TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 990
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....y was handed over to the developer to commence development work. This act constitutes part performance of a contract as per Section 53A of the Transfer of Property Act, 1882, and hence, attracts the deeming provisions of Section 2(47)(v) of the Income Tax Act. 3. The CIT(A) erred in holding that the assessee retained control over the property. The facts and terms of the agreement clearly show that the assessee granted exclusive rights to develop the land and thereby parted with possession and interest in the land to the developer, constituting a transfer under Section 2(47)(v). 4. The CIT(A) wrongly relied on the presence of a clause in the JDA stating that possession was not handed over in part performance of an agreement under Section 53A of the TPA. It is submitted that substance over form should prevail, and mere wording in the agreement cannot override the factual delivery of possession to the developer for development purposes. 5. The CIT(A) ignored the Explanation 2 to Section 2(47), which clarifies that "transfer" includes and shall be deemed to always include the creation of any Interest in any capital asset in any manner whatsoever, directly or indirectly, whethe....
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....man & Estates on 16/12/2013, duly registered with the Sub Registrar, the Assessing Officer was of the view that there was a transfer of capital asset in favour of the developer as the assessee was entitled to 47.5% of the total constructed area, whereas the developer shall be entitled to 52.5% of the constructed area out of the total built up area of the project. Accordingly, the Assessing Officer reopened the assessment by issuing notice u/s 148 of the Act on 16/03/2021 and assessed the capital gain to the tune of Rs. 32,52,59,750/ -. 4. The assessee challenged the order of the Assessing Officer before the learned CIT (A). The learned CIT (A) vide the impugned order has held that there is no transfer of immovable property in terms of section 2(47)(v) of the Act as there was no transfer of possession of the land and ownership in favour of the developer vide the said joint development agreement dated 16/12/2013. 5. Aggrieved by the impugned order of the learned CIT (A), the Revenue has filed the present appeal. 6. Before the Tribunal, the learned DR has submitted that the possession of the land was handed over to the developer at the time of joint development agreement agai....
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....mpletion of the development work. The developer obtained the plans of the residential complex from Municipal Corporation, Visakhapatnam approved for construction of the flats on 09/02/2015 which falls in the A.Y 2015-16 and not for the A.Y 2014-15. He has further submitted that the assessee admitted Long Term Capital Gains from sale of the flats for the A.Y 2017- 189 to 2021-22 amounting to Rs. 44,66,96,340/ -. By considering all these facts, the learned CIT (A) has rightly admitted the additions otherwise it would amount to double taxation. The learned Counsel for the assessee has submitted that the Assessing Officer has relied upon the judgment of the Hon'ble jurisdictional High Court in the case of Potla Nageswara Rao (365 ITR 249 A.P), whereas the Hon'ble jurisdictional High Court in a subsequent judgment in the case of Smt. Shantha Vidyasagar Annam dated 7/10/2025 (303 Taxman 348) wherein the Hon'ble High Court after considering the earlier judgment in case of Potla Nageswara Rao has held that the mere entering into a JDA without any consideration at the time of the JDA as well as without handing over of the possession would not amount to transfer of immovable prop....
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....e within the limits of Greater Visakhapatnam Municipal Corporation('GVMC'), Visakhapatnam vide agreement dated 19.06.2004. The said purchase agreement was registered later on 17.04.2013. 9.1 During the year under consideration, the appellant had entered into JDA dated 16.12.2013 with the developer Sree Balajee Nirman & Estates for development of the said land jointly with the appellant. As per the terms of the said JDA, the appellant would introduce the land on which the developer would develop and construct the building. It was agreed that the appellant would be entitled to 47.5% of the share of the constructed area and the developer would be entitled to 52.5% of the constructed area. The appellant had filed a copy of the JDA which has been perused by me. The various clauses of the agreement show that the appellant permitted the developer to enter the property to develop the same. However, as contended by the appellant, specific stipulation is made in the agreement which would not amount to parting of the possession of the land to the developer and that possession of the land continues to be with appellant. It is argued that as per the said Agreement while the dev....
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....ting the developer to enter the premises for the purpose of developing of the land does not constitute delivery of possession of the land in part performance of the agreement of sale u/s. 53A of The Transfer of Property Act (TOPA). It has been brought to notice that the clause 51 of the Agreement also confirms the above stated fact that the parties to the agreement did not intend to part with the possession of the land to the developer and that such possession would be continued to be in the hands of the appellant. In light of the aforesaid agreement executed between the appellant and the developer, it has been stated to be evident that while the JDA was executed between two parties, the possession of the land was not parted by the appellant to the developer. 9.3 It has been further contended that since the appellant has entered into the agreement for transfer of development rights under the JDA, capital gains would be taxable only if the transfer of development rights comply with the conditions of s 2(47)(v) of the Act which is reproduced below: "(47) "transfer", in relation to a capital asset, includes,- .... .... .... (v) any....
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....hts are transferred along with the possession of the property. It is further stated that as per the terms of agreement executed between the appellant and the developer, the possession has not been parted with by the appellant to the developer and that the possession continues to be in the hands of the appellant in the year under appeal. Under these circumstances, it is contended that the provisions of s. 2(47) (v) r.w.s. 45 of the Act would not be attracted, and that no capital gain can be said to have arisen in the year under appeal. 9.4 In the submissions filed by the appellant, reliance was placed on the decision of the Hon'ble Supreme Court in the case of Seshasayee Steels (P.) Ltd. v. ACIT [421 ITR 16 (SC)] wherein similar issue was involved for adjudication. The relevant extract of the said decision is reproduced below: "11. In order that the provisions of Section 53A of the T.P. Act be attracted, first and foremost, the transferee must, in part performance of the contract, have taken possession of the property or any part thereof. Secondly, the transferee must have performed or be willing to perform his part of the agreement. It is only if these two imp....
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....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. 17. 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." 9.5 The appellant has stated that the Hon'ble Supreme Court has clearly held that the transfer pursuant to the JDA would not be complete if the possession has not been granted to the developer. The appellant has further referred to the findings of the Hon'ble Supreme Court in the case of CIT V. Balbir Singh Maini - 398 ITR 531 in support of his case stating that t....
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.... explained that no further progress in terms of the JDA was made by the developer and that the developer has not been able to perform his part of the contract in spite of the fact that strict time lines were set for his performance. The appellant has referred to the clause 9 of the JDA whereby the developer was required to obtain the sanction and permission for the development within maximum period of 12 months from the date of the agreement. In the present case, the approval for undertaking the construction activity was obtained by the developer on 19.2.2015 which was much beyond 12 months. It has been asserted in the submissions of the appellant that even the said condition required u/s. 53A of the TOPA has not been complied with therefore, under these circumstances, s. 2(47)(v) does not stand attracted even on the said count. The appellant has also relied upon the decision in the case of Fibars Infratech (P.) Ltd v. ITO - 162 TTJ 228 (Hyd.) in support of the case . 9.8 It is seen from the assessment order, the Ld. A.O. has referred to the decision Chaturbhuj Dwarkadas Kapadia v. CIT - 260 ITR 491 (Bom.) and Potla Nageswara Rao v. DCIT 365 ITR 249 (AP) to justify the fac....
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.... the developer has performed its obligation during the period 28.2.2006 to 31.3.2006 in which the capital is sought to be taxed by the Revenue authorities. In our opinion, the condition laid down u/s. 53A of TP Act was not satisfied during the period from 28.2.2006 to 31.3.2006. Once we come to the conclusion that the developer has not performed the stipulation as required by the development agreement during the period under consideration and within the meaning assigned to the expression in section 53A of TP Act, its contractual obligation in the previous year relevant to the present A.Y. 2006-07, and it cannot be said that there was a transfer u/s. 2(47)(v) of the Act so as to levy capital gain tax. The judgement in the case of Chaturbhuj Dwarkadas Kapadia by the Bombay High Court undoubtedly lays down a proposition which, more often than not, favours the Revenue but on the facts of this case the said judgement supports the case of the assessee as "willingness to perform" has been specifically recognised as one of the essential ingredients to cover a transaction by the scope of section 53A of TP Act. The Revenue does not get any assistance from this judicial precedent. The very fo....
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....herein shall be construed as parting with the possession of the scheduled property by the owner. It was also specifically stated that nothing contained in the said agreement shall construed as delivery of possession of land in part performance or any agreement of sale u/s 53A of the Transfer of Property Act. This intention of the parties is repeatedly expressed in various clauses of the agreement as reproduced by the learned CIT (A) like clause (2), (31) and 51 reproduced in para 9.1 of the impugned order. Even otherwise, from the contents, the terms & conditions of the JDA in question it is clear that it not an agreement to sell so as to invoke the provisions of section 53A of the Transfer of Property Act and consequently deemed transfer in terms of section 2(47)(v) of the I.T. Act. The Hon'ble jurisdictional High Court in the case of Smt. Shantha Vidyasagar Annam (Supra) as relied upon by the learned Counsel for the assessee, after considering the judgement in case of Potla Nageswara Rao vs. Dy. CIT (365 ITR 249) has held in para 10 to 19 as under: "10. We have considered the rival submissions on both sides and have perused the record. 11. Before proceeding ....
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....of part performance in India where requirements mentioned in the are provisions satisfied (see Ramachandrayya v. Satyanarayana AIR 1964 SC 877 ). Section 53A of the Transfer of Property Act, 1882 reads as under: "53A. Part Performance :- Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that 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 t....
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....Rupees two lakhs only) with First Party vide Pay Order No.002314 dated 04.05.1996 for Rs. 2,00,000/- (Rupees two lakhs only) drawn on Bank of Bahrain and Kuwait B.S.C., Somajiguda, Hyderabad. The receipt of which the First Party hereby admits and acknowledged, which is returnable to the Second Party without any interest after the execution of the work entrusted to the Second Party under this agreement and after completion of all further floors. It is hereby clarified that 40% of the built- up portion includes usable area i.e., floor area as also the other areas like Balcony, Staircase, Lifts, Corridors, and other common spaces etc. Similarly, apart from this, 40% of the Car Park area shall be given to the First Party, all these will be clearly demarcated on the plan after obtaining sanction from the MCH or Government. 8. The owner shall be liable to pay Municipal taxes, non- agriculture and other charges and duties relating to the schedule property up to the date of delivery of possession to the developers." 15. The assessee vide letter dated 11.05.1996 handed over the possession of the land to the developer. The relevant extract of the aforesaid letter, which is ....