GST Helpdesk   Subscription   Demo   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (5) TMI 932 - ITAT CHENNAI

2016 (5) TMI 932 - ITAT CHENNAI - TMI - Capital gain - transfer - CIT(A) held Joint Venture Agreement did not result in transfer of capital asset in the year under consideration and hence no capital gain had arisen - Held that:- In the present case, vide JDA dated 20.10.2007, the developer will get 60 to 65% of the constructed area and the assessee will get 30 to 35% of the constructed area. The assessee has also received ₹ 2.50 crores as interest free refundable security deposit and the d .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 ₹ 20 lakhs per month shall be payable to the assessee.

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 actual .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n 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 that a “transfer” took place within the meaning of sec.2(47)(v) of the Act. The completion of “transfer” of an immovable property under the general law was not required for the applicability of the provisions of sec.2(47)(v) of the Act, as held by various High Courts as discussed in earlier para. Ac .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is directed against the order of the Commissioner of Income-tax(Appeals) dated 31.8.2012. 2. The main crux of the ground raised by the Revenue is that the Commissioner of Income-tax(Appeals) has erred in holding that the Joint Venture Agreement did not result in transfer of capital asset in the year under consideration and hence no capital gain had arisen. 3. The facts of the case are that the assessee along with six others entered into Joint Development Agreement(JDA) with M/s. Vijay Shanthi Bu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

roperty 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 S .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

power to the developer to advertise for the sale of flats and negotiations for the sale with the prospective buyers etc. and sale deeds would be executed by the developer, through their Power of Attorney Agent and the developer would be responsible for the transactions with the prospective buyers. It was also mentioned that the developer agrees to construct and deliver the constructed area inclusive of common areas to the owners in fit condition for occupation within 36 months from the date of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

19.11.2010, wherein the assessee had enclosed a letter dated 6.7.2009 addressed to Mr. Suresh Kumar Jain, M.D. of M/s. Vijay Shanthi Builders Pvt. Ltd., wherein the assessee informed the developer as follows: a) We are having huge financial commitment b) As thing stand today, it is unlikely that you will be able to meet the deadline of October, 2010 c) Inspite of all these changes, the progress is in minimum. d) It is not feasible to continue with this J.V. Agreement, under these circumstances. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e developer for applying permission w.r.t. building plan and other permission from the State Authorities which shows that the possession of the property have been transferred. 4) Para 12 of page 6, by executing General Power of Attorney registered in favour of Sri Suresh Jain, M.D. of Vijay Shanthi Group 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 agreeme .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

veals 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

haik Md. Shafijan and Dr. N. Sadiya Shafijan vide Doc. No.6175/09 dated 21.08.2009. Similarly on 18.11.2010 vide Doc. No.11356/10 dated 18.11.2010, the above owners/power of attorney holder have transferred the undivided sale of land to Sri. Srinivasan, No.35, 52"d Street, D.A.E. Township, Kalapakkam-603 102 to the extent of 381.78 sq.ft. In both the sale deed at page 5, it was mentioned about the joint development agreement dated 20.10.2007 entered by Sh. Praveen Kumar & 6 others with .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

deed executed in favour of Mr. Srinivasan, does not find place. Most importantly, the supplementary agreement dated 19.04.2010 talks about the outright purchase of land by Vijay Shanthi Builders Ltd. from Praveen Kumar and 6 others for consideration of ₹ 33 Crores. If this is found to be correct, instead of Mr. Praveen Kumar & 6 others, the present owner i.e. Mr. Suresh Jain, M.D. of Vijay Shanthi Builders Pvt. Ltd. (as per supplementary agreement dated 19.04.2010) should have been exe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 prope .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng 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 case of Vijay Productions (P) Ltd. v. Addl. CIT (134 ITD 19), wherein it was held as under : 47. On the question of treating the business income of ₹ 2,28,52,471/- as income from other sources, I find that the assessing authority has not discussed anything to that effect. The learned Accountant Member has rightly pointed out this vacuum in the assessment order. At .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s. The reframing is sought for by the assessee in the matter of computing the long-term capital gains, provided a situation arises where the JV agreement has resulted in generating long-term capital gains in the hands of the assessee. As the issue of capital gains itself is decided in favour of assessee by the Third Member agreeing with the view of the learned Accountant Member, in fact, this issue of computing long-term capital gains becomes academic. I do not think it necessary to discuss the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

existing, there is no question of estimating the probable cost of construction and discounting to NPV, for the statutory purpose of computing capital gains. No commercial complex is available at the particular point of time. That basic vacuum is apparent. It is something to come within a period of three to four years in future. The exercise suggested by the learned Accountant Member is like a project forecast, relevant for cost and finance management. It cannot be applied to Income-tax law. No .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eed 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 w .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

al gains during the year under appeal. Mere accrual of the consideration, as it is to be received in the subsequent years does not defer the taxability of the capital gains. The assessee being owner of the capital asset, having parted with the possession of the land under a joint development agreement, for construction of residential flats/villas and having handed over the possession of the vacant land to the developer on promise to be handed over four flats equivalent to 40% of the value of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

liable to be assessed to tax in relation to the capital gains in the year under consideration itself. For this purpose, we place reliance on the decision of the coordinate Benches of this Tribunal in Smt. Maya Shenoy V/s. ACIT (2009)124 TTJ(Hyd) 692). We also find support in this behalf, from the judgment of the Hon ble Bombay High Court in the case of Chaturbhuj Dwarkaddas Kapadia V/s. CIT (260 ITR 491), wherein it has been held that S.2(47)(v) read with S.45 indicates that capital gains was ta .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e retained. Secondly, such taking or retention of possession as is well known is a facet of the equitable doctrine of part performance 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o 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 : 30. A perusal of the documents filed before this court shows that admittedly, the appellant-assessee was put in possession and enjoyment of the suit property as agreeme .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rms of the settlement reached in the suit proceedings. As such, there was no novation of contract to result in a fresh agreement entered into. 31. On the question as to whether a possessory right under this agreement, per se, confers an interest to claim longterm capital gains, we may have to look at the definition provisions relating to "capital asset" under section 2(14), "short-term capital asset" under section 2(42A) and "transfer" under section 2(47) of the Inc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

#39;transfer' in relation to a capital asset, includes,- (i) the sale, exchange or relinquishment of the asset ; or (ii) the extinguishment of any rights therein ; or (iii) the compulsory acquisition thereof under any law ; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment" ; or The following clause was inserted under the Finance Act, 1987, with effect from April .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 enjo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

efers to property of any kind "held" by an assessee. In contradistinction to the word "owner" or "owned" definition uses the phrase "held". 34. Touching on the meaning of the term "owner" in the context of assessability of the income from property under section 22, in the decision reported in CIT v. Podar Cement P. Ltd. [1997] 226 ITR 625, the apex court held that "owner is the person who is entitled to receive income from the property in hi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed to him after complying with the requirements of law under the Transfer of Property Act and the Registration Act, having regard to the ground realities and the object of the Act, namely, to tax income, in the context of section 22, the owner is the person who is entitled to receive income from the property in his own right. Adverting to the provisions of the Transfer of Property Act under sections 53A, 54 and 55, the apex court held that legal title does not pass unless there is a deed of conv .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tical purpose that the doctrine of the equity of part performance was introduced in the Transfer of Property Act, 1882, by inserting section 53A therein. The section specifically allows the doctrine of part performance to be applied to the agreements which, though required to be registered, are not registered and to transfers not completed in the manner prescribed therefor by any law. The section is, therefore, applicable to cases where the transfer is not completed in a manner required by law u .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s put in possession of the land. The document of sale was registered on June 8, 1979. The assessee sold the land after converting it into plots. The sale of these lands was sought to be assessed as capital gains. On a reference, the Andhra Pradesh High Court held that though the document was registered on June 8, 1979, it related back to the date on which the agreement of sale was executed in favour of the assessee by the vendor. Hence, the assessee was deemed to be the owner of the property wit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ear 1970. He was put in possession of the flat in the same year. The assessee made a final payment in the year 1973, i.e., on February 10, 1973. On the same day, he sold the property and claimed the gain arising therefrom as long-term capital gains. The Punjab and Haryana High Court took the view that section 2(42A) relating to the definition of short-term capital gains asset refers to a capital asset held by an assessee for not more than 36 months immediately preceding the date of transfer. The .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ho may be termed as lessees, mortgagees with possession or persons in possession as part performance of the contract would not in strict parlance come within the purview of 'owner'. As per the 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ction 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 High Courts. 40. Learned counsel for the respondent submitted that in the context of the decision of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

assessment year 1968-69. This court held that the delivery of possession of immovable property could not, by itself, be treated as equivalent to conveyance of the immovable property. This court held that having regard to the law that prevailed in the assessment year concerned, capital gains could be regarded only when the conveyance was executed and not at any earlier point of time. 42. The decision of this court reported in Meccane Industries Ltd. v. CIT [2002] 254 ITR 175, no doubt, applied t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cover the issue on hand. 43. In the decision reported in Zuari Estate Development and Investment Co. P. Ltd. v. J. R. Kanekar, Deputy CIT (Assessment) [2004] 271 ITR 269 (Bom), the Bombay High Court considered the effect of section 2(47) which was amended from March 1, 1988. The Bombay High Court held that for the transaction to amount to "transfer" within the meaning of section 2(47), the minimum requirements are that there has to be an agreement between the parties signed by the par .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ot 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s wider in scope and is an inclusive definition. Touching on the scope of section 12B, the apex court held (page 192 of 57 ITR) : "Before section 12B can be attracted, title must pass to the company by any of the modes mentioned in section 12B, i.e., sale, exchange or transfer. It is true that the word 'transfer' is used in addition to the word 'sale' but even so, in the context transfer must mean effective conveyance of the capital asset to the transferee. Delivery of posse .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssed on under a registered deed alone could be considered as resulting in a profit or gain assessable under section 45. All that the present section looks at is the transfer of a capital asset held as understood under section 2(14) and under section 2(47). In the background of the provisions as they stand today, the decision reported in Meccane Industries Ltd. v. CIT [2002] 254 ITR 175 (Mad) relating to the assessment year 1968-69, or for that matter, the decision of the Supreme Court reported i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

this court reported in Meccane Industries Ltd. v. CIT [2002] 254 ITR 175. 47. The question then is, what will be the effect of the amendment brought forth to section 2(47) by the insertion of sub-clause (v) to section 2(47) relating to the definition of "transfer" under the Finance Act 1987, with effect from April 1, 1988. 48. This takes us once again to the decision of the apex court reported in CIT v. Podar Cement P. Ltd. [1997] 226 ITR 625. Further, in the case of Smt. D. Kasthuri .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d 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 immovabl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nt date to decide the date of transfer under section 2(47)(v) and, in which event, the question of substantial performance of the contract thereafter would not arise. This point had not been considered by any of the authorities below. The assessee had paid the capital gains tax for the assessment year 1999-2000. From mere substantial compliance of the agreement, one could not infer transfer in the accounting year ending March 31, 1996. There were mistakes apparent on the face of the record, in t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ring the financial year 1996-97 corresponding to the assessment year 1997-98. Therefore, this finding of the Tribunal was erroneous. Taking into account the totality of the circumstances the Tribunal was not justified in concluding that the appellant had transferred the property during the previous year relevant to the assessment year 1996-97 . 7. In the present case, vide JDA dated 20.10.2007, the developer will get 60 to 65% of the constructed area and the assessee will get 30 to 35% of the co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version