TaxTMI 
TaxTMI 
2003 (2) TMI 62
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.... appellant transferred the property situated in Gamdevi in the previous year relevant to the assessment year 1996-97 was arrived at by considering irrelevant circumstances and without appreciating and considering the relevant factual material and was contrary to the material and the evidence of record was thereby vitiated Facts: The assessee is an individual. He had 44/192 undivided share in an immovable property at Gamdevi in Greater Bombay. The entire property consisted of land and ten buildings. However, a building bearing No. 10 was under requisition by the State Government, which was later derequisitioned. That building was not occupied by tenants. By agreement dated August 18, 1994, the assessee herein agreed to sell to Floreat Investments Ltd. (hereinafter referred to, for the sake o brevity as "Floreat"), his share of the immovable property for total consideration of Rs. 1,85,63,220 with a right to the said Floreat to develop the property in accordance with the rules and regulations framed under the Maharashtra Housing and Area Development Act. For that purpose, the assessee agreed under clause 8 to execute a limited power of-attorney, authorising Floreat to deal with....
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....ounting year ending March 31, 1996, relevant to assessment year 1996-97, whereas according to the assessee, the transfer took place only when the assessee executed an irrevocable licence in favour of Floreat to enter upon the property and, therefore, according to the assessee the liability arose during the assessment year 1999-2000. Arguments: Mr. Dastur, learned senior counsel appearing on behalf of the assessee, contended that the only question which is required to be decided in this case is: Whether the Department was right in inferring possession in favour of Floreat during the accounting year ending March 31, 1996, relevant to the assessment year 1996-97. He submitted that in this case, the assessee has paid capital gains tax for assessment year 1999-2000. That, this is not a case where the assessee denies transfer of property. He contended that the only issue which is required to be decided in this appeal was as to whether the transfer, as contemplated by section 2(47)(v), had taken place during the assessment year 1996-97 or whether it had taken place during the assessment year 1999-2000. He pointed out that the decision of the Tribunal was perverse in the sense that r....
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....assessment year 1996-97. That the development agreement was dated August 18, 1994, and, therefore, that agreement also did not come within the purview of the assessment year 1996-97. He further pointed out that even IOD was granted by BMC during the period September to November 1996, and, therefore, even the IOD did not come within the purview of the assessment year 1996-97. He submitted that even the power of attorney was given on March 16, 1999, in favour of Floreat. He, therefore, contended that in this case, there was no transfer of possession during the accounting year ending March 31, 1996, relevant to the assessment year 1996-97. Mr. Dastur contended that under section 45 of the Income-tax Act, capital gains was chargeable to tax in the previous year in which a transfer takes place and that unless such transfer takes place, there was no liability to pay capital gains tax. He contended that the assessee stood divested of his proprietary rights only during the accounting year ending March 31, 1999, relevant to the assessment year 1999-2000 as the assessee granted irrevocable licence to Floreat only in that year. That till such date, the assessee had not parted with possession.....
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....ear 1996-97 and as a result, the assessee is now faced with the consequence of payment of interest of almost Rs. 16 lakhs on a tax demand of Rs. 12 lakhs. That, this was apart from the penalty proceedings. He contended that payment of substantial price will not amount to transfer. That, the assessee offered the amount to tax during the assessment year 1999-2000 as it was during that year that an irrevocable licence came to be executed in favour of Floreat. That the assessee had possessory rights on March 31, 1996. That till March 31, 1996, the assessee had not obtained BMC permission for constructing the building. That till March 31, 1996, the assessee had not executed the power of attorney in favour of Floreat. That till March 31, 1996, the assessee had collected rent. That till March 31, 1996, the property had not been demolished. That till March 31, 1996, the assessee has paid all outgoings. That till March 31, 1996, the assessee has recovered water charges. He, therefore, contended that possession was given only during the year ending March 31, 1999, when irrevocable licence came to be executed in favour of Floreat. Mr. R.V. Desai, learned senior counsel appearing on behalf ....
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.... in any manner which has the effect of transferring or enabling the enjoyment of any immovable property (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. This test is important to decide the year of chargeability of the capital gains. Findings: At the outset, we may point out that in this case, the assessee does not deny transfer. The only dispute in this case, is whether the transfer took place during the accounting year ending March 31, 1996, or whether it took place during the accounting year ending March 31, 1999. In other words, the dispute is confined to the year of chargeability. 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). That, in order to attract section 53A, the following conditions need to be fulfilled. There should be a contract for consideration; it should be in ....
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....pplied, 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. Before us, it was argued on behalf of the assessee that the date on which possession is parted with by the transferor is the date which should be taken into account for determining the relevant accounting year in which the liability accrues. It was argued on behalf of the assessee that in this case, irrevocable licence was given in terms of the contract only during the financial year ending March 31, 1999, and, therefore, there was no transfer during the financial year ending March 31, 1996.....
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....provals of various authorities. In fact, the limited power of attorney may not be actually given, but once under clause 8 of the agreement a limited power of attorney is intended to be given to the developer to deal with the property, then we are of the view that the date of the contract, viz., August 18, 1994, would be the relevant date to decide the date of transfer under section 2(47)(v) and, in which event, the question of substantial performance of the contract thereafter does not arise. This point has not been considered by any of the authorities below. No judgment has been shown to us on this point. Therefore, although there is a concurrent finding of fact in this case, we have enunciated the principles for applicability of section 2(47)(v). We do not find merit in the argument of the assessee that the court should go only by the date of actual possession and that in this particular case, the court should go by the date on which irrevocable licence was given. If the contract, read as a whole, indicates passing of or transferring of complete control over the property in favour of the developer, then the date of the contract would be relevant to decide the year of chargeabilit....