TMI Blog2012 (9) TMI 486X X X X Extracts X X X X X X X X Extracts X X X X ..... and no material is brought on record regarding the construction cost incurred in the year 2006-07, hence developer in the A.Y. 2006-07 had not shown his readiness or having made preparation for compliance of the agreement - thus as it is not possible to hold that the transferee is willing to perform his obligation in the A.Y. 2006-07 though the JDA was entered on 21.12.2005 the conditions laid down in section 53A of Transfer of Property Act were satisfied in A.Y. 2007-08, capital gain has to be taxed in A.Y. 2007-08 only - aginst assessee. Determination of cost of construction with regard to transfer of long term capital asset - Held that:- The sales consideration 'in the case of developer's case cannot be adopted because while selling the properties, the developer may have considered several factors like the floor on which a particular premises is situated, personal relationship between the buyer and the developer and so on & if the assessee itself had constructed the property, it can be presumed that the assessee also must have incurred, by and large, the same cost thus it is the actual cost of construction only which should be, adopted as the sales consideration in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having held that capital gains is assessable in AY 2007-08, the commissioner of Income Tax (Appeals) erred in upholding the cost of construction at ₹ 925/- per sq. ft determined arbitrarily by the Assessing Officer. 7. Without prejudice to the grounds raised above, the learned CIT(A), having held that capital gain is assessable in AY 2007-08, ought to have directed allowance of the sum of ₹ 5,00,000/- paid, through DD No. 754761 dated 3-9-04 drawn on Vijaya Bank Bangalore, by the appellant to the seller at the time of purchase of the land towards bore well, gate with compound wall etc. 8. Without prejudice to the grounds raised above, the learned CIT(A), having held that capital gain is assessable in AY 2007-08, ought to have directed allowance of the sum of ₹ 1,61,300/- incurred by the appellant as development charges for making payment to labourers towards cutting of trees, shrubs, bushes and levelling of land purchased by her. 9. For the above grounds and such other grounds that may be urged at the time of hearing, the appellant prays that the appeal be allowed. The appellant craves leave to ad to, amend or modify the above grounds of appeal eit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Sec. 2(47) of the I.T Act, the assessee also invited attention of the Assessing Officer to the fact that it was specifically agreed between the assessee and the developer, in clause 11 of the joint development agreement that making the property available to the developer for construction of the residential apartments shall not be construed as delivery of possession. The Assessing Officer, however, proposed to assess capital gain in the A.Y. 2007-08 by treating the cost of construction of the 7 flats falling to the share of the assessee as full value of consideration. He proposed to adopt the cost of construction at ₹ 925 per sft which was stated to be the cost to the builder as per information in the builder' return of income. The Assessing Officer was of the view that Capital gain arose on account of relinquishment of assessee's right in 57% of land in favour of the developer, Sri C. Janardhan Reddy. 6. The AR submitted that the transaction between the assessee and the developer may not be treated as resulting in relinquishment of assessee's right. The assessee pointed out that sale, exchange and relinquishment are included in clause (i) of sec. 2(47 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement dated 3-4-2006. The CIT (Appeals) failed to appreciate that clause 3 of the JDA already fixed the ratio of built-up area falling to the share of the assessee at 43% of the total built-up area. The supplementary agreement merely facilitated demarcation of the individual flats failing to the share of owner and developer by identifying the flats by the flat numbers which became available by then. The CIT(A) negated the assessee's claim that no event resulting in transfer took place in the previous year relevant to A.Y. 2007-08. 9. The AR further submitted that in confirming the addition made by the Assessing Officer, the CIT(A) ought to have appreciated the submission of the assessee that the supplementary agreement did not result in any fresh determination of consideration but merely facilitated identification of the flats falling to the share of the assessee to the extent of 43% of total built-up area even as agreed to in the joint development agreement dated 21-12-2005. He confirmed the assessment on an entirely different ground viz., that the development agreement resulted in transfer. He also confirmed the assessability of the gain in A.Y. 2007-08 on the premis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted that the facts of the assessee's case are in pari materia with the facts of the said cases, the Assessing Officer ought to have followed the ratio of the said decisions of the ITAT. The CIT(A) ought to have held that the assessment as made by the Assessing Officer is unsustainable. 12. The AR further submitted that in the case of Dr. Usha Mohandas v. ITO (ITA No. 595/Hyd/2010 dated 12.11.2010) the assessee entered into an agreement of sale-cum-GPA on 7.9.2001 for sale of 5 acres of dry agricultural land for a total consideration of ₹ 60 lakhs. She received a sum of ₹ 1 lakh as advance money. As per the terms of the agreement, the assessee authorised the vendee to carry out such development works as the vendee may deem fit till such time the property sold out in part or in full and till that date the vendor and vendee would in joint possession of the land The possession letter was given on 15-09-2004 which specifically states that the vendee has made full and final payment as per the terms of the agreement dated 7-9-201 and possession of the said dry agricultural land was handed over to the vendee absolutely. The assessee declared capital gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in coming to a conclusion about the full value of consideration. The ITAT also rejected the submission of the assessee that the decision of the Tribunal, Hyderabad Bench in the case of Smt. Shanta Vidya Sagar Annan in ITA No. 885/Hyd/2003 dated 9-6-2006 favours him. The said decision relates to exigibility of capital gain on handing over of possession in the case of development agreement. The aforesaid decision also supports the assessee case. 15. The AR submitted that in the light of the facts and the decisions of the ITAT narrated in the preceding paras, the CIT(A) erred in upholding the order of the Assessing Officer in levying tax on capital gain for the A.Y. 2007-08. The CIT(A) also erred in holding that the consideration to be received by the assessee was determined only in the supplementary agreement. The Tribunal may kindly pass appropriate orders holding that transfer did not take place in A.Y. 2007-08. The AR further submits that there are other decisions holding that transfer as per sec. 2(47)(v) occurs in the year of entering into development agreement. In most of these cases it was held that possession was given to the developer in the year of development agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opined that transfer takes place when the assessee enters into development agreement. It has further been held by the Hon'ble Supreme Court in the case of Ajay Jagati (215 CTR 316) that possession is the crux of the matter in deciding whether there is a transfer or not. Even the Pune bench of the ITAT in the case of Mulik (98 TTJ 179) have opined that transfer takes place once a GPA is given to the developer. Further, the Hon'ble Chennai Bench of the ITAT in the case of R. Kalanidhi v. ITO (122 TTJ 405) have opined that if total consideration is agreed and possession is handed over, provisions of sec. 2(47)(v) would be attracted. The decision of the Delhi Bench of ITAT in the case of Satyavathi Verma (123 TTJ 97) goes further to propound that for invoking the provisions of sec 2(47)(v) , it is a must that the transferee has no part left to perform in the contract and that the transferor has performed or is willing to perform the contract. It is only in the cases where the transfer has a right to revoke the power of attorney and the possession is not complete that it can be said that a license was given and there was no transfer, as held in the case of Asian Dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (106 ITD 388). The jurisdictional ITAT in the said case were concerned with a sale cum development agreement dt 22.8.1997. The said agreement however, was modified by a supplementary agreement on 15.10.1997, wherein the earlier agreed consideration was reduced. Since in the said case the possession of the land had been handed over in the relevant asst year, the ITAT opined that there was no right left to the transferor other than the right to receive the consideration in the manner laid down in the agreement, the transaction entered into by the parties through the agreements in the F.Y. 1997-98 was a transaction envisaged u/s. 53A of the Transfer of Property Act. They held that the assessee was not right in contending that the capital gain would arise in the asst year 2001-02 on the account that the possession of built up area was given to him only during the said asst year. They held that the transfer had taken place in the year when the agreement was entered into and the possession of vacant land was given by the assessee and not when the constructed flats were given by the assessee. The ITAT noted that it was not a case of transfer by sale or exchange, in so far as the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 the contract, though required to be registered, has not been registered, or, 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 the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof.] 24. A plain reading of the Section 53A of the Transfer of Property Act shows that in order that a contract can be termed to be of the nature referred to in Section 53A of the Transfer of Property Act it is one of the necessary preconditions that transferee should have or is willin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he vendee to perform its obligations. Unless the party has performed or is willing to perform its obligations under the contract, and in the same sequence in which these are to be performed, it cannot be said that the provisions of Section 53A of the Transfer of Property Act will come into play on the facts of that case. It is only elementary that, unless provisions of Section 53A of the Transfer of Property Act are satisfied on the facts of a case, the transaction in question cannot fall within the scope of deemed transfer under Section 2(47)(v) of the IT Act. Let us therefore consider whether the transferee, on the facts of the present case, can be said to have 'performed or is willing to perform' its obligations under the agreement. 27. In the light of the above provisions section 53A of the Transfer of Property Act, if we examine the JDA dated 21.12.2005 and the Supplementary Agreement dated 3.4.2006 the undisputed fact is that the assessee given possession of the property vide clause No. 6. However, the consideration receivable by the assessee in the form of flats is specifically determined by the Supplementary Agreement dated 3rd April, 2006. Being so, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be charged. In our opinion the Revenue authority justified in bringing the transaction into capital gain in A.Y. 2007-08 and the same is confirmed. 28. The next ground is with regard to determination of cost of construction at ₹ 925 per sft while determining the consideration with regard to transfer of long term capital asset. The lower authorities considered the cost of construction incurred by the builder at ₹ 925 per sft for determining the value of consideration of 850 sft relating to assessee's share in residential flats. This is based on the cost of construction admitted by the builder in his return of income. 29. We have heard both the parties and perused the material on record. Similar issue came before this Tribunal in the case of B. Narasimha Reddy Ors. in ITA Nos. 535-540/Hyd/2011 and 410/Hyd/2011, the Tribunal vide order dated 5.7.2012 held as follows: 11. In our opinion, this is a settled issue. In the case of Hyderabad Co-operative Central Trading Society Ltd., Hyderabad v. ACIT , in ITA No. 15/Hyd/2008 for assessment year 2001-02, the co-ordinate Bench of the Tribunal vide order dated 30.5.2008 held as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 per sft for the purpose of sales consideration in the case of the assessee. We direct accordingly. 12. Accordingly, we direct the Assessing Officer to consider the above order and also price inflation for each assessment year from 2001-02 to 2008-09 and determine the cost of construction per flat to be received by the assessee. In other words, the Assessing Officer is directed to consider the base index as per the order of the Tribunal (cited supra) and thereafter he has to work out the price inflation index and determine the value of the flats to be received by the assessee as consideration and decide thereupon after giving reasonable opportunity of hearing to the assessee. Assessee's appeals as well as Revenue appeal are allowed for statistical purposes. 30. In view of the above order of the Tribunal, we remit the issue back to the file of the Assessing Officer on similar direction. However, while determining the value of consideration it shall not go above ₹ 925 per sft. This ground is partly allowed for statistical purposes. 31. The next ground is with regard to disallowance of expenditure of ₹ 5 lakhs and ₹ 1,61,300 paid to l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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