TMI Blog2014 (2) TMI 1393X X X X Extracts X X X X X X X X Extracts X X X X ..... hat lower authorities have correctly rejected the arguments that income from such plots, if any, should be charged under the head business profits because it is a settled law that if an income falls under specific head of income contained in Section 14 under Chapter IV then the same has to be taxed under that head. - Decided against assessee. - I.T.A. No.697(Asr)/2013 - - - Dated:- 28-2-2014 - SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P. JAIN, ACCOUNTANT MEMBER For the Appellant : Noe For the Respondent : Sh.Mahavir Singh, DR ORDER PER BENCH ; This appeal; of the assessee arises from the order of the CIT(A), Jalandhar dated 16.01.2012 for the assessment year 2007-08.The assessee has raised following grounds of appeal: 1. That the Ld. CIT(A) has grossly misdirected himself in law and facts in upholding the order of the ITO confirming addition of ₹ 3,64,31,681/- made under the head capital gains by misreading the Joint Development agreement as sale deed . 2. That the authorities has grossly erred in arbitrarily rejecting all the contentions made by the assessee, supported by material evidence to show that merely signing of a triparti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rative House Building Society Ltd. Mohali. This Society with the consent of its members entered into a tripartite agreement with Hash Builder Pvt. Ltd. and M/s. Tata Housing Development Company Ltd Mumbai and as per which each member against the plot size of 500 sq. yards was to receive a cash consideration of ₹ 82.50 lakhs along with a flat measuring 2250 sq. ft. to be built by HASH. The cash consideration, however, was not to be paid in one time but in parts from time to time. Till the end of the accounting period, the assessee had received ₹ 30 lakh, which in the revised return dated 11.04.2008, was considered to work out Long Term Capital Gain at ₹ 26,81,681/-. This working of the assessee was accepted by the AO at the time of framing original assessment. According to the CIT, Jalandhar-1, Jalandhar, this action of the AO results in committing a mistake of law since as per provisions of section 48 of the Act, Capital Gain is to be computed by taking into account the full value of the consideration received or accrued as a result of transfer which was ₹ 3,67,50,000/-. This tripartite agreement was for transfer and development of the whole of the land bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have heard both the parties at length. We are of the view that on identical facts, in the bunch of appeals in ITA No.180(Asr)/2013 and others in the case of Sh. Satnam Singh Kainth and others we have decided the issue vide our order dated 19.08.2013, the relevant part of the same is reproduced for the sake of convenience as under: 26. The Ld. Addl. CIT(DR), Mr. Mahavir Singh invited our attention that the issues in all the 24 appeals mentioned hereinabove are identical to the issues in the bunch of 30 appeals decided by the ITAT, Chandigarh Bench vide a consolidated order dated 29.07.2013 in the case of Charanjit Singh Atwal, Ludhiana vs. ITO Ward VI(1), Ludhiana in ITA No.448(Asr)/2011 and others for the assessment year 2007-08. 27. He further invited our attention that in the present appeals, the assessees are either present or Ex-MLAs of Punjab Legislative Assembly who are members of housing society. The said society consists of in total 95 present or Ex-MLAs of Punjab Legislative Assembly. The matter with respect to some MLAs and the matter with respect to the Society itself fall under the jursidction of Chandigarh ITAT and the rest under the Amritsar ITAT jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contentions of Ld. Counsels and Ld. DR and cases of various Courts of law relied upon that by considering the purpose of insertion of clause (v) and clause (vi) of section 2(47) and various clauses of Power of Attorney and JDA, it becomes absolutely clear that the Society has handed over the possession of the Society to THDC/HASH and accordingly first contention of the ld. DR was rejected. ii) Vide para 59 to 61 of the order, second contention was that JDA was executed on 25.02.2007 and if possession was given then how the assessee was having possession in terms of later sale deeds executed on 2.3.2007 and 25.4.2007. It was held after considering and arguments of rival parties and facts on record that mere recitation in the sale deed to the effect that the Society was owner of land in possession measuring 21.2 acres, does not show that the society was having actual possession. What the Society was having is only ownership right and the possession was only concurrent as the possessory right. Accordingly the second contention was also rejected. iii) Vide para 62 to 63 the third contention was that possession if at was given should be held to be only a license as defined in sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty has transferred the land through JDA on a pro-rata basis, therefore, only whatever money is received against which sale deeds have also been executed can be taxed and notional income i.e. the money to be received later, cannot be taxed. It was held that there is no dispute that no notional income can be taxed, but in the case of Capital Gain section 45 read with section 48 clearly provides that it is the profit arising from the transfer of capital asset, which would be subjected to change capital gain tax and section 48 clearly provides for taking the total consideration into account while computing the capital gains, which has already been discussed in paras 64 to 68 of the order. Therefore, the whole consideration whether received or accrued which has to be taxed under the capital gain, once the transfer of capital asset takes place. Accordingly, the contention was rejected. Further, the Chandigarh ITAT Bench in the order dated 29.7.2013 (supra) vide paras 97 to 99 has dealt with issue of taxability of flat on the basis of above principles considering clause 4 of JDA, it was held that once this vested right arises out of the above contract, it can be easily said that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansfer of plots and the Society being only a facilitator or post office. Accordingly, this contention was also rejected. 32. Vide paras 5 to 9 also the assessee has raised the additional evidence, which after considering the facts on record and arguments of Ld. Counsels allowed the admission of additional evidence. 33. Vide para 10 to 14, the revised return was treated as non-est and it was held that no disadvantage has occurred to the assessee because in the revised return, the assessee has included a sum of ₹ 27,58,436/- on account of Capital Gain and the whole dispute in the assessment relates to Capital Gain arising out of sale of plot in the assessment relating to Capital Gain arising out of sale of plot in Punjabi Co-operative Housing Building Society Ltd. Mohali. In fact, the AO has ultimately assessed much higher amount of Capital Gain, which the assessee is disputing. Accordingly, this ground of the assessee was rejected. Accordingly all the issues, as discussed above in the case of Sh.Charanjit Singh Atwal (supra) were dismissed by the ITAT Chandigarh Bench in its order dated 29.07.2013. 34. As regards issue of notice u/s 148, the same was dealt with in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r holding a plot of 500 sqyd was to receive fully furnished flat measuring 2250 sqft to be constructed by THDC/HASH and Members having 1000 sqyd were to get two such flats. According to the Assessing Officer total consideration to be received by all the Members was ₹ 1,06,42,35,000/- and furnished flats as mentioned above. Before entering into the tripartite agreement the Society in its Executive Committee meeting held on 4.01.2007 which was approved in the General Body meeting held on 26.2.2007, passed a resolution to the effect that all the Members would surrender their all rights in the property to the Society and the Society would enter into an agreement on behalf of the Members with THDC/HASH. The Assessing Officer has referred to this resolution as well as various important clauses of the JDA and has placed lot of reliance on clause 2.1 of the JDA which is as under: The owner hereby irrevocaboy and unequivocally grants and assigns in perpetuity all its rights to develop, construct, mortage, lease, license sell and transfer the property along with any and all the constructions, premises, hereditaments, easements, trees thereon in favour of THDC for the purpose of dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction at ₹ 3,67,50,000/-. The assessee filed various replies which have been extracted by the Assessing Officer as under: This has reference to your letter dated 7.12.2009, we submitted that under: 1 The agreement under reference is only in the nature of an agreement to sell and not a sale deed and therefore no capital gain can arise under the said agreement. The amounts received under the said agreement are actually the advances received and not the sale consideration and the land transferred in favour of THDC Ltd. is only on account of security. A letter from M/s Hash Builders to that effect is enclosed herewith. There are many conditions envisaged in the agreement which need to be fulfilled before the full execution of the agreement and transfer of property to THDC Lid. and receipt of the consideration. 4 Under the partial execution, the part of property measuring approx, 72 sq yards was registered in favour of THDC and sum of ₹ 12 lacs was received As stated earlier, the amount was received as advance under the agreement and the property was transferred as security towards that advance. There were different legal opinions on the taxability o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be transferred. 5) While making the calculation of capital gain tax, the amount of consideration has been wrongly taken of ₹ 15 lacs Instead of Rs,12 lacs. As per the agreement, sum of ₹ 3 lacs is adjustable advance. You are requested to kindly recomputed tax liability, 6) There are various judgments on this issue. The following cases are enclosed herewith for the reference. a. CIT vs. Atam Prakash Sons (2008) 219 CTR (Del) b. Smt. Raj Rani Devi Ramna vs. CIT (1993) 201 ITR 1032 (PAT) c. Zuari Estate Development Investments Co. (P) Ltd. Vs. J.R.Kanekar, Deputy CIT. (2004) 191 CTR (Bom) In view of the above you are requested to kindly consideration the capita! gain as submitted by us. 9. The case was further fixed for 24.12.2009, On the said date the counsel of the assessee fifed another reply which is reproduced as under: 1As per Para 6.1 of your letter, you have mentioned that there is a transfer of property upon the surrender of allotment rights. You may kindly refer to the agreement dated 25,02.2007 wherein it is clearly mentioned that allotment rights have been surrendered by the members in favour of the owner i.e. Punjabi Co-operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer and consideration. No consideration will be received if the land is not transferred. As far as the possession as mentioned in the agreement is concerned, the same is for development only and the termination clause very clearly states that if the agreement is terminated, THDC Ltd will retain only that much land which has been transferred to them and the remaining land will be retained by the society/members. The actual position is such that no development work has till date been undertaken by the THDC Lid because the various conditions stipulated in the agreement have not been fulfilled. The possession as mentioned in the agreement and which is being made the basis by you to consider the transaction as transfer u/s 53A of the Transfer of Property Act is actually not of any consequences and actually there is no transfer except to the extent of land transferred by way of registered sale-deed. 2 Clause 6.1 of the agreement clearly states that handing over the original title -deeds is as security for the adjustable advance. 3 As per clause 9.2 of the agreement, it is very clearly mentioned that the owner shall execute in favour of M/s THDC Ltd: the sale-deeds to complete the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled the assessee to surrender his proposed flat to THDC Ltd. and in that case only 75% of the future market-price will be received by him. In the light of above discussion it is once again requested that tax may be calculated as per the return filed by the assessee. However If the department choose to disagree with our submissions then It Is submitted that the capita! gain should be charged in the hands of the Punjabi Co-operative House Bldg. Society. It will be pertinent to note here that the proceedings in the case of the society have been reopened u/s 148 of the I.T Act 1961 by the learned D.C.I.T Mohali. In the reasons recorded by the learned D.C.I.T, it has clearly been mentioned that he proposes to tax the capital-gain in the hands of the Society. Copy of the reasons recorded is enclosed. It may be appreciated that the same amount can't be taxed twice . On 29,12,2009 again the counsel of the assessee filed a letter and submitted as under: This being referred to the captioned proceedings Regarding your query about the cost of acquisition is ₹ 11 lacs which is paid as per following dates. Receipt No, 307 09-11-01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) had held that once the possession even for a part of the property was handed over to the transferee, for the purpose of Section 2(47)(v) r.w.s 45, the transfer was complete. (iii) The assessee s case was also covered by the provisions of section 2(47)(vi) which deals with any transaction which had effect of transferring or enabling the enjoyment of any immovable property and assigning various rights in the property in favour of THDC and handing over the original title deeds as well as handing over of the physical vacant possession of land has the effect of transferring or enabling the enjoyment of the said property to THDC/HASH. (iv) There was no force in the contention that the amounts received under the said agreement were advances received and not the sale consideration because total consideration was structured in the JDA and the consideration was to be received as per clause 4(iv) of the JDA. In fact the assessee has himself shown the receipt and returned the same as capital gain which contradicts these arguments of the assessee. As per Section 45 of IT Act, income-tax was to be charged under the head capital gain on transfer of a capital asset and shall be deemed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital gain by either not executing conveyance deed or postpone such execution because vendor of the property could give the privilege of ownership or enjoyment of the property by executing a Power of Attorney etc. To avoid such leakage of revenue clauses (v) and (vi) were inserted to section 2(47) of the Act. He then discussed the decision of Hon'ble Bombay High Court in case of Chaturbhuj Dwarkadas Kapadia V. CIT, 260 ITR 491 (Bom) and extracted the following conditions which were required to be satisfied to cover the case u/s 2(47)(v) r.w.s. 53A of T.P. Act. (a) There should be contract for consideration (b) It should be in writing (c) It should be signed by the transferor or on his behalf (d) It should pertain to transfer of immoveable property (e) Transferee has in part performance of contract has taken possession or part possession of the property. (f) Lastly, transferee should be ready and willing to perform his part of contract. 23 If the above conditions were satisfied then the transfer can be said to have taken place for the purpose of Section 45. According to him as per the decision of Chaturbhuj Dwarkadas Kapadia V. CIT (supra) once the possessio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 simultaneously to the execution and registration of this agreement to develop the same as set out therein . Thus possession in part performance of contract has been handed over to the transferee without any ambiguity in the previous year 2006-07 itself. e) An irrevocable transfer has thus been made which is not dependent on any condition to be fulfilled. f) Further coining to consideration part . As per Para 4,1 Rs,6,00,000 per holder of 1000 Sq,Yards has to be paid by transferee on account of earnest money , which has been paid to the assessee, Further as Per Para 4.1 (ii) clearly states that in lieu of. Rs, 12,00,000 per plot holder of 500 Sq. Yards and ₹ 24,00,000 per plot holder of 1000 Sq. Yards is being paid on the execution of agreement against' which the Society on behalf of members will transfer 3.08 Acres of the contiguous land out of property, It has been confirmed that against the above payment the land measuring,3.08 acres has been transferred in the name of THDC and registered vide sale deed dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Para 2.1 of the Joint Development Agreement and discussed in detail in preceeding paragraphs. m) Thus the transfer would be deemed to happen in the previous year 2006-07 itself. n) It has already been discussed in detail that registration of conveyance deed and receipt of entire consideration is not at all important in the year in which deemed transfer u/s 2(47)(v) of IT Act has taken place. o) Further the Agreement is clear and there is no ambiguity regarding irrevocable rights being given to the transferee. As regards certain petty conditions and provisions relating to termination of the contract, it Is observed that these clauses are necessary part of such type of joint development agreement. At the same time such agreements including this agreement has the provisions of 'disclaimer' 'partial invalidity' 'indemnity' and 'arbitration'. The disputes arising, if any, shall be resolved as per the provisions and awards shall be granted, in appropriate cases by the arbitrator. These provisions are there to safeguard the interest of all the parties to the joint development agreement and parties would be indemnified by each other and shall also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble certainty. d The transferee must have in part performance taken the possession of the property or part thereof from the transferor and if already in possession, continues in the possession in part performance of the contract. e Transferee must have done something in furtherance of the contract. f The transferee must have performed or willing to perform his obligations in such contract. In view of the above conditions in the present case, condition no. (d) and (f) have not been complied because the assessee and/or society has not handed over the possession to THDC/HASH. In this regard he particularly referred to clause 2(1) of the JDA and pointed out that the possession was to be handed over to THDC/HASH simultaneously with the execution and registration of the JDA. Since the JDA was not registered therefore, it is clear that the possession was not handed over. In any case the possession if at all was granted as permissive license with right to developers i.e. THDC/HASH only for the purpose of development of the land and not as part of performance of the contract of transfer of land. The fact that possession was not handed over to the THDC/HASH also becomes clear fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese clauses will entirely show that possession was given and was envisaged in the shape of license to the developers for undertaking the development of property and legal possession was neither handed over or intended to be handed over. III Money which is received at the time of execution of JDA can be termed as advance payment. In any case when these amounts were adjusted as part of sale consideration for sale of part of the property and the same have been retuned by the assessee as long term capital gains through revised return in the year of receipt. IV It was emphasized that in any case Section 53A of T.P. Act has been amended by Amendment Act, 2001 whereby registration of agreement has been made mandatory for the same to be enforceable. Since JDA was never registered therefore, recourse could not be taken to Section 2(47)(v) of the Act because JDA was not registered. Pursuant to amendment in Section 53A of T.P. Act with effect from 24.9.2001 it was only the amended provision which can be read with Section 2(47)(v) of the Act. In this regard he referred to decision of Hon'ble Supreme Court in case of Surana Steels P Ltd. V. CIT, 237 ITR 777. In that case it was observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the contract which becomes clear from clause 1.2(a), 4.1 and 7.10 regarding timely payment and clause 14(iv) regarding termination of contract. In the case before us, there was no willingness on the part of developer i.e. THDC/HASH to perform the above obligation because of the following (i) THDC/HASH failed to obtain necessary approval and did not undertake any development work on land. (ii) THDC/HASH i.e. developer has not paid timely payment in timely installments of agreed consideration. (iii) HASH has not obtained approval from various authorities and had not commenced construction within six months of handing over all final plans. (Reference was made to page 34 of the paper book). (iv) THDC/HASH vide letter dated 4.2.2001 (Page 23 to 24 of the additional evidence) refused to make further payment as stipulated in the agreement. (v) The transferor has gone back on their representation to complete construction in the time bound manner and in handing over the flats to the Society /its Members. In this regard he also referred to para 16 of the commentary by MULLA Dinshaw Frederick Mulla (copy of which has been filed at page 102 and 103 of the paper bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shoorji Vallabhdas Co., 46 ITR 144 (S.C) CIT V. Raman and Co. 67 ITR 11 (S.C) Godhra Electricity Co. Ltd. V CIT, 225 ITR 746 (S.C) CIT V. Balrampur Commercial Enterprises Ltd., 262 ITR 439 (Cal) CIT V. K. Jeelani Basha, 256 ITR 282 FOBEOZ India (P) Ltd. V ITO, ITA No. 9231/Mum/2010 (copy filed) It was claimed that since the flats were never constructed and given to the assessee, therefore, if the value of the flat is added in the total consideration then it will be totally on notional basis and since notional income cannot be taxed, therefore, the value of these flats, in no case, should be considered in the total consideration. Further if notional receipts were taxed then the assessee would be deprived to take benefit available in the IT Act. For example if whole consideration was received the assessee could have easily taken benefit of Section 54EC and other provisions like Section 54 by investing in any specified asset or a house. Since full consideration has not been received and the assessment of the whole consideration will lead to unintended consequences like denial of deduction u/s 54 EC etc. IX It was contended that since JDA has already been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vaid v ITO, 53 SOT 385 Smt. Ranjit Sandhu v DCIT, 133 TTJ 46 (Chd) 25 On the other hand, the ld. CIT DR for the revenue made detailed submissions and have also filed written submissions. It was pointed out by the CIT-DR for the revenue that though copy of the special power of attorney has been filed at pages 153 to 165 but two of the most important crucial pages containing clause u to z and last page No. 9 are missing. He made an allegation that this has been done deliberately which was controverted by the ld. counsel of the assessee and he submitted that this is a simple mistake and he would file those papers. The ld. DR for the revenue in view of these submissions submitted that these pages can be referred in case of Punjabi Coop House Building Society Ltd. in ITA No. 310 556/Chd/2012 at page 40 to 52 of the paper book in that case. The submissions of the revenue can be summarized as under: (I) The Society passed a resolution in its executive committee on 4.01.2007 which was confirmed / ratified in the General Body Meeting on 25.2.2007. In the Society there were two types of Members holding plots of 500 sqyd and 1000 sqyd. It was resolved that members would surre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original title deeds and possession of land to THDC/ HASH. (ii) The Society handed over the possession of the land and original title deeds of the property to THDC/HASH. (iii) Society permitted THDC/HASH to mortgage, sell and create charge in the property. (iv) The Society resolved to execute an irrevocable special power of attorney which could not be revoked in any circumstances without proper consent of THDC/HASH and such power of attorney was actually executed on 26.2.2007. Through this power of attorney THDC/HASH has been authorized to mortgage or create charge by the Society. THDC/HASH was authorized to give the possession of the property or any part thereof to the authorities to whom same was required to be handed over which was not possible unless THDC/HASH was handed over the possession of the property and the rights of the ownership. Through this power of attorney the right to sell was also given which is again not possible without transfer of possession or ownership. These clauses clearly show that complete control over the property confirming all privilege of ownership was given in favour of THDC/HASH and thus such transfer of ownership satisfies the requiremen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antime it was noticed by the Government that many properties were being transferred without execution of sale deed through various documents what is popularly known as power of attorney transactions. To curb the leakage of Revenue, through such transaction, clauses (v) (vi) were added to section 2(47) which defines transfer. This has been explained by Circular No. 495 dated 22.9.1987. The Board has clarified through paras 11.1 11.2 that newly inserted clauses (v) (vi) would enlarge the definition of transfer whereby the cases of transfer what is popularly known as power of attorney transaction which allows the enjoyment of right in the property would be covered by new definition. The new clauses would also cover arrangements by which the property could be enjoyed by becoming a member of the company or such other arrangement. According to him it may not be out of place to invoke Heydon s Rule of interpretation of statutes for interpreting these clauses. The Heydon s Rule is mainly applicable wherever the true meaning of amended provisions is to be understood. If the amendments are seen through prism of Heydon s Rule, it would become clear that amended clauses have been bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ggarwal Vs ITO (48 SOT 2010) that amendment made in section 53A of the Transfer of Property Act by which requirement of registration of transfer has been brought on statute need not be applicable for construing the meaning of the transfer with reference to section 2(47) of the Act. Similar view has been taken by the ITAT Cochin Bench in the case of G. Sreenivasan Vs DCIT 140 ITD 235 and Pune Bench of the Tribunal in the case of Mahesh Memichandra Ganeshwade 51 SOT 155. (VI) It was contended that there is no force in the submissions of the Ld. Counsel for the assessee that THDC/HASH were not willing to perform their part of the contract. It was pointed out that developers i.e THDC/HASH have made payments as per clause 4(i)(ii) (iii) of the JDA. The developers have also approached the concerned authorities for permissions and approvals as per the obligation agreed in the JDA. However, a PIL was filed against the developers against TATA Camelot Project (this is the name of the project which was to be developed by THDC on the land acquired from the Society). The PIL was dismissed vide order dated 26.3.2012 (copy of order filed on record). A reference to paras 3, 4, 25 26 of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Punjab Urban Planning and Development Authority (PUDA), Department of Town and Country Planning, Nagar Panchyat, Nayagon, Department of Local Bodies (Punjab) and any other Authority under Municipal Authority. It also includes Department of Environment, Electricity Board etc. Since permission from Department of Environment etc was not available because of ongoing litigation which was filed through a PIL, therefore, it cannot be said that Developer was not wiling to make the payment. As per the JDA, the payment would become due only when such permission were granted by various authorities. In fact M/s Hash Builder wrote a letter on 04.02.2011 through which it was stated that since High Court has stayed the construction, therefore, payment could not be made. Further, as PIL was filed in the Hon'ble High Court and the matter had gone even to the Hon'ble Supreme Court and THDC/HASH has vigorously defended the same. This fact clearly shows that developer i.e. THDC/HASH was willing to perform in all respects to the JDA. (VII) It was also contended that the society has already terminated the contract and in this respect reference was made to the Resolution passed by general bod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts which were to be received by the various Members of the Society. No legal action was taken against the Developer for recovery of balance of consideration in the form of flats. This only goes to prove that cancellation is only a make believe story and actually no cancellation has been done. (VIII) It was contended that there is no force in the submissions that the value of the flats which has not been constructed, cannot be included in the total consideration because that would be a case of taxing the notional income. He referred to clause 4 of the JDA which deals with the consideration and pointed out that allotment of flat was part of the consideration. As per the resolution of the Executive Body of the Society which was latter ratified by the General Body as well as the terms of the JDA very clearly show that in addition to monetary consideration each Member having 500sqyd plot was entitled to receive one fully furnished flat measuring 2250 sqft and the Members holding 1000 sqyd plot were entitled to two such flats. This clearly shows that upon entering the JDA, the Members got vested rights to receive such flats and therefore, as per the definition of capital gain in Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled by both the parties in the light of material on record, paper books and various judgments cited by the parties. The main issue is whether assessee is liable to capital gain tax in the year under consideration i.e assessment year 2007-08 in view of the JDA. For charging capital gains, the charging section is 45 and the relevant portion is as under:- Section 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, 54B, [ [54D, [54E, [54EA, 54EB,] 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. 28 The plain reading of the above provision would show that charging an item of income under the head Capital gains require three ingredients i.e. (i) there should be some profit. (ii) Such profit must be arising on account of transfer and (iii) there should be capital asset which has been transferred. There is no dispute that a capital asset was involved and there was some profit also i.e. why assessee has himself returned income under the head capital gains;. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and (vi), immovable property shall have the same meaning as in clause (d) of section 269UA;] Clauses (v) (vi) to section 2(47) of the Act have been inserted by Finance Act, 1987 w.e.f. 1.4.1988. The purpose of this insertion has been explained by CBDT in Circular No. 495 dated 22.9.1987. The relevant part 11.1 and 11.2 of the circular reads as under:- 11.1 The existing definition of the word transfer in section 2(47) does not include transfer of certain rights accruing to a purchaser, by way of becoming a member or acquiring shares in a co-operative society, company, or as way of any agreement or any arrangement whereby such any building which is either being constructed or which is to be constructed. 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 multi-storeyed constructions in big cites. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons are popularly called power of attorney transactions. To avoid these and to stop the leakage of Revenue, the Parliament has inserted clauses (v) (vi) to section 2(47) so as such type of transactions are also be brought in to taxation net. However, interpretations of these clauses has led to lot of litigation and the main point of litigation was that at what point of time the possession can be said to have been given. In the present case, the Revenue has mainly relied on two decisions namely (i) Chaturbhuj Dwarkadas Kapadia v CIT 260 ITR 491 (Bom.) and; (ii) Authority for Advance Ruling (AAR) New Delhi in the case of Jasbir Singh Sarkaria 294 ITR 196. 33. In the case of Chaturbhuj Dwarkadas Kapadia v CIT (supra), the facts before the Hon'ble Bombay High Court were that assessee who was an individual had 44/192 undivided share in an immovable property in Greater Bombay which consisted of various lands and buildings. By Agreement dated August 18, 1994, the assessee agreed to sell to Floreat Investment Ltd, (herein referred to Floreat ) his share of immovable property for a total consideration of ₹ 1,85,63,220/- with right to said Floreat to develop the property in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property is not effective or complete under the general law. Under section 2(47)(v) any transaction involving allowing of possession to be taken over or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act would come within the ambit of section 2(47)(v). In order to attract section 53A, the following conditions need to be fulfilled. There should be a contract for consideration ; it should be in writing ; it 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 perform his part of the contract. 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. Assessees used to enter into agreements for developing properties with builders and under the arrangement with the builders, they used to confer privileges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... movable property (s. 269UA(d)) to be taken or retained in part performance of a contract of the nature referred to in s.53A of the transfer of Property Act 1882, and (b) any transaction entered into in any manner which has the effect of transferring, or enabling the enjoyment of, any immovable property (s. 269UA(d)). Therefore in these two cases capital gains would be taxable in the year in which such transactions are entered into, even if the transfer of the immovable property is not effective or complete under general law. 36 From the above, it is clear that Court was of the view that in case any transaction covered by clause (v) and (vi) to section 2(47) the liability for capitol gain would arise on the date when such transactions are entered into. In the judgment at some other places, the similar observations have been made. However, despite this observation the case was decided in favour of the assessee. The reason for the same have been given in the judgment itself. Firstly it is observed that provision of section 2(47)(v) of the Act were not invoked by the Revenue itself. This becomes clear from the following para: It was argued on behalf of the assessee that there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id capital gain in the Assessment year 1999-2000, therefore, tax was held to be chargeable in Assessment year 1999-2000. Thirdly certain shortcomings were also noted in the order of the Tribunal where certain documents were mentioned to have been executed before March 31, 1996 e.g. the following observation of the Tribunal was not found correct as something is done on Ist April, 1997 then the same cannot fall in the year ending 31.3.1996. From the dates it is evident that from the very next day, i.e., April 1, 1997, from the end of the financial year ending on March 31, 1996, the builder was using the well water against payment of relevant charges to the assessee. 37 Thus it is very clear that in cases where an arrangement had been entered into by an assessee in terms of clause (v) of Section 2(47) which has effect of handing over the possession then the transfer is said to have been taken place on the date of entering into such arrangement. 38. We do not find any force in the contention of the Ld. Counsel for the assessee that judgment has to be read in the context of the decision made in such judgment. In fact, it is well settled that doctrine of precedent which me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cost. The owners were entitled to visit the site in order to review the progress of the project. It was clarified by clause 18 that ownership would remain exclusively with the owners till it vests with both the parties as per their respective shares on the completion of the project. The other clauses and the steps in the agreement were that a sum of ₹ 1 crore towards payment of earnest money at the time of entering into agreement; a special power of attorney was to be executed in favour of the Developer to enable to deal with the Statutory authorities etc. for obtaining necessary approvals / sanctions; letter of intent was to be obtained not later than March 8, 2006 and in case of a failure to do so, the agreement shall stand terminated. Letter of intent is basically a license granted by the Director of Town Planting to Developer of land for the purpose of constructing residential flats subject to payment of certain charges and compliance of other conditions. It was further stated in the agreement that on fulfillment of the requirement in the letter of intent, owners will have to execute irrevocable general power of attorney in favour of the Developer authorizing the Deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in decided cases and leading text books. The following statement of law in Sampath Iyengar s Commentary (10th Edition- Revised by Shri S. Rajaratnam) brings out the correct legal position : Section 45 enacts that the capital gains shall by fiction be deemed to be the income of the previous year in which the transfer took place . Since this is a statutory fiction, the actual year in which the sale price was received, whether it was one year, two years, three years, four years etc. previous to the previous year of transfer, is beside the point. The entirety of the sum or sums received in any earlier year or years would be regarded as the capital gains arising in the previous year of transfer. . . . . In the words of section 45, the capital gains arising from the transfer 'shall be the income of the previous year in which the transfer took place'. So, the payments of consideration stipulated to be paid in future would have to be attributed, by statutory mandate, to the year of transfer, even as payments made prior to the year of transfer. 41. Thereafter, the Authority referred to section 2(47) and objects of the introduction of clauses (v) (vi) and also referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r suffered too much theorizing it is that of possession . Much of the difficulty is caused by the fact that possession is not a pure legal concept, as pointed out by Salmond. The learned judge then explained the connotation of 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) 14 . . . . 15. While recognizing 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nderstood as exclusive possession of the transferee/developer, then, the very purpose of the amendment expanding the definition of transfer for the purpose of capital gains may be defeated. The reason is this: the owner of the property can very well contend, as is being contended 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o activities for advancing sale promotion, construction etc. The Authority further observed that if this clause is read in isolation this would suggest on passing of possession but according to Authority the other factors are to be considered. Clause 15 provided that on fulfillment of the requirements laid down in the letter of intent which is provisional license, the owners should execute an irrevocable general power of attorney in favour of the developer allowing inter alia to book and sell the dwelling unit failing under their share. This was possible only after deposit of requisite charges etc. and perhaps there was litigation regarding ownership of land which has also to be withdrawn. The Authority has discussed the significance of general power of attorney and the terms of the general power of attorney at para 33 and the relevant portion of the same is as under:- A copy of the irrevocable GPA executed in terms of paragraph 15 of the agreement has been furnished by the applicant. It authorizes the developer : (i) to enter upon and survey the land, prepare the layout plan, apply for renewal/extension of licence, submit the building plans for sanction of the appropriate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law which allows possession to be taken in part performance of the contract for transfer of the property in question .. 43 Thus, the above clearly shows that irrevocable general power of attorney which leads to over all control of the property in the hands of the Developer, even if that means no exclusive possession by the Developer would constitute transfer. It can be said that it has to be construed as possession in terms of clause (v) of section 2(47) of the Act. 44 A question may arise that why the transfer was not held to be taken place in Assessment year 2006-07 when first agreement was entered into on June 8, 2005. The supplementary agreement was also entered into on Sept 15, 2005 both of which fall in Financial Year 2005-06 relevant to Assessment year 2006-07. Then why transfer was not construed in Assessment year 2006-07 it was because the first agreement itself contained a condition that letter of intent should be procured not later than March 8, 2006. In case of failure to do so the agreement shall stand terminated. Therefore, obtaining the letter of intent was the crucial factor. It has been explained in the decision that the letter of intent basically i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he JDA refers to number of members as 96). The Society was owning 21.2 acres of land in village Kansal Distt. Mohali adjacent to Chandigarh. There were two types of members firstly the members who were owning plot of 500 sqyd and secondly the members who are holding plot of 1000 sqyd. Somewhere in 2006 it was decided to develop a Group Housing commercial project and do development as per the applicable municipal building bye-laws in force and accordingly a bid was invited through advertisement in the Tribune dated 31.5.2006. HASH a developer, approached the Society with proposal for development of the property. Since Hash did not have sufficient means to develop the property, Hash had approached THDC for development of the property by constructing the building and/or structures to be used for interalia residential, public use and commercial purposes. This proposal was discussed by the Society in its Executive Committee meeting on 4.1.2007. Minutes of the meeting are placed at page 58 to 65 of the paper book. In the Executive committee it was decided to appoint Hash who was acting alongwith the joint developer THDC as joint developer on the terms and conditions to be mentioned in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or exploitation for full utilization of the Property (Rights) and to execute all the documents necessary to carry out, facilitate and enforce the Rights in the Property including to execute Lease Agreement, License Agreements, Construction Contracts, Supplier Contracts, Agreement for sale, Conveyance, Mortgage Deeds, finance documents and all documents and agreements necessary to create and register the mortgage, conveyance, lease deeds, license agreement, Power of Attorney, affidavits, declaration, 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 authority 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to time be required in this behalf. 9.2 The owner shall execute in favour of THDC the sale deed is in accordance with the provisions of clause 4.1(ii) to Clause 4.1(iv) of this Agreement and execute all other necessary documents and papers to complete the aforesaid transaction. 9.3 That all the original title deeds pertaining to property as mentioned in Annexure IV has been handed over to THDC by the owner at the time of signing of this Agreement and in furtherance of the common interest of the Parties for the development of the Project and except the Sale Transaction made by the Owner in favour of THDC as et out in Clause 4.1 above. THDC hereby undertake and assure the owner that they shall use the title deeds only for the purpose of furtherance of the Project in the manner that it does not adversely effect the Owner/Allottee in any manner whatsoever. 49 Clause 10 describes the consent given by the Society to THDC for raising finance for development and completion of project. Clause 11 talks about formation of maintenance Society for the project after its completion. Clause 13 talks about transfer of rights which reads as under: 13 Transfer of Rights The owner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of this agreement because clause 9.3 there is no mention about registration of JDA. 53 Special Power of Attorney which has been executed on 26.2.2007 and has been registered also. The irrevocable special Power of Attorney has been executed as provided in clause 6.7 of the JDA which reads as under: 6.7 The Owner shall execute an irrevocable special Power of Attorney granting its complete Development Rights in the Property in favour of THDC interalia including the right to raise finance by mortgaging the property and register the charge with the Competent Authority and execute registered sale deeds) as set out in Clause 4.1 (ii), (iii), (iv) and (v) and the Owner confirms, undertakes, declares and binds itself not to revoke the same for any reason whatsoever out of its own will and discretion without obtaining a specific prior written consent of THDC or any of its duly constituted attorneys. Through this Power of Attorney various powers have been given like to assign, file, amend etc. various plans, designs to represent before various authorities, to appoint architect, Lawyers. Some of the specific clauses relevant, are extracted below: (j) To negotiate and agree to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, lease, license and/or in any other manner for such price as the Attorneys may deem fit and proper. To collect and receive from the purchased, transferees, lessees, licensees of the Premises, monies/price and/or consideration and/or maintenance charges and to sign and execute and/or give proper and lawful discharge for the receipts. (bb) To execute from time to time all the writing, agreement, deeds etc. in respect of the premises which maybe constructed on the Property and also to execute and sign conveyance, transfer or surrender in respect of the Property or any part thereof. (cc) To sign, execute and register the conveyances or assignments and/or Power of Attorney s and/or other documents and/or agreements and/or any other writings in respect of the Property in part or full and/or the Premises constructed thereon or any part thereof in favour of any person as the Attorneys may determine including in favour of any individual and/or legal entitles and/or Cooperative Society and/or Limited Company and/or any other entity that may be formed for such purpose. (dd) To issue letter of lien/NOC s and to sign documents on behalf of the Owner as required by the prospective buy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the above clauses of the Irrevocable Special Power of Attorney and JDA clearly show that the developer was authorized to enter upon the property for not only for the purpose of development but other purposes also. THDC was authorized to amalgamate the project with any other project in the adjacent area or adjoining area as per clause (t) of the special Power of Attorney. If the possession was never given to the developer by the Society then how the developer could amalgamate the project with another project which may be acquired latter in the adjoining area. Through clause (w) THDC was authorized to hand over the possession of property or portion thereof to the authority to whom the same is required. In large Housing Society Projects sometimes Municipal authorities takes some portion of land for the purpose of roads, parks or other general utility purposes like installation of electricity transformers and before sanctioning the plans the developer is required to undertake that such portions of land would be given for such a common purpose. If possession was not given then how THDC was authorized to hand over such land or portions thereof which have not been identified in the JDA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the land, prepare lay out plans, submit building plan for sanction with the appropriate authorities to control, manage and look after and supervise the property, to obtain water and sewerage, disposal and electricity connection. In that case the developer was authorized to mortgage the property to obtain money for meeting the cost of construction on security and mortgage of land falling only to the developer s share. In that case it was held that GPA was not a license to enter upon for doing some preliminary acts in relation to development of work but the power to control the land has also been confirmed. It has also been noted that the agreement described the Power of Attorney as irrevocable and extra declaration to that effect in the Power of Attorney is not without significance. In case before us, many more powers have been given to THDC in addition to powers which have been described in that judgment and Power of Attorney has been described as irrevocable in clause 6.7 of JDA. Therefore, it is clear that the assessee s plea that the possession was to be given only at the time of registration of the JDA, is not correct. Once irrevocable power was given then it cannot be said t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ischief and pro private commando and to add force and life to the cure and remedy according to the true intent of the makers of the Act pro bono public. There is now the further addition that regard must be had not only to the existing law but also to prior legislation and to the judicial interpretation thereof. 58 Going by the Heydon s Rule of interpretation if we analyze the purpose of clause (v) of Section 2(47) then it would emerge that law before making the amendment was that capital gain could be charged only if a transfer has been effected and transfer was interpreted by various Courts including the decision of Hon'ble Supreme Court in case of Alapati Venkatramian V CIT, 57 ITR 185 (SC) that proper conveyance of the property has been made under the common law. The mischief was with regard to transfer in the sense that there was common practice that properties were being transferred in such a manner that transferee could enjoy the benefit of the property without execution of the conveyance deed. Thirdly we need to examine the remedy which was insertion of clause (v) and (vi) so that cases of giving possession of the property, were also covered by the definition of tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a limited extent and for a limited purpose and that of the buyer/developer who has a general control and custody of the land can very well be reconciled. 61 In further discussion in para 26 to 28 of the above decision it has been held that it is not necessary in terms of clause (v) that the developer should have exclusive possession. The concurrent possession of the owner is possible which gives rights to a limited extent for a limited purpose. Thus it is very much possible to hold concurrent possession. Mere recitation in the sale deed to the effect that the Society was owner of and in possession of land measuring 21.2 acres, does not show that the Society was having actual possession. What the Society was having is only ownership right and the possession was only concurrent as the possessary right. Further it is a standard clause in the conveyance deed and it does not prove or indicate anything except that a portion of land measuring 3.08 acres, has been sold / conveyed to the developer. In the light of this position, this contention is rejected. 62 We find no force in the next contention of the ld. counsel of the assessee that possession if at all was given should be he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quated with the expression received . Both these expressions and in addition thereto, the expression accrue are used in the Income-tax Act either collectively or separately according to the context and nature of the charging provision. The second point which deserves notice is that by a deeming provision, the profits or gains that have arisen would be treated as the income of the previous year in which the transfer took place. That means, the income on account of arisal of capital gain should be charged to tax in the same previous year in which the transfer was effected or deemed to have taken place. The effect and ambit of the deeming provision contained in section 45 has been considered in decided cases and leading text books. The following statement of law in Sampath Iyengar s Commentary (10th Edition- Revised by Shri S. Rajaratnam) brings out the correct legal position : Section 45 enacts that the capital gains shall by fiction be deemed to be the income of the previous year in which the transfer took place . Since this is a statutory fiction, the actual year in which the sale price was received, whether it was one year, two years, three years, four years etc. previ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must be a debt owed by somebody. Ld. Commissioner of Income Tax, West Bengal-II, Calcutta V. Hindustan Housing and Land Development Trust Ltd. AIR 1986 S.C 1805, 1807. The expression accrual of income has been defined in the same Lexicon as under: Accrual of income. E.D Jassoon C. Ltd. V Ld. Commissioner of Income Tax, AIR 1954 S.C 470 quoted 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. Bhogilal V Income Tax Ld. Commissioner, AIR 1956 Bom 411, 414 (Income Tax Act (11 of 1992) Ss. 16(1) and (3)} 67 The combined reading of these two definitions show that it (i.e. accrual) is not equal to the receipt of income. In fact it is a stage before the point of time when the income becomes receivable. In other words, once the vested rights come to a person then it can be said that such right or income has accrued to such person. The concept of accrual or arousal of income has also been discussed by the ld. aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, 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, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that the contract, [***]where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right 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 70 A plain reading of the above provision shows that it provides a safety measure or a shield in the hands of the transferee to protect the possession of any property which has been given by the transferor as lawful possessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri G.P.Singh and extracted following piece: 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 par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der:- The above clearly shows that there was certain situation where properties were being transferred without registration of transfer instruments and people were escaping tax liabilities on transfer of such properties because the same could not be brought in the definition of transfer particularly in many States of the country properties were being held by various people as leased properties which were allotted by the various Govt. Departments and transfers of such lease were not permissible. People were transferring such properties by executing agreement to sell and general power of attorney as well as Will and receiving full consideration, but since the agreement to sell was not registered and though full consideration was received and even possession was given, still the same transactions could not be subjected to tax because the same could not covered by the definition of transfer . To bring such transactions within the tax net, this amendment was made. It has to be appreciated that clause (v) in section 2(47) does not lift the definition of part performance from section 53A of the Transfer of Property Act, 1882. Rather, it defines any transaction involving allowing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owner and possibly there cannot be two owners of same property at the same time. In fact, the amendments to section 27 were made later on but were taken into cognizance on the basis of above principle and ultimately it was held as under: Hence, though under the common law owner means a person who has got valid title legally conveyed to him after comply with the requirements of law such as the Transfer of Property Act, the Registration Act, etc., in the context section 22 of the Income-tax Act, 1961, having regard to the ground realities and further having regard to the object of the Incometax Act, namely, to tax the income, owner is a person who is entitled to receive income from the property in his own right. The requirement of registration of the sale deed in the context of section 22 is not warranted. Thus, from the above, it is clear that it is not necessary to get the instrument of transfer registered for the purpose of Income-tax Act when a person has got a valid legally conveyed after complying with the requirements of the law. 9. Similarly, in the case of Mysore Minerals Ltd. v. CIT [1999] 239 ITR 775/106 Taxman 166 (SC), the assessee had purchased for the us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tribunal in case of G.Sreenivasan Vs DCIT 28 Txmann.com 200 (Coch.) and ITAT Pune Bench in the case of Mahesh Nemichandra Ganeshwade v ITO 21 Taxmann.com 136 (Pune). In view of this legal position, this contention is rejected. 75 The next contention was that the decision of Hon'ble Bombay High Court in case of Chaturbhuj Dwarkadas Kapadia (supra) is not applicable particularly because ultimately in that case it was held that capital gain tax should be charged in Assessment year 1999-2000 whereas agreement was executed in August, 1994. 76 We have already discussed the implications of the decision in case of Chaturbhuj Dwarkadas Kapadia (supra) in para 33 to 38. We had also examined why in that case capital gain was not held to be chargeable in Assessment year 1995-96.There is no need to repeat the same and in view of the said observations, we reject this contention. 77 The next contention is that it is necessary for invoking of section 2(47)(v) of the Act to comply with the provisions of section 53A of the Transfer of Property Act to the extent that there should be willingness on the part of the transferee to perform his part of the contract. 78 In this aspect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en possession unless and until the land was denotified. Since facts of the case are different than the case in hand and therefore, same are not relevant for our purpose. 81 Now coming to the facts, firstly it was contended that Developer i.e transferee has not obtained various permissions which were required to be taken by the Developer as per clauses 3.1, 7.9, 8.4 and 8.6 of the JDA. This is not correct as pointed out by the Ld. CIT DR that assessee had already got the municipal plan sanctioned but in the meantime PIL was filed before the Hon'ble Punjab Haryana High Court against the implementation of the project. Initially, the construction was banned by the Hon'ble High Court. However, later on it was observed in the CWP No. 20425 of 2010 and as clarified by the order of the Hon'ble Supreme Court that refusal of sanction under the Environment (Protection) Act, the society have sought a review of the order because the findings arrived were ex.parte. No order in the matter has been passed by the competent authority perhaps because of the order of High Court. In the interim order passed in the PIL it has been clarified by the Hon'ble Supreme Court vide order da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 extent it is capable of doing so, use its best efforts to remove or remedy the cause thereof and minimize the economic damage arising thereof. v) Either Party may terminate this Agreement after giving the other Party a prior notice of fifteen (15) days in writing of the Event of Force Majeure continues for period of ninety (90) days. In the event of termination of this Agreement all obligations of the Parties until such date shall be fulfilled. 82 The combined reading of these clauses show that if any of the party could not perform its part of the obligation because of the unforeseen circumstances which included government directions, court orders, injunctions etc. such party would not be liable to other party. In view of Force Majeure clause which included Court Injunction it can not be said that THDC is not willing to perform its obligation. In fact Develpers i.e. THDC/HASH were perusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e project have submitted themselves to the jurisdiction of the authorities under the said enactments we should refrain from addressing ourselves on any of the issues connected with either of the two statutory enactments as any such exercise, even though may be unintended, may have the effect of fettering the jurisdiction of statutory authorities functioning under the two relevant statutes. 22. Insofar as the provisions of the Environment (Protection) Act and the Wild Life (Protection) Act are concerned, it need not be emphasised that every project attracting the provisions of the Periphery Control Act and/or the provisions of the 1995 Act must satisfy the ecological concerns of the area in the light of the provisions of the two statues in question. As already held by us, a public trust has been bestowed on the authorities by provisions of the said Acts which cast on such authorities a duty to interdict any project or activity which even remotely seems to create an imbalance in the pristine ecology and environment of the area on which the city of Chandigarh is situated or for that matter in the immediate vicinity thereof. As already observed, necessary clearances under the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not willing to perform his part of contract. 84 Secondly, it was contended that payments have not been made as per the JDA. However, again this is not correct. As per clause 4(iv) of the JDA, the installment for ₹ 31,92,75,000/- was required to be paid. The clause 4(iv) read as under:- iv) Payment being ₹ 31,92,75,000/- (Rupees One Crore ninety two lacs seventy five thousand only) calculated @ ₹ 24,75,000/- (Rs. Twenty Four lacs seventy five thousand only) per plot holder of 500 Sq. yards and (₹ 49,50,000/- (Rs. Forty nine lacs fifty thousand only) as per plot holder of 1000 square yards to be made to the Owner and / or the respective members of the Owner (as the case may be) within six(6) months from the date of execution of this agreement or within two (2) months from the date of approval of the plans / Design and Drawings and grant of the final licence to develop where upon the construction can commence, whichever is later, against which the Owner shall execute a registered sale deed for land of equivalent value being 6.36 acres out of the Property as demarcated in green colour (also hatched in green colour) in the Demarcation Plan annexed hereto a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this contention. Clause (vi) to Section 2(47) reads as under: any transaction (whether by way of becoming a member of, or accruing shares in, a cooperative 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 . 88 The plain reading of the provision shows that any transaction by way of becoming a Member or acquiring shares in the Cooperative Society or shares in the company which has the effect of transferring or enabling the enjoyment of any immoveable property would be covered by the definition of transfer. In the case before us, initially the Members of the Society were holding shares in the Society for ownership of plot of 500 sqyd or 1000 sqyd. This membership was surrendered to the Society vide resolution of the Society passed in the Executive Committee on 4.1.2007 which was later ratified in the General Body Meeting of the Society on 25.1.2007, so that the society could enter into JDA. In the JDA the Society has agreed to transfer the land. Therefore, technically it can be said that the developer i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h balance consideration of ₹ 99.00 crores which has not been received as per the contention of the ld. counsel of the assessee . But in that case no taxes can be levied even after 20 years because no transfer can be said to have taken place after 20 years and Revenue cannot do any thing because capital gain can be charged u/s 45 only on transfer of capital asset. We do not think that this kind of interpretation can be made while interpreting Section 45 r.w.s. 48 by invoking the rule that there can not be any tax on notional receipt. Generally speaking it is only the real income which can be taxed but this has to be understood subject to limitations. Commenting on these limitations, the Ld. Author Shri S. Rajaratnam in the Commentary of Law of Income Tax by Sampat Iyengar s Volume 1, (11th Edition) has observed at page 343 as under:- 5. Reservations on real income theory. - Whether accrual of income has taken place or not, must be judged on the principle of the real income theory. After accrual, non-charging of tax on the same because of certain conduct based on the ipse dixit of a particular assessee cannot be accepted. In determining the question whether it is hypothetic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the property is let out or not [Sultan Bros. Pr. Ltd. v. CIT, (1964) 51 ITR 353 (SC); Jamnadas Prabhudas v. CIT, (1951)20 ITR 160(Bom); D.M. Vakil v. CIT, (1946) 14 ITR 298, 302(Bom); CIT v. Biman Behari Shaw, Shebait, (1968) 68 ITR 815 (Cal); Sri Sri Radha Govinda Jew v. CIT, (1972) 84 ITR 150, 156 (Cal); CIT v. Ganga Properties Ltd., (1970) 77 ITR 637, 647 (Cal); Liquidator, Mahmudabad Properties Ltd. v. CIT, (1972) 83 ITR 470 (Cal), affirmed, (1980) 124 ITR 31 (SC); CIT v. Zorostrian Building Society Ltd., (1976) 102 ITR 499 (Bom); C.J. George V. CIT, (1973) 92 ITR 137 (Ker); D.C. Anand Sons v. CIT, (1981) 131 ITR 77 (Del). Also see, CIT v. Parbutty Churn Law, (1965) 57 ITR 609, 619 (Cal); In the matter of Krishna Lal Seal, AIR 1932 Cal 836; Lalla Mal Samgham Lal v. CIT, (1936) 4 ITR 250 (Lah); New Delhi Municipal Committee v. Nand Kumar Bussi, (1977) Tax LR 2130 (Del)] 93 Similar view has been expressed by Shri N.A. Palkhivala in his commentary on the Law land Practice of Income Tax, Volume 2 (Eighth edition) by Kanga and Palkhivala s observation at pages 22 23. Again even Shri S. Rajaratnam in the Commentary of Law of Income Tax by Sampat Iyengar s Volume 2, ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly. It may be sometimes hard to the assessee s but again it has been held in numerous decisions that Fiscal statues have to be interpreted on the basis of language used and there is no scope for equity or intent. Ld. Author Shri S. Rajaratnam in the Commentary of Law of Income Tax by Sampat Iyengar s Volume 1, page 236 in this regard has observed as under:- Once it is shown that the case of the assessee comes within the letter of the law, he must be taxed, however, great the hardship may appear to the judicial mind. Considerations of hardship, injustice or anomalies do not play any useful role in construing taxing statutes unless there be some real ambiguity. Thus, any benevolent construction in favour of the assessee has been held to be uncalled for. 96 Therefore, it can be said that generally speaking notional income could not be subjected to tax but whenever there is a specific provision, the same has to be taxed. Now, in case of capital gain, section 45 read with section 48 very clearly provides that it is the profit arising from the transfer of a capital asset which would be subjected to charge of capital gain tax and section 48 clearly provides for taking t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same. It is expressly provided that as resolved by the Owner, the total amount payable by HASH to the Owner and / or the respective members of the Owner (as the case may be) for assignment of the Development Rights and for transfer and sale of 21.2 acres of land of the Property shall be ₹ 106,42,50,000/- (Rupees One Hundred Six Crores Forty Two Lacs Fifty Thousand only) and one hundred and twenty nine (129) flats consisting of Super Area of 2250 Sq. feet ( Flats ); one flat each for sixty five members having a plot of 500 sq. yards, two flats for the (thirty) 30 members having a plot of 1000 sq. yards and 4 flats to the Owner for the 4 plots of 500 sq. yards each as per list annexed with this Agreement as Schedule B ( Sale Transaction ) It is expressly agreed 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: 4.2 As resolved by the Owner, THDC either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enjoy the construction, which is yet to commerce or in the process of construction being put up by the developer, but the solution lies in statutory clarification in such cases. In view of the increasing scale of such development agreements to solve the housing problem in the cities, a statutory clarification or circular is overdue. 99 These comments and the other detailed discussion on this aspect clearly show that capital gain tax has to be paid on the total consideration arising on transfer which would include the consideration which has been received as well as the consideration which has arosen and become due and may be received later on. In view of this discussion this contention is rejected. 100 Ninth contention is that the assessee has already terminated the agreement and has revoked the Power of Attorney. We find no force in this submissions. 101 In this regard ld. counsel of the assessee has relied on the decision of Mumbai Bench of the Tribunal in case of Chemosyn Ltd. V ACIT (supra). In that case the assessee-Company was owner of two plots bearing 256 257 in Gundabali Andheri Mumbai. The assesseecompany entered into a development agreement with Dipiti Builde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is any material breach of the representations, warranties, undertakings, declarations, covenants and/or obligations given by the Owner under this Agreement after giving thirty (30) days written notice for rectification of such breach. In the event the Agreement is termination by THDC, all the lands registered in the name of THDC as per the terms of this Agreement upto 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. (ii) In the event all the requisite government and statutory approvals, authorizations, consents, licenses, approvals of all the plans/designs and Drawings as may be required for the development of this Property in relation to the Project and to undertake the Project are not granted within nine (9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the event the Agreement is terminated by Owner, all the lands registered in the name of THDC as per the terms of this Agreement upto 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 forfeit the Adjustable Advance/Earnest Money mentioned in clause 4(i). 103 The reading of the above clause would show that power of termination has been given in many circumstances to THDC vide clause 14(i), (ii) and (iii). The power for termination by the owner has been mentioned in clause 14(iv) only. Reading of this clause would show that right to terminate with the owner i.e. the Society was available only in case of default in making the payment. The issue regarding default for making payment has already been discussed by us in Paras 84 to 86 above while discussing the issue of willingness on the part of the transferee to perform its part of the contract We have already held that there was no default on the part of developer i.e. THDC/HASH in making the payment, therefore, the assessee had no right to terminate the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in clause 6.7 of the JDA from THDC. 105 We may also note that CIT D.R has pointed out that total consideration was to be determined as under: (i) Consideration in cash (₹ 82,50,000 x 129 plots) ₹ 106,42,50,000/- (ii) Consideration in kind (₹ 101,25,000/- x 129 plots) ₹ 130,61,25,000/- Total ₹ 237,03,75,000/- Average cost of consideration ₹ 11.18 crores per acre (Total consideration of ₹ 237.03 crores divided by 21.2 acres of land) It is claimed on behalf of the assessee that JDA has been cancelled and the developer has been allowed to retain the property which has also been conveyed to developer through two sale deeds. If that is so then what would happen to the balance consideration because in such situation the assessee has received consideration of only about ₹ 5 croress per acre because the assessee has registered land measuring 3.08 acres for ₹ 15.48 crores through first conveyance deed, whereas consideration as per original agreement was ₹ 11.18 crores per acre as shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case for exclusion or reduction of income. However, if the time-limit for filing a revised return expires, the difficulty will arise. It is for Parliament or the Central Government to provide a remedy to the assessee in such cases. Moreover, the other side of the picture as depicted in paragraph 27 (supra) should also be kept in view. Here the comments of Shri Rajaratnam quoted at para 5164 above are also relevant again: It is hard on the owners when required to pay tax, when handing over the possession for purposes of construction without being able to enjoy the construction, which is yet to commerce or in the process of construction being put up by the developer, but the solution lies in statutory clarification in such cases. In view of the increasing scale of such development agreements to solve the housing problem in the cities, a statutory clarification or circular is overdue. We may mention here that no doubt sometimes an assessee may be put in a difficult situation and as mentioned by Hon'ble Authority in case of Jasbir Singh Sarkaria (supra) as well as Ld. Author Shri Rajaratnam it is for the legislature to take corrective steps. However, it may not be o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall stand amended, modified and substituted by the following:- 4.1 It is expressly agreed and understood by and between the Parties hereto (a) in the ratio of 72,28 between THDC and HASH in case Gross Sales Proceeds does not exceed ₹ 1272 crores; (b) in the ratio of 70: 30 between THDC and HASH in case Gross Sales Proceeds is equal to ₹ 1272 crores; (c) in addition (b), in the ratio of 60: 40 between THDC and HASH in respect of gross sales Proceeds in excess of ₹ 1272 crores. It is agreed that the minimum guaranteed amount from the Gross Sales Proceeds for THDC and HASH is ₹ 890.40 crores and ₹ 225.76 crores respectively. The minimum guaranteed amount of ₹ 225.76 crores to HASH includes ₹ 58.88 crores that shall be expended by THDC towards construction of 126 flats equivalent to 2,83,500 sq. ft,, which flats are to be allotted in the names of the members of the Society or otherwise, as the case may be, calculated as ₹ 2000 per sq. ft. for the area 2,83,500 sq. ft. and the 72% share of 3 flats of 2250 Sq. ft. to be purchased by HASH @ Rs, 4500/- per sq. ft. Should the application of the ratio stipulated in (a) above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Public. Considering these facts we are of the opinion that Assessing Officer has estimated the value of the flats on most reasonable basis. In view of these observations this contention is rejected. 110 The Ld. Counsel for the assessee had made some submissions on the issue of deduction u/s 54F. He has pointed out that this issue has been rejected wrongly by CIT(A). However, carefully perusal of the grounds of appeal show that no ground in respect of deduction u/s 54F has been raised before us and, therefore, we decline to adjudicate this issue and all the arguments made in this behalf are rejected. Though reference was made to ground No. 2.3 in this regard. The perusal of grounds No. 2.3 would show that reference has been made only to Section 54 and Section 54EC. Section 54 deals with deduction in case the assessee being an individual or HUF, transfers the residential house and in case before us, the assessee has transferred the plot. Therefore, it cannot be said that deduction u/s 54F and 54 is same. Since no ground has been raised for deduction u/s 54F, we reject this contention. 111 Ground No. 3 - The ld. counsel of the assessee submitted that without prejudice to the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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