TaxTMI 
TaxTMI 
2013 (8) TMI 364
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....Chd/2011 - Shri Charanjit Singh Atwal v. ITO 2. This appeal is directed against the order passed by the ld. CIT(A)-II, Ludhiana dated 23.2.2011. 3. In this appeal the assessee has raised the following grounds: "1 That the ld. CIT(A) erred on facts and in law in sustaining the action of the Assessing Officer in rejecting the revised return filed by the appellant during the course of assessment proceedings on 7.10.2009 without assigning reasons thereof. 2. That the ld. CIT(A) erred in facts and in law insustaining the addition of long term capital gains of Rs. 3,54,68,276/- u/s 45 of the Act on account of alleged transfer of property. 2.1 That the ld. CIT(A) erred on facts and in law in confirming the finding of the Assessing Officer that there was deemed transfer of property on the date of signing of tripartite Joint Development Agreement ("the Agreement") itself, in terms of sub section (ii), (v) and (vi) section 2(47) of the Act. 2.2 That the ld. CIT(A) erred on facts and in law in observing that the receipt of consideration and registration of property are not rel....
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....pect to the actual amount received during the relevant Assessment year. 3. Without prejudice, that the ld. CIT(A) failed to appreciate that the income, if at all, could have been assessed in the hands of the Society and not the appellant. 3.1 That the ld. CIT(A) erred on facts and in law in rejecting the application for admission of additional grounds filed by the appellant, vide letter dated 31.1.2011 holding the same to be frivolous and irrelevant. All these grounds of appeal are requested to be considered and allowed. 4. That the assessed income having far exceeded Rs. 5 lakhs of which the ITO was well aware before invoking her jurisdiction, she ought to have transferred the case to an Assessing Officer of competent jurisdiction. This legal infirmity renders the order impugned as null and void. 5. That the impugned capital gain was also not assessable as the very right to receive the projected consideration has fallen into serious jeopardy following stay granted by the Hon'ble Punjab & Haryana High Court taking cognizance of a PIL filed against the execution of impugne....
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....alment as per terms of JDA - pages No. 8-22 (ii) Reply dated 4.2.2011 received from Hash Builders declining further payments - Page 23-24 (iii) Resolution dated 13.6.2011 passed by the Society rescinding the JDA - page No. 25 (iv) Letter written to the Sub-Registrar, Mohali canceling the POA, Page 26-29 (v) High Court's order staying execution of the Project on filing of a PIL at page No. 30 (vi) Assessment order dated 29.12.2010 passed against the Society on protective basis, Page Nos. 31 to 53 (vii) Appellate order dated 21.12.2011 passed by ld. CIT(A)-I, Ludhiana in the case of Shri Satpal Gosain, Page 54-94 (viii) Copy of registration and other laws (amendment) Act, 2001, Page Nos. 95-96 9. A bare reading of above shows that these documents came into existence only after completion of assessment. In any case, the same have been admitted by the ld. CIT(A)-I, Ludhiana in case of Satpal Gosain (supra) though the Department has challenged the admittance of these additional evidence unde....
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....se in the revised return the assessee has included a sum of Rs. 27,58,436/- on account of capital gain and the whole dispute in the assessment relates to capital gain arising out of sale of plot in Punjabi Cooperative Housing Building society Ltd., Mohali (herein after refereed to "Society"). In fact the Assessing Officer has ultimately assessed much higher amount of capital gain which the assessee is disputing. In view of these facts we reject the first ground. 15. Grounds No. 2 to 2.8, 5 & 6 16. The ld. counsel of the assessee at the time of hearing had clearly admitted that in above noted grounds basically various facets of the dispute have been highlighted, therefore, all these grounds are being taken together for adjudication. 17. Brief facts of the case are that while making discreet enquiries in the cases of housing societies, it was gathered that housing society consisting of 95 pre cent and Ex-MLAs of Punjab Legislative Assembly is owner of the 21.2 acres of land in village Kansal, Distt. Mohali. The village Kansal shares its boundary with capital city of Chandigarh. On 25.2.2007 the Housing Society of MLAs entered into a tripartite Joint Development Agreement (he....
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....eement, POA, affidavits, declarations, indemnities and all such other documents, letters as may be necessary to carry out, facilitate and enforce the Rights and to register the same with the revenue/Competent authorities and to appear on our behalf before all authorities, statutory or otherwise and before any Court of Law (The "Development Rights'). The Owner hereby hands over the original title deeds of the Property as mentioned in the list Annexued hereto and marked as Annexure IV and physical, vacant possession of the Property has been handed over to THDC simultaneously to the execution and registration of this Agreement to develop the same as set out herein." 18. It was further noticed that till date a Member having 500 sqyd plot in Society had received Rs. 33.00 lakhs each and a Member having 1000 sqyd plot had received Rs. 66.00 lakh. The assessee was also a Member and President of the Society and was owner of a plot measuring 1000 sqyd. Therefore, as per JDA, he was to receive Rs. 1.65 crores as monetary consideration and two furnished flats as consideration in kind and the cost of the same as per Assessing Officer was Rs. 2,02,50,000/- and total consideration would be Rs....
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....hich has been transferred and for which consideration has been received. The assessee has fully discharged his liability to that extent. There cannot be any tax liability on Incomplete transaction i.e. where the land has not been transferred and the Consideration has not been received, 5. In your letter under consideration, you have considered the national 'value of the proposed flat measuring 2250 sq. feet as a part of the consideration. Here the following points need to be considered. (1) The flat shall be given only after the full land i.e. 500 sq. yard, has been transferred to the buyer. (2) There is no provision in the agreement to allot proportionate flat or make equivalent proportionate payment. So for the present transaction where only a part of the land has been transferred, no consideration on account of flat is available. So no question of any tax liability arise. (3) It may kindly be appreciated that the developer has not even ' acquired the land till da....
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....tment rights have been surrendered by the members in favour of the owner i.e. "Punjabi Co-operative House Building, Society Ltd." and not In favour of the buyers. So therefore, there is no transfer of property u/ss 2(14) and 2(47). 2. Regarding your observation of having accepted the position of transfer, please note that we understand that transfer of property is only to the extent of the land transferred by way of sale deed. 3. It is very clear from the agreement that no transfer of property have taken place only the development right has been transferred. Therefore, there is no transfer of property under section 53A of Transfer of property Act, 4. Clause 9.3 of the agreement is very clearly stating that the ownership has not been transferred. In view of our submission you are requested to complete the Capital Gains Tax in accordance with our return. The assessee wants to be personally heard and make further submission. You are requested to kindly adjourn the case till 29-12-2009." &n....
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.... to the extent of land transferred by way of registered sale-deed. 2. Clause 6.1 of the agreement clearly states that handing over the original title -deeds is as security for the adjustable advance. 3. As per clause 9.2 of the agreement, it is very clearly mentioned that the owner shall execute in favour of M/s THDC Ltd: the sale-deeds to complete the aforesaid transaction. So it is evident that the execution of sale-deeds is an integral part of the transaction and the transaction shall remain incomplete. if the sale deeds are not executed. 4. The clause 13 very clearly states that the rights transferred relate to Development/construction work and M/s THDC Ltd shall not do anything which adversely affect the right of the owner to receive the entire consideration. 5. Keeping in view the conditions in the agreement and to the fact that M/s THDC Ltd: M/s Hash Builder Ltd. have not done any development work on the land under consideration till date in pursuance of the agreement da....
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....ative House Bldg. Society. It will be pertinent to note here that the proceedings in the case of the society have been reopened u/s 148 of the I.T Act 1961 by the learned D.C.I.T Mohali. In the reasons recorded by the learned D.C.I.T, it has clearly been mentioned that he proposes to tax the capital-gain in the hands of the Society. Copy of the reasons recorded is enclosed. It may be appreciated that the same amount can't be taxed twice". On 29,12,2009 again the counsel of the assessee filed a letter and submitted as under: "This being referred to the captioned proceedings Regarding your query about the cost of acquisition is Rs. 11 lacs which is paid as per following dates. Receipt No. 307 09-11-01 5,04,000/- Receipt No. 426 12-02-04 7,00,007/- Out of above amount Rs. 1,00.000/- was refunded to the assessee and Rs, 4000/- was towards membership charges and other funds of the society. In continuation to our earlier reply submitted, we once again reiterate that the possession given by the assessee is only to the extent of land sold by way of registered sale deed. Ther....
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....g various rights in the property in favour of THDC and handing over the original title deeds as well as handing over of the physical vacant possession of land has the effect of transferring or enabling the enjoyment of the said property to THDC/HASH. (iv) There was no force in the contention that the amounts received under the said agreement were advances received and not the sale consideration because total consideration was structured in the JDA and the consideration was to be received as per clause 4(iv) of the JDA. In fact the assessee has himself shown the receipt and returned the same as capital gain which contradicts these arguments of the assessee. As per Section 45 of IT Act, income-tax was to be charged under the head "capital gain" on transfer of a capital asset and shall be deemed to be the income of the previous year in which transfer took place. The year of transfer is the crucial year and not the time of the receipt. (v) There was no force in the contention that the value of the flat should not be included because the assessee has not received such flat, because the flat was to be received by each Member of the ....
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....enue clauses (v) and (vi) were inserted to section 2(47) of the Act. He then discussed the decision of Hon'ble Bombay High Court in case of Chaturbhuj Dwarkadas Kapadia v. CIT, 260 ITR 491 (Bom) and extracted the following conditions which were required to be satisfied to cover the case u/s 2(47)(v) r.w.s. 53A of T.P. Act. (a) There should be contract for consideration (b) It should be in writing (c) It should be signed by the transferor or on his behalf (d) It should pertain to transfer of immoveable property (e) Transferee has in part performance of contract has taken possession or part possession of the property. (f) Lastly, transferee should be ready and willing to perform his part of contract. 23. If the above conditions were satisfied then the transfer can be said to have taken place for the purpose of Section 45. According to him as per the decision of Chaturbhuj Dwarkadas Kapadia v. CIT (supra) once the possession or part possession of the property was given by the transferor to the transferee then the tra....
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....mentioned in the list Annexed hereto and marked as Annexure IV and physical, vacant possession of the property has been handed over to THDC simultaneously to the execution and registration of this agreement to develop the same as set out therein". Thus possession in part performance of contract has been handed over to the transferee without any ambiguity in the previous year 2006-07 itself. (e) An irrevocable transfer has thus been made which is not dependent on any condition to be fulfilled. (f) Further coining to "consideration" part . As per Para 4.1 Rs. 6,00,000 per holder of 1000 Sq. Yards has to be paid by transferee on account of earnest money, which has been paid to the assessee, Further as Per Para 4.1 (ii) clearly states that in lieu of. Rs. 12,00,000 per plot holder of 500 Sq. Yards and Rs. 24,00,000 per plot holder of 1000 Sq. Yards is being paid on the execution of agreement against' which the Society on behalf of members will transfer 3.08 Acres of the contiguous land out of property. It has been confirmed that against the above payment the land measuring,3.08 acres has been transferred in the *name of THDC and r....
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....mportantly physical and vacant possession of whole of the land of 21.2 acres has been handed to M/s Tata Housing development company Ltd. in the previous year 2006-07, Same is clear from Para 2.1 of the Joint Development Agreement and discussed in detail in preceeding paragraphs. (m) Thus the "transfer" would be deemed to happen in the previous year 2006-07 itself. (n) It has already been discussed in detail that registration of conveyance deed and receipt of entire consideration is not at all important in the year in which deemed transfer u/s 2(47)(v) of IT Act has taken place. (o) Further the Agreement is clear and there is no ambiguity regarding irrevocable rights being given to the transferee. As regards certain petty conditions and provisions relating to termination of the contract, it Is observed that these clauses are necessary part of such type of joint development agreement. At the same time such agreements including this agreement has the provisions of 'disclaimer' 'partial invalidity' 'indemnity' and 'arbitration'. The disputes arising, if any, shall be resolved as per the provisions and ....
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....y. The assessee due to these provisions is also precluded from contending that the capital gains would accrue to society and not assessee. (s) Hence amount of Rs. 30,00,000/- received by assessee is towards part performance of contract by transferee and not mere advance. (t) As regards valuation of the said flat at Rs.4500 per square feet, the rate has to be taken as per the rate offered to the general public. That would be the actual rate of flat at which the builder would offer to any person. The sum of Rs.4500/- per sq. feet is rate as per which HASH is liable to buy from THDC. It is a clear indicative of the value of flat, devoid of any special benefit to the members. The rate which could be offered to general public would in any case be not less than Rs. 4500/- per sq.feet. Therefore according to facts the rate of flat taken at Rs.4500 per sq.feet to arrive at the full value of consideration, adopted by the Assessing Officer, is held to be correct." In view of the above, the order of Assessing Officer was confirmed. 24. Before us, the ld. counsel of the assessee made detailed submissions. Further written submissions....
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....t 3.08 acres out of total land contracted to be given to THDC/HASH measuring about 21.2 acres. He pointed out that sale deed has been executed on 2.3.2007 whereas JDA was executed on 25.2.2007. Thus it is clear that no possession was given on 25.2.2007 otherwise the Society would not be in possession on 2.3.2007. Similarly one more part of the land was sold by second deed executed on 25.4.2007 wherein similar clause 'A' as in the first deed is there (Refer page 138 of the paper book) shows that the Society was in possession of the land on later date. These two sale deeds clearly show that no possession was given on the date of execution of the JDA. In any case the JDA makes it clear that the possession was to be given simultaneously to the registration of JDA and since JDA was not registered, no possession was given. II It was submitted that the possession, if at all, was given to the developers i.e. THDC/HASH which was a permissive license to develop the project and not as performance of the contract. Reference was made to Section 52 of the Indian Easement Act, 1882 which reads as under: "52. "Licence" defined "where one p....
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....ct undergoes amendment the same has to be read in Section 2(47)(v) as amended and therefore, as JDA is not registered Section 2(47)(v) will not be applicable. V The ld. counsel of the assessee referred to the decision of Hon'ble Bombay High Court in case of Chaturbhuj Dwarkadas Kapadia v. CIT (supra) and tried to distinguish the same. He submitted that this decision cannot be taken as an authority for the proposition that date of agreement should be reckoned as date of transfer. In any case, the decision has to be seen for what has been held in the decision and in this case ultimately the appeal of the assessee was allowed which means the transfer was held to have taken effect only after receipt of substantial payment of consideration. VI The ld. counsel of the assessee further pointed out that there is another important condition in invoking Section 2(47)(v) of the Act r.w.s 53A of T.P. Act i.e. the transferee must have performed or willing to perform his part of the contract. It was argued that willingness of the transferee to perform his part of the contract is not an empty formality and it has to be absolute and unqualified. Thus willingness cannot be conditional or conti....
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.... willingness of the transferee to perform their part of the contract. In this regard he also referred to various observations in the following case laws: General Glass Co. Pvt Ltd. v. Dy. CIT 14 SOT 132 (Mum.), K Radhika v. DCIT 149 TTJ 736 (Hyd.) Dy. CIT v. Tej Singh, 138 ITD 489 (Agra) The facts of these case laws and the facts in the present case before us are identical and therefore, since as per these decisions there was no willingness on the part of the transferee to perform his/its obligation the provisions of Section 2(47) (v) r.w.s. 53A of T.P. Act could not be applied. VII It was contended that revenue has also held that clause (vi) of Section 2(47) is also applicable which is not correct because that provision is applicable where a person becomes owner of the immovable property pursuant to taking Membership of Co-operative Society etc. In the present case, the JDA was entered into between Society and two developers i.e. THDC/HASH and therefore, there was no transaction involving Membership of Co-operative Society/ company etc. Therefore, clearly clause (vi) of sec. 2(47) is not applicable in the present case. VIII The ld. counsel of the assessee also submi....
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....n u/s 54 EC etc. IX It was contended that since JDA has already been terminated vide Society's resolution dated 13.6.2011 and thereafter on 31.10.2011 even special Power Of Attorney executed earlier has been revoked, therefore, in view of the subsequent events, the balance of consideration receivable could not be taxed in the hands of the assessee. Subsequent events to the date of transactions have to be reckoned before taxing a particular transaction. He also submitted that in almost similar circumstances, subsequent events were reckoned by Mumbai Bench of the Tribunal in case of Chemosyn Ltd. v. Asstt. CIT, 139 ITD 68. He referred to various paras and pointed out how the subsequent events were reckoned by the Tribunal. X The ld. counsel of the assessee submitted that without prejudice to the above if it is considered a case of transfer then the value of flat to be allotted to each of the Member of the Society has not been valued correctly. The Assessing Officer has referred to clause 3.5 of inter-se agreement entered into between THDC and HASH. The ld. counsel of the assessee submitted that the assessee was not party to such agreement and price at which THDC was selling fla....
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.... 4.01.2007 which was confirmed/ratified in the General Body Meeting on 25.2.2007. In the Society there were two types of Members holding plots of 500 sq.yd and 1000 sq.yd. It was resolved that members would surrender the respective plots of 500 sq.yd and 1000 sq.yd in favour of the Society for further transfer of the entire land by the Society in favour of THDC/HASH for the development of property in lieu of consideration of Rs. 82,50,000/- to a Member holding 500 sq.yd plot and Rs. 1,65,00,000/- to a Member holding 1000 sq.yd plot to be paid in four instalments by HASH directly to the Members of the Society. In addition to this consideration member holding 500 sq.yd plot was to receive a furnished flat with super area of 2250 sq.ft to be constructed by THDC/HASH and two flats in case of Members holding 1000 sq.yd plots. It was also resolved through this resolution to hand over the possession of the property and original title deeds of the property to THDC/HASH. The Society was further permitted to allow THDC/HASH to mortgage, sell the property and create change in property. The Society also resolved to execute irrevocable power of attorney in favour of THDC/HASH which was actually....
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....orney the right to sell was also given which is again not possible without transfer of possession or ownership. These clauses clearly show that complete control over the property confirming all privilege of ownership was given in favour of THDC/HASH and thus such transfer of ownership satisfies the requirements of Section 45 r.w. clauses (ii), (v), (vi) of Section 2(47) of the Act. (II) The Ld. CIT DR for the revenue contended that Hon'ble Supreme Court in case of Sunil Sidhharath Bhai v. CIT, 156 ITR 509 and CIT v. Narang Products, 219 ITR 478 has clearly held that definition of transfer u/s 2(47) is inclusive one and does not exclude contextual or ordinary word meaning of "Transfer". Further in case of Ajay Kumar Shah Jagati v. CIT, 168 Taxman 53 it was observed that for the purpose of Section 45 of the Act the word "Transfer" as defined in IT Act is required to be considered and not sale as indicated in the Transfer of Property Act. Therefore, u/s 2(47) of the Act, it is "Transfer" which is one of the most important ingredient for levy of taxation u/s 45 which is to be complied with. For invoking Section 2(47) (v) what is required is that an agreement to sell has been entered....
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....uses would also cover arrangements by which the property could be enjoyed by becoming a member of the company or such other arrangement. According to him it may not be out of place to invoke Heydon's Rule of interpretation of statutes for interpreting these clauses. The Heydon's Rule is mainly applicable wherever the true meaning of amended provisions is to be understood. If the amendments are seen through prism of Heydon's Rule, it would become clear that amended clauses have been brought on the statute to overcome the earlier mischief. Properties could be transferred without execution of proper sale deeds and the same could be enjoyed by the respective buyers without any taxation on the part of sellers. (V) The Ld. DR pointed out that there is no force in the submissions that since section 53A of the transfer of property Act has itself gone under amendment w.e.f. 24.9.2011 wherein the registration of the agreement has been made mandatory and, therefore, since JDA was not registered it cannot be construed to be covered under clause (v) of section 2(47). It was contended that doctrine of part performance was given statutory recognition in section 53A of the Transfer of Property ....
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.... payments as per clause 4(i)(ii) &(iii) of the JDA. The developers have also approached the concerned authorities for permissions and approvals as per the obligation agreed in the JDA. However, a PIL was filed against the developers against TATA Camelot Project (this is the name of the project which was to be developed by THDC on the land acquired from the Society). The PIL was dismissed vide order dated 26.3.2012 (copy of order filed on record). A reference to paras 3, 4, 25 & 26 of this order would clearly show that Hon'ble High Court has observed that against the rules of sanction under the Environment (Protection) Act, the respondent i.e. Developers have sought a review of the order because of the findings arrived at were ex-parte. No order in the Review matter has been passed by the competent authority because the interim order passed in the PIL which was later on clarified by the Hon'ble Supreme Court vide order dated 31.01.2012 permitting the concerned authorities under the different statutes governing the matter to exercise their respective jurisdiction in accordance with the law and such clarifications came in later decision of the High Court. As the rejection under the Wi....
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....n, therefore, payment could not be made. Further, as PIL was filed in the Hon'ble High Court and the matter had gone even to the Hon'ble Supreme Court and THDC/HASH has vigorously defended the same. This fact clearly shows that developer i.e. THDC/HASH was willing to perform in all respects to the JDA. (VII) It was also contended that the society has already terminated the contract and in this respect reference was made to the Resolution passed by general body of the meeting dated 13.6.2011 and legal notice was issued to THDC/HASH. First of all, there is no evidence on record to show that such notice was served upon THDC/HASH. In any case, as contended earlier, power of attorney could not have been revoked because it was irrevocable power of attorney as per clause 6.7 of the JDA. Further, there was arbitration clause and that means a notice for arbitration was required to given otherwise such unilateral cancellation was not valid in the eyes of law. If the JDA was canceled then there should be document showing return of whatever possession was given by the society. The documents showing cancellation is only a self serving document, which cannot be relied to refuse the existence ....
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....sideration each Member having 500 sq.yd plot was entitled to receive one fully furnished flat measuring 2250 sq.ft and the Members holding 1000 sq.yd plot were entitled to two such flats. This clearly shows that upon entering the JDA, the Members got vested rights to receive such flats and therefore, as per the definition of capital gain in Section 45 such flat has also arosen from the JDA and therefore, has to be included in the total consideration. He again emphasized that receipt of consideration has nothing to do with its taxability u/s 45 and it is the accrual of consideration which means a portion of the consideration which can be received later also. He also submitted that as far as the value of the flat is concerned, the same has been taken by the Assessing Officer on the basis of agreement entered between THDC and HASH among themselves and the rate adopted is the same at which THDC had agreed to sell the flat to Hash. He also referred to a few paper books filed by other assessees wherein various News Paper clipping has been included which clearly show that flats were booked @ Rs. 8000/- approximately in the Pre Launch bookings. Such Pre Launch bookings generally take place....
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....e parties. The main issue is whether assessee is liable to capital gain tax in the year under consideration i.e. assessment year 2007-08 in view of the JDA. For charging capital gains, the charging section is 45 and the relevant portion is as under:- Section 45. [(1)] Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections [54, 54B, [ [54D, [54E, [54EA, 54EB,] 54F [ 54G and 54H], be chargeable to income-tax under the head "Capital gains", and shall be deemed to be the income of the previous year in which the transfer took place. 28. The plain reading of the above provision would show that charging an item of income under the head 'Capital gains" require three ingredients i.e. (i) there should be some profit. (ii) Such profit must be arising on account of transfer and (iii) there should be capital asset which has been transferred. There is no dispute that a capital asset was involved and there was some profit also i.e. why assessee has himself returned income under the head 'capital gains;. The dispute is mainly on account of transfer and that too whether the transfer....
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....ion of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. Explanation.-For the purposes of sub-clauses (v) and (vi), "immovable property" shall have the same meaning as in clause (d) of section 269UA;] Clauses (v) & (vi) to section 2(47) of the Act have been inserted by Finance Act, 1987 w.e.f. 1.4.1988. The purpose of this insertion has been explained by CBDT in Circular No. 495 dated 22.9.1987. The relevant part 11.1 and 11.2 of the circular reads as under:- "11.1 The existing definition of the word " transfer " in section 2(47) does not include transfer of certain rights accruing to a purchaser, by way of becoming a member or acquiring shares in a co-operative society, company, or as way of any agreement or any arrangement whereby such any building which is either being constructed or which is to be constructed. Transactions of the nature referred to above are not required to be registered under the Registration Act, 1908. Such arrangements confer the privileges of ownership without transfer of title in the building a....
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.... properties were being sold by way of sale agreement and also execution of General Power Of Attorney and possession was given on receipt of full consideration without executing the proper sale deeds etc. which as mentioned earlier was not even permissible in some cases. These transactions are popularly called "power of attorney" transactions. To avoid these and to stop the leakage of Revenue, the Parliament has inserted clauses (v) & (vi) to section 2(47) so as such type of transactions are also be brought into taxation net. However, interpretations of these clauses has led to lot of litigation and the main point of litigation was that at what point of time the possession can be said to have been given. In the present case, the Revenue has mainly relied on two decisions namely (i) Chaturbhuj Dwarkadas Kapadia v. CIT 260 ITR 491 (Bom.) and; (ii) Authority for Advance Ruling (AAR) New Delhi in the case of Jasbir Singh Sarkaria 294 ITR 196. 33. In the case of Chaturbhuj Dwarkadas Kapadia v. CIT (supra), the facts before the Hon'ble Bombay High Court were that assessee who was an individual had 44/192 undivided share in an immovable property in Greater Bombay which consisted of vari....
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....nd (ii) any transaction entered into in any manner which has the effect of transferring or enabling the enjoyment of any immovable property. Therefore, in these two cases capital gains would be taxable in the year in which such transactions are entered into, even if the transfer of the immovable property is not effective or complete under the general law. Under section 2(47)(v) any transaction involving allowing of possession to be taken over or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act would come within the ambit of section 2(47)(v). In order to attract section 53A, the following conditions need to be fulfilled. There should be a contract for consideration ; it should be in writing ; it should be signed by the transferor ; it should pertain to transfer of immovable property ; the transferee should have taken possession of the property ; lastly, the transferee should be ready and willing to perform his part of the contract. Even arrangements confirming privileges of ownership without transfer of title could fall under section 2(47)(v). Section 2(47)(v) was introduced in the Act from the assessment year 1988-8....
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....rvations were made on the basis of opinion expressed by Ld. author in the commentary - "The Law and Practice of Income Tax by Kanga and Palkhivala Eighth Edition at page 766. Relevant observations read as under: "Cls. (v) and (vi) of sec. 2(47), inserted by the Finance Act 1987 with effect from 1st April 1988, provide that "transfer" includes (a) any transaction which involves the allowing of the possession of an immovable property (s. 269UA(d)) to be taken or retained in part performance of a contract of the nature referred to in sec.53A of the transfer of Property Act 1882, and (b) any transaction entered into in any manner which has the effect of transferring, or enabling the enjoyment of, any immovable property (s. 269UA(d)). Therefore in these two cases capital gains would be taxable in the year in which such transactions are entered into, even if the transfer of the immovable property is not effective or complete under general law." 36. From the above, it is clear that Court was of the view that in case any transaction covered by clause (v) and (vi) to section 2(47) the liability for capital gain would arise on the date when such transactions ar....
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....as substantial payments were effected during that year and substantial permissions were obtained. In such cases of development agreements, one cannot go by substantial performance of a contract. In such cases, the year of chargeability is the year in which the contract is executed. This is in view of section 2 (47)(v) of the Act." Secondly it is mentioned in the order of the Court that law was not very clear on this point and since the assessee has admitted and paid capital gain in the Assessment year 1999-2000, therefore, tax was held to be chargeable in Assessment year 1999-2000. Thirdly certain shortcomings were also noted in the order of the Tribunal where certain documents were mentioned to have been executed before March 31, 1996 e.g. the following observation of the Tribunal was not found correct as something is done on 1st April, 1997 then the same cannot fall in the year ending 31.3.1996. "From the dates it is evident that from the very next day, i.e., April 1, 1997, from the end of the financial year ending on March 31, 1996, the builder was using the well water against payment....
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....nto a Collaboration agreement on 8.6.2005 with M/s Santur Developer Pvt Ltd, New Delhi (hereinafter called 'Developer'). According to the terms of agreement, the Developer should obtain a letter of intent from the concerned government department and obtain other permissions and sanctions for developing the land at its own risk and cost. The Developer was to take 84% of the built-up area and balance 16% would belong to assessee and other co-owner. The consideration for the agreement was taken as the built-up area to be handed over to the owners free of cost. The owners were entitled to visit the site in order to review the progress of the project. It was clarified by clause 18 that ownership would remain exclusively with the owners till it vests with both the parties as per their respective shares on the completion of the project. The other clauses and the steps in the agreement were that a sum of Rs. 1 crore towards payment of earnest money at the time of entering into agreement; a special power of attorney was to be executed in favour of the Developer to enable to deal with the Statutory authorities etc. for obtaining necessary approvals / sanctions; letter of intent was to be obt....
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....ession "received". Both these expressions and in addition thereto, the expression "accrue" are used in the Income-tax Act either collectively or separately according to the context and nature of the charging provision. The second point which deserves notice is that by a deeming provision, the profits or gains that have arisen would be treated as the income of the previous year in which the transfer took place. That means, the income on account of arisal of capital gain should be charged to tax in the same previous year in which the transfer was effected or deemed to have taken place. The effect and ambit of the deeming provision contained in section 45 has been considered in decided cases and leading text books. The following statement of law in Sampath Iyengar's Commentary (10th Edition- Revised by Shri S. Rajaratnam) brings out the correct legal position : "Section 45 enacts that the capital gains shall by fiction 'be deemed to be the income of the previous year in which the transfer took place'. Since this is a statutory fiction, the actual year in which the sale price was received, whether it was one year, two years, three....
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....abstract concept. It has different shades of meaning. It is variously described as "a polymorphous term having different meanings in different contexts" (per R. S. Sarkaria J. in Superintendent and Remembrance of Legal Affairs, W. B. v. Anil Kumar Bhunja [1979] 4 SCC 274 and as a word of "open texture" (see Salmond on Jurisprudence, paragraph 51, Twelfth Edition, Indian reprint). Salmond observed : "to look for a definition that will summarize the meanings of the term "possession" in ordinary language, in all areas of law and in all legal systems, is to ask for the impossible". In the above case of Anil Kumar Bhunja [1979] 4 SCC 274, Sarkaria J. speaking for a three-judge Bench also referred to the comments of Dias and Hughes in their book on Jurisprudence that "if a topic ever suffered too much theorizing it is that of 'possession'". Much of the difficulty is caused by the fact that possession is not a pure legal concept, as pointed out by Salmond. The learned judge then explained the connotation of the expression "possession" by referring to the well known\ treatises on jurisprudence (page 278) : "'Possession', implies a right and a fact : the right to....
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....ole and exclusive possession. So long as the transferee is, by virtue of the possession given, enabled to exercise general control over the property and to make use of it for the intended purpose, the mere fact that the owner has also the right to enter the property to oversee the development work or to ensure performance of the terms of agreement does not introduce any incompatibility. The concurrent possession of the owner who can exercise possessory rights to a limited extent and for a limited purpose and that of the buyer/developer who has a general control and custody of the land can very well be reconciled. Clause (v) of section 2(47) will have its full play even in such a situation. There is no warrant to postpone the operation of clause (v) and the resultant accrual of capital gain to a point of time when the concurrent possession will become exclusive possession of developer/transferee after he pays full consideration. Further, if "possession" referred to in clause (v) is to be understood as exclusive possession of the transferee/developer, then, the very purpose of the amendment expanding the definition of transfer for the purpose of capital ga....
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....cise acts of possession effectively pursuant to the covenants in the contract. That tantamounts to legal possession. We are referring to this aspect because the authorized representative has submitted when he appeared before us in the last week of May, 2007, that even by that date the development work could not be commenced for want of certain approvals, and therefore, the developer was "not willing to take possession of the land". Such an unsubstantiated statement which is not found in the original application or even written submissions filed earlier need not be probed into especially when it is not his case that the developer was not allowed to take possession in terms of the agreement." 42. After the above discussion, the Authority discussed the facts of the case before it. It was observed that paragraph 18 of the Collaboration Agreement provides that on issuance of letter of intent, the owners will allow and permit the Developer to enter upon and survey the land, erect site / sales office, carry out the site development work and do activities for advancing & sale promotion, construction etc. The Authority further observed that if this clause is read in isolation this would ....
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....ond and supplemental agreement by virtue of which the entire developed property including the owners' share has been agreed to be sold to the developer or his nominees for valuable money consideration, the developer has a vital stake in the entire property. As far as the quality of possession is concerned, he is on a higher pedestal than a developer who apportions built-up area with the owner. Even if he is an agent in one sense in the course of developing the land, that agency is coupled with interest. For these reasons, the prefix "irrevocable" is deliberately chosen. As discussed earlier, the owner's limited right to enter the land and oversee the development work is not incompatible with the developer's right of control over the land which he derives from the GPA. Exclusive possession, as already pointed out, is not necessary for the purpose of satisfying the ingredients of clause (v) of section 2(47). We are therefore, of the view that the irrevocable GPA executed by the owners in favour of the developer must be regarded as a transaction in the eye of law which allows possession to be taken in part performance of the contract for transfer of the property in question........" ....
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....sp; 3. In the instant case, having regard to the terms of the two agreements and the irrevocable GPA executed pursuant to the agreement, the execution of the GPA shall be regarded as the "transaction involving the allowing of the possession" of land to be taken in part performance of the contract and therefore, the transfer within the meaning of section 2(47)(v) must be deemed to have taken place on the date of execution of such GPA. The irrevocable GPA was executed on May 8, 2006, i.e., during the previous year relevant to the assessment year 2007-08 and the capital gains must be held to have arisen during that year. Incidentally, it may be mentioned that during the said year, i.e., financial year 2006-07, a final license was granted and the applicant/owners received nearly 2/3rds of the consideration. " 45. Legal position has been discussed in above noted paras and now let us discuss the facts of the case in the light of above noted legal position. 46. Undisputed facts of the case are that the assessee is a Member of Punjabi Coop House Building Society Ltd. which had 96 members (Number of members were stated as 95 during arguments but clause 13 of the JDA refers to number o....
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....een further recited that the Society has agreed to accept the proposals of Hash and further executed this agreement with THDC/HASH. Hash was responsible to make payment to the owner as described earlier and the flats were to be provided by THDC. In case of Hash fails to make the payment, THDC agreed to make the payments. Copy of the resolution of the Executive Committee of the Society dated 4.1.2007 as well as resolution of the General Body Meeting of the Society dated 25.2.2007 were made part of JDA by way of annexure. The Society agreed to execute an irrevocable Special Power of Attorney in favour of THDC and all other necessary documents, at the request of the developers. 47. In clause 1 of JDA various expressions have been defined. Clause 2 describes the project as under: "2.1 The owner hereby irrevocably and unequivocally grants and assigns in perpetuity all its rights to develop, construct, mortgage, lease, licence, sell and transfer the property along with any and all the construction, premises, hereditaments, easements, trees thereon in favour of THDC for the purpose of development, construction, mortgage, sale, transfer, lease, licence and or....
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.... the obligations of the developers & Society for getting the plans, etc. sanctioned from competent authority / applications to be signed by owner for plans, drawings etc., construction. Clause 4 deals with consideration clauses 5 to 8 deals various aspects of project and obligations of Society and Developer. Clause 9 talks about ownership and rights and read as under: "9 Transfer of ownership/Rights 9.1 The owner shall simultaneously on receipt of Payment as set out in Clause 4.1 above, execute an irrevocable Special Power of Attorney to THDC for development of the property authorizing THDC to do all lawful acts, deeds, matters and things pertaining to the development of the property for the project along with inter alia right to mortgage the property and/or premises, sell, lease, licence the premises and receive/collect monies in its name in respect of the same and approach interact, communicate with the Competent authorities and for doing all acts, deeds, matters and things to be done or incurred by THDC in that behalf as also to sign all letters, applications, agreements and register the same if necessary, documents, court ....
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.... irrevocable Special Power of Attorney has also been executed by the Society in favour of the developers i.e. THDC. (Copy of which is available at pages 40 to 52 of the paper book in case of Society in ITA No. 556 of 2012 as discussed earlier in para 25 (complete copy of Supplementary Power of Attorney was not available in the paper book of the assessee, therefore, reference was made to the paper book in case of the Society). 52. The first major contention of the ld. counsel of the assessee is that the possession was not given by the Society because according to him as per clause 2.1 of the JDA the possession of the property was to be handed over simultaneously to the execution and registration of JDA and since the JDA was not registered, therefore, the possession was not given. We can not accept this contention because in "Power of Attorney" transactions, it is not necessary to register the JDA if a special Power of Attorney has been given and same is registered. Secondly clause 9.3 of the JDA as reproduced above clearly show that original title deed which have been mentioned along with the possession in para 2.1 which according to the ld. counsel of the assessee were to be han....
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.... buildings and/or structures thereon and/or on the Property or utilize such lands and properties for making provision of parking spaces thereon, and/or may utilize the same for any other lawful purpose, as THDC and/or their associate and/or group concerns may in their sold, absolute and unfettered discretion think fit. (w) To hand over the possession of the Property or any part or portion thereof to the authorities to whom the same is required to be handed over or otherwise and to execute and deliver any undertakings, declarations, affidavits, bonds, deeds, documents, etc. as may be required by the authorities concerned for vesting such a part or portion in such authority and to admit execution thereof before the concerned Competent Authority and get the same registered with the concerned sub-registrar. (y) Reasonable opportunity of hearing shall be given to mortgage, encumber or create a charge on the Property or any part or portion thereof and execute the necessary security documents in favour of any bank/financial institution to raise funds for the construction/development of the Property and for the said purpose to deposit....
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....itle deeds of the property would be handed over to the developer i.e. THDC/HASH so that same can be used in furtherance of development of the Project as well as security for the money paid by the owner. Through clause 6.24 it was agreed that developer THDC/HASH was always permitted by owner to amalgamate the property with any other contiguous, adjacent and adjoining land and the properties wherein developmental and or other rights, benefits and interest were acquired by the developer or would be acquired in future. This clearly shows that the Society was under obligation in terms of agreement itself to allow the developer to amalgamate the project. Towards the end of clause 6.24 it has been clearly stated that in the event of termination of JDA, provision of clause 6 would be surviving which clearly shows that developer continues to be in possession for the purpose of development, mortgage etc. even after termination. Clause 8 which describes the obligation and undertaking of the THDC/HASH and provides specifically that all environmental clearance shall be obtained by THDC/HASH out of its own sources. Thus it was clearly understood by the parties that requisite environmental cleara....
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....ses which were to be constructed. This is further clarified by clause (bb) and (cc) which gives the power of execution of conveyance and other documents involving in respect of the premises to be constructed without any interference of the Society being made confirming party. All these clauses clearly show that the possession was given by the Society and/or its members to THDC/HASH on the execution of irrevocable Power of Attorney. Through these clauses of JDA and irrevocable Power of Attorney the developer was able to completely control the property and make use of it not only for the purpose of development but also for the purpose of amalgamation, sale, mortgage etc. When the above clauses are compared on touchstone of the discussion on possession in paras 26 to 28 in the case of Jasbir Singh Sarkaria (supra) which we have reproduced above, it becomes clear that the possession has been given. 56. In that discussion, it has been clearly mentioned that the position contemplated by clause (v) of section 2(47) of the Act need not to be exclusive possession. What is required is that the transferee by virtue of possession should be able to exercise control from overall intended purp....
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....Co. Rep 7a. This Rule was upheld by the Constitution Bench of Hon'ble Apex Court in case of Bengal Immunity Co. Ltd. v. State of Bihar (1955) 2 SCR 603 for consideration of Article 286 of the Constitution. It has been held in case of Dr. Baliram Waman Hiray v. Mr. Justice B. Lentin and another, 176 ITR 1 that for understanding amendment in the Act, perhaps Heydon's Rule is best rule for interpretation of such amendment. We find that without mentioning this rule Ld. Authority For Advance Ruling has discussed this issue in para 27 of the judgment which we have extracted above. It has been held that if 'possession' referred to in clause (v) is to be understood as exclusive basis of the transferee then very purpose of the amendment or enlargement of the definition of transfer would get defeated. We are reproducing following head note of the Hon'ble Apex Court in case of Dr. Baliram Waman Hiray v. Mr. Justice B. Lentin and another (supra): "The following principles enunciated in Heydon's case (1584) 3 Co. Rep 7a and firmly established, are still in full force and effect: "that for the sure and true interpretation of all statutes in generals (be they penal or ....
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.... for 3.08 acres and recitation clause (A) reads as under: Clause (A) - The vendor is the absolute owner and in possession of land total measuring 169 kanal 7 marlas equivalent to approx. 21.2 acres in Village Kansal, Tehsil Mohali and more particularly described in Schedule A hereunder written and delineated in green colour boundary line in the Shizra Plan issued by the Patwari dated 23.2.2007." 60. According to the ld. counsel of the assessee if Society had already given the possession then the Society would not have / had possession on 2.3.2007 of the land. At face value this argument looks attractive but when examined in terms of possession which has been explained in case of Jasbir Singh Sarkaria (supra), actual reality will come forward. In this judgment concept of concurrent possession has also been discussed and following extract of paragraph 55 of Salmond's Jurisprudence has been extracted which reads as under: "It was a maxim of the civil law that two persons could not be in possession of the same thing at the same time. As a general proposition this is true: for exclusiveness is of the essence of possession. Two a....
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.... be acquired later, right to mortgage etc. clearly show that rights given by the Society are much more larger than what is covered in the term "license". 64. Fourth contention is that the money received at the time of execution of JDA can be termed as advance and whatever money has been received has already been shown as capital gain. We find no force in this submission because Section 45 which has been extracted above clearly provide for taxing of profits and gains arising from the transfer. We have already discussed the implication of Section 45 r.w.s. 48 while discussing the legal position. We had also discussed this issue in the light of the decision in case of Jasbir Singh Sarkaria (supra) and pointed out that when Section 45 is read along with Section 48 it becomes clear that whole of the consideration which is received or accrued is to be taxed once capital asset is transferred in a particular year. 65. We would like to discuss this aspect of the issue in little more detail and try to understand why the whole of the consideration is required to be taxed. At the cost of repetition let us again reproduce the observations of the Ld. authority in case of Jasbir Singh Sarka....
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.... arising from the transfer 'shall be the income of the previous year in which the transfer took place'. So, the payments of consideration stipulated to be paid in future would have to be attributed, by statutory mandate, to the year of transfer, even as payments made prior to the year of transfer." 66. The above clearly shows that it is because of expression used in Section 45 that is "arising" which cannot be equated with "receipt". In this respect the ld. authority has quoted a very old decision of Hon'ble Madras High Court in case of T.V. Sundaram Iyengaar and Sons Ltd. v. CIT, 37 ITR 26 (Mad). At para 13 of the said decision is extracted in the following manner: "13. In T.V. Sundaram Iyengar and Sons Ltd. v. CIT [1959] 37 ITR 26, a Division Bench of the Madras High Court while construing section 12 B of the Indian Income-tax Act, 1922 clarified the import of the expression "arise" as follows "Section 12B does not require that profits should have been actually received. It is sufficient if they have arisen. Throughout the Income-tax Act the words "accrue' and "arise" are used in contradistinction to the word "receive" and indic....
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.... of Law of Income Tax by Sampath Iyengar XIth Edition by discussing the meaning of "accrued and arise" at page 1300 it has been observe as under: "(1) Important principles.- (a) Meaning - 'Accrue' means 'to arise or spring as a natural growth or result', to come by way of increase'. 'Arising' means 'coming into existence or notice or presenting itself'. 'Accrue' connotes growth or accumulation with a tangible shape so as to be receivable. In a secondary sense, the two words together mean 'to become a present and enforceable right' and 'to become a present right of demand'. In the Act, the two words are used synonymously with each other to denote the same idea or ideas very similar, and the difference lies only in this that one is more appropriate than the other, when applied, to a particular case. It will indeed be difficult to distinguish between the two words, but it is clear that both the words are used in contradistinction to the word 'receive' and indicate a right to receive. They represent a stage anterior to the point of time when the income becomes receivable and connote a character of the income, which is more or less inchoate and which is somet....
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.... property which has been given by the transferor as lawful possession under a particular agreement of sale. This position of law was incorporated in the definition of 'transfer' by insertion of clauses (v) & (vi) in section 2(47) of the Act. It is important to note that clause (v) uses the expression "contract of the nature referred to in section 53A of T.P. Act, therefore, clearly the idea is that an agreement which provides some defense in the hands of transferee was incorporated under the definition of 'transfer' in the Income Tax Act. Now originally section 53A of T.P. Act provided that even if "the contract though required to be registered has not been registered", which means the right of defending the possession was available even if the contract was not registered but by Amendment Act 48 of 2001, the expression "though required to be registered has not been registered", has been omitted which means for the purpose of possession u/s 53A of T.P. Act, a person has to prove that possession has been given under a registered agreement. In other words, now u/s 53A of T.P. Act, the agreement referred is required to be registered. This requirement cannot be read in clause (v) of sec....
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....ections of an earlier Act are incorporated into later, in construing the incorporated Sections it may be at times necessary and permissible to refer to other parts of the earlier statute which are not incorporated. As was stated by LORD BLACKBURN: "When a single Section of an Act of Parliament is introduced into another Act, I think it must be read in the sense it bore in the original Act from which it was taken, and that consequently it is perfectly legitimate to refer to all the rest of that Act in order to ascertain what the Sections meant, though those other Sections are not incorporated in the new Act. (p.244) 72. On the basis of above observation, it was held that meaning of past losses or unabsorbed depreciation has to be taken same as was defined in the Companies Act. In this case it is clear that provision itself refers to clause (b) of sub section (1) of section 205 of Company's Act 1956 and therefore, same meaning was given to past losses or unabsorbed depreciation as is given under the Companies Act, 1956. 73. In case of clause (v) to section 2(47), clearly the expression used is "contract of the nature referred to in section 53A of T.P. Act", which means it is no....
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....t clause (v) in section 2(47) does not lift the definition of part performance from section 53A of the Transfer of Property Act, 1882. Rather, it defines any transaction involving allowing of possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act. This means such transfer is hot required to be exactly similar to the one defined u/s.53A of the Transfer of Property Act, otherwise legislature would have simply stated that transfer would include transactions defined in sec. 53A of the Transfer of Property Act. But the legislature in its wisdom has used the words "of a contract, of the nature referred in section 53A". Therefore, it is only the nature which has to be seen. As discussed above, the purpose of insertion of clause (v) was to tax those transactions where properties were being transferred by way of giving possession and receiving full consideration. Therefore, in our humble opinion, in the case of a transfer where possession has been given and full consideration has been received, then such transaction needs to be construed as "transfer". Therefore, the amendment ma....
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....urpose of Income-tax Act when a person has got a valid legally conveyed after complying with the requirements of the law. 9. Similarly, in the case of Mysore Minerals Ltd. v. CIT [1999] 239 ITR 775/106 Taxman 166 (SC), the assessee had purchased for the use of its staff seven low income group houses from a Housing Board. The payment had been made and in turn possession of the houses was taken over by the assessee. The actual conveyance deed was not executed. The assessee claimed depreciation which was denied by the department. After great discussion, it was observed that for all practicable purposes and for the purpose of Income-tax Act, the assessee shall be construed as owner of the property. In fact, it was held as under:- "Held, reversing the judgment of the High Court, that the finding of fact arrived at in the case at hand was that though a document of title was not executed by the Housing Board in favour of the assessee, the houses were allotted to the assessee by the Housing Board, part payment received and possession delivered so as to confer dominion over the property on the assessee whereafter the assessee had in it....
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....ion. 77. The next contention is that it is necessary for invoking of section 2(47)(v) of the Act to comply with the provisions of section 53A of the Transfer of Property Act to the extent that there should be willingness on the part of the transferee to perform his part of the contract. 78. In this aspect we have no quarrel with the proposition that for invoking section 53A pf T.P. Act read with clause (v) of section 2(47), the transferee has to perform or is willing to perform his part of the contract. In this respect as referred to by Ld. Counsel for the assessee, the comments of the Ld. Author in the commentary by Mulla - Dinshan Frederick Mulla vide para 16 are clear and shows that this requirement has to be absolute and unconditional. Some observations have been made in the case of General Glass Company Pvt Ltd v. DCIT (supra). In that case it was held that willingness to perform for the purpose of section 53A is something more than a statement of intent and it is unqualified and unconditional willingness on the part of the transferee to perform his obligation. In that case the transferee has agreed to make certain payments in instalments in consideration of the developm....
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....society have sought a review of the order because the findings arrived were ex parte. No order in the matter has been passed by the competent authority perhaps because of the order of High Court. In the interim order passed in the PIL it has been clarified by the Hon'ble Supreme Court vide order dated 31.1.2012 permitting the concerned authority under the different statutes governing the matter to their respective jurisdiction to be decided in accordance with law. Thus, it becomes clear that developer i.e. THDC has applied for various permissions before the relevant authorities and in some cases permission were declined on ex parte basis and in some cases the same were declined in view of the High Court order banning the construction. After the clarification of the order of the High Court by Hon'ble Supreme Court by order dated 31.1.2012, the authorities have already been permitted to examine the issue on merits under various laws. Further in the JDA there is a clause 26 which deals with the Force Majeure clauses. The clause 26 (i) to (v) reads as under:- FORCE MAJEURE (i) None of the parties shall be liable to the other Party or be deemed to be in br....
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....lauses show that if any of the party could not perform its part of the obligation because of the unforeseen circumstances which included government directions, court orders, injunctions etc. such party would not be liable to other party. In view of Force Majeure clause which included Court Injunction it can not be said that THDC is not willing to perform its obligation. In fact Developers i.e. THDC/HASH were perusing the issue of permissions/sanctions vigorously. These aspects become further clear if the judgment of the Hon'ble Punjab & Haryana High Court in CWP No. 20425 of 2010 vide order dated March 26, 2012 is perused. Paras 3, 4, 22, 25 & 26 of the judgment read as under:- 3. The broad contours of the present proceeding having been outlined, we may now proceed to take note of the specific contentions of the contesting parties as made before us. However, before we do so, it may be appropriate to mention the somewhat conflicting stand of the parties with regard to the present stage of the applications filed under the provisions of the Environment (Protection) Act as well as the Wild Life (Protection) Act. While the petitioner, who is supported by the ....
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.... the provisions of the two statues in question. As already held by us, a public trust has been bestowed on the authorities by provisions of the said Acts which cast on such authorities a duty to interdict any project or activity which even remotely seems to create an imbalance in the pristine ecology and environment of the area on which the city of Chandigarh is situated or for that matter in the immediate vicinity thereof. As already observed, necessary clearances under the aforesaid two enactments, insofar as the respondents are concerned, are presently pending before the concerned authorities and, therefore, it would be highly incorrect on our part to enter into any further discussion on the aforesaid aspect of the case. 25. We also hasten to emphasise that a more rigorous regulated development in what are now the remnants of the periphery and the areas adjoining to it is the need of the hour for which the stakeholders i.e. the Administration of Chandigarh, the States of Punjab and Haryana as also the authorities under the Environment (Protection) Act and the Wild Life Protection Act have to demonstrate the need to engage themselves intensively and no....
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....espective members of the Owner (as the case may be) within six(6) months from the date of execution of this agreement or within two (2) months from the date of approval of the plans/Design and Drawings and grant of the final licence to develop where upon the construction can commence, whichever is later, against which the Owner shall execute a registered sale deed for land of equivalent value being 6.36 acres out of the Property as demarcated in green colour (also hatched in green colour) in the Demarcation Plan annexed hereto as Annexure V and bearing Khasra nos. 123/15, 123/6, 123/7 (balance part), 123/3 (part), 123//4//1, 123///4//1/2, 123//4/2, 123/5/1, 123//5/2, 123//5/3, 112/24/24 (part)" 85. The careful reading of the said clause of the JDA would show this payment was required to be made within a period of six months from the date of execution of this agreement or within two months from the date of approval of plan/sanction and drawing grant of final license to develop where upon the construction can commence, whichever is later. Thus, this instalment was dependent on two contingencies first the expiration of a period of six months from the date of agreement or alternativ....
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....e covered by the definition of transfer. In the case before us, initially the Members of the Society were holding shares in the Society for ownership of plot of 500 sqyd or 1000 sqyd. This membership was surrendered to the Society vide resolution of the Society passed in the Executive Committee on 4.1.2007 which was later ratified in the General Body Meeting of the Society on 25.1.2007, so that the society could enter into JDA. In the JDA the Society has agreed to transfer the land. Therefore, technically it can be said that the developer i.e. THDC/HASH has purchased the membership of the Members in the society which would lead to enjoyment of the property and in that technical sense, clause (vi) of Section 2(47) is applicable. 89. Eighth contention is that since the Society has transferred the land through JDA on a pro rata basis, therefore, only whatever money is received against which sale deeds have also been executed, can be taxed and notional income i.e. the money to be received later, can not be taxed. In this regard reliance was placed on certain Supreme Court decisions and other cases for the proposition that notional income cannot be taxed. There is no need to discuss ....
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....s. Commenting on these limitations, the Ld. Author Shri S. Rajaratnam in the Commentary of Law of Income Tax by Sampat Iyengar's Volume 1, (11th Edition) has observed at page 343 as under:- "5. Reservations on real income theory. -Whether accrual of income has taken place or not, must be judged on the principle of the real income theory. After accrual, non-charging of tax on the same because of certain conduct based on the ipse dixit of a particular assessee cannot be accepted. In determining the question whether it is hypothetical income or whether real income has materialized or not, various factors will have to be taken into account. It would be difficult and improper to extend the concept of real income to all cases depending upon the self-serving statement of the assessee. What has really accrued to the assessee has to be found out and what has accrued must be considered from the point of view or real income taking the probability or improbability of realization in a realistic manner, but once accrual takes place, on the conduct of the parties subsequent to the year of closing, an income which has been accrued cannot be made "no income'." 91. The....
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....ITR 499 (Bom); C.J. George v. CIT [1973] 92 ITR 137 (Ker); D.C. Anand & Sons v. CIT [1981] 131 ITR 77 (Delhi). Also see, CIT v. Parbutty Churn Law [1965] 57 ITR 609, 619 (Cal); In the matter of Krishna Lal Seal, AIR 1932 Cal 836; Lalla Mal Samgham Lal v. CIT [1936] 4 ITR 250 (Lah); New Delhi Municipal Committee v. Nand Kumar Bussi [1977] Tax LR 2130 (Delhi)]" 93. Similar view has been expressed by Shri N.A. Palkhivala in his commentary on the Law land Practice of Income Tax, Volume 2 (Eighth edition) by Kanga and Palkhivala's observation at pages 22 & 23. Again even Shri S. Rajaratnam in the Commentary of Law of Income Tax by Sampat Iyengar's Volume 2, (11th edition) expressed identical views in his commentary at page 2738. 94. In all the leading commentaries cited above, it has been observed that annual value is to be computed whether property has been let out or not. This means that notional value of the property has to be charged to the Income Tax under the head "income from house property". From the above, it becomes clear that though there is no real income from letting out of the property, still the notional annual value is subjected to tax under the head "income from h....
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....he judicial mind. Considerations of hardship, injustice or anomalies do not play any useful role in construing taxing statutes unless there be some real ambiguity. Thus, any benevolent construction in favour of the assessee has been held to be uncalled for. 96. Therefore, it can be said that generally speaking notional income could not be subjected to tax but whenever there is a specific provision, the same has to be taxed. Now, in case of capital gain, section 45 read with section 48 very clearly provides that it is the profit "arising" from the transfer of a capital asset which would be subjected to charge of capital gain tax and section 48 clearly provides for taking the total consideration into account while computing the capital gains. This aspect we have already discussed in detail at para Nos. 64 to 68 from which it becomes clear that it is the whole consideration whether received or accrued, which has to be taxed under the capital gain once transfer of the capital asset takes place. Accordingly, there is no force in this part of the contention. 97. Now let us examine the issue of taxability of flat on the basis of above principles. Relevant portion of clause 4 of the ....
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....sixty five members having a plot of 500 sq. yards, two flats for the (thirty) 30 members having a plot of 1000 sq. yards and 4 flats to the Owner for the 4 plots of 500 sq. yards each as per list annexed with this Agreement as Schedule B ('Sale Transaction') It is expressly agreed between the Developers that HASH shall be responsible for making all payments to the Owner and/or the respective members of the Owner (as the case may be) as per the negotiated and agreed terms between the Owner and HASH, HASH expressly undertakes to make timely payments of the Payment to the Owner and/or the respective members of the Owner (as the case may be) as under: 4.2 As resolved by the Owner, THDC either by itself or along with HASH shall allot the Flats in the name of members of the Owner as per list annexed with this Agreement as Schedule B attached herein (hereinafter referred to as the 'Allottees'). The specifications of the flats would be provided by the Developers to the Owner and more particularly described in the Schedule C attached herein (hereinafter referred to as the 'Specifications'). The Allotment letters shall be issued to the ....
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....is aspect clearly show that capital gain tax has to be paid on the total consideration arising on transfer which would include the consideration which has been received as well as the consideration which has arose and become due and may be received later on. In view of this discussion this contention is rejected. 100. Ninth contention is that the assessee has already terminated the agreement and has revoked the Power of Attorney. We find no force in this submissions. 101. In this regard ld. counsel of the assessee has relied on the decision of Mumbai Bench of the Tribunal in case of Chemosyn Ltd. (supra). In that case the assessee-Company was owner of two plots bearing 256 & 257 in Gundabali Andheri Mumbai. The assessee-company entered into a development agreement with Dipiti Builders for the development rights for a consideration of Rs. 16.11 crores. Dipiti Builders had also agreed to construct 18000 sqft carpet area for the benefit of assessee on plot No. 256. In the return of income total consideration was shown only at Rs. 16.11 crores. It was explained that before Dipiti Builders could start the development/construction work, entire property comprising of plot Nos. 256 &....
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....e of the termination shall remain with THDC and the balance lands to be transferred to THDC as per the terms of this Agreement shall not be transferred by the Owner in favour of THDC. Upon the termination, the Owner shall refund to THDC the Adjustable Advance/Earnest Money mentioned in clause 4.1(i) above within one month of such termination. In the event of failure of the Owner to refund the said amount, the Owner hereby agrees to execute a registered sale deed for land of equivalent value in favour of THDC. (ii) In the event all the requisite Government and statutory approvals, authorizations, consents, licenses, approvals of all the plans/designs and Drawings as may be required for the development of this Property in relation to the Project and to undertake the Project are not granted within nine (9) months of the submission of the final plans/Designs and Drawings to the Competent Authority for approval then THDC may as its sole discretion either decide that it does not desire to undertake and complete the Project and hence terminate this Agreement after giving thirty (30) days written notice in this regard or decide to wait for any further times deem....
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....avour of THDC. Upon the termination, the Owner shall forfeit the Adjustable Advance/Earnest Money mentioned in clause 4(i)." 103. The reading of the above clause would show that power of termination has been given in many circumstances to THDC vide clause 14(i), (ii) and (iii). The power for termination by the owner has been mentioned in clause 14(iv) only. Reading of this clause would show that right to terminate with the owner i.e. the Society was available only in case of default in making the payment. The issue regarding default for making payment has already been discussed by us in Paras 84 to 86 above while discussing the issue of willingness on the part of the transferee to perform its part of the contract We have already held that there was no default on the part of developer i.e. THDC/HASH in making the payment, therefore, the assessee had no right to terminate the contract. In any case we further find that clause 20 of the JDA refers to Arbitration and it is clearly provided that all the disputes under it should be referred to the arbitration. Therefore, if the Society had some grievance it was duty bound to give a notice for appointment of an Arbitrator to the develop....
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....0/- x 129 plots) Rs. 130,61,25,000/- Total Rs. 237,03,75,000/- Average cost of consideration Rs. 11.18 crores per acre (Total consideration of Rs. 237.03 crores divided by 21.2 acres of land) It is claimed on behalf of the assessee that JDA has been cancelled and the developer has been allowed to retain the property which has also been conveyed to developer through two sale deeds. If that is so then what would happen to the balance consideration because in such situation the assessee has received consideration of only about Rs. 5 crores per acre because the assessee has registered land measuring 3.08 acres for Rs. 15.48 crores through first conveyance deed, whereas consideration as per original agreement was Rs. 11.18 crores per acre as shown above. The difference is because of non-receipt of consideration in kind and the assessee has not shown any evidence that it has made the claim for receipt of balance consideration. This leads to the conclusion that there was no cancellation of the JDA. 106. Some arguments were made by both the parties that if the contract is finally stand abandoned then what would happen. The contention on behalf of the assessee....
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....164 above are also relevant again: "It is hard on the owners when required to pay tax, when handing over the possession for purposes of construction without being able to enjoy the construction, which is yet to commerce or in the process of construction being put up by the developer, but the solution lies in statutory clarification in such cases. In view of the increasing scale of such development agreements to solve the housing problem in the cities, a statutory clarification or circular is overdue." We may mention here that no doubt sometimes an assessee may be put in a difficult situation and as mentioned by Hon'ble Authority in case of Jasbir Singh Sarkaria (supra) as well as Ld. Author Shri Rajaratnam it is for the legislature to take corrective steps. However, it may not be out of place that if considering the difficulty the interpretation given by the ld. counsel of the assessee is accepted then the Revenue may not be able to tax such assessees when these difficulties are removed. For example in the present case if tomorrow when all permissions are obtained and construction is completed and if no taxes are held to be payable then later on also ....
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....0 between THDC and HASH in case Gross Sales Proceeds is equal to Rs. 1272 crores; (c) in addition (b), in the ratio of 60: 40 between THDC and HASH in respect of gross sales Proceeds in excess of Rs. 1272 crores. "It is agreed that the minimum guaranteed amount from the Gross Sales Proceeds for THDC and HASH is Rs. 890.40 crores and Rs. 225.76 crores respectively. The minimum guaranteed amount of Rs. 225.76 crores to HASH includes Rs. 58.88 crores that shall be expended by THDC towards construction of 126 flats equivalent to 2,83,500 sq. ft, which flats are to be allotted in the names of the members of the Society or otherwise, as the case may be, calculated as Rs. 2000 per sq. ft. for the area 2,83,500 sq. ft. and the 72% share of 3 flats of 2250 Sq. ft. to be purchased by HASH @ Rs. 4500/- per sq. ft. Should the application of the ratio stipulated in (a) above result in HASH being entitled to a sum greater than the minimum guaranteed amount and THDC being entitled to a sum less than the minimum guaranteed amount, THDC shall-be entitled to the entitlement of HASH which is in excess of its minimum, guaranteed amount until THDC....
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....as pointed out that this issue has been rejected wrongly by CIT(A). However, carefully perusal of the grounds of appeal show that no ground in respect of deduction u/s 54F has been raised before us and, therefore, we decline to adjudicate this issue and all the arguments made in this behalf are rejected. Though reference was made to ground No. 2.3 in this regard. The perusal of ground Nos. 2.3 would show that reference has been made only to Section 54 and Section 54EC. Section 54 deals with deduction in case the assessee being an individual or HUF, transfers the residential house and in case before us, the assessee has transferred the plot. Therefore, it cannot be said that deduction u/s 54F and 54 is same. Since no ground has been raised for deduction u/s 54F, we reject this contention. 111. Ground No. 3 - The ld. counsel of the assessee submitted that without prejudice to the issues raised in ground Nos. 2, 5 & 6, capital gain should have been taxed in the hands of the Society which is legal owner of the land. 112. On the other hand, the ld. DR for the revenue submitted that the Society was acting on behalf of the Members and the Members have surrendered their rights in fav....
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....al of interest u/s 244A(3) should also be done in accordance with law. 115. In the result, appeal of the assessee is partly allowed. ITA No. 276/Chd/2012 in case of ACIT v. Satpal Gosain 116. This appeal is directed against the order passed by the ld. CIT(A)-I, Ludhiana dated 21.12.2011. 117. In this appeal the Revenue has raised the following grounds: "1 That the ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 3,55,21,070/- made on account of capital gains ignoring the principle laid down in the case of Chaturbhuj Dwarikadas Kapadia v. CIT 260 ITR 491 (Bom). 2. That the ld. CIT(A) has erred in law and on facts innot passing an order in writing and therefore, not complying with the Sub-Rule (2) of Rule 46A while admitting the additional evidence ignoring the decision of the Jurisdictional Bench of the Hon'ble ITAT, Chandigarh in the case of Smt. Surinder Kaur dated 29.7.2011 passed in ITA No. 596/Chd/2011. 3. That the order of the ld. CIT(A) be set aside and that of Assessing Officer be restored." 118. The ld. DR for the revenue submitted that since the issue ....
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....at additional evidence came into existence after the completion of assessment proceedings, therefore, in this case ground of revenue against the admission of additional evidence, has been allowed on technical basis but additional evidence stands considered in case of Shri Charanjit Singh Atwal and that decision has been followed in the case of this assessee. Therefore, no harm has been caused to the assessee despite the fact that admission of additional evidence has been held to be not valid. 124. Appeal of the Revenue in ITA No. 276/Chd/2012 is allowed. ITA No. 986/Chd/2011 - Avtar Singh Brar v. ITO 125. This is an appeal filed by the assessee against the order dated 18/08/2011 of CIT (Appeals) Chandigarh. 131 In this appeal various grounds have been raised but disputes raised can be summarized as under: (i) That despite the issue of notice u/s 148, the assessment order has been framed u/s 143(3) of the Act. (ii) Confirmation of action of the Assessing Officer to charge capital gain tax on full value of consideration against the sale of plot through JDA. (iii) The ld. CIT(A) erred in co....
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....nothing wrong with the same and accordingly this issue is decided against the assessee. 132. Second issue has been adjudicated in detail in the case of Shri Charanjit Singh Atwal, ITA No. 448/Chd/2011 in Para Nos. 27 to 110 and following the same we decide the issue against the assessee. 133. Third issue has been adjudicated by the ld. CIT(A) vide Para 7.1 which is as under: "During the course of appellate proceedings, the Ld. Counsel for the appellant has filed a copy of revised return of income for A.Y. 2008-09 and not A.Y. 2007-08, the year for which notice u/s 148 was issued. As the return had been revised for A.Y. 2008-09 and not A.Y. 2007-08, the Assessing Officer was right in not considering the revised return filed by the appellant for A.Y. 2008-09. Ground of appeal No. 5 is dismissed." 134. We find no reason to deviate from the reasoning given by the ld. CIT(A) because there is no evidence to show that return for Assessment year 2007-08 was revised. Therefore, this issue is also decided against the assessee. 135. In the result, the appeal of the assessee is dismissed. ITA No. 993/Chd/2011 - Smt. Surjit Kaur v. ITO 136. This app....
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....fore, these grounds are dismissed as not pressed. 143. Ground Nos. 4 to 11 contain the issue regarding transfer of 1000 sqyd plot through the Society to the developer. 144. Both the parties adopted identical arguments which were given in the case of Shri Charanjit Singh Atwal (supra). 145. After considering the rival submissions we find that identical issue has been dealt in case of Shri Charanjit Singh Atwal (supra) and following the decision in that case we decide this issue against the assessee. 146. Ground No. 12 regarding deduction u/ss 54 & 54F was not pressed and therefore, same is dismissed. 147. Ground No. 13 is regarding charging of interest u/ss 234A, 234B and 234C of the Act. Charging of interest u/s 234A, 234B and 234C is consequential nature and the Assessing Officer is directed to charge interest as per provisions of the Act. 148. In the result, appeal of the assessee is dismissed. ITA No. 1070/Chd/2011 - Shri Madan Mohan Mittal v ACIT 149. This appeal is directed against the order of ld. CIT(A), Chandigarh dated 23.8.2011. 150. In this appeal the assessee has raised various grounds of appeal but at the time of hearing the ld. counsel of th....
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....ore, the same is not emanating from the impugned order and cannot be adjudicated by us. 158. Section 54 of the Act clearly provides for deduction in a case where the assessee being an individual or HUF, transfers long term capital asset in the nature of residential house. Since in the case before us, the asset transferred is a plot, therefore, deduction u/s 54 cannot be allowed to be entertained. In view of this ground No. 13 is rejected. 159. Ground No. 14 is regarding charging of interest u/s 234B of the Act which is consequential nature. The Assessing Officer is directed to decide the issue in accordance with law. 160. In the result, appeal of the assessee is dismissed. ITA No. 1071/Chd/2011 - Shri Surinder Singh v Dy. CIT 161. This appeal is directed against the order of ld. CIT(A), Chandigarh dated 5.8.2011. 162. In this appeal the assessee has raised various grounds of appeal but at the time of hearing the ld. counsel of the assessee submitted that ground Nos. 1 to 3 deals with reopening of the assessment which are not pressed, therefore, these grounds are dismissed as not pressed. 163. Ground Nos. 4 to 12 contain the issue regarding levy of capital gain ....
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.... net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45 : Provided that nothing contained in this sub-section shall apply where- (a) the appellant- (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchase any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head "Income from house property". Explanation - For the purposes of this section, "net consider....
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....given in the case of Shri Charanjit Singh Atwal (supra). 177. After considering the rival submissions we find that identical issue has been dealt in case of Shri Charanjit Singh Atwal (supra) and following the decision in that case we decide this issue against the assessee. 178. Ground No. 13 reads as under: "That the ld. CIT(A) has further erred in upholding the non-allowance of benefit provided u/s 54/54F of the Act and claimed on the amount received which is arbitrary and unjustified." 179. Both the parties were heard. The Issue has been adjudicated by us in ITA No. 1071/Chd/2011 which we have dealt above. In this case also similar findings have been given by ld. CIT(A). Following our earlier order in ITA No. 1071/Chd/2011, we dismiss this ground. 180. Ground No. 14 is regarding charging of interest u/s 234B of the Act. The Assessing Officer is directed to decide the issue of charging of interest u/s 234B of the Act, in accordance with law. 181. In the result, appeal of the assessee is dismissed. ITA No. 1073/Chd/2011 - Shri Tara Singh Ladal v. ACIT 182. This appeal is directed against the order of ld. CIT(A), Chandigarh dated 1.8....
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.... DR for the revenue supported the order of the ld. CIT(A). 198. After considering the rival submissions and on verification of record we find that this issue was raised before the ld. CIT(A) through ground No. 11 which reads as under: "That the ld. CIT(A) has further erred in not giving the benefit provided u/s 54 of the Act and claimed on the amount received which is arbitrary and unjustified." 199. This issue has been adjudicated by the ld. CIT(A) vide para 5.14 and we have dealt with similar issue in ITA No. 1070/Chd/2011 above in para Nos. 153 to 158. Following that decision we decide this issue against the assessee. 200. Ground No. 15 - This ground is regarding charging of interest u/s 234B of the Act which is of consequential nature. The Assessing Officer is directed to charge the interest as per provisions of law. 201. In the result, appeal of the assessee is dismissed. ITA No. 1088/Chd/2011 - Smt. Neena Chaudhary v. ITO ITA No. 1089/Chd/2011 - Smt. Krishna Raghu v. ITO ITA No. 1090/Chd/2011 - Sh. Gaurav Raghu v. ITO 202. These appeals are directed a....
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.... v. Dy. CIT 211. This appeal is directed against the order of ld. CIT(A), Chandigarh dated 1.8.2011. 212. In this appeal the assessee has raised various grounds of appeal but at the time of hearing the ld. counsel of the assessee submitted that ground Nos. 1 to 3 deals with reopening of the assessment which are not pressed, therefore, these grounds are dismissed as not pressed. 213. Ground Nos. 4 to 12 contain the issue regarding levy of capital gain tax for transfer of plot through the Society in terms of JDA. 214. Both the parties adopted identical arguments which were given in the case of Shri Charanjit Singh Atwal (supra). 215. After considering the rival submissions we find that identical issue has been dealt in case of Shri Charanjit Singh Atwal (supra) and following the decision in that case we decide this issue against the assessee. 216. Ground No. 13 is regarding charging of interest u/s 234B of the Act. 217. The Assessing Officer is directed to decide the issue of charging of interest u/s 234B of the Act, in accordance with law. 218. In the result, appeal of the assessee is dismissed. ITA No. 1099/Chd/2011 - Sh. Rajesh Singhal v. ITO ITA No. ....
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....the delay. 230. In this appeal various grounds have been raised but the ld. counsel of the assessee submitted that only three disputes are involved in this appeal which are as under: (i) Reopening of assessment (ii) Taxability of capital gain (iii) Denial of deduction u/s 54F of the Act. 231. First issue regarding reopening of assessment was not pressed before us, therefore, the same is dismissed as not pressed. 232. Regarding second issue the assessee is a member of Punjabi Co-op. Housing Building Society Ltd. and was owner of 500 sq.yd plot. The Society had entered into an agreement for development with THDC/HASH and was entitled for cash consideration of Rs. 82,50,000/- and furnish a flat of 2250 sq.ft. Whole of cash consideration and value of furnish flat was subjected to capital gain tax by the Assessing Officer and confirmed by the ld. CIT(A). 233. Both the parties adopted identical arguments which were given in the case of Shri Charanjit Singh Atwal (supra). 234. After considering the rival submissions we find that identical issue has been dealt in case of Shri Charanjit Singh ....
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....r Pvt Ltd. 291 ITR 500, notice u/s 148 can be issued particularly because the department has made enquiries in respect of Group Housing Societies and information was available that Punjabi Co-op. Housing Building Society Ltd. has transferred land, therefore, issuance of notice u/s 148 is justified. In any case at the time of recording the reasons, it is not necessary to reach a fool proof conclusion that particular item of income has escaped. What is required under the Act is only prima facie reasons. He also supported the order of the ld. CIT(A). 241. We have heard the rival submissions carefully. We do not find any force in the submissions of the ld. counsel of the assessee. The ld. CIT(A) has adjudicated this issue vide paras 5.2 to 5.4 which are as under: "5.2 I have considered the facts of the case. It is seen that there was information available with the Assessing Officer that the appellant, being a member of M/s Punjabi Co-operative House Building Society Ltd. Mohali (who had 21.2 acres of land in Village Kansal and had entered into an agreement with TATA and HASH for sale of land ), had received Rs. 15 lakhs as consideration in this year and w....
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....ning the assessment is upheld. Grounds of appeal Nos. 2 & 3 are dismissed." 242. First of all admittedly the original return was processed u/s 143(1) and further from the enquiries made by the Department information was available that Punjabi Co-op. Housing Building Society Ltd. has transferred 21.2 acres of land through JDA to the developers i.e. THDC/HASH which means that the Assessing Officer had reasons to believe that income has escaped. As observed by the ld. CIT(A) once the preliminary information is available then in view of the decision of Hon'ble Supreme Court in case of ACIT v. Rajesh Jhaveri Stock Broker Pvt Ltd. (supra), notice u/s 148 can be issued because no assessment u/s 143(3) has been framed originally. 243. Perusal of the reasons recorded by the Assessing Officer show that Assessing Officer has referred to the agreement entered into by the Society which shows that certain consideration has been received. He has referred to a sum of Rs. 15 lakhs received in Financial Year 2006-07. But basically what he is referring is to the escapement of capital gains. It is settled position of law that at the time of reopening what is required is prima facie reasons and n....
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....reason to believe that income has escaped assessment and such reasons should be prima facie reason and there is no requirement that the Assessing Officer should finally ascertain the factum of the escapement of income at the stage of issuing of notice itself. Even Hon'ble Supreme Court in case of Raymond Woolen Mills v. ITO 236 ITR 34 has clearly held that at the stage of reopening of assessment what is required is that there should be some prima facie material on the basis of which the Department would reopen the case. Head note of the decision reads as under: "In determining whether commencement of re-assessment proceedings was valid it has only to be seen whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. Held, that the case of the Revenue was that the assessee was charging to its profit and loss account, fiscal duties paid during the year as well as labour charges, power, fuel, wages, chemicals etc. However, while valuing its closing stock the elements of fiscal duty and the oth....
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.... future years (iv) Capital gain should have been levied in the hands of the Society and not in the hands of the assessee. (v) Index cost of acquisition 251. Regarding First issue the ld. counsel of the assessee referred to pages 12 to 14 of paper book which is copy of notice and copy of the reasons recorded and pointed out that copy of the reasons would clearly show that no date has been mentioned in the reasons, therefore, same cannot be said to have been recorded before issuance of notice. It was also pointed out by him that these reasons were supplied by the Department when the same were asked by the assessee. 252. On the other hand, the ld. DR for the revenue strongly relied on the order of ld. CIT(A) and submitted that even if the date was not put on the reasons same should be construed as a mistake which has to be ignored in view of Section 292B of the Act. 253. In the rejoinder, the ld. counsel of the assessee submitted that fatal mistake of not putting the date cannot be ignored in view of Section 292B particularly in the light of the decision of Hon'ble Punjab & Haryana High Court ....
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....e consideration for the purposes of calculation of capital gain on sale of land in the return of income filed on 30.10.2009. This return is non-est in the eyes of law, as it is not a revised return u/s 139 (5) of the Act and so the contention of the appellant that the return of income was revised before issuance of notice u/s 148 of the Act is not relevant. The correct value of capital gain had not been declared in the return of income filed by the appellant and since the full value of consideration was at least Rs. 1,83,75,000/- (82,50,000/- as monetary consideration and Rs. 1,01,25,000/- as value of furnished flat of 2250 sq. feet), the Assessing Officer formed her reasons to believe that some income had escaped assessment and so issued notice u/s 148 of the Act. 5.2.1 The appellant has also contended that the reasons recorded do not disclose the date on which these were recorded. This issue was never raised before the Assessing Officer; though the appellant had requested the Assessing Officer to intimate the reasons for issuing notice u/s 148 vide his letter dated 6.08.2010 and the Assessing Officer had provided the same vide letter dated 25th August ....
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....n this regard are rejected. 5.2.2 The appellant has also relied upon the decision of Hon'ble ITAT, Chandigarh Bench in the case of Shri Karanvir Singh Ghosal in ITA No. 377/Chd/2002. In that case, the Hon'ble ITAT has merely set aside the matter to the file of CIT (A) to give a finding on the validity of initiation of proceedings u/s 148. The Hon'ble ITAT had not given any finding in that case. Hence, the ratio of this judgment also does not apply to the facts of the instant case. 5.2.3 It has been held by Hon'ble Supreme Court in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (291 ITR 500) that at the stage of issue of notice u/s 148, the only question to be seen is whether there was relevant material, on the basis of which a reasonable person could have formed the requisite belief. Whether material would conclusively prove escapement of income is not the concern at the stage of issue of notice u/s 148. It is so because the formation of belief is within the realm of the subjective satisfaction of the Assessing Officer. The various judgments quoted by the Ld. Counsel for the appellant are distinguishable on f....
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....ed upon for curing a jurisdictional defect in the assessment notice, summons or other proceeding. In other words, if the notice, summons or other proceeding taken by an authority suffers from an inherent lacuna affecting his/its jurisdiction, the same cannot be cured by having resort to section 292B." 256. From above it becomes clear that what can be saved in view of Section 292B, is a mistake or defect or omission in an assessment, notice, summons or other proceedings. But the same could not be invoked to validate for curing jurisdictional defect. In our view the fact of not mentioning the date is not a jurisdictional defect and it can be treated as a simple case of mistake or typographical mistake of omission. Therefore, the ld. CIT(A) has correctly adjudicated the issue and accordingly we confirm his order. 257. In respect of second issue of chargeability of capital gain -After considering the rival submissions we find that identical issue has been dealt in case of Shri Charanjit Singh Atwal (supra) and following the decision in that case we decide this issue against the assessee. 258. Third issue - After going through the record, we find that this issue has not been ad....
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....ion and benefit of indexation before calculating capital gain. 270. On the other hand, the ld. DR for the revenue supported the order of the Assessing Officer. 271. After considering the rival submissions we find that we have already confirmed the charging of capital gain tax on whole of the consideration, therefore, whole cost of acquisition has to be considered. Since the details are not available therefore, we set aside the issue to the file of Assessing Officer with a direction to compute the capital gain tax after allowing full cost of acquisition after applying inflation index on the same. 272. Third issue is regarding denial of deduction u/s 54F of the Act. Both the parties were heard. The Issue has been adjudicated by us in ITA No. 1071/Chd/2011 which we have dealt above. In this case also similar findings have been given by ld. CIT(A). Following our earlier order in ITA No. 1071/Chd/2011, we dismiss this ground. 273. Fourth issue is regarding chargeability of interest u/s 234B which is of consequential in nature and the Assessing Officer is directed to decide this issue in accordance with law. 274. In the result, appeal of the assessee is dismissed. ITA N....
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....e u/s 147/148 of the I.T. Act. Therefore the objections raised in this regard are not sustainable. 4.2.1 As per the decision of the Apex Court in the case of GKN Driveshafts (India) Ltd. (supra), the preliminary objection against issue of notice u/s 148 of the Act has to be disposed off by passing a speaking order and this has been done by the Assessing Officer even before discussing about the disallowance/additions in the assessment order. Further, as per the reasons recorded, the appellant's income exceeded the maximum amount chargeable to tax. 4.2.2 It is seen that there was information available with the Assessing Officer that the appellant, being a member of M/s Punjabi Co-operative House Building Society Ltd. Mohali (who had 21.2 acres of land in village Kansal and had entered into an agreement with TATA and HASH for sale of land), had received Rs. 15 lakhs as consideration in this year and was liable to pay capital gain tax on sale of land. The appellant had declared Rs. 15 Lacs only as the sale consideration for the purposes of calculation of capital gain on sale of land in the return of income filed and the correct va....
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....ls), Chandigarh dated 28.09.2011 285. In this appeal various grounds have been raised but at the time of hearing, the ld. counsel of the assessee submitted that only three disputes are involved in this appeal which are as under: (i) Chargeability of capital gain (ii) Deduction u/s 54F (iii) Reopening of assessment 286. The issue regarding reopening of the assessment was not pressed before us and the same is dismissed as not pressed. 287. In respect second issue regarding chargeability of capital gain - both the parties submitted identical arguments which were given in the case of Shri Charanjit Singh Atwal (supra). 288. After considering the rival submissions we find that identical issue has been dealt in case of Shri Charanjit Singh Atwal (supra) and following the decision in that case we decide this issue against the assessee. 289. Regarding third issue the ld. counsel of the assessee made identical arguments which were given in the case of Shri Charanjit Singh Atwal (supra). 290. On the other hand, the ld. DR for the revenue strongly relied on the order of the ld. CIT(A). 291....
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.... disputes are involved in this appeal which are as under: (i) Reopening of assessment (ii) Chargeability of capital gain in respect of flat to be received by the assessee on hypothetical basis @ Rs. 4500 sqft (iii) Deduction u/s 54F 296. First issue regarding reopening of assessment was not pressed by the ld. counsel of the assessee and the same is dismissed as not pressed. 297. In addition to above an application dated 1.5.2013 has been made for admission of addition ground which are as under: "1. That the ld. CIT(A) has further erred in upholding the addition of Rs. 80,00,000/- as the alleged consideration received in cash which in fact has not been received till date except Rs. 32,00,000/- and as such the addition upheld is illegal, arbitrary and unjustified. 2. That the ld. CIT(A) has erred in holding that the transaction was squarely covered by the provisions of section 2(47) r.w.s. 45 and 48 which is arbitrary and unjustified. 3. That in any case, Section 53A of the Transfer of Property Act is not applica....
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....ked out as per return filed and the assessee claimed exemption u/s 54 F for Rs. 26,36,402/- i.e. to the extent of long-term capital gain as shown in the return and the same was allowed. copy of computation chart is enclosed marked as annexure "B" However, while computing the long term capital gain in the assessment order passed u/s 143(3)/147, the Ld. A.O. has wrongly restricted the claim of exemption u/s 54F at Rs. 26,36,402/- instead allowing to the extent of Rs. 32 Lacs i.e. the amount which was invested in the construction of residential house and evidence for which was provided by the appellant and examined by the Ld. A.O. As such the exemption u/s 54 F is wrongly allowed at Rs. 26,36,402/- instead of Rs. 32 Lacs on this account for which necessary evidence was provided in the course of assessment proceedings. Even the assessee had filed an application for rectification u/s 154 for this purpose vide letter dated 27.01.2011 duly acknowledged by the Ld. A.O. on 31.01.2011 and till date no rectification order either making the amendment or refusing to allow the claim has been passed. Whereas, as per provisions of sub Section....
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....ecision in that case we decide this issue against the assessee. 313. Third issue regarding deduction u/s 54F, ld. counsel of the assessee adopted identical arguments as in the case of Shri Chranjit Singh Atwal (supra). 314. On the other hand, the ld. DR for the revenue supported the order of the ld. CIT(A). 315. After considering the rival submissions we find that the issue regarding Section 54F has been adjudicated by the ld. CIT(A) vide para 5.7p which is as under: "As regards applicability of Section 54F, there are certain conditions which are attached with Section 54F also which have to be fulfilled before which exemption under that section is available to the assessee. The assessee has not even tried to make any claim by showing that he has fulfilled the said conditions to be eligible for exemption u/s 54F. So exemption cannot be given in such a situation u/s 54F." Relevant portion of Section 54F reads as under: "54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term cap....
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....tion u/s 54F of the Act. Therefore, we find nothing wrong with the order of the ld. CIT(A) and confirm the same. 316. In the result, appeal of the assessee is allowed for statistical purposes. ITA No. 765/CHD/2012- Ms. Manmohan Kaur v. The ACIT, 317. This appeal is directed against the order of CIT (Appeals), Chandigarh dated.08.05.2012 318. In this appeal various grounds have been raised but at the time of hearing, the ld. counsel of the assessee submitted that only three disputes are involved in this appeal which are as under: (i) Chargeability of capital gain (ii) Deduction u/s 54F (iii) Levy of interest u/s 234B/234C 319. In respect of issue No. 1 regarding chargeability of capital gain - both the parties adopted identical arguments which were given in the case of Shri Charanjit Singh Atwal (supra). 320. After considering the rival submissions we find that the assessee is a Member of Defence Services Coop House Building Society Ltd. and was holding a plot of 500 sqyd. The Society sold the land to the developer THDC/HASH. All the facts are identical with the facts in case of Shr....
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....n the date of the agreement i.e. 27.04.2007. That, the Assessing Officer has fallen in error and has misconstrued the terms of the agreement dated 27.04.2007. 4. That the learned CIT(A) has also not allowed deduction u/s 54 F which was eligible to the applicant since, he has included the cost of proposed flat in the sale consideration." 326. Out of above, ground Nos. 1 & 4 were not pressed before us and same are dismissed as not pressed. 327. Ground Nos. 2 & 3 - Both the parties adopted identical arguments which were given in the case of Shri Charanjit Singh Atwal (supra). 328. After considering the rival submissions we find that identical issue has been dealt in case of Shri Charanjit Singh Atwal (supra) and following the decision in that case we decide this issue against the assessee. 329. In the result, appeal of the assessee is dismissed. ITA No. 196/CHD/2013- Mr. Amrik Singh v. The ITO 330. This appeal is directed against the order of CIT (Appeals)-II, Ludhiana dated.21.12.2012 331. In this appeal various grounds have been raised but at the time of hearing, the ld. counsel of the assessee submitted that only dispute is regarding....
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....; (ii) Chargeability of capital gain 344. First issue regarding reopening of assessment was not pressed before us and the same is dismissed as not pressed. 345. Second issue regarding chargeability of capital gain - During the assessment proceedings the Assessing Officer noticed that the assessee society has also transferred four plots which were owned by the Society along with plots of the Members for which resolution was passed by the Society for surrender of membership rights by the Members, to the developer i.e. THDC/HASH by execution of a JDA. Firstly it was submitted that on the basis of mutuality the Society had basically purchased land and allotted the plots to the Members, therefore, on principal of mutuality in respect of transfer of four plots could not be subjected to tax. Secondly even if such income was to be taxed the same should have been taxed under the head "business and profession". The Assessing Officer did not agree with the submissions and observed that since the plots have been transferred to the outsiders therefore, principal of mutuality will not apply and since it is a case of transfer of property same has to be subjected to tax under the head ....
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....plots is liable to be taxed as capital gains in the hands of the society." 347. Before us, both the parties adopted similar arguments which were given in the case of Shri Charanjit Singh Atwal (supra). 348. After considering the rival submissions we find that the society has purchased 21.2 aces of land in village Kansal. The land was developed into various plots and the plots in the size of 500 sqyd and 1000 sqyd were allotted to 95 members. These members through a general body meeting resolution dated 4.1.2007 agreed to surrender the rights of their plots so that the society could enter into JDA with the developer i.e. THDC/HASH for development and transfer of the property. It seems that four plots were there which were not allotted. These plots obviously would become property of the society because same remained un-allotted. It is a common practice that co-operative housing societies purchase a particular piece of land and develop the same into plots. Some plots always remain un-allotted because at that point of time some new members may join the society to whom such plots could be allotted. If such plots have not been allotted then they would obviously be the property of t....
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....the facts and in the circumstances and in law, the ld. CIT(A) has erred in allowing relief to the appellant society, even though the land has been registered in the name of the society in Land Records and members of the society are only shareholders. 3. On the facts and in the circumstances, the ld. CIT(A) has erred in allowing relief to the appellant society even though the society had entered into agreement with the Developers with the due approval of the member who had surrendered their rights in their respective plots." 353. At the time of hearing, the ld. DR for the revenue pointed out that only dispute revenue has is that the ld. CIT(A) has deleted the addition on protective basis made in respect of development sale consideration of Rs. 234 crores. 354. Before us the ld. DR for the revenue relied on the grounds of appeal. 355. On the other hand, the ld. counsel of the assessee adopted the arguments made in case of Shri Charanjit Singh Atwal (supra) in respect of ground no. 3 in that appeal. 356. After considering the rival submissions we find that in the assessment order it has been observed by the Assessing Officer that to prevent leak....