TMI Blog2017 (9) TMI 1647X X X X Extracts X X X X X X X X Extracts X X X X ..... 2-9-2017 - S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER Assessee by : Shri S.C.Bhadra, AR Revenue by : Shri Kunal Singh, CIT DR O R D E R Per N.S.Saini, AM This is an appeal filed by the assessee against the order of the CIT(A)- Berhampur Camp: Bhubaneswar dated 30.10.2014 for the assessment year 2009-2010. 2. Ground Nos.1 4 are general in nature and hence, require no separate adjudication by us. 3. Ground Nos.2 3 reads as under: 2. That the learned Additional Commissioner erred in the point of law and fact by computing long term capital gain tax on the date on which the development agreement was entered into with the promoter instead of the date on which the land and the title therein was actually transferred. 3. That, the authority of ownership have not been passed to the developer and the developer is not the owner to execute sales. Only an agreement for the development of land was executed with the developer wherein matters of permission from BDA, conditional advance receipt, consideration etc. were mentioned. That the learned Additional Commissioner arbitrarily estimated the consideration to be recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, the developer was to give 14 flats out of the 32 flats to be constructed on the said piece of land. The appellant also signed a general power of attorney in favour of Shri Hans so as to enable him to sale the remaining 18 flats to prospective customers. In other words, the appellant clearly transferred his interest in the land to the extent of the undivided share of the 18 flats and in return got back 14 flats. After signing the agreement, the appellant handed over the possession of the land to the developer, who went ahead and obtained necessary permission from BDA in his name to develop the land. The appellant has argued that the agreement does not specify that the possession of the land was immediately handed over to the developer. However, the appellant has not filed any evidence that the possession was handed over at any later date. Admittedly, the agreement was signed on 09.09.2008 along with the execution of the GPA in favour of the developer. The appellant also received a refundable advance of ₹ 20,00,000/- from the developer. Therefore, considering the overall facts of the case and in the absence of any evidence to the contrary, it is quite clear that the possessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land relating to apartments in favour of prospective purchasers. In several States, the execution of such development agreement and powers of attorney are already regulated by law and subjected to specific stamp duty. Our observations regarding SA/GPA/Will transactions are not intended to apply to such bona fide/genuine transactions... (emphasis supplied) Quite clearly, the Supreme Court has not said that in no case a conveyance can be registered by taking recourse to a GPA. As long as the transaction is genuine, the same will have to be registered by the Sub-Registrar. There is distinctly a specific reference to the fact that, a person may enter into a development agreement with a land developer or builder for development of a parcel of land or for construction of apartments in a building, and for this purpose a power of attorney empowering the developer to execute sale agreements, can be executed. Apart from the decision relied upon by the AO, there are several decisions of various High Courts Tribunals which can be relied upon in support of the decision taken by the AO in the instant case. In Ravinder Singh Arora v. ACIT (2012) 24 Taxmann.com 346 (Hyd), the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed over possession of the land. The developer obtained the approval of the municipality to the plan for construction on the property. The AO held that the capital gains was assessable in AY 2003-04 while the assessee claimed that the same was assessable in AY 2004-05 when the consideration was received. The CIT (A) upheld the claim of the AO. The Tribunal (included in file), relying on Chaturbhuj Dwarkaddas Kapadia 260 ITR 491 (Bom), Dr.T. K. Dayalu 202 Taxman 531(Kar) Maya Shenoy 124 TTJ (Hyd) 692, held that as the assessee had handed over possession of the property to the developer, it was a clear case of transfer by exchange within the meaning of s.2(47) (v) read with s. 53A of the Transfer of Property Act. It was held that the fact that the consideration was received in a later year was not relevant. On appeal by the assessee to the High Court, HELD dismissing the appeal: The assessee's contention that no transfer takes place on the date of the agreement and handing over of possession if consideration is not received by the assessee is not acceptable because s. 53A of the Transfer of Property Act, 1882, which is engrafted in the definition of transfer in s. 2(47) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1A) shall be substituted. 7. He submitted that this insertion of the above provision in the Registration Act makes it mandatory for Joint Development Agreement to be registered, without which section 53A has no effect. Further, he relied on the decision of Hon ble Supreme Court, in the case of Suraj Lamp Industries (P) Ltd., vs State of Haryana, (2012) 1 SCC 656,, wherein, it was held, that by simply executing a power of attorney, one cannot transfer immovable property. He further relied on the decision of P H High Court in the case of C.S. Atwal vs. CIT, Ludhiana,378 ITR 244 (P H), wherein, it was held that prior to the registration and Other Related Laws (Amendment) Act, 2001,an agreement on sale which fulfilled the ingredients of section 53A, was not liable to be registered. But the amendment made by the 2001 Act in Section 53A of Transfer of Property Act and sections 17 49 of Registration Act, now requires the agreement of sale to be registered for the purpose of section 53A on transfer of Property Act. In this case, the Court held that the developer was given possession under the joint development agreement and special power of Attorney only in the capacity of a lice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is an unregistered agreement. He claimed that the agreement was not registered. The contention of the ld A.R. of the assessee is that the registration and other related laws (Amendment) Act 2001) has brought about a radical change in rights flowing on the basis of agreements executed in part performance of the contract u/s.53A of 1882 Act. The amendments have been made in section 53A of the 1882 Act and Sections 17 49 of the 1908 Act. The amendment, vide 2001 Act, which stood enforced w.e.f. September 24, 2001, the words the contract though required to be registered has not been registered. 12. We find that Hon ble P H High Court in the case of C.S. Atwal (supra), has held as under: 9.. The following issues emerge for consideration and adjudication : (i) scope and legislative intent of section 2(47)(ii), (v) and (vi) of the Act ; (ii) the essential ingredients for applicability of section 53A of the 1882 Act ; (iii) meaning to be assigned to the term possession ? (iv) whether, in the facts and in the circumstances, any taxable capital gains arises from the transaction entered by the assessee ? 10. Taking up the first issue, it may be noticed that section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land or any building or part of a building is to be transferred together with any machinery, plant, furniture, fittings or other things, such machinery, plant, furniture, fittings or other things also. Explanation.-For the purposes of this sub-clause, land, building, part of a building, machinery, plant, furniture, fittings and other things include any rights therein ; (ii) any rights in or with respect to any land or any building or a part of a building (whether or not including any machinery, plant, furniture, fittings or other things, therein) which has been constructed or which is to be constructed, accruing or arising from any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement of whatever nature), not being a transaction by way of sale, exchange or lease of such land, building or part of a building ; (e) and (f) . . . 11. The Finance Act, 1987, introduced clauses (v) and (vi) in section 2(47) of the Act with effect from April 1, 1988. It provides that transfer includes (i) any transaction which allows possession to be taken/retain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of or acquiring shares in a co-operative society, company or association of persons or by way of any agreement or any arrangement whereby such person acquires any right in any building which is either being constructed or which is to be con structed. Transactions of the nature referred to above are not required to be registered under the Registration Act, 1908. Such arrangements confer the privileges of ownership without transfer of title in the building and are a common mode of acquiring flats particularly in multistoried constructions in big cities. The definition also does not cover cases where possession is allowed to be taken or retained in part performance of a contract, of the nature referred to in section 53A of the Transfer of Property Act, 1882. New sub-clauses (v) and (vi) have been inserted in section 2(47) to prevent avoidance of capital gains liability by recourse to transfer of rights in the manner referred to above. 11.2 The newly inserted sub-clause (vi) of section 2(47) has brought into the ambit of 'transfer', the practice of enjoyment of property rights through what is commonly known as power of attorney arrangements. The practice in such cases is ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court in Alapati Venkataramiah v. CIT [1965] 57 ITR 185, which Mr.Rajan relied upon and pointed out that before the amendment, transfer was very strictly construed. In the said decision, the Supreme Court refused to accept the agreement to sell or the entries made in the account for the receipt of consideration by the transferor as a completed transfer for the purpose of then section 12B. The Supreme Court observed that transfer means effective conveyance of a capital asset to the transferee and delivery of possession of immovable property could not by itself be treated as equivalent to conveyance of the immovable property. Relying on this judgment, learned counsel pointed out that the amendment has effected a sea change in law, inasmuch as under section 2(47), delivery of possession provided it is in the nature as contemplated in section 53A of the Transfer of Property Act, would be enough to bring the transaction into the mischief of the word 'transfer'. The argument is undoubtedly correct. Section 2(47)(v) has probably been introduced to meet the law laid down in this judgment, wherein there used to be a transfer for all the practical purposes, but the tax could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t should be signed by the transferor ; it should pertain to transfer of immovable property ; the transferee should have taken possession of the property ; lastly, the transferee should be ready and willing to per form his part of the contract. That even arrangements confirming privileges of ownership without transfer of title could fall under section 2(47)(v). Section 2(47)(v) was introduced in the Act from the assessment year 1988-89 because prior thereto, in most cases, it was argued on behalf of the assessee that no transfer took place till execution of the conveyance. Consequently, the assessees used to enter into agreements for developing properties with the builders and under the arrangement with the builders, they used to confer privileges of ownership without executing conveyance and to plug that loophole, section 2(47)(v) came to be introduced in the Act. It was argued on behalf of the assessee that there was no effective transfer till grant of irrevocable licence. In this connection, the judgments of the Supreme Court were cited on behalf of the assessee, but all those judgments were prior to introduction of the concept of deemed transfer under section 2(47)(v). In thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty Act will not come into operation. In the present case, there is no written agreement and no sale consideration was received during the relevant period. The Revenue is also unable to prove that the assessee had put the developer in possession of the property by receiving the consideration partly or in full. The fact remains that there is no sale agreement between the assessee and the builder and also the assessee had not received the sale consideration. Hence, the Tribunal is right in holding that there is no transfer of property, as contemplated under section 2(47(v) of the Act. The rea sons given by the Tribunal are based on valid materials and evidence and we do not find any error or legal infirmity in the order of the Tribunal so as to warrant interference. 17. Adverting to clause (vi) of section 2(47) of the Act, it may be noticed that the scope and ambit of this clause as explained by the Central Board of Direct Taxes in its circular No. 495, dated September 22, 1987, has already been reproduced above. On a perusal of this clause, it would be clear that it was intended to cover those cases of transfer of ownership where the prospective buyer becomes owner of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has no notice of the contract or of the part performance thereof. 19. Analysing the scope of section 53A of the 1882 Act, necessarily, the legislative history of the provision is required to be scrutinised. Section 53A was inserted in 1929 by the Transfer of Property (Amendment) Act, 1929, and imports into India in a modified form the equity of part performance as it developed in England over the years. The doctrine of part performance as enshrined in section 53A of the 1882 Act is an equitable doctrine which creates a bar of estoppel in favour of the transferee against the transferor. Section 53A of the 1882 Act provides protection to a transferee to retain his possession where in part performance of the contract, he had taken possession of the property even if the limitation to bring a suit for specific performance had expired. But there are certain conditions which are required to be fulfilled if a transferee wants to defend or protect his possession under section 53A of the 1882 Act. The Supreme Court in Shrimant Shamrao Suryavanshi v. Pralhad Bhairoba Suryavanshi, AIR 2002 SC 960, had reiterated the following to be necessary conditions for applicability of section 53A of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53A of the 1882 Act is registered, it shall not have effect for purposes of section 53A of the 1882 Act. Section 17(1A) as incorporated and section 49 of the 1908 Act as amended read thus : 17. (1A) The documents containing contracts to transfer for con sideration, any immovable property for the purpose of section 53A of the Transfer of Property Act, 1882 (4 of 1882), shall be registered if they have been executed on or after the commencement of the Regis tration 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 regis tered.-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 pro perty or conferring such power,unless it has been registered : Provided that an unregistered document affecting immovable property and required by this Act or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall have no effect for the purpose of section 53A of the 1882 Act. Section 17(1A) reads as follows : 'Section 17(1A) of the Indian Registration Act, 1908. The documents containing contracts to transfer for consideration, any immovable property for the purpose of section 53A of the Transfer of Property Act, 1882 (4 of 1882), shall be registered if they have been executed on 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. 9. Section 17(1A) of the 1908 Act declares in no uncertain terms if a contract executed in part performance of an agreement is unregistered, it shall have no effect for the purpose of section 53A of the 1882 Act. Section 17(1A) does not refer to much less prohibit the filing of a suit for specific performance or leading of such a contract into evidence. 10. The Amendment Act also introduced a proviso to section 49 of the Indian Registration Act to clarify the effect of non-registration of a contract executed in terms of section 53A of the Transfer of Property Act. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1908, does not, whether in specific terms or by necessary intent, prohibit the filing of a suit for specific performance based upon an unregistered agreement to sell, that records delivery of possession or is executed in favour of a person to whom possession is delivered and the proviso to section 49 of the Indian Registration Act, 1908, put paid to any argument to the contrary. 14. We, therefore, hold that : (a) a suit for specific performance, based upon an unregistered contract/agreement to sell that contains a clause recording part performance of the contract by delivery of possession or has been executed with a person, who is already in possession shall not be dis missed for want of registration of the contract/agreement ; (b) the proviso to section 49 of the Registration Act, legitimises such a contract to the extent that, even though unregistered, it can form the basis of a suit for specific performance and be led into evidence as proof of the agreement or part performance of a contract. In Sukhwinder Kaur v. Amarjit Singh [2012] ILR 2 P H 718, a single Bench of this court observed as follows : 8. Section 53A of the Transfer of Property Act before amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmance under section 53A of the Transfer of Property Act, 1882, unless such an agreement is a registered document. Section 17(1A) of the Registration Act, 1908, which has come into force with effect from September 24, 2001, reads as under : 'Documents containing contracts to transfer for consideration, any immovable property for purpose of section 53A of the Transfer of Property Act, 1882 (4 of 1882), shall be registered if they have been executed on 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.' Once a person cannot even protect the possession, which he is holding, in absence of an unregistered agreement to sell, then how such a person can seek possession on the basis of such a document. In Sunil Kapoor v. Himmat Singh [2010] 167 Delhi Law Times 806, a single judge of this court has held thus 'a mere agreement to sell of immovable property does not create any right in the property save the right to enforce the said agreement. Thus, even if the respondents/ plaintiffs are found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 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.' (page 233) 'Even though only particular sections of an earlier Act are inco porated into later, in construing the incorporated sections it may be at times necessary and permissible to refer to other parts of the earlier statute which are not incorporated. As was stated by Lord Blackburn : When a single section of an Act of Parliament is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n excluding the operation of section 115J of the Act. Thus, it would mean that section 53A of the 1882 Act has been bodily transposed into section 2(47)(v) of the Act and the effect of it would be that section 53A of the 1882 Act shall be taken to be an integral part of section 2(47)(v) of the Act. In other words, the legal requirements of section 53A of 1882 Act are required to be fulfilled so as to attract the provisions of section 2(47)(v) of the Act. 25. Examining the question of possession, one of the essential conditions for enforceability of section 53A of the 1882 Act is that the transferee must in part performance of the contract take possession of the property or any part thereof. There is a serious dispute with regard to the nature of possession contemplated by section 53A of the 1882 Act. It was contended on behalf of the appellantassessee that reference to the possession of the transferee as postulated under section 53A of the 1882 Act is that it must have been delivered in furtherance to the contract and should be sole, exclusive and cannot be concurrent. The possession is not to be in any other capacity to invoke section 53A of the 1882 Act. On the other hand, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expression 'possession' by referring to the well known treatises on Jurisprudence (page 278) : ' Possession , implies a right and a fact : the right to enjoy annexed to the right to property and the fact of the real intention. It involves power of control and intent to control (see Dias and Hughes) . . . 15. While recognising that 'possession' is not a purely legal concept but also a matter of fact, Salmond (12th Ed., 52) describes possession, in fact, as a relationship between a person and a thing. According to the learned author, the test for determining 'whether a person is in possession of anything is whether he is in general control of it'. In Salmond's Jurisprudence, at paragraph 54, we find an illuminating discussion on 'immediate' and 'mediate possession'. The learned author states in law one person may possess a thing for and on account of some one else. In such a case the latter is in possession by the agency of him who so holds the thing on his behalf. The possession thus held by one man through another may be termed mediate, while that which is acquired or retained directly or person ally may be distinguishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of capital gains may be defeated. The reason is this : the owner of the property can very well contend, as is being con tended in the present case, that the developer will have such exclusive possession in his own right only after the entire amount is paid to the owner to the last pie. There is then a possibility of staggering the last instalment of a small amount to a distant date, may be, when the entire building complex gets ready. Even if some amount, say 10 per cent., remains to be paid and the developer/transferee fails to pay, leading to a dispute between the parties, the right to exclusive and indefeasible possession may be in jeopardy. In this state of affairs, the transaction within the meaning of sub-clause (v) cannot be said to have been effected and the liability to pay capital gains may be indefinitely postponed. True, it may not be profitable for the developer to allow this situation to linger for long as the process of transfer of flats to the prospective purchasers will get delayed. At the same time, the other side of the picture cannot be over looked. There is a possibility of the owner with the connivance of the transferee postponing the payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... performance, it is necessary that this aspect may be examined in the background of statutory requirement as enacted in section 53A. To qualify for the protection of the doctrine of part performance it must be shown that there is a contract to transfer for consideration immovable property and the contract is evidenced by a writing signed by the person sought to be bound by it and from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty. These are pre-requisites to invoke the equitable doctrine of part performance. After establishing the aforementioned circumstances it must be further shown that a transferee had in part performance of the contract either 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. The acts claimed to be in part performance must be unequivocally referable to the pre-existing contract and the acts of part performance must unequivocally point in the direction of the existence of contract and evidencing implementation or performance of contract. There must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apex court in D. S. Parvathamma v. A. Srinivasan, AIR 2003 SC 3542 reiterated as under : 9. Secondly, the appellant has failed to allege and prove that he was delivered possession in part performance of the contract or he, being already in possession as lessee, continued in possession in part performance of the agreement to purchase, i.e., by mutual agreement between the parties his possession as lessee ceased and commenced as that of a transferee under the contract. On the contrary, there is a finding recorded in the earlier suit that in spite of his having entered into a contract to purchase the property he had not disowned his character as lessee and he was treated as such by the parties. The judgment dated September 1, 1999, in the civil suit notes the conduct of the plaintiff inconsistent with his conduct as vendee in possession. When a person already in possession of the property in some other capacity enters into a contract to purchase the property, to confer the benefit of protecting possession under the plea of part performance, his act effective from that day must be consistent with the contract alleged and also such as cannot be referred to the preceding title. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of transfer, if the person in possession is ready and willing to perform his part of contract. In the recent past, courts have recognized that this provision can be treated as a source of independent right, and that it can be enforced by filing a suit. 31. One of the most important ingredients of section 53A of the Act is that the person claiming the benefit under it, must be in possession of the property, which is the subject-matter of the con templated transfer. By its very nature, possession is a fluid concept, and is not susceptible to any precise definition. For the most part of it, possession was treated as a question of fact, and was held to depend upon the purpose, as well as the connection with which it arises. Shartel, in his article Meanings of Possession [1932] 16 Minnesota Law Review 611, observed as under : 'I want to make the point that there are many meanings of the word possession ; that possession can only be usefully defined with reference to the purpose in hand ; and that possession may have one meaning in one connection and another meaning in another.' 32. Jurists hailing from various legal systems have pointed out that possession, as a le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty by a co-owner, of an undivided property, or the corresponding taking possession of such property by the transferee. section 44 of the Act makes this abundantly clear. It reads as under : '44. Transfer by one co-owner.-Where one of two or more co- owners of immovable property legally competent in that behalf trans fers his share of such property or any interest therein, the transferee acquires, as to such share or interest, and so far as is necessary to give effect to the transfer, the transferor's right to joint possession or other common or part enjoyment of the property, and to enforce a partition of the same, but subject to the conditions and liabilities affecting, at the date of the transfer, the share or interest so transferred. Where the transferee of a share of a dwelling-house belonging to an undivided family is not a member of the family, nothing in this section shall be deemed to entitle him to joint possession or other common or part enjoyment of the house.' It mandates that, what a transferee, from a co-owner of an undi vided property, gets, is a right, to enforce a partition, that too, subject to conditions and liabilities, in relation to the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... participation of the lessee, in a tripartite transaction, or through intimation by the transferor to the lessee about the latter's obligations to pay the rents to the transferee, henceforth. Even where no such specific steps are taken, an implied symbolic, delivery of possession can be culled out, if the transferee is able to prove to the satisfaction of the court, that he is started receiving the rents of the property, subsequent to the agreement, as of right. 39. In the absence of any of the circumstances referred to above, the court cannot infer delivery of possession in favour of a transferee. Taking of possession, being one of the most important ingredients of section 53A, the plaintiff cannot derive the benefit of that provision, once he failed to prove that he has taken possession of the suit schedule property. 29. Similarly, the Delhi High Court in R. K. Apartments Pvt. Ltd. v. Smt. Aruna Bahree [1998] 2 ILR 727 (Delhi), delving into the issue of possession under section 53A of the 1882 Act had recorded as under : 14. From the aforesaid statements made in both the Articles it is manifest that the legal position enunciated in Hounslow London Borough's case (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was observed that once it was held that the transaction of the nature referred to in sub-clause (v) of section 2(47) of the Act had taken place on a particular date, the actual date of taking physical possession need not be probed into. It is enough if the transferee has by virtue of that transaction a right to enter upon and exercise the acts of possession effectively. It was further held in that case that the capital gains which arose during the financial year 2006-07 shall be subjected to tax for the assessment year 2007-08. The aforesaid observations were recorded in that context on the facts involved therein. It would have to be ascertained in each case independently whether a transferee has been delivered possession in furtherance of the contract in order to fall under section 53A of the 1882 Act and, thus, amenable to tax by virtue of section 2(47)(v) read with section 45 of the Act. 31. Lastly, both the parties had hotly and with great vehemence contested the question of delivery of possession under the JDA dated February 25, 2007, and also the registered special power of attorney dated February 26, 2007. It would be expedient to notice the respective submissions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deeds, licence agreement, Power of Attorneys, affidavits, declarations, indemnities and all such other documents, letters as may be necessary to carry out, facilitate and enforce the rights and to register the same with the revenue/competent authorities and to appear on our behalf before all authorities, statutory or otherwise, and before any court of law (the Development Rights). The owner hereby hands over the original title deeds of the property as mentioned in the list annexed hereto and marked as annexure IV and physical, vacant possession of the property has been handed over to THDC simultaneous to the execution and registration of this agreement to develop the same as set out herein. It is hereby agreed and confirmed that what is stated in the recitals hereinabove, shall be deemed to be declarations and representations on the part of the owner as if the same were set out herein in verbatim and forming an integral part of this agreement. 4. Consideration 4.1. It is specifically understood and agreed amongst the parties that THDC shall use its expertise and its brand name and/or any other brand name at its discretion to develop the property into the premises as per app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the developers that HASH shall be responsible for making all payments to the owner and/or the respective members of the owner (as the case may be) as per the negotiated and agreed terms between the owner and HASH. HASH expressly undertakes to make timely payments of the payment to the owner and/or the respective members of the owner (as the case may be) as under : (The schedule of payment referred in clause 4.1 herein has already been reproduced in the earlier part of the judgment). 9. Transfer of ownership/rights 9.1. The owner shall simultaneously on receipt of payment as set out in clause 4.1 above, execute an irrevocable special power of attorney in favour of THDC for development of the property, authorizing THDC to do all lawful acts, deeds, matters and things pertaining to the development of the property for the project along with inter alia right to mortgage the property and/or premises, sell, lease, licence the premises and receive/collect monies in its name in respect of the same and approach, interact, communicate with the competent authorities and for doing all acts, deeds, matters and things to be done or incurred by THDC in that behalf as also to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not granted within nine (9) months of the submission of the final plans/design and drawings to the competent authority for approval, then THDC may at its sole discretion either decide that it does not desire to undertake and complete the project and hence terminate this agreement after giving thirty (30) days written notice in this regard or decide to wait for any further time as deemed fit by THDC for the grant of the aforesaid approvals and licences. In the event the agreement is terminated by THDC, all the lands registered in the name of THDC as per the terms of this agreement up to the date of the termination shall remain with THDC and the balance lands to be transferred to THDC as per the terms of this agreement shall not be transferred by the owner in favour of THDC. Upon the termination, the owner shall refund to THDC the adjustable advance/earnest money mentioned in clause 4.1(i) above within one month of such termination. In the event of failure of the owner to refund the said amount, the owner hereby agrees to execute a registered sale deed for land of equivalent value in favour of THDC. (iii) In the event THDC is unable to develop the property due to refusal/non grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or other epidemics, acts of God including fire, floods, volcanic eruptions, typhoons, hurri canes, storms, tidal waves, earthquake, landslides, lightning, explo sions, and other natural calamities, prolonged failure of energy, court orders/injunctions, change of laws, action and/or order by statutory and/or government authority, third party actions affecting the deve lopment of the project, acquisition/requisition of the property or any part thereof by the government or any other statutory authority and such other circumstances affecting the development of the project (Event of force majeure). (iii) Any party claiming restriction on the performance of any of its obligations under this agreement due to the happening or arising of an event of force majeure hereof shall notify the other party of the happening or arising and the ending or ceasing of such event or circumstance within three (3) days of determining that an event of force majeure has occurred. In the event any party anticipates the happening of an event of force majeure, such party shall promptly notify the other party. (iv) The party claiming event of force majeure conditions shall, in all instances and to the ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorized user to be determined by THDC (hereinafter referred to as the project ). Further the S . . . to execute an irrevocable special power of attorney in favour of THDC authorised nominee . . . (D). Under the terms and conditions of the joint development agreement, the owner is required to execute and register an irrevo cable special power of attorney (Irrevocable special power of attorney) in favour of THDC and/or its authorised nominee to facilitate THDC to carry out its duties and obligations for the execution, co-ordination and implementation of the project under the joint development agreement. In pursuance thereof, the owner hereby nominates and appoints THDC and/or its authorized nominee to act for and in the name of and on the behalf of the owner and to do all acts and things relating to the property. Now, know all and these presents witness that the owner hereby nominates, constitutes and appoints THDC Limited and/or its authorised nominees (the attorneys) to be the owner's true and lawful attorneys and to do the following acts, deeds, matters and things on behalf of and in the name of the owner in relation to the property that is to say. 1. To make, sign, ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) . . . 33. Conversely, learned counsel for the Revenue, argued that where the intention and facts are contained in more than one document between the same parties, they are required to be read and interpreted together by taking them to be one document. To garner support, reliance was placed on the following observations in the judgment of the Supreme Court in S. Chattanatha Karayalar v. Central Bank of India Limited, AIR 1965 SC 1856 : The first question presented for determination in this case is whether the status of the third defendant in regard to the transaction of overdraft account is that of a surety or of a co-obligant. It was argued by Mr. Desai on behalf of the appellant that the High Court has misconstrued the contents of exhibits A and B in holding that the 3rd defendant has undertaken the liability as a co-obligant. It was submitted that there was an integrated transaction constituted by the various documents-exhibits A, B and G executed between the par ties on the same day and the legal effect of the documents was to confer on the third defendant the status of a surety and not of a co- obligant. In our opinion, the argument put forward on behalf of the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n it be terminated by his insanity or death. (b) A consigns 1,000 bales of cotton to B, who has made advances to him on such cotton, and desires B to sell the cotton, and to repay himself, out of the price the amount of his own advances. A cannot revoke this authority, nor is it terminated by his insanity or death. To buttress her submissions, support was gathered from following observations in the judgment rendered by Delhi High Court in Harbas Singh v. Shanti Devi [1977] 13 DLT 369 : (7) For the purposes of the Law of Contract, therefore, it would not be useful to restrict the meaning of the word 'interest' by the nar row compass in which this world is used at times in relation to immovable property. For instance, the last sentence of section 54 of the Transfer of Property Act states that a contract for sale of itself does not create any interest in or charge on immovable property. Similarly, section 17(1)(b) of the Registration Act makes only those documents compulsorily registrable which create, declare, assign, limit or extin guish any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards to or in immovable pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the sure and true interpretation of all Statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered : 1st. What was the common law before the making of the Act. 2nd. What was the mischief and defect for which the common law did not provide. 3rd. What remedy the Parliament hath resolved and appointed to cure the disease of the Commonwealth, and 4th. The true reason of the remedy ; and then the office of all the judges is always to make such construction as shall suppress the mis chief, and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief, and pro privato com modo , and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publico .' In In re Mayfair Property Co. [1896] 2 Ch 28, at page 35 (W) Lind ley, M. R. in 1898 found the rule 'as necessary now as it was when Lord Coke reported Heydon's case'. In (v) Eastman Photographic Material Company v. Comptroller General of Patents, Designs and Trade Marks [1898] AC 571 at page 576 Earl of Halsbury re-affirmed the rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that transfer of immovable property by way of sale can only be by a deed of conveyance (sale deed). In the absence of a deed of conveyance duly stamped and registered as required by law, no right, title or interest in an immovable property can be transferred. Any contract of sale which is not a registered deed of conveyance would fall short of the requirements of sections 54 and 55 of the 1882 Act and will not confer any title nor transfer any interest in an immovable property except to the limited right granted under section 53A of the 1882 Act. The following observations were referred to (page 12) : 24. We therefore, reiterate that immovable property can be legally and lawfully transferred/conveyed only by a registered deed of conveyance. Transactions of the nature of 'GPA sales' or 'SA/GPA/WILL transfers' do not convey title and do not amount to transfer, nor can they be recognized or valid mode of transfer of immovable property. The courts will not treat such transactions as completed or concluded transfers or as conveyances as they neither convey title nor create any interest in an immovable property. They cannot be recognized as deeds of title, except to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated by law and subjected to specific stamp duty. Our observations regarding 'SA/GPA/WILL transactions' are not intended to apply to such bona fide/genuine transactions. 38. In so far as enunciation of legal principles in various pronouncements relied upon by learned counsel for the Revenue are concerned, they are well recognised but their applicability has to be judged in the facts and circumstances of the present case. 39. It would be apt to notice undisputed facts as discernible from the record of the case. The assessee is a member of Punjabi Co-operative House Building Society Ltd. who owned 21.2 acres of land in Village Kansal, District Mohali. Certain members were owning plots measuring 500 square yards whereas others were holding plots of 1,000 square yards. On advertisement having been floated by the society to develop a group housing commercial project and do development as per the municipal building bye- laws, HASH a developer approached them with proposal for the development of the property. HASH in turn due to paucity of funds with it for constructing the building and/or structures entered into an agreement with THDC for the said purpose. The executi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Various relevant clauses A, B, D and other conditions relied upon by the parties have already been reproduced in the earlier part of the judgment. 40. Under clause 2.1 of the JDA, the possession of the property was to be handed over simultaneously with the execution and registration of the said agreement. The JDA dated February 25, 2007, was never registered and, therefore, the presumption of delivery of possession to the developers cannot be assumed. The delivery of title deeds would not necessarily raise the presumption of delivery of possession as these are two distinct actions. Further, the irrevocable registered special power of attorney also records that on February 26, 2007 (i.e., the date of its execution and registration), the possession continued to be with the members of the society. Still further, even the two sale deeds executed between the parties on March 2, 2007, and April 25, 2007, in respect of 3.08 acres and 4.62 acres, respectively, clearly stipulates that possession was delivered under the said instruments which would show that the parties had agreed for pro rata transfer of land. A combined reading of the various clauses of the JDA dated February 25, 2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o make timely payment of the consideration in the manner set out therein which was an essence of the JDA. Additionally, it was the responsibility of the developers to obtain requisite government and statutory approvals, sanctions of all drawings and plans required for development of the project and also to undertake the project within six months of the handing over of the final plans, designs and drawings to the developer for submission of the same to the competent authority for obtaining the approval which was to be done by HASH and THDC within the prescribed time schedule. The external development charges, licence fee, CLU charges and any other related charges were the liability of THDC. 42. Apart from the above, HASH/THDC had made payment of adjustable advance of ₹ 3 lakhs to the plot holder of 500 square yards besides making payment of ₹ 12 lakhs and ₹ 18 lakhs as first and second instalments respectively. THDC defaulted in making payment of third instalment of ₹ 24.75 lakhs as required under clause 4.1(iv) of the JDA. It was double the aforesaid amount for plot holder of 1,000 square yards. The project was delayed due to various subsequent developmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eure had been provided for, which would be applicable with full vigour in the circumstances noticed earlier. However, the Heydon's rule, in the facts as narrated hereinbefore, would not be attracted. 43. In view of preceding analysis, it is reiterated that from the cumulative effect of covenants contained in the JDA dated February 25, 2007, read with the registered special power of attorney dated February 26, 2007, it cannot be held that the mandatory requirements of section 53A of the 1882 Act were complied with which stood incorporated in section 2(47)(v) of the Act. Once that was so, it could not be said that the assessee-appellants were liable to capital gains tax in respect of the remaining land which was not transferred by them to the developer/builder because of supervening event not on account of any volition on their part. 44. Viewed from another angle, it cannot be said that any income chargeable to capital gains tax in respect of the remaining land had accrued or arisen to the appellant-assessee in the facts of the case. Considering the issue of taxability of income with regard to its accrual or receipt as the basis for charging Income-tax, the apex court in CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut a hypothetical income , which does not materialise. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account.' The above passage was cited with approval in Morvi Industries Ltd. v. CIT [1971] 82 ITR 835 (SC) in which this court also considered the dictionary meaning of the word 'accrue' and held that income can be said to accrue when it becomes due. It was then observed that (page 840) : '. . . the date of payment . . . does not affect the accrual of income. The moment the income accrues, the assessee gets vested with the right to claim that amount even though it may not be immediately'. This court further held, and, in our opinion, more importantly, that income accrues when there 'arises a corresponding liability of the other party from whom the income becomes due to pay that amount'. It ..... X X X X Extracts X X X X X X X X Extracts X X X X
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