Mere Transfer of Possession of Land to Developer under MoU not sufficient to prove ‘Sale’: ITAT Quashes Assessment solely based on TDS Statement [Read Order]

Possession of Land - MoU - ITAT - TDS Statement - Taxscan

The Income Tax Appellate Tribunal (ITAT), Bangalore bench has recently quashed an assessment merely based on TDS Statement under Form 26AS where the developer paid the TDS amount to the Government upon the transfer of possession of land under the Memorandum of Undertaking (MoU) for joint development.

Form 26AS is a statement that provides details of any amount deducted as TDS or TCS from various sources of income of a taxpayer. 

The assessee, a HUF entered into an MoU with a builder where the possession of the ancestral property was transferred to the latter for development.

The assessee contended before the Tribunal that the land transaction agreed vide aforesaid MOUs was not materialized and the land was not transferred in favour of the Developer Company M/s. Nambiar Builders Pvt Ltd and therefore there was no transfer of the Asset and hence there is no liability to the Capital Gain Tax. It was also pointed out that the Developer Company has deducted the TDS in respect of the payments made to the assessee and his Sister Smt. Girija with whom the developer Company had entered into a separate MOU. According to the MOUs the Developer Company has deducted the TDS on the deemed consideration payable to the assessee.

After hearing arguments from both sides, the Tribunal bench comprising Judicial Member Beena Pillai and Accountant Member Chandra Poojari observed that the lower authorities determined the sale consideration on the basis of Form 26AS without seeing the actual sale deed entered by the assessee with concerned parties.

“In our opinion, sale consideration cannot be determined only on the basis of Form 26AS. The provisions of s.2(47)(v) can be applied only if there is a written contract coupled with the transfer of possession in terms of s.53A of the Transfer of Property Act. In English law, the contract to which the doctrine of part-performance applies may be oral. However, s. 53A of the Transfer of Property Act expressly requires that the contract must be in writing by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty. Thus s. 53A does not recognize an oral contract. The writing is an essential sine qua non for the applicability of the doctrine of part-performance,” the Tribunal said.

“The lower authorities must have considered the relevant sale deed so as to compute the correct value of sale consideration and during the year of assessment. Being so, the assessment framed on the basis of Form 26AS is set aside. However, we make it clear that if the revenue finds that there is material evidence in support of the transfer of land by the assessee to M/s. Nambiars Pvt. Ltd. who had deducted TDS in anticipation of the transfer of land in this A.Y. under consideration that to be brought to tax. In other words, if the revenue finds that there was a transferable land by the assessee in favor of the deductor of TDS i.e.Nambiars Pvt. Ltd. in the A.Y. by executing a proper sale deed towards the transfer of the impugned property, the same may be examined in accordance with the law. At this stage, we refrain from committing anything on the status of the assessee in whose name capital gain to be taxed as we have set aside the assessment. It is kept open,” the Tribunal added.

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