Capital Gain Taxable when accrued to Assessee: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the capital gain is taxable under the Income Tax Act, 1961 when the same is accrued to the assessee for the relevant period.

The return filed by the assessee, a contractor, was selected for scrutiny. During the proceedings, the Assessing Officer found that the assessee had entered into a development agreement with M/s. Vastusiddhi Associates, Kalyan on 07.07.2009 upon the market value of the property of Rs.32,66,000/- for the purpose of registration stamp duty. The Assessing Officer assessed this consideration under the head ‘short-term capital gain’.

Before the tribunal, the assessee had contended that the assessee received nothing in lieu of execution of the development agreement dated 07.07.2009, therefore, no short-term capital gain/ long-term capital gain is liable to be assessed in the assessment year.

Referring to the decision in the case of M/s. Binjursaria Properties Pvt. Ltd. Vs. ACIT, the Tribunal noted that after the accrual of consideration, the capital gain is liable assessable in the hands of the assessee.

“However, in the said case the activity of development was not completed and basically the assessee did not receive any consideration. At the time of argument, the representative of the assessee has also relied upon the case Balbir Singh Maini (supra) in which it is specifically held that the income short-term capital gain/long-term capital gain is only liable to tax when it accrued to the assessee,” the Tribunal observed.

Allowing the contentions of the assessee, the Tribunal said that “Now, coming to the facts and circumstances of the present case, the assessee in pursuance of execution development agreement dated 07.07.2009 received no consideration if any. In view of the law mentioned above. The long-term/short-term capital gain is liable to be assessed when the income will be accrued to the assessee. It is settled law that it is the real income that is to be taxed and not the hypothetical income.”