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TMI Blog2015 (3) TMI 489X X X X Extracts X X X X X X X X Extracts X X X X ..... a Constructions and other related parties on 07/10/2009, certain documents/papers relating to Smt. N. Sarojini, the assessee were found. A notice dated 30/08/2010 u/s 153C of the IT Act was issued and assessee filed return in response to this notice on 12/11/2010. In the return filed in response to the notice u/s 153C, the income returned was Rs. 6,17,630/-, which included items admitted in course of search proceedings to the tune of Rs. 3,61,861/- (pension of 1,06,642/- under the head "Salaries" & interest income of Rs. 2,55,219/- under the head "Income from other sources") apart from the income from house property to the tune of Rs. 2,55,766/- In the computation statement the assessee had not disclosed any income towards capital gains on account of the development agreement she had entered into. 4. The relevant facts as noted by the Assessing Officer in his order, which are summarized by the CIT(A) in his order are as under: i) The assessee had purchased 9 acres 8 guntas in survey no.673/1 (Ac 1.20 gts), Survey No.665 (4 Ac 28 gts), Survey No.668 (2 AC.11 gts) and Survey NO.669 (0.29 gts) situated at Dundigal, RR Dist, for an amount of Rs. 9,88,800/- through registered sale dee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase for cancellation of the development agreement. Details of court cases were also called for and the copy of the petition filed in the court was submitted. The assessee / counsel also filed two detailed paper books in course of the hearing enclosing written arguments and applicable case laws which were referred by the counsel in the submissions made. Relying on various case laws, it was submitted that the development agreement itself cannot be considered u/s 2(47), and that capital gains cannot be levied when the computation mechanism fails. For this proposition, AR of assessee relied on the decision of coordinate bench of Hyderabad in case of Smt . Radhika and others, 47 SOT 180 to claim that capital gains do not arise on the date of transfer on 04/05/2007. It was also stated that the Assessing Officer's premise that there was postponement of tax liability is incorrect as no income actually arose to the assessee during the year. The AR of the assessee vide submissions filed on 10/09/13 also enclosed copy of the order of the CIT(A)-V, dated 03/10/12 in the case of Bhavya Constructions Pvt. Ltd. wherein it was held that the transfer takes place only when the constructed area is gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date there is no development activity by the developer. The conversion of the land from agricultural to nonagricultural has also not taken place. It was submitted that for this very reason the assessee along with land owners have filed a suit in the city civil court for cancellation of the development agreement, which is pending. In these circumstances, it cannot be said that there is transfer of property giving rise to capital gain. The learned AR submitted that as developer is totally unwilling to perform his part of contract, the conditions of section 2(47)(v) read with section 53A of the TP Act, is not fulfilled. In support of such contention the learned AR relied upon a decision of the ITAT, Hyderabad in case of Smt. K. Radhika and others v. DCIT (supra) and a recent decision of ITAT, Hyderabad 'B' Bench in case of Binjusaria Properties Ltd Vs. ACIT, dated 04/04/2014. 10. We have considered the submissions of the parties and perused the materials on record along with the orders passed by the revenue authorities. Similar issue came up for consideration before us in case of M/s Bhavya Constructions Pvt. Ltd., and others who are jointly entered into a development agreement with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see along with other land owners have filed a civil suit for cancellation of the development agreement, which clearly brings out the dispute between the land owners and developer and also the fact that developer has not only failed to perform but is also unwilling to perform his part of the contract. Therefore, when the developer has not performed or there is unwillingness to perform his part of the contract, it cannot be concluded that there is transfer of capital asset in terms with section 2(47(v) read with section 53A of the TP Act only because the assessee has entered into a development agreement or even handed over possession of the land to the developer during the previous year relevant to AY under dispute. As rightly held by the ld. CIT(A), handing over possession of the property is not the sole criteria but one of the criteria to construe 'transfer' u/s 53A of the T.P. Act. The ITAT Hyderabad Bench in case of Smt. K. Radhika Vs. DCIT (supra) has held as under: "48. We are in considered agreement with the views so expressed in this commentary on the provisions of the Transfer of Property Act. It is thus clear that 'willingness to perform' for the purposes of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, a developer cannot undertake construction. As a result of this lapse by the transferee, the construction was not taken place in the assessment year under consideration. There is a breach and break down of development agreement in the assessment year under consideration. Nothing is brought on record by authorities to show that there was development activity in the project during the assessment year under consideration and cost of construction was incurred by the builder/developer. Hence it is to be inferred that no amount of investment by the developer in the construction activity during the assessment year in this project and it would amount to non-incurring of required cost of acquisition by the developer. In the assessment year under consideration, it is not possible to say whether the developer prepared to carry out those parts of the agreement to their logical end. The developer in this assessment year had not shown its readiness or having made preparation for the compliance of the agreement. The developer has not taken steps to make it eligible to undertake the performance of the agreement which are the primary ingredient that make a person eligible and entitled to make th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions in the financial year in which the capital gains are sought to be taxed by the Revenue. We hold that this condition laid down under Section 53A of the Transfer of Property Act was not satisfied in this assessment year. Once we come to the conclusion that the transferee was not 'willing to perform', as stipulated by and within meanings assigned to this expression under Section 53A of the Transfer of Property Act, its contractual obligations in this previous year relevant to the present assessment year, it is only a corollary to this finding that the development agreement dt. 11.5.2005 based on which the impugned taxability of capital gain is imposed by the AO and upheld by the CIT(A), cannot be said 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 Chaturbhuj Dwarkadas Kapadia v. CIT's case (supra) undoubtedly lays down a proposition which, more often than 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt agreement. The process of construction has not been even initiated and no approval for the construction of the building is obtained. Thus, the sale consideration in the form of developed area has not been received. Mere receipt of refundable deposit cannot be termed as receipt of consideration. Further, as submitted , the Assessing Officer calculated the capital gain on the entire land, even though the assessee has retained 38% share to itself. The valuation was also disputed. There is, therefore, no accrual of income in favour of the assessee as per S.48 of the Act. Due to lapse on the part of the transferee, the construction has not taken place in the year under consideration, and it has not commenced even now. In the facts and circumstances of the present case, wherein while the assessee has fulfilled its part of the obligation under the development agreement, the developer has not done anything to discharge the obligations cast on it under the develop agreement, the capital gains cannot be brought to tax in the year under appeal, merely on the basis of signing of the development agreement during this year. We are supported in this behalf by the decision of the Tribunal dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rued 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 30 months to complete construction with additional grace period of 6 months, 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 the reason that the capital gains could not have been taxed in the in this assessment year in appeal before us." 13. In the light of the foregoing discussion, we set aside the impugned orders of the Revenue authorities and hold that the capital gains on the property in question cannot be brought to tax in the year under appeal, and consequentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopment agreement, as contemplated u/s 2(47)(v) read with section 53A of the T.P. Act, has to be decided keeping in view the facts involved in each case. Ratio laid down in a particular case cannot be applied uniformly to all cases without considering the factual aspect." 11. As the issue in dispute is similar to that of the case decided by the coordinate bench in case of Bhavya Constructions Pvt. Ltd. and others (supra), respectfully following the decision therein, we do not find any reason to interfere with the finding of the CIT(A) that there is no income to be taxed as capital gains on account of the development agreement. Accordingly, we uphold the order of the CIT(A) and dismiss the grounds raised by the revenue in this regard. 12. In the result, appeal of the department is dismissed. 13. As the facts and grounds are materially identical in ITA No. 101/Hyd/2014 in case of Smt. R. Venkataramani to that of ITA No. 100/Hyd/2014 in case of Smt. N. Sarojini (supra), following the conclusions drawn therein, we uphold the order of the CIT(A) also in this case and dismiss the grounds raised by the revenue. 14. To sum up both the appeals of revenue are dismissed. Pronounced in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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