Capital Gains cannot be Taxable when Transfer of Land Taken Place in Previous Year of Assessment proceedings: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that capital gains cannot be taxable when the transfer of land took place in the previous year of the assessment proceedings. 

Gajanan Parshuram Khismatrao, the appellant assessee was an individual and derives income from his salary. The assessing officer made an addition during the proceedings of assessment under the head “capital gains‟ earned by the assessee during the relevant assessment year. 

Thus the assessee appealed against the order passed by the Commissioner of Income Tax(Appeals) for confirming the addition made by the assessing officer. 

Pranav Phadke, the counsel for the assessee contended that the assessee conferred ownership right to the developer under the Development Agreement in the previous year in which the assessment proceedings were initiated by the assessing officer. 

It was further submitted that possession of the land was given to the developer on the date of the Development Agreement and even the developer was given the right to sell the constructive area vide the Development Agreement and entitling the developer to sell the constructive area further was only possible once the possession was given. 

Satyaprakash Singh, the counsel for the revenue contended that under the Development Agreement, the owner had the right to get back the property if the payment terms are not fulfilled, and therefore, the Development Agreement was a contingent contract. 

It was further submitted that the possession was handed over to the developer on the date of the sale deed and the transfer of property took place in the year under consideration. 

The bench observed that the assessee had transferred the development rights in the plot of land to the builder/developer and the possession of the land was also handed over to the builder/developer along with the development rights in the previous year in which the assessment proceedings were initiated. 

The two-member bench comprising Prashant Maharishi (Accountant) and Sandeep Singh Karhail (Judicial) held that land was transferred by the assessee along with the other 17 co-owners to the builder/developer in the previous year and therefore, capital gains, if any, thereon cannot be taxed in the year of assessment while allowing the appeal filed by the assessee. 

To Read the full text of the Order CLICK HERE

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