Non delivery of possession to the purchaser by the date of filing of suit proves provisions U/S 2(47) not being applicable: ITAT upholds order of CIT(A) [Read Order]

The Pune bench of the Income Tax Appellate Tribunal (ITAT) held that no provisions under Section 2(47) of the Income Tax Act is attracted as neither the entire sale consideration was paid by the purchaser nor possession was given by the assessee arising capital gains in the hands of the assessee.

The assessee is a firm, engaged in the business of purchase and sale of land. The assessee conducts its business under the name and style as “Kapurba and Company”. The assessee filed its return of income declaring a total income of Rs.10,16,327/- which was processed under Section 143(1) of the Income Tax Act. The case was selected for scrutiny, notices under Sections 143(2) and 142(1) were issued by the AO. In response to the said notices, the assessee explained its claim in the assessment proceedings. According to the AO, the assessee entered into an agreement of sale dated 27-12- 2011 relating to the land bearing Survey Nos. 73/1, 73/2 and 73/3A of village Majiwad and Survey No. 27A of village panchpakhadi, Dist.-Thane with Bluestar Infra Housing Private Limited for a sale consideration of Rs.20 crores.

The said agreement of sale registered on 19-01-2012 and irrevocable power of attorney also executed on the same day, 19-01-2012, which was according to the AO, the assessee extinguished all its rights to Bluestar Infra Housing Private Limited for development of the said property. Further, it was noted by the AO that the market value of the said property for the purpose of stamp duty is of Rs.30,74,93,500/- and the assessee has shown the same as capital asset under the head fixed assets in the balance sheet. The AO issued letter dated 23-01-2015 requesting the assessee as to why the receipts of sale consideration of land has not been offered for taxation. It was contended by the assessee that the purchaser is not co-operating to complete the sale and paid only Rs.13 crores out of Rs.20 crores. Further, it was requested to treat the subjected property as a stock-in-trade.

The AO was of the opinion that the said subjected property is a capital asset as per balance sheet and in terms of various clauses of agreement of sale and irrevocable power of attorney he that the assessee transferred its capital asset to Bluestar Infra Housing Private Limited under section. 2(47) of the Act, the gain arising out of the said transfer of capital asset chargeable to tax. The AO considering the cost of acquisition added capital gain Rs.30,69,57,165/- to the total income of the assessee vide its order dated 25-03-2015 passed under section. 143(3) of the Act.

CIT(A) held that no provisions under section. 2(47) of the Act is attracted as neither the entire sale consideration was paid by the purchaser nor possession was given by the assessee arising capital gains in the hands of the assessee. As aggrieved by the order of CIT(A), the Revenue appealed before the tribunal.

After hearing both the parties, the two member bench of the tribunal consisting of Inturi Rama Rao (Accountant member) and S.S. Viswanethra Ravi (Judicial member) held that on the date of filing of Suit on 10-07-2015 there was no possession delivered to the purchaser and non-applicability of provisions under section. 2(47) of the Act, as he by the CIT(A) is justified. It is also clear that the assessee received Rs.13 crores out of Rs.20 crores of sale consideration. Therefore, taking into account the facts and circumstances of the case, the bench held that the provisions under section. 2(47) of the Act are not attracted and the finding of CIT(A) is justified. Thus, the grounds raised by the Revenue failed and were dismissed.

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