The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) held that a mere agreement to sell the immovable property without giving possession to the buyer, not a transfer of assets under section 2(47) of the Income Tax Act,1961.
Shree Ami Office Owner’s Association, the assessee is an association of persons (AOP) registered under the provisions of the Bombay Non-Trading Corporation Act, purchased a property in an auction carried out by the office of the Chief Commissioner of income tax, Gujarat, Ahmedabad for a total consideration of 57 lakhs.
During the course of the assessment, the AO observed that since the assessee AOP was restrained from carrying out any commercial activity which rendered profit, the activity was done by assessee AOP through its members by allotting shares to its members, entering into construction agreement and after having got the construction completed, sell the constructed property to buyers.
The Assessing Officer held that the assessee AOP was the “real owner” of the property and its members were not owners in reality and have no legally sustainable identity. The AO held that the members of the assessee AOP had merely acted on behalf of the assessee AOP and the actual title in the property was in the name of the assessee AOP only.
The AO also held that the assessee AOP had complete control over the entire endeavour and actual day-to-day conduct of the business and the allotment of shares between its members had no sanctity in law.
A Coram comprising of Ms Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member observed that all the funds for the purchase of land and construction of the building are given by the members and the assessee AOP has accordingly issued shares to the members, in proportion to their contribution.
The assessee AOP was fully funded by its members and the assessee allowed the right in the land and issued an allotment certificate on 27th October 1999 in favour of its members. By this allotment certificate, the members of the assessee AOP got rights in the land to the extent of their share in the funds contributed by them.
It was further observed that on 10-01-2007, the respective allottee members entered into a sale agreement with the proposed purchaser to sell the land and building appurtenant thereto, as owners of the said property. The Members were in possession and enjoyment of flats and paid no rent to the company. The ITAT held that the assessee company could not be held to be the owner of flats on the ground that the land title remained with the assessee and, hence, it could be assessed on the notional annual letting value of flats.
The Tribunal held that where the assessee merely agreed to sell the immovable property without giving possession to the buyer, where there was nothing to show that possession was ever delivered by the assessee to the purchaser in part performance of the agreement for sale, there was no transfer within the meaning of section 2(47)(v) of the Act.
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