No capital gain if transaction related to transfer of property didn’t materialize: ITAT


No capital gain if transaction related to transfer of property didn’t materialize: ITAT
Appasaheb Baburao Lonkar v. ITO – [2019] 104 130 (Pune – Trib.)
Assessing Officer (AO) received information regarding sale of immovable property by assessee along with 13 other co-owners. It was noticed that the extract of the land submitted by the assessee showed that the property was registered in the name of ‘S Properties’; therefore, the property was transferred to ‘S Properties’.
Assessee submitted that he did not receive monetary consideration towards sale of the said property as the cheques which were handed over by the purchaser were stopped for payment. Further, possession of land was under dispute and parties approached Court to adjudicate on differences that arose between them.
However, AO rejected contentions raised by assessee holding it to be part performance in view of provisions of section 53A of Transfer of Property Act and held the assessee was liable to pay tax on long-term capital gains.
The Pune ITAT held that in case of part performance, there had to be willingness to perform part of contract by the transferee and the transferee should have been put in possession in such part performance of the contract and the transferor had agreed to transfer the property for consideration.
However, in the instant case, though there was a contract in writing between the parties but there was dispute between the parties as to the possession of the property. The transferor claimed that possession had not been given and the transferee claimed that the possession had been given but the said possession was subject to encashment of cheques which were issued by the transferee.
Since the transferee had stopped payment of cheques issued by him, the parties approached the Court to adjudicate on differences arising between them and the matter was pending before the High Court of Bombay. Thus, it couldn’t be said that part performance of the contract had been completed. Since transfer of said land was not materialized, no profit or gain which arose from it could be brought to tax.