The completion of transfer under joint development agreements is determined by the possession of the property and compliance with the conditions under Sec. 53A of the Transfer of Property Act and Sec. 2(47)(v) of the Income Tax Act.

R. Sudhakar, J.

1. The Revenue has filed the present appeal, challenging the order of the Income Tax Appellate Tribunal, which upheld the order of the Commissioner of Income Tax (Appeal), and held that the capital gains on transfer of the property through joint development is assessable as income of the previous year relevant to assessment year 2008-2009 and rejected the contention of the Revenue that it should be assessable as income of the year relevant to the assessment year 2006-2007.

2. The respondent/assessee is a Company engaged in the business of manufacturing and trading. In respect of the Assessment Year 2006-2007, returns were filed on 13.04.2007, declaring loss of Rs.19,64,300/-. The same was summarily processed on 22.8.2007 and the assessee's income was assessed at Rs.10,79,320/-. Thereafter, the Assessing Officer was of the opinion that the income of the assessee, liable to be assessed under the head long term capital gains of Rs.10,11,12,800/-, had escaped assessment. This prompted him to issue notice under Sec.148 of the Income Tax Act dated 24.12.2010 on the assessee.

3. The assessee pleaded before the Assessing Officer that it had owned a factory building at Coimbatore, which he intended to transfer through joint development agreement and accordingly on 28.12.2005, he entered into a joint development agreement with partnership firm by taking an advance of Rs.1.74 crores. Thereafter, the Coimbatore Corporation accorded approval to the development plan only on 27.09.2007 i.e., relevant to assessment year 2008-2009 and the possession was handed over to the developer who commenced the construction. Since approval was granted on 27.9.2007 and possession was handed over thereafter, the assessee claimed long term capital gains in Assessment Year 2008-2009.

4. The Assessing Officer, by Proceedings dated 01.12.2011, rejected the explanation and held that the “transfer” under section 2(47)(v) of the Act should be deemed to have been completed only in the impugned assessment year 2006-2007, since the joint development agreement had been registered on 28.12.2005. A Protective Assessment order was also passed in respect of the year 2008-09 including the capital gains.

5. The Assessee preferred appeals before the Commissioner of Income Tax (Appeals) against both orders. Both appeals were disposed of by order dated 16.5.2012 insofar as the assessment year 2006-2007. At the time of hearing the appeal in relation to the impugned assessment year 2006-2007, the Commissioner of Income Tax (Appeals) relied upon the earlier order in assessee's appeal for assessment year 2008-2009 holding that the long term capital gains are to be substantively assessed in the said assessment year. In the order dated 16.5.2012, the Commissioner of Income Tax (Appeals) held that capital gains in respect of transfer of property should be assessed during the year 2008-09, as it satisfied all the conditions required under sec.53A of the Transfer of Property Act as well as under section 2(47)(v) of the Act. The assessee has complied with the requirements of Law during the assessment year 2008-09.

6. The specific finding given by the Commissioner of Income Tax (Appeals) to the Assessing Officer is to treat the income offered on capital gains for the assessment year 2008-09 on substantive basis and not on protective basis as mentioned in the assessment order. The order reads as follows:

“6.13. The Assessing Officer in his order admits that possession of the property was handed over during the assessment year 2008-09. The Honourable Madras High Court in the case of CIT vs. Saroja 301 ITR 124 held that for invoking the provisions of Section 53A of the Transfer of Property Act handing over possession is very relevant. The Chennai Bench of the Tribunal in the case of C. Venkatachalam vs ACIT by its order dated 31.10.2009 held that in respect of the joint development agreement, the transfer is complete only when the land owner gets the built up area