TaxTMI 
TaxTMI 
2016 (4) TMI 896
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....(Appeals)-III, in so far as it is prejudicial to the interests of the appellant, is against law, weight of evidence and probabilities of the case. 2) a) The learned CWT(Appeals) erred in upholding the impugned reassessment despite the fact that no valid notice u/s. 17 was issued and served within the statutory time limit. She ought to have annulled the assessment as done by her in the case of the sister concern of the appellant on identical facts and circumstances. b) The learned CWT(Appeals) failed to appreciate that there was no documentary evidence with the Assessing Officer for having issued within the statutory time limit the impugned notice u/s.17 of the Wealth Tax Act, 1957, nor was there any evidence for service of such notice. Consequently, she erred in upholding the assumption of jurisdiction u/s 17 of the Wealth Tax Act, 1957. c) The learned CWT(Appeals) failed to appreciate that the appellant challenged the assumption of jurisdiction without issue of valid notice u/s.17 from the beginning, nor was there any acceptance of jurisdiction by the appellant at any point of time. Consequently, she erred in upholding the reopening of the impugned assessment. 3) Witho....
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....ially interested. It is engaged in the business of running of hotels and service apartments. Since no wealth-tax returns were filed, the Assessing Officer (AO) issued notice u/s 17 of the Wealth-tax Act, 1957 ['the Act' for short] on 21/7/2008. The assessment was completed after adopting the Fair Market Value [FMV] of the land property situated in survey No.113/1 measuring 2 acres; survey No.113/2 measuring 1 acre 39 guntas of Patandar Agrahara, K.R.Puram Hubli, Bangalore South Taluk. The AO noticed that this land was shown as investment i.e. capital asset in the books of account regularly maintained by it. He further noticed that when this property was sold in the year 2008, profits arising out of sale of the property were offered to income-tax under the head 'capital gains' for the assessment year 2008-09. Taking into consideration these facts, the AO had issued notice proposing to re-assess the wealth which escaped tax. 5. During the course of assessment proceedings, it was contended before the AO that Joint Development Agreement [JDA)] was entered into with M/s.Classic Infrastructure Development Ltd., on 5/12/2000 for development of property and therefore, the property ceased ....
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....f lands cannot be included. He further submitted that there is a substantial difference in the provisions of sec.4 of the Act w.e.f. 1/4/1993. The sum and substance of his argument is that by virtue of JDA, assessee-company ceased to be owner of the land and therefore, value of the land cannot be included while computing net wealth of the assessee. 7.2 On the other hand, ld.CIT(DR) vehemently opposed the above arguments. He filed written submissions drawing our attention to certain paragraphs of ld.CWT(A)'s order and highlighted the treatment given by assessee-company in the books of account. He further submitted that JDA does not create an AOP or a partnership between assessee-company and developer and therefore, the asset cannot be treated as stock-intrade. Treatment given in income-tax proceedings also holds good for wealth-tax purposes. 8. We have heard rival submissions and perused the material on record. The only issue that arises in the appeals is whether the lands, which are undisputedly urban land within the meaning of provisions of 2(e)(a) of the Act, which are subject matter of JDA can be included in the net wealth of the assessee-company. Undisputed facts are that in ....
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....s of JDA, it is settled principle of law that by virtue of General Power of Attorney [GPA] does not create any interest in/or charge on such property. By virtue of JDA, the developer is only given a permission to develop the property. JDA is only a creation of agency whereby the land owners authorize the developer to do certain acts specified therein on behalf of land owners. JDA is not an instrument of transfer in regard to any right, title or interest in the immovable property. In fact, the Hon'ble Supreme Court in the case of Suraj Lamp & Industries Pvt. Ltd. vs. State of Haryana (340 ITR 1) vide para.20 of the judgment had dealt with the scope of the Power of Attorney as follows: "A power of attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property. The power of attorney is creation of an agency whereby the grantor authorizes the grantee to do the acts specified therein, on behalf of grantor, which when executed will be binding on the grantor as if done by him (see section 1A and section 2 of the Powers of Attorney Act, 1882). It is revocable or terminable at any time unless it is made irrevocable in a manner known to law. Ev....
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..... They cannot be recognized as deeds of title, except to the limited extent of section 53A of the TP Act. Such transactions cannot be relied upon or made the basis for mutations in Municipal or Revenue Records. What is stated above will apply not only to deeds of conveyance in regard to freehold property but also to transfer of leasehold property. A lease can be validly transferred only under a registered Assignment of Lease. It is time that an end is put to the pernicious practice of SA/GPA/WILL transactions known as GPA sales." 10. Even assuming that JDA is in the nature of agreement of sale, the Hon'ble Supreme Court, after referring to the provisions of sec.54 of the Transfer of Property Act, which deals with agreement of sale, held as under: "Section 54 of TP Act makes it clear that a contract of sale, that is, an agreement of sale does not, of itself, create any interest in or charge on such property. This Court in Narandas Karsondas v. S.A. Kamtam and Anr. (1977) 3 SCC 247, observed: A contract of sale does not of itself create any interest in, or charge on, the property. This is expressly declared in Section 54 of the Transfer of Property Act. See Rambaran Prosad ....
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....nt paragraphs of the judgment are reproduced hereunder: "140. Therefore, any transaction which has the effect of transferring or enabling the enjoyment of any immovable property is deemed to be a transfer under s. 2(47). The apex Court in the case of Surqj Lamp & Industries (P) Ltd. vs. State of Haryana. Special Leave Petn. No. 13917 of 2009 explaining the scope of power of attorney has held as under : "A power of attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property. A power of attorney is creation of an agency whereby the grantor authorises the grantee to do the acts specified therein, on behalf of grantor, which when executed will be binding on the grantor as if done by him (Sec. lA and 2 of Power of Attorney Act, 1882). It is revocable or terminable at any time unless it is made irrevocable in a manner known to law. Even an irrevocable attorney does not have the effect of transferring title to the grantee." 141 In State of Rajasthan & Ors. vs. Basant Nahata 2005 (12) SCC 77. the Court held as follows : "A grant of power of attorney is essentially governed by Chapter X of the Indian Contract Act. By reason of a de....
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....de in favour of the power of attorney holder or in favour of the purchasers unless he has executed the sale deed on behalf of the purchasers. Therefore, In view of s. 45(2) of the Act, the capital gains is not chargeable on receipt of the consideration in the year in which that consideration was received under s. 45(2). The income-tax is charged in the previous year in which such stock-in-trade is sold. Sale took place in the asst. yrs. 2004-05 and 2005-06. The power of attorney had been executed in asst. yr. 2001-02. When stock-in- trade is sold by executing a deed for conveyance and duly registered, the question of the said stock-in-trade king otherwise transferred would riot arise at all. Therefore, the argument of the Revenue, that on the day the power of attorney was executed when entire consideration due under the agreement of sale was received and virtue of the power of attorney, the power of attorney holder is authorized to develop the property, to sell the property and to receive the consideration, It amounts to the stock-in-trade being otherwise transferred leading to the said income being chargeable to Income-tax in the previous year in which the power of attorney is exe....
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....and absolute possession of the property, and had been empowered to dispose of or even alienate the property. The assessee had the right to get the conveyance duly registered and executed in its favour, but had not exercised that option. The assessee was not entitled to say that because of its own default in having a deed registered in its name, the assessee was not the owner of the property. In the circumstances, it was held that the assessee must be deemed to be the owner of the property within the meaning of section 22 of the Income-tax Act, 1961, and was assessable as such on the income from the property." Even the Hon'ble jurisdictional High Court in the case of Vysya Bank Ltd. vs. DCWT (299 ITR 335), after considering the abovementioned two Supreme Court judgments held that an asset, which was not registered and title of the property had not been passed on to the company, cannot be included in the taxable wealth of a company In light of the abovementioned legal position, we hold that the assessee-company continues to be owner of the lands and is liable to wealth-tax. 13. With regard to the claim of the assessee-company that refundable deposits received from M/s.Classic ....