| Question And Answer | |
|---|---|
| Subject: | Sec. 2(47)(v) , Sec. 45 |
| Category: | Income-Tax |
| Querist: | Prakash |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | Capital Gains, Transfer |
| Date: | April 29, 2023 |
- The assessee is an individual engaged in the business of real estate dealings as well as in real estate consultancy. Assessee is also a partner in various partnership firms from which he derives exempt income and also has agricultural income.
- The assessee had filed his return of income for A.Y. 2016-17 disclosing total income at Rs. Nil.
- Assessee was holding land jointly with his wife, son and daughter During the year under consideration, the assessee and other family members had entered into development agreement with M/s. ABC, developers for development of the said land vide registered development agreement. In consideration of land given for development, M/s. ABC agreed to give the assessee and his family members constructed area in the proposed scheme to be undertaken on the said piece of land but due to some internal problems, few of the terms of the said development agreement were not complied and thus possession of the said land was not given to M/s. ABC. As the possession of land was not given to the developer, transfer had not taken place within the meaning of Sec. 45 of The Income Tax Act, 1961 and therefore no capital gain is offered to tax.
- The Ld AO has made the addition mainly on the ground that assessee is liable for capital gain under section 45(1) of the Act in view of development agreement executed between assessee and M/s. ABC and accordingly considering the assessee’s share as 1/3rd, made addition in the hands of the assessee as Long-Term Capital Gain.
- CIT(A) has confirmed the addition made by the AO, relying upon the assessment order on the following ground:
- a.Assessee has entered into registered development agreement instead of Joint Venture Agreement.
- b.Development agreement is in respect of capital asset.
- c.Assessee is liable for capital gain U/sec. 45
- Contention of the Assessee :
- a.Possession of the said land was not given to M/s. ABC.
- b.Capital gain is attracted on the receipts of constructed aera.
- c.No development is carried on the plot till today also and no approval for the construction of the building is obtained .Developers is also confirm the same and therefore there is no “transfer” u/s 2(47)(v) of the Act.
- As the possession of land was not given to the developer, transfer had not taken place within the meaning of Sec. 45 of The Income Tax Act, 1961 and therefore no capital gain is offered to tax.
- Transfer is not complete on mere registration of agreement for sale of property. In the case of the assessee, it had not parted with the possession of the property in question and hence the transfer is not completed so as to treat the act of registration of development agreement eligible for Capital Gains.
- Issues :–
- Whether assessee’s stand is correct?
- Is any other arguments which can be taken.
- Any decisions to support assessee’s stand .
It is advisable to purchase the property in your own name with the second of your daughter to avoid any unpleasant scenarios.
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