INCOME TAX ACT, 1961

Section 2(47)(v) read with Section 45

Capital gains - Transfer under section 2(47)(v) - Unregistered JV agreement for developing multi-facility complex - Transaction being not materialized

Assessee-company entered into an unregistered JV agreement for developing multi-facility complex. AO noticed that the assessee allowed the developer to enter upon the project of the land for the purpose of construction and also allowed the developer to open the site office and also granted him some rights to raise any loan for development and construction of the project. Thus, the AO concluded that the transfer in terms of section 2(47)(v) took place on the date of execution of the JV agreement and accordingly, brought to tax LTCG by applying section 2(47)(v) read with section 45. Assessee contended that the status of the said property remained vacant as no development took place and the developer did not carry out any activity relating to construction for the reason that the project would not be successful. Held: The Supreme Court in the case of (CIT v. Balbir Singh Maini (2017) 398 IT 531 (SC)) held that the income from capital gain of a transaction, which never materialized could be termed as a hypothetical income at best and that being the case, there would be no profit or gain that would arise from transfer of a capital asset, which could be brought to tax under section 45 read with section 48. In view of the same, the subject question as to transfer exigible to tax with reference to section 2(47)(v) read with section 45, was remanded to the AO for fresh consideration.

Relied:(CIT v. Balbir Singh Maini (2017) 398 IT 531 (SC))

REFERRED :

FAVOUR : In assessee's favour by way of remand.

A.Y. :

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