CIT Vs. Balbir Singh Maini (Supreme Court of India)
Capital gain arising under a Joint Development Agreement (JDA) which never materialized for want of necessary permissions was nothing but a hypothetical income and the same could not, therefore, be taxed under section 45 read with section 48.
In the facts of the present case, it is clear that the income from capital gain on a transaction which never materialized is, at best, a hypothetical income. It is admitted that, for want of permissions, the entire transaction of development envisaged in the JDA fell through. In point of fact, income did not result at all for the aforesaid reason. This being the case, it is clear that there is no profit or gain which arises from the transfer of a capital asset, which could be brought to tax under section 45 read with section 48 of the Income Tax Act.
In the present case, the assessee did not acquire any right to receive income, inasmuch as such alleged right was dependent upon the necessary permissions being obtained. This being the case, in the circumstances, there was no debt owed to the assessees by the developers and therefore, the assessees have not acquired any right to receive income under the JDA. This being so, no profits or gains “arose” from the transfer of a capital asset so as to attract sections 45 and 48 of the Income Tax Act.
Comments are closed.