TMI Blog2018 (6) TMI 608X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose. - I.T.A. No. 1705/CHNY/2017 - - - Dated:- 11-6-2018 - SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER For The Appellant : Shri.B. Sagadevan, IRS, JCIT For The Respondent : Ms. Petchi, C.A. ORDER PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER In this appeal filed by the Revenue, which is directed against an order dated 28.04.2017 of the ld. Commissioner of Income Tax (Appeals)-10, Chennai, it is aggrieved on a view taken by ld. Commissioner of Income Tax (Appeals) that income of the assessee was to be considered under the head business income and not under short term capital gains . 2. Facts apropos are that assessee engaged in the business of marbles and granites had entered into a joint development agreement on 23.01.2009 with one M/s. S S Scapes Pvt. Ltd for development of an plot of land owned by him bearing No.60, Door No.D-6, 2nd Main Road, North Jaganath Nagar, Villivakam, Chennai-49 measuring 3440 sq.ft. As per the joint development agreement, developer was to construct a building and allot 54% of the built up area to the assessee while retaining 46% to itself. Assessee was paid a refundable d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs the balance of Rs. 15 Lakhs is returned to the builder by way of Chq. during the F. Y 2010-11 .. (a copy of ledger is enclosed) 10. The balance of 4 flats was shown under closing stock during the FY 2009-10, 2010-11, 2011-12,2012-13,2013- 14 . Assessee was also required to explain how its claim for exemption u/s.54F of the Act was justified. Reply of the assessee on this aspect was as under:- The property is given for joint development on 23/01/2009 with an agreement to authorize them to develop and construct a new building at plot no. 60, Door no, 0-6, Old no. 60, 2nd Main Road, North Jagannathan Nagar, Villivakkam, Chennai - 600049. The agreement is made with the following terms. The developers will hold 46% of build up plinth area and give 54% of build up plinth area to the owner of the property i. e. me. During the F. Y. 2009-10 out of 54% of my share I have sold an apartment and same is shown as Contract receipt in my income and expenditure account, since this is a business transaction and the balance apartments are shown in the closing stock during F. Y. 2009-10. These apartments, which is of my share is not my residential purpose and it is for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income from business and not as short term capital gains. 5. Now before us, the ld. Departmental Representative strongly assailing the order of the ld. Commissioner of Income Tax (Appeals) submitted that assessee was never engaged in the business of sale of flats or property. As per the ld. Departmental Representative, the transaction considered by ld. Assessing Officer was the only one entered by the assessee, in relation to any immovable property, upto and including the impugned assessment year. Thus, according to the ld. Departmental Representative, assessee had no intention to do a business in real estate. Further, as per the ld. Departmental Representative, assessee had in its own return claimed to be a trader of marbles and granites. Thus, as per the ld. Departmental Representative, ld. Commissioner of Income Tax (Appeals) fell in error in directing the ld. Assessing Officer to consider the income under the head income from business/profession . 6. Per contra, ld. Authorised Representative submitted that there was no transfer during the relevant previous year since joint development agreement was not registered. Further, according to her, no power of attorney was exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof.] Income Tax Act Section 2 - Definitions In this Act, unless the context otherwise requires, - ( 47) transfer , in relation to a capital asset, includes, - ( i) to (iv) xxx xxx xxx ( v) any transaction involving the allowing of the possession of any immovable property 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 (4 of 1882) ; or ( vi) 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 or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. 45. Capital gains - (1) Any profits or gains arising from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01. Amendments were made simultaneously in Section 53A of the Transfer of Property Act and Sections 17 and 49 of the Indian Registration Act. By the aforesaid amendment, the words the contract, though required to be registered, has not been registered, or in Section 53A of the 1882 Act have been omitted. Simultaneously, Sections 17 and 49 of the 1908 Act have been amended, clarifying that unless the document containing the contract to transfer for consideration any immovable property (for the purpose of Section 53A of 1882 Act) is registered, it shall not have any effect in law, other than being received as evidence of a contract in a suit for specific performance or as evidence of any collateral transaction not required to be effected by a registered instrument. Section 17(1A) and Section 49 of the Registration Act, 1908 Act, as amended, read thus: 17(1A). 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Shamrao Suryavanshi (supra), that the Section applies, and this is what is meant by the expression of the nature referred to in Section 53A . This expression cannot be stretched to refer to an amendment that was made years later in 2001, so as to then say that though registration of a contract is required by the Amendment Act of 2001, yet the aforesaid expression of the nature referred to in Section 53A would somehow refer only to the nature of contract mentioned in Section 53A, which would then in turn not require registration. As has been stated above, there is no contract in the eye of law in force under Section 53A after 2001 unless the said contract is registered. This being the case, and it being clear that the said JDA was never registered, since the JDA has no efficacy in the eye of law, obviously no transfer can be said to have taken place under the aforesaid document. Since we are deciding this case on this legal ground, it is unnecessary for us to go into the other questions decided by the High Court, namely, whether under the JDA possession was or was not taken; whether only a licence was granted to develop the property; and whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r can also be viewed from a slightly different angle. Shri Vohra is right when he has referred to Sections 45 and 48 of the Income Tax Act and has then argued that some real income must arise on the assumption that there is transfer of a capital asset. This income must have been received or have accrued under Section 48 as a result of the transfer of the capital asset. 25. This Court in E.D. Sassoon Co. Ltd. v. CIT, (1955) 1 SCR 313 at 343 held: It is clear therefore that income may accrue to an assessee without the actual receipt of the same. If the assessee acquires a right to receive the income, the income can be said to have accrued to him though it may be received later on its being ascertained. The basic conception is that he must have acquired a right to receive the income. There must be a debt owed to him by somebody. There must be as is otherwise expressed debitum in presenti, solvendum in futuro; See W.S. Try Ltd. v. Johnson (Inspector of Taxes) [(1946) 1 AER 532 at p. 539], and Webb v. Stenton, Garnishees [11 QBD 518 at p. 522 and 527]. Unless and until there is created in favour of the assessee a debt due by somebody it cannot be sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the income is not hypothetical and it has really accrued to the assessee. 18. Insofar as the present case is concerned, even if it is assumed that the assessee was entitled to the benefits under the advance licences as well as under the duty entitlement passbook, there was no corresponding liability on the Customs Authorities to pass on the benefit of duty-free imports to the assessee until the goods are actually imported and made available for clearance. The benefits represent, at best, a hypothetical income which may or may not materialise and its money value is, therefore, not the income of the assessee. 27. In the facts of the present case, it is clear that the income from capital gain on a transaction which never materialized is, at best, a hypothetical income. It is admitted that, for want of permissions, the entire transaction of development envisaged in the JDA fell through. In point of fact, income did not result at all for the aforesaid reason. This being the case, it is clear that there is no profit or gain which arises from the transfer of a capital asset, which could be brought to tax under Section 45 read with Section 48 of the Income Tax Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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