TMI Blog2012 (6) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... e so in the period relevant to Assessment Year 2003-04. - in accordance with the provisions of section 2(47) of the Act r.w.s. 53A of the Transfer Property Act, 1882, we hold that the capital gains on the assessee’s land at Kayathamaranahalli, Mysore has been correctly brought to tax in Assessment Year 1995-96 by the Assessing Officer. - Decided against the assessee. - ITA No.1364/Bang/2010 - - - Dated:- 4-5-2012 - P Madhavi Devi, Jason P Boaz, JJ. For Appellant: Shri Ashok A Kulkarni For Respondent: Smt Susan Thomas Jose ORDER Per: Jason P Boaz: Order on condonation of delay in filing appeal. 1. The petition in Form No.36 was filed on 2.12.2010. As per the details therein it was noted that there was delay of 8 days in filing the appeal and a defect memo was issued accordingly. In response thereto the assessee by letter dt.19.8.2011 filed an application enclosing an affidavit for condonation of delay of 8 days in filing the appeal. After careful perusal and consideration of the explanations put forth by the assessee in the application, we are of the opinion that the assessee was prevented by reasonable cause in filing the appeal belatedly and in the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Kaytamaranahalli, Mysore and therefore there were no capital gains liable. 4. With prejudice and in the alternative the Tribunal have been already decided in its order dated 29.02.2008 that there was no transfer and the department have not contested the finding. It was not open to the income tax officer to bring to tax the alleged capital gains in respect of a non-existence transfer as held by the ITAT. 5. It should have been appreciated that having regard to the law laid down by this Tribunal and the provisions of the Act until and unless the developer is in a position to hand over the relevant portion of the super structure that is ready and meant for the owner of the land under the development agreement no capital gains could arise to the owner and such stage had not been reached by 31.3.1995 and therefore bringing to tax any capital gains as arising from the transaction was not in accordance with law. 6. It should have been appreciated that the original developer M/s. SI Property Development Ltd, abandoned the construction of the residential complex midway when the complex was in a wholly incomplete state and the project was taken over under a tripartite agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e elaborately and in accordance with law and his action and findings have been upheld by the learned CIT(A). It was submitted by the learned Departmental Representative that the learned CIT(A) too had dealt with the issue of validity of assumption of jurisdiction by the Assessing Officer in initiating proceedings under section 147, validity of issue of notice under section 148 etc at length in his order at pages 2 to 9 thereof and drew our attention thereto. It was contended by the learned Departmental Representative that since all arguments raised by the assessee have been addressed by the learned CIT(A), this ground deserves to be dismissed. 5.2 We have heard both the parties and carefully perused the material on record. The facts on record indicate that the Assessing Officer recorded in writing the reasons for the belief. He found that the assessee had not filed her return of income for Assessment Year 1995-96. It had also come to his knowledge that the assessee had entered into a development agreement dt.30.6.1994 with M/s. SI Property Development Ltd. for transfer of 92% of the property at Survey No.193/2, Kayathamaranahally, Mysore measuring 71874 sq. ft for a considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 appeared to be due to her own making. We have perused the various grounds which inter alia for the respective assessment years indicate that the assessee herself was not clear about the computation of capital gains in accordance with the provisions of the Act . In other words, she has been sitting on the fence for the AO to make a mistake .. In these circumstances, as mentioned, we have no hesitation in holding that the Assessing Officer s initiation of proceedings under section 147 in the instant case is in order and therefore dismiss the assessee s ground of appeal on this issue. 5.3 The assessee has also challenged validity of the issue of notice under section 148 and the order of assessment passed subsequently for Assessment Year 1995-96. We have already held that the proceedings initiated by the Assessing Officer under section 147 was valid. In respect of the consequential notice issued under section 148, we find from the record that the learned CIT(A) held the notice issued under section 148 to be valid after examining the assessee s objections. It is seen that the learned CIT(A) found that the Assessing Officer issued the notice under section 148 only after obtainin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ginal agreement dt.30.6.1994 remained unchanged. 6.3 In pursuance of the agreement dt.30.6.1994, the assessee executed a power of attorney dt.27.9.1994 in favour of the developer for applying for obtaining various government clearances for the housing project called Kingsdale which consisted of 7 phases. The developer obtained a bank loan by surrendering the title deed of the property to the Bank. The developer after completion of 4 phases of the project backed out of the remaining portion of the project. The assessee then entered into an agreement on 8.1.2003 with M/s. Shanthi Niketan Housing Foundations to complete the remaining portion,; phases 4, 5 and 6 of the project. The original developer M/s. S.I. Property Development Ltd was a consenting party to this agreement and assigned all its rights and interest in the project to M/s. Shanthi Niketan Housing Foundations, who took it upon themselves to fulfill all the commitments that M/s. S.I. Property Development Ltd. had to the flat owners/purchasers in the project. As per agreementdt.30.6.1994, the assessee received Rs. 10 lakhs on 30.6.1994. The remaining payments were received; Rs.10 lakhs on 27.2.1996, Rs.5 lakhs on 31.3.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to demonstrate that the possession of the said property had not been made over to the developer as the approval for the housing project thereon was accorded only on 22.1.1996. The learned Authorised Representative then argued that the possession of the land could only have been said to have been given to the developers pursuant to agreement dt.8.1.2003 between the assessee and M/s. Shanti Niketan Housing Foundations to complete the uncompleted portion of the project in phases 5,6 and 7 of Kingsdale which could not be constructed by M/s.S.I. Property Development Ltd. who became a consenting party to this agreement. The learned Authorised Representative concluded by claiming that the possession being made over only in 2003, the assessee has correctly offered capital gains in the Assessment Year 2006-04 and pleaded that the finding of the Assessing Officer and learned CIT(A) that the capital gains on this project pertained to Assessment Year 1995- 96 be reversed and the assessee s position that it be taxed in Assessment Year 2003-04 be accepted. In support of its stand the assessee placed reliance on the decision of the Hon'ble Karnataka High Court in the case of CIT Vs. Dr. T.K. Da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant to Assessment Year 1995-96, the assessee has not been able to produce any evidence to show that the possession of the land was handed over or any subsequent date. In support of the proposition that possession of the property was handed over to the developer pursuant to agreement dt.30.6.1994, the ld. D. R. placed reliance on the decision of the Authority for Advanced Ruling (hereinafter referred to as AAR) in the case of Jasbir Singh Sarkaria reported in 294 ITR 196 (2007) wherein the meaning of the possession as contemplated in clause (v) of section 2(47) was laid out. It is submitted that the Hon'ble authority held that possession need not necessarily be sole and exclusive possession, and it is enough if the transferee has, by virtue of that transaction / contract / agreement, a right to enter upon the land and exercise acts of possession effectively, pursuant to the covenants in the agreement. It is submitted by the learned Departmental Representative that in the instant case of the assessee, it is clear from the AAR s ruling that possession of the land was handed over to the developer in the period relevant to Assessment Year 2005-06 pursuant to the joint development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e building, to the exclusion of the assessee etc. The supplementary agreement dt.27.2.1996 was a virtual repetition of the agreement dt.30.1.1994, only modified to the extent that the consideration to be received by the assessee was increased from Rs.30 lakhs to Rs.40 lakhs and its share in the built up area increased from 8% to 8.5%. There was no other change in the conditions of the agreement dt.30.6.1994. In fact, clause 5 of agreement dt.27.2.1996 states that, this agreement shall hereinafter be deemed to be a part of the earlier agreement dt.30.6.1994 between the parties hereto for the purpose of all other terms as agreed earlier leave apart the revised terms agreed as per this deed of agreement. It is seen from the record and details filed that the assessee executed a power of attorney dt.27.7.1994 in favour of the developer to apply for government/statutory clearances from various bodies like MUDA, KEB, Municipal Corporation of City, Vani Vilas Water Works, etc for obtaining sanction for construction of the proposed building of the Kingsdale project. The developer accordingly initiated the housing project Kingsdale in the said property and along with other works like get ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidences that possession of the property for joint development has been given much before the agreement dt.8.1.2003 relevant to Assessment Year 2003-04. The assessee has also denied that it handed over possession of the said land in the period relevant to the Assessment Year 1996-97 to 2002-03 which leaves us only with the period relevant to Assessment Year 1995-96 in which the joint development agreement dt.30.6.1994 was entered into. In these circumstances, with due respect, we are of the view that the facts of cited case would not come to the assessee s rescue in determining that the capital gains on transfer of the possession of the assessee s land would arise in Assessment Year 2003-04 pursuant to agreement dt.8.1.2003. 6.8 The learned Authorised Representative referred to orders under the ULC Act, in the instant case, dt.22.1.1996 and 21.6.1996 copies of which were filed along with translations thereof. The learned Authorised Representative attempted to show that, since the permission for construction of the project was received by virtue of the order, possession of the land was not handed over to the developer, M/s. S.I. Property Developers Ltd. in the period relevant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the facts of the assessee s case are quite similar to the case reported in 260 ITR 491 (Chaturbhuj Dwarkadas Kapadia Vs. CIT) (Bom) and applicable in the instant case. The judgement is reproduced hereunder : Facts: The assessee is an individual. He had 44/192 undivided share in an immovable property at Gamdevi in Greater Bombay. The entire property consisted of land and ten buildings. However, a building bearing No. 10 was under requisition by the State Govt, which was later derequisitioned. That building was not occupied by tenants. By agreement dated August 18, 1994 , the assessee herein agreed to sell to Floreat Investments Ltd. (hereinafter referred to, for the sake of brevity as Floreat ), his share of the immovable property for total consideration of Rs. 1,85,63,220 with a right to the said Floreat to develop the property in accordance with the rules and regulations framed under the Maharashtra Housing and Area Development Act. For that purpose, the assessee agreed under clause 8 to execute a limited power of attorney, authorising Floreat to deal with the property and also obtain permissions and approvals from the Urban Land Ceiling Authority, Bombay Municipal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee, the transfer took place only when the assessee executed an irrevocable licence in favour of Floreat to enter upon the property and, therefore, according to the assessee the liability arose during the assessment year 1999-2000. Findings: At the outset, we may point out that in this case, the assessee does not deny transfer. The only dispute in this case, is whether the transfer took place during the accounting year ending March 31, 1996, or whether it took place during the accounting year ending March 31, 1999. In other words, the dispute is confined to the year of chargeability. Under section 2(47)(v), any transaction involving allowing of possession to be taken over or retained in part performance of a contract of the nature referred to in section 53A of the transfer of Property Act would come within the ambit of section 2(47)(v). That, in order to attract section 53A, the following conditions need to be fulfilled. There should be a contract for consideration; it should be in writing; it should be Signed by the transferor; it should pertain to transfer of immovable property; the transferee should have taken possession of the property; lastly, the transfere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erformance on the other hand. In this case, the Tribunal as well as the Department have come to the conclusion that the transfer took place during the accounting year ending March 31, 1996, as substantial payments were effected during that year and substantial permissions were obtained. In such cases of development agreements, one cannot go by substantial performance of a contract. In such cases, the year of chargeability is the year in which the contract is executed. This is in view of section 2(47)(v) of the Act. Before us, it was argued on behalf of the assessee that the date on which possession is parted with by the transferor is the date which should be taken into account for determining the relevant accounting year in which the liability accrues. It was argued on behalf of the assessee that in this case, irrevocable licence was given in terms of the contract only during the financial year ending March 31, 1999, and, therefore, there was no transfer during the financial year ending March 31, 1996. On the other hand, it was argued on behalf of the Revenue that one has to go by the date on which the developer substantially performed the contract. It was argued on behalf of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be given to the developer to deal with the property, then we are of the view that the date of the contract, viz., August 18, 1994, would be the relevant date to decide the date of transfer under section 2(47)(v) and, in which event, the question of substantial performance of the contract thereafter does not arise. This point has not been considered by any of the authorities below. No judgment has been shown to us on this point. Therefore, although there is a concurrent finding of fact in this case, we have enunciated the principles for applicability of section 2(47)(v). We do not find merit in the argument of the assessee that the court should go only by the date of actual possession and that in this particular case, the court should go by the date on which Irrevocable licence was given. If the contract, read as a whole, indicates passing of or transferring of complete control over the property in favour of the developer, then the date of the contract would be relevant to decide the year of chargeability." 23. The Hon'ble High Court has held that if the agreement read as a whole indicates passing of or transferring of complete control over the property in favour of the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court explained the meaning of 'owner' for the purposes of section 22 of the Income-tax Act in the case of CIT v. Poddar Cement (P.) Ltd. {1997} 226 ITR 625 and observed as under:- "Considering the provisions of the Act, English decisions, Jodha Mal Kuthiala's case (1971} 82 ITR 570 (SC) and passages from the G. W. Paton on Jurisprudence, Dias on Jurisprudence, Stroud s Judicial Dictionary and Pallock on Jurisprudence, the court expressed the view and pointed out as under: 'The juristic principle from the view-point of each one is to determine the true connotation of the term 'owner' within the meaning of section 22 of the Act in its practical sense, leaving the husk of the legal title beyond the domain of ownership for the purpose of this statutory provision. The reason is obvious. After all, who is to be taxed or assessed to be taxed more accurately - a person in receipt of money having actual control over the property with no person having better right to defeat his claim of possession or a person in legal parlance who may remain a remainderman, say, at the end or extinction of the period of occupation after, against say, a thousand years?'" (v) Thus, the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on who has got valid title legally conveyed to him after complying with the requirements of law such as the Transfer of Property Act, the Registration Act etc., in the context of section 22 of the Income-tax Act, 1961, having regard to the ground realities and further having regard to the object of the Income-tax Act, namely, to tax the income, "owner" is a person who is entitled to receive income from the property in his own right. The requirement of registration of the sale deed in the context of section 22 is not warranted." (vii) In the case of CIT v. Mormasji Mancharji Vaid [2001j 250 ITR 542(Guj.)(FB), following the decision of the Hon'ble Supreme Court in the case of CIT v. Poddar Cement (P.) Ltd. [1997] 226 ITR 625 the Hon'ble Gujarat High Court held as under: "One should not forget that as pointed out by the Apex Court in the case of CIT v. Podar Cement Ltd [1997j 226 ITR 625 the settled position under the common law is that owner means a person who has got valid title legally conveyed to him after complying with the requirements of law such as the Transfer of Property Act, Registration Act, etc. But in the context of section 22 of the Income-tax Act, having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties and in particular from the assessee, regarding any subsequent deal or document for the transfer of the disputed property. No such deal or transaction regarding sale or transfer of this property could be pointed out. It could also not be pointed out that M/s. Agarwal's Associates were not owners of the property on the basis of this agreement. Thus, this agreement is the only document on the basis of which the rights of ownership and interest in the property were transferred to M/s. Agarwal s Associates. There is no subsequent agreement, assignment or arrangement for transferring any right in relation to this property by the owners. As the parties have acted on the basis of this agreement. it is a final document between them. To repeat, even the possession had been taken by virtue of the provisions and stipulations of this agreement. Thus, the transfer of the property by the co-owners to the purchasers has to be traced, connected and correlated with this agreement alone. It is true that there was delay in payment and also in obtaining permission from Ceiling Department etc. but on the basis of such delay neither the agreement was cancelled nor any claim was made by the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in that this agreement has been treated to be binding by the parties and both the patties have acted upon the same. The owners do not deny that the property was not transferred to M/s. Agarwal's Associates. In fact, the version of the assessee is that the transfer took place in the year 1999 when delivery of possession was given to the purchaser, this contention is not acceptable because the only basis for transferring the rights of ownership by the owners is the deed of 1991 and not the delivery of possession and as the possession was not in their hands, it was not to be delivered by them. The owners had already made arrangements for delivery of the possession and for all other necessary acts under the agreement. Thus, the transfer of rights of ownership by the owners stood concluded by this agreement. From the above, it is clear that the transferors i.e., the co-owners had done everything on their part to convey the title to the transferor. The intention of the parties to the agreement has also to be seen while construing the document. In the present case, clear intention of parties was to change hands over the property. (xiii) So far as the present matter is concerned in vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned CIT(A) has misdirected himself in invoking the provisions of section 2(47)(v) of the Income-tax Act because in the present case the possession was not delivered in pursuance of the agreement. (xvi) The Id. Counsel for the assessee painted out that in assessment year 1999- 2000, the assessee filed return disclosing the capital gain on transfer of the said Bungalow and the Department had accepted the returns. On perusal of the relevant documents, it is found that these are only acknowledgements and not scrutiny assessments. In any case, on the basis of these acknowledgements, it cannot be said that the Department has applied mind in accepting the return of the assessee. Nextly, it may be pointed out that in the present case, we are examining the validity of the assessment made in assessment year 1992-93 and not the validity of assessments made in subsequent years. 7. Ld. Counsel placed heavy reliance on the wealth-tax assessments made in the case of the assessee in subsequent assessment years. His emphatic submission was that as the Department has charged wealth-tax in assessment years 1992-93 to 1995-96 in respect of the same property by making under section 16(3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned CIT(A) and after setting aside the same, we hold that the transfer of the capital asset i.e. Bungalow No.210-B, West End Road, Meerut, took place by virtue and under the agreement dated 7.9.1991 on the financial year 1991-92 (assessment year 1992-93) and as such, the Assessing Officer was fully justified in levying the capital gain in Assessment Year 1992-93. The Assessing Officer is directed to compute capital gain accordingly. 10. In view of the above, we allow ground Nos.1 to 3 taken by the Revenue in the above three appeals. In the assessee s case also the developer M/s. SI Property Development Limited could construct and sell flats/apartments in phases 1 to 4 of Kingsdale project only by virtue of transfer of possession of the land pursuant to agreement dt.30.6.1994. Though this agreement was modified by agreements dt.27.2.1996 and 8.1.2003, they were in essence only supplementaries to the original agreement dt.30.6.1994 whereby the construction was completed partly by M/s. S.I. Property Devp. Ltd. and partly by M/s. Shantinikethan Housing Foundations. From the discussion of this issue from para 1 to para 6.8 of this order, we are of the clear view that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing observations by the Tribunal in their order in the assessee s own case for Assessment Year 1999- 2000, 2002-03 to 2004-05 in ITA Nos.764 to 767/Bang/08 dt.28.9.2009 . We are of the considered view that the assessee s grievance with respect to proceeding undertake under the provisions of section 147/148 appear to be due to her own making. We have perused the various grounds which inter alia for the respective assessment years indicate that the assessee herself was not clear about the computation of capital gains in accordance with the provisions of the Act. In other words, she has been sitting on the fence for the Assessing Officer to make a mistake .. The assessee in the return of income for Assessment Year 2003-04 has taken the stand that the said land was transferred in the financial year 2002-03 when she entered an agreement with M/s. Shanti Nikethan Housing Foundation on 8.1.2003. However, on going through this agreement we find that the assessee s stand/contention is factually not correct. The agreement dt.8.1.2003 between the assessee, M/s. Shanti Nikethan Housing Foundation with M/s. S.I. Property Development Ltd. as consenting party, mentions clearly that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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