The Income Tax Appellate Tribunal (ITAT), Bangalore Bench consisting of Beena Pillai, Judicial Member, and Laxmi Prasad Sahu, Accountant Member held that Capital Gain does not attract in case of permissive possession in immovable property and hence not taxable.
The assessee, Vani Shree filed a return of income for Assessment Year 2015-16 declaring an income of Rs.17,31,950/-. The case was selected for scrutiny for verifying the large exemption claimed u/s 54F. Notices u/s 143(2) and 142(1) were served on the assessee.
A reminder letter was sent to the assessee as there was no response to the above notices. Later the assessee’s Counsel furnished details of the property transferred, date of plan sanction, etc. The assessee’s share was one-fourth of the property or 26,953 square feet of undivided share in the land.
The assessee and the other owners of the property entered into a Joint Development Agreement on 05/02/2011 with M/s Vishnupriya Group of Builders and developers for the development of the land for the construction of a residential apartment complex. As per the terms of the agreement, the assessee was entitled to receive a 45% share of the super built-up area in consideration for transferring 55% of the undivided share in the land.
Before the AO, the assessee submitted that the developer obtained a sanction plan for construction of the apartment complex on 18/07/2014, and accordingly, construction had commenced after that date. The assessee took the stand that since 18/07/2014 was the date on which the developer took possession of the property, the transfer of the asset as defined under the provisions of section 2(47)(v) of the Act and 53A of the Transfer of Property Act took place on that date and hence the capital gains arising from the JDA was to be assessed in Assessment Year 2015-2016. The AO accepted this submission of the assessee as declared in the return of income.
The Tribunal observed that “The assessee only permitted the developer to develop the project in their land. Therefore, it cannot be construed that the possession of the immovable property of the assessee is vested with the joint developer as per the provisions of the Act.
In the instant case, it is noted that the assessee has given permissive possession and not ‘legal possession’, as contemplated within the meaning of section 53A of the Transfer of Property Act. Hence, it is held that the provisions of section 53A of the Transfer of Property Act, are not applicable to the impugned Joint Development Agreement. Based on the above facts, the conditions laid down in section 2(47)(v) of the Act, cannot be invoked, so as to bring the capital gains into tax.”
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