Advance received against sale of land is not taxable in the year of receipt

No agreement has been signed in this year. The possession has also not been delivered in this year. The twin conditions of execution of written agreement and handing over of the possession have to be cumulatively satisfied in order to bring the case within the ambit of section 2(47)(v) read with section 53A of the Transfer of Property Act. None of these conditions are satisfied. Therefore, it is held that the property has not been transferred in this year. It has also not been sold in this year. Since the transaction of transfer has not taken place in this year, nothing can be brought to tax as business income in this year. In this view of the matter, the money received is only an advance, which will get taxed as and when the transaction actually takes place.

An assessee could hold lands either for business or as an investment. Accordingly it may offer for taxation under the head ‘Capital gain’ –The assessee could very well be a trader in land as well as an investor in land simultaneously, depending on what his intention was and how he treated the asset in question. The land was purchased and was shown as an asset in the balance sheet. There was no evidence that borrowed capital had been used for the purchase.  Hence the assessee had appropriately taxed under the head ‘capital gains.

THE HIGH COURT OF DELHI AT NEW DELHI

Judgment delivered on: 07.03.2013

ITA 569/2012

COMMISSIONER OF INCOME TAX, DELHI        

versus

DELHI APARTMENTS PVT LTD 

JUDGMENT

BADAR DURREZ AHMED, J (ORAL)