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2019 (3) TMI 391 - AT - Income TaxLong term capital gain - additional construction on pre owned property - completion of “transfer” of Capital asset - development agreement entered with developer wherein assessee was entitled to receive a sum in cash and two flats that are going to be constructed - taken possession in earlier year - completion certificate also issued in earlier year - Only allotment letter of flat already in possession was issued in relevant financial year. HELD THAT:- The assessee has entered into development agreements in the year 2002. As per the supplementary agreement, the assessee was to receive ₹ 49.50 lakhs and two flats from the developer. Hence the flats received by the assessee are only a part of total sale consideration receivable by the assessee as per the development agreement. No dispute that the capital gains liability shall arise upon completion of “transfer” of Capital asset. Hence the assessee cannot postpone the capital gains tax liability on account of delay in receipt of sale consideration and on the very same criteria, the AO cannot bring capital gains to taxation in the year of receipt of part of sale consideration. The tax authorities are not justified in placing reliance on the allotment letter given by the developer to the assessee. As per the decision rendered in the case of Chaturbhuj Dwarkadas Kapadia [2003 (2) TMI 62 - BOMBAY HIGH COURT] the liability to capital gains tax shall arise upon entering development agreement, if the assessee has handed over the possession of property and received part consideration. The copy of occupancy certificate show that the assessee had handed over the possession as per the development agreement and the construction itself has been completed in the year 2006. All these events have taken place much prior to the financial year relevant to AY 2008-09. The assessee has also placed copies of electricity bills to show that he has taken possession of flats in the year 2005 itself. These facts would show that the capital gains liability cannot, in any case, would arise in AY 2008-09. Thus the capital gains, if any, arising on account of development agreement is not assessable in assessment year 2008-09. - Decided in favour of assessee.
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