The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that the mere license to enter the property for carrying out development not ‘Transfer’ for imposing capital gain liability under the provisions of the Income Tax Act, 1961.
A single bench of Judicial Member N.V. Vasudevan was considering the case of Smt. Lakshmi Swarupa versus The Income Tax Officer and there Assessee an individual owned a property in Bangalore and entered into the joint development agreement with another builder. As per the agreement assessee would get 30% built-up area and proportionate undivided share of land.
The assessee did not file the return of income even pursuant to the notice issued under Section 148 of the Income Tax Act, 1961. However, AO determined the value of the property and determined the capital gain.
Before the first appellate authority assessee submitted that he himself given to the builder only the license to enter the property for the purpose of carrying out development, which was not legal possession as contemplated u/s.53A of the Transfer of Property Act.
The assessee also pointed that no transfer held during the previous year relevant to the assessment year, there was no delivery of possession in part performance of the agreement for sale in the manner contemplated by Sec.53A of the Transfer of Property Act.
After heard all the submissions of Assessee, CIT(A) not satisfied confirmed the decision of Assessing Officer holding that there was a transfer within the meaning of Sec.2(47)(v) of the Act.
Now Assessee carried the matter to this tribunal and reiterated the submissions made before lower authority. The bench heard the rival submission and heard the cases cited by both the parties.
The bench observed that “the clause in the JDA regarding possession clearly states that what is given is not possession contemplated u/s.53A of the Transfer of Property Act and that it is merely a license to enter the property for the purpose of carrying out development.”
Based on the above findings, the bench held that capital gain on transfer of property cannot be done since no transfer was undertaken.
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