TaxTMI 
TaxTMI 
TaxTMI 
2015 (4) TMI 294
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....Ltd (hereinafter called the Developer), represented by Sri V. Anand Prasad. According to the Development Agreement, the assessee has given licence to the Developer to enter into the property to make construction thereon on agreed terms. He has also given licence for this purpose to demolish any structures on the existing property. In consideration of the licence for development, the assessee has agreed with the Developer to share the constructed area in the ratio of 55% to the owner and 45% to the Developer. As per the Agreement, the Developer shall get the Plans prepared from his architects and at its cost shall construct the building and complete the same within 24 months from the date of municipal sanction with a grace period of 6 months. The Developer paid an amount of Rs. 3.00 crores as a Refundable Security Deposit which shall be refunded by the assessee at the time of completion of the construction and the allocation of the snares of the assessee and the Developer. The assessee has also given a Power of Attorney to the Developer for the purpose of carrying out the construction and to deal with his share in the constructed area. 3. Assessing Officer opined that the Developme....
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.... Income Tax Officer Dr.T.Achyut Rao Vs ACIT, the case of the Bombay High Court in Chaturbhuj Das Dwarakadas Kapadia vs. CIT (260 ITR 491) and the advance ruling in the case of Jasbir Singh Sarkaria. 5. Aggrieved, the assessee filed appeal before the CIT (A) and relied on the decision of the ITAT Hyderabad Bench in the case of M/s Fibars Infratech (P) Ltd vs. ITO (ITA No. 477/Hyd/2013). The assessee also summarised his written submissions as follows: "13. To sum up our arguments, we wish to say that the possession was given by the appellant for the development of the land into a residential complex consisting of villas and thus, is a licence for the sole purpose of development A reading of Clauses-1, 5 and 6 would clearly indicate this. This possession cannot be taken as one contemplated In Section 53A of the Transfer of Property Act. The Developer did not obtain permission from 2006 to 2014 and therefore, it is very clear that the Developer did not cross the first step in the furtherance of development contemplated in the agreement as no permission was obtained and no expenditure was incurred in the development not only in the year relevant to the Assessment Year 2006-07 but als....
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....5/2014 dated 09.04.2014 in the case of Shri Potla Nageswara Rao vs. DCIT. 4. The ld CIT (A) ought to have appreciated the Hon'ble ITAT decision in the case of Sri Brij Gopal D Shah in ITA No.1166/Hyd/2010 dated 12.07.2012 which is similar on facts of the present case. 5. The ld CIT (A) ought to appreciated that substantial payment of Rs. 3,00,00,000/- as interest free refundable deposit was made to the assessee in part performance of the agreement and the payment received was utilised for purchase of another immovable property. 6. The ld CIT (A) erred in not appreciating that all that ingredients of transfer within the meaning of the section 2(47) of the IT Act and Section 53 of the Transfer of Property Act, 1882 have been fulfilled in the case. 7. The ld CIT (A) erred in observing that it is not fair to hold that no consideration has accrued to the assessee pursuant to development agreement for the reason that the AO has himself computed the capital gains only on the basis of the fair market value of land given for development and not on the basis of any area constructed by the developer. 8. The CIT (A) ought to have appreciated that the AO computed the consideration value on....
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....d be contract for consideration; it should be in writing; it should be signed by the transferor; it should pertain to the transfer of immovable property; the transferee should have taken possession of property; lastly, transferee should be ready and willing to perform the contract. That even arrangements confirming privileges of ownership, without transfer of title, could fall under Section 2(47)(v)". 49. Their Lordships, having made the above observations, took note of the fact that Section 2(47)(v) was introduced in the Act w.e.f. asst. yr. 1988-89 because prior thereto, in most cases, it was argued on behalf of the assessee that no transfer took place till execution of conveyance. It was also noted by their Lordships that, in this scenario, assessee used to enter into agreements for developing properties with the builders and under arrangement with the builders, they used to confer privileges of ownership without executing conveyance, and to plug that loophole, Section 2(47)(v) came to be introduced in the Act. 50. There was no dispute on whether or not the conditions of Section 53A of the Transfer of Property Act were satisfied on the facts of the case before the Hon'ble Bo....
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.... to perform his part of the contract then, ITA No.1604 of 2014 Sham Kumar Hyderabad notwithstanding that the contract, though required to be registered, has not been registered, or, where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed thereof by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the, transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than the right specifically provided by the terms of the contract; Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof. (Emphasis, italicized in print, supplied by us now) 53. A plain reading of the Section 53A of the Transfer of Property Act shows that in order that a contract can be termed to be "of the nature referred to in Section 53A of the Transfer of Property Act" it is one of the necessary preconditions that transferee should have or is willing to perform his part of the contract. This aspect h....
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.... 53A of the Transfer of Property Act will come into play on the facts of that case. It is only elementary that, unless provisions of Section 53A of the Transfer of Property Act are satisfied on the facts of a case, the transaction in question cannot fall within the scope of deemed transfer under Section 2(47)(v) of the IT Act. Let us, therefore, consider whether the transferee, on the facts of the present case, can be said to have 'performed or is willing to perform' its obligations under the agreement. 56. Coming to the facts of the present case, the assessee entered into Development Agreement with MAK Projects Pvt. Ltd. with reference to the land measuring 79 acres 2.5 guntas situated at Sy. Nos. 260 and 262 at Tummaloor village, Ranga Reddy District. At the time of entering into development agreement on 15th December, 2006, the land was in the promoter's name. The assessee was under incorporation. The same agreement was presented for registration on 29th December, 2006. Later the assessee-company was incorporated on 4th January, 2007. On the basis of this agreement, the AO taxed the capital gain on the transaction treating that there was a transfer in terms of secti....
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....7-08. Commencement of building construction had not been initiated as the building approval was granted only on 06.03.2007. Therefore, no income be said to have accrued, as laid down in section 48, in A.Y. 2007-08. More so, building/villas has to be constructed as per the approved plan within 36 months from the date of agreement. The construction was not taken place in the assessment year under consideration. The sanction of the building plan is utmost important for the implementation of the agreement entered between the parties which was granted only in the last month of the year i.e., on 6.3.2007. 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. Since there was no amount of investment by the developer in the construction activity during the previous year relevant to the assessment year in this project, it would amount to non-incurring of required cost of acquisition by the developer. Hence no consideration can be attributed to the AY 07-08. Nothing is brought on record by authorities to show that there was development activity in the project during ....
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....s 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. 59. 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 condition laid down under Section 53A of the Transfer of Property Act was not satisfied in this assessment year. Once we come to the conclusion that the transferee's 'willing to perform' the contract is ascertainable in the assessment year, as stipulated by and within the meanings assigned to this expression under Section 53A of the Transfer of Property Act, its contractual obligations in this previous year relevant to the present assessment year, it is only a corollary to this finding that the Development Agreement dt. 15.12.2006, based on which the impugned taxability of capital gain is imposed by the AO and upheld by the CIT(A), cannot be said to be a "contract of the nature referred to in Section 53A of the Transfer of Property Act" and, accordingly, provisions....
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.... 2 Hyderabad and we reproduce Para 50 of the said order, as under: "That is clearly an erroneous assumption and the provisions deemed transfer under Section 2(47)(v) could not have been invoked on the facts of the present case and for the assessee year in dispute before us. In the present case, the situation is that the assessee has received only a meagre amount' out of to consideration, the transferee is avoiding adhering to the agreement and there is no evidence brought on record by the revenue authorities to show that there was actual construction has been taken place at the impugned property in the assessment year under consideration and also there is no evidence to show that the right to receive the sale consideration was actually accrued to the assessee. Without accrual of the consideration to the assessee, the assessee is not expected to pay capital gains on the entire agreed sales consideration. When time is essence of the contract, and the time schedule is not adhered to, it cannot be said that such a contract confers any rights on the vendor/landlord to seek redressal under Section 53A of the Transfer of Property Act. This agreement cannot, therefore, be said to be i....
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....t the agreement has not been implemented by constructing flats on the land. Further it is clear that the Developer was not willing to fulfil his part of contract till date. Till date no construction has come up in the property and even the conversion of the land from agricultural land to housing plot has not been done. 14. In this context the decision of the Coordinate Bench in the case of M/s. Binjusaria Properties vs. ACIT (ITA No. 157/Hyd/2011) is very relevant, wherein it has been held as follows: 12. It is an undisputed fact that as on date, there was no developmental activity on the land which is subject matter of development agreement. The process of construction has not been even initiated and no approval 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....
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....is. 60. That is clearly an erroneous assumption, as the provisions of deemed transfer under Section 2(47)(v) could not have been invoked on the facts of the present case and for the assessment year in dispute before us. In the present case, the situation is that the assessee has not received any consideration, and there is no evidence brought on record by the Revenue authorities to show that there was actual construction taken place at the impugned property in the previous year relevant to the assessment year under consideration and also there is no evidence to show that the right to receive the sale consideration was actually accrued to the assessee. Without accrual of the consideration to the assessee, the assessee is not expected to pay capital gains on the entire agreed sales consideration. When time is essence of the contract, and the time schedule is 30 months to complete construction with additional grace period of 6 months, it cannot be said that such a contract confers any rights on the vendor/landlord to 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 ....