TaxTMI 
TaxTMI 
2014 (2) TMI 1393
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.... of the alleged capital gain to the assessee. 3. That the relevant provisions of section 2(47) as also the provisions of section 53A of the Transfer of property Act, 1882, qua the facts of this case, have been misconstrued by the ld. CIT(A) to confirm the ITO's order 4. That the computation of capital gain, by assuming notional consideration of to non existent flats, not being consistent with the basic scheme of Income tax Act, deserves not to be upheld. 5. That by any reckoning and without prejudice to the outcome of aforesaid grounds, the income under the head capital gain could not have been computed beyond the amount of Rs. 30 lakhs actually received during the year. 6. That exemption u/s 54F, ought to have been allowed, as claimed. 7. That the impugned capital gain, if any, ought to have been assessed in the hands of Punjabi Coop Housing Building Society Ltd. being the owner in possession of the property and not on assessee, being a member thereof. 8. That the orders of authorities below are highly unjust, arbitrary against equity and natural justice and hence liable to be set aside on this score also." 2. The brief fact....
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....lats each measuring 2250 sq. ft. of the value of Rs. 2,02,50,000/-. The total consideration, thus, accrued as a result of this transfer was Rs. 3,67,50,000/- and the same was required to be considered for the purpose of computing capital gains. According to Ld. CIT-1, Jalandhar, the order of the AO was erroneous as the provisions of section 48 of the Act had been ignored or misapplied which was a mistake of law and this caused prejudice to the interest of the Revenue. Keeping this facts in view, a show cause notice dated 24.02.2011 was issued to the assessee. In response to the same, the assessee filed her written submission pleading that when two views are possible and the AO has taken one view but with which the Commissioner does not agree, then in such a case, the order cannot be treated as erroneous and prejudicial to the interest of the revenue. Secondly, the consideration was to be received in part as and when the sale deed for the part plot was to be executed. Since at that time only a part of the registry corresponding to the receipt of consideration of Rs. 30 lacs had been executed, thus, only this consideration was liable to be considered for computing capital gain. Ld. C....
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....the bunch of 30 appeals decided by the ITAT, Chandigarh Bench (supra). 28. On the other hand, all the Ld. counsels appearing on behalf of different assessees before us in all the 24 present appeals, agreed to the argument made by the Ld. DR. Mr. Mahavir Singh. All the counsels prayed before the Bench to consider their written submissions and decide the issues in all the 24 appeals accordingly. 29. On perusing the facts in the present 24 appeals before us and the facts in the bunch of 30 appeals decided by a consolidated order dated 29.07.2013 by the ITAT Chandigarh Bench (supra) and on perusal of written submissions placed on record by different ARs, we are of the view that the issues decided by the ITAT Chandigarh Bench vide order dated 29.07.2013 (supra) are identical to the issues in the present 24 appeals before us. Therefore, we are proceeding to decide the present appeals by this consolidated order as under: "30. We have heard both the parties and perused the written submissions placed on record by the representatives of the assessees. The main issue in the present appeals is whether the assessee is liable to capital gains tax in the impugned year o....
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.... covered in the term 'License'. iv) Vide paras 64 to 68, the fourth contention was that the money received at the time of execution of JDA can be termed, as advance and whatever money has been received has already been shown as capital gain. It was held that it is not only the money, which is required to be taxed but the consideration which has accrued to the assessee is also required to be taxed. Accordingly, the fourth contention was also rejected. v) Vide para 69 to 74, fifth contention was that since section 53A of the Transfer of Property Act itself has undergone amendment w.e.f. 24.9.2001 by which agreement referred to in that section is required to be registered and therefore, now in section 2(47)(v) only the amended provisions can be read. It was held that non-registration of agreement cannot lead to the conclusion that provision of section 2(47)(v) is not applicable. Accordingly, fifth contention was rejected. vi) Vide paras 75 and 76, the sixth contention was with respect to decision of Hon'ble Bombay High Court in the case of Chaturbhuj dwarkadas Kapadia vs. CIT 260 ITR 491 is not applicable. It was held that the Bench has already discussed the....
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....deration arising on the transfer which would include the consideration which has been received as well as the consideration which has arisen and become due and may be received later on. Accordingly, this contention of the assessee was also rejected. ix Vide para 100 to 107, being the ninth contention that assessee has already terminated the agreement and has revoked the Power of Attorney. It was held in view of provision of section 45 read with section 48 of the Act that subsequent events, if at all any will not make any difference because total consideration received or accrued has to be assessed in the year of transfer. The word 'irrevocable' itself shows that in the eyes of law Special Power of Attorney could not have been revoked. In view of this analysis, either the JDA has not been cancelled or in any case the same cannot be considered for determining the taxation of Capital Gain. Accordingly this contention was also rejected. x. Vide para 108 & 109, being the tenth contention that even if the whole consideration has to be taxed then value of the flats cannot be taken at Rs. 4500/- per sq.feet. In view of agreement between HASH and THDC consideration has bee....
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....Ld. CIT(A) has done no wrong in rejecting the issue on reopening of assessment. Accordingly, the ground was rejected. 35. In the case of Smt. Surjit Kaur in ITA No.993/CHD/2011, the assessee was a member of 'The Defence Services Co-operative Housing Building Society Ltd; which was the owner of 27.3 Acres of land. This land was transferred to THDC/HASH as in the case of Punjabi Co-operative Housing Building Society Ltd; either facts are identical to the case of Sh. Charanjit Singh Atwal (supra). Accordingly, being identical issue as in the case of Sh.Charanjit Singh Atwal (supra), the appeal of the assessee was dismissed. 36. Regarding interest u/s 234B and withdrawal u/s 244A, it was held in para 114 that the same is consequential in nature and AO was directed to charge or withdraw interest in accordance with law. 37. Accordingly, all the grounds and contentions raised in 30 appeals as mentioned hereinabove by the ITAT, Chandigarh Bench have been dismissed. For the sake of convenience, we reproduce the facts in the case of Sh. Charanjit Singh Atwal vs ITO in ITA No.448(CHD/2011 and the findings of the ITAT, Chandigarh Bench on the issues in the appeal vid....
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....ase, license and/or exploitation for full utilization of the Property (Rights) and to execute all the documents necessary to carry out, facilitate and enforce the Rights in the Property including to execute Lease Agreement. License Agreements, Construction contracts, Supplier Contracts, Agreement for Sale. Conveyance, Mortgage Deeds, Finance documents and all documents and agreements necessary to create and register the mortgage, conveyance, lease deeds, license agreement, POA, affidavits, declarations, indemnities and all such other documents, letters as may be necessary to carry out, facilitate and enforce the Rights and to register the same with the revenue/Competent authorities and to appear on our behalf before all authorities, statutory or otherwise and before any court of Law (The "Development Rights'). The Owner hereby hands over the original title deeds of the Property as mentioned in the list Annexued hereto and marked as Annexure IV and physical, vacant possession of the Property has been handed over to THDC simultaneously to the execution and registration of this Agreement to develop the same as set out herein." 18 It was further noticed that till date a Member....
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....charge of the duties as responsible citizens and avoid litigation, the members decided to pay capital gain tax on the amounts received voluntarily and such as the assessee has paid due amount of taxes voluntarily during the course of proceedings It may kindly be appreciated that tax liability will arise only to extent of completed transactions i.e. the capital gain arising on the land which has been transferred and for which consideration has been received. The assessee has fully discharged his liability to that extent There cannot be any tax liability on Incomplete transaction I.e. where the land has not been transferred and the Consideration has not been received, 5 In your letter under consideration, you have considered the national 'value of the proposed flat measuring 2250 sq. feet as a part of the consideration Here the following points need to be considered. 1.) The flat shall be given only after the full land i.e. 500 sq. yard, has been transferred to the buyer. 2) There is no provision in the agreement to allot proportionate flat or make equivalent proportionate payment. So for the present transaction where only a part of the land has been tr....
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....of the owner i.e. "Punjabi Co-operative House Building, Society Ltd" and not In favour of the buyers. So therefore, there is no transfer of property u/s 2(14) and 2(47). 2Regarding your observation of having accepted the position of transfer, please note that we understand that transfer of property is only to the extent of the land transferred by way of sale deed. 3 It is very clear from the agreement that no transfer of property have taken place only the development right has been transferred. Therefore, there is no transfer of property under section 53A of Transfer of property Act, 4. Clause 9.3 of the agreement is very clearly stating that the ownership has not been transferred. in view of our submission you are requested to complete the Capita! Gains Tax in accordance with our return. The assessee wants to be personally heard and make further submission. You are requested to kindly adjourn the case till 29-12-2009." 11. Vide the above said letter the assessee requested to be personally heard however on 29.12.2009 he did not appear. The counsel of the assessee filed written submission which is reproduced as under: 1 In para 6,1 ....
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....at the owner shall execute in favour of M/s THDC Ltd: the sale-deeds to complete the aforesaid transaction. So it is evident that the execution of sale-deeds is an integral part of the transaction and the transaction shall remain incomplete. if the sale deeds are not executed. 4 The clause 13 very clearly states that the rights transferred relate to Development/construction work and M/s THDC Ltd shall not do anything which adversely affect the right of the owner to receive the entire consideration. 5 Keeping in view the conditions in the agreement and to the fact that M/s THDC Ltd: M/s Hash Builder Ltd have not done any development work on the land under consideration till date in pursuance of the agreement dated 25.2.2007 or in furtherance of the said agreement, no transfer should be considered to have been taken place in respect of the land which is not yet transferred, if the views of the department are held to be correct for the sake of discussion, the following situation will arise: 1, Assesses will be deprived from availing the exemption u/s 54EC since no funds are available with the assessee for investment. 2, Assessee will be deprived fro....
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....your query about the cost of acquisition is Rs. 11 lacs which is paid as per following dates. Receipt No, 307 09-11-01 5,04,000/- Receipt No. 426 12-02-04 7,00,007/- Out of above amount Rs. 1,00.000/- was refunded to the assessee and Rs, 4000/- was towards membership charges and other funds of the society. In continuation to our earlier reply submitted, we once again reiterate that the possession given by the assessee is only to the extent of land sold by way of registered sale deed. There are certain addendums to the agreement which are not presently available with the assessee & cannot be submitted immediately." 20 The Assessing Officer after considering the submissions did not find any force in the same and observed as under: (i) There is no force in the argument that the JDA was only an agreement to sell and not a sale deed because JDA resulted in the transfer of assets. All the ingredients of transfer i.e. consideration from schedule of payments, rights and liabilities of the parties etc. were mentioned in the JDA, Capital gain arose because of the fact that it was a case of transfer of capital asset in view of Sectio....
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....was to be charged under the head "capital gain" on transfer of a capital asset and shall be deemed to be the income of the previous year in which transfer took place. The year of transfer is the crucial year and not the time of the receipt. (v) There was no force in the contention that the value of the flat should not be included because the assessee has not received such flat, because the flat was to be received by each Member of the Society was part of the entire consideration as per clause 4.2 of JDA. In any case as per Section 45 r.w.s. 48, its full value of consideration received or accrued which has to be considered. (vi) It was also observed that surrender of allotment letter by the Members including assessee was processed in order to enable the Society to enter into tripartite JDA with HASH and THDC. By surrendering the allotment letter, the right of the assessee in immovable property owned by him got extinguished and this extinguishment was in lieu of entire consideration which was received by the Members including the assessee. thus this case was also covered u/s 2(47)(ii) of the Act. (vii) It was observed that there is no merit in the contentio....
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.... satisfied then the transfer can be said to have taken place for the purpose of Section 45. According to him as per the decision of Chaturbhuj Dwarkadas Kapadia V. CIT (supra) once the possession or part possession of the property was given by the transferor to the transferee then the transfer can be said to have taken place. He also referred to the decision of Authority for Advance Ruling in case of Jasbir Singh Sarkaria, 164 Taxman 108: 294 ITR 196. He referred to various observations of the Authority in this case and concluded that the receipt of entire consideration was not a factor to be seen for application of Section 2(47)(v). Once these two decisions were considered along with the provisions of section 45 r.w.s. 2(47)(v) then it would emerge as under: "(a) The Joint development agreement has been entered into between the Punjab Coop Housing Building Society Ltd. Mohali, of which assessee is member, and. M/s Hash Builders (P) Ltd. and M/s Tata Housing development Company Ltd. Mumbai as on 25.2.2007. b) The members of the society surrendered their allotment rights and the society on behalf of members entered into the joint development agreement in lieu of &#....
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....will transfer 3.08 Acres of the contiguous land out of property, It has been confirmed that against the above payment the land measuring,3.08 acres has been transferred in the *name of THDC and registered vide sale deed dated 02/03/2007 i.e. in the previous year 200607. g) Thus it is clear from above transactions that transferee, M/s Tata Housing development Company Ltd,, Mumabi, has performed and is willing to perform his part of contract and in this part performance of contract, the assessee and other members of the Punjab Coop Housing Building Society Ltd, Mohali have given possession of the whole of land of 21.2 acres to the THDC and have further irrevocably and unequivocally granted and assigned all rights in perpetuity to THDC in the said previous year i.e. 2006-07. h) Hence it is established beyond doubt that transfer has taken place as envisaged as per Section 2(47)(v) of the-Income Tax Act and since it has taken place through Society of which assessee is also member so Sections 2(47) (vi) and 2(47)(ii) would also support Section 2(47)(v) of the income Tax Act. (i) Now once it has been established that transfer has taken place, then the next....
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....ing, if any, shall be resolved as per the provisions and awards shall be granted, in appropriate cases by the arbitrator. These provisions are there to safeguard the interest of all the parties to the joint development agreement and parties would be indemnified by each other and shall also receive award if the terms/conditions are not fulfilled. p) As regards applicability of Section 54F, there are-certain conditions which are attached with Section 54F also which have to be fulfilled before which exemption under that section is available to the assessee. The assessee has not even tried to make any claim by showing that he has fulfilled the said conditions to be eligible for exemption under Section 54F, So exemption cannot be given in such a situation u/s 54F. q) The judgment relied upon by the assessee are not applicable to the case of assessee as most of them pertain to the previous year before Section 2(47)(v) and 2(47)(vi) was inserted w.e.f. 1.4.1988. Other judgments referred by assessee are distinguishable as follows: ACIT vs Puspa Devi: This ruling has been in fact in favour of revenue and completely ratifies the principles laid down in the judgment....
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.... was not registered therefore, it is clear that the possession was not handed over. In any case the possession if at all was granted as permissive license with right to developers i.e. THDC/HASH only for the purpose of development of the land and not as part of performance of the contract of transfer of land. The fact that possession was not handed over to the THDC/HASH also becomes clear from the sale deed dated 2.3.2007 (Placed at page 119 to 136). He referred to clause A of recitation clauses at page 120 which clearly provides that vendor i.e. the Society was owner and in possession of total land measuring 160 kanal and 7 marlas equivalent to 21.2 acres in village Kansal Distt. Mohali. This deed was for sale of part of the property measuring about 3.08 acres out of total land contracted to be given to THDC/HASH measuring about 21.2 acres. He pointed out that sale deed has been executed on 2.3.2007 whereas JDA was executed on 25.2.2007. Thus it is clear that no possession was given on 25.2.2007 otherwise the Society would not be in possession on 2.3.2007. Similarly one more part of the land was sold by second deed executed on 25.4.2007 wherein similar clause 'A' as in the first d....
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....nce JDA was never registered therefore, recourse could not be taken to Section 2(47)(v) of the Act because JDA was not registered. Pursuant to amendment in Section 53A of T.P. Act with effect from 24.9.2001 it was only the amended provision which can be read with Section 2(47)(v) of the Act. In this regard he referred to decision of Hon'ble Supreme Court in case of Surana Steels P Ltd. V. CIT, 237 ITR 777. In that case it was observed that when a section or an Act of Parliament is introduced into another Act, it must be read in the sense it bore in the original Act. In other words, the meaning attached to the original section which has been referred in another act, has to be understood as same. Therefore, once the original section 53A of T.P. Act undergoes amendment the same has to be read in Section 2(47)(v) as amended and therefore, as JDA is not registered Section 2(47)(v) will not be applicable. V The ld. counsel of the assessee referred to the decision of Hon'ble Bomay High Court in case of Chaturbhuj Dwarkadas Kapadia V CIT (supra) and tried to distinguish the same. He submitted that this decision cannot be taken as an authority for the proposition that....
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....(Reference was made to page 34 of the paper book). (iv) THDC/HASH vide letter dated 4.2.2001 (Page 23 to 24 of the additional evidence) refused to make further payment as stipulated in the agreement. (v) The transferor has gone back on their representation to complete construction in the time bound manner and in handing over the flats to the Society /its Members. In this regard he also referred to para 16 of the commentary by "MULLA - Dinshaw Frederick Mulla" (copy of which has been filed at page 102 and 103 of the paper book). He pointed out how the ld. authors have discussed the significance of the willingness of the transferee to perform their part of the contract. In this regard he also referred to various observations in the following case laws: General Glass Co. Pvt Ltd. V DCIT, 14 SOT 132 (Mum) K Radhika V DCIT, 149 TTJ 736 (Hyd) DCIT V. Tej Singh, 138 ITD 489 (Agra) The facts of these case laws and the facts in the present case before us are identical and therefore, since as per these decisions there was no willingness on the part of the transferee to perform his/its obligation the provisions o....
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....nd since notional income cannot be taxed, therefore, the value of these flats, in no case, should be considered in the total consideration. Further if notional receipts were taxed then the assessee would be deprived to take benefit available in the IT Act. For example if whole consideration was received the assessee could have easily taken benefit of Section 54EC and other provisions like Section 54 by investing in any specified asset or a house. Since full consideration has not been received and the assessment of the whole consideration will lead to unintended consequences like denial of deduction u/s 54 EC etc. IX It was contended that since JDA has already been terminated vide Society's resolution dated 13.6.2011 and thereafter on 31.10.2011 even special Power Of Attorney executed earlier has been revoked, therefore, in view of the subsequent events, the balance of consideration receivable could not be taxed in the hands of the assessee. Subsequent events to the date of transactions have to be reckoned before taxing a particular transaction. He also submitted that in almost similar circumstances, subsequent events were reckoned by Mumbai Bench of the Tribunal in case of....
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.... an allegation that this has been done deliberately which was controverted by the ld. counsel of the assessee and he submitted that this is a simple mistake and he would file those papers. The ld. DR for the revenue in view of these submissions submitted that these pages can be referred in case of Punjabi Coop House Building Society Ltd. in ITA No. 310& 556/Chd/2012 at page 40 to 52 of the paper book in that case. The submissions of the revenue can be summarized as under: (I) The Society passed a resolution in its executive committee on 4.01.2007 which was confirmed / ratified in the General Body Meeting on 25.2.2007. In the Society there were two types of Members holding plots of 500 sqyd and 1000 sqyd. It was resolved that members would surrender the respective plots of 500 sqyd and 1000 sqyd in favour of the Society for further transfer of the entire land by the Society in favour of THDC/HASH for the development of property in lieu of consideration of Rs. 82,50,000/- to a Member holding 500 sqyd plot and Rs. 1,65,00,000/- to a Member holding 1000 sqyd plot to be paid in four installments by HASH directly to the Members of the Society. In addition to this considera....
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.... of THDC/HASH and such power of attorney was actually executed on 26.2.2007. Through this power of attorney THDC/HASH has been authorized to mortgage or create charge by the Society. THDC/HASH was authorized to give the possession of the property or any part thereof to the authorities to whom same was required to be handed over which was not possible unless THDC/HASH was handed over the possession of the property and the rights of the ownership. Through this power of attorney the right to sell was also given which is again not possible without transfer of possession or ownership. These clauses clearly show that complete control over the property confirming all privilege of ownership was given in favour of THDC/HASH and thus such transfer of ownership satisfies the requirements of Section 45 r.w. clause (ii), (v), (vi) of Section 2(47) of the Act. (II) The Ld. CIT DR for the revenue contended that Hon'ble Supreme Court in case of Sunil Sidhharath Bhai V CIT, 156 ITR 509 and CIT V. Narang Products, 219 ITR 478 has clearly held that definition of transfer u/s 2(47) is inclusive one and does not exclude contextual or ordinary word meaning of "Transfer". Further in case of ....
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....cular No. 495 dated 22.9.1987. The Board has clarified through paras 11.1 & 11.2 that newly inserted clauses (v) & (vi) would enlarge the definition of transfer whereby the cases of transfer what is popularly known as 'power of attorney' transaction which allows the enjoyment of right in the property would be covered by new definition. The new clauses would also cover arrangements by which the property could be enjoyed by becoming a member of the company or such other arrangement. According to him it may not be out of place to invoke Heydon's Rule of interpretation of statutes for interpreting these clauses. The Heydon's Rule is mainly applicable wherever the true meaning of amended provisions is to be understood. If the amendments are seen through prism of Heydon's Rule, it would become clear that amended clauses have been brought on the statute to overcome the earlier mischief. Properties could be transferred without execution of proper sale deeds and the same could be enjoyed by the respective buyers without any taxation on the part of sellers. (V) The Ld. DR pointed out that there is no force in the submissions that since section 53A of the transfer of property Act has....
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.... Sreenivasan Vs DCIT 140 ITD 235 and Pune Bench of the Tribunal in the case of Mahesh Memichandra Ganeshwade 51 SOT 155. (VI) It was contended that there is no force in the submissions of the Ld. Counsel for the assessee that THDC/HASH were not willing to perform their part of the contract. It was pointed out that developers i.e THDC/HASH have made payments as per clause 4(i)(ii) &(iii) of the JDA. The developers have also approached the concerned authorities for permissions and approvals as per the obligation agreed in the JDA. However, a PIL was filed against the developers against TATA Camelot Project (this is the name of the project which was to be developed by THDC on the land acquired from the Society). The PIL was dismissed vide order dated 26.3.2012 (copy of order filed on record). A reference to paras 3, 4, 25 & 26 of this order would clearly show that Hon'ble High Court has observed that against the rules of sanction under the Environment (Protection) Act, the respondent i.e. Developers have sought a review of the order because of the findings arrived at were ex.parte. No order in the Review matter has been passed by the competent authority because the interi....
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....e of ongoing litigation which was filed through a PIL, therefore, it cannot be said that Developer was not wiling to make the payment. As per the JDA, the payment would become due only when such permission were granted by various authorities. In fact M/s Hash Builder wrote a letter on 04.02.2011 through which it was stated that since High Court has stayed the construction, therefore, payment could not be made. Further, as PIL was filed in the Hon'ble High Court and the matter had gone even to the Hon'ble Supreme Court and THDC/HASH has vigorously defended the same. This fact clearly shows that developer i.e. THDC/HASH was willing to perform in all respects to the JDA. (VII) It was also contended that the society has already terminated the contract and in this respect reference was made to the Resolution passed by general body of the meeting dated 13.6.2011 and legal notice was issued to THDC/HASH. First of all, there is no evidence on record to show that such notice was served upon THDC/HASH. In any case, as contended earlier, power of attorney could not have been revoked because it was irrevocable power of attorney as per clause 6.7 of the JDA. Further, there was ....
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....n because that would be a case of taxing the notional income. He referred to clause 4 of the JDA which deals with the consideration and pointed out that allotment of flat was part of the consideration. As per the resolution of the Executive Body of the Society which was latter ratified by the General Body as well as the terms of the JDA very clearly show that in addition to monetary consideration each Member having 500sqyd plot was entitled to receive one fully furnished flat measuring 2250 sqft and the Members holding 1000 sqyd plot were entitled to two such flats. This clearly shows that upon entering the JDA, the Members got vested rights to receive such flats and therefore, as per the definition of capital gain in Section 45 such flat has also arosen from the JDA and therefore, has to be included in the total consideration. He again emphasized that receipt of consideration has nothing to do with its taxability u/s 45 and it is the accrual of consideration which means a portion of the consideration which can be received later also. He also submitted that as far as the value of the flat is concerned, the same has been taken by the Assessing Officer on the basis of agreement enter....
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....cted in the previous year shall, save as otherwise provided in sections [54, 54B, [ [54D, [54E, [54EA, 54EB,] 54F [ 54G and 54H], 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. 28 The plain reading of the above provision would show that charging an item of income under the head 'Capital gains" require three ingredients i.e. (i) there should be some profit. (ii) Such profit must be arising on account of transfer and (iii) there should be capital asset which has been transferred. There is no dispute that a capital asset was involved and there was some profit also i.e. why assessee has himself returned income under the head 'capital gains;. The dispute is mainly on account of transfer and that too whether the transfer could be covered under clauses (ii), (v) & (vi) of section 2(47) so as to bring into picture the whole of consideration arising on transfer of such assets. We shall deal with each of the aspect in detail at appropriate time. 29. Apart from charging provisions u/s 45 another important provision is section 48 which deals with the mode of computation an....
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.... 11.1 and 11.2 of the circular reads as under:- "11.1 The existing definition of the word " transfer " in section 2(47) does not include transfer of certain rights accruing to a purchaser, by way of becoming a member or acquiring shares in a co-operative society, company, or as way of any agreement or any arrangement whereby such any building which is either being constructed or which is to be constructed. Transactions of the nature referred to above are not required to be registered under the Registration Act, 1908. Such arrangements confer the privileges of ownership without transfer of title in the building and are a common mode of acquiring flats particularly in multi-storeyed constructions in big cites. The definition also does not cover cases where possession is allowed to be taken or retained in part performance of a contract, of the nature referred to in section 53A of Transfer of Property Act, 1882. New sub-clauses (v) & (vi) have been inserted in section2(47) to prevent avoidance of capital gains liability by recourse to transfer of rights in the manner referred to above. 11.2 The newly inserted sub-clause (vi) of section 2(47) has brought in to the ambi....
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....o lot of litigation and the main point of litigation was that at what point of time the possession can be said to have been given. In the present case, the Revenue has mainly relied on two decisions namely (i) Chaturbhuj Dwarkadas Kapadia v CIT 260 ITR 491 (Bom.) and; (ii) Authority for Advance Ruling (AAR) New Delhi in the case of Jasbir Singh Sarkaria 294 ITR 196. 33. In the case of Chaturbhuj Dwarkadas Kapadia v CIT (supra), the facts before the Hon'ble Bombay High Court were that assessee who was an individual had 44/192 undivided share in an immovable property in Greater Bombay which consisted of various lands and buildings. By Agreement dated August 18, 1994, the assessee agreed to sell to Floreat Investment Ltd, (herein referred to 'Floreat') his share of immovable property for a total consideration of Rs. 1,85,63,220/- with right to said Floreat to develop the property in accordance with the rules / regulations framed by local authorities. For this purpose, the assessee also agreed to execute a limited power of attorney authorizing Floreat to deal with the property and also obtain permissions and approvals from various authorities. Under clause 11 of the agreem....
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....bit of section 2(47)(v). In order to attract section 53A, the following conditions need to be fulfilled. There should be a contract for consideration ; it should be in writing ; it should be signed by the transferor ; it should pertain to transfer of immovable property ; the transferee should have taken possession of the property ; lastly, the transferee should be ready and willing to perform his part of the contract. Even arrangements confirming privileges of ownership without transfer of title could fall under section 2(47)(v). Section 2(47)(v) was introduced in the Act from the assessment year 1988-89 because prior thereto, in most cases, it was argued on behalf of the assessee that no transfer took place till execution of the conveyance. Assessees used to enter into agreements for developing properties with builders and under the arrangement with the builders, they used to confer privileges of ownership without executing conveyance and to plug that loophole, section 2(47)(v) came to be introduced in the Act. ................ Held, that section 2(47)(v) read with section 45 indicates that capital gains was taxable in the year in which such transacti....
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....fect of transferring, or enabling the enjoyment of, any immovable property (s. 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 general law." 36 From the above, it is clear that Court was of the view that in case any transaction covered by clause (v) and (vi) to section 2(47) the liability for capitol gain would arise on the date when such transactions are entered into. In the judgment at some other places, the similar observations have been made. However, despite this observation the case was decided in favour of the assessee. The reason for the same have been given in the judgment itself. Firstly it is observed that provision of section 2(47)(v) of the Act were not invoked by the Revenue itself. This becomes clear from the following para: "It was argued on behalf of the assessee that there was no effective transfer till grant of irrevocable licence. In this connection, the judgment of the Hon'ble Supreme Court were cited on behalf of the assessee, but all those judgment were prior to introduction of ....
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....nal where certain documents were mentioned to have been executed before March 31, 1996 e.g. the following observation of the Tribunal was not found correct as something is done on Ist April, 1997 then the same cannot fall in the year ending 31.3.1996. "From the dates it is evident that from the very next day, i.e., April 1, 1997, from the end of the financial year ending on March 31, 1996, the builder was using the well water against payment of relevant charges to the assessee." 37 Thus it is very clear that in cases where an arrangement had been entered into by an assessee in terms of clause (v) of Section 2(47) which has effect of handing over the possession then the transfer is said to have been taken place on the date of entering into such arrangement. 38. We do not find any force in the contention of the Ld. Counsel for the assessee that judgment has to be read in the context of the decision made in such judgment. In fact, it is well settled that doctrine of precedent which means what needs to be followed later on particularly by subordinate Tribunals and Courts is the ratio of a particular judgment given by the higher Court or Forum. Further, there ....
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....with the owners till it vests with both the parties as per their respective shares on the completion of the project. The other clauses and the steps in the agreement were that a sum of Rs. 1 crore towards payment of earnest money at the time of entering into agreement; a special power of attorney was to be executed in favour of the Developer to enable to deal with the Statutory authorities etc. for obtaining necessary approvals / sanctions; letter of intent was to be obtained not later than March 8, 2006 and in case of a failure to do so, the agreement shall stand terminated. Letter of intent is basically a license granted by the Director of Town Planting to Developer of land for the purpose of constructing residential flats subject to payment of certain charges and compliance of other conditions. It was further stated in the agreement that on fulfillment of the requirement in the letter of intent, owners will have to execute irrevocable general power of attorney in favour of the Developer authorizing the Developer to took and sell the dwelling units out of developer's share and collect the money for the same. However, finally sale deeds could be executed only after the owner recei....
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....ised by Shri S. Rajaratnam) brings out the correct legal position : "Section 45 enacts that the capital gains shall by fiction 'be deemed to be the income of the previous year in which the transfer took place'. Since this is a statutory fiction, the actual year in which the sale price was received, whether it was one year, two years, three years, four years etc. previous to the previous year of transfer, is beside the point. The entirety of the sum or sums received in any earlier year or years would be regarded as the capital gains arising in the previous year of transfer. . . . . In the words of section 45, the capital gains arising from the transfer 'shall be the income of the previous year in which the transfer took place'. So, the payments of consideration stipulated to be paid in future would have to be attributed, by statutory mandate, to the year of transfer, even as payments made prior to the year of transfer." 41. Thereafter, the Authority referred to section 2(47) and objects of the introduction of clauses (v) & (vi) and also referred to paras 11.1 & 11.2 of the Board Circular No. 495 (which we have already discussed earlier). The Hon....
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....the fact that possession is not a pure legal concept, as pointed out by Salmond. The learned judge then explained the connotation of the expression "possession" by referring to the well known treatises on jurisprudence (page 278) : "'Possession', implies a right and a fact : the right to enjoy annexed to the right to property and the fact of the real intention. It involves power of control and intent to control, (see Dias and Hughes) 14 . . . . 15. While recognizing that 'possession' is not a purely legal concept but also a matter of fact, Salmond (12th Ed., 52) describes possession, in fact, as a relationship between a person and a thing. According to the learned author, the test for determining 'whether a person is in possession of anything is whether he is in general control of it'." In Salmond's Jurisprudence, at paragraph 54, we find an illuminating discussion on "immediate" and "mediate possession". The learned author states "in law one person may possess a thing for and on account of some one else. In such a case the latter is in possession by the agency of him who so holds the thing on his behalf. The possession thus held by one man....
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....ssession of the transferee/developer, then, the very purpose of the amendment expanding the definition of transfer for the purpose of capital gains may be defeated. The reason is this: the owner of the property can very well contend, as is being contended in the present case, that the developer will have such exclusive possession in his own right only after the entire amount is paid to the owner to the last pie. There is then a possibility of staggering the last instalment of a small amount to a distant date, may be, when the entire building complex gets ready. Even if some amount, say 10 per cent., remains to be paid and the developer/transferee fails to pay, leading to a dispute between the parties, the right to exclusive and indefeasible possession may be in jeopardy. In this state of affairs, the transaction within the meaning of clause (v) cannot be said to have been effected and the liability to pay capital gains may be indefinitely postponed. True, it may not be profitable for the developer to allow this situation to linger for long as the process of transfer of flats to the prospective purchasers will get delayed. At the same time, the other side of the picture cannot be ov....
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....ties for advancing & sale promotion, construction etc. The Authority further observed that if this clause is read in isolation this would suggest on passing of possession but according to Authority the other factors are to be considered. Clause 15 provided that on fulfillment of the requirements laid down in the letter of intent which is provisional license, the owners should execute an irrevocable general power of attorney in favour of the developer allowing inter alia to book and sell the dwelling unit failing under their share. This was possible only after deposit of requisite charges etc. and perhaps there was litigation regarding ownership of land which has also to be withdrawn. The Authority has discussed the significance of general power of attorney and the terms of the general power of attorney at para 33 and the relevant portion of the same is as under:- "A copy of the irrevocable GPA executed in terms of paragraph 15 of the agreement has been furnished by the applicant. It authorizes the developer : (i) to enter upon and survey the land, prepare the layout plan, apply for renewal/extension of licence, submit the building plans for sanction of the appropriat....
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....of law which allows possession to be taken in part performance of the contract for transfer of the property in question........" 43 Thus, the above clearly shows that irrevocable general power of attorney which leads to over all control of the property in the hands of the Developer, even if that means no exclusive possession by the Developer would constitute transfer. It can be said that it has to be construed as 'possession' in terms of clause (v) of section 2(47) of the Act. 44 A question may arise that why the transfer was not held to be taken place in Assessment year 2006-07 when first agreement was entered into on June 8, 2005. The supplementary agreement was also entered into on Sept 15, 2005 both of which fall in Financial Year 2005-06 relevant to Assessment year 2006-07. Then why transfer was not construed in Assessment year 2006-07 it was because the first agreement itself contained a condition that "letter of intent" should be procured not later than March 8, 2006. In case of failure to do so the agreement shall stand terminated. Therefore, obtaining the "letter of intent" was the crucial factor. It has been explained in the decision that the "letter of ....
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....embers were stated as 95 during arguments but clause 13 of the JDA refers to number of members as 96). The Society was owning 21.2 acres of land in village Kansal Distt. Mohali adjacent to Chandigarh. There were two types of members firstly the members who were owning plot of 500 sqyd and secondly the members who are holding plot of 1000 sqyd. Somewhere in 2006 it was decided to develop a Group Housing commercial project and do development as per the applicable municipal building bye-laws in force and accordingly a bid was invited through advertisement in the Tribune dated 31.5.2006. HASH a developer, approached the Society with proposal for development of the property. Since Hash did not have sufficient means to develop the property, Hash had approached THDC for development of the property by constructing the building and/or structures to be used for interalia residential, public use and commercial purposes. This proposal was discussed by the Society in its Executive Committee meeting on 4.1.2007. Minutes of the meeting are placed at page 58 to 65 of the paper book. In the Executive committee it was decided to appoint Hash who was acting alongwith the joint developer THDC as joint....
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....ment, construction, mortgage, sale, transfer, lease, license and or exploitation for full utilization of the Property (Rights) and to execute all the documents necessary to carry out, facilitate and enforce the Rights in the Property including to execute Lease Agreement, License Agreements, Construction Contracts, Supplier Contracts, Agreement for sale, Conveyance, Mortgage Deeds, finance documents and all documents and agreements necessary to create and register the mortgage, conveyance, lease deeds, license agreement, Power of Attorney, affidavits, declaration, indemnities and all such other documents, letters as may be necessary to carry out, facilitate and enforce the Rights and to register the same with the revenue/Competent authority and to appear on our behalf before all authorities, statutory or otherwise, and before any court of law (the 'Development Rights'). The owner hereby hands over the original title deeds of the Property as mentioned in the list Annexed hereto and marked as Annexure IV and physical, vacant possession of the property has been handed over to THDC simultaneous to the execution and registration of this agreement to develop the same as set out herein. ....
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.... proceedings, affidavits and such other papers containing true facts and correct particulars as made from time to time be required in this behalf. 9.2 The owner shall execute in favour of THDC the sale deed is in accordance with the provisions of clause 4.1(ii) to Clause 4.1(iv) of this Agreement and execute all other necessary documents and papers to complete the aforesaid transaction. 9.3 That all the original title deeds pertaining to property as mentioned in Annexure IV has been handed over to THDC by the owner at the time of signing of this Agreement and in furtherance of the common interest of the Parties for the development of the Project and except the Sale Transaction made by the Owner in favour of THDC as et out in Clause 4.1 above. THDC hereby undertake and assure the owner that they shall use the title deeds only for the purpose of furtherance of the Project in the manner that it does not adversely effect the Owner/Allottee in any manner whatsoever." 49 Clause 10 describes the consent given by the Society to THDC for raising finance for development and completion of project. Clause 11 talks about formation of maintenance Society fo....
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....nd registration of the JDA, is not correct because clause 9.3 clearly mention that original title deed of the property have been handed over to the THDC at the time of signing of this agreement because clause 9.3 there is no mention about registration of JDA. 53 Special Power of Attorney which has been executed on 26.2.2007 and has been registered also. The irrevocable special Power of Attorney has been executed as provided in clause 6.7 of the JDA which reads as under: "6.7 The Owner shall execute an irrevocable special Power of Attorney granting its complete Development Rights in the Property in favour of THDC interalia including the right to raise finance by mortgaging the property and register the charge with the Competent Authority and execute registered sale deeds) as set out in Clause 4.1 (ii), (iii), (iv) and (v) and the Owner confirms, undertakes, declares and binds itself not to revoke the same for any reason whatsoever out of its own will and discretion without obtaining a specific prior written consent of THDC or any of its duly constituted attorneys." Through this Power of Attorney various powers have been given like to assign, file, amend et....
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....register the charge created on the Property if so required in the revenue records and/or desired by the Attorney. (aa) To sell, transfer, lease, license the Premises that may be constructed on the Property on ownership basis, lease, license and/or in any other manner for such price as the Attorneys may deem fit and proper. To collect and receive from the purchased, transferees, lessees, licensees of the Premises, monies/price and/or consideration and/or maintenance charges and to sign and execute and/or give proper and lawful discharge for the receipts. (bb) To execute from time to time all the writing, agreement, deeds etc. in respect of the premises which maybe constructed on the Property and also to execute and sign conveyance, transfer or surrender in respect of the Property or any part thereof. (cc) To sign, execute and register the conveyances or assignments and/or Power of Attorney's and/or other documents and/or agreements and/or any other writings in respect of the Property in part or full and/or the Premises constructed thereon or any part thereof in favour of any person as the Attorneys may determine including in favour of any individual and/or....
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.... of the property by way of mortgaging the property. Thus whatever power/authorization have been given through irrevocable special Power of Attorney are emanating from the terms and conditions agreed to among the parties from the JDA. 55 The combined reading of the above clauses of the Irrevocable Special Power of Attorney and JDA clearly show that the developer was authorized to enter upon the property for not only for the purpose of development but other purposes also. THDC was authorized to amalgamate the project with any other project in the adjacent area or adjoining area as per clause (t) of the special Power of Attorney. If the possession was never given to the developer by the Society then how the developer could amalgamate the project with another project which may be acquired latter in the adjoining area. Through clause (w) THDC was authorized to hand over the possession of property or portion thereof to the authority to whom the same is required. In large Housing Society Projects sometimes Municipal authorities takes some portion of land for the purpose of roads, parks or other general utility purposes like installation of electricity transformers and before sanc....
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....l Power of Attorney. The issue has been discussed in he judgment of Jasbir Singh Sarkaria (supra) in further discussion which has been made in para 33 regarding Power of Attorney (which has been reproduced earlier). In that case the powers were given to enter upon and survey the land, prepare lay out plans, submit building plan for sanction with the appropriate authorities to control, manage and look after and supervise the property, to obtain water and sewerage, disposal and electricity connection. In that case the developer was authorized to mortgage the property to obtain money for meeting the cost of construction on security and mortgage of land falling only to the developer's share. In that case it was held that GPA was not a license to enter upon for doing some preliminary acts in relation to development of work but the power to control the land has also been confirmed. It has also been noted that the agreement described the Power of Attorney as irrevocable and extra declaration to that effect in the Power of Attorney is not without significance. In case before us, many more powers have been given to THDC in addition to powers which have been described in that judgment and Po....
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.... did not provide; (3) what remedy Parliament has resolved and appointed to cure the disease of the common wealth and (4) the true reason of the remedy. And then, the office of all the judges is always to make such construction as shall suppress the evasions for the continuance of the mischief and pro private commando and to add force and life to the cure and remedy according to the true intent of the makers of the Act pro bono public." There is now the further addition that regard must be had not only to the existing law but also to prior legislation and to the judicial interpretation thereof." 58 Going by the Heydon's Rule of interpretation if we analyze the purpose of clause (v) of Section 2(47) then it would emerge that law before making the amendment was that capital gain could be charged only if a transfer has been effected and transfer was interpreted by various Courts including the decision of Hon'ble Supreme Court in case of Alapati Venkatramian V CIT, 57 ITR 185 (SC) that proper conveyance of the property has been made under the common law. The mischief was with regard to transfer in the sense that there was common practice that properties were being transferr....
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....ases of duplicate possession. 1 Mediate and immediate possession Crossobjections-exist in respect of the same thing as already explained. 2 Two or more persons may possess the same thing in common; just as they may owe it in common. The concurrent possession of the owner who can exercise possession right to a limited extent and for a limited purpose and that of the buyer/developer who has a general control and custody of the land can very well be reconciled." 61 In further discussion in para 26 to 28 of the above decision it has been held that it is not necessary in terms of clause (v) that the developer should have exclusive possession. The concurrent possession of the owner is possible which gives rights to a limited extent for a limited purpose. Thus it is very much possible to hold concurrent possession. Mere recitation in the sale deed to the effect that the Society was owner of and in possession of land measuring 21.2 acres, does not show that the Society was having actual possession. What the Society was having is only ownership right and the possession was only concurrent as the possessary right. Further it is a standard clause in the con....
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....in the previous year, (b) resultant profits or gains from such transfer, (c) those profits or gains would constitute the income of the assessee/ transferor (d) such income shall be deemed to be the income of the same previous year in which the transfer had taken place. Two aspects may be noted at this juncture. Firstly, the expression used is "arising" which is not to be equated with the expression "received". Both these expressions and in addition thereto, the expression "accrue" are used in the Income-tax Act either collectively or separately according to the context and nature of the charging provision. The second point which deserves notice is that by a deeming provision, the profits or gains that have arisen would be treated as the income of the previous year in which the transfer took place. That means, the income on account of arisal of capital gain should be charged to tax in the same previous year in which the transfer was effected or deemed to have taken place. The effect and ambit of the deeming provision contained in section 45 has been considered in decided cases and leading text books. The following statement of....
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....in that case. 15. The legal position does not therefore admit of any doubt that the actual receipt of the entire sale consideration during the year of "transfer" is not necessary for the purpose of computing capital gains." Further the expression arising has been defined in the Advanced Law Lexicon by P. Ramanatha Aiyer edited by Y.V. Chandrachud, Former Chief Justice of India: "The words "Arising or accruing" describe a right to receive profits, and that there must be a debt owed by somebody. Ld. Commissioner of Income Tax, West Bengal-II, Calcutta V. Hindustan Housing and Land Development Trust Ltd. AIR 1986 S.C 1805, 1807." The expression "accrual of income" has been defined in the same Lexicon as under: "Accrual of income. E.D Jassoon & C. Ltd. V Ld. Commissioner of Income Tax, AIR 1954 S.C 470 quoted - Income may accrue to an assessee without the actual receipt of the same. If the assessee acquires a right to receive the income, the income can be said to have accrued to him though it may be received later on its being ascertained. The basic conception is that he must have acquired a right to receive the income. Bhogilal ....
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....ion 2(47)(v) only the amended provisions can be read. We find no force in this contention. It is well known that section 53A of the Transfer of Property Act was passed on equitable doctrine so as to protect the taking over or retention of the possession by the transferee. It was not a source by which title of immovable property could be acquired. Section 53A of TP Act read as under:- 53A. Part performance.- Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that the contract, [***]where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law ....
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.... of MAT provision what is the meaning of past losses or unabsorbed depreciation. It was found that in explanation to section 115J clause (iv), the following expression was used:- "(iv) the amount of the loss or the amount of depreciation which would be required to be set off against the profit of the relevant previous year as if the provisions of clause (b) of the first proviso to sub section (i) of section 205 of the Companies Act, 1956 (1 of 1956) are applicable. 71 The Hon'ble Apex Court referred to the Principles of Statutory Interpretation by Shri G.P.Singh and extracted following piece: " Section 115J, Explanation clause (iv), is a piece of legislation by incorporation. Dealing with the subject, Justice G.P. Singh states in Principles of Statutory Interpretation (7th edition, 1999). Incorporation of an earlier Act into a later Act is a legislative device adopted for the sake of convenience in order to avoid verbatim reproduction of the provisions of the earlier Act into the later. When an earlier Act or certain of its provisions are incorporated by reference into a later Act, the provisions so incorporated become part and parcel of the ....
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....n redundant. This position we have already discussed earlier while discussing the Heydon's Rule in the interpretations of this clause. Further the issue of interpretation of clause (v) and amendment to section 53A of the Transfer of Property Act came for consideration before the Mumbai Bench of the Tribunal in the case of Suresh Chander Aggarwal vs ITO 48 SOT 2010. The Tribunal discussed this issue at page 7 and after quoting the provisions of section 2(47) and also section 53A before and after amendment as wall as para Nos. 11.1 to 11.2 of the Board's Circular No. 495 dated 22.9.1987 observed as under:- "The above clearly shows that there was certain situation where properties were being transferred without registration of transfer instruments and people were escaping tax liabilities on transfer of such properties because the same could not be brought in the definition of "transfer" particularly in many States of the country properties were being held by various people as leased properties which were allotted by the various Govt. Departments and transfers of such lease were not permissible. People were transferring such properties by executing agreement to sell and genera....
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....e assessee contended that the rental income from these flats was assessable as "income from other sources" because the assessee was not the legal owner because the title of the property had not been conveyed to the Co-operative Society which was formed by the purchasers of the flats. The Hon'ble Court noted that section 27 had been amended vide clause 3(a) wherein when a person was allowed to take possession of the building in part performance of the nature referred to in section 53A, such person shall be deemed to be the owner. It was further observed that for all practicable purposes the assessee was the owner and possibly there cannot be two owners of same property at the same time. In fact, the amendments to section 27 were made later on but were taken into cognizance on the basis of above principle and ultimately it was held as under: "Hence, though under the common law "owner" means a person who has got valid title legally conveyed to him after comply with the requirements of law such as the Transfer of Property Act, the Registration Act, etc., in the context section 22 of the Income-tax Act, 1961, having regard to the ground realities and further having regard t....
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....of section 53A, reference has been made by stating that contracts in the nature of section 53A should also be covered by the definition of "transfer". Therefore, in our humble view, the amendment to sec. 53A of the Transfer of Property Act, whereby the requirement of the documents not being registered has been omitted, will not alter the situation for holding the transaction to be a transfer u/s.2(47)(v) if all other ingredients have been satisfied." 74 Thus, it is clear that non registration of agreement cannot lead to the conclusion that provision of section 2(47) (v) is not applicable. Similar view has been taken by ITAT Cochin Bench of the Tribunal in case of G.Sreenivasan Vs DCIT 28 Txmann.com 200 (Coch.) and ITAT Pune Bench in the case of Mahesh Nemichandra Ganeshwade v ITO 21 Taxmann.com 136 (Pune). In view of this legal position, this contention is rejected. 75 The next contention was that the decision of Hon'ble Bombay High Court in case of Chaturbhuj Dwarkadas Kapadia (supra) is not applicable particularly because ultimately in that case it was held that capital gain tax should be charged in Assessment year 1999-2000 whereas agreement was executed in....
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....ed by the government and the matter went for litigation. During the pendency of litigation, the assessee entered into a Development agreement with a Developer for the purpose of development of the property, however, it was clarified in the agreement that there is litigation in respect of acquisition of property and the developer has to take clearance from the government in the matter of denotification of the land. It was held that since the land was under compulsory acquisition and no compensation has been received, therefore, there could not be any capital gain tax u/s 2(47) (iii) which deals with the compulsory acquisition. It was further observed that assessee could not have given possession unless and until the land was denotified. Since facts of the case are different than the case in hand and therefore, same are not relevant for our purpose. 81 Now coming to the facts, firstly it was contended that Developer i.e transferee has not obtained various permissions which were required to be taken by the Developer as per clauses 3.1, 7.9, 8.4 and 8.6 of the JDA. This is not correct as pointed out by the Ld. CIT DR that assessee had already got the municipal plan sanctioned ....
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.... calamities, prolonged failure of energy, court orders / injunctions, charge of laws, action and / or order by statutory and / or government authority, third party actions affecting the development of the Project, acquisition / requisition of the Property or any part thereof by the government or any other statutory authority and such circumstances affecting the development of the project (Event of Force Majeure). iii) Any Party claiming restriction on the performance of any of its obligations under this agreement due to the happening or arising of an Event of Force Majeure hereof shall notify the other Party of the happening or arising and the ending of ceasing of such event or circumstance with three (3) days of determining that an Event of Force Majeure has occurred. In the event any Party anticipates the happening of an Event of Force Majeure, such Party shall promptly notify the other party. iv) The Party claiming Event of Force Majeure conditions shall, in all instances and to the extent it is capable of doing so, use its best efforts to remove or remedy the cause thereof and minimize the economic damage arising thereof. v) Either Party may terminate....
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....tection) Act is concerned, it appears that the rejection has been made by the Chief Wild Life Warden who, the respondents claim, is merely a recommending authority and is required to forward his recommendation to the Central Government. As the rejection under the Wild Life (Protection) Act has been made by an authority not competent to do, the promoters of the project have sought a review of the order which is still pending for the same reason(s) as noticed above. 4. On these facts we are of the view that it would be prudent on our part to take the view that the issue with regard to clearance/sanction under the two enactments i.e. Environment (Protection) Act and Wild Life (Protection) Act is presently pending and as the promoters of the project have submitted themselves to the jurisdiction of the authorities under the said enactments we should refrain from addressing ourselves on any of the issues connected with either of the two statutory enactments as any such exercise, even though may be unintended, may have the effect of fettering the jurisdiction of statutory authorities functioning under the two relevant statutes. 22. Insofar as the provisions of the Enviro....
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....83 The combined reading of the above paras in the order of Hon'ble High Court clearly shows that Developer THDC/ HASH i.e. transferee have made their sincere efforts for obtaining the necessary permissions / sanctions which were required under the JDA. However, some of the sanctions could not be taken in time because of the litigation by way of PIL but since none of the party was liable to the other party in view of the clause 26 dealing with FORCE MAJEURE it cannot be said that Developer was not willing to perform his part of contract. In any case no specific evidence has been shown us to prove that THDC / HASH were declining to perform particular obligation provided in JDA. In view of this discussion, it cannot be said that transferee i.e. Developer THDC/HASH is not willing to perform his part of contract. 84 Secondly, it was contended that payments have not been made as per the JDA. However, again this is not correct. As per clause 4(iv) of the JDA, the installment for Rs. 31,92,75,000/- was required to be paid. The clause 4(iv) read as under:- "iv) Payment being Rs. 31,92,75,000/- (Rupees One Crore ninety two lacs seventy five thousand only) calculated @ R....
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....& 24 of the paper book dealing with the additional evidence. Through this letter it has been clearly stated that since permission is pending from the Ministry of Environment and Forest Department and therefore constructions could not commence. These permissions were pending because of the PIL filed by Shri Aalok Jagga before the Hon'ble Punjab & Haryana High Court. All these facts clearly shows that in view of clause 4.1(iv) read with clause 26(v) of the JDA, HASH Builder were not required to make the payment and it cannot be said that they were not willing to perform their part of the contract on this aspect. Therefore, this contention is rejected. 87 Seventh contention is that revenue wrongly held that even clause (vi) of Section 2(47) is applicable. We find no force in this contention. Clause (vi) to Section 2(47) reads as under: "any transaction (whether by way of becoming a member of, or accruing shares in, a cooperative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property". ....
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....w.s 48 whole of the consideration, received or accrued has to be taxed. Every person is supposed to know the law and if the transaction is structured in such a way for the transfer of capital asset that some of the consideration would be received later then such person is supposed to know the consequences of the denial of such benefits. However, if the section is interpreted in the manner suggested by the ld. counsel of the assessee then no person would pay capital gain tax on transfer of a property. This will be clear from a simple example. Let us assume if "A" sells the property to "B" for a consideration of Rs. 100 crores and receive only a consideration of 1.00 crore and it is mentioned in the transfer instrument that balance of consideration would be paid after 20 years then no tax can be levied on such balance consideration of Rs. 99.00 crores which has not been received as per the contention of the ld. counsel of the assessee . But in that case no taxes can be levied even after 20 years because no transfer can be said to have taken place after 20 years and Revenue cannot do any thing because capital gain can be charged u/s 45 only on transfer of capital asset. We do not thin....
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....to in clause (a), the amount so received or receivable; or.......... 92 On this aspect the settled position of the law is that the annual value has to be determined even if the property is not let out. This position has been discussed by the Ld. author Chaturvedi & Pithisaria's in Commentary of Income Tax Law (fifth edition) Volume 1 in this respect at pages 1275 & 1276 observed as under: "Annual value- determination of - Section 23(1)(a) provides that for the purposes of section 22, the annual value of any property shall be deemed to be the sum for which the property might reasonably be expected to let from year to year. The word used is 'might' and not 'can' or 'is'. It is thus a notional income to be gathered from what a hypothetical tenant would pay which is to be objectively ascertained on a reasonable basis irrespective of the fact whether the property is let out or not [Sultan Bros. Pr. Ltd. v. CIT, (1964) 51 ITR 353 (SC); Jamnadas Prabhudas v. CIT, (1951)20 ITR 160(Bom); D.M. Vakil v. CIT, (1946) 14 ITR 298, 302(Bom); CIT v. Biman Behari Shaw, Shebait, (1968) 68 ITR 815 (Cal); Sri Sri Radha Govinda Jew v. CIT, (1972) 84 ITR 150, 156 (Cal); CIT v. Ganga Pro....
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....vil contractor and does not maintain books of account and his turnover is less than Rs. 60 lakhs then the profit would be presumed to be 8% of turnover even if he has suffered a loss. Another example of Section 2(22)(e) can be taken. Under this provision a loan or advance given by certain companies to a substantial share holder is to be treated as deemed dividend. Such loan under the normal accounting principle or on commercial principles cannot be regarded as income but because of this specific provision regarding deemed dividend such amount has to be treated as income of the person receiving such loans. 95 The above position of law makes it absolutely clear that theory of real income is subject to the provisions of the Act and whenever any specific provisions of the Act is there for charging of a particular item of income, then the same has to be charged accordingly. It may be sometimes hard to the assessee's but again it has been held in numerous decisions that Fiscal statues have to be interpreted on the basis of language used and there is no scope for equity or intent. Ld. Author Shri S. Rajaratnam in the Commentary of Law of Income Tax by Sampat Iyengar's Volume 1, p....
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....One Hundred Six Crores Forty Two Lacs Fifty Thousands Only) calculated @ Rs. 82,50,000/- (Rupees Eighty Two Lacs Fifty Thousands Only) payable to 65 members having plot of 500 sq. yards each, Rs. 1,65,00,000/- (Rupees One Crore Sixty Five Lacs Only) payable to 30 members having plot of 1000 sq. yards each and Rs. 3,30,00,000/- (Rupees Three Crores Thirty Lacs Only) payable to the Owner for the 4 plots of 500 sq. yards each, which shall tantamount to the full and final payment to the Owner and / or the respective members of the Owner (as the case may be) in a manner set out herein below ('Payment'). Further, the transfer, sale and conveyance of 21.2 acres of land of the Property shall be made by the Owner in favour of THDC pro rata to the Payment received by the Owner and/or the respective members of the Owner (as the case may be) from HASH by executing sale deeds and registering the same. It is expressly provided that as resolved by the Owner, the total amount payable by HASH to the Owner and / or the respective members of the Owner (as the case may be) for assignment of the Development Rights and for transfer and sale of 21.2 acres of land of the Property shall be Rs. 106,42,50,00....
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....out of the above contract it can easily be said that this right has also accrued to the assessee. Clause 4.2 makes it absolutely clear that developer i.e. THDC/HASH was to allot the letters of allotment within 45 days from final sanction from the competent authority and such flats were part of entire consideration. Merely because such allotment letter has not been given because of sanctions / permissions could not be obtained because of Public Interest Litigation before the Hon'ble Punjab & Haryana High Court, it cannot be said that such right has not accrued. Though it may be hard on the assessee but it is well settled that taxation and equity are strangers. Further commenting on this aspect Shri Rajarathnam in his commentary has observed at page 5164 as under: "It is hard on the owners when required to pay tax, when handing over the possession for purposes of construction without being able to enjoy the construction, which is yet to commerce or in the process of construction being put up by the developer, but the solution lies in statutory clarification in such cases. In view of the increasing scale of such development agreements to solve the housing problem in the c....
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....on it is not clear whether in case of Kalaptaru Construction Oversees Pvt Ltd. (supra) which has been followed in above case, was concerning capital gain or not? Secondly it is not clear that whether the amended consideration i.e. settlement for Rs. 1.00 crore was made in the same year or not? As observed earlier while discussing the issue of notional income that provisions of section 45 r.w.s. 48, are absolutely clear and there is no ambiguity that once a capital asset is transferred then whole of the consideration received or accruing has to be considered for the purpose of taxation in the year in which the transfer has taken place. We further find that in the JDA there is a clause for termination of the agreement. Relevant clause 14 reads as under: "Termination "14(i) Save and except the provision of clause 26, THDC shall at all times have the right to terminate this Agreement in the event there is any material breach of the representations, warranties, undertakings, declarations, covenants and/or obligations given by the Owner under this Agreement after giving thirty (30) days written notice for rectification of such breach. In the event the Agreem....
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....terms of this Agreement upto the date of the termination shall remain with THDC and the balance lands to be transferred to THDC as per the terms of this Agreement shall not be transferred by the Owner in favour of THDC. Upon the termination, the Owner shall refund to THDC the Adjustable Advance/Earnest Money mentioned in clause 4.1(i) above within one month of such termination. In the event of failure of the Owner to refund the said amount, the Owner hereby agrees to execute a registered sale deed for land of equivalent value in favour of THDC. (iv) The owner shall have the right to terminate the Agreement only in the event of default by the Developers for making the Payment in accordance with the terms of this Agreement and the allotment of Flats within the time period as mentioned in this Agreement after giving Thirty (30) days written notice for rectification of such breach or any further time as may be desired by the Owner. In the event the Agreement is terminated by Owner, all the lands registered in the name of THDC as per the terms of this Agreement upto the date of the termination shall remain with THDC and the balance lands to be transferred to THDC as per the ter....
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....ny reason without obtaining specific prior written consent of THDC/HASH. No document showing the consent of THDC for revocation of this irrevocable Power of Attorney has been produced before us. We fail to understand that in the absence of such document how the assessee can claim that this Power of Attorney has been revoked. As discussed earlier while considering the legal position, we would again recall the words of Hon'ble Authority for Advance Ruling in case of Jasbir Singh Sarkaria (supra) wherein at para 33 of the decision while discussing the issue in respect of Power of Attorney, it was highlighted that execution of irrevocable Power of Attorney is of significant nature and the words "irrevocable" are very important. The expression "irrevocable" itself shows that normally such attorney cannot be revoked. Therefore, no cognizance can be taken in respect of revocation of the irrevocable Power of Attorney. In the absence of specific consent as provided in clause 6.7 of the JDA from THDC. 105 We may also note that CIT D.R has pointed out that total consideration was to be determined as under: (i) Consideration in cash (Rs. 82,50,000 x 129 plots) Rs. 106,42,50,....
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....e the return showing the entire capital gain based on the full sale price whether or not received during the year of deemed transfer. In such an eventuality, hardship may be caused to the owner who would have paid full tax. No doubt, such a situation could be avoided if the contention of the applicant is accepted. On deep consideration, however, we find that the construction of the relevant provision should not be controlled by giving undue importance to such hypothetical situations. Normally, the owner executes a Power of Attorney or does similar act to left the transferee take possession only after the basic permissions are granted and he is satisfied about the ability of transferee/developer to fulfil the contract. In spite of that, if such rate situations take place, the owner/transferor will not be without remedy. He can file a revised return and make out a case for exclusion or reduction of income. However, if the time-limit for filing a revised return expires, the difficulty will arise. It is for Parliament or the Central Government to provide a remedy to the assessee in such cases. Moreover, the other side of the picture as depicted in paragraph 27 (supra) should also be ke....
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....e of the opinion that either the JDA has not been cancelled or in any case the same cannot be considered for determining the taxation of capital gain. Accordingly this contention is rejected. 108 The next contention of the assessee is that even if the whole consideration has to be taxed then value of the flats cannot be taken at Rs. 4,500/- per sq. feet. It is also pointed out that in view of the agreement between the HASH & THDC consideration has been shown at Rs. 2,000/- per sq. feet for 126 flats whereas it is Rs. 4,500/- per sq. feet for three flats. We find no force in these submissions. The assessee has filed along with the written submissions copy of the addendum of agreement between THDC and HASH by Joint Developer (at page 265 & 266) and this issue is discussed in clause 5 which is as under:- "5. Clauses 4.1, 4.2, 4.3 and 4.4 on the page nos. 18 and 19 of the Agreement shall stand amended, modified and substituted by the following:- 4.1 It is expressly agreed and understood by and between the Parties hereto (a) in the ratio of 72,28 between THDC and HASH in case Gross Sales Proceeds does not exceed Rs. 1272 crores; (b) in the ra....
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....use this portion of consideration in any case was received or to be received later by the society in cash. Considering the present market value of the flats in and around Chandigarh area which is Rs. 4,000/- to 12,000/- per square feet we are of the opinion that value of the flat at Rs. 4,500/- per square feet is absolutely fair. In any case M/s HASH has agreed to purchase the flats at this rate from M/s THDC. It may be noted as pointed out by the ld. DR for the revenue some of the News report clippings filed by various assessees clearly shows that flats were booked in the "Tata Camleot" (this was the name which was given to the Project which was to be developed on the land of two societies) in the Pre Launch offer in the range of Rs. 7500 to 8000 per sqft. It is a common knowledge that rates in Pre Launch offer are lower than the rates when bookings open for the Public. Considering these facts we are of the opinion that Assessing Officer has estimated the value of the flats on most reasonable basis. In view of these observations this contention is rejected. 110 The Ld. Counsel for the assessee had made some submissions on the issue of deduction u/s 54F. He has pointed out....