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TMI Blog2017 (8) TMI 1189X X X X Extracts X X X X X X X X Extracts X X X X ..... avit of the assessee stated that the order of CIT(A) received on 29-04-2016 and addition to the extent of 22,29,875/- was made on account of the long term capital gain which has been confirmed by CIT(A). On this assessee was advised by the consultant that he has to file application under section 154 of the Act for rectification of the order and rectification application dated 04-05-2016 was filed with CIT(A) but no action was taken by CIT(A) on that application. Subsequently, the consultant advised the assessee to file appeal before ITAT and accordingly, appeal was filed before ITAT on 15-11-2016, thereby causing delay of 140 days. The relevant Paras of affidavit reads as under: - "2. That I received an Order of CIT(A)-38 for the assessment year 2008-09 of the Income Tax Act 1962 on Date 29-04-2016 3. That as per the said Order I found that Addition to the extent of Rs. 2229875 as LTCG has been confirmed. 4. That I was advised by my consultant that the said order is factually incorrect and an application for rectification under section 154 shall be filed. And the application Dated 04/05/2016 filed with CIT(A) 38. 5. That in response to the said application for rectificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in confirming the additions to the extent of Rs. 22,29,875/- as Notional Long term Capital Gain on entering the development Agreement on 27-12-2007 between Developer & 8 Joint Owners without consideration and without fulfilling provisions of section 2(47) of the Income Tax Act 1961 and section 53A of the Transfer of Property Act, since no sale effected during the year. 2. Without prejudice to ground No.1, the Learned CIT(A) further erred in working out Long Term Capital gain at Rs. 22,29,875/- without giving Cost Indexation benefit to the appellant, without giving any reason." 5. Briefly stated facts are that the property bearing Cadastral Survey No. 361 admeasuring 3255.98 Sq. mtrs, excluding the land measuring 1113 Sq. Yards on which there existed the Dargah of Hazrat Shaikh Misri, Shaikh Misri Jama Masjid and Private Burial ground of Ahmedji family. The assessee along with 7 co-owners entered into development agreement for the purpose of re-development of the slum, in which they were residing, with the developer M/s Jiva Builders & Developers on 07-01-2010 as per the document/ deed was confirmation of the documents/ deed registering with the registrar after payment of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as transferred the development right of the property to the developer M/s Jiva Builders and Developers and therefore, they have earned capital gains and the same is to be assessed as long term capital gain. He assessed accordingly. Aggrieved, assessee preferred the appeal before CIT(A), who also confirmed the action of the AO and assessed the long term capital gain after rectifying the earlier orders at Rs. 22,29,875/- in each of the co-owners i.e. restricted to 5 co-owners which are in appeal before Tribunal. For this CIT(A) has observed which reads as under: - "4.4.2 Ground No.2.3 & 4: The grounds of appeal no.2,3 & 4 are in respect of addition of Rs.48,27,410/- on account of LTCG and will be taken together for consideration and decision. 1. The appellant has argued that neither the appellant or the 7 co- owners of the property had transferred the property within the meaning of section 2(47) of the I.T. Act r.w.s. 53A of the transfer of property Act and that they have not received any consideration either monetary or otherwise during the year and neither possession of the property was handed over to the developer nor the development had been undertaken by the developer durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of Hon'ble Supreme Court mentioned supra, the contention of the appellant that they had not received any monetary consideration is not found acceptable. As per the development agreement it has categorically been specified as per clause 4 pg. 10 of the Agreement for Development dtd. 27.12.2007, the Developers shall provide the landowners three shops in the Rehabilitation Component on the ground floor each of 150 sq. Carpet to the landowners free of cost and 5500 sq. Ft. Incentive FSI in the sale component building free of cost (in terms of ready flats) to the owners to be retained by them on ownership basis. Beside the above, in consideration of land and increased incentives FSI, the developer shall construct and provide to the owners free of cost an independent Bungalow measuring 1500 sq. Ft. of carpet area. Therefore, in view of the above facts and decision referred above, the contention of the appellant that there is no monetary consideration received by them is not acceptable because even on the basis of accrual, the consideration is deemed to have been received. III. Deemed transfer under section 2(47)(v) r/w section 53A of T.P. Act (a) In the cases of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 2(47) came up for consideration and discussion before Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia v. CIT, (2003) 260 ITR 491 (Born.) wherein the Hon'ble Court observed that the development agreement does not transfer the interest in the property to the developer in general law and therefore, section 2(47)(v) has been enacted and in such cases, even entering into such a contract could amount to transfer from the date of agreement itself. Further, it was observed that if the contract, read as a whole, indicates passing of or transferring of complete control over the property in favour of the developer, then the date of the contract would be relevant to decide the year of the chargeability. (b) As far as the question of transfer u/s. 2(47) of the Act r.w.s. 53 of TPA is concerned in the instant case it is observed that if the agreement of development enables the passing of domain and control of the immovable property by grant of an irrevocable authority or licence, then even the date of agreement of development will constitute the date of transfer of the Capital asset as held by the jurisdictional Bombay High Court in the case of Chaturbhuj Dwar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... landowners shall convey the property excluding their independent building and the land occupied by the building with all rights and entitlement of future benefits of additional FSI as mentioned in sub-clause (ii) of clause 2 to 10 of the agreement. Thus it fulfils the condition envisaged in section 2(47) r.w.s. 53A of TPA. viii. As per clause of the development agreement, the developer has to take full responsibility of slum dwellers and ensure acceptance of atleast 70% of the slum dwellers and construct the new buildings for them. The aforesaid property was sold by the appellant and his co- owners with liability of the slum dwellers which were regularised by the State Govt. of Maharashtra in 1994 under the Slum Redevelopment Scheme whereby the Slum Dwellers of regularized slum were to be rehabilitated and the owners I developers of such lands were to be compensated with increase in FSI. ix. Thus it has to be understood in such factual matrix that the physical transfer of property was not necessary. The possession of property could be only after fulfilling the conditions laid down in the agreement and the fact that there has been a delay on the part of the Developer to start ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re registered in such cases there involve a 'transfer of land / FSI' in case of grant of development right. Thus, it does include cost of acquisition and section 50c is applicable. xvi. Since the appellant alongwith his 7 co-owners have transferred the development rights to the developer M/s. Jiva Builders and Developers, therefore Capital Gain is applicable on such transfer. xvii. Registration under TP Act not necessary for taxability of income (a) In the case of development agreement though possession is given to developer immediately for the purpose of construction on entering into agreement legal ownership of land continues to be with owner. (b) It has, been held by the Courts that date of registration of such document is not relevant for the purpose of transfer under Section 2(47) of the Act. (c) In regard to the matter as to the importance of registration of documents under the Transfer of Property Act conferring rights in the immovable property, reference can be made to certain court decisions wherein a view has been taken that notwithstanding that the documents have not been registered the rights will be deemed to be transferred to the person having th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing him indexed cost of acquisition at Rs.4,48,875/-. Accordingly, the appellant gets a relief of Rs.25.97.535/ -(Rs.48,27.4 10 - Rs.22,29,875). In view of the above, the addition to the extent of Rs.22,29,875/-is confirmed." Aggrieved, now these five assessees are in appeal before Tribunal. 7. I have heard the rival contentions and gone through the facts and circumstances of the case. Before me, both the parties i.e. the Sr. DR as well as learned counsel for the assessee admitted that the facts narrated are undisputed. The facts are that the assessee along with 7 other co-owners entered into development agreement dated 27-12-2007 with M/s Jiva Builders and Developers for development of Slum i.e. the property of the assessee under Slum redevelopment scheme wherein the developer was required to obtain all sanctions, consent of payments and of slum dwellers, occupiers etc. as well as permissions, plans and lay out sanctioned from local authorities and government. Unless and until, such plans and layout first approve and signed by the land owners the development rights would not commence. It only intended to transfer the said properties on fulfillment of the said conditions stipula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances, I am of the view that the assessee entered into a new development agreement cum deed of assignment of lease with another developer M/s Jiva Builders and developers dated 27-12-2007 & deed of confirmation was registered with the sub-registrar Mumbai city-3 vide dated 07-01-2010. It is also a fact that the assessee has not parted with the possession of the property till date or has not handed over the possession of the property to the new developer and even the new agreement. According to me, the liability for capital gain would arise only in the year in which possession is given and this view of ours is supported by the decision of Hon'ble Bombay High Court in the case of Geetadevi Pasari (supra), wherein Hon'ble Bombay High Court held as under:- "4. In the aforesaid Judgment, this Court had clearly taken a view that in the relevant Assessment year for the purpose of computation of capital gains will be the Assessment year in which the assessee was actually physically put in possession and in the instant case, there is no dispute that though the agreement was entered into on 29th March, 1994, the assessee was put in possession only in the year 10th April, 1998. 5. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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