TaxTMI 
TaxTMI 
2013 (8) TMI 932
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....lopment agreement on 3-2-2007 with M/s. Legend Estates Pvt Ltd in respect of land owned by him in survey No.102, admeasuring 6 acres 39 guntas situated Serilingampaly mandal, Ranga Reddy district. As per this agreement, assessee and his two sons granted rights to M/s. Legend Estates Pvt Ltd for the purpose development of the said property for making residential/commercial complex. In consideration of the rights granted, the developer agreed to give 50% of the fully developed built up space in the form of residential/commercial units to the assessee and the developer shall get 50% of the constructed area. Accordingly, the developer i.e. Legend Estates Pvt. Ltd paid Rs.l,25,000/- as returnable earnest money deposit on 3-2-2007 vide the regd. document. Another unregistered supplementary agreement was also entered into on the same day as per which the developer agreed to pay a further returnable earnest money deposit of Rs. 11,98,75,000/- to the assessee. Thus, the total advance received by the assessee aggregates to Rs. 12.00 crores. However, it was later claimed by the assessee that out of Rs. 12.00 crores, Rs. 3 crores was returned by the assessee, bringing down the advance to Rs. 9....
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....agreement entered into by the assessee with the developer tantamount to transfer of property in the hands of the assessee. It was contended that the AO failed to notice the unwillingness of the developer to carry on the project as the developer subsequently revised the sharing basis of the built up area from 50: 50 to 38.5:61.5 due to various reasons and also on account of delay in the progress of the project. This was further evidenced by the event of taking over the project of development by a new company by name M/s. R.D.B. Legend Infrastructure Pvt Ltd. He, therefore submitted that it is totally arbitrary on the part of the AO to treat such agreement as transfer and to compute income in the hands of the assessee when the project was not complete and not handed over to the assessee. The AR also relied on the decision of the Hon'ble ITAT, Hyderabad Bench in the case of K.Radhika Vs. DCIT to support his case that as there is no intent on the part of the developer to carry on the project; hence there is no transfer within the meaning of sec.2(47) of the Act r.w.s. 53A of Transfer of Property Act. 7. In the course of appellate proceedings the assessee raised additional ground....
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....d specific coloured ceramic tiles and other sanitary fittings etc. Similarly, specifications are also given for plastering, painting, kitchen work and electrical works with generator back up etc. Provisions were also made for elevator, telephone, television, water supply, development of common area, security system etc. There is specific mention for special amenities like health club, sports facilities, gym and yoga, super market so on and so forth. It is not a simple agreement in broader sense but it contains various specifications to be provided in the construction to be undertaken on the property of the assessee. There is serious intent shown by both the parties to develop the property. 10. After obtaining the municipal permission, the assessee started the work of construction and spent about Rs. 17.49 crores as at the end of the March, 2011. This is in addition to Rs. 12 crores paid to the assessee as earnest money. The subsequent entry of RDB Legend Infrastructure Pvt. Ltd. into the picture vide Supplementary Agreement dated 11-2-2011 does not alter the nature of the contract as well as content of the contract. The CIT(A) further observed that if one looks at the compositio....
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....ment between the parties to develop the property, there is monetary consideration in the form of security deposit of Rs. 12 crores paid by the developer to the assessee in lieu of the land, physical possession of the property has been given to the developer, developer approached the GHMC and got building permission plan, developer commenced the land development as well as construction of the building as per plan approved, etc. All these above factors indicate the true nature of the transaction entered into by both the parties. It is not correct on the part of the assessee to contend that there is no willingness on the part of the developer to carry on the project because the developer has commenced the project incurred huge expenditure on the land and obtained municipal permission and paid huge amount as fee to carry out the construction activity. Merely because the developer has roped in other sister concern to carry on the unfinished project, it cannot be presumed that the project has been shelved. In fact, the new entity is not a unrelated concern at all. The Managing Director and the Director of the developer company is also holding similar positions in the new entity. Shri B. ....
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....uch estimation is made on reasonable basis with some base attached to such estimation. One need not compute the total income purely on the basis of actual delivery method. The AO proceeded to estimate the income based on certain parameters. He has taken the subregistrar base rate for the purpose of computing the cost of the property in the hands of the assessee. There are clear evidences to that effect and the Assessee also did not dispute the estimation of the cost of the property. As far as estimation of constructed area is concerned, the CIT(A) observed that the AO obtained the valuation report from the Chief Engineer, Valuation Cell, Income-tax Department for cost of construction of apartment building 'Legend Madapur- II situated at Kondapur, Serilingampalli, Ranga Reddy district which was developed by M/s. Legend Estates Pvt Ltd, Hyderabad. The specifications mentioned in the Valuation Report of that property are similar to the specifications provided in the project of instant case. Both the properties are in Serilingampally area only. There is no exaggeration of values and the AO has taken similar property developed by same builder during that period. On the contrary, the....
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.... building plan from HUDA. The CIT(A) held that in view of the specific clause in the development agreement and also in the facts and circumstances of the case which is evident by the subsequent act of the developer by incurring huge expenses not only for the municipal fee but also on construction and development, the physical possession was taken over by the developer only in the year 2008-09 relevant to the asst. year 2009-10. Thereby taxability under the head 'capital gains' of the consideration, can be considered only in the asst. year 2009-10 but not in asst. year 2008-09 where no action was taken by the developer. He further held that although agreement was executed and amount was received in the financial year 2006-07 relevant to asst. year 2007-08, transfer of property took place only in the financial year 2008-09 relevant to the asst. year 2009-10. Transfer as per sec.2(47) is complete only when all the three factors are executed. Since in this case, the physical possession of the property was handed over in the asst. year 2009-10, the capital gains is to be taxed in that year only. The transaction of transfer is complete only if the possession of the property given....
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....the assessee, it is necessary to examine whether the taxability of capital gain arise in this year or in asst. year 2007-08 or asst. year 2009-10. Though the agreement was dated 3-2-2007, actual possession of the land was handed over only in the year 2008-09 relevant to the asst. year 2009-10 because the developer has applied for permission from GHMC and got the permit order on 5-8-2008. Soon after, he started developing the land after taking physical possession of the land. Subsequently also, amounts are spent for land development, construction of the super structure on the said land. As per clause 8 of the Development Agreement dated 3-2-2007, the possession of the scheduled property shall be handed over to the developer by the first party after developer obtains approval of the building plan from HUDA. In view of the specific clause in the development agreement and also on the facts and circumstances of the case which is evident by the subsequent act of the developer by incurring huge expenses not only for the municipal fee but also on construction and development, the physical possession was taken over by the developer only in the year 2008- 09 relevant to the asst. year 2009-1....
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.... 21. In the result, appeal of the revenue being ITA No. 140/H/12 is dismissed. ITA NO. 28/h/12 - Assessee's appeal 22. Coming to the appeal of the assessee, the assessee has raised a number of grounds totalling to 12 as well as an additional ground basically challenging the finding of the CIT(A) that there is a transfer within the meaning of section 53A of Transfer of Property Act read with section 2(47(v) of the IT Act and directing the Assessing Officer to examine the taxability of capital gain in ay 2009-10. 23. The learned AR submitted before us that though the assessee had entered into registered development agreement with the developer Legend Estates Pvt. Ltd on 03/02/2007 but in reality there was no development activity carried out by the developer till 2010 and the assessee had to enter into fresh development with another developer, namely, RBD Legend Infrastructure Pvt. Ltd. on 11/02/2011. It was further contended that no development activity in pursuance to the development agreement dated 03/02/2007 had taken place would be further evident from the fact that the assessee entered into registered supplementary agreement on 03/10/2010 with the developer Legend Estat....
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.... the property belonging to the assessee along with other co-owner. As per Clause 5 of the development agreement irrecoverable right was given to the developer for developing the property. As per Clause 8 of the development agreement, the actual possession of land would be deemed to have been handed over to the developer after obtaining permission from the GHMC. As per the material available on record, permission from GHMC was obtained on 05/08/2008. Hence, possession of the property would be deemed to have been handed over to the developer after obtaining permission from GHMC on 05/08/2008. This is further evident from the fact that the developer in fact has started development activity after obtaining permission by making substantial investment. Therefore, neither the execution of development agreement and payment of the security deposit of Rs. 12 crores nor taking over the possession by the developer of the property happened during the impugned assessment year. In the aforesaid view of the matter the CIT(A) was correct in holding that under no circumstances the capital gain could have been charged to tax in the impugned assessment year. The ratio laid down by the Hon'ble Bombay H....