TaxTMI 
TaxTMI 
2024 (6) TMI 94
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.... Desom, Kasaba Village, for construction of a residential complex thereat. The assessee, without prejudice, also disputes the quantum of the capital gain. Vide the said agreement and GPA of even date, the assessee 'transfers' his rights in 62% of the land in lieu of 38% of the developed area to be constructed, over a period of time, covering the entire land, envisaged to yield 75,818 sq.ft. of built up area - Annexure C to the JDA. The issue is if it indeed amounts to a transfer u/s. 2(47) of the Act. 3. The issue stands discussed and considered extensively by both the Revenue authorities. We proceed by enlisting the respective cases, i.e., excluding the quantification aspect, as under: Assessee's case: a). Possession given as per the Joint Development Agreement was not absolute possession and constituted only a "License" to enter upon the property for the purpose of development in terms of the JDA. b. It was the specific stipulation - as agreed to by both parties - that nothing in the agreement shall be construed as delivery of possession in part performance of any agreement of sale under section 53A of the TP Act. c. That the property contin....
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....ation 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; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in trade of a business carried on by him, such conversion or treatment; (v) any transaction involving the allowing of the 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 of Property Act, 1882 (4 of 1882); or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative 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. (emphasis, ours) Even us pointed out by the Assessing Officer (AO), the law stands amended w.e.f. 01.04.1989 to include clauses (v) and (vi) with a view to avoid rampant abuse of the tax law by....
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.... Even arrangements confirming privileges of ownership without transfer of title could fall under section 2(47)(v). Section 2(47)(v) was introduced in the Act from the assessment year 1988-89 because prior thereto, in most cases, it was argued on behalf of the assessee that no transfer took place till execution of the conveyance. Assessees used to enter into agreements for developing properties with builders and under the arrangement with the builders, they used to confer privileges of ownership without executing conveyance and to plug that loophole, section 2(47)(v) came to be introduced in the Act.' We may next reproduce some of the clauses of the JDA and GPA - which derives it's authority from Cl. 13 of the JDA, as under: Joint Development Agreement Area Entitlements 11.1 The Owner is entitled to the constructed area, common area and car parking area, which are more fully set out in the Annexure 'A' hereto and (hereinafter referred to as the Owners Constructed Area) in lieu of the Owner having agreed to convey 62% of the undivided share in the Schedule Property or such undivided share in the Schedule Property corresponding to the constructed ....
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....enable the developer to perform his part of the contract. It was, thus, both his right and obligation to enter the land and construct the proposed residential complex. Further, as long as it is willing to perform it's part of contract, satisfying the ingredients of section 53A of the TP Act, nothing turns on the delay attending it's performance, which may be for reasons beyond it's control. Emphasizing on the construction being not completed within 36 months would thus not be of much consequence. The assessee, in any case, has the right to specific performance as indeed has the Developer. If anything, it only shows time to be not of essence. Reference toward this may also be made to Cl. 10 of the JDA, wherein, vide Cls. 10.2 & 10.3, extension of the time period is envisaged, should the occasion so arise. No compensation for the delay, as contemplated u/c. 10.4, is reported to have been, despite delay, claimed, much less charged. There is, further, no estoppel against law and, therefore, to state in the agreement that the transaction shall not be construed as delivery of possession would be by itself to no avail. That apart, JDA is to be read along with GPA, clauses 11 & 12 of which....
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....this regard was made by him; the assessee resting his case with reliance on the decision in Balbir S. Mani (supra). The same is, firstly, principally with reference to section 2(47)(v) of the Act and, besides, on facts, a case of project failure, leading to the Hon'ble Apex Court finding that there was in fact no accrual of income, placing reliance for the purpose on the decisions in E.D. Sasoon and Co. Ltd. v. CIT [1954] 26 ITR 27, 51(SC); Morvi Industries Ltd. v. CIT [1971] 82 ITR 835 (SC); and CIT v. Excel Industries Ltd. [2013] 358 ITR 295 (SC), also reproducing there-from. That is to say, the same turned on the basis of an absence of any real income. As regards s. 2(47)(vi), also pleaded, though found inapplicable in that case, the same, as a reading of the judgement would show, was in view of the peculiar facts of the case, wherein the agreement was subject to obtaining necessary permissions and clearances, since denied. It is this that led the Hon'ble Court to state of the possession as having been allowed for the limited purpose of construction. In fact, for the first two tranches, where agreement succeeded, the capital gain was not disputed. The instant, on the con....