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TMI Blog2021 (12) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... into a joint development agreement with M/s. Vastu Structures Pvt. Ltd. on 29.12.2005 for construction of an apartment project in respect of a land owned by the assessee admeasuring 9600 sq.ft. at Kammanahalli Village, Begur, Hobli. As per the above agreement, the assessee has agreed to convey or transfer 65% of share of undivided interest in the above said land and in consideration thereof, agreed to receive 35% of the built up area in the apartment project. The assessee also has received Rs. 10 lakhs as refundable deposit for having handed over the property to the builder. It was noticed that the assessee has not declared any capital gain in the return of income filed by the assessee for AY 2006-07. The A.O. took the view that capital gains income has arisen to the assessee on account of above cited Joint Development Agreement. Since the assessee has not declared capital gain, the AO reopened the assessment u/s 147 of the Act by issuing notice u/s 148 of the Act on 30.3.2013. 4. Before the A.O., the assessee contested the reopening of assessment. The assessee also submitted that the above said land has been held as stock in trade by the assessee and not as "capital asset". The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in trade only in its books of accounts and hence the A.O. was not justified in treating the stock in trade as capital asset and assessing the capital gains. Accordingly, the Ld. A.R. submitted that the Ld. CIT(A) was not justified in upholding the assessment of short term capital gains. The Ld A.R placed her reliance on the following case law:- (a) Smt. Kavitha Kamlesh shah vs. ACIT (ITA Nos.1508 & 1509/Bang/2016 dated 25-06-2021) (b) M/s Agnus Holdings P Ltd vs. DCIT (ITA Nos.410/Bang/2016 dated 01-09-2021). 8. The Ld. D.R. on the contrary submitted that the assessee has transferred the property under Joint development agreement and hence the decision rendered by Hon'ble Karnataka High Court in the case of Dr. T.K. Dayalu (supra) shall squarely apply to the facts of the present case. 9. We heard the rival contentions and perused the record. We notice that the original return of income has been processed u/s 143(1) of the Act. Even though the AO has reopened the assessment after expiry of four years from the end of the assessment year, yet the proviso to sec.147 is not applicable, since the original assessment was done u/s 143(3) of the Act. The Ld A.R submitted that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our of the II Party or Developers, save as expressly provided in this agreement. The I Party or Owners shall not enter into any agreement with any party to sell 65% of undivided share in schedule property or any part thereof which is allotted to the II Party or Developers except to the nominees of the II Party or Developers or the buyers located by them." We notice that the AO has also extracted the above cited clause in the assessment order, but conveniently omitted the a portion of the paragraph highlighted above. 10. A careful perusal of the above said paragraph of the agreement would show that the developer is granted irrevocable permission and license to enter the scheduled property for the purpose of construction of residential apartments as per the plan to be obtained. It is specifically been mentioned that the license so granted shall not be considered as possession delivered in part performance of the contract u/s 53(sic. 53A) of Transfer of property Act nor any property right shall be deemed in favour of developer. 11. We notice that the AO has invoked the provisions of sec.2(47)(v) of the Act, which reads as under:- "2(47) "transfer" in relation to a capital asset in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extracted below:- "4. Clause 1 of the JDA provides as follows: "1) PERMISSION FOR DEVELOPMENT: 1.1) The Owner is in possession and enjoyment of the Schedule Property. The Owner hereby authorize the Promoter for the purpose of development, to enter upon the Schedule Property and develop the same, however the authority so granted does not in any manner be construed as delivery of possession by the Owner in part performance of this agreement under Section 53-A of the Transfer of Property Act or under Section 2(47)(iv) of the Income Tax Act, 1961. 1.2) The Owner hereby agrees not to interfere or interrupt in the course of construction and development of the Schedule Property and/or commit any act or omission having the effect of delaying or stopping the work that has to be done under this Agreement. However, the Owner shall always be entitled to inspect the progress of the work and type of work which is being done on the Schedule Property." .............. 9. I have carefully considered the rival submissions. Sec.45 of the Act lays down that profits and gains arising out of transfer of capital asset effected in the previous year shall be chargeable to income tax under the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en after transaction is completed by delivery of possession and receipt of consideration, capital gains tax would escape assessment altogether or if such execution of registered sale-deed is postponed, the capital gains tax would also be postponed. In several cases it suited the parties to complete such transactions without execution of registered deed and thereby evade payment of tax on capital gains. It is in order to plug this loophole that cl. (v) was inserted in section 2(47) to lay down that transfer would include any transaction involving allowing of 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 Transfer of Property Act. Thus, the Provisions of Sec.53A of the Transfer of Property Act, 1882 stand incorporated into the provisions of the Income Tax Act, 1961. If that be so then the Tax authorities for coming to a conclusion that provisions of Sec.53A of the Transfer of Property Act, 1882 are attracted to a particular transaction have to come to a conclusion the transaction/agreement in question is such that the terms necessary to constitute the transfer can be ascertained with reasonabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this view of the matter, the provisions of sec.2(47)(v) of the Act are also not applicable. Hence the tax authorities are not justified in invoking the above said provision and consequently, the capital gains assessed in the hands of the assessee is liable to be deleted. 14. Before us, the Ld A.R placed her reliance on the decisions rendered by co-ordinate bench in the case of M/s Agnus Holding P Ltd (supra) and M/s Kavitha Kamlesh Shah (supra). We have gone through both these decisions. We notice that the co-ordinate bench has held that the provisions of sec.53A of Transfer of Property Act are not applicable in the above said cases, since the "willingness of the developer to perform his part of contract" is absent, which is a mandatory condition laid down in sec.2(47)(v) of Income tax Act and sec. 53A of Transfer of Property Act. We notice that the decision in the above said cases has been rendered on the basis of facts prevailing in these cases. 15. The Ld A.R has submitted that the impugned land has been held by the assessee as "current asset"/stock in trade and not as Capital asset. Accordingly she argued that the provisions of sec.2(47)(v) are not applicable to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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