Decided on June 25,2013

ITO Respondents


- (1.) FOR the assessment year 2008 -2009, appellant was selected for scrutiny assessment and, accordingly, a notice under section 143(2) of the Income Tax Act, 1961 (hereinafter referred to as the Act) was issued to him. In course of scrutiny assessment, assessee was confronted with the report submitted by the annual information wing, which held out that the assessee has sold an immovable property at a consideration of Rs. 39 lacs. Appellant contended that he had an agricultural land which land and land situate in the vicinity were declared as industrial estate. Appellant contended that he and other land owners having agricultural land within that declared industrial estate formed an AOP, transferred the agricultural land to AOP, whereupon AOP applied for conversion of land use and the same having been granted, the industrial land was ultimately sold by AOP. It was contended that transfer by him of a piece of agricultural land to AOP does not attract any capital gain. Steps taken to sell the industrial land will attract capital gains in the hands of the AOP. This contention was not accepted by the Assessing Officer, inasmuch as, there was no evidence to suggest transfer of any agricultural land by the appellant to AOP. It was found as a fact that before constitution of AOP, the land was converted from agricultural to industrial, and thereafter, in fact, the industrial land was sold. The entire capital gains tax was fastened upon the appellant. Appellant approached the learned Commissioner (Appeals). The Commissioner (Appeals) found that AOP came in to existence on 16 -6 -2007 and the land in question was sold by AOP on 12 -2 -2008. It, accordingly, held that assessing full amount of capital gains in the hands of appellant is not correct since he is only one constituent of AOP. Commissioner (Appeals) held that when the land vested in the AOP on 16 -6 -2007 the land had already been converted from agricultural to industrial. The Commissioner (Appeals) held that in terms of section 2(47) of the Act, the land in question stood transferred on 16th June, 2007 from individual owners to AOP. The Commissioner (Appeals) directed the Assessing Officer to initiate proceedings under section 150 read with Section 147/148 of the Act on each individual member/constituent of AOP for assessing the short term capital gains on each one of them on account of transfer of capital asset to AOP on 16 -6 -2007. For that purpose, Assessing Officer was directed to consider the price of transfer to AOP on the basis of the circle rate prevailing on 16 -6 -2007. The Commissioner (Appeals) then directed assessment of capital gains in the hands of AOP also when it sold ultimately the land in question to the ultimate purchaser on 12 -12 -2008. Aggrieved thereby, appellant approached the Tribunal, but the Tribunal refused to interfere.
(2.) NO doubt that for the purpose of income tax, a capital asset may be transferred to an AOP as is provided in section 2(47) of the Act. However, when the capital asset is an immovable property by reason of the provisions contained in the Transfer of Property Act read with the Registration Act, transfer of an immovable property of the nature dealt with herein requires an instrument which is also required to be registered. In accordance with the provisions of the Income Tax Act read with the various instructions/clarifications/directions issued by CBDT from time to time, transfer will take effect in a situation as provided in Section 53A of the Transfer of Property Act, namely, when there is an agreement to transfer and, in part performance thereof, the transferee is in possession of the immovable property agreed to be transferred. In the instant case, there is no conveyance by the appellant in favour of AOP, nor there is any agreement between the appellant and the AOP coupled with the contention by the AOP that in pursuance with that agreement and in part performance thereof it is in possession of the property in question. We are, therefore, of the view that there was no just reason by the Commissioner (Appeals) to interfere with the order of the Assessing Officer and we are also of the view that the Tribunal did not take notice of what may be treated as a transfer from one to the other in terms of the general law as well as in terms of the laws applicable to income tax. However, there being no independent appeal by the revenue, we refuse to interfere.
(3.) THE appeal fails and then same is dismissed.;

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