TaxTMI 
TaxTMI 
2013 (9) TMI 1283
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....o capital gain was attracted on its alleged transfer. 3. That the AO has grossly misdirected himself in law and on facts in bringing to tax the notional capital gain on the strength of a Joint Development Agreement, which remained unexecuted for various disputes and finally terminated by the Society, being the owner. 4. That even otherwise, the assessee being only a member of the society and the JDA having been executed by the Society with the developers, in its capacity as owner, the alleged capital gain, if any, ought to have been assessee in the hands of the society. 5. That also, the concept of mutuality being involved in the formation of the Society, the impugned transaction per se was not liable to tax at all. 6. That by any angle, in terms of the amended provisions of section 53A of the Transfer of Property Act, read with section 2(47) of IT Act, 1961, no capital gain, beyond the part of land actually transferred by way of registered sale deed, was liable to tax. 7. That the mechanical charging of interest u/s. 234A, 234B and 234C is illegal. 8. That all capital gain is wrongly assessed in the AY 2007-08 of sold land. ....
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....o or amend the aforesaid grounds at or before the hearing of appeal. 3. In ITA No. 408(Asr)/2013, Sh. Devinder Pal Singh Oberoi, the assessee has raised following grounds of appeal: 1. That the ld. CIT(A) has erred in dismissing the appeal and confirming order of A.O. assessing income at Rs. 1,03,07,560/-, including long terms capital gains of Rs. 1,00,05,000/-. 2. That the ld. CIT(A) Bathinda has erred in law and on facts in upholding the action of the AO of bringing to tax the notional capital gain of Rs. 1,00,05,000/- on the strength of Joint Development Agreement which remained unexecuted for various disputes and finally terminated by the society being the owner. 3. That the ld. CIT(A) Bathinda has erred in law and on facts in upholding the action of the AO of determining the long term capital gain of Rs. 1,00,05,000/-. The impugned transaction on the basis of which the short term capital gain has been determined by the AO is not covered under the definition of transfer as defined u/s. 2(47) of the Act. 4. That the ld. CIT(A) Bathinda has erred in law and on facts in upholding the action of AO of determining the long term capital gains of ....
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....448(Asr)/2011 and others for the assessment year 2007-08 and 24 appeals decided by this Bench in the case of Sh. Satnam Singh Kaith vs. ITO Nawanshahar and others ITA No. 180(Asr)/2013 and others, dated 19.08.2013. 5. He further invited our attention that in the present appeals, the assessees are either present or Ex-MLAs of Punjab Legislative Assembly who are members of housing society. The said society consists of in total 95 present or Ex-MLAs of Punjab Legislative Assembly. The matter with respect to some MLAs and the matter with respect to the Society itself fall under the jursidction of Chandigarh ITAT and the rest under the Amritsar ITAT jurisdiction. All the 3 matters fixed today for hearing as mentioned hereinabove are part of 95 present or Ex-MLAs hereinabove. The issues in the present appeals are common and identical as in the bunch of 30 appeals decided by the ITAT, Chandigarh Bench in the case of Charanjit Singh Atwal, Ludhiana vs. ITO Ward VI(1), Ludhiana in ITA No. 448(Asr)/2011 and others dated 29.07.2013 and 24 appeals decided by the ITAT, Amritsar Bench, in the case of Sh. Satnam Singh Kaith vs. ITO Nawanshahar and others in ITA No. 180(Asr)/2013 and others, da....
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....tions of Ld. Counsels and Ld. DR and cases of various Courts of law relied upon that by considering the purpose of insertion of clause (v) and clause (vi) of section 2(47) and various clauses of Power of Attorney and JDA, it becomes absolutely clear that the Society has handed over the possession of the Society to THDC/HASH and accordingly first contention of the ld. DR was rejected. ii) Vide para 59 to 61 of the order, second contention was that JDA was executed on 25.02.2007 and if possession was given then how the assessee was having possession in terms of later sale deeds executed on 2.3.2007 and 25.4.2007. It was held after considering and arguments of rival parties and facts on record that mere recitation in the sale deed to the effect that the Society was owner of land in possession 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 possessory right. Accordingly the second contention was also rejected. iii) Vide para 62 to 63 the third contention was that possession if at was given should be held to be only a license as defined i....
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....iii) Vide paras 89 to 96, being the eighth contention that since the society has transferred the land through JDA on a pro-rata basis, therefore, only whatever money is received against which sale deeds have also been executed can be taxed and notional income i.e. the money to be received later, cannot be taxed. It was held that there is no dispute that no notional income can be taxed, but in the case of Capital Gain section 45 read with section 48 clearly provides that it is the profit arising from the transfer of capital asset, which would be subjected to change capital gain tax and section 48 clearly provides for taking the total consideration into account while computing the capital gains, which has already been discussed in paras 64 to 68 of the order. Therefore, the whole consideration whether received or accrued which has to be taxed under the capital gain, once the transfer of capital asset takes place. Accordingly, the contention was rejected. Further, the Chandigarh ITAT Bench in the order dated 29.7.2013 (supra) vide paras 97 to 99 has dealt with issue of taxability of flat on the basis of above principles considering clause 4 of JDA, it was held that once this ....
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..... Thus, it becomes clear that it is the individual member who are liable to tax in respect of transfer of plots and the Society being only a facilitator or post office. Accordingly, this contention was also rejected. 32. Vide paras 5 to 9 also the assessee has raised the additional evidence, which after considering the facts on record and arguments of Ld. Counsels allowed the admission of additional evidence. 33. Vide para 10 to 14, the revised return was treated as non-est and it was held that no disadvantage has occurred to the assessee because in the revised return, the assessee has included a sum of Rs. 27,58,436/- on account of Capital Gain and the whole dispute in the assessment relates to Capital Gain arising out of sale of plot in the assessment relating to Capital Gain arising out of sale of plot in Punjabi Co-operative Housing Building Society Ltd. Mohali. In fact, the AO has ultimately assessed much higher amount of Capital Gain, which the assessee is disputing. Accordingly, this ground of the assessee was rejected. Accordingly all the issues, as discussed above in the case of Sh. Charanjit Singh Atwal (supra) were dismissed by the ITAT Chandigarh Bench....
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.... consideration of Rs. 82,50,000/- and the Members holding plot of 1000 sqyd was to receive a sum of Rs. 1.65 crores. In addition to this Member holding a plot of 500 sqyd was to receive fully furnished flat measuring 2250 sq. ft. to be constructed by THDC/HASH and Members having 1000 sqyd were to get two such flats. According to the Assessing Officer total consideration to be received by all the Members was Rs. 1,06,42,35,000/- and furnished flats as mentioned above. Before entering into the tripartite agreement the Society in its Executive Committee meeting held on 4.01.2007 which was approved in the General Body meeting held on 26.2.2007, passed a resolution to the effect that all the Members would surrender their all rights in the property to the Society and the Society would enter into an agreement on behalf of the Members with THDC/HASH. The Assessing Officer has referred to this resolution as well as various important clauses of the JDA and has placed lot of reliance on clause 2.1 of the JDA which is as under: The owner hereby irrevocably and unequivocally grants and assigns in perpetuity all its rights to develop, construct, mortgage, lease, license sell and transfe....
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....he Society on 26.2.2007, capital gain was to be charged in the hands of the assessee in Assessment year 2007-08 by taking full value of the construction at Rs. 3,67,50,000/-. The assessee filed various replies which have been extracted by the Assessing Officer as under: This has reference to your letter dated 7.12.2009, we submitted that under: 1. The agreement under reference is only in the nature of an agreement to sell and not a sale deed and therefore no capital gain can arise under the said agreement. The amounts received under the said agreement are actually the advances received and not the sale consideration and the land transferred in favour of THDC Ltd. is only on account of security. A letter from M/s. Hash Builders to that effect is enclosed herewith. There are many conditions envisaged in the agreement which need to be fulfilled before the full execution of the agreement and transfer of property to THDC Ltd. and receipt of the consideration. 4. Under the partial execution, the part of property measuring approx, 72 sq yards was registered in favour of THDC and sum of Rs. 12 lacs was received. As stated earlier, the amount was....
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....on for the purpose of capital gain of the assessee. The assessee is a Hon'ble citizen and regular Income Tax Payee and shall discharge his liability under Income Tax when the whole land will be transferred. 5.) While making the calculation of capital gain tax, the amount of consideration has been wrongly taken of Rs. 15 lacs Instead of Rs. 12 lacs. As per the agreement, sum of Rs. 3 lacs is adjustable advance. You are requested to kindly recomputed tax liability, 6.) There are various judgments on this issue. The following cases are enclosed herewith for the reference. a. CIT vs. Atam Prakash & Sons (2008) 219 CTR (Del) b. Smt. Raj Rani Devi Ramna vs. CIT MANU/BH/0042/1992 : (1993) 201 ITR 1032 (PAT) c. Zuari Estate Development & Investments Co. (P) Ltd. Vs. J.R. Kanekar, Deputy CIT. (2004) 191 CTR (Bom) In view of the above you are requested to kindly consideration the capital gain as submitted by us. 9. The case was further fixed for 24.12.2009, On the said date the counsel of the assessee filed another reply which is reproduced as under: 1. As per Para 6.1 of your letter, you have mentioned that there is....
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....elopment was to be borne by the THDC. The payment to the society was to be made pro-rata on transfer of land in favour of THDC Ltd., It is very clear from the agreement that no consideration was payable to the assessee unless the land was transferred. So there is a clear cut relation between the land transfer and consideration. No consideration will be received if the land is not transferred. As far as the possession as mentioned in the agreement is concerned, the same is for development only and the termination clause very clearly states that if the agreement is terminated, THDC Ltd. will retain only that much land which has been transferred to them and the remaining land will be retained by the society/members. The actual position is such that no development work has till date been undertaken by the THDC Lid because the various conditions stipulated in the agreement have not been fulfilled. The possession as mentioned in the agreement and which is being made the basis by you to consider the transaction as transfer u/s. 53A of the Transfer of Property Act is actually not of any consequences and actually there is no transfer except to the extent of land transferred by way of regist....
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....at case the assessee will have no remedy available against the tax paid on consideration which will never be received by him. Under such circumstances it will be fully unlawful to charge tax. 4. The value of proposed flat is undeterminable and there is no way to determine the same. There is no provision to pay tax on the notional value. Clause 6.18 of the agreement entitled the assessee to surrender his proposed flat to THDC Ltd. and in that case only 75% of the future market-price will be received by him. In the light of above discussion it is once again requested that tax may be calculated as per the return filed by the assessee. However if the department choose to disagree with our submissions then it is submitted that the capital gain should be charged in the hands of the Punjabi Co-operative House Bldg. Society. It will be pertinent to note here that the proceedings in the case of the society have been reopened u/s. 148 of the I.T. Act 1961 by the learned D.C.I.T. Mohali. In the reasons recorded by the learned D.C.I.T., it has clearly been mentioned that he proposes to tax the capital-gain in the hands of the Society. Copy of the reasons recorded is ....
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....ovisions of section 2(47)(v) of the Act r.w.s. 53A of T.P. Act. as part consideration had also been received. According to the Assessing Officer the facts of the case were similar to the facts in case of CIT V.K. Jeelani Basha, MANU/TN/2956/2002 : 256 ITR 282 (Mad) wherein Hon'ble High Court after analyzing the provisions of section 2(47)(v) had held that once the possession even for a part of the property was handed over to the transferee, for the purpose of Section 2(47)(v) r.w.s. 45, the transfer was complete. (iii) The assessee's case was also covered by the provisions of section 2(47)(vi) which deals with any transaction which had effect of transferring or enabling the enjoyment of any immovable property and assigning various rights in the property in favour of THDC and handing over the original title deeds as well as handing over of the physical vacant possession of land has the effect of transferring or enabling the enjoyment of the said property to THDC/HASH. (iv) There was no force in the contention that the amounts received under the said agreement were advances received and not the sale consideration because total consideration was structured in....
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....the ld. CIT(A) detailed submissions were made (In the impugned order reference is made to written submissions without discussing the arguments). The ld. CIT(A) referred to the provisions of section 45 and 2(47) of the Act and observed that clauses (v) to (vi) were inserted in section 2(47) w.e.f. 1.4.1988. He observed that before insertion of this provision, it was always possible to avoid or postpone capital gain by either not executing conveyance deed or postpone such execution because vendor of the property could give the privilege of ownership or enjoyment of the property by executing a Power of Attorney etc. To avoid such leakage of revenue clauses (v) and (vi) were inserted to section 2(47) of the Act. He then discussed the decision of Hon'ble Bombay High Court in case of Chaturbhuj Dwarkadas Kapadia V. CIT, MANU/MH/0152/2003 : 260 ITR 491 (Bom) and extracted the following conditions which were required to be satisfied to cover the case u/s. 2(47)(v) r.w.s. 53A of T.P. Act. (a) There should be contract for consideration (b) It should be in writing (c) It should be signed by the transferor or on his behalf (d) It should pertain to transf....
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....n of the property and to execute all the documents necessary to carry out, facilitate and enforce the rights in the property. Thus, in fact the owner has irrevocably and unequivocally granted and assigned in perpetuity all the rights which an owner can have in an immoveable property. All these rights have been given on date of agreement i.e. 25.02.2007 and even possession has been handed over in the financial year 2006-2007. The para 2.1 clearly states that "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 simultaneously to the execution and registration of this agreement to develop the same as set out therein". Thus possession in part performance of contract has been handed over to the transferee without any ambiguity in the previous year 2006-07 itself. e) An irrevocable transfer has thus been made which is not dependent on any condition to be fulfilled. f) Further coining to "consideration" part. As per Para 4.1 Rs. 6,00,000 per holder of 1000 Sq. Yards has to be paid by transferee on account of earne....
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....ontract has made the payments to the owners and is willing to perform his part, of contract and the members of society in this part performance of contract have assigned full rights in the favour of transferee in the previous year 2006-07 itself and surrendered allotment letters to enable the Society to enter into tripartite agreement with HASH and THDC. l) Most importantly physical and vacant possession of whole of the land of 21.2 acres has been handed to M/s. Tata Housing development company Ltd. in the previous year 2006-07, Same is clear from Para 2.1 of the Joint Development Agreement and discussed in detail in preceding paragraphs. m) Thus the "transfer" would be deemed to happen in the previous year 2006-07 itself. n) It has already been discussed in detail that registration of conveyance deed and receipt of entire consideration is not at all important in the year in which deemed transfer u/s. 2(47)(v) of IT Act has taken place. o) Further the Agreement is clear and there is no ambiguity regarding irrevocable rights being given to the transferee. As regards certain petty conditions and provisions relating to termination of the contract, i....
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....se by referring to various documents in paper book and also case laws as well as commentary by, "Mulla - Dinshaw Frederick Mulla" on the interpretation of Section 53A of Transfer of Property Act. The submissions can be summarized as under: I. First of all he referred to provisions of section 2(47)(v) of IT Act and Section 53A of T.P. Act and submitted that following conditions emerged for attracting these provisions- a. There must be contract of transfer for consideration for an immovable property; b. Contract must be in writing c. Terms necessary to constitute transfer should be ascertainable with reasonable certainty. d. The transferee must have in part performance taken the possession of the property or part thereof from the transferor and if already in possession, continues in the possession in part performance of the contract. e. Transferee must have done something in furtherance of the contract. f. The transferee must have performed or willing to perform his obligations in such contract. In view of the above conditions in the present case, condition No. (d) and (f) have not been complied because the asses....
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....ence of such right, be unlawful and such right does not amount to an easement or an interest in which the property, the right is called a license. It was contended that Section 2(47)(v) r.w.s. 53A of T.P. Act refers to legal possession whereby the transferee has a legal right to enter upon and exercise rights of possession i.e. control over the property. In this connection he referred to the observation of Authority for Advance Ruling in case of Jasvir Singh Sarkaria, MANU/AR/0015/2007 : 294 ITR 196. He particularly referred to para 26 to 28 of the judgment. He further referred to clause "F" (page 17 of the paper book) i.e., clause 2.1 of the JDA (page 24 of the paper book) and submitted that contents of these clauses will entirely show that possession was given and was envisaged in the shape of license to the developers for undertaking the development of property and legal possession was neither handed over or intended to be handed over. III. Money which is received at the time of execution of JDA can be termed as advance payment. In any case when these amounts were adjusted as part of sale consideration for sale of part of the property and the same have been ret....
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.... (a) As per clause "J" of the JDA the Government approvals were to be obtained by the transferee i.e. THDC/HASH. (b) As per clause 3.1 of JDA all building, plans and designs and drawings etc. for construction of the project were to be prepared by the transferee i.e. THDC/HASH. (c) Clause 4.1 and 7.10 of JDA provided regarding timely payment of consideration. (d) Clause 7.9 of the JDA provided that THDC/HASH shall obtain all approvals and commence construction within 6 months of hand over of final plans. (e) Clause 8.4 provided obligation to take timely approval and clause 8.6 provided for payment of various statutory charges in respect of development charges, license fee and external default etc. Further to above obligation, time was of essence in the contract which becomes clear from clause 1.2(a), 4.1 and 7.10 regarding timely payment and clause 14(iv) regarding termination of contract. In the case before us, there was no willingness on the part of developer i.e. THDC/HASH to perform the above obligation because of the following- (i) THDC/HASH failed to obtain necessary approval and did not undertake any developm....
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....y executing the sale deed. This clearly shows that transfer was wholly dependent on timely receipt of the consideration. As pointed out earlier only two sale deeds could be executed and whatever payments have been received, have been offered for taxation under the head "Capital gain". However, the Assessing Officer has subjected to tax whole of the consideration under the JDA as capital gain which is totally uncalled for particularly in view of the fact that an agreement has been subsequently terminated and this action of the Assessing Officer amounts to taxation of notional sum which is not permissible under the law. Under the various provisions of the Act, only real income can be taxed which has been earned by the assessee and no notional income can be subjected to tax. In this regard, reliance was placed on the following decisions of the Hon'ble Supreme Court: Shoorji Vallabhdas & Co., MANU/SC/0228/1962 : 46 ITR 144 (S.C.) CIT V. Raman and Co. 67 ITR 11 (S.C.) Godhra Electricity Co. Ltd. V. CIT, MANU/SC/0592/1997 : 225 ITR 746 (S.C.) CIT V. Balrampur Commercial Enterprises Ltd., MANU/WB/0048/2003 : 262 ITR 439 (Cal) CIT V. K. Jeel....
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....e is notionally fixed by two developers and did not reflect the price of the flats. In any case the Developers have not been able to obtain necessary approval from the concerned authorities, therefore, construction of such flats has not commenced and no flats have been constructed and allotted to the assessee, therefore, notional value of the same could not be adopted and taxed in the hands of the assessee. At best the Assessing Officer could have taken the price of Rs. 2000 per sq. ft. XI. It was contended that if the value of the flat was to be recognized for the purpose of computing the capital gain, the corresponding deduction u/s. 54F of the Act should have been allowed particularly in view of Circular No. 472 dated 15.10.1986. In this regard he relied on the following decisions: CIT V. Sardarmal Kothari and another, MANU/TN/0835/2008 : 302 ITR 286 (Mad) CIT V. R.L. Sood, 245 ITR 727 (Del.) CIT V. Mrs. Hilla J.B. Wadia, MANU/MH/0188/1993 : 216 ITR 376 (Bom) Mrs. Seetha Subramanian V. ACIT, 59 ITD 94 (Mad Bench) Usha Vaid v. ITO, 53 SOT 385 Smt. Ranjit Sandhu v. DCIT, 133 TTJ 46 (Chd) 25. On the other hand,....
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..../lease/license, sell and transfer the property. Clause 6.7 of the JDA provides for execution of irrevocable special power of attorney through which rights of development were granted in favour of THDC/HASH and right to raise finance by mortgage in the property and to register the charge with competent authority and further power of sale etc. were also given through this power of attorney. It was agreed that the Society would not revoke such power of attorney without obtaining a specific prior written consent of THDC/HASH. The above clauses clearly show that possession of the property was handed over to THDC/HASH and further rights to mortgage and sale of the property was also given. The combined reading of various clauses in the JDA and power of attorney show that:- (i) All the Members of the Society expressly and willingly had surrendered their respective plots in favour of the Society and the Society was authorized to sell/transfer the entire land in favour of THDC/HASH for a consideration which was set out in the clauses of JDA. The society was also authorized to hand over original title deeds and possession of land to THDC/HASH. (ii) The Society handed over th....
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....07 : 294 ITR 196 2) Chaturbhuj Dwarkadas Kapadia v. CIT MANU/MH/0152/2003 : 260 ITR 491 (Bom.) 3) C. Ravi Vs. DCIT in 325 ITR 417 (Ker) 4) CIT v. Dr. T.K. Dayalu 202 Taxman 531 (Kar.) 5) D. Kasturi v. CIT & Anr MANU/TN/0504/2010 : 323 ITR 40 (Mad.) 6) CIT V. Dhir & Co. Colonisers (P) Lta MANU/PH/1237/2006 : 288 ITR 561 (P & H) (III) The Ld. CIT DR further submitted that assessee's case apart from being covered under clause (v) of section 2(47) is also covered by clause (vi) of section 2(47) of the Act. Clause (vi) is applicable in cases where any transaction is entered into which has the effect of transferring and enabling the enjoyment of immovable property. In this regard he relied on the decisions of Mumbai Bench 'D' of the Tribunal in Ms. Rubab M. Kazerani v. JCIT 91 ITR 429(Mum.), ITAT Hyderabad 'A' Bench in D. Achutha Rao Vs. ACIT 106 ITD 388 (Hyd) and ITAT Delhi Bench 'D' Bench in ACIT v. Smt. Pushpa Devi Jain 93 ITD 289 (Del.). (IV) He further submitted that clause (v) & (vi) of section 2(47) of the Act were inserted w.e.f. 1.4.1988 by Finance Act, 1987. Before that, passing of the ti....
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....amendment to section 53A of the Transfer of Property Act has been done perhaps to collect Revenue. In any case, the same cannot have a impact on the clause (v) of section 2(47). This is so because clause (v) clearly employs language by using the expression "part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act". The Legislature intentionally not employed the expression "in part performance of contract as defined under section 53A of Transfer of Property Act". Therefore, it is nature of contact which is similar to the nature of contract u/s. 53A of the Transfer of Property Act which is relevant to section 2(47)(v). In any case Hon'ble Supreme Court in the case of CIT Vs. Podar Cement (P) Ltd. MANU/SC/0649/1997 : 226 ITR 625 has clearly held that 'principle of common law, the Transfer of Property Act and the Registration Act were not conclusive for interpretation of provision of Income Tax Act on the question of ownership of the property. If consequent to the amendment in section 53A of the Transfer of property Act, the registration of Agreement was considered as one of the essential ingredient then section 2(47)(v) would beco....
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....ken under JDA and were perusing the matter of sanction of the project at different levels vigorously. The copy of the order of Hon'ble Punjab & Haryana High Court and Hon'ble Supreme Court filed at pages 172 to 174 of the paper book are on the issue of land falling within catchment area of Sukhna lake and litigation in this case is being vigorously followed by developers. The assessee has not led any evidence to show that either the HASH or THDC have shown reluctance to take the various steps required for execution of project. The Ld. CIT DR also contended that it was argued on behalf of the assessee that developer have not made the payments as agreed in the JDA, which is not correct. In this connection, he referred to clause 4(iv) which clearly states that payment of Rs. 31,92,75,000/- was to be made to the owner and or respective members of the owner within six months from the date of execution of this agreement or within two months from the date of approval of plan/design and the grant and drawings of final license to develop whereupon the construction can commence which ever is later. This clearly shows that payments was to be made on happening of two events and the tim....
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....ransfer took effect in assessment year 2007-08, then a subsequent event taking place in 2011 will not have any effect on such transfer. It has been contended through written submissions that total consideration of the property was 2,37,03,75,000/- which was calculated as under:- (i) Consideration in cash (Rs. 82,50,000 x 129 plots) Rs. 106,42,50,000/ - (ii) Consideration in kind (Rs. 101,25,000/ - x 129 plots) Rs. 130,61,25,000/ - Total Rs. 237,03,75,000/ - The above total consideration would be enhanced figure because total consideration received and or agreed against the sale of property by the Members is required to consider the value of flats which were contracted to be received by the Members. On the basis of above calculation, the consideration per acre of land would come to about Rs. 11.18 crores whereas Society had registered a sale deed for land measuring 3.08 acres for only Rs. 15.48 crores whereas the actual consideration should be 34.43 crores. This only shows that value of the flats to be received was not reflected in such sale deed. Now, if it is believed that contract was cancelled and Developer was allowed to retain the land which has alre....
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....e and Society had never handed over the possession, therefore, there is no question of executing the documents at the time of cancellation of the agreement for reversing the possession. As no possession was given, therefore, there is no question of taking the back possession. He further submitted: (a) that normal rules of interpretation should be applied to understand the meaning of clause (v) and (vi) of Section 2(47) and this is not a fit case for invocation of Heydon's Rule. He submitted that lot of emphasis has been laid by the ld. DR for the revenue on para 2.1 of JDA to prove that the possession was handed over. However, a careful reading of this para would show that what was contemplated through this para, was to hand over the possession on the execution and registration of the agreement. When an agreement is read it has to be read in whole and therefore, it may not be proper to ignore the word "Registered". (b) He also contended that lot of emphasis was given on the irrevocability clause in respect of special Power of Attorney which is not correct because once the JDA is terminated, irrevocable Power of Attorney would come to an end automatically. ....
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....section 48 which deals with the mode of computation and relevant portion reads as under:- 48. The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely:-- (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of any improvement thereto: 30. Again plain reading would show that capital gain would be computed by considering the full value of consideration whether received or accruing as a result of the transfer. Therefore, it is not only the consideration received which is relevant but the consideration which has accrued is also relevant. 31. The expression 'transfer' has been defined u/s. 2(47) of the Act which reads as under:- 2(47) ["transfer", in relation to a capital asset, includes,-- (i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein; or (iii) the compulsory acquisition thereof under any law;....
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....rought in to the ambit of transfer, the practice of enjoyment of property rights through what is commonly known as Power of Attorney arrangements. The practice in such cases is adopted normally where transfer of ownership is legally not permitted. A person holding the power of attorney is authorized the powers of owner, including that of making construction. The legal ownership in such cases continues to be with the transferor. 32. Before insertion of the clause (v) & (vi) to section 2(47) of the Act, the position of law was that unless and until a sale deed was executed for transfer of immovable property, the same could not be construed as transfer for the purpose of charging capital gain tax. This was particularly so in the light of various judgments particularly the judgment of Hon'ble Apex Court in the case of Alapati Venkatramiah v. CIT (MANU/SC/0108/1965 : 57 ITR 185) (SC). In this case it was held that in the context of transfer for the purpose of capital gain tax, what is meant by transfer is the effective conveyance of the capital asset by a transferor to the transferee. Delivery of possession and agreement to sell by itself could not constitute conveyance of ....
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....n permissions and approvals from various authorities. Under clause 11 of the agreement, it was provided that after Floreat was given an irrevocable license to enter upon the assessee's share of property and after Floret investment have obtained all necessary approvals, the Floret was entitled to demolish various buildings for settling the claims of the tenants. Under clause 14 of the agreement, the assessee was entitled to receive proportionate rent till the payment of last installments and till that time assessee was bound to pay all outgoings. Under clause 20 of the Agreement, it was agreed that sale shall be completed by execution of conveyance, however, till the matter was adjudicated by the Hon'ble High Court, no conveyance was executed. Pursuant to this agreement, Floreat obtained various permissions namely (i) clearance from CRZ Authority dated February 7, 1996; (ii) letter from ULC for redevelopment of property dated April 26, 1995. Other permissions were also obtained during the financial year ending March 31, 1996 relevant to assessment year 1996-97. By March, 31, 1996, Floreat had paid almost the entire consideration expect for a small sum of Rs. 9,98,000/-. Howe....
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....icates that capital gains was taxable in the year in which such transactions were entered into even if the transfer of immovable property is not effective or complete under the general law. In this case, the test had not been applied by the Department. No reason had been given why that test had not been applied, particularly when the agreement in question, read as a whole, showed that it was a development agreement. Once under clause 8 of the agreement a limited power of attorney was intended to be given to the developer to deal with the property, then the date of the contract, viz., August 18, 1994, would be the relevant date to decide the date of transfer under section 2(47)(v) and, in which event, the question of substantial performance of the contract thereafter would not arise... ... 34. The Hon'ble Court referred to clauses (v) & (vi) of section 2(47) and made the following observations at page 499 of the report: ........ The above two clauses were introduced with effect from April 1, 1988. They provide that "transfer" includes (i) any transaction which allows possession to be taken/retained in part performance of a contract of the nature referred to in ....
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....ehalf of the assessee, but all those judgment were prior to introduction of the concept of deemed transfer u/s. 2(47)(v). In this matter, the agreement in question is a development agreement. Such development agreements do not constitute transfer in general law. They are spread over a period of time. They contemplate various stages. The Bombay High Court in various judgments has taken the view in several matters that the object of entering into a development agreement is to enable a professional builder/contractor to make profits by completing the building and selling the flats at a profit. That the aim of these professional contractors was only to make profits by completing the building and, therefore, no interest in the land stands created in their favour under such agreements. That such agreements are only a mode of remunerating the builder for his services of constructing the building (see Gurudev Developers v. Kurla Konkan Niwas Cooperative Housing Society [2003] 3 Mah LJ 131). It is precisely for this reason that the Legislature has introduced section 2(47)(v) read with section 45 which indicates that capital gains is taxable in the year in which such transactions are entered....
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.... judgment given by the higher Court or Forum. Further, there is no force in the contention that decision of the Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia v. CIT (supra) does not show that the date of agreement itself constitute the transfer. Again there is no force even in the contention that in that case it was ultimately decided that capital gain taxes is chargeable in Assessment year 1999-2000 because of the reasons given in above noted paras particularly because the Revenue itself never invoked the provisions of section 2(47)(v) of the Act and held it to be taxable in Assessment year 1996-97. No doubt in that case ultimately it was held that capital gain was in assessment year 1999-2000 but Court had made it very clear that this is first time that law is being laid down and guidelines are being issued which means that there was a confusion earlier. Clauses (v) & (vi) to section 2(47) were introduced in the year only in 1998. Perhaps Court took a lenient view because of these reasons and held that capital gain was taxable in Assessment year 1999-2000. It is quite clear that ratio of the above decision is that in case of any arrangements or transac....
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....e. However, finally sale deeds could be executed only after the owner received their share of constructed area. Three months later, a supplementary agreement was entered on September 15, 2005 between the assessee and other co-owners and Developers through which it was agreed that owners will sell their 16% share in the built up area to the Developer or its nominee for consideration of Rs. 42 crores. A sum of Rs. 2 crores was received. This collaboration agreement and balance of Rs. 40 crores was payable by the Developer to the owners in six installments from March 06, 2008. The installments could be extended subject to payment of interest and further subject to maximum extension of three months. There were various other clauses which are not relevant for our purposes. The question arose whether capital gain accrue/arise to the assessee during the financial year 2006-07 relevant to assessment year 2007-08 or during financial year 2007-08 relevant to assessment year 2008-09. 40. On the above, the Hon'ble Authority after referring to the provisions of section 45 and observed as under:- ... ... ....The section can be analysed thus: (a) transfer of a capit....
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....Circular No. 495 (which we have already discussed earlier). The Hon'ble Authority has discussed various implications of clause (v) of section 2(47) and also implication of section 53A of the Transfer of Property Act as well as observations of Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia v. CIT (supra). The Authority observed that to understand this provision properly meaning of 'possession' has to be understood properly and went on to discuss the meaning of term 'possession, and how the same is to be understood in the context of clause (v). These are very important observations and have been discussed in most elucidated fashion. These observations will answer many of the questions raised before us and, therefore, we are extracting these observations as under:- Meaning of "possession" and how should it be understood in the context of clause (v) The next question is, in what sense we have to understand the term "possession" in the context of clause (v) of section 2(47). Should it only mean the right to exclusive possession--which the transferee can maintain in his own right to the exclusion of everyone including the trans....
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....ne 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 through another may be termed mediate, while that which is acquired or retained directly or personally may be distinguished as 'immediate or direct'." Salmond makes reference to three types of mediate possession. In all cases of "mediate possession", two persons are in possession of the same thing at the same time. An allied concept of concurrent possession has also been explained in paragraph 55 of Salmond's Jurisprudence in the following words: It was a maxim of the civil law that two persons could not be in possession of the same thing at the same time. As a general proposition this is true: for exclusiveness is of the essence of possession. Two adverse claims of exclusive use cannot both be effectually realized at the same time. Claims, however, which are not adverse, and which are not, therefore, mutually destructive, admit of concurrent realization. Hence, there are several possible cases of duplicate possession. 1. Mediate and immediate possession co-exist in respect of the same thing as already expla....
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....s 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 over-looked. There is a possibility of the owner with the connivance of the transferee postponing the payment of capital gains tax on the ostensible ground that the entire consideration has not been received and some balance is left. The mischief sought to be remedied, will then perpetuate. We are, therefore of the view that possession given to the developers need not ripen itself into exclusive possession on payment of all the installments in entirety for the purpose of determining the date of transfer. While on the point of possession, we would like to clarify one more aspect. What is spoken to in clause (v) of section 2(47) is the "transaction" which involves allowing the possession to be taken. By means of such transaction, a transferee like a developer is allowed to undertake development work on the land by assuming general control over the property in part performance of the contract. The date of that transaction determines the date of transfer. The actual date of taking physical possession or the instances of possessory acts ex....
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....land, prepare the layout plan, apply for renewal/extension of licence, submit the building plans for sanction of the appropriate authority and to carry out the work of development of a multi-storied residential complex, (ii) to manage and control, look after and supervise the property in any manner as the attorney deems fit and proper, (iii) to obtain water, sewage disposal and electricity connections. The developer is also authorized to borrow money for meeting the cost of construction on the security and mortgage of land falling to the developer's share. The other clauses in the GPA are not relevant for our purpose. The GPA unequivocally grants to the developer a bundle of possessory rights. The acts of management, control and supervision of property are explicitly mentioned. It is fairly clear that the GPA is not a mere licence to enter the land for doing some preliminary acts in relation to the development work. The power of control of the land which is an incidence of possession as explained supra has been conferred on the developer under this GPA. The developer armed with the GPA cannot be regarded merely as a licensee or an agent subject to the control of the owners. His....
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....all stand terminated. Therefore, obtaining the "letter of intent" was the crucial factor. It has been explained in the decision that the "letter of intent" basically is a license issued by the Director of Town and Country Planning, Haryana which gives permission for construction of the flats. The other crucial point was execution of irrevocable of GPA which was executed on May 8, 2006 which according to the ld. authority depicts the intention of the handing over of the possession. Therefore, it becomes very clear that it is not necessary that transfer would take place on the signing of development agreement but the same has to be inferred only when the possession has been handed over by the transferor to the developer which can be inferred from the documents e.g. Power of Attorney. After above discussion Hon'ble authority has summarized the decision in para 41 which is as under: The following is the summary of conclusions: 1. Where the agreement for transfer of immovable property by itself does not provide for immediate transfer of possession, the date of entering into the agreement cannot be considered to be the date of transfer within the meaning of clause (....
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....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 developer on the terms and conditions to be mentioned in the JDA. It was further resolved that member owing plot of 500 sqyd would receive a consideration of Rs. 82,50,000/- each to be paid in four installments by Hash directly in favour of the members and one flat with super area of 2250 sqf to be constructed by THDC. The members who held the plot of 1000 sqyd were to receive a consideration of Rs. 1,65,00,000/- and two flats consisting of 2250 sq. ft. to be constructed by the THDC. It was further resolved to enter into a JDA with THDC/HASH. It was also resolved to execute irrevocable Power of attorney by the Society in favour of THDC for this purpose. This resolution was ultimately ratified in the General Body meeting held by the Society on 25.2.2007. Pursuant to the above resolution, tripartite JDA was executed (copy of the same is available at page 15 to 54 of first paper book). Through recitation clause it has been mentioned that owner is in possession of land measuring about 21.2 acres of land which has come in the purview of Nagar Panc....
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....on 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. It is hereby agreed and confirmed that what is stated in the recitals hereinabove, shall be deemed to be declarations and representations on the part of the Owner as if the same were set out herein verbatim and forming an integral part of the agreement. 2.2 The Project shall comprise of development/construction of the Property into the premises as permissible under Punjab Municipal Building Bye-laws/Punjab Urban Development Authority or any other Competent Authority by the Developer at their own cost and expense. The Project shall be developed as may be sanctioned by the concerned local authority i.e. Department of Local Bodies, Punjab/Punjab Urban Planning and Development Authority (PUDA) or any other Competent Authority. 2.3 The owner hereby irrevocably and unequivocally grants and assigns all its Development Rights in the property to THDC to develop the property and undertake the project at its own costs, efforts and expenses whereupon the Developer shall be entitled to apply for and obtain necessary sa....
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....iety to THDC for raising finance for development and completion of project. Clause 11 talks about formation of maintenance Society for the project after its completion. Clause 13 talks about transfer of rights which reads as under: 13 Transfer of Rights The owner herein i.e. The Punjabi Coop House Building Society Ltd. along with all its ninety six (96) members have given their express, free and clear consent in writing in the form of an Affidavit/No Objection Certificate/Consent Letter whereby the Developers have been allowed to develop the property in accordance with the Project and that THDC shall be entitled to transfer the rights obtained under this agreement to any third party and to get the development/construction work completed on such terms and conditions as THDC may deem fit so long as it does not adversely effect the Owner in terms of their right to receive Entire consideration as mentioned in this agreement subject to all other conditions mentioned therein as well. The owner shall at all times provide full support to the Developers herein. 50. Other clauses provide for termination, General provisions, Disclaimer, Partial Invalidity, Arbitrati....
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....y constituted attorneys. Through this Power of Attorney various powers have been given like to assign, file, amend etc. various plans, designs to represent before various authorities, to appoint architect, Lawyers. Some of the specific clauses relevant, are extracted below: (j) To negotiate and agree to any/or to enter into agreement(s) to construct/sell and to undertake construction/sale of the Premises on the Property or any portion thereof with/to such persons(s) or body and for such consideration and upon such terms and conditions as the Attorney deem fit. (n) To enter upon the Property either alone or with others for the purpose of development, Coordination, execution, implementation of the Project and commercialization of the Property/Premises. (t) To amalgamate the Property with any other contiguous, adjacent and adjoining land sand properties wherein development and/or other right, benefits and interests are acquired and/or proposed to be acquired and developed or proposed to be developed by THDC and/or their associate and/or group concerns/s and/or utilize the FSI, FAR, DR and TDR of the contiguous, adjacent and adjoining lands for the p....
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....reon or any part thereof in favour of any person as the Attorneys may determine including in favour of any individual and/or legal entitles and/or Cooperative Society and/or Limited Company and/or any other entity that may be formed for such purpose. (dd) To issue letter of lien/NOC's and to sign documents on behalf of the Owner as required by the prospective buyers/lending instructions to create a charge on the allotted premises. (gg) To look after and maintain the Property and the Premises constructed thereon till its transfer in favour of the Co-operative Society or Limited Company or any other Organisation. 54. It is pertinent to note that power/authorization which have been given by the Society to the developer, were in fact were required to be given in terms of various clauses of the JDA. Clause 6.7 reproduced above itself shows that the Society was required to give powers to raise finance to mortgage the property and even the registration of charge was also required to be given. Further through clause 6.15 it was agreed that documents of original title deeds of the property would be handed over to the developer i.e. THDC/HASH so that same can b....
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....nd for the purpose of roads, parks or other general utility purposes like installation of electricity transformers and before sanctioning the plans the developer is required to undertake that such portions of land would be given for such a common purpose. If possession was not given then how THDC was authorized to hand over such land or portions thereof which have not been identified in the JDA out of the total land. Similarly through clause (y) THDC has been authorized to mortgage, encumbrance or create charge on the property in favour of any bank or financial institution for raising the funds for the project. In the absence of possession such powers cannot be given. Clause (aa) clearly authorized the THDC to sell, transfer, lease, license the premises which were to be constructed on ownership basis and further to receive moneys against such sale etc. and to issue final receipt. Nowhere it is mentioned in this clause that such sale deeds were to be singed by the Society as confirming party. In the absence of possession it is just not possible for the developer to sell and transfer the premises which were to be constructed. This is further clarified by clause (bb) and (cc) which gi....
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....ce. In case before us, many more powers have been given to THDC in addition to powers which have been described in that judgment and Power of Attorney has been described as irrevocable in clause 6.7 of JDA. Therefore, it is clear that the assessee's plea that the possession was to be given only at the time of registration of the JDA, is not correct. Once irrevocable power was given then it cannot be said that the possession was not given. The issue regarding revocation of irrevocable Power of Attorney and cancellation of the JDA would be discussed later on while dealing with that contention. 57. We find force in the submissions of the ld. DR for the revenue that interpretation of clause (v) to section 2(47) should be made in the light of Heydon's Rule. There is no force in the objection of the ld. counsel of the assessee that this clause should be interpreted on general rules of interpretation particularly in the light of the fact that no reason has been given for the same. Heydon's Rule has been applied by the Indian Courts many times. The Rule was applied and initiated in Heydon's case (1584) 3 Co. Rep 7a. This Rule was upheld by the Constitution Bench of....
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....MANU/SC/0108/1965 : 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 transferred in such a manner that transferee could enjoy the benefit of the property without execution of the conveyance deed. Thirdly we need to examine the remedy which was insertion of clause (v) and (vi) so that cases of giving possession of the property, were also covered by the definition of transfer. Fourthly, true reason for this amendment was to plug a loop hole in the law. Therefore, considering the purpose of insertion of clause (v) and (vi) of section 2(47) and various clauses of Power of Attorney and JDA it becomes absolutely clear that the Society has handed over the possession of the property to THDC/HASH. 59. Second important contention on behalf of the assessee is that JDA was executed on 25.2.2007 and if possession was given then how the assessee was having possession in terms of later sale deeds executed on 2.3.2007 and 25.4.2007. The Society has executed two sale deeds for conveyance of parts of the total land. First sale deed has bee....
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....uring 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 conveyance deed and it does not prove or indicate anything except that a portion of land measuring 3.08 acres, has been sold/conveyed to the developer. In the light of this position, this contention is rejected. 62. We find no force in the next contention of the ld. counsel of the assessee that possession if at all was given should be held to be only a license as defined in Section 52 of Indian Easement Act because clearly as per Section 52 of this Act, where one person grants to another or many other persons to do something upon immoveable property which in the absence of such right would be unlawful. 63. Here in case before us, the right has not been given for the purpose of doing something but all the possible rights in property including right to sell, right to amalgamate the project with another project in the adjoining area which may be acquired later, right to mortgage etc. clearly show that rights given by the Society are much....
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....h 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 law in Sampath lyengar's Commentary (10th Edition--Revised 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....
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....ee 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 V. Income Tax Ld. Commissioner, MANU/MH/0220/1956 : AIR 1956 Bom 411, 414 (Income Tax Act (11 of 1992) Ss. 16(1) and (3) 67. The combined reading of these two definitions show that it (i.e. accrual) is not equal to the receipt of income. In fact it is a stage before the point of time when the income becomes receivable. In other words, once the vested rights come to a person then it can be said that such right or income has accrued to such person. The concept of accrual or arousal of income has also been discussed by the ld. author S. Rajaratnam in the commentary of Law of Income Tax by Sampath lyengar XIth Edition by discussing the meaning of "accrued and arise" at page 1300 it has been observe as under: (1) Important principles. - (a) Meaning - 'Accrue' means 'to arise or spring as a natural growth or result', to come by way of increase. 'Arising' mea....
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....ntinues 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 for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract 70. A plain reading of the above provision shows that it provides a safety measure or a shield in the hands of the transferee to protect the possession of any property which has been given by the transferor as lawful possession under a particular agreement of sale. This position of law was incorporated in the definition of 'transfer' by insertion of clauses (v) & (vi) in section 2(47) of the Act. It is important to note that clause (v) uses the expression contract of t....
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....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 later Act as if they had been "bodily transposed into it". The effect of incorporation is admirably stated by LORD ESHER, M.R.: "If a subsequent Act brings into itself by reference some of the clauses of a former Act, the legal effect of that, as has often been held, is to write those Sections into the new Act as if they had been actually written in it with the pen, or printed in it. (p. 233) Even though only particular Sections of an earlier Act are incorporated into later, in construing the incorporated Sections it may be at times necessary and permissible to refer to other parts of the earlier statute which are not incorporated. As was stated by LORD BLACKBURN: "When a single Section of an Act of Parliament is introduced into another Act, I think it must be re....
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....d 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 general power of attorney as well as Will and receiving full consideration, but since the agreement to sell was not registered and though full consideration was received and even possession was given, still the same transactions could not be subjected to tax because the same could not covered by the definition of "transfer". To bring such transactions within the tax net, this amendment was made. It has to be appreciated that clause (v) in section 2(47) does not lift the definition of part performance from section 53A of the Transfer of Property Act, 1882. Rather, it defines any transaction involving allowing of possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer o....
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....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 to the object of the Income-tax Act, namely, to tax the income, "owner" is a person who is entitled to receive income from the property in his own right. The requirement of registration of the sale deed in the context of section 22 is not warranted. Thus, from the above, it is clear that it is not necessary to get the instrument of transfer registered for the purpose of Income-tax Act when a person has got a valid legally conveyed after complying with the requirements of the law. 9. Similarly, in the case of Mysore Minerals Ltd. v. CIT [1999] MANU/SC/0540/1999 : 239 ITR 775/106 Taxman 166 (SC), the assessee had purchased for the use of its staff seven low income group houses from a Housing Board. The payment had been made and in turn posse....
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....h 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 August, 1994. 76. We have already discussed the implications of the decision in case of Chaturbhuj Dwarkadas Kapadia (supra) in para 33 to 38. We had also examined why in that case capital gain was not held to be chargeable in Assessment year 1995-96. There is no need to repeat the same and in view of the said observations, we reject this contention. 77. The next contention is that it is necessary for invoking of section 2(47)(v) of the Act to comply with the provisions of section 53A of the Transfer of Property Act to the extent that there should be willingness on the part of the transferee to perform his part of the contract. 78. In this aspect we have no quarrel with the proposition that for invoking sect....
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....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 but in the meantime PIL was filed before the Hon'ble Punjab & Haryana High Court against the implementation of the project. Initially, the construction was banned by the Hon'ble High Court. However, later on it was observed in the CWP No. 20425 of 2010 and as clarified by the order of the Hon'ble Supreme Court that refusal of sanction under the Environment (Protection) Act, the society have sought a review of the order because the findings arrived were ex-parte. No order in the matter has been passed by the competent authority perhaps because of the order of High Court. In the interim order passed in the PIL it has been clarified by the Hon'ble Supreme Court vide order dated 31.1.2012 permitting the concern....
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....ng 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 this Agreement after giving the other Party a prior notice of fifteen (15) days in writing of the Event of Force Majeure continues for period of ninety (90) days. In the event of termination of this Agreement all obligations of the Parties until such date shall be fulfilled. 82. The combined reading of these clauses show that if any of the party could not perform its part of the obligation because of the unforeseen circumstances which included government directions, court orders, injunctions etc. such party would not be liable to other party. In view of Force Majeure clause which included Court Injunction it can not be said that THDC is not willing to perform its obligation. In fact Developers i.e. THDC/HASH were perusing....
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....moters 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 Environment (Protection) Act and the Wild Life (Protection) Act are concerned, it need not be emphasised that every project attracting the provisions of the Periphery Control Act and/or the provisions of the 1995 Act must satisfy the ecological concerns of the area in the light of the provisions of the two statues in question. As already held by us, a public trust has been bestowed on the authorities by provisions of the said Acts which cast on such authorities a duty to interdict any project or activity which even remotely seems to create an imbalance in the pristine ecology and environment of the area on which the city of Chandigarh is situated or for that matter in the immediate vicinity thereof. As already observed, necessary clearance....
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....ree 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 @ Rs. 24,75,000/- (Rs. Twenty Four lacs seventy five thousand only) per plot holder of 500 Sq. yards and (Rs. 49,50,000/- (Rs. Forty nine lacs fifty thousand only) as per plot holder of 1000 square yards to be made to the Owner and/or the respective members of the Owner (as the case may be) within six (6) months from the date of execution of this agreement or within two (2) months from the date of approval of the plans/Design and Drawings and grant of the final licence to develop where upon the construction can commence, whichever is later, against which the Owner shall execute a registered sale deed for land of equivalent value being 6.36 acres out of the Property as demarcated in green colour (also hatched in green colour) in the Demarcat....
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....ion 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. 88. The plain reading of the provision shows that any transaction by way of becoming a Member or acquiring shares in the Cooperative Society or shares in the company which has the effect of transferring or enabling the enjoyment of any immoveable property would be covered by the definition of transfer. In the case before us, initially the Members of the Society were holding shares in the Society for ownership of plot of 500 sqyd or 1000 sqyd. This membership was surrendered to the Society vide resolution of the Society passed in the Executive Committee on 4.1.2007 which was later ratified in the General Body Meeting of the Society on 25.1.2007, so that the society could enter into JDA. In the JDA the Society has agreed to transfer the land. Therefor....
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....on 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 think that this kind of interpretation can be made while interpreting section 45 r.w.s. 48 by invoking the rule that there can not be any tax on notional receipt. Generally speaking it is only the real income which can be taxed but this has to be understood subject to limitations. Commenting on these limitations, the Ld. Author Shri. S. Rajaratnam in the Commentary of Law of Income Tax by Sampat Iyengar's Volume 1, (11th Edition) has observed at page 343 as under:- 5. Reservations on real income theory. - Whether accrual of income has taken place or not, must be judged on the principle of the real income theory. After accrual, non-charging of tax on the same because of certain conduct based on the ipse dixit of a particular assessee ca....
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....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) MANU/SC/0112/1963 : 51 ITR 353 (SC); Jamnadas Prabhudas v. CIT, (1951) MANU/MH/0134/1951 : 20 ITR 160 (Bom); D.M. Vakil v. CIT, MANU/MH/0213/1945 : (1946) 14 ITR 298, 302 (Bom); CIT v. Biman Behari Shaw, Shebait, (1968) MANU/WB/0265/1967 : 68 ITR 815 (Cal); Sri Sri Radha Govinda Jew v. CIT, (1972) MANU/WB/0123/1970 : 84 ITR 150, 156 (Cal); CIT v. Ganga Properties Ltd., (1970) MANU/WB/0145/1969 : 77 ITR 637, 647 (Cal); Liquidator, Mahmudabad Properties Ltd. v. CIT, (1972) MANU/WB/0129/1970 : 83 ITR 470 (Cal), affirmed, (1980) 124 ITR 31 (SC); CIT v. Zorostrian Building Society Ltd., (1976) MANU/MH/0054/1975 : 102 ITR 499 (Bom); C.J. George V. CIT, MANU/KE/0135/1973 : (1973) 92 ITR 137 (Ker); D.C. Anand & Sons v. CIT, (1981) MANU/DE/0117/1981 : 131 ITR 77 (Del). Also see, CIT v. Parbutty Churn Law, (1965) MANU/WB/0208/1964 : 57 ITR 609, 619 (Cal); In the matter of Krishna Lal Seal, AIR 1932 Cal 836; Lalla Mal Samgham Lal v. CIT, (1936) MANU/LA/0011/1936 : 4 ITR 250 (Lah)....
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....ut 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 lyengar's Volume 1, page 236 in this regard has observed as under:- Once it is shown that the case of the assessee comes within the letter of the law, he must be taxed, however, great the hardship may appear to the judicial mind. Considerations of hardship, injustice or anomalies do not play any useful role in construing taxing statutes unless there be some real ambiguity. Thus, any benevolent construction in favour of the assessee has been held to be uncalled for. ....
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....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. 106,42,50,000/- (Rupees One Hundred Six Crores Forty Two Lacs Fifty Thousand only) and one hundred and twenty nine (129) flats consisting of Super Area of 2250 Sq. feet ('Flats'); one flat each for sixty five members having a plot of 500 sq. yards, two flats for the (thirty) 30 members having a plot of 1000 sq. yards and 4 flats to the Owner for the 4 plots of 500 sq. yards each as per list annexed with this Agreement as Schedule B ('Sale Transaction') ....
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....d 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 cities, a statutory clarification or circular is overdue. 99. These comments and the other detailed discussion on this aspect clearly show that capital gain tax has to be paid on the total consideration arising on transfer which would include the consideration which has been received as well as the consideration which has arosen and become due and may be received later on. In view of this discussion this contention i....
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.... 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 Agreement is termination by THDC, 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 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 on....
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.... 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 terms of this Agreement shall not be transferred by the Owner in favour of THDC. Upon the termination, the Owner shall forfeit the Adjustable Advance/Earnest Money mentioned in clause 4(i). 103. The reading of the above clause would show that power of termination has been given in many circumstances to THDC vide clause 14(i), (ii) and (iii). The power for termination by the owner has been mentioned in clause 14(iv) only. Readi....
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....thority 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. 106,42,50,000/ - (ii) Consideration in kind (Rs. 101,25,000/ - x 129 plots) Rs. 130,61,25,000/ - Total Rs. 237,03,75,000/ - Average cost of consideration Rs. 11.18 crores per acre (Total consideration of Rs. 237.03 crores divided by 21.2 acres of land) It is claimed on behalf of the assessee that JDA has been cancelled and the developer has been allowed to retain the property which has....
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....ng 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 fulfill 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 kept in view. Here the comments of Shri. Rajaratnam quoted at para 5164 above are also relevant again: 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 ....
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....ideration 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 ratio of 70: 30 between THDC and HASH in case Gross Sales Proceeds is equal to Rs. 1272 crores; (c) in addition (b), in the ratio of 60:40 between THDC and HASH in respect of gross sales Proceeds in excess of Rs. 1272 crores. It is agreed that the minimum guaranteed amount from the Gross Sales Proceeds for THDC and HASH is Rs. 890.40 crores and Rs. 225.76 crores respectively. The minimum guaranteed amount of Rs. 225.76 crores to....
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....he 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 sq. ft. 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 that this issue has been rejected wrongly by CIT(A). However, carefully perusal of the grounds of appeal show that no ground in respect of deduction u/s. 54F has been raised before us and, therefore, we decline to adjudicate this issue and all the arguments made in this behalf are rejected. Though reference was made to ground No. 2.3 in this regard. The perusal of grounds No. 2.3 would show that reference has been made only to Section 54 an....
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....tal gain against part money received against his plot. Thus it becomes clear that it is the individual member who are liable to tax in respect of transfer to plots and the Society being only a facilitator or Post office. Some more details have been discussed in this respect while adjudicating the appeal of Punjabi Coop House Building Society Ltd. in ITA No. 310/Chd/2012 and 556/Chd/2012 which have been adjudicated little later in this order itself. Accordingly we find no force in the submissions and this ground is rejected. 114. Ground No. 7 - The issue regarding levy of interest u/s. 234B and withdrawal u/s. 244A (3) is of consequential nature and the Assessing Officer is directed to charge interest u/s. 234B of the Act in accordance with law. Withdrawal of interest u/s. 244A(3) should also be done in accordance with law. 115. In the result, appeal of the assessee is partly allowed. Now, we take up the three appeals before this Bench one by one as under: 8. Now, we take up appeal of the assessee in ITA No. 404(Asr)/2013 in the case Sh. Raghbir Singh. 8.1. The facts in the grounds taken in the present appeal are identical to the facts in the case of Sh. C....