THE PR COMMISSIONER OF INCOME TAX I JALANDHAR vs. CHUNI LAL BHAGAT 2015 J P NAGAR JALANDHAR

ITA/24/2017HC Punjab & HaryanaPHHC01117436201717 February 2017Author: MR. JUSTICE SURINDER GUPTA,MRS JUSTICE DAYA CHAUDHARY7 pages
AI SummaryDismissed

What were the facts?

The assessee, an individual, filed his return for AY 2007-08. Later, proceedings under Sections 147/148 were initiated due to non-declaration of entire long-term capital gains. The Assessing Officer (AO) completed the assessment on 13.02.2015, determining assessed income at ₹3,56,93,826/-, including a long-term capital gain addition of ₹3,53,94,940/-. The assessee was a member of Punjabi Housing Building Society, which owned 21.2 acres of land. The society entered into a Joint Development Agreement (JDA) dated 25.02.2007 with Hash Builders Private Limited (HASH) and Tata Housing Development Company Limited (THDC). The AO held that the JDA constituted a 'transfer' under Section 2(47)(v) of the Income Tax Act, 1961 (the Act), read with Section 53A of the Transfer of Property Act, 1882, attracting capital gains. The CIT(A) upheld the AO's order. The Tribunal, however, allowed the assessee's appeal, relying on a High Court decision.

What did the High Court hold?

The High Court held that the matter was no longer res integra, as the issue stood decided by this Court in C.S. Atwal’s case (supra). The Court noted that in C.S. Atwal's case, it was concluded that the JDA, read with sale deeds, indicated a pro-rata transfer of land. Crucially, it was held that no possession had been given by the transferor to the transferee of the entire land in part performance of the JDA so as to fall within Section 53A of the Transfer of Property Act, 1882. The possession delivered, if any, was as a licensee for development, not as a transferee. Furthermore, since the JDA was executed after 24.09.2001 and was not registered, it did not fall under Section 53A of the 1882 Act, consequently, Section 2(47)(v) of the Income Tax Act, 1961, did not apply. The Court also noted the assessee's submission that capital gains tax had been paid on amounts received, and sale deeds executed, and that as and when further amounts are received, tax would be discharged. The Court observed that the assessee appellants would remain bound by this stand. The issue of exigibility to capital gains tax was decided in favour of the assessee, rendering the question of exemption under Section 54F academic. The Tribunal and lower authorities were not right in holding the assessee liable to capital gains tax in respect of land for which no consideration was received and which stood cancelled. The appeal was dismissed as the substantial questions of law were answered in line with the C.S. Atwal decision. No issue was expressly left undecided.

What were the issues?

The High Court had to decide the following substantial questions of law: 1. Whether the ITAT was justified in deleting the addition relying on the decision in C.S. Atwal Vs. CIT, despite the department filing an SLP? 2. Whether the ITAT erred in holding that the transfer of land by members of a Cooperative Society via an irrevocable Power of Attorney and a Joint Development Agreement (JDA) constitutes 'transfer' under Section 2(47)(ii) of the Act, attracting capital gains under Section 45 read with Section 48? 3. Whether the ITAT erred in holding that possession was not given in part-performance of the JDA under Section 53A of the Transfer of Property Act, 1882, ignoring the combined reading of the Power of Attorney and JDA? 4. Whether the ITAT erred in holding that the unregistered JDA, executed after 24.09.2001, does not fall under Section 53A of the Transfer of Property Act, 1882, and thus Section 2(47)(v) of the Act does not apply? 5. Whether the ITAT erred in holding that only money received against which sale deeds were executed could be taxed, and future receipts could not be presently taxed, contrary to Section 45 read with Section 48 of the Act? 6. Whether the ITAT erred in concluding that the assessee terminated the agreement and revoked the Power of Attorney, ignoring that it was irrevocable without prior written consent? 7. Whether the ITAT erred in holding that Section 2(47)(vi) of the Act would not apply, ignoring that the developer purchased membership, leading to enjoyment of property? Assessee's Contentions: The assessee argued that the ITAT correctly followed the High Court's decision in C.S. Atwal. They contended that capital gains tax was already paid on amounts received, and sale deeds executed. They stated that as and when further amounts are received, capital gains tax shall be discharged. They also argued that the JDA was cancelled, and no further amounts were received. Revenue's Contentions: The revenue argued that the ITAT erred in deleting the addition, especially since an SLP was filed against the High Court's decision in C.S. Atwal. They contended that the JDA constituted a transfer under various clauses of Section 2(47) of the Act, attracting capital gains on the total consideration, whether received or to be received.

Which sections of the Income-tax Act were involved?

Section 260A,Section 2(47)(ii),Section 45,Section 48,Section 2(47)(v),Section 53A,Section 2(47)(vi),Section 139(5),Section 147,Section 148,Section 143(1),Section 143(3),Section 54F

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision: 17.02.2017

Pr. Commissioner of Income Tax, Jalandhar-I, Jalandhar

……Appellant

Vs. Sh. Chuni Lal Bhagat, 215, J.P. Nagar, Jalandhar

…..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL

HON’BLE MR. JUSTICE RAMENDRA JAIN Present: Mr. Vivek Sethi, Advocate for the appellant.

Ajay Kumar Mittal,J.

1.

This appeal has been preferred by the appellant-revenue under Section 260A of the Income Tax Act, 1961 which (in short, “the Act”) against the order dated 28.06.2016, Annexure A.3, passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (in short, “the Tribunal”) in ITA No. 393(ASR)/2015, claiming following substantial questions of law:- (i) “Whether on the facts and circumstances of the case, the Hon’ble ITAT was justified in deleting the addition made by AO relying upon the decision of Hon’ble High Court in the case of C.S. Atwal Vs. CIT in ITA No. 200 of 2013, w

The order continues below.

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