TaxTMI 
TaxTMI 
2008 (8) TMI 7
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....ortant to refer to certain undisputed facts. The same are as follows:- 3. On 9.10.1936 a perpetual deed was executed between the Secretary of State for India-in-Council representing the Government of India (i.e., the lessor) and one Shri Kanwar Narain Singh (i.e., the lessee) whereby, the said indenture demised in perpetutity, as and by way of lease, for a consideration and conditions contained in the said indenture as a lessee; rights, title and interest in land admeasuring 3851 sq. meters situate at block No. 205 in New Capital of Delhi presently known as Bungalow No. 22, Barakhamba Road, New Delhi. 4. By way of devolution, consequent upon partition and inheritance in the family of the aforesaid lessee, the said plot of land alongwith a double storeyed bungalow constructed thereon including ancillary buildings comprising of servant quarters, garages and the like, vested in the 1st assessee being a 1/6th co-owner alongwith the other co-owners holding 5/6th undivided share in the said property situate at 22, Barakhamba Road, New Delhi (hereinafter referred to as the 'said property'). 5. By virtue of a decree passed by this Hon'ble Court dated 25.5.73 the said proper....
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....reements with SSPL. The first, being an agreement to sell dated (hereinafter referred to as the 'first agreement') and the second, being a collaboration agreement (hereinafter referred to as the 'collaboration agreement'). 8.1. In the first agreement, the parties therein i.e., the 1st assessee and SSPL, recorded that on account of certain diverse circumstances and reasons, it had not been possible to execute the sale deed in pursuance to the earlier agreement for sale dated 24.06.1977 and hence, the agreement for sale executed on 24.06.1977 stood modified to the extent and according to the terms and conditions provided in the collaboration agreement for redevelopment and construction of a multi-storeyed building after demolition of the existing structure. 8.2. The agreement further recorded that on fulfillment of the collaboration agreement, the 1st assessee shall be entitled to 6000 sq. feet of the built up area in addition to three (3) garages and a proportionate share of the open area in the said multi-storeyed commercial building. 8.3. It is further recorded in the first agreement that the remaining built up and unbuilt area in the proposed building shall fall within t....
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....ed and transferred by the 1st assessee to SSPL and/or to its nominees at the cost and expense of SSPL. 8.11. The first agreement was, however, made subject to any change as may be necessitated on account of permissions/approvals and sanctions of the municipal authority, Urban Land (Ceiling and Regulation) authorities etc. or by mutual consent of parties. 9. As referred to hereinabove, on 6.10.81 the 1st assessee also executed the collaboration agreement with SSPL. The collaboration agreement reflects the terms agreed to between the 1st assessee and SSPL in the first agreement. The salient terms and conditions as recorded in the collaboration agreement being important for the purposes of deciding the present matter are extracted hereinbelow:-???? (i) THAT the subject matter of this Deed of Collaboration between the Owners and the Builders is the utilization of the bungalow property No.22, Barakhamba Road, new Delhi, for the purpose of erecting a multistoreyed commercial building on the said plot of land after demolishing the existing structures. The area of the said plot No.22, Barakhamba Road, New Delhi is 0.956 are (equal to 462....
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..../- (Rupees one lakh ninety nine thousand only) subsequently which now on execution of this Agreement stands modified and shall be treated as security to ensure due performance of the obligations on the part of the Builders reserved in this Agreement. (xi) THAT 6,000 sq.ft. (six thousand sq. ft. only) (1,000 sq.ft. on second floor and the rest of the area on any floor, from 1st to 7th floor) in the proposed multi-storeyed commercial building and three garages in the said commercial building with proportionate share of the open area shall be taken by the Owner, and the remaining areas built and unbuilt in the said proposed multi-storyed commercial building shall be taken by the Builders in accordance with their respective separate agreement with the Owners of the five-sixth share of property as a consideration for the liabilities undertaken by the Builders in terms thereof. (xii) THAT unless exemption of the excess vacant land, if any, also the land that would be obtained after demolition of the existing building on the plot No.22, Barakhamba Road, New Delhi, from provisions of Chapter III of the Urban Land (Ceiling and ....
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....e was to receive a sum of Rs. 16 lacs in lieu of the 2nd assessee conveying and/or transferring his right, title and interest in the land alongwith the super structures built thereon in favour of SSPL. As in the case of the 1st assessee, SSPL and the 2nd assessee entered into a collaboration agreement dated 24.8.81 and an agreement to sell of even date dated 24.8.81. The share of the 2nd assessee in the collaboration agreement is mentioned as 1/6th . 10.1. By virtue of the collaboration agreement dated 24.8.81, the 2nd assessee was to receive 6000 sq. ft. of covered area and three (3) garages alongwith a proportionate open area in the proposed multi-storeyed commercial building. As referred to above, the 2nd assessee, as was in the case of the 1st assessee, also entered into an agreement to sell of even date dated 24.08.1981, by virtue of which, the 2nd assessee agreed to sell to SSPL, 4000 sq. ft. of covered area and two (2) garages alongwith a proportionate open area in the proposed multi-storeyed commercial building. 10.2. The 2nd assessee received similar sums of money as was in the case of the 1st assessee. Also, the stipulations contained....
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....d ending on 02.06.1982; assessed capital gains in the sum of Rs.8,87,001/- in regard to the transaction as reflected in the afore-mentioned agreement in regard to the said property. The 1st assessee aggrieved by the said order preferred an appeal to the Commissioner of Income Tax Appeals (in short, CIT). The CIT by an order dated 16.2.1986 dismissed the appeal of the 1st assessee. 14. Aggrieved by the aforesaid order of the CIT, the 1st assessee preferred an appeal to the ITAT. By a common order dated 22.9.87 the ITAT allowed the appeals of both the assessees. 15. As stated hereinabove by virtue of a reference made under Section 256(1) of the Income Tax Act, the afore-mentioned question of law was referred to this Court. 16. Having perused the record and the documents and after hearing the submissions of the learned counsel for the revenue Mr.Sanjeev Sabharwal, we are of the view that the decision of the ITAT deserves to be upheld. In our view, no capital gains accrued to the assessees for the reasons given below. 17. Under Section 45 of the said A....
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.... asset or extinguishment of any rights therein. 19. In the light of the aforesaid provisions, let us analyse what the transaction as reflected in the aforementioned agreements entailed. The terms of the 1st agreement dated 06.10.1981 when read alongwith the collaboration agreement 06.10.1981 would, in sum and substance, establish that the parties had agreed to do the following: (i) terminate their earlier agreement for sale dated 24.06.1977; (ii) substitute the said agreement to sell dated 24.6.77 with a collaboration agreement and agreement to sell, whereby it was agreed that in lieu of the assessee transferring his undivided share in the said property it would get in return, as consideration, 6000 sq.ft. and three garages alongwith proportionate open area in the proposed multi-storeyed building to be built by the SSPL, out of which 4000 sq. ft. alongwith two garages alongwith proportionate open area would be conveyed by the assessee to SSPL, in lieu of consideration in the sum of Rs.11 lacs, which was required to be appropriated and paid in the manner provided in....
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....aid Act. 23. In this context the following facts are relevant:- (i) the land in issue is a lease hold property owned by the Government of India; (ii) for the 1st assessee to transfer his lease hold rights in the said land, sanction of the Government of India was necessary which eventually had not been granted; (iii) the agreement to sell dated 24.6.77 did not reach fruition for a period of four years for diverse circumstances and reasons, whereupon parties entered into a collaboration agreement in furtherance of their object to construct a multi-storeyed building on the said property; (iv) the parties were joint owners of the said venture, however, SSPL was to undertake the development of the said plot at its own costs after obtaining requisite permissions and approvals; (v) SSPL was given necessary authority for obtaining such statutory necessary permissions and approvals necessary for the said purpose; (vi) the SSPL was given power....
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....sions of Section 2(m) of the Wealth Tax Act, 1957, as to whether an immovable property in respect of which a conveyance deed had not been executed could be included in the assessee?s net worth. 25.1. The assessee in the said case was the Nizam of Hyderabad who had received full consideration for certain immovable properties from the purchaser pursuant to which even though he had handed over possession to the purchaser, he had not executed any registered sale deed in favour of the purchaser. 25.2. In the background of these broad facts, the Supreme Court held that the asset belonged to the assessee in view of the fact that against the world at large the assessee was still the legal and real owner of the property in issue even though he had parted with possession. 25.3. In the instant case, it is important to note that before the ITAT - the Revenue conceded that in order to complete the transfer of the said property, a registered deed of conveyance was necessary and since no such document had been executed, the said property cannot be said to have been transferred to SSPL. 25.4. The Revenue, faced with a simi....
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....tinguished his rights in the said property? The answer to our minds lies in the answer to the question as to what would be the consequence of the collaboration agreement dated 06.10.1981 being breached by either party, or becoming incapable of performance due to supervening circumstances? Could it be said that the right of the 1st assessee to build a superstructure on his own had been extinguished. If the answer to the question is in the negative, which to our minds, it is, then there is no extinguishment of a right and hence, no transfer within the meaning of Section 2 (47) of the Act has taken place. The word extinguishment connotes 'annihilation' or end of a thing (See Black's Law Dictionary, Sixth Edition). To overcome this hurdle the learned counsel for the Revenue tried to demonstrate that there had been an 'extinguishment' of the right to build; as according to him, the usufruct of the leasehold right of the 1st assessee in the said property, had been transferred in favour of SSPL, if reference was had to the following aspects of the transaction entered into between the parties; i) possession of the land had been given to SSP....
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....the more usual type of licences which serve to authorise acts which would otherwise be trespasses. (See : John Dwar; 'Licenses and Land Law' : Modern Law Review (Vol. 49 No. 6 Nov. 1986) and S. Moriorty 'Licences and Land Law : Legal principles and public policies' (1984) 100 LQR 376. Thus exclusive possession itself is not decisive in favour of a lease and against a mere licences, for, even the grant of exclusive possession might turn out to be only a licence and not a lease where the grantor himself has no power to grant the lease. In the last analysis the question whether a transaction is a lease or a licence 'turns on the operative intention of the parties' and that there is no single, simple litmus-test to distinguish one from the other. The 'solution that would seem to have been found is, as one would expect, that it must depend on the intention of the parties' See Cobb v. Lane (1952) 1 All ER 1199." 26.4. The Supreme Court also quoted with approval the following observations in the case of Marchant v. Charters : (1977) 3 All ER 918 at page 922 (C.A.) as under:- "Lord Denning MR referred to the tests for determining whether an occ....
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....e there was no capital asset in existence nothing could be transferred. 26.8. In this context the observations of the Supreme Court in the case of Provat Kumar Mitter v. Commissioner of Income-Tax, West Bengal : 41 ITR 624 are relevant. The Supreme Court while discussing the provisions of Section 16(1)(c ) and 16(3) of the Income Tax Act, 1922 came to the conclusion that the Assessing Officer was correct in his approach in including the dividend declared on shares held by the assessee in a company in the assessee's income even though the assessee by a written instrument had assigned to his wife the right, title and interest in all dividends both present and future, and sums of money which might be declared or might become due on account of or in respect of the said shares held by the assessee for the term of the wife's natural life. In coming to the said conclusion, the Supreme Court held that while a transfer of a property may take place not only in praesenti but also in future; but the property must be in existence. The Supreme Court concluded upon reading of the deed of settlement whereby, the husband had assigned all right, title, interest in the dividend or ....
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....essee, because it was part of his income though applied subsequently towards payment to the wife under the terms of the contract. In this view of the matter, it is not necessary to decide the further question if a contract of this nature operates only as a contract to be performed in future which may be specifically enforced as soon as the property comes into existence or is a contract which fastens upon the property as soon as the settler acquires it. .. . . . . . . . ." 26.10. It is important to note that the Supreme Court in the said case did not find it necessary to decide the further question that if a contract of this nature discussed in the said case was only a contract to be performed in future which may be specifically enforced as soon as the property comes into existence or a contract which fastens upon the property as soon as the settlor acquires it. 26.11. Looked at in the light of the aforesaid principle enunciated by the Supreme Court, it would appear that, in the present case as well, the rights conferred upon the parties to the contract will crystallize only if and when the proposed multi-storeyed building would come into existence. Thus, what th....