TaxTMI 
TaxTMI 
2018 (12) TMI 1138
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.... income of Rs. 13,34,054/-. The assessment was completed u/s. 153C r.w.s. 143(3) of the I.T. Act vide order dated 31/03/2018. In the said assessment order, the Assessing Officer made an addition of Rs. 3,81,59,200/- as long term capital gains. The relevant finding of the Assessing Officer for making the impugned addition reads as follows: "Submissions of the assessee have been considered with facts and available records. In this case, assessee along with many others had entered into the Joint Venture Development Agreement with Artech to build a apartment complex. In this case, it is seen that the assessee had executed an irrevocable Special Power of Attorney (POA) in favour of M/s. Artech Realtors thereby giving them control and rights over the land. In this case under POA transaction, it may not be necessary to register the Joint Venture development Agreement if the special POA has been given and the same is duly registered. Based on review of the terms of the JDA documents entitled the developers to not only enter the property of development, but they were also given rights for various other purposes like consolidating the project with others, creating mortgage ....
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....n then arises - at what point of time the transaction allowing the taking of possession in partITA No.367/Coch/2017. Smt.Hema Mohanlal. 4 performance of such contract had taken place. Incidentally it raises the question as to how the expression 'transaction' is to be understood. One view that could possibly be taken is that the execution of the agreement under the terms of which the purchaser is enabled to take possession even before the execution of conveyance deed is itself the 'transaction' contemplated by section 2(47](v). It is enough if the agreement/contract falling within the description of section 53A' provides for taking possession at some stage before the ownership is transferred in a manner known to law. This interpretation has no doubt the merit of certainty. Take the date of execution of agreement as the relevant date of transfer and pay the tax on capital gains that would arise based on the price stipulated in the agreement - that is what this interpretation leads to. 13. Meaning of 'possession' and how should it be understood in context of sub-clause (v) of Section 2(47) Possession is an abstract concept. It has differen....
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....the context of the instant case. The fact that legal ownership continues to remain with the owners or that the transfer of title cannot be demanded by the developer till he pays the entire consideration is really not germane to the applicability of sub-clause (v) of section 2(47). The very purpose of expanding the definition of transfer will be frustrated if the test of ownership and title is applied. The readiness and willingness of the transferee who is put in possession to fulfill his obligations is sufficient to invoke the doctrine of part performance. Once it is held that the transaction of the nature referred to in sub-clause (v) of section 2(47) had taken place on a particular date, the actual date of taking physical possession need not be probed into. It is enough if the transferee, has by virtue of that transaction, a right to enter upon and exercise the acts of possession effectively." "Where owners (assesses) had entered into an agreement for development of property and certain rights were assigned to developer who in turn had made substantial payment and, consequently, entered upon property and constructed flats, fact that legal ownership cont....
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....argeable 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". 15) 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 S. 45, the gain shall be the deemed income of the year of transfer of the capital asset. The point which deserves notice is that the amount or the consideration settled may not be fully received or may not technically accrue but if it arises from the agreement in question, then the deeming provisions shall come into operation. Another point is also equally noticeable that by the presence of the deeming provision, the income on account of arousal of the capital gain should be charged to tax in the same previous year in which the transfer was effected or deem....
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....e 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 eyes of law. (a) Starting words of s. 53A are "where any person contracts" which means just the existence of a contract. The assessee is the "person" who has entered into a contract with the developer vide agreement dated 12.4.2006. (b) This sections says "to transfer" means the said contract is in respect of a transfer and not for any other purpose. The term "transfer" is to be read along with the s. 45 and s. 2(47)(v) of I T Act, It is pertinent to clarify that one must not mistake to identify the issue of capital gain with the term "transfer" as defined in s. 54 of Transfer of Property Act. At the cost of elaboration, we may like to add that in the past there was a long line of pronouncements; while deciding income tax cases, that unless and until a sale deed is executed and that too it is....
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....contract and has done some act in furtherance of the contract". Retention of possession is open of the facet of part performance of contract. The agreement in question can be said to be a distinct transaction that has given rise to the event of allowing the contractor to enter into the property. What is contemplated by s. 2(47)(v) is a transaction which has direct and immediate bearing on allowing the possession to be taken in part performance. It is at that point of time that the deemed transfer takes place. According to us the possession as contemplated in cl. (v) need not necessarily be sole and exclusive possession, so long as the transferee is enabled to exercise general control over the property and to make use 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 cl. (v) has its full role to play. There is no warrant to postpone the operation of cl.(v) to....
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....nd consequently entered into the property and thereafter if the transferee has taken steps in relation to construction of the flats, then it is to be considered as transfer u/s. 2(47)(v) of the I.T. 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 s. 2(47)(v) as per the reasons assigned hereinabove. If the transferee was undisputedly willing to perform its part of the contract, then we have to hold that there is transfer u/s. 2(47)(v) of the Act. Thus, if the possession and control of the property is already vested with the transferee and the impugned development agreement has been duly acted upon and it is still in operation, it has to be decided that there is a transfer u/s. 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, If there are grounds appearing from the face of the instrument affording proof of the real intention ....
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....981-82 72*20,000*632/100 = 91,00,800 91,00,800 Long term Capital Gain 3,81,59,200 3. Aggrieved by the order of the assessment bringing to tax a sum of Rs. 3,81,59,200/- as long term capital gains in the current assessment year, the assessee preferred appeal to the first appellate authority. The CIT(A) allowed the appeal of the assessee and deleted the addition made by the Assessing Officer. It was held by the CIT(A) that the consideration of total built-up area of 20,000 sq. ft. to be handed over to the assessee on signing MOU and Joint Development Agreement had not taken place during the relevant assessment year and relying on the judgment of the Hon'ble Punjab & Haryana High Court in the case of C S Atwal vs. CIT (2015) TaxCorp (DT) 61500, the CIT(A) concluded that execution of Joint Development Agreement with an irrevocable Power of Attorney in favour of the Developer does not result in the "transfer" for the purpose of capital gains liability. 4. Aggrieved by the order of the CIT(A), the Revenue is in appeal before us raising the following grounds: "1. The Commissioner of Income Tax(Appeals) erred in deleting addition of Rs. 3,81,59,200/- under the head,....
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....h as copy of power of attorney, Land Owners Agreement and its enclosure, case law relied on, etc. It was also mentioned that in the case of Mrs.Preethy John (the other land owner who also entered in JDA with M/s Artech Builder for development of 34 cents of land) was pending adjudication before the CIT(A). 7. We have carefully perused the JDA entered between the assessee and the developer. As per the JDA (in page 3 para 4), the construction should have completed and the share of build up area marked for the assessee ought to have been handed over within 36 months of obtaining necessary sanction. The developer could not complete the construction as per the JDA due to their internal problems and working capital issues and 20,000 sq. ft. of buildup area was handed over to the assessee only on 12.04.2016 after a gap of seven years. The closure agreement dated 12th April, 2016 evidencing the handing over is enclosed from page 16 of the paper book. As per page 3 para 5 of the JDA, it is stated that "the sale deeds the developer executes with the prospective buyers or other investors, shall be without prejudice to the complete ownership of land to the land owner until the owner's part ....
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....operty under section 53A of the Transfer of Property Act. "Willingness to perform" the conditions stipulated has been specifically recognized as one of the essential ingredients to cover a transaction within the scope of section 53A of the Transfer of Property Act. 7.3 The provisions of deemed transfer u/s 2(47)(v) cannot be invoked in the assessee's case since she did not receive any consideration and also no construction actually took place during the Asst.Year 2009-2010. The permission from Trivandrum Corporation to construct the building was issued only during the next financial year on 08.06.2009. Copy of permission to construct the building is enclosed at page 19 of the paper book filed by the assessee. 7.4 The Power of Attorney was given to the developer only to represent the land owner and to sign on behalf of the land owner as per the instruction given by her since she is handicapped and living abroad at the time of execution of power of attorney. Nowhere in the power of attorney, handing over of the complete possession of the property to M/s.Artech Realtors (P) Ltd. was mentioned. Copy of the Power of Attorney is enclosed at page 21 of the paper book. As per the Pow....
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.... actually accrued to the assessee." Further it is held that "Unless the party has performed or is willing to perform its obligations under the contract, and in the same sequence in which these are to be performed, it cannot be said that provisions of section 53A of the Transfer of Property Act will come into play on the facts of that case. It is only elementary that, unless provisions of section 53A of the Transfer of Property Act are satisfied on the facts of the case, the transaction in question cannot fall within the scope of deemed transfer under section 2(47)(v) of the Act." 7.7 When time is essence of the contract, and the time schedule is 30 months to complete construction with additional grace period of 6 months, it cannot be said that such a contract confers any right on the vendor / landlord to seek redressal under Section 53A of the Transfer of Property Act. This agreement cannot be said to be in the nature of a contract referred to in section 53A of the Transfer of Property Act. The provisions of section 2(47)(v) will not apply in such a situation. It was held in the case of Sri ABVS Prakash, Hyderabad v. The ACIT, Central Circle-1, Hyderabad (2014) 8 TaxCorp (A.T.) ....
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....red, then it shall have no effect in law for the purposes of section 53A. In short, there is no agreement in the eyes of law which can be enforced under section 53A of the Transfer of Property Act. This being the case, we are of the view that the High Court was right in stating that in order to qualify as a "transfer" of a capital asset under section 2(47)(v) of the Act, there must be a "contract" which can be enforced in law under section 53A of the Transfer of Property Act. A reading of section 17(1A) and section 49 of the Registration Act shows that in the eyes of law, there is no contract which can be taken cognizance of, for the purpose specified in section 53A. The Income-tax Appellate Tribunal was not correct in referring to the expression "of the nature referred to in section 53A" in section 2(47)(v) in order to arrive at the opposite conclusion. This expression was used by the Legislature ever since sub-section (v) was inserted by the Finance Act of 1987, with effect from April 1, 1988. All that is meant by this expression is to refer to the ingredients of applicability of section 53A to the contracts mentioned therein. It is only where the contract contains all the six fe....