K.V. Satish Babu [HUF] Vs ITO (ITAT Bangalore)
The ITAT Bangalore considered whether execution of a Joint Development Agreement (JDA) dated 16.09.2010 resulted in a transfer under Section 2(47)(v) of the Income-tax Act, 1961 read with Section 53A of the Transfer of Property Act, 1882, thereby attracting capital gains tax in AY 2011-12. The assessee contended that the land remained agricultural until its conversion on 03.12.2012, possession was handed over only on 20.12.2012, and the capital gains were accordingly offered to tax in AY 2013-14. The Revenue treated the date of the JDA as the date of transfer and assessed short-term and long-term capital gains in AY 2011-12. The Tribunal examined the JDA, particularly Clause 5.1, which expressly stated that the developer’s right to enter the property would not constitute delivery of possession under Section 53A and that the owner would continue in possession until the contract was discharged by performance. The Tribunal held that Section 53A requires the transferee to have taken possession in part performance of the contract and to have performed or been willing to perform its obligations. It found that the developer was granted only permissive entry for development purposes and not possession contemplated under Section 53A. There was no document evidencing delivery of possession, and the mere necessity of possession for development could not establish transfer under Section 2(47)(v). Consequently, the Tribunal held that no transfer occurred during the previous year relevant to AY 2011-12, deleted the capital gains assessed for that year, and allowed the assessee’s appeal.
