TMI Blog2023 (7) TMI 1109X X X X Extracts X X X X X X X X Extracts X X X X ..... the expression in the development agreement that the possession transferred shall be deemed to be in part performance of an agreement to sell for the purposes of section 53A of the Transfer of Property Act 1882, does not hold any significance. It is the conduct of the parties that determine the satisfaction or otherwise of the requirements of section 53A of the Transfer of Property Act 1882. Therefore, we are of the view that there is no transfer of ownership of the impugned urban land under the master development agreement. Effect of 'No objection certificate' issued under Chapter XX-C of the IT Act - Revenue right from the start of the controversy surrounding development agreements was always of the view that when the possession of land was handed over to the developer for development purposes, the transfer was effected. Legislature through the Memorandum to Finance Bill 2017, in the context of insertion of n/s 45(5A) to the Income-tax Act, 1961, clarified that the year in which the completion certificate has been issued by the competent authority shall be the year of transfer. In view of the conclusion drawn in Seshasayee's case ( 2019 (12) TMI 702 - SUPREME ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 11.08.2016 rejected the MPs filed by the assessee. Aggrieved, the assessee has filed appeals before the Hon ble Karnataka High Court. The Hon ble High Court vide its judgment dated 30.06.2022, set aside the Tribunal orders in the WTA and MPs and remanded the matter to the Tribunal to have a relook into the matter afresh. 2. The facts in all the cases are similar. For the sake of convenience, the facts pertaining to M/s. Triad Resorts Hotels Pvt.Ltd. for AY 2004-05 are narrated. The assessee is a Private Limited company, it is engaged in the business of running Hotels and service Apartments. The assessee had not filed any return of wealth for the AY 2004-05. The AO noticed that assessee was owner of 3.39 acres of land and having not filed return of wealth, he issued notice u/s. 17 of the W.T. Act 1957. The AO during the course of reassessment proceedings noticed that land was shown as investment, i.e. capital asset in the books of accounts regularly maintained by assessee. The AO further noticed when this property was sold in the year 2008 and profit arising out of sale of property was offered to income tax under the head long term capital gains for AY 2008-09. Before the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised before the Tribunal were not adjudicated. The Tribunal however rejected the MPs filed by the assessee by observing that the additional grounds were specifically adjudicated in paragraph no.9 of its original order dated 12.02.2016. 5. Aggrieved by the order of the Tribunal in ITAs as well as the MPs, the assessee filed appeals before the Hon ble Karnataka High Court u/s. 260A of the Act. As mentioned earlier the Hon ble High Court remanded the cases to the Tribunal. Subsequent to the remand by the Hon ble High Court the appeals were heard on various dates and it was finally concluded on 09.03.2023. The assessee has filed revised additional grounds. The main grounds raised in the memorandum of appeals were not pressed during the course of hearing by the learned A.R. (the main grounds pertain to the claim of the assessee that impugned land is deemed to be stock in trade as on the valuation date in terms of sub-clause (ii) of clause (b) of Explanation (1) to Section 2(ea) of the WT Act, 1957 and hence not liable to WT Act.) The revised additional grounds raised read as follows. (a) The learned AO grossly erred in assuming jurisdiction u/s 17 of WT Act, 1957 despite the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Personal property; EFFECTS. See personal property under PROPERTY. 2. All property, including realty/' (From Black's Law Dictionary 8th Edition, page 164) (g) The term Belonging to is of much wider import than the term Owner. Kind attention is drawn to paragraphs 37 to 65 of the decision reported in (2019) 410 ITR 306 (Karnataka). (case law pp: 74, 75, 87 to 99) (h) The appellant did not have any dominion over the impugned urban land w.e.f. 26-03-2001, the date on which possession was handed over to the developer in part performance of the JDA in terms of section 53A T.P. Act. Thus, on all the valuation dates from 31-03-2001 to 31-03-2007, the appellants had only a right to receive 15.3% of the constructed property in terms of the JDA, which is not a chargeable wealth under WT Act, 1957. (case law pp: 21, 22, 24) (i) There is no conflict in the stands taken between Income Tax and Wealth Tax Act. Further, there is no estoppel against law. The doctrine of Approbate and Reprobate is a species of estoppel and it operates only on facts and not against law. Reliance on: 56 ITR 67(SC) at page 74 and 57 ITR 185(SC) at page 189. (j) Entries in the books o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 263 dated 28.02.2014 for the A.V 2008-09; (c) M/s Verde Developers (P) Ltd. - u/s 143(3) dated 22.12.2010 for the A.V 2008-09 . 4. IMPORTANT FACTS IN THE ASSESSMENT ORDERS IN THE CASE OF 3 APPELLANTS (a) Deduction towards Cost of Improvement on the respective share holding of land claimed by all the 3 appellants in the ROIs filed for A.Y.2008-09, while declaring capital gains on the SALE OF THE SAME LAND VIDE SALE DEED DATED 29/08/2007 TO ITC LTD.for the following A.Ys, PROVES THAT THE RESPECTIVE SHARE OF LAND WAS HELD BY THE 3 APPELLANTS UPTO A.Y.2008-09: - by M/s Triad Resorts Hotels (P) Ltd, from A.Y. 1997-98 to 2007-08 (except 1999-00 and 2005-06); - by M/s Noorani Properties (P) Ltd, from A.Y. 1995-96 to 2007- 08; - by M/s Verde Developers (P) Ltd, from A.Y. 1998-99 to 2007- 08 (except 2004-05 and 2005-06) (b) As per the statement recorded u/s 131 of the Act of Shri Ravipuri, Director of CIDL by the AO of the M/s Triad Resorts Hotels (P) Ltd., during the course of assessment proceedings, neither CIDL nor Shri Dhingra had constructed any wall after signing JDA (3 JDAs WERE ENTERED INTO WITH CIDL i.e. JDA on 18/04/1996. amended JDA in A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 08.03.2023 as directed by the Hon'ble Bench. Parawise Comments: With regard to PARA I This does not require any comments as the Ld. DR has reproduced Para 22 of the order of the Hon'ble High Court of Karnataka Dt. 30.06.2022 in the impugned appeals Nevertheless, the Ld. DR has supplied emphasis on certain parts of this Paragraph, perhaps, to support her submissions vide para II of her submissions received today. With regard to PARA II The Ld. CIT-DR has wrongly assumed that the Appellants failed to submit sale deed dt. 29.08.2007 with ITC Ltd. before the Hon'ble High Court of Karnataka. This allegation of non filing of sale deed before the Hon'ble High Court is made on the ground that no reference was made to the sale deed with ITC by the Hon'ble High Court in para 22 of its order. This is begging the question. It is respectfully submitted that the discussion and observations in the order of the Hon'ble High Court starts from Para 11 there off which reads : 11. We have carefully considered rival contentions and perused the records. While listing out all the documents and the facts, specific refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DL had the absolute right to assign and consequences of termination of the MDA at the instance of the appellants would be completely detrimental to the appellants in terms of clauses 17 and 18 of the MDA ( at pg. 41 of the Paper book).Thus the question raised by the Id. CIT DR at para 5 (e) is meaningless and irrelevant. In sum, it is respectfully submitted that the original grounds of appeal are not pressed, and the revised additional grounds may kindly be allowed to meet the ends of justice. 9. The assessee has also filed a clarificatory rejoinder and the same is reproduced below for ready reference: A. Regarding period of construction of compound wall by developer- Kind reference drawn to letter dt: 11-01-2000 from Ravi Puri of CIDL (at pp.21 and 22 of paper book), wherein he says, This is to confirm our discussion of 07-01-2000 wherein you have conveyed to us that work on the construction of Boundary Wall, which is nearing completion (except for, the stretch next to the village road) should be immediately stopped in view of the Temporary Injunction. (emphasis supplied). At page 23 of paper book letter from Noorani Properties, dt: 17.01.2000 to CID ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or fresh consideration in the light of the observations contained in the said judgment. The observation of the Hon ble High Court is reproduced as under:- 22. A combined reading of Clause 10.1(g), Clause 13.1, 13.2 and Clause A(viii) of the Annexure-A together with the 'No Objection ' under Chapter XX-C of the IT Act and the letter written by Shri. Dhingra prima facie demonstrates that the Developers did have power to alienate their portion of the property: and they had entered into the property. It is a different matter if the project did not progress further. A mere failure of the project does not undo the acts of the parties. Therefore, in our view, the impugned order passed by the ITAT is not sustainable and in facts and circumstances of this case, it is just and appropriate for the ITAT to have a re-look into the matter in the light of the contents of MDA, NOC issued under Chapter XX-C and the letter written by Shri. Dhingra 11. The Hon ble High Court has thus directed us to decide the matter considering: a) the contents of MDA (Master Development Agreement); b) the NOC issued under Chapter XX-C; and c) the letter written by Shri Dingra. The Hon ble High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de Complex Land and Triad Hotel Land with effect from April I, 2001 upto the date of notice of handing over of possession of the relevant Property or any part thereof to the relevant Owner/purchaser thereof. The Developer shall keep the relevant Owner indemnified against any claim or demand in that behalf upto such date. From the date of notice of handing over of possession above-referred, the relevant owner/purchaser shall be responsible for payment of all outgoings in respect of such part of the relevant Property. 10. Owners Covenants 10.1 The Owners shall do and perform all acts, deeds, mailers and things as may be required by the Developer for the development of the Noorani Complex Land, Verde Complex Land and/or the Triad Hotel Land as the case may be, including without limitation, the following:- g. to convey or cause to be conveyed a portion or a proportionate undivided interest in their respective Properties in favour of the proposed/prospective purchaser/s/nominee/s as may be required by the Developer. i. soon after execution hereof execute in favour of and deliver to the Developer or its nominee/s an irrevocable Power of Attorney concerning their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Property Act. It is argued that during the valuation date, the assessee only had a right to receive 15.3% of the constructed property in terms of the master development agreement. 14. In this connection, we refer to clause 13.2 of the development agreement which inter alia states the following: Immediately upon the issue of such No Objection Certificate, each of the Owners shall grant an irrevocable license to the Developer to enter upon their respective Properties to carry out the development and construction on their respective Properties at the request of the Developer . (Emphasis supplied). A reading of clause 13.2 of the development agreement would state that the assessee had only granted a license to enter the land for the limited purpose of carrying out development. 15. The Hon ble Punjab Haryana High Court in C.S Atwal v. CIT [2015] 378 ITR 244 (P H) had held that a license to enter the land for the limited purpose of development cannot be treated as transfer of possession. The judgment of the Hon ble High Court was affirmed by the Supreme Court in CIT v Balbir Singh Maini (2017) 398 ITR 531 (SC). The Hon ble Supreme Court, while analyzing the applicabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land for the purpose of developing the land into flats and selling the same. Such license cannot be - said to be 'possession' within the meaning of Section 53A, which is a legal concept, and which denotes control over the land and not actual physical occupation of the land. This being the case, Section 53A of the T.P. Act cannot possibly be attracted to the facts of this case for this reason alone. 17. Therefore, the grant of license to enter the land for the limited purpose of development cannot be construed as transfer of possession within the meaning of section 53 A of the Transfer of Property Act, 1882. In fact, a reading of clause 10.1(g) which the High Court emphasized in its observations, would state that the owners shall convey or cause to be conveyed a portion or a proportionate undivided interest in their respective properties in favour of prospective purchasers. The Developer definitely had no power to alienate any portion of undivided interest (emphasis supplied). 18. The Hon ble Karnataka High Court in case of CIT vs. Dr. T.K.Dayalu [2011] 14 taxmann.com 120 had held that date on which possession was handed over to the developer is relevant to decide t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer of Property Act 1882. 21. The section 53A of the Transfer of Property Act, 1882, reads as under: Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainly, and the transferee has, in part, performance of the contract, taken possession of the properly 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, though required to be registered, has not been registered , or ] there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefore 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 po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 53A of the Transfer of Property Act 1882, does not hold any significance. It is the conduct of the parties that determine the satisfaction or otherwise of the requirements of section 53A of the Transfer of Property Act 1882. Therefore, we are of the view that there is no transfer of ownership of the impugned urban land under the master development agreement. B. Effect of 'No objection certificate' issued under Chapter XX-C of the IT Act 25. A copy of the 'No objection certificate (NOC)' dated 12.03.2001 issued by the Appropriate Authority under section 269UL(1) of the Income Tax Act, 1961 is placed on record (refer pages 53 to 56). Section 269UL(1) of the Act, states that registering officer shall not register any document which purports to transfer of immovable property exceeding the value prescribed under Section 269UC of the Act, unless no objection certificate is issued by Appropriate Authority for the transfer. The certificate states that the Appropriate Authority has no objection to the transfer of the property for an apparent consideration of Rs. 65.38,00,000 as per the terms of the agreement dated 05.12.2000 (i.e. MDA). The issue of no ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Wealth Tax Act, 1957 and the same is as follows: (b) urban land means land situate (i) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town, area committee, town committee, or by any of her name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been r published before the valuation date ; or (ii) in any area within such distance, not being more than eight kilometers from the local limits - any municipality or cantonment board referred to in sub-clause (i), as the Central Government may, having regard to the extent of, and scope for, urbanization of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette, [but does not include land classified as agricultural land in the records of the Government and used for agricultural purposes or land on which construction of a building ] is not permissible under any law for the time being in force in the area in which such land is situated or the land occupied by an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a building where it is still under construction. If the contention of Mr. Jain is accepted, an assessee would become entitled to the benefit of the said clause, at that very moment, the commencement of construction even with construction the moment one brick is laid. It would be too far fetch, in such a situation, to say ' that the land stands occupied by a building that has been constructed thereon. Even Mr. Jain was candid in accepting that when the construction of building is still going on and is not completed, literally speaking, it cannot be said that the building 'has been constructed'. It is for this reason that he wanted us to give the benefit of this provision even in such cases by reading the expression to mean the same as 'is being constructed'. His submission was that the moment construction starts the urban land is put to 'productive use ' and that entitles the land from exemption of wealth-tax. This argument of giving so called purposive interpretation has to be rejected for more than one reasons. 33. Therefore, in the absence of any building on the impugned urban land, this clause will not apply to the present case. Clause ii) - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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