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TMI Blog2022 (9) TMI 328X X X X Extracts X X X X X X X X Extracts X X X X ..... d the assessee in the ratio of 70 : 30 respectively. The "Project Revenue" meant the aggregate of the amounts attributable to Base Sale Price, Initial club membership admission fees, car park charges, delayed interest payment and any other amount collected from the purchasers of units, but excluded certain items like deposits with BWSSB, BESCOM, maintenance fee etc., as specified in clause 5.1(b) of the agreement. The assessee received refundable interest free deposit of Rs.31,15,35,000/- from the Developer as security to ensure appropriate performance by the Developer, which is to be recovered by the Developer directly and by way of deduction from the Owner's share of Project Revenue. 3. The assessee did not declare any income under the head "Capital Gain" in the Return of Income filed for Assessment year 2014-15. The facts regarding the JDA came to light in the course of Assessment Proceedings. The AO in the order of assessment concluded that there was a transfer of the property by the assessee under the JDA within the meaning of Section 2(47)(v) of the Income tax Act, as held by the Hon'ble High Court of Karnataka in the case of CIT Vs. Dr. T.K.Dayalu 202 Taxman 531(Karnataka)" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property and that such permission cannot be equated with delivery of possession in part performance under the JDA within the meaning of section 53-A of the Transfer of Property Act, 1882, held that on a combined reading of the relevant clauses of the JDA that the possession was retained by the assessee and not passed on to the developer. He held that the transferee has not taken possession of the property and as such the main ingredient of the jurisdictional High Court's decision remains unfulfilled. Accordingly, the CIT(A) held that there was no transfer of the property and therefore no capital gain can be brought to tax in the relevant Assessment Year. 6. Aggrieved by the order of the CIT(A), the Revenue is in appeal before the Tribunal. The learned DR relied on the order of the AO while the learned Counsel for the assessee relied on the order of the CIT(A) and the following decisions in which it had been held that if there is no delivery of possession in part performance of an Agreement for Sale within the meaning of section 53A of the Transfer of Property Act, 1882, there cannot be a transfer within the meaning of section 2(47)(v) of the Act. The following were the cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oper, at any point of time during the development of the JD property. Nothing herein shall be construed as transfer or sale of the JD property or any part thereof by the Owner in favour of the Developer, delivery of part-possession under Section 53-A of the Transfer of Property Act, 1882 or "transfer" under Section 2(47) of the Income Tax Act, 1961.(emphasis supplied) 3.3 Except as specifically and expressly provided under this Agreement, the Owner cannot revoke the right, permission and authorisation granted to the Developer under this Agreement, until Completion of the Project and Final Settlement. 3.4 It is hereby clarified that the Developer has no ownership rights in the JD property. It is further clarified that the Developer shall not be entitled to transfer undeveloped land. (emphasis supplied) Clause 4.1 Refundable Interest Free Deposit The Developer has agreed to pay as security to ensure appropriate performance by the Developer of its obligations towards the Project, a refundable interest free deposit of Rs.1,38,00,000/- (One Crore Thirty Eight Lakhs) per acre of the JD Property. The total amount of refundable interest free deposit is Rs.31,15,35,000 (Rupees T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chasers for delay in making payments for purchase of the units in the Project, (iv) transfer fees collected from purchasers of units for transfer of allotted units, (v) money collected towards deposits with statutory authorities such as BWSSB and BESCOM (vi) money collected towards legal fees and other charges for documents, stamping and registering the conveyance of units to purchasers, (vii) money collected for maintenance fee and sinking fund (viii) money collected towards payment of Taxes in relation to the Project (ix) amounts collected in relation to escalation in Taxes/addition of Taxes (that may be paid on account of the impending levy of goods and services tax); and (xi) Other amounts; Clause 5.2 Revenue Share (a) Subject to the other provisions of this Agreement, the Project Revenue shall be shared between the Developer and the Owner in the ratio of 70 (Seventy) : 30 (Thirty) respectively. The Owner shall be entitled to 30% (Thirty Percent) of the Project Revenue herein referred to as "Owner's Revenue" and the Developer shall be entitled to 70% (Seventy Percent) of the Project Revenue, herein referred to as "Developer's Revenue" for developing the project. (b) In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature. (emphasis supplied)" 8. From a reading of the above clauses of the JDA, it is clear that the Developer will take possession of the property for the specific purpose of development only, that too after satisfying the conditions like obtaining approvals etc. The clause also provides that possession given to the develop cannot be regarded as delivery of possession in part performance of Agreement for Sale as contemplated under section 53-A of the Transfer of Property Act, 1882. The Hon'ble Supreme Court in the case of COMMISSIONER OF INCOME TAX vs. BALBIR SINGH MAINI & ORS. (2017) 398 ITR 531 (SC) on identical clause in a JDA held as follows: "23. A reading of the JDA in the present case would show that the owner continues to be the owner throughout the agreement, and has at no stage purported to transfer rights akin to ownership to the developer. At the highest, possession alone is given under the agreement, and that too for a specific purpose -the purpose being to develop the property, as envisaged by all the parties. We are, therefore, of the view that this clause will also not rope in the present transaction." 9. In a decision rendered on identical clause in a JDA, B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee has retained the possession of the scheduled property and it is clearly stated so in clause 11.1 extracted above. It is further stated that the developer shall not claim any right in this regard. In clause 1.1 extracted above also, it is clearly stated that the developer is granted only permission to enter upon the scheduled property. 8. An identical issue was considered by the coordinate bench in the case of Anugraha Shelters Pvt. Ltd. (supra), wherein it was held that there is difference between permissive possession and legal possession. In the case of permissive possession, the developer enters the scheduled property on behalf of the owner and not in the independent capacity of purchaser of the property. For the sake of convenience, we extract below the relevant observations made in the above cited case by the coordinate bench:- "10. We notice that the assessee has entered into a joint development agreement on 29.12.2005 and on the very same day a supplementary joint development agreement was also entered. Both the agreements have been registered with the registration authorities. The last paragraph in page 4 of the supplementary joint development agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n relation to a capital asset includes .................... (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act, 1882 (4 of 1882)." The provisions of section 53A of the Transfer of property Act reads as under:- "53A. Part performance.-Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from 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 2[***] 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. It is thus clear that there should be transfer during the previous year to attract charge to tax on capital gain. Sec.2(47) of the Act defines "Transfer" for the purpose of the Act. It reads thus: "Sec.2 (47) "transfer", in relation to a capital asset, includes,-- (i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein ; or (iii) the compulsory acquisition thereof under any law ; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in trade of a business carried on by him, such conversion or treatment ; or (iva) the maturity or redemption of a zero coupon bond; or (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 11. In the present case, the clause in the JDA regarding possession clearly states that what is given is not possession contemplated u/s.53A of the Transfer of Property Act and that it is merely a license to enter the property for the purpose of carrying out development. Further, the subsequent MOU dated 16.8.2006 and delivery of legal possession on 22.4.2006 clearly shows that there was no transfer within the meaning of Sec.2(47)(v) of the Act during the previous year relevant to AY 2006-07. Therefore, invocation of the provisions of Sec.2(47)(v) in the facts and circumstances of the present case on the basis of clause-1 of the JDA, in my view was not proper. The possession in the present is traced to the joint development agreement which is in the nature of permi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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