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TMI Blog2015 (7) TMI 1064X X X X Extracts X X X X X X X X Extracts X X X X ..... e Society has entered into JDA on behalf of the Members. It is the members who are owning the plots and the Society was only a facilitator. It becomes clear from the JDA that payment for consideration was to be made to an individual plot holder and in fact consideration was mentioned in terms of per Member. Each Member holding 500sqyd plot was to receive a sum of 82,50,000/- and one fully furnished flat measuring 2250 sqft and the Members holding 1000sqyd plot were to receive monetary consideration of 1.65 crores plus two flats measuring 2250 sqft. In fact the payment of cheques is made by Hash by issuing cheques in the name of individual Member and not the Society. This fact stands admitted because assessee has filed a return declaring capital gain against part money received against his plot. Thus it becomes clear that it is the individual member who are liable to tax in respect of transfer to plots and the Society being only a facilitator or Post office. - Decided against the assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 1,01,25,000/- Full value of consideration Rs. 1,83,75,000/- Less: Cost of acquisition (index cost) (-) ₹ 6,78,345/- Long Term Capital Gain ₹ 1,76,96,655/- The above capital gain was added to the taxable income of the assessee. 4. On appeal the action of the AO was confirmed by the Ld. CIT(A). 5. Before us Ld. Counsel for the assessee fairly conceded that issue is squarely covered against the assessee by the order of Tribunal in case of Charanjit Singh Atwal Vs. I.T.O & others in ITA No. 448/Chd/2011 and others. 6. On the other hand Ld. DR strongly supported the order of Ld. CIT(A) 7. After considering the rival submissions carefully we find that identical issues came up for consideration of Tribunal in case of Charanjit Singh Atwal Vs. ITO (supra). This issue was adjudicated vide Para 27 to 113 which are as under: 27. We have considered the rival submissions and carefully gone through the written submissions filed by both the parties in the light of material on record, paper books and various judgments cited by the parties. The main issue is whether assessee is liable to capital gain tax in the year under consideration i.e assessment year 2007-08 in view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereof under any law ; or 2 (47) of the Act which (iv)in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment ;] [or] [(iva)the maturity or redemption of a zero coupon bond; or] [(v)any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or (vi)any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. Explanation.-For the purposes of sub-clauses (v) and (vi), "immovable property" shall have the same meaning as in clause (d) of section 269UA;] Clauses (v) & (vi) to section 2(47) of the Act have been inserted by Finance Act, 1987 w.e.f. 1.4.1988. The purpose of this insertion has been explained by CBDT in Circular No. 495 dated 22.9.1987 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime apart from this decision a practice came into vogue by which certain properties were being transferred without executing the proper sale deeds. This was being done because there was restriction on sale of properties in various towns e.g. in case of lease hold plots and flats in Delhi if the same were to be transferred, permission was required to be taken from the Government / DDA and transferor was required to pay 50% of the market value - cost (i.e. unearned increase) to the Government. To avoid such payments and / or also to avoid the payment of stamp duty or cumbersome procedure of obtaining permission, some properties were being sold by way of sale agreement and also execution of General Power Of Attorney and possession was given on receipt of full consideration without executing the proper sale deeds etc. which as mentioned earlier was not even permissible in some cases. These transactions are popularly called "power of attorney" transactions. To avoid these and to stop the leakage of Revenue, the Parliament has inserted clauses (v) & (vi) to section 2 (47) so as such type of transactions are also be brought in to taxation net. However, interpretations of these clauses has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued on November 15, 1996. The power of attorney was executed on March 12, 1999. The question arose whether liability of the assessee for capital gain arose in the assessment year 1996-97 or 1999-2000. The observation of the Court has been summarized in head note as under:- "Clauses (v) and (vi) were introduced in section 2(47) of the Income-tax Act, 1961, with effect from April 1, 1988. They provide that "transfer" includes (i) any transaction which allows possession to be taken/retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882, and (ii) any transaction entered into in any manner which has the effect of transferring or enabling the enjoyment of any immovable property. Therefore, in these two cases capital gains would be taxable in the year in which such transactions are entered into, even if the transfer of the immovable property is not effective or complete under the general law. Under section 2(47)(v) any transaction involving allowing of possession to be taken over or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act would come within the amb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion entered into in any manner which has the effect of transferring or enabling the enjoyment of any immovable property (see section 269UA(d)). Therefore, in these two cases capital gains would be taxable in the year in which such transactions are entered into, even if the transfer of the immovable property is not effective or complete under the general law (see Kanga and Palkhivala's Law and Practice of Income-tax-VIII edition, page 766). This test is important to decide the year of chargeability of the capital gains." 35 The above observations were made on the basis of opinion expressed by Ld. author in the commentary - "The Law and Practice of Income Tax by Kanga and Palkhivala Eighth Edition at page 766. Relevant observations read as under: "Cls. (v) and (vi) of s. 2(47), inserted by the Finance Act 1987 with effect from 1st April 1988, provide that "transfer" includes (a) any transaction which involves the allowing of the possession of an immovable property (s. 269UA(d)) to be taken or retained in part performance of a contract of the nature referred to in s.53A of the transfer of Property Act 1882, and (b) any transaction entered into in any manner which has the effect of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In this case that test has not been applied by the Department. No reason has been given why that test has not been applied, particularly when the agreement in question, read as a whole, shows that it is a development agreement. There is a difference between the contract on the one hand and the performance on the other hand. In this case, the Tribunal as well as the Department have come to the conclusion that the transfer took place during the accounting year ending March 31,1996, as substantial payments were effected during that year and substantial permissions were obtained. In such cases of development agreements, one cannot go by substantial performance of a contract. In such cases, the year of chargeability is the year in which the contract is executed. This is in view of section 2 (47)(v) of the Act." Secondly it is mentioned in the order of the Court that law was not very clear on this point and since the assessee has admitted and paid capital gain in the Assessment year 1999-2000, therefore, tax was held to be chargeable in Assessment year 1999-2000. Thirdly certain shortcomings were also noted in the order of the Tribunal where certain documents were mentioned to have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of transfer. 39. The second relevant decision cited by the Revenue is by Authority for Advance Ruling (AAR) New Delhi in the case of Jasbir Singh Sarkaria (supra). In that case the assessee was co-owner of agricultural land measuring about 27.7 acres and his share was 4/9. The co-owner decided to develop the land by constructing residential complex through developer and entered into a Collaboration agreement on 8.6.2005 with M/s Santur Developer Pvt Ltd, New Delhi (herein after called 'Developer'). According to the terms of agreement, the Developer should obtain a letter of intent from the concerned government department and obtain other permissions and sanctions for developing the land at its own risk and cost. The Developer was to take 84% of the built up area and balance 16% would belong to assessee and other co-owner. The consideration for the agreement was taken as the built up area to be handed over to the owners free of cost. The owners were entitled to visit the site in order to review the progress of the project. It was clarified by clause 18 that ownership would remain exclusively with the owners till it vests with both the parties as per their respective share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee/ transferor (d) such income shall be deemed to be the income of the same previous year in which the transfer had taken place. Two aspects may be noted at this juncture. Firstly, the expression used is "arising" which is not to be equated with the expression "received". Both these expressions and in addition thereto, the expression "accrue" are used in the Income-tax Act either collectively or separately according to the context and nature of the charging provision. The second point which deserves notice is that by a deeming provision, the profits or gains that have arisen would be treated as the income of the previous year in which the transfer took place. That means, the income on account of arisal of capital gain should be charged to tax in the same previous year in which the transfer was effected or deemed to have taken place. The effect and ambit of the deeming provision contained in section 45 has been considered in decided cases and leading text books. The following statement of law in Sampath Iyengar's Commentary (10th Edition- Revised by Shri S. Rajaratnam) brings out the correct legal position : "Section 45 enacts that the capital gains shall by fiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no warrant to place such a restricted interpretation on the word "possession" occurring in clause (v) of section 2(47). Possession is an abstract concept. It has different shades of meaning. It is variously described as "a polymorphous term having different meanings in different contexts" (per R. S. Sarkaria J. in Superintendent and Remembrance of Legal Affairs, W. B. v. Anil Kumar Bhunja [1979] 4 SCC 274 and as a word of "open texture" (see Salmond on Jurisprudence, paragraph 51, Twelfth Edition, Indian reprint). Salmond observed : "to look for a definition that will summarize the meanings of the term "possession" in ordinary language, in all areas of law and in all legal systems, is to ask for the impossible". In the above case of Anil Kumar Bhunja [1979] 4 SCC 274, Sarkaria J. speaking for a three-judge Bench also referred to the comments of Dias and Hughes in their book on Jurisprudence that "if a topic ever suffered too much theorizing it is that of 'possession'". Much of the difficulty is caused by the fact that possession is not a pure legal concept, as pointed out by Salmond. The learned judge then explained the connotation of the expression "possession" by referring to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abled to exercise general control over the property and to make use of it for the intended purpose, the mere fact that the owner has also the right to enter the property to oversee the development work or to ensure performance of the terms of agreement does not introduce any incompatibility. The concurrent possession of the owner who can exercise possessory rights to a limited extent and for a limited purpose and that of the buyer/developer who has a general control and custody of the land can very well be reconciled. Clause (v) of section 2(47) will have its full play even in such a situation. There is no warrant to postpone the operation of clause (v) and the resultant accrual of capital gain to a point of time when the concurrent possession will become exclusive possession of developer/transferee after he pays full consideration. Further, if "possession" referred to in clause (v) is to be understood as exclusive possession of the transferee/developer, then, the very purpose of the amendment expanding the definition of transfer for the purpose of capital gains may be defeated. The reason is this: the owner of the property can very well contend, as is being contended in the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause the authorized representative has submitted when he appeared before us in the last week of May, 2007, that even by that date the development work could not be commenced for want of certain approvals, and therefore, the developer was "not willing to take possession of the land". Such an unsubstantiated statement which is not found in the original application or even written submissions filed earlier need not be probed into especially when it is not his case that the developer was not allowed to take possession in terms of the agreement." 42. After the above discussion, the Authority discussed the facts of the case before it. It was observed that paragraph 18 of the Collaboration Agreement provides that on issuance of letter of intent, the owners will allow and permit the Developer to enter upon and survey the land, erect site / sales office, carry out the site development work and do activities for advancing & sale promotion, construction etc. The Authority further observed that if this clause is read in isolation this would suggest on passing of possession but according to Authority the other factors are to be considered. Clause 15 provided that on fulfillment of the requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le money consideration, the developer has a vital stake in the entire property. As far as the quality of possession is concerned, he is on a higher pedestal than a developer who apportions built up area with the owner. Even if he is an agent in one sense in the course of developing the land, that agency is coupled with interest. For these reasons, the prefix "irrevocable" is deliberately chosen. As discussed earlier, the owner's limited right to enter the land and oversee the development work is not incompatible with the developer's right of control over the land which he derives from the GPA. Exclusive possession, as already pointed out, is not necessary for the purpose of satisfying the ingredients of clause (v) of section 2(47). We are therefore, of the view that the irrevocable GPA executed by the owners in favour of the developer must be regarded as a transaction in the eye of law which allows possession to be taken in part performance of the contract for transfer of the property in question…….." 43 Thus, the above clearly shows that irrevocable general power of attorney which leads to over all control of the property in the hands of the Developer, even if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rformance of the contract and therefore, the transfer within the meaning of section 2(47)(v) must be deemed to have taken place on the date of execution of such GPA. The irrevocable GPA was executed on May 8, 2006, i.e., during the previous year relevant to the assessment year 2007-08 and the capital gains must be held to have arisen during that year. Incidentally, it may be mentioned that during the said year, i.e., financial year 2006-07, a final license was granted and the applicant/owners received nearly 2/3rds of the consideration. " 45. Legal position has been discussed in above noted paras and now let us discuss the facts of the case in the light of above noted legal position. 46 Undisputed facts of the case are that the assessee is a Member of Punjabi Coop House Building Society Ltd. which had 96 members (Number of members were stated as 95 during arguments but clause 13 of the JDA refers to number of members as 96). The Society was owning 21.2 acres of land in village Kansal Distt. Mohali adjacent to Chandigarh. There were two types of members firstly the members who were owning plot of 500 sqyd and secondly the members who are holding plot of 1000 sqyd. Somewhere in 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke the payment, THDC agreed to make the payments. Copy of the resolution of the Executive Committee of the Society dated 4.1.2007 as well as resolution of the General Body Meeting of the Society dated 25.2.2007 were made part of JDA by way of annexure. The Society agreed to execute an irrevocable Special Power of Attorney in favour of THDC and all other necessary documents, at the request of the developers. 47 In clause 1 of JDA various expressions have been defined. Clause 2 describes the project as under: "2.1 The owner hereby irrevocably and unequivocally grants and assigns in perpetuity all its rights to develop, construct, mortgage, lease, license, sell and transfer the property along with any and all the construction, premises, hereditaments, easements, trees thereon in favour of THDC for the purpose of development, construction, mortgage, sale, transfer, lease, license and or exploitation for full utilization of the Property (Rights) and to execute all the documents necessary to carry out, facilitate and enforce the Rights in the Property including to execute Lease Agreement, License Agreements, Construction Contracts, Supplier Contracts, Agreement for sale, Conveyance, Mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Transfer of ownership/Rights 9.1 The owner shall simultaneously on receipt of Payment as set out in Clause 4.1 above, execute an irrevocable Special Power of Attorney to THDC for development of the property authorizing THDC to do all lawful acts, deeds, matters and things pertaining to the development of the property for the project along with interalia right to mortgage the property and/or premises, sell, lease, license the premises and receive/collect monies in it's name in respect of the same and approach interact, communicate with the Competent authorities and for doing all acts, deeds, matters and things to be done or incurred by THDC in that behalf as also to sign all letters, applications, agreements and register the same if necessary, documents, court proceedings, affidavits and such other papers containing true facts and correct particulars as made from time to time be required in this behalf. 9.2 The owner shall execute in favour of THDC the sale deed is in accordance with the provisions of clause 4.1(ii) to Clause 4.1(iv) of this Agreement and execute all other necessary documents and papers to complete the aforesaid transaction. 9.3 That all the original title deeds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because according to him as per clause 2.1 of the JDA the possession of the property was to be handed over simultaneously to the execution and registration of JDA and since the JDA was not registered, therefore, the possession was not given. We can not accept this contention because in "Power of Attorney" transactions, it is not necessary to register the JDA if a special Power of Attorney has been given and same is registered. Secondly clause 9.3 of the JDA as reproduced above clearly show that original title deed which have been mentioned along with the possession in para 2.1 which according to the ld. counsel of the assessee were to be handed over simultaneously to execution and registration of the JDA, is not correct because clause 9.3 clearly mention that original title deed of the property have been handed over to the THDC at the time of signing of this agreement because clause 9.3 there is no mention about registration of JDA. 53 Special Power of Attorney which has been executed on 26.2.2007 and has been registered also. The irrevocable special Power of Attorney has been executed as provided in clause 6.7 of the JDA which reads as under: "6.7 The Owner shall execute an irre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n such authority and to admit execution thereof before the concerned Competent Authority and get the same registered with the concerned sub-registrar. (y) Reasonable opportunity of hearing shall be given to mortgage, encumber or create a charge on the Property or any part or portion thereof and execute the necessary security documents in favour of any bank/financial institution to raise funds for the construction/development of the Property and for the said purpose to deposit title deeds (if required) in respect of the Property in favour of such bank/financial institution, execute the necessary documents and register the charge created on the Property if so required in the revenue records and/or desired by the Attorney. (aa) To sell, transfer, lease, license the Premises that may be constructed on the Property on ownership basis, lease, license and/or in any other manner for such price as the Attorneys may deem fit and proper. To collect and receive from the purchased, transferees, lessees, licensees of the Premises, monies/price and/or consideration and/or maintenance charges and to sign and execute and/or give proper and lawful discharge for the receipts. (bb) To execute from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion for the purpose of development, mortgage etc. even after termination. Clause 8 which describes the obligation and undertaking of the THDC/HASH and provides specifically that all environmental clearance shall be obtained by THDC/HASH out of its own sources. Thus it was clearly understood by the parties that requisite environmental clearances had to be obtained before start of the project. Clause 10 again casts specific obligation on the owner Society to give consent to THDC/HASH to raise finance for the development and completion of the project on the Security of the property by way of mortgaging the property. Thus whatever power/authorization have been given through irrevocable special Power of Attorney are emanating from the terms and conditions agreed to among the parties from the JDA. 55 The combined reading of the above clauses of the Irrevocable Special Power of Attorney and JDA clearly show that the developer was authorized to enter upon the property for not only for the purpose of development but other purposes also. THDC was authorized to amalgamate the project with any other project in the adjacent area or adjoining area as per clause (t) of the special Power of Att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecomes clear that the possession has been given. 56 In that discussion, it has been clearly mentioned that the position contemplated by clause (v) of section 2(47) of the Act need not to be exclusive possession. What is required is that the transferee by virtue of possession should be able to exercise control from overall intended purposes. We do not think in the present case the assessee has given only a license as claimed by ld. counsel of the assessee because of the powers of selling, amalgamating etc. mentioned in the JDA and irrevocable Special Power of Attorney. The issue has been discussed in he judgment of Jasbir Singh Sarkaria (supra) in further discussion which has been made in para 33 regarding Power of Attorney (which has been reproduced earlier). In that case the powers were given to enter upon and survey the land, prepare lay out plans, submit building plan for sanction with the appropriate authorities to control, manage and look after and supervise the property, to obtain water and sewerage, disposal and electricity connection. In that case the developer was authorized to mortgage the property to obtain money for meeting the cost of construction on security and mort ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ex Court in case of Dr. Baliram Waman Hiray V. Mr. Justice B. Lentin and another (supra): "The following principles enunciated in Heydon"s caase (1584) 3 Co. Rep 7a and firmly established, are still in full force and effect: "that for the sure and true interpretation of all statutes in generals (be they penal or beneficial, restrictive or enlarging of the common law), four things are to be discerned and considered: (1) what was the common law before the making of the Act; (2) what was the mischief and defect for which the common law did not provide; (3) what remedy Parliament has resolved and appointed to cure the disease of the common wealth and (4) the true reason of the remedy. And then, the office of all the judges is always to make such construction as shall suppress the evasions for the continuance of the mischief and pro private commando and to add force and life to the cure and remedy according to the true intent of the makers of the Act pro bono public." There is now the further addition that regard must be had not only to the existing law but also to prior legislation and to the judicial interpretation thereof." 58 Going by the Heydon's Rule of interpretation if we anal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence has been extracted which reads as under: "It was a maxim of the civil law that two persons could not be in possession of the same thing at the same time. As a general proposition this is true: for exclusiveness is of the essence of possession. Two adverse claims of exclusive use cannot both be effectually realized at the same time. Claims, however, which are not adverse, and which are not, therefore, mutually destructive, admit of concurrent realization. Hence there are several possible cases of duplicate possession. 1 Mediate and immediate possession Cross-objections-exist in respect of the same thing as already explained. 2 Two or more persons may possess the same thing in common; just as they may owe it in common. The concurrent possession of the owner who can exercise possession right to a limited extent and for a limited purpose and that of the buyer/developer who has a general control and custody of the land can very well be reconciled." 61 In further discussion in para 26 to 28 of the above decision it has been held that it is not necessary in terms of clause (v) that the developer should have exclusive possession. The concurrent possession of the owner is possible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cost of repetition let us again reproduce the observations of the Ld. authority in case of Jasbir Singh Sarkaria (supra) which we have earlier extracted at para 40 and the relevant portion is as under: "4 0 . On the above, the Hon'ble Authority after referring to the provisions of section 45 and observed as under:- "……….The section can be analysed thus : (a) transfer of a capital asset effected in the previous year, (b) resultant profits or gains from such transfer, (c) those profits or gains would constitute the income of the assessee/ transferor (d) such income shall be deemed to be the income of the same previous year in which the transfer had taken place. Two aspects may be noted at this juncture. Firstly, the expression used is "arising" which is not to be equated with the expression "received". Both these expressions and in addition thereto, the expression "accrue" are used in the Income-tax Act either collectively or separately according to the context and nature of the charging provision. The second point which deserves notice is that by a deeming provision, the profits or gains that have arisen would be treated as the income of the previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al words descriptive of a right to receive profits.' See also CIT v. Anamallais Timber Trust Ltd. To attract the operation of section 12B it is therefore sufficient if the profits arose. They need not have been actually received." 14. Thus the criterion of right to receive the profits / gains was applied in that case. 15. The legal position does not therefore admit of any doubt that the actual receipt of the entire sale consideration during the year of "transfer" is not necessary for the purpose of computing capital gains." Further the expression arising has been defined in the Advanced Law Lexicon by P. Ramanatha Aiyer edited by Y.V. Chandrachud, Former Chief Justice of India: "The words "Arising or accruing" describe a right to receive profits, and that there must be a debt owed by somebody. Ld. Commissioner of Income Tax, West Bengal-II, Calcutta V. Hindustan Housing and Land Development Trust Ltd. AIR 1986 S.C 1805, 1807." The expression "accrual of income" has been defined in the same Lexicon as under: "Accrual of income. E.D Jassoon & C. Ltd. V Ld. Commissioner of Income Tax, AIR 1954 S.C 470 quoted - Income may accrue to an assessee without the actual receipt of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was that since section 53A of the Transfer of Property Act itself has undergone amendment w.e.f. 24.9.2001 by which the agreement referred to in that section is required to be registered and therefore, now in section 2 (47) (v) only the amended provisions can be read. We find no force in this contention. It is well known that section 53A of the Transfer of Property Act was passed on equitable doctrine so as to protect the taking over or retention of the possession by the transferee. It was not a source by which title of immovable property could be acquired. Section 53A of TP Act read as under:- 53A. Part performance.- Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, 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 and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of that judgment would show that situation is applicable only when a particular provision of an Act has been incorporated in the later Act. In that case a question arose that for the purpose of MAT provision what is the meaning of past losses or unabsorbed depreciation. It was found that in explanation to section 115J clause (iv), the following expression was used:- "(iv) the amount of the loss or the amount of depreciation which would be required to be set off against the profit of the relevant previous year as if the provisions of clause (b) of the first proviso to sub section (i) of section 205 of the Companies Act, 1956 (1 of 1956) are applicable. 71 The Hon'ble Apex Court referred to the Principles of Statutory Interpretation by Shri G.P.Singh and extracted following piece: " Section 115J, Explanation clause (iv), is a piece of legislation by incorporation. Dealing with the subject, Justice G.P. Singh states in Principles of Statutory Interpretation (7th edition, 1999). Incorporation of an earlier Act into a later Act is a legislative device adopted for the sake of convenience in order to avoid verbatim reproduction of the provisions of the earlier Act into the later. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de compulsory but since properties were being sold in the market on "power of attorney" basis through unregistered agreements which would make this provision redundant. This position we have already discussed earlier while discussing the Heydon's Rule in the interpretations of this clause. Further the issue of interpretation of clause (v) and amendment to section 53A of the Transfer of Property Act came for consideration before the Mumbai Bench of the Tribunal in the case of Suresh Chander Aggarwal vs ITO 48 SOT 2010. The Tribunal discussed this issue at page 7 and after quoting the provisions of section 2(47) and also section 53A before and after amendment as wall as para Nos. 11.1 to 11.2 of the Board's Circular No. 495 dated 22.9.1987 observed as under:- "The above clearly shows that there was certain situation where properties were being transferred without registration of transfer instruments and people were escaping tax liabilities on transfer of such properties because the same could not be brought in the definition of "transfer" particularly in many States of the country properties were being held by various people as leased properties which were allotted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd., and two were purchased by its sister concerns which were later purchased by the assessee. The possession of the flats was taken after full payment of consideration. The flats were let out. The assessee contended that the rental income from these flats was assessable as "income from other sources" because the assessee was not the legal owner because the title of the property had not been conveyed to the Co-operative Society which was formed by the purchasers of the flats. The Hon'ble Court noted that section 27 had been amended vide clause 3(a) wherein when a person was allowed to take possession of the building in part performance of the nature referred to in section 53A, such person shall be deemed to be the owner. It was further observed that for all practicable purposes the assessee was the owner and possibly there cannot be two owners of same property at the same time. In fact, the amendments to section 27 were made later on but were taken into cognizance on the basis of above principle and ultimately it was held as under: "Hence, though under the common law "owner" means a person who has got valid title legally conveyed to him after comply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been registered will not alter the situation. This position is further strengthened by the fact that legislature itself has inserted clause (v) to section 2(47) and while referring to the provisions of section 53A, reference has been made by stating that contracts in the nature of section 53A should also be covered by the definition of "transfer". Therefore, in our humble view, the amendment to sec. 53A of the Transfer of Property Act, whereby the requirement of the documents not being registered has been omitted, will not alter the situation for holding the transaction to be a transfer u/s.2(47)(v) if all other ingredients have been satisfied." 74 Thus, it is clear that non registration of agreement cannot lead to the conclusion that provision of section 2(47) (v) is not applicable. Similar view has been taken by ITAT Cochin Bench of the Tribunal in case of G.Sreenivasan Vs DCIT 28 Txmann.com 200 (Coch.) and ITAT Pune Bench in the case of Mahesh Nemichandra Ganeshwade v ITO 21 Taxmann.com 136 (Pune). In view of this legal position, this contention is rejected. 75 The next contention was that the decision of Hon'ble Bombay High Court in case of Chaturbhuj Dw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the contract. 80 The third judgment relied upon by the Ld. Counsel for the assessee is in the case of DCIT v Tej Singh (supra). In that case land was acquired by the government and the matter went for litigation. During the pendency of litigation, the assessee entered into a Development agreement with a Developer for the purpose of development of the property, however, it was clarified in the agreement that there is litigation in respect of acquisition of property and the developer has to take clearance from the government in the matter of denotification of the land. It was held that since the land was under compulsory acquisition and no compensation has been received, therefore, there could not be any capital gain tax u/s 2 (47) (iii) which deals with the compulsory acquisition. It was further observed that assessee could not have given possession unless and until the land was denotified. Since facts of the case are different than the case in hand and therefore, same are not relevant for our purpose. 81 Now coming to the facts, firstly it was contended that Developer i.e transferee has not obtained various permissions which were required to be taken by the Developer as per c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds, volcanic eruptions, typhoons, hurricanes, storms, tidal waves, earthquake, landslides, lightning, explosions and other natural calamities, prolonged failure of energy, court orders / injunctions, charge of laws, action and / or order by statutory and / or government authority, third party actions affecting the development of the Project, acquisition / requisition of the Property or any part thereof by the government or any other statutory authority and such circumstances affecting the development of the project (Event of Force Majeure). iii) Any Party claiming restriction on the performance of any of its obligations under this agreement due to the happening or arising of an Event of Force Majeure hereof shall notify the other Party of the happening or arising and the ending of ceasing of such event or circumstance with three (3) days of determining that an Event of Force Majeure has occurred. In the event any Party anticipates the happening of an Event of Force Majeure, such Party shall promptly notify the other party. iv) The Party claiming Event of Force Majeure conditions shall, in all instances and to the extent it is capable of doing so, use its best efforts to remove or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their respective jurisdictions in accordance with law. Insofar as the Wild Life (Protection) Act is concerned, it appears that the rejection has been made by the Chief Wild Life Warden who, the respondents claim, is merely a recommending authority and is required to forward his recommendation to the Central Government. As the rejection under the Wild Life (Protection) Act has been made by an authority not competent to do, the promoters of the project have sought a review of the order which is still pending for the same reason(s) as noticed above. 4. On these facts we are of the view that it would be prudent on our part to take the view that the issue with regard to clearance/sanction under the two enactments i.e. Environment (Protection) Act and Wild Life (Protection) Act is presently pending and as the promoters of the project have submitted themselves to the jurisdiction of the authorities under the said enactments we should refrain from addressing ourselves on any of the issues connected with either of the two statutory enactments as any such exercise, even though may be unintended, may have the effect of fettering the jurisdiction of statutory authorities functioning under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions and directions contained hereinabove. 83 The combined reading of the above paras in the order of Hon'ble High Court clearly shows that Developer THDC/ HASH i.e. transferee have made their sincere efforts for obtaining the necessary permissions / sanctions which were required under the JDA. However, some of the sanctions could not be taken in time because of the litigation by way of PIL but since none of the party was liable to the other party in view of the clause 26 dealing with FORCE MAJEURE it cannot be said that Developer was not willing to perform his part of contract. In any case no specific evidence has been shown us to prove that THDC / HASH were declining to perform particular obligation provided in JDA. In view of this discussion, it cannot be said that transferee i.e. Developer THDC/HASH is not willing to perform his part of contract. 84 Secondly, it was contended that payments have not been made as per the JDA. However, again this is not correct. As per clause 4(iv) of the JDA, the installment for ₹ 31,92,75,000/- was required to be paid. The clause 4(iv) read as under:- "iv) Payment being ₹ 31,92,75,000/- (Rupees One Crore ninety two lacs seven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been filed at pages 23 & 24 of the paper book dealing with the additional evidence. Through this letter it has been clearly stated that since permission is pending from the Ministry of Environment and Forest Department and therefore constructions could not commence. These permissions were pending because of the PIL filed by Shri Aalok Jagga before the Hon'ble Punjab & Haryana High Court. All these facts clearly shows that in view of clause 4.1 (iv) read with clause 26 (v) of the JDA, HASH Builder were not required to make the payment and it cannot be said that they were not willing to perform their part of the contract on this aspect. Therefore, this contention is rejected. 87 Seventh contention is that revenue wrongly held that even clause (vi) of Section 2(47) is applicable. We find no force in this contention. Clause (vi) to Section 2(47) reads as under: "any transaction (whether by way of becoming a member of, or accruing shares in, a cooperative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property". 88 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration, received or accrued has to be taxed. Every person is supposed to know the law and if the transaction is structured in such a way for the transfer of capital asset that some of the consideration would be received later then such person is supposed to know the consequences of the denial of such benefits. However, if the section is interpreted in the manner suggested by the ld. counsel of the assessee then no person would pay capital gain tax on transfer of a property. This will be clear from a simple example. Let us assume if "A" sells the property to "B" for a consideration of ₹ 100 crores and receive only a consideration of 1.00 crore and it is mentioned in the transfer instrument that balance of consideration would be paid after 20 years then no tax can be levied on such balance consideration of ₹ 99.00 crores which has not been received as per the contention of the ld. counsel of the assessee . But in that case no taxes can be levied even after 20 years because no transfer can be said to have taken place after 20 years and Revenue cannot do any thing because capital gain can be charged u/s 45 only on transfer of capital asset. We do not think that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or………. 92 On this aspect the settled position of the law is that the annual value has to be determined even if the property is not let out. This position has been discussed by the Ld. author Chaturvedi & Pithisaria's in Commentary of Income Tax Law (fifth edition) Volume 1 in this respect at pages 1275 & 1276 observed as under: "Annual value- determination of - Section 23(1)(a) provides that for the purposes of section 22, the annual value of any property shall be deemed to be the sum for which the property might reasonably be expected to let from year to year. The word used is 'might' and not 'can' or 'is'. It is thus a notional income to be gathered from what a hypothetical tenant would pay which is to be objectively ascertained on a reasonable basis irrespective of the fact whether the property is let out or not [Sultan Bros. Pr. Ltd. v. CIT, (1964) 51 ITR 353 (SC); Jamnadas Prabhudas v. CIT, (1951)20 ITR 160(Bom); D.M. Vakil v. CIT, (1946) 14 ITR 298, 302(Bom); CIT v. Biman Behari Shaw, Shebait, (1968) 68 ITR 815 (Cal); Sri Sri Radha Govinda Jew v. CIT, (1972) 84 ITR 150, 156 (Cal); CIT v. Ganga Properties Ltd., (1970) 77 ITR 637, 647 (Cal); Liquidator, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over is less than ₹ 60 lakhs then the profit would be presumed to be 8% of turnover even if he has suffered a loss. Another example of Section 2(22)(e) can be taken. Under this provision a loan or advance given by certain companies to a substantial share holder is to be treated as deemed dividend. Such loan under the normal accounting principle or on commercial principles cannot be regarded as income but because of this specific provision regarding deemed dividend such amount has to be treated as income of the person receiving such loans. 95 The above position of law makes it absolutely clear that theory of real income is subject to the provisions of the Act and whenever any specific provisions of the Act is there for charging of a particular item of income, then the same has to be charged accordingly. It may be sometimes hard to the assessee's but again it has been held in numerous decisions that Fiscal statues have to be interpreted on the basis of language used and there is no scope for equity or intent. Ld. Author Shri S. Rajaratnam in the Commentary of Law of Income Tax by Sampat Iyengar's Volume 1, page 236 in this regard has observed as under:- "Once it is shown that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lacs Fifty Thousands Only) payable to 65 members having plot of 500 sq. yards each, ₹ 1,65,00,000/- (Rupees One Crore Sixty Five Lacs Only) payable to 30 members having plot of 1000 sq. yards each and ₹ 3,30,00,000/- (Rupees Three Crores Thirty Lacs Only) payable to the Owner for the 4 plots of 500 sq. yards each, which shall tantamount to the full and final payment to the Owner and / or the respective members of the Owner (as the case may be) in a manner set out herein below ('Payment'). Further, the transfer, sale and conveyance of 21.2 acres of land of the Property shall be made by the Owner in favour of THDC pro rata to the Payment received by the Owner and/or the respective members of the Owner (as the case may be) from HASH by executing sale deeds and registering the same. It is expressly provided that as resolved by the Owner, the total amount payable by HASH to the Owner and / or the respective members of the Owner (as the case may be) for assignment of the Development Rights and for transfer and sale of 21.2 acres of land of the Property shall be ₹ 106,42,50,000/- (Rupees One Hundred Six Crores Forty Two Lacs Fifty Thousand only) and one hundred and twent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear that developer i.e. THDC/HASH was to allot the letters of allotment within 45 days from final sanction from the competent authority and such flats were part of entire consideration. Merely because such allotment letter has not been given because of sanctions / permissions could not be obtained because of Public Interest Litigation before the Hon'ble Punjab & Haryana High Court, it cannot be said that such right has not accrued. Though it may be hard on the assessee but it is well settled that taxation and equity are strangers. Further commenting on this aspect Shri Rajarathnam in his commentary has observed at page 5164 as under: "It is hard on the owners when required to pay tax, when handing over the possession for purposes of construction without being able to enjoy the construction, which is yet to commerce or in the process of construction being put up by the developer, but the solution lies in statutory clarification in such cases. In view of the increasing scale of such development agreements to solve the housing problem in the cities, a statutory clarification or circular is overdue." 99 These comments and the other detailed discussion on this aspect clearly show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gain or not? Secondly it is not clear that whether the amended consideration i.e. settlement for ₹ 1.00 crore was made in the same year or not? As observed earlier while discussing the issue of notional income that provisions of section 45 r.w.s. 48, are absolutely clear and there is no ambiguity that once a capital asset is transferred then whole of the consideration received or accruing has to be considered for the purpose of taxation in the year in which the transfer has taken place. We further find that in the JDA there is a clause for termination of the agreement. Relevant clause 14 reads as under: "Termination "14(i) Save and except the provision of clause 26, THDC shall at all times have the right to terminate this Agreement in the event there is any material breach of the representations, warranties, undertakings, declarations, covenants and/or obligations given by the Owner under this Agreement after giving thirty (30) days written notice for rectification of such breach. In the event the Agreement is termination by THDC, all the lands registered in the name of THDC as per the terms of this Agreement upto the date of the termination shall remain with THDC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sferred by the Owner in favour of THDC. Upon the termination, the Owner shall refund to THDC the Adjustable Advance/Earnest Money mentioned in clause 4.1(i) above within one month of such termination. In the event of failure of the Owner to refund the said amount, the Owner hereby agrees to execute a registered sale deed for land of equivalent value in favour of THDC. (iv) The owner shall have the right to terminate the Agreement only in the event of default by the Developers for making the Payment in accordance with the terms of this Agreement and the allotment of Flats within the time period as mentioned in this Agreement after giving Thirty (30) days written notice for rectification of such breach or any further time as may be desired by the Owner. In the event the Agreement is terminated by Owner, all the lands registered in the name of THDC as per the terms of this Agreement upto the date of the termination shall remain with THDC and the balance lands to be transferred to THDC as per the terms of this Agreement shall not be transferred by the Owner in favour of THDC. Upon the termination, the Owner shall forfeit the Adjustable Advance/Earnest Money mentioned in clause 4(i)." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tand that in the absence of such document how the assessee can claim that this Power of Attorney has been revoked. As discussed earlier while considering the legal position, we would again recall the words of Hon'ble Authority for Advance Ruling in case of Jasbir Singh Sarkaria (supra) wherein at para 33 of the decision while discussing the issue in respect of Power of Attorney, it was highlighted that execution of irrevocable Power of Attorney is of significant nature and the words "irrevocable" are very important. The expression "irrevocable" itself shows that normally such attorney cannot be revoked. Therefore, no cognizance can be taken in respect of revocation of the irrevocable Power of Attorney. In the absence of specific consent as provided in clause 6.7 of the JDA from THDC. 105 We may also note that CIT D.R has pointed out that total consideration was to be determined as under: (i) Consideration in cash (Rs. 82,50,000 x 129 plots) ₹ 106,42,50,000/- (ii) Consideration in kind (Rs. 101,25,000/- x 129 plots) ₹ 130,61,25,000/- Total ₹ 237,03,75,000/- Average cost of consideration ₹ 11.18 crores per acre (Total consideration of ₹ 237 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided if the contention of the applicant is accepted. On deep consideration, however, we find that the construction of the relevant provision should not be controlled by giving undue importance to such hypothetical situations. Normally, the owner executes a Power of Attorney or does similar act to left the transferee take possession only after the basic permissions are granted and he is satisfied about the ability of transferee/developer to fulfil the contract. In spite of that, if such rate situations take place, the owner/transferor will not be without remedy. He can file a revised return and make out a case for exclusion or reduction of income. However, if the time-limit for filing a revised return expires, the difficulty will arise. It is for Parliament or the Central Government to provide a remedy to the assessee in such cases. Moreover, the other side of the picture as depicted in paragraph 27 (supra) should also be kept in view." Here the comments of Shri Rajaratnam quoted at para 5164 above are also relevant again: ""It is hard on the owners when required to pay tax, when handing over the possession for purposes of construction without being able to enjoy the construction, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flats cannot be taken at ₹ 4,500/- per sq. feet. It is also pointed out that in view of the agreement between the HASH & THDC consideration has been shown at ₹ 2,000/- per sq. feet for 126 flats whereas it is ₹ 4,500/- per sq. feet for three flats. We find no force in these submissions. The assessee has filed along with the written submissions copy of the addendum of agreement between THDC and HASH by Joint Developer (at page 265 & 266) and this issue is discussed in clause 5 which is as under:- "5. Clauses 4.1, 4.2, 4.3 and 4.4 on the page nos. 18 and 19 of the Agreement shall stand amended, modified and substituted by the following:- 4.1 It is expressly agreed and understood by and between the Parties hereto (a) in the ratio of 72,28 between THDC and HASH in case Gross Sales Proceeds does not exceed ₹ 1272 crores; (b) in the ratio of 70: 30 between THDC and HASH in case Gross Sales Proceeds is equal to ₹ 1272 crores; (c) in addition (b), in the ratio of 60: 40 between THDC and HASH in respect of gross sales Proceeds in excess of ₹ 1272 crores. "It is agreed that the minimum guaranteed amount from the Gross Sales Proceeds for THDC and HASH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per square feet is absolutely fair. In any case M/s HASH has agreed to purchase the flats at this rate from M/s THDC. It may be noted as pointed out by the ld. DR for the revenue some of the News report clippings filed by various assessees clearly shows that flats were booked in the "Tata Camleot" (this was the name which was given to the Project which was to be developed on the land of two societies) in the Pre Launch offer in the range of ₹ 7500 to 8000 per sqft. It is a common knowledge that rates in Pre Launch offer are lower than the rates when bookings open for the Public. Considering these facts we are of the opinion that Assessing Officer has estimated the value of the flats on most reasonable basis. In view of these observations this contention is rejected. 110 The Ld. Counsel for the assessee had made some submissions on the issue of deduction u/s 54F. He has pointed out that this issue has been rejected wrongly by CIT(A). However, carefully perusal of the grounds of appeal show that no ground in respect of deduction u/s 54F has been raised before us and, therefore, we decline to adjudicate this issue and all the arguments made in this behalf are rejected. Though ..... X X X X Extracts X X X X X X X X Extracts X X X X
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