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2008 (11) TMI 310 - AT - Income TaxChargeability of capital gains in respect of the land not 'transferred' - Scope of 'Transfer' u/s 2(47)(v) - doctrine of "part performance" - CIT(A) held that AO was legally justified in holding that the assessee was liable to capital gains tax for the AY 1995-96 on transfer of development rights in the previous year relevant to AY 1995-96 - appellant had undivided 29.68 per cent share in an ancestral property - A development agreement was executed with a firm M/s Lunkad Associates; stated to be for a consideration having both cash and kind components - though the appellant had received cash - but no capital gain was shown for the year under consideration i.e. AY 1995-96 as per the return - HELD THAT:- The Importance of the word "transfer" is due to the reason that in the charging s. 45 the capital gain is taxable on "transfer of a capital asset". Precisely this section prescribes that "any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to income-tax under the head capital gains and shall be deemed to be the income of the previous year in which the transfer took place. The doctrine of "part performance" is undoubtedly based upon the doctrine of equity. If one party has performed his part of duty then equity demands that the other party shall also perform his part of. the obligation. If one party has stood by his words then it is expected from the other party to also stand by his promise. On the facts of this case the developer has got bundle of rights and thereupon entered into the property. Undisputedly flats have also been constructed by M/s Lunkad Associates. Thus under the provision of IT Act a "transfer" has definitely took place. To sum-up the owners have entered into an agreement for development of the property and certain rights were assigned to the developer who in turn had made the substantial payment and consequently entered into the property and constructed the flats. The fact that the legal ownership continued with the owners to be transferred to the society at a future distant date really does not affect the applicability of s. 2(47)(v). The transferee was undisputedly willing to perform his part of the contract even though a dispute had cropped up but that subsequent event had not adversely effected the main agreement rather the confirmity of events and thereafter series of developments have further admittedly strengthened the amount of consideration. Entering into the property and handing over of the possession was instantaneous thus entire conspectus of the case has attracted the provision of s. 45 of the Act. We have arrived at the conclusion by respectfully following a decision and the law laid down by the Hon'ble jurisdictional High Court delivered in the case of Chaturbhuj Dwarkadas Kapadia vs. CIT [2003 (2) TMI 62 - BOMBAY HIGH COURT]. In the result ground is dismissed.
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