Capital gains

Unless the provisions of s 53A of the Transfer of Property Act are satisfied on the facts of a case, a transaction relating to a Development Agreement of a property cannot fall within the scope of deemed transfer under s 2(47)(v) of the IT Act, as held by HydTrib in K Radhika v DCIT — In favour of: The assessee (partly).

The assessee had received only a “meager amount” out of the total consideration, the transferee was avoiding adhering to the agreement and there was no evidence brought on record by the revenue authorities to show that actual construction had taken place at the impugned property in the assessment year under consideration and, also, there was no evidence to show that the right to receive the sale consideration was actually accrued to the assessee. Without accrual of the consideration to the assessee, the assessee was not expected to pay capital gains on the entire agreed sales consideration. When time is the essence of the contract, and the time schedule is not adhered to, it cannot be said that such a contract confers any rights on the vendor/landlord to seek redressal under s 53A of the Transfer of Property Act. This agreement cannot, therefore, be said to be in the nature of a contract referred to in s 53A of the Transfer of Property Act. The provisions of s 2(47)(v) will not apply to the assessees in the assessment year under consideration.

Capital gains vis-à-vis business income — When the assessee was not engaged in the regular activity of purchasing and selling agricultural land and the land was held as an investment, even if the land was developed and sold after converting the same into plots with a view to secure a better price, it cannot come within the purview of adventure in the nature of trade and business.

Decided on: 9 September 2011.