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TMI Blog2025 (1) TMI 460X X X X Extracts X X X X X X X X Extracts X X X X ..... eloper to enjoy 60% of the constructed area of the building is not perverse? ii) Whether on the facts and circumstances of the case, the appellate authority was correct in law in holding that the appellant is liable to capital gains tax during the assessment year 1997-98?" 3. Facts leading to filing of this appeal in nutshell are that the assessee is a Non Resident Indian (NRI). A notice under Section 148 of the Act was issued to her. In response to the said notice, assessee filed return of income on 27.11.2000, wherein the assessee declared her income as Nil. However, in the note accompanying the return, the assessee stated that she had entered into a development agreement on 04.05.1996 with a builder for construction of residential flats on sharing basis. A copy of the agreement along with the return was enclosed. According to the assessee, the possession of the land owned by her was handed over to the builder only for the purposes of construction and the builder did not get any right to transfer the property or to execute sale deeds. Therefore, according to the assessee, the same was not a transfer within the meaning of Section 2 (47)(v) of the Act read with Section 53 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Income Tax (Appeals) before the Appellate Tribunal. The Appellate Tribunal, by order dated 09.06.2006 held that the development agreement amounts to transfer as the same is covered under Section 2 (47) (vi) of the Act. In the result, the appeal preferred by the assessee was dismissed. In the aforesaid factual background, this appeal has been filed. 7. Learned Senior Counsel for the assessee submitted that the Appellate Tribunal ought to have appreciated that under the development agreement, the assessee has handed over the vacant possession of the land for the purposes of carrying out development only and there was no transfer of ownership in the year 1996 and the same, therefore, would not be covered in terms of Section 2 (47) of the Act. It is contended that from perusal of the development agreement dated 04.05.1996, it is evident that the transfer of title has been contemplated only after construction of the building. It is also contended that the transfer of possession in part performance of any agreement to sell cannot be treated as transfer of ownership under Section 53A of the Transfer of Property Act, 1882. It is pointed out that there is no transfer of capital asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid submission, reliance has been placed on the Division Bench decision of the erstwhile Andhra Pradesh High Court in P.T. Narasimhachar vs. The Assistant Settlement Officer, Chittoor 1970 SCC OnLine AP 117. It is also urged that the decision in Commissioner of Income Tax vs. Harbour View (supra) and the Commissioner of Income Tax vs. T.K. Dayalu 2011 (202) taxman 531 rendered by the Kerala and Karnataka High Courts respectively have no application to the fact situation of the case. It is contended that in the instant case, agreement was executed without any consideration. It is therefore argued that in view of the decision of the Supreme Court in Seshasayee Steels Private Limited vs. Assistant Commissioner of Income Tax, Chennai (supra), the substantial questions of law deserve to be answered in favour of the assessee. 10. We have considered the rival submissions on both sides and have perused the record. 11. Before proceeding further, it is apposite to take note of relevant statutory provisions of the Income Tax Act, 1961. Section 2 (47) defines the expression 'transfer' in relation to capital assets. The aforesaid definition is inclusive in nature and reads as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof." 13. Thus, it is evident that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement and after completion of all further floors. It is hereby clarified that 40% of the builtup portion includes usable area i.e., floor area as also the other areas like Balcony, Staircase, Lifts, Corridors, and other common spaces etc. Similarly, apart from this, 40% of the Car Park area shall be given to the First Party, all these will be clearly demarcated on the plan after obtaining sanction from the MCH or Government. 8. The owner shall be liable to pay Municipal taxes, non-agriculture and other charges and duties relating to the schedule property upto the date of delivery of possession to the developers." 15. The assessee vide letter dated 11.05.1996 handed over the possession of the land to the developer. The relevant extract of the aforesaid letter, which is referred to by the assessing officer in para 5.5 of the order reads as under: "5.5 By virtue of a Possession Letter dated 11.05.1996 the assessee handed over possession of the said land to the Developer, which reads as under: "In pursuance of the 'DEVELOPMENT AGREEMENT' dated 4th May, 1996, at Hyderabad by and between, I have handed over this day vacant possession of the schedule land mentioned below to the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision Bench of Kerala High Court on the facts of the case found that the possession of the property was handed over under Section 53A of the Transfer of Property Act, 1882. Therefore, the aforesaid decision also has no application to the fact situation of the case.
19. However, the finding has been recorded by the Tribunal that the appellant has handed over the possession of the entire property enabling the developer to enjoy 60% of the constructed area of the building cannot, but be said to be perverse. Similarly, the finding that the assessee is liable to pay capital gains tax during the assessment year 1997-98 also cannot be sustained.
20. For the aforementioned reasons, the substantial questions of law framed in this appeal are answered in favour of the assessee and against the revenue.
21. In the result, the orders dated 09.06.2006 passed by the Income Tax Appellate Tribunal, dated 21.03.2003 passed by the Commissioner of Income Tax (Appeals)-V, Hyderabad and dated 21.02.2002 passed by the Assessing Officer are quashed. The appeal is accordingly allowed. There shall be no order as to costs.
22. Miscellaneous petitions, pending if any, shall stand closed. X X X X Extracts X X X X X X X X Extracts X X X X
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