TMI Blog2013 (11) TMI 416X X X X Extracts X X X X X X X X Extracts X X X X ..... ORDER:- PER : D. Manmohan This appeal by the assessee is directed against the order dated 16.08.2011 passed by CIT(A)-30, Mumbai and it pertains to A.Y. 2006-07. 2. The assessee is admittedly engaged in the activity of development of plots/houses as builder. Assessee entered into an agreement for selling the property at Caddle Road on 16.03.2005. According to the assessee possession was given to the developer on 20.09.2005 which falls in the accounting year relevant to A.Y. 2006-07 and going by the clauses in the agreement the assessee held the view that the transfer, within the meaning of section 2(47) of the Income Tax Act r.w.s. 53A of the Transfer of Property Act, took place in the financial year 2005-06 relevant to A.Y. 2006-07 and the assessee having invested a sum of Rs. 25 lakhs in December, 2005, it claimed deduction thereof under section 54EC of the Act. The AO was, however, of the view that the assessee having entered into contract with the builder on 16.03.2005, the transfer is deemed to have taken place in the previous year relevant to A.Y. 2005-06 and hence assessee is not entitled to claim deduction under section 54EC of the Act in the year under consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said property. According to the AO the terms of the agreement clearly implies that the assessee has transferred complete control over the property in favour of the developers on 16.03.2005 itself. He thereupon referred to the decision of the Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia of Bombay v. CIT 260 ITR 491 wherein the court observed that any transaction involving possession to be taken over or retained in part-performance of a contract would come within the ambit of section 2(47)(v) of the Act. In the instant case the transferee has the right to enter upon the property and hence it is deemed possession. The court further observed that developers agreement, per se, do not constitute transfer, in general law, but the Legislature introduced section 2(47)(v) r.w.s. 45 of the Income Tax Act to bring to tax capital gains in such cases in the year in which such transactions are entered into even if the transfer of immovable property is not effective or complete under the general law. According to the AO, on an application of the aforementioned principles, the transfer in the instant case can be deemed to have taken placed in March, 2005 and not in Septe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereas a consolidated price was agreed with regard to the said transfer. In the instant case, upon signing the development agreement the assessee did not transfer the title deeds to the developers, it was in fact kept with the escrow agent till such time the developers made the entire payment in terms of clause 2(c) of the agreement, though the developer was permitted to enter the premises under a licence. It was also contended that though the developer would insist upon possession even on signing the contract, in the interest of security/safety of the assessee, various conditions were provided in the agreement whereby the effective date of possession would be only upon payment of the entire consideration. In short, the case of the assessee before the first appellate authority was that the transfer took place on 20.09.2005 which falls in the previous year relevant to A.Y. 2006-07 and the assessee having invested within six months from the said date, he is entitled to exemption under section 54EC of the Act. 8. The learned CIT(A) rejected the contention of the assessee by observing as under: - "3.5 I have carefully gone through the assessment order and the submissions made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had admitted that the transfer took place in this year. In fact the AO stated that he is only making a protective assessment in this year, which is not permissible in law because there is no concept of making protective assessment under Income Tax Act. Though traditionally protective assessments are made in the case of a particular assessee or in a particular year, with firm conviction that it is taxable in the case of another person or year, but in the instant case the AO has not made any effort to bring to tax the sale proceeds in A.Y. 2005-06 and now the proceedings, even if the AO intends to, would be barred by limitation. It is thus seen that the AO never had any intention to make a substantive assessment in A.Y. 2005-06. The learned counsel for the assessee also contended that the CIT(A) made an observation that the date of possession is 20.09.2005 against which the Revenue has not preferred any appeal and if the date of possession is taken as 20.09.2005, even by applying the decision of Hon'ble Bombay High Court in the case Chaturbhuj Dwarkadas Kapadia of Bombay (supra), the receipts on transfer of rights on immovable property are assessable to tax only in A.Y. 2006-07; The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsel for the assessee emphatically stated that to the best of his knowledge the assessee is not in receipt of any notice regarding reopening of assessment of A.Y. 2005-06. The learned D.R. submitted that in the light of the decision of the Hon'ble Bombay High Court (supra) the date of effective transfer is the date on which the developer is entitled to enter the premises and in the instant case also, despite clause 2(c) of the contract, the overall circumstances indicate that the developer is entitled to have complete possession of the property from the date first payment is made and agreement is entered into. She thus submitted that the date of possession, in the instant case, should be taken as 16.03.2005 in which event investment made in December, 2005 falls outside the period of six months, from the date of transfer, and hence the assessee is not entitled to exemption under section 54EC of the Act. 11. We have carefully considered the rival submissions and perused the record. At the outset it may be stated that there is dichotomy in the approach of the tax authorities; on one hand the sale proceeds are sought to be taxed in A.Y. 2006-07 implying thereby that the transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied, i.e. execution of the agreement and handing over of possession. It is not necessary that both conditions should be satisfied in one year but at the same time only upon satisfying the second condition also it would amount to transfer. In this case also there is no dispute that the agreement is dated 16.03.2005 whereas with regard to the date of possession the learned CIT(A) assumed that it took place on 20.09.2005, which falls in the financial year relevant to A.Y. 2006-07. In the peculiar nature of this case, if at all the plea of the AO has to be accepted, it would amount to holding that the transfer had not taken place in this year and consequently the sale proceeds cannot be assessed in this year, but the AO having not initiated any proceedings with respect to A.Y. 2005-06 till date the impugned income would escape taxability even in A.Y. 2005-06 and it would really be prejudicial to the interest of the Revenue. Under this peculiar circumstance we have to rationally interpret the findings of the AO as well as the CIT(A) in the backdrop of the clauses in the agreement. As rightly pointed out by the learned counsel for the assessee, the Hon'ble Bombay High Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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