TMI Blog2009 (11) TMI 910X X X X Extracts X X X X X X X X Extracts X X X X ..... L a/c by ₹ 15,25,000 as flat booking and also invested ₹ 20 lakhs during the year in capital savings scheme. In the computation of income, the assessee claimed benefit under s. 54EC of the IT Act treating the receipt as long-term capital gain. The assessee was a co-owner of the property purchased in the year 1990. On 31st Oct., 2000, the assessee along with other entered into a development agreement with the developer M/s Eastern Development (P) Ltd. As per this agreement, all the co-owners were to get 32.5 per cent of the total constructed area and the balance was to be remained with the developer. The assessee has sold the flat so received in his share during the financial year 2004-05 and received the sum of ₹ 15,25,000. She (sic) pleaded that the occupation certificate in respect of this building issued on 2nd June, 2004 by Dumdum Municipality and the assessee got possession of the flat on or after 2nd June, 2004. According to her, therefore, the building was constructed on the land which was purchased more than 36 months back, but the building that was constructed was a new asset, which came into existence only after 2nd June, 2004 and the same was held by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this regard. He, therefore, submitted that on the date of the development agreement, i.e., 31st Oct., 2000, transfer under s. 45 of the Act of 67.5 per cent of the total land had taken place and capital gains on the same accrued to all the co-owners of the said land in asst. yr. 2001-02 itself. He further explained that the transfer was of the land (67.5 per cent), the cost of acquisition of which was the proportionate (67.5 per cent) cost incurred by the owners on its acquisition and the sale consideration for the same was the construction of the balance 32.5 per cent constructed area. He, therefore, submitted that the assessee during financial year 2004-05 relevant to asst. yr. 2005-06 received his l/5th share of the sale consideration amounting to ₹ 15,25,000. The same being a long-term capital receipt has rightly been treated by the assessee as long-term capital gain. In support of his submissions, the learned counsel relied on several judicial pronouncements and Board's circulars which are, inter alia, as under : (i) Jasbir Singh Sarkaria, In re (2007) 212 CTR (AAR) 107 : (2007) 294 ITR 196 (AAR); (ii) Chaturbhuj Dwarkadas Kapadia vs. CIT (2003) 180 CTR (Bom) 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f flats shops, common parking area etc. As per the said agreement, upon development of the premises, the developer shall retain with him as his share 67.5 per cent of the land and constructed area and the balance 32.5 per cent land and constructed area shall be allotted to all the five owners of the land. As per second schedule to the said agreement, the assessee's 1/5th share out of 32.5 per cent land and constructed area comes to 6,225 sq. ft. Therefore, in effect, vide the said development agreement, the owners of the land, i.e., assessee and other co-owners, transferred 67.5 per cent of the total land belonging to them unto the developer in consideration of the construction at the developer's cost over remaining 32.5 per cent of the land retained by the co-owners. The co-owners did not realise any cost for such transfer of 62.5 per cent of land to the developer and in lieu thereof, they were entitled to get back 32.5 per cent constructed area with land and other common place etc. From the above it is evident that the value of 32.5 per cent constructed area was the consideration for the transfer of 67.5 per cent of the land to the developer. As stated by the learned coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the developer was, in fact, given the ultimate right to sell any part of his share. Vide cl. (d) above, though the developer could sell his part earlier, the legal power of executing the sale agreement was granted to the developer by the owner upon delivery of the possession of the owner's share. 6.2 Clause 11 of the development agreement narrates the owner's following rights and representations : (a) As per cl. 11(d), the owner upon receiving its share from the developer was to execute deed of conveyance in respect of the proportionate undivided share of land being the developer's share in favour of the developer or his nominees. From the above it is seen that the legal deed of conveyance was, however, to be executed by the owner upon receiving his share from the developer. 6.3 In cl. 12 of the said agreement, the developer's obligations and rights are recorded and it is seen that the developer was granted the exclusive right and power to deal with or dispose of his share. Such right of disposal in total absoluteness forms the right of ownership of the developer over his share. 6.4 Clause 13(c) of the agreement with the developer speaks of develope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... auses (v) and (vi) of s. 2(47) read as under : (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in s. 53A of the Transfer of Property Act, 1882 (4 of 1982); or (vi) any transaction (whether by way of becoming a member of or acquiring shares in, a co-operative society, company or other AOP or by way of any agreement or arrangement or in any other manner whatsoever) which has effect of transferring, or enabling the enjoyment of, any immovable property. (Emphasis, italicized in print, supplied) In its explanatory notes on the insertion of cls. (v) and (vi) to s. 2(47) w.e.f. 1st April, 1988, CBDT vide its Circular No. 495, dt. 22nd Sept., 1987, reported in (1988) 67 CTR (St) 1 : (1987) 168 ITR (St) 87, has explained the purpose of such insertion. Relevant portion of the said circular reads as under : 11.1 The existing definition of the word 'transfer' in s. 2(47) does not include transfer of certain rights accruing to a purchaser, by way of becoming a member of or acquiring shares in a co-operative society, company or AOP or by way of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land, in the year of such transfer, i.e., financial year 2000-01 relevant to asst. yr. 2001-02. To make it further clear, transfer was 67.5 per cent of the land and the sale consideration for the same was 32.5 per cent of the constructed area on such land. 6.7 Further, the view that in a case where a development agreement between the owner of the land and the developer results in transferring the privileges of ownership of the land unto the developer, the said agreement would in effect result in a transfer of the land in favour of the developer. In the case of Jasbir Singh Sarkaria (supra), it has been held as under : Under cl. 15 it was stipulated that on fulfilment of the requirements laid down in the letter of intent, which was a provisional licence, the owner should execute an irrevocable power of attorney in favour of the developers or their nominees, inter alia, authorizing them to book and sell the dwelling units falling to their share. Thus, it was only after the deposit of the requisite charges with the urban development authorities in accordance with the conditions stipulated in the provisional licence and the developers taking necessary steps pursuant to the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... developer. In the said case the developer was granted the rights to book and sell the dwelling units falling to their share and thus it was held in that case that the agreement resulted in the transfer of the land. In the case of the assessee before us also, the developer was granted specifically vide cl. 12(f) of the development agreement the right to deal with or dispose of the same to his nominee or nominees as the developer shall think fit and proper and for which the owners shall not in any way interfere or disturb the possession of the developer's share . Also vide cl. 13(c), the developer was granted the right to enter into agreement for sale with the intending purchasers to sell the developer's share only and to receive earnest money and/or advances from such purchasers for raising fund for making construction of the said building . 6.8 In the case of Chaturbhuj Dwarkadas Kapadia vs. CIT (supra), the Hon'ble Bombay High Court on identical facts held as under : Clauses (v) and (vi) were introduced in s. 2(47) of the IT Act, 1961, w.e.f. 1st April, 1988. They provide that 'transfer' includes (i) any transaction which allows possession to be take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res. Thus, from the terms of MoU, it is clear that the lady signed the MoU through her general power of attorney holder for ₹ 5.5 crores. The possession of the property was handed over to the builder and original documents were also given to him on that day with an understanding that he will obtain all necessary clearance certificates under the provisions of Urban Land (Ceiling Regulation) Act, 1976, and certificate under s. 269UC of the IT Act, 1961. Therefore, it is clear that the MoU entered into between the parties was not for the purpose of simply identifying the prospective buyer or the consideration received by the assessee was only a security deposit. On reading the contents it will be clear that it was a transaction by which the assessee transferred the property in question in the manner prescribed in cls. (v) and (vi) introduced in s. 2(47) w.e.f 1st April, 1988. The events which had taken place constitute transfer which includes any transaction which allows possession to be taken/retained in part performance of a contract of the nature referred to in s. 53A of the Transfer of Property Act, 1882, and any transaction entered into in any manner which has the effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circulars, the Hon'ble Gujarat High Court in the case of CIT vs. Jindas Panchand Gandhi (supra) held that the assessee was entitled to claim long-term capital gain on sale of the flat. The facts before the Hon'ble High Court were that the assessee became a member in a co-operative society. He was allotted a flat in the building of the society by resolution dt. 4th Nov., 1980. On this date, the property was under construction and came to be completed on 12th Nov., 1983. Physical possession was handed over to the assessee on that date itself. On 30th April, 1984, the assessee sold the flat for a consideration of ₹ 3.75 lakhs and worked out the capital gains at ₹ 1,59,295. The matter ultimately came to the Hon'ble High Court and the High Court concluded the matter as under : that the assessee in the present case was allotted a share by the co-operative housing society on 4th Nov., 1980, and the sale of the same took place on 30th April, 1984, i.e., after a period of 36 months. The Tribunal was therefore justified in holding that the capital gains arising were long-term capital gains and the assessee was entitled to deduction from such gains as per law. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
