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TMI Blog2016 (5) TMI 932X X X X Extracts X X X X X X X X Extracts X X X X ..... the developer to hand over the vacant possession of the property within the grace period of 12 months, there is a penalty clause that ₹ 20 lakhs per month shall be payable to the assessee. Further, by December, 2011, the developer almost constructed 9 towers each having 9 floors, which is mentioned in para 3.2 of this order. All these show that the JDA entered on 20.10.2007 actually acted upon. Subsequent agreements executed by the parties took only paper documents so as to postpone tax incidence. If one party is performed his part of duty i.e. developer shows that the other party also performed its part of obligation. Thus, the transaction entered into by the parties herein, which have the effect of transferring or enabling the enjoyment of any immovable property, then capital gains would be taxable in the year in which the transactions were entered into even if the transfer of the immovable property was not effective or complete under the general law. In our opinion, all the ingredients of sec.2(47)(v) of the Act are satisfied and it has to be inferred that a “transfer” took place within the meaning of sec.2(47)(v) of the Act. The completion of “transfer” of an immo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk of construction. Further, the vendor/owner has to execute a General Power of Attorney in favour of Shri Suresh Jain, Managing Director of the developing company for obtaining the permissions and approval from concerned authorities. It was further noticed from para 16 at page 7 of the JDA that the owners have given power to the developer to advertise for the sale of flats and negotiations for the sale with the prospective buyers etc. and sale deeds would be executed by the developer, through their Power of Attorney Agent and the developer would be responsible for the transactions with the prospective buyers. It was also mentioned that the developer agrees to construct and deliver the constructed area inclusive of common areas to the owners in fit condition for occupation within 36 months from the date of relevant plan sanctions and other permissions required for construction from the Statutory Authorities and or handing over of vacant possession of the entire Schedule A property to the developer, whichever is later. Thus, according to the AO, the land owners have given the possession of the entire land owned by them to the developer for developing purpose. However, before the AO, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 months. vi) May be, to avoid capital gain and to claim deduction u/s.80IB, the owners and the developer would have carried out the above method. 3.2 Further, by December, 2011 the developer almost constructed 9 towers each having 9 floors, which is evident from the following: In support of the above, sample sale deed received from the State Sub-Registrar Office has shown that the Power of Attorney holder viz. Mr. Suresh Jain, M.D. of Vijay Shanthi Builders (P) Ltd. which was conveyed by Mr. Praveen Kumar and 6 others vide Doc. No.1920/07 in Book-4 of Sl Registrar, Periamet and the owners (Mr. Praveen Kumar 6 others) had transferred the undivided share of land of 536.21 sq.ft. of Sch-A property to the proposed purchaser of one of the flats viz. Shaik Md. Shafijan and Dr. N. Sadiya Shafijan vide Doc. No.6175/09 dated 21.08.2009. Similarly on 18.11.2010 vide Doc. No.11356/10 dated 18.11.2010, the above owners/power of attorney holder have transferred the undivided sale of land to Sri. Srinivasan, No.35, 52 d Street, D.A.E. Township, Kalapakkam-603 102 to the extent of 381.78 sq.ft. In both the sale deed at page 5, it was mentioned about the joint development agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c.2(47) in the asst. year 2007-08 in the hands of the assessee. Against this, the assessee went in appeal before the CIT (Appeals), who deleted the addition by observing that there is no transfer of capital asset in the asst. year 2007- 08, in view of the ratio laid down by the Tribunal in the case of Vijay Productions (P) Ltd. v. Addl. CIT (134 ITD 19), wherein it was held as under : 47. On the question of treating the business income of ₹ 2,28,52,471/- as income from other sources, I find that the assessing authority has not discussed anything to that effect. The learned Accountant Member has rightly pointed out this vacuum in the assessment order. At page 32 in the computation portion of the assessment order, the Assessing Officer has just stated as Income from other sources as above . I agree with the view taken by the learned Accountant that the matter should go back to the Assessing Officer for deciding the issue afresh in accordance with law. 48. After considering the two questions, I agree with the views of the learned Accountant Member. 49. I should also make a reference to the prayer of the assessee to reframe the questions. The reframing is sought for by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the instant case, on 7.3.2003 an agreement was entered into by the assessee with M/s. Bhavya Constructions Pvt. Ltd., and the plan of the building was approved on 31.3.2003. These dates fall in the previous year 2002-03, relevant to assessment year 2003-04. Thus, in this case, the land being capital asset was transferred by the assessee to the developer during the assessment year under consideration, viz. 2003-04, for construction and it is enough if the assessee has received the right to receive consideration on a later date, so as to attract exigibility to tax on capital gains during the year under appeal. Mere accrual of the consideration, as it is to be received in the subsequent years does not defer the taxability of the capital gains. The assessee being owner of the capital asset, having parted with the possession of the land under a joint development agreement, for construction of residential flats/villas and having handed over the possession of the vacant land to the developer on promise to be handed over four flats equivalent to 40% of the value of the property to be constructed, it was a clear case of transfer by exchange within the meaning of S.2(47)(i) of the Act. Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of the matter, we find no merit in the contentions of the assessee that there is no taxability of capital gains in the year under appeal. We accordingly reject the grounds of the assessee on this issue. 5. Further, in the case of Madathil Brothers v. DCIT(301 ITR 345), the Madras High Court observed as under : 30. A perusal of the documents filed before this court shows that admittedly, the appellant-assessee was put in possession and enjoyment of the suit property as agreement holder right from January 1, 1976. The suit for specific performance was filed by the appellant-assessee herein before the original side of this court and in terms of the compromise memo filed in the suit, a decree was passed on September 30, 1983, in favour of this appellant. It is no doubt true that as part of the settlement terms, the parties agreed to revise the sale consideration. However, the same was done with reference to the claim under the agreement. The sale deed was executed in terms of the settlement reached in the suit proceedings. As such, there was no novation of contract to result in a fresh agreement entered into. 31. On the question as to whether a possessory right unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de amplitude to include every possible interest that a person may hold and enjoy. The meaning ascribed by the apex court to the term property applies with equal force to the understanding of capital asset under the provisions of the Income-tax Act. 33. The definition of capital asset refers to property of any kind held by an assessee. In contradistinction to the word owner or owned definition uses the phrase held . 34. Touching on the meaning of the term owner in the context of assessability of the income from property under section 22, in the decision reported in CIT v. Podar Cement P. Ltd. [1997] 226 ITR 625, the apex court held that owner is the person who is entitled to receive income from the property in his own right. The apex court held that in the context of section 9 of the 1922 Act, the owner must be a person who can exercise the rights of owner not on behalf of the owner, but in his own right. The apex court pointed out to the amendment to section 27 under the Finance Bill, 1987, to get over an obvious omission to the meaning of the word owner under section 22 that even though in common law, owner means a person who has got valid title ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Rajasthan High Court held that (726) : Following the view taken by their Lordships, we are of the view that for taxing the capital gain, registration of the sale deed is not necessary under the provisions of the Income-tax Act. The said decision of the Rajasthan High Court was again followed in the decision reported in CIT v. Rajasthan Mirror Manufacturing Co. [2003] 260 ITR 503. 36. Again, in the decision reported in M. Syamala Rao v. CIT [1998] 234 ITR 140, the Andhra Pradesh High Court considered the situation, where, under the agreement of sale on May 1, 1962, the assessee was put in possession of the land. The document of sale was registered on June 8, 1979. The assessee sold the land after converting it into plots. The sale of these lands was sought to be assessed as capital gains. On a reference, the Andhra Pradesh High Court held that though the document was registered on June 8, 1979, it related back to the date on which the agreement of sale was executed in favour of the assessee by the vendor. Hence, the assessee was deemed to be the owner of the property with effect from 1962. The Andhra Pradesh High Court pointed out that the assessee had held property for mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 45. Although the decision of the apex court related to a case of income assessability at the hands of an occupier who need not be an owner in the normal connotation, yet, given the scope of the definition provisions under section 2(14) and section 2(47) and the effect of the amendment brought forth by the insertion of clause (v) under section 2(47), we agree with the view expressed by other High Courts. 40. Learned counsel for the respondent submitted that in the context of the decision of the apex court reported in Alapati Venkataramiah v. CIT [1965] 57 ITR 185, referred to above, the period of holding the property has to be reckoned from the date of passing of title. 41. This decision was considered by this court in the decision reported in Meccane Industries Ltd. v. CIT [2002] 254 ITR 175, that transfer meant effective conveyance of capital asset to the transferee. It may be noted that the case reported in Meccane Industries Ltd. v. CIT [2002] 254 ITR 175 (Mad), related to the assessment year 1968-69. This court held that the delivery of possession of immovable property could not, by itself, be treated as equivalent to conveyance of the immovable property. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any profits or gains arising from sale, exchange, relinquishment or transfer of a capital asset . . . . The 1922 Act contained a definition of capital asset under section 2(4A). However, there was no specific provision therein corresponding to section 2(47) under the 1961 Act defining transfer . The present provision under section 2(47) defining transfer is wider in scope and is an inclusive definition. Touching on the scope of section 12B, the apex court held (page 192 of 57 ITR) : Before section 12B can be attracted, title must pass to the company by any of the modes mentioned in section 12B, i.e., sale, exchange or transfer. It is true that the word 'transfer' is used in addition to the word 'sale' but even so, in the context transfer must mean effective conveyance of the capital asset to the transferee. Delivery of possession of immovable property cannot by itself be treated as equivalent to conveyance of the immovable property . 46. A reading of section 45 as it stands today, shows that capital gains is chargeable on any profits or gains arising from the transfer of the capital asset . . . . Read in the context of the definitions of capital ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. CIT (260 ITR 491(Bombay), wherein it was observed as under: that section 2(47)(v) read with section 45 indicates that capital gains was taxable in the year in which such transactions were entered into even if the transfer of immovable property is not effective or complete under the general law. In this case, the test had not been applied by the Department. No reason had been given why that test had not been applied, particularly when the agreement in question, read as a whole, showed that it was a development agreement. Once under clause 8 of the agreement a limited power of attorney was intended to be given to the developer to deal with the property, then the date of the contract, viz., August 18, 1994, would be the relevant date to decide the date of transfer under section 2(47)(v) and, in which event, the question of substantial performance of the contract thereafter would not arise. This point had not been considered by any of the authorities below. The assessee had paid the capital gains tax for the assessment year 1999-2000. From mere substantial compliance of the agreement, one could not infer transfer in the accounting year ending March 31, 1996. There were mistake ..... X X X X Extracts X X X X X X X X Extracts X X X X
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