9911796707
TMI Blog2018 (12) TMI 1138X X X X Extracts X X X X X X X X Extracts X X X X ..... INDIA) that after amendment of Registration Act, 1908 in the year 2001, unless the document containing the contract to transfer any immovable property is registered, it shall not have any effect in law. In the instant case, there is no Joint Development Agreement (JDA), but only an unregistered sale agreement, which could not be fulfilled due to external reasons and there was no handing over of possession at any point of time to the purchaser. The property in question as on the date is still with the assessee and there is no transfer of the impugned property at any point of time. Therefore, the addition made by the Assessing Officer is uncalled for and we uphold the finding of the CIT(A) - we hold that the CIT(A) is justified in deleting the addition of Long Term Capital Gain - Decided against revenue - ITA No. 367/Coch/2017 - - - Dated:- 17-12-2018 - Shri Chandra Poojari, AM And Shri George George K, JM For The Appellant : Sri. Shanthom Bose For The Respondent : Sri. V. Venugopal, CA ORDER Per George George K . , JM This appeal at the instance of the Revenue is directed against the order of CIT(A)-IV, Kochi dated 05.05.2017 . The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erted with effect from 1 April 1988 by Finance Act, 1987 to enlarge the definition of transfer, whereby cases of transfer, what is popularly known as 'power of attorney' transaction, which allows the enjoyment of right in the property would be covered by new definition. It is clear that doctrine of part performance was given statutory recognition in Section 53A of the T.P. Act and it was desired only to protect possession of at transferee when the transfer falls short of requirement laid down by law. The purpose of introducing sub-clause (v) in conjunction with sub-clause (vi) is to widen the net of taxation so as to include transactions that closely resemble transfers but are not treated as such under the general law. In order to be 'transfer' within the meaning of subclause (v)} there must be a transaction under which the possession of immovable property is allowed to be taken or allowed to be retained. Secondly, such taking or retention of possession, as is well known, is a facet of the equitable doctrine of part performance of contract falling within the scope of section 53A of the Transfer of Property Act, 1882. Section 53A is not a source by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 general control and custody of the land can very well be reconciled. Sub-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 sub-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, what is spoken to in sub-clause (v) of section 2(47) is the 'transaction' which involves allowing the possession to be taken. By means of such transaction, a transferee like a developer is allowed to undertake development work on the land by assuming general control over the property in part performance of the contract. The date of that transaction determines the date of transfer. The actual date of taking physical possession or the instances of possess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r consideration in kind which was in the nature of 2 flats to be given to her by the developer. Thus, it was a case of exchange as understood in clause (i) of section 2(47). There was no force in the argument that the handing over of the possession was not in pursuance of part performance of the contract. Possession of the land being one of the interest in property had been transferred to the developer who also would be enjoying the usufruct of the land. If the shield of section 53A was available to the developer, it obviously meant that handing over of the possession was pursuant to the transfer contemplated under the Transfer of Property Act and hence under clause (v) of section 2(47). In the present case, this was not a sale transaction since money was not sole the consideration but some other valuable consideration was passing to the assessee in the form of 2 flats. Therefore, the transfer in the present case was for consideration and it was immaterial that the consideration may be received in future. Therefore, the development agreement in the present case had the effect of transfer as contemplated in section 2(47). refer to the provisions of S.2(47)(v) which reads as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in part performance of a contract of the nature referred in s. 53A of the Transfer of Property Act. Therefore, it is further requisite to deal with the relevant section contained in Transfer of Property Act. Transfer of Property Act contains S. 53A under the heading Part performance and, for deciding the case in hand, it is necessary to quote the impugned section verbatim as follows: Where any person contracts to transfer for consideration any immovable 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 his part of the contract, Then, notwithstanding that the contract, though required to be registered, has not been registered, or, where there is an instrument of transfer, that the transfer has not been completed in the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer of certain rights vesting to a purchaser; however such transfer does confer certain privileges of constructive ownership with connected bundle of rights. Indeed it is a departure from the commonly understood meaning of the definition transfer while interpreting this terra for tax purpose. On the facts of this case, the developer has got bundle of rights and thereupon entered into the property. Thereafter, we have to see what has happened and what steps the transferee has taken to discharge the obligation on his part. If transferee has taken any steps to construct the flats, undisputedly then, under the provision of Income Tax Act a transfer has definitely taken place. ( c) The existence of the consideration is the essence of the contract. In this case the amount of consideration has to be paid to the assessee in the form of cash as well as in kind i.e., the flats to be constructed by the developers to be handed over to the owners. ( d) Next is the important phrase i.e., terms necessary to constitute the transfer can be ascertained with reasonable certainty . According to us, in this case, the terms and conditions of the contract were unambiguous thus cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowing the possession so as to allow developer to undertake development work on the site. It is a general control over the property in part performance of the contract. The date of that transaction determines the date of transfer. To our understanding of the language of the Act, it is enough if the transferee has, by virtue of the impugned transaction, has a right to enter upon and exercise the act of possession effectively then such an act amounts to legal possession over the property. 16) The last noticeable ingredient is, the transferee has performed or is willing to perform his part of the contract . To ascertain the existence of willingness on the part of the transferee one must not put stop at one event but willingness is to be judged by the series of action of the transferee. The transferees survey the land and to attract purchases put up hoardings plus sales office and carry out site development work. Landscaping, sales promotion, execution of construction and completion of project are all incidental to demonstrate the willingness of the transferee. On one hand, the power of JDA grants bundle of possessor rights to the developer simultaneously and on the other hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal of the assesses is therefore computed in the year in which the Joint Ventrue Agreement was entered into, as detailed below; . During the completion of her assessment proceedings, Smt Preethy John who was also a joint venture partner along with Smt. Hema Mohanlal, submitted that if the capital gain is chargeable on the development of property under the Joint Development Agreement dated 21/03/2009, the proposal to arrive at the consideration @ ₹ 3500/- per sq.ft is highly objectionable, that ₹ 3500/- is only the cut off rate for paying commission to Artech for effecting the sale of the residential units for paying commission and has nothing to do with the cost of construction, that as per the MOU between Muthoot Estate Investments and Artech rate for purchase of super built up area is only ₹ 2,363/- per sq.ft. 20. After considering the merits of the arguments and supporting documents put in by Smt. Preethy John regarding the rates, it was decided to take the value @Rs.2,363/- for computing the sale consideration of Hema Mohanlal, since the facts and circumstances are exactly similar in this case. Hence, it has been decided to adopt the value of @Rs.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gain. 3. The Commissioner of Income Tax (Appeals) overlooked that the assesse had entered into an irrevocable power of attorney with M/s Artech Realtors (P) Ltd. and had handed over possession to M/s Artech Realtors. As such transfer as defined in 2(47)(v) of the Income Tax Act took place in the PY relevant to A.Y. 2009-10. 4. The Commissioner of Income Tax(Appeals) overlooked that as per section 2(47)(v) of the Income Tax Act, transfer' includes 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 . 5. The Commissioner of Income Tax (Appeals) overlooked that Finance Act 2017 introduced subsection 5A to section 45 to defer the incidence of capital gains in cases of Joint Development Agreement, to the year in which the certificate of completion is issued for the whole or part of the project. This was done precisely because as per the law in existence, the execution of Joint Development Agreement ('JDA') between the owner of immovable property and the developer triggered the capital gai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obstruct the process of construction in the aforesaid property . Therefore, the assessee has given the possession of the property for limited purpose of construction as per the JDA and the assessee continue to retain the ownership of the property. In other words, the assessee has the right to take back or reclaim property at any time, if the 20,000 sq.ft. builtup area is not handed over to the assessee in time. 7.1 As per the provisions of section 53A of the Transfer of Property Act, transaction would constitute transfer for the purpose of capital gain only if all following conditions are satisfied:- (i) There should be a contract in writing. (ii) The transferee has paid consideration. (iii) The transferee is willing to perform his part of the contract. (iv) The transferee should have taken possession of the property. 7.2 In this case, other than entering into the Agreement, no other condition stipulated u/s 53A as stated above is complied with. The following conditions are not fulfilled:- (i) No consideration in cash or kind is passed on at the time of signing the agreement or afterwards. Hence there is no accrual of consideration. (ii) The conditions s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the JDA that the land owner hereby agrees to give the right to sell the undivided share of interest in the aforesaid property to the developer in lieu of construction and handing over of 20,000 sq.ft. of super built-up area of service apartments . 7.5 In the case of C.S.Atwal v. CIT (2015) TaxCorp (DT) 61500 the Hon ble Punjab and Haryana High Court held that Entering into a joint development agreement with an irrevocable power of attorney in favour of the developer does not result in a transfer for purpose of capital gains. For the purpose of taxability the income has to really accrue to the assessee . In this case the right to receive the sale consideration is not accrued at the time of signing of agreement on 8th February, 2009. Without the accrual of consideration, the assessee is not expected to pay capital gain on the agreed sale consideration. Even the sale consideration is not mentioned in the agreement and no amount was handed over at the time of signing the agreement or afterwards. It was held in the case of C.S.Atwal v CIT (supra) that willingness to perform their part of the contract was absent on the part of the developers or it could not be performed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 53A of the Transfer of Property Act. It cannot be said that the provisions of section 2(47)(v) will apply in the situation. Thus, the capital gains could not have been taxed . 7.8 In the instant case, the assessee has offered a capital gain amount of ₹ 1,17,00,000 in Asst.Year 2017-2018 in respect of this transaction and has also paid the full tax. Copy of the statement of the total income along with ITR V for Asst.Year 2017-2018 enclosed as Annexure 14 in the paper book filed by the assessee. 7.9 Further, as per the newly inserted sub-section (5A) to section 45 to the Income Tax Act, 1961, by the Finance Act, 2017, capital gains in case of a joint development agreement arises only in the previous year in which the certificate of completion for the whole or the part of the project is issued by the competent authority. The stand of the assessee that just by signing the joint development agreement capital gains will not be attracted is now accepted by way of this newly inserted sub-section (5A) to section 45 of the Income-tax Act. 7.10 Most importantly, we notice that JDA was not a registered document. The general Power of Attorney executed by the assessee in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re registration. As has been stated above, there is no contract in the eye of law in force under section 53A after 2001 unless the said contract is registered. This being the case, and it being clear that the said JDA was never registered, since the JDA has no efficacy in the eye of law, obviously no transfer can be said to have taken place under the aforesaid document. Since we are deciding this case on this legal ground, it is unnecessary for us to go into the other questions decided by the High Court, namely, whether under the JDA possession was or was not taken ; whether only a licence was granted to develop the property ; and whether the developers were or were not ready and willing to carry out their part of the bargain. Since we are of the view that sub-clause (v) of section 2(47) of the Act is not attracted to the facts of this case, we need not go into any other factual question. 7.11 In view of aforesaid reasoning and judicial pronouncements cited supra, we hold that the CIT(A) is justified in deleting the addition of Long Term Capital Gain during the relevant assessment year. 8. In the result, the appeal of the Revenue is dismissed. Order pronounced on this ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
