TaxTMI 
TaxTMI 
2014 (4) TMI 351
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....ing the fact that the Developer did not perform any obligation in pursuance of the Development Agreement. 3. The Commissioner of Income-tax(Appeals) erred in estimating market value of the property by estimating Rs.3000/- per sq. yard (Plotted) which is very high side and needs revision. 4. The Commissioner of Income-tax(Appeals) erred in considering the market value of the entire property given for development without appreciating the fact that the 30% of the developed area shall revert to the landlord. 5. The Commissioner of Income-tax(Appeals) erred in adopting low market value as on 1.4.1981 at a very low figure of Rs.10000/- per acre and not indexing the property properly. The property in question was acquired prior to 01.04.1981 which is evident from Page 2 of the assessment order and the same ought to have been indexed at 4.97 times. 6. ....." 3. Facts of the case in brief are that the assessee is a private limited company. During the year under consideration, the assessee gave its land for development and received a deposit of Rs.2,00,00,016 from the developer. There was a search and seizure operation conducted in the case of Kedia Group of companies and in assessee's ....
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....y was operated and the same was closed subsequently and no agricultural operation was carried out in this land at any point of time, and consequently, the land squarely falls under the definition of 'capital asset' as mentioned in S.2(14) of the IT Act. Since the transfer has taken place during the year under appeal, in terms of the development agreement cum GPA, the Assessing Officer was of the view that the assessee was liable to pay capital gain taxes on the date of transfer. 4. The assessee objected to the proposal of the Assessing Officer to bring to tax the capital gains in the year under consideration. It was stated that no capital gains could be determined in respect of the development agreement, since no obligation has been performed by the developer even though a period of 45 months has already passed from the date of agreement. The Assessing Officer found no merit in the objection of the assessee. He noted that as evident from the reply given by the developer, the developer has already occupied the property and constructed wall around the property and level work has also been done, and as per the books of account of the developer, the amount invested by the developer on....
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....constructed area. Agreeing with the Assessing Officer, he noted that once a property transaction has been entered into by the assessee for development of the land for construction, there is a transfer of property, and consequently, the assessee cannot deny the liability to tax on resultant capital gains, on the ground that the property was not developed. The concluding remarks of the CIT(A) in this behalf are as follows- "5.......According to Assessing Officer once a property transaction has been entered into by the appellant for development of the said land for construction, there is a transaction of property. I am in agreement with the Assessing Officer in this regard. Therefore, the appellant cannot deny the capital gains on the ground that the property is not developed. The property may not be developed for various reasons for some more time. However, the property is transferred to receive consideration from the transferee. Therefore, the Assessing Officer is justified to compute capital gains of the said property. It may be seen that the Assessing Officer has caused the local enquiry of the said site and has arrived fair market value per sq. yard. (plotted) at Rs.3,000 in Feb....
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....nt has become time-barred. Learned counsel for the assessee relied upon the decisions of this Tribunal in the case of Fibers Infratech Pvt. Ltd. V/s. ITO (ITA 477/Hyd/2013) dated 3.1.2014; and Smt.K.Radhika and others dated 9.8.2011 in ITA No.208/Hyd/2011 for assessment. In any event, it is submitted that the Assessing Officer has worked out the capital gains even on the portion of the land retained by the assessee, which is absolutely incorrect and unjustified. 8. The Learned Departmental Representative, on the other hand, submitted that the ground contesting the legality of invoking the provisions ofS.153C has not been raised before the CIT(A). On the merits of the issue under dispute, the Learned Departmental Representative relied on the orders of the Revenue authorities, and distinguished the case-law relied upon by the assessee. 9. We heard both sides and perused the orders of the Revenue authorities and other material on record. The short dispute arising for consideration in this case relates to the year of assessability of capital gains arising on the property, which was subject matter of a development agreement, i.e. whether it is assessable in the year in which the devel....
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.... Rs.10 lakhs on 11.5.2005 and another payment of Rs.90 lakhs on the same day as refundable security deposit. However, out of this a sum of Rs.50 lakhs was said to be refunded by the landlord to the developer on 5.3.2009. As such, the assessee has received only a meager amount as refundable security deposit which cannot be construed as receipt of part of sale consideration. Admittedly, there is no progress in the development agreement in the assessment year under consideration. The Municipal sanction for development was obtained not in this assessment year and it was obtained only on 17.09.2006 from the Hyderabad Urban Development Authority. The sanction of the building plan is utmost important for the implementation of the agreement entered between the parties. Without sanction of the building plan, the very genesis of the agreement fails. To enable the execution of the agreement, firstly, plan is to be approved by the competent authority. In fact, the building plan was not got approved by the builder in the assessment year under consideration. Until permission is granted, a developer cannot undertake construction. As a result of this lapse by the transferee, the construction was n....
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....r under consideration or any development has taken place in the project in the relevant period. He went on to proceed on the sole issue with regard to handing over the possession of the property to the developer in part performance of the Development Agreement-cum-General power of Attorney. In our opinion, the handing over of the possession of the property is only one of the condition u/s 53A of the Transfer of Property Act but it is not the sole and isolated condition. It is necessary to go into whether or not the transferee was 'willing to perform' its obligation under these consent terms. When transferee, by its conduct and by its deeds, demonstrates that it is unwilling to perform its obligations under the agreement in this assessment year, the date of agreement ceases to be relevant. In such a situation, it is only the actual performance of transferee's obligations which can give rise to the situation envisaged in Section 53A of the Transfer of Property Act. On these facts, it is not possible to hold that the transferee was willing to perform its obligations in the financial year in which the capital gains are sought to be taxed by the Revenue. We hold that this co....
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.... seek redressal under Section 53A of the Transfer of Property Act. This agreement cannot, therefore, be said to be in the nature of a contract referred to in Section 53A of the Transfer of Property Act. It cannot, therefore, be said that the provisions of Section 2(47)(v) will apply in the situation before us. Considering the facts and circumstances of the present case as discussed above, we are of the considered view that the assessee deserves to succeed on reason that the capital gains could not have been taxed in the in this assessment year in appeal before us. The other grounds raised by the assessees in their appeals have become irrelevant at this point of time as we have held that provisions of section 2(47)(v) will not apply to the assessees in the assessment year under consideration. ...." 10. In the present case, admittedly, what has been executed by the assessee is a 'Development Agreement-cum-General Power of Attorney'. A reading of the said agreement indicates that what was handed over by the assessee to the developer is only a 'permissive possession'. Clause 5 of the said agreement dated 2nd February, 2006, on page 3 thereof, specifically provides that 'First party on....
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....val for the construction of the building is obtained. Thus, the sale consideration in the form of developed area has not been received. Mere receipt of refundable deposit cannot be termed as receipt of consideration. Further, as submitted , the Assessing Officer calculated the capital gain on the entire land, even though the assessee has retained 38% share to itself. The valuation was also disputed. There is, therefore, no accrual of income in favour of the assessee as per S.48 of the Act. Due to lapse on the part of the transferee, the construction has not taken place in the year under consideration, and it has not commenced even now. In the facts and circumstances of the present case, wherein while the assessee has fulfilled its part of the obligation under the development agreement, the developer has not done anything to discharge the obligations cast on it under the develop agreement, the capital gains cannot be brought to tax in the year under appeal, merely on the basis of signing of the development agreement during this year. We are supported in this behalf by the decision of the Tribunal dated 3rd January, 2014 in the case of Fibars Infratech Pvt. Ltd. (supra), wherein it w....