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TMI Blog2016 (4) TMI 646X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Thus the said agreements are only a mode of remunerating the builder for his services of constructing the building. The assessees were entering into development agreements with the builders by conferring privileges of ownership to them and were claiming that the capital gains would arise only after registering the conveyance deed. Accordingly the section 2(47)(v) was brought into the statute to plug this kind of loop hole. Thus by considering the object of the Development Agreements and also the purpose of introduction of section 2(47)(v) of the Act,finally held that the year of chargeability in the case of Development Agreements is the year in which the contract was executed. In view of the foregoing discussions, we are of the view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 1986, the land was inherited by his five sons. The daughters of Shri Laxmi Singh Udit Singh relinquished their respective rights in favour of their brothers. Thus each son inherited 1/5th share in the land. They entered into an agreement on 10-10-2002 with M/s Brickworks Trading Pvt. Ltd. for development of the land and accordingly executed a power of attorney on 10-10-2002. According to the assessees the possession of the land was handed over to the developers at that point of time itself. 4. The assessees herein had declared long term capital gain in the return of income filed for assessment year 2007-08. The department noticed during the course of assessment proceedings of Shri Harinaryan L Singh (one of the co-owners) that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AY 2007-08 and they have also declared the same in their respective returns of income. Accordingly he submitted that the assessees are precluded from taking a different stand at this point of time. 7. We have heard the rival contentions and perused the record. It is a well settled proposition of law that there is no estoppel against law and hence we are of the view that the assessees herein are entitled to contend that the income offered by them is not liable to tax during the year under consideration, if the said income is not liable to tax at all in that year. In the instant cases, the undisputed fact remains that the assessees have entered into a development agreement with M/s Brickwork Trading Pvt. Ltd. on 09-10-2002. The very fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s support from the decision rendered by Hon ble Bombay High Court in the case of Chaturbhu Dwarkadas Kapadia Vs. CIT ( 260 ITR 491). 9 The legal position of development agreement vis- -vis section 2(47(v) of the Act was considered by the Hon ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia, cited supra. The relevant observations of the High Court, in that case, are extracted below: It was argued on behalf of the assessee that there was no effective transfer till grant of irrevocable licence. In this connection, the judgments of the Supreme Court were cited on behalf of the assessee, but all those judgments were prior to introduction of the concept of deemed transfer under section 2(47)(v). In this matter, the agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as the department have come to the conclusion that the transfer took place during the accounting year ending 31.3.1996, as substantial payments were effected during that year and substantial permissions were obtained. In such cases of development agreement, 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. .. In this case, the agreement is a development agreement and in our view, the test to be applied to decide the year of chargeability is the year in which the transaction was entered into. We have taken this view for the reason that the development agreement does not transfer the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also the NOC under Chapter XXC of the Income tax Act. By 31.3.1996, the builder obtained most of the approvals and also paid major portion of the consideration. The power of attorney was executed in favour of the builder on 12.3.1999. The assessee offered the capital gains in the assessment year 1999-2000, since the licence and power of attorney were given in the financial year 1998-99. The AO and ITAT held that the capital gains is assessable in the assessment year 1996-97 since substantial compliance of terms of agreement has taken place before 31.3.1996. However the High Court held that the impugned sale agreement is only a Development agreement and hence the capital gain is assessable in the year in which the said agreement was entere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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