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2016 (4) TMI 631 - ITAT CHENNAI

2016 (4) TMI 631 - ITAT CHENNAI - TMI - Deemed Transfer u/s 2(47)(v) - LTCG - transfer of property through Joint Development Agreement (JDA) - Held that:- It is clear that 'willingness to perform' for the purposes of Section 53A is something more than a statement of intent; it is the unqualified and unconditional willingness on the part of the vendee to perform its obligations. Unless the party has performed or is willing to perform its obligations under the contract, and in the same sequence in .....

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tions under the JDA. Even otherwise, the assessing authorities has not brought on record the actual position of the project even as on the date of assessment and he has not recorded the findings whether the developer started the construction work at any time during the assessment year 2006-07.

The condition laid down under Section 53A of the Transfer of Property Act was not satisfied in the assessment year 2006-07. - . When time is essence of the contract, and the time schedule is not .....

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the appeal of the assessee for the asst. year is to be allowed. - Decided in favor of assessee.

Denial of cost of improvement the assessee has not produced anything to prove the cost of construction. It is the duty of the assessee to produce necessary evidence to show that the assessee actually incurred towards improvement of capital asset. However, the assessee asked one more opportunity to see the document collected by the A.O., which was relied upon by him, at the back of the asses .....

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flats constructed thereon to be assessed as long term capital gains in sale of land and short term capital gains in sale of flats.

Decided partly in favor of assessee. - ITA Nos. 1779 to 1788/Mds/2013, ITA Nos. 1944 to 1949/Mds/2013 - Dated:- 4-3-2016 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER For The Assessee : Shri S. Sridhar, Advocate For The Department : Shri Anuragh Sahay, CIT ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER These cross appeal .....

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resulted in transfer in terms of sec.2(47)(v) of the I.T.Act, and thereby assessment of capital gains in these assessment years. The assessee is also in appeals before us, in ITA Nos.1785 to 1788/Mds/2013 for restricting the levy of penalty to 100% from 300% levied by the Assessing Officer u/s.271(1)(c) of the Act consequent to assessment of capital gains in the assessment years 2006-07, 2009-10 to 2011-12. 3. The Revenue is in appeals before us in ITA Nos.1945 & 1946/Mds/13 for the assessm .....

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e as narrated for the assessment year 2006-07 are that M/s. Coromandel Cables Pvt. Ltd. (for short CCPL) is incorporated in 1976 to carry on the business of manufacture of cables. However, on account of operational losses and due to labour unrest, the factory at Perungudi, Chennai, was shut down in late 1990. Subsequently, the founder promoters of the company sold their entire stake in the company to the present shareholders namely Smt. Rani Gopinath, Shri T. Chinnadurai and Shri M. Ganesan in 2 .....

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reasons. For the asst. year 2006-07, long term capital gains were brought to tax based on the JDA dated 23.11.2005, wherein the share of the land-owner i.e. the assessee of 37.54% of the saleable value of the property was agreed upon. The AO has also observed that instead of reaching the entire share of the assessee to its account about ₹ 25 crores of the share of the assessee have been diverted to Doshi Housing, the developer which is enjoying the exemption u/s.80-IB(10) in the form of i .....

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st. years 2007-08 and 2008-09, the A.O. has passed the orders protectively, since the project has not taken off till. Since the assessee is in dispute with regard to the working of the capital gains based on the market value disregarding its offering to tax on the basis of guideline value, there was a denial of cost of improvement. 4.3 Before the CIT(Appeals), the assessee challenged the reopening of assessment on the reason that the assessment was reopened only on the basis of statement given b .....

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essment is valid. Against this, the assessee is in appeal before us. 5. The first common issue with regard to reopening of assessment is in ITA Nos. 1779, 1780, 1781 and 1782/Mds/2013 (A.Ys. 2006-07 to 2009-10). We consider the facts narrated for the asst. year 2006-07, since the facts are similar in all these asst. years. 6. Before us, the ld. AR reiterated the submissions, which was advanced before the CIT(Appeals). The ld. DR relied on the order of the CIT(Appeals). 7. We have gone through th .....

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ent year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Offi .....

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tion is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction. 7.2 The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood .....

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such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatev .....

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g the action of the AO in reopening of assessment in all these appeals and reject this ground of appeal of the assessee. 8. The next common ground in all the above appeals is with regard to invoking the provisions of sec.2(47)(v) of the Act based on the JDA entered into by the assessee with Doshi Housing on 23.11.2005, which was found during the course of survey u/s.133A of the Act on 24.1.2012. 9. The facts of the issue are that during the course of survey u/s.133A, JDA dated 23.11.2005 was fou .....

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- which was mentioned in the JDA dated 23.11.2005. It was also recorded by the lower authorities that there was one more agreement between the assessee and the same party, where it is also reflected the same amount of sales. According to the Assessing Officer, the assessee being vendor and Doshi Housing is the developer, the assessee is liable to pay capital gains in view of JDA entered into by the assessee with Doshi Housing for the assessment year 2006-07. The assessee, herein, offered capital .....

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t year 2006-07. The consideration of Joint Developer Agreement was to be shared in the ratio of 67.46% to the Developer and 37.54% to the Appellant Company in respect of the Residential Flats constructed. ii) Smt. Rani Gopinath confirmed the Joint Developer Agreement between parties. iii) Share of Profits of about ₹ 25 Crores of Mr. Surendranath from the Firm of M/s. Doshi House was part of the Sale price for Land. iv) Cost of Improvement of Land at ₹ 4,53,42,980/- was an incorrect c .....

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ssment years 2007-08 to 2010-11 ₹ 32,52,42,147 Sale consideration 37.54% share of Appellant Company ₹ 12,20,95,902 Less: Indexed cost as worked out at para 11 of the Assessment Order which works out to(0.1% of sale price) ₹ 1,24,146 Long Term Capital Gains ₹ 12,20,07,920 Against this, the assessee is in appeal before us. 10. The ld. AR submitted that the assessment proceedings for the assessment year 2006-07 was reopened consequent to the survey under section 133A of the .....

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term capital gain on the presumption of the possession vesting with the Developer and occurrence of deemed transfer while rejecting the sale agreement inasmuch as the A.O. had further referred to the survey statement recorded from Mrs.Rani Gopinath. 10.2 Further, the ld. AR submitted that the Assessing Officer had questioned the induction of the related parties in M/s.Doshi Housing, partnership firm, who were shown as purchasers in the sale agreement relied upon the assessee company and in the .....

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said order of the Assessing Officer was confirmed by the CIT(Appeals)-l, Chennai, in his common order dated 28-8- 2013 and the said common order is under challenge before this Bench in the present proceedings. 10.5 The joint development agreement was not relied upon by the assessee company so as to attribute the motive of tax evasion while questioning the constitution of the partnership firm M/s.Doshi Housing and hence the transaction reckoned through the said JDA should be totally rejected esp .....

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ported in the returns of income filed for Assessment years 2008-09 to 2011-12) should be consequently considered as correct. 10.7 The ld. AR submitted that if the Assessing Officer wants to consider the transaction from the perspective of the impounded JDA, the recent decision of the Punjab and Haryana High Court, in the case of C.S.Atwal v. CIT in ITA No.200 of 2013(O&M) dated 22.7.2015 has to be taken into account. It was held by the Court in the case that the deemed transfer theory could .....

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that the JDA was not pressed into service by them for computing the capital gain tax while circumventing the deemed transfer theory. 10.9 He submitted that first of all, in the implementation of the JDA, the deemed transfer theory cannot be roped in and further it is to be noted that if the survey results including the documents impounded as well as the sworn statements are taken into consideration, it is fatal for the revenue's case. If the assessee company is considered as a joint develop .....

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not acted upon as well as not in vogue. Without reading the entire statement of the Managing Director of the assessee company, the Assessing Officer had bent upon to take shelter under the impounded JDA as well as the other answers given in the said sworn statement in order to justify shifting of the capital gains to the first assessment year, viz., 2006-07 in which year the said JDA was entered into. 10.11 Even in the first page of the reassessment order for A. Y. 2006-07 the Assessing Officer .....

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t, then the computation of long terms capital gain in the first assessment year viz., 2006- 07 is consequently not correct and not justifiable. 10.12 Inasmuch as the provisions of section 45(2) of the Act as well as the business profits computation should legally follow to tax the surplus as business profits in such scenario. 10.13 In any event the strict prescription of section 53A of the Transfer of Property Act which is the pivot/fulcrum of the provisions in section 2(47)(v) of the Act, the d .....

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as the argument to support the plea before the Bench for interfering in the matter in quashing the re-assessment framed for the assessment year 2006-07. 10.15 The ld. AR submitted that the treatment in the hands of the other developer, M/s. Doshi Housing is also very critical to render decision in the present appeals and without cross verifying the financials of the said partnership firm the A.O. rejected the reporting of long term capital gains by the assessee company in the subsequent four as .....

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t marked as "Annexure G" to the said reassessment order for the assessment year 2006-07, it was stated in answer to question No.8 that the impounded JDA was not enforced and implemented. The said crucial aspect was not addressed in the assessment order for the assessment year 2006-07. 10.17 Further, as the joint developer/land owner, the assessee company is also entitled for deduction under section 80IB(10) of the Act to the extent of the profits proportionately earned by them and the .....

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10) of the Act. 10.18 He relied on the judgment of the Karnataka High Court in the case of CIT v. Shravanee Constructions, reported in 81 CCH 253 has approved the exigibility of the claim for deduction under section 80IB(10) of the Act to the joint developer/land owner. Similarly the co-ordinate Bench of the Appellate Tribunal, rendered in the case of Sri Lakshmi Brick Industries in ITA Nos.1644 to 1647/Mds/2012 has approved the said legal consequence in their decision rendered on 22-11- 2012 in .....

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hri M.G. Surendranath was inducted as a partner in Doshi Housing whereby about ₹ 25 crores were diverted as his share of profits in that firm which is enjoying exemption u/s 80- IB(10) of the Act. From the sworn statement recorded u/s.131 of the Act, from Smt. Rani Gopinath on the date of survey it is also clear that the JDA is in vogue and amounts paid to her son Sri Surendranath of about 25 crores belong to CCPL only. In view of the above, she has offered the additional income of ₹ .....

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s. Gopal AIR 1960 SC 100 4) V. Kunhanbu v. CIT (219 ITR 325) (Kerala) 11.2 Further, the ld. DR submitted that Smt. Rani Gopinath is well educated and is conscious of what she was telling and she was assisted and advised by her C.A., Sri Ramasubramaniam, her son Sri Surendranath, her business partners Shri Mehul Doshi and Harshad Doshi, during the course of survey. She was not alone, her own son also agreed for the facts disclosed by Smt. Rani Gopinath in a letter form independently on the day of .....

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val from her C.A who was present during the survey proceedings and come forward to offer the additional income of ₹ 25 crores voluntarily, that she may be excused from penalty, that she will cooperate in paying the correct dues etc. This does not show any force, threat or coercion. It is further emphasized that the assessee with regard to application of JDA even though denied in answer to Question No.15, she has admitted her mistake in answer to Question No.16, when certain evidences were .....

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ts and authorizations given by Smt. Rani Gopinath to the builder also clearly shows that the appellant has to get amounts as per JDA which are more than what was disclosed. The joint meeting called for between CCPL and the Doshi Housing on 14.4.2008 also throws some light on the rationale for sharing ratio and the block-wise, floor- wise, and f1at-wise identification for such sharing of saleable area between the appellant and the Doshi Housing. The AO has got independent evidences which were det .....

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7. All these facts support to the statement given by Smt. Rani Gopinath, MD of the assessee company. 11.4 He submitted that it is seen from the records that the AO has given several opportunities to the assessee to give basis for retraction vide notices u/s.142(1) dated 21.3.2012 and 4.4.2012. The AR has appeared on 28.3.2012 and 17.4.2012, but no contemporaneous evidence subsequent to survey to the effect that JDA was not acted upon was filed. Therefore, retraction is invalid. 11.5 The argument .....

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ommunicated officially by the Income-tax Officer (HQs), attached to the O/o Commissioner of Income-tax- I, Chennai. 11.6 Regarding taxing of profits in the hands of the developer which were attributed to the assessee holding that ₹ 25 crores paid to one of the partners were taken as part of sale proceeds of land held by the assessee, the ld. DR submitted that the assessee holds that there cannot be an acquiesce on a statutory provisions and the share of profits of Shri Surendernath cannot .....

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Etopia-I . The equivalent monies worth staggered over a period of time to approximately ₹ 35 crores. Taking into account, the unsold portion as on date the actual realization was found to be more than ₹ 35 crores. However, the assessee in order to suppress the true and correct taxable profit which should be in the order of 35 crores, has shifted the profits to the firm to the extent of about ₹ 25 crores in the form of share of profits of Shri. M.G.Surendranath who has been indu .....

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f JDA recovered by the survey party during the course of survey. The fact of shifting of profits and the share of 37.54% receivable by the assessee are clearly stated in the statements given by Smt. Rani Gopinath, Mehul Doshi and Surendernath. , 11.8 According to the ld. DR, from the arguments above and in the light of the successful rebuttal of the retraction by the department, it is seen that the statements given by Smt. Rani Gopinath are true and correct and the arrangement delineated in the .....

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e of surety and harmony between the contracting parties. But, there is an enforceable JDA at the back-drop, to support the actual transactions. Hence, the parties had not taken care to mention the sale value in it. It only mentions that the actual sale consideration to be received from buyers as per guideline value would be sale consideration. The document also mentions a receipt of advance of ₹ 10 lakhs only vide Cheque No.088218 dated 24.11.2005 drawn on Central Bank of India, Chennai 60 .....

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ns, is sufficed by the Joint Development Agreement dated 23.11.2005 comprising 10 Pages. It incorporates all the essential qualities a true agreement must possess in it, in stark comparison to the sale agreement dated 23.11.2005. As stated earlier, this important record was hidden from the view of the" Department, neither was it produced before the .Income Tax Officer, while the firm was under scrutiny nor during the returns filed for the AY 2008-09 and AY 2009-10 before the action u/s.133A .....

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1.11 If the agreement of sale is taken into account, then the above two things are not evident from it but are clearly discernible from the JDA. As seen from both the agreements, both are dated 23.11.2005. However, since Smt. Rani Gopinath and Others have admitted in their statements the arrangement of transfer of the land to the developer as per JDA and the retraction has been successfully countered by the department, all the terms and conditions as per the JDA only are taken as applicable. As .....

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agreement which will help the assessee to avoid payment of taxes on the eventuality of capital gains arising on transfer of its land. Further to prove that the transfer of the property has taken place on 23.11.2005, reliance can be made on numerous authorization letters duly signed by Smt. Rani Gopinath addressed and given to Doshi Housing, wherein the second para treads as under : ………..These flats are towards the area receivable by me as per Joint Development Agreement dat .....

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acres and 34.5 cents more fully described in Schedule - A hereunder. And WHEREAS OWNER have agreed to sell to the DEVELOPER or its nominee 2 acres and 8.68 cents of land more fully described in Schedule-B hereunder out of the Schedule - A detailed property, and accept as total sales consideration 37.54% of the area sanctionable on the entire land of 3 acres and 34.5 cents described in Schedule-A hereunder, such area allotable to the OWNER more fully described in Schedule-C hereunder". Accor .....

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resolved only in 2007. The explanation of the assessee that transfer has not taken place in view of the above will not hold good. Sec. 2(47) of the Act clearly defines what is transfer and it is appropriate to hold that the transfer of the land in the assessee's case has taken place truly by 23.11.2005 as per JDA u/s.2(47)(v) of the Act which reads as under: 2(47) Transfer in relation to a capital asset, includes - (v) Any transaction involving the allowing of the possession of any immovable .....

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fact no capital gains accrued on actual receipt of lesser sales price in the subsequent year and also following the judgments in the cases of Dr. Maya Shenoy v. ACIT [124 TTJ (Hyd.) 692] and Chaturbhuj Dwarkadas Kapadia of Bombay v. CIT (260 ITR 491). 12. We have heard both the parties and perused the material on record. The ld. DR placed heavy reliance on the judgment of the Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia v. CIT (supra). Their Lordships of the Bombay High Court w .....

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the scope of Section 2(47)(v), their Lordships observed as follows: Under section 2(47)(v), any transaction involving allowing of possession to be taken or retained in part performance of the 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). That, in order to attract Section 53A, the following conditions need to be fulfilled. There should be contract for consideration; it should be in writing; it should be signed by .....

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, in most cases, it was argued on behalf of the assessee that no transfer took place till execution of conveyance. It was also noted by their Lordships that, in this scenario, assessee used to enter into agreements for developing properties with the builders and under arrangement with the builders, they used to confer privileges of ownership without executing conveyance, and to plug that loophole, Section 2(47)(v) came to be introduced in the Act. 12.2 There was no dispute on whether or not the .....

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thorities, either under power of attorney or otherwise and in the name of the assessee, the AO is entitled to take the date of contract as the date of the transfer under Section 2(47)(v). 12.3 It is important to bear in mind that Section 2(47)(v) refers to 'possession to be taken or retained in part performance of the contract of the nature referred to in Section 53A of the Transfer of Property Act" and in the case before Hon'ble Bombay High Court, there was no dispute that the cond .....

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ements, in all situations, satisfy the conditions of Section 53A which is a sine qua non for invoking Section 2(47)(v). 12.4 In order to invoke the principles laid down by the Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia (supra), it is, therefore, necessary to demonstrate that the conditions under Section 53A of the Transfer of Property Act are satisfied. This section is reproduced below for ready reference: Section 53A : Part performance-Where any person contracts to transfer f .....

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lling to perform his part of the contract, then, notwithstanding that the contract, though required to be registered, has not been registered, or, where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed thereof 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 .....

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53A of the Transfer of Property Act" it is one of the necessary preconditions that transferee should have or is willing to perform his part of the contract. This aspect has been duly taken note of by the Bombay High when their Lordships observed as follows: That, in order to attract Section 53A, the following conditions need to be fulfilled. (a) There should be contract for consideration; (b) It should be in writing; (c) It should be signed by the transferor; d) It should pertain to the tra .....

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at the transferee always abides by the terms of the agreement and is willing to perform his part of the contract. Part performance, as a statutory right, is conditioned upon the transferee's willingness to perform his part of the contract in terms covenanted there under. Willingness to perform the roles ascribed to a party, in a contract is primarily a mental disposition. However, such willingness in the context of Section 53A of the Act has to be absolute and unconditional. If willingness i .....

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ip;….. 12.7 We are in considered agreement with the views so expressed in this commentary on the provisions of the Transfer of Property Act. It is thus clear that 'willingness to perform' for the purposes of Section 53A is something more than a statement of intent; it is the unqualified and unconditional willingness on the part of the vendee to perform its obligations. Unless the party has performed or is willing to perform its obligations under the contract, and in the same seque .....

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can be said to have 'performed or is willing to perform' its obligations under the agreement. 13. In the present case, there is a JDA dated 23.11.2005 between the assessee and Doshi Housing and on the same day, there is also a sale agreement between the same parties. There is one more sale agreement on the same day. In the sale agreement, there is mentioning of payment of ₹ 10 lakhs vide cheque No.088218 dated 24.11.2005 drawn on Central Bank of India, Chennai - 600 08. In the two .....

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s under : 6. The VENDOR hereby confirms that the purchaser shall be entitled to develop the SAID PROPERTY by putting up residential complexes in the same at the cost of the PURCHASER and that the VENDOR shall have no claim whatsoever to such development. 7. As per the Agreement of even date entered between PURCHASER and VENDOR, the PURCHASER shall also develop the SAID PROPERTY as a developer construct and sell built up areas in the SAID PROPERTY and the PURCHASER will separately enter into Buil .....

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or its nominee 2 acres and 8.68 cents of land more fully described in Schedule - B hereunder out of the Schedule - A detailed property and accept as total sales consideration 37.54% of the area sanctionable in the entire land of 3 acres and 34.5 cents described in Schedule - A hereunder, such area allotable to the OWNER more fully described in Schedule - C hereunder 13.3 It is also mentioned in the JDA dated 23.11.2005 at page 4 in clause No.3 as follows: 3. M/S.DOSHI HOUSING this day has given .....

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e Developers shall step into the shoes of the Owners and shall perform all the duties, rights and obligations as envisaged in the Sale Agreement dated 23.11.2005. The Developers have taken possession of the property and they are entitled to construct and develop the schedule mentioned property as per the sanctioned plan. 13.5 Thus, as seen from the JDA, the possession has not been given and also sale consideration is quantified at 37.54% of sanctionable construction area. The assessee only recei .....

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is of the agreement fails. To enable the execution of the agreement, firstly, plan is to be approved by the competent authority. In fact, there is nothing on record to show that building plan was got approved on or before 31.3.2006 in the relevant asst. year 2006- 07. If permission is not granted for construction of the building, a developer cannot undertake construction. As a result of this, the construction was not taken place in the assessment year under consideration. Nothing is brought on r .....

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eveloper in asst. year 2006- 07 and it is not possible to say whether the developer prepared to carry out those parts of the agreement to their logical end. The developer in this assessment year had not shown its readiness or having made preparation for the execution of the JDA. In other words, the developer has not taken steps to make it eligible to undertake the performance of the agreement which are the primary ingredient that make a person eligible and entitled to make the construction. The .....

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ities concerned. Being so, approval of the building plan is foremost important and 30 days from the sanctioned plan, time starts from completion of development of the project and thereafter, the developer hand over the possession of the allocated area- developed property to the assessee. 13.7 But the fact remains that the developer had failed to get the approval of the plan or perform its obligations under the JDA. Even otherwise, the assessing authorities has not brought on record the actual po .....

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he sole and isolated condition because of the supplementary agreement dated 23.11.2005. It was stated by the ld. DR that the developer has taken the possession of the property and the developer was entered into JDA to develop the property as per sanctioned plan. It cannot be presumed that all the conditions required u/s.2(47)(v) of the Act are fulfilled. On these facts, it is not possible to hold that the transferee was willing to perform its obligations in the financial year 2005-06 relevant to .....

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year relevant to the present assessment year 2006- 07, it is only a corollary to this finding that the development agreement dated 23.11.2005 based on which the impugned taxability of capital gain is imposed by the AO and upheld by the CIT(A), cannot be said to be a "contract of the nature referred to in Section 53A of the Transfer of Property Act" and, accordingly, provisions of Section 2(47)(v) cannot be invoked on the facts of this case. In our opinion, in the case of Chaturbhuj Dw .....

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learly an erroneous assumption, and an the provisions of deemed transfer under Section 2(47)(v) could not have been invoked on the facts of the present case and for the assessment year in dispute before us. In the present case, the situation is that the assessee has not received any amount out of total consideration, the transferee is avoiding adhering to the agreement and there is no evidence brought on record by the revenue authorities to show that there was actual construction has been taken .....

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ntire agreed sales consideration. When time is essence of the contract, and the time schedule is not adhered to, it cannot be said that such a contract confers any rights on the vendor/landlord to seek redressal under Section 53A of the Transfer of Property Act. This agreement of JDA cannot, therefore, be said to be in the nature of a contract referred to in Section 53A of the Transfer of Property Act. It cannot, therefore, be said that the provisions of Section 2(47)(v) will apply in the situat .....

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ly and deliberately through a ruse in the form of introducing the son as a partner of the Developer firm, suppressed taxable profits and she confirmed that the share of profits of her son from the firm should also be included to the value of sale consideration and offered to tax. However, those statements were retracted by the same person vide letter filed before the CIT(Appeals) on 22.2.2012, which is kept on record. In that letter, she stated that the survey team visited their office on 24.1.2 .....

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R 172). 15.3 Further, the Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. v. State of Kerala (91 ITR 18) observed that an admission is extremely an important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect. The Madras High Court in the case of CIT v. S. Khader Khan Son (300 ITR 157) held that sec.133A of the Act, does not empower any income-tax authority to examine on oath. Hence, any s .....

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sion made by the Smt. Rani Gopinath, the AO framed the assessment. He relied on judgment of the Madras High Court in the case of T.V.Sundaram Iyengar & Sons(supra). Now, one more argument of the DR is that the assessee arranged as assessee s affairs in such a manner by introducing Sri M.G.Surendranath, son of the managing of the assessee company as a partner in M/s. Doshi Housing and he has received a sum of ₹ 25 crores which is nothing but amount receivable by the assessee towards the .....

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was routed through Shri M.G.Surendranath, who is son of Smt. Rani Gopinath, Managing Director of the assessee company. According to the DR, the entire issue is required to be considered in its proper perspective and has to be treated as one common transaction entered through three separate agreements but in common principle underlying is that it is a transfer u/s.2(47(v) of the Act. 15.5 Admittedly, in this case, Shri MG Surendranath was inducted into the partnership of M/s. Doshi Housing. Accor .....

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Surendranath is the son of the Managing Director of the assessee company. Whenever the law permits, the Shri M.G.Surendranath is at liberty to enter into any contract to carry on his business. The AO interpreted the credit of ₹ 25,64,59,023/- by Doshi Housing to the account of Shri M.G.Surendranath during the period from 1.4.2009 to 31.3.2010 as a receipt of money towards sale value of the land property by the assessee. 15.6 This evidence collected by the Revenue authorities is not suffici .....

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our opinion, the entire evidence has to be appreciated in a wholesome manner. When there is documentary evidence, the same cannot be overlooked, if there are surrounding circumstances to show that the claim of the assessee is opposed normal course of human thinking and conduct and human probabilities. Even high degree of suspicion is not replace the evidence on record. This principle has been laid down by the Supreme Court in two leading cases viz., in the case of CIT v. Durga Prasad More (82 I .....

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mpany has given a sworn statement during the course of survey u/s.133A of the Act and also circumstances under which Shri MG Surendranath made a statement before the authorities. We have already given the reasons as to why these statements cannot be relied upon. There was no evidence collected during the course of survey to show that the assessee has already given the possession of the property to the developer and the developer carried out the development activity in the asst. year 2006-07. Fur .....

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ue fixed by the Registration Department of Govt. of Tamilnadu prevailing at the time of each sale. The vendor, the present assessee authorised the purchaser i.e. Doshi Housing to collect the sale consideration from the prospective purchasers on behalf of the assessee and the said sale consideration shall be paid by the purchaser to the vender on completion of the project and also it was mentioned in clause 5 that absolute possession of the landed property in the hands of the present assessee als .....

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is came into operation with effect from 1.4.2013. Thus, surrounding circumstances did not contain anything which belied the claim of the assessee that there was no transfer of property by giving the possession to the vendor. 16. We have also gone through the ledger account extracted in the assessment order at page 80, which shows receipt of money by Sri M.G.Surendranath from M/s. Doshi Housing which is as follows : M.G. Surendranath Ledger Account 1-Apr-2009 to 31-March-2010 Even if it is presu .....

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saving device. But it should apply the look at test to ascertain true legal nature of the transaction. The authorities may invoke the substance over form principle or piercing the corporate veil test only after it is able to establish on the basis of the facts and circumstances surrounding the transaction that the impugned transaction is a sham or tax avoidant. Every strategic plan should be looked at in a holistic manner. Merely because the tax is not payable or receivable could not make the en .....

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of the property by the land owner to the developer is not mentioned in the JDA and it is to be construed as deferred till the handing over of the stipulated portion of the marked built up area by the developer to the land owner. Upto that point of time, the developer was only licensed to enter the property for the limited purpose of development and construction as discussed earlier. The transfer does not take place immediately and the liability to capital gains does not arise until the built up .....

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from the JDA dated 23.11.2005 cannot be liable to be taxed in the asst. year 2006-07 in terms of sec.2(47)(v) of the Act. 16.3 Further, as held by the Madras High Court in the case of CIT v. G. Saroja (301 ITR 124) that sec. 2(47)(v) of the Act comes into operation only if the conditions of sec.53A of the Transfer of Property Act are satisfied and a written agreement being basic requirement for invoking the provisions of sec.53A of the TP Act, there was no transfer of property u/s.2(47)(v) of t .....

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Court in the case of R. Vijayalakshmi v. Appu Hotels Ltd. and Others(257 ITR 4) held that development agreement is executory contract and not be construed as an agreement for sale simplicitor. Further, it was held that possession of the properties was given to the builder under a development agreement for construction for a specified period, which is not a permanent transfer. Similar issue came for consideration before the Supreme Court in the case of Suraj Lamps & Industries Pvt. Ltd. vs. .....

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n of backup documents immediately in support of genuinely concluded deal: - Unregistered sale agreement, GPA and will transfers do not convey title and do not amount to a transfer of immovable property. - Further held that such transactions cannot be recognized as a valid mode of transfer - the validity of genuine agreement of sale and power of attorney would not be affected on the basis of above observation. -Transactions effected through an unregistered agreement of sale, GPA and would not get .....

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his decision. Since the Supreme Court has protected the genuine transactions, those were executed previously (before the date of making compulsory registration of all transfer documents under the registration Act, 1908) and supported by unregistered documents, by providing an option to get it registered and claim better title on the property involved therein, we may infer that transfer or sale of capital assets took place under the category of deemed concept as per section 2(47)(v) prior to the .....

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Minerals Ltd. v. CIT [239 ITR 775], wherein it was held that registration document is not essential requirement for transfer of property under the Act. Further, regarding the Registration, the plea of the ld. AR is that Registration under TP Act is must for taxability of income in respect of JDA and reference can be made to certain court decisions wherein a view has been taken that notwithstanding that the documents have not been registered the rights will be deemed to be transferred to the per .....

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of conferring ownership right was not necessary as regards taxability of income received in respect of the property. Following the view taken by the Supreme Court in above case Full Bench of the Gujarat High Court in CIT v. Mormasji Mancharji Vaid [2001] 250 ITR 542 has held that capital gain on the transfer has to be assessed to tax in the assessment year relevant to previous year within which the date of execution of deed of transfer falls and not in the subsequent assessment year in which the .....

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rban Land Ceiling Act. The Court held that the amounts received from the buyers were in the nature of business receipts and notwithstanding that documents were not registered, the land plots under reference could not be treated as stock-in-trade of the assessee. Thus it was held that the mere fact that sale deed had not been executed was not conclusive for holding that the amount received was only earnest money and not trading receipt. 16.7 Further, the Hon ble Supreme Court in the case of Sarda .....

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e 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 prerequisites to invoke the equitable doctrine of part performance. After establishing the aforementioned circumstances it must be further shown that a transferee had in part performance of the contract either taken possession of the property or any part thereof or the transferee being already in possession continues in possession in part perform .....

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rable to the contract. In view of above legal position, wherever the department claims it to be transfer under section 2(47) (v) of the Act, it has to satisfy the conditions of section 53A of TPA. Accordingly, it has to be decided in the light of facts of each case, whether conditions of section 53A of the TP Act have been fulfilled and consequentially there is a transfer under section 2(47)(v) of the IT Act notwithstanding that relevant documents have not yet been registered in favour of the de .....

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d and in such cases, even entering into such a contract could amount to transfer from the date of agreement itself. Further, it was observed that if the contract, read as a whole, indicates passing of or transferring of complete control over the property in favour of the developer, then the date of the contract would be relevant to decide the year of the chargeability. In the facts of above case the assessee had entered into an agreement with the developer on 18-8-1994 to sell his share of immov .....

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certificate permitting construction only on 15-11-1996. Ultimately the power of attorney was executed on 12-3-1999. The assessee paid the tax on capital gain in A.Y. 1999-2000. The department contended that transfer had taken place during year ended 31-3-1996 relevant to A.Y. 1996-97 and accordingly, taxed the assessee in A.Y. 1996-97. The Hon ble High Court after fully discussing the scope of clause (v) of section 2(47) of the Act and also laying down guidelines for applying the clause held on .....

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ntered into with developer for sharing of built-up area. Subsequently, supplementary agreement was executed to sell agreed share in built-up area also to developer for money consideration, payable in installments. In pursuant to above agreement GPA was executed to give total control to developer along with power to execute further agreements for sale of flats to buyers. AAR held that in view of the facts and terms of the agreement, there was transfer of capital asset and capital gain was payable .....

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and make necessary arrangements required for future construction and marketing does not amount to possession. 17.2 In the case of CIT v. Ashok Kapoor (HUF) (2007) 165 Taxman 569 (Del.) a question regarding transfer of rights in property and chargeability of capital gain had come up for consideration before the Delhi High Court. In the above case the High Court has taken a view that transfer has taken place at the time of entering into the agreement with the developer for the reason that as per .....

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ITO, (2014) 111 DTR (Kar.) 364/(2014) 221 Taxman 485 (Kar.) considered by High Court of Karnataka the facts were that an agreement was entered into by the land owner with a development company on 30-6-1994. As per the agreement 92% of undivided share in the land was to be transferred to the developer and 8% was to be retained by the land owner. The developer has to handover 8% of built-up-area to the land owner along with consideration of ₹ 30 lakhs. ₹ 10 lakhs have been paid during .....

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uilder was brought in to complete the construction. An agreement dated 8-1-2003 was executed along with earlier builder being a confirming party. The subsequent builder completed the project. Pursuant to notice u/s. 148 of the Act the land owner filed return for assessment year 2003-04 showing capital gain and contended that the possession of land was handed over at the time of entering into the agreement dated 8-1-2003. All the appellate authorities examining the facts held that possession of t .....

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start the booking of various flats and to receive sale price etc. from prospective buyers but land owners/assessee continued to be the owner of the land till development and receipts were not in the nature of business income from joint business venture with developer. 17.5 The same view has been taken by the Tribunal, Cochin Bench in the case of G. Srinivsan v. DCIT (140 ITD 235) and Pune Bench in the case of Mahesh Nemichandra Ganesh Wade v. ITO (17 ITR (Trib) 116). In view of the above discus .....

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ng of the assessee and Doshi Housing which is a separate assessee assessable as AOP and not the present assessee so as to grant deduction. 19. The Tribunal in the case of Vijaya Productions (P) Ltd. v. Addl. CIT (134 ITD 19) held that in a Development Agreement no transfer takes place on the date of execution of the Development Agreement as at that stage the right of the Land Lord is an inchoate right and the transfer if any takes place only when the built up area is given to the Land Lord by th .....

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st. year 2006-07 is partly allowed. 20. ITANo.1780/Mds/2013 : For the asst. year 2007-08, the assessee did not file any return of income. Therefore, an action u/s.133A was conducted in the case of the assessee and consequent to the survey operations, the assessee filed a return of income on 10.4.2012 admitting a gain of ₹ 55,84,094/-. However, the said return of income was lodged by the AO that the same was filed much after the due date envisaged u/s.139(4) of the Act. The AO, thereafter c .....

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completing the assessment, the AO rejected the claim of expenditure incurred towards cost of improvement of ₹ 8,99,590/- 21. As we have held in the asst. year 2006-07 that there is no instance of tax on capital gains in terms of sec.2(47)(v) of the Act, the assessment in this year is to be treated as substantive and the assessee is directed to place necessary evidence towards cost of improvement and the AO has to decide the issue afresh. Accordingly, the levy of interest u/s.234A for the .....

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₹ 1,99,534/-. The income from business ws a loss of ₹ 68,32,357/- and the capital gain of ₹ 66,32,823/- was set off against it. However, the liability to tax was computed on the capital gain at special rate of 20% and a refund of ₹ 18,67,344/- was claimed. Consequent to the reopening, the assessee claims to have reworked the computation based on year wise sale of land and re-organized the profits between the assessment years starting from 2007-08. According to the assesse .....

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ased on the JDA entered into between the assessee and Doshi Housing on 23.11.2005 by observing that there is a transfer in terms of sec.2(47)(v) of the Act. 23. Since, we have vacated the finding of the CIT(Appeals), for the asst. year 2006-07 by observing that there is no transfer u/s.2(47)(v) of the Act, the assessment for the asst. year 2008- 09 is to be treated as substantive as discussed in earlier paragraph for the asst. year 2007-08 and the income has to be computed on long term capital g .....

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05. The AO found that the agreement lacks credence mainly because the impoverishment of the appropriate contents which a true agreement ought to incorporate in it. The AO did not believe that the amounts were left unpaid for a period of 6 years and no proof of payment was also submitted. The AO was of the opinion that the bills provided by Takshil Trading P. Ltd. cannot rely upon in view of the Commercial Department, Maharashtra viz. MahaVat. 25. Before us, the ld. AR submitted that report as we .....

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he AO for fresh consideration and the assessee is directed to produce necessary evidence in support of the claim of the assessee, as the AO used the report collected from the Commercial Department, Maharashtra viz. MahaVat without providing the same to the assessee. Accordingly, in the asst. Year 2009-10, long term capital gains on the sale of that portion of the land corresponding to the flats allotted to the assessee s share and sale of flats constructed thereon to be assessed as long term cap .....

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7. According to the Revenue Authorities, loss on account of various reasons includes the bogus cost on improvement of capital asset also. The assessee has also filed the return belatedly. The A.O. observed that the said loss cannot be considered and set off against capital gains. As seen from the assessment order, the assessee has filed return of income on 16.11.2009. If the assessee filed return of income within due date for filing of return of income u/s.139(1) for the asst. year 2009-10 i.e. .....

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013 are partly allowed for statistical purposes. 29. Now, we take up the Revenue s appeal in ITA Nos.1945 & 1946/Mds/2013 (A.Ys. 2007-08 and 2008-09). The issue raised by the Revenue in these appeals is with regard to cancelling the protective assessment for the assessment year 2008-09 as the income assessed was based on the income admitted by the assessee. Since, we have confirmed the substantive assessment with certain directions in the assessee s appeal for the assessment years 2007-08 an .....

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that the transfer took place in terms of JDA dated 23.11.2005 for the asst. year 2006-07, determined the income for these asst. years 2006-07, 2009-10, 2010-11 and 2011-12, correspondingly he levied penalty at 300% of tax to be evaded. On appeal, the CIT(Appeals) reduced it to 100%. Against this, the assessee is in appeal before us for all these four asst. years. Similarly, the Revenue is in appeal before us on the same issue for reduction of penalty at 100% of tax to be evaded by the CIT(Appea .....

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