Jaitley’s Punjabi brethren knock at his door

Distraught politicians from Punjab have a most favoured destination in Parliament House these days — Finance Minister Arun Jaitley’s chambers on the ground floor.

Jaitley can scarcely avoid his colleagues, overburdened though he may be with a plethora of portfolios — Finance, Defence and Corporate Affairs. He is handling Commerce as well these days, with Nirmala Sitharaman away in Brazil with Prime Minister Narendra Modi.

But besides lending a sympathetic ear, there is precious little even the second most powerful man in the Cabinet is reportedly willing to do for his adopted country cousins. They have a common grievance — the Income-Tax Department’s action against non-payment of capital gains tax.

Incidentally, it is not a party-specific matter. Politicians of all hues, from the Congress to the Akalis and the BJP, have been equally affected. In some cases, such as former Lok Sabha Deputy Speaker and Punjab Assembly Speaker Charanjit Singh Atwal, the I-T Department’s wrath has been particularly severe. Not only has his house been attached but his wife’s jewellery too has been impounded.

The case dates back to 2007, when a society was floated by the who’s who in Punjab politics. Preneet Kaur, wife of former Chief Minister and MP Amarinder Singh, MP Santosh Chaudhary, Deputy CM Sukhbir Singh Badal, ousted Finance Minister Manpreet Badal and a host of former and present ministers including Manoranjan Kalia, Gulzar Singh Ranike, Parminder Singh Dhindsa, former Assembly Speaker Nirmal Singh Kahlon and Deputy Speaker Satpal Gosain were all members of a society that held 21.2 acres of prime land in Chandigarh.

In February 2007, the society entered into a tripartite Joint Development Agreement (JDA) with HASH Builder Pvt Ltd and Tata Housing Development Company Ltd (THDC). Under the JDA, the society agreed to transfer its land to the developers in lieu of a four-bedroom flat and ₹82.50 lakh in cash for each member.

However, the housing project has been halted, thanks to a writ petition in the Supreme Court which has asked Tata to maintain status quo and remarked that “even a brick should not be laid in the area”, and thereafter remanded the case to the Delhi High Court.

The Chandigarh administration has, in the meantime, told the High Court that “political and business interests influenced the Punjab Government’s decision to clear the project”.

In the meantime, the I-T Department invoked provisions of transfer as defined in Clause (v) of Section 2(47)2 of the Income Tax Act, 1961 and held that the land owners are liable to pay capital gains tax on their share of consideration and considering the terms of the JDA.

The Assessing Officer held that the transfer arose pursuant to the JDA executed in February 2007. Accordingly, the entire amount of consideration was taxed in assessment year 2007-08. This was a double whammy for the politicians who had not only been able to acquire new flats in what was expected to be the swankiest address in Chandigarh but also faced the ignominy of their original homes being attached by the I-T Department.

The I-T authorities have stood firm in the face of this strong force, with the Commissioner of Income Tax Appeals confirming the Assessing Officer’s order. Thereafter, the Chandigarh Bench of the I-T Appellate Tribunal in the case of Charanjit Singh Atwal pronounced a 165-page ruling on the development agreement taxability.

The Tribunal held that capital gains (on land held as capital asset) are taxable in the year when the JDA is entered into with a developer for development of the land wherein rights with regard to such land are transferred to the developer.

In such a situation, sources told BusinessLine , the Finance Minister is hardly likely to intervene. The politicians, it appears, are caught in a web of their own making.

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