Thursday, October 17, 2013

In absence of an agreement, transfer of land by assessee to his AOP won’t be deemed as transfer

Where assessee contended that he formed an AOP and transferred a land to it, but no agreement between assessee and AOP was found, transaction would not amount to transfer

In the instant case, the assessee had an agricultural land which was declared as industrial estate. He and other landowners within that industrial estate formed an AOP and transferred this land to it. The CIT (A) held that the land stood transferred in terms of section 2(47) to AOP. He, therefore, directed the AO to assess capital gain on each member of the AOP on account of transfer of capital asset. On appeal, the Tribunal refused to interfere.  Aggrieved assessee filed the instant appeal.

The High Court held in favour of assessee as under:

1) For the purpose of income tax, a capital asset may be transferred to an AOP as is provided in section 2(47);

2) 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;

3) Thus, 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;

4) In the instant case, there was no conveyance by the appellant in favour of AOP, nor there any agreement between them and AOP also didn’t contend that in pursuance of that agreement and in part performance thereof, it was in possession of the property in question. Therefore, the impugned transaction wouldn’t be deemed as transfer - Rajesh Kumar Agarwal v. ITO [2013] 37 442 (Uttarakhand)