TMI Blog2019 (10) TMI 343X X X X Extracts X X X X X X X X Extracts X X X X ..... pa vs. ITO [ 2018 (10) TMI 1345 - ITAT BANGALORE] followed, and the decision of HC [ 2012 (6) TMI 405 - KARNATAKA HIGH COURT] distinguished. In the case of Smt. Lakshmi Swarupa, The tribunal held that the possession granted is in the nature of permissive possession and not possession in part performance of agreement for sale. In the present case, even this permissive possession is not given to the builder prior to 24.08.2009. Hence, we hold that in the facts of the present case as discussed above, even permissive possession was not handed over to the builder in the present year - Decided in favour of assessee. - ITA No. 956 (Bang) 2016, 957 (Bang) 2016 (Assessment year : 2009 – 10) - - - Dated:- 28-8-2019 - SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER Assessee by: Shri Nitish Ranjan, C. A. Revenue by: Shri Ujjwal Kumar, JCIT DR ORDER PER A. K. GARODIA, A.M.: These two appeals are filed by two different but connected assesses being husband and wife and these are directed against two separate orders of learned CIT (A) 6, Bangalore both date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te. 4.7 The Ld. CIT(A) failed to appreciate that if the tax is levied in the year of entering into Development Agreement, it would militate against the theory of real income. 4.8 The Ld. CIT(A) erred in relying on the decision of Hon'ble Karnataka High Court in the case of Dr. T K Dayalu wherein the facts were different to that of the instant case. 5. Failure of computation Mechanism 5.1 Without prejudice to any of the aforesaid grounds, the Ld. CIT(A) failed to note that if the date of execution of the Development agreement is adopted as the date of transfer, the machinery provisions for computation of capital gains fails. 5.2 The Ld. AO while computing capital gains, erred in holding that the full value of consideration accruing or arising on the date of execution of the document i.e. 10.09.2008 was ₹ 2,04,03,000/- since the built up area to be allotted to the Appellant was non-existing on the aforesaid date. 6. Exemption u/s. 54F of the Act 6.1 Without prejudice to the above grounds, the Ld. AO based on the facts of the case, erred in conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) erred in confirming the order of assessment passed by the Ld. AO determining capital gains at ₹ 2,03,53,228/- without appreciating the fact that the Developer did not perform any obligation in pursuance of the Development Agreement during the previous year relevant to assessment year 2009-10.The willingness to perform the Contract which is one of the significant conditions u/s. 53A of the Transfer of Property Act is absent during the previous year 2008-09. 4.6 The Ld. AO erred in adopting market value of the land as on 1.4.1981 at a very low rate. 4.7 The Ld. CIT(A) failed to appreciate that if the tax is levied in the year of entering into Development Agreement, it would militate against the theory of real income. 4.8 The Ld. CIT(A) erred in relying on the decision of Hon'ble Karnataka High Court in the case of Dr. T K Dayalu wherein the facts were different to that of the instant case. 5. Failure of computation Mechanism 5.1 Without prejudice to any of the aforesaid grounds, the Ld. CIT(A) failed to note that if the date of execution of the Development agreement is adopted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 Sq. feet but in the present case, only a refundable deposit is received in addition to built up area to be received later. It was also submitted that effective possession is also not handed over. The AO followed the judgment of Hon ble Karnataka High Court rendered in the case of CIT vs. Dr. T. K. Dayalu (Supra) and held that capital gain is taxable in the present year. He computed the capital Gain by applying Guidance Value on the date of JDA @ ₹ 1320/- per square feet of the built-up area of flats and ₹ 70,000/- for each Car Parking Space to be received by these two assesses and in this manner, the AO brought to tax an amount of ₹ 203,53,228/- in each case after allowing deduction of ₹ 49,772/- as Indexed cost of acquisition. Both these assesses carried the matter in appeal before CIT (A) but without success and now these two assesses are in further appeal before the tribunal. 5. Learned AR of the assessee submitted that Ground No. 1 is general and Ground No. 2 and three are not pressed. Regarding remaining grounds, he filed written submissions as reproduced hereinbelow: - Brief Facts of the case The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of ₹ 2,03,53,228 for each of the Appellants as income from capital gains. thereby determining total income at ₹ 2,03,53,230 ₹ 2,06,22,148. Aggrieved with the order of Ld. AO, the Appellants filed an appeal before the Hon'ble Commissioner of Income-tax (Appeals) 6 (`CIT(A) ), Bengaluru. However, the Hon'ble CIT(A)-6, vide her order dated 18'- March 2016 upheld the addition made by the Ld AO. Aggrieved with the order of the Hon'ble CIT(A), the Appellants have preferred an appeal before the Hon'ble Tribunal. In this regard, the Appellants wish to submit as under: Appellants' submissions: A. Grounds on chargeability In connection with the above. the Appellants wish to submit as follows: 1. The Appellants. had received a share of 10% each in the land measuring 4 acres 26guntas in Survey No. 11/3 of Dasarahalli Village, Yeshwanthpura Hobli, Bangalore North Taluk from Smt Jayalakshmamma along with other co-members. Smt Jayalakshmamma had in fact received this land by way of a gift deed dated 26'h May 2003 from Sri A Ramiah Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ights to approve such plans as also suggest changes/modifications /alterations if any. (Refer Pg 13 of the JDA, Para 2.1) (Pg. 33 of the revised Paperbook filed on 02- Jul-2019); 3.4. M/s Vaishnavi Infrastructure agrees to pay an interest free refundable security deposit of ₹ 1,25,00,000 to the Appellants and co-owners which stands paid as on date of entering into the JDA (Refer Pg 12 Pg 17 of the JDA, point (c)); (Pg. 32 37 of the revised Paperbook filed on 02-Jul-2019) 3.5. Further, it has also been agreed that such deposit would be refunded by the Appellants and other co-owners upon receiving the Owners' Area. (refer Pg 20 of the JDA, para 6.4); 3.6. It has further been agreed that upon M/s Vaishnavi Infrastructure delivering the Owners' Area and paying the interest free refundable deposit to the Appellants co-owners, the Appellants and the coowners would convey the ownership of the undivided 70% or proportionate share, title and interest in the land a d retain the remaining undivided 30% or proportionate share in the land (Refer Pg 12 of the JDA, Point (d)); (Pg. 32 of the revised Paperbook filed on 02-Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the Act: 4.1. Provisions ot Income-tax Act, 1961 Capital gains : Sec. 45 (1) - Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 54, 548, 54D, 54E, 54EA, 54E8, 54F, 54G and 54H, be chargeable to income-tax under the head Capital gains , and shall be deemed to be the income of the previous year in which the transfer took place. In this regard, transfer as defined in section 2(47) of the Act inter alia includes, 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); 4.2. Transfer of capital asset: Under sec. 2(47) of the Act, 'transfer' includes sale, exchange or relinquishment of asset, extinguishment of any rights, compulsory acquisition under any law and conversion of asset. It also covers any transaction involving the allowing of the possession of any immovable property to be taken or retained in par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossession is a word of open texture. It is an abstract notion'. It implies a right to enjoy which is attached to the right to property. It is not purely a legal concept but is a matter of fact. The issue of ownership depends on the rule of law whereas possession is a question which is dependent upon fact without any reference to law. To put it differently. ownership is strictly a legal concept and possession is both a legal and a non-legal or pre-legal concept. The test for determining whether any person is in possession of anything is to see whether it is under his general control or not. He should be actually holding, using and enjoying it without any interference on the part of others. It would have to be ascertained in each case independently whether a transferee has been delivered possession in furtherance to the contract in order for it to fall under sec. 53A of the TP Act and thus is amenable to tax by virtue of sec. 2(47)(v) read with sec. 45 of the Act. In the instant case, what has been conveyed under the JDA is only a permission to enter into the land for the limited purpose of its development and construction as per the sanctioned plans. The powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed an interest free refundable deposit which was repayable on receiving Owners' share whereas in the case of Dr. T.K.Dayalu. the assessee had received a non-refundable advance which is treated on par with consideration received (Refer Pg 3 of the decision of Dr. T. K. Dayalu): The JDA, in the instant case, in clear terms denies the transfer of possession for the purpose of Section 53A of TOPA r.w.s. 2(47)(v) of the Act upon entering into the agreement whereas in the case of Dr T.K. Dayalu. there is a finding of fact that possession in land has been transferred upon entering into the JDA (Refer Pg 4 of the decision of Dr. T.K. Dayalu) Accordingly, for reasons evident from the above discussions. the Hon'ble Karnataka High Court, in the case of Dr. T.K. Dayalu has held that the assessee would be liable to capital gains in the year of entering into the JDA. However, it is humbly submitted that this decision, for reasons stated above, would not apply to the facts in the Appellants' case. 8. The Appellants wish to rely on the judgement of the Hon'ble Bangalore ITAT in the case of Lakshmi Swaroopa re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was to minimize hardship faced by taxpayer landowners of paying capital gains tax in the year. of entering into the JDA. Accordingly, the provisions of Section 45(5A) ought to be read retrospectively. In this regard, we wish to rely on the decision of the Hon'ble Supreme Court in the case of Vatika Township (P.) Ltd. reported in 367 ITR 466 (SC) (Refer Para 33) wherein the general principles concerning retrospectivity was laid down as under: We would also like to point out, for sake of completeness, that where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the Legislators object, then the presumption would be that such a legislation. giving it a purposive construction, would warrant it to be given a retrospective effect... In such cases, retrospectively is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where. the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39; is used in sec. 54F of the Act makes it clear that, it was not the intention of the legislation to convey the meaning that it refers to a single residential house. if, that was the intention, they would have used the word one. An asset newly acquired after the sale of the original asset can be buildings or lands appurtenant thereto. which should be a residential house. Therefore, the letter 'a' in the context it is used should not be construed as meaning singular. But, being an indefinite article, the said expression should be read in consonance with the other words buildings' and lands' and, therefore, the singular 'a residential house' also permits use of plural by virtue of Section 13(2) of the General Clauses Act. In the instant case, the Appellants under the joint development agreement transferred his land to a builder for development of residential flats. Under the agreement, 21 such residential units were to be allocated to the Appellants. In other words, the consideration for selling the Appellants share in the land is the 21 flats and since these 21 flats amount to a residential house under the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endment to sec. 54F of the Act, which came into effect only from 01.04.2015, makes it very clear that the benefit of Section 54F will be applicable to one residential house in India. However, prior to the said amendment, it is clear that a residential house would include multiple residential units as in the present case where the assessee has got 21 residential units. In view of above, it is humbly submitted that the stand taken by the Ld. AO is contrary to the provisions prevailing during the year under consideration. The view has also been upheld by the Hon'ble Madras High Court in the case of CIT vs. Smt. V R Karpapam (supra) wherein Hon'ble Bench has held that the amendment to section 54 and 54F vide Finance Act 2014 is prospective one and not retrospective. and What emanates from the provisions and judicial pronouncements discussed in the forgoing paragraphs is that: a) acquisition of residential units under a JDA on surrender of land satisfy the condition of purchase I construction of residential house (new asset) b) the expression 'a residential house' may be interpreted to mean more than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule Property and/or commit any act or omission having the effect of delaying or stopping the work that has to be done under this Agreement. However, the Owner shall always be entitled to inspect the progress of the work and type of work which is being done on the Schedule Property. 8. In this case also, the tribunal has duly considered the judgment of Hon ble Karnataka High Court rendered in the case of Dr. T. K. Dayalu (Supra) and thereafter, the issue in dispute was decided in favour of the assessee as per Para 11. This para 11 of that tribunal order in the case of Smt. Lakshmi Swarupa vs. ITO (supra) is also reproduced hereinbelow. 11. In the present case, the clause in the JDA regarding possession clearly states that what is given is not possession contemplated u/s.53A of the Transfer of Property Act and that it is merely a license to enter the property for the purpose of carrying out development. Further, the subsequent MOU dated 16.8.2006 and delivery of legal possession on 22.4.2006 clearly shows that there was no transfer within the meaning of Sec.2(47)(v) of the Act during the previous year relevant to AY 2006-07. Therefore, invocation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule Property shall however not be construed as delivery of possession under Section 53A of Transfer of Property Act read with Section 2 (47) (v) of the Income Tax Act of 1961. The legal possession of Schedule Property shall continue to vest in the First Party at all times including during the course of development and at no time the Second Party is entitled to claim exclusive possession of the Schedule Property. The Second Party shall not be entitled to possession of the proportionate share in the land in the Schedule Property in part performance until issue of Certificate of Completion of the respective buildings and completion and delivery to First Party OWNERS AREA referred to in this Agreement in such building as agreed to under this Agreement and specifically allocated for First Party as per the Allocation Agreement. 10. When we compare the terms of possession in the said case as per Para 4 of the tribunal order reproduced above and the terms of JDA in the present case as reproduced above, we find that in both cases, the possession is handed over to the builder only for limited purpose to enter upon the property for the purpose of implementation of JDA. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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