TaxTMI 
TaxTMI 
2024 (11) TMI 533
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....grounds of appeal in their respective grounds of appeals and therefore, for the sake of brevity, the grounds of appeal filed by the assessee in ITA No.610/Hyd/2022 are reproduced as under : "1. The Appellate order of Commissioner of Income Tax Appeals), Hyd-11 is bad and erroneous both of facts bad in law. 2. On the facts and circumstances of the cases and in law, the Ld.CIT(Appeals) has erred in the computation of short term capital gain on the basis of land development agreement cum GPA where physical possession could not be delivered during the assessment year. He ought to have considered the fact that the "transfer" could not be completed due to problems in handing over of the physical possession of the land to the developer. 3. On the facts and circumstances of the cases and in law, the Learned CIT(A) has erred in sustaining the addition made under short term capital gains for the land intended to transfer under (development cum GPA ignoring the fact that physical 8,87,9 possession has not been delivered to the developer and the contents of the affidavit" given by the developer were completely ignored. He ought to have considered the fact that the contents of affidavit w....
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....order on 18.02.2022 u/s 153C of the Act. 4. Feeling aggrieved by the order passed by the Assessing Officer, assessee filed appeal before the Ld. CIT(A), who dismissed the appeal of assessee. 5. Feeling aggrieved with the order of ld.CIT(A), assessee is now in appeal before us. 6. Before us, ld.AR Shri ChandraMouli, C.A, has drawn our attention to paras 4 to 4.3 of the assessment order, which are to the following effect : "4.0) Development Agreement-cum-GPA During the course of search proceedings conducted in the case of Sri Allam Raja Reddy (Giridhari Construction Group) on 26.04.2018, a document pertaining to the assessee was found and seized. The details of the document are as follows: Development Agreement-Cum-General Power of Attorney document no. 8396 of 2015 dated 27.06.2015 executed between Sri Bandi Sudheer Reddy & 4 others [Land Owners] and M/s Giridhari's Vue represented by its Partners Sri K. Indra Sena Reddy and Sri O. Raghupathi Reddy [Developer] in respect of the property in Survey No.46 land admeasuring Ac.0.32 Guntas (Eastern Side Portion) situated at Kismathpur Village & O.P, Rajendranagar Mandal, Ranga Reddy District, Telangana State. Further, as seen....
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.... that the possession of the property was not given to the assessee at the time of Development Agreement cum General Power of Attorney and therefore, the permission for erection of the property was given on 05.01.2021. It was submitted by the ld.AR that the Assessing Officer without examining the affidavit filed by the assessee, (the third party) and without taking into the encroachment of the property, has taxed the income on account of the Development Agreement cum General Power of Attorney, in the year of agreement i.e., for the assessment year 2016-17. Ld.AR further submitted that the Assessing Officer was bound to apply his mind to the facts of the case and that the Assessing Officer has wrongly relied upon the judgment of jurisdictional High Court in the case of Potla Nageswara Rao Vs. DCIT reported in (2014) 8 TMI 636 (Andhra Pradesh High Court) and has wrongly decided the issue against the assessee. It was submitted by the ld.AR that the issue was decided by the hon'ble Supreme Court in the case of CIT Vs. Balbir Singh Maini reported in (2018) 12 SCC 354, wherein it was held that the year of taxation would be the year in which the physical possession of the property has ....
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..... Since we are deciding this case on this legal ground, it is unnecessary for us to go into the other questions decided by the High Court, namely, whether under the JDA possession was or was not taken; whether only a licence was granted to develop the property; and whether the developers were or were not ready and willing to carry out their part of the bargain. Since we are of the view that sub-clause (v) of Section 2(47) of the Act is not attracted on the facts of this case, we need not go into any other factual question. 21. However, the High Court has held that Section 2(47)(vi) will not apply for the reason that there was no change in membership of the society, as contemplated. We are afraid that we cannot agree with the High Court on this score. Under Section 2(47)(vi), any transaction which has the effect of transferring or enabling the enjoyment of any immovable property would come within its purview. The High Court has not adverted to the expression "or in any other manner whatsoever" in sub-clause (vi), which would show that it is not necessary that the transaction refers to the membership of a cooperative society. We have, therefore, to see whether the impugned transa....
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....tor of Taxes) [(1946) 1 AER 532 at p. 539], and Webb v. Stenton, Garnishees [11 QBD 518 at p. 522 and 527]. Unless and until there is created in favour of the assessee a debt due by somebody it cannot be said that he has acquired a right to receive the income or that income has accrued to him." 26. This Court, in Commissioner of Income Tax v. Excel Industries, (2014) 13 SCC 459 at 463-464 referred to various judgments on the expression "accrues", and then held: "14. First of all, it is now well settled that income tax cannot be levied on hypothetical income. In CIT v. Shoorji Vallabhdas and Co. [CIT v. Shoorji Vallabhdas and Co., (1962) 46 ITR 144 (SC)] it was held as follows: (ITR p. 148) "... Income tax is a levy on income. No doubt, the Income Tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in bookkeeping, an entry is made about a 'hypothetical income', which does not materialise. Where income has, in fact, been received and is subsequently given up in such circumstances t....
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.... the transfer of a capital asset, which could be brought to tax under Section 45 read with Section 48 of the Income Tax Act. 28. In the present case, the assessee did not acquire any right to receive income, inasmuch as such alleged right was dependent upon the necessary permissions being obtained. This being the case, in the circumstances, there was no debt owed to the assessee's by the developers and therefore, the assessee's have not acquired any right to receive income under the JDA. This being so, no profits or gains "arose" from the transfer of a capital asset so as to attract Sections 45 and 48 of the Income Tax Act. 29. We are, therefore, of the view that the High Court was correct in its conclusion, but for the reasons stated by us hereinabove. The appeals are dismissed with no order as to costs." 6.2. The ld.AR Shri Mohd. Afzal, Advocate, appearing for the assessee Shri Pramod Reddy Tekula has submitted that besides the decision in the case of CIT Vs. Balbir Singh Maini (supra), the hon'ble Supreme Court in the case of Seshasayee Steels (P) Ltd. Vs. ACIT reported in 421 ITR 0046 (2020) has also decided the issue in favour of the assessee. The relevant portion of ....
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....ct of Section 2(47)(vi) appears to be to bring within the tax net a de facto transfer of any immovable property. The expression "enabling the enjoyment of" takes color from the earlier expression "transferring", so that it is clear that any transaction which enables the enjoyment of immovable property must be enjoyment as a purported owner thereof. The idea is to bring within the tax net, transactions, where, though title may not be transferred in law, there is, in substance, a transfer of title in fact. Given the test stated in paragraph 25 of the aforesaid judgment, it is clear that the expression "enabling the enjoyment of" must take colour from the earlier expression "transferring", so that it can be stated on the facts of a case, that a de facto transfer of immovable property has, in fact, taken place making it clear that the de facto owner's rights stand extinguished. It is clear that as on the date of the agreement to sell, the owner's rights were completely intact both as to ownership and to possession even de facto, so that this Section equally, cannot be said to be attracted. Coming to the third argument of the learned senior counsel on behalf of the appellant, what h....
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....ty, more fully described in the schedule mentioned below, on this day for the development of the same into Residential Apartment." 7.1. Further, it was submitted by the ld.DR that as per the development agreement cum General Power of Attorney dt.27.06.2015, in case of delay, the developer is liable to compensate to the assessee and to buttress his arguments, the ld.DR has drawn our attention to page 20 of the order of Ld.CIT(A) wherein it was held as under : ".... Further, the Development Agreement also mentions that the Developer would obtain any approvals / permissions required for construction activity and in case of any delay beyond the period of completion, mutually agreed by both parties, the developer was to pay a compensation of Rs.6,000/- per flat per month for the land owners share for such delayed period. This implies that the appellant and the other land owners had clearly considered the risk of delay in the project and are ready to take the risk." 8. We have heard the rival contentions of both the parties and perused the material available on record and also the orders passed by the lower authorities. Undisputedly, as per the development agreement cum General Pow....