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2015 (7) TMI 878 - PUNJAB & HARYANA HIGH COURT

2015 (7) TMI 878 - PUNJAB & HARYANA HIGH COURT - [2015] 378 ITR 244, [2015] 279 CTR 330 - 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 - JDA entered by assessee - Whether 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”? - Whether ITAT has ignored rights ema .....

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82 Act. - The possession delivered, if at all, was as a licencee for the development of the property and not in the capacity of a transferee. - Further Section 53A of 1882 Act, by incorporation, stood embodied in section 2(47)(v) of the Act and all the essential ingredients of Section 53A of 1882 Act were required to be fulfilled. In the absence of registration of JDA dated 25.2.2007 having been executed after 24.9.2001, the agreement does not fall under Section 53A of 1882 Act and conse .....

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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. - 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. - Decided in favour of assessee. - I. T. A. Nos. 200, 201, 232 to 255, 27 .....

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Suri, Advocate and Mr. Sachin Bhardwaj, Advocate For The Revenue : Mr. Ashish Kashyap, Advocate, Mr. Dinesh Goyal, Advocate. Mr. Rajesh Katoch, Advocate. Ms. Savita Saxena, Advocate and Mr. G.S.Hooda, Advocate Ajay Kumar Mittal,J. 1. This order shall dispose of a bunch of 85 appeals bearing ITA Nos. 200, 201, 232 to 255, 271 to 273, 283 to 298, 303 to 308, 310 to 316, 332 to 334, 356 to 358 and 361 of 2013, 10 to 16, 25, 26, 73, 74, 90, 110, 136, 191, 192, 253, 254, 278 and 398 of 2014, as lear .....

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;) 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 repu .....

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ved as narrated in ITA No.200 of 2013 may be noticed. The appellantassessee is an individual and one of the members of the Punjabi Cooperative Housing Building Society Limited (hereinafter referred to as the Society ). The Society consisting of 95 members is owner of 21.2 acres of land in Village Kansal. It had allotted plots measuring 500 square yards to its 65 members, 1000 square yards to its 30 members and four plots of 500 square yards each were retained by it. It entered into a tripartite .....

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sh to each individual member of the society having plot size of 500 square yards partly in monetary terms (Rs 82.50 lacs in cash) and balance in terms of built up property (one flat measuring 2250 square feet). Clause 4 of the JDA provided the following schedule:- a) Payment of ₹ 3 lacs per plot holder of 500 square yards and ₹ 6 lacs per plot holder of 1000 square yards upon execution of the JDA as adjustable advance. b) Payment of ₹ 12 lacs per plot holder of 500 square yards .....

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the society in favour of THDC for land of equivalent value being 4.62 acres. d) Payment of ₹ 24.75 lacs per plot holder of 500 square yards and ₹ 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 de .....

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ue 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 was entitled to two built up apartments having super area of 2250 square feet after transfer of land in the name of THDC. Allotment letters were to be issued by THDC within two months from the date of obtaining approval to commence construction at the site. Copies of the minutes of the Executive C .....

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of the land measuring 7.7 acres i.e. 3.08 acres plus 4.62 acres having specific khasra nos. as mentioned in the JDA and plan attached thereto have actually been registered in the name of THDC. Copy of the sale deed dated 2.3.2007 is attached as Annexure A.3 with the appeal. Subsequently, substantial disputes arose between the society on the one hand and the developers on the other with regard to further payments to be made in terms of the JDA i.e. from clause (d) onwards. The appellant, who had .....

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assessment year 2007-08, the appellant filed original return of income on 7.12.2007 declaring income of ₹ 2,50,171/-. In the original return, the appellant did not offer to tax any amount under the JDA on the ground that there was no transfer to THDC during the year under consideration and also because ownership as well as possession of the land still vested in the society. The return of income for the relevant assessment year 2007-08 was later revised by the appellant on 7.10.2009 declari .....

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n for the assessment year 2007-08 are attached as Annexures 4 (colly) with the appeal. According to the appellant, ₹ 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 b .....

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be treated as transfer for purposes of the Act. Since the JDA was signed on 25.2.2007 i.e. during the previous year relevant to assessment year 2007-08, the Assessing Officer computed chargeable capital gains in that year. It was also held that there was 'transfer' within the meaning of sub sections (ii) and (vi) of Section 2(47) of the Act. The Assessing Officer held that the following consideration receivable by the members of the society having plot size of 500 square yards under the .....

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ear under consideration on the entire amount receivable in future under the head 'capital gains' and thus made net addition of ₹ 3,54,68,276/- on account of long term capital gains taxable in the hands of the appellant in terms of the JDA as under:- Monetary consideration (Rs. 82.50 lacs x2) ₹ 1,65,00,000 Two flats of 2250 square feet each valued at the rate of ₹ 4500 square feet. ₹ 2,02,50,000 Total consideration ₹ 3,67,50,000 Less Indexed cost of acquisiti .....

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iled to strictly comply with the payment schedule in as much as it did not make payment of the installments mentioned in clauses (d) to (f) above; ii) THDC further failed to discharge their part of obligation by failing to obtain various sanctions like 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) .....

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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 for the following reasons:- a) possession and original .....

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of the assessee that possession was given only as permissive licensee under section 52 of the Indian Easement Act, 1882 since in the present case, all possible rights in the property including right to sell etc. had been given to the builder; e) requirement of registration of agreement under section 53A of the TPA cannot be read into section 2(47)(v) of the Act since the said section only refers to the contract of the nature referred to in section 53A of the TPA without going into controversy wh .....

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not considered as the grounds raised before the Tribunal referred to sections 54 and 54EC and not to section 54F of the Act. Hence the instant appeal by the assessee- appellant. 8. We have heard learned counsel for the parties and perused the record. 9. The following issues emerge for consideration and adjudication:- (i) scope and legislative intent of Section 2(47)(ii), (v) and (vi) of the Act; (ii) the essential ingredients for applicability of Section 53A of 1882 Act; (iii) meaning to be assi .....

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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 .....

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sub-clauses (v) and (vi), "immovable property" shall have the same meaning as in clause (d) of section 269UA. Explanation 2.-For the removal of doubts, it is hereby clarified that "transfer" includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (w .....

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xt otherwise requires,- (1) to (c) xx xx xx xx xx xx xx (d) " immovable property" means- (i) any land or any building or part of a building, and includes, where any land or any building or part of a building is to be transferred together with any machinery, plant, furniture, fittings or other things, such machinery, plant, furniture, fittings or other things also. Explanation.- For the purposes of this sub- clause," land, building, part of a building, machinery, plant, furniture, .....

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y arrangement of whatever nature), not being a transaction by way of sale, exchange or lease of such land, building or part of a building; (e) & (f) xx xx xx xx xx xx xx 11. Finance Act, 1987 introduced Clauses (v) ands (vi) in Section 2 (47) of the Act with effect from April 1, 1988. It provides that 'transfer' includes (i) any transaction which allows possession to be taken/retained in part performance of a contract of the nature referred to in Section 53A of the 1882 Act and (ii) .....

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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 S .....

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2(47) of the Act. According to Explanation to Section 2(47) of the Act, operative from 1.4.1988 (numbered as Explanation 1 by Finance Act, 2012) for the purposes of sub clauses (v) and (vi), the expression immovable property shall have the same meaning as in Section 269UA(d) of the Act. 12. The Central Board of Direct Taxes (CBDT) Circular No.495 dated 23.9.1987 (168 ITR (St.) 87 at Page 92) provides an insight into the background and objectives of the said clauses. The relevant portion is repr .....

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nsactions of the nature referred to above are not required to be registered under the Registration Act, 1908. Such arrangements confer the privileges of ownership without transfer of title in the building and are a common mode of acquiring flats particularly in multistoreyed constructions in big cities. The definition also does not cover cases where possession is allowed to be taken or retained in part performance of a contract, of the nature referred to in section 53A of the Transfer of Propert .....

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d. A person holding the power of attorney is authorised the 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 a .....

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eferred 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 incorporating and including that where possession of any immovable property is taken or retained in part performance of a contract of the nature referred to in Section 53A of 1882 Act. 14. In CIT vs. K.Jeelani Basha, (2002) 256 ITR 282, the Madras High .....

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refore, the tax authorities and more particularly, the Tribunal was justified to calculate the consideration received in that particular year for that part of the property which was parted with. In fact, a reference can be made to the judgment of the Supreme Court in Alapati Venkataramaiah v. CIT (1963) 57 ITR 185 (SC), which Mr. Rajan relied upon and pointed out that before the amendment, the transfer was very strictly construed. In the said decision, the Supreme Court refused to accept the agr .....

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nge in law, inasmuch as under section 2 (47), the delivery of possession provided it is in the nature as contemplated in section 53A of the Transfer of Property Act, would be enough to bring the transaction into the mischief of the word "transfer". The argument is undoubtedly correct. 18. Section 2(47)(v) has probably been introduced to meet the law laid down in this judgment, wherein there used to be a transfer for all the practical purposes, but the tax could be avoided only on the s .....

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tion 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 .....

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ration. 15. Similar provisions were considered by the Bombay High Court in Chaturbhuj Dwarkadas Kapadia vs. Commissioner of Income Tax, (2003) 260 ITR 491, wherein it was held that Section 2(47)(v) read with Section 45 of the Act indicates that capital gains was taxable in the year in which such transactions were entered into even if the transfer of immovable property is not effective or complete under the general law. The relevant findings read thus:- 7. Under Section 2(47)(v), any transaction .....

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ken possession of the property ; lastly, the transferee should be ready and willing to perform his part of the contract. That even arrangements confirming privileges of ownership without transfer of title could fall under Section 2(47)(v). Section 2(47) (v) was introduced in the Act from the assessment year 1988-89 because prior thereto, in most cases, it was argued on behalf of the assessee that no transfer took place till execution of the conveyance. Consequently, the assessees used to enter i .....

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introduction of the concept of deemed transfer under section 2 (47)(v). In this matter, the agreement in question is a development agreement. Such development agreements do not constitute transfer in general law. They are spread over a period of time. 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 .....

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re 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 it is a development agreement. There is a differen .....

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contract is executed. This is in view of Section 2(47)(v) of the Act. 16. Further, the Madras High Court in Commissioner of Income Tax vs. G.Saroja, (2008) 301 ITR 124 had noticed as under:- Section 2(47)(v) of the Income-tax Act comes into the aid of the Department only if the conditions of Section 53A of the Transfer of Property Act are satisfied. From a reading of the above provisions, it is clear that unless there is a written agreement, Section 53A of the Transfer of Property Act will not c .....

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transfer of property, as contemplated under Section 2(47(v) of the Act. The reasons given by the Tribunal are based on valid materials and evidence and we do not find any error or legal infirmity in the order of the Tribunal so as to warrant interference. 17. Adverting to clause (vi) of Section 2(47) of the Act, it may be noticed that the scope and ambit of this clause as explained by CBDT in its circular No.495 dated 23.9.1987 has already been reproduced above. On perusal of this clause, it wou .....

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e 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 1 .....

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the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession 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 where there is an instrument of transfer, that the tr .....

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n who has no notice of the contract or of the part performance thereof. 19. Analyzing the scope of Section 53A of 1882 Act, necessarily, the legislative history of the provision is required to be scrutinized. Section 53-A was inserted in 1929 by the Transfer of Property (Amendment) Act, 1929, and imports into India in a modified form the equity of part performance as it developed in England over the years. Doctrine of part performance as enshrined in Section 53-A of the 1882 Act is an equitable .....

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The Supreme Court in Shrimant Shamrao Suryavanshi and another vs. Pralhad Bhairoba Suryavanshi (dead) by LRs and others, AIR 2002 SC 960 had reiterated the following to be necessary conditions for applicability of Section 53A of 1882 Act : 1) there must be a contract to transfer for consideration any immovable property; 2) the contract must be in writing, signed by the transferor, or by someone on his behalf; 3) the writing must be in such words from which the terms necessary to construe the tra .....

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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 vend .....

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performance of the contract under Section 53A of the 1882 Act. The amendments have been made in Section 53A of 1882 Act and Sections 17 and 49 of the 1908 Act. The amendment vide 2001 Act which stood enforced with effect from 24.9.2001, the words the contract, though required to be registered, has not been registered, or in Section 53A of 1882 Act have been omitted. Simultaneously, Sections 17 and 49 of the 1908 Act have been amended clarifying that unless the document containing contract to tra .....

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mencement of the Registration and Other Related laws (Amendment) Act, 2001 and if such documents are not registered on or after such commencement, then, they shall have no effect for the purposes of the said section 53A. 49. Effect of non-registration of documents required to be registered.-No document required by section 17 or by any provision of the Transfer of Property Act, 1882 (4 of 1882)], to be registered shall- (a) affect any immovable property comprised therein, or (b) confer any power .....

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o be effected 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 pur .....

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ble 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 of 2001') has, however, brought about a paradigm shift in rights flowing from agreements executed under Section 53-A of the Transfer of Property Act. Section 17(1A) of the Indian Registration Act introduced by theAmendment Act of 2001, provides that contracts to transfer for consideration any im .....

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the Transfer of Property Act shall, after enactment of Section 17(1A), be compulsorily registrable and if not so registered, shall have no effect for the purpose of Section 53A of the 1882 Act. Section 17(1A) reads as follows:- "Section 17(1A) of Indian Registration Act, 1908 The documents containing contracts to transfer for consideration, any immovable property for the purpose of Section 53A of the Transfer of Property Act, 1882 (4 of 1882) shall be registered if they have been executed o .....

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it the filing of a suit for specific performance or leading of such a contractinto evidence. 10. The Amendment Act also introduced a proviso to Section 49 of the Indian Registration Act, to clarify the effect of nonregistration of a contract executed in terms of Section 53-A of the Transfer of Property Act. Section 49 of the Registration Act 1908, reads as follows:- "49. Effect of non-registration of documents required to be registered.- No document required by Section 17 or by any provisio .....

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ormance 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 consider .....

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ibit the filing of a suit for specific performance based upon such an agreement or the leading of such an unregistered agreement into evidence. 12. A suit for specific performance based upon an unregistered agreement to sell accompanied by delivery of possession or executed in favour of a person who is already in possession, cannot, therefore, be said to be barred by Section 17 (1A) of the Registration Act, 1908. 13. Section 17(1A) merely declares that such an unregistered contract shall not be .....

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the contrary. 14. We, therefore, hold that: (a) a suit for specific performance, based upon an unregistered contract/agreement to sell that contains a clause recording part performance of the contract by delivery of possession or has been executed with a person, who is already in possession shall not be dismissed for want of registration of the contract/agreement; (b) the proviso to Section 49 of the Registration Act, legitimises such a contract to the extent that, even though unregistered, it .....

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nd the transferor has performed or is will to perform his part of the contact then despite the fact that the contract was required to be registered and has not been registered, the transferrer shall 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 possess .....

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ngly 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 MAC Associates vs. S.P. Singh Chandel and another, RFA No.518 of 2011 decided on 7.2.2013, deal .....

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ssion of property. Even if a person is put in possession of property through an Agreement to Sell, he cannot protect his possession on the pretext of part performance under Section 53-A of the Transfer of Property Act, 1882 unless such an agreement is a registered document. Section 17 (1A) of the Registration Act, 1908, which has come into force with effect from 24th September, 2001, reads as under:- ' Documents containing contracts to transfer for consideration, any immoveable property for .....

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possession on the basis of such a document. In Sunil Kapoor v/s Himmat Singh & Ors. 167 (2010) Delhi Law Times 806, a Single Judge of this Court has held thus "a mere agreement to sell of immovable property does not create any right in the property save the right to enforce the said agreement. Thus, even if the respondents/plaintiffs are found to have agreed to sell the property, the petitioner/defendant would not get any right to occupy that property as an agreement purchaser. This Cou .....

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s 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 provi .....

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to sub section (1) of Section 205 of the Companies Act, 1956 are applicable. It was pronounced that there is no reason to assign to the term loss as occurring in Section 205, Proviso clause (b) of the Companies Act, a meaning different from the one in which it is understood therein solely because it is being read alongwith Section 115J of the Act. While dealing with the principles relating to interpretation of taxing statute where there was inclusion of a provision of another statute, it was he .....

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ier Act into the later. When an earlier Act or certain of its provisions are incorporated by reference into a later Act, the provisions so incorporated become part and parcel of the later Act as if they had been "bodily transposed into it". The effect of incorporation is admirably stated by LORD ESHER, M.R. "If a subsequent Act brings into itself by reference some of the clauses of a former Act, the legal effect of that, as has often been held, is to write those sections into the .....

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e it bore in the original Act from which it was taken, and that consequently it is perfectly legitimate to refer to all the rest of that Act in order to ascertain what the sections meant, though those other sections are not incorporated in the new Act". 24. Similarly, following the Apex Court judgment in Surana Steels Pvt. Limited's case (supra), the Gauhati High Court in Assam Bengal Carriers Limited vs. CIT, (1999) 239 ITR 862 (Gauhati), observed that when a legal fiction is created f .....

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d 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 Inc .....

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a similar manner indicated also for giving full effect to a legal fiction ref. State of Bombay v. Pandurang Vinayak, AIR 1953 SC 244 ; CIT v. S. Teja Singh, [1959] 35 ITR 408 (SC) ; Rajputna Trading Co. Ltd. v. CIT [1969] 72 ITR 286 (SC) ; A. S. Glittre D/5 I/S Garonne v. CIT, [1997] 225 ITR 739 (SC). There is also no statutory exception excluding the operation of Section 115J of the Act. Thus, it would mean that Section 53A of 1882 Act has been bodily transposed into Section 2(47)(v) of the Act .....

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perty or any part thereof. There is a serious dispute with regard to the nature of possession contemplated by Section 53A of 1882 Act. It was contended on behalf of the appellant-assessee that reference to the possession of the transferee as postulated under Section 53A of 1882 Act is that it must have been delivered in furtherance to the contract and should be sole, exclusive and cannot be concurrent. The possession is not to be in any other capacity to invoke Section 53A of 1882 Act. On the ot .....

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rvations for meaning of possession and how should it be 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 o .....

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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 "possession" in ordinary language, in all areas of law and in all legal systems, is to ask for the impossible". In the above case of Anil Kumar, Sarkaria, J. speaking for a 3 Judge Bench also referred to the co .....

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the right to property and the fact of the real intention. It involves power of control and intent to control. (see Dias and Huges) 14. ... 15. While recognizing that 'possession' is not a purely legal concept but also a matter of fact, Salmond (12th Ed., 52) describes possession, in fact", as a relationship between a person and a thing. According to the learned author, the test for determining 'whether a person is in possession of anything is whether he is in general control of .....

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be distinguished as "immediate or direct"." Salmond makes reference to three types of mediate possession. In all cases of "mediate possession", two persons are in possession of the same thing at the same time. An allied concept of concurrent possession has also been explained in para 55 of Salmond's Jurisprudence in the following words: It was a maxim of the civil law that two persons could not be in possession of the same thing at the same time. As a general propos .....

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ommon, 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 .....

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tant accrual of capital gain to a point of time when the concurrent possession will become exclusive possession of developer/transferee after he pays full consideration. 27. Further, if 'possession' referred to in clause (v) is to be understood as exclusive possession of the transferee/developer, then, the very purpose of the amendment expanding the definition of transfer for the purpose of capital gains may be defeated. The reason is this: the owner of the property can very well contend .....

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e and indefeasible possession may be in jeopardy. In this state of affairs, the transaction within the meaning of clause (v) cannot be said to have been effected and the liability to pay capital gains may be indefinitely postponed. True, it may not be profitable for the developer to allow this situation to linger for long as the process of transfer of flats to the prospective purchasers will get delayed. At the same time, the other side of the picture cannot be over-looked. There is a possibilit .....

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possession, we would like to clarify one more aspect. What is spoken to in clause (v) of section 2 (47) is the 'transaction' which involves allowing the possession to be taken. By means of such transaction, a transferee like a developer is allowed to undertake development work on the land by assuming general control over the property in part performance of the contract. The date of that transaction determines the date of transfer. The actual date of taking physical possession or the inst .....

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en 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 agree .....

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is necessary that this aspect may be examined in the background of statutory requirement as enacted in section 53A. To qualify for the protection of the doctrine of part performance it must be shown that there is a contract to transfer for consideration immovable property and the contract is evidenced by a writing signed by the person sought to be bound by it and from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty. These are pre-requisites to in .....

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ontract and the acts of part performance must unequivocally point in the direction of the existence of contract and evidencing implementation or performance of contract. There must be a real nexus between the contract and the acts done in pursuance of the contract or in furtherance of the contract and must be unequivocally referable to the contract. When series of acts are done in part performance, one such may be payment of consideration. Any one act by itself may or may not be of such a conclu .....

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y 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 a .....

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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 of the contract. Anything done in furtherance of the contract postulates the pre- existing contract and the acts done in furtherance thereof. Therefore, the acts interior to the contract or merely incidental to the contract would hardly provide any evidence of part performance. 27. Applying the principle of law laid down .....

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under the contract. On the contrary, there is a finding recorded in the earlier suit that in spite of his having entered into a contract to purchase the property he had not disowned his character as lessee and he was treated as such by the parties. The judgment dated 1.9.1999 in the Civil Suit notes the conduct of the plaintiff inconsistent with his conduct as vendee in possession. When a person already in possession of the property in some other capacity enters into a contract to purchase the .....

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enancy. However, he failed to show his nature of possession having altered from that of a tenant into that of a transferee. In a suit of ejectment based on landlord-tenant relationship, the tenant sought to protect his possession by raising the plea of part performance as against subsequent purchaser of the property. Referring to Section 91 of Indian Trust Act, the High Court held that a subsequent purchaser of the property with notice of an existing contract affecting that property must hold th .....

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ssion 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 Thot .....

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discussion was undertaken by the Trial Court on this. It is true that Section 53-A of the Act is basically a legal weapon to be used in defence to protect the possession, under an agreement of transfer, if the person in possession is ready and willing to perform his part of contract. In the recent past, Courts have recognized that this provision can be treated as a source of independent right, and that it can be enforced by filing a suit. 31. One of the most important ingredients of Section 53-A .....

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Law Review 611], observed as under: "I want to make the point that there are many meanings of the word 'possession'; that possession can only be usefully defined with reference to the purpose in hand; and that possession may have one meaning in one connection and another meaning in another". 32. Jurists hailing from various legal systems have pointed out that possession, as a legal concept, has two components, viz., corpus possessions, physical possession of the property and an .....

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t;. 33. Opinions drastically varied, as to whether possession is a question of fact, or of law. While some jurists treated it as a pure question of fact, others held it to be matter of law. Dias, in his treatise 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 .....

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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 was delivered physical possession of the property. It can also happen when a .....

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-owner :-Where one of two or more co-owners of immovable property legally competent in that behalf transfers his share of such property or any interest therein, the transferee acquires as to such share or interest, and so far as is necessary to give, effect to the transfer, the transferor's right to joint possession or other common or part enjoyment of the property, and to enforce a partition of the same, but subject to the conditions and liabilities affecting at the date of the transfer, th .....

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fer. 36. The phenomena of co-ownership of an undivided property, on the one hand, and delivering of physical or symbolical possession thereof do not co-exist. In fact, they are mutually exclusive. In Saleem, S/o. Yaseen v. I Additional Civil Judge, Senior Division, Saharanpur, , it was held that the right of a transferee under Section 53-A of the Act does not have the effect of superceding, or frustrating the provisions of Section 44 of the Act. To the same effect is the judgment of the Supreme .....

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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, a .....

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ssion was effected to him, the plaintiff would not prove its ingredients. One of the most well-recognized methods of symbolic delivery of possession of immovable property is, by attorning existing lease in favour of the transferee. Such attornment can take place either with the direct participation of the lessee, in a tripartite transaction, or through intimation by the transferor to the lessee about the latter's obligations to pay the rents to the transferee, henceforth. Even where no such .....

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erive the benefit of that provision, once he failed to prove that he has taken possession of the suit schedule property. 29. Similarly, Delhi High Court in M/s R.K.Apartments Pvt. Limited and another vs. Smt.Aruna Bahree and others, (1998) 2 ILR 727 (Del.), delving into the issue of possession under Section 53A of 1882 Act, had recorded as under:- 14. From the aforesaid statements made in both the Articles it is manifest that the legal position enunciated in Hounslow London Borough's case (s .....

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Property Act. 30. The concept of possession to be defined is an enormous task to be precisely elaborated. Possession is a word of open texture. It is an abstract notion. It implies a right to enjoy which is attached to the right to property. It is not purely a legal concept but is a matter of fact. The issue of ownership depends on rule of law whereas possession is a question dependent upon fact without reference to law. To put it differently, ownership is strictly a legal concept and possession .....

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veloper 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 docu .....

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hysical possession need not be probed into. It is enough if the transferee has by virtue of that transaction a right to enter upon and exercise the acts of possession effectively. It was further held in that case that the capital gains which arose during the financial year 2006-07 shall be subjected to tax for the assessment year 2007-08. The aforesaid observations were recorded in that context on the facts involved therein. It would have to be ascertained in each case independently whether a tr .....

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for the parties. Firstly, noting the arguments of the assessee, reliance was placed on Section 52 of the Indian Easement Act, 1882 which defines 'licence' in the following terms:- 52. "License" defined.- Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or .....

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e of JDA dated 25.2.2007 as required 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. Proj .....

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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 documents and all documents and agreements necessary to create and register the mortgage, conveyance, lease deeds, licence agreement, Power of Attorneys, affidavits, declarations, indemnities and all such other documents, letters as may be necessary to carry out, facilitate and e .....

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the same as set out herein. It is hereby agreed and confirmed that what is stated in the recitals hereinabove, shall be deemed to be declarations and representations on the part of the owner as if the same were set out herein in verbatim and forming an integral part of this agreement. 4. Consideration 4.1.It is specifically understood and agreed amongst the parties that THDC shall use its expertise and its Brand name and/or any other brand name at its discretion to develop the property into the .....

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007 (copy attached as per Annexures I & II), HASH is committed to pay to the owner and/or the respective members of the owner (as the case may be) a total amount of ₹ 106,42,50,000/- (Rupees one hundred six crores forty two lacs fifty thousand only) calculated @ ₹ 82,50,000/- (Rupees eighty two lacs fifty thousand only) payable to 65 members having plot of 500 square yards each, ₹ 1,654,00,000/- (Rupees one crore sixty five lacs only) payable to 30 members having plot of 10 .....

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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 ₹ 106,42,50,000/- (Rupees one hundred six crores forty two lacs fifty thousand only) and one hundr .....

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he respective members of the owner (as the case may be) as per the negotiated and agreed terms between the owner and HASH. HASH expressly undertakes to make timely payments of the payment to the owner and/or the respective members of the owner (as the case may be) as under: (The schedule of payment referred in clause 4.1 herein has already been reproduced in the earlier part of the judgment). 9. Transfer of ownership/rights 9.1. The owner shall simultaneously on receipt of payment as set out in .....

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, deeds, matters and things to be done or incurred by THDC in that behalf as also to sign all letters, applications, agreements and register the same if necessary, documents, court proceedings, affidavits and such other papers containing true facts and correct particulars as may from time to time be required in this behalf. 9.2 The owner shall execute in favour of THDC, the sale deeds in accordance with the provisions of clause 4.1(ii) to clause 4.1(v) of this agreement and execute all other nec .....

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itle deeds only for the purpose of furtherance of the project in the manner that it does not adversely effect the owner/allottee in any manner whatsoever. 14. Termination (i) Save and except the provisions of clause 26, THDC shall at all 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 n .....

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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 project and to undertake the project are not granted within nine (9) mo .....

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d 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 agree .....

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tion 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 he 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. (iv .....

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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 .....

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sm, civil commotion, lock outs, sabotage,plagues or other epidemics, acts of God including fire, floods, volcanic eruptions, typhoons, hurricanes, storms, tidal waves, earthquake, landslides, lightning, explosions, and other natural calamities,prolonged failure of energy, court orders/injunctions, change of laws, action and/or order by statutory and/or government authority, third party actions affecting the development of the project, acquisition/requisition of the property or any part thereof b .....

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occurred. In the event any party anticipates the happening of an event of Force Majeure, such party shall promptly notify the other party. (iv) The party claiming event of force Majeure conditions shall, in all instances and to the extent it is capable of doing so, use its best efforts to remove or remedy the cause thereof and minimize the economic damage arising thereof. (v)Either party may terminate this agreement after giving the other party a prior notice of fifteen (15) days in writing if .....

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gistrar Majri, District Rupnagar (now within District Mohali) and more particularly described in the Schedule A hereunder written and delineated in green colour boundary line in the plan attached hereto, annexed as Annexure I (hereinafter referred to as the 'Property'). B). The owner is the absolute and undisputed owner of the property and has assigned and transferred all its righst to plan, develop, construct, sell, lease, mortgage the property as more particularly set out in the Joint .....

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ur 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 an .....

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power of attorney) in favour of THDC and/or its authorized nominee to facilitate THDC to carry out its duties and obligations for the execution, coordination and implementation of the project under the Joint Development Agreement. In pursuance thereof, the owner hereby nominates and appoints THDC and/or its authorized nominee to act for and in the name of and on the behalf of the owner and to do all acts and things relating to the property. Now know all and these presents witness that the owner .....

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or may be required from time to time to enable the development of the property and for undertaking, executing and completing the project and without prejudice to the aforegoing to jointly and severally do and perform the following acts, deeds, matters and things, namely: (a) to (l) xx xx xxx xx xx xx (m) To apply to the competent authority and/or any other body (ies) and/or any other relevant statutory and/or government authority(ies) for the time being concerned therewith for the permanent or t .....

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es. (o) to (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/ .....

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ct 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 for the receipts. (bb) to (hh) xx xx xxx xx xx xx 33. Conversely, learned counsel for the revenue, argued that where the intention and facts are contained in more than one document between the same parties, they are required to be read and interpreted together by taking them to be one docu .....

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ents of Exs. A and B in holding that the 3rd defendant has undertaken the liability as a co-obligant. It was submitted that there was an integrated transaction constituted by the various documents- Exs. A, B and G executed between the parties on the same day and the legal effect of the documents was to confer on the 3rd defendant the status of a surety and not of a co-obligant. In our opinion, the argument put forward on behalf of the appellant is well-rounded and must be accepted as correct. It .....

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ame date. There is another document executed by defendant No. 1 on November 26, 1946-Ex. G-Hypothecation agreement. The principle is well- established that if the transaction is contained in more than one document between the same parties they must be read and interpreted together and they have the same legal effect for all purposes as if they are one document. In Manks v. Whiteley,(1) Moulton, L.J. stated: "Where several deeds form part of one transaction and are contemporaneously executed .....

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es 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 .....

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nsanity or death." (b) A consigns 1,000 bales of cotton to B, who has made advances to him on such cotton, and desires B to sell the cotton, and to repay himself out of the price the amount of his own advances. A cannot revoke this authority, nor is it terminated by his insanity or death. "(b) A consigns 1,000 bales of cotton to B, who has made advances to him on such cotton, and desires B to sell the cotton, and to repay himself out of the price the amount of his own advances. A canno .....

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e last sentence of section 54 of the Transfer of Property Act states that a contract for sale of itself does not create any interest in or charge on immovable property. Similarly, section 17(1)(b) of the Registration Act makes only those documents compulsorily registerable which create, declare, assign, limit or extinguish any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards to or in immovable property. Since an agreement for sale does not cr .....

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n Law, the specific performance of contracts was a part of the law of contract. This is why Chapter Iv of the Contract Act deals with the performance of contracts which includes the performance of contracts relating to immovable property also. In 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 agr .....

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ruction 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 hands of the assessee-appellant. The following observations r .....

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law before the making of the Act., 2nd. What was the mischief and defect for which the common law did not provide., 3rd. What remedy the Parliament hath resolved and appointed to cure the disease of the Commonwealth., and (1) 3 Co. Rep. 7a; 76 ElR. 637, 6334th. 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 continuance of the mischi .....

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that to construe the Statute in question, it is not only legitimate but highly convenient to refer both to the former Act and to the ascertained evils to which the former Act had given rise, and to the later Act which provided the remedy' These three being compared I cannot doubt the conclusion". 36. Reliance was placed on the conclusion of the Apex Court in Dr. Baliram Waman Hiray vs. Mr. Justice B.Lentin and another, (1988) 176 ITR 1, wherein following the Bengal Immunity's case .....

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larging 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 inv .....

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State of Bihar & Ors., [1955] 2 SCR 603 in the construction of Art. 286 of the Constitution. 37. The claim of the assessee was also contested relying upon judgment in Suraj Lamp and Industries Private Limited's case (supra) by urging that while interpreting Sections 54, 55, 53-A of the 1882 Act, the Apex Court held that transfer of immovable property by way of sale can only be by a deed of conveyance (sale deed). In the absence of a deed of conveyance duly stamped and registered as requi .....

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transferred/conveyed only by a registered deed of conveyance. Transactions of the nature of RsGPA sales' or RsSA/GPA/WILL transfers' do not convey title and do not amount to transfer, nor can they be recognized as valid mode of transfer of immoveable property. The courts will not treat such transactions as completed or concluded transfers or as conveyances as they neither convey title nor create any interest in an immovable property. They cannot be recognized as deeds of title, except to .....

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xx x 26. We have merely drawn attention to and reiterated the wellsettled legal position that SA/GPA/WILL transactions are not Rstransfers' or Rssales' and that such transactions cannot be treated as completed transfers or conveyances. They can continue to be treated as existing agreement of sale. Nothing prevents affected parties from getting registered Deeds of Conveyance to complete their title. The said RsSA/GPA/WILL transactions' may also be used to obtain specific performance o .....

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bservations 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 execu .....

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bonafide/genuine transactions. 38. In so far as enunciation of legal principles in various pronouncements relied upon by learned counsel for the revenue are concerned, they are well recognized but their applicability has to be judged in the facts and circumstances of the present case. 39. It would be apt to notice undisputed facts as discernible from the record of the case. The assessee is a member of Punjabi Cooperative House Building Society Limited who owned 21.2 acres of land in Village Kan .....

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with THDC for the said purpose. The Executive Committee of the society decided to appoint HASH alongwith the Joint Developer THDC in terms of JDA. It was resolved that members of the society owning plots measuring 500 square yards would receive ₹ 82,50,000/- each to be paid by HASH in four instalments and one flat with super area of 2250 square feet to be constructed by THDC. The members owning plots of 1000 square yards were to receive double the amount of settlement of plot holders of 5 .....

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ed as Annexure A.2 with ITA No.200 of 2013. It may be advantageous to broadly 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 wi .....

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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 dated 26.2.2007 had also been executed by the society in favour of THDC. Various relevant clauses A, B, D and other conditions relied upon by the parties have already been reproduced in the earlier part of the judgment. 40. Under .....

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2.2007 (i.e. the date of its execution and registration), the possession continued to be with the members of the society. Still further, even the two sale deeds executed between the parties on 2.3.2007 and 25.4.2007 in respect of 3.08 acres and 4.62 acres respectively clearly stipulates that possession was delivered under the said instruments which would show that the parties had agreed for pro-rata transfer of land. A combined reading of the various clauses of JDA dated 25.2.2007 and irrevocabl .....

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as been delivered the same in part performance of a contract. In other words, the society or its members had never parted possession of the property though under JDA and the special power of attorney, the developer was given power to raise finance by mortgaging the property and for the purpose of registration of the charge thereon. If at all, it is to be held that possession was delivered to the developers then it would be as a licencee only. The developer was authorized to amalgamate the projec .....

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urposes 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 obligatio .....

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ment and statutory approvals, sanctions of all drawings and plans required for development of the project and also to undertake the project within six months of the handing over of the final plans, designs and drawings to the developer for submission of the same to the competent authority for obtaining the approval which was to be done by HASH and THDC within the prescribed time schedule. The External development charges, licence fee, CLU charges and any other related charges were the liability .....

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ents. A Public Interest Litigation bearing CWP No.20425 of 2010 was filed in this court where construction/development of the project was stayed vide order dated 20th January 2011. On 26.3.2012, this Court had directed the developers to obtain additional permission under the Punjab New Capital (Periphery) Control Act, 1952. Subsequently, in CWP No.18253 of 2009 titled 'Court on its own motion vs. UT, Chandigarh and others, this Court vide order dated 14.5.2012 directed stay of construction i .....

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r dated 28.1.2011 to HASH for payment of third instalment as per clause 4.1(iv) of the JDA. Vide letter dated 4.2.2011, HASH stated that the third installment would become due only after obtaining permission to commence construction which was still pending with the Ministry of Environment 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. .....

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ted 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 hereinbefore, woul .....

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ich was not transferred by them to the developer/builder because of supervening event not on account of any volition on their part. 44. Viewed from another angle, it cannot be said that any income chargeable to capital gains tax in respect of remaining land had accrued or arisen to the appellant-assessee in the facts of the case. Considering the issue of taxability of income with regard to its accrual or receipt as the basis for charging income tax, the Apex Court in Commissioner of Income Tax, .....

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ncome, if income does not result at all, there cannot be a tax, even tough in bookkeeping, an entry is made about a " hypothetical income " which does not materialize. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though a .....

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) 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 .....

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ceived and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account. 18. The above passage was cited with approval in Morvi Industries Ltd. v. Commissioner of Income-Tax (Central), [197 .....

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corresponding liability of the other party from whom the income becomes due to pay that amount. 20. It follows from these decisions that 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 that the income is not hypothetical and it has really accrued to the assessee. 46. We summarize our conclusions as under:- 1. Perusal of the JDA dated 25.2.2007 read w .....

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