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TMI Blog2013 (9) TMI 1283X X X X Extracts X X X X X X X X Extracts X X X X ..... d himself in law and on facts in bringing to tax the notional capital gain on the strength of a Joint Development Agreement, which remained unexecuted for various disputes and finally terminated by the Society, being the owner. 4. That even otherwise, the assessee being only a member of the society and the JDA having been executed by the Society with the developers, in its capacity as owner, the alleged capital gain, if any, ought to have been assessee in the hands of the society. 5. That also, the concept of mutuality being involved in the formation of the Society, the impugned transaction per se was not liable to tax at all. 6. That by any angle, in terms of the amended provisions of section 53A of the Transfer of Property Act, read with section 2(47) of IT Act, 1961, no capital gain, beyond the part of land actually transferred by way of registered sale deed, was liable to tax. 7. That the mechanical charging of interest u/s. 234A, 234B and 234C is illegal. 8. That all capital gain is wrongly assessed in the AY 2007-08 of sold land. 9. That no rebate of Section 54F is given to the appellant. 10. That the orders passed are illegal, unwarranted and uncalled for and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissing the appeal and confirming order of A.O. assessing income at ₹ 1,03,07,560/-, including long terms capital gains of ₹ 1,00,05,000/-. 2. That the ld. CIT(A) Bathinda has erred in law and on facts in upholding the action of the AO of bringing to tax the notional capital gain of ₹ 1,00,05,000/- on the strength of Joint Development Agreement which remained unexecuted for various disputes and finally terminated by the society being the owner. 3. That the ld. CIT(A) Bathinda has erred in law and on facts in upholding the action of the AO of determining the long term capital gain of ₹ 1,00,05,000/-. The impugned transaction on the basis of which the short term capital gain has been determined by the AO is not covered under the definition of transfer as defined u/s. 2(47) of the Act. 4. That the ld. CIT(A) Bathinda has erred in law and on facts in upholding the action of AO of determining the long term capital gains of ₹ 1,00,05,000/- on account of the following reasons: i) The capital gain can only be computed in accordance with the provisions of section 48 of the Act after deducting the cost of acquisition from the full value of considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the present appeals, the assessees are either present or Ex-MLAs of Punjab Legislative Assembly who are members of housing society. The said society consists of in total 95 present or Ex-MLAs of Punjab Legislative Assembly. The matter with respect to some MLAs and the matter with respect to the Society itself fall under the jursidction of Chandigarh ITAT and the rest under the Amritsar ITAT jurisdiction. All the 3 matters fixed today for hearing as mentioned hereinabove are part of 95 present or Ex-MLAs hereinabove. The issues in the present appeals are common and identical as in the bunch of 30 appeals decided by the ITAT, Chandigarh Bench in the case of Charanjit Singh Atwal, Ludhiana vs. ITO Ward VI(1), Ludhiana in ITA No. 448(Asr)/2011 and others dated 29.07.2013 and 24 appeals decided by the ITAT, Amritsar Bench, in the case of Sh. Satnam Singh Kaith vs. ITO Nawanshahar and others in ITA No. 180(Asr)/2013 and others, dated 19.08.2013. 6. Nobody appeared on behalf of the assessees inspite of valid service of notice. Adjournment filed by the assessees are rejected, since the issues in the present appeals are covered by the decision of Chandigarh ITAT and by our Bench, as men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over the possession of the Society to THDC/HASH and accordingly first contention of the ld. DR was rejected. ii) Vide para 59 to 61 of the order, second contention was that JDA was executed on 25.02.2007 and if possession was given then how the assessee was having possession in terms of later sale deeds executed on 2.3.2007 and 25.4.2007. It was held after considering and arguments of rival parties and facts on record that mere recitation in the sale deed to the effect that the Society was owner of land in possession measuring 21.2 acres, does not show that the society was having actual possession. What the Society was having is only ownership right and the possession was only concurrent as the possessory right. Accordingly the second contention was also rejected. iii) Vide para 62 to 63 the third contention was that possession if at was given should be held to be only a license as defined in section 52 of Indian Easement Act. This third contention was also rejected for the reasons that rights given by the society are much larger than what is covered in the term 'License'. iv) Vide paras 64 to 68, the fourth contention was that the money received at the time of execu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no dispute that no notional income can be taxed, but in the case of Capital Gain section 45 read with section 48 clearly provides that it is the profit arising from the transfer of capital asset, which would be subjected to change capital gain tax and section 48 clearly provides for taking the total consideration into account while computing the capital gains, which has already been discussed in paras 64 to 68 of the order. Therefore, the whole consideration whether received or accrued which has to be taxed under the capital gain, once the transfer of capital asset takes place. Accordingly, the contention was rejected. Further, the Chandigarh ITAT Bench in the order dated 29.7.2013 (supra) vide paras 97 to 99 has dealt with issue of taxability of flat on the basis of above principles considering clause 4 of JDA, it was held that once this vested right arises out of the above contract, it can be easily said that this right has also accrued to the assessee. Therefore, capital gain tax has to be paid on the total consideration arising on the transfer which would include the consideration which has been received as well as the consideration which has arisen and become due and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of Ld. Counsels allowed the admission of additional evidence. 33. Vide para 10 to 14, the revised return was treated as non-est and it was held that no disadvantage has occurred to the assessee because in the revised return, the assessee has included a sum of ₹ 27,58,436/- on account of Capital Gain and the whole dispute in the assessment relates to Capital Gain arising out of sale of plot in the assessment relating to Capital Gain arising out of sale of plot in Punjabi Co-operative Housing Building Society Ltd. Mohali. In fact, the AO has ultimately assessed much higher amount of Capital Gain, which the assessee is disputing. Accordingly, this ground of the assessee was rejected. Accordingly all the issues, as discussed above in the case of Sh. Charanjit Singh Atwal (supra) were dismissed by the ITAT Chandigarh Bench in its order dated 29.07.2013. 34. As regards issue of notice u/s. 148, the same was dealt with in ITA No. 986/CHD/2011 in the case of Avtar Singh Brar vs. ITO. It was held that Ld. CIT(A) has done no wrong in rejecting the issue on reopening of assessment. Accordingly, the ground was rejected. 35. In the case of Smt. Surjit Kaur in ITA No. 993/CHD/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al consideration to be received by all the Members was ₹ 1,06,42,35,000/- and furnished flats as mentioned above. Before entering into the tripartite agreement the Society in its Executive Committee meeting held on 4.01.2007 which was approved in the General Body meeting held on 26.2.2007, passed a resolution to the effect that all the Members would surrender their all rights in the property to the Society and the Society would enter into an agreement on behalf of the Members with THDC/HASH. The Assessing Officer has referred to this resolution as well as various important clauses of the JDA and has placed lot of reliance on clause 2.1 of the JDA which is as under: The owner hereby irrevocably and unequivocally grants and assigns in perpetuity all its rights to develop, construct, mortgage, lease, license sell and transfer the property along with any and all the constructions, premises, hereditaments, easements, trees thereon in favour of THDC for the purpose of development, construction, mortgage, sale, transfer, lease, license and/or exploitation for full utilization of the Property (Rights) and to execute all the documents necessary to carry out, facilitate and enforce t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at under: 1. The agreement under reference is only in the nature of an agreement to sell and not a sale deed and therefore no capital gain can arise under the said agreement. The amounts received under the said agreement are actually the advances received and not the sale consideration and the land transferred in favour of THDC Ltd. is only on account of security. A letter from M/s. Hash Builders to that effect is enclosed herewith. There are many conditions envisaged in the agreement which need to be fulfilled before the full execution of the agreement and transfer of property to THDC Ltd. and receipt of the consideration. 4. Under the partial execution, the part of property measuring approx, 72 sq yards was registered in favour of THDC and sum of ₹ 12 lacs was received. As stated earlier, the amount was received as advance under the agreement and the property was transferred as security towards that advance. There were different legal opinions on the taxability of the amounts received. However in discharge of the duties as responsible citizens and avoid litigation, the members decided to pay capital gain tax on the amounts received voluntarily and such as the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acs is adjustable advance. You are requested to kindly recomputed tax liability, 6.) There are various judgments on this issue. The following cases are enclosed herewith for the reference. a. CIT vs. Atam Prakash & Sons (2008) 219 CTR (Del) b. Smt. Raj Rani Devi Ramna vs. CIT MANU/BH/0042/1992 : (1993) 201 ITR 1032 (PAT) c. Zuari Estate Development & Investments Co. (P) Ltd. Vs. J.R. Kanekar, Deputy CIT. (2004) 191 CTR (Bom) In view of the above you are requested to kindly consideration the capital gain as submitted by us. 9. The case was further fixed for 24.12.2009, On the said date the counsel of the assessee filed another reply which is reproduced as under: 1. As per Para 6.1 of your letter, you have mentioned that there is a transfer of property upon the surrender of allotment rights. You may kindly refer to the agreement dated 25.02.2007 wherein it is clearly mentioned that allotment rights have been surrendered by the members in favour of the owner i.e. "Punjabi Co-operative House Building, Society Ltd." and not in favour of the buyers. So therefore, there is no transfer of property u/s. 2(14) and 2(47). 2. Regarding your observation of having accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development only and the termination clause very clearly states that if the agreement is terminated, THDC Ltd. will retain only that much land which has been transferred to them and the remaining land will be retained by the society/members. The actual position is such that no development work has till date been undertaken by the THDC Lid because the various conditions stipulated in the agreement have not been fulfilled. The possession as mentioned in the agreement and which is being made the basis by you to consider the transaction as transfer u/s. 53A of the Transfer of Property Act is actually not of any consequences and actually there is no transfer except to the extent of land transferred by way of registered sale-deed. 2. Clause 6.1 of the agreement clearly states that handing over the original title-deeds is as security for the adjustable advance. 3. As per clause 9.2 of the agreement, it is very clearly mentioned that the owner shall execute in favour of M/s. THDC Ltd: the sale-deeds to complete the aforesaid transaction. So it is evident that the execution of sale-deeds is an integral part of the transaction and the transaction shall remain incomplete, if the sale deed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion it is once again requested that tax may be calculated as per the return filed by the assessee. However if the department choose to disagree with our submissions then it is submitted that the capital gain should be charged in the hands of the Punjabi Co-operative House Bldg. Society. It will be pertinent to note here that the proceedings in the case of the society have been reopened u/s. 148 of the I.T. Act 1961 by the learned D.C.I.T. Mohali. In the reasons recorded by the learned D.C.I.T., it has clearly been mentioned that he proposes to tax the capital-gain in the hands of the Society. Copy of the reasons recorded is enclosed. It may be appreciated that the same amount can't be taxed twice. On 29.12.2009 again the counsel of the assessee filed a letter and submitted as under: This being referred to the captioned proceedings Regarding your query about the cost of acquisition is ₹ 11 lacs which is paid as per following dates. Receipt No, 307 09-11-01 5,04,000/- Receipt No. 426 12-02-04 7,00,007/- Out of above amount ₹ 1,00.000/- was refunded to the assessee and ₹ 4000/- was towards membership charges and other funds of the society. In con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch deals with any transaction which had effect of transferring or enabling the enjoyment of any immovable property and assigning various rights in the property in favour of THDC and handing over the original title deeds as well as handing over of the physical vacant possession of land has the effect of transferring or enabling the enjoyment of the said property to THDC/HASH. (iv) There was no force in the contention that the amounts received under the said agreement were advances received and not the sale consideration because total consideration was structured in the JDA and the consideration was to be received as per clause 4(iv) of the JDA. In fact the assessee has himself shown the receipt and returned the same as capital gain which contradicts these arguments of the assessee. As per section 45 of IT Act, income-tax was to be charged under the head "capital gain" on transfer of a capital asset and shall be deemed to be the income of the previous year in which transfer took place. The year of transfer is the crucial year and not the time of the receipt. (v) There was no force in the contention that the value of the flat should not be included because the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd (vi) were inserted to section 2(47) of the Act. He then discussed the decision of Hon'ble Bombay High Court in case of Chaturbhuj Dwarkadas Kapadia V. CIT, MANU/MH/0152/2003 : 260 ITR 491 (Bom) and extracted the following conditions which were required to be satisfied to cover the case u/s. 2(47)(v) r.w.s. 53A of T.P. Act. (a) There should be contract for consideration (b) It should be in writing (c) It should be signed by the transferor or on his behalf (d) It should pertain to transfer of immoveable property (e) Transferee has in part performance of contract has taken possession or part possession of the property. (f) Lastly, transferee should be ready and willing to perform his part of contract. 23. If the above conditions were satisfied then the transfer can be said to have taken place for the purpose of Section 45. According to him as per the decision of Chaturbhuj Dwarkadas Kapadia V. CIT (supra) once the possession or part possession of the property was given by the transferor to the transferee then the transfer can be said to have taken place. He also referred to the decision of Authority for Advance Ruling in case of Jasbir Singh Sarkaria, 164 Taxman 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to develop the same as set out therein". Thus possession in part performance of contract has been handed over to the transferee without any ambiguity in the previous year 2006-07 itself. e) An irrevocable transfer has thus been made which is not dependent on any condition to be fulfilled. f) Further coining to "consideration" part. As per Para 4.1 ₹ 6,00,000 per holder of 1000 Sq. Yards has to be paid by transferee on account of earnest money, which has been paid to the assessee, Further as Per Para 4.1 (ii) clearly states that in lieu of ₹ 12,00,000 per plot holder of 500 Sq. Yards and ₹ 24,00,000 per plot holder of 1000 Sq. Yards is being paid on the execution of agreement against which the Society on behalf of members will transfer 3.08 Acres of the contiguous land out of property, It has been confirmed that against the above payment the land measuring, 3.08 acres has been transferred in the name of THDC and registered vide sale deed dated 02/03/2007 i.e. in the previous year 2006-07. g) Thus it is clear from above transactions that transferee, M/s. Tata Housing development Company Ltd., Mumabi, has performed and is willing to perform hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready been discussed in detail that registration of conveyance deed and receipt of entire consideration is not at all important in the year in which deemed transfer u/s. 2(47)(v) of IT Act has taken place. o) Further the Agreement is clear and there is no ambiguity regarding irrevocable rights being given to the transferee. As regards certain petty conditions and provisions relating to termination of the contract, it is observed that these clauses are necessary part of such type of joint development agreement. At the same time such agreements including this agreement has the provisions of 'disclaimer' 'partial invalidity' 'indemnity' and 'arbitration'. The disputes arising, if any, shall be resolved as per the provisions and awards shall be granted, in appropriate cases by the arbitrator. These provisions are there to safeguard the interest of all the parties to the joint development agreement and parties would be indemnified by each other and shall also receive award if the terms/conditions are not fulfilled. p) As regards applicability of Section 54F, there are-certain conditions which are attached with Section 54F also which have to be fulfill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion in part performance of the contract. e. Transferee must have done something in furtherance of the contract. f. The transferee must have performed or willing to perform his obligations in such contract. In view of the above conditions in the present case, condition No. (d) and (f) have not been complied because the assessee and/or society has not handed over the possession to THDC/HASH. In this regard he particularly referred to clause 2(1) of the JDA and pointed out that the possession was to be handed over to THDC/HASH simultaneously with the execution and registration of the JDA. Since the JDA was not registered therefore, it is clear that the possession was not handed over. In any case the possession if at all was granted as permissive license with right to developers i.e. THDC/HASH only for the purpose of development of the land and not as part of performance of the contract of transfer of land. The fact that possession was not handed over to the THDC/HASH also becomes clear from the sale deed dated 2.3.2007 (Placed at page 119 to 136). He referred to clause A of recitation clauses at page 120 which clearly provides that vendor i.e. the Society was owner and in poss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f property and legal possession was neither handed over or intended to be handed over. III. Money which is received at the time of execution of JDA can be termed as advance payment. In any case when these amounts were adjusted as part of sale consideration for sale of part of the property and the same have been retuned by the assessee as long term capital gains through revised return in the year of receipt. IV. It was emphasized that in any case Section 53A of T.P. Act has been amended by Amendment Act, 2001 whereby registration of agreement has been made mandatory for the same to be enforceable. Since JDA was never registered therefore, recourse could not be taken to Section 2(47)(v) of the Act because JDA was not registered. Pursuant to amendment in Section 53A of T.P. Act with effect from 24.9.2001 it was only the amended provision which can be read with Section 2(47)(v) of the Act. In this regard he referred to decision of Hon'ble Supreme Court in case of Surana Steels P. Ltd. V. CIT, MANU/SC/0262/1999 : 237 ITR 777. In that case it was observed that when a section or an Act of Parliament is introduced into another Act, it must be read in the sense it bore in the origin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of contract. In the case before us, there was no willingness on the part of developer i.e. THDC/HASH to perform the above obligation because of the following- (i) THDC/HASH failed to obtain necessary approval and did not undertake any development work on land. (ii) THDC/HASH i.e. developer has not paid timely payment in timely installments of agreed consideration. (iii) HASH has not obtained approval from various authorities and had not commenced construction within six months of handing over all final plans. (Reference was made to page 34 of the paper book). (iv) THDC/HASH vide letter dated 4.2.2001 (Page 23 to 24 of the additional evidence) refused to make further payment as stipulated in the agreement. (v) The transferor has gone back on their representation to complete construction in the time bound manner and in handing over the flats to the Society/its Members. In this regard he also referred to para 16 of the commentary by "MULLA - Dinshaw Frederick Mulla" (copy of which has been filed at page 102 and 103 of the paper book). He pointed out how the ld. authors have discussed the significance of the willingness of the transferee to perform their par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Ltd. V. CIT, MANU/SC/0592/1997 : 225 ITR 746 (S.C.) CIT V. Balrampur Commercial Enterprises Ltd., MANU/WB/0048/2003 : 262 ITR 439 (Cal) CIT V. K. Jeelani Basha, MANU/TN/2956/2002 : 256 ITR 282 FOBEOZ India (P) Ltd. V. ITO, ITA No. 9231/Mum/2010 (copy filed) It was claimed that since the flats were never constructed and given to the assessee, therefore, if the value of the flat is added in the total consideration then it will be totally on notional basis and since notional income cannot be taxed, therefore, the value of these flats, in no case, should be considered in the total consideration. Further if notional receipts were taxed then the assessee would be deprived to take benefit available in the IT Act. For example if whole consideration was received the assessee could have easily taken benefit of Section 54EC and other provisions like Section 54 by investing in any specified asset or a house. Since full consideration has not been received and the assessment of the whole consideration will lead to unintended consequences like denial of deduction u/s. 54EC etc. IX. It was contended that since JDA has already been terminated vide Society's resolution dated 13.6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO, 53 SOT 385 Smt. Ranjit Sandhu v. DCIT, 133 TTJ 46 (Chd) 25. On the other hand, the ld. CIT DR for the revenue made detailed submissions and have also filed written submissions. It was pointed out by the CIT-DR for the revenue that though copy of the special power of attorney has been filed at pages 153 to 165 but two of the most important crucial pages containing clause "u" to "z" and last page No. 9 are missing. He made an allegation that this has been done deliberately which was controverted by the ld. counsel of the assessee and he submitted that this is a simple mistake and he would file those papers. The ld. DR for the revenue in view of these submissions submitted that these pages can be referred in case of Punjabi Coop House Building Society Ltd. in ITA No. 310 & 556/Chd/2012 at page 40 to 52 of the paper book in that case. The submissions of the revenue can be summarized as under: (I) The Society passed a resolution in its executive committee on 4.01.2007 which was confirmed/ratified in the General Body Meeting on 25.2.2007. In the Society there were two types of Members holding plots of 500 sqyd and 1000 sqyd. It was resolved that members wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er original title deeds and possession of land to THDC/HASH. (ii) The Society handed over the possession of the land and original title deeds of the property to THDC/HASH. (iii) Society permitted THDC/HASH to mortgage, sell and create charge in the property. (iv) The Society resolved to execute an irrevocable special power of attorney which could not be revoked in any circumstances without proper consent of THDC/HASH and such power of attorney was actually executed on 26.2.2007. Through this power of attorney THDC/HASH has been authorized to mortgage or create charge by the Society. THDC/HASH was authorized to give the possession of the property or any part thereof to the authorities to whom same was required to be handed over which was not possible unless THDC/HASH was handed over the possession of the property and the rights of the ownership. Through this power of attorney the right to sell was also given which is again not possible without transfer of possession or ownership. These clauses clearly show that complete control over the property confirming all privilege of ownership was given in favour of THDC/HASH and thus such transfer of ownership satisfies the requirements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1987. Before that, passing of the title in the property was necessary condition to constitute a transfer under the Act in view of the various pronouncements of the Courts. In the meantime it was noticed by the Government that many properties were being transferred without execution of sale deed through various documents what is popularly known as 'power of attorney' transactions. To curb the leakage of Revenue, through such transaction, clauses (v) & (vi) were added to section 2(47) which defines transfer. This has been explained by Circular No. 495 dated 22.9.1987. The Board has clarified through paras 11.1 & 11.2 that newly inserted clauses (v) & (vi) would enlarge the definition of transfer whereby the 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. The new clauses would also cover arrangements by which the property could be enjoyed by becoming a member of the company or such other arrangement. According to him it may not be out of place to invoke Heydon's Rule of interpretation of statutes for interpreting these clauses. The Heydon's R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essential ingredient then section 2(47)(v) would become redundant. The Income Tax Act cannot be interpreted in such a way that a particular provision becomes redundant. In any case it has been held by Mumbai Bench of the Tribunal in the case of Suresh Chand Aggarwal Vs. ITO (48 SOT 2010) that amendment made in section 53A of the Transfer of Property Act by which requirement of registration of transfer has been brought on statute need not be applicable for construing the meaning of the "transfer" with reference to section 2(47) of the Act. Similar view has been taken by the ITAT Cochin Bench in the case of G. Sreenivasan Vs. DCIT 140 ITD 235 and Pune Bench of the Tribunal in the case of Mahesh Memichandra Ganeshwade 51 SOT 155. (VI) It was contended that there is no force in the submissions of the Ld. Counsel for the assessee that THDC/HASH were not willing to perform their part of the contract. It was pointed out that developers i.e. THDC/HASH have made payments as per clause 4(i)(ii) &(iii) of the JDA. The developers have also approached the concerned authorities for permissions and approvals as per the obligation agreed in the JDA. However, a PIL was filed against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yments was to be made on happening of two events and the time limit was to be applied on the event taking place later on. As per clause 3.3 of the THDC/HASH was required to take permission from competent authority and the competent authority has been defined in JDA as Punjab Urban Planning and Development Authority (PUDA), Department of Town and Country Planning, Nagar Panchayat, Nayagon, Department of Local Bodies (Punjab) and any other Authority under Municipal Authority. It also includes Department of Environment, Electricity Board etc. Since permission from Department of Environment etc was not available because of ongoing litigation which was filed through a PIL, therefore, it cannot be said that Developer was not wiling to make the payment. As per the JDA, the payment would become due only when such permission were granted by various authorities. In fact M/s. Hash Builder wrote a letter on 04.02.2011 through which it was stated that since High Court has stayed the construction, therefore, payment could not be made. Further, as PIL was filed in the Hon'ble High Court and the matter had gone even to the Hon'ble Supreme Court and THDC/HASH has vigorously defended the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and Developer was allowed to retain the land which has already been registered in the name of developer then what would happen to the flats which were to be received by the various Members of the Society. No legal action was taken against the Developer for recovery of balance of consideration in the form of flats. This only goes to prove that cancellation is only a make believe story and actually no cancellation has been done. (VIII) It was contended that there is no force in the submissions that the value of the flats which has not been constructed, cannot be included in the total consideration because that would be a case of taxing the notional income. He referred to clause 4 of the JDA which deals with the consideration and pointed out that allotment of flat was part of the consideration. As per the resolution of the Executive Body of the Society which was latter ratified by the General Body as well as the terms of the JDA very clearly show that in addition to monetary consideration each Member having 500 sqyd plot was entitled to receive one fully furnished flat measuring 2250 sq.ft. and the Members holding 1000 sqyd plot were entitled to two such flats. This clearly shows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Attorney would come to an end automatically. (c) He contended that simply saying that the cancellation was an unilateral act of the assessee, would not serve any purpose because the revenue can not sit in the judgment when the assessee should cancel the agreement or not. Clause 14 of the JDA specifically provided for termination of the agreement only in the event of default and the assessee was required to give notice of 30 days in terms of clause 14(iv) and such notice has already been given. JDA was entered in 2007 and ended in 2011 and that is why the assessee was forced to cancel this agreement. In any case THDC/HASH are not related to the assessee, therefore, it was not possible to create self serving documents. 27. We have considered the rival submissions and carefully gone through the written submissions filed by both the parties in the light of material on record, paper books and various judgments cited by the parties. The main issue is whether assessee is liable to capital gain tax in the year under consideration i.e. assessment year 2007-08 in view of the JDA. For charging capital gains, the charging section is 45 and the relevant portion is as under:- Section 45 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 co-operative 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. Explanation.--For the purposes of sub-clauses (v) and (vi), "immovable property" shall have the same meaning as in clause (d) of section 269UA;] Clauses (v) & (vi) to section 2(47) of the Act have been inserted by Finance Act, 1987 w.e.f. 1.4.1988. The purpose of this insertion has been explained by CBDT in Circular No. 495 dated 22.9.1987. The relevant part 11.1 and 11.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m this decision a practice came into vogue by which certain properties were being transferred without executing the proper sale deeds. This was being done because there was restriction on sale of properties in various towns e.g. in case of lease hold plots and flats in Delhi if the same were to be transferred, permission was required to be taken from the Government/DDA and transferor was required to pay 50% of the market value-cost (i.e. unearned increase) to the Government. To avoid such payments and/or also to avoid the payment of stamp duty or cumbersome procedure of obtaining permission, some properties were being sold by way of sale agreement and also execution of General Power of Attorney and possession was given on receipt of full consideration without executing the proper sale deeds etc. which as mentioned earlier was not even permissible in some cases. These transactions are popularly called "power of attorney" transactions. To avoid these and to stop the leakage of Revenue, the Parliament has inserted clauses (v) & (vi) to section 2(47) so as such type of transactions are also be brought in to taxation net. However, interpretations of these clauses has led to lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itting construction of the building was issued on November 15, 1996. The power of attorney was executed on March 12, 1999. The question arose whether liability of the assessee for capital gain arose in the assessment year 1996-97 or 1999-2000. The observation of the Court has been summarized in head note as under:- Clauses (v) and (vi) were introduced in section 2(47) of the Income-tax Act, 1961, with effect from April 1, 1988. They provide that "transfer" includes (i) any transaction which allows possession to be taken/retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882, and (ii) any transaction entered into in any manner which has the effect of transferring or enabling the enjoyment of any immovable property. Therefore, in these two cases capital gains would be taxable in the year in which such transactions are entered into, even if the transfer of the immovable property is not effective or complete under the general law. Under section 2(47)(v) any transaction involving allowing of possession to be taken over or retained in part performance of a contract of the nature referred to in section 53A of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any transaction entered into in any manner which has the effect of transferring or enabling the enjoyment of any immovable property (see section 269UA(d)). Therefore, in these two cases capital gains would be taxable in the year in which such transactions are entered into, even if the transfer of the immovable property is not effective or complete under the general law (see Kanga and Palkhivala's Law and Practice of Income-tax-VIII edition, page 766). This test is important to decide the year of chargeability of the capital gains. 35. The above observations were made on the basis of opinion expressed by Ld. author in the commentary - "The Law and Practice of Income Tax by Kanga and Palkhivala Eighth Edition at page 766. Relevant observations read as under: Cls. (v) and (vi) of s. 2(47), inserted by the Finance Act 1987 with effect from 1st April 1988, provide that "transfer" includes (a) any transaction which involves the allowing of the possession of an immovable property (s. 269UA(d)) to be taken or retained in part performance of a contract of the nature referred to in s. 53A of the transfer of Property Act 1882, and (b) any transaction entered into in an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or complete under the general law. In this case that test has not been applied by the Department. No reason has been given why that test has not been applied, particularly when the agreement in question, read as a whole, shows that it is a development agreement. There is a difference between the contract on the one hand and the performance on the other hand. In this case, the Tribunal as well as the Department have come to the conclusion that the transfer took place during the accounting year ending March 31, 1996, as substantial payments were effected during that year and substantial permissions were obtained. In such cases of development agreements, one cannot go by substantial performance of a contract. In such cases, the year of chargeability is the year in which the contract is executed. This is in view of section 2(47)(v) of the Act. Secondly it is mentioned in the order of the Court that law was not very clear on this point and since the assessee has admitted and paid capital gain in the Assessment year 1999-2000, therefore, tax was held to be chargeable in Assessment year 1999-2000. Thirdly certain shortcomings were also noted in the order of the Tribunal where certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on itself needs to be construed as the date of transfer. 39. The second relevant decision cited by the Revenue is by Authority for Advance Ruling (AAR) New Delhi in the case of Jasbir Singh Sarkaria (supra). In that case the assessee was co-owner of agricultural land measuring about 27.7 acres and his share was 4/9. The co-owner decided to develop the land by constructing residential complex through developer and entered into a Collaboration agreement on 8.6.2005 with M/s. Santur Developer Pvt. Ltd., New Delhi (herein after called 'Developer'). According to the terms of agreement, the Developer should obtain a letter of intent from the concerned government department and obtain other permissions and sanctions for developing the land at its own risk and cost. The Developer was to take 84% of the built up area and balance 16% would belong to assessee and other co-owner. The consideration for the agreement was taken as the built up area to be handed over to the owners free of cost. The owners were entitled to visit the site in order to review the progress of the project. It was clarified by clause 18 that ownership would remain exclusively with the owners till it vests with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or gains would constitute the income of the assessee/transferor (d) such income shall be deemed to be the income of the same previous year in which the transfer had taken place. Two aspects may be noted at this juncture. Firstly, the expression used is "arising" which is not to be equated with the expression "received". Both these expressions and in addition thereto, the expression "accrue" are used in the Income-tax Act either collectively or separately according to the context and nature of the charging provision. The second point which deserves notice is that by a deeming provision, the profits or gains that have arisen would be treated as the income of the previous year in which the transfer took place. That means, the income on account of arisal of capital gain should be charged to tax in the same previous year in which the transfer was effected or deemed to have taken place. The effect and ambit of the deeming provision contained in section 45 has been considered in decided cases and leading text books. The following statement of law in Sampath lyengar's Commentary (10th Edition--Revised by Shri. S. Rajaratnam) brings out the correct le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transferor has forfeited his right to exercise acts of possession over the land or to resume possession. In our view, there is no warrant to place such a restricted interpretation on the word "possession" occurring in clause (v) of section 2(47). Possession is an abstract concept. It has different shades of meaning. It is variously described as "a polymorphous term having different meanings in different contexts" (per R.S. Sarkaria J. in Superintendent and Remembrance of Legal Affairs, W.B. v. Anil Kumar Bhunja MANU/SC/0266/1979 : [1979] 4 SCC 274 and as a word of "open texture" (see Salmond on Jurisprudence, paragraph 51, Twelfth Edition, Indian reprint). Salmond observed: "to look for a definition that will summarize the meanings of the term "possession" in ordinary language, in all areas of law and in all legal systems, is to ask for the impossible". In the above case of Anil Kumar Bhunja MANU/SC/0266/1979 : [1979] 4 SCC 274, Sarkaria J. speaking for a three-judge Bench also referred to the comments of Dias and Hughes in their book on Jurisprudence that "if a topic ever suffered too much theorizing it is that of 'posse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, just as they may owe it in common .... On a fair and reasonable interpretation and on adopting the principle of purposive construction, it must be held that possession contemplated by clause (v) need not necessarily be sole and exclusive possession. So long as the transferee is, by virtue of the possession given, enabled to exercise general control over the property and to make use of it for the intended purpose, the mere fact that the owner has 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 a general control and custody of the land can very well be reconciled. 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 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, if "possession&q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or, leads to complicated inquiries, which may frustrate the objective of the legislative provision. It is enough if the transferee has, by virtue of that transaction, a right to enter upon and exercise acts of possession effectively pursuant to the covenants in the contract. That tantamounts to legal possession. We are referring to this aspect because the authorized representative has submitted when he appeared before us in the last week of May, 2007, that even by that date the development work could not be commenced for want of certain approvals, and therefore, the developer was "not willing to take possession of the land". Such an unsubstantiated statement which is not found in the original application or even written submissions filed earlier need not be probed into especially when it is not his case that the developer was not allowed to take possession in terms of the agreement. 42. After the above discussion, the Authority discussed the facts of the case before it. It was observed that paragraph 18 of the Collaboration Agreement provides that on issuance of letter of intent, the owners will allow and permit the Developer to enter upon and survey the land, erect sit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the agreement describes the GPA as irrevocable and an express declaration to that effect is found in the GPA itself is not without significance. Having regard to the second and supplemental agreement by virtue of which the entire developed property including the owners' share has been agreed to be sold to the developer or his nominees for valuable money consideration, the developer has a vital stake in the entire property. As far as the quality of possession is concerned, he is on a higher pedestal than a developer who apportions built up area with the owner. Even if he is an agent in one sense in the course of developing the land, that agency is coupled with interest. For these reasons, the prefix "irrevocable" is deliberately chosen. As discussed earlier, the owner's limited right to enter the land and oversee the development work is not incompatible with the developer's right of control over the land which he derives from the GPA. Exclusive possession, as already pointed out, is not necessary for the purpose of satisfying the ingredients of clause (v) of section 2(47). We are therefore, of the view that the irrevocable GPA executed by the owners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (v) of section 2(47), it is not necessary that the entire sale consideration up to the last installment should be received by the owner. 3. In the instant case, having regard to the terms of the two agreements and the irrevocable GPA executed pursuant to the agreement, the execution of the GPA shall be regarded as the "transaction involving the allowing of the possession" of land to be taken in part performance of the contract and therefore, the transfer within the meaning of section 2(47)(v) must be deemed to have taken place on the date of execution of such GPA. The irrevocable GPA was executed on May 8, 2006, i.e., during the previous year relevant to the assessment year 2007-08 and the capital gains must be held to have arisen during that year. Incidentally, it may be mentioned that during the said year, i.e., financial year 2006-07, a final license was granted and the applicant/owners received nearly 2/3rds of the consideration. 45. Legal position has been discussed in above noted paras and now let us discuss the facts of the case in the light of above noted legal position. 46. Undisputed facts of the case are that the assessee is a Member of Punjabi Coop Hous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... another notification dated 21.11.2006 and that no part of land of the property falls under Forest Area under the Punjab Land Preservation Act. It has been further recited that the Society has agreed to accept the proposals of Hash and further executed this agreement with THDC/HASH. Hash was responsible to make payment to the owner as described earlier and the flats were to be provided by THDC. In case of Hash fails to make the payment, THDC agreed to make the payments. Copy of the resolution of the Executive Committee of the Society dated 4.1.2007 as well as resolution of the General Body Meeting of the Society dated 25.2.2007 were made part of JDA by way of annexure. The Society agreed to execute an irrevocable Special Power of Attorney in favour of THDC and all other necessary documents, at the request of the developers. 47. In clause 1 of JDA various expressions have been defined. Clause 2 describes the project as under: 2.1 The owner hereby irrevocably and unequivocally grants and assigns in perpetuity all its rights to develop, construct, mortgage, lease, license, sell and transfer the property along with any and all the construction, premises, hereditaments, easements, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pletion of the project on the property. 48. Clause 3 describes the obligations of the developers & Society for getting the plans, etc. sanctioned from competent authority/applications to be signed by owner for plans, drawings etc., construction. Clause 4 deals with consideration clauses 5 to 8 deals various aspects of project and obligations of Society and Developer. Clause 9 talks about ownership and rights and read as under: 9. Transfer of ownership/Rights 9.1 The owner shall simultaneously on receipt of Payment as set out in Clause 4.1 above, execute an irrevocable Special Power of Attorney to THDC for development of the property authorizing THDC to do all lawful acts, deeds, matters and things pertaining to the development of the property for the project along with inter alia right to mortgage the property and/or premises, sell, lease, license the premises and receive/collect monies in it's name in respect of the same and approach interact, communicate with the Competent authorities and for doing all acts, deeds, matters and things to be done or incurred by THDC in that behalf as also to sign all letters, applications, agreements and register the same if necessary, do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopers i.e. THDC. (Copy of which is available at pages 40 to 52 of the paper book in case of Society in ITA No. 556 of 2012 as discussed earlier in para 25 (complete copy of Supplementary Power of Attorney was not available in the paper book of the assessee, therefore, reference was made to the paper book in case of the Society). 52. The first major contention of the ld. counsel of the assessee is that the possession was not given by the Society because according to him as per clause 2.1 of the JDA the possession of the property was to be handed over simultaneously to the execution and registration of JDA and since the JDA was not registered, therefore, the possession was not given. We can not accept this contention because in "Power of Attorney" transactions, it is not necessary to register the JDA if a special Power of Attorney has been given and same is registered. Secondly clause 9.3 of the JDA as reproduced above clearly show that original title deed which have been mentioned along with the possession in para 2.1 which according to the ld. counsel of the assessee were to be handed over simultaneously to execution and registration of the JDA, is not correct because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose, as THDC and/or their associate and/or group concerns may in their sold, absolute and unfettered discretion think fit. (w) To hand over the possession of the Property or any part or portion thereof to the authorities to whom the same is required to be handed over or otherwise and to execute and deliver any undertakings, declarations, affidavits, bonds, deeds, documents, etc. as may be required by the authorities concerned for vesting such a part or portion in such authority and to admit execution thereof before the concerned Competent Authority and get the same registered with the concerned sub-registrar. (y) Reasonable opportunity of hearing shall be given to mortgage, encumber or create a charge on the Property or any part or portion thereof and execute the necessary security documents in favour of any bank/financial institution to raise funds for the construction/development of the Property and for the said purpose to deposit title deeds (if required) in respect of the Property in favour of such bank/financial institution, execute the necessary documents and register the charge created on the Property if so required in the revenue records and/or desired by the Attorney. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the properties wherein developmental and or other rights, benefits and interest were acquired by the developer or would be acquired in future. This clearly shows that the Society was under obligation in terms of agreement itself to allow the developer to amalgamate the project. Towards the end of clause 6.24 it has been clearly stated that in the event of termination of JDA, provision of clause 6 would be surviving which clearly shows that developer continues to be in possession for the purpose of development, mortgage etc. even after termination. Clause 8 which describes the obligation and undertaking of the THDC/HASH and provides specifically that all environmental clearance shall be obtained by THDC/HASH out of its own sources. Thus it was clearly understood by the parties that requisite environmental clearances had to be obtained before start of the project. Clause 10 again casts specific obligation on the owner Society to give consent to THDC/HASH to raise finance for the development and completion of the project on the Security of the property by way of mortgaging the property. Thus whatever power/authorization have been given through irrevocable special Power of Attorne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... THDC/HASH on the execution of irrevocable Power of Attorney. Through these clauses of JDA and irrevocable Power of Attorney the developer was able to completely control the property and make use of it not only for the purpose of development but also for the purpose of amalgamation, sale, mortgage etc. When the above clauses are compared on touch stone of the discussion on possession in para 26 to 28 in the case of Jasbir Singh Sarkaria (supra) which we have reproduced above, it becomes clear that the possession has been given. 56. In that discussion, it has been clearly mentioned that the position contemplated by clause (v) of section 2(47) of the Act need not to be exclusive possession. What is required is that the transferee by virtue of possession should be able to exercise control from overall intended purposes. We do not think in the present case the assessee has given only a license as claimed by ld. counsel of the assessee because of the powers of selling, amalgamating etc. mentioned in the JDA and irrevocable Special Power of Attorney. The issue has been discussed in he judgment of Jasbir Singh Sarkaria (supra) in further discussion which has been made in para 33 regardi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r understanding amendment in the Act, perhaps Heydon's Rule is best rule for interpretation of such amendment. We find that without mentioning this rule Ld. Authority For Advance Ruling has discussed this issue in para 27 of the judgment which we have extracted above. It has been held that if 'possession' referred to in clause (v) is to be understood as exclusive basis of the transferee then very purpose of the amendment or enlargement of the definition of transfer would get defeated. We are reproducing following head note of the Hon'ble Apex Court in case of Dr. Baliram Waman Hiray V. Mr. Justice B. Lentin and another (supra): The following principles enunciated in Heydon's case (1584) 3 Co. Rep 7a and firmly established, are still in full force and effect: "that for the sure and true interpretation of all statutes in generals (be they penal or beneficial, restrictive or enlarging of the common law), four things are to be discerned and considered: (1) what was the common law before the making of the Act; (2) what was the mischief and defect for which the common law did not provide; (3) what remedy Parliament has resolved and appointed to cure the disease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der written and delineated in green colour boundary line in the Shizra Plan issued by the Patwari dated 23.2.2007. 60. According to the ld. counsel of the assessee if Society had already given the possession then the Society would not have/had possession on 2.3.2007 of the land. At face value this argument looks attractive but when examined in terms of possession which has been explained in case of Jasbir Singh Sarkaria (supra), actual reality will come forward. In this judgment concept of concurrent possession has also been discussed and following extract of paragraph 55 of Salmond's Jurisprudence has been extracted which reads as under: It was a maxim of the civil law that two persons could not be in possession of the same thing at the same time. As a general proposition this is true: for exclusiveness is of the essence of possession. Two adverse claims of exclusive use cannot both be effectually realized at the same time. Claims, however, which are not adverse, and which are not, therefore, mutually destructive, admit of concurrent realization. Hence there are several possible cases of duplicate possession. 1. Mediate and immediate possession Cross-objections-exist in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofits and gains arising from the transfer. We have already discussed the implication of section 45 r.w.s. 48 while discussing the legal position. We had also discussed this issue in the light of the decision in case of Jasbir Singh Sarkaria (supra) and pointed out that when section 45 is read along with section 48 it becomes clear that whole of the consideration which is received or accrued is to be taxed once capital asset is transferred in a particular year. 65. We would like to discuss this aspect of the issue in little more detail and try to understand why the whole of the consideration is required to be taxed. At the cost of repetition let us again reproduce the observations of the Ld. authority in case of Jasbir Singh Sarkaria (supra) which we have earlier extracted at para 40 and the relevant portion is as under: 40. On the above, the Hon'ble Authority after referring to the provisions of section 45 and observed as under:- ... ... ....The section can be analysed thus: (a) transfer of a capital asset effected in the previous year, (b) resultant profits or gains from such transfer, (c) those profits or gains would constitute the income of the assessee/transfero ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said decision is extracted in the following manner: 13. In T.V. Sundaram lyengar and Sons Ltd. V. CIT MANU/TN/0174/1960 : [1959] 37 ITR 26, a Division Bench of the Madras High Court while construing section 12B of the Indian Income-tax Act, 1922 clarified the import of the expression "arise" as follows Section 12B does not require that profits should have been actually received. It is sufficient if they have arisen. Throughout the Income-tax Act the words "accrue" and "arise" are used in contradistinction to the word "receive" and indicate a right to receive. This was explained by Fry L.J., in Colquhoun v. Brooks. The learned judge observed: I think, therefore, that the words "arise or accruing" are general words descriptive of a right to receive profits. See also CIT v. Anamallais Timber Trust Ltd. To attract the operation of section 12B it is therefore sufficient if the profits arose. They need not have been actually received. 14. Thus the criterion of right to receive the profits/gains was applied in that case. 15. The legal position does not therefore admit of any doubt that the actual receipt of the entire sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me idea or ideas very similar, and the difference lies only in this that one is more appropriate than the other, when applied, to a particular case. It will indeed be difficult to distinguish between the two words, but it is clear that both the words are used in contradistinction to the word 'receive' and indicate a right to receive. They represent a stage anterior to the point of time when the income becomes receivable and connote a character of the income, which is more or less inchoate and which is something less than a receipt. An unenforceable claim to receive an undetermined or undefined sum does not give rise to accrual. 68. Therefore, it is not only the money which has been received by the assessee which is required to be taxed but the consideration which has accrued to the assessee is also required to be taxed. In view of this, this contention is rejected. 69. The fifth contention made by the Ld. Counsel for the assessee was that since section 53A of the Transfer of Property Act itself has undergone amendment w.e.f. 24.9.2001 by which the agreement referred to in that section is required to be registered and therefore, now in section 2(47)(v) only the amended p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailable even if the contract was not registered but by Amendment Act 48 of 2001, the expression "though required to be registered has not been registered", has been omitted which means for the purpose of possession u/s. 53A of T.P. Act, a person has to prove that possession has been given under a registered agreement. In other words, now u/s. 53A of T.P. Act, the agreement referred is required to be registered. This requirement cannot be read in clause (v) of section 2(47) because that refers only to the contract of the nature of section 53A of T.P. Act without going into the controversy whether such agreement is required to be registered or not. The Ld. Counsel for the assessee had referred to the decision of Hon'ble Supreme Court in the case of Surana Steels v. DCIT MANU/SC/0262/1999 : 237 ITR 777 (SC) for the proposition that when a section of a particular statute is introduced into another Act it must be read in the same sense as it bore in the original Act. The careful perusal of that judgment would show that situation is applicable only when a particular provision of an Act has been incorporated in the later Act. In that case a question arose that for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies Act. In this case it is clear that provision itself refers to clause (b) of sub section (1) of section 205 of Company's Act 1956 and therefore, same meaning was given to past losses or unabsorbed depreciation as is given under the Companies Act, 1956. 73. In case of clause (v) to section 2(47), clearly the expression used is "contract of the nature referred to in section 53A of T.P. Act", which means it is not a case of incorporation of one piece of legislation into another piece of legislation. If that was the intention of the Parliament, obviously clause (v) would contain the expression "contract as defined under section 53A of Transfer of Property Act, 1882". Further, it is settled position of law that any interpretation which could render a particular provision redundant should be avoided. If the contention of the Ld. counsel was to be accepted, obviously the provisions of clause (v) of section 2(47) of the Act would become redundant in the sense that registration of agreement would again be made compulsory but since properties were being sold in the market on "power of attorney" basis through unregistered agreements which would make thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, it is only the nature which has to be seen. As discussed above, the purpose of insertion of clause (v) was to tax those transactions where properties were being transferred by way of giving possession and receiving full consideration. Therefore, in our humble opinion, in the case of a transfer where possession has been given and full consideration has been received, then such transaction needs to be construed as "transfer". Therefore, the amendment made in section 53A by which the requirement of registration has been indirectly brought on the statute need not be applied while construing the meaning of "transfer" with reference to the Income-tax Act. 8. The above situation further becomes clear if we refer to the celebrated decision of Hon'ble Supreme Court in the case of Podar Cement (P.) Ltd. (supra). In that case, the assessee was owner of four flats in a building called "Silver Arch"/on Nepean Sea Road, Bombay. Out of these four flats, two were purchased directly from the Builders, Malabar Industries Pvt. Ltd., and two were purchased by its sister concerns which were later purchased by the assessee. The possession of the flats was take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under:- Held, reversing the judgment of the High Court, that the finding of fact arrived at in the case at hand was that though a document of title was not executed by the Housing Board in favour of the assessee, the houses were allotted to the assessee by the Housing Board, part payment received and possession delivered so as to confer dominion over the property on the assessee whereafter the assessee had in its own right allotted the quarters to the staff and they were being actually used by the staff of the assessee. The assessee was entitled to depreciation in respect of the seven houses in respect of which the assessee had not obtained a deed of conveyance from the vendor although it had taken possession and made part payment of the consideration. Thus, from the above two decisions, it becomes absolutely clear that for the purpose of the Income-tax Act the ground reality has to be recognized and if all the ingredients of transfer have been completed, then such transfer has to be recognized. Merely because the particular instrument of transfer has not been registered will not alter the situation. This position is further strengthened by the fact that legislature itself has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been made in the case of General Glass Company Pvt. Ltd. Vs. DCIT (supra). In that case it was held that willingness to perform for the purpose of section 53A is something more than a statement of intent and it is unqualified and unconditional willingness on the part of the transferee to perform his obligation. In that case the transferee has agreed to make certain payments in installments in consideration of the development agreement but such payments were not made. Later on, the agreement was modified and more time was given to the transferee for payment of such installments. However, the installments were not paid even under the modified terms and that is why it was ultimately held that such agreement cannot be construed as transfer. 79. The second decision referred to by Ld. Counsel for the assessee is K. Radika v. DCIT (supra). In this case, similar observations were made, though it is not pointed out in what respect the transferee has failed to perform his part but it has been observed that the facts of the case shows that transferee has not performed his part of the contract. 80. The third judgment relied upon by the Ld. Counsel for the assessee is in the case of DCI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larification of the order of the High Court by Hon'ble Supreme Court by order dated 31.1.2012, the authorities have already been permitted to examine the issue on merits under various laws. Further in the JDA there is a clause 26 which deals with the Force Majeure clauses. The clause 26(i) to (v) reads as under:- FORCE MAJEURE i) None of the parties shall be liable to the other Party or be deemed to be in breach of this Agreement by reasons of any delay in performing or any failure to perform, any of its own obligations in relation to the Agreement, if the delay or failure is due to any Event of Force Mejeure. Event of Force Majeure is any event caused beyond the parties reasonable control. The following shall be regarded as issues beyond the Parties reasonable control. ii) For the purposes of this Clause, an Event of Force Majeure shall mean events of war, war like conditions, blockades, embargoes, insurrection, Governmental directions, riots, strikes, acts of terrorism, civil commotion, lock-outs, sabotage, plagues or other epidemics, acts of God including fire, floods, volcanic eruptions, typhoons, hurricanes, storms, tidal waves, earthquake, landslides, lightning, exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so, it may be appropriate to mention the somewhat conflicting stand of the parties with regard to the present stage of the applications filed under the provisions of the Environment (Protection) Act as well as the Wild Life (Protection) Act. While the petitioner, who is supported by the respondent No. 6-Chandigarh Administration, asserts that necessary sanction/permission under both the Acts have been refused by orders passed by the competent authorities, the promoters of the project contend to the contrary. The facts, as unfolded before us, indicate that against the refusal of sanction under the Environment (Protection) Act, the respondents have sought a review of the order on the ground that the findings arrived at, which have formed the basis of the refusal, are ex-parte. No order in the review matter has been passed by the competent authority, perhaps, because of the interim order passed in the PIL which has been clarified by the Hon'ble Supreme Court by order dated 31.1.2012 permitting the concerned authority under the different statutes governing the matter to exercise their respective jurisdictions in accordance with law. Insofar as the Wild Life (Protection) Act is conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Chandigarh, the States of Punjab and Haryana as also the authorities under the Environment (Protection) Act and the Wild Life Protection Act have to demonstrate the need to engage themselves intensively and not acquire a placid approach indicating an eloquent acquiescence to the violation of the 1995 Act, Periphery Control Act and the Periphery Policy. 26. We thus conclude on the aforesaid note by holding and observing that the provisions of the Periphery Control Act and the 1995 Act are complementary to each other and the provisions of the two statutes would apply to the housing project in question. The respondents, therefore, will have to comply with all the requirements spelt out by both the aforesaid statutes. As the requirement of clearances under the Wild Life (Protection) Act and Environment (Protection) Act is not a contentious issue, and as we have already held that the process of grant of such clearances is pending before the appropriate authorities under the respective Acts, the same will now have to be brought to its logical conclusion keeping in mind our observations and directions contained hereinabove. 83. The combined reading of the above paras in the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can commence, whichever is later. Thus, this installment was dependent on two contingencies first the expiration of a period of six months from the date of agreement or alternatively on the expiration of a period of two months from the date of approval of plans/designs drawing etc. leading to grant of final licenses which can lead to commencement of construction, whichever is later. The matter was taken up by way of PIL by certain citizens and Administration of the Union Territory before the Hon'ble High Court which initially stayed the sanction of such plan etc. This led to situation where construction could not be commenced and hence payment was not required to be made in view of the pending litigation. The clauses of force majeure came into operation and therefore, it cannot be said that the developer is not willing to perform its part of the contract. In any case there is no default on the part of the developer as payment was not yet due as per clause 4(i)(iv) of JDA. 86. This position was informed to the Society by letter dated 4.2.2011 by HASH Builder, copy of which has been filed at pages 23 & 24 of the paper book dealing with the additional evidence. Through this let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance was placed on certain Supreme Court decisions and other cases for the proposition that notional income cannot be taxed. There is no need to discuss the cases relied on by the ld. counsel of the assessee because it is settled position of law that no notional income can be taxed. Though there is no quarrel that it is a settled principle of law that notional income can not be taxed but in case of capital gain, section 45 which is charging Section and section 48 which is computation section, makes it absolutely clear that rigor of tax in case of capital gain would come into play on the transfer of capital asset and total consideration which is arising on such transfer, has to be taxed. section 48 clearly talks about full consideration received or accruing as result of transfer. This aspect we have already discussed in detail at paras 64 to 68. 90. Second aspect of this contention was that if consideration which has not been received was to be taxed then the assessee would be deprived for claiming exemption u/s. 54 and 54EC. As observed above as per section 45 r.w.s. 48 whole of the consideration, received or accrued has to be taxed. Every person is supposed to know the law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , but once accrual takes place, on the conduct of the parties subsequent to the year of closing, an income which has been accrued cannot be made "no income". 91. The above position can be understood by examining some of the provisions of the Act which would show that concept of notional income can not be extended if specific provision is available in the Act. For example in case of income from house property, the income has to be determined as per section 23. Section 22 of the Income Tax Act provides that it is the annual value of the property which can be taxed under the head "income from house property". Sector 23 prescribes the method for determining the annual value. Section 23(1)(a) reads as under:- 23. (1) For the purposes of section 22, the annual value of any property shall be deemed to be-- (a) the sum for which the property might reasonably be expected to let from year to year; or (b) where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable; or... ... ... 92. On this aspect the settled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e computed whether property has been let out or not. This means that notional value of the property has to be charged to the Income Tax under the head "income from house property". From the above, it becomes clear that though there is no real income from letting out of the property, still the notional annual value is subjected to tax under the head "income from house property". However, we may mention that u/s. 23(1)(c) of the Act if the property is let out and then remained vacant for some part of the year or for whole of the year then vacancy allowance can be claimed. Here, it is important to note that if property is not let out, then notional income becomes chargeable to the tax because of provisions of sections 22 and 23(1)(a) of the Act. Similarly, under the Mat provisions, it is basically the notional income which is being subjected to charge under the head "income from business and profession". A businessman may have income of ₹ 100/- but because of higher depreciation allowable under the Income-tax Act or some other weighted deductions say for example in case of expenditure on scientific research, the taxable income as per the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... para No. 64 to 68 from which it becomes clear that it is the whole consideration whether received or accrued, which has to be taxed under the capital gain once transfer of the capital asset takes place. Accordingly, there is no force in this part of the contention. 97. Now let us examine the issue of taxability of flat on the basis of above principles. Relevant portion of clause 4 of the JDA which deals with consideration are as under: 4. CONSIDERATION 4.1 It is specifically understood and agreed amongst the Parties that THDC shall use its expertise and its Brand name and/or any other brand name at its discretion to develop the Property into the Premises as per applicable building bye-laws of the Competent Authority and the Owner shall have no objection to the same in whatsoever manner. In consideration of the Owner granting and assigning, its Development Rights in the Property, irrevocably and in perpetuity, to THDC to develop the Property and for transfer of the Property upon the surrender of allotment rights of 500 sq. yards and/or 1000 sq. yards (as the case may be) by its members to the Owner, vide resolution dated 04.01.2007 and 25.02.2007 (copy attached as per Annexur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Agreement as Schedule B attached herein (hereinafter referred to as the 'Allottees'). The specifications of the flats would be provided by the Developers to the Owner and more particularly described in the Schedule C attached herein (hereinafter referred to as the 'Specifications'). The Allotment letters shall be issued to the Allottees (members of the Owner) within forty-five (45) days from the date of sanction of the building plans/Design and Drawing and on obtaining final license/permission for the development of the Project from the Competent Authority. Thereafter, the possession of the flats shall be handed over to the Allottees within thirty (30) months form the date of issuance of the Allotment Letter. It is expressly provided that the Payment to be made by HASH to the Owner and/or to the respective members of the Owner (as the case may be) and the Flats to be allotted to the Allottees as set out in this Clause 4.2 shall hereinafter be collectively referred to as the 'Entire Consideration' 98. From this clause it becomes absolutely clear that each Member having 500 sqyd of plot was entitled to receive one furnished flat measuring 2250 sq. ft. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had also agreed to construct 18000 sq. ft. carpet area for the benefit of assessee on plot No. 256. In the return of income total consideration was shown only at ₹ 16.11 crores. It was explained that before Dipti Builders could start the development/construction work, entire property comprising of plot No. 256 & 257 was sold to a third party M/s. Financial Technology Ltd. by a tripartite conveyance deed executed on 5.7.2007 for ₹ 29.11 crores and therefore, additional consideration of ₹ 13 crores has been offered to tax in Assessment year 2008-09. This explanation was rejected by the Assessing Officer because according to him it was a case of transfer u/s. 2(47)(v) and total consideration has to be charged in the year of transfer. The Tribunal after considering the provisions of section 45 & 48 posed a question to itself that what should be the consideration in the case before the Bench. The case law relied on by the Department was rejected because same was relevant to accrual of interest. The Bench followed the decision of Kalptaru Construction Oversees Pvt. Ltd. 13 SOT 194. In that case the assessee had agreed to sell to its subsidiary equity shares for a consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for approval then THDC may as its sole discretion either decide that it does not desire to undertake and complete the Project and hence terminate this Agreement after giving thirty (30) days written notice in this regard or decide to wait for any further times deemed fit by THDC for the grant of the aforesaid approvals and licenses. In the event the Agreement is terminated by THDC, all the lands registered in the name of THDC as per the terms of this Agreement upto the date of the termination shall remain with THDC and the balance lands to be transferred to THDC as per the terms of this Agreement shall not be transferred by the Owner in favour of THDC. Upon the termination, the Owner shall refund to THDC the Adjustable Advance/Earnest Money mentioned in clause 4.1(i) above within one month of such termination. In the event of failure of the Owner to refund the said amount, the Owner hereby agrees to execute a registered sale deed for land of equivalent value in favour of THDC. (iii) In the event THDC is unable to develop the Property due to refusal/non grant of approvals, consents, permission, licenses or revocation of the same by the appropriate statutory authority, then THDC ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... early provided that all the disputes under it should be referred to the arbitration. Therefore, if the Society had some grievance it was duty bound to give a notice for appointment of an Arbitrator to the developer. In the absence of such notice the termination will not stand scrutiny of law. Here it is also pertinent to note that though it was stated that irrevocable Power of Attorney has been revoked and some documents have been filed before us for revocation but clause 6.7 of the JDA which we have reproduced earlier clearly provides that such Power of Attorney cannot be revoked. We reproduce clause 6.7 again which is as under: 6.7 The Owner shall execute an irrevocable special Power of Attorney granting its complete Development Rights in the Property in favour of THDC inter alia including the right to raise finance by mortgaging the property and register the charge with the Competent Authority and execute registered sale deeds) as set out in Clause 4.1 (ii), (iii), (iv) and (v) and the Owner confirms, undertakes, declares and binds itself not to revoke the same for any reason whatsoever out of its own will and discretion without obtaining a specific prior written consent of TH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusion that there was no cancellation of the JDA. 106. Some arguments were made by both the parties that if the contract is finally stand abandoned then what would happen. The contention on behalf of the assessee is that if the contract is abandoned then the assessee would have paid tax in the year of transfer and would be left with no recourse for relief. The contention on behalf of the Department was that the assessee could always file revised return or make a petition u/s. 264 and some relief was possible in case of the assessee. However, if revenue fails to tax the total consideration in the year of transfer then same cannot be subjected to tax in any other year. We find that this question was seriously considered by the Ld. Authority for Advance Ruling in case of Jasbir Singh Kataria (supra) which has been relied on by both the parties for various aspects. In that case it was observed at para 39 as under: We have to advert to one aspect which has caused some concern to us. What will happen if during the year following the one in which the deemed transfer took place, the proposed venture collapses for reasons such as refusal of permissions, the developer facing financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For example in the present case if tomorrow when all permissions are obtained and construction is completed and if no taxes are held to be payable then later on also the assessee may not be subjected to any tax under the head "capital gain" because then it can be easily contended on behalf of the assessee that the transfer has already taken place on the date when irrevocable Power of Attorney was executed. In that situation the Revenue will have no remedy. 107. The above clearly shows that such hypothetical consideration cannot be considered for giving true meaning to a particular provision. It has also been observed that in some genuine cases the difficulties may arise but it was for the Parliament or the Government to provide remedy in such cases and judicial forums cannot do anything. Therefore, in view of the provisions of section 45 r.w.s. 48 we are of the opinion that subsequent events, if at all any will not make any difference because total consideration received or accrued has to be assessed in the year of transfer. We may also note that it was stated that irrevocable Power of Attorney has been revoked but the word "irrevocable" itself shows that in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of HASH which is in excess of its minimum, guaranteed amount until THDC achieves its minimum guaranteed amount. The same is illustrated in Annexure I hereto. 109. The above clearly shows that HASH was entitled to total proceeds of ₹ 225.76 crores out of total proceeds of the project which were agreed to be shared by THDC and HASH but the portion of HASH includes a sum of ₹ 58.88 crores which was required to be spent towards construction of 126 flats equivalent to 283500 square feet area which were to be allotted to the members of the society. Thus, it is clear that figure of ₹ 2,000/- per sq. feet represents only the cost of constructions to be incurred by THDC which was debited to the account of HASH. Further, HASH has agreed to purchase three Flats @ 4,500/- per square feet. Some news reports were quoted before us in one of the cases to show that various brokers had issued various advertisements for sale of these flats and these flats were ultimately to be sold at ₹ 7,000/- to ₹ 10,000/- per square feet. This also becomes clear from the addendum of agreement in terms of total proceeds of 1272 crores. In any case if the cost of construction is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue submitted that the Society was acting on behalf of the Members and the Members have surrendered their rights in favour of the Society so as to enable the Society to enter into JDA for transfer of property in favour of the developer i.e. THDC/HASH. Therefore, capital asset has been sold by the Members. Further the consideration was to be received from Hash by the individual plot owners. 113. We have heard the rival submissions carefully and find that the Society was formed by various Members for the purpose of purchase of land and to develop the same and they allotted the plots to the Members. The Society purchased 21.2 acres of land and ultimately plots in the sizes of 500 sqyd and 1000 sqyd were allotted to various Members. When the proposal for development of property came it was resolved in the General Body Meeting of the Society that the Members would surrender their rights in favour of the Society so that the Society can enter into the JDA. Thus it is clear that the Society has entered into JDA on behalf of the Members. It is the members who are owning the plots and the Society was only a facilitator. It becomes clear from the JDA that payment for consideration was to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances, all the grounds of the assessee are dismissed. In the result, the appeal in ITA No. 404(Asr)/2013 is dismissed. 9. ITA No. 406(Asr)/2013 - Bikramjit Singh Gill In grounds No. 1 & 2, the assessee has raised issue with respect to the validity of assumption of jurisdiction u/s. 147 /148 of the Act. The said issue was raised before the Ld. CIT(A), who has dismissed the grounds of the assessee. 9.1 After hearing the ld. DR and on perusing the record, we find that the ld. CIT(A) has passed a well reasoned order and we find no infirmity in this regard. Accordingly grounds No. 1 & 2 of the assessee are dismissed. 9.2 As regards grounds No. 3 to 11 raised by the assessee, the facts in these grounds are identical to the facts in the case of Sh. Charanjit Singh Atwal vs. ITO and others (supra) and in the case of Satnam Singh Kainth vs. ITO and others (supra), where detailed orders have been passed in the said cases. Since the facts in the present case are identical to the facts in the case of Sh. Charanjit Singh Atwal vs. ITO and others (supra) and in the case of Satnam Singh Kainth vs. ITO and others (supra), therefore, our order in the case of Satnam Singh Kainth vs. ITO and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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