S. 45(5A) of Income Tax Has No Retrospective Application to JDAs Executed Before 01.04.2018: ITAT [Read Order]
ITAT Bangalore held that Section 45(5A) of the Income Tax Act has no retrospective application to Joint Development Agreements (JDAs) executed prior to 01.04.2018 and capital gains arising from such agreements cannot be taxed in the year of receipt of occupancy certificate.
The Income Tax Appellate Tribunal (ITAT), Bangalore Bench, held that Section 45(5A) of the Income Tax Act, introduced with effect from 01.04.2018, applies prospectively and cannot govern Joint Development Agreements (JDAs) executed prior to the said date.
The assessee, Shri Lakkanna Durgappa, had entered into a Joint Development Agreement with SJR Prime Corporation Pvt. Ltd. on 17.12.2012 for development of residential property, pursuant to which the assessee and his spouse were entitled to 37% share in the super built up area.
During the assessment proceedings for AY 2020-21, the Assessing Officer observed that occupancy certificates for the developed flats were received on 30.05.2019 and held that capital gains had accrued to the assessee during AY 2020-21. Accordingly, addition towards capital gains was made by invoking Section 45(5A) of the Income Tax Act.
Before the CIT(A), the assessee contended that the JDA had been executed in FY 2012-13 and therefore capital gains could not be taxed on the basis of receipt of occupancy certificate under Section 45(5A). Reliance was placed on the decisions in Chaturbhuj Dwarkadas Kapadia v. CIT and CIT v. Dr. T.K. Dayalu.
Accepting the contention and relying upon the earlier Bangalore Bench ruling in Smt. Shantha Alias Shanthamma v. DCIT, involving the assessee’s spouse, the CIT(A) deleted the addition towards capital gains for AY 2020-21.
Aggrieved, the Revenue filed an appeal before the Tribunal contending that capital gains had accrued to the assessee upon receipt of occupancy certificate during AY 2020-21 and were therefore taxable under Section 45(5A) of the Income Tax Act.
The Tribunal comprising Prashant Maharishi (Vice-President) and Keshav Dubey (Judicial Member) observed that the JDA had been executed and possession had been handed over during FY 2012-13 itself, and therefore transfer within the meaning of Section 2(47)(v) had already taken place in that year.
The Tribunal further held that Section 45(5A), introduced with effect from 01.04.2018, applies prospectively and cannot be invoked merely because occupancy certificate was received subsequently.
Accordingly, the Tribunal deleted the addition made towards capital gains for AY 2020-21.
The Revenue’s appeal was dismissed.
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