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TMI Blog2015 (4) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... n in Binjusaria Properties case [2014 (4) TMI 351 - ITAT HYDERABAD] squarely applies to the facts of the present case as the department has failed to controvert the finding of the learned CIT(A) by bringing material on record to show that the developer has taken any steps towards development activity. Further, we may observe, though the AO referring to the development agreement has inferred that possession of the property was handed over to the developer, however, on going through the pleadings and prayer of the plaintiffs in the plaint filed in Civil Court, it appears assessee along with others are still having physical possession over the property. Be that as it may, after careful consideration of facts and materials on record, we are of the view, CIT(A)’s order being well founded and well reasoned needs to be upheld. Another crucial aspect which needs to be commented upon is the CIT(A) has also held that the transaction will not attract capital gain as the asset transferred being an agricultural land is not a capital asset as defined u/s 2(14) of the Act. This finding of the learned CIT(A) remains unchallenged and uncontroverted by the Department. For this reason also, short ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the case, the ld. CIT(A) erred in holding that there was no transfer within the meaning of section 2(47)(i) or section 2(47)(v) r.w.s. 53A of Transfer of Property Act. 2. On the facts and circumstances of the case, the ld. CIT(A) erred in holding that the value of consideration received or accruing cannot be determined and thereby the computation of capital gains fails. 3. As facts are common in all the appeals, for the sake of convenience, we refer to the facts as involved in ITA No. 1788/Hyd/2012. Briefly, the facts are assessee a company is engaged in real estate business. For the AY under dispute the assessee originally had filed its return of income on 27/09/2008 declaring total income of ₹ 2,97,79,960. Subsequently, on 07/10/2009, a search and seizure operation u/s 132 of the Act was conducted in case of Shri Vengella Anand Prasad and others in the group which also included the assessee. As a consequence of the search action, notice u/s 153A was issued calling upon the assessee to submit his return of income. In response to the said notice, assessee filed his return of income showing the same income as was declared originally. During the assessment proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning of section 53A of the Transfer of Property Act read with section 2(47)(v) of the Act. It was also submitted by the assessee that as per clause 11 of the agreement allotment of constructed area proportionate to the undivided share of land of the land owner will be worked out after making various adjustments. As on the date of agreement, since the interest or consideration relatable to the land owner is not crystallized, the computation of capital gain fails. 4. The AO after considering the submissions of the assessee was not convinced with the same. He was of the view that capital gain happens at the hands of the land owner on the date of entering into the development. The AO referring to the development agreement opined that as the assessee had delivered possession of the property to the developer there is a transfer within the meaning of section 2(47)(v) of the Act read with section 53A of the Transfer of Properties Act. The AO relying upon a number of decisions of different High Courts as well as Authority for Advance Ruling finally concluded that as the assessee has not only entered into development agreement with developer but has also handed over possession of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of section 53 of the Transfer of Property Act read with 2(47)(v) of the I.T.Act do not apply in the present case as all the parameters for application of section 53A of the Transfer of Property Act fails in this case. In this context, it was pointed out that although the Development Agreement was entered into on 04.05.2007, no work whatsoever has commenced even till today. This indicates that the Developer is not showing his willing and ready to execute the contract. It was argued that if the tax is levied in the year of entering into Development Agreement, it would militate against the theory of real income. In the instant case, neither any income has accrued nor received by the land owner, other than some refundable deposit on which the land owner has no dominion, as the same was to be returned as per the terms of the agreement. On the issue of theory of real income, the learned AR placed reliance on the following cases: (a) CIT Vs M/s. Shoorji Vallabhdas and Co. (1962) 46 ITR 144 (SC) and (b) CIT Vs A Gajapati Naidu (1964) 53 ITR 114 (SC). While completing his argument, the learned AR placed reliance in the unreported case passed by the jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 53A of the TP Act will come into play. Once provisions of section 53A of TP Act are not satisfied, the transaction in question cannot also fall within the scope of deemed transfer u/s 2(47)(v) of the Act. The CIT(A) on examining the facts of the assessee s case, in the aforesaid legal context, found that the transferee had neither performed nor is willing to perform his obligation under the agreement in the impugned assessment year. The CIT(A) noted that the development agreement on the basis of which AO sought to tax capital gain was entered into on 04/05/2007, but, the transferee has not performed even a single act under the agreement even as on date. He noted that the transferee originally has made payment of ₹ 13 lakhs per acre to the assessee as a refundable security deposit. However, that amount cannot be construed as receipt of part sale consideration. The CIT(A) noted that as per clause 5 of the development agreement, the developer is to construct at its own cost, the integrated residential township as per the plan approved by GHMC/HUDA or any other competent authorities and as per the detailed specifications to be agreed. However, there is no progress in the devel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sive rights to the developer, simultaneously on the other hand transferee s gesture of payment of consideration coupled with development work can be construed to be a positive step towards willingness to fulfil the commitment. When the transferee by its conduct and deeds demonstrates that it is unwilling to perform its obligations under the agreement, the date of agreement ceases to be relevant. In such situation only the actual performance of transferees obligation can give rise to the situation envisaged u/s 2(47)(v) read with section 53A of the TP Act. The CIT(A) was of the view that as the facts and materials on record clearly indicate the unwillingness of the developer to perform his part of the contract, the conditions of section 53A of the TP Act are not fulfilled. The CIT(A) also took note of the fact that the assessee along with land owners have filed a suit before the First Additional District Judge, RR District, registered as OS No. 903/12, which shows that the transferee has not undertaken any development work. Hence, no capital gain can be said to have arisen on the date of entering into development agreement as inferred by the AO. Accordingly, the CIT(A) held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other essential requirement of section 48 fails. As decided by the Apex Court, if computation section fails, charge also fails. Hence, no computation is possible in the present case. The SRO's value (prevailing rate of ₹ 1 crore per acre as per the lands sold by some land owners at this area of Bowrampet/Dundigal mentioned on page 8 of the assessment order), as adopted by the AO cannot be equated with full value of consideration, which means the price bargained for and paid. This figure is hypothetical and on any event, the same cannot be full value of consideration. f) The approach of the AD runs contrary to the theory of real income. In this case, on the date of entering into Development Agreement, no consideration has either accrued or received by the appellant for the purpose of working out the gain. g) The case is fully supported by the decision of the jurisdictional ITAT in the case of Raghuram Reddy (supra). This is a decision which comprehensively addresses to all the issues in relation to assessment of capital gain in case of a Development Agreement. h) Although, the case of Maya Shenoy was decided later, the case of Raghuram Reddy which was decided by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment year solely on the basis of the fact that assessee has entered into the development agreement with the developer 04/05/2007 and handed over possession of the property. He has also put stress on the fact that the assessee has received refundable security deposit from the developer @ ₹ 13 lakhs per acre. However, as rightly held by the learned CIT(A) neither entering into the development agreement or handing over of the possession of property are the sole and exclusive criteria to construe transfer of capital asset as envisaged u/s 2(47)(v) of the Act. On plain reading of section 2(47)(v) would make it clear that it refers to handing over possession of the property under a development agreement towards part performance of contract as envisaged u/s 53A of the TP Act. However, the handing over of possession by the assessee towards part performance of contract will not amount to transfer unless the transferee is also willing and ready to perform his part of the contract under the development agreement. As can be seen from the facts and materials on record, the developer apart from making payment of the refundable security deposit of ₹ 13 lakhs per acre has not taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 cursory look at the admitted facts of the case would show that the transferee had neither performed nor was it willing to perform its obligation under the agreement in the assessment year under consideration. The agreement based on which capital gains are sought to be taxed in the present case is agreement dated 11.05.2005 but this agreement was not adhered to by the transferee. The transferee originally made a payment of ₹ 10 lakhs on 11.5.2005 and another payment of ₹ 90 lakhs on the same day as refundable security deposit. However, out of this a sum of ₹ 50 lakhs was said to be refunded by the landlord to the developer on 5.3.2009. As such, the assessee has received only a meager amount as refundable security deposit which cannot be construed as receipt of part of sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 transferee was not only failed to perform its obligations under the agreement, but also unwilling to perform its obligations in the assessment year under consideration. Even otherwise, the assessing authorities has not brought on record the actual position of the project even as on the date of assessment or he has not recorded the findings whether the developer started the construction work at any time during the assessment year under consideration or any development has taken place in the project in the relevant period. He went on to proceed on the sole issue with regard to handing over the possession of the property to the developer in part performance of the Development Agreement-cum-General power of Attorney. In our opinion, the handing over of the possession of the property i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 there is no evidence to show that the right to receive the sale consideration was actually accrued to the assessee. Without accrual of the consideration to the assessee, the assessee is not expected to pay capital gains on the entire agreed sales consideration. When time is essence of the contract, and the time schedule is not adhered to, it cannot be said that such a contract confers any rights on the vendor/landlord to seek redressal under Section 53A of the Transfer of Property Act. This agreement cannot, therefore, be said to be in the nature of a contract referred to in Section 53A of the Transfer of Property Act. It cannot, therefore, be said that the provisions of Section 2(47)(v) will apply in the situation before us. Considering the facts and circumstances of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transferee's 'willing to perform' the contract is ascertainable in the assessment year, as stipulated by and within the meanings assigned to this expression under Section 53A of the Transfer of Property Act, its contractual obligations in this previous year relevant to the present assessment year, it is only a corollary to this finding that the Development Agreement dt. 15.12.2006, 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rely applies to the facts of the present case as the department has failed to controvert the finding of the learned CIT(A) by bringing material on record to show that the developer has taken any steps towards development activity. Further, we may observe, though the AO referring to the development agreement has inferred that possession of the property was handed over to the developer, however, on going through the pleadings and prayer of the plaintiffs in the plaint filed in Civil Court, a copy of which is at page 51 of assessee s paper book, it appears assessee along with others are still having physical possession over the property. Be that as it may, after careful consideration of facts and materials on record, we are of the view, CIT(A) s order being well founded and well reasoned needs to be upheld. Another crucial aspect which needs to be commented upon is the CIT(A) has also held that the transaction will not attract capital gain as the asset transferred being an agricultural land is not a capital asset as defined u/s 2(14) of the Act. This finding of the learned CIT(A) remains unchallenged and uncontroverted by the Department. For this reason also, short term capital gain c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidence such as bank account copy, salary/income proof to substantiate the loan. Accordingly, the AO by treating the unsecured loan of ₹ 19,86,664 as unexplained cash credit and added it to the income of the assessee. Being aggrieved of such addition, assessee preferred appeal before the CIT(A). 20. The CIT(A) confirmed the addition with the following observations: 3.1 I have gone through the issue and I find that the AO has examined the issue in detail in the assessment order. It is clearly observed in the assessment order that the sources of the NRI couple with proper evidence could not be made available in support of the claim. The appellant has failed to furnish any justification in support of the claim made by him in course of the appellate proceedings also. Accordingly, I hold that the addition made by the AO was justified. This effective ground of appeal is dismissed. 21. The learned AR submitted before us that the assessee has discharged the primary burden cast upon him by disclosing the identity of the creditor, her creditworthiness. Further, the transaction having been routed through banking channels, the genuineness also cannot be doubted. The learned AR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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