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TMI Blog2021 (5) TMI 663X X X X Extracts X X X X X X X X Extracts X X X X ..... s herself accepted the learned lower authorities action treating the developed area as the capital asset only giving rise to long term capital gains. We rather note that the assessee has claimed Section 54 deduction of ₹ 69,27,420/- AY.2008-09 as well. We thus hold that the assessee s divergent stand in treating herself as engaged in adventure in real estate development in AY.2005- 06 and capital gains in AY.2008-09 does not deserve to the concurred with. We therefore decline her argument that the plot of land purchased on 15-08-2004 followed by the development agreement within a very short span of time i.e., 19-10-2004 could give rise to huge profits in the nature of business income only. Reopening of assessment - It is an admitted fact that their lordship s decision herein nowhere dealt with an instance of double addition per se as is the assessee s case before us.We therefore restore the instant issue back to the Assessing Officer to frame his necessary computation afresh after ensuring that whatever the assessee s income has been assessed in preceding assessment year(s) would not be treated as her income escaping assessment pertaining to AY.2008-09. - ITA No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts related to the same in brief are as below: The assessee purchased a plot of land admeasuring 1088 sq. yards at Eenadu Colony, Kukatpally on 15/08/2004. She entered into a development agreement on 19/10/2004 with M/s.Ashwini Abodes, a proprietary concern of Smt. J. Usha Kiran for construction of flats. The assessee is entitled to 11,850 sq. ft of constructed area being 44% of the total area to be constructed. The assessee has given the possession of the land to the developer. The AO after analyzing the various clauses of the development agreement concluded that there was transfer within the meaning of Sec. 2(47) of Income tax Act and brought to tax the result gains as short term capital gains as the asset was held for less than 3 years. 5. During the course of appellate proceedings, the assessee has submitted as under: The assessee entered into a development agreement-cum-General Power_of Attorney with M/s Ashwini Abodes a proprietary concern of Smt. J.Usha Kiran on 09.10.2004, which is also registered before the Sub-Registrar, Kukatpally. As per the development agreement the owner and the developer have to fulfill certain obligations recorded ill the Document o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or (iii) the compulsory acquisition thereof under any law; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment; [or] (iva) the maturity or redemption of a zero coupon bond; or (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); or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a cooperative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of any immovable property. The Assessing Officer has 1101 stated which sub section of section 2(47) is attracted ill the case of assessee Analysis of all the subsections of section 2(47) reveal that the transaction does not fall within the ambit of section 2[47][i][ii][liii][iv][iva] [vi] of the IT Act. However, the other secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s studded with a condition, it is in fact no more than all offer and cannot be termed as willingness. When the vendee company expresses its Willingness to pay the amount, provided the (vendor) clears his income tax arrears, there is no complete willingness but a conditional willingness or partial willingness which is not sufficient ... In judging the willingness to perform, the Court must consider the obligations of the parties and the sequence in which these are to be performed 48. We are in considered agreement with the views so expressed in this commentary on the provisions of the Transfer of Property Act. It is thus clear that 'Willingness to perform' for the purposes of Section 53A is something more than a statement of intent; it is the unqualified and unconditional willingness on the part of the vendee to perform its obligations. Unless the party has performed or is willing to perform its obligations under the contract, and in the same sequence in which these are to be performed, it cannot be said that the provisions of Section 53 A of the Transfer of Property Act will come into play on the facts of that casco. It is only elementary that, unless provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at no amount of investment by the developer in the construction activity during tile assessment year in this project and it would amount to non-incurring of required cost of acquisition by the developer. In the assessment year under consideration, it is not possible to say whether the developer prepared to carry out those parts of the agreement to their logical end. The developer ill this assessment year had not shown its readiness or having made preparation for Ute compliance of the agreement. The developer has not taken steps to make it eligible to undertake the performance of the agreement which are the primary ingredient that make a person eligible and entitled to make the construction. The act and conduct of the developer in this assessment year shows that it had violated essential terms of the agreement which tend to subvert the relationship established by the development agreement. Being so, it was clear that in the year under consideration, there was no transfer of not only the flats as superstructure but also the proportionate land by the assessee under the joint development agreement, As per clause no. 12.11 and 19.1 of Development Agreement-cum Power of Attorney, time is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is only a corollary to this finding that the development agreement dt. 11.5.2005 based on which the impugned taxability of capital gain is imposed by the AO and upheld by the CIT(A), cannot be said to be a contract of the nature referred to in Section 53A of the Transfer of Property Act and, accordingly, provisions of Section 2(47)(v) cannot be invoked on the facts of this case Chaturbhuj Dwarkadas Kapadia v. Oil's case (supra) undoubtedly lays down a proposition Which, more often than not, favours the Revenue, but, on the facts of this case, the said judgment supports the case of the assessee inasmuch as 'willingness to perform' has been specifically recognized as one of the essential ingredients to cover a transaction by the scope of Section 53A of the Transfer of Property Act. Revenue does not get any assistance from this judicial precedent. The very foundation of Revenue's case is thus devoid of legally sustainable basis. 50. That is clearly an erroueous assumption, and an the provisions of deemed transfer under Section 2(47)(v) could not have been invoked on the facts of the present case and for the assessment year in dispute before us. In the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he subject land can be verified by the Department from the concerned Authorities or from the Developer. Therefore, the transferee has not performed or was willing to perform any of the conditions laid in the development agreement upto 14.11.2006. Therefore, there is no certainty of fulfillment of any of the conditions by the Developer during the period relevant to the subject assessment year. In this scenario it cannot be said that a transfer has taken place as per the provisions of section 2[471 of the IT Act to attract the capital gains . From the facts 01 the case it is clear that willingness to perform the obligations of the development agreement was lagging on the part of developer therefore, unless the developer has performed or willing to perform its obligations under the development agreement, ill the sequence in which these are to be performed i.e. starting with obtaining permission for construction from the Appropriate Authority and then starting the real development work of the property, it cannot be said that the provisions of the Section 53A of the transfer of property Act will come into play on the facts of the case. Therefore, it is respectfully submitted that n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loper pending the release of the sanctioned pans by HUDA / Kukatpally Municipality to enable the Developer to star construction work. Further, the assessee has entered into a rectification deed on 09/02/2005, which again falls in the period relevant to the assessment year 2005-06. 8. The assessee again entered into a supplemental agreement on 21/11/2006. On perusal of the same, it is seen that the same is entered into, basically to identify the flats which would be given to the assessee, after the building plans have been approved. The agreement dated 21/11/2006 contains a specific clause as under: All other terms and conditions contained in the Registered Development Agreement cum General Power of Attorney dated 19/10/2004 read with Rectification Deed dated 09/02/2005 and the Supplemental Agreement dated 19/10/2004 shall be in full farce and virtue . The above clause clearly shows that the developer is very much bound by the development agreement dated 19/10/2004 and is willing to perform the duties cast on him and has been acting on the same. 9. In view of the factual position as stated in paras 6,7 supra, it is clear that the possession of the flat was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent that she had herself not undertaken any development activity indicating the adventure component which in fact had been borne by the concerned developer only. We also wish to highlight the fact that the parcel of land has remained the same in AYs.2005-06 to 2008-09 wherein the assessee has herself accepted the learned lower authorities action treating the developed area as the capital asset only giving rise to long term capital gains. We rather note that the assessee has claimed Section 54 deduction of ₹ 69,27,420/- AY.2008-09 as well. We thus hold that the assessee s divergent stand in treating herself as engaged in adventure in real estate development in AY.2005- 06 and capital gains in AY.2008-09 does not deserve to the concurred with. We therefore decline her argument that the plot of land purchased on 15-08-2004 followed by the development agreement within a very short span of time i.e., 19-10-2004 could give rise to huge profits in the nature of business income only. The assessee s main as well as additional grounds fail accordingly. 6. Learned counsel s third argument is that both the lower authorities have erred in adopting the erroneous measurements of the dev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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