TMI Blog2015 (3) TMI 489X X X X Extracts X X X X X X X X Extracts X X X X ..... n. - Accordingly,as relying on case of Bhavya Constructions Pvt. Ltd. and others [2015 (4) TMI 295 - ITAT HYDERABAD] we uphold the order of the CIT(A) and dismiss the grounds raised by the revenue in this regard. - Decided against revenue. - ITA No. AY 100/H/14, ITA No 101/H/14 - - - Dated:- 26-2-2015 - Shri P.M. Jagtap And Smt. Asha Vijayaraghavan JJ. For the Appellant Shri Ramakrishna Bandi For the Respondent S/Shri K.C. Devdas/A. Srinivas ORDER Per Asha Vijayaraghavan, J.M.: These appeals by the revenue, in respect of two assessees, are directed against separate orders of ld. CIT(A)-VII, Hyderabad, both, dated 29/11/2013 for AY 2008-09. ITA No. 100/Hyd/2014 in case of Smt. N. Sarojini 2. In this appeal, the revenue has raised the following grounds: 1. On the facts and circumstances of the case, and in law, the CIT(A) erred in holding that capital gains on account of development agreement entered into by the assessee with M/s Amsri Developers Pvt. Ltd. on 04/05/2007 did not arise in AY 2008-09. 2. The assessee prays that the order of the CIT(A) on the above ground be set aside and that of the AO be restored. 3. Briefly the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of ₹ 13 lakhs per acre as refundable security deposit in furtherance of the development agreement. As per the registered document, the market value of the entire project referred was ₹ 720 crores and with the sharing ratio of 35% to the land owners on the built up area and undivided land. v) In the assessment order, the AO dealt with the statement recorded from Sri Ananda Prasad, the MD of M/s Bhavya Constructions Pvt Ltd and proceeded to analyze the provisions of section 2C 47)(v) r. w section 45 . In the extract of submissions of assessee given on page 2, it is also seen that the assessee submitted that the assessee and others are contemplating filing of a suit for cancellation of development agreement as there was no progress whatsoever even after 4.5 years. 5. Finally, the AO relying upon few case laws, came to the conclusion that capital gains accrued to the assessee and other 33 persons and, hence, proceeded to tax the capital gains on account of the development agreement. Accordingly, the resultant capital gains computed in the hands of assessee at ₹ 18,96,08,900. Aggrieved by the order of Assessing Officer, assessee has preferred an appeal before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cellation is filed and is presently in court. 26. It is also seen that apart from the ₹ 13 lakh per acre that the assessees and others received as refundable security deposit, there was no further payment. Since 2007 May, there was no further movement and no willingness of the developer to do his part of the deal could be seen. I am therefore constrained to hold that no capital gains arise to the assessee in the year 2008-09 based on this development agreement which turned out to be a nonstarter. Consequently, there is no income to be taxed as capital gains on account of the development agreement. Aggrieved, by the order of CIT(A), the revenue is in appeal before us. 8. The learned DR relying on the order of Assessing Off icer submitted that as the assessee has handed over possession of the property on the date of entering into development agreement there was transfer within the meaning of section 2(47)(v) of the Act. 9. The learned AR on the other hand strongly supporting the order of the CIT(A) submitted that though the assessee had entered into the development agreement in the previous year relating to the AY under dispute, but, as the developer has neither per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of capital asset as envisaged u/s 2(47)(v) of the Act. On plain reading of section 2(47)(v) would make it clear that it refers to handing over possession of the property under a development agreement towards part performance of contract as envisaged u/s 53A of the TP Act. However, the handing over of possession by the assessee towards part performance of contract will not amount to transfer unless the transferee is also willing and ready to perform his part of the contract under the development agreement. As can be seen from the facts and materials on record, the developer apart from making payment of the refundable security deposit of ₹ 13 lakhs per acre has not taken any step towards development of the property. In fact the most important act of converting the nature of land from agriculture to non agriculture has not been put into motion. The nature and character of land remains as it is even today. The Developer has not taken any steps to get sanction/approval of plan, building construction, etc. from the competent authorities. Even not a single development activity like leveling of land, sales promotion, has been initiated by the developer. These facts, which have not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling to perform its obligation under the agreement in the assessment year under consideration. The agreement based on which capital gains are sought to be taxed in the present case is agreement dated 11.05.2005 but this agreement was not adhered to by the transferee. The transferee originally made a payment of ₹ 10 lakhs on 11.5.2005 and another payment of ₹ 90 lakhs on the same day as refundable security deposit. However, out of this a sum of ₹ 50 lakhs was said to be refunded by the landlord to the developer on 5.3.2009. As such, the assessee has received only a meager amount as refundable security deposit which cannot be construed as receipt of part of sale consideration. Admittedly, there is no progress in the development agreement in the assessment year under consideration. The Municipal sanction for development was obtained not in this assessment year and it was obtained only on 17.09.2006 from the Hyderabad Urban Development Authority. The sanction of the building plan is utmost important for the implementation of the agreement entered between the parties. Without sanction of the building plan, the very genesis of the agreement fails. To enable the executio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm its obligations in the assessment year under consideration. Even otherwise, the assessing authorities has not brought on record the actual position of the project even as on the date of assessment or he has not recorded the findings whether the developer started the construction work at any time during the assessment year under consideration or any development has taken place in the project in the relevant period. He went on to proceed on the sole issue with regard to handing over the possession of the property to the developer in part performance of the Development Agreement-cum-General power of Attorney. In our opinion, the handing over of the possession of the property is only one of the condition u/s 53A of the Transfer of Property Act but it is not the sole and isolated condition. It is necessary to go into whether or not the transferee was 'willing to perform' its obligation under these consent terms. When transferee, by its conduct and by its deeds, demonstrates that it is unwilling to perform its obligations under the agreement in this assessment year, the date of agreement ceases to be relevant. In such a situation, it is only the actual performance of transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued to the assessee. Without accrual of the consideration to the assessee, the assessee is not expected to pay capital gains on the entire agreed sales consideration. When time is essence of the contract, and the time schedule is not adhered to, it cannot be said that such a contract confers any rights on the vendor/landlord to seek redressal under Section 53A of the Transfer of Property Act. This agreement cannot, therefore, be said to be in the nature of a contract referred to in Section 53A of the Transfer of Property Act. It cannot, therefore, be said that the provisions of Section 2(47)(v) will apply in the situation before us. Considering the facts and circumstances of the present case as discussed above, we are of the considered view that the assessee deserves to succeed on reason that the capital gains could not have been taxed in the in this assessment year in appeal before us. The other grounds raised by the assessees in their appeals have become irrelevant at this point of time as we have held that provisions of section 2(47)(v) will not apply to the assessees in the assessment year under consideration. . 12. The coordinate bench again in case of M/s Binjusaria prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be a contract of the nature referred to in Section 53A of the Transfer of Property Act and, accordingly, provisions of Section 2(47)(v) cannot be invoked on the facts of this case. The judgement in the case of Chaturbhuj Dwarkadas Kapadia v. CIT (supra) undoubtedly lays down a proposition which, more often that not, favours the Revenue, but, on the facts of this case, the said judgment supports the case of the assessee inasmuch as 'willingness to perform' has been specifically recognized as one of the essential ingredients to cover a transaction by the scope of Section 53A of the Transfer of Property Act. The Revenue does not get any assistance from this judicial precedent. The very foundation of Revenue's case is thus devoid of legally sustainable basis. 60. That is clearly an erroneous assumption, as the provisions of deemed transfer under Section 2(47)(v) could not have been invoked on the facts of the present case and for the assessment year in dispute before us. In the present case, the situation is that the assessee has not received any consideration, and there is no evidence brought on record by the Revenue authorities to show that there was actual constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page 51 of assessee s paper book, it appears assessee along with others are still having physical possession over the property. Be that as it may, after careful consideration of facts and materials on record, we are of the view, CIT(A) s order being well founded and well reasoned needs to be upheld. Another crucial aspect which needs to be commented upon is the CIT(A) has also held that the transaction will not attract capital gain as the asset transferred being an agricultural land is not a capital asset as defined u/s 2(14) of the Act. This finding of the learned CIT(A) remains unchallenged and uncontroverted by the Department. For this reason also, short term capital gain computed by the AO cannot be sustained. In view of the aforesaid, we do not find any reason to interfere with the order of the CIT(A). 14. So far as the ground raised by the department challenging the view of CIT(A) to the effect that there cannot be any capital gain in absence of value of consideration received or accrued, we are of the view, the same is not required to be adjudicated as it is of mere academic interest in view of our finding that there is no transfer of capital asset by the assessee in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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