TMI Blog2000 (1) TMI 990X X X X Extracts X X X X X X X X Extracts X X X X ..... received in the month of May, 1988. The instalments received from the developer was shown under the head sundry creditors . 3. However, the Assessing Officer was of the view that by virtue of the development agreement the assessee transferred the land at Thane to M/s Runwal Investments (P) Ltd. and therefore, the total consideration receivable from the developer is liable to be taxed under section 45 of the Act i.e., under the head Capital gains . The reasons given by Assessing Officer in this regard are as under : (a)Prior to 1st April, 1988 only legal ownership was recognised under the Indian laws and it was immaterial whether one had given possession of the property to someone and there was absolutely no chance of getting it back. Whereas, consequent to the decision of the Supreme Court in Nizam s case, section 2(47) of the IT Act, was amended and w.e.f. 1st April, 1988 the Legislature recognised the concept of beneficial ownership of the nature referred to in section 53A of the Transfer of Property Act, 1882 (T.P. Act). (b)In the present case, the assessee transferred the possession of land to M/s Runwal Investments (P) Ltd., the company engaged in the business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he T.P. Act and section 2(47)(v) of the IT Act, the Assessing Officer summarised that the following points would decide whether there was a transfer within the meaning of the Act or not : (a)There should be a contract of transfer of any immovable property for consideration. (b)The agreement should be in writing. (c)The terms necessary to constitute the transfer can be ascertained with reasonable certainty. (d)There should be transfer of possession of the property or any part thereof in part-performance of the contract. (e)Transferee has performed or willing to perform his part of the contract. 6. Assessing Officer observed that all the aforementioned conditions are fulfilled in the instant case because there is a valid contract to transfer the immovable property for consideration and the agreement is in writing. The terms are specific and unambiguous and the purchaser has taken the possession of the property in part-performance of the contract. He also observed that both the parties were willing to honour the contract. He thus concluded that all the conditions contained in section 53A of the T.P. Act are fulfilled and hence the transaction is covered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he payment already made by M/s Runwal Investments (P) Ltd. and terminate the contract. He thus concluded that the amount is not taxable in the current year but can be taxed in the subsequent year. It may be observed here that the assessee has not disputed the taxability of the above sum in the next assessment year and has not filed any cross-objections against the observations of the CIT(A). In fact, the assessee voluntarily offered to tax the said sum in the subsequent assessment year. 9. Aggrieved by the order of the CIT(A), the Revenue is in appeal before us contending, inter alia, that the builder has given possession of the land without which he cannot develop the land and construct the flats. As per section 2(47)(v) of the IT Act r/w section 53A of the T.P. Act, transfer of possession of land would amount to part-performance of the contract and by virtue of the extended meaning given to the term transfer , the assessee is liable to be taxed under the head capital gains . The Departmental Representative took us through the detailed order passed by the Assessing Officer in support of his plea that transfer of legal title is not necessary in order to constitute transfer a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gations under this agreement and upon the execution of the conveyance as hereinafter provided. 11. Vide clause (6) of the supplementary agreement, it is agreed that the developer is allowed to carry out the development work on and from the grant of licence and the developers in turn have the right to enter into agreements for sale of flats constructed on the said property but in the event of failure on the part of the developers to complete the transaction with the owners, for any reason whatsoever, such purchasers shall have no claim, of whatsoever nature, against the owners, as a result thereof. The case of the learned counsel is that nowhere transferring the possession is contemplated by the agreement, the developer is only granted a licence so that he can enter in the said premises and peacefully carry out the construction activity as otherwise the developer would be considered as trespasser. He also adverted our attention to pp. 15 to 18 of the paper-book No. 2 to submit that the assessee-company has full rights to terminate the agreement in the event of default on the part of the developer in making payment of the last instalment within the stipulated time and till the fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l contended that in order to treat a particular transaction as amounting to transfer under the IT Act, the transferee, in part performance of the contract, should take possession of the property whereas under section 53A of the T.P. Act, the language used is .... taken possession of the property or any part thereof which abundantly shows that the transfer of possession should not be in part in order to constitute a transfer under the IT Act. Elaborating his submissions further, the learned counsel explains that section 2(47)(v) deals with complete possession of property and not mere licence or a part possession for carrying on the developmental activities and, therefore, such alleged possession did not fall within the meaning of transfer under the IT Act. He further submitted that one of the conditions laid down in section 53A of the T.P. Act is that the transferee should either perform or willing to perform his part of the contract and the willingness of the transferee to perform his part of the contract can be proved only in a Court of Law, by producing evidence on record, before invoking section 53A of the T.P. Act. Explaining this argument further, the learned counsel ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid amount and interest as aforesaid. Such guarantee shall be in the form approved by the advocates of the owners. The developers shall not give possession of any tenement in the building to any of the buyers of such tenements till the amount due under this agreement to the owners is paid in full. Relevant portion of clause (8)(d) reads as under : ..... Notwithstanding the fact that the said Power of Attorney dated 30-7-1987, given by the owners is made irrevocable it is hereby mutually agreed and declared that in case the developers make any default in making payment of any of the instalments due under the development agreement, dated 29-7-1987, or this agreement is terminated, then the owners will be at liberty to revoke the said power by giving 30 days notice to the Developers and if within the said time the default is not remedied. (As agreed upon by supplementary agreement dated 24-9-1987). 15. The learned counsel also relied upon the decision of the Hon ble Gujarat High Court in the case of Shantivan Corporation v. Sub-Registrar Ors. [1990] 90 CTR (Guj.) 196 : [1990] 189 ITR 583 (Guj.) in support of his plea that the transferee has no right of possess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he impugned transaction can be classified as transfer of capital asset or would be considered as allowing of the possession of any immovable property in part-performance of a contract of the nature referred to in section 53A of the T.P. Act. As rightly pointed out by the learned counsel for the assessee, the transaction can at best be classified as an agreement granting licence to the developers within the meaning of section 52 of the Easement Act, 1882. It may also be noted that the Revenue has not brought any material to show that as on 31st March, 1988 i.e. the last day of the previous year, the developer was willing to perform the contract on his part. On the contrary, the factum of delayed payment of the last instalment would indicate that the assessee had the privilege to terminate the contract as per terms of agreement and the other party cannot have any protection under law to seek specific performance of the contract or to take shelter under section 53A of the T.P. Act. Thus, the conditions stipulated in section 53A of the T.P. Act are also not satisfied. Thus, on a careful perusal of the agreements and upon a plain interpretation of the concerned provisions, we are of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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