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TMI Blog2022 (9) TMI 328X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the year under consideration. Accordingly, capital gain is not assessable in the hands of the assessee during the year under consideration. We therefore uphold the order of the CIT(A). - Decided against revenue. - ITA No.1624/Bang/2019 - - - Dated:- 15-3-2022 - SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B. R. BASKARAN, ACCOUNTANT MEMBER Assessee by : Shri. V. Sridhar, CA Revenue by : Shri. Sumer Singh Meena, CIT(DR)(ITAT), Bengaluru. ORDER Per N. V. Vasudevan, Vice President : This is an appeal by the Revenue against order dated 29.03.2019 of CIT(A)-14, Bengaluru, relating to Assessment Year 2014-15. 2. The assessee entered into a Joint Development Agreement (JDA for short) dated: 3.4.2013 with M/s Assetz Whitefield Homes P.Ltd., (hereinafter called Developer, for short) and the same was registered before the Sub- Registrar on 2.7.2013. The agreement was for development of 22 acres and 23 guntas of land in various Survey Numbers situated at Kannamangala Village, Bidarahalli Hobli, Bangalore East Taluk, Bangalore Dist (hereinafter referred to as the property ). As per the JDA, the parties were to share what is defined as Project Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the developer. It was submitted that even in the case of Dr. Dayalu (supra), it was conceded that as per the clause in the JDA, on the date of original agreement dt. 26th Jan., 1996, possession had been handed over and a sum of Rs. 45 lakhs has been paid in addition to the structure which the assessee was entitled free of cost. Further, as per the agreement, actual possession of the property was handed over on 30th May, 1996 and an affidavit was also filed to that effect. On these admitted facts. It was concluded that the date of entering of the development agreement would be construed to be the date of transfer of land by the land owner. Therefore, the reliance placed on the decision of the Karnataka High Court in the case of Dr. T.K. Dayalu (supra) by the Assessing Officer is not correct as the above judgement does not suggest that the date of entering into development agreement would be construed as the date of transfer of land by the land owner, irrespective of the terms of Development agreement, particularly when there is no intention to transfer the land by the land owner to the developer. 5. The CIT(A), after noticing that under para 3.2 of the JDA, only a licence was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble interest free deposit referred to in Clause 4.2 and in consideration of the other mutual rights and obligations specified in this Agreement, as on the date of this Agreement, the Owner hereby permits the Developer to enter as a licensee and develop the JD property in the manner and subject to the terms and conditions set forth in this Agreement. In consideration of the Developer s Revenue and other mutual rights and obligations specified in this Agreement, the Developer hereby accepts the right to enter and agrees to develop the JD property in the manner and subject to the terms and conditions set forth in this Agreement. Until conveyed to the purchasers of the units in the Project, the Owner shall own the entire JD property and the Developer shall own all structures, units, buildings and other infrastructure constructed, erected or installed by the Developer on the JD property pursuant to this Agreement. (emphasis supplied) 3.2 Under and in terms of this Agreement, the Owner grants the Developer, its agents, servants, associates and any Person claiming through or under the Developer, permission and authorisation to enter the JD property to develop the same. Owner shall n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) Second instalment of Rs.2,82,18,750 (Two Crores Eighty Two Lakhs Eighteen Thousand Seven Hundred and Fifty), upon receipt of one third of the revenue in the Cash Escrow Account before any further disbursement of the Owner s Revenue. (c) Third instalment of Rs.2,82,18,750 (Two Crores Eighty Two Lakhs Eighteen Thousand Seven Hundred and Fifty), after receipt of two thirds of the revenue in the Project Escrow Account before any further disbursement of the Owner s Revenue. (d) Fourth instalment of Rs.2,82,18,750 (Two Crores Eighty Two Lakhs Eighteen Thousand Seven Hundred and Fifty), after receipt of 95% of the revenue in the Cash Escrow Account before any further disbursement of the Owner s Revenue. (e) Fifth instalment of all remaining refundable interest free deposit, on the day falling 6 months after the Final Settlement. For the purposes of this Clause 4.6, revenue shall mean the launch price multiplied by the Saleable Area. Clause 5.1 Revenue (a) The Parties agree that the term Base Sale Price shall mean sale price of the units including additional charges on account of floor rise and preferred location charges if any, calculated after exclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for development of the Project and fulfill the Developer s obligations under this Agreement, by creating Encumbrance or mortgage on not more than 70% (Seventy Percent) of the JD Property as security for the loans that may be raised by it for development of the Project, pursuant to the Power of Attorney, subject to a maximum outstanding of Rs.60,00,00,000 (Rupees Sixty Crores) at any given point of time. For the purpose of clarity, the right to Encumber or mortgage the JD Property in itself does not provide the Developer with any rights over the land and is purely to facilitate the raising of finance or the development of the JD Property and to fulfil the Developer s obligations under this Agreement. The charge over the land encumbered or mortgaged shall be released by the Developer upon termination of the agreement or Completion of the Project, whichever is earlier. (emphasis supplied) Clause 13. POWER OF ATTORNEY 13.1 The Owner shall, simultaneously with the execution of this Agreement, execute and register a power of attorney in favour of the Developer, to do all acts and deeds in relation to the rights, obligations and entitlements under this Agreement and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndertaking to carry out all operations necessary for the commencement, execution and completion of the project at the cost, expense and effort of the developer, in accordance with the terms and conditions set out herein. .. .. 11. MISCELLANEOUS 11.1 In terms of the permission granted by the owners to the developer to enter upon the schedule property under clause 1.1, the developer may remain on the schedule property for the execution of the project including housing workmen and security personnel and storage of material,. the developer shall remove its men and material and vacate the schedule property on the completion of the project or on termination or rescission of this agreement for any reason whatsoever; notwithstanding the use of the schedule property by the developer for the project, the possession of the schedule property shall always be with the owners and the developer shall not claim any right in this regard. 7. The Ld. CIT(A) even though considered the above said clauses of the agreement took the view that the above said clauses contradict with the various clauses of general power of attorneygiven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n delivered in part performance under Section 53 of Transfer of Property Act nor any property right shall be deemed to vest in favour 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 noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... warupa vs ITO (ITA No.2278/Bang/2018 dated 12.10.2018). The relevant observations made and decision taken by the Tribunal in the above said case are 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arise as a result of transfer of capital asset and the date on which they arise is date of transfer . If as a result of mutual arrangement by parties or otherwise, no registered deed is executed even 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 saledeed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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