TaxTMI 
TaxTMI 
2013 (9) TMI 1054
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....l Bathinda 07.03.2013 4. 469(Asr)/2013 2008-09 Gurdev Singh Badal Bathinda -do 5. 490(Asr)/2013 2008-09 Rajiv Krishan Mahajan Amritsar 23.04.2013 6. 491(Asr)/2013 2008-09 Meenu Mahajan Amritsar 23.04.2013 2. In ITA No.459(Asr)213 - Sh. Manpreet Singh Singh, the assessee has raised following grounds of appeal: 1. That the Ld. CIT(A) Bathinda has erred in law and on facts in dismissing the assessee's ground of appeal against the initiation of proceedings u/s 148 by terming the same as vague in nature. 2. That the Ld. CIT(A) Bathinda has erred in law and on facts in blindly following his order in the case of Nirmal Singh Kahlon in appeal No.214-IT/10-11 dated 7.3.2013 while deciding the appeal in this case. 3. That the Ld. CIT(A) Bathinda has erred in law and on facts in confirming the addition of long term capital gain of Rs. 1773588/- u/s 45 of the Act on account of alleged transfer of property. 4. That the Ld. CIT(A) Bathinda as well as the AO have grossly erred in law and on facts in not appreciating the fact that the assessee has received a paltry sum of Rs. 1500000 only as per Joint Development ....
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....l gain on the amount which has not accrued is unjustified and illegal. 4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred by holding that there is a transfer of capital assets by as per provisions of section 53A of the transfer of property Act, 1882 without appreciating that provisions of section 53A are not applicable to the agreement entered into by the assessee because the developers has not fulfilled the primary conditions of the agreement i.e. development of the land and had not made any further payment as per agreement. Moreover, it is not a registered agreement. 5. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred by disallowing exemption u/s 54F of the Act whereas as per settled law that if the consideration has been invested in purchase of residential property even if possession of the same has not been received within three years the assessee is entitled for exemption. 6. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred by disallowing exemption u/s 54F as claimed during the assessment proceedings whereas the assessee is duly entitled for the same. 7. On the fa....
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....F of the Act whereas as per settled law that if the consideration has been invested in purchase of residential property even if possession of the same has not been received within three years the assessee is entitled for exemption. 6. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred by disallowing exemption u/s 54F as claimed during the assessment proceedings whereas the assessee is duly entitled for the same. 7. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred by confirming the determination of sale consideration at Rs. 1,83,75,000 merely on presumption and assumption, at any rate, the determination of considerations very much on the higher side and excessive. 8. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred by confirming levy of capital gain tax on the assessee whereas capital gain on the same assets has already been charged in the hands of Punjabi Cooperative House Building Society also. Therefore, it is double taxation. 9. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred by confirming the addition on account of capital gain in th....
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....ary and opposed to law and provisions relating to capital gains. 8. The appellant craves to amend, alter and modify any ground or grounds found feasible at the time of hearing of the appeal." 7. The Ld. JCIT(DR), Mr. Mahavir Singh invited our attention that the issues in all the 6 appeals mentioned hereinabove are identical to the issues in the bunch of 30 appeals decided by the ITAT, Chandigarh Bench vide a consolidated order dated 29.07.2013 in the case of Charanjit Singh Atwal, Ludhiana vs. ITO Ward VI(1), Ludhiana in ITA No.448(Asr)/2011 and others for the assessment year 2007-08 and 24 appeals decided by this Bench in the case of Sh. Satnam Singh Kaith vs. ITO Nawanshahar and others ITA No.180(Asr)/2013 and others, dated 19.08.2013. 8. He further invited our attention that in the present appeals, the assessees are either present or Ex-MLAs of Punjab Legislative Assembly who are members of housing society. The said society consists of in total 95 present or Ex-MLAs of Punjab Legislative Assembly. The matter with respect to some MLAs and the matter with respect to the Society itself fall under the jursidction of Chandigarh ITAT and the rest under the Amritsar ITAT juris....
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....lt by Chandigarh Bench of ITAT in its order dated 29.07.2013 (supra) as under: i) Vide para 52 to 58 of the order, first contention was that 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. It was held by considering various contentions of Ld. Counsels and Ld. DR and cases of various Courts of law relied upon that by considering the purpose of insertion of clause (v) and clause (vi) of section 2(47) and various clauses of Power of Attorney and JDA, it becomes absolutely clear that the Society has handed over the possession of the Society to THDC/HASH and accordingly first contention of the ld. DR was rejected. ii) Vide para 59 to 61 of the order, second contention was that JDA was executed on 25.02.2007 and if possession was given then how the assessee was having possession in terms of later sale deeds executed on 2.3.2007 and 25.4.2007. It was held after considering and arguments of rival parties and facts on record that mere recitation in the s....
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....ead with clause 26(v) vii. Vide para 87 and 88, being the seventh contention that revenue wrongly held that even clause (vi) of section 2(47) is applicable. It was held that the developer i.e. THDC/HASH has purchased the membership of the members in the society which now lead to the enjoyment of the property and in that technical sense, clause (v) of the section 2(47) is applicable. viii. Vide paras 89 to 96, being the eightth contention 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, cannot be taxed. It was held that there is no dispute that no notional income can be taxed, but in the case of Capital Gain section 45 read with section 48 clearly provides that it is the profit arising from the transfer of capital asset, which would be subjected to change capital gain tax and section 48 clearly provides for taking the total consideration into account while computing the capital gains, which has already been discussed in paras 64 to 68 of the order. Therefore, the whole consideration whe....
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....e para 166 to 169 for the reasons mentioned therein. 31. Vide para 111 to 113, it was contended that capital gain should have been taxed in the hands of Society which is legal owner of the land. It was held that the fact stands admitted by the assessee because assessee has filed a return declaring capital gain against part money received against the plot. Thus, it becomes clear that it is the individual member who are liable to tax in respect of transfer of plots and the Society being only a facilitator or post office. Accordingly, this contention was also rejected. 32 Vide paras 5 to 9 also the assessee has raised the additional evidence, which after considering the facts on record and arguments of Ld. Counsels allowed the admission of additional evidence. 33 Vide para 10 to 14, the revised return was treated as non-est and it was held that no disadvantage has occurred to the assessee because 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 the assessment relating to Capital Gain arising out of sale of plot in Punjabi Co-operat....
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....was agreed upon among these parties that the Society which is owner of 21.2 acres of land, shall transfer its land to THDC/HASH in lieu of monetary consideration and consideration in kind. As per the agreement each Member of the Society having a plot of 500 sqyd in the Society was to receive monetary consideration of Rs. 82,50,000/- and the Members holding plot of 1000 sqyd was to receive a sum of Rs. 1.65 crores. In addition to this Member holding a plot of 500 sqyd was to receive fully furnished flat measuring 2250 sqft to be constructed by THDC/HASH and Members having 1000 sqyd were to get two such flats. According to the Assessing Officer total consideration to be received by all the Members was Rs. 1,06,42,35,000/- and furnished flats as mentioned above. Before entering into the tripartite agreement the Society in its Executive Committee meeting held on 4.01.2007 which was approved in the General Body meeting held on 26.2.2007, passed a resolution to the effect that all the Members would surrender their all rights in the property to the Society and the Society would enter into an agreement on behalf of the Members with THDC/HASH. The Assessing Officer has referred to this reso....
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.... property to THDC/HASH, therefore, the assessee became liable to capital gain tax on his share of consideration. Accordingly a letter dated 7.12.2008 was issued intimating the assessee that after consideration of the various clauses of JDA dated 25.2.2007 and the resolution passed by the Society on 26.2.2007, capital gain was to be charged in the hands of the assessee in Assessment year 2007-08 by taking full value of the construction at Rs. 3,67,50,000/-. The assessee filed various replies which have been extracted by the Assessing Officer as under: "This has reference to your letter dated 7.12.2009, we submitted that under: "1 The agreement under reference is only in the nature of an agreement to sell and not a sale deed and therefore no capital gain can arise under the said agreement. The amounts received under the said agreement are actually the advances received and not the sale consideration and the land transferred in favour of THDC Ltd. is only on account of security. A letter from M/s Hash Builders to that effect is enclosed herewith. There are many conditions envisaged in the agreement which need to be fulfilled before the full execution of the agreement and t....
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....hall be made by them. In that event the amount received by assessee will be considered as full, and final consideration. So there is no question of considering the national value of proposed flat as the unrealized consideration for the purpose of capital gain of the assessee. The assessee is a Hon'ble citizen and regular Income Tax Payee and shall discharge his liability under Income Tax when the whole land will be transferred. 5.) While making the calculation of capital gain tax, the amount of consideration has been wrongly taken of Rs. 15 lacs Instead of Rs,12 lacs. As per the agreement, sum of Rs. 3 lacs is adjustable advance. You are requested to kindly recomputed tax liability, 6.) There are various judgments on this issue. The following cases are enclosed herewith for the reference. a. CIT vs. Atam Prakash & Sons (2008) 219 CTR (Del) b. Smt. Raj Rani Devi Ramna vs. CIT (1993) 201 ITR 1032 (PAT) c. Zuari Estate Development & Investments Co. (P) Ltd. Vs. J.R.Kanekar, Deputy CIT. (2004) 191 CTR (Bom) In view of the above you are requested to kindly consideration the capita! gain as submitted by us." 9. The case was further fixed for 24.12.2009, On ....
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....ertise were not available with the society, the other two developers were involved in the project. The cost of development was to be borne by the THDC. The payment to the society was to be made pro-rata on transfer of land in favour of THDC Ltd, It is very clear from the agreement that no consideration was payable to the assessee unless the land was transferred. So there is a clear cut relation between the land transfer and consideration. No consideration will be received if the land is not transferred. As far as the possession as mentioned in the agreement is concerned, the same is for development only and the termination clause very clearly states that if the agreement is terminated, THDC Ltd will retain only that much land which has been transferred to them and the remaining land will be retained by the society/members. The actual position is such that no development work has till date been undertaken by the THDC Lid because the various conditions stipulated in the agreement have not been fulfilled. The possession as mentioned in the agreement and which is being made the basis by you to consider the transaction as transfer u/s 53A of the Transfer of Property Act is actually not ....
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....ven FY 2009-10 is also going to expire. In that case the assessee will have no remedy available against the tax paid on consideration which will never be received by him. Under such circumstances it will be fully unlawful to charge tax. 4. The value of proposed flat is undeterminable and there is no way to determine the same. There is no provision to pay tax on the notional value. Clause 6.18 of the agreement entitled the assessee to surrender his proposed flat to THDC Ltd. and in that case only 75% of the future market-price will be received by him. In the light of above discussion it is once again requested that tax may be calculated as per the return filed by the assessee. However If the department choose to disagree with our submissions then It Is submitted that the capita! gain should be charged in the hands of the Punjabi Co-operative 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 t....
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.... section 2 (47) (v) of the Act r.w.s 53A of T.P. Act. as part consideration had also been received. According to the Assessing Officer the facts of the case were similar to the facts in case of CIT V. K. Jeelani Basha, 256 ITR 282 (Mad) wherein Hon'ble High Court after analyzing the provisions of section 2(47)(v) had held that once the possession even for a part of the property was handed over to the transferee, for the purpose of Section 2(47)(v) r.w.s 45, the transfer was complete. (iii) The assessee's case was also covered by the provisions of section 2(47)(vi) which deals with any transaction which had effect of transferring or enabling the enjoyment of any immovable property and assigning 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 recei....
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.... to written submissions without discussing the arguments). The ld. CIT(A) referred to the provisions of section 45 and 2(47) of the Act and observed that clauses (v) to (vi) were inserted in section 2 (47) w.e.f. 1.4.1988. He observed that before insertion of this provision, it was always possible to avoid or postpone capital gain by either not executing conveyance deed or postpone such execution because vendor of the property could give the privilege of ownership or enjoyment of the property by executing a Power of Attorney etc. To avoid such leakage of revenue 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 pro....
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.... and assigned in perpetuity all the rights which an owner can have in an immoveable property. All these rights have been given on date of agreement i.e. 25.02.2007 and even possession has been handed over in the financial year 2006-2007. The para 2.1 clearly states that " the owner hereby hands over the original title deeds of the property as 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. Y....
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....r 2006-07 itself and surrendered allotment letters to enable the Society to enter into tripartite agreement with HASH and THDC. l) Most importantly 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 ....
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....7)(v) of IT Act and Section 53A of T.P. Act and submitted that following conditions emerged for attracting these provisions- a There must be contract of transfer for consideration for an immovable property; b Contract must be in writing c Terms necessary to constitute transfer should be ascertainable with reasonable certainty. d The transferee must have in part performance taken the possession of the property or part thereof from the transferor and if already in possession, continues in the possession in part performance of the contract. e Transferee must have done something in furtherance of the contract. f The transferee must have performed or willing to perform his obligations in such contract. In view of the above conditions in the present case, condition no. (d) and (f) have not been complied because the assessee and/or society has not handed over the possession to THDC/HASH. In this regard he particularly referred to clause 2(1) of the JDA and pointed out that the possession was to be handed over to THDC/HASH simultaneously with the execution and registration of the JDA. Since the JDA was not registered therefore, it is clear that the possession was not h....
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....he referred to the observation of Authority for Advance Ruling in case of Jasvir Singh Sarkaria, 294 ITR 196. He particularly referred to para 26 to 28 of the judgment. He further referred to clause "F" (page 17 of the paper book) i.e., clause 2.1 of the JDA (page 24 of the paper book) and submitted that contents of these clauses will entirely show that possession was given and was envisaged in the shape of license to the developers for undertaking the development of property and legal possession was neither handed over or intended to be handed over. III Money which is received at the time of execution of JDA can be termed as advance payment. In any case when these amounts were adjusted as part of sale consideration for sale of part of the property and the same have been retuned by the assessee as long term capital gains through revised return in the year of receipt. IV It was emphasized that in any case Section 53A of T.P. Act has been amended by Amendment Act, 2001 whereby registration of agreement has been made mandatory for the same to be enforceable. Since JDA was never registered therefore, recourse could not be taken to Section 2(47)(v) of the Act because JDA was not r....
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....vals and commence construction within 6 months of hand over of final plans. (e) Clause 8.4 provided obligation to take timely approval and clause 8.6 provided for payment of various statutory charges in respect of development charges, license fee and external default etc. Further to above obligation, time was of essence in the contract which becomes clear from clause 1.2(a), 4.1 and 7.10 regarding timely payment and clause 14(iv) regarding termination of contract. In the case before us, there was no willingness on the part of developer i.e. THDC/HASH to perform the above obligation because of the following - (i) THDC/HASH failed to obtain necessary approval and did not undertake any development work on land. (ii) THDC/HASH i.e. developer has not paid timely payment in timely installments of agreed consideration. (iii) HASH has not obtained approval from various authorities and had not commenced construction within six months of handing over all final plans. (Reference was made to page 34 of the paper book). (iv) THDC/HASH vide letter dated 4.2.2001 (Page 23 to 24 of the additional evidence) refused to make further payment as stipulated in the agreement. (v) ....
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.... to taxation of notional sum which is not permissible under the law. Under the various provisions of the Act, only real income can be taxed which has been earned by the assessee and no notional income can be subjected to tax. In this regard, reliance was placed on the following decisions of the Hon'ble Supreme Court: Shoorji Vallabhdas & Co., 46 ITR 144 (S.C) CIT V. Raman and Co. 67 ITR 11 (S.C) Godhra Electricity Co. Ltd. V CIT, 225 ITR 746 (S.C) CIT V. Balrampur Commercial Enterprises Ltd., 262 ITR 439 (Cal) CIT V. K. Jeelani Basha, 256 ITR 282 FOBEOZ India (P) Ltd. V ITO, ITA No. 9231/Mum/2010 (copy filed) It was claimed that since the flats were never constructed and given to the assessee, therefore, if the value of the flat is added in the total consideration then it will be totally on notional basis and since notional income cannot be taxed, therefore, the value of these flats, in no case, should be considered in the total consideration. Further if notional receipts were taxed then the assessee would be deprived to take benefit available in the IT Act. For example if whole consideration was received the assessee could have easily taken benefit of Section....
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....ar No. 472 dated 15.10.1986. In this regard he relied on the following decisions: CIT V. Sardarmal Kothari and another, 302 ITR 286 (Mad) CIT V. R.L. Sood, 245 ITR 727 (Delhi) CIT V. Mrs. Hilla J.B. Wadia, 216 ITR 376 (Bom) Mrs. Seetha Subramanian V ACIT, 59 ITD 94 (Mad Bench) Usha Vaid v ITO, 53 SOT 385 Smt. Ranjit Sandhu v DCIT, 133 TTJ 46 (Chd) 25 On the other hand, the ld. CIT DR for the revenue made detailed submissions and have also filed written submissions. It was pointed out by the CIT-DR for the revenue that though copy of the special power of attorney has been filed at pages 153 to 165 but two of the most important crucial pages containing clause "u" to "z" and last page No. 9 are missing. He made an allegation that this has been done deliberately which was controverted by the ld. counsel of the assessee and he submitted that this is a simple mistake and he would file those papers. The ld. DR for the revenue in view of these submissions submitted that these pages can be referred in case of Punjabi Coop House Building Society Ltd. in ITA No. 310& 556/Chd/2012 at page 40 to 52 of the paper book in that case. The submissions of the revenue can be summarized a....
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.... expressly and willingly had surrendered their respective plots in favour of the Society and the Society was authorized to sell/transfer the entire land in favour of THDC/HASH for a consideration which was set out in the clauses of JDA. The society was also authorized to hand over original title deeds and possession of land to THDC/ HASH. (ii) The Society handed over the possession of the land and original title deeds of the property to THDC/HASH. (iii) Society permitted THDC/HASH to mortgage, sell and create charge in the property. (iv) The Society resolved to execute an irrevocable special power of attorney which could not be revoked in any circumstances without proper consent of THDC/HASH and such power of attorney was actually executed on 26.2.2007. Through this power of attorney THDC/HASH has been authorized to mortgage or create charge by the Society. THDC/HASH was authorized to give the possession of the property or any part thereof to the authorities to whom same was required to be handed over which was not possible unless THDC/HASH was handed over the possession of the property and the rights of the ownership. Through this power of attorney the right to sell was a....
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....tted that clause (v) & (vi) of section 2 (47) of the Act were inserted w.e.f. 1.4.1988 by Finance Act, 1987. Before that, passing of the title in the property was necessary condition to constitute a transfer under the Act in view of the various pronouncements of the Courts. In the meantime it was noticed by the Government that many properties were being transferred without execution of sale deed through various documents what is popularly known as 'power of attorney' transactions. To curb the leakage of Revenue, through such transaction, clauses (v) & (vi) were added to section 2(47) which defines transfer. This has been explained by Circular No. 495 dated 22.9.1987. The Board has clarified through paras 11.1 & 11.2 that newly inserted clauses (v) & (vi) would enlarge the definition of transfer whereby the cases of transfer what is popularly known as 'power of attorney' transaction which allows the enjoyment of right in the property would be covered by new definition. The new clauses 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 o....
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....ent was considered as one of the essential ingredient then section 2 (47) (v) would become redundant. The Income Tax Act cannot be interpreted in such a way that a particular provision becomes redundant. In any case it has been held by Mumbai Bench of the Tribunal in the case of Suresh Chand Aggarwal Vs ITO (48 SOT 2010) that amendment made in section 53A of the Transfer of Property Act by which requirement of registration of transfer has been brought on statute need not be applicable for construing the meaning of the 'transfer" with reference to section 2 (47) of the Act. Similar view has been taken by the ITAT Cochin Bench in the case of G. Sreenivasan Vs DCIT 140 ITD 235 and Pune Bench of the Tribunal in the case of Mahesh Memichandra Ganeshwade 51 SOT 155. (VI) It was contended that there is no force in the submissions of the Ld. Counsel for the assessee that THDC/HASH were not willing to perform their part of the contract. It was pointed out that developers i.e THDC/HASH have made 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 P....
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....s clearly shows that payments was to be made on happening of two events and the time limit was to be applied on the event taking place later on. As per clause 3.3 of the THDC/HASH was required to take permission from competent authority and the competent authority has been defined in JDA as Punjab Urban Planning and Development Authority (PUDA), Department of Town and Country Planning, Nagar Panchyat, Nayagon, Department of Local Bodies (Punjab) and any other Authority under Municipal Authority. It also includes Department of Environment, Electricity Board etc. Since permission from Department of Environment etc was not available because of ongoing litigation which was filed through a PIL, therefore, it cannot be said that Developer was not wiling to make the payment. As per the JDA, the payment would become due only when such permission were granted by various authorities. In fact M/s Hash Builder wrote a letter on 04.02.2011 through which it was stated that since High Court has stayed the construction, 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 vigoro....
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....act was cancelled and Developer was allowed to retain the land which has already been registered in the name of developer then what would happen to the flats which were to be received by the various Members of the Society. No legal action was taken against the Developer for recovery of balance of consideration in the form of flats. This only goes to prove that cancellation is only a make believe story and actually no cancellation has been done. (VIII) It was contended that there is no force in the submissions that the value of the flats which has not been constructed, cannot be included in the total consideration because that would be a case of taxing the notional income. He referred to clause 4 of the JDA which deals with the consideration and pointed out that allotment of flat was part of the consideration. As per the resolution of the Executive Body of the Society which was latter ratified by the General Body as well as the terms of the JDA very clearly show that in addition to monetary consideration each Member having 500sqyd plot was entitled to receive one fully furnished flat measuring 2250 sqft and the Members holding 1000 sqyd plot were entitled to two such flats. This ....
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....ney would come to an end automatically. (c) He contended that simply saying that the cancellation was an unilateral act of the assessee, would not serve any purpose because the revenue can not sit in the judgment when the assessee should cancel the agreement or not. Clause 14 of the JDA specifically provided for termination of the agreement only in the event of default and the assessee was required to give notice of 30 days in terms of clause 14(iv) and such notice has already been given. JDA was entered in 2007 and ended in 2011 and that is why the assessee was forced to cancel this agreement. In any case THDC/HASH are not related to the assessee, therefore, it was not possible to create self serving documents. 27. We have considered the rival submissions and carefully gone through the written submissions filed by both the parties in the light of material on record, paper books and various judgments cited by the 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)....
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....ed by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment ;] [or] [(iva) the maturity or redemption of a zero coupon bond; or] [(v) any transaction involving the allowing of the 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, 1882 (4 of 1882) ; or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association 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....
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.... were being transferred without executing the proper sale deeds. This was being done because there was restriction on sale of properties in various towns e.g. in case of lease hold plots and flats in Delhi if the same were to be transferred, permission was required to be taken from the Government / DDA and transferor was required to pay 50% of the market value - cost (i.e. unearned increase) to the Government. To avoid such payments and / or also to avoid the payment of stamp duty or cumbersome procedure of obtaining permission, some 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 in to taxation net. However, interpretations of these clauses has led to lot of litigation and the main point of litigation was that at what point o....
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....tion arose whether liability of the assessee for capital gain arose in the assessment year 1996-97 or 1999-2000. The observation of the Court has been summarized in head note as under:- "Clauses (v) and (vi) were introduced in section 2(47) of the Income-tax Act, 1961, with effect from April 1, 1988. They provide that "transfer" includes (i) any transaction which allows possession to be taken/retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882, and (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 ....
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....(see section 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 the general law (see Kanga and Palkhivala's Law and Practice of Income-tax-VIII edition, page 766). This test is important to decide the year of chargeability of the capital gains." 35 The above observations 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 s. 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 s.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 capita....
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.... been applied, particularly when the agreement in question, read as a whole, shows that it is a development agreement. There is a difference between the contract on the one hand and the performance on the other hand. In this case, the Tribunal as well as the Department have come to the conclusion that the transfer took place during the accounting year ending March 31,1996, 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 ....
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....dvance Ruling (AAR) New Delhi in the case of Jasbir Singh Sarkaria (supra). In that case the assessee was co-owner of agricultural land measuring about 27.7 acres and his share was 4/9. The co-owner decided to develop the land by constructing residential complex through developer and entered into a Collaboration agreement on 8.6.2005 with M/s Santur Developer Pvt Ltd, New Delhi (herein after 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 su....
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....transfer had taken place. Two aspects may be noted at this juncture. Firstly, the expression used is "arising" which is not to be equated with the expression "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 ....
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....n clause (v) of section 2(47). Possession is an 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....
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....d 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 gains may be defeated. The reason is this: the owner of the property can very well contend, as is being contended in the present case, that the developer will have such exclusive possession in his own right only a....
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....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 suggest on passing of possession but according to Authority the other factors are to be considered. Clause 15 provided that on fulfillment of the requirements laid down in the letter of intent which is provisional license, the owners s....
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....s 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........" 43 Thus, the above clearly shows that irrevocable general power of attorney which leads to over all control of the property in the hands of the Developer, even if that means no exclusive possession by the Developer would constitute transfer. It can be s....
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....tion 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 of members as 96). The Society was owning 21.2 acres of land in village Kansal Distt. Mohali adjacent to Chandigarh. There were two types of members firstly the members who were owning plot of 500 sqyd and secondly the members who are holding plot of 1000 sqyd. Somewhere in 2006 it was decided to develop a Group Housing commercial project and do devel....
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....cutive 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, license, 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, license and or exploitation for full utilization of the Property (Rights) and to execute all the documents necessary to carry out, facilitate and enforce the Rights in the Property including to execute Lease Agreement, License Agreements, Construction Contracts, Supplier Contracts, Agreement for sale, Conveyance, Mortgage Deeds, finance documents and all documents and agreements necessary to c....
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.... 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 interalia right to mortgage the property and/or premises, sell, lease, license the premises and receive/collect monies in it's 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 proceedings, affidavits and such other papers containing true facts and correct particulars as made from time to time be required in this behalf. 9.2 The owner shall execute in favour of THDC the sale deed is in accordance with the provisions of clause 4.1(ii) to Clause 4.1 (iv) of this Agreement and execute all other necessary documents and papers to complete the aforesaid transaction. 9.3 That all the original title deeds pertaining to property as mentioned in Annexure IV has been ha....
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.... 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 handed over simultaneously to execution and registration of the JDA, is not correct because clause 9.3 clearly mention that original title deed of the property have been handed over to the THDC at the time of signing of this agreement because clause 9.3 there is no mention about registration of JDA. 53 Special Power of Attorney which has been executed on 26.2.2007 and has been registered also. The irrevocable special Power of Attorney has been executed as provided in clause 6.7 of the JDA which reads as under: "6.7 The Owner shall execute an irrevocable special Power of Attorney granting it....
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....tion 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 title deeds (if required) in respect of the Property in favour of such bank/financial institution, execute the necessary documents and register the charge created on the Property if so required in the revenue records and/or desired by the Attorney. (aa) To sell, transfer, lease, license the Premises that may be constructed on the Property on ownership basis, lease, license and/or in any other manner for such price as the Attorneys may deem fit and proper. To collect and receive from the purchased, transferees, lessees, licensees of the Premises, monies/price and/or consideration and/or maintenance charges and to sign and execute and/or give proper and lawful discharge for the receipts. (bb) To execute from time to time all the writing,....
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.... 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 clearances had to be obtained before start of the project. Clause 10 again casts specific obligation on the owner Society to give consent to THDC/HASH to raise finance for the development and completion of the project on the Security of the property by way of mortgaging the property. Thus whatever power/authorization have been given through irrevocable special Power of Attorney are emanating from the terms and conditions agreed to among the parties from the JDA. 55 The combined reading of the above clauses of the Irrevocable Special Power of Attorney and JDA clearly show that the developer was authorized to enter upon the property for not only for the purpose of development but other purposes also. THDC was authorized to amalgamate the project with any other project in the adjacent area or adjoining area as per clause (t) of the special Power of Attorney. If the posse....
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....he 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 purposes. We do not think in the present case the assessee has given only a license as claimed by ld. counsel of the assessee because of the powers of selling, amalgamating etc. mentioned in the JDA and irrevocable Special Power of Attorney. The issue has been discussed in he judgment of Jasbir Singh Sarkaria (supra) in further discussion which has been made in para 33 regarding Power of Attorney (which has been reproduced earlier). In that case the powers were given to enter upon and survey the land, prepare lay out plans, submit building plan for sanction with the appropriate authorities to control, manage and look after and supervise the property, to obtain water and sewerage, disposal and electricity connection. In that case the developer was authorized to mortgage the property to obtain money for meeting the cost of construction on security and mortgage of land fall....
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....se of Dr. Baliram Waman Hiray V. Mr. Justice B. Lentin and another (supra): "The following principles enunciated in Heydon"s caase (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 beneficial, restrictive or enlarging of the common law), four things are to be discerned and considered: (1) what was the common law before the making of the Act; (2) what was the mischief and defect for which the common law did not provide; (3) what remedy Parliament has resolved and appointed to cure the disease of the common wealth and (4) the true reason of the remedy. And then, the office of all the judges is always to make such construction as shall suppress the evasions for the continuance of the mischief and pro private commando and to add force and life to the cure and remedy according to the true intent of the makers of the Act pro bono public." There is now the further addition that regard must be had not only to the existing law but also to prior legislation and to the judicial interpretation thereof." 58 Going by the Heydon's Rule of interpretation if we analyze the pu....
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....e 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 adverse claims of exclusive use cannot both be effectually realized at the same time. Claims, however, which are not adverse, and which are not, therefore, mutually destructive, admit of concurrent realization. Hence there are several possible cases of duplicate possession. 1 Mediate and immediate possession Cross- objections-exist in respect of the same thing as already explained. 2 Two or more persons may possess the same thing in common; just as they may owe it in common. The concurrent possession of the owner who can exercise possession right 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." 61 In further discussion in para 26 to 28 of the above decision it has been held that it is not necessary in terms of clause (v) that the developer should have exclusive possession. The concurrent possession of the owner is ....
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....o be taxed. At the cost of repetition let us again reproduce the observations of the Ld. authority in case of Jasbir Singh Sarkaria (supra) which we have earlier extracted at para 40 and the relevant portion is as under: "4 0 . On the above , the Hon'ble Authority after referring to the provisions of section 45 and observed as under:- "..........The section can be analysed thus : (a) transfer of a capital asset effected in the previous year, (b) resultant profits or gains from such transfer, (c) those profits or gains would constitute the income of the assessee/ transferor (d) such income shall be deemed to be the income of the same previous year in which the transfer had taken place. Two aspects may be noted at this juncture. Firstly, the expression used is "arising" which is not to be equated with the expression "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 inco....
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....t the words "arise or accruing" are general words descriptive of a right to receive profits.' See also CIT v. Anamallais Timber Trust Ltd. To attract the operation of section 12B it is therefore sufficient if the profits arose. They need not have been actually received." 14. Thus the criterion of right to receive the profits / gains was applied in that case. 15. The legal position does not therefore admit of any doubt that the actual receipt of the entire sale consideration during the year of "transfer" is not necessary for the purpose of computing capital gains." Further the expression arising has been defined in the Advanced Law Lexicon by P. Ramanatha Aiyer edited by Y.V. Chandrachud, Former Chief Justice of India: "The words "Arising or accruing" describe a right to receive profits, and that there must be a debt owed by somebody. Ld. Commissioner of Income Tax, West Bengal-II, Calcutta V. Hindustan Housing and Land Development Trust Ltd. AIR 1986 S.C 1805, 1807." The expression "accrual of income" has been defined in the same Lexicon as under: "Accrual of income. E.D Jassoon & C. Ltd. V Ld. Commissioner of Income Tax, AIR 1954 S.C 470 quoted - Income may ac....
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....cted. 69 The fifth contention made by the Ld. Counsel for the assessee was that since section 53A of the Transfer of Property Act itself has undergone amendment w.e.f. 24.9.2001 by which the agreement referred to in that section is required to be registered and therefore, now in section 2(47)(v) only the amended provisions can be read. We find no force in this contention. It is well known that section 53A of the Transfer of Property Act was passed on equitable doctrine so as to protect the taking over or retention of the possession by the transferee. It was not a source by which title of immovable property could be acquired. Section 53A of TP Act read as under:- 53A. Part performance.- Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the co....
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....read in the same sense as it bore in the original Act. The careful perusal of that judgment would show that situation is applicable only when a particular provision of an Act has been incorporated in the later Act. In that case a question arose that for the purpose of MAT provision what is the meaning of past losses or unabsorbed depreciation. It was found that in explanation to section 115J clause (iv), the following expression was used:- "(iv) the amount of the loss or the amount of depreciation which would be required to be set off against the profit of the relevant previous year as if the provisions of clause (b) of the first proviso to sub section (i) of section 205 of the Companies Act, 1956 (1 of 1956) are applicable. 71 The Hon'ble Apex Court referred to the Principles of Statutory Interpretation by Shri G.P.Singh and extracted following piece: " Section 115J, Explanation clause (iv), is a piece of legislation by incorporation. Dealing with the subject, Justice G.P. Singh states in Principles of Statutory Interpretation (7th edition, 1999). Incorporation of an earlier Act into a later Act is a legislative device adopted for the sake of convenience in order to a....
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....ant in the sense that registration of agreement would again be made compulsory but since properties were being sold in the market on "power of attorney" basis through unregistered agreements which would make this provision redundant. This position we have already discussed earlier while discussing the Heydon's Rule in the interpretations of this clause. Further the issue of interpretation of clause (v) and amendment to section 53A of the Transfer of Property Act came for consideration before the Mumbai Bench of the Tribunal in the case of Suresh Chander Aggarwal vs ITO 48 SOT 2010. The Tribunal discussed this issue at page 7 and after quoting the provisions of section 2 (47) and also section 53A before and after amendment as wall as para Nos. 11.1 to 11.2 of the Board's Circular No. 495 dated 22.9.1987 observed as under:- "The above clearly shows that there was certain situation where properties were being transferred without registration of transfer instruments and people were escaping tax liabilities on transfer of such properties because the same could not be brought in the definition of "transfer" particularly in many States of the country properties were being held by vario....
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....ustries Pvt. Ltd., and two were purchased by its sister concerns which were later purchased by the assessee. The possession of the flats was taken after full payment of consideration. The flats were let out. The assessee contended that the rental income from these flats was assessable as "income from other sources" because the assessee was not the legal owner because the title of the property had not been conveyed to the Co-operative Society which was formed by the purchasers of the flats. The Hon'ble Court noted that section 27 had been amended vide clause 3(a) wherein when a person was allowed to take possession of the building in part performance of the nature referred to in section 53A, such person shall be deemed to be the owner. It was further observed that for all practicable purposes the assessee was the owner and possibly there cannot be two owners of same property at the same time. In fact, the amendments to section 27 were made later on but were taken into cognizance on the basis of above principle and ultimately it was held as under: "Hence, though under the common law "owner" means a person who has got valid title legally conveyed to him after comply with the re....
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.... alter the situation. This position is further strengthened by the fact that legislature itself has inserted clause (v) to section 2(47) and while referring to the provisions of section 53A, reference has been made by stating that contracts in the nature of section 53A should also be covered by the definition of "transfer". Therefore, in our humble view, the amendment to sec. 53A of the Transfer of Property Act, whereby the requirement of the documents not being registered has been omitted, will not alter the situation for holding the transaction to be a transfer u/s.2(47)(v) if all other ingredients have been satisfied." 74 Thus, it is clear that non registration of agreement cannot lead to the conclusion that provision of section 2 (47) (v) is not applicable. Similar view has been taken by ITAT Cochin Bench of the Tribunal in case of G.Sreenivasan Vs DCIT 28 Txmann.com 200 (Coch.) and ITAT Pune Bench in the case of Mahesh Nemichandra Ganeshwade v ITO 21 Taxmann.com 136 (Pune). In view of this legal position, this contention is rejected. 75 The next contention was that the decision of Hon'ble Bombay High Court in case of Chaturbhuj Dwarkadas Kapadia (supra) is not applic....
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....third judgment relied upon by the Ld. Counsel for the assessee is in the case of DCIT v Tej Singh (supra). In that case land was acquired by the government and the matter went for litigation. During the pendency of litigation, the assessee entered into a Development agreement with a Developer for the purpose of development of the property, however, it was clarified in the agreement that there is litigation in respect of acquisition of property and the developer has to take clearance from the government in the matter of denotification of the land. It was held that since the land was under compulsory acquisition and no compensation has been received, therefore, there could not be any capital gain tax u/s 2(47) (iii) which deals with the compulsory acquisition. It was further observed that assessee could not have given possession unless and until the land was denotified. Since facts of the case are different than the case in hand and therefore, same are not relevant for our purpose. 81 Now coming to the facts, firstly it was contended that Developer i.e transferee has not obtained various permissions which were required to be taken by the Developer as per clauses 3.1, 7.9, 8.4 and ....
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....ons, typhoons, hurricanes, storms, tidal waves, earthquake, landslides, lightning, explosions and other natural calamities, prolonged failure of energy, court orders / injunctions, charge of laws, action and / or order by statutory and / or government authority, third party actions affecting the development of the Project, acquisition / requisition of the Property or any part thereof by the government or any other statutory authority and such circumstances affecting the development of the project (Event of Force Majeure). iii) Any Party claiming restriction on the performance of any of its obligations under this agreement due to the happening or arising of an Event of Force Majeure hereof shall notify the other Party of the happening or arising and the ending of ceasing of such event or circumstance with three (3) days of determining that an Event of Force Majeure has occurred. In the event any Party anticipates the happening of an Event of Force Majeure, such Party shall promptly notify the other party. iv) The Party claiming Event of Force Majeure conditions shall, in all instances and to the extent it is capable of doing so, use its best efforts to remove or remedy the cau....
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....espective jurisdictions in accordance with law. Insofar as the Wild Life (Protection) Act is concerned, it appears that the rejection has been made by the Chief Wild Life Warden who, the respondents claim, is merely a recommending authority and is required to forward his recommendation to the Central Government. As the rejection under the Wild Life (Protection) Act has been made by an authority not competent to do, the promoters of the project have sought a review of the order which is still pending for the same reason(s) as noticed above. 4. On these facts we are of the view that it would be prudent on our part to take the view that the issue with regard to clearance/sanction under the two enactments i.e. Environment (Protection) Act and Wild Life (Protection) Act is presently pending and as the promoters of the project have submitted themselves to the jurisdiction of the authorities under the said enactments we should refrain from addressing ourselves on any of the issues connected with either of the two statutory enactments as any such exercise, even though may be unintended, may have the effect of fettering the jurisdiction of statutory authorities functioning under the two ....
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....tions and directions contained hereinabove. 83 The combined reading of the above paras in the order of Hon'ble High Court clearly shows that Developer THDC/ HASH i.e. transferee have made their sincere efforts for obtaining the necessary permissions / sanctions which were required under the JDA. However, some of the sanctions could not be taken in time because of the litigation by way of PIL but since none of the party was liable to the other party in view of the clause 26 dealing with FORCE MAJEURE it cannot be said that Developer was not willing to perform his part of contract. In any case no specific evidence has been shown us to prove that THDC / HASH were declining to perform particular obligation provided in JDA. In view of this discussion, it cannot be said that transferee i.e. Developer THDC/HASH is not willing to perform his part of contract. 84 Secondly, it was contended that payments have not been made as per the JDA. However, again this is not correct. As per clause 4(iv) of the JDA, the installment for Rs. 31,92,75,000/- was required to be paid. The clause 4(iv) read as under:- "iv) Payment being Rs. 31,92,75,000/- (Rupees One Crore ninety two lacs seventy....
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.... been filed at pages 23 & 24 of the paper book dealing with the additional evidence. Through this letter it has been clearly stated that since permission is pending from the Ministry of Environment and Forest Department and therefore constructions could not commence. These permissions were pending because of the PIL filed by Shri Aalok Jagga before the Hon'ble Punjab & Haryana High Court. All these facts clearly shows that in view of clause 4.1 (iv) read with clause 26 (v) of the JDA, HASH Builder were not required to make the payment and it cannot be said that they were not willing to perform their part of the contract on this aspect. Therefore, this contention is rejected. 87 Seventh contention is that revenue wrongly held that even clause (vi) of Section 2(47) is applicable. We find no force in this contention. Clause (vi) to Section 2(47) reads as under: "any transaction (whether by way of becoming a member of, or accruing shares in, a cooperative society, company or other association 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". ....
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....le of the consideration, received or accrued has to be taxed. Every person is supposed to know the law and if the transaction is structured in such a way for the transfer of capital asset that some of the consideration would be received later then such person is supposed to know the consequences of the denial of such benefits. However, if the section is interpreted in the manner suggested by the ld. counsel of the assessee then no person would pay capital gain tax on transfer of a property. This will be clear from a simple example. Let us assume if "A" sells the property to "B" for a consideration of Rs. 100 crores and receive only a consideration of 1.00 crore and it is mentioned in the transfer instrument that balance of consideration would be paid after 20 years then no tax can be levied on such balance consideration of Rs. 99.00 crores which has not been received as per the contention of the ld. counsel of the assessee . But in that case no taxes can be levied even after 20 years because no transfer can be said to have taken place after 20 years and Revenue cannot do any thing because capital gain can be charged u/s 45 only on transfer of capital asset. We do not think that thi....
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....ceivable; or.......... 92 On this aspect the settled position of the law is that the annual value has to be determined even if the property is not let out. This position has been discussed by the Ld. author Chaturvedi & Pithisaria's in Commentary of Income Tax Law (fifth edition) Volume 1 in this respect at pages 1275 & 1276 observed as under: "Annual value- determination of - Section 23(1)(a) provides that for the purposes of section 22, the annual value of any property shall be deemed to be the sum for which the property might reasonably be expected to let from year to year. The word used is 'might' and not 'can' or 'is'. It is thus a notional income to be gathered from what a hypothetical tenant would pay which is to be objectively ascertained on a reasonable basis irrespective of the fact whether the property is let out or not [Sultan Bros. Pr. Ltd. v. CIT, (1964) 51 ITR 353 (SC); Jamnadas Prabhudas v. CIT, (1951)20 ITR 160(Bom); D.M. Vakil v. CIT, (1946) 14 ITR 298, 302(Bom); CIT v. Biman Behari Shaw, Shebait, (1968) 68 ITR 815 (Cal); Sri Sri Radha Govinda Jew v. CIT, (1972) 84 ITR 150, 156 (Cal); CIT v. Ganga Properties Ltd., (1970) 77 ITR 637, 647 (Cal); Liquidator, Ma....
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....er is less than Rs. 60 lakhs then the profit would be presumed to be 8% of turnover even if he has suffered a loss. Another example of Section 2(22)(e) can be taken. Under this provision a loan or advance given by certain companies to a substantial share holder is to be treated as deemed dividend. Such loan under the normal accounting principle or on commercial principles cannot be regarded as income but because of this specific provision regarding deemed dividend such amount has to be treated as income of the person receiving such loans. 95 The above position of law makes it absolutely clear that theory of real income is subject to the provisions of the Act and whenever any specific provisions of the Act is there for charging of a particular item of income, then the same has to be charged accordingly. It may be sometimes hard to the assessee's but again it has been held in numerous decisions that Fiscal statues have to be interpreted on the basis of language used and there is no scope for equity or intent. Ld. Author Shri S. Rajaratnam in the Commentary of Law of Income Tax by Sampat Iyengar's Volume 1, page 236 in this regard has observed as under:- "Once it is shown that t....
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....s Fifty Thousands Only) payable to 65 members having plot of 500 sq. yards each, Rs. 1,65,00,000/- (Rupees One Crore Sixty Five Lacs Only) payable to 30 members having plot of 1000 sq. yards each and Rs. 3,30,00,000/- (Rupees Three Crores Thirty Lacs Only) payable to the Owner for the 4 plots of 500 sq. yards each, which shall tantamount to the full and final payment to the Owner and / or the respective members of the Owner (as the case may be) in a manner set out herein below ('Payment'). Further, the transfer, sale and conveyance of 21.2 acres of land of the Property shall be made by the Owner in favour of THDC pro rata to the Payment received by the Owner and/or the respective members of the Owner (as the case may be) from HASH by executing sale deeds and registering the same. It is expressly provided that as resolved by the Owner, the total amount payable by HASH to the Owner and / or the respective members of the Owner (as the case may be) for assignment of the Development Rights and for transfer and sale of 21.2 acres of land of the Property shall be Rs. 106,42,50,000/- (Rupees One Hundred Six Crores Forty Two Lacs Fifty Thousand only) and one hundred and twenty nine (129) fl....
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....that developer i.e. THDC/HASH was to allot the letters of allotment within 45 days from final sanction from the competent authority and such flats were part of entire consideration. Merely because such allotment letter has not been given because of sanctions / permissions could not be obtained because of Public Interest Litigation before the Hon'ble Punjab & Haryana High Court, it cannot be said that such right has not accrued. Though it may be hard on the assessee but it is well settled that taxation and equity are strangers. Further commenting on this aspect Shri Rajarathnam in his commentary has observed at page 5164 as under: "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." 99 These comments and the other detailed discussion on this aspect clearly....
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....not? Secondly it is not clear that whether the amended consideration i.e. settlement for Rs. 1.00 crore was made in the same year or not? As observed earlier while discussing the issue of notional income that provisions of section 45 r.w.s. 48, are absolutely clear and there is no ambiguity that once a capital asset is transferred then whole of the consideration received or accruing has to be considered for the purpose of taxation in the year in which the transfer has taken place. We further find that in the JDA there is a clause for termination of the agreement. Relevant clause 14 reads as under: "Termination "14(i) Save and except the provision of clause 26, THDC shall at all times have the right to terminate this Agreement in the event there is any material breach of the representations, warranties, undertakings, declarations, covenants and/or obligations given by the Owner under this Agreement after giving thirty (30) days written notice for rectification of such breach. In the event the Agreement is termination by THDC, all the lands registered in the name of THDC as per the terms of this Agreement upto the date of the termination shall remain with THDC and the balance l....
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....red 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. (iv) The owner shall have the right to terminate the Agreement only in the event of default by the Developers for making the Payment in accordance with the terms of this Agreement and the allotment of Flats within the time period as mentioned in this Agreement after giving Thirty (30) days written notice for rectification of such breach or any further time as may be desired by the Owner. In the event the Agreement is terminated by Owner, all the lands registered in the name of THDC as per the terms of this Agreement upto the date 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 forfeit the Adjustable Advance/Earnest Money mentioned in clause 4(i)." ....
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....derstand that in the absence of such document how the assessee can claim that this Power of Attorney has been revoked. As discussed earlier while considering the legal position, we would again recall the words of Hon'ble Authority for Advance Ruling in case of Jasbir Singh Sarkaria (supra) wherein at para 33 of the decision while discussing the issue in respect of Power of Attorney, it was highlighted that execution of irrevocable Power of Attorney is of significant nature and the words "irrevocable" are very important. The expression "irrevocable" itself shows that normally such attorney cannot be revoked. Therefore, no cognizance can be taken in respect of revocation of the irrevocable Power of Attorney. In the absence of specific consent as provided in clause 6.7 of the JDA from THDC. 105 We may also note that CIT D.R has pointed out that total consideration was to be determined as under: (i) Consideration in cash (Rs. 82,50,000 x 129 plots) Rs. 106,42,50,000/- (ii) Consideration in kind (Rs. 101,25,000/- 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 considerat....
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....d be avoided if the contention of the applicant is accepted. On deep consideration, however, we find that the construction of the relevant provision should not be controlled by giving undue importance to such hypothetical situations. Normally, the owner executes a Power of Attorney or does similar act to left the transferee take possession only after the basic permissions are granted and he is satisfied about the ability of transferee/developer to fulfil the contract. In spite of that, if such rate situations take place, the owner/transferor will not be without remedy. He can file a revised return and make out a case for exclusion or reduction of income. However, if the time-limit for filing a revised return expires, the difficulty will arise. It is for Parliament or the Central Government to provide a remedy to the assessee in such cases. Moreover, the other side of the picture as depicted in paragraph 27 (supra) should also be kept in view." Here the comments of Shri Rajaratnam quoted at para 5164 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 c....
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....then value of the flats cannot be taken at Rs. 4,500/- per sq. feet. It is also pointed out that in view of the agreement between the HASH & THDC consideration has been shown at Rs. 2,000/- per sq. feet for 126 flats whereas it is Rs. 4,500/- per sq. feet for three flats. We find no force in these submissions. The assessee has filed along with the written submissions copy of the addendum of agreement between THDC and HASH by Joint Developer (at page 265 & 266) and this issue is discussed in clause 5 which is as under:- "5. Clauses 4.1, 4.2, 4.3 and 4.4 on the page nos. 18 and 19 of the Agreement shall stand amended, modified and substituted by the following:- 4.1 It is expressly agreed and understood by and between the Parties hereto (a) in the ratio of 72,28 between THDC and HASH in case Gross Sales Proceeds does not exceed Rs. 1272 crores; (b) in the ratio of 70: 30 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 an....
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....case M/s HASH has agreed to purchase the flats at this rate from M/s THDC. It may be noted as pointed out by the ld. DR for the revenue some of the News report clippings filed by various assessees clearly shows that flats were booked in the "Tata Camleot" (this was the name which was given to the Project which was to be developed on the land of two societies) in the Pre Launch offer in the range of Rs. 7500 to 8000 per sqft. It is a common knowledge that rates in Pre Launch offer are lower than the rates when bookings open for the Public. Considering these facts we are of the opinion that Assessing Officer has estimated the value of the flats on most reasonable basis. In view of these observations this contention is rejected. 110 The Ld. Counsel for the assessee had made some submissions on the issue of deduction u/s 54F. He has 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 r....
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.... stands admitted because assessee has filed a return declaring capital gain against part money received against his plot. Thus it becomes clear that it is the individual member who are liable to tax in respect of transfer to plots and the Society being only a facilitator or Post office. Some more details have been discussed in this respect while adjudicating the appeal of Punjabi Coop House Building Society Ltd. in ITA No. 310/Chd/2012 and 556/Chd/2012 which have been adjudicated little later in this order itself. Accordingly we find no force in the submissions and this ground is rejected. 114 Ground No. 7 - The issue regarding levy of interest u/s 234B and withdrawal u/s 244A (3) is of consequential nature and the Assessing Officer is directed to charge interest u/s 234B of the Act in accordance with law. Withdrawal 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." Now, we take up the six appeals before this Bench one by one as under: 11. First of all, we take up appeal of the assessee in ITA No.459(Asr)/2013 in the case Sh. Manpreet Singh Badal. 11.1 In grounds No. 1 & 2, the assessee ....
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....t Singh Atwal vs. ITO and others (supra) and in the case of Satnam Singh Kainth vs. ITO and others (supra), where detailed orders have been passed in the said cases. Since the facts in the present case are identical to the facts in the case of Sh. Charanjit Singh Atwal vs. ITO and others (supra) and in the case of Satnam Singh Kainth vs. ITO and others (supra), therefore, our order in the case of Satnam Singh Kainth vs. ITO and others (supra) is identically applicable to the facts of the present appeal, which have been discussed in detail in our order in the case of Sh. Satnam Singh Kainth vs ITO (supra). Therefore, in the facts and circumstances, all the grounds of the assessee in both the appeals are dismissed. In the result, both the appeals in ITA Nos.468 & 469(Asr)/2013 are dismissed. 15. ITA No. 490(Asr)/2013 - Sh.Rajiv Krishan Mahajan, HUF In grounds No. 1, the assessee has raised issue with respect to the validity of assumption of jurisdiction u/s 148 of the Act. The said issue was raised before the Ld. CIT(A), who has dismissed the grounds of the assessee. 15.1 After hearing the rival parties and on perusing the record, we find that the ld. CIT(A) has passed a well r....