TMI Blog2016 (5) TMI 370X X X X Extracts X X X X X X X X Extracts X X X X ..... constructing seven storey’s of residential building on this property , and it is not that the assessee and the other coowners of the property in execution of the MOU have handed over the possession of the property in lieu of the part consideration received from GCB in the capacity of the buyer of the said property, rather the possession of the afore-stated property was handed over to GCB as licensee only for limited purpose of demolition of the existing bungalow and for reconstruction of the said property by constructing seven storey’s residential building on the said property. The assessee and the co-owners continue to enjoy the possession as and in the capacity as the owners of the afore-stated property while concurrent possession was with GCB as licensee for limited purposes of demolition of bungalow and for construction of seven stories and hence in our considered view, income there-of cannot be brought to tax in the hands of the assessee and the co-owner during the impugned assessment year as transfer as contemplated u/s 2(47) of the Act read with Section 53A of the Transfer of Property Act ,1882 is not been effected as the possession in fact was never been transferred from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Act,1961(hereinafter called the Act ). 4. The grounds raised by the assessee in ITA No. 1038/Mum/2013 in the memo of appeal filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called the Tribunal ) reads as under :- 1) No valid and legal notice was served on AOP/BOI/co-owner. 2) Impugned assessment order is passed without legal and proper jurisdiction. 3) On the facts and in law, learned CIT(A) has erred in sustenance of assumed Long Term Capital Gains of ₹ 1,00,26,763/- made by the AO on substantive basis in the hands of the appellant without taking cognizance of various documents/ statements/ submissions of the Appellant filed before the AO and before the learned CIT(A). 4) On the facts and in law, learned CIT(A) has erred in sustenance of assumed Long Term Capital Gains of ₹ 1,00,26,763/- made by the AO on protective basis in the hands of the appellant without taking cognizance of various documents/ statements/ submissions of the appellant filed before the AO and before the said CIT(A). 5) You are kindly requested to delete impugned aggregate additions of assumed long term capital gains of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement dated 29th December 2004 with the assessee and his family members. The said builder GCB submitted to the AO in reply to notice u/s 133(6) of the Act, that the possession of the said property was handed over to GCB by the assessee vide letter dated 16th October 2005, with effect from 16th October 2005 for the purpose of demolition of the bungalow standing on the said plot of land and for construction of seven storied building. The Copy of the MOU dated 29-12-2004 entered into by the builder GCB and the assessee and his family members, was submitted by the builder GCB to AO and it was confirmed that the 4th and 5th floors are physically independent, joined by common staircase to all seven floors and not interconnected from within. The AO on perusal of the MOU dated 29-12-2004 observed that the said bungalow was leased to Dave family on long term lease and as per the records of rights, the ownership of the property is in the name of one Shri Harivallabh Parmanand Dave Dr. Devendra Harivallabh Dave. But it is contended by Dave family that now (after the death of Shri Harivallabh Parmanand Dave) , the property belongs to all the four signatories to the MOU dated 29-12- 2004 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sec 2(47) of the Act is not acceptable as the assessee has allowed the peaceful possession of the land in question to the GCB with the condition that they have to construct 7 storey building and to hand over 5 floor to assessee as free of cost. As per the MOU, the assessee has received the fixed amount of ₹ 1,65,00,000/- on various installment and the last such installment was received by the assessee on 2/4/2007 and hence the AO held that there is a transfer of capital asset as envisaged in Sec 2(14) of the Act. Since, the assessee has part performed the contract as per the provisions of Sec 53(2)(sic. to be read as Sec. 53A) of the Transfer of Property Act,1882 even though the agreement in question is not registered or executed as the possession of the land was given to the builder and the assessee has received sale consideration including the outer construction of the 5 storey, the transfer is complete and assessable to tax in the assessment year 2008-09. The said consideration of ₹ 1,65,00,000/- together with the cost of construction of 5 floors to be retained by the assessee constructed free of cost by the GCB , is to be the share of the assessee and the legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee preferred an appeal before the CIT(A). 8. Before the CIT(A), the assessee contended that four family members termed as co-owners of immovable property have entered into MOU dated 29.12.2004 for development of their property by the GCB, but due to certain breach of contract, the MOU was terminated, hence incomplete work was carried out by the Association of Person(AOP) which is not completed till date. The assessee submitted that the additions being made by the AO in the hands of the assessee is bad in law , as the same should be assessed in the hands of the AOP as the assessee being the co-owner of the property and is thus AOP. The assessee contended that the AO has no jurisdiction over the AOP and hence the assessment made is without jurisdiction and should be quashed. The AO in his remand report dated 11/06/2012 submitted that there was no such claim/submission made by the assessee during the assessment proceedings before the AO regarding existence of AOP and further no documentary evidence whatsoever nature was also filed to substantiate the status of the assessee as AOP and merely because certain person have inherited property after death of a person that does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd construction of seven storied building, the property was handed over to them w.e.f. 16.10.2005 by Dave s letter dated 16.10.2005. Thus , the entire property was in the possession of GCB till the termination of the MOU and the GCB have applied to the statutory authorities for approval of the plan and other permissions and therefore it is clear that the property for all practical purposes was with M/s.GCB. With respect to the claim of the assessee that the transfer is complete only when the conveyance deed is executed as per decision in the case of Allapatti Venkatramiah v. CIT (1965) 57 ITR 185. The AO submitted that the assessee has received compensation as mentioned in the MOU and the developer has taken the possession of the property from the owner s as per section 53A of the Transfer of the Property Act ,1882 . The transfer is complete even though the conveyance deed is not executed by relying upon provisions of Section 2(47)(v) of the Act as it involves the possession of immovable property to be taken in part performance of the contract. The arguments of the assessee were rejected by the AO in remand report. The AO also noted that the MOU did not state that a deposit of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has also handed over the peaceful possession of the land in question to the GCB to construct seven storied building and handover five floors to the assessee as free of cost as per the MOU, which clearly establish the fact that there is transfer of asset as envisaged in section 2(14) r.w.s. 2(47) of the Income Tax Act and since the assessee has performed the contract as per the provisions of section 53(2)(sic. To be read as Section 53A) of the Transfer of Property Act,1882 even though the agreement is not registered but the possession of the land in question was given to the builder and sale consideration has been received by the assessee including the outer construction of the 5 storied, which amounts to transfer of property and hence as per the AO in his remand report , it was held that the income was rightly brought to tax in the assessment year 2008-09 as long term capital gains. It was also submitted in the remand report by the AO that the assessee was not able to furnish any details quantifying the cost of construction of the five floors retained by him. The assessee has also not furnished documentary evidences to show that who are the legal heirs of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the assessee and rejected the contentions of the assessee.The CIT(A) held that remand report called from the AO is for the benefit of the assessee , hence the objection of the assessee with respect to reference to AO for remand report was rejected. It is seen that the assessee is having land bearing CTS No. 204 admeasuring 852.50 sq. meter with bungalow named Udgith on plot No. 35 on lease ownership basis at Vallabh Nagar CHS, Vile Parle( West), Mumbai in the name of Shri Harivallabh Parmanand Dave (father of the assessee) and Shri Devendra Dave (the assessee) with 50% shares of each. On the death of Shri Harivallabh P Dave on 11.11.1985, 50% shares of his share devolved upon Ms. Anusuya H Dave (sister of the assessee), Shri Rajiv H Dave and Shri Alok D. Dave (with 16 1/3rd share each). The said bungalow was owned by four co-owners with definite shares in which the assessee s share was 50% and other three persons had 16 1/3rd each. The co-owners of the bungalow No. 35 were taken on record by the society as inherited property on 12.09.1989. The said plot was acquired in the name of the assessee and his father vide conveyance deed dated 21.09.1971. The said plot No. 35 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the afore-stated land being Bungalow No. 35 to the GCB to construct 7 storied building and hand over 5 flats to the assessee as free of cost as per the MOU dated 29-12-2004. Thus , the CIT(A) held that the transfer is complete and the AO has rightly brought to tax income from transfer of property as capital gains , keeping in view the provisions of section 2(47) of the Act and section 53A of the Transfer of Property Act,1882. Thus , the assessment order dated 31.12.2010 of the Assessing Officer passed u/s 143(3) of the Act was upheld by the CIT(A) vide orders dated 10.12.2012. The CIT(A) directed the AO to intimate the concerned AO having jurisdiction over the other co-owners of the property for considering long term capital gain on substantive basis in their cases. 9. Aggrieved by the orders dated 10.12.2012 passed by the CIT(A), the assessee has filed an appeal before the Tribunal. 10. Learned counsel appearing for the assessee reiterated the submissions as were made before the authorities below, which are not repeated for the sake of brevity. Ld. Counsel for the assessee submitted that the assessee along with other co-owners has entered into an MOU dated 29.12.2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s always with the assessee along with other co-owners and only for the limited purposes of demolition of the bungalow and reconstruction of the building , the property was handed over to the GCB, which is evidenced from the terms of MOU dated 29.12.2004 which is placed in the paper book filed with the Tribunal at pages No. 94 to 102. He also drew our attention to the various defects and discrepancies in the performance of the GCB with respect to terms and conditions as stipulated in the MOU which were communicated to the GCB in writing before terminating the MOU on 15- 10-2007, whereby the construction of the project suffered as to the quality and also with respect to delay in terms of time in completing the work of construction of the building, the correspondence with the GCB informing discrepancies and deficiencies in performance in terms of the MOU is placed in paper book pages 69-75. Various notices in writing were issued by the assessee to the GCB requesting to comply with the terms of the MOU but the GCB did not comply and ultimately the MOU was terminated as per clause 11 of the MOU vide letter dated 15.10.2007 and the possession of the property given to GCB for limited purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tagi , learned senior counsel appearing for the Respondent gives an undertaking that flats on fourth and fifth floors and the corresponding parking space shall not be alienated or dealt with in any manner till the disposal of the suit. We request the learned judge to dispose of the suit as expeditiously as possible in any event with a within one year. In view of this order, nothing survives in this appeal of the Division Bench and the same is disposed of. The special leave petition is, accordingly disposed of. The copy of Hon ble Supreme Court above orders are placed in paper book page 76-78. The ld. Counsel for the assessee submitted without prejudice that the MOU was entered into in the assessment year 2005-06 and if it is to be considered that the possession is given by the assessee, then without prejudice the same was given on 16-10-2005 by Sh. D. H. Dave i.e. in the assessment year 2006- 07 and not in the instant assessment year 2008-09 under appeal, then the income being long term capital gain on the transfer of the afore-stated property can only be brought to tax for the assessment year 2006-07 keeping in view the provisions of Section 2(47) of the Act r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complete He relied upon the Judgment of Hon'ble Punjab and Haryana High Court in the case of C.S. Atwal and Others v. CIT [(2015) 59 taxman.com 359(P H HC)] and submitted that no capital gains can be brought to tax in this case. 13. We have considered the rival submissions and perused the material on record including case laws relied upon by both the parties. We have observed that the assessee alongwith Shri Harivallabh Parmanand Dave was the owner of the impugned bungalow at Plot No.35, Vallabh Nagar Co-op Housing Society Ltd., North South Road No. 3, J.V.P.D Scheme, Vile Parle(W), Mumbai-400 56. The said plot was purchased by the assessee and Sh. Harivallabh Parmanand Dave (father of the assessee ) in the year 1971 and the bungalow was stated to be constructed in the year 1972. The copies of the original purchase deed dated 21.09.1971 in favour of the assessee and Mr.Harivallabh P. Dave for purchase of land being Plot No.35, Vallabh Nagar Co-op Housing Society Ltd., North South Road No. 3, J.V.P.D Scheme, Vile Parle(W), Mumbai-400 56 is filed in the paper book , page 001-018. The said Sh. Harivallabh Parmanand Dave died on 11.11.1985 and his daughter and two grandsons are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial building on this property and payment of ₹ 1.65 crores to be made by the GCB to the assessee and the co-owners, the GCB shall be entitled for two floors namely 4th and 5th floor along with corresponding parking space in the stilt as earmarked in the plan attached. We have carefully perused the terms of the afore-stated MOU dated 29.12.2004. The said MOU is an unregistered MOU. The documents in connection with the transfer of share certificate showing registration of change of ownership of the property w.e.f. 12.09.1989 in favour of the assessee, Sh Rajiv D. Dave, Sh. Alok D. Dave and Ms. Ansuya H Dave , pursuant to the death of Mr.Harivallabh P. Dave on 11.11.1985 is placed in paper book page 019-21. The copy of NOC dated 19/12/2003 from the society in favour of the assessee, Sh Rajiv D. Dave, Sh. Alok D. Dave and Ms. Ansuya H Dave for development of property is placed in the paper book page no 021. The assessee and the other co-owners are stated to have received ₹ 1.65 crores from GCB spread over four years starting from the financial year 2004-05. First payment being ₹ 5 lacs was stated to be received in the assessment year 2005-06, ₹ 25 lacs was stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved that allegedly the GCB has not fulfilled its commitment with respect to the performance of the MOU whereby there was discrepancy and deficiencies in the construction of the seven storyed residential building as to the time in completion of the construction as also as to the quality of the construction . The said MOU was terminated by the assessee and the coowners on 15.10.2007 and the matter is sub-judice with the Hon ble Bombay High Court vide suit no 189 of 2008 filed by the GCB whereby the assessee and other co-owners are defendents. It was contended before us that various defects and discrepancies in the performance of the builder with respect to terms and conditions as stipulated in the MOU were communicated to the GCB before terminating the MOU on 15-10-2007, whereby the construction of the project suffered as to the quality and also with respect to delay in terms of time of execution of the work, the correspondence with the GCB is placed in paper book pages 69-75. Various notices were issued to the GCB requesting to comply with the terms of the MOU but the said GCB did not comply and ultimately the MOU was terminated as per clause 11 of the MOU vide letter dated 15.10.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was also contended that occupation certificate was also obtained by the assessee and the co-owners directly from BMC The assessee also placed on record the municipal taxes receipt of February 2014 and electricity bills which are in the name of Dave s to contend that the Dave family is the owner of the said property seized of possession also even as of 2014. The Hon'ble Supreme Court vide its orders dated 22-3-2010 in SLP to Appeal (Civil) No(s). 7354/2010 have disposed off the SLP as under : We have heard learned counsel for the parties. Mr. Mukul Rohtagi , learned senior counsel appearing for the Respondent gives an undertaking that flats on fourth ad fifth floors and the corresponding parking space shall not be alienated or dealt with in any manner till the disposal of the suit. We request the learned judge to dispose of the suit as expeditiously as possible in any event with a within one year. In view of this order, nothing survives in this appeal of the Division Bench and the same is disposed of. The special leave petition is, accordingly disposed of. The copy of Hon ble Supreme Court above orders are placed in paper book page 76-78. We hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 (3 of 1877) [***] or as evidence of any collateral transaction not required to be effected by registered instrument.] Section 53A of the Transfer of the Property Act,1882 provides as under: Section 53A in The 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 transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... title has been transferred in part performance of the contract as it had not affected the immovable property comprised there-in, hence capital gain cannot be brought to tax. The similar view has been taken in the case of C.S. Atwal (supra) by the Hon ble Punjab and Haryana High Court. We have also noticed in the instant case that possession is handed over for the limited purpose of demolition and reconstruction of the property for constructing seven storey s of residential building on this property , and it is not that the assessee and the other coowners of the property in execution of the MOU have handed over the possession of the property in lieu of the part consideration received from GCB in the capacity of the buyer of the said property, rather the possession of the afore-stated property was handed over to GCB as licensee only for limited purpose of demolition of the existing bungalow and for reconstruction of the said property by constructing seven storey s residential building on the said property. The assessee and the co-owners continue to enjoy the possession as and in the capacity as the owners of the afore-stated property while concurrent possession was with GCB as licens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gain on transfer of the afore-stated property which shall be considered for addition on substantive basis in their respective hands. The AO recorded the reasons for re-opening of the assessment and the AO reopened the assessment u/s 147/148 of the Act and the afore-said new and tangible material coming to possession of the AO has in our considered view direct and live link/nexus with the formation of belief that the income has escaped assessment and the re-opening has been done within four years from the end of the assessment year. In the case of Ms Ansuya H Dave in ITA No. 156/Mum/2015 , even the said assessee did not filed any return of income u/s 139 of the Act on the grounds that the income of the said assessee, Ms Ansuya H Dave is below the taxable limit of the income which is not chargeable to tax as per the Act. Thus, we uphold the reopening of the assessment u/s 147/148 of the Act by the AO as valid and proper in both these appeals. The contentions of both the respective assessee s to this effect covered under both these appeals are hereby rejected . We order accordingly. 16. Thus, both the above appeals in ITA no. 155 156/Mum/2015 filed by the respective asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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