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2019 (10) TMI 343
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....ainst the principle of natural justice and thus liable to be quashed. 4. Chargeability 4.1 The Ld. CIT(A) erred in confirming the Order of Ld. AO who brought to tax a sum of Rs. 2,03,53,228/- as long term capital gain for the A.Y. 2009-10. 4.2 The Ld. AO erred in holding that there was a "transfer" within the meaning of Sec. 2 (47) of the Income Tax Act, 1961 on the date of execution of impugned Agreement so as to attract the chargeability of capital gain u/s. 45 of the Act. The Ld. AO failed to note that 'permission to develop' a land cannot be construed as 'delivery of possession' under the aforesaid provisions. 4.3 The Ld. AO failed to appreciate the fact that the legal possession of the land continued to vest with the Appellant at all times during the course of development and at no time the Developer was entitled to claim exclusive possession of the land for the purpose of section 53A of the Transfer of Property Act until the issue of Certificate of Completion of the Project from the regulatory Authority. 4.4 The Ld. AO ought to have noted that as per the said Agreement the Developer was mere a representative of the ....
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....time of hearing." 3. Similarly, the grounds raised by the assessee in ITA No. 957/Bang/2016 are as under: - "1. The Order of the Learned CIT (A) is opposed to law, facts and circumstances of the case. 2. The Order is passed in haste, without providing sufficient and reasonable opportunity of being heard. 3. The Order is passed against the principle of natural justice and thus liable to be quashed. 4. Chargeability 4.1 The Ld. CIT(A) erred in confirming the Order of Ld. AO who brought to tax a sum of Rs. 2,03,53,228/- as long term capital gain for the A.Y. 2009-10. 4.2 The Ld. AO erred in holding that there was a "transfer" within the meaning of Sec. 2 (47) of the Income Tax Act, 1961 on the date of execution of impugned Agreement so as to attract the chargeability of capital gain u/s. 45 of the Act. The Ld. AO failed to note that 'permission to develop' a land cannot be construed as 'delivery of possession' under the aforesaid provisions. 4.3 The Ld. AO failed to appreciate the fact that the legal possession of the land continued to vest with the Appellant at all times during the course of development....
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....ed in not allowing the said exemption u/s. 54F of the Act even to the extent of flats acquired by the Appellant, situated in the same building. 7. The Ld. CIT(A) erred in upholding the order of Ld. AO levying interest u/s. 234A and 234B of the Act. The Appellant seeks your leave to add, alter, amend or delete any of the grounds urged at the time of hearing." 4. As per the facts noted by the AO in both these cases, these two assesses alongwith other co-owners entered into an agreement dated 10.09.2008 with M/s Vaishnavi Infrastructures, Bangalore for development of residential apartments in their land measuring 4 Acres 26 Guntas and each of these two assesses who are husband and wife had share in the property of 10% each. This is also noted by the AO that share of each of these two assesses was determined at 21 Flats, 29800 Sq. Feet and the AO also noted that each of these two assesses had transferred 70% of undivided interest in the said property for a consideration of 30% of developed area. Before the AO, it was submitted by both these assesses that the judgment of Hon'ble Karnataka High Court rendered in the case of CIT vs. Dr. T. K. Dayalu 202 Taxman 531 is ....
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....nsfer 70% undivided interest in the property for a consideration of 30% of the developed area. Based on this information, the Ld. AO, relying on the decision of the Karnataka High Court in the case of Dr T.K.Dayalu Vs CIT [ITA No. 3209 of 2005 dated 20.06.2011] concluded that the Appellants were liable to tax on Capital Gains in the year in which the J DA was entered i.e. subject AY which had in fact not been offered to tax by the Appellants in their returns of income. Therefore, the Ld. AO concluded that income from capital gains had escaped assessment and consequently issued notice under Section 148 of the Act dated 6th February 2014 asking the Appellants to file their return of income for the subject AY. In response to such notice, the Appellants, vide their letters submitted on 29th April 2014 & 7th May 2014, have requested the Ld AO to consider the return filed on 9'" March 2010 as return in response to notice under Section 148 of the Act. Further, the Appellants had also sought from the Ld. AO, reasons for reopening of their assessments. Accordingly, reasons recorded for reopening of assessment were provided to the Appellants. The Ld. AO. after hearing the repres....
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.... Property Act ("TOPA") r.w.s 2(47)(v) of the Act and that the legal possession of the property i.e. the land in this case, would vest with the Appellant and the co-owners at all times, including during the course of development and at no time M/s Vaishanvi Infrastructure would be entitled to claim exclusive possession of the said land. Further, the JDA also states that M/s Vaishnavi Infrastructure shall not be entitled to possession of the proportionate share in the land in part performance as contemplated under Section 53A of TOPA until upon issue of Certificate of completion of the respective buildings and completion and delivery to the Appellants and other co-owners of the land of the Owners' Area (Refer Pg 13 of the JDA, para 1.3 & Pg 27 of the JDA, para 7.7) (Pg. 33 and 47 of the revised Paperbook filed on 02-Jul-2019); 3.3. M/s Vaishnavi Infrastructure would prepare plans and all required drawings as per building bye laws, rules and regulations in force for development of the land for construction of residential apartment buildings and also the necessary drawings, designs etc. for each of the buildings therein and get the same approved from the Appellants and the....
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....ppellants and co-owners would discharge all Municipal Taxes, cesses and assessments on the entire land to BBMP until delivery of Owners' Area pursuant to which the same would be borne by the respective parties based on their allocated share in the constructed property. (Refer Page 33 of the JDA, para 11.1) 3.10. A general Power of Attorney has been executed in favour of M/s. Vaishnavi Infrastructure to enable it obtain permissions, sanctions, orders, no objections, consents, clearances and License and Plans, for development of the land authorizing Vaishnavi Infrastructure to represent the Appellants before the BBMP, BDA, State and Central Governments, Fire Force Departments, BESCOM, etc. (Refer Pg 35 of the JDA, para 12.1); 3.11. Original documents of title to the land would continue to be held by the Appellants and the Co-owners while only photocopies of the same would stand transferred to M/s Vaishnavi Infrastructure; (refer Pg 35 of the JDA, Para 13); 4. At this juncture, in order to determine taxability arising consequent upon entering into a JDA, the Appellants wish to draw reference to the relevant provisions under the Act: 4.1. Provisi....
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....ce of contract for the purpose of Section 53A. Here it is essential to note that obtaining of possession of property by the transferee and receipt of consideration or at least part of the consideration are two essential conditions to be satisfied. 6. Therefore. is it submitted that, the terms of the JDA, when analyzed in the background of the aforementioned discussions on the mandates for a transaction to come within the purview of Section 53A of TOPA r.w.s. 2(47) (v) of the Act, we submit as follows: 6.1. Possession of the land by M/s Vaishnavi Infrastructure It is evident that that possession of the land was not conveyed to M/s. Vaishnavi Infrastructure at the time of entering into contract but was rather deferred to the time of issue of Certificate of completion of the respective buildings and completion and delivery to the Appellants and other co-owners of the land, of the Owners' Area (Refer Point 3.2 above). "Possession" is a word of open texture. It is an abstract notion'. It implies a right to enjoy which is attached to the right to property. It is not purely a legal concept but is a matter of fact. The issue of ownership....
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....magination can such deposit be treated on par with consideration. In fact, the consideration in this case is the handing over of the Owners' share of 30% which in fact has taken place only during the AY 2013-14 vide letter dated 25th April 2013. In this regard, the Appellants rely on the decision of the Hon'ble Hyderabad ITAT in the case of Binjusaria Properties Private Limited Vs ACIT in ITA No. 157/Hyd/2011. 7. The Appellants further wish to submit that the Learned AO has relied on the decision of Dr. T.K.Dayalu Vs CIT (ITA No. 3209 of 2005 dated 20.06.2011) (Refer Pg 293 of paper book) to tax capital gains arising out of the JDA in the year of entering into the JDA without appreciating that the facts in the instant case are distinguishable on significant aspects from those in Dr. T.K. Dayalu in as much as • The Appellants & co-owners have received an interest free refundable deposit which was repayable on receiving Owners' share whereas in the case of Dr. T.K.Dayalu. the assessee had received a non-refundable advance which is treated on par with consideration received (Refer Pg 3 of the decision of Dr. T. K. Dayalu): â....
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.... there was no transfer during the previous year relevant to AY 2006-07. Therefore, capital gain on transfer of the property cannot be assessed in AY 2006-07. The assessment of capital gain in AY 2006-07 is therefore held to be bad and deleted. 9. Additionally, the Appellants refer to the amendment brought vide Finance Act 2017 to Section 45 of the Act by insertion of a new subsection 5A which provides for taxability of capital gains in the hands of an individual or HUF in the year in which certificate of completion is issued by the concerned authorities. In this regard, it is submitted that though Section 45(5A) comes into effect only from 1.4.2018, the principle laid out in this subsection ought to be extended to JDAs entered into even prior to this date given that the intention of the Government to bring about this amendment was to minimize hardship faced by taxpayer landowners of paying capital gains tax in the year. of entering into the JDA. Accordingly, the provisions of Section 45(5A) ought to be read retrospectively. In this regard, we wish to rely on the decision of the Hon'ble Supreme Court in the case of Vatika Township (P.) Ltd. reported in 367 ITR ....
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....t in place only to bring coherence to the said section. In the instant case, the Appellant has invested in purchase or construction of residential house and therefore, the same should be eligible for deduction under sec. 54F of the Act. A reading of the aforesaid provision makes it very clear that the stress is on the use to which the property purchased or constructed is put to. The term 'a residential house' cannot be construed as one residential house. The issue involved here is no more res integra and has been considered on a number of instances by the Indian Courts wherein their Lordships while referring to sec. 13 of the General Clauses Act, 1897 have held that the context in which the expression 'a residential house' is used in sec. 54F of the Act makes it clear that, it was not the intention of the legislation to convey the meaning that it refers to a single residential house. if, that was the intention, they would have used the word "one." An asset newly acquired after the sale of the original asset can be buildings or lands appurtenant thereto. which should be "a residential house." Therefore, the letter 'a' in the context it is us....
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....e subject AY. the Appellants would be eligible for claim of exemption under section 54F of the Act on the 21 flats received by them in lieu of the land they parted with." 3. The Appellants, at this juncture also wish to draw a reference to the amendment to the said section with regard to the word 'a' by the Finance (No.2) Act, 2014, which will come into effect from 01 04.2015. The said amendment reads as follows: "32a. Words "constructed", one residential house in India" shall be substituted for "constructed, a residential house" by the Finance (No.2) Act, 2014, with effect from 01.04.2015. "The aforementioned amendment to sec. 54F of the Act, which came into effect only from 01.04.2015, makes it very clear that the benefit of Section 54F will be applicable to one residential house in India. However, prior to the said amendment, it is clear that a residential house would include multiple residential units as in the present case where the assessee has got 21 residential units. In view of above, it is humbly submitted that the stand taken by the Ld. AO is contrary to the provisions prevailing during the year under consideration. The view has also be....
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....ent of the Schedule Property. The Owner hereby authorize the Promoter for the purpose of development, to enter upon the Schedule Property and develop the same, however the authority so granted does not in any manner be construed as delivery of possession by the Owner in part performance of this agreement under Section 53-A of the Transfer of Property Act or under Section 2(47)(iv) of the Income Tax Act, 1961. 1.2) The Owner hereby agrees not to interfere or interrupt in the course of construction and development of the Schedule Property and/or commit any act or omission having the effect of delaying or stopping the work that has to be done under this Agreement. However, the Owner shall always be entitled to inspect the progress of the work and type of work which is being done on the Schedule Property."" 8. In this case also, the tribunal has duly considered the judgment of Hon'ble Karnataka High Court rendered in the case of Dr. T. K. Dayalu (Supra) and thereafter, the issue in dispute was decided in favour of the assessee as per Para 11. This para 11 of that tribunal order in the case of Smt. Lakshmi Swarupa vs. ITO (supra) is also reproduced hereinbelow. "11.....
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....t Party one set of sanction of licence and plan by Bruhat Bangalore Mahanagara Palike/other authorities. 1.2) That on execution of Allocation Agreement, the Second Party will be permitted to enter Schedule Property and Second Party is empowered to develop the Schedule Property by constructing residential buildings therein as per the Sanctioned plans, subject to terms of this Agreement. 1.3) Such permission to develop the Schedule Property shall however not be construed as delivery of possession under Section 53A of Transfer of Property Act read with Section 2 (47) (v) of the Income Tax Act of 1961. The legal possession of Schedule Property shall continue to vest in the First Party at all times including during the course of development and at no time the Second Party is entitled to claim exclusive possession of the Schedule Property. The Second Party shall not be entitled to possession of the proportionate share in the land in the Schedule Property in part performance until issue of Certificate of Completion of the respective buildings and completion and delivery to First Party 'OWNERS AREA' referred to in this Agreement in such building as agreed to under this Ag....