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TMI Blog2011 (12) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... payment and consequently entered into the property and thereafter if the transferee has taken any steps in relation to construction of the flats, then it is to be considered as transfer u/s. 2(47)(v) of the I.T. Act. The fact that the legal ownership continued with the owners to be transferred to the developer at a future distant date really does not affect the applicability of s. 2(47)(v) - Matter restored to the file of CIT(A) to decide the same afresh in light the ratio laid down by the Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia v. CIT (2003 -TMI - 12097 - BOMBAY High Court) - IT Appeal NOS. 420 TO 423, 425 & 426 OF 2011 - - - Dated:- 16-12-2011 - Chandra Poojari And Asha Vijayaraghavan, JJ. ORDER Chandra Poojari, Accountant Member This is a bunch of six appeals. These appeals are directed against two orders of CIT(A)-I, Hyderabad one order dated 28.11.2010 for the assessment year 2007-08 and a common order also dated 28.11.2010 for the assessment years appeal 2002-03 to 2006-07. Since common issues are involved, these appeals are being disposed off with this common order for the sake of convenience. ITA No. 425/Hyd/2011 : Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in the development agreement entered into by the assessee and came to a conclusion that capital gain is exigible on the said transaction. He accordingly computed the long term capital gain on this asset at ₹ 16,93,17,260. The total income was computed at ₹ 18,15,63,320 and a tax demand of ₹ 5,40,36,820 was raised. 4. On appeal, the CIT(A), dealing with the sale of 1 acre of land in the first place, upheld the addition by way of long term capital gain of ₹ 1,20,94,810 made by the assessing officer, with the following observations- 03.1 ..I find from the assessment order that the assessing officer has obtained the land revenue records from the MRO Rajendra Nagar Mandal. The pahanis obtained from the MRO revealed that the land situated at survey No.163 was vacant for more than 10 years. The certified copies of the revenue records were obtained by the AO for the period of 1997-98 to 2007-08. Even the assessing officer had personally visited the landed property and noticed that the entire land was barren surrounded by rocky mountains and not fit for agricultural activities. Apparently, during the assessment proceedings, the assessee had submitted a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Tribunal in Taher Allmohammed Poonawala v. Addl. CIT (124 TTJ (Pune) 387). Hyderabad Bench of the Tribunal in the case of Dr. Maya Shenoy v. ACIT [2009] 124 TTJ (Hyd) 692, and concluded following the ratio laid own in those cases that as on the date of signing of the agreement in the present case, the assessee has given possession of the land for the purpose of development by M/s. Dakshin Shelters P. Ltd. and as such there was a transfer in terms of S.2(47)(v) of the Act and hence capital gains is exigible in the case of the assessee in the year in which the development agreement has been entered into and possession has been handed over. He also referred to the appellate orders dated 26.7.2010 passed in the cases of Shri Brij Gopal Shah HUF for assessment year 2007-08 and Shri Krishna Kumar Shah HUF for the assessment year 2006-07. 6. Aggrieved by the order of the CIT(A) assessee preferred the present appeal before us. 7. Learned counsel for the assessee, reiterating the contentions urged before the lower authorities submitted that the land sold was agricultural land, which was situated beyond 8 kms from the end of municipal limits of Hyderabad, and as such the CIT(A) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh the relevant pages of the paper-book that detailed documentary evidence has been produced by the assessee to prove that agricultural operations were being carried on the lands in question upto the year 2006-07 and Revenue records issued by the Mandal Revenue Officer, Rajendranagar clearly disclose that the Survey Nos.163(P) 263(P) and 264(P) of Vattinagulapalli(V) are agricultural lands. He pointed out that the MRO, presently redesignated as Tahsildar, is the only competent authority and Recording Authority, for preparation and maintenance of Revenue records and also Custodian of the Revenue Records of all villages falling within the Mandal and the land revenue records prepared and maintained including annual pahani patrikas are only in respect of lands in which agricultural operations are being carried on, for raising crops in each facli year. 10. Inviting our attention to pages 25 to 86 of the paper-book, it is submitted that lands in question belonging to the assessee are agricultural lands and agricultural operations were carried on upto 2005-06. It is further submitted that the lands belonging to the assessee are dry lands which are capable of agriculture and paddy crop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rasimha Reddy never answered the same, which according to the learned counsel, clearly indicated that the paddy belonged to the assessee. It was submitted that it was only on the last date of hearing on 21.12.2009, the assessee came to know about the sworn statement of Narasimha Reddy after concluding the hearing on the said date, as it was at that time only that the assessing officer handed over a copy of the sworn deposition dated 16.12.2009 to the assessee and as such the assessee was not given any opportunity of being heard on the statement of Shri Narasimha Reddy, much less the opportunity of cross-examining Shri Narasimha Reddy. It was in that context that the assessee filed the affidavit of Shri Ram Reddy, who sold the paddy on assessee's behalf, but the assessing officer without considering the affidavit of Shri Ram Reddy, reached his conclusions as to the nature of the lands in question. 11. Referring to the visit of the assessing officer for inspection as to the nature of land, it is submitted that the assessing officer visited without the assistance of any one like Mandal Surveyor, Mandal Revenue Inspector or village level officer of the village or even the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for Non-Agricultural Purposes) Act, 2006. (f) On the relevant date, i.e date of sale/development agreement, the land had not ceased to be put to agricultural use and it was also not put to any alternative use and it was used only for agriculture. (g) The land was entered in revenue records and was actually used for agriculture by ploughing and tilling the land and the assessee intended to use it for agricultural purposes. (h) The land was situated in Vattinagulapally village, which is an underdeveloped area, which is more than 8 Kms from the city limits, having a village population of less than 10000. (i) The land is surrounded by other agricultural lands, where agricultural operations are being carried on. (j) The land was not developed by plotting and providing roads and other facilities. (k) Before the transfer, no portion of the land was sold for the purposes other than agriculture. (l) The land of the assessee is situated in Vattinagulapally Village, R.R. District, Andhra Pradesh and hence Bombay Tenancy and Agricultural Land Act does not apply to the case of the assessee and the land was sold as agricultural land. (m) The land was sold on acrage ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee has not received any consideration in respect of the land. It is submitted that against 65% of land agreed to be given to the developer only refundable security advance was received by the assessee and the so called possession of the land given was given to enable the developer to undertake the work on the land for the purpose of laying out plots and carrying on construction which is not possible without entering the land. Thus, the possession given is a mere licence and does not confer any rights of ownership of land on the developer. It is further submitted that in terms of clause 5.1 of the agreement, the developer has to get all the clearances including for change of land use and relaxation/exemption for land use change from bio conservation to residential/commercial use within six months with extension of another six months, after which time, the position was to be reviewed mutually. The Developer, according to the counsel has failed to get the necessary clearances and in the circumstances requested the assessee vide letter dated 12.4.2007 to renew the agreement and GPA for a further period of one year from 12.4.2007 with automatic extension for another six mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge are not in existence. 20. Distinguishing a development agreement from any transfer, it is submitted that conditions under S.2(47) are not satisfied in the case of a development agreement, and consequently no transfer is involved and therefore, no capital gain tax arises. 21. In support of the above contentions, reliance is placed on plethora of decisions, which are noted below- (a) State of Kerala v. K.T. Shaduli (AIR 1977(SC) 1627) (b) CIT v. Sidhartha J. Desai (139 ITR 628)-Guj (c) CIT v. Minguel Chandra Pais Anr. (282 ITR 618)-Bom. (d) Shrimant Shamrao Suryavanshi Anr. v. Prahlad Bhairoba Suyryavanshi (Dead) by LRs and Otehrs (AIR (2002) SC 960) (e) R.Vijaylaxmi v. Appu Hotels (257 ITR 4)-Mad (f) General Glass Co. (P.) Ltd., v. DCIT (108 TTJ 854 (Mum) (g) DCIT v. Geeta Devi Pasari (104 TTJ 375)-Mum. (h) DCIT v. Asian Distributors Ltd. (70 TTJ 88)-Mum (i) CIT v. Sanjeev Kumar Jain (310 ITR 178)-P H (j) Jindal Stainless Steel v. ACIT (1 ITR (Trib) 484)-Del. (k) Shantilal Godawat Ors v. ACIT (126 TTJ 135)-Jodh Elaborate written submissions have also been filed reiterating the above contentions in the light of the above case-law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the land was barren land and no agricultural operations were carried on for the last 10 years. The assessee placed revenue records suggesting the land for agricultural usage and it was submitted before us that the agricultural operations has been carried on and the sale of such land to be treated as income exempt from tax. But the fact is that the entire land which is subject matter before us is a barren land surrounded by rocky mountains and not fit for agricultural operations. The assessee though filed copy of the order of the MRO dated 18-8-2005 stating that the land was agricultural land, it was found by the lower authorities that the impugned property bearing Survey No.163 was not mentioned in the order of the MRO. The assessee filed a letter from M/s Jai Sri Mata Rice Mill claiming that he had sold paddy as it was stated by the Managing Partner of the Rice Mill. However, later the Managing Partner stated that the letter was issued at the insistence of one Mr. Rami Reddy and he denied the purchase of any paddy from the assessee. Further, coming to the facts of the case that the land is assessed to land revenue as agricultural land under the State Revenue, it is certainly rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of a contract of the nature referred to in s. 53A of the Transfer of Property Act, 1882 (4 of 1982) 25. 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 . [Emphasis supplied] 26. 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 total profits may actually be received in any other year, but for the purposes of S. 45, the gain shall be the deemed income of the year of transfer of the capital asset. It shall not be out of context, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract, 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. 29. 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 expected from the other party to also stand by his promise. Naturally an inequitable conduct of any person has no sanction in the eyes of law. 30. In the light of the ingredients of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 sections says 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed 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 fulfill the commitment. Facts of this case thus suggest that the developer had never intended to walk-out of the project. However, whether the developer has performed its part of the contract by taking steps to construct the flats or not has to be verified by the lower authorities. 31. To sum up the owners have entered into an agreement for development of the property and certain rights were assigned to the deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement; and the CIT(A) has also erred in confirming the value of the land as on 1.4.1981 at a ridiculously low figure of ₹ 1000 per acre while computing the capital gains arising out of Development Agreement. We find that the grounds No.9 to 11 have not emanated form the order of the CIT(A) and consequently, the contentions raised by the assessee through those grounds cannot be entertained by us at this stage. We accordingly reject the same. 34. In the result, appeal ITA No.425/Hyd/2011 of the assessee for the assessment year 2007-08, is partly allowed for statistical purposes ITA No.420/Hyd/2011 Assessment year 2002-03 ITA No.421/Hyd/2011 Assessment year 2003-04 ITA No.422/Hyd/2011 Assessment year 2004-05 ITA No.423/Hyd/2011 Assessment year 2005-06 ITA No.424/Hyd/2011 Assessment year 2006-07 35. Effective grievance of the assessee in these appeals is against the action of the CIT(A) in confirming the additions made by the assessing officer for the relevant years, disbel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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