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TMI Blog2018 (5) TMI 1842X X X X Extracts X X X X X X X X Extracts X X X X ..... ic ground before the CIT(A) and reproduced in the appellate order, which reads as under: “6. The Assessing Officer ought to have referred the valuation of the properties under consideration to the Valuation Officer as provided for in Sec. 50C(2)(a) and (b) of the IT Act as claimed by the appellant Firm before the AO during the assessment proceedings, particularly considering the steep increase noticed in the guideline values fixed by the Stamp Value Authority in the short period covered.” CIT(A) has not given any findings upon the specific ground raised by the assessee. Accordingly, we direct the CIT(A) to adjudicate and decide the above issue in accordance with law after allowing sufficient opportunities of being heard to both the parties. Thus, this ground of appeal is allowed for statistical purposes. Additional ground - Reckoning transfer u/s 2(47)(v) based on JDA - plea of the assessee is that the reckoning of date of transfer should be based on the execution of MOA dated 30.01.2012 - HELD THAT:- The execution of MOA alone does not convey transfer of the schedule property to the developer within the meaning of section 2(47(v) because, the MOA is not a registered docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le in law. 4. The CIT (Appeals) failed to appreciate that the misconstruction of facts and misreading of the provisions governing the reckoning the deemed transfer would vitiate the decision rendered from para 5.3 of the impugned order. 5. The CIT (Appeals) failed to appreciate that in any event the computation of Long Term Capital Gains on various facets was wrong, erroneous, unjustified, incorrect and not sustainable in law. 6. The CIT (Appeals) failed to appreciate that the decisions cited were completely overlooked/wrongly rejected incorporating irrelevant reasons and further ought to have appreciated that the decisions applied to sustain the computation of Long Term Capital Gains on the reckoning of deemed transfer in the previous year relating to the assessment year under consideration were not applicable to the facts of the present case while the principles laid down in those decisions were applied out of context. 7. The CIT (Appeals) failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles natural justice would be nullity in law. 8. The Appellant craves leave to fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tra, by filing detailed written submissions, the ld. DR pleaded for confirmation of orders of authorities below. 6. We have heard both sides, perused the materials available on record and gone through the orders of authorities below. The assessee was engaged in the business of brick manufacture till 1986 and was not functioning due to stoppage of brick manufacture as the available land was fully exploited. The firm had about 35 acres of land and the same was subject of joint development agreement [JDA] with M/s. Brigade Enterprises Ltd. during the year 2012-13 to develop residential flats of superior quality. In this transaction, the assessee has received interest free refundable deposit of ₹.10 crores [₹.1,00,00,000/- vide cheque No. 812960 dated 25.01.2012 and ₹.9,00,00,000/- vide DD No. 240826]. The Assessing Officer noticed that the provisions of section 2(47)(v) of the Act is attracted in this case since the assessee had agreed to transfer/sell its 60% of total land of 35.55 acres to M/s. Brigade Enterprises Ltd. for a consideration which would be equivalent to 40% of total constructed area Hence, the Assessing Officer requested the assessee to explain the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court further held in the case of Suraj Lamp and Industries Ltd. (supra) that registration date will be taken as the date of transfer only in the absence of part performance as contemplated under section 53A of Transfer of Property Act. Till 31st March 1988, in the absence of registered conveyance deed if owner of a immovable property had put the purchaser in possession of the immovable property, he was not required to pay capital gains tax. Many owners of immovable property used to take advantage of this legal position by postponing the tax liability by delaying the execution of conveyance deed in favour of the purchasers. Section 2(47) was amended vide Finance Act 1987 w.e.f. 01.04.1988 by rectifying this loophole by inserting clause (v) as under: (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); After the introduction of clause (v) to Section 2(47) of the Act, possession was unanimous with transfer and the liability for capital gain tax will arise as soon as possession takes place. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1994 would be relevant date to decide the date of transfer under section 2(47)(v) of the Act, and, in which event, the question of substantial performance of the contract thereafter would not arise and accordingly previous year 1994-95 was held to be the year of transaction. Similar to clause 8 of agreement in the case of Chaturbhuj Dwarakdas Kapadia, para 6.3 of JDA in the case of the appellant is relevant wherein, the parties have agreed to execute power of attorney to conveyor transfer the undivided shares in the schedule property. Clause 6.3 of the JDA is reproduced as under: 6.3 In consideration of the Developer agreeing to construct and deliver the Owners' Constructed Area as per clause 6.1 above, the Owners hereby agree, bind and undertake to transfer/ convey/ sell to the Developer and/or their nominee(s) or their assignee(s), an undivided 60% share or such proportionate undivided share in the Schedule Property as is proportionate to the Developer's Constructed Area either in one lot or in several shares or in the form of undivided shares or otherwise at the sole discretion of the Developer. For this purpose, the Owners shall execute and register a power of att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in order to be a transfer within the meaning of Section 2(47)(v), there must be transaction under which the possession of immovable property is allowed to be taken or allowed to be retained and secondly such taking or retention of possession is a part performance of contract falling within the scope of Section 53A of Transfer of Property Act. The Authority followed the judgement of the Supreme Court in the case of Govindrao Mahadik v Devi Sahai AIR 1982 SC 989, wherein it was held that: In order to be transfer within the meaning of clause (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. Section 53A is not a source by which title to immovable property could be acquired but it only serves as a shield to defend one's lawful possession obtained pursuant to a contract for transfer of immovable property for consideration. The following passage from the decision of the Supreme Court in Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to be submitted to enable Second Party to take up the above said activities including the Government survey on behalf of First Party. 9. The first Party/Owner agrees to permit the Second Party/ Developer to enter into the Schedule Properties immediately on execution of this MOA to take up survey, soil testing, planning etc., and permit the development activities simultaneously on execution of Joint Development Agreement and registered Power of Attorney for the purpose of obtaining various approvals by the First Party/ Owner in favour of the Second Party/ Developer. Further, the First Party / Owner agree to execute a separate registered Power of Attorney for the purpose of sale of the undivided shares in the property, as per the terms and conditions mutually agreed between the parties, simultaneous to the execution of Joint Development Agreement. The above clauses indicate that simultaneously on entering into JDA the developer carried out a lot of developmental activities. Therefore, the ld. CIT(A) was of the view that the assessee acted in furtherance of the contract. The contract has not been cancelled and is subsisting. The transferee never sought to cancel the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch as refusal of permissions, the developer facing financial crunch etc. By that time, the owner would have received only a part of the agreed consideration, but he is obliged to file the return showing the entire capital gain based on the full sale price whether or not received during the year of deemed transfer. In such an eventuality, hardship may be caused to the owner who would have paid full tax. No doubt, such a situation could be avoided 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 let 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 rare 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee contended in its written submission that the requisite conditions for fulfilling part performance in terms of Section 53A of the Transfer of Property Act have not been met and argued that there should be a consideration for transfer of its capital asset to bring the same as transfer within the meaning of section 53A of the Transfer of Property Act. According to the assessee no consideration was received. The amount of ₹.30 crores as per clause 14 of the JDA was an interest free refundable deposit, which is stated to be not a consideration for the transfer of the property. After considering the above submission, the ld. CIT(A) observed that it was not the case of the department that the refundable deposit received or receivable is a sale consideration for the transfer of the land property to the builder. As per the GPA, the assessee was in receipt of share in the proposed super structure as a consideration for transfer of a proportionate undivided share of the land. As per JDA, the consideration proposed to be received at the stage of entering into agreement was not in cash but in kind, which is in the nature of share in the super structure going to be built. ₹. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks are unbridled rights and the owner of the land has no right to stop the developer not to enter or to carry out the developmental activities until otherwise the JDA is terminated which is possible only under special circumstances. As per clause 16 of JDA, it is only the developer who has the sole discretion to terminate the JDA for false representation or breach of the terms of the JDA by the owner, deficit in the ownership title etc. The owner is not given such sole discretion to terminate the JDA. As per clause 3.2 of JDA, if the statutory approvals are not obtained within the stipulated period the parties shall mutually agree on the future course of action including the extension of time required for plan sanction. In the event of the parties mutually agreeing to terminate the JDA in writing, the owners shall refund within 30 days of such notice to terminate, refundable deposits received, any vacant land tax paid and any other amounts paid by the developer to the owner. The JDA will be terminated only after the refund of such amounts by the owners to the developer and not before. Till that time, the developer will have a charge over the property. As per clause 13.6 of JDA the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terminate the contract. 6.13 Against the dispute of the assessee that the developer is never the owner of the property and as per the JDA the land owner and developer perform construction project by joining together by way of owner providing the land and the developer constructing the building, which will be ultimately sold to the buyers on the completion of the project and therefore it was contended that the developer is never entitled to be a buyer and the property is never transferred to him as the owner. In this regard, the ld. CIT(A) observed that the developer became the owner of the land, not by registration, but as per the part performance of a contract as provided under section 53A of the Transfer of Property Act. In this case, transfer took place because land is given possession to the developer and in consideration of land owner agreeing to give 60% undivided share in the land, the developer agreed to construct and deliver 40% of the super built up area, therefore the transferor is liable for capital gain tax. There is vesting of rights by the land owner to the developer to possess the land and bring such land under its control to do certain developmental activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivity was carried on only by the developer and the land owner is a mere spectator. The owner has no role other than handing over the possession of the land to the developer. He can merely inspect the progress of work and require the developer to properly implement the work of owners constructed area and in this regard, the decision of the architect as to the quality of the material and work, the rate of progress shall be final and binding. The limited role of the owner is restricted to inspect the progress of work that too limited to its share of super structure is to only fulfil its part of the contract and this activity in no way can be equated with the business activity of the assessee. The assessee owns the land and it is not doing any business activity. It is the developer who develops the land and constructs the building. The activity of the developer is the adventure in the nature of trade and for the land owner it is a mere handing over of the possession of the land to the developer. Section 45(2) is not applicable to the case of the assessee. The relevant section applicable is Section 2(47)(v) r.w. Section 53A of the Transfer of Property Act, as per which the transfer ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the fair market value of the asset in question must be deemed to be the full value of consideration received or accrued as a result of transfer. 6.16 Against the submissions of the assessee that as per Section 50C the date of transfer will be the date of agreement of sale for the purposes of calculation of capital gain and placed reliance in the case of Modipon Ltd., 57 taxmann.com 360 and therefore the assessee contended that 31.01.2000 on which date the MOA was effected must be taken as the date of agreement of sale and not the date on which the JDA was entered. The ld CIT(A) was of the view that the Memorandum of Agreement was in a nascent stage which got fructified and fortified by the Joint Development Agreement entered on 17.09.2012. The second General Power of Attorney [GPA-2] was also entered on 17.09.2012. The JDA and the GPA-2 are more definitive. GPA-2 is irrevocable . The rights of the parties have been determined in clear terms both in JDA and the GPA-2 in comparison to MOU. The MOU is mere understanding which got formalized in JDA and GPA. Therefore, the ld. CIT(A) was of the view that the date of transfer must be taken as on 17.09.2012 instead of 31.01.2012. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of plan sanction process within the time fixed under the JDA (or extended period as may be mutually agree upon) shall be taken into consideration while taking a decision on the future course of action in this regard. In the event of the Parties mutually agreeing to terminate the JDA in writing, the Owners shall refund within 30 days of such notice to terminate, (a) all the Refundable Deposits received by them from the Developer without any interest (b) all amounts paid by the Developer towards the Owner s share of vacant land tax, if any, as provided under clause 11.2 and (c) any other amount paid or advanced by the Developer to the Owners. 14.3 The Developer will have first charge over the Schedule Property and the Owners Constructed Area for the interest free Refundable deposit, the amount paid by the Developer towards Owners share of vacant land tax and other amounts and advances paid or made by the Developer to the Owners. The Developer shall have a first charge over the Schedule property, including the Owner s Constructed Area till the refund of the aforesaid amounts to the Developer in the manner provided under this JDA. 16.2 Notwithstanding anything contained in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BEFORE THE Hon. ITAT: 1. Both MOA and JDA are unregistered documents and therefore the decision of the Hon. Supreme Court in CIT Vs Balbir Singh Maini (2017) is applicable. 4.1.1. The Hon Supreme Court In CIT Vs. Balbir Singh Maini dated Oct4 2017, has held that if an agreement, like JDA in the present case, is not registered then it shall have no effect in law for the purpose of Sec 53A of the TOPA. The Hon SC in Para No.20 has observed as under: 20. the effect of the aforesaid amendment is that, on and after the commencement of the Amendment Act of 2001, if an agreement, like the JDA in the present case, is not registered, then it shall have no effect in law for the purposes of Section 53A. In short, there is no agreement in the eyes of law which can be enforced under Section 53A of the Transfer of Property Act This being the case, we are of the view that the High Court was right in stating that in order to qualify as a transfer of a capital asset under Section 2(47)(v) of the Act, there must be a contract which can be enforced in law under Section 53A of the Transfer of Property Act A reading of Section 1 7(IA) and Section 49 of the Registration Act shows that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se expressed debitum in present solvendum in futuro; See W. S. Try Ltd. V. Johnson (Inspector of Taxes) ((1946) 1 AER 532 at p. 539], and Web V. Stenton, Garnishees (11 QBD 518 at p. 522 and 527). Unless and until there is created in favour of the assessee a debt due by somebody it cannot be said that he acquired a right to receive the income or that income has accrued to him. 26. This Court, in Commissioner of Income Tax v. Excel Industries, (2014) 13 SCC 459 at 463-464 referrred to various judgements on the expression accrues and then held: 14. First of all, it is now well settled that income tax cannot be levied on hypothetical income. In CIT v. Shoorji Vallabhdas and Co. (CIT v. Shoorji Vallabhdas and Co., (1962) 46 ITR 144 (SC)] it was held as follows: (ITR p. 148) .... Income tax is a levy on income. No doubt, the Income Tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in bookkeeping, an entry is made about a hypothetical income , which does not materialise. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the JDA and therefore no profit and gain arose from transfer of capital assets so as to attract sec 45 and sec48 of the Income tax act. 4.2.4. As the JDA entered into by the appellant pan material, the same as cited in the above decision, there is no real income earned by the appellant and therefore capital gains does not arise. 3. APPLICABILITY OF SEC. 45(2) - BRICK CHAMBER LANDS OWNED BY THE FIRM AS A BUSINESS ASSET CONVERTED INTO STOCK - IN -TRADE. 4.3.1 In this respect we submit that the capital asset of land belonging to the assessee Firm was treated as stock-in -trade in the year 1996-1997 itself as per Sec.45(2) of the l.T.Act,1961 (after the stoppage of the business in manufacture of bricks), when the entire land measuring 35.50 acres were planned to be utilized for commercial exploitation, either by appellant s or by the way of joint venture with other suitable builders. 4.3.2 The provisions of Sec. 45(2) provide as under Sec 45(2) notwithstanding anything contained in sub-section (1), the profits or gains arising from the transfer by way of conversion by the owner of a capital asset into, or its treatment by him as stock in trade of a business carri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of land changes factually. What was held as capital asset changes colour especially after the arrangement with the developer (if not before) is made for construction and then sale to the buyers. The interpretation of the words or otherwise would not be required as the agreement provide for sale of constructed units to the prospective buyers and therefore the year of charging capital gains would be taken to be year of sale as provided in section 45(2). This is important more so as the rights in land remain with the land owner till they are sold to the prospective buyers. The words sale or otherwise transferred are mutually exclusive situations. When the same agreement provides for sale of land to the prospective buyers there is no question of going to the word or otherwise . 4.3.5 Applying the facts of the appellant s case to the above, it is submitted that the assessee firm M/s. Tamilnadu brick industries has been in the business of manufacture of bricks since 1971 and continued till 1996, when the business was stopped due to the full utilization of the area for bricks manufacture. 4.3.6 After the discontinuance of the business in manufacture of bricks from the year 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isting by the owners till the Developer completes the development and transfers or otherwise disposes of their share of built-up space as per the JD. The possession of the Schedule property shall continue to be retained by the Owners and the same will be handed over to the buyers! allottees as and when the undivided share of the land in the Schedule property is conveyed in favour of buyers/allottees of the built up space. Commencement and completion of construction: Para 7 (page no.34 of JDA page no.54 of Paper book - Vol. I): 7.1 The Owners have permitted the developer to enter and exit the Schedule property for the purpose of development only. Provided always that the same shall not be construed as delivery of possession or part performance contemplated u/s 53-A of the TOPA. The owners hereby permit and authorize the developer to enter upon the Schedule property only for the purposes of development. Transfer of Developer s Share: Para 10 (Page No.42 of JDA and Page No. 62 of Paper book- Vol. I) 10.1: The Owners agree to convey/transfer to the Developer and/or their nominees or assignees an undivided 60% share or such proportionate share in the Schedule property ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the possession in the property was not handed over to the developer and that he was granted the permission to develop and it was expressly agreed that such permission shall not be construed as delivery of possession or part performance contemplated under 53A of the TP Act and that the developer is entitled to sell only after obtaining the plan permissions. Therefore there is no possession granted to the developer even if the provisions of sec 2(47)(v) are applicable, for such JDAs and therefore the requirement of part performance fails. 4.4.4. The Developers, M/s. Brigade Enterprises Limited submitted the proposal for the construction of Residential group development before the CMDA 29/05/2013 in file No. B311009412013 (SBC No. 556/2013) for the joint development project. It is submitted that the application for the plan approvals was submitted only after the year ended 31st March 2013, not falling in A.Y.2013 -2014. 4.4.5. The CMDA finally issued the Building permission in Building Plan No. CEBA/WDCN11/00328/2016 dt. 18/11/2016. As the Plan approvals have been received in the previous year 2016-2017, relevant to Assessment year 2017-2018, the handing over of the possessio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue impact and no dispute in determination of tax liability except the year of taxation: 7.1 It is submitted that there is no dispute on the payment of tax or determination of tax liability, whether under capital gains (long or short) or business income. Only the assessment year in which the income is chargeable to tax is the issue. The large residential housing project launched in the heart of the Chennai city, is estimated to make gross earnings close to about ₹ 1500 crores in the next five years, involving big contribution to the exchequer. 8. Sec. 45(5A) of the IT Act., introduced from AY 2018 -2019: 8.1 It is submitted that the legislature has introduced a new Sec. 45(5A) in the Finance Act, 2017, w.e.f. AY 2018 -2019, providing for chargeability of capital gains to income tax as income of the previous year in which certificate of completion for the whole or part of the project is issued by the competent authority applicable to Individuals and HUF, but the amendment is curative in nature, to eliminate the taxation of hypothetical income on the date of execution of JDA itself. 9. RESPONSE TO THE WRITTEN SUBMISSIONS OF Ld . Standing Counsel. The Point wise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Brigade Enterprises Ltd. The terms agreed upon in the JDA starts at Page 43 of the Vol-1. 2. Permission to Develop: 3. Statutory Approvals 4. Construction 5. Cost of Construction 6. Sharing of Built up area and car parking area 7. Commencement and completion of construction 8. Marketing Sale of owners constructed area 9. Indemnity 10. Transfer of Developers share 11. Taxes, Maintenance charges, Deposits etc., on owners constructed area 12. Maintenance charges/sinking fund/campus corpus fund, etc., 13. Obligation of the Owners 14. Refundable Deposit (internal page 51 of iDA is missing in Vol-i) 15. Borrowings by the Developer and Documents of Title 16. Termination and Consequences of Termination 17 to 20 are other general covenants. III. Registered General Powers of Attorney: 7. On the same day 17.09.2012, the appellant executed and registered two General Powers of Attorney in favour of the Developer, M/s.Brigade Enterprises Ltd vide Document No.603/2012(Page 93 of Vol-i) and Document No.604/2012(Page 112 of Vol-2). 8. Terms of the Document No.603/2012 starts at Page 102 i.e., 1. To sell or otherwise dispose of by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Attorney entered in the AY 2013-14. V. Submissions of the Appellant/Assessee during Assessment: 11. The appellant vide letter dated 14.07.2016 and submissions dated 18.06.2016 (Page 2 of the assessment order) stated that the appellant had received interest free refundable deposits of ₹ 10 Cr. a. The appellant contended that the provisions of Section 2(47) (v) are not applicable as the actual transfer of property as per section 53A of the Transfer of Property Act has not taken place as it is a mere agreement to develop the property without acquiring ownership till development. b. The appellant referred to various covenants of the IDA to contend that the agreements are not the type of contracts covered by Section 53A of the Transfer of Property Act. On the applicability of Section 50C of the Act: c. The appellant contended that the assessee firm was converted its capital asset of land into stock-in-trade in the year 1986-1987 as per Section 45(2) of the Act. d. The appellant contended that the Capital gains as on the date of conversion can be offered in the year of actual sale and the difference in sale price and market value on conversion will be o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilable as on date of MOA to be taken into consideration is not acceptable, as it is a mere understanding to come together to pursue their intended activity of development of land. Actual agreement for performance of development of land by developer takes power from JDA and same is reinforced with registered GPA dated 17.09.2012 and same is taken as the actual date of accrual as falling in AY 2013-14 and stamp valuation as per FY 2012-13 is to be adopted as per provisions u/s.50C. Therefore the Assessing officer determined the value of the property as on the date of execution of iDA by adopting the guideline value at ₹ 5,500 per sq.ft. 13. Accordingly, the learned Assessing Officer computed the stamp value rate as existing as on the date of execution of JDA and extracted the details of guideline value of land survey number wise taken from the official website of Tamil Nadu Government Land registration department. 14. The Assessing Officer therefore held that the appellant is deemed to have sold 60% of the total area of the property which is worked out as ₹ 511,02,41,400/- and added to the total income under the head LTCG . 15. The Assessing Officer has also mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tent with the legislative mandate as required u/s.2(47)(v) and judicial precedents discussed hereunder, the transaction in question is in nature of transfer u/s.2(47)(v) for the purpose of computing capital gains u/s.50C of the Act. 21. That the learned CIT(A) affirming the order of the Assessing Officer by a well structured order duly discussing the entire legal and factual scenario, the respondent, with great respect submits that such an order may not be interfered with. Section 2(47)(v)- Scope 22. That the purpose of introducing Sub-Cl(v) in conjunction with sub-cl(vi) in Section 2(47) defining the term transfer was to widen the net of taxation of capital gains and include transactions that closely resembled transfers but were not treated as such under the general law. Any avoidance or postponement of tax or capital gains by adopting devices such as the enjoyment of property in pursuance of a revocable power of attorney or part performance of a contract of sale was sought to be arrested by introducing the two clauses, cls(v) and (vi), in Section 2(47). Section 2(47) contemplates a transaction which enables direct and immediate possession to be taken and not one whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of CIT(A) in this regard. Developer has the first charge over the property 28. It is humbly submitted that in view of para 14.3 and 16.2 of the JDA, the developer has the first charge over the schedule property and the contract was duly extended, subsisting and binding on the parties. Transaction is in the nature of part performance u/s.53A of the Transfer of Property Act, 1882 29. That under section 53A of the TP Act, what is to be seen is that the section provides for a shield of protection to the proposed transferee to remain in possession against the original owner who has agreed to sell to the transferee, if the proposed transferee satisfies other conditions of Section 53A. That protection is available as a shield, only against the transferor, the proposed vendor would disentitle him from disturbing the possession of the proposed transferees who are put in possession pursuant to such an agreement. 30. The Following postulates are sine qua non for basing a claim on Section 53A of the TP Act: i) There must be a contract to transfer for consideration any immovable property. ii) The contract must be in writing, signed by the transferor, or by someo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 108 (AAR). All these decisions have observed and held that where possession is handed over to the developer under the development agreement-cum-GPA capital gains tax is chargeable in the year in which such transfer takes place and possession is handed over to the developer. The fact that payment of consideration was deferred to a future date is irrelevant. 35. That the decision of the Supreme Court in the case CIT Vs Balbir Singh Maini [2017] 86 taxmann.com 94 (SC) relied on by the appellant is distinguishable on the facts of the case. In that case, for want of permissions, as the entire transaction of development of land envisaged in Joint Development Agreement (iDA) fell through, it was held, therefore, there would be no profit or gain which arose from transfer of a capital asset, which could be brought to tax under section 45, read with section 48. In fact, Capital gains tax was paid on the two parcels of land, admeasuring 7.7 acres. Only the rest of the project could not go through for want of various permissions. Therefore, the Apex Court felt that there could be no transfer as such, as the transaction has not completed for the want of permissions and the profits did not ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to subsequently enter into Joint Development Agreement(herein after referred to as JDA) on 17.09.2012. Terms of sharing of the super built up area is agreed between the parties as 40% to the land owner and 60% to the developer. It was agreed that an amount of ₹.30,00,00,000/- by way of interest free refundable deposit to be paid to the appellant as a security deposit. The manner in which the deposits are paid are at Page 8 of Vol-1 paper book. a. ₹.1,00,00,000/- at the stage of execution of MOA. b. ₹.9,00,00,000/- at the stage of execution and registration of JDA. c. ₹.10,00,00,000/- on obtaining all NOCs, approval and plan sanction for the development. d. ₹.10,00,00,000/- before commencement of project. It was also stated that the developer exercised lien over the property for the deposit paid by it to the assessee. It is noticed that para 9 of the MOA (at page 10 of Vol-1) stated that the assessee agreed to permit the developer to enter into the scheduled properties immediately on execution of MOA to take up survey, soil testing, planning, etc., and permit the development activities simultaneously on execution of JDA and registered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required for Open space reservation and to execute and register necessary deeds of gifts or other documents as required by such authorities for conveyance...and etc. The above terms of POA confers very limited scope to the developer. 7.1.5 However, as per paper book page 93 to 111, the assessee has executed another General Power of Attorney [GPA], which was registered vide Document No.603/2012 on the same day dated 17.09.2012 clearly confers the developer, the complete transfer of total rights of the assessee over the above landed property to the developer and the relevant terms are reproduced as under: 1. To sell or otherwise dispose of by way of sale, gift, lease, mortgage, exchange or otherwise, saleable built up area to the extent of 60% of total saleable built up area, or such other additional extent of total saleable built-up area as agreed to by the Principals, in whole or in portions and proportionate undivided share, right title, interest and ownership in the Schedule Property on such terms and conditions as our Attorney/s deem/s it fit in favor of any purchaser/s or in favor of and/or his/her/their/its nominee/s or assignee/s. Provided however, the Attorney/s s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all ratify and confirm all and whatever other act or acts, the said Attorney/s shall lawfully do or cause to be done by virtue of these presents. 8. No consideration has been received for executing this Power of Attorney and no conveyance has been effected under this Power of Attorney document. 7.1.6 The agreement, or a contract entered into by and between the parties has to be executed and registered before the Sub Registrar of concerned jurisdiction. When the Owner and the Developer have agreed to develop the land, it is almost necessary that all terms and conditions are reduced in writing, signed by the parties, executed and registered, or else, such an agreement, or MOU is not admissible in evidence. In this case, even though the MOU was executed on 30.01.2012, it become operative and valid in the eyes of law consequent to the subsequent documents, whatsoever, it may be, is registered. The MOU and the JDA become valid subsequent to the execution of two different GPAs on 17.09.2012. Once the GPAs executed are registered, the other MOU and JDA executed in favour of the developer, the developer become the absolute right over the property, for which, the developer, against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission was already reproduced hereinabove]. By relying on the decision in the case of R. Gopinath v. ACIT 42 DTR 127, it was the contention that as per section 45(2) of the Act, the business profit arises to the assessee on the sale of the stock in trade only when the constructed apartments were sold and not at the time when the development agreement was entered into. 7.2.1 Against the submissions, we find that first of all as per the JDA, the assessee is not carrying on any business activity. The business activity was carried on only by the developer and the land owner is a mere spectator. The owner has no role other than handing over the possession of the land to the developer. He can merely inspect the progress of work and require the developer to properly implement the work of owners constructed area and in this regard, the decision of the architect as to the quality of the material and work, the rate of progress shall be final and binding. The limited role of the owner is restricted to inspect the progress of work that too limited to its share of super structure is to only fulfil its part of the contract and this activity in no way can be equated with the business acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e whereas the chargeability of capital gain under section 45(1) of the Act will be in the previous year in which the transfer took place. In the case of assessee, section 45(1) r.w.s. 2(47) are relevant and not section 45(2) of the Act. Since the facts in the case of R. Gopinath v. ACIT (supra) are different from the case of the assessee, the same is not applicable. In the case of the assessee, there is no conversion of capital asset into stock in trade and the assessee is not carrying on the business of development of the land or construction of building and such activities are carried out only by the developer and not by the assessee. The assessee also argued that section 45(2) of the Act refers to the previous year in which the stock in trade is sold or otherwise transferred, therefore, the assessee contended that the terms otherwise will not be applicable to the case of the assessee because in this case agreement provides for sale of land to the prospective buyers and therefore the sale incidence will arise only when the final buyer purchases the flats and not before that. As already stated that the assessee is not covered under section 45(2) of the Act but covered by the mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the aforesaid purchaser/s, lessee/s and/or transferee/s or and/or his/her/their/its nominee/s or assignee/s on such terms and conditions as the Attorney/s deem/s it fit in respect of the undivided share(s) in the Schedule Property to the extent referred to in para-1 above 4. To present any agreement/s to sell, agreement/s to lease, sale deed/s, lease deed in respect of the Schedule Property or portions thereof for registration to the extent referred to above in para-1, admit execution and receipt of consideration before the Sub-Registrar having authority and get the same registered and to do all acts, deeds and things which our said Attorney/s shall consider necessary for conveying the Schedule Property to the said purchaser/s and/or and /or his/her/their/ its nominee/s assignee/s or in any other manner as the Attorney/s may deem/s it fit as fully and effectually in all respects as the Principals could do the same. 5. To sign and execute necessary documents, declarations, affidavits undertakings and other documents required for completion of sale, lease and/or transfer and/or alienation of the Schedule Property to the extent referred to in para-1 above or in respect of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no single registered document available and therefore, this case has no application to the facts of the present case. 7.2.4 Under the above facts and circumstances, the execution of MOU and JDA coupled with two registered GPAs in favour of the developer, we conclude and held that the transfer of the schedule property was taken place on 17.09.2012 in terms of provisions of section 2(47)(v) of the Act and to this extent, the order of the ld. CIT(A) stands sustained. 7.3 With regard to the computation of long term capital gains, by referring to the para 5 of the written submissions before the Tribunal, the ld. Counsel for the assessee vehemently argued that the assessee has made specific request before the Assessing Officer to refer the valuation of the property under consideration to the Valuation Officer to determine the fair market value of the property and the same was also reiterated during the course of appellate proceedings. We find that the assessee has raised a specific ground before the ld. CIT(A) at ground No. 6 and reproduced in the appellate order, which reads as under: 6. The Assessing Officer ought to have referred the valuation of the properties under co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act and in the process, the Petitioner/Appellant referred to the Memorandum of Agreement entered into between the parties on 30.01.2012 and submitted consequently that the presumption of deemed transfer should be reckoned if at all in the immediately preceding Assessment Year for which a separate legal course is available under the Act. Accordingly, the Petitioner/Appellant pleaded for accepting the stand in not reckoning transfer u/s 2(47)(v) of the Act based on JDA. While maintaining the said stand throughout, the Petitioner/Appellant had not made an attempt to confirm the date of handing over of the possession to the Developer by furnishing necessary documentary evidence and in the present proceedings, the paper book, Volume - 11 is being filed to fill the deficiencies in fortifying the said alternative stand, for which the Petitioner/Appellant seeks the permission of the Bench for taking such documents/details on record by passing appropriate interim order before proceeding with the consideration of the main matter/issue, namely, the correctness of reckoning transfer under the JOA in the previous year relating to the assessment year under consideration as against the alte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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