TMI Blog2015 (7) TMI 878X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 consequently Section 2(47)(v) of the Act does not apply. 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. 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was any default on the part of the developers, and if so, its effect on the transactions and on exigibility to tax? v) Whether amount yet to be received can be taxed on an hypothetical assumption arising from the amount to be received? 3. A few facts relevant for the decision of the controversy involved 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 Joint Development Agreement dated 25.2.2007 (in short, JDA ) with Hash Builders Private Limited, Chandigarh (for brevity HASH ) and Tata Housing Development Company Limited, Mumbai (THDC). Under the JDA, it was agreed that HASH and THDC ( the developers') shall undertake development of 21.2 acres of land owned and registered in the name of the society in respect of which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Committee of the society dated 4.1.2007 and JDA dated 25.2.2007 are attached as Annexures A.1 and A.2 respectively with the appeal. Clause 14 of the agreement further provided that in case of termination of the JDA, lands registered in the name of THDC upto the date of termination shall remain with THDC and the balance lands to be transferred shall not be transferred in favour of THDC. 4. The developers made payments only upto clause (c) above i.e. upto second installment and till date only part 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... session of any immovable property to be taken or retained in part performance of contract of the nature referred to in Section 53A of the 1882 Act shall 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 JDA was to be taxable under the head 'capital gains' in the assessment year 2007-08 since JDA was signed in the said year: a) monetary consideration receivable at ₹ 82.50 lacs (though only ₹ 15 lacs received during the relevant year) and; b) fair market value of 2250 square feet flat (to be received in future) at the rate of ₹ 4500 per square feet = ₹ 1,01,25,000/-. The Assessing Officer accordingly held that the appellant was liable to tax during the assessment year under consideration on the entir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 title deeds of the land were actually handed over by the society to the developers; b) irrevocable power of attorney granting substantial rights to the developers was executed on 26.2.2007 which having been registered, it was not necessary to register the JDA; c) through various clauses of the JDA and irrevocable power of attorney, the developer was in complete control of the property and was in possession thereof as contemplated in the aforesaid section; d) there was no force in the contention 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterized as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India. Clause (d) of Section 269UA of the Act which defines 'immovable property for the purposes of Sub-clauses (v) and (vi) of Section 2(47) of the Act is in the following terms:- 269UA. Def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 are not treated as such under the general law. Avoidance or postponement of tax on capital gains by adopting devices such as the enjoyment of property in pursuance of irrevocable power of attorney or part performance of a contract of sale is also sought to be arrested by introducing the two clauses, clause (v) and (vi) in section 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 reproduced as under:- Definition of transfer widened to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 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 Court held that once possession, even of a part of the property was handed over to the transferee, for the purpose of section 2 (47) (v) read with section 45 of the Act, the transfer was complete. It was held thus:- In this case, possession was parted with whereas the assessee/vendor received the consideration therefor. Once the possession, even of a part of the property was handed over to the transferee for the purpose of section 2(47)(v) read with section 45, the transfer was complete and, therefore, the tax authorities and more particularly, the Tribunal was justified to calculate the consideration received in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pelt 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 Tribunal has correctly held that the assessee would have to be assessed on the basis of the transfer of the possession in proportionate to the consideration. 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 involving allowing of possession to be taken over or retained in part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act would come within the ambit of Section 2(47)(v). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 difference between the contract on the one hand and the performance on the other hand. In this case, the Tribunal as well as the Department have come to the conclusion that the transfer took place during the accounting year ending March 31, 1996, as substantial payments were effected during that year and substantial permissions were obtained. In such cases of development agreements, one cannot go by substantial performance of a contract. In such cases, the year of chargeability is the year in which the 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 53 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld 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 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 transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. 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 1882 Act was not required to be executed through a registered instrument either under 1882 Act or the Indian Registration Act, 1908 (in short, the 1908 Act ) as originally enacted. 21. The Registration and Other Related Laws (Amendment) Act, 2001 (in short, the 2001 Act ) has brought about a radical change in the rights flowing on the basis of agreements executed in part 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 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 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 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 immovable property for the purpose of Section 53Aof the Transfer of Property Act, 1882, shall be registered if they have been executed on or after the commencement of the Registration and Other Related Law (Amendment) Act, 2001. Section 17(1A)further provides that, in case, such a document is not registered, it shall have no effect, for the purpose of Section 53A. A combined reading of Sections 53A and 17(1A), reveals that a contract that evidences part performance, as envisage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 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 possession of any benefit conferred by Section 53A of the 1882 Act. The proviso to Section 49 of the Indian Registration Act clearly postulates that non-registration of such a contract would not prohibit 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 pressed into service for the purpose of Section 53(A) of the Tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct 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 MAC Associates vs. S.P. Singh Chandel and another, RFA No.518 of 2011 decided on 7.2.2013, dealing with essential requirements of registration in an agreement under Section 53A of 1882 Act after 24.9.2001 noticed as under:- 13. If the matter is viewed from another angle then also suit for possession on the basis of Collaboration Agreement, which at best can be taken at par with the Agreement to Sell, is not maintainable even if, for the sake of arguments, it is accepted that the respondent was agent of appellant. Agreement to Sell does not vest any right in favour of a person to the possession of property. Even if a person is put in possession of property through an Agreement to Sell, he cannot protect his possession on the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciation, 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 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 held that provision must be construed in the sense it bore in statute from which it is taken. It was recorded as under:- Section 115J, Explanation clause (iv), is a piece of legislation by incorporation. Dealing with the subject, Jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. In CIT v. Bombay Trust Corporation, AIR 1930 PC 54, Viscount Dunedin in the aforesaid case observed (page 55): Now when a person is 'deemed to be' something the only meaning possible is that whereas he is not in reality that something the Act of Parliament requires him to be treated as if he were. The Supreme Court also dealt in 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 Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession' 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 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 comments of Dias and Hughes in their book on Jurisprudence that if a topic ever suffered too much theorizing it is that of possession . Much of the difficulty is caused by the fact that possession is not a pure legal concept, as pointed out by Salmond. The learned Judge then explained the connotation of the expression possession by referring to the well known treatises on Jurisprudence: Possession , implies a right and a fact : the right to enjoy annexed to the right to property and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 clause (v) and the resultant 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, as is being contended in the present case, that the developer will have such exclusive possession in his own right only after the entire amount is paid to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 for a case to be falling under the provisions of Section 53A of 1882 Act, in Sardar Govindrao Mahadik and another vs. Devi Sahai and others, AIR 1982 SC 989 had dealt as follows:- 31. While text book writers and English decisions may shed some light to illuminate the blurred areas as to whether part payment of purchase money or even the whole of the consideration would not be sufficient act of part performance, it 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 immov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erance 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 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 in Sardar Govindrao Mahadik's case (supra), the Apex Court in D.S.Parvathamma vs. A.Srinivasan, AIR 2003 SC 3542 reiterated as under:- 9. Secondly, the appellant has failed to allege and prove that he was delivered possession in part performance of the contract or he, being already in possession as lessee, continued in possession in part perf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ti 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 performance of an agreement of sale, observed as under:- 30. Now the third point: The plaintiff raised a plea, as to his entitlement for the benefit under Section 53-A of the Act. Specific issue was framed and extensive 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 was delivered physical possession of the property. It can also happen when a symbolical delivery of possession was effected, such as by attornment of the existing lease over such property. Where the contemplated transfer relates to an undivided share, Section 53-A takes a different colour. The reason is that, there cannot be delivery of possession of property by a co-owner, of an undivided property, or the corresponding taking possession of such property by the transferee. Section 44 of the Act makes this abundantly clear. It reads as under: Sec. Transfer by one co-owner :--Where one of two or more co-owners of immovable property legally competen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty 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, 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 specific steps are taken, an implied symbolic, delivery of possession can be culled out, if the transferee is able to prove to the satisfaction of the Court, that he is sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. Integrally connected to it was the identification of the previous year in which the deemed transfer within the meaning of clause (v) of Section 2(47) of the Act had taken place. It was observed that once it was held that the transaction of the nature referred to in clause (v) of section 2(47) of the Act had taken place on a particular date, the actual date of taking physical 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 fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, 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 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 enforce the rights and to register the same with the revenue/competent authorities and to appear on our behalf before all authorities, statutory or otherwise, and before any court of law (the Development Rights). The owner hereby hands over the original title deeds of the property as mentioned in the list annexed hereto and marked as Annexu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pective 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 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 Schedule B (sale transaction). 4.2.It is expressly agreed between the developers that HASH shall be responsible for making all payments to the owner and/or the 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/r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement 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 project and to undertake the project are not granted within nine (9) months of the submission of the final plans/design and drawings to the competent authority for approval, then THDC may at its sole discretion either decide that it does not desire to undertake and complete the project and hence terminate this agreement after giving thirty (30) days written notice in this regard or decide to wait for any further time as deemed fit by THDC for the grant of the aforesaid approvals and licences. In the event the agreement is terminated by THDC, all the lands register ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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, 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 by the government or any other statutory authority and such other circumstances aff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to be determined by THDC (hereinafter referred to as the 'Project'). Further the S....to execute an irrevocable special power of attorney in favour of THDC authorized nominee. xx xx xx xx xx xx D). Under the terms and conditions of the Joint Development Agreement, the owner is required to execute and register an irrevocable special power of attorney (Irrevocable special 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, coordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 document. To garner support, reliance was placed on the following observations in the judgment of the Supreme Court in S.Chathanatha Karayalar vs. The Central Bank of India Limited and others, AIR 1965 SC 1856:- The f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) 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. (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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 hands of the assessee-appellant. The following observations recorded by the Apex Court in Bengal Immunity Co. Limited vs. State of Bihar and others, 1955(2) SCR 603 were referred:- It is a sound rule of construction of a statute firmly established in England as far back as 1584 when Heydon's case(1) was decided that- .................... for the sure and true interpretation of all Statutes in general (be they penal or beneficial, restrictive or enlarging of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 required by law, no right, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed 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 undivided shares in the land relating to apartments in favour of prospective purchasers. In several States, the execution of such development agreements and powers of attorney are already regulated by law and subjected to specific stamp duty. Our observations regarding RsSA/GPA/WILL transactions' are not intended to apply to such bonafide/genuine transactions. 38. In so far as enunciation of legal principles in various pronouncemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 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 Clause 2.1 of JDA, the possession of the property was to be handed over simultaneously with the execution and registration of the said agreement. The JDA dated 25.2.2007 was never registered and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporation, 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 set out therein which was an essence of the JDA. Additionally, it was the responsibility of the developers to obtain requisite government 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 hereinbefore, would not be attracted. 43. In view of preceding analysis, it is reiterated that from the cumulative effect of covenants contained in JDA dated 25.2.2007 read with registered special power of attorney dated 26.2.2007, it cannot be held that the mandatory requirements of Section 53A of 1882 Act were complied with which stood incorporated in Section 2(47) (v) of the Act. Once that was so, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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