Land given for development is ‘transfer’ for capital gain; ITAT analyzed Sec. 53A of Transfer of Property Act, 1882

Land given for development is 'transfer' for capital gain; ITAT analyzed Sec. 53A of Transfer of Property Act, 1882

In this case, the assessee had entered into a land development agreement with M/s S. As per the agreement, the assessee would get 36% of the saleable constructed area and in addition, it had received an interest-free security deposit from M/s S. On this arrangement, the Assessing Officer took the view that the development agreement would attract Sec. 2(47)(v) and the resultant profit would be chargeable to capital gain. On appeal, the Tribunal thoroughly analyzed the provisions of Section 53 of Transfer of Property Act, 1882 and held in favour of revenue. The relevant extracts of the judgment are as follows: 1) Ingredient of Sec. 53A: "Where any person contracts to transfer…..any immovable property by writing ITAT's Interpretation: "To transfer" means that the said contract is in respect of a transfer and not for any other purpose. As per 2(47)(v), the transaction involving transfer of a property are not required to be registered under Registration Act for the purpose of capital gains. How ingredient satisfied in instant case-per ITAT: The assessee is the "person" who has entered into a contract with the developer to transfer the land for its development. 2) Ingredient of Sec. 53A: "for consideration" ITAT's interpretation: The existence of the "consideration" is the essence of the contract. How ingredient satisfied in instant case-per ITAT: In this case the amount of consideration has to be paid to the assessee in the form of cash as well as in kind i.e., the flats to be constructed by the developers to be handed over to the owners - KRISHNA KUMAR D. SHAH (HUF) v. DCIT [2012] 23 taxmann.com 111 (Hyderabad - Trib.) (View full summary & judgment)