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TMI Blog2015 (7) TMI 878X X X X Extracts X X X X X X X X Extracts X X X X ..... 25, 26, 73, 74, 90, 110, 136, 191, 192, 253, 254, 278 and 398 of 2014, as learned counsel for the parties are agreed that common substantial questions of law are involved therein in all these appeals. However, the facts are being extracted from ITA No.200 of 2013. 2. ITA No.200 of 2013 has been preferred by the appellantassessee under Section 260A of the Income Tax Act, 1961 (in short, "the Act") against the order dated 29.7.2013 passed under Section 254(1) of the Act by the Income Tax Appellate Tribunal, Chandigarh 'B' Bench, Chandigarh (in short, "the Tribunal') in ITA No.448/Chd/2011 for the assessment year 2007-08. On 30.5.2014, these appeals were admitted which raise the following substantial questions of law:- i) "Whether the transactions in hand envisage a "transfer" exigible to tax by reference to Section 2(47)(v) of the Income Tax Act, 1961 read with Section 53-A of the Transfer of Property Act, 1882? ii) Whether the Income Tax Appellate Tribunal, has ignored rights emanating from the JDA, legal effect of non registration of JDA, its alleged repudiation etc.? iii) Whether "possession" as envisaged by Section 2(47)(v) and Section 53-A of the Transfer of Prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale deed by the society in favour of THDC for land of equivalent value being 4.62 acres. d) Payment of Rs. 24.75 lacs per plot holder of 500 square yards and Rs. 49.50 lacs per plot holder of 1000 square yards to be made within six months from the date of execution of the JDA or within two months from the date of the approval of the plans/design and drawings and grant of final licence to develop whereupon construction can commence, whichever was later, against execution of another registered sale deed by the society in favour of THDC for land of equivalent value being 6.36 acres. e) Balance payment of Rs. 24.75 lacs per plot holder of 500 square yards and Rs. 49.50 lacs per plot holder of 1000 square yards to be made within two months from the date of payment as per clause (d) above, towards full and final settlement of payments after adjustment of the advance/earnest money against execution of another registered sale deed by the society in favour of THDC for land of equivalent value being 7.14 acres. f) Each member having plot of 500 square yards was entitled to receive one built up apartment having super area of 2250 square feet and each member having plot of 1000 square yards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax Rs. 30 lacs under the head 'capital gains' received by him during the year under consideration qua that portion of land in respect of which sale deed was registered in favour of the developers. The Assessing Officer, however, treated the revised return filed by the appellant as non est. Copies of the return of income originally filed and revised return for the assessment year 2007-08 are attached as Annexures 4 (colly) with the appeal. According to the appellant, Rs. 36 lacs received in the subsequent year relevant to the assessment year 2008-09 were also offered for tax in the year under the head 'capital gains' (Annexure A.5). 6. The Assessing Officer vide order dated 30.12.2009, Annexure A.6 passed under Section 143(3) of the Act held that since as per the JDA, there was grant and assignment of various rights in the property by the appellant in favour of THDC alongwith handing over physical and vacant possession, the same tantamount to "transfer". The Assessing Officer applied the provisions of Section 2(47)(v) of the Act read with Section 53A of the Transfer of Property Act, 1882 (in short, "the 1882 Act") which provides that any transaction involving a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ike site plan/drawings/designs etc. from appropriate authorities in order to commence and carry out development as stipulated under the agreement; iii) Order dated 20.1.2011 passed by this Court staying the execution of the project under the JDA; iv) Refusal by THDC vide letter dated 4.2.2011 to make payment of third installment. v) Resolution dated 13.6.2011 passed by the society terminating the JDA and revocation of power of attorney on 31.10.2011, Annexure A.8 (Colly). It was further pointed out by the appellant that in the case of Shri Satpal Gosain, one of the co-members of the society, the CIT(A) in his appeal for the assessment year 2007-08 had admitted the aforesaid evidence and after considering the same deleted the addition made by the Assessing Officer on similar grounds. The Tribunal admitted the additional evidence. Vide order dated 29.7.2013, Annexure A.9-A impugned herein upheld the order passed by the Assessing officer bringing to tax the entire consideration receivable under the JDA as liable for tax under the head 'capital gains'. The Tribunal held that the provisions of section 2(47)(v) of the Act read with section 53A of the 1882 Act were applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 48 of the Act provides for mode of computation of capital gains. Before delving into the controversy involved in the present case, it would be advantageous to refer to the relevant portion of Section 2(47) of the Act defining 'transfer', which reads thus:- Section 2(47) of Income Tax Act, 1961 - Definition of Transfer In this Act, unless the context otherwise requires- "transfer", in relation to a capital asset, includes,- (i) xx xx xx xx xx xx x (ii) the extinguishment of any rights therein ; or (iii), (iv) & (iva) x xx xx xx xx xx (v) 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 Transfer of Property Act, 1882 (4 of 1882) ; or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. Explanation 1.-For the purposes of sub-clauses (v) and (vi), "immovable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 53A of the 1882 Act and (ii) any transaction entered into in any manner which has the effect of transferring or enabling the enjoyment of any immovable property. Therefore, in these two eventualities, profits on account of capital gains would be taxable in the year in which such transactions are entered into, even if the transfer of the immovable property is not effective or complete under the general law. Under Section 2(47) (v) of the Act, any transaction involving allowing of possession referred to in Section 53A of the 1882 Act would come within the ambit of 'transfer'. Even arrangements confirming privileges of ownership without transfer of title could fall under Section 2 (47)(v) of the Act. Section 2(47)(v) read with Section 45 of the Act indicates that capital gains is taxable in the year in which such transactions are entered into even if the transfer of immovable property is not effective or complete under the general law. The purpose of introducing clause (v) in conjunction with clause (vi) in Section 2(47) of the Act, defining 'transfer' is to widen the net of taxation of capital gains so as to include transactions that closely resembles transfers but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he powers of owner, including that of making construction. The legal ownership in such cases continues to be with the transferor. 11.3 These amendments shall come into force with effect from Ist April 1988 and will accordingly apply to the assessment year 1988-89 and subsequent years (Section 3(g) of the Finance Act, 1987)." 13. The legislative intent behind incorporating clause (v) to Section 2(47) of the Act from assessment year 1988-89 as discernible from CBDT circular is to embrace within its ambit those transactions of sale of property where assessee enters into agreements for developing properties with builders and the seller confers the rights and privileges of ownership to the buyer without executing/registering a formal conveyance deed in order to avoid capital gains tax. In order to thwart such tendencies, transactions where the possession is given or allowed to be retained in part performance of contract of the nature referred to in Section 53A of 1882 Act is held to be "transfer" by fiction of law though under general law it would not be considered to be "transfer". In other words, by deeming fiction, "transfer" is assigned extended meaning for taxation purposes by in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a transfer of possession in the nature as contemplated under section 53A of the Transfer of Property Act, the transaction would be covered as a transfer. By the necessary logic then, that transaction would be coverable in that particular assessment year as has been done by the Delhi High Court. The only question was as to whether a transaction could be considered for the purpose of calculation of capital gains in parts. The position in law has been indicated by the Delhi High Court that it can be so treated in parts, we respectfully agree with the Delhi High Court judgment. However, the only conditions would be that (1) such a delivery of possession should be in the nature of a doctrine of part-performance under section 53A for which there should be an agreement between the parties, (2) such agreement should be in writing, (3) a completed contract has to be spelt out from that agreement, and the most important (4) the transfer of possession of the property in pursuance of the said agreement. All these conditions undoubtedly and admittedly are completed here. If that is so, then there would be no question of interfering with the Tribunal's judgment. In our opinion, the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. They contemplate various stages. The Bombay High Court in various judgments has taken the view in several matters that the object of entering into a development agreement is to enable a professional builder/contractor to make profits by completing the building and selling the flats at a profit. That the aim of these professional contractors was only to make profits by completing the building and, therefore, no interest in the land stands created in their favour under such agreements. That such agreements are only a mode of remunerating the builder for his services of constructing the building (see Gurudev Developers v. Kurla Konkan Niwas Co-operative Housing Society [2000] 3 Mah LJ 131). It is precisely for this reason that the Legislature has introduced Section 2(47)(v) read with Section 45 which indicates that capital gains is taxable in the year in which such transactions are entered into even if the transfer of immovable property is not effective or complete under the general law. In this case that test has not been applied by the Department. No reason has been given why that test has not been applied, particularly when the agreement in question, read as a whole, shows that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a cooperative society/company etc. in terms of Section 2(47) (vi) of the Act. The surrender of right to obtain plot by the members was for facilitating the society to enter into the JDA with the developers. There was no change in the membership of the society as contemplated under Section 2 (47)(vi) of the Act. Equally Clause (ii) of Section 2(47) of the Act has no applicability in as much as there was no extinguishment of any rights of the assessee in the capital asset at the time of execution of JDA in the absence of any registered conveyance deed in favour of the transferee in view of judgments in Alapati Venkataramiah vs. CIT, (1965) 57 ITR 185 (SC) and Additional CIT vs. Mercury General Corporation (P) Limited, (1982) 133 ITR 525 (Delhi). 18. For determining the ingredients for applicability of Section 53A of 1882 Act, it would be essential to reproduce the relevant provision which reads as under:- Section 53A of Transfer of Property Act, 1882 "53A. Part performance.-Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be in such words from which the terms necessary to construe the transfer can be ascertained; 4) the transferee must in part performance of the contract take possession of the property, or of any part thereof; 5) the transferee must have done some act in furtherance of the contract; and 6) the transferee must have performed or be willing to perform his part of the contract." 20. Following the aforesaid pronouncement, the Apex Court in Rambhau Namdeo Gajre vs. Narayan Bapuji Dhgotra (dead) through Lrs, (2004) 8 SCC 614 observed as under:- "Protection provided under Section 53-A of the Act to the proposed transferee is a shield only against the transferor. It disentitles the transferor from disturbing the possession of the proposed transferee who is put in possession in pursuance to such an agreement. It has nothing to do with the ownership of the proposed transferor who remains full owner of the property till it is legally conveyed by executing a registered sale deed in favour of the transferee. Such a right to protect possession against the proposed vendor cannot be pressed in service against a third party. An agreement of sale which fulfilled the ingredients of Section 53A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by registered instrument." The words "or as evidence of part performance of a contract for the purposes of Section 53A of the Transfer of Property Act, 1882" have been omitted from the Proviso to Section 49. 22. Section 17(1A) of the 1908 Act introduced by the 2001 Act provides that no benefit would be admissible on the basis of unregistered contract for the purposes of Section 53A of 1882 Act. Equally, deletion of the words "or as evidence of part performance of a contract for the purposes of Section 53A of the Transfer of Property Act" from Proviso to Section 49 of 1908 Act clarifies the effect of non-registration of a contract executed in terms of Section 53A of 1882 Act. A Division Bench of this Court interpreting the aforesaid provisions in Ram Kishan and another vs. Bijender Mann alias Vijender Mann and others, (2013) 1 PLR 195 had succinctly laid down as under:- "7. A contract/agreement that satisfies the ingredients of Section 53A of 1882 Act was not compulsory registrable whether under the Transfer of Property Act or the Indian Registration Act, 1908. 8. The Registration and Other Related laws (Amendment) Act, 2001(hereinafter referred to as the 'Amendment Act o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed therein, or (b) confer any power to adopt, or (c) be received as evidence of any transaction affecting such property or conferring such power; unless it has been registered: Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882, to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877, or as evidence of part performance of a contract for the purposes of Section 53A of the Transfer of Property or as evidence of any collateral transaction not required to be effected by registered instrument." 11. A conjoint appraisal of Sections 53A of the Transfer of Property Act, 1882, Sections 17(1A) and 49 of the Indian Registration Act, 1908, particularly the proviso to Section 49 of the Indian Registration Act, in our considered opinion, leaves no ambiguity that, though, a contract accompanied by delivery of possession or executed in favour of a person in possession, is compulsorily registrable under Section 17(1A) of the Registration Act, 1908, but the failure to register such a contract would only deprive the person in posse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be debarred from enforcing against the transferee any right other than a right expressly provided by the contract. Meaning thereby, Section 53-A of the TPA recognized part performance of the contract even though the contract used to be unregistered and the transferee's rights to remain in possession was protected. By the amendment Act No.48 of 2001 (w.e.f. 24.9.2001), the words "the contract, though required to be registered, has not been registered, or" have been omitted from the provision. The effect of the amendment is that now if any person takes possession in pursuance to a contract which is required to be registered but has not been registered, the transferee has no right to remain in possession of the property. To give effect to this principle,Section 17(1A) has accordingly been inserted in the Act which mandates that such contract is now required to be registered. If such a contract entered into after the amendment is not registered then per Section 49 of the Act, the same can neither affect any immovable property comprised therein nor will it be received as evidence of any transaction affecting such property or conferring such power." Similarly, Delhi High Court in M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slative intent of Section 2 (47)(ii), (v) and (vi) of the Act and also the mandatory ingredients for applicability of Section 53A of 1882 Act, it would be essential to notice that the provisions of section 53A of 1882 Act have been introduced in Section 2 (47)(v) of the Act by incorporation. The concept of inclusion of a provision of another statute by incorporation has been dealt with by the Apex Court in detail in Surana Steels Pvt. Limited vs. DCIT, (1999) 237 ITR 777. The issue before the Apex Court in Surana Steels Pvt. Limited's case (supra) was relating to computation of book profit under Section 115J of the Income Tax Act, 1961. Section 205 of the Companies Act, 1956 provided that past losses or unabsorbed depreciation, whichever is loss shall be allowed as set off against the book profits of the current year for determining profits for the purpose of declaring dividend. Explanation clause (iv) to Section 115J of the Act incorporated that book profits shall be reduced by the amount of the loss or the amount of depreciation which would be required to be set off against the profit of the relevant previous year as if the provisions of clause (6) of the first proviso to sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Gauhati), observed that when a legal fiction is created for an obvious purpose, full effect of it is to be given. The relevant observations read thus:- "xxxxxx When a legal fiction is created for an obvious purpose full effect of it is to be given--there is no half way house, In this regard it would be advantageous to rehearse the following passage from Lord Asquith in East End Dwellings Co. Ltd. v. Finsbury Borough Council, [1951] 2 All ER 587 (HL) "If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real, the consequences and incidents which if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. ... The statute says that you must imagine a certain state of affairs, it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs." While interpreting the deeming provision contained in Section 43 of the Indian Income-tax Act, 1922, the Privy Council hold that under the circumstances sot out therein an agent was also chargeable to income-tax as of an assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... understood in the context of clause (v) of Section 2(47) of the Act:- "24. The next question is, in what sense we have to understand the term 'possession' in the context of clause (v) of section 2 (47). Should it only mean the right to exclusive possession - which the transferee can maintain in his own right to the exclusion of everyone including the transferor from whom he derived the possession? Such a criterion will be satisfied only after the entire sale consideration is paid and the transferor has forfeited his right to exercise acts of possession over the land or to resume possession. In our view, there is no warrant to place such a restricted interpretation on the word 'possession' occurring in clause (v) of section 2(47). Possession is an abstract concept. It has different shades of meaning. It is variously described as "a polymorphous term having different meanings in different contexts" (per R.S. Sarkaria, J in Supdt and Legal Remebrancer, W.B. v. Anil Kumar) and as a word of "open texture" (see Salmond on Jurisprudence, Para 51, Twelth Edition, Indian reprint). Salmond observed : "to look for a definition that will summarize the meanings of the term "po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ization. Hence, there are several possible cases of duplicate possession. 1. Mediate and immediate possession coexist in respect of the same thing as already explained. 2. Two or more persons may posses the same thing in common, just as they may owe it in common.... 26. On a fair and reasonable interpretation and on adopting the principle of purposive construction, it must be held that possession contemplated by clause (v) need not necessarily be sole and exclusive possession. So long as the transferee is, by virtue of the possession given, enabled to exercise general control over the property and to make use of it for the intended purpose, the mere fact that the owner has also the right to enter the property to oversee the development work or to ensure performance of the terms of agreement does not introduce any incompatibility. The concurrent possession of the owner who can exercise possessory rights to a limited extent and for a limited purpose and that of the buyer/developer who has general control and custody of the land can very well be reconciled. Clause (v) of section 2(47) will have its full play even in such a situation. There is no warrant to postpone the operation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract. The date of that transaction determines the date of transfer. The actual date of taking physical possession or the instances of possessory acts exercised is not very relevant. The ascertainment of such date, if called for, leads to complicated inquiries, which may frustrate the objective of the legislative provision. It is enough if the transferee has, by virtue of that transaction, a right to enter upon and exercise acts of possession effectively pursuant to the covenants in the contract. That tantamounts to legal possession. We are referring to this aspect because the authorized representative has submitted when he appeared before us in the last week of May, 2007 that even by that date the development work could not be commenced for want of certain approvals, and therefore, the developer was " not willing to take possession of the land". Such an unsubstantiated statement which is not found in the original application or even written submissions filed earlier need not be probed into especially when it is not his case that the developer was not allowed to take possession in terms of the agreement." 26. The Supreme Court considering the requirement of delivery of possession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and see whether they prove that there must have been a contract and it is only if they do so prove that one can bring in the oral contract. This view may not be wholly applicable to the situation in India because an oral contract is not envisaged by section 53A. Even for invoking the equitable doctrine of part performance there has to be a contract in writing from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty. Therefore, the correct view in India would be, look at that writing that is offered as a contract for transfer for consideration of any immovable property and then examine the acts said to have been done in furtherance of the contract and find out whether there is a real nexus between the contract and the acts pleaded as in part performance so that to refuse relief would be perpetuating the fraud of the party who after having taken advantage or benefit of the contract backs out and pleads non registration as defence, a defence analogous to section 4 of the Statute of Frauds. 32. We may recall here that the acts preliminary to the contract would be hardly of any assistance in ascertaining whether they were in furtherance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o sell has been executed to the extent it is necessary to give effect to that contract. But that does not mean that till a final decision has been reached the contract creates a right in the person in possession, i.e. the tenant, to refuse to surrender possession of the premises even if such possession was obtained by him not in part performance of the contract but in his capacity as a tenant. Having entered into possession as a tenant and having continued to remain in possession in that capacity he cannot be heard to say that by reason of the agreement to sell his possession was no longer that of a tenant. (Also see Dakshinamurthi Mudaliar (Dead) & Ors. Vs. Dhanakoti Ammal, AIR 1925 Madras 965 and A.M.A. Sultan (deceased by LRs) & Ors. Vs. Seydu Zohra Beevi, AIR 1990 Kerala 186) In our opinion the law has been correctly stated by the High Court of Madhya Pradesh in the abovesaid decision." 28. In Thota Rambabu alias Ramu vs. Cherukuri Venkateswara Rao alias Pedababu and others, AIR 2006 AP 114, the Andhra Pradesh High Court while considering the question of requirement of delivery of possession for claiming benefits of Section 53A of 1882 Act in a suit for relief of specific perf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise on 'Jurisprudence', struck a balance and observed, as under (Dias Jurisprudence Fifth Edition Page- 290): "Possession has three aspects: firstly, the relation between a person and a thing is a fact. Secondly, the advantages attached by law to that relation is a matter of law. Thirdly, these advantages are also attributed to a person when certain other facts exist. What they are in any given type of case is a matter of law". 34. Where the possession of a property, movable or immovable, is physically delivered to another, it is not difficult to discern, as to who exactly is in possession of such property. Difficulty, however, arises, where the delivery is implied or symbolical. It is only an examination of a bunch of facts, that would yield an answer to this. In the instant case, the plaintiff pleaded that symbolical delivery of possession was affected to him. Admittedly, the 1st defendant is owner of only 1/4th share of the rice mill and that the mill, as a whole, was under lease to a third party. 35. Section 53-A of Act is clear to the effect that the person claiming benefit under it, must have "taken possession of the property". This can happen, if the transferee wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titled to right of exclusive possession, and that he can, at the best, enforce a partition of joint estate. The Himachal Pradesh High Court in its judgment in Paldev Singh v. Smt. Darshani Devi, , observed that a co-owner cannot be said to be in actual physical or exclusive possession of any parcel, till a partition takes place, and the question of his delivering the possession of such an undivided share does not arise. Authorities can be multiplied on this aspect. The gist is that the transferee from a co-owner of an undivided property gets nothing more than a right to seek partition, and thereafter, secure possession of the share of property purchased by him, and he cannot claim any exclusive possession, on the basis of such transfer till the partitions takes place. Resultantly, such a transferee cannot claim the benefit of Section 53-A, since he does not gain or take possession of I the subject-matter of transfer. 38. Even if we assume that the 1st defendant was in exclusive possession of the suit schedule property, it is difficult to invoke Section 53-A in favour of the plaintiff. The reason is that, except pleading that a symbolic delivery of possession was effected to him, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put it differently, ownership is strictly a legal concept and possession is both a legal and a non-legal or pre-legal concept. The test for determining whether any person is in possession of anything is to see whether it is under his general control. He should be actually holding, using and enjoying it, without interference on the part of others. The AAR in Jasbir Singh Sarkaria's case (supra) had observed that there can be concurrent possession of the owner who can exercise possessory rights to a limited extent and for a limited purpose and that of the buyer/developer who has general control and custody of the land. It was also noticed that possession contemplated by clause (v) of Section 2 (47) of the Act need not necessarily be sole and exclusive possession. The legality of these conclusions was, however questioned by learned counsel for the assessee. In our opinion, broadly speaking, the aforesaid proposition enunciated by AAR may not be faulted as it would depend upon facts and circumstances of individual cases on the construction of combined documents executed between the parties. The primary issue before AAR was the year of chargeability of the income to capital gain tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red under Section 53A of the 1882 Act. 32. Further, in order to demonstrate that no absolute possession as required under section 53A of the 1882 Act had been delivered by the transferor to the transferee, learned counsel for the assessee-appellant extensively drew the attention of the court to various relevant clauses of the JDA dated 25.2.2007 and also the registered special power of attorney dated 26.2.2007 as under:- (I) Clauses of JDA dated 25.2.2007 2. Project 2.1. The owner hereby irrevocably and unequivocally grants and assigns in perpetuity all its rights to develop, construct, mortgage, lease, licence, sell and transfer the property alongwith any and all the construction, premises, hereditaments, easements, trees thereon in favour of THDC for the purpose of development, construction, mortgage, sale, transfer, lease, licence and/or exploitation for full utilization of the property ('rights') and to execute all the documents necessary to carry out, facilitates and enforce the Rights in the property including to execute lease agreement, licence agreements,Construction Contracts, Supplier Contracts, Agreement for sale, Conveyance, Mortgage Deeds, finance documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each which shall tantamount to the full and final payment to the owner and/or the respective members of the owner (as the cas may be) in a manner set out herein below (Payment). Further, the transfer, sale and conveyance of 21.2 acres of land of the property shall be made by the owner in favour of THDC pro rata to the payment received by the owner and/or the respective members of the owner (as the case may be) from HASH by executing sale deeds and registering the same. It is expressly provided that as resolved by the owner, the total amount payable by HASH to the owner and/or the respective members of the owner (as the cas may be) for assignment of the Development rights and for transfer and sale of 21.2 acres of land of the property shall be Rs. 106,42,50,000/- (Rupees one hundred six crores forty two lacs fifty thousand only) and one hundred and twenty nine (129) flats consisting of super area of 2250 square feet (Flats) one flat each for sixty five (65) members having a plot of 500 square yards, two flats for the (thirty) 30 members having a plot of 1000 square yards and 4 flats to the owner for the 4 plots of 500 square yards each as per list annexed with this agreement as Sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l times have the right to terminate this agreement in the event there is any material breach of the representations, warranties, undertakings, declarations, covenants and/or obligations given by the owner under this agreement after giving thirty(30) days written notice for rectification of such breach. In the event the agreement is terminated by THDC, all the lands registered in the name of THDC as per the terms of this agreement upto the date of the termination shall remain with THDC and the balance lands to be transferred to THDC as per the terms of this agreement shall not be transferred by the owner in favour of THDC. Upon the termination, the owner shall refund to THDC the adjustable advance/earnest money mentioned in clause 4.1(i) above within one month of such termination. In the event of failure of the owner to refund the said amount, the owner hereby agrees to execute a registered sale deed for land of equivalent value in favour of THDC. (ii) In the event all the requisite governmental and statutory approvals, authorizations, consents, licences, approvals of all the plans/design and drawings as may be required for the development of this property in relation to the projec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch or any further time as may be desired by the owner. In the event the agreement is terminated by owner, all the lands registered in the name of THDC as per the terms of this agreement upto the date of the termination shall remain with THDC and the balance lands to be transferred to THDC as per the terms of this agreement shall not be transferred by the owner in favour of THDC. Upon the termination, the owner shall forfeit the adjustable advance/earnest money mentioned in clause 4(i). 26. Force Majeure (i)None of the parties shall be liable to the other party or be deemed to be in breach of this agreement by reason of any delay in performing, or any failure to perform, any of its own obligations in relation to the agreement, if the delay or failure is due to any event of force majeure. Event of Force Majeure is any event caused beyond the parties' reasonable control. The following shall be regarded as causes beyond the parties reasonable control. (ii)For the purposes of this clause, an event of Force Majeure shall mean events of war, war like conditions, blockades, embargoes, insurrection, governmental direction, riots, strikes, acts of terrorism, civil commotion, lock outs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sell, lease, mortgage the property as more particularly set out in the Joint Development Agreement dated 25.2.2007 (Joint Development Agreement) entered into by the owner with Hash Builders Private Limited having its registered office at SCO No.311-12, 2nd Floor, Sector 40-D, Chandigarh, hereinafter referred to as "Hash" and THDC Limited having their registered office at Eruchshaw Building, Fourth Floor, 249, Dr. D.N.Road, Mumbai 400 001, hereinafter referred to as "THDC" wherein the owner assigned its development rights (as defined in the Joint Development Agreement in favour of THDC, who possesses the relevant and required skills and other expertise for developing the property by constructing thereupon buildings and/or structure to be used for inter alia residential, public use, commercial use, institutional use, club use, parking and any other kind of structures, and necessary amenities, utilities, infrastructure thereto as may be decided by THDC and all work including investigations, studies, design, planning, financing, constructing, operations, maintenance and marketing for sale/lease/transfer to purchasers/lessees/transferees for residential and/or any other authorized user ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (s) xxxx xx xx xx xx (t) To amalgamate the property with any other contiguous, adjacent and adjoining lands and properties wherein developmental and/or other rights, benefits and interests are acquired and/or proposed to be acquired and developed or proposed to be developed by THDC and/or their associate and/or group concern/s and/or utilize the FSI, FAR, DR and TDR of the contiguous, adjacent and adjoining lands for the purpose of constructing buildings and/or structures thereon and/or on the property or utilize such lands and properties for making provision of parking spaces thereon, and/or may utilize the same for any other lawful purpose, as THDC and/or their associate and/or group concern/s may in their sale, absolute and unfettered discretion think fit. (aa) To sell, transfer, lease, licence the premises that may be constructed on the property on ownership basis, lease, licence and/or in any other manner for such price as the attorneys may deem fit and proper. To collect and receive from the purchasers, transferees, lessees, licencees of the premises, monies/price and/or consideration and/or maintenance charges and to sign and execute and/or give proper and lawful discharge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecuted on the faith of all the others being executed also and is intended to speak only as part of the one transaction, and if one is seeking to make equities apply to the parties they must be equities arising out of the transaction as a whole." 34. It was contended that irrevocable power of attorney had been registered wherein power to sell the property as owners to third parties had been given to the developers and thus, it partakes the colour of contract under Section 202 of Indian Contract Act, 1872. Therefore, termination of agency in the present case could not be effected by the transferor in view of Section 202 of the Indian Contract Act, 1872 which is in the following terms:- "202. Termination of agency, where agent has an interest in subject-matter.-Where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest." Illustrations (a) A gives authority to B to sell A's land, and to pay himself, out of the proceeds, the debts due to him from A. A cannot revoke this authority, nor can it be terminated by his insanity or death. "(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n fact, section 4 of the Transfer of Property Act says that the chapters and sections of that Act which relate to contracts shall be taken as part of the Indian Contract Act, 1872. Therefore, the respondent in whose favor the appellant had executed an agreement for the sale of an immovable property had an interest in the subject-matter of the contract, namely, the shop, turn the purposes of section 202 of the Contract Act if not for the purposes of the Transfer of Property and the Registration Acts." 35. Principle of law enunciated in Haydon's case was pressed into service to urge that while interpreting a statute, the mischief and the defect which was sought to be removed by the enactment, full meaning should be assigned to it and such construction is required to be put as shall suppress the mischief. It was strongly put forward that the JDA executed on 25.2.2007 followed by registered special power of attorney dated 26.2.2007 when read together supported the view of the revenue that provisions of Section 53A of 1882 Act stood fulfilled and as a necessary corollary transaction was exigible to capital gains tax under Section 2(47)(v) read with Section 45 of the Act in the hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 as follows: "That for the sure and true interpretation of all statutes in general (be they penal or beneficial restrictive or enlarging of the common law), four things are to be discerned and considered: (1) what was the common law before the making of the Act (2) What was the mischief and defect for which the common law did not provide (3) What remedy the Parliament hath resolved and appointed to cure the disease of the commonwealth (4) The true reason of the remedy. And then the office of all the judges is always to make such construction as shall suppress the mischief and advance the remedy, and to suppress subtle inventions and evasions for the continuance of the mischief and pro privato commodo, and to add force and life to the cure and remedy according to the true intent of the makers of the Act pro bono publico." These rules are still in full force and effect, with the addition that regard must now be had not only to the existing law but also to prior legislation and to the judicial interpretation thereof. The Court applied the rule in Heydon's case in The Bengal Immunity Company Limited v. The State of Bihar & Ors., [1955] 2 SCR 603 in the construction of Art. 286 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtain specific performance or to defend possession under section 53A of TP Act. If they are entered before this day, they may be relied upon to apply for regularization of allotments/leases by Development Authorities. We make it clear that if the documents relating to SA/GPA/WILL transactions' has been accepted acted upon by DDA or other developmental authorities or by the Municipal or revenue authorities to effect mutation, they need not be disturbed, merely on account of this decision. 27. We make it clear that our observations are not intended to in any way affect the validity of sale agreements and powers of attorney executed in genuine transactions. For example, a person may give a power of attorney to his spouse, son, daughter, brother, sister or a relative to manage his affairs or to execute a deed of conveyance. A person may enter into a development agreement with a land developer or builder for developing the land either by forming plots or by constructing apartment buildings and in that behalf execute an agreement of sale and grant a Power of Attorney empowering the developer to execute agreements of sale or conveyances in regard to individual plots of land or undiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roadly refer to various clauses of JDA dated 25.2.2007 and irrevocable special power of attorney dated 26.2.2007. A plain reading of JDA dated 25.2.2007 spells out that clause 1 thereof has defined various expressions. Clause 2 enumerates the description of the project. Clause 3 describes the obligations of the developers for getting building plans, designs, drawings etc. sanctioned from competent authority. Clause 4 deals with consideration whereas Clauses 5 to 8 are relating to various aspects of project and obligations of Society and Developers. Under Clause 9 of JDA, the method of transfer of ownership and rights have been prescribed. Clause 10 speaks about consent given by the society to THDC for raising finance for development and completion of project. Other clauses provide for general provisions, disclaimer partial invalidity, formation of maintenance society for the project after its completion, transfer of rights, notices and jurisdiction whereas termination under Clause 14 and Force Majeure under Clause 26 are also material clauses which had been strenuously referred by the appellants. In addition to JDA dated 25.2.2007, irrevocable registered special power of attorney d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... THDC/HASH out of its own sources. The Tribunal had sought to raise presumption of delivery of possession which on the basis of preceding analysis of factual matrix involved herein was legally not permissible. The JDA dated 25.2.2007 to be covered under Section 53A of 1882 Act was required to be a registered instrument even for purposes of enforcing civil law rights. Once it was embodied in Section 2(47)(v) of the Act by incorporation, all the legal requirements of Section 53A of 1882 Act had to be complied with. In the absence of registration of such an agreement, the same was not enforceable under general law keeping in view the provisions of Sections 17(1A) and 49 of the 1908 Act and at the same time, the transaction would not fall under Section 2(47)(v) of the Act. 41. Under JDA dated 25.2.2007, it was the obligation of the developers to prepare, submit and obtain sanction of the plans, designs and drawings for construction of the project from the competent authority which was to be within the prescribed time. The costs for necessary approvals were also to be borne by them. It was also the obligation of the developers to make timely payment of the consideration in the manner se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment and Forests. The High Court vide order dated 28.1.2011 had already restrained the developers to start construction. The Society not satisfied with the stand taken by the developers sent legal notice dated 11.5.2011 to them stating therein that time was the essence of JDA and there was delay on their part to obtain necessary approval from the competent authority. The society gave 30 days time to the developers to make payment of the third instalment failing which the JDA was liable to be terminated. On failure of the developers to pay the instalment, the society decided to terminate the JDA vide resolution dated 13.6.2011 and cancelled the special power of attorney on 31.10.2011 which was earlier executed in favour of the developers. Thus, willingness to perform their part of the contract was absent on the part of the developers or it could not be performed by them which was one of the condition precedent for applying Section 53A of the 1882 Act. Under Clause 26 of the JDA dated 25.2.2007, principle of Force Majeure had been provided for, which would be applicable with full vigour in the circumstances noticed earlier. However, the Haydon's rule, in the facts as narrated he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as & Co.'s case (supra), the Supreme Court in CIT vs. Excel Industries Limited (2013) 358 ITR 295 (SC) held that income tax cannot be levied on hypothetical income. Income accrues when it becomes due but it must also be accompanied by a corresponding liability of the other party to pay the amount. Only then can it be said that for the purposes of taxability, the income is not hypothetical and it has really accrued to the assessee. It was observed as under:- "17. First of all, it is now well settled that income tax cannot be levied on hypothetical income. In Commissioner of Income Tax v. Shoorji Vallabhdas and Co., [1962] 46 ITR 144 (SC) it was held as follows:- "Income-tax is a levy on income. No doubt, the Incometax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a 'hypothetical income', which does not materialise. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er amount was received from the developer, capital gains tax has already been paid on that and sale deeds have also been executed. In view of cancellation of JDA dated 25.2.2007, no further amount has been received and no action thereon has been taken. It was urged that as and when any amount is received, capital gains tax shall be discharged thereon in accordance with law. In view of the aforesaid stand, while disposing of the appeals, we observe that the assessee appellants shall remain bound by their said stand. 6. The issue of exigibility to capital gains tax having been decided in favour of the assessee, the question of exemption under Section 54F of the Act would not survive any longer and has been rendered academic. 7. The Tribunal and the authorities below were not right in holding the assessee-appellant to be liable to capital gains tax in respect of remaining land measuring 13.5 acres for which no consideration had been received and which stood cancelled and incapable of performance at present due to various orders passed by the Supreme Court and the High Court in PILs. Therefore, the appeals are allowed. 47. Consequently, the substantial questions of law as reproduced ..... X X X X Extracts X X X X X X X X Extracts X X X X
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