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TMI Blog2021 (9) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... t Agreement would not ipso facto result in any income much less capital Gains nor would that create any title over the property in favour of the builder. 4. Without prejudice, the CIT(A) grossly erred in not appreciating that in the afore-said facts and circumstances, there was no question of any `Transfer' as per S.2(47) of the Income-tax Act and therefore, the addition as made by the AO is liable to be deleted as unsustainable. 4.(sic) The CIT(A) ought to have appreciated that the decision of T.K. Dayalu was not at all applicable on account of distinguishing facts, especially that it was the case of construction of commercial project as opposed to Residential project, as in the case on hand. 5. The CIT(A)further erred in confirming charging of interest under S. 234B, S. 234C 85S. 234D of the Act. 6. For these and such other grounds that are urged during the hearing, it is prayed that the impugned order of the CIT(A) be set-aside granting relief to the Appellant, in the interest of Justice." 3. The assessee is a private limited company, engaged in the business of holding of investments, promoting and investing in start-up companies, investing in real estate properties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lasted about 4 years time from the date of signing the JDA), the same should be adopted as the value for the land given up by the assessee. 3. The value as adopted by the assessee in the JDA for the purpose of capitalising the value in its books representing its share of the land value at Rs. 99.32 lacs should be taken as cost to compute the capital gains (the AO has restricted the cost to Rs. 83.66 Lacs representing 84.235 % of the land value). 7. The ld. AR submitted that thus by extrapolating the data obtained from the developer which is supposed to represent the cost of construction of the area to be handed over subsequently as the sale value for the land developed as part of the JDA. According to him, the AO raised a wholly fictitious and notional demand, since he presumed that the capital gains arose in the year of signing the agreement itself and the same should be assessed as short term capital gains. 8. On appeal, the CIT(Appeals) confirmed the order of AO on both the reopening of assessment as well as addition made holding that there was a transfer u/s. 2(47)(v) of the Act so as to bring the capital gain to tax. Against this, the assessee is in appeal before us. 9. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property which does not amount to transfer in terms of section 2(47)(v) of the Act r.w.s. section 53A of the T.P. Act. According to her, the provisions of section 2(47)(v) of the Act will not apply in this situation and this JDA cannot be construed as an agreement in the nature of contract referred to in section 53A of the T.P. Act. As such, no capital gain could be assessed in this assessment year under consideration. Further, she submitted that as per provisions of section 53A of the T.P. Act, transaction would constitute "transfer" for the purpose of computing capital gain only if all the conditions laid down in the provisions are satisfied. In this case, other than entering into JDA, no other condition stipulated u/s. 53A of the T.P. Act is complied with. The provisions of deemed transfer u/s. 2(47)(v) of the Act cannot be invoked in the assessee's case since no consideration was received and also no construction activity actually took place during the FY 2005-06 relevant to AY 2006-07. Even the developer did not obtain the building plan so as to construct the building thereon. No income accrued to the assessee in the assessment year under consideration. The JDA was entered at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract, read as a whole, indicates passing of or transferring of complete control over the property in favour of the developer, then the date of the contract would be relevant to decide the year of chargeability. 15. Further he submitted that sub-section (5A) to section 45 was inserted by the Finance Act, 2017 w.e.f. 1.4.2018 and hence it cannot be applied to the present AY 2006-07. He also submitted that the order of Tribunal in the case of DCIT v. Smt. Hema Mohanlal (supra) cannot be applied to the facts of the case. In that case, though JDA was entered into on 21.6.2009. Permission for construction was obtained from Trivandrum Corporation to construct the building on 8.6.2009. The condition for handing over construction was 36 months. However, it was actually handed over on 12.4.2016 with a long delay of 7 years. In such peculiar facts and circumstances, the Tribunal held that there was no transfer in the year in which the JDA was entered into. Accordingly the ratio of that decision cannot be applied. 16. We have heard both the parties and considered the rival submissions. In this case, the assessee entered into JDA with the Developer along with the other parties on 15.3.2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the right specifically provided by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof." 19. A plain reading of section 53A of the Transfer of Property Act shows that in order that a contract can be termed to be "of the nature referred to in section 53A of the Transfer of Property Act" it is one of the necessary preconditions that transferee should have or is willing to perform his part of the contract. This aspect has been duly taken note of by the Hon'ble Bombay High Court when their Lordships observed as follows: "That, in order to attract section 53A, the following conditions need to be fulfilled. (a) There should be contract for consideration; (b) It should be in writing; (c) It should be signed by the transferor; (d) It should pertain to the transfer of immovable property; (e) The t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. No municipal sanction for development was obtained in the assessment year under consideration. Sanction of building plan is utmost important for implementation of JDA entered into between the parties. Without sanction of building plan, very genesis of the agreement fails. To enable execution of the JDA, firstly plain is to be approved by the competent authority. In fact, the building plan was not got approved by the Developer in the assessment year under consideration. Only permission is granted to the Developer to undertake construction of the project. Until permission is granted, a developer cannot undertake construction. As a result of this lapse by the transferee, the construction has not taken place in the assessment year under consideration. There is no progress in the Development activities in the assessment year under consideration. Nothing is brought on record by authorities to show that there was development activity in the project during the assessment year under consideration and cost of construction was incurred by the builder/Developer. Hence it is to be inferred that no amount of investment was made by the Developer in the construction activity and it would am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A), cannot be said to be a "contract of the nature referred to in section 53A of the Transfer of Property Act" and, accordingly, provisions of section 2(47)(v) cannot be invoked on the facts of this case. 22. We have carefully gone through the conditions laid down in the JDA dated 15.3.2006 to the Developer. As seen from Clause 12 of the JDA, it suggests that the assessee authorized the Developer to enter into agreements for sale of his proportionate undivided right along with the partly or fully constructed residential apartments allotted to the Developer and the assessee also authorized to execute the Sale Deed conveying the undivided interest in the schedule property along with partly or fully constructed apartment thereon and to present the same for registration and to receive consideration. According to the ld. DR, it shows that that the assessee transferred the absolute right over the new property to the Developer to the extent of undivided share on entering into the JDA on 15.3.2006. At this point, it is appropriate to mention the ratio laid down by the Hon'ble High Court of Karnataka in the case of Dr. T.K. Dayalu (supra) as follows:- "The Hon'ble Supreme Court (si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... introduced in the Act." 24. The ld. DR argued that the assessee being owner of the property entered into JDA on 15.3.2006 in terms of which the assessee had given the bundle of rights as mentioned above and possession of the property to the Developer, against which the assessee recovered 24,000 sq.ft. constructed area of flats. The assessee's argument that it has offered the same for taxation in AY 2013-14 holds no merit. The judgment in Chaturbhuj Dwarkadas Kapadia v. CIT (supra) undoubtedly lays down a proposition, which more often than not, favours the Revenue, but, on the facts of this case, the said judgment supports the case of assessee inasmuch as 'willingness to perform' has been specifically recognized as one of the essential ingredients to cover a transaction by the scope of section 53A of the T.P. Act. The Revenue does not get any assistance from this judicial precedent. More so, there is binding precedent of decision of CIT v. Balbir Singh Maini (supra) in which it was held as follows:- " An agreement of sale which fulfilled the ingredients of section 53A of the Transfer of Property Act, 1882 was not required to be executed through a registered instrument. This posi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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