Loading judgment…
Facts
The Revenue filed an appeal against the CIT(A)'s order for AY 2012-13. The appellant, a non-resident Indian, had filed a return of income in 2012. Subsequently, during AY 2016-17 proceedings, the AO discovered that the appellant had transferred land via a development agreement in 2012, leading to the belief that capital gains had escaped assessment.
Held
The CIT(A) had deleted the addition made by the AO on account of capital gains, holding that the transfer of the property had not taken place during the relevant assessment year. The Tribunal found that the true nature of the agreement, which was styled as a power of attorney, needed to be determined.
Key Issues
Whether the execution of a power of attorney and a joint development agreement constituted a 'transfer' of property under section 2(47) of the Income Tax Act, 1961, for the relevant assessment year.
Sections Cited
2(47), 147, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI SONJOY SARMA, JM
O R D E R Per: Inturi Rama Rao, AM This appeal filed by the Revenue is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 20.10.2023 for Assessment Year (AY) 2012-13.
Brief facts of the case are that the appellant is a non-resident Indian. The return of income for AY 2012-13 was filed on 30.07.2012 disclosing total income of Rs. 39,940/-. Against the said Thomas Chandy return of income there was no scrutiny assessment against the said return of income. Subsequently, during the course of assessment proceedings for AY 2016-17, the AO gathered information that the appellant transferred 150 cents of land in Kakkanad, Ernakulam vide development agreement dated 09.01.2012. Accordingly, formed opinion that capital gains eligible for tax for AY 2012-13 escaped assessment to tax. Accordingly, issued a notice u/s. 148 of the Income Tax Act, 1961 (the Act). In response to the notice u/s. 148 the appellant filed return of income on 06.02.2019 disclosing the same amount of income as disclosed in the original return of income. Against the said return of income the assessment was completed vide order dated 20.12.2019 passed us 143(3) r.w.s. 147 of the Act at a total income of Rs.11,71,48,420/-. While doing so, the AO brought to tax the long term capital gains of Rs. 11,71,08,481/- on transfer of land.
The factual background leading to the addition is that the appellant is owner of land admeasuring 150 cents in Kakkanad, Ernakulam. The appellant executed a registered power of attorney vide document No. 375/2011 on 23.11.2011 for development of that land in favour of M/s Skyline Foundations & Structures Pvt. Ltd. In addition to the execution of power of attorney, the appellant also entered into an agreement with builder. The AO, after making reference to some clauses of the power of attorney and agreement, concluded that all ingredients necessary to constitute a transfer as Thomas Chandy defined u/s. 2(47) of the Act stand satisfied. Therefore, the assessee is liable to pay capital gain tax on the said transfer. Accordingly, brought to tax capital gain of Rs. 11,71,08,481/-.
Being aggrieved, an appeal was filed before the CIT(A), contending that the power of attorney executed in favour of the developer does allow possession of the property for the purpose of carrying out the project. The joint development agreement entered into with the developer on 09.01.2012 was not a registered one. Therefore, there was no transfer within the meaning of provisions of section 2(47) of the Act placing reliance on the decisions of the Hon’ble Punjab & Haryana High Court in the case of C.S. Atwal v. CIT [2015] TaxCorp (DT) 61500 and Hyderabad Bench of this Tribunal in the case of ITO v. Sham Kumar 2015 Tax Pub (DT) (Hyd ITAT – ITA No. 40270). It was further submitted that the appellant had offered capital gains of Rs. 1.17 lakhs for AY 2017- 18. However, the CIT(A) placing reliance on the decision of the Hon'ble Supreme Court in the case of CIT. v. Balbir Singh Maini [2017] 398 ITR after making reference to the provisions of section 2(47) of the Act held that the transfer of the property had not took place during the year relevant to the assessment year under consideration. Accordingly, deleted the addition made under the head ‘capital gains’.
Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.
Thomas Chandy 6. The learned counsel for the assessee submitted that in view of the decision of the Hon'ble Kerala High Court in the case A.T. Sheriff v. CIT of 2017 there is no transfer within the meaning of section 2(47) of the Act and, therefore, the question of taxability of capital gain does not arise. It is further submitted that the joint development agreement entered into by the appellant with the developer was not registered. Only the power of attorney was registered. Therefore, the ratio of the decision of the Hon'ble High Court is squarely applicable.
On the other hand, the ld. CIT-DR submits that the AO had referred to the relevant clauses of the POA in page 2 of the assessment order, wherein, it is clearly stated that the appellant had agreed to sell to the developer or his nominee a portion of the undivided property in consideration for built up area and the power of attorney was duly registered and, therefore, the ratio of the judgement Balbir Singh Maini (supra) and Hon'ble High Court have no application to the facts of the case.
At the outset, we find that there is a delay of 98 days in filing the present appeal. Revenue filed a petition along with an affidavit seeking condonation of delay in filing the appeal, wherein it is stated that the delay had happened due to a technical glitch within the ITBA system due to which the order dated 20.10.2023 of CIT(A) was not reflected on the portal as and when it was passed. Hence, the delay is neither willful nor wanton. Therefore, it is prayed that the Thomas Chandy delay in filing the appeal may be condoned and the appeal may be admitted for adjudication. Having regard to the averments made in the affidavit seeking condonation of delay, in the absence of any evidence contrary, we are of the considered opinion that the Revenue is prevented by sufficient reasonable cause in filing the appeal within the prescribed limit. Accordingly, we condone the delay and admit the appeal for adjudication.
We have heard the rival contentions and perused the material available on record. The issue that arises for our consideration is whether there was a transfer of the property as defined u/s. 2(47) of the Act, having regard to the terms of the power of attorney entered into by the appellant with the builder. The AO had extracted certain clauses of the power of attorney at para 2 of the assessment order. On a mere reading of those clauses it would clearly suggest that the appellant had sold to the developer or his nominee the portion of undivided share in the property. It is undisputed fact that the power of attorney entered into by the appellant with the developer is registered. Merely because the agreement is styled as power of attorney, it cannot be said that no possession of the property was handed over to the developer. The mere nomenclature of the agreement does not determine the true nature of the agreement but the substance of the agreement shall alone determine the true nature of the agreement. However, the copy of the power of attorney filed before us does not contain the clauses extracted by the AO.
Thomas Chandy Therefore, we are of the considered opinion that the matter requires remand to the file of the AO to determine the true nature of the agreement entered into by the appellant with developer keeping in view the ratio of the decision of the Hon'ble Jurisdictional High Court in the case of Sheriff (supra) the Hon'ble Apex Court in the case of Balbir Singh Maini (supra).
In the result, the appeal filed by the Revenue stands partly allowed for statistical purposes.
Order pronounced in the open court on 31st July, 2025.