The date of possession of the property handed over to the developer is crucial for determining the assessment year for taxation of capital gains from the property transfer.

V.G. Sabhahit , J.—ITA No. 3209/2005 is filed by the revenue which has been admitted on 26-9-2006 for consideration of the following substantial questions of law:

1. Whether the Tribunal was correct in holding that the assessee was not liable to pay capital gains tax despite the assessee declaring taxable income under this head by filing a return of income?

2. Whether the Tribunal was correct in proceeding to decide the issue regarding the chargeability of capital gains for the first time before it, without properly affording opportunity to the Assessing Officer to rebut this contention or remitting the matter back for fresh consideration?

3. Whether the Tribunal was correct in holding that there was no transfer during the current assessment year despite the assessee handing over the possession of the immovable property to the builder who had in turn handed over the part of the consideration amount which would amount to transfer attracting capital gains tax?

4. Whether the Tribunal was correct in holding that the capital gains tax should be levied only on completion of the entire transaction when the super built-up area is handed over to the assessee as per the agreement?

ITA No. 3165/2005 is filed by the assessee which has been admitted on 21-1-2006 for consideration of the following substantial questions of law:

1. Whether, on the facts and circumstances of the case the capital gains in respect of the property in question was liable under the Act for the assessment year 1996-97?

2. Whether, on the facts and circumstances of the case the amounts aggregating to Rs.26,50,000 as allowed by the CIT(A) were permissible deductions in computing capital gains?

2. The material facts giving rise to the above said questions of law are as follows:

The assessee - medical practitioner by profession filed his return of income on 18-9-1997 which was processed under section 143(1) of the Income-tax Act, 1961 (hereinafter called the 'Act'). According to him, total income was computed at Rs.33,57,990. A notice was issued to the assessee under section 143(2) of the Act and in response to the same, assessee's representative appeared before the assessee. It was contended that assessee was an owner of an immovable property at No. 15, I Main Road, Gandhinagar, Bangalore. On 26-1-1996, the assessee entered into a joint venture agreement with M/s. Venus Udyog Limited for developing the property. The agreement provides that a sum of Rs.45 lakhs to be paid to the assessee as a non-refundable advance and in addition to the same, he was also entitled to total built-up area of 5500 sq.ft. to be constructed by the developers which will be made available to the assessee free of cost. On the basis of the said agreement, assessee returned a long term capital gain of Rs.29,19,570. The Assessing Officer by order dated 30-3-2000 imposed tax on the capital gain as per the terms of the agreement after giving proper deductions. Being aggrieved by the same the assessee preferred an appeal before the Commissioner of Income Tax (Appeals)-V, Bangalore and the first appellate authority by order dated 14-2-2001 holding that it cannot be stated that there is no transfer of the immovable property in the year ending 31-3-1997 in terms of section 2(47) of the Act and there has been transfer of land in consideration of having received Rs.45 lakhs from the owner and also having handed over the possession of land to the developer for construction and therefore, there has been a transfer within the meaning of section 2(47) between the owner i.e., the appellant and the developer for the year ended 31-3-1997 is correct and the capital gains thereon is taxable for the year 1997-98. Being aggrieved by the said order, an appeal was filed before the Income Tax Appellate Tribunal, Bangalore (hereinafter called the Tribunal) by the revenue. The assessee filed cross objections regarding assessment year during which capital gain is to be taxed. The Income Tax Appellate Tribunal, by order d