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TMI Blog2024 (7) TMI 1179X X X X Extracts X X X X X X X X Extracts X X X X ..... as erred in holding that in the year under consideration, there being no transfer of capital asset no liability to pay capital gain tax arises. 3. On the facts and circumstances of the case and in law, the Learned. CIT(A) failed to appreciate that Sec.2(47)(v) read with section 45 which indicates that capital gain is taxable in the year in which such transactions are entered into even if the transfer of immovable property is not effective or complete under the general law. 4. On the facts and circumstances of the case and in law, the Learned. CIT(A) failed to appreciate that in terms of Section 45(1) of the Act, transfer of capital asset would attract the capital gains tax, the amount to be taxes u/s 45(1) is not dependent upon the receipt of the consideration. 5. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the assessee has correctly declared the capital gains on sale of immovable property in the assessment year 2017-18. 6. On the facts and circumstances of the case and in law, the Learned. CIT(A) failed to appreciate that the facts of the case were similar to the facts in the case of CIT V.K. Jeelani Basha, 256 ITR 282 (M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of M/s Concrete Developers certain documents were found and seized. The description of the documents is as under: Bundle No. Page No. Description & Remarks Asstt. Year B-47 Seized on 04,12,2015 from the premises of Concrete Developers Gauri Heights Plot No. 19, Ground Floor, Kachipura, Ramdaspeth, Nagpur 72 to 102 Agreement of Joint Development of Construction and sale dated 05.08.2011 between Shri Naresh Vasantrai Trivedi, Shri Ashok Vasantrai Trivedi, Shri Ajay Vasantrai Trivedi and M/s Concrete Developers. For development of land at Mouza Somalwada CTS No. 504, Nagpur 2012-13 4. On verification of the seized material, it was seen that the Joint Development Agreement was made between the three brothers Shri Naresh Vasantrai Trivedi, Shri Ashok Vasantrai Trivedi, Shri Ajay Vasantrai Trivedi, and M/s Concrete Developers on 05.08.2011 for property at Mouza Somalwada CTS No. 504, Nagpur. The Stamp duty value of the property as per the Joint Development Agreement was Rs. 9,62,20,000/-. 5. During Course of assessment proceedings, on perusal of the seized documents B-47 Page No. 1 to 176 found and seized from the office premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perusal of the Joint Development Agreement it is seen that the assessee has transferred the development right to the developer. This fact is clearly brought out in para 3 of the Joint Development Agreement dated 05.08.2011. 3] THAT, in consideration of the OWNER transferring development right and authority to the DEVELOPER to deal with the said property, the DEVELOPER shall construct a portion of the building for the OWNER'S which shall be in proportion of 42.5% out of the total built up area of the proposed building, from and out of his own expenses and in accordance with the same amenities and attached specifications as would be made available to the remaining portion of the building. The said portion of the building to be constructed by the DEVELOPER for the OWNERS equal to 42.5% shall be the full and final consideration to be paid by the DEVELOPER to the OWNERS for giving unfettered and absolute authority for development and sale of the remaining portion of the building equal to 57.5% along with undivided proportionate share of land. The DEVELOPER agrees to pay the OWNERS a refundable security deposit of Rs. 1,31,00,000/- (Rs. One Crore Thirty One Lakh Only) for faithful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings, fines, penalties, architect's fees and all costs, charges, expenses, and damages incurred or suffered by the OWNERS due to the use of the said power of attorney by the DEVELOPER. 9] THAT, the parties hereby agrees that after the sanction of building plan is received by the DEVELOPER by the Nagpur Improvement Trust the OWNERS shall have first choice of reserving their 42.5% of built-up area from the buildings to be sanctioned on the same property with a condition that the said choice shall be taken by the OWNERS from one side only and in continuation. 10] THAT the OWNERS hereby permits the DEVELOPER to commence, carry on and to complete development in accordance with the building plans that will be sanctioned on the said property by the concerned authority by loading the permissible T.D.R/F.S.I. on the said land. It will be responsibility of the DEVELOPER to obtain sanction of the building plans on the land of OWNERS. The Development of the property as per the development rules and bye laws shall be done by the DEVELOPER at the entire cost, risk and Consequences of the DEVELOPER, The OWNERS hereby agrees to render all assistance and co-operation that may be required b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstruction and sale of flats. As per clause 20 of the agreement the owner has also given right to the developer to mortgage the land to financial institutions for raising the finance. It is also mentioned that at the time of development of plot the owner is not required to attend in person hence general power of attorney is given to Shri Sanjay Paidlewar, partner in M/s Concrete developer. 12. The possession was given to the builder by the assessee under G.P.A. The assessee acted upon the agreement and received the security deposit of Rs. 1,31,00,000/-, Based on facts on record, all the conditions of sub-clause (v) of section 2(47) are satisfied in the case and therefore it had to be inferred that a transfer did take place within the meaning of Sec. 2(47) (v). 13. It is not clear LTCG shown in return of income for AY 2017-18, the amount of Rs. 3.40 Crore is the value of land or the value of new asset in the forms of flats. In the case of Shri Naresh Vasantrai Trivedi it is seen from the CIT(A)'s order at para-No. 4.2.3 that assessee has declared capital gain taxes in the AY 2017-18. Thus, it can be seen that for the transfer of same land on 05.08.2011, out of 3 Co-owners, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 45(1) of the Act, transfer of capital asset would attract the capital gains tax, the amount to be taxed u/s 45(1) is not dependent upon the receipt of the consideration. * The facts of the case were similar to the facts in the case of CIT vs. V. K. Jeelani Basha, 256 ITR 282 (Mad) wherein Hon'ble High Court after analyzing the provisions of section 2(47)(v) has held that once the possession even for a part of property was handed over to the transferee for purpose of section 2(47)(v) r.w.s. 45, the transfer was complete. * The Finance Act, 2017 has inserted sub-section (5A) to Section 45 of the IT Act, 1961. As per the said sub section Capital Gain on transfer of land or building or both in the case of Individual or HUF shall be taxable in the previous year relevant to assessment year wherein completion certificate is issued by the Competent Authority. The said sub section 5A is applicable w.e.f. 01.04.2018 i.e. from the A.Y. 2018-19. This clearly reveals that intention of the legislature that Capital gain on transfer of land or building or both will be taxable up to A.Y. 2017-18 in the assessment year in which development agreement is entered by the assessee. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e developer in possession of land constitutes transfer u/s 2(47). Capital gains is taxable in the year in which development agreement is entered. 21. In the case of Chemosyn Ltd., the Hon'ble Court has held that no income is accrued or received on the value of 18,000 sq. ft. of constructed area under the development agreement because the said agreement was not acted upon as it came to be superseded / modified by the Tripartite agreement. This was the position when the return of income was filed. Therefore, the Hon'ble Court held that no income has accrued or arisen to the assessee on constructed are of 18,000 sq. ft. But, in the instant case, there is no tripartite agreement. The appellant at the time of filing or return of income. Ld. CIT(A) has not appreciated the act that the case of the assessee is distinguishable on facts and hence the ratio of the decision cited is not applicable to the instant case. 22. As per section 45 of the IT Act, Income-tax is 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 the transfer took place. The year of transfer is the crucial year and not t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilding, from and out of his own expenses and in accordance with the same amenities and attached specifications as would be made available to the remaining portion of the building. We note it is clear from the above narration where the donor has given a property for development to the developer and the developer shall construct building for owners with his own expenses which clearly establishes that no consideration was paid on to the assessee in the year under consideration and the assesses will get his share only the constructed area. The CIT(A) observed that in the impugned order that the developer has given possession of constructed area to the assessee in June, 2017 vide para 5.3.3 of the impugned order. Further, clause 6 of the modified Joint Development Agreement which explains that the owners has confirmed the license and permission given to the developer by the previous owner to enter upon the said property in accordance with the permission herein mentioned. Further, clause 7, wherein, it describes that the owners has given registered general power of attorney to the developer in respect of the said property giving all the general power in respect of obtaining sanction of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 98, what is clear is that both the parties are entitled to specific performance. (See clause 14) 13. Clause 16 is crucial, and the expression used in clause 16 is that the party of the first part hereby gives 'permission' to the party of the second pat to start construction on the land. 14. Clause 16 would, therefore, lead to the position that a license was given to another upon the land for the purpose of developing the land into flats and selling the same. Such license cannot be said to be 'possession' within the meaning of Section 53A, which is a legal concept, and which denotes control over the land and not actual physical occupation of the land. This being the case, Section 53A of the T.P. Act cannot possibly be attracted to the facts of this case for this reason alone. 8. Learned Counsel for the Petitioner, vehemently, urged that even in the present case there was a development agreement executed between the owners including the Petitioner and the developer, namely, Sai Ashray Developers Put Ltd., which had permitted the said developer to develop the property belonging to the owners only as a 'licensee'. Reliance in this regard was placed upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e owners in proportion of 42.5% out of total built up area of the proposed building which supports the case of the assessee no capital gain arose in the year under consideration, but it could be in the year in which possession of share of assessee in the proposed building is given. Further, clause 7 reads that the owners including the assessee given a registered power of attorney to the developer, in order to obtain the sanction of layout, building plan and to appear before various authorities for mutation on behalf of the owners and to do all general acts, deeds and things in the name of owners to commence and complete the development of the said property as per the terms and conditions mentioned in the said agreement. Therefore, as per the said agreement, the owners has permitted the said developer to develop the property belonging to the owners only as a licensee which did not have the effect of transfer of property to the licensee. Further, the developer has given possession of the assessee's share in June, 2017 which is evident from para 5.3.3 of the impugned order which is also not disputed by the ld. DR. The CIT(A) clearly recorded that the assessee offered the capital g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is sub-section, shall apply for the purpose of determination of full value of consideration received or accruing as a result of such transfer. Explanation. For the purposes of this sub-section, the expression- (i) "competent authority" means the authority empowered to approve the building plan by or under any law for the time being in force; (ii) "specified agreement" means a registered agreement in which a person owning land or building or both, agrees to allow another person to develop a real estate project on such land or building or both, in consideration of a share, being land or building or both in such project, whether with or without payment of part of the consideration in cash; (iii) "stamp duty value" means the value adopted or assessed or assessable by any authority of the Government for the purpose of payment of stamp duty in respect of an immovable property being land or building or both.]. Upon conspectus of the materials on record, we dismiss the appeal of the department. CO NO. 2/NAG/2021 6. The Ld.AR submitted the following grounds of cross objection. "1) On the facts and circumstances of the case and in law, the entire assessment framed and the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explained in view of the fact that the amount is negligible and further normally wives help husband in distress. 9. Now, there remains an unexplained balance of Rs. 90,625/-. Shri Hirani fairly submitted that Rs. 16,625/- may be added and balance sum of Rs. 74,000/- is out of accumulated past capital. Keeping in view the status of the assessee, his age and his financial position, this sum of Rs. 74,000/- can be ascribed to his past savings which has been accumulated from years together. The Ld.DR in all fairness accepted that this could be a reasonable plausibility keeping in view the fact that the assessee has explained a substantial part of the credit in the bank account. 10. We have given our thoughtful consideration to the above submissions. It is quite possible that a person can always have some minimum savings for which perhaps no detailed explanation is required. It is also a fact that the case pertains to financial year 2011-12 and as on date 12 years have passed. So it may not be possible for a person to meticulously remember such minuscule transactions which have transpired about such a long period ago. So, we deem it fit not to make any separate addition of Rs. 90,625/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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