CIT Vs Vijaya Productions Pvt. Ltd. (Madras High Court)
Unregistered Joint Venture Agreement Held Insufficient to Trigger Capital Gains Tax; Capital Gains Assessment Set Aside as Joint Venture Was Not Implemented During Relevant Year; Deemed Transfer Under Income Tax Act Rejected Due to Lack of Possession and Consideration; Unregistered Development Agreement Cannot Create Transfer Under Section 2(47).
The appeal was filed by the Commissioner of Income Tax, Chennai, against the order of the Income Tax Appellate Tribunal for the Assessment Year 2007-08. The dispute concerned whether a Joint Venture Agreement, Shareholders’ Agreement, and General Power of Attorney executed on 26.05.2006 between the assessee company and M/s. Prestige Estates Projects Pvt. Ltd. amounted to a “transfer” under Section 2(47) of the Income Tax Act, thereby attracting capital gains tax liability.
The Revenue contended that the agreements resulted in relinquishment and creation of rights in favour of the developer and that the assessee accrued consideration of Rs.115 crores for transferring 50% shareholding to the investing company. It was argued that the transaction enabled enjoyment of the immovable property by the developer and therefore constituted a transfer under Section 2(47)(v) and (vi), read with Explanation (2). According to the Department, possession had already been transferred and development activities had commenced before 31.03.2007, making the assessee liable to capital gains tax for the relevant assessment year.
