TMI Blog2016 (11) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A). In other words, nothing has been brought on record to show that physical possession was given by the assessee to the developer. It does not transpire that there was clear intendment of the assessee to make transfer of the said land by virtue of this agreement itself, in view of the detailed reasoning and analyses given by us in earlier part of our order. Further, the distinguishing features and facts of the above said case were that in the said case, the admitted case of the said assessee was that transfer had taken place, and the only dispute in the said case was confined to the year of chargeability. Further, the fact of possession having been handed over by the assessee to the developer was also admittedly on record and the same was not denied. Whereas, on the other hand, in the case before us neither the possession has been handed over nor it is an admitted case of the assessee that transfer has taken place even till date. Further,Hon’ble Bombay High Court got an occasion to analyse the aforesaid judgment in the case of CIT v. Geeta Devi Pasari (2008 (7) TMI 990 - BOMBAY HIGH COURT) wherein it was clearly held that unless the purchaser was actually physically put in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in law, the ld. CIT(A) not appreciated the facts that AO has rightly worked out the Capital Gain under the Income Tax Act. The appellant prays that the order of the CIT(A) being erroneous in facts and in law be reversed and that of the Assessing off icer be restored. 2. During the course of hearing, arguments were made by Shri Hiro Rai, Authorised Representative (AR) on behalf of the Assessee and by Shri Sanjay Singh, Departmental Representative (CIT-DR) on behalf of the Revenue. 3. During the course of hearing, exhaustive arguments have been made by both the parties drawing our attention on various evidences enclosed in the paper book, orders of the lower authorities and judgments of various courts on this issue as were placed before us. The central issue involved in this appeal is with regard to determination taxability of long term capital gain of ₹ 25,81,38,515/- arising on account of a development agreement entered into by the assessee with M/s. Shivalik Ventures, a partnership firm with respect to pieces and parcels of land located at Bandra (E) owned by the assessee. As per the AO, the said development agreement gave rise to transfer of land in view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities with respect to development of land and its free use. 3.2. It was stated that cost of construction in respect to 130000 sq ft FSI to be given to assessee in pursuance to development of land by Shivalik Venture was determined at ₹ 26 crores. The aforesaid cost of construction was to be incurred by Shivalik Ventures or money was to be provided to assessee for construction. Only part of this sum being ₹ 10 crores was received by assessee during the year under consideration, which was shown by the assessee under the head advances as part of its liabilities in its Balance Sheet. During the course of assessment proceedings, the AO gave show cause notice that said development agreement gave rise to transfer of the impugned land, and being not satisfied with the reply of the assessee, he treated the sum of ₹ 26 crores as sales consideration and after reducing index cost of acquisition of ₹ 18,61,485/-, he computed long term capital gain of ₹ 25,81,38,515/- and held the same as taxable in the year under consideration. 3.3. Being aggrieved, the assessee filed an appeal before the Ld. CIT(A) wherein exhaustive submissions were made and various docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possession was effectively given and substantial part of consideration was received and therefore it constituted transfer as per section 2(47)(v) of the Act, and therefore, the AO had rightly held that long term capital gain was taxable during the year under consideration. In his support, Ld. CIT-DR relied upon following judgments: 1. Chaturbuj Dwarkadas Kapadia vs. CIT 260 ITR 491(Bom) 2. Jasbir Singh Sarkaria v CIT AAR. No.724 of 2006 dt. 30.08.2007 3. Electro Zavod (I) Pvt. Ltd. vs. CIT, 278 ITR 189 (Cal) 4. Dr. Maya Shenoy vs. ACIT 124 TTJ 692 (Hyd) 5. Shri Mahesh Nemichandra Ganeshwade vs. ITO 594/PN/10 dated 29.03.2012 6. V. Ramchandra Const. P. Ltd. 11 taxmann.com415(Agra) 7. Sureshchandra Agarwal vs. ITO (2011) 15 taxmann 115(Mum) 8. Smt. Binderchokh vs. ACIT (2013) 36 taxmann 503 (CHD) 9. G. Srinivasan vs. DCIT (2012) 28 taxman 200 (Cochin) 10. Hussanlal Puri vs. ITO (2013) 28 taxmann 7 (CHD) 11. Vrajchandra Karar Varma Rathod (264 taxmann 391 (Hyd) 12. Mahesh Nimichandra Ganeshwade vs. ITO 21 taxmann.com 136 (Pune) 13. Smita N Shah vs. JCIT (2005) 94 ITD 492 (Mum) 3.6. Per contra, Ld. Counsel of the assessee vehemently opposed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been given by the assessee to the developer. The land still remains under domain and control of the assessee. It was further submitted that factually speaking the physical possession is not retained by the assessee, and therefore, no question arises of handing over its physical possession to the developer. Since, no physical possession has been given by the assessee to the developer, this transaction cannot be tested under the provisions of section 2(47)(v) of the Act. Thus, the impugned transaction could give rise to taxable capital gains only in accordance with the main provisions of section 45, wherein, admittedly, no transfer of the impugned land can be said to have taken place during the year under consideration. 3.8. It was further submitted that situation of the impugned land as well as impugned development agreement under consideration are not comparable to other normal cases, since, in this case, various strings were attached and there were various fetters on the legal rights of the assessee as well as the developer for making free use of the land, in view of the admitted fact that said land was occupied by the slum dwellers and therefore, it was subjected to variou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and therefore, no transfer of the impugned land could be said to have taken place by the impugned development agreement which was not more than an understanding in regard to the proposed transfer which was to come into effect only when proper scheme was sanctioned by the Slum Rehabilitation Authority and other requisite legal compliance in this regard were made. 3.11. We have gone through the orders of the lower authorities and documentary evidences, copies of judgment placed and also the arguments made by both the parties before us. The only issue which we have been called upon to decide is whether the impugned development agreement dated 07.11.2007 entered into by the assessee with M/s. Shivalik Venture gives rise to transfer of the impugned land owned by the assessee in terms of provisions of section 2(47)(v) or any other provision of Income Tax Act, so as to bring to tax the amount of long term capital gain as has been computed by the Ld. AO or not, as was claimed by the assessee in its return of income. Before thrashing out the facts and applicable legal position, it is noted by us that Ld. CIT(A) has recorded detailed and well reasoned findings while deciding this issue, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2.2. Perusal of map placed in paper book indicates that various portions which are marked in red colour are area of land belonging to assessee. The various areas in between two portions of land of the assessee does not belong to assessee but belongs to developer and other persons from whom developer has agreed to purchase. The land owned by assessee is thus evidently fragmented and not contiguous. The terms and conditions of MOU would indicate that developer has to provide contiguous portion of land wherein FSI 1,30,000 Sq, f t, can be built (clause 8) The total area of land may be used for development of slum building or free use for public amenities or free sale building to be taken by the developer after providing land to assessee. On the date of execution of agreement, no such conclusion can be drawn and it is only after the requisite permissions are granted to developer for a project as whole and land owned by assessee and other land owned by developer the project can be implemented. M/s Shivalik Ventures has agreed to make compliances and also incur expenses to obtain sanction from Slum Rehabilitation Authorities so that land owned by assessee can be developed. 3.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause 6 (Para 6) On the issuance of letter of intent and on issuance of Annexure-II, the developer shal l be enti tled to enter upon the said proper ty for the purpose of implementation of scheme of SRA'. Clause- 14 (Page 9) Notwithstanding anything stated in this agreement the owner shall always be deemed to be in physical and exclusive possession of the said property until issue of Annexure-II by S.R.A. 3.2.5. The perusal of aforesaid clauses as well as reading of agreement as whole clearly indicates that there is no possession given by assessee to M/s Shivalik Ventures during the previous year under consideration It is undisputed fact on record that land was not avai lable for development during the previous year under consideration in as much as there was no sanction available from Slum Rehabilitation Authorities during the year under consideration or even on the date of assessment as is evident from assessment order. The land is not clear from slums and available for development under the Slum Development Scheme as no permissions are available with assessee or developer as is evident from evidence on record. As per clause 14 of the development agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 54. Sale defined -- 'Sale is a transfer of ownership in exchange for a price paid or promised or part - paid and part - promised. Sale how made -- Such transfer, in the case of tangible immovable property of the value of one hundred rupees and upward, or in the case of a reversion or other intangible thing, can be made only by a registered instrument. In the case of tangible immovable property, of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property. Delivery of tangible immovable property takes place when the seller places the buyer, or such person as he directs, in possession of the property. Contract for sale -- A contract for the sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties. It does not, of itself, create any interest in, or charge on, such property. 3.2.9. Considering the provisions of sec 54 of Transfer of Property Act, the transfer of capital asset cannot be said to have taken place in the absence of a registered conveyance deed. A document of sale, exchange or relinquish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, provision of sec. 2(47)(v) cannot be pressed into service. In the facts of present case, no possession of property is given by assessee to M/s Shval ik Ventures. On the contrary evidence on record being agreement on the basis of which AO has assessed long term capital gain indicates that possession is with assessee and has not been parted with. The Assessing Officer has not brought any evidence on record to demonstrate that possession of land has been given to Shivalik Ventures during the year under consideration The perusal of various clauses of agreement corroborates the submission of assessee that possession of land is with assessee and has not been transferred to Shival ik Ventures during the previous year under consideration. The arrangement is only to make compliance with Slum Rehabilitation Authorities for sanction of scheme for and on behalf of assessee. It is only after such sanction scheme is obtained in the name of assessee from Slum Rehabilitation Authorities the question as to giving of possession by assessee to Shivalik Ventures would arise, The above facts are substantiated from agreement/arrangement considered by AO in assessment order. It is undisputed fact on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see whether the plot under the development is not affected by any reservation such as playground or recreation ground in view of the stay granted by the High Court in writ petition No. 1152 and also to verify whether the proposed appointed developer has the financial capacity to undertake and complete the scheme. The SRA is also directed to consider as to whether the guidelines and other conditions are fulfilled by the slum dwellers/ the society/as well by the developers and issue notice to the society also and hear them pass appropriate speaking order within 3 months from today. The above direction is issued in the larger interest of the slum dwellers and in order to rehabilitate the poor slum dwellers and needy slum dwellers at the earliest. The perusal of aforesaid portion of judgment indicates that for development of land occupied by slum dwellers there are various essential steps to be taken which are conditions precedent for making any development of such land. In the facts of the present case as no letter of intent has been issued by SRA the question of transfer of land for the purpose of development by assessee does not arise. On above admitted factual posit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax in the case of appellant in the year in which transfer of land takes place in terms of provisions of sec. 2(47) of I.T. Act 1961. It will be charged to tax when appellant hands over possession of the land in substantial fulfillment of contract as per the provisions of section 2(47) of the Act. As I have concluded on facts that no transfer has taken place u/s. 2(47) during the year under consideration no capital gain is chargeable in) Asstt Year 2008-09. 3.2.14. Considering the facts and evidence on record it is concluded that there no transfer as envisaged u/s 2(47) of I T. Act 1961 during the previous year and consequently there is no liability to capital gain tax during the year under consideration The action of Assessing Officer in assessing long term capital gain on transfer of and cannot be sustained. The addi tion made by Assessing Of f icer amounting to ₹ 25.81.38.515/- is hereby deleted. (emphasis supplied in bold). 3.12. It is noted by us that Ld. CIT(A) has analysed the facts threadbare and the factual findings recorded by him are based upon the evidences held on record. Therefore, in absence of any contradictions or doubts in the facts recorded by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. The other important aspect that cannot be ignored here is that the AO had held this transaction to be a case of transfer by erroneously presuming that development agreement was registered with the concerned authorities. The correct fact has been noted by Ld CIT(A) that impugned document was not registered with the registrar under the Registration Act, 1908. This factual finding has not been negated or controverted by Ld. CIT-DR before us. Thus, decision taken by the AO was under a mistaken belief of a fact which did not actually exist. Thus, on this very ground, the whole action of Ld. AO in treating impugned transaction as a case of transfer becomes seriously doubtful. 3.16. But another legal issue has been raised before us by Ld CIT-DR i.e. whether there is any legal requirement of registration of the document for invoking the provisions of section 2(47)(v) since it only talks about contract of the nature as referred to in section 53A of the Transfer of property Act, and therefore it is not mandatory that whole of the section 53A needs to be complied with while applying the provisions of section 2(47)(v). It was further submitted that if we analyse the object of brin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompleteness, first we should apply the Doctrine of Legislation by Incorporation and after applying the same, once the law before us becomes complete, then we should interpret the provisions so combined by applying Haydon s mischief rule. In other words, we should first read the provisions of section 17(1A) of the Registration Act into provisions of section 53A of the Transfer of Property Act, and the provisions so combined together, should be read into section 2(47)(v) of the Act. In our view, the provisions of section 2(47)(v) should be read in toto. When section 2(47)(v) talks about contract of the nature referred to in section 53A of the Transfer of Property Act, then we should also read the conditions attached in section 53A and one of the main requirements is for registration of the document as per the provisions of section 17(1A) of the Registration Act 1908. Thus, registration of the document becomes one of the essential ingredients to invoke provisions of section 2(47)(v). It is noteworthy that subsequent to insertion of clause (v) to section 2(47) of the Act, amendments have been made in section 53A of Transfer of Property Act as well as section 17(1A) of Registration Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or after the commencement of the Registration and Other Related laws (Amendment) Act, 2001 and if such documents are not registered on or after such commencement, then, they shall have no effect for the purposes of the said section 53A. 49. Effect of non-registration of documents required to be registered.--No document required by section 17 or by any provision of the Transfer of Property Act, 1882 (4 of 1882)], to be registered shall-- (a) affect any immovable property comprised therein, or (b) confer any power to adopt, or (c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered: Provided that an unregistered document affecting 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 (1 of 1877) or as evidence of any collateral transaction not required to be effected by registered instrument. The words or as evidence of part performance of a contract for the purposes of Section 53A of the Transfer of Property Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was recorded as under:- Section 115J, Explanation clause (iv), is a piece of legislation by incorporation. Dealing with the subject, Justice G.P. Singh states in Principles of Statutory Interpretation (7th edition-1999): Incorporation of an earlier Act into a later Act is a legislative device adopted for the sake of convenience in order to avoid verbatim reproduction of the provisions of the earlier Act into the later. When an earlier Act or certain of its provisions are incorporated by reference into a later Act, the provisions so incorporated become part and parcel of the later Act as if they had been bodily transposed into it . The effect of incorporation is admirably stated by LORD ESHER, M.R. If a subsequent Act brings into itself by reference some of the clauses of a former Act, the legal effect of that, as has often been held, is to write those sections into the new Act as if they had been actually written in it with the pen, or printed in it. (p.233) Even though only particular sections of an earlier Act are incorporated into later, in construing the incorporated sections it may be at times necessary and permissible to refer to other parts of the earlier statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the land and the developer. For the purpose of determining the actual date of transfer of the land by the land owner, all these stages / events needs to be collectively analsysed and after evaluating overall effect of the same we can determine the actual date of transfer. These stages / events may be described as date of entering into JDA, date of executing power of attorney authorising the developer for taking various approvals / permissions etc., handing over the possession of the land to the developer for various purposes, receipt of part / full sale consideration from the developer, date of execution of power of attorney in favour of developer authorising him for the sale of developed units to the customers at his absolute discretion; and transfer of developed units to the customers etc. There may be few more stages / events to complete the transaction. Though, one single event may trigger the process of transfer but may not necessarily complete it also. Whether the transfer has, in substance, taken place, can be determined by analysing the inter-play and effect of all these stages / events combined and put together. For example, possession may be given for various purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preting the same in any manner, one cannot conclude by any stretch of imagination that the impugned property has indeed been transferred. Thus, viewed from any angle, we have no option but to affirm the detailed finding of Ld. CIT(A) on this issue. 3.22. Ld. CIT-DR had also heavily relied upon the judgment of Hon ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia v. CIT, (supra) for upholding the action of the AO on the ground that as per the said judgment the amount of capital gain shall be charged to tax in the year of entering of Joint Development Agreement, and the moment the possession is handed over irrespective of the fact that whether any conveyance deed was entered or not and whether the registration is done or not. We have carefully gone through the judgment of Hon ble Bombay High Court as well as order of the AO. In fact, in the given facts of the case before us, the aforesaid judgment of Hon ble Bombay High Court helps the assessee. Our reading of the said judgment suggest that ratio coming out from the same is that in the case of a development agreement, if the contract, read as a whole, indicates passing or transferring of complete control over the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect to the provisions of section 53A of Transfer of Propter Act. Thus, the said judgment was delivered, keeping in view the pre-amended law.The development agreement under consideration before us is admittedly not registered.The effect of non-registration after the said amendment has been analysed by Hon ble Punjab and Haryana High Court in the case of C.S. Atwal which has been already discussed by us in earlier part of our order. Thus, taking into case, it can be said that no transfer of the impugned land had taken place during the year before us. 3.23. Before parting with, we shall like to deal with an alternative issue raised by the Ld. CIT-DR that the impugned amount of ₹ 10 crores received by the assessee should be brought to tax as income from other sources. We shall deal with the argument of Ld. CIT-DR on this aspect also. The impugned amount of ₹ 10 crores is stated to be in the nature of advance money received by the assessee for the proposed contracts of the land and to deal with such a situation a specific section i.e. section 51 exists on the statute. Section 51 provides that under such circumstances, amount of advance received shall be deducted from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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