Whether mere execution of a development agreement results in a "transfer" u/s 2(47((v)/(vi) if the approval of the municality is delayed and the developer has not started work?

Last updated: 24 November 2014

Court :
ITAT Mumbai

Brief :
Assessee entered into MOU on 05-08-1994 with M/s Radiant Builder for development of property. Subsequently, the assessee entered into another MOU with M/s Murali realtors on 26.12.1995 & 17.5.1996 and a Deed of confirmation was also executed on 13.11.1997. Thereafter the assessee also applied to the Income tax department seeking clearance u/s 269UL and the Income tax department also issued a certificate on 15.9.1998. Assessee had received advance amounts before execution of development agreement on basis of MOU. Between 2000 to 2005, the assessee purchased the tenancy rights of various tenants. There was delay in approval from municipal corporation due to which plans were revised subsequent to AY 2000- 01. Thus development work did not start in AY 2001-02. As per development agreement, possession was not given by assessee in AY 2001-02 but only licence to enter into property was given. Thus, assesse contented that ITO is incorrect in holding that transfer of property took place in the year relevant to AY 2001-02. Held on the basis of various case laws that the transfer of property did not take place on the date of execution of development agreement and accordingly the ITO is not justified in assessing the capital gain in AY 2001-02.

Citation :
Dilip Anand Vazirani – Appellant – Versus - Income Tax Officer – Respondent