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TMI Blog2016 (5) TMI 932X X X X Extracts X X X X X X X X Extracts X X X X ..... get 30 to 35% and the developer paid to the owners Rs. 2.50 crores as interest free refundable security deposit by way of cheque bearing No.117146 dated 20.10.2007. At page 3 clause (2) of the said agreements states that the developer has accepted to develop the Schedule A mentioned property after getting the necessary plan sanction from the Chennai Metropolitan Development Authority/Corporation and the case may be. At page 5 para. (11) of the said agreement states that the developer shall give an acknowledgement in writing to the owners of having received all the original title deeds, pertaining to the Schedule mentioned property, for the purposes of applying and getting Plan Sanction, Lay-out Sanction, Sub-division Sanction, for getting various permissions from Local and Statutory Authorities etc. Further, it was mentioned that original title deeds and all relevant documents shall be handed over to the Association after the completion of the entire work of construction. Further, the vendor/owner has to execute a General Power of Attorney in favour of Shri Suresh Jain, Managing Director of the developing company for obtaining the permissions and approval from concerned authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p shows that possessions have been given. 5) The supplementary agreement was dated 19.04.2010 which is 2 years 6 months from the date of J.V.Agreement. 3.1 Further, there was supplementary agreement dated 19.4.2010, which shows that it was only a substitution and continuation of earlier JDA and difference between these two JDA are as follows : i) In the first agreement the parties of first party had received Rs. 2.50 crores interest-free refundable security deposit. ii) In the supplementary agreement, it was shown as sales for a consideration of Rs. 33 crores. iii) In the first agreement, sharing the proceeds of development is in the ration of 65% & 35% iv) Later agreement reveals outright sale. v) If the JVA is cancelled then the developer would not have started any construction in the said land. For the reasons best known to them, the owners said that they have cancelled the JVA after lapse of 2 years and 6 months. vi) May be, to avoid capital gain and to claim deduction u/s.80IB, the owners and the developer would have carried out the above method. 3.2 Further, by December, 2011 the developer almost constructed 9 towers each having 9 floors, which is evident from the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Sub-registrar Office conveyed by the assessee along with the developer in favour of Shaik Md. Shafijan and Dr. N. Sadiya Shafijan vide Doc. No.6175/09 dated 21.08.2009. Similarly, document No.11356/10 dated 18.11.2010 is in favour of Srinivasan No.35, 52"d Street, D.A.E. Township, Kalapakkam-603 102 and both the sale deeds contained reference of supplementary agreement dated 19.4.2010, where the assessee allowed along with 6 others to sell the entire flats. From this, the AO was of the opinion that the assessee has already transferred the possession of the property to the developer vide JDA dated 20.10.2007 and the power of attorney given by the owners in favour of Mr. Suresh Jain was also mentioned in the sale deed. The assessee entered into supplementary sale deed so as to misguide the Department and to avoid capital gains tax. Accordingly, he brought to capital gains tax in terms of sec.2(47) in the asst. year 2007-08 in the hands of the assessee. Against this, the assessee went in appeal before the CIT (Appeals), who deleted the addition by observing that there is no transfer of capital asset in the asst. year 2007- 08, in view of the ratio laid down by the Tribunal in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch forecast. 51. If at all there is a case of computing long-term capital gains in the above scheme contemplated by the assessee, It is to be looked into as to from whom the right is being transferred, whether it is from the assessee company to PEPL or from the shareholders of the assessee company to PEPL. All these matters have to be determined on the basis of the development of the project year after year. The final line may be drawn on induction of the agreed funds and consequential allotment of shares to PEPL and on completion of the project. Anyhow the issue will have to be considered afresh, as and when it arises." Against this, the Revenue is in appeal before us. 4. We have heard both the parties and perused the material on record. The Tribunal, Hyderabad Bench in the case of Sri Potla Nageswara Rao v. DCIT in ITA No. 1519/Hyd/2011 & others, held as under : "9. In the instant case, on 7.3.2003 an agreement was entered into by the assessee with M/s. Bhavya Constructions Pvt. Ltd., and the plan of the building was approved on 31.3.2003. These dates fall in the previous year 2002-03, relevant to assessment year 2003-04. Thus, in this case, the land being capital asset was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of contract falling within the scope of S.53A of the Transfer of Property Act. The legislature advisedly referred to "any transaction" with a view to emphasize that it is not the factum of entering into agreement or formation of contract that maters, but it is the distinct transaction that gives rise to the event of allowing the contractee to enter into possession that matters. That transaction is identifiable by the terms of the agreement itself and it takes place within the framework of the agreement. We may also refer in this behalf to the decision of the Hon'ble Karnataka High Court in the case of CIT V/s. Dr.T.K.Dayalu (202 Taxman 531), wherein it has been held that it is well settled position by now that the date on which possession was handed over to the developer is relevant for determination of the year in which the capital gains are assessable to tax. In this view of the matter, we find no merit in the contentions of the assessee that there is no taxability of capital gains in the year under appeal. We accordingly reject the grounds of the assessee on this issue." 5. Further, in the case of Madathil Brothers v. DCIT(301 ITR 345), the Madras High Court observed as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oint reading of the provisions, as they stood at the material assessment year, show that "capital asset" means "property of any kind held" by the assessee. It may be seen that the Income-tax Act, 1961, does not contain the definition of "property". In the decision reported in Ahmed G. H. Ariff v. CWT [1970] 76 ITR 471 (SC), in the context of the wealth-tax proceedings with reference to the definition of "assets" in section 2(e) to "include property of any description", the apex court held that "property" is a term of the widest import and, subject to any limitation which the context may require, it signified every possible interest that a person can hold or enjoy. The definition of "capital asset" under the Income-tax Act, referring to "property of any kind" carries no words of limitation. The definition is of the wide amplitude to include every possible interest that a person may hold and enjoy. The meaning ascribed by the apex court to the term "property" applies with equal force to the understanding of "capital asset" under the provisions of the Income-tax Act. 33. The definition of "capital asset" refers to property of any kind "held" by an assessee. In contradistinction to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing void." Affirming the view of the Rajasthan High Court, the apex court held that in the context of section 22, where the transferor had handed over possession of the property pursuant to an agreement for sale, "owner is a person who is entitled to receive income from the property." The apex court held that the amendment introduced by the Finance Bill, 1987, was declaratory/clarificatory in nature and hence, these provisions are retrospective in operation. 35. The Rajasthan High Court had an occasion to consider a case similar to the one that we have on hand. Applying the aforesaid decision of the apex court to the case dealing with a question of capital gains where possession was given to an agreement holder, in the decision reported in CIT v. Vishnu Trading and Investment Co. [2003] 259 ITR 724, the Rajasthan High Court held that (726) : "Following the view taken by their Lordships, we are of the view that for taxing the capital gain, registration of the sale deed is not necessary under the provisions of the Income-tax Act." The said decision of the Rajasthan High Court was again followed in the decision reported in CIT v. Rajasthan Mirror Manufacturing Co. [2003] 260 ITR 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Shorter Oxford Dictionary, edition 1985, 'owner' means one who owns or holds something ; one who has the right to claim title to a thing." 38. The High Court held that even if the amount was not paid in full by the assessee in terms of the agreement, it could not be construed that the assessee had no right or interest in the property. The assessee was put in possession as early as 1970 and was remaining in occupation as a matter of right. Thus, for all purposes, he was a beneficial owner from the start. In the context of this view taken, the court held that the capital gain was assessable as long-term capital gain. 39. We find no reason to differ from the view taken by the other High Courts as stated above on the scope of section 2(47) with reference to the liability under section 45. Although the decision of the apex court related to a case of income assessability at the hands of an occupier who need not be an owner in the normal connotation, yet, given the scope of the definition provisions under section 2(14) and section 2(47) and the effect of the amendment brought forth by the insertion of clause (v) under section 2(47), we agree with the view expressed by other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purposes of the Income-tax Act, 1961, require facts of conveyance of the capital assets to the transferee. Delivery of possession of immovable property, by itself, could not be treated as equivalent to conveyance of the immovable property. 44. The decision of the Supreme Court reported in Alapati Venkataramiah v. CIT [1965] 57 ITR 185, on which the Tribunal based its decision and relied on by the Revenue is to be understood with reference to section 12B of the Indian Income-tax Act, 1922, and in the context of the provisions as they stood at the material time. 45. The provisions of section 12B of the Indian Income-tax Act, 1922, which corresponds to section 45 of the 1961 Act relating to capital gains liability brought to charge capital gains "in respect of any profits or gains arising from sale, exchange, relinquishment or transfer of a capital asset . . .". The 1922 Act contained a definition of "capital asset" under section 2(4A). However, there was no specific provision therein corresponding to section 2(47) under the 1961 Act defining "transfer". The present provision under section 2(47) defining "transfer" is wider in scope and is an inclusive definition. Touching ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Anr. v. CIT (323 ITR 40), the Madras High Court held that for application of sec.53A, relevant consideration would be clauses in the agreement between parties to the agreement and their performance in terms of the agreement. Subsequent act of assessee in executing power of attorney and deeds executed by the power holder on basis of such power would not in any way later the status of the parties to the agreement, for applicability of sec.53A of the Act as has been rightly held by the learned single judge. The assessee could no longer asset possessory rights against the firm o which possession was already given pursuant to the agreement and that too after receiving the full sale consideration." 6. Further, in the case of Chaturbhuj Dwaralkdas Kapadia v. CIT (260 ITR 491(Bombay), wherein it was observed as under: "that section 2(47)(v) read with section 45 indicates that capital gains was taxable in the year in which such transactions were entered into even if the transfer of immovable property is not effective or complete under the general law. In this case, the test had not been applied by the Department. No reason had been given why that test had not been applied, particularly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstruction of flats within 36 months from the date of obtaining of plan sanctions. If there is a failure on the part of the developer to hand over the vacant possession of the property within the grace period of 12 months, there is a penalty clause that Rs. 20 lakhs per month shall be payable to the assessee. 7.1 Further, by December, 2011, the developer almost constructed 9 towers each having 9 floors, which is mentioned in para 3.2 of this order. All these show that the JDA entered on 20.10.2007 actually acted upon. Subsequent agreements executed by the parties took only paper documents so as to postpone tax incidence. If one party is performed his part of duty i.e. developer shows that the other party also performed its part of obligation. Thus, the transaction entered into by the parties herein, which have the effect of transferring or enabling the enjoyment of any immovable property, then capital gains would be taxable in the year in which the transactions were entered into even if the transfer of the immovable property was not effective or complete under the general law. In our opinion, all the ingredients of sec.2(47)(v) of the Act are satisfied and it has to be inferred th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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