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TMI Blog2021 (9) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... we do not find any infirmity in the reopening of assessment in this case. Transfer in terms of section 2(47)(v) of the Act when the JDA was entered with the Developer on 15.3.2006 - . The judgment in Chaturbhuj Dwarkadas Kapadia . [ 2003 (2) TMI 62 - BOMBAY HIGH COURT] 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 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 T.P. Act. The Revenue does not get any assistance from this judicial precedent. As decided in BALBIR SINGH MAINI, CS ATWAL [ 2017 (10) TMI 323 - SUPREME COURT] Under sub-clause (vi) of section 2(47) of the 1961 Act, any transaction which has the effect of transferring or enabling the enjoyment of any immovable property would come within its purview. The expression 'or in any other manner whatsoever' in sub-clause ( vi ) would show that it is not necessary that the transaction refers to the membership of a cooperative society. The object of section 2(47)( vi ) appears to be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elief to the Appellant, in the interest of Justice. 3. The assessee is a private limited company, engaged in the business of holding of investments, promoting and investing in start-up companies, investing in real estate properties and so on. The assessment for the assessment year 2006-07 was completed u/s. 143(3) of the Income-tax Act, 1961 [the Act] on 15-2-2008. This assessment was sought to be reopened under the first proviso to section 147 of the Act and a notice u/s. 148 was issued on 20-3-2013. The assessee denied that any income pertaining to the above assessment has escaped assessment and requested that the return of income filed originally may be considered as the Return filed pursuant to the notice issued under this section. After rejecting the objections, the AO passed an Order under sec 147 read with Sec 143 (3) dated 31-01-2014. 4. According to the AO, the assessee has entered into 'Joint development agreement' with M/s Plama Developers Limited, Mangalore in respect of a land owned by the assessee (along with 3 other parties) in Mangalore, which was not disclosed that led to the income chargeable to tax escaping assessment by reason of failure on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. On appeal, the CIT(Appeals) confirmed the order of AO on both the reopening of assessment as well as addition made holding that there was a transfer u/s. 2(47)(v) of the Act so as to bring the capital gain to tax. Against this, the assessee is in appeal before us. 9. We have heard both the parties and perused the material on record. Regarding the reopening of assessment, it was submitted that the original assessment u/s. 143(3) was completed on 15.02.2008. Notice u/s. 148 of the Act was issued on 20.3.2013, which is beyond four years from the end of relevant assessment year and there is no obligation on the part of assessee to disclose fully and truly all the material facts for the purpose of assessment. As such, according to the assessee, the reopening is bad in law. 10. The ld. DR relied on the order of CIT(Appeals). 11. In this case, originally assessment was completed u/s. 143(3) of the Act on 15.2.2008. There was no discussion whatsoever with regard to the earning of capital gain by entering into JDA with the Developer on 15.3.2006. The assessee has not disclosed anything about this transaction either in its return of income or in its computation. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also no construction activity actually took place during the FY 2005-06 relevant to AY 2006-07. Even the developer did not obtain the building plan so as to construct the building thereon. No income accrued to the assessee in the assessment year under consideration. The JDA was entered at the fag end of financial year i.e. on 15.3.2006 and no activities relating to the development of the property has taken place and no right to receive the consideration has accrued to the assessee, as such assessee cannot be placed with any tax liability in this assessment year. Further it was the stand of the assessee that just by signing the JDA, capital gain will not be attracted which is now accepted by way of newly inserted sub-section (5A) of section 45. For this purpose, she relied on the decision of Cochin Bench in the case of DCIT v Smt. Hema Mohanlal, 54 CCH 393. Further she relied on the judgment of Hon ble Supreme Court in the case of CIT v. Balbir Singh Maini, 398 ITR 531 (SC) wherein it was held that after the amendment to Registration Act, 1908 in the year 2001, unless documents containing the contract to transfer any immovable property is registered, the transaction shall not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there was no transfer in the year in which the JDA was entered into. Accordingly the ratio of that decision cannot be applied. 16. We have heard both the parties and considered the rival submissions. In this case, the assessee entered into JDA with the Developer along with the other parties on 15.3.2006 and also executed irrevocable Power of Attorney on 07.11.2005 with Plama Developers Pvt. Ltd. with regard to the property bearing No. 13/2A, 89, Kodialbail Village, Mangalore Taluk. As per this agreement, assessee has to receive 24,000 sq.ft. of constructed area in the apartment in this project. The contention of the ld. AR for the assessee is that there was no transfer for the AY 2006- 07. The actual transfer of property was in the assessment year when the assessee received constructed area of flats, which was offered for taxation in the AY 2013-14. As such, it cannot be brought to tax for the AY 2006- 07. 17. It is appropriate to refer to the provisions of section 2(47)(v) of the Act which are as follows:- Section 2(47) 'transfer', in relation to a capital asset, includes (i) (iv)** ** ** (v) any transaction involving the allowing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f by the Hon'ble Bombay High Court when their Lordships observed as follows: That, in order to attract section 53A, the following conditions need to be fulfilled. ( a ) There should be contract for consideration; ( b ) It should be in writing; ( c ) It should be signed by the transferor; ( d ) It should pertain to the transfer of immovable property; ( e ) The transferee should have taken possession of property; ( f ) Lastly, transferee should be ready and willing to perform the contract . 20. Elaborating upon the scope of expression has performed or is willing to perform , the oft quoted commentary Mulla- The Transfer of Property Act (9th Edn. : Published by Butterworths India), at p. 448, observes that: The doctrine of readiness and willingness is an emphatic way of expression to establish that the transferee always abides by the terms of the agreement and is willing to perform his part of the contract. Part performance, as a statutory right, is conditioned upon the transferee's willingness to perform his part of the contract in terms covenanted thereunder. Willingness to perform the roles ascribed to a party, in a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess in the Development activities in the assessment year under consideration. Nothing is brought on record by authorities to show that there was development activity in the project during the assessment year under consideration and cost of construction was incurred by the builder/Developer. Hence it is to be inferred that no amount of investment was made by the Developer in the construction activity 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 has not shown any readiness or having made preparation for compliance of the agreement dated 15.3.2006. The Developer has not taken any steps to make it eligible to undertake the performance of the agreement which are the primary ingredients 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, in the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and to receive consideration. According to the ld. DR, it shows that that the assessee transferred the absolute right over the new property to the Developer to the extent of undivided share on entering into the JDA on 15.3.2006. At this point, it is appropriate to mention the ratio laid down by the Hon ble High Court of Karnataka in the case of Dr. T.K. Dayalu (supra) as follows:- The Hon'ble Supreme Court (sic) has referred to the contention of the assessee and the earlier judgments of the Supreme Court cited by him and held that those judgments were prior to introduction of the concept of deemed transfer under section 2(47)(v) of the Act and 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 chargeability. Therefore, in these appeals, we hold that capital gain is to be taxed in the year 1997- 98 and not in the year 2003-04 as contended by the assessee. Accordingly, we answer the substantial questions of law framed in ITA No.3209/2005 in favour of the revenue and substantial questions of law framed in ITA No.310 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to cover a transaction by the scope of section 53A of the T.P. Act. The Revenue does not get any assistance from this judicial precedent. More so, there is binding precedent of decision of CIT v. Balbir Singh Maini (supra) in which it was held as follows:- An agreement of sale which fulfilled the ingredients of section 53A of the Transfer of Property Act, 1882 was not required to be executed through a registered instrument. This position was changed by the Registration and Other Related Laws (Amendment) Act, 2001. Amendments were made simultaneously in section 53A of the 1882 Act and sections 17 and 49 of the Registration Act, 1908. The effect of the aforesaid amendment was that, on and after the commencement of the Amendment Act of 2001, if an agreement 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 in law under section 53A of the 1882 Act. A reading of section 17(1A) and section 49 of the 1908 Act shows that in the eyes of law, there is no contract which can be taken cognizance of, for the purpose specified in section 53A of the 1882 Act. Under sub-clau ..... X X X X Extracts X X X X X X X X Extracts X X X X
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