TMI Blog2003 (2) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... ted above. As far as question No. (iii) is concerned, we answer the said question in the affirmative, i.e., in favour of the assessee - - - - - Dated:- 13-2-2003 - Judge(s) : S. H. KAPADIA., J. P. DEVADHAR. JUDGMENT The judgment of the court was delivered by S.H. KAPADIA J.-Being aggrieved by the order of the Tribunal dated July 29, 2002, the assessee has come by way of appeal under section 260A of the Income-tax Act, 1961, raising the following questions of law for determination by this court: "(i) Whether on the facts and in the circumstances of the case, the Tribunal was justified in concluding that the appellant had transferred the property situated at Gamdevi during the previous year relevant to the assessment year 1996-97? (ii) Whether the Tribunal's conclusion that the appellant had transferred the property situated at Gamdevi during the previous year relevant to the assessment year 1996-97 was so unreasonable that no person properly instructed could ever have arrived at the same? (iii) Whether, the Tribunal's conclusion that the appellant transferred the property situated in Gamdevi in the previous year relevant to the assessment year 1996-97 was arrived at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e property dated April 26, 1995. These two permissions were amongst several other permissions obtained. These three permissions, however, are mentioned as they were obtained during the financial year ending March 31, 1996, relevant to the assessment year 1996-97. Similarly, by March 31, 1996, Floreat had paid almost the entire sale price of Rs. 1,85,63,220, except for the small amount of Rs. 9,98,000. However, the important point which is required to be noted is that BMC issued a commencement certificate permitting construction of a building up to the plinth level only on November 15, 1996. In the meantime, the plan came to be amended. Ultimately, the power of attorney was executed on March 12, 1999. The narrow dispute which arises for determination in this appeal is Whether the liability of the assessee for capital gains accrued to the assessee during the assessment year 1996-97 or whether the assessee was liable to pay capital gains tax during the assessment year 1990-2000. According to the Department the transfer had taken place during the accounting year ending March 31, 1996, relevant to assessment year 1996-97, whereas according to the assessee, the transfer took place only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is finding is perverse; that in this case we are concerned with the accounting year ending March 31, 1996. He pointed out that the day after March 31, 1996, is April 1, 1996, and not April 1, 1997, and if April 1, 1997, is the date on which Floreat was put in possession then Floreat enters upon possession during the accounting year 1997-98 and not during the accounting year 1996-97 with which we are concerned. It is for these two reasons mainly that Mr. Dastur has criticized the judgment of the Tribunal as perverse. Mr. Dastur further submitted that even the commencement certificate came to be issued by BMC in December, 1998, and he submitted that under clause 9 of the contract, the parties had specifically agreed that Floreat will not be put into possession till full payment was effected and till all permissions from various authorities were obtained. He contended that the above facts clearly indicated that Floreat was not put in possession during the assessment year 1996-97. He contended that the building permission was not obtained during the assessment year 1996-97. That the development agreement was dated August 18, 1994, and, therefore, that agreement also did not come within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are various discrepancies in the list of permissions given by the Tribunal, as stated above. That, under the agreement, large number of permissions are required to be obtained and only on those permissions being obtained, supported by full payment of consideration, Floreat was to be put in possession. Mr. Dastur accordingly contended that there is no basis for coming to the conclusion that possession was given to Floreat during the assessment year 1996-97. He submitted that the layout plan was approved on September 5, 1996; that IOD was issued during September to November 1996; that the building plan was amended on March 30, 1998. He, therefore, contended that there was no reason for the Tribunal to infer possession in favour of Floreat during the assessment year 1996-97. He contended that in this case, the assessee has not denied transfer of property; that the assessee has paid the capital gains tax for the assessment year 1999-2000. However, the assessee is told by the Assessing Officer that the transfer has taken place during the assessment year 1996-97 and as a result, the assessee is now faced with the consequence of payment of interest of almost Rs. 16 lakhs on a tax demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7)(v): Clauses (v) and (vi) of section 2(47) reads as under: "2(47)... (v) (with effect from April 1, 1988) any transaction involving the allowing of the possession of any immovable property (as defined) 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) (with effect from April 1, 1988) 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 (as defined)." The above two clauses were introduced with effect from April 1, 1988. They provide that "transfer" includes (i) any transaction which allows possession to be taken/retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, and (ii) any transaction entered into in any manner which has the effect of transferring or enabling the enjoyment of any immovable property (see section 269UA(d)). Therefore, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spread over a period of time. They contemplate various stages. The Bombay High Court in various judgments has taken the view in several matters that the object of entering into a development agreement is to enable a professional builder/contractor to make profits by completing the building and selling the flats at a profit. That the aim of these professional contractors was only to make profits by completing the building and, therefore, no interest in the land stands created in their favour under such agreements. That such agreements are only a mode of remunerating the builder for his services of constructing the building. It is precisely for this reason that the Legislature has introduced section 2(47)(v) read with section 45 which indicates that capital gains is taxable 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. In this case that test has not been applied by the Department. No reason has been given why that test has not been applied, particularly when the agreement in question, read as a whole, shows that it is a development agreement. There is a difference between the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that year. Such interpretation would result in anomaly because what is substantial compliance would differ from officer to officer. Therefore, if on a bare reading of a contract in its entirety, an Assessing Officer comes to the conclusion that in the guise of the agreement for sale, a development agreement is contemplated, under which the developer applies for permissions from various authorities, either under power of attorney or otherwise and in the name of the assessee, then the Assessing Officer is entitled to take the date of the contract as the date of transfer in view of section 2(47)(v). In this very case, the date on which the developer obtained a commencement certificate is not within the accounting year ending March 31, 1996. At the same time, if one reads the contract as a whole, it is clear that a dichotomy is contemplated between the limited power of attorney authorising the developer to deal with the property vide para. 8 and an irrevocable licence to enter upon the property after the developer obtains the requisite approvals of various authorities. In fact, the limited power of attorney may not be actually given, but once under clause 8 of the agreement a limited p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther than the concerned financial year ending March 31, 1996, to come to the conclusion that the transfer had taken place during that year. Lastly, the Tribunal has referred to the permission dated June 25, 1995, for redevelopment of the property vide item (iii). However, in the compilation given by the assessee there is no such permission. The assessee has disputed the existence of this document. Office is directed to take the assessee's compilation on record and mark "X". It is for this reason that vide order dated January 29, 2003, we called upon the Commissioner of Income-tax (judicial) to forward to us the R P. However, learned counsel for the Department has informed us that R P is not available. There are other apparent errors in the order of the Tribunal. At page 144 of the paper book, the Tribunal has stated as under: "From the dates it is evident that from the very next day, i.e., April 1, 1997, from the end of the financial year ending on March 31, 1996, the builder was using the well water against payment of relevant charges to the assessee." The above quoted findings of the Tribunal is apparently an error because the financial year ended on March 31, 1996, and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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