| The Tax Publishers2020 TaxPub(DT) 4855 (Hyd-Trib) INCOME TAX ACT, 1961
Section 2(47)(v)
Where the possession of land was not handed over to developer but only license was granted for developing the land and construction of residential house and where the developer was not willing to complete his part then there was no transfer of land and as such no capital gain was chargeable to tax. In case of joint development agreement, it should be construed that the land owner entered into business venture by introducing his landed property into the business, accordingly the provisions of section 45(2) will come into operation and the long-term capital gains shall be chargeable to income-tax as his income of the previous year in which the land is transferred, and for the purpose of section 48, the fair market value of the land on the date of introducing the land in the Joint Venture shall be deemed to be the full value of the consideration received or accrued as a result of the transfer of the land.
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Capital gains - Chargeability of long-term capital gains - Revenue alleged that assessee transferred immovable property to developer - Apart from execution of development agreement, no other activities were pursued by developer
Assessees were ordinary resident individuals. Pursuant to search and seizure operation under section 132 in case of R, it was revealed that both assessees entered into a development agreement and executed general power of attorney with R. Thereafter, scrutiny assessment was framed under section 143(3) and addition was made for long-term capital gains. AO alleged that both assessees transferred their immovable property as per the provisions of section 2(47)(v) read with section 53A of Transfer of Property Act. Case of assessees was that even though they handed over possession of the property, the developer was not willing to perform their obligation. Assessee contended that there was no progress in development work during the relevant assessment year and no sale consideration was received. Held: Apart from execution of the development agreement, it appeared that no other activities were pursued by the developer till date such as obtaining the plan sanction, development of the land, etc. Considering above facts and circumstances of the case, it was extremely doubtful regarding legal validity of the development agreement between both assessees and the developer. In case of joint development agreement, it should be construed that the land owner entered into business venture by introducing his landed property into the business, accordingly the provisions of section 45(2) will come into operation and the long-term capital gains shall be chargeable to income-tax as his income of the previous year in which the land is transferred, and for the purpose of section 48, the fair market value of the land on the date of introducing the land in the Joint Venture shall be deemed to be the full value of the consideration received or accrued as a result of the transfer of the land.
REFERRED : Potla Nageswara Rao v. DCIT [ITTA No.245 of 2014, dated 9-4-2014] : 2014 TaxPub(DT) 2459 (AP-HC), Dy. CIT v. JSW Limited & (Vice-Versa) [ITA No.6264/M/2018 and 6103/M/2018 for assessment year 2013-14 Order, dated 14-5-2020] : 2020 TaxPub(DT) 2142 (Mum-Trib), Sudha Giri v. ITO [ITA No. 1578/Hyd/2014 vide its Order, dated 31-7-2015] : 2015 TaxPub(DT) 3054 (Hyd-Trib), ITO v. Sham Kumar ITA No. 1604/Hyd/2014, dated 20-3-2015, CIT & Ors. v. R. Srinivasa Rao ITA No. 1 1786/Hyd/2012 dated 28-8-2014, Binjusaria Properties Pvt. Ltd. v. Asstt. CIT ITA No.157/Hyd/2011, dated 04-4-2014 : 2014 TaxPub(DT) 2438 (Hyd-Trib) and K. Radhika v. Dy. CIT ITA No. 208/Hyd/2011 : 2012 TaxPub(DT) 3122 (Hyd-Trib).
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