SANJAY DUTT,NEW DELHI vs. ACIT, CIRCLE 1(2)(2), INTERNATIONAL TAXATION, NEW DELHI

This appeal by the assessee is directed against the Assessment Order passed u/s. 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 24.06.2022, for Assessment Year 2018-19.

Ms. Manju Goel, appearing on behalf of the assessee submitted that the short issue for consideration of the Tribunal in this case is; the year of taxation of capital gains. 2.1. Narrating facts of the case, the ld. AR of the assessee submits that the assessee is a non-resident. The assessee entered into Property Development Agreement (PDA) with Sanskar Home P. Ltd. (Developer) on 14.06.2017 with respect (A.Y.2018-19) to property bearing no. C-9/3 Vasant Vihar, Delhi admeasuring 420 sq. yards. As per the said agreement, the assessee was to receive an amount of Rs.5.65 crores as consideration for transfer of rights in the immovable property. During the Financial Year 2017-18, possession of the property was not handed over by the assessee to the developer for construction as the assessee immediately after signing the PDA left for the USA. Subsequently, when the assessee came back to India a Supplementary Agreement was signed on 23.05.2018 by the assessee with the developer, whereby consideration was revised and reduced to Rs.5.15 crores. It is pertinent to mention here that neither the original PDA nor the Supplementary Agreement was registered. Admittedly, the assessee received Rs.3.39 crores during FY 2017-18 and the balance amount of consideration was received by the assessee in FY 2018-19. The possession of the immovable property was given by the assessee to the developer in FY 2018-19 and project was completed in the same FY 2018-19. After the receipt of the entire consideration, the assessee offered capital gains to tax in his return of income for AY 2019-20. The ld. AR in order to substantiate her contentions furnished a copy of acknowledgment of assessee’s return of income for AY 2019-20 along with the computation. The ld. AR contended that since the Development Agreements were not registered, the case of the assessee is squarely covered by the decision in the case of CIT vs. Balbir Singh Maini, 398 ITR 531 (SC).

Per contra, Shri M.S Nethrapal representing the department vehemently defending the assessment order submitted that as per assessee’s own admission, the assessee has received consideration amounting to Rs.3.39 crores during FY 2017-18. The assessee ought to have offered the same to tax in his return of income for AY 2018-19. No such income was offered to tax by the assessee in the ITR. He thus, prayed for dismissing appeal of the assessee.

The Hon’ble Supreme Court of India in the case of Balbir Singh Maini (supra) after referring to the amended provisions of section 53A of the Transfer of Property Act and sections 17 & 49 of the Indian Registration Act held that, unless the document containing the contract to transfer for consideration of any immovable property is registered, it shall not have any effect in law. Thus, in the instant case since neither the PDA nor the Supplementary Agreement was registered, the transaction of transfer of rights vide aforesaid unregistered agreements could not be considered as transfer u/s.2(47) of the Income Tax Act, 1961(hereinafter referred to as ‘the Act’). Since, provisions of section 2(47)(v) of the Act are not attracted on the facts of instant case, the question to tax capital gains in the impugned assessment year does not arise.