Principal Commissioner of In vs. Shri Mafaz Mohammed

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TCA/127/2022HC Madras27 April 2022Bench: Hon`ble Mr Justice R. MAHADEVAN5 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court dismissed the appeal as withdrawn. The Revenue's counsel brought to the court's attention Circular No.17/2019 issued by the CBDT, which stipulates that appeals should not be filed or pursued before the High Court if the tax effect does not exceed Rs. 1,00,00,000/-. The counsel submitted that the tax effect in the present appeal was less than this threshold limit. Consequently, the High Court, in light of this submission and the monetary limit, dismissed the appeal as withdrawn. The court explicitly stated that the substantial questions of law were kept open for determination in an appropriate case. No costs were awarded. The judgment does not provide findings on the merits of the substantial questions of law raised.

What were the facts?

The appeal was filed by the Principal Commissioner of Income Tax, International Taxation – 1(2), Chennai (Revenue) against an order dated 01.03.2018 passed by the Income Tax Appellate Tribunal (ITAT) in ITA.No.1759/CHNY/2017. The assessee is Shri Mafaz Mohammed. The dispute concerns the assessment year 2007-08, where the Revenue challenged the ITAT's direction to tax Long Term Capital Gain (LTCG) in that year, as opposed to assessment year 2014-15, which the assessee had initially declared. The core of the dispute revolved around when the transfer of property, for the purpose of capital gains tax, had occurred, specifically in relation to a Joint Development Agreement (JDA) entered into on 27.06.2006.

What were the issues?

The Tribunal had to decide five substantial questions of law: 1. Whether the ITAT was correct in directing the Assessing Officer to tax LTCG in assessment year 2007-08, contrary to the assessee's own filing for assessment year 2014-15, concerning the transfer of property. 2. Whether the ITAT was correct in holding that the transfer of property occurred in FY 2006-07 (AY 2007-08) based on the JDA dated 27.06.2006, despite a clause in the JDA stating the assessee would not be entitled to possessory rights, which the Revenue argued did not constitute a transfer under the Income Tax Act. 3. Whether the ITAT was correct in holding the transfer occurred in FY 2006-07, viewing the developer as an exclusive licensee and not a transferee, citing Vijaya Productions P.Ltd Vs. ACIT (2012) 134 ITD 19. 4. Whether the ITAT was correct in not appreciating that for a 'Transfer' under Section 2(47)(v) of the Act, a registered contract under Section 53A of the Transfer of Property Act is necessary, as per the Supreme Court's decision in CIT Vs. Balbir Singh Mainin, especially after the amendment to the Indian Registration Act, 2011. 5. Whether the ITAT was correct in concluding the transfer occurred in FY 2006-07 when the JDA did not indicate a complete transfer of control to the developer, referencing the Bombay High Court's decision in Chaturbuj Dwarakadas Kapadia of Bombay Vs. CIT (2003)-206 ITR 491. The Revenue argued that the transfer did not occur in AY 2007-08, challenging the ITAT's interpretation of the JDA and the definition of 'transfer'. The assessee's arguments are not explicitly detailed but are implied through the issues raised by the Revenue and the ITAT's findings.

Which sections of the Income-tax Act were involved?

Section 260A,Section 2(47)(v)

AI-generated summary — verify with the full judgment below

TCA.No.127 of 2022 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 27.04.2022 CORAM THE HONOURABLE MR. JUSTICE R. MAHADEVAN AND THE HONOURABLE MR. JUSTICE J. SATHYA NARAYANA PRASAD T.C.A.No.127 of 2022 Principal Commissioner of Income Tax, International Taxation – 1(2), Chennai 600 006

.. Appellant Versus Shri Mafaz Mohammed, 4th Floor, Celestial Centre, South Usman Road, T.Nagar, Chennai 600 017.

.. Respondent Tax Case Appeal filed under Section 260 A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal “A” Bench, Chennai, dated 01.03.2018 in ITA.No.1759/CHNY/2017. For Appellant : Mr.Karthik Ranganathan Standing Counsel 1/5 https://www.mhc.tn.gov.in/judis TCA.No.127 of 2022 JUDGMENT (Judgment of the Court was delivered by R. MAHADEVAN, J.) This Tax Case Appeal has been filed by the appellant / revenue, questioning the correctness of the order dated 01.03.2018 passed by the Income Tax Appellate Tribunal “A” Bench, Chennai in ITA.No.1759/CHNY/2017, raising the following substantial questions of law; 1. Whether on the facts and in the circumstances of the case, the Hon'ble ITAT was right in directing the Assessing Officer to tax Long Term Capital Gain in the assessment year 2007-08 as against Assessment year 2014-15, when the assessee himself filed the return of income admitting Long Term Capital Gain in that year? 2. Whether on the facts and in the circumstances of the case, the Hon'ble ITAT was right in holding that the transfer of property had taken place in the financial year 2006-07 relevant to assessment year 2007-08 since Joint Development Agreement that Developer was entered in 27.06.2006, when the assessee himself mentioned in para 7.3 of the Joint Development Agreement shall not be entitled to create any possessory right over the said lands, which could be construed as transfer of the property within the meaning of the Income Tax Act? 3. Whether on the facts and in the circumstances of the case, the 2/5 https://www.mhc.tn.gov.in/judis TCA.No.127 of 2022 Hon'ble ITAT was right in holding that the transfer of property had taken place in the financial year 2006-07 relevant to assessment year 2007-08 when the developer had acted only as exclusive licensee to carry out construction and not as a transferee, (as per para 7.2 of JDA), as observed by Hon'ble ITAT in the case of Vijaya Productions P.Ltd Vs. ACIT (2012) 134 ITD 19? 4. Whether the Hon'ble ITAT was right in not appreciating the fat that to qualify “Transfer” of a capital asset u/s.2(47)(v) of the Act, there must be a contract which can be taken cognizance of for the purpose of specified sec.53A of Transfer of Property Act, after amendment of Indian Registration Act, 2011, unless the said contract is registered, as observed by the Hon'ble Supreme Court of India in the case of Commissioner of Income Tax Vs. Balbir Singh Mainin in Civil Appeal No.15619 of 2017? 5. Whether Hon'ble ITAT was right to conclude that the transfer of property had taken place in the financial year 2006-07 relevant to assessment year 2007-08 when the Development Agreement is not indicating that the passing of transferring of complete control over the property in favour of the Developer, as observed by the Hon'ble High Court of Bombay in thecase of Chaturbuj Dwarakadas kapadia of Bombay Vs. CIT (2003)-206 ITR 491)?'

3/5 https://www.mhc.tn.gov.in/judis TCA.No.127 of 2022 2. When the matter was taken up for consideration, the learned counsel for the appellant / Revenue brought to the notice of this court the Circular No.17/2019 dated 08.08.2019 issued by the Central Board Direct Taxes, wherein, it is stipulated that appeals shall not be filed/pursued by the Department before the High Court in cases where the tax effect does not exceed Rs.1,00,00,000/- (Rupees One Crore). It is also submitted that the tax effect in this appeal is less than the threshold limit. 3. In the light of the aforesaid submissions made by the learned counsel for the appellant / Revenue, the present appeal, wherein, the tax effect is said to be less than the monetary limit imposed, is dismissed as withdrawn, keeping open the substantial questions of law for determination in an appropriate case. No costs. [R.M.D,J.] [J.S.N.P, J.] 27.04.2022 msr

Index : Yes / No To The Income Tax Appellate Tribunal “A” Bench, Chennai 4/5 https://www.mhc.tn.gov.in/judis TCA.No.127 of 2022 R. MAHADEVAN, J. AND J.SATHYA NARAYANA PRASAD, J. msr TCA.No.127 of 2022 27.04.2022 5/5 https://www.mhc.tn.gov.in/judis

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