2023 (9) TMI 624 - BOMBAY HIGH COURT

Capital gain - transfer u/s 2(47) - unregistered JD agreement - appellant had not received any consideration under the two Joint Development Agreements - Whether in light of S. 17 (I)-A r/w S.49 of the Registration Act, 1908 the unregistered agreement can be construed as a document effecting transfer of the subject properties in terms of S. 2(47) of Income Tax Act? - HELD THAT:- Admittedly, the Joint Development Agreements dated 31.12.2008 were not registered, though they were required to be compulsorily registered under Section 17 (I-A) of the Registration Act post the introduction of this provision by the Registration and Other Related Laws (Amendment) Act, 2001.

The Amendment Act of 2001 made simultaneous amendments in Section 53(A) of the Transfer of Property Act and Sections 17 and 49 of the Registration Act. By these amendments, the words “the contract, though required to be registered, has not been registered, or” in Section 53(A) of the IT Act have been omitted. Simultaneously, Sections 17 and 49 of the Registration Act were also amended, clarifying that unless the document containing the contract to transfer for consideration any immovable property (for the purpose of Section 53A of the TP Act) is registered, it shall not have any effect in law, other than being received as evidence of a contract in a suit for specific performance or as evidence of any collateral transaction not required to be effected by a registered instrument.

The impact of the amendments to the Registration Act and the TP Act on the provisions of Section 2(47) of the IT Act was explained by the Hon'ble Supreme Court in Balbir Singh Maini [2017 (10) TMI 323 - SUPREME COURT] held Section 2(47) of the IT Act makes it clear that 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 TP Act will amount to a transfer in relation to a capital asset. The Court reasoned that since an unregistered agreement involving the transfer of possession of an immovable property would not qualify as a contract of the nature referred to under Section 53A of the TP Act, no transfer could be presumed based upon an unregistered agreement. The Court held that in order to qualify as a transfer of a capital asset under Section 2(47)(v) of the IT Act, there must be a contract that could be enforced in law under Section 53A of the TP Act. This reasoning would squarely apply to the facts of the present case.

Substantial question of law in favour of the appellant and against the Revenue.