sq.ft, which was the prevailing rate until 31.03.2012. The Tribunal did not specifically address this issue in the final judgment, as the primary issue of the correct assessment year for capital gain tax liability was decided in favor of the assessee.

5. Assessment of Short-term Capital Gain on the Same Transaction:
The assessee argued that the AO erred in assessing short-term capital gain on the same transaction. The Tribunal did not specifically address this issue in the final judgment, as the primary issue of the correct assessment year for capital gain tax liability was decided in favor of the assessee.

Conclusion:
The Tribunal concluded that the long-term capital gain on transfer of land pursuant to the JDA dated 27.06.2006 accrues for the assessment year 2007-08, not for the assessment year 2014-15 as considered by the AO. The appeal filed by the assessee was allowed, and the AO was directed to delete the additions made for the assessment year 2014-15.