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TMI Blog2012 (7) TMI 376X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the developers to be handed over to the owners - Even if some part of consideration remains to be paid, the transaction shall not affect the liability of capital gains tax so as to postpone the same indefinitely. What is meant in clause (v) is the "transfer" which involves allowing the possession so as to allow developer to undertake development work on the site - since the possession of the property already handed over to the developer and right and interest in the property has been transferred in favour of the developers.Being so the condition laid down in section 2(47)(v) has been complied with and the lower authorities justified in treating the transaction is liable for capital gain - against assessee. - IT APPEAL NO. 1164 to 1167 (HYD.) OF 2010 - - - Dated:- 12-7-2012 - CHANDRA POOJARI, Smt. ASHA VIJAYARAGHAVAN, JJ. ORDER Chandra Poojari, Accountant Member The above appeals by different assessees are directed against different orders of the CIT(A)-I, Hyderabad dated 26.7.2010 for assessment years 2006-07 and 2007-08. Since the issues arising out of these appeals are common in nature, they are clubbed together, heard together and are being disposed of by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agreement with M/s. Splendid Aparana Projects Private Limited on 31.03.2006, for development of their land admeasuring 11.34 acres in survey No. 167, Vattinagulapally, R.R. District. As per the said agreement, the developers paid a sum of Rs. 1,18,50,000 as interest free refundable deposit as security for due performance of agreement. Further the said deposit was refundable at the time of handing over the agreed area of 36% built up area of the proposed township project to the land owners. The agricultural property is covered by G.O. No. 111 of 1996 issued by Government of Andhra Pradesh which restricts construction in view of land lying between two water bodies of Osman Sagar Himayat Sagar. Para 11 14 of the said Development Agreement creates a restriction that the construction activity and execution of the project is subject to approval of drawings after obtaining amendment to GO 111 from Government of Andhra Pradesh. Copy of the Development Agreement is placed on record. 5. The AR submitted that the owners have not delivered possession of the land to developers but only agreed to deliver as clearly specified in para 1 page 4 of Development Agreement. In fact in view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At Clause 1 of page 5, it is clearly mentioned that the physical delivery and vacant possession of the property shall be given to the developer/second party. There is no option for the first party to retain the physical possession as per the agreement. Since the lands are situated in hilly and rocky area it cannot be contended that physical possession has not been given by the first party. 8. The learned DR submitted that a physical inspection has been carried out by an Inspector of Income Tax with the help of the village revenue assistants of Vattinagulapally Gram Panchayat and the surveyor concerned of the village and the lands were identified by them. It is found that there is no security arrangement nor boundary wall nor any separation from the other lands. It cannot be stated that the physical possession is with the landlords/owner of the lands only and not with the Developer/second party. Further, this contention of the assessee that physical possession is still with him is incorrect. Copy of the Inspector's report is placed on record. The encumbrance certificate as on date has been obtained through online and the same mentioned that the claimants are M/s Splendid Aparna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, the income on account of arisal of the capital gain should be charged to tax in the same previous year in which the transfer was effected or deemed to have taken place. Due to the presence of this statutory fiction, the actual year in which the entire sale consideration is received, is beside the point but what needs to be judged is the point of time at which the transfer took place either by handing over of the possession or by allowing the entry into the premises or by making the constructive presence of the vendee nevertheless duly supported by a legal document. 12. But the issue do not get settled only by the interpretation of s. 45 and s. 2(47)(v) because the definition of "transfer" not merely prescribes allowing of possession but to be retained in part performance of a contract of the nature referred in s. 53A of the Transfer of Property Act. Therefore, it is further requisite to deal with the relevant section contained in Transfer of Property Act. 13. Transfer of Property Act contains S.53A under the heading "Part performance" and, for deciding the case in hand, it is necessary to quote the impugned section verbatim as follows: "Where any person contracts to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gain with the term "transfer" as defined in s. 54 of Transfer of Property act. At the cost of elaboration, we may like to add that in the past there was a long line of pronouncements; while deciding income tax cases, that unless and until a sale deed is executed and that too it is registered, transfer cannot be said to have been effected. The consequence of said catena of decisions was that no capital gain tax was directed to be levied so long as "transfer" took place as per the generally accepted connotation of the term under Transfer of Property Act. The resultant position was that the levy of capital gain tax thus resulted in major amendments in the income-tax statute. The main objective of those amendments was to enact that for the purposes of capital gains, the transaction involving transfer of the nature referred are not required to be registered under Registration Act. Such arrangement does not include transfer of certain rights vesting to a purchaser; however such "transfer" does confer certain privileges of constructive ownership with connected bundle of rights. Indeed it is a departure from the commonly understood meaning of the definition "transfer" while interpreting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is enabled to exercise general control over the property and to make use of it for the intended purpose. The mere fact that the assessee owner has also the right to enter the property to oversee the development work or to ensure performance of the terms of the agreement, did not restrict the rights of the developer or did not introduce any incompatibility. In a situation like this when there is a concurrent possession of both the parties, even then cl. (v) has its full role to play. There is no warrant to postpone the operation of cl. (v) to that point of time when the concurrent possession would become exclusive possession of the developer. Any other interpretation i.e., possession means exclusive possession, shall defeat the purpose of amendment. The possibility of staggering of payment linked with possession is ruled out by this amendment so that the taxability of gain may not be shifted to an uncertain distant date. We have no hesitation in saying that even if some part of consideration remains to be paid, the transaction shall not affect the liability of capital gains tax so as to postpone the same indefinitely. What is meant in clause (v) is the "transfer" which involves allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by obtaining the necessary permission. As per clause 25 of the agreement whereby the assessee authorised the developer and appointing them as lawful attorney to approach the appropriate authorities for the purpose of obtaining permissions, service connection etc. It is also noticed that the developer is also entitled to sell their share, enter into agreements, receive consideration and execute sale deed and other conveyance deed as enshrined in clause 25 of the agreement. Further, it is noticed from the latest encumbrance certificate as on date which has been obtained through online and therein it was mentioned that the claimants are M/s Splendid Aparna Projects (P.) Ltd. Hence, in the present case, the possession of the property already handed over to the developer and right and interest in the property has been transferred in favour of the developers. 16. Being so, in our opinion, the condition laid down in section 2(47)(v) has been complied with and the lower authorities justified in treating the transaction is liable for capital gain. 17. Accordingly, we confirm the order of the lower authorities in the case of all these assessees as the facts in all these appeals are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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