Question ; Whether handing over the Possession of Capital Asset amounts to Transfer u/s 2(47) and hence liable for tax on capital gain ?
Answer:No, Even if possession is handed over to the developer, there is no transfer if the developer has only paid an interest-free advance to the assessee to meet expenses.
Capital gain would only be chargeable in the years in which stock-in-trade would be sold (Chaturbhuj Dwarkadas Kapadia vs. CIT, 260 ITR 491 (Bombay), R. Gopinath (HUF) vs. ACIT 133 TTJ 595 (Chennai) & DCIT vs. Crest Hotels Ltd., 78 ITD 213
The provisions of section 2(47)(v) of the Act can only be invoked where absolute possession of capital asset was given to the buyer against certain consideration, but in the instant case no consideration was ever fixed for handing over the possession to the developer and whatever amount was received it was received as interest free advance to meet the expenses to be incurred in discharging certain responsibilities agreed upon in this agreement. The said advance would be refundable at different phases stipulated in the agreement
Therefore, from any angle there is no transfer of asset as per provisions of section 2(47) of the Act.
ACIT vs. Upper India Paper Mills Co Pvt. Ltd (ITAT Lucknow)
June 23, 2015