TMI Blog2023 (3) TMI 1217X X X X Extracts X X X X X X X X Extracts X X X X ..... hase was funded by the members of the AOP. No interest-bearing loan was taken for the purpose of purchase of said property and construction thereon. No change in land user of the property was affected in order sell the aforementioned property. It is not the case of the Department that when initially the assessee AOP purchased the land and took possession thereof on 19-01-1994, the buyers were identifiable and thus the whole purpose of purchase and subsequent construction was for the purpose of selling the same and not earning any rental income. Accordingly said sale of property would be taxable as capital gains and not business income, and we find no infirmity in the order of ld. CIT(A). Year of taxability of the aforementioned property - We find no infirmity in the order of Ld. CIT(Appeals) wherein the held that the year of taxability of the impugned property sold was financial year 2007-08 relevant to assessment year 2008-09. - ITA No. 636/Ahd/2017 - - - Dated:- 23-11-2022 - Ms. Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member For the Assessee : Shri S.N. Divatia, A.R. For the Revenue : Shri Alok Kumar, CIT-D.R. ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... khs. The assessee had taken the possession of the said property on 19-01-1994 and was issued allotment letter dated 21-06-1999 in the name of Shri Narendra M Patel allotting 40% of the property and further allotment letters were issued on 27-10-1999 in the names of Dhirubhai Patel, Krutiben Patel, Anilaben Patel, Shruti Patel, Meeraben Patel and Rajendrabhai Patel, allotting 10% of the premises to each according to their contribution. The final conveyance deed was executed by the Income Tax Department on 14-09-2005. After that, the assessee started construction on the said property for which it got permission from AMC vide letter dated 05- 06-2006. The assessee entered into an agreement for construction with Shri Ami infrastructure for the construction of the office building on 31-10-2006. Thereafter, an agreement of sale dated 10-01-2007 was executed between the members of the assessee AOP as vendors and M/s CMS Computer Ltd as buyer for the sale of the property for a total consideration of 5.87 crores. The assessee AOP acted as a confirming party in this agreement to sale dated 10-01-2007. The final conveyance deed in this regard was entered into on 22-05-2007 between the member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies in the hands of assessee AOP or the members of the assessee AOP, Ld. CIT(Appeals) allowed assessee s appeal and held that taxability lies in the hands of the members of assessee AOP and not with the assessee, with the following observations: With regard to the question of taxability in the hands of NTC or the members of the NTC, the AO is of the opinion that as the entire transaction is done by the NTC, the real owner of the property is NTC only. On the other hand the case of the appellant is that all the funds for the purchase of land and construction of building are given by the members and the NTC has issued shares as well allotment certificate to the members, -therefore the members are the real owner of the property. The appellant NTC was fully funded by the members of the NTC and the NTC has allowed the rights in the land and issued an allotment certificate on 27th October, 1999. By this allotment certificate the members of the NTC got rights in the land to the extent of their share in the funds. On 10/1/2007 the allotee members entered into the sale agreement with the proposed purchaser to sale the land and building apparent thereto and the appellant NTC was confirmi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 8. The Department is in appeal against the aforesaid order passed by Ld. CIT(Appeals). The DR primarily relied upon the observations made by the AO in the assessment order. He reiterated that the year of taxability is assessment year 2007-08 itself since on receipt and distribution of initial amount received by the assessee AOP between the members, effectively the property is sold/transferred during the year under consideration itself. In response, the counsel for the assessee primarily relied upon the observations made by CIT in the appellate order. 9. We have heard the rival contentions and perused the material on record. The first issue for consideration before us is whether the property is taxable in the hands of the assessee AOP or in the respective hands of the members of AOP. From the facts placed before us, we observe that all the funds for the purchase of land and construction of building are given by the members and the assessee AOP has accordingly issued shares to the members, in proportion to their contribution. The assessee AOP was fully funded by its members and the assessee allowed the right in the land and issued allotment certificate on 27th October, 1999 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of proportionate cost to the builders under instructions from the assessee. In fact, one of the members, who had acquired the flat by paying up the construction cost, had in turn sold the same to another by agreeing to transfer his membership and shares in the assessee-company to and in favour of the vendee. The memorandum of association of the assessee-company authorised the assessee to enable its members to acquire flats or apartments through it. So, if regard was had to the substance of the transaction rather than its form, the person coming into possession and enjoyment of a flat or apartment on payment of the proportionate cost of construction to the developers, was the real owner in respect of the flat or apartment that fell to his share. 9.1 Accordingly, in view of the above facts placed before us and in light of the judicial precedents highlighted above, we are of the considered view that Ld. CIT(Appeals) has not erred in facts and in law in holding that it was the members of the assessee AOP who were the real owners of the impugned property in question, and accordingly income is liable to be taxed in the hands of the respective members, in proportion to their hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t), the Gujarat High Court held that transfer of immovable property takes place on execution of sale deed and, therefore, to hold that upon mere execution of agreement to sell, immovable property gets transferred to purchaser, even within extended definition of section 2(47), would be incorrect. In the case of Godha Realtors (P.) Ltd.[2022] 135 taxmann.com 24 (Bangalore - Trib.), ITAT held that where assessee merely entered into an agreement to sell immovable property without giving possession to buyer, there was no extinguishment of rights in capital asset by assessee, and thus, agreement to sell would not result in transfer of asset, under section 2(47). In the case of Abdul Wahab[2015] 57 taxmann.com 27 (Bangalore - Trib.), the ITAT held that where there was nothing to show that possession was ever delivered by assessee to purchaser in part performance of agreement for sale, there was no transfer within meaning of section 2(47)(v) of the Act. 11.1 Accordingly, in light of the facts before us and the judicial precedents on the subject, we find no infirmity in the order of Ld. CIT(Appeals) wherein the held that the year of taxability of the impugned property sold was financial ..... X X X X Extracts X X X X X X X X Extracts X X X X
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