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TMI Blog2014 (4) TMI 351X X X X Extracts X X X X X X X X Extracts X X X X ..... on, and it has not commenced even now - the assessee has fulfilled its part of the obligation under the development agreement, the developer has not done anything to discharge the obligations cast on it under the develop agreement, the capital gains cannot be brought to tax in the year under appeal, merely on the basis of signing of the development agreement during this year – Relying upon M/s. Fibars Infratech Pvt. Ltd. Versus The ITO, Ward-1(2), Hyderabad [2014 (1) TMI 344 - ITAT HYDERABAD] - the capital gains on the property cannot be brought to tax – Decided in favour of Assessee. - ITA No. 157/Hyd/11 - - - Dated:- 4-4-2014 - Shri B. Ramakotaiah And Smt. Asha Vijayaraghavan,JJ. For the Appellant : Shri A. Srinivas For the Respondent : Shri Solgy Jose T. Kottaram DR ORDER Per Smt. Asha Vijayaraghavan, Judicial Member: This appeal by the assessee is directed against the order of the Commissioner of Income-tax(Appeals)-VII, Hyderabad dated 16.11.2010, for the assessment year 2006-07. 2. Effective grounds of the assessee in this appeal are as follows 1. The order passed by the Commissioner of Income-tax(Appeals) is erroneous in law and on fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by it vide documents dated 10.2.67, 26.2.1969 and 29.12.80, i.e. in the financial years 1966-67, 1968-69 and 1980-81 respectively, and it was proposed to give the entire land of 13-12 guntas for development. Subsequently, however, a rectification deed dated 13.6.2006 was entered into with the developer wherein the land extent that shall be covered for the purpose of development agreement was reduced to 11 acres 11 guntas and 115 sq. yards, i.e. the land acquired during the financial years 1966-67 and 1980-81. As per the Development agreement and subsequent rectification deed, the developer shall develop the property according to the approved plan from the competent authority and deliver the owner 38% of the constructed area in the residential part. In terms of the development agreement dated 2.2.2006, M/s. Binjusaria Properties P. Ltd. has handed over to the Developer vacant and peaceful possession of the entire land mentioned above. The factum of handing over of the possession of the land in terms of the Development Agreement was evidenced by the answer of the assessee to question No.4 of the sworn deposition recorded from Pavan Kumar Kedia on 7.3.2008; Director s report of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansfer takes place at the time of the handing over of the physical possession of the land, and hence the issue of the date on which the capital gains arises is to be considered in this light. He also referred to the provisions of S.45 of the Act, under which the profits or gains arising from the transfer of a capital asset 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 takes place. The Assessing Officer then referring to various decisions on this aspect, concluded that the assessee has to pay capital gains tax in the assessment year under consideration, since the development agreement was entered into and, in turn, the transfer of land took place with the handing over of the possession of the land, in the year under appeal . The Assessing Officer then proceeded to compute the capital gains in terms of S.48 of the Act. From the consideration of 11 acres 11 guntas in the assessment year 2005-06 of Rs.9,30,00,000, deducting the indexed cost of acquisition computed at Rs.2,16,358, the Assessing Officer brought to tax capital gains of Rs.9,27,83,642, vide order of assessment dated 31.12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ligation in pursuance of the development agreement, and as such the capital gains are not liable to be assed in the year under appeal, based on the mere signing of the development agreement during this year. He invited our attention to page 48 of the paper-book, which is deposit acceptance letter, and also to page 15 and it is submitted that in the accounts, the deposit received has been reflected against land, even prior to search and hence, no incriminating material or incriminating evidence was unearthed in the course of search. On 24.11.2006 itself, return has been filed alongwith the Balance Sheet with the Department, though the proceedings under S.153C were initiated only on 30.2.2009. Hence, notice under S.153C cannot be issued, as there was no incriminating material with the department. Assessee relied upon the decision in the case of Global Estates (142 ITD 742) and All Cargo Logistics (132 ITD 233). Further, it is submitted that the person who has taken the property from the assessee for development, has not applied to the Government as on 18.10.2007 and the ratio of sharing has been reduced from 38% to 33%, vide amendment deed, copy of which is at page 49. Even though th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thers (supra) and it was ultimately held by the coordinate bench of this Tribunal as follows- 48. We are in considered agreement with the views so expressed in this commentary on the provisions of the Transfer of Property Act. It is thus clear that 'willingness to perform' for the purposes of Section 53A is something more than a statement of intent; it is the unqualified and unconditional willingness on the part of the vendee to perform its obligations. Unless the party has performed or is willing to perform its obligations under the contract, and in the same sequence in which these are to be performed, it cannot be said that the provisions of Section 53A of the Transfer of Property Act will come into play on the facts of that case. It is only elementary that, unless provisions of Section 53A of the Transfer of Property Act are satisfied on the facts of a case, the transaction in question cannot fall within the scope of deemed transfer under Section 2(47)(v) of the IT Act. Let us therefore consider whether the transferee, on the facts of the present case, can be said to have 'performed or is willing to perform' its obligations under the agreement. 49. Even a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... developer in this assessment year had not shown its readiness or having made preparation for the compliance of the agreement. The developer has not taken steps to make it eligible to undertake the performance of the agreement which are the primary ingredient that make a person eligible and entitled to make the construction. The act and conduct of the developer in this assessment year shows that it had violated essential terms of the agreement which tend to subvert the relationship established by the development agreement. Being so, it was clear that in the year under consideration, there was no transfer of not only the flats as superstructure but also the proportionate land by the assessee under the joint development agreement. As per clause no. 12.11 and 19.1 of Development Agreement-cum Power of Attorney, time is the essence of the contract and as per clause No.12.11 the said property is to be developed and hand over the possession of the owners allocation to the owners and or their nominees within 24 months from the date of receiving the sanction of the plan from HUDA and Municipality/Gram Panchayat with a further grace period of 3 months. But the fact remains that the transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of this case Chaturbhuj Dwarkadas Kapadia v. CIT's case (supra) undoubtedly lays down a proposition which, more often than not, favours the Revenue, but, on the facts of this case, the said judgment supports the case of the assessee inasmuch as 'willingness to perform' has been specifically recognized as one of the essential ingredients to cover a transaction by the scope of Section 53A of the Transfer of Property Act. Revenue does not get any assistance from this judicial precedent. The very foundation of Revenue's case is thus devoid of legally sustainable basis. 50. That is clearly an erroneous assumption, and an the provisions of deemed transfer under Section 2(47)(v) could not have been invoked on the facts of the present case and for the assessment year in dispute before us. In the present case, the situation is that the assessee has received only a meager amount' out of total consideration, the transferee is avoiding adhering to the agreement and there is no evidence brought on record by the revenue authorities to show that there was actual construction has been taken place at the impugned property in the assessment year under consideration and also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of recital on page 2 of the supplementary agreement dated 3rd February, 2006, was to receive a refundable deposit of Rs.2,00,00,016, through two cheques, the said deposit was to be refunded on the complete handing over of the area falling to the share of the first party, viz. the assessee; and in the event of failure on the part of the assessee in refunding such deposit, the same shall be adjusted at the time of final delivery, by the developer against the area to be handed over to the assessee applying a mutually agreeable rate. Considering these specific clauses and peculiar facts and circumstances of the case, we are of the considered view that the capital gains in the case on hand, are liable to be taxed only in the year, in which the developed area, coming to the share of the assessee, has been handed over to the assessee, in terms of the development agreement. In the present case, as the undisputed facts on record reveal, the developer has not undertaken any developmental activity to execute the construction work even today, even though in the final supplemental agreement dated 18th October, 2007 provided extension of time for the execution of the construction, by stating th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2006, based on which the impugned taxability of capital gain is imposed by the AO and upheld by the CIT(A), cannot be said to be a contract of the nature referred to in Section 53A of the Transfer of Property Act and, accordingly, provisions of Section 2(47)(v) cannot be invoked on the facts of this case. The judgement in the case of Chaturbhuj Dwarkadas Kapadia v. CIT (supra) undoubtedly lays down a proposition which, more often that not, favours the Revenue, but, on the facts of this case, the said judgment supports the case of the assessee inasmuch as 'willingness to perform' has been specifically recognized as one of the essential ingredients to cover a transaction by the scope of Section 53A of the Transfer of Property Act. The Revenue does not get any assistance from this judicial precedent. The very foundation of Revenue's case is thus devoid of legally sustainable basis. 60. That is clearly an erroneous assumption, as the provisions of deemed transfer under Section 2(47)(v) could not have been invoked on the facts of the present case and for the assessment year in dispute before us. In the present case, the situation is that the assessee has not received a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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