TMI Blog2012 (7) TMI 1156X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the assessee. 3. The CIT(A) ought to have considered the letter dated 14.10.2009 issued by Developer, confirming that they have not taken possession of the land, as enough evidence for non applicability of section 2(47)(v) of the Income-tax Act. 4. The CIT(A) erred in relying upon contingent clauses of the Development Agreement for the purpose of determining applicability of section 2(47)(v). 5. Based on the facts and circumstances, the CIT(A) ought to have held that the assessee was not liable for long term capital gain in the year under appeal. 6. Without prejudice to the above, the CIT(A) ought to have determined the market value based on records of the Registrar of Assurance. 3. The facts in all these appeals are common in nature. For brevity, we consider the facts relating to ITA No. 1164/Hyd/2010 in the case of Krishna Kumar D. (HUF). Brief facts of the issue are that the assessee had entered into a Development Agreement cum GPA with M/s. Splendid Aparna Projects Ltd., Hyderabad vide agreement dated 31.3.2006. As per the said agreement, a total land to the extent of 11 acres 34 guntas in Vattinagulapalli village, Rajendra Nagar Mandal was to be developed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Assessing Officer to frame the assessment based on assumptions and his own personal views on the subject. Section 2(47) of the Act clearly specifies that possession of the property should be handed over in order to define transfer under the Act. This was also clearly decided in the case of Chaturbhuj Dwarkadas Kapadia v. CIT (2003) ITR 497 (Bom). The case law relied by the Assessing Officer is not applicable since possession was given in the said case. Capital Gains is taxable strictly in accordance with section 2(47) of the IT Act and in the present case no possession was given. The entire assessment was framed on probability and assumptions not based on facts and contrary to the evidence filed. 6. The learned AR further submitted that with prejudice to the above, the assessing officer should have applied the provisions of section 50 C of the Act, and not based on any comparable cases, for arriving at the market value of the property for determining capital gains. Therefore relying upon the sale deed of Suresh Kumar D Shah as a comparable case is not valid since, the Assessing Officer is duty bound to apply the market value of the property based on Sub Registrar Records ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. We may refer to the provisions of S.2(47)(v) which reads as follows:- 2 (47) . (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 s. 53A of the Transfer of Property Act, 1882 (4 of 1982) 10. The importance of the word transfer is due to the reason that under the charging section, viz. S.45, the capital gain is taxable on transfer of a capital asset . Precisely, this section prescribes that any profits or gains arising from the transfer of a capital asset effected in the previous year shall 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 . 11. Thus the fundamental features which determine the taxability of capital gain are that the gain ought to be from the transfer of a capital asset. This section has a large scope of its operation due to the presence of deeming provision which says that the gain shall be the deemed income of that previous year in which the transfer took place. This phrase can be interpreted in the manner that the tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inues 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, though required to be registered, has not been registered, or, 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 transfer 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: Provided that nothing in this section shall effect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof. 14. The doctrine of part performance is undoubtedly based upon the doctrine of equity. If one party has performed his part of duty then equity demands that the other party shall also perform his part of the obligation. If one party stood by his words then it is ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act a transfer has definitely taken place. (c) The existence of the consideration is the essence of the contract. In this case the amount of consideration has to be paid to the assessee in the form of cash as well as in kind i.e., the flats to be constructed by the developers to be handed over to the owners. (d) Next is the important phrase i.e., terms necessary to constitute the transfer can be ascertained with reasonable certainty . According to us, in this case, the terms and conditions of the contract were unambiguous thus clearly spoken about the rights and duties with certainty of both the signing parties. We are concerned mainly with two certainties; one is passing of substantial consideration and second is passing over of possession. As far as the payment of consideration is concerned, we have already noticed that it is in the form of both cash as well as kind and payment made to the assessee has not been brought on record by the lower authorities and the same to be examined and considered by the CIT(A). (e) The other factor which governs the happening of transfer is the handing over of possession. This section says and the transferee has, in part perfor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r upon and exercise the act of possession effectively then such an act amounts to legal possession over the property. (f) The last noticeable ingredient is, the transferee has performed or is willing to perform his part of the contract . To ascertain the existence of willingness on the part of the transferee one must not put stop at one event but willingness is to be judged by the series of action of the transferee. The transferees survey the land and to attract purchases put up hoardings plus sales-office and carry out site development work. Landscaping, sales promotion, execution of construction and completion of project are all incidental to demonstrate the willingness of the transferee. On one hand, the power of attorney grants bundle of possessor rights to the developer simultaneously and on the other hand transferee s gesture of payment of consideration coupled with development work can be said to be a positive step towards willingness to fulfil the commitment. Facts of this case thus suggest that the developer had never intended to walk-out of the project. Even otherwise, clause 14(iv) of the agreement states that if the project does not take up in six years due to delay ..... 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