TaxTMI 
TaxTMI 
2017 (5) TMI 1168
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....g proper reasons and justification. 3. The CIT(Appeals) went wrong in recording the findings in this regard in para 7 of the impugned order without assigning proper reasons and justification. 4. The CIT(Appeals) erred in sustaining the claim of the Long Term Capital Loss suffered from sale of shares of M/s. Paramount Builders P. Ltd. to the extent of Rs. 1,07,45,847/- as sham in the computation of taxable total income without assigning proper reasons and justification. 5. The CIT(Appeals) went wrong in recording the findings in this regard in para 10 of the impugned order without assigning proper reasons and justification and ought to have appreciated that there was no concession for dismissing the said ground of appeal thereby vitiating the findings recorded in relation thereto. 6. The CIT(Appeals) erred in confirming the assessment of Long Term Capital Gains relating to the JDA in overlooking the detailed factual submissions made as well as in not properly appreciating the fact of reporting of such Long Term Capital Gains in the return of income filed for the Assessment Year 2014-15 without assigning proper reasons and justification. 7. The CIT(Appeals) failed to apprec....
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.... of Joint Venture Agreement as Long Term Capital gains." 3. At the time of hearing, the ld. AR submitted that the assessee is not pressing ground Nos. 2, 3, 4, 5 and therefore, we dismiss ground Nos. 2, 3, 4, 5 as not pressed. 4. The facts of the case are that the assessee filed his return of income for the assessment year 2011-12 on 14.6.2012 admitting a taxable income of Rs. 14,41,921/-. Subsequently, the order u/s.143(3) of the Act was passed on 5.3.2014 arriving at a taxable income of Rs. 1,25,49,533/-. The contentious issues which formed the enhanced value to the taxable income, were on account of ignoring the assessee's claim of Long Term Capital Loss(LTCL) on sale of shares in M/s. Paramount Builders (Chennai) Ltd. amounting to Rs. 1,07,45,847/- and invoking the provisions of sec.45(2), thereby treating a portion of gain on sale of asset at Velachery as business profits. Additionally, the interest claimed u/s.24(a) of the Act of Rs. 4,20,000/- was also disallowed on the finding that the loan did not relate to the property that fetched rental income. 4.1 The assessee along with 14 other family members had entered into a Joint Development Agreement(JDA) w....
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....submission. The CIT(Appeals) has examined the Remand Report, the copy of the Sale Deed dated 15.12.2010 for Rs. 2,50,00,000/-, the copy of Agreement for Sale-cum-construction dated 15.12.2010 and the computation of income offering capital gains in A.Y. 2014-15 of the assessee. 4.4 Regarding the correctness of invoking the provisions of sec.45(2) of the Act in determining the taxability of gains on sale of land during F.Y. 2010-11 to Shri Salil Bansal and others for Rs. 2,50,00,000/-, in which the land owners received Rs. 1,25,00,000/-, the CIT(Appeals) observed that the Survey Report of the DGIT (Inv.) had clearly held that the transaction results in LTCG. According to the CIT(Appeals), since the office of the DGIT (Inv.), had endorsed that the resultant gain cannot be termed as business profit, while the AO had not illustrated otherwise, the act of invoking provisions of sec.45(2) thereby treating a portion of gains as business profit, is untenable. Accordingly, the CIT(Appeals) directed the AO to treat the gains on execution of JDA as LTCG. 4.5 According to the AO,, the transactions involving sale of shares of M/s. Paramount Builders (Chennai) Ltd. and the los....
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....ortion was retained by the owners of land and the balance portion was sold jointly along with the developer to outside parties. The co-owners of land had thus sold 8568 sq.ft. of 'Food Street' commercial building and the property sold during F.Y. 2010-11 to Shri Salil Bansal and Shri Jayesh Agarwal forms part of this area sold jointly. The capital gain offered to tax in A.Y. 2014-15 relates to the asset retained by the assessee and 14 other co-owners and has no connection with the property sold during the year under consideration. According to the CIT(Appeals), this transaction is undertaken separately and the sale proceeds have been received by the assessee. 4.9 The CIT(Appeals) observed that as per the JDA, the developers had paid a refundable security deposit of Rs. 11.50 crores and the same were to be appropriated against sale proceeds of a portion of the land owners' share in constructed space. In order to refund the deposit, the co-owners of land had transferred 36537 sq.ft. of residential area and 4284 sq.ft. of commercial area 'Food Street' during the year. Therefore, according to the CIT(A), the total sale consideration received by the co-owners is Rs. 22,71,223/- and dir....
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....to in section 53A of the Transfer of Property Act, 1882 (4 of 1882)" 6. The importance of the word "transfer" is due to the reason that under the charging section, viz., section 45, and the capital gain is taxable on "transfer of a capital asset". Precisely, this section prescribes that "any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to Income-tax under the head capital gains and shall be deemed to be the income of the previous year in which the transfer took place". 7. Thus, the fundamental features which determine the taxability of capital gain, are that the gain ought to be from the transfer of a capital asset. This section has a large scope of its operation due to the presence of deeming provision which says that the gain shall be the deemed income of that previous year in which the transfer took place. This phrase can be interpreted in the manner that the total profits may actually be received in any other year, but for the purposes of section 45, the gain shall be the deemed income of the year of transfer of the capital asset. It shall not be out of context, at this juncture, to mention an observation of t....
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....the contract, then, notwithstanding that the contract, though required to be registered, has not been registered, or, where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the trans feror or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract : Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof." 8.1. The doctrine of "part performance" is undoubtedly based upon the doctrine of equity. If one party has performed his part of duty then equity demands that the other party shall also perform his part of the obligation. If one party stood by his words then it is expected from the other party to also stand by his promise. Naturally an inequitable conduct of any person has no sanction in the eye of law. 8.2 In the light of the ingredients of thi....
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....as to be paid to the assessee in the form of cash as well as in kind, i.e., the commercial and residential area to be constructed by the developers to be handed over to the owners. (d) Next is the important phrase, i.e., "terms necessary to constitute the transfer can be ascertained with reasonable certainty". According to us, in this case, the terms and conditions of the contract were unambiguous and clearly spoke about the rights and duties with certainty of both the signing parties. We are concerned mainly with two certainties; one is passing of substantial consideration and the second is passing over of possession. As far as the payment of consideration is concerned, we have noticed that it is in the form of both cash as well as kind and payment made to the assessee. The consideration is as follows: i) The land owners would get from the Developers a refundable security of Rs. 11.5 crores without interest as per Clause No.6.1 of the Development Agreement. Out of this, Rs. 5/- crores was paid to Mr.M.S.Hameed on 27th day of June, 2006 and each owners admitted and acknowledged the receipt of their proportionate share of the above said consideration. The balance Rs. 6.5 crroes t....
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.... of it for the intended purpose. The mere fact that the assessee owner has also the right to enter the property to oversee the development work or to ensure performance of the terms of the agreement, did not restrict the rights of the developer or did not introduce any incompatibility. In a situation like this when there is a concurrent possession of both the parties, even then clause (7) has its full role to play. There is no warrant to postpone the operation of clause 2(47)(v) to that point of time when the concurrent possession would become exclusive possession of the developer. Any other interpretation, i.e., possession means exclusive possession, shall defeat the purpose of amendment. The possibility of staggering of payment linked with possession is ruled out by this amendment so that the taxability of gain may not be shifted to an uncertain distant date. We have no hesitation in saying that even if some part of consideration remains to be paid, the transaction shall not affect the liability of the capital gains tax so as to postpone the same indefinitely. What is meant in clause (v) of section 2(47) is the "transfer" which involves allowing the possession so as to allow deve....
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....er in the F.Y 2006-07 or in the FY 2013-14." Facts of this case thus suggest that the developer had never intended to walk-out of the project. The possession was with developer from the date of 27th June, 2006 as per clause 7.1 to 7.4 of the Development Agreement. (h) From the development agreement, it is more than clear that it was an agreement for construction of residential/commercial flats on the property owned by the assessee. In lieu of the right given to the developer thereunder, the assessee was to receive 50 per cent of the constructed area of both commercial and residential areas. Further, even the vacant and peaceful possession of the property had been delivered to the developer on 27th June, 2006 after receiving substantial amount of Rs. 11.5 crores as interest free security deposit. Under the circumstances, there was indeed an exchange of property which amounted to a transfer within the meaning of section 2(47)(v) of the Act on 27.06.2006 and the gain resulting from such transfer was indeed taxable in the year in which the development agreement entered which was coupled with by giving vacant and peaceful possession of the property to the developer. This view of ours ....
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....receipt of the agreed sale consideration, which, in fact, was received by her in August, 1993. C had taken delivery of the property during 1993-94. The assessee executed a power of attorney on August 17, 1993, in favour of the two partners of C after obtaining the clearance for the sale of property under Chapter XXC of the Income-tax Act, 1961. The partners of C who had obtained power of attorney started selling the property in parts to others on or after March, 1995, by executing the sale deeds, describing themselves as the agents of the assessee. Originally, she filed the return for the assessment year 1994-95 admitting the capital gain by treating the transfer of possession to C in August, 1993, as a transfer under section 2(47)(v) of the Act. Subsequently, she claimed that there was no transfer relevant for the assessment year 1994-95 and that the actual transfers were made in the assessment year 1995-96 when the power of attorney hol-ders executed registered sale deeds in favour of others. This claim was rejected by the Department. On a writ petition : Held, rejecting the claim of the assessee, that the ingredients of section 53A of the Transfer of Property Act, 1882, were s....
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....he argument of the AR that commencing from the date of transferring the land to the developer and ending on the date when the assessee sold his share of constructed area constitute a single transaction which cannot be accepted as this contention easily defeat very charging provision of Sec.45 of the Act by postponing the sale of new asset indefinitely. Such a situation is not envisaged under the Act. As per the Development Agrrment the assessee has no claim over the land which has been given to the Developer and he may not s3ell any constructed area coming to his share. In that case, despite there being transfer of land u/s.2(47)(v) of the Act, the assessee could escape the liability of the capital gains taxes. Therefore, as mentioned earlier it is not possible to treat the two transactions as one transactions which is too fallacious. Accordingly we hold the transfer of land in consideration of the constructed area constitute one transaction which giving rise to the capital gains in the F.Y 2006-07 relevant to A.Y 2007-08 and the sale of constructed area along with undivided share in land by the assessee constitute another transaction due rise to the capital gains which may be shor....
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....property and thereafter the transferee has taken steps in relation to construction of the building including project plan approval on 11.04.2008, then it is to be considered as transfer under section 2(47)(v) of the Income-tax Act. The fact that the legal ownership continued with the owners to be transferred to the developer at a future distant date really does not affect the applicability of section 2(47)(v) as per the reasons assigned hereinabove. The transferee was undisputedly willing to perform its part of the contract, in this circumstance we have to hold that there is transfer under section 2(47)(v) of the Act. Thus, the possession and control of the property is already vested with the transferee and the impugned development agreement has not been duly cancelled and it is still in operation, it has to be decided that there is a transfer under section 2(47)(v) of the Act. We have to see the real intention of the parties. As per the well known cannon of construction of document, the intention generally prevails over the word used and that such a construction placed on the word in a deed as is most agreeable to the intention of the parties. There are grounds appearing from the ....
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....y as per the general law is not a requirement for the applicability of the provisions of sub-clause (v) of section 2(47). Thus, the taxability of long term capital gains only taxed in the F.Y 2006-07 relevant to A.Y 2007-08 and ordered accordingly. 11. Now coming to the computation of short term capital gains on selling of assessee's share of residential and commercial constructed area, the ld. AR submitted that coowners of the land have transferred 36,537 sq.ft. of residential area and 4284 commercial area called as Food street during the financial year relevant to the A.Y 2011-12 and the findings of the CIT(Appeals) in para -14 of his order is irrelevant and bad in law. In our considered opinion, the gain on the transfer of the asessee's share in constructed area is to be brought in tax as short term capital gains after giving due deduction as enumerated in sec.48 of the Act. The Assessing Officer has to consider this issue of computation of capital gains on assessee's share of construction area along with undivided share in land which was actually transferred by the asseseee in this assessment year. In other words, the Assessing Officer cannot bring into tax entire share of con....