M/s Avtar Singh Brar, Chandigarh v. ITO, Chandigarh

8

de ta i led ad jud ica t ion . W i th the consen t o f a l l the pa r t ies the appea ls in cases o f Shr i Cha ran j i t S ingh A twa l and Sh r i Sa t Pa l Gosa in we re taken up fo r de ta i led ad jud ica t ion wh ich was a rgued by Sh r i A jay Voh ra , Advoca te .

I TA No. 44 8 /Chd/ 20 11 - Shr i Char an j i t S ingh Atw al V . I TO

2 Th is appea l i s d i rec ted aga ins t the o rde r passed by the ld . CIT (A ) - I I , Ludh iana da ted 23 .2 .2011 . 3 . In th i s appea l the assessee has ra i sed the fo l lowing g rounds:

"1 Tha t the ld . CIT(A ) e r red on fac t s and in law in sus ta in ing the ac t ion o f the Assess ing O f f ice r in re jec t ing the rev i sed re tu rn f i led by the appe l lan t du r ing the cou rse o f assessmen t p roceed ings on 7 .10 .2009 w i thout ass ign ing reasons the reo f .

2 Tha t t he ld . CIT(A ) e r red in fac ts and in law in sus ta in ing the add i t ion o f long te rm cap i ta l ga ins o f Rs . 3 ,54 ,68 ,276 / - u /s 45 o f t he Ac t on account o f a l l eged t rans fe r o f p rope r t y .

2 .1 Tha t t he ld . CIT (A) e r red on fac ts and in l aw in con f i rming the f ind ing o f the Assess ing O f f ice r tha t there was deemed t rans fe r o f p roper ty on the da te o f s ign ing o f t r ipa r t i te Jo in t Deve lopment Ag reement ( " the Ag reement " ) i t se l f , in te rms o f sub sec t ion ( i i ) , ( v ) and (v i ) sec t ion 2 (47 ) o f the Ac t .

2 .2 Tha t the ld . CIT(A ) e r red on fac t s and in law in obse rv ing tha t t he rece ip t o f cons ide ra t ion and reg is t ra t i on o f p rope r t y a re no t re levan t fac to rs wh i le de te rmin ing the t rans fe r o f the p rope r t y .

2 .3 Tha t the ld . C IT (A ) fa i led to apprec ia te tha t unde r the p rov is ions o f the Ac t what cou ld be b rought to tax is on ly t he rea l i ncome and no t an amount , wh ich was ne i the r rece ived no r l i ke ly to be rece ived by the assessee . Bes ides the assessee has been dep r ived fo r c la iming exempt ion u /s 54EC and o the r p rov is ions o f sec t ion 54 , due to non - rece ip t o f en t i re sa le cons ide ra t ion .

2 .4 Tha t the ld . C IT(A ) fa i led to app rec ia te tha t the Ag reemen t en te red in to by the appe l lan t was sub jec t to var ious regu la to ry /s ta tu to ry /o the r app rova ls /permiss ions , e t c . requ i red to be ob ta ined by the o ther par ty ( ies ) , wh ich

9

were no t rece ived and hence there cou ld be no ' t rans fe r ' unde r the sa id Agreement .

2 .5 Tha t the ld . CIT(A ) fu r the r e r red on fac ts and in law in ho ld ing /observ ing tha t ce r ta in te rms and cond i t ions o f the Ag reemen t wh ich p rov ided tha t the t rans fe r o f land was sub jec t to fu r the r cond i t ion /encumbrances , were no t re levan t .

2 .6 Tha t the ld . CIT (A ) e r red on fac ts and in law in no t app rec ia t ing tha t ac tua l phys ica l possess ion o f the p rope r t y was no t handed ove r by the appe l lan t in pa r t pe r fo rmance o f the con t rac t , , in te rms o f sec t ion 53A o f the T rans fe r o f P rope r t y Ac t and hence the re was no ' t rans fe r ' i n law . Tha t t he re levan t p rov is ions o f sec t ion 2 (47 ) as a l so the p rov is ions o f sec t ion 53A o f the T rans fe r o f P rope r t y Ac t , 1882 qua the fac ts o f t h i s case , have been miscons t rued by the ld . C IT (A ) to con f i rm the ITO 's o rde r . Tha t the ld . C IT (A ) f a i led to app rec ia te tha t reg is t ra t i on o f te rms o f ag reemen t was a p recond i t ion to the hand ing ove r the possess ion o f the p rope r t y . 2 .7 Tha t the ld . CIT(A ) e r red on fac t s and in law in a f f i rming the va lue o f the f la ts rece ivab le towards pa r t cons ide ra t ion o f the p roposed t rans fe r o f p roper ty , @ Rs . 4500 pe r sq . fee t ignor ing the ev idence o f lower va lue g iven du r ing the cou rse o f assessment . Tha t computa t ion o f cap i ta l ga in , by assuming no t iona l cons ide ra t ion o f two non ex is ten t f l a ts , no t be ing cons is ten t w i th the bas ic scheme o f I ncome- tax Ac t , dese rves no t to be uphe ld . 2 .8 W i thou t p re jud ice , the ld . CIT (A ) e r red on fac t s and in law in no t d i rec t ing the Assess ing Of f i ce r to compute cap i ta l ga in w i th respec t to the ac tua l amount rece ived du r ing the re levan t Assessment yea r .

3 W i thou t p re jud ice , tha t the ld . C IT(A ) fa i l ed to app rec ia te tha t the income, i f a t a l l , cou ld have been assessed in the hands o f the Soc ie ty and no t the appe l lan t .

3 .1 Tha t the ld . CIT(A ) e r red on fac t s and in law in re jec t ing the app l ica t ion fo r admiss ion o f add i t iona l g rounds f i led by the appe l lan t , v ide le t te r da ted 31 .1 .2011 ho ld ing the same to be f r i vo lous and i r re levan t . A l l these g rounds o f appea l a re requested to be cons ide red and a l lowed.

4 . Tha t the assessed income hav ing fa r exceeded Rs. 5 l akhs o f wh ich the ITO was we l l aware be fo re invok ing he r j u r i sd ic t ion , she ough t to have t rans fe r red the case to an Assess ing Of f i ce r o f competen t ju r i sd ic t i on . Th is l ega l i n f i rmi t y renders the o rder impugned as nu l l and vo id .

10

5 Tha t the impugned cap i ta l ga in was a lso no t assessab le as the ve ry r igh t t o rece ive the p ro jec ted cons ide ra t ion has fa l len in to se r ious jeopardy fo l low ing s tay g ran ted by the Hon 'b le Pun jab & Haryana H igh Cou r t tak ing cogn izance o f a P IL f i led aga ins t the execu t ion o f impugned dea l .

6 Tha t the ld . CIT (A ) has re jec ted the con ten t ion o f the appe l lan t tha t the Assess ing O f f ice r e r red on fac t s and in law in no t app rec ia t ing the amount o f Rs . 30 ,00 ,000 / - rece ived unde r the ag reemen t were in the na tu re o f advance rece ived and no t t he ac tua l sa les cons ide ra t ion .

7 Tha t the ld . CIT(A ) e r red on fac t s and in law in upho ld ing the impos i t ion o f in te res t u /s 234B and w i thd rawa l o f in te res t u / s 244A(3) o f the Ac t .

8 Tha t the o rde rs o f the au tho r i t ies be low a re h igh ly un jus t , a rb i t ra ry , aga ins t equ i ty and na tu ra l jus t i ce and hence l iab le to be se t as ide on th i s sco re a l so . "

4. A t the t ime o f hea r ing, Ground No. 4 was no t p ressed and there fo re , same is d ism issed as no t p ressed . 5 . The assessee has a lso moved a pe t i t ion unde r Ru le 29 fo r adm iss ion o f add i t iona l ev idence and has a l so ra ised g round No. 3 .1 in th is rega rd . The app l ica t ion fo r admiss ion o f th is add i t iona l ev idence was re jec ted by the ld . CIT (A ) v ide para 7 . Re levan t po r t ion o f the same reads as under :

"The appe l lan t 's p lea o f tak ing add i t iona l g round o f appea l by h i s le t te r da ted 31 .01 .2011 i s f r i vo lous and i r re levan t and is no t admiss ib le to the fac t s o f the case . "

6. Be fo re us , the ld . counse l o f t he assessee re fe r red to the pe t i t ion and po in ted ou t to t he l i s t o f documen ts wh ich we re sought to be adm i t ted as add i t iona l ev idence . I t was po in ted ou t tha t these came in to ex i s tence because o f the deve lopments wh ich we re subsequen t to assessmen t p roceed ings . These documen ts a re ve ry mater ia l f o r ad jud ica t ion o f appea l be fo re us . I t was a lso po in ted ou t tha t s im i la r documents have a l ready been adm i t ted by the ld . C IT (A) - I , Ludh iana in case o f Appea l No . 269 / IOT/CIT - I /Ludh iana /2010 -11 da ted 21 .12 .2011 in case o f Sa tpa l Gosa in . The revenue i s i n appea l aga ins t tha t o rde r in ITA No.

11

276 /Chd/2012 and the re fo re , such documents have to be cons ide red by the T r ibuna l , the re fo re , he made a p rayer tha t these documen ts may be adm i t ted .

7 On the o ther hand , the ld . DR fo r t he revenue opposed the adm iss ion o f the add i t iona l documen ts .

8 A f te r cons ider ing the r i va l subm iss ions we f ind tha t the fo l lowing documents a re sought to be admi t ted by way o f add i t iona l ev idence :

i ) No t ice da ted 28 .1 .2011 g iven to Hash Bu i lders for payment o f 3 ^rd

ins ta l lment as per te rms o f JDA - page No. 8 -22

i i ) Rep ly da ted 4 .2 .2011 rece ived f rom Hash Bu i lde rs dec l in ing fu r the r payments - Page 23 -24 i i i ) Reso lu t ion da ted 13 .6 .2011 passed by the Soc ie ty resc ind ing the JDA - page No. 25

i v ) Le t te r wr i t ten to the Sub -Reg is t ra r , Moha l i cance l ing the POA, Page 26-29

v ) H igh Cou r t ' s o rde r s tay ing execu t ion o f t he P ro jec t on f i l ing o f a P IL a t page No . 30

v i ) Assessmen t o rder da ted 29 .12 .2010 passed aga ins t the Soc ie t y on p ro tec t i ve bas is , Page No . 31 to 53 v i i ) Appe l la te o rde r da ted 21 .12 .2011 passed by ld . C IT (A) - I , Ludh iana in the case o f Sh r i Sa tpa l Gosa in , Page 54 -94

v i i i 0 Copy o f reg is t ra t ion and o the r laws (amendment ) Ac t , 2001 , Page No. 95-96

9 A ba re read ing o f above shows tha t these documents came in to ex is tence on ly a f te r comp le t ion o f assessment . In any case , the same have been adm i t ted by the ld . CIT (A ) - I , Ludh iana in case o f Sa tpa l Gosa in (sup ra ) though the Depa r tmen t has cha l lenged the adm i t tance o f these add i t iona l ev idence under ru le 46A(2 ) o f the Ac t . Howeve r , cons ide r ing the fac t s t ha t the documents came in to ex i s tence a f te r comple t ion o f assessment , we a re o f t he op in ion tha t in t he in te res t o f j us t i ce , the same shou ld have been adm i t ted by the

12

l d . CIT (A ) . Accord ing ly we adm i t these add i t iona l ev idences ment ioned in pa ra 7 and a l low ground No. 3 .1 o f assessee 's appea l .

10 Ground No. 1 - A f te r hea r ing bo th the pa r t ies we f ind tha t the assessee o r ig ina l l y f i led re tu rn o f income dec la r ing income o f Rs . 2 ,50 ,175 / - and agr i cu l tu ra l income o f Rs . 1 ,58 ,530 / - on 7 .12 .2007 . The case was se lec ted fo r sc ru t iny and no t i ce u / s 143 (2 ) o f the Ac t was i ssued . Du r ing the cou rse o f assessment p roceed ings a copy o f rev ised re tu rn was f i led on 7 .10 .2009 dec la r ing g ross taxab le income amount ing to Rs. 30 ,08 ,606 / - . The Assess ing Of f ice r observed tha t th is rev i sed re tu rn was f i led beyond t ime and acco rd ing ly the same was t rea ted as nonest re tu rn . On appea l the ac t ion o f the Assess ing Of f ice r was con f i rmed by the ld . CIT (A ) .

11 Be fo re us , the ld . counse l o f the assessee submi t ted tha t the ld . CIT (A ) has no t g i ven any reason fo r con f i rm ing the ac t ion o f t he Assess ing Of f ice r f o r t rea t ing the rev ised re tu rn as nonest .

12 On the o the r hand , the ld . DR fo r the revenue subm i t ted tha t s ince rev i sed re tu rn was la te , there fo re , same was r i gh t l y t rea ted as nonest .

13 A f te r cons ide r ing the r i va l subm iss ions we do no t f ind any fo rce in the subm iss ions o f the ld . counse l o f t he assessee . Sec t ion 139 (5 ) wh ich dea ls w i th the rev i sed re tu rn reads as unde r :

"139 (5 ) - I f any pe rson , hav ing fu rn ished a re tu rn unde r sub -sec t ion (1 ) o r i n pu rsuance o f a no t i ce issued unde r sub -sec t ion (1 ) o f sec t ion 142 , d iscove rs any omiss ion any wrong s ta tement the re in , he may fu rn ish a rev i sed re tu rn a t any t ime be fo re the exp i ry o f one yea r f rom the end o f the re levan t Assessmen t yea r o r be fo re the comple t ion o f the assessmen t , wh icheve r is ea r l ie r . "

14 The above c lea r ly shows tha t rev ised re tu rn can be f i led a t any t ime be fo re the exp i ry o f one yea r f rom the end o f re levan t assessmen t yea r o r be fo re comp le t ion o f assessment

13

wh ich eve r is ea r l i e r . In case be fore us , l im i ta t ion o f one yea r wou ld exp i re on 31 .3 .2009 whereas rev ised re tu rn has been

f i l ed on 7 .10 .2009 which i s c lear l y beyond the l imi ta t ion p rescr ibed u /s 139 (5) . In any case no d isadvantage has occur red to the assessee because in the rev i sed re tu rn the assessee has inc luded a sum o f Rs . 27 ,58 ,436 / - on accoun t o f cap i ta l ga in and the who le d i spu te in the assessmen t re la tes to cap i ta l ga in a r is ing ou t o f sa le o f p lo t in Pun jab i Coope ra t i ve Hous ing Bu i ld ing soc ie t y L td . , Moha l i (he re in a f te r re fe reed to

"Soc ie t y " ) . In f ac t the Assess ing Of f i ce r has u l t imate ly assessed much h ighe r amount o f cap i ta l ga in wh ich the assessee i s d ispu t ing . In v iew o f t hese fac ts w e re jec t the f i rs t ground .

15 Grounds No. 2 to 2 .8 , 5 & 6

16 The ld . counse l o f the assessee a t the t ime o f hear ing had c lea r l y adm i t ted tha t i n above no ted g rounds bas ica l l y va r ious face ts o f the d ispu te have been h igh l i gh ted , the re fo re , a l l these g rounds a re be ing taken toge the r f o r ad jud ica t ion .

17 B r ie f f ac t s o f the case a re tha t wh i le mak ing d isc ree t enqu i r ies in the cases o f hous ing soc ie t ies , i t was ga thered tha t hous ing soc ie t y cons is t ing o f 95 p resen t and Ex-MLAs o f Pun jab Leg is la t i ve Assemb ly i s owner o f the 21 .2 ac res o f land in v i l lage Kansa l , D is t t . Moha l i . The v i l lage Kansa l shares i ts bounda ry w i th cap i ta l c i t y o f Chand iga rh . On 25 .2 .2007 the Hous ing Soc ie t y o f MLAs en te red in to a t r ipa r t i te Jo in t Deve lopmen t Agreemen t (he re in a f te r re fe r red as "JDA" ) w i th HASH Bu i lders (P) L td (he re ina f te r re fe r red to "HASH" ) and M/s Ta ta Hous ing Deve lopment Company L td . (he re ina f te r re fe r red as "THDC") . By v i r tue o f th is t r ipa r t i te agreement i t was agreed upon among these pa r t ies tha t the Soc ie t y wh ich is owner o f 21 .2 ac res o f l and , sha l l t rans fe r i t s l and to THDC/HASH in l ieu o f mone ta ry cons ide ra t ion and cons ide ra t ion in k ind . As pe r the agreement each Member o f the Soc ie t y hav ing a p lo t o f 500 sqyd in the Soc ie t y was to rece ive moneta ry cons ide ra t ion o f Rs . 82 ,50 ,000 / - and the Members ho ld ing p lo t o f 1000 sqyd was

14

to rece ive a sum o f Rs . 1 .65 c ro res . In add i t ion to th is Member ho ld ing a p lo t o f 500 sqyd was to rece ive fu l l y f u rn ished f la t measur ing 2250 sqf t to be cons t ruc ted by THDC/HASH and Members hav ing 1000 sqyd were to ge t two such f la ts . Acco rd ing to t he Assess ing Of f ice r t o ta l cons ide ra t ion to be rece ived by a l l the Members was Rs . 1 ,06 ,42 ,35 ,000 / - and fu rn i shed f la t s as men t ioned above . Be fo re en te r ing in to the t r ipa r t i te agreemen t the Soc ie t y i n i t s Execu t i ve Commi t tee meet ing he ld on 4 .01 .2007 wh ich was app roved in the Genera l Body mee t ing he ld on 26 .2 .2007 , passed a reso lu t ion to the e f fec t tha t a l l the Members wou ld sur rende r the i r a l l r i gh ts in the p rope r t y to the Soc ie t y and the Soc ie t y wou ld en te r in to an agreemen t on beha l f o f the Members w i th THDC/HASH. The Assess ing Of f ice r has re fe r red to th is reso lu t ion as we l l as va r ious impor tan t c lauses o f the JDA and has p laced lo t o f re l iance on c lause 2 .1 o f the JDA wh ich i s as unde r :

"The owner hereby i r revocaboy and unequivoca l ly grants and ass igns in perpe tui ty a l l i ts r ights to develop , const ruc t , mortage, lease , l icense se l l and t rans fer the proper ty a long wi th any and a l l the const ruc t ions, premises, heredi taments , easements , t rees thereon in favour o f THDC for the purpose o f development , construct ion, mortgage , sa le , t rans fer , lease , l i cense and/or exp lo i ta t ion for fu l l u t i l i za t ion of the Proper ty (Rights ) and to execu te a l l the documents necessa ry to ca r ry ou t , fac i l i ta te and en fo rce the R igh ts in the P rope r ty inc lud ing to execu te Lease Ag reement . L icense Ag reemen ts , Cons t ruc t ion con t rac ts , Supp l ie r Cont rac ts , Agreement fo r Sa le . Conveyance , Mor tgage Deeds, F inance documents and a l l documents and

ag reemen ts necessa ry to c rea te and reg is te r the mor tgage , conveyance , lease deeds , l i cense agreement , POA, a f f idav i t s , dec la ra t ions , i ndemn i t ies and a l l such o ther documents , l e t te rs as may be necessa ry to car ry ou t , fac i l i ta te and en fo rce the R igh ts and to reg is te r the same w i th the revenue/Competen t au tho r i t i es and to appear on our beha l f be fo re a l l au tho r i t ies , s ta tu to ry o r o therw ise and be fo re any cou r t o f Law (The "Deve lopment R igh ts ' ) . The Owner hereby hands over the or ig ina l t i t le deeds of the Proper ty as ment ioned in the l is t Annexued hereto and marked as Annexure IV and

phys ica l , vacant possess ion o f the Property has been handed over to THDC s imul taneous ly to the execut ion and regis t ra t ion o f th is Agreement to deve lop the same as se t out here in ."

15

18 I t was fu r the r no t i ced tha t t i l l da te a Member hav ing 500 sqyd p lo t in Soc ie t y had rece ived Rs . 33 .00 lakhs each and a Member hav ing 1000 sqyd p lo t had rece ived Rs. 66 .00 lakh . The assessee was a l so a Member and Pres iden t o f the Soc ie t y and was owner o f a p lo t measu r ing 1000 sqyd . There fo re , as pe r JDA, he was to rece ive Rs. 1 .65 c ro res as moneta ry cons ide ra t ion and two fu rn i shed f la t s as cons idera t ion in k ind and the cos t o f the same as pe r Assess ing Of f ice r was Rs. 2 ,02 ,50 ,000 / - and to ta l cons ide ra t ion wou ld be Rs. 3 ,67 ,50 ,000 / - .

19 Acco rd ing to the Assess ing Of f ice r s ince the Soc ie ty has ass igned a l l r i gh ts i n 21 .2 ac res o f land be long ing to the Soc ie t y in t e rms o f JDA to THDC/HASH and a lso handed ove r the phys ica l vacan t possess ion o f the p rope r t y to THDC/HASH, there fo re , the assessee became l i ab le to cap i ta l ga in tax on h is sha re o f cons idera t ion . Accord ing ly a le t te r da ted 7 .12 .2008 was issued in t imat ing the assessee tha t a f te r cons ide ra t ion o f t he va r ious c lauses o f JDA da ted 25 .2 .2007 and the reso lu t ion passed by the Soc ie t y on 26 .2 .2007 , cap i ta l ga in was to be cha rged in the hands o f the assessee in Assessmen t year 2007-08 by tak ing fu l l va lue o f t he cons t ruc t ion a t Rs . 3 ,67 ,50 ,000 / - . The assessee f i led va r ious rep l i es wh ich have been ex t rac ted by the Assess ing Of f ice r as unde r :

"Th is has re fe rence to you r le t te r da ted 7 .12 .2009, we submi t ted tha t unde r :

"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.

2 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.

3 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 Lid. 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 Rs. 12

16

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 assessee has paid due amount of taxes voluntarily during the course of proceedings It may kindly be appreciated that tax liability will

arise only to extent of completed transactions i.e. the capital gain arising on the land which has been transferred and for which consideration has been received. The assessee has fully discharged his liability to that extent There cannot be any tax liability on Incomplete transaction I.e. where the land has not been transferred and the Consideration has not been received,

5 In your letter under consideration, you have considered the national 'value of the proposed flat measuring 2250 sq. feet as a part of the consideration Here the following points need to be considered.

1.) The flat shall be given only after the full land i.e. 500 sq. yard, has been transferred to the buyer.

2) There is no provision in the agreement to allot proportionate flat or make equivalent proportionate payment. So for the present transaction where only a part of the land has been transferred, no consideration on account of flat is available. So no question of any tax liability arise.

3) It may kindly be appreciated that the developer has not even ' acquired the land till date and has not even obtained permission to start development. So there is no question of any construct ion of f iats now or near future that is to say, there is no capita! asset in existence as on date for which the national value can be considered.

4) Clause No 14 is termination clause of the agreement under reference (copy enclosed), very clearly states the rights of THDC to terminate the agreement and in that situat ion, the land already transferred to THDC will be retained by them and no further land will be purchased by THDC and no further payment shall be made by them. In that event the amount received by assessee will be considered as full, and final consideration. So there is no question of considering the national value of proposed flat as the unrealized consideration for the purpose of capital gain of the assessee. The assessee is a Hon'ble citizen and regular Income Tax Payee and shall discharge his liability under Income Tax when the whole land will be transferred.

5.) While making the calculation of capital gain tax, the amount of consideration has been wrongly taken of Rs. 15 lacs Instead of Rs,12 lacs. As per the agreement, sum of Rs. 3 lacs 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 (1993) 201 ITR

1032 (PAT)

17

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 capita! gain as submitted by us."

9. The case was further fixed for 24.12.2009, On the said date the counsel of the assessee fi fed 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 accepted the position of transfer, please note that we understand that transfer of property is only to the extent of the land transferred by way of sale deed.

3 It is very clear from the agreement that no transfer of property have taken place only the development right has been transferred. Therefore, there is no transfer of property under section 53A of Transfer of property Act,

4. Clause 9.3 of the agreement is very clearly stating that the ownership has not been transferred. in view of our submission you are requested to complete the Capita! Gains Tax in accordance with our return. The assessee wants to be personally heard and make further submission. You are requested to kindly adjourn the case t i l l 29-12-2009."

11. Vide the above said letter the assessee requested to be personally heard however on 29.12.2009 he did not appear. The counsel of the assessee fi led written submission which is reproduced as under:

1 In para 6,1 of your letter dated 7.12.2009, you have written that there is grant and assignment of development rights in the property and there is transfer of property upon the surrender of allotment right. This is not a true factual position. The allotment rights have not been surrendered by the members in favour of THDC LTD or M/s Hash Builders Ltd. The factual posit ion is that the society I.e. M/s Punjabi Co-op House Bldg. Society Ltd. has entered into an agreement with M/s THDC Lid.

18

M/s Hash Builders Ltd. As per clause 2.1 of the agreement it is very clearly mentioned that the possession of the property has been handed over to THDC Ltd. only to develop the same. A close examination of the agreement clearly reveals that the agreement is a Joint development agreement. The Society intended to develop the land owned by it. However since the requisite expertise were not available with the society, the other two developers were involved in the project. The cost of development was to be borne by the THDC. The payment to the society was to be made pro-rata on transfer of land in favour of THDC Ltd, It is very clear from the agreement that no consideration was payable to the assessee unless the land was transferred. So there is a clear cut relation between the land transfer and consideration. No consideration will be received if the land is not transferred. As far as the possession as mentioned in the agreement is concerned, the same is for 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 deeds are not executed.

4 The clause 13 very clearly states that the rights transferred relate to Development/construction work and M/s THDC Ltd shall not do anything which adversely affect the right of the owner to receive the entire consideration.

5 Keeping in view the conditions in the agreement and to the fact that M/s THDC Ltd: M/s Hash Builder Ltd have not done any development work on the land under consideration till date in pursuance of the agreement dated 25.2.2007 or in furtherance of the said

19

agreement, no transfer should be considered to have been taken place in respect of the land which is not yet transferred,

if the views of the department are held to be correct for the sake of discussion, the following situation will arise:

1, Assesses will be deprived from availing the exemption u/s 54EC since no funds are available with the assessee for investment.

2, Assessee will be deprived from availing exemption u/s 54F as no residential house has yet been constructed. This is an ironical situat ion where assessee is having to pay tax on the notional value of the flat to be given in the future to him as consideration but exemption under section 54F will be denied because the residential house did not exist,

3. Further as per the termination clause of the agreement various conditions have been prescribed under which the agreement can be terminated. It is very clearly mentioned in the agreement that in the event of termination of the agreement the land transferred by the members will be retained by THDC Ltd and consequently no further consideration shall be given to the members. It is evident from the facts in the case that inordinate delay has already taken place In this case. The agreement was originally envisaged to be fully executed In F.Y 2007-08. But now even FY 2009-10 is also going to expire. In that case the assessee will have no remedy available against the tax paid on consideration which will never be received by him. Under such circumstances it will be fully unlawful to charge tax.

4. The value of proposed flat is undeterminable and there is no way to determine the same. There is no provision to pay tax on the notional value. Clause 6.18 of the agreement entit led the assessee to surrender his proposed flat to THDC Ltd. and in that case only 75% of the future market- price will be received by him.

In the light of above discussion 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 capita! gain should be charged in the hands of the Punjabi Co-operative House Bldg. Society. It wi l l 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:

20

"This being referred to the captioned proceedings Regarding your query about the cost of acquisition is Rs. 11 lacs which is paid as per fol lowing dates. Receipt No, 307 09-11-01 5,04,000/-

Receipt No. 426 12-02-04 7,00,007/-

Out of above amount Rs. 1,00.000/- was refunded to the assessee and Rs, 4000/- was towards membership charges and other funds of the society.

In continuation to our earlier reply submitted, we once again reiterate that the possession given by the assessee is only to the extent of land sold by way of registered sale deed. There are certain addendums to the agreement which are not presently available with the assessee & cannot be submitted immediately."

20 The Assess ing Of f ice r a f te r cons ide r ing the submiss ions d id no t f ind any fo rce in the same and observed as unde r :

( i ) The re is no fo rce in the a rgument tha t the JDA was on ly an agreement to se l l and no t a sa le deed because JDA resu l ted in the t rans fe r o f asse ts . A l l the ingred ien ts o f t rans fe r i .e . cons ide ra t ion f rom schedu le o f payments , r i gh ts and l iab i l i t ies o f the pa r t ies e tc . we re ment ioned in t he JDA, Cap i ta l ga in a rose because o f the fac t tha t i t was a case o f t rans fe r o f cap i ta l asse t i n v iew o f Sec t ion 2 (47 ) ( i i ) , 2 (47 ) (v ) and 2 (47) (v i ) . Acco rd ing to h im as pe r c lause 2 .1 o f the JDA owner o f the land made agreement and i r revocab ly and unequ ivoca l l y

g ran ted and ass igned in pe rpe tu i ty a l l o f i t s r i gh ts to deve lop , cons t ruc t , mor tgage , lease , l i cense , se l l and t rans fe r the p rope r t y (21 .2 ac res o f land) a long wi th any and a l l

cons t ruc t ions t rees e tc . in f avour o f THDC/HASH fo r t he pu rpose o f deve lopment , cons t ruc t ion , mor tgage , se l l , t rans fe r , l ease , l i cense and /o r exp lo i ta t ion fo r f u l l u t i l i za t ion o f the p rope r t y and to execu te a l l documen ts necessa ry to ca r ry ou t f ac i l i t ies and r i gh ts in t he p rope r t y . Thus t rans fe r o f p rope r t y was e f fec ted th rough th is agreement .

( i i ) The owner had a lso handed ove r the o r ig ina l t i t le deeds o f the p rope r t y and a l so handed ove r the phys ica l , vacan t possess ion o f t he p rope r t y to THDC/HASH s imu l taneous ly to the execu t ion and reg is t ra t ion o f th i s JDA and there fo re , the

21

case o f the assessee was cove red by the p rov is ions o f sec t ion 2 (47 ) (v ) o f the Ac t r .w.s 53A o f T .P . Ac t . as pa r t cons ide ra t ion had a lso been rece ived . Acco rd ing to the Assess ing Of f i ce r the fac t s o f the case were s im i la r to the fac t s in case o f CIT V . K . Jee lan i Basha , 256 ITR 282 (Mad) whe re in Hon 'b le H igh Cou r t a f te r ana lyz ing the p rov is ions o f sec t ion 2 (47 ) (v ) had he ld tha t once the possess ion even fo r a par t o f the p rope r t y was handed ove r t o the t rans fe ree , f o r the pu rpose o f Sec t ion 2 (47 ) (v ) r .w.s 45 , the t rans fe r was comp le te . ( i i i ) The assessee 's case was a lso cove red by the p rov is ions o f sec t ion 2 (47 ) (v i ) wh ich dea ls w i th any t ransac t ion wh ich had e f fec t o f t rans fe r r i ng o r enab l ing the en joyment o f any immovab le p rope r t y and ass ign ing va r ious r i gh ts in the p rope r t y i n f avour o f THDC and hand ing ove r the o r ig ina l t i t le deeds as we l l as hand ing over o f the phys ica l vacan t possess ion o f land has the e f fec t o f t rans fe r r ing o r enab l ing the en joymen t o f the sa id p roper t y to THDC/HASH.

( i v ) The re was no force in the con ten t ion tha t the amounts rece ived unde r the sa id agreemen t we re advances rece ived and no t the sa le cons idera t ion because to ta l cons ide ra t ion was s t ruc tu red in the JDA and the cons ide ra t ion was to be rece ived as per c lause 4 ( i v ) o f the JDA. In f ac t the assessee has h imse l f shown the rece ip t and re tu rned the same as cap i ta l ga in wh ich con t rad ic ts these a rguments o f the assessee . As pe r Sec t ion 45 o f IT Ac t , income- tax was to be charged unde r the head "cap i ta l ga in " on t rans fe r o f a cap i ta l asse t and sha l l be deemed to be the income o f the p rev ious yea r i n wh ich t rans fe r t ook p lace . The yea r o f t rans fe r i s the c ruc ia l yea r and no t the t ime o f the rece ip t .

( v ) The re was no fo rce in the con ten t ion tha t the va lue o f the f la t shou ld no t be inc luded because the assessee has no t rece ived such f la t , because the f la t was to be rece ived by each Member o f the Soc ie t y was pa r t o f the en t i re cons ide ra t ion as pe r c lause 4 .2 o f JDA. In any case as pe r Sec t ion 45 r .w.s . 48 ,

22

i t s f u l l va lue o f cons ide ra t ion rece ived o r acc rued wh ich has to be cons ide red .

( v i ) I t was a l so obse rved tha t su r rende r o f a l l o tment le t te r by the Members inc lud ing assessee was p rocessed in o rde r to enab le the Soc ie ty t o en te r in to t r ipa r t i te JDA wi th HASH and THDC. By su r rende r ing the a l lo tment le t te r , the r i gh t o f the assessee in immovab le p rope r t y owned by h im go t ex t ingu ished and th is ex t ingu ishment was in l i eu o f en t i re cons idera t ion wh ich was rece ived by the Members inc lud ing the assessee . thus th i s case was a lso cove red u /s 2 (47 ) ( i i ) o f the Ac t . ( v i i ) I t was obse rved tha t the re i s no mer i t in the con ten t ion tha t the assessee wou ld no t be cove red u /s 54EC due to lack o f f unds o r exempt ion u /s 54 was no t re levan t to the issue abou t taxab i l i t y o f l ong te rm cap i ta l ga ins wh ich was dependent on ly on t rans fe r .

( v i i i ) I t was obse rved tha t the re was no fo rce in the con ten t ion tha t the va lue o f the f la ts was unde te rminab le because the va lue o f the f l a t was ve ry much de te rm inab le as pe r the marke t ra te p reva i l ing wh ich cou ld a l so be asce r ta ined f rom the ra te a t wh ich the f la ts were be ing o f fe red to the gene ra l pub l i c . ( x ) The Assess ing Of f i ce r was o f the v iew tha t the case laws re l ied on by the assessee were d is t ingu ishab le fo r wh ich the reasons have been g iven a t page 23 and 24 o f the assessment o rde r .

21 In th is background the assessee was cha rged to cap i ta l ga in tax u /s 45 fo r the to ta l cons ide ra t ion rece ived and rece ivab le by be ing a Member o f the Soc ie t y in v iew o f JDA.

22 On appea l be fo re the ld . C IT (A ) de ta i led subm iss ions we re made ( In the impugned o rde r re fe rence i s made to wr i t ten submiss ions w i thou t d iscuss ing the a rguments ) . The ld . CIT (A ) re fe r red to the p rov is ions o f sec t ion 45 and 2 (47 ) o f the Ac t and obse rved tha t c lauses (v ) to (v i ) we re inse r ted in sec t ion 2 (47 ) w.e . f . 1 .4 .1988 . He obse rved tha t be fo re inser t ion o f th is

23

p rov is ion , i t was a lways poss ib le to avo id o r pos tpone cap i ta l ga in by e i the r no t execu t ing conveyance deed o r pos tpone such execu t ion because vendo r o f the p rope r t y cou ld g i ve the p r i v i lege o f ownersh ip o r en joyment o f the p rope r t y by execu t ing a Power o f A t to rney e t c . To avo id such leakage o f revenue c lauses (v ) and (v i ) we re inse r ted to sec t ion 2 (47 ) o f the Ac t . He then d iscussed the dec is ion o f Hon 'b le Bombay H igh Cou r t in case o f Chatu rbhu j Dwarkadas Kapad ia V . CIT ,

260 ITR 491 (Bom) and ex t rac ted the fo l lowing cond i t ions wh ich we re requ i red to be sa t i s f i ed to cover the case u /s 2 (47 ) (v ) r .w.s . 53A o f T .P . Ac t .

(a ) The re shou ld be con t rac t fo r cons ide ra t ion (b ) I t shou ld be in wr i t ing

( c ) I t shou ld be s igned by the t rans fe ro r o r on h is beha l f (d ) I t shou ld pe r ta in to t rans fe r o f immoveab le p rope r t y (e ) T rans fe ree has in pa r t per fo rmance o f con t rac t has taken possess ion o r pa r t possess ion o f t he p rope r t y . ( f ) Las t ly , t rans fe ree shou ld be ready and w i l l ing to pe r fo rm h is pa r t o f con t rac t .

23 I f the above cond i t ions we re sa t is f ied then the t rans fe r can be sa id to have taken p lace for the pu rpose o f Sec t ion 45 . Acco rd ing to h im as pe r the dec is ion o f Cha tu rbhu j Dwarkadas Kapad ia V . C IT (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 108: 294 ITR 196. He referred to various observations of the Authority in this case and concluded that the receipt of entire consideration was not a factor to be seen for applicat ion of Section 2(47)(v). Once these two decisions were considered along with the provisions of section 45 r.w.s. 2(47)(v) then it would emerge as under:

"(a) The Joint development agreement has been entered into between the Punjab Coop Housing Building Society Ltd. Mohali, of which assessee is member, and. M/s Hash Builders

(P) Ltd. and M/s Tata Housing development Company Ltd. Mumbai as on 25.2.2007.

24

b) The members of the society surrendered their allotment rights and the society on behalf of members entered into the joint development agreement in l ieu of 'entire consideration' as described in the Joint Development agreement in the previous year 2006-07.

(c) The receipt of considerat ion was structured and the assessee received part of the 'ent ire consideration' during the financial year 2006-07. This clearly shows that the transferee is ready and will ing to perform his part of contract.

(d) In view of clause 2.1 of the Joint Development agreement, the owner has at the t ime of making the agreement irrevocably and unequivocally granted and-assigned in perpetuity al l i ts rights to develop, construct, mortgage, lease, l icense, sel l and transfer the property i.e (21.2 acres of land) alongwlth any and all construct ions, trees etc. in favour of M/s Tata Housing development Company Ltd, for the purpose of development, construct ion, mortgage, sale , transfer, lease, l icense and/or exploitat ion for the full ut i l izat ion of the property and to execute al l the documents necessary to carry out, facil itate and enforce the rights in the property. Thus, in fact the owner has irrevocably and unequivocally granted and assigned in perpetuity al l the rights which an owner can have in an immoveable property. All these rights have been given on date of agreement i.e. 25.02.2007 and even possession has been handed over in the financial year 2006-2007. The para

2.1 clearly states that " the owner hereby hands over the original t it le deeds of the property as mentioned in the list Annexed hereto and marked as Annexure IV and physical, vacant possession of the property has been handed over to THDC simultaneously to the execution and registrat ion of this agreement 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 fulf i l led.

f) Further coining to "considerat ion" part . As per Para 4,1 Rs,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 (i i) clearly states that in l ieu of. Rs, 12,00,000 per plot holder of 500 Sq. Yards and Rs.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 t ransfer 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 will ing to perform his part of contract and in

25

this part performance of contract, the assessee and other members of the Punjab Coop Housing Building Society Ltd, Mohali have given possession of the whole of land of 21.2 acres to the THDC and have further irrevocably and unequivocally granted and assigned all rights in perpetuity to THDC in the said previous year i .e. 2006-07.

h) Hence it is established beyond doubt that transfer has taken place as envisaged as per Section 2(47)(v) of the- Income Tax Act and since it has taken place through Society of which assessee is also member so Sections 2(47) (vi) and 2(47)(i i) would also support Section 2(47)(v) of the income Tax Act.

(i) Now once it has been established that transfer has taken place, then the next important question is the year in which the transfer has taken place and it is the year in which the transfer has taken place, whole of the considerat ion , whether received or receivable in cash or kind, would be chargeable to capital gains u/s 45, whether the entire considerat ion has been received in the year of transfer or not.

j) From the discussion in above paras it is clear that not only agreement has been entered into in, the pervious year 2006- 07 but the owner has at the time of making the agreement irrevocably and unequivocally granted and assigned in perpetuity all its r ights to develop, construct, mortgage, lease, l icense, sel l and transfer the property i.e (21.2 acres of land) alongwith any and all constructions, trees etc. in favour of M/s Tata Housing development Company Ltd.

k) Furthur M/s Tata Housing development Company Ltd has also in part performance of contract has made the payments to the owners and is will ing to perform his part, of contract and the members of society in this part performance of contract have assigned full rights in the favour of transferee in the previous year 2006-07 itself and surrendered allotment letters to enable the Society to enter into triparti te agreement with HASH and THDC.

l) Most importantly physical and vacant possession of whole of the land of 21.2 acres has been handed to M/s Tata Housing development company Ltd. in the previous year 2006-07, Same is clear from Para 2.1 of the Joint Development Agreement and discussed in detai l in preceeding paragraphs.

m) Thus the "transfer" would be deemed to happen in the previous year 2006-07 itself.

n) It has already 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 r ights being given to the transferee. As regards certain petty condit ions and provisions relating to

26

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 'arbitrat ion'. 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 indemnif ied by each other and shall also receive award if the terms/conditions are not fulf i l led.

p) As regards applicabil ity of Section 54F, there are-certain conditions which are attached with Section 54F also which have to be fulf i l led before which exemption under that section is available to the assessee. The assessee has not even tried to make any claim by showing that he has fulf i l led the said conditions to be eligible for exemption under Section 54F, So exemption cannot be given in such a situation u/s 54F.

q) The judgment relied upon by the assessee are not applicable to the case of assessee as most of them pertain to the previous year before Section 2(47)(v) and 2(47)(vi) was inserted w.e.f. 1.4.1988. Other judgments referred by assessee are distinguishable as fol lows:

ACIT vs Puspa Devi: This rul ing has been in fact in favour of revenue and completely rat if ies the principles laid down in the judgment of Chaturbhuh Dwarkadas Kapadia vs CIT as it says that transfer of capital asset took place by virtue of agreement dated 07/09/1991 in the financial year 1991-92 and as such, the AO was fully justif ied in levying capital gains in the same previous year.

i i ) CIT vs K. Jeeiani Basha: This ruling supports the contention of revenue that ent ire considerat ion receivable for that part of property would 'be' taxable which has been parted with or transferred even when whole of the considerat ion l ies not been received.

.

i i i) Zuari Estate Development & Investment Co. (P) Ltd, vs DCIT: This case is also not relevant as it pertains to agreement entered into in 1984 much before Section 2(47(v)

27

was inserted .

r) As stated earlier also the assessee's case is also covered by the general provisions of section 45 and Section 2(47)(i i) - ext inguishment of any rights therein. The case is also covered by Section 2(47)(vi) - any transaction which has effect of transferring or enabling the enjoyment of any property. The assessee due to these provisions is also precluded from contending that the capital gains would accrue to society and not assessee.

s) Hence amount of Rs. 30,00,000/- received by assessee is towards part performance of contract by transferee and not mere advance.

t) As regards valuation of the said f lat at Rs.4500 per square feet, the rate has to be taken as per the rate offered to the genera! public. That would be the actual rate of f lat at which the builder would offer to any person. The sum of Rs.4500/- per sq. feet is rate as per which HASH is l iable to buy from THDC. I t is a clear indicative of the value of f lat, devoid of any special benefit to the members . The rate which could be offered to general public would in any case be not less than Rs. 4500/- per sq.feet. Therefore according to facts the rate of f lat taken at Rs.4500 per sq.feet to arrive at the full value of consideration, adopted by the Assessing Off icer, is held to be correct."

In view of the above, the order of Assessing Off icer was confirmed. 24 . Be fo re us , the ld . counse l o f the assessee made de ta i led submiss ions . Fu r ther wr i t ten submiss ions has a l so been f i l ed . He ca r r ied us th rough the fac t s o f the case by re fe r r ing to va r ious documen ts in pape r book and a lso case laws as we l l as commenta ry by , "Mu l la - D inshaw Frede r ick Mu l la " on the in te rp re ta t ion o f Sec t ion 53A o f Trans fe r o f P rope r t y Ac t . The submiss ions can be summar ized as unde r :

28

I F i r s t o f a l l he re fe r red to p rov is ions o f sec t ion 2 (47 ) (v ) o f IT Ac t and Sec t ion 53A o f T .P . Ac t and submi t ted tha t f o l lowing cond i t ions emerged fo r a t t rac t ing these p rov is ions - a The re must be con t rac t o f t rans fe r f o r cons ide ra t ion fo r an immovab le p roper t y ;

b Cont rac t must be in wr i t i ng

c Te rms necessa ry to cons t i tu te t rans fe r shou ld be asce r ta inab le w i th reasonab le ce r ta in t y .

d The t rans fe ree must have in par t pe r fo rmance taken the possess ion o f the p rope r t y o r par t thereo f f rom the t rans fe ro r and i f a l ready in possess ion , con t inues in the possess ion in pa r t pe r fo rmance o f the con t rac t .

e T rans fe ree mus t have done someth ing in f u r the rance o f the con t rac t .

f The t rans fe ree must have pe r fo rmed o r w i l l ing to pe r fo rm h is ob l i ga t ions in such con t rac t .

In v iew o f the above cond i t ions in the p resen t case , cond i t ion no . (d ) and ( f ) have no t been compl ied because the assessee and /o r soc ie t y has no t handed ove r the possess ion to THDC/HASH. In th is rega rd he par t icu la r l y re fe r red to c lause 2 (1 ) o f the JDA and po in ted ou t tha t the possess ion was to be handed ove r to THDC/HASH s imu l taneous ly w i th the execu t ion and reg is t ra t ion o f the JDA. S ince the JDA was no t reg is te red there fo re , i t i s c lea r t ha t t he possess ion was no t handed over . In any case the possess ion i f a t a l l was g ran ted as pe rm iss i ve l i cense wi th r i gh t t o deve lopers i .e . THDC/HASH on ly f o r the pu rpose o f deve lopment o f the land and no t as pa r t o f pe r fo rmance o f t he con t rac t o f t rans fe r o f land . The fac t t ha t possess ion was no t handed ove r t o the THDC/HASH a lso

becomes c lea r f rom the sa le deed da ted 2 .3 .2007 (P laced a t page 119 to 136) . He re fe r red to c lause A o f rec i ta t ion c lauses

29

at page 120 wh ich c lear l y p rov ides tha t vendor i . e . the Soc ie t y was owner and in possess ion o f to ta l land measu r ing 160 kana l and 7 mar las equ iva len t to 21 .2 ac res in v i l lage Kansa l D is t t . Moha l i . Th is deed was fo r sa le o f pa r t o f the p rope r t y measur ing abou t 3 .08 acres ou t o f t o ta l land con t rac ted to be g i ven to THDC/HASH measu r ing abou t 21 .2 ac res . He po in ted ou t t ha t sa le deed has been execu ted on 2 .3 .2007 whereas JDA was execu ted on 25 .2 .2007 . Thus i t i s c lear tha t no possess ion was g i ven on 25 .2 .2007 o the rwise the Soc ie t y wou ld no t be in possess ion on 2 .3 .2007 . S im i la r ly one more pa r t o f the land was so ld by second deed execu ted on 25 .4 .2007 where in s im i la r c lause 'A ' as in the f i rs t deed is there (Refe r page 138 o f the pape r book) shows tha t the Soc ie t y was in possess ion o f the land on la te r da te . These two sa le deeds c lear ly show tha t no possess ion was g iven on the da te o f execu t ion o f the JDA. In any case the JDA makes i t c lea r t ha t the possess ion was to be g i ven s imu l taneous ly to t he reg is t ra t i on o f JDA and s ince JDA was no t reg is te red , no possess ion was g i ven .

I I I t was submi t ted tha t the possess ion , i f a t a l l , was g i ven to the deve lope rs i .e THDC/HASH wh ich was a pe rm iss i ve l i cense to deve lop the p ro jec t and no t as pe r fo rmance o f the con t rac t . Re fe rence was made to Sec t ion 52 o f the Ind ian Easement Ac t , 1882 wh ich reads as unde r :

"52 . "L i cence" de f ined

"whe re one pe rson g ran ts to ano ther , o r to a de f in i te number o f o the r pe rsons , a r igh t to do , o r con t inue to do , i n o r upon the immovab le p rope r t y a l l the g ran to r , someth ing wh ich wou ld , in t he absence o f such r igh t , be un lawfu l and such r i gh t does no t amoun t to an easement o r an in te res t in wh ich the p rope r ty , the r igh t i s ca l l ed a l i cense . "

I t was con tended tha t Sec t ion 2 (47 ) (v ) r .w.s . 53A o f T .P Ac t re fe rs to lega l possess ion whe reby the t rans fe ree has a lega l r i gh t to en te r upon and exe rc i se r i gh ts o f possess ion i .e . con t ro l ove r the p rope r t y . I n t h i s connect ion he re fer red to the obse rva t ion o f Au thor i t y f o r Advance Ru l ing in case o f Jasv i r

30

Singh Sa rka r ia , 294 ITR 196 . He pa r t i cu la r l y re fe r red to pa ra 26 to 28 o f the judgmen t . He fu r ther re fe r red to c lause "F "

(page 17 o f the pape r book ) i .e . , c lause 2 .1 o f the JDA (page 24 o f t he pape r book ) and subm i t ted tha t con ten ts o f these c lauses w i l l en t i re l y show tha t possess ion was g i ven and was env isaged in the shape o f l i cense to the deve lope rs fo r unde r tak ing the deve lopment o f p rope r t y and lega l possess ion was ne i the r handed ove r o r in tended to be handed ove r . I I I Money wh ich is rece ived a t the t ime o f execu t ion o f JDA can be te rmed as advance payment . In any case when these amoun ts we re ad jus ted as pa r t o f sa le cons ide ra t ion fo r sa le o f pa r t o f the p rope r t y and the same have been re tuned by the assessee as long te rm cap i ta l ga ins th rough rev ised re tu rn in the year o f rece ip t .

IV I t was emphas ized tha t in any case Sect ion 53A o f T .P . Ac t has been amended by Amendmen t Ac t , 2001 whereby reg is t ra t i on o f agreemen t has been made mandato ry fo r the same to be en fo rceab le . S ince JDA was neve r reg is te red there fo re , recou rse cou ld no t be taken to Sec t ion 2 (47 ) (v ) o f the Ac t because JDA was no t reg is te red . Pu rsuan t to amendmen t in Sec t ion 53A o f T .P . Ac t w i th e f fec t f rom 24 .9 .2001 i t was on ly the amended p rov is ion wh ich can be read wi th Sec t ion 2 (47) (v ) o f the Ac t . In th i s rega rd he re fe r red to dec is ion o f Hon 'b le Sup reme Cour t i n case o f Su rana S tee ls P L td . V . CIT , 237 ITR 777 . In tha t case i t was obse rved tha t when a sec t ion o r an Ac t o f Par l iamen t is i n t roduced in to ano the r Ac t , i t mus t be read in the sense i t bo re in the o r ig ina l Ac t . In o ther wo rds , the mean ing a t tached to the o r ig ina l sec t ion wh ich has been re fe r red in ano the r ac t , has to be unde rs tood as same. The re fo re , once the o r ig ina l sec t ion 53A o f T .P . Ac t unde rgoes amendmen t the same has to be read in Sec t ion 2 (47 ) (v ) as amended and the re fo re , as JDA is no t reg is te red Sect ion 2 (47) (v ) w i l l no t be app l icab le . V The ld . counse l o f the assessee re fe r red to the dec is ion o f Hon 'b le Bomay H igh Cou r t in case o f Chatu rbhu j Dwarkadas

31

Kapad ia V CIT (sup ra ) and t r ied to d i s t ingu ish the same. He submi t ted tha t th is dec is ion canno t be taken as an au thor i t y f o r the p ropos i t ion tha t da te o f agreement shou ld be reckoned as da te o f t rans fe r . I n any case , the dec is ion has to be seen fo r what has been he ld in the dec is ion and in t h i s case u l t imate ly the appea l o f the assessee was a l lowed wh ich means the t rans fe r was he ld to have taken e f fec t on ly a f te r rece ip t o f subs tan t ia l payment o f cons idera t ion .

V I The ld . counse l o f the assessee fu r the r po in ted ou t tha t there is ano ther impo r tan t cond i t ion in invok ing Sect ion 2 (47 ) (v ) o f t he Ac t r .w.s 53A o f T .P . Ac t i .e . the t rans fe ree mus t have pe r formed o r w i l l ing to pe r fo rm h is pa r t o f the con t rac t . I t was a rgued tha t w i l l ingness o f the t rans fe ree to pe r fo rm h is pa r t o f the con t rac t i s no t an emp ty fo rma l i t y and i t has to be abso lu te and unqua l i f ied . Thus w i l l ingness cannot be cond i t iona l o r con t ingen t on subsequent even ts . In t he JDA fo l lowing ob l i ga t ions we re to be comp l ied by the t rans fe ree - (a ) As pe r c lause "J " o f t he JDA the Gove rnment approva ls we re to be ob ta ined by the t rans fe ree i .e . THDC/HASH. (b ) As pe r c lause 3 .1 o f JDA a l l bu i ld ing, p lans and des igns and d rawings e t c . f o r cons t ruc t ion o f the p ro jec t we re to be p repa red by the t rans fe ree i . e . THDC/HASH.

( c ) C lause 4 .1 and 7 .10 o f JDA p rov ided regard ing t ime ly payment o f cons ide ra t ion .

(d ) C lause 7 .9 o f the JDA p rov ided tha t THDC/HASH sha l l ob ta in a l l app rova ls and commence cons t ruc t ion w i th in 6 months o f hand ove r o f f ina l p lans .

(e ) C lause 8 .4 p rov ided ob l iga t ion to take t ime ly approva l and c lause 8 .6 p rov ided fo r payment o f va r ious s ta tu to ry cha rges in respec t o f deve lopmen t cha rges , l i cense fee and exte rna l de fau l t e t c .

32

Fu r the r t o above ob l iga t ion , t ime was o f essence in the con t rac t wh ich becomes c lea r f rom c lause 1 .2 (a ) , 4 .1 and 7 .10 rega rd ing t ime ly payment and c lause 14 ( i v ) rega rd ing te rm ina t ion o f con t rac t .

In the case be fore us , the re was no w i l l ingness on the pa r t o f deve lope r i .e . THDC/HASH to pe r fo rm the above ob l iga t ion because o f the fo l lowing -

( i ) THDC/HASH fa i led to ob ta in necessa ry app rova l and d id no t unde r take any deve lopment work on land .

( i i ) THDC/HASH i .e . deve lope r has no t pa id t ime ly paymen t in t ime ly ins ta l lments o f agreed cons ide ra t ion . ( i i i ) HASH has no t ob ta ined app rova l f rom var ious au thor i t ies and had no t commenced cons t ruc t ion w i th in s i x mon ths o f hand ing ove r a l l f i na l p lans . (Re ference was made to page 34 o f the pape r book) .

( i v ) THDC/HASH v ide le t te r da ted 4 .2 .2001 (Page 23 to 24 o f the add i t iona l ev idence ) re fused to make fu r the r payment as s t ipu la ted in the agreemen t .

( v ) The t rans fe ro r has gone back on the i r rep resen ta t ion to comple te cons t ruc t ion in the t ime bound manner and in hand ing ove r the f la t s to the Soc ie t y / i t s Members . In th is rega rd he a l so re fe r red to pa ra 16 o f the commenta ry by "MULLA - D inshaw Freder i ck Mu l la " (copy o f wh ich has been f i l ed a t page 102 and 103 o f the pape r book ) . He po in ted ou t how the ld . au thors have d i scussed the s ign i f i cance o f the w i l l ingness o f the t rans fe ree to pe r fo rm the i r pa r t o f the con t rac t . In th is rega rd he a lso re fe r red to va r ious obse rva t ions in the fo l lowing case laws :

Genera l G lass Co. Pv t L td . V DCIT , 14 SOT 132 (Mum)

K Radh ika V DCIT , 149 TTJ 736 (Hyd )

33

DCIT V . Te j S ingh , 138 ITD 489 (Agra ) The fac ts o f these case laws and the fac t s in the p resen t case be fo re us a re iden t i ca l and the re fo re , s ince as pe r these dec is ions the re was no w i l l ingness on the pa r t o f the t rans fe ree to per fo rm h is / i t s ob l i ga t ion the p rov is ions o f Sec t ion 2 (47 ) ( v) r .w.s . 53A o f T .P . Ac t cou ld no t be app l ied .

V I I I t was con tended tha t revenue has a lso he ld tha t c lause (v i ) o f Sec t ion 2 (47 ) i s a lso app l i cab le wh ich i s no t co r rec t because tha t p rov is ion i s app l icab le whe re a pe rson becomes owner o f the immovab le p rope r t y pu rsuan t to tak ing

Membersh ip o f Coope ra t i ve Soc ie ty e t c . In the p resen t case , the JDA was en te red in to be tween Soc ie t y and two deve lope rs i .e . THDC/HASH and the re fo re , t he re was no t ransac t ion invo lv ing Membersh ip o f Coope ra t i ve Soc ie t y / company e tc . The re fo re , c lea r ly c lause (v i ) o f sec 2 (47 ) is no t app l icab le in the p resen t case .

V I I I The ld . counse l o f the assessee a lso submi t ted tha t as pe r c lause 4 .1 o f the JDA t rans fe r / sa le o f 21 .2 acres o f land was to be made in f avou r o f THDC/HASH on a p ro - ra ta bas is cor respond ing to p ro - ra ta payments rece ived by the Soc ie t y and respec t i ve Members o f the Soc ie t y f rom THDC/HASH by execu t ing the sa le deed . Th is c lear l y shows tha t t rans fe r was who l l y dependent on t ime ly rece ip t o f the cons ide ra t ion . As po in ted ou t ea r l ie r on ly two sa le deeds cou ld be execu ted and whateve r payments have been rece ived , have been o f fe red fo r taxa t ion unde r the head "Cap i ta l ga in " . Howeve r , the Assess ing Of f ice r has sub jec ted to tax who le o f the

cons ide ra t ion unde r the JDA as cap i ta l ga in wh ich is t o ta l l y unca l led fo r pa r t i cu la r l y in v iew o f the fac t tha t an agreemen t has been subsequen t l y t e rm ina ted and th is ac t ion o f t he Assess ing Of f ice r amounts to taxa t ion o f no t iona l sum wh ich is no t pe rmiss ib le unde r the law. Unde r the va r ious p rov is ions o f the Ac t , on ly rea l i ncome can be taxed wh ich has been ea rned by the assessee and no no t iona l income can be sub jec ted to tax . In th is rega rd , re l iance was p laced on the f o l lowing dec is ions o f the Hon 'b le Supreme Cour t :

34

Shoor j i Va l labhdas & Co. , 46 ITR 144 (S .C) C IT V . Raman and Co . 67 ITR 11 (S .C) Godhra E lec t r i c i t y Co . L td . V CIT , 225 ITR 746 (S .C) C IT V . Ba l rampur Commerc ia l En te rp r ises L td . , 262 ITR 439 (Ca l )

C IT V . K . Jee lan i Basha , 256 ITR 282

FOBEOZ Ind ia (P ) L td . V ITO, ITA No. 9231 /Mum/2010 (copy f i led )

I t was c la imed tha t s ince the f la ts we re neve r cons t ruc ted and g i ven to the assessee , there fo re , i f the va lue o f the f la t i s added in the to ta l cons ide ra t ion then i t w i l l be to ta l l y on no t iona l bas is and s ince no t iona l income cannot be taxed , there fo re , the va lue o f these f l a t s , i n no case , shou ld be cons ide red in the to ta l cons ide ra t ion . Fu r the r i f no t iona l rece ip ts we re taxed then the assessee wou ld be dep r i ved to take benef i t ava i l ab le in the IT Ac t . Fo r example i f who le cons ide ra t ion was rece ived the assessee cou ld have eas i l y taken benef i t o f Sec t ion 54EC and o ther p rov is ions l i ke Sec t ion 54 by inves t ing in any spec i f ied asse t o r a house . S ince fu l l cons ide ra t ion has no t been rece ived and the assessment o f the who le cons idera t ion w i l l lead to un in tended consequences l i ke den ia l o f deduct ion u /s 54 EC e tc .

IX I t was con tended tha t s ince JDA has a l ready been te rm ina ted v ide Soc ie t y ' s reso lu t ion da ted 13 .6 .2011 and therea f te r on 31 .10 .2011 even spec ia l Power Of A t to rney execu ted ea r l ie r has been revoked , the re fo re , in v iew o f t he subsequent even ts , the ba lance o f cons ide ra t ion rece ivab le cou ld no t be taxed in the hands o f the assessee . Subsequen t even ts to the da te o f t ransac t ions have to be reckoned be fo re tax ing a pa r t i cu la r t ransac t ion . He a lso submi t ted tha t in a lmost s im i la r c i r cums tances , subsequen t even ts we re reckoned by Mumba i Bench o f the T r ibuna l in case o f Chemosyn L td . V ACIT , 139 ITD 68 . He re fe r red to va r ious pa ras and po in ted ou t how the subsequent even ts were reckoned by the T r ibuna l .

35

X The ld . counse l o f the assessee submi t ted tha t w i thou t p re jud ice to the above i f i t i s cons idered a case o f t rans fe r then the va lue o f f l a t to be a l lo t ted to each o f the Member o f the Soc ie t y has no t been va lued co r rec t l y . The Assess ing Of f ice r has re fer red to c lause 3 .5 o f in te r -se agreemen t en te red in to be tween THDC and HASH. The ld . counse l o f the assessee submi t ted tha t the assessee was no t par t y to such agreemen t and p r i ce a t wh ich THDC was se l l i ng f la ts to HASH cou ld no t be adop ted in the case o f the assessee . I t was submi t ted tha t i f c lause (5 ) was re fe r red to i t can be seen tha t re fe rence has been made to two p r ices ie . Rs . 2000 /sqf t f o r 126 f la t s and Rs. 4500 per sqf t f o r t h ree f la t s . Th is p r i ce i s no t iona l l y f i xed by two deve lope rs and d id no t re f lec t the p r i ce o f the f la t s . In any case the Deve lope rs have no t been ab le to ob ta in necessa ry app rova l f rom the conce rned au thor i t ies , there fo re , cons t ruc t ion o f such f la t s has no t commenced and no f la ts have been cons t ruc ted and a l lo t ted to the assessee , there fo re , no t iona l va lue o f the same cou ld no t be adop ted and taxed in t he hands o f the assessee . A t bes t the Assess ing Of f ice r cou ld have taken the p r i ce o f Rs . 2000 per sqf t . X I I t was con tended tha t i f the va lue o f the f la t was to be recogn ized fo r the purpose o f comput ing the cap i ta l ga in , the cor respond ing deduct ion u / s54F o f the Ac t shou ld have been a l lowed pa r t i cu la r l y in v iew o f C i rcu la r No . 472 da ted 15 .10 .1986. In th i s regard he re l ied on the fo l lowing dec is ions :

C IT V . Sa rda rma l Ko tha r i and ano the r , 302 ITR 286 (Mad) C IT V . R .L . Sood, 245 ITR 727 (De lh i )

C IT V . Mrs . H i l la J .B . W ad ia , 216 ITR 376 (Bom) Mrs . See tha Sub raman ian V ACIT , 59 ITD 94 (Mad Bench ) Usha Va id v ITO, 53 SOT 385

Smt . Ran j i t Sandhu v DCIT , 133 TTJ 46 (Chd )

25 On the o ther hand , the ld . CIT DR fo r the revenue made de ta i led subm iss ions and have a lso f i led wr i t ten subm iss ions . I t was po in ted ou t by the CIT -DR fo r the revenue tha t though

36

copy o f the spec ia l power o f a t to rney has been f i led a t pages 153 to 165 bu t two o f the mos t impor tan t c ruc ia l pages con ta in ing c lause "u " to " z " and las t page No. 9 a re m iss ing. He made an a l lega t ion tha t th i s has been done de l ibe ra te l y wh ich was con t rove r ted by the ld . counse l o f the assessee and he submi t ted tha t t h i s i s a s imp le m is take and he wou ld f i l e those pape rs . The ld . DR fo r t he revenue in v iew o f these submiss ions subm i t ted tha t these pages can be re fe r red in case o f Pun jab i Coop House Bu i ld ing Soc ie t y L td . i n ITA No . 310& 556 /Chd/2012 a t page 40 to 52 o f the pape r book in tha t case . The submiss ions o f the revenue can be summar ized as unde r :

( I ) The Soc ie t y passed a reso lu t ion in i t s execu t i ve commi t tee on 4 .01 .2007 wh ich was con f i rmed / ra t i f ied in the Genera l Body Meet ing on 25 .2 .2007 . I n the Soc ie t y t he re we re two t ypes o f Members ho ld ing p lo ts o f 500 sqyd and 1000 sqyd . I t was reso lved tha t members wou ld su r rende r the respec t i ve p lo t s o f 500 sqyd and 1000 sqyd in f avou r o f t he Soc ie t y f o r f u r the r t rans fe r o f the en t i re land by the Soc ie t y in f avou r o f THDC/HASH fo r the deve lopment o f p rope r t y i n l ieu o f cons ide ra t ion o f Rs . 82 ,50 ,000 / - to a Member ho ld ing 500 sqyd p lo t and Rs . 1 ,65 ,00 ,000 / - to a Member ho ld ing 1000 sqyd p lo t to be pa id in f our i ns ta l lmen ts by HASH d i rec t l y to the Members o f the Soc ie t y . In add i t ion to th i s cons ide ra t ion member ho ld ing 500 sqyd p lo t was to rece ive a fu rn ished f la t w i th supe r a rea o f 2250 sqf t to be cons t ruc ted by THDC/HASH and two f la t s in case o f Members ho ld ing 1000 sqyd p lo t s . I t was a lso reso lved th rough th i s reso lu t ion to hand ove r the possess ion o f the p roper t y and o r ig ina l t i t le deeds o f t he p rope r t y to THDC/HASH. The Soc ie t y was fu r ther pe rm i t ted to a l low THDC/HASH to mor tgage , se l l the p rope r t y and c rea te change in p roper t y . The Soc ie t y a l so reso lved to execu te i r revocab le power o f a t to rney in f avou r o f THDC/HASH wh ich was ac tua l l y execu ted on 26 .2 .2007 wh ich was du ly reg is te red a lso . Pu rsuance to th i s reso lu t ion , t he JDA was execu ted on 25 .2 .2007 . Th rough c lause 2 .1 i t was spec i f i ca l l y agreed tha t owner i .e . the Soc ie t y has i r revocab ly and unequ ivoca l l y

37

gran ted and ass igned in pe rpe tu i ty a l l the r i gh ts to deve lop / cons t ruc t / mor tgage / lease / l i cense , se l l and t rans fe r the p rope r t y . C lause 6 .7 o f the JDA p rov ides fo r execu t ion o f i r revocab le spec ia l power o f a t to rney th rough wh ich r i gh ts o f deve lopment we re g ran ted in f avou r o f THDC/HASH and r igh t to ra ise f inance by mor tgage in the p rope r t y and to reg is te r the cha rge wi th competen t au tho r i t y and fu r ther power o f sa le e tc . we re a lso g i ven th rough th is power o f a t to rney . I t was agreed tha t t he Soc ie t y wou ld no t revoke such power o f a t t o rney w i thou t ob ta in ing a spec i f i c p r io r wr i t ten consen t o f THDC/HASH. The above c lauses c lea r l y show tha t possess ion o f the p rope r t y was handed ove r to THDC/HASH and fu r the r r i gh ts to mor tgage and sa le o f t he p rope r t y was a l so g i ven . The comb ined read ing o f va r ious c lauses in the JDA and power o f a t t o rney show tha t :-

( i ) A l l the Members o f the Soc ie t y exp ress ly and wi l l i ng ly had sur rende red the i r respec t i ve p lo t s i n f avou r o f the Soc ie t y and the Soc ie t y was au tho r i zed to se l l / t rans fe r the en t i re land in f avou r o f THDC/HASH fo r a cons ide ra t ion wh ich was se t ou t i n the c lauses o f JDA. The soc ie t y was a l so au tho r i zed to hand ove r o r ig ina l t i t le deeds and possess ion o f land to THDC/

HASH.

( i i ) The Soc ie t y handed over the possess ion o f the land and o r ig ina l t i t le deeds o f the p roper t y to THDC/HASH. ( i i i ) Soc ie t y pe rmi t ted THDC/HASH to mor tgage , se l l and c rea te cha rge in the p rope r t y .

( i v ) The Soc ie t y reso lved to execu te an i r revocab le spec ia l power o f a t to rney wh ich cou ld no t be revoked in any c i r cumstances w i thou t p rope r consen t o f THDC/HASH and such power o f a t to rney was ac tua l l y execu ted on 26 .2 .2007 . Th rough th i s power o f a t to rney THDC/HASH has been au thor i zed to mor tgage o r c rea te cha rge by the Soc ie t y . THDC/HASH was au tho r i zed to g i ve the possess ion o f the p roper t y o r any pa r t thereo f to the au thor i t ies to whom same was requ i red to be handed ove r wh ich was no t poss ib le un less THDC/HASH was

38

handed ove r t he possess ion o f the p rope r t y and the r i gh ts o f the ownersh ip . Th rough th i s power o f a t to rney the r igh t to se l l was a l so g i ven wh ich i s aga in no t poss ib le w i thou t t rans fe r o f possess ion o r ownersh ip . These c lauses c lea r l y show tha t comple te con t ro l ove r the p rope r t y con f i rm ing a l l p r i v i l ege o f ownersh ip was g iven in f avou r o f THDC/HASH and thus such t rans fe r o f ownersh ip sa t i s f ies the requ i rements o f Sec t ion 45 r .w. c lause ( i i ) , ( v ) , ( v i ) o f Sec t ion 2 (47 ) o f the Ac t . ( I I ) The Ld . C IT DR fo r the revenue con tended tha t Hon 'b le Sup reme Cour t in case o f Sun i l S idhha ra th Bha i V CIT , 156 ITR 509 and CIT V . Na rang P roducts , 219 ITR 478 has c lea r l y he ld tha t de f in i t i on o f t rans fe r u /s 2 (47 ) i s i nc lus i ve one and does no t exc lude con tex tua l o r o rd ina ry wo rd mean ing o f "T rans fe r " . Fu r the r in case o f A jay Kumar Shah Jaga t i V CIT , 168 Taxman 53 i t was observed tha t f o r t he pu rpose o f Sec t ion 45 o f the Ac t the word "T rans fe r " as de f ined in IT Ac t i s requ i red to be cons ide red and no t sa le as ind ica ted in the T rans fe r o f P rope r t y Ac t . The re fo re , u / s 2 (47 ) o f t he Ac t , i t i s "T rans fe r "

wh ich i s one o f t he most impo r tan t ing red ien t fo r levy o f taxa t ion u /s 45 wh ich i s to be comp l ied w i th . Fo r invok ing Sect ion 2 (47) ( v ) what i s requ i red is tha t an agreemen t to se l l has been en te red by the T rans fero r w i th the t rans fe ree and possess ion has been handed ove r by the t rans fe ro r to the t rans fe ree in pa r t pe r fo rmance o f the con t rac t u /s 53A o f T .P . Ac t . In th is regard he re l ied on the fo l lowing dec is ions : - 1 ) Au tho r i t y fo r Advance Ru l ing (AAR) New De lh i in the case o f Jasb i r S ingh Sa rkar ia 294 ITR 196

2 ) Chatu rbhu j Dwarkadas Kapad ia v C IT 260 ITR

491 (Bom. )

3 ) C .Rav i Vs DCIT in 325 ITR 417 (Ke r )

4 ) C IT v Dr . T .K . Daya lu 202 Taxman 531 (Ka r . )

5 ) D . Kas tu r i v CIT & An r 323 ITR 40 (Mad. )

6 ) C IT V Dh i r & Co. Co lon ise rs (P ) L ta 288 ITR 561

(P&H)

39

( I I I ) The Ld . C IT DR fu r the r submi t ted tha t assessee 's case apa r t f rom be ing cove red unde r c lause (v ) o f sec t ion 2 (47 ) i s a lso covered by c lause (v i ) o f sec t ion 2 (47 ) o f the Ac t . C lause (v i ) i s app l i cab le in cases whe re any t ransac t ion i s en te red in to wh ich has the e f fec t o f t rans fe r r i ng and enab l ing the en joyment o f immovab le p rope r t y . In th i s rega rd he re l ied on the dec is ions o f Mumba i Bench 'D ' o f the T r ibuna l in Ms Rubab M. Kaze ran i v JCIT 91 ITR 429 (Mum. ) , ITAT Hyde rabad 'A ' Bench in D. Achu tha Rao Vs ACIT 106 ITD 388 (Hyd) and ITAT De lh i Bench 'D ' Bench in ACIT v Smt . Pushpa Dev i Ja in 93 ITD 289 (De lh i ) .

( IV ) He fu r the r submi t ted tha t c lause (v ) & (v i ) o f sec t ion 2 (47 ) o f the Ac t we re inse r ted w.e . f . 1 .4 .1988 by F inance Ac t , 1987 . Be fo re tha t , pass ing o f the t i t l e in the p rope r t y was necessa ry cond i t ion to cons t i tu te a t rans fe r unde r t he Ac t in v iew o f the va r ious p ronouncements o f the Cou r t s . In the meant ime i t was no t i ced by the Gove rnment t ha t many p rope r t ies we re be ing t rans fe r red w i thou t execu t ion o f sa le deed th rough va r ious documents what i s popu la r l y known as 'power o f a t to rney ' t ransac t ions . To curb the leakage o f Revenue, t h rough such t ransac t ion , c lauses (v ) & (v i ) we re added to sec t ion 2 (47 ) wh ich de f ines t rans fe r . Th is has been exp la ined by C i rcu la r No . 495 da ted 22 .9 .1987 . The Boa rd has c la r i f ied th rough pa ras 11 .1 & 11 .2 tha t newly i nser ted c lauses (v ) & (v i ) wou ld en la rge the de f in i t ion o f t rans fe r whe reby the cases o f t rans fe r what i s popu la r l y known as 'power o f a t to rney ' t ransac t ion wh ich a l l ows the en joymen t o f r i gh t in the p rope r ty wou ld be cove red by new de f in i t ion . The new c lauses wou ld a l so cove r a r rangemen ts by wh ich the p rope r t y cou ld be en joyed by becoming a member o f t he company o r such o ther a r rangement . Acco rd ing to h im i t may no t be ou t o f p lace to i nvoke Heydon 's Ru le o f in te rp re ta t ion o f s ta tu tes fo r in te rp re t ing these c lauses . The Heydon 's Ru le is ma in l y app l icab le whe rever the t rue mean ing o f amended p rov is ions is to be unde rs tood . I f the amendmen ts a re seen th rough p r ism o f Heydon 's Ru le , i t wou ld become c lea r tha t amended c lauses have been b rough t on the s ta tu te to ove rcome the ea r l i e r m isch ie f . P rope r t ies cou ld be

40

t rans fe r red w i thou t execu t ion o f p rope r sa le deeds and the same cou ld be en joyed by the respec t i ve buye rs w i thou t any taxa t ion on the par t o f se l le rs .

(V ) The Ld . DR po in ted ou t tha t the re is no fo rce in the submiss ions tha t s ince sec t ion 53A o f the t rans fe r o f p rope r t y Ac t has i t se l f gone unde r amendment w.e . f . 24 .9 .2011 where in the reg is t ra t i on o f the agreement has been made mandato ry and , there fo re , s ince JDA was no t reg is te red i t cannot be cons t rued to be cove red unde r c lause (v ) o f sec t ion 2 (47 ) . I t was con tended tha t doc t r ine o f pa r t pe r fo rmance was g i ven s ta tu to ry recogn i t i on in sec t ion 53A o f the T rans fe r o f P rope r t y Ac t and i t was des i red on ly to p ro tec t possess ion o f a t rans fe ree when the t rans fe r f a l l s sho r t o f requ i rement la id down by law. The p lea o f t he pa r t pe r fo rmance cou ld be taken on ly as sh ie ld in de fence and no t as a sword . The mos t impo r t i ng red ien t o f sec t ion 53A o f T .P . Ac t was the change o f possess ion . The amendmen t to sec t ion 53A o f the T rans fe r o f P rope r t y Ac t has been done perhaps to co l lec t Revenue. I n any case , the same cannot have a impact on the c lause (v ) o f sec t ion 2 (47 ) . Th is i s so because c lause (v ) c lear l y emp loys language by us ing the exp ress ion "pa r t per fo rmance o f a con t rac t o f the na tu re re fe r red to in sec t ion 53A o f the T rans fe r o f P rope r t y Ac t " . The Leg is la tu re in ten t iona l l y no t emp loyed the express ion " i n pa r t pe r fo rmance o f con t rac t as de f ined unde r sec t ion 53A o f T rans fe r o f Prope r t y Ac t " . There fo re , i t i s na tu re o f con tac t wh ich i s s im i la r to the na tu re o f con t rac t u /s 53A o f the T rans fe r o f P rope r t y Ac t wh ich i s re levan t t o sec t ion 2 (47 ) (v ) . In any case Hon 'b le Sup reme Cour t in the case o f C IT Vs Poda r Cement (P) L td 226 ITR 625 has c lea r l y he ld tha t ' p r inc ip le o f common law, the T rans fe r o f P rope r t y Ac t and the Reg is t ra t i on Ac t we re no t conc lus i ve fo r in te rp re ta t ion o f p rov is ion o f Income Tax Ac t on the ques t ion o f ownersh ip o f the p roper t y . I f consequen t to the amendmen t in sec t ion 53A of the T rans fe r o f p rope r t y Ac t , the reg is t ra t ion o f Agreement was cons ide red as one o f the essen t ia l ing red ien t then sec t ion 2 (47 ) (v ) wou ld become redundan t . The Income Tax Ac t canno t be in te rp re ted in such a way tha t a pa r t icu la r p rov is ion

41

becomes redundant . In any case i t has been he ld by Mumba i Bench o f the T r ibuna l in the case o f Suresh Chand Agga rwa l Vs ITO (48 SOT 2010 ) tha t amendment made in sec t ion 53A o f the T rans fe r o f P roper t y Ac t by wh ich requ i rement o f reg is t ra t i on o f t rans fe r has been b rough t on s ta tu te need no t be app l icab le fo r cons t ru ing the mean ing o f the ' t rans fe r " w i th re fe rence to sec t ion 2 (47 ) o f the Ac t . S im i la r v iew has been taken by the ITAT Coch in Bench in the case o f G . S reen ivasan Vs DCIT 140 ITD 235 and Pune Bench o f the T r ibuna l i n the case o f Mahesh Memichand ra Ganeshwade 51 SOT 155 .

(V I ) I t was con tended tha t there i s no fo rce in the subm iss ions o f the Ld . Counse l f o r the assessee tha t THDC/HASH were no t w i l l i ng to pe r fo rm the i r pa r t o f the con t rac t . I t was po in ted ou t tha t deve lope rs i .e THDC/HASH have made payments as pe r c lause 4 ( i ) ( i i ) & ( i i i ) o f the JDA. The deve lope rs have a lso app roached the conce rned au thor i t ies f o r pe rmiss ions and app rova ls as pe r the ob l i ga t ion agreed in the JDA. Howeve r , a P IL was f i l ed aga ins t the deve lope rs aga ins t TATA Camelo t P ro jec t ( th is i s the name o f the p ro jec t wh ich was to be deve loped by THDC on the land acqu i red f rom the Soc ie t y ) . The P IL was d ism issed v ide o rder da ted 26 .3 .2012 (copy o f o rde r f i led on reco rd ) . A re fe rence to pa ras 3 , 4 , 25 & 26 o f th i s o rde r wou ld c lea r l y show tha t Hon 'b le H igh Cou r t has obse rved tha t aga ins t the ru les o f sanc t ion unde r the Env i ronment (P ro tec t ion ) Ac t , the respondent i . e . Deve lopers have sought a rev iew o f the o rde r because o f the f ind ings a r r i ved a t we re ex .pa r te . No o rder i n the Rev iew mat te r has been passed by the competen t au thor i t y because the in te r im o rde r passed in the P IL wh ich was la te r on c la r i f i ed by the Hon 'b le Sup reme Cour t v ide o rde r da ted 31 .01 .2012 pe rm i t t ing the concerned au tho r i t ies unde r the d i f f e ren t s ta tu tes gove rn ing the mat te r to exe rc i se the i r respec t i ve ju r isd i c t ion in acco rdance wi th the law and such c la r i f i ca t ions came in la te r dec is ion o f the H igh Cou r t . As the re jec t ion unde r the W i ld l i f e (P ro tec t ion ) Ac t has been made by the au tho r i t y no t competen t to do so , the p romote rs have sought rev iew o f t he o rde r wh ich i s s t i l l pend ing fo r some o the r reasons . A l l these s teps c lea r l y

42

shows tha t deve lope rs we re w i l l ing to pe r fo rm a l l the ob l i ga t ions unde r taken unde r JDA and were pe rus ing the mat te r o f sanc t ion o f t he p ro jec t a t d i f f e ren t leve ls v igorous ly . The copy o f the o rde r o f Hon 'b le Pun jab & Haryana High Cou r t and Hon 'b le Sup reme Cour t f i led a t pages 172 to 174 o f the paper book a re on the issue o f l and fa l l ing w i th in ca tchmen t a rea o f Sukhna lake and l i t i ga t ion in th is case is be ing v igo rous ly f o l lowed by deve lope rs . The assessee has no t led any ev idence to show tha t e i the r the HASH o r THDC have shown re luc tance to take the va r ious s teps requ i red fo r execu t ion o f p ro jec t . The Ld . C IT DR a lso con tended tha t i t was a rgued on beha l f o f the assessee tha t deve lope r have no t made the payments as agreed in the JDA, wh ich i s no t co r rec t . In th i s connec t ion , he re fe r red to c lause 4 ( i v ) wh ich c lea r l y s ta tes tha t payment o f Rs . 31 ,92 ,75 ,000 / - was to be made to the owner and o r respec t i ve members o f the owner w i th in s i x months f rom the da te o f execu t ion o f th i s agreement o r w i th in two months f rom the da te o f app rova l o f p lan / des ign and the g ran t and d rawings o f f ina l l i cense to deve lop whereupon the cons t ruc t ion can commence wh ich eve r is la te r . Th is c lea r l y shows tha t paymen ts was to be made on happen ing o f two even ts and the t ime l im i t was to be app l ied on the even t tak ing p lace la te r on . As pe r c lause 3 .3 o f the THDC/HASH was requ i red to take pe rm iss ion f rom competen t au thor i t y and the competen t au tho r i t y has been de f ined in JDA as Pun jab Urban P lann ing and Deve lopment Au tho r i t y (PUDA) , Depa r tmen t o f Town and Count ry P lann ing, Naga r Panchya t , Nayagon, Depa r tmen t o f Loca l Bod ies (Pun jab ) and any o ther Au tho r i t y unde r Mun ic ipa l Au tho r i t y . I t a lso inc ludes Depa r tmen t o f Env i ronment , E lec t r i c i t y Boa rd e tc . S ince pe rmiss ion f rom Depar tmen t o f Env i ronmen t e tc was no t ava i lab le because o f ongo ing l i t i ga t ion wh ich was f i l ed th rough a P IL , the re fo re , i t canno t be sa id tha t Deve lope r was no t w i l ing to make the payment . As pe r the JDA, the paymen t wou ld become due on ly when such pe rmiss ion we re g ran ted by va r ious au tho r i t ies . In f ac t M/s Hash Bu i lde r wro te a le t te r on 04 .02 .2011 th rough wh ich i t was s ta ted tha t s ince H igh Cou r t has s tayed the cons t ruc t ion , the re fo re , payment cou ld no t be made. Fu r the r ,

43

as P IL was f i led in the Hon 'b le H igh Cou r t and the mat te r had gone even to the Hon 'b le Supreme Cour t and THDC/HASH has v igo rous ly de fended the same . Th is f ac t c lear l y shows tha t deve lope r i . e . THDC/HASH was wi l l ing to pe r fo rm in a l l respec ts to the JDA.

(V I I ) I t was a lso con tended tha t the soc ie t y has a l ready te rm ina ted the con t rac t and in th i s respec t re fe rence was made to the Reso lu t ion passed by gene ra l body o f t he meet ing da ted 13 .6 .2011 and lega l no t i ce was issued to THDC/HASH. F i rs t o f a l l , the re is no ev idence on reco rd to show tha t such no t ice was se rved upon THDC/HASH. In any case , as con tended ea r l i e r , power o f a t to rney cou ld no t have been revoked because i t was i r revocab le power o f a t to rney as pe r c lause 6 .7 o f the JDA. Fu r the r , there was a rb i t ra t ion c lause and tha t means a no t i ce fo r a rb i t ra t ion was requ i red to g i ven o the rwise such un i la te ra l cance l la t ion was no t va l i d in the eyes o f l aw. I f the JDA was cance led then the re shou ld be documen t showing re tu rn o f whateve r possess ion was g i ven by the soc ie t y . The documents showing cance l la t ion i s on ly a se l f se rv ing document , wh ich cannot be re l ied to re fuse the ex is tence o f JDA and fac t o f g i v ing possess ion by the Soc ie t y to the Deve loper . Fu r the r , the subsequen t even t canno t i nva l ida te the con t rac t f o r t rans fe r o f the p rope r t y because unde r t he tax laws income has to be de te rm ined fo r each yea r separa te l y and once t rans fe r took e f fec t in assessment year 2007 -08 , then a subsequent even t tak ing p lace in 2011 wi l l no t have any e f fec t on such t rans fe r . I t has been con tended th rough wr i t ten submiss ions tha t to ta l cons ide ra t ion o f the p rope r t y was 2 ,37 ,03 ,75 ,000 / - wh ich was ca lcu la ted as unde r : - ( i ) Cons ide ra t ion in cash Rs . 106 ,42 ,50 ,000 / - (Rs . 82 ,50 ,000 x 129 p lo ts )

( i i ) Cons ide ra t ion in k ind Rs . 130 ,61 ,25 ,000 / - (Rs . 101 ,25 ,000 / - x 129

p lo t s )

To ta l Rs . 237 ,03 ,75 ,000 / -

44

The above to ta l cons ide ra t ion wou ld be enhanced f i gu re because to ta l cons ide ra t ion rece ived and o r agreed aga ins t the sa le o f p rope r t y by the Members i s requ i red to cons ide r the va lue o f f la ts wh ich we re con t rac ted to be rece ived by the Members . On the bas is o f above ca lcu la t ion , the cons idera t ion pe r ac re o f land wou ld come to abou t Rs . 11 .18 c ro res whe reas Soc ie t y had reg is te red a sa le deed fo r land measur ing 3 .08 acres fo r on ly Rs . 15 .48 c ro res whereas the ac tua l cons ide ra t ion shou ld be ` 34 .43 c ro res . Th is on ly shows tha t va lue o f the f l a ts to be rece ived was no t re f lec ted in such sa le deed . Now, i f i t i s be l ieved tha t con t rac t was cance l led and Deve loper was a l l owed to re ta in the land wh ich has a l ready been reg is te red in the name o f deve lope r then what wou ld happen to the f la t s wh ich we re to be rece ived by the var ious Members o f the Soc ie t y . No lega l ac t ion was taken aga ins t the Deve loper f o r recove ry o f ba lance o f cons ide ra t ion in the fo rm o f f la t s . Th is on ly goes to p rove tha t cance l la t ion i s on ly a make be l ieve s to ry and ac tua l l y no cance l la t ion has been done . (V I I I ) I t was con tended tha t there i s no fo rce in the subm iss ions tha t t he va lue o f t he f la ts wh ich has no t been cons t ruc ted , cannot be inc luded in the to ta l cons ide ra t ion because tha t wou ld be a case o f tax ing the no t iona l income. He re fe r red to c lause 4 o f the JDA wh ich dea ls w i th the cons ide ra t ion and po in ted ou t tha t a l l o tment o f f la t was pa r t o f the cons ide ra t ion . As pe r t he reso lu t ion o f t he Execu t i ve Body o f the Soc ie t y wh ich was la t te r ra t i f ied by the Genera l Body as we l l as the te rms o f the JDA ve ry c lea r l y show tha t in add i t ion to moneta ry cons ide ra t ion each Member hav ing 500sqyd p lo t was en t i t led to rece ive one fu l l y f u rn i shed f la t measu r ing 2250 sqf t and the Members ho ld ing 1000 sqyd p lo t we re en t i t led to two such f la t s . Th is c lear l y shows tha t upon en te r ing the JDA, t he Members go t ves ted r i gh ts t o rece ive such f la ts and the re fo re , as pe r the de f in i t ion o f cap i ta l ga in in Sec t ion 45 such f la t has a lso a rosen f rom the JDA and the re fo re , has to be inc luded in the to ta l cons idera t ion . He aga in emphas ized tha t rece ip t o f cons ide ra t ion has no th ing to do w i th i t s taxab i l i t y u /s 45 and i t i s the accrua l o f cons idera t ion wh ich means a por t ion o f t he

45

cons ide ra t ion wh ich can be rece ived la te r a lso . He a lso submi t ted tha t as fa r as the va lue o f the f la t i s conce rned , the same has been taken by the Assess ing Of f ice r on the bas is o f agreemen t en te red be tween THDC and HASH among

themse lves and the ra te adop ted is the same a t wh ich THDC had agreed to se l l the f la t to Hash . He a lso re fe r red to a few pape r books f i led by o ther assessees whe re in va r ious News Paper c l ipp ing has been inc luded wh ich c lea r l y show tha t f la t s we re booked @ Rs. 8000 / - app rox ima te ly i n the P re Launch book ings . Such P re Launch book ings gene ra l l y t ake p lace a t l ower ra tes o f fe red then in the gene ra l book ings by the pub l ic . The re fo re , the va lue o f Rs . 4500 / - i s mos t reasonab le wh ich has been adop ted by the Assess ing Of f ice r .

26 In the rejoinder, the ld. counsel of the assessee submitted that the assessee and Society had never handed over the possession, therefore, there is no question of executing the documents at the time of cancellation of the agreement for reversing the possession. As no possession was given, therefore, there is no question of taking the back possession. He further submitted:

(a) that normal rules of interpretat ion should be applied to understand the meaning of clause (v) and (vi) of Section 2(47) and this is not a f it case for invocation of Heydon's Rule. He submitted that lot of emphasis has been laid by the ld. DR for the revenue on para 2.1 of JDA to prove that the possession was handed over. However, a careful reading of this para would show that what was contemplated through this para, was to hand over the possession on the execution and registrat ion of the agreement. When an agreement is read it has to be read in whole and therefore, it may not be proper to ignore the word "Registered".

(b) He also contended that lot of emphasis was given on the irrevocabil ity clause in respect of special Power of Attorney which is not correct because once the JDA is terminated, irrevocable Power of Attorney would come to an end automatical ly.

46

(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 specif ically 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 . W e have cons idered the r i va l subm iss ions and ca re fu l l y gone th rough the wr i t ten subm iss ions f i led by bo th the pa r t ies i n the l i gh t o f mate r ia l on reco rd , pape r books and va r ious judgments c i ted by the pa r t ies . The ma in i ssue i s whether assessee is l iab le to cap i ta l ga in tax in the yea r unde r cons ide ra t ion i .e assessmen t yea r 2007 -08 in v iew o f the JDA. Fo r cha rg ing cap i ta l ga ins , the charg ing sec t ion i s 45 and the re levan t po r t ion is as unde r : -

Section 45. [(1)] Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections [54, 54B, [ [54D, [54E, [54EA, 54EB,] 54F [ 54G and 54H], be chargeable to income-tax under the head "Capital gains", and shall be deemed to be the income of the previous year in which the transfer took place.

28 The p la in read ing o f the above p rov is ion wou ld show tha t cha rg ing an i tem o f income under t he head 'Cap i ta l ga ins "

requ i re th ree ingred ien ts i . e . ( i ) the re shou ld be some p ro f i t . ( i i ) Such p ro f i t must be a r i s ing on account o f t rans fe r and ( i i i ) the re shou ld be cap i ta l asse t wh ich has been t rans fe r red . The re i s no d i spu te tha t a cap i ta l asse t was invo lved and there was some p ro f i t a lso i .e . why assessee has h imse l f re tu rned income unde r the head ' cap i ta l ga ins ; . The d i spu te i s ma in l y on account o f t rans fe r and tha t t oo whether the t rans fe r cou ld be cove red unde r c lauses ( i i ) , ( v ) & (v i ) o f sec t ion 2 (47 ) so as to b r ing in to p ic tu re the who le o f cons ide ra t ion a r i s ing on

47

t rans fe r o f such asse ts . W e sha l l dea l w i th each o f the aspec t i n de ta i l a t approp r ia te t ime .

29 . Apa r t f rom cha rg ing p rov is ions u /s 45 ano the r impor tan t p rov is ion i s sec t ion 48 wh ich dea ls w i th the mode o f computa t ion and re levan t por t ion reads as unde r : -

48. The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :—

(i) expenditure incurred wholly and exclusively in connection with such transfer;

(ii) the cost of acquisition of the asset and the cost of any improvement thereto:

30 Aga in p la in read ing wou ld show tha t cap i ta l ga in wou ld be computed by cons ider ing the fu l l va lue o f cons ide ra t ion whethe r rece ived o r acc ru ing as a resu l t o f the t rans fe r . The re fo re , i t i s no t on ly the cons ide ra t ion rece ived wh ich i s re levan t bu t t he cons ide ra t ion wh ich has acc rued is a l so re levan t .

31 . The exp ress ion ' t rans fe r ' has been de f ined u /s 2 (47 ) o f the Ac t wh ich reads as unde r : -

2 (47) ["transfer", in relation to a capital asset, includes,—

(i) the sale , exchange or relinquishment of the asset ; or

(ii) the extinguishment of any rights therein ; or

(iii) the compulsory acquisition thereof under any law ; or

(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

48

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;]

C lauses (v ) & (v i ) t o sec t ion 2 (47 ) o f the Ac t have been inse r ted by F inance Ac t , 1987 w.e . f . 1 .4 .1988 . The pu rpose o f th i s inser t ion has been exp la ined by CBDT in C i rcu la r No . 495 da ted 22 .9 .1987 . The re levan t pa r t 11 .1 and 11 .2 o f the c i r cu la r reads as unde r : -

"11.1 The existing definit ion of the word " transfer " in section 2(47) does not include transfer of certain rights accruing to a purchaser, by way of becoming a member or acquir ing shares in a co-operative society, company, or as way of any agreement or any arrangement whereby such any building which is either being constructed or which is to be constructed. Transactions of the nature referred to above are not required to be registered under the Registrat ion Act, 1908. Such arrangements confer the privi leges of ownership without transfer of t it le in the building and are a common mode of acquir ing f lats particularly in multi-storeyed constructions in big cites. The definit ion also does not cover cases where possession is al lowed to be taken or retained in part performance of a contract, of the nature referred to in section 53A of Transfer of Property Act, 1882. New sub- clauses (v) & (vi) have been inserted in section2(47) to prevent avoidance of capital gains liabil ity by recourse to transfer of rights in the manner referred to above.

11.2 The newly inserted sub-clause (vi) of section 2(47) has brought in to the ambit of transfer", the practice of enjoyment of property r ights through what is commonly known as Power of Attorney arrangements. The practice in such cases is adopted normally where transfer of ownership is legally not permitted. A person holding the power of attorney is authorized the powers of owner, including that of making construction. The legal

49

ownership in such cases continues to be with the transferor."

32 Befo re inse r t ion o f the c lause (v ) & (v i ) to sec t ion 2 (47 ) o f the Ac t , the pos i t ion o f law was tha t un less and un t i l a sa le deed was execu ted fo r t rans fe r o f immovab le p rope r t y , the same cou ld no t be cons t rued as t rans fe r f o r the pu rpose o f cha rg ing cap i ta l ga in tax . Th is was par t i cu la r l y so in t he l i gh t o f va r ious judgments pa r t i cu la r l y the judgmen t o f Hon 'b le Apex Cou r t in the case o f A lapa t i Venka t ram ian v CIT (57 ITR 185 ) (SC) . In th i s case i t was he ld tha t i n the con tex t o f t rans fe r f o r the pu rpose o f cap i ta l ga in tax , what i s meant by t rans fe r i s the e f fec t i ve conveyance o f the cap i ta l asse t by a t rans fe ro r to the t rans fe ree . De l ive ry o f possess ion and agreement to se l l by i t se l f cou ld no t cons t i tu te conveyance o f the immovab le p rope r t y . In the meant ime apa r t f rom th is dec is ion a p rac t i ce came in to vogue by wh ich ce r ta in p rope r t ies we re be ing t rans fe r red w i thou t execu t ing the p rope r sa le deeds . Th is was be ing done because the re was res t r i c t ion on sa le o f p rope r t ies i n va r ious towns e .g . i n case o f lease ho ld p lo t s and f la ts in De lh i i f the same were to be t rans fe r red , pe rm iss ion was requ i red to be taken f rom the Government / DDA and t rans fe ror was requ i red to pay 50% o f t he marke t va lue - cos t ( i . e . unea rned inc rease) to the Gove rnment . To avo id such

payments and / o r a l so to avo id the payment o f s tamp du ty or cumbersome p rocedu re o f ob ta in ing pe rm iss ion , some p rope r t ies we re be ing so ld by way o f sa le agreement and a lso execu t ion o f Gene ra l Power Of A t to rney and possess ion was g i ven on rece ip t o f f u l l cons ide ra t ion w i thou t execu t ing the p rope r sa le deeds e tc . wh ich as ment ioned ea r l i e r was no t even pe rm iss ib le in some cases . These t ransac t ions a re popu la r l y ca l led "power o f a t to rney" t ransac t ions . To avo id these and to s top the leakage o f Revenue , t he Pa r l iamen t has inser ted c lauses (v ) & (v i ) to sec t ion 2 (47 ) so as such t ype o f t ransac t ions a re a lso be b rough t in to taxa t ion ne t . However , i n te rp re ta t ions o f t hese c lauses has led to lo t o f l i t iga t ion and the ma in po in t o f l i t i ga t ion was tha t a t what po in t o f t ime the possess ion can be sa id to have been g iven . In the p resen t

50

case , the Revenue has ma in l y re l ied on two dec is ions name ly ( i ) Cha tu rbhu j Dwarkadas Kapad ia v C IT 260 ITR 491 (Bom.) and ; ( i i ) Au tho r i t y f o r Advance Ru l ing (AAR) New De lh i in the case o f Jasb i r S ingh Sa rka r ia 294 ITR 196 .

33 . In the case o f Chatu rbhu j Dwarkadas Kapad ia v C IT (supra ) , the f ac ts be fo re the Hon 'b le Bombay H igh Cou r t we re tha t assessee who was an ind iv idua l had 44 /192 und iv ided sha re in an immovab le p rope r t y i n Grea te r Bombay wh ich cons is ted o f va r ious lands and bu i ld ings . By Agreement da ted August 18 , 1994 , the assessee agreed to se l l to F lo rea t Inves tment L td , (he re in re fe r red to 'F lo rea t ' ) h is sha re o f immovab le p rope r t y f o r a to ta l cons ide ra t ion o f Rs . 1 ,85 ,63 ,220 / - w i th r i gh t to sa id F lo rea t to deve lop the p rope r t y i n acco rdance wi th the ru les / regu la t ions f ramed by loca l au tho r i t ies . For t h is purpose , the assessee a lso agreed to execu te a l im i ted power o f a t to rney au tho r i z ing F lo rea t to dea l w i th t he p rope r t y and a lso ob ta in perm iss ions and approva ls f rom va r ious au tho r i t ies . Under c lause 11 o f the agreement , i t was p rov ided tha t a f te r F lo rea t was g i ven an i r revocab le l i cense to en te r upon the assessee 's sha re o f p rope r t y and a f te r F lo re t inves tmen t have ob ta ined a l l necessary app rova ls , the F lo re t was en t i t led to demo l ish va r ious bu i l d ings fo r se t t l ing the c la ims o f the tenan ts . Unde r c lause 14 o f the agreemen t , the assessee was en t i t led to rece ive p ropo r t iona te ren t t i l l the payment o f las t ins ta l lments and t i l l tha t t ime assessee was bound to pay a l l ou tgo ings . Unde r c lause 20 o f the Agreement , i t was agreed tha t sa le sha l l be comp le ted by execu t ion o f conveyance , howeve r , t i l l the mat te r was ad jud ica ted by the Hon 'b le H igh Cou r t , no conveyance was execu ted . Pu rsuan t to th is agreement , F lo rea t ob ta ined va r ious pe rm iss ions name ly ( i ) c lea rance f rom CRZ Autho r i t y da ted Feb rua ry 7 , 1996 ; ( i i ) le t te r f rom ULC fo r redeve lopment o f p rope r t y da ted Ap r i l 26 , 1995 . O the r perm iss ions we re a l so ob ta ined du r ing the f inanc ia l yea r end ing March 31 , 1996 re levan t to assessment yea r 1996 -97 . By March , 31 , 1996 , F lo rea t had pa id a lmos t the en t i re cons ide ra t ion expec t f o r a sma l l sum o f Rs . 9 ,98 ,000 / - . However , the commencement

51

cer t i f i ca te pe rmi t t i ng cons t ruc t ion o f the bu i ld ing was i ssued on November 15 , 1996 . The power o f a t to rney was execu ted on March 12 , 1999 . The ques t ion a rose whethe r l iab i l i t y o f the assessee fo r cap i ta l ga in a rose in the assessment yea r 1996 - 97 o r 1999 -2000. The obse rva t ion o f the Cour t has been summar ized in head no te as unde r : -

"C lauses (v ) and (v i ) we re in t roduced in sec t ion 2 (47 ) o f the Income- tax Ac t , 1961 , w i th e f fec t f rom Apr i l 1 , 1988 . They p rov ide tha t " t rans fe r " i nc ludes ( i ) any t ransac t ion wh ich a l lows possess ion to be taken / re ta ined in pa r t pe r fo rmance o f a con t rac t o f the na tu re re fe r red to in sec t ion 53A o f the T rans fe r o f P rope r t y Ac t , 1882 , and ( i i ) any t ransac t ion en te red in to in any manner wh ich has the e f fec t o f t rans fe r r ing o r enab l ing the en joyment o f any immovab le p roper ty . The re fo re , in t hese two cases cap i ta l ga ins wou ld be taxab le in the yea r in wh ich such t ransac t ions a re en te red in to , even i f the t rans fe r o f the immovab le p rope r t y is no t e f fec t i ve o r comp le te unde r the gene ra l l aw . Unde r sec t ion 2 (47) (v ) any t ransac t ion invo lv ing a l low ing o f possess ion to be taken ove r o r re ta ined in par t pe r fo rmance o f a con t rac t o f the na tu re re fe r red to in sec t ion 53A o f the T rans fe r o f P rope r t y Ac t wou ld come w i th in the amb i t o f sec t ion 2 (47 ) (v ) . In o rde r to a t t rac t sec t ion 53A , the fo l low ing cond i t ions need to be fu l f i l l ed . The re shou ld be a con t rac t fo r cons ide ra t ion ; i t shou ld be in w r i t ing ; i t shou ld be s igned by the t rans fe ro r ; i t shou ld pe r ta in to t rans fe r o f immovab le p rope r t y ; the t rans fe ree shou ld have taken possess ion o f the p rope r ty ; las t ly , the t rans fe ree shou ld be ready and w i l l ing to per fo rm h is pa r t o f the con t rac t . Even a r rangements con f i rming p r i v i leges o f ownersh ip w i thou t t rans fe r o f t i t le cou ld fa l l unde r sec t ion 2 (47 ) (v ) . Sec t ion 2 (47) (v ) was in t roduced in the Ac t f rom the assessment yea r 1988 -89 because p r io r the re to , i n mos t cases , i t was a rgued on beha l f o f t he assessee tha t no t rans fe r took p lace t i l l execu t ion o f t he conveyance . Assessees used to en te r i n to ag reements fo r deve lop ing

p rope r t ies w i th bu i lde rs and under the a r rangement w i th the bu i lde rs , they used to con fe r p r iv i leges o f ownersh ip w i thou t execu t ing conveyance and to p lug tha t loopho le , sec t ion 2 (47) (v ) came to be in t roduced in t he Ac t .

…………….

He ld , tha t sec t ion 2 (47 ) (v ) read w i th sec t ion 45 ind ica tes tha t cap i ta l ga ins was taxab le in the year in wh ich such t ransac t ions we re en te red in to even i f the t rans fe r o f immovab le p rope r ty is no t e f fec t ive o r comple te unde r the genera l law . In th i s case , the tes t

52

had no t been app l ied by the Depa r tmen t . No reason had been g iven why tha t tes t had no t been app l ied , pa r t i cu la r l y when the ag reemen t in ques t ion , read as a who le , showed tha t i t was a deve lopment ag reemen t . Once unde r c lause 8 o f the ag reement a l im i ted power o f a t to rney was in tended to be g iven to the deve lope r to dea l w i th the p rope r t y , then the da te o f the con t rac t , v i z. , August 18 , 1994 , wou ld be the re levan t da te to dec ide the da te o f t rans fe r unde r sec t ion 2 (47 ) (v ) and , in wh ich even t , the ques t ion o f subs tan t ia l pe r fo rmance o f the con t rac t t herea f te r wou ld no t a r ise……"

34 . The Hon 'b le Cou r t re fe r red to c lauses (v ) & (v i ) o f sec t ion 2 (47 ) and made the fo l lowing observa t ions a t page 499 o f the repo r t :

"…….. The above two c lauses were in t roduced w i th e f fec t f rom Apr i l 1 ,1988 . They p rov ide tha t " t rans fe r "

i nc ludes ( i ) any t ransac t ion wh ich a l l ows possess ion to be taken / re ta ined in pa r t pe r fo rmance o f a con t rac t o f the na tu re re fe r red to in

sec t ion 53A o f the Trans fe r o f P rope r t y Ac t , and ( i i ) any t ransac t ion en te red in to in any manner wh ich has the e f fec t o f t rans fe r r ing o r enab l ing the en joyment o f any immovab le p rope r t y ( see sec t ion 269UA(d ) ) . There fo re , in these two cases cap i ta l ga ins wou ld be taxab le in the yea r in wh ich such t ransac t ions a re en te red in to , even i f the t rans fe r o f the immovab le p rope r t y i s no t e f fec t ive o r comp le te unde r the gene ra l law (see Kanga and Pa lkh iva la 's Law and P rac t i ce o f Income- tax -V I I I ed i t ion , page 766 ) . Th is tes t i s impo r tan t to dec ide the yea r o f cha rgeab i l i t y o f the cap i ta l ga ins . "

35 The above observations were made on the basis of opinion expressed by Ld. author in the commentary - "The Law and Pract ice 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 1^st

Apri l 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 any manner which has the effect of transferring, or enabling the enjoyment of, any immovable property (s. 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 general law."

53

36 F rom the above , i t i s c lea r tha t Cou r t was o f the v iew tha t i n case any t ransac t ion cove red by c lause (v ) and (v i ) to sec t ion 2 (47 ) the l iab i l i t y f o r cap i to l ga in wou ld a r i se on the da te when such t ransac t ions a re en te red in to . In t he judgment a t some o the r p laces , the s im i la r obse rva t ions have been made. Howeve r , desp i te th is obse rva t ion the case was dec ided in f avou r o f the assessee . The reason for the same have been given in the judgment itself . First ly i t is observed that provision of section 2(47)(v) of the Act were not invoked by the Revenue itself . This becomes clear from the following para:

"It was argued on behalf of the assessee that there was no effective transfer t i l l grant of irrevocable l icence. In this connection, the judgment of the Hon'ble Supreme Court were cited on behalf of the assessee, but all those judgment were prior to introduction of the concept of deemed transfer u/s 2(47)(v). In this matter, the agreement in question is a development agreement. Such development agreements do not constitute transfer in general law. They are spread over a period of t ime. They contemplate various stages. The Bombay High Court in various judgments has taken the view in several matters that the object of entering into a development agreement is to enable a professional builder / contractor to make prof its by complet ing the building and sel l ing the f lats at a profit. That the aim of these professional contractors was only to make prof its by completing the building and, therefore, no interest in the land stands created in their favour under such agreements. That such agreements are only a mode of remunerating the builder for his services of constructing the building (see Gurudev Developers v. Kurla Konkan Niwas Co- operative Housing Society [2003] 3 Mah LJ 131). It is precisely for this reason that the Legislature has introduced section 2(47)(v) read with section 45 which indicates that capital gains 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. 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."

54

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 o rde r o f the T r ibuna l whe re ce r ta in documents we re ment ioned to have been execu ted be fo re March 31 , 1996 e .g . the fo l lowing obse rva t ion o f t he T r ibuna l was no t f ound co r rec t as someth ing i s done on Is t Ap r i l , 1997 then the same canno t f a l l in the yea r end ing 31 .3 .1996 .

"F rom the da tes i t i s ev iden t t ha t f rom the ve ry nex t day , i .e . , Ap r i l 1 , 1997 , f rom the end o f t he f inanc ia l yea r end ing on March 31 , 1996 , t he bu i lde r was us ing the we l l wa te r aga ins t payment o f re levan t cha rges to the assessee . "

37 Thus i t i s ve ry c lea r tha t in cases whe re an a r rangement had been en te red in to by an assessee in te rms o f c lause (v ) o f Sec t ion 2 (47 ) wh ich has e f fec t o f hand ing ove r the possess ion then the t rans fe r i s sa id to have been taken p lace on the da te o f en te r ing in to such a r rangemen t .

38 . W e do no t f ind any fo rce in the con ten t ion o f the Ld . Counse l f o r the assessee tha t j udgment has to be read in the con tex t o f the dec is ion made in such judgmen t . In f ac t , i t i s we l l se t t l ed tha t doc t r i ne o f p receden t wh ich means what needs to be fo l lowed la te r on par t i cu la r ly by subo rd ina te T r ibuna ls and Cour ts i s the ra t io o f a pa r t icu la r judgment g iven by the h ighe r Cou r t o r Fo rum. Fu r the r , t he re i s no fo rce in the con ten t ion tha t dec is ion o f the Hon 'b le Bombay H igh Cou r t in the case o f Chatu rbhu j Dwarkadas Kapad ia v C IT (sup ra ) does no t show tha t the da te o f agreement i t se l f cons t i tu te the t rans fe r . Aga in the re i s no fo rce even in the con ten t ion tha t in tha t case i t was u l t imate ly dec ided tha t cap i ta l ga in taxes i s cha rgeab le in Assessment yea r 1999 -2000 because o f the reasons g i ven in above no ted paras pa r t i cu la r l y because the Revenue i t se l f neve r invoked the p rov is ions o f sec t ion 2 (47 ) (v ) o f the Ac t and he ld i t to be taxab le in Assessment yea r 1996 - 97 . No doub t in t ha t case u l t imate ly i t was he ld tha t cap i ta l

55

ga in was in assessment year 1999-2000 bu t Cou r t had made i t ve ry c lea r tha t th is i s f i rs t t ime tha t law i s be ing la id down and gu ide l ines a re be ing issued wh ich means tha t the re was a con fus ion ear l ie r . C lauses (v ) & (v i ) to sec t ion 2 (47 ) were in t roduced in the yea r on ly in 1998 . Pe rhaps Cou r t took a len ien t v iew because o f t hese reasons and he ld tha t cap i ta l ga in was taxab le in Assessment yea r 1999 -2000. I t is qui te c lear tha t ra t io o f the above decis ion is tha t in case o f any a rrangements or t ransac t ions w hereby the o ther par ty becomes ent i t led to en joy the proper ty then tha t da te o f such t ransac t ion i tse l f needs to be construed as the da te o f t rans fer .

39 . The second re levan t dec is ion c i ted by the Revenue i s by Au tho r i t y f o r Advance Ru l ing (AAR) New De lh i in the case o f Jasb i r S ingh Sa rka r ia (supra ) . In tha t case the assessee was co-owner o f agr i cu l tu ra l land measu r ing abou t 27 .7 acres and h is sha re was 4 /9 . The co -owner dec ided to deve lop the land by cons t ruc t ing res iden t ia l complex th rough deve lope r and en te red in to a Co l labo ra t ion agreement on 8 .6 .2005 wi th M/s San tu r Deve loper Pv t L td , New De lh i (he re in a f te r ca l led 'Deve lope r ' ) . Acco rd ing to the te rms o f agreement , the Deve loper shou ld ob ta in a le t te r o f in ten t f rom the conce rned gove rnment depa r tmen t and ob ta in o the r pe rmiss ions and sanc t ions fo r deve lop ing the land a t i t s own r i sk and cos t . The Deve loper was to take 84% o f the bu i l t up a rea and ba lance 16% wou ld be long to assessee and o the r co -owner . The cons ide ra t ion fo r the agreement was taken as the bu i l t up a rea to be handed ove r to the owners f ree o f cos t . The owners we re en t i t led to v i s i t the s i te in o rder to rev iew the p rogress o f the p ro jec t . I t was c la r i f ied by c lause 18 tha t ownersh ip wou ld rema in exc lus i ve ly w i th the owners t i l l i t ves ts w i th bo th the pa r t ies as per the i r respec t i ve sha res on the comp le t ion o f the p ro jec t . The o ther c lauses and the s teps in the agreement we re tha t a sum o f Rs . 1 c ro re towards payment o f ea rnes t money a t the t ime o f en te r ing in to agreement ; a spec ia l power o f a t to rney was to be execu ted in favou r o f t he Deve lope r to enab le to dea l w i th the S ta tu to ry au tho r i t ies e t c . f o r ob ta in ing necessa ry app rova ls / sanc t ions ; l e t te r o f in ten t was to be

56

ob ta ined no t la te r than March 8 , 2006 and in case o f a f a i l u re to do so , t he agreement sha l l s tand te rm ina ted . Le t te r o f in ten t i s bas ica l l y a l i cense g ran ted by the D i rec to r o f Town P lan t ing to Deve lope r o f land fo r the pu rpose o f cons t ruc t ing res iden t ia l f la t s sub jec t to payment o f ce r ta in cha rges and comp l iance o f o ther cond i t ions . I t was fu r the r s ta ted in the agreemen t tha t on fu l f i l lment o f the requ i rement in the le t te r o f i n ten t , owners w i l l have to execu te i r revocab le gene ra l power o f a t to rney in f avou r o f t he Deve lope r au tho r i z ing the Deve lope r to took and se l l the dwe l l ing un i ts ou t o f deve loper ' s sha re and co l lec t the money fo r t he same. Howeve r , f i na l l y sa le deeds cou ld be execu ted on ly a f te r the owner rece ived the i r sha re o f cons t ruc ted a rea . Th ree months la te r , a supp lementa ry agreement was en te red on September 15 , 2005 be tween the assessee and o the r co - owners and Deve lope rs th rough wh ich i t was agreed tha t owners w i l l se l l the i r 16% sha re in the bu i l t up a rea to the Deve loper o r i t s nom inee fo r cons ide ra t ion o f Rs . 42 c ro res . A sum o f Rs . 2 c ro res was rece ived . Th is co l l abo ra t ion agreement and ba lance o f Rs . 40 c ro res was payab le by the Deve lope r to the owners in s ix i ns ta l lmen ts f rom March 06 , 2008 . The ins ta l lmen ts cou ld be extended sub jec t to payment o f in te res t and fu r the r sub jec t to max imum ex tens ion o f t h ree mon ths . The re we re va r ious o ther c lauses wh ich a re no t re levan t f o r ou r pu rposes . The ques t ion a rose whether cap i ta l ga in acc rue / a r ise to the assessee du r ing the f inanc ia l year 2006 -07 re levan t to assessment year 2007 -08 o r du r ing f inanc ia l yea r 2007 -08 re levan t to assessment yea r 2008-09 .

40 . On the above , the Hon 'b le Au thor i t y a f te r re fe r r ing to the p rov is ions o f sec t ion 45 and obse rved as unde r : -

"……….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,

57

(c) those prof its 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. First ly, 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 col lectively 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 sect ion 45 has been considered in decided cases and leading text books. The following statement of law in Sampath Iyengar's Commentary (10th Edition— Revised by Shri S. Rajaratnam) brings out the correct legal posit ion :

"Section 45 enacts that the capital gains shall by f ict ion 'be deemed to be the income of the previous year in which the transfer took place'. Since this is a statutory f ict ion, the actual year in which the sale price was received, whether it was one year, two years, three years, four years etc. previous to the previous year of transfer, is beside the point. The entirety of the sum or sums received in any earlier year or years would be regarded as the capital gains arising in the previous year of transfer.

. . . . In the words of sect ion 45, the capital gains arising from the transfer 'shall be the income of the previous year in which the transfer took place'. So, the payments of consideration st ipulated to be paid in future would have to be attributed, by statutory mandate, to the year of transfer, even as payments made prior to the year of transfer."

41 . The rea f te r , the Au tho r i t y re fe r red to sec t ion 2 (47 ) and ob jec ts o f the in t roduc t ion o f c lauses (v ) & (v i ) and a lso re fe r red to pa ras 11 .1 & 11 .2 o f the Boa rd C i rcu la r No . 495 (wh ich we have a l ready d i scussed ea r l ie r ) . The Hon 'b le

58

Au tho r i t y has d iscussed va r ious imp l i ca t ions o f c lause (v ) o f sec t ion 2 (47 ) and a l so imp l i ca t ion o f sec t ion 53A o f t he T rans fe r o f P rope r t y Ac t as we l l as obse rva t ions o f Hon 'b le Bombay H igh Cou r t in the case o f Cha tu rbhu j Dwarkadas Kapad ia v CIT (supra ) . The Au tho r i t y observed tha t to unde rs tand th is p rov is ion p rope r l y mean ing o f 'possess ion ' has to be unde rs tood p rope r l y and went on to d iscuss the mean ing o f te rm 'possess ion , and how the same is to be unde rs tood in the con tex t o f c lause (v ) . These a re very impor tan t obse rva t ions and have been d iscussed in most e luc ida ted fash ion . These obse rva t ions w i l l answer many o f the ques t ions ra ised be fo re us and , the re fo re , we a re ex t rac t ing these obse rva t ions as unde r : -

"Meaning of "possession" and how should it be understood in the context of clause (v)

The next question is, in what sense we have to understand the term "possession" in the context of clause

(v) of sect ion 2(47). Should it only mean the right to exclusive possession—which the transferee can maintain in his own right to the exclusion of everyone including the transferor from whom he derived the possession ? Such a criterion wil l be satisf ied only after the entire sale consideration is paid and the 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 restr icted 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 dif ferent contexts" (per R. S. Sarkaria J. in Superintendent and Remembrance of Legal Affairs, W. B. v. Anil Kumar Bhunja [1979] 4 SCC 274 and as a word of "open texture" (see Salmond on Jurisprudence, paragraph 51, Twelfth Edit ion, Indian reprint). Salmond observed : "to look for a definit ion that will summarize the meanings of the term "possession" in ordinary language, in al l areas of law and in al l legal systems, is to ask for the impossible". In the above case of Anil Kumar Bhunja [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 'possession'". Much of the diff iculty is caused by the fact that possession is not a pure legal concept, as pointed out by Salmond. The learned judge then explained the connotation of the expression

"possession" by referring to the well known treatises on jurisprudence (page 278) :

59

" 'Possession', implies a right and a fact : the right to enjoy annexed to the right to property and the fact of the real intention. It involves power of control and intent to control, (see Dias and Hughes)

14 . . . .

15. While recognizing that 'possession' is not a purely legal concept but also a matter of fact, Salmond (12th Ed., 52) describes possession, in fact, as a relationship between a person and a thing. According to the learned author, the test for determining 'whether a person is in possession of anything is whether he is in general control of it '. "

In Salmond's Jurisprudence, at paragraph 54, we find an il luminating discussion on "immediate" and

"mediate possession". The learned author states "in law one person may possess a thing for and on account of some one else. In such a case the latter is in possession by the agency of him who so holds the thing on his behalf. The possession thus held by one man through another may be termed mediate, while that which is acquired or retained direct ly or personally may be dist inguished as 'immediate or direct '." Salmond makes reference to three types of mediate possession. In al l cases of "mediate possession", two persons are in possession of the same thing at the same time. An al l ied concept of concurrent possession has also been explained in paragraph 55 of Salmond's Jurisprudence in the following words :

"It was a maxim of the civi l law that two persons could not be in possession of the same thing at the same time. As a general proposit ion this is true : for exclusiveness is of the essence of possession. Two adverse claims of exclusive use cannot both be effectually real ized at the same time. Claims, however, which are not adverse, and which are not, therefore, mutually destructive, admit of concurrent real izat ion. Hence, there are several possible cases of duplicate possession.

1. Mediate and immediate possession co-exist in respect of the same thing as already explained.

2. Two or more persons may possess the same thing in common, just as they may owe it in common …."

60

On a fair and reasonable interpretation and on adopting the principle of purposive construction, i t must be held that possession contemplated by clause (v) need not necessari ly 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 incompatibil ity. The concurrent possession of the owner who can exercise possessory rights to a l imited extent and for a l imited 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 sect ion 2(47) will have its full play even in such a situat ion. There is no warrant to postpone the operation of clause (v) and the resultant accrual of capital gain to a point of t ime when the concurrent possession wil l become exclusive possession of developer/transferee after he pays full considerat ion. Further, if "possession" referred to in clause (v) is to be understood as exclusive possession of the transferee/developer, then, the very purpose of the amendment expanding the definit ion of transfer for the purpose of capital gains may be defeated. The reason is this: the owner of the property can very well contend, as is being contended in the present case, that the developer will have such exclusive possession in his own right only after the entire amount is paid to the owner to the last pie. There is then a possibi l ity of staggering the last instalment of a small amount to a distant date, may be, when the entire building complex gets ready. Even if some amount, say 10 per cent., remains to be paid and the developer/transferee fails to pay, leading to a dispute between the parties, the right to exclusive and indefeasible possession may be in jeopardy. In this state of affairs, the transaction within the meaning of clause (v) cannot be said to have been effected and the l iabi l i ty to pay capital gains may be indefinitely postponed. True, it may not be profitable for the developer to al low this situat ion to l inger for long as the process of transfer of f lats to the prospective purchasers wil l get delayed. At the same t ime, the other side of the picture cannot be over- looked. There is a possibil ity of the owner with the connivance of the transferee postponing the payment of capital gains tax on the ostensible ground that the entire consideration has not been received and some balance is left. The mischief sought to be remedied, will then perpetuate. We are, therefore of the view that possession given to the developers need not ripen itself into exclusive possession on payment of all the instalments in entirety for the purpose of determining the date of transfer.

61

While on the point of possession, we would like to clarify one more aspect. What is spoken to in clause (v) of sect ion 2(47) is the "transaction" which involves allowing the possession to be taken. By means of such transaction, a transferee like a developer is allowed to undertake development work on the land by assuming general control over the property in part performance of the contract. The date of that transaction determines the date of transfer. The actual date of taking physical possession or the instances of possessory acts exercised is not very relevant. The ascertainment of such date, if called for, leads to complicated inquir ies, 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 will ing to take possession of the land". Such an unsubstantiated statement which is not found in the original application or even written submissions fi led earlier need not be probed into especial ly when it is not his case that the developer was not al lowed to take possession in terms of the agreement."

42 . A f te r t he above d iscuss ion , the Au thor i t y d i scussed the fac t s o f t he case be fo re i t . I t was obse rved tha t paragraph 18 o f the Co l labo ra t ion Agreemen t p rov ides tha t on issuance o f l e t t e r o f in ten t , the owners w i l l a l low and pe rm i t the Deve loper to en te r upon and su rvey the land , e rec t s i te / sa les o f f i ce , ca r ry ou t t he s i te deve lopment wo rk and do ac t i v i t ies f o r advanc ing & sa le p romot ion , cons t ruc t ion e t c . The Au tho r i t y f u r the r obse rved tha t i f th is c lause is read in iso la t ion th is wou ld sugges t on pass ing o f possess ion bu t accord ing to Au tho r i t y the o the r f ac to rs a re to be cons ide red . C lause 15 p rov ided tha t on fu l f i l lmen t o f the requ i rements la id down in t he le t t e r o f in ten t wh ich i s p rov is iona l l i cense , the owners shou ld execu te an i r revocab le genera l power o f a t to rney in f avou r o f the deve loper a l lowing in te r a l i a to book and se l l the dwe l l i ng un i t f a i l ing unde r the i r sha re . Th is was poss ib le on ly a f te r depos i t o f requ is i te charges e tc . and pe rhaps there was l i t i ga t ion rega rd ing ownersh ip o f land wh ich has a l so to be w i thd rawn. The Autho r i t y has d iscussed the s ign i f i cance o f

62

gene ra l power o f a t to rney and the te rms o f the gene ra l power o f a t t o rney a t para 33 and the re levan t po r t ion o f the same i s as unde r : -

"A copy of the irrevocable GPA executed in terms of paragraph 15 of the agreement has been furnished by the applicant. It authorizes the developer : (i) to enter upon and survey the land, prepare the layout plan, apply for renewal/extension of l icence, submit the building plans for sanction of the appropriate authority and to carry out the work of development of a multi- storied residential complex, ( i i) to manage and control, look after and supervise the property in any manner as the attorney deems fit and proper, ( i i i) to obtain water, sewage disposal and electricity connections. The developer is also authorized to borrow money for meeting the cost of construct ion on the security and mortgage of land fall ing to the developer's share. The other clauses in the GPA are not relevant for our purpose. The GPA unequivocally grants to the developer a bundle of possessory rights. The acts of management, control and supervision of property are explicit ly mentioned. I t is fairly clear that the GPA is not a mere licence to enter the land for doing some preliminary acts in relat ion to the development work. The power of control of the land which is an incidence of possession as explained supra has been conferred on the developer under this GPA. The developer armed with the GPA cannot be regarded merely as a licensee or an agent subject to the control of the owners. His possession cannot be characterized as precarious or tentat ive in nature. The 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 signif icance. 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 del iberately chosen. As discussed earlier, the owner's l imited 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 sat isfying the ingredients of clause (v) of section 2(47). We are therefore, of the view that the irrevocable GPA executed by the owners in favour of the developer must be regarded as a transaction in the eye of law which allows possession to be taken in part

63

performance of the contract for transfer of the property in question…….."

43 Thus , the above c lea r l y shows tha t i r revocab le gene ra l power o f a t to rney wh ich leads to ove r a l l con t ro l o f the p rope r t y in the hands o f the Deve lope r , even i f tha t means no exc lus i ve possess ion by the Deve loper wou ld cons t i tu te t rans fe r . I t can be sa id tha t i t has to be cons t rued as 'possess ion ' in t e rms o f c lause (v ) o f sec t ion 2 (47) o f the Ac t .

44 A question may arise that why the transfer was not held to be taken place in Assessment year 2006-07 when f irst agreement was entered into on June 8, 2005. The supplementary agreement was also entered into on Sept 15, 2005 both of which fal l in Financial Year 2005-06 relevant to Assessment year 2006-07. Then why transfer was not construed in Assessment year 2006-07 it was because the f irst agreement itself contained a condit ion that " letter of intent" should be procured not later than March 8, 2006. In case of failure to do so the agreement shall stand terminated. Therefore, obtaining the "letter of intent" was the crucial factor. It has been explained in the decision that the "letter of intent" basically is a l icense issued by the Director of Town and Country Planning, Haryana which gives permission for construction of the f lats. The other crucial point was execution of irrevocable of GPA which was executed on May 8, 2006 which according to the ld. authority depicts the intention of the handing over of the possession. Therefore, it becomes very clear that it is not necessary that transfer would take place on the signing of development agreement but the same has to be inferred only when the possession has been handed over by the transferor to the developer which can be inferred from the documents e.g. Power of Attorney. After above discussion Hon'ble authority has summarized the decision in para 41 which is as under:

"The following is the summary of conclusions:

1. Where the agreement for transfer of immovable property by itself does not provide for immediate transfer of possession, the date of entering into the agreement cannot be considered to be the date of transfer within the meaning of clause (v) of section 2 (47) of the Income-Tax Act.

64

2. To attract clause (v) of sect ion 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. Incidental ly, it may be mentioned that during the said year, i.e., f inancial year 2006-07, a f inal l icense was granted and the applicant/owners received nearly 2/3rds of the consideration. "

45. Lega l pos i t ion has been d iscussed in above no ted pa ras and now le t us d iscuss the fac t s o f t he case in the l i gh t o f above no ted lega l pos i t ion .

46 Und ispu ted fac ts o f the case a re tha t t he assessee i s a Member o f Pun jab i Coop House Bu i ld ing Soc ie t y L td . wh ich had 96 members (Number o f members we re s ta ted as 95 du r ing a rgumen ts bu t c lause 13 o f the JDA re fe rs to number o f members as 96) . The Soc ie t y was own ing 21 .2 acres o f land in v i l l age Kansa l D is t t . Moha l i ad jacen t to Chand iga rh . The re we re two t ypes o f members f i r s t l y the members who were own ing p lo t o f 500 sqyd and second ly the members who a re ho ld ing p lo t o f 1000 sqyd . Somewhere in 2006 i t was dec ided to deve lop a Group Hous ing commerc ia l p ro jec t and do deve lopment as pe r t he app l icab le mun ic ipa l bu i ld ing bye - laws in f o rce and acco rd ing ly a b id was inv i ted th rough adve r t isemen t in the T r ibune da ted 31 .5 .2006 . HASH a deve lope r , app roached the Soc ie t y w i th p roposa l f o r deve lopment o f the p rope r t y . S ince Hash d id no t have su f f i c ien t means to deve lop the p rope r t y , Hash had app roached THDC fo r deve lopment o f the p rope r t y by cons t ruc t ing the bu i ld ing and /o r s t ruc tu res to be used fo r in te ra l ia res iden t ia l , pub l ic use and commerc ia l pu rposes . Th is p roposa l was d iscussed by the Soc ie t y in i t s Execu t i ve Commi t tee meet ing

65

on 4 .1 .2007 . M inu tes o f the meet ing a re p laced a t page 58 to 65 o f the pape r book . In the Execu t i ve commi t tee i t was dec ided to appo in t Hash who was ac t ing a longwi th the jo in t deve lope r THDC as jo in t deve lope r on the te rms and cond i t ions to be ment ioned in the JDA. I t was fu r the r reso lved tha t member owing p lo t o f 500 sqyd wou ld rece ive a cons ide ra t ion o f Rs . 82 ,50 ,000 / - each to be pa id in f our i ns ta l lmen ts by Hash d i rec t l y i n f avou r o f the members and one f la t w i th supe r a rea o f 2250 sqf to be cons t ruc ted by THDC. The members who he ld the p lo t o f 1000sqyd were to rece ive a cons ide ra t ion o f Rs . 1 ,65 ,00 ,000 / - and two f la ts cons is t i ng o f 2250sqf t to be cons t ruc ted by the THDC. I t was f u r the r reso lved to en te r in to a JDA wi th THDC/HASH. I t was a lso reso lved to execu te i r revocab le Power o f a t to rney by the Soc ie t y in f avour o f THDC fo r th is pu rpose . Th is reso lu t ion was u l t imate ly ra t i f ied in the Genera l Body meet ing he ld by the Soc ie t y on 25 .2 .2007 . Pu rsuan t to the above reso lu t ion , t r ipa r t i te JDA was execu ted (copy o f the same is ava i lab le a t page 15 to 54 o f f i r s t paper book ) . Through rec i ta t ion c lause i t has been ment ioned tha t owner i s in possess ion o f land measur ing abou t 21 .2 ac res o f land wh ich has come in the pu rv iew o f Nagar Panchaya t , Naya Gaon v ide Not i f i ca t ion i ssued on 18 .10 .2006 du ly subs t i tu ted by ano the r no t i f i ca t ion da ted 21 .11 .2006 and tha t no pa r t o f land o f t he p rope r t y f a l l s unde r Fo res t A rea unde r the Pun jab Land P rese rva t ion Ac t . I t has been fu r ther rec i t ed tha t the Soc ie t y has agreed to accep t the p roposa ls o f Hash and fu r the r execu ted th is agreemen t w i th THDC/HASH. Hash was respons ib le to make paymen t to the owner as desc r ibed ea r l ie r and the f la t s we re to be p rov ided by THDC. In case o f Hash fa i l s to make the payment , THDC agreed to make the payments . Copy o f the reso lu t ion o f the Execu t i ve Commi t tee o f the Soc ie ty da ted 4 .1 .2007 as we l l as reso lu t ion o f the Genera l Body Mee t ing o f the Soc ie t y da ted 25 .2 .2007 were made pa r t o f JDA by way o f annexu re . The Soc ie t y agreed to execu te an i r revocab le Spec ia l Power o f A t to rney in f avou r o f THDC and a l l o ther necessa ry documents , a t the request o f the deve lope rs .

66

47 In c lause 1 o f JDA va r ious exp ress ions have been de f ined . C lause 2 descr ibes the p ro jec t as unde r :

"2 .1 The owner hereby i r revocably and unequivocal ly grants and ass igns in perpe tui ty a l l i ts r ights to develop , const ruc t , mor tgage , lease , l icense, se l l and t rans fer the proper ty a long wi th any and a l l the const ruc t ion, premises, heredi taments , easements , t rees thereon in favour o f THDC for the purpose o f development , construct ion, mortgage , sa le , t rans fer , lease , l i cense and or exploi ta t ion for fu l l u t i l i za t ion of the Proper ty (Rights ) and to execu te a l l the documents necessa ry to ca r ry ou t , fac i l i ta te and en fo rce the R igh ts in the P rope r ty inc lud ing to execu te Lease Ag reement , L icense Agreemen ts , Const ruc t ion Con t rac ts , Supp l ie r Cont rac ts , Ag reement fo r sa le , Conveyance , Mor tgage Deeds, f inance documents and a l l documents and

ag reemen ts necessa ry to c rea te and reg is te r the mor tgage , conveyance , lease deeds , l i cense agreement , Power o f A t to rney , a f f idav i ts , dec la ra t ion , indemni t ies and a l l such o the r documents , le t te rs as may be necessary to car ry ou t , fac i l i ta te and en fo rce the R igh ts and to reg is te r the same w i th the revenue/Competen t au tho r i t y and to appear on our beha l f be fo re a l l au tho r i t ies , s ta tu to ry o r o therw ise , and be fo re any cou r t o f l aw ( the 'Deve lopment R igh ts ' ) . The owner hereby hands over the or ig ina l t i t le deeds of the Proper ty as ment ioned in the l is t Annexed hereto and marked as Annexure IV and

phys ica l , vacant possession o f the proper ty has been handed over to THDC s imul taneous to the execut ion

and regis t ra t ion o f th is agreement to deve lop the same as se t out here in .

I t i s he reby ag reed and con f i rmed tha t what i s s ta ted in the rec i ta l s here inabove , sha l l be deemed to be dec la ra t ions and rep resen ta t ions on the pa r t o f the Owner as i f t he same were se t ou t he re in ve rba t im and fo rming an in teg ra l pa r t o f the ag reemen t .

2 .2 The P ro jec t sha l l compr i se o f

deve lopment / cons t ruc t ion o f the P rope r t y in to the p remises as pe rmiss ib le unde r Pun jab Mun ic ipa l Bu i ld ing Bye - laws/Pun jab Urban Deve lopment Au tho r i t y o r any o ther Compe ten t Au tho r i t y by the Deve loper a t the i r own cos t and expense . The P ro jec t sha l l be deve loped as may be sanc t ioned by the conce rned loca l au tho r i t y i . e . Depa r tmen t o f Loca l Bod ies , Pun jab /Pun jab Urban P lann ing and Deve lopment Au tho r i t y (PUDA) o r any o ther Competen t Au tho r i t y .

2 .3 The owner he reby i r revocab ly and unequ ivoca l l y g ran ts and ass igns a l l i t s Deve lopmen t R igh ts in the p rope r t y to THDC to deve lop the p rope r t y and under take the p ro jec t a t i t s own cos ts , e f fo r ts and expenses whe reupon the Deve lope r sha l l be en t i t led to app ly fo r

67

and ob ta in necessary sanc t ions , l i censes and pe rmiss ions f rom a l l the conce rned au thor i t ies fo r the commencement , deve lopment and comple t ion o f t he p ro jec t on the p rope r t y . "

48 C lause 3 desc r ibes the ob l i ga t ions o f the deve lope rs & Soc ie t y f o r ge t t ing the p lans , e t c . sanc t ioned f rom competen t au tho r i t y / app l ica t ions to be s igned by owner f o r p lans , d rawings e tc . , cons t ruc t ion . C lause 4 dea ls w i th cons idera t ion c lauses 5 to 8 dea ls va r ious aspec ts o f p ro jec t and ob l iga t ions o f Soc ie t y and Deve lope r . C lause 9 ta lks abou t ownersh ip and r i gh ts and read as unde r :

"9 T rans fe r o f ownersh ip /R igh ts 9 .1 The owner sha l l s imul taneously on rece ip t of Payment as set out in C lause 4 .1 above, execute an i r revocable Specia l Power o f At torney to THDC for development o f the proper ty author iz ing THDC to do a l l lawful ac ts , deeds, matters and th ings per ta in ing to the development o f the property for the projec t a long wi th in te ra l ia r ight to mortgage the proper ty and/or premises, se l l , lease , l icense the premises and rece ive /co l lec t monies in i t 's name in respect o f the same and approach i n te rac t , commun ica te w i th the Competen t au thor i t ies and fo r do ing a l l ac t s , deeds, ma t te rs and th ings to be done o r incur red by THDC in t ha t beha l f as a l so to s ign a l l le t te rs , app l ica t ions , ag reements and reg is te r the same i f necessa ry , documents , cou r t p roceed ings , a f f idav i ts and such o ther pape rs con ta in ing t rue fac ts and co r rec t pa r t i cu la rs as made f rom t ime to t ime be requ i red in th is beha l f .

9 .2 The owner sha l l execu te in favou r o f THDC the sa le deed i s i n acco rdance w i th the p rov is ions o f c lause 4 .1 ( i i ) to C lause 4 .1 ( iv ) o f th i s Ag reemen t and execu te a l l o ther necessa ry documents and pape rs to comp le te the

a fo resa id t ransac t ion .

9 .3 Tha t a l l the o r ig ina l t i t le deeds pe r ta in ing to p rope r t y as ment ioned in Annexu re IV has been handed over to THDC by the owner a t the t ime o f s igning o f th is Agreement and in fur therance o f the common

in teres t o f the Par t ies for the deve lopment o f the Pro jec t and except the Sa le Transac t ion made by the Owner in favou r o f THDC as e t ou t in C lause 4 .1 above . THDC he reby unde r take and assure the owner t ha t they sha l l use the t i t le deeds on ly f o r the pu rpose o f fu r the rance o f the P ro jec t i n the manner tha t i t does no t adve rse ly e f fec t t he Owner /A l lo t tee in any manner whatsoever . "

68

49 C lause 10 desc r ibes the consen t g i ven by the Soc ie t y t o THDC fo r ra is ing f inance fo r deve lopment and comp le t ion o f p ro jec t . C lause 11 ta lks abou t f o rma t ion o f ma in tenance Soc ie t y f o r the p ro jec t a f te r i t s comp le t ion . C lause 13 ta l ks abou t t rans fe r o f r i gh ts wh ich reads as unde r :

"13 T rans fe r o f R igh ts The owner he re in i . e . The Pun jab i Coop House Bu i ld ing Soc ie ty L td . a long w i th a l l i t s n ine ty s i x (96 ) members have g i ven the i r express , f ree and c lea r consen t in w r i t ing in the fo rm o f an A f f idav i t /No Ob jec t ion Ce r t i f i ca te /Consent Le t te r whe reby the Deve lope rs have been a l lowed to deve lop the p rope r t y in acco rdance w i th the P ro jec t and tha t THDC sha l l be en t i t led to t rans fe r the r i gh ts ob ta ined unde r th is ag reemen t t o any th i rd pa r t y and to ge t t he deve lopment / cons t ruc t ion work comp le ted on such te rms and cond i t ions as THDC may deem f i t so long as i t does no t adve rse ly e f fec t the Owner in te rms o f the i r r igh t to rece ive En t i re cons ide ra t ion as men t ioned in th i s ag reemen t sub jec t t o a l l o ther cond i t ions ment ioned there in as we l l . The owner sha l l a t a l l t imes p rov ide fu l l suppo r t to the Deve lope rs here in . "

50 O the r c lauses p rov ide fo r te rm ina t ion , Genera l p rov is ions , D isc la imer , Pa r t ia l Inva l id i t y , A rb i t ra t ion , No t ices and Fo rce Ma jeu re & Ju r isd ic t ion .

51 In add i t ion to above an i r revocab le Spec ia l Power o f A t to rney has a lso been execu ted by the Soc ie t y in f avou r o f the deve lope rs i .e . THDC. (Copy o f wh ich i s ava i lab le a t pages 40 to 52 o f the pape r book in case o f Soc ie t y in ITA No. 556 o f 2012 as d iscussed ea r l ie r in pa ra 25 (comple te copy o f Supp lemen ta ry Power o f A t to rney was no t ava i l ab le in the pape r book o f t he assessee , the re fo re , re fe rence was made to the pape r book in case o f the Soc ie t y ) .

52 The f i r s t ma jo r con ten t ion o f the ld . counse l o f the assessee is tha t the possess ion was no t g i ven by the Soc ie t y because acco rd ing to h im as pe r c lause 2 .1 o f the JDA the possess ion o f the p roper t y was to be handed ove r s imu l taneous ly to the execu t ion and reg is t ra t i on o f JDA and s ince the JDA was no t reg is te red , the re fo re , the possess ion

69

was no t g i ven . W e can no t accep t th is con ten t ion because in

"Power o f A t to rney" t ransac t ions , i t i s no t necessa ry to reg is te r the JDA i f a spec ia l Power o f A t to rney has been g iven and same is reg is te red . Second ly c lause 9 .3 o f the JDA as rep roduced above c lea r l y show tha t o r ig ina l t i t le deed wh ich have been ment ioned a long wi th the possess ion in para 2 .1 wh ich acco rd ing to the ld . counse l o f the assessee were to be handed ove r s imu l taneous ly to execu t ion and reg is t ra t ion o f the JDA, is no t co r rec t because c lause 9 .3 c lea r l y men t ion tha t o r ig ina l t i t le deed o f the p rope r t y have been handed ove r t o t he THDC a t the t ime o f s ign ing o f th is agreement because c lause 9 .3 the re i s no men t ion abou t reg is t ra t ion o f JDA.

53 Spec ia l Power o f A t to rney wh ich has been execu ted on 26 .2 .2007 and has been reg is te red a l so . The i r revocab le spec ia l Power o f A t to rney has been execu ted as p rov ided in c lause 6 .7 o f the JDA wh ich reads as unde r :

"6 .7 The Owner sha l l execu te an i r revocab le spec ia l Power o f A t to rney g ran t ing i t s comple te Deve lopment R igh ts i n the Prope r t y in favour o f THDC in te ra l i a i nc lud ing the r igh t to ra ise f inance by mor tgag ing the p rope r t y and reg is te r the cha rge w i th the Compe ten t Au tho r i t y and execu te reg is te red sa le deeds ) as se t ou t in

Clause 4 .1 ( i i ) , ( i i i ) , ( iv ) and (v ) and the Owner conf i rms , under takes , dec lares and b inds i tse l f not to revoke the same for any reason whatsoever out o f i ts own wi l l and d iscre t ion wi thout obta in ing a spec i f ic pr ior wr i t ten consent of THDC or any o f i ts duly const i tu ted a t torneys."

Through th i s Power o f A t to rney va r ious powers have been g iven l i ke to ass ign , f i le , amend e tc . va r ious p lans , des igns to rep resen t be fo re va r ious au thor i t ies , to appo in t a rch i tec t , Lawye rs . Some o f the spec i f i c c lauses re levan t , a re ex t rac ted be low:

( j ) To nego t ia te and agree to any/o r to en te r in to agreemen t (s ) to cons t ruc t / se l l and to unde r take cons t ruc t ion /sa le o f the P rem ises on the P rope r t y o r any po r t ion thereo f wi th / to such pe rsons(s ) o r body and fo r such cons ide ra t ion and upon such te rms and cond i t ions as the A t to rney deem f i t .

70

(n ) To en te r upon the P rope r t y e i the r a lone o r w i th o thers fo r the pu rpose o f deve lopment , Coo rd ina t ion , execu t ion , imp lementa t ion o f the P ro jec t and commerc ia l i za t ion o f the P rope r t y /Premises . ( t ) To ama lgamate the P rope r t y w i th any o the r con t iguous, ad jacen t and ad jo in ing land sand p roper t ies whe re in deve lopment and /o r o the r r i gh t , bene f i t s and in te res ts a re acqu i red and /o r p roposed to be acqu i red and deve loped o r p roposed to be deve loped by THDC and /o r the i r assoc ia te and /o r g roup conce rns /s and /o r u t i l i ze the FSI , FAR, DR and TDR o f the con t iguous, ad jacen t and ad jo in ing lands fo r the pu rpose o f cons t ruc t ing bu i ld ings and /o r s t ruc tu res the reon and /o r on the P rope r ty o r u t i l i ze such lands and p rope r t ies fo r mak ing p rov is ion o f pa rk ing spaces the reon , and /o r may u t i l i ze the same fo r any o the r l awfu l pu rpose , as THDC and/o r the i r assoc ia te and /o r g roup concerns may in the i r so ld , abso lu te and un fe t te red d isc re t ion th ink f i t .

(w) To hand ove r the possess ion o f the P rope r t y o r any pa r t o r po r t ion the reo f to the au thor i t ies to whom the same is requ i red to be handed ove r o r o the rwise and to execu te and de l i ve r any unde r tak ings , dec la ra t ions , a f f idav i t s , bonds, deeds, documen ts , e tc . as may be requ i red by the au thor i t ies concerned fo r ves t ing such a pa r t o r po r t ion in such au tho r i t y and to adm i t execu t ion thereo f be fo re the conce rned Competen t Au tho r i t y and ge t the same reg is te red w i th the concerned sub - reg is t ra r . ( y ) Reasonab le oppor tun i t y o f hea r ing sha l l be g i ven to mor tgage , encumber o r c rea te a cha rge on the P roper t y o r any pa r t o r po r t ion the reo f and execu te the necessa ry secu r i t y documents in f avou r o f any bank / f inanc ia l i ns t i tu t ion to ra ise funds fo r the cons t ruc t ion /deve lopment o f the P rope r t y and fo r t he sa id pu rpose to depos i t t i t le deeds ( i f requ i red) in respec t o f the P rope r t y in f avou r o f such bank / f inanc ia l ins t i tu t ion , execu te the necessa ry documents and reg is te r the cha rge c rea ted on the P rope r t y i f so requ i red in the revenue reco rds and /o r des i red by the A t to rney .

(aa ) To se l l , t rans fe r , l ease , l i cense the P rem ises tha t may be cons t ruc ted on the Proper t y on ownersh ip bas is , l ease , l i cense and /o r in any o the r manner f o r such p r i ce as the A t to rneys may deem f i t and p rope r . To co l lec t and rece ive f rom the pu rchased, t rans fe rees , lessees , l i censees o f the P rem ises , mon ies /p r ice and /o r cons ide ra t ion and /o r ma in tenance charges and to s ign and execu te and /o r g i ve p rope r and lawfu l d i scharge fo r the rece ip t s .

(bb ) To execu te f rom t ime to t ime a l l the wr i t i ng, agreemen t , deeds e tc . i n respec t o f the p rem ises wh ich maybe cons t ruc ted on the P rope r ty and a lso to execu te

71

and s ign conveyance , t rans fe r o r su r rende r in respec t o f the P rope r t y o r any pa r t the reo f .

( cc ) To s ign , execu te and reg is te r the conveyances o r ass ignments and /o r Power o f A t to rney 's and /o r o ther documents and /o r agreements and /o r any o the r wr i t ings in respec t o f the P rope r t y i n pa r t o r fu l l and /o r the P rem ises cons t ruc ted the reon o r any pa r t t he reo f i n f avou r o f any pe rson as the A t to rneys may de te rm ine inc lud ing in f avou r o f any ind iv idua l and /o r l ega l en t i t les and /o r Co - ope ra t i ve Soc ie ty and /o r L im i ted Company and /o r any o ther en t i t y tha t may be fo rmed for such pu rpose . (dd ) To i ssue le t te r o f l ien /NOC's and to s ign documents on beha l f o f t he Owner as requ i red by the p rospect i ve buye rs / lend ing ins t ruc t ions to c rea te a charge on the a l lo t ted p remises .

(gg) To look a f te r and ma in ta in the P rope r t y and the P rem ises cons t ruc ted thereon t i l l i t s t rans fe r in f avou r o f the Co -ope ra t i ve Soc ie t y o r L im i ted Company o r any o the r Organ isa t ion .

54 It is pertinent to note that power/authorization which have been given by the Society to the developer, were in fact were required to be given in terms of various clauses of the JDA. Clause

6.7 reproduced above itself shows that the Society was required to give powers to raise f inance to mortgage the property and even the registrat ion of charge was also required to be given. Further through clause 6.15 it was agreed that documents of original t it le deeds of the property would be handed over to the developer i .e. THDC/HASH so that same can be used in furtherance of development of the Project as well as security for the money paid by the owner. Through clause 6.24 it was agreed that developer THDC/HASH was always permitted by owner to amalgamate the property with any other contiguous, adjacent and adjoining land and the properties wherein developmental and or other r ights, benefits and interest were acquired by the developer or would be acquired in future. This clearly shows that the Society was under obligat ion 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 obligat ion and

72

undertaking of the THDC/HASH and provides specif ically 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 specif ic obl igation on the owner Society to give consent to THDC/HASH to raise f inance 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 Attorney are emanating from the terms and conditions agreed to among the parties from the JDA.

55 The comb ined read ing o f the above c lauses o f the I r revocab le Spec ia l Power o f A t to rney and JDA c lea r l y show tha t the deve loper was au tho r i zed to en te r upon the p roper ty f o r no t on ly f o r t he pu rpose o f deve lopment bu t o the r pu rposes a lso . THDC was au tho r i zed to ama lgamate the p ro jec t w i th any o ther p ro jec t in the ad jacen t a rea o r ad jo in ing a rea as pe r c lause ( t ) o f t he spec ia l Power o f A t to rney . I f the possess ion was neve r g i ven to t he deve lope r by the Soc ie t y then how the deve lope r cou ld ama lgamate the p ro jec t w i th ano ther p ro jec t wh ich may be acqu i red la t te r i n the ad jo in ing a rea . Th rough c lause (w) THDC was au thor i zed to hand ove r the possess ion o f p rope r t y o r po r t ion the reo f to the au thor i t y to whom the same is requ i red . I n la rge Hous ing Soc ie t y P ro jec ts somet imes Mun ic ipa l au thor i t ies t akes some po r t ion o f land fo r t he pu rpose o f roads , pa rks o r o the r gene ra l u t i l i t y purposes l i ke ins ta l la t ion o f e lec t r i c i t y t rans fo rmers and be fo re sanc t ion ing the p lans the deve lope r i s requ i red to under take tha t such po r t ions o f land wou ld be g i ven fo r such a common pu rpose . I f possess ion was no t g i ven then how THDC was au thor i zed to hand ove r such land o r por t i ons the reo f wh ich have no t been iden t i f ied in t he JDA ou t o f the to ta l land . S im i la r l y th rough c lause (y ) THDC has been au tho r i zed to mor tgage ,

encumbrance o r c rea te charge on the p rope r t y i n f avou r o f any bank o r f inanc ia l i ns t i tu t ion fo r ra is ing the funds fo r t he p ro jec t . In the absence o f possess ion such powers cannot be g i ven . C lause (aa ) c lea r l y au tho r i zed the THDC to se l l ,

73

t rans fe r , lease , l i cense the p rem ises wh ich we re to be cons t ruc ted on ownersh ip bas is and fu r ther to rece ive moneys aga ins t such sa le e tc . and to i ssue f ina l rece ip t . Nowhere i t i s ment ioned in th is c lause tha t such sa le deeds were to be s inged by the Soc ie t y as con f i rm ing par t y . In the absence o f possess ion i t i s jus t no t poss ib le fo r the deve lope r to se l l and t rans fe r the p remises wh ich were to be cons t ruc ted . Th is i s f u r the r c la r i f ied by c lause (bb ) and (cc) wh ich g i ves the power o f execu t ion o f conveyance and o ther documents invo lv ing in respec t o f the p remises to be cons t ruc ted w i thou t any in te r fe rence o f the Soc ie t y be ing made con f i rm ing pa r t y . A l l these c lauses c lea r l y show tha t the possess ion was g i ven by the Soc ie t y and /o r i t s members to THDC/HASH on the execu t ion o f i r revocab le Power o f A t to rney . Th rough these c lauses o f JDA and i r revocab le Power o f A t to rney the deve lope r was ab le to comple te ly con t ro l the p rope r t y and make use o f i t no t on ly f o r the pu rpose o f deve lopment bu t a l so fo r the purpose o f ama lgamat ion , sa le , mor tgage e tc . W hen the above c lauses a re compared on touch s tone o f the d iscuss ion on possess ion in para 26 to 28 in the case o f Jasb i r S ingh Sa rka r ia (sup ra ) wh ich we have rep roduced above , i t becomes c lea r tha t the possess ion has been g iven .

56 In t ha t d i scuss ion , i t has been c lear l y ment ioned tha t the pos i t i on con temp la ted by c lause (v ) o f sec t ion 2 (47 ) o f the Ac t need no t to be exc lus i ve possess ion . W hat i s requ i red is tha t the t rans fe ree by v i r t ue o f possess ion shou ld be ab le to exe rc ise con t ro l f rom ove ra l l in tended pu rposes . W e do no t th ink in t he p resen t case the assessee has g i ven on ly a l i cense as c la imed by ld . counse l o f t he assessee because o f the powers o f se l l i ng, ama lgamat ing e tc . ment ioned in the JDA and i r revocab le Spec ia l Power o f A t to rney . The i ssue has been d iscussed in he judgmen t o f Jasb i r S ingh Sa rka r ia (supra ) in f u r the r d iscuss ion wh ich has been made in pa ra 33 rega rd ing Power o f A t to rney (wh ich has been rep roduced ea r l i e r ) . In tha t case the powers we re g i ven to en te r upon and survey the land , p repa re lay ou t p lans , submi t bu i l d ing p lan fo r sanc t ion w i th the app rop r ia te au thor i t ies to con t ro l , manage and look a f te r

74

and supe rv i se the p rope r t y , to ob ta in wate r and sewerage , d isposa l and e lec t r i c i t y connec t ion . In t ha t case the deve lope r was au tho r i zed to mor tgage the p rope r t y to ob ta in money fo r meet ing the cos t o f cons t ruc t ion on secu r i t y and mor tgage o f l and fa l l ing on ly to the deve lope r 's sha re . In tha t case i t was he ld tha t GPA was no t a l i cense to en te r upon fo r do ing some p re l im ina ry ac ts i n re la t ion to deve lopment o f work bu t the power to con t ro l the land has a lso been con f i rmed . I t has a lso been no ted tha t the agreement desc r ibed the Power o f A t to rney as i r revocab le and ex t ra dec la ra t ion to tha t e f f ec t i n the Power o f A t to rney i s no t w i thou t s ign i f i cance . In case be fo re us , many more powers have been g iven to THDC in add i t ion to powers wh ich have been desc r ibed in tha t j udgment and Power o f A t to rney has been desc r ibed as i r revocab le in c lause 6 .7 o f JDA. The re fo re , i t i s c lea r tha t the assessee 's p lea tha t the possess ion was to be g i ven on ly a t the t ime o f reg is t ra t ion o f the JDA, i s no t co r rec t . Once i r revocab le power was g i ven then i t cannot be sa id tha t the possess ion was no t g i ven . The i ssue regard ing revoca t ion o f i r revocab le Power o f A t to rney and cance l la t ion o f the JDA wou ld be d i scussed la te r on wh i le dea l ing w i th tha t con ten t ion .

57 W e f ind fo rce in the submiss ions o f the ld . DR fo r the revenue tha t in te rp re ta t ion o f c lause (v ) to sec t ion 2 (47 ) shou ld be made in the l igh t o f Heydon 's Ru le . The re i s no fo rce in the ob jec t ion o f the ld . counse l o f the assessee tha t th is c lause shou ld be in te rp re ted on genera l ru les o f in te rp re ta t ion pa r t i cu la r l y i n the l i gh t o f the fac t tha t no reason has been g iven fo r the same. Heydon 's Ru le has been app l ied by the Ind ian Cou r ts many t imes. The Ru le was app l ied and in i t ia ted in Heydon 's case (1584 ) 3 Co. Rep 7a . Th is Ru le was uphe ld by the Const i tu t ion Bench o f Hon 'b le Apex Cou r t i n case o f Benga l Immun i t y Co. L td . V S ta te o f B iha r (1955 ) 2 SCR 603 fo r cons ide ra t ion o f A r t i c le 286 o f the Const i t u t ion . I t has been he ld in case o f Dr . Ba l i ram W aman H i ray V . Mr . Jus t i ce B . Len t in and ano ther , 176 ITR 1 tha t f o r unde rs tand ing amendmen t in the Ac t , pe rhaps Heydon 's Ru le i s bes t ru le f o r i n te rp re ta t ion o f such amendment . W e f ind tha t w i thou t

75

ment ion ing th is ru le Ld . Au tho r i t y Fo r Advance Ru l ing has d iscussed th i s i ssue in pa ra 27 o f the judgmen t wh ich we have ex t rac ted above . I t has been he ld tha t i f 'possess ion ' re fe r red to in c lause (v ) i s t o be unders tood as exc lus i ve bas is o f the t rans fe ree then ve ry purpose o f the amendmen t o r en la rgement o f the de f in i t ion o f t rans fe r wou ld ge t de fea ted . W e a re rep roduc ing fo l lowing head no te o f the Hon 'b le Apex Cou r t in case o f Dr . Ba l i ram W aman Hi ray V . Mr . Jus t i ce B . Len t in and ano the r (supra ) :

"The fo l low ing p r inc ip les enunc ia ted in Heydon "s caase (1584 ) 3 Co. Rep 7a and f i rmly es tab l ished , a re s t i l l in fu l l fo rce and e f fec t : " tha t f o r the sure and t rue in te rp re ta t ion o f a l l s ta tu tes in gene ra ls (be they pena l o r bene f i c ia l , res t r i c t i ve o r en la rg ing o f the common law ) , fou r th ings a re to be d i sce rned and cons idered : (1 ) what was the common law be fo re the mak ing o f the Ac t ; (2 ) what was the misch ie f and de fec t fo r wh ich the common law d id no t p rov ide ; (3 ) what remedy Pa r l iament has reso lved and appo in ted to cu re the d isease o f the common wea l th and (4 ) the t rue reason o f the remedy . And then , the o f f i ce o f a l l the judges is a lways to make such cons t ruc t ion as sha l l supp ress the evas ions fo r the con t inuance o f the misch ie f and p ro p r iva te commando and to add fo rce and l i fe t o the cu re and remedy accord ing to the t rue in ten t o f the make rs o f t he Ac t p ro bono pub l ic . " The re i s now the fu r the r add i t ion tha t rega rd must be had no t on ly to the ex is t ing law bu t a l so to p r io r leg is la t ion and to the jud ic ia l i n te rp re ta t ion thereo f . "

58 Go ing by the Heydon 's Ru le o f in te rp re ta t ion i f we ana lyze the pu rpose o f c lause (v ) o f Sec t ion 2 (47) then i t wou ld emerge tha t l aw be fo re mak ing the amendment was tha t cap i ta l ga in cou ld be cha rged on ly i f a t rans fe r has been e f fec ted and t rans fe r was in te rp re ted by va r ious Cour ts inc lud ing the dec is ion o f Hon 'b le Sup reme Cour t in case o f A lapa t i Venka t ram ian V C IT , 57 ITR 185 (SC) tha t p rope r conveyance o f the p rope r t y has been made unde r the common law. The m isch ie f was w i th rega rd to t rans fe r in the sense tha t the re was common p rac t i ce tha t p rope r t ies we re be ing t rans fe r red in such a manner tha t t rans fe ree cou ld en joy the bene f i t o f the p rope r t y w i thou t execu t ion o f the conveyance deed. Th i rd l y we need to examine the remedy wh ich was inse r t ion o f c lause (v ) and (v i ) so tha t cases o f g i v ing possess ion o f the p rope r t y , we re a l so cove red by the de f in i t ion o f t rans fe r . Four th l y , t rue reason fo r

76

th i s amendment was to p lug a loop ho le in the law. The re fo re , cons ide r ing the pu rpose o f inse r t ion o f c lause (v ) and (v i ) o f sec t ion 2 (47 ) and var ious c lauses o f Power o f A t to rney and JDA i t becomes abso lu te l y c lea r tha t the Soc ie t y has handed ove r the possess ion o f the p rope r t y to THDC/HASH.

59 Second impor tan t con ten t ion on beha l f o f t he assessee i s tha t JDA was execu ted on 25 .2 .2007 and i f possess ion was g i ven then how the assessee was hav ing possess ion in te rms o f l a te r sa le deeds execu ted on 2 .3 .2007 and 25 .4 .2007 . The Soc ie t y has execu ted two sa le deeds fo r conveyance o f par ts o f the to ta l land . F i r s t sa le deed has been execu ted on 2 .3 .2007 fo r 3 .08 ac res and rec i ta t ion c lause (A ) reads as unde r :

Clause (A) - The vendo r i s the abso lu te owner and in possess ion o f land to ta l measu r ing 169 kana l 7 mar las equ iva len t to approx . 21 .2 ac res in V i l l age Kansa l , Tehs i l Moha l i and more par t i cu la r l y desc r ibed in Schedu le A he reunder w r i t ten and de l inea ted in g reen co lou r bounda ry l ine in t he Sh i zra P lan i ssued by the Pa twar i da ted 23 .2 .2007 . "

60 Acco rd ing to the ld . counse l o f the assessee i f Soc ie t y had a l ready g i ven the possess ion then the Soc ie t y wou ld no t have / had possess ion on 2 .3 .2007 o f the land . A t f ace va lue th i s a rgument looks a t t rac t i ve bu t when examined in t e rms o f possess ion wh ich has been exp la ined in case o f Jasb i r S ingh Sa rka r ia (sup ra ) , ac tua l rea l i t y w i l l come fo rwa rd . In th is j udgment concep t o f concu r ren t possess ion has a lso been d iscussed and fo l l owing ext rac t o f pa ragraph 55 o f Sa lmond 's Jur i sp rudence has been ex t rac ted wh ich reads as unde r :

" I t was a max im o f the c i v i l law tha t two pe rsons cou ld no t be in possess ion o f the same th ing a t the same t ime. As a gene ra l p ropos i t ion th i s i s t rue : fo r exc lus i veness i s o f the essence o f possess ion . Two adve rse c la ims o f exc lus i ve use canno t bo th be e f fec tua l ly rea l i zed a t the same t ime. C la ims , however , wh ich a re no t adve rse , and wh ich a re no t , the re fo re , mu tua l ly des t ruc t ive , admi t o f concu r ren t rea l i za t ion . Hence there a re seve ra l poss ib le cases o f dup l ica te possess ion .

1 Med ia te and immed ia te possess ion Cross- ob jec t ions -ex is t in respec t o f the same th ing as a l ready exp la ined .

77

2 Two o r more pe rsons may possess the same th ing in common ; j us t as they may owe i t in common. The concur ren t possess ion o f the owner who can exe rc i se possess ion r igh t t o a l im i ted ex ten t and fo r a l im i ted pu rpose and tha t o f the buye r /deve lope r who has a gene ra l con t ro l and cus tody o f the land can ve ry we l l be reconc i led . "

61 In f u r the r d iscuss ion in pa ra 26 to 28 o f the above dec is ion i t has been he ld tha t i t i s no t necessa ry in te rms o f c lause (v ) tha t the deve loper shou ld have exc lus i ve possess ion . The concur ren t possess ion o f the owner is poss ib le wh ich g i ves r i gh ts to a l im i ted exten t f o r a l im i ted pu rpose . Thus i t i s ve ry much poss ib le to ho ld concu r ren t possess ion . Mere rec i ta t ion in the sa le deed to t he e f fec t tha t the Soc ie t y was owner o f and in possess ion o f land measur ing 21 .2 ac res , does no t show tha t the Soc ie t y was hav ing ac tua l possess ion . W hat the Soc ie t y was hav ing is on ly ownersh ip r i gh t and the possess ion was on ly concu r ren t as the possessary r i gh t . Fur the r i t i s a s tanda rd c lause in the conveyance deed and i t does no t p rove o r ind ica te anyth ing excep t tha t a por t ion o f land measu r ing 3 .08 acres , has been so ld / conveyed to the deve lope r . In t he l i gh t o f th is pos i t ion , th i s con ten t ion i s re jec ted .

62 W e f ind no fo rce in the next con ten t ion o f the ld . counse l o f the assessee tha t possess ion i f a t a l l was g i ven shou ld be he ld to be on ly a l i cense as de f ined in Sec t ion 52 o f I nd ian Easement Ac t because c lea r l y as pe r Sec t ion 52 o f th i s Ac t , whe re one pe rson g ran ts to ano the r o r many o ther pe rsons to do someth ing upon immoveab le p rope r t y wh ich in the absence o f such r i gh t wou ld be un lawfu l .

63 He re in case be fo re us , the r i gh t has no t been g iven fo r the pu rpose o f do ing someth ing bu t a l l the poss ib le r i gh ts i n p rope r t y i nc lud ing r i gh t to se l l , r i gh t to ama lgamate the p ro jec t w i th ano the r p ro jec t in the ad jo in ing a rea wh ich may be acqu i red la te r , r igh t to mor tgage e tc . c lea r l y show tha t r i gh ts g i ven by the Soc ie t y a re much more la rge r than what i s covered in t he te rm " l i cense" .

78

64 Fourth contention is that the money received at the t ime of execution of JDA can be termed as advance and whatever money has been received has already been shown as capital gain. We f ind no force in this submission because Section 45 which has been extracted above clearly provide for taxing of prof its and gains arising from the transfer. We have already discussed the implicat ion of Section 45 r.w.s. 48 while discussing the legal posit ion. We had also discussed this issue in the l ight 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 part icular year.

65 We would like to discuss this aspect of the issue in l it t le more detail and try to understand why the whole of the considerat ion is required to be taxed. At the cost of repetit ion let us again reproduce the observations of the Ld. authority in case of Jasbir Singh Sarkaria (supra) which we have earl ier extracted at para 40 and the relevant portion is as under:

"40 . On the above , the Hon 'b le Au tho r i t y a f te r re fe r r ing to the p rov is ions o f sec t ion 45 and observed as unde r : -

"……….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 prof its 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. First ly, 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 col lectively 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

79

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 sect ion 45 has been considered in decided cases and leading text books. The following statement of law in Sampath Iyengar's Commentary (10th Edition— Revised by Shri S. Rajaratnam) brings out the correct legal posit ion :

"Section 45 enacts that the capital gains shall by f ict ion 'be deemed to be the income of the previous year in which the transfer took place'. Since this is a statutory f ict ion, the actual year in which the sale price was received, whether it was one year, two years, three years, four years etc. previous to the previous year of transfer, is beside the point. The entirety of the sum or sums received in any earlier year or years would be regarded as the capital gains arising in the previous year of transfer.

. . . . In the words of sect ion 45, the capital gains arising from the transfer 'shall be the income of the previous year in which the transfer took place'. So, the payments of consideration st ipulated to be paid in future would have to be attributed, by statutory mandate, to the year of transfer, even as payments made prior to the year of transfer."

66 The above clearly shows that it is because of expression used in Section 45 that is "arising" which cannot be equated with

"receipt". In this respect the ld. authority has quoted a very old decision of Hon'ble Madras High Court in case of T.V. Sundaram Iyengaar and Sons Ltd. V. CIT, 37 ITR 26 (Mad). At para 13 of the said decision is extracted in the following manner:

"13. In T.V. Sundaram Iyengar and Sons Ltd. V. CIT [1959]

37 ITR 26, a Division Bench of the Madras High Court while construing section 12 B of the Indian Income-tax Act, 1922 clarif ied the import of the expression "arise" as fol lows

" 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 contradist inct ion 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 descript ive of a r ight to receive profits. '

80

See also CIT v. Anamallais Timber Trust Ltd. To attract the operation of section 12B it is therefore sufficient i f 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 posit ion does not therefore admit of any doubt that the actual receipt of the entire sale considerat ion during the year of "transfer" is not necessary for the purpose of computing capital gains."

Further the expression arising has been defined in the Advanced Law Lexicon by P. Ramanatha Aiyer edited by Y.V. Chandrachud, Former Chief Just ice of India:

"The words "Arising or accruing" describe a right to receive profits, and that there must be a debt owed by somebody. Ld. Commissioner of Income Tax, West Bengal-II, Calcutta V. Hindustan Housing and Land Development Trust Ltd. AIR 1986 S.C 1805, 1807."

The expression "accrual of income" has been defined in the same Lexicon as under:

"Accrual of income. E.D Jassoon & C. Ltd. V Ld. Commissioner of Income Tax, AIR 1954 S.C 470 quoted - Income may accrue to an assessee without the actual receipt of the same. If the assessee acquires a right to receive the income, the income can be said to have accrued to him though it may be received later on its being ascertained. The basic conception is that he must have acquired a right to receive the income. Bhogilal V Income Tax Ld. Commissioner, AIR 1956 Bom 411, 414 (Income Tax Act (11 of 1992) Ss. 16(1) and (3)}"

67 The combined reading of these two definit ions show that it (i.e. accrual) is not equal to the receipt of income. In fact it is a stage before the point of t ime when the income becomes receivable. In other words, once the vested rights come to a person then it can be said that such right or income has accrued to such person. The concept of accrual or arousal of income has also been discussed by the ld. author S. Rajaratnam in the commentary of Law of Income Tax by Sampath Iyengar XIth Edit ion by discussing the meaning of

"accrued and arise" at page 1300 it has been observe as under:

"(1) Important principles.- (a) Meaning - 'Accrue' means 'to arise or spring as a natural growth or result ', to come by way of increase'. 'Arising' means 'coming into existence or notice or presenting itself '. 'Accrue' connotes growth or accumulation with a tangible shape so as to be receivable. In a secondary

81

sense, the two words together mean 'to become a present and enforceable r ight ' and 'to become a present right of demand'. In the Act, the two words are used synonymously with each other to denote the same 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 wil l indeed be diff icult 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 t ime 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 considerat ion which has accrued to the assessee is also required to be taxed. In view of this, this contention is rejected.

69 The f i f th con ten t ion made by the Ld . Counse l f o r the assessee was tha t s ince sec t ion 53A o f the T rans fe r o f P rope r t y Ac t i t se l f has unde rgone amendmen t w.e . f . 24 .9 .2001 by wh ich the agreemen t re fe r red to in tha t sec t ion i s requ i red to be reg is te red and the re fo re , now in sec t ion 2 (47 ) (v ) on ly the amended p rov is ions can be read . W e f ind no force in th i s con ten t ion . I t i s we l l known tha t sec t ion 53A o f the T rans fe r o f P rope r t y Ac t was passed on equ i tab le doc t r ine so as to p ro tec t the tak ing ove r o r re ten t ion o f the possess ion by the t rans fe ree . I t was no t a sou rce by wh ich t i t le o f immovab le p rope r t y cou ld be acqu i red . Sec t ion 53A o f TP Act read as unde r : -

53A. Part performance.- Where any person contracts to transfer for consideration any immoveable property 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 the contract, [***]where

82

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"

70 A p la in read ing o f the above p rov is ion shows tha t i t p rov ides a sa fe ty measure o r a sh ie ld i n the hands o f the t rans fe ree to p ro tec t the possess ion o f any p rope r t y wh ich has been g iven by the t rans fe ro r as lawfu l possess ion unde r a pa r t i cu la r agreement o f sa le . Th is pos i t ion o f law was inco rpora ted in the de f in i t ion o f ' t rans fe r ' by inser t i on o f c lauses (v ) & (v i ) i n sec t ion 2 (47 ) o f the Ac t . I t i s impo r tan t to no te tha t c lause (v ) uses the express ion "con t rac t o f the na tu re re fe r red to in sec t ion 53A o f T .P . Ac t , the re fo re , c lea r l y the idea i s tha t an agreemen t wh ich p rov ides some de fense in the hands o f t rans fe ree was inco rpo ra ted unde r the de f in i t ion o f ' t rans fe r ' i n the Income Tax Ac t . Now o r ig ina l l y sec t ion 53A o f T .P . Ac t p rov ided tha t even i f " the con t rac t though requ i red to be reg is te red has no t been reg is te red " , wh ich means the r i gh t o f de fend ing the possess ion was ava i lab le even i f the con t rac t was no t reg is te red bu t by Amendment Ac t 48 o f 2001 , the exp ress ion " though requ i red to be reg is te red has no t been reg is te red " , has been omi t ted wh ich means fo r the purpose o f possess ion u /s 53A o f T .P . Ac t , a person has to p rove tha t possess ion has been g iven unde r a reg is te red agreement . In o ther wo rds , now u /s 53A o f T .P . Ac t , the agreement re fe r red i s requ i red to be reg is te red . Th is requ i rement canno t be read in c lause (v ) o f sec t ion 2 (47 ) because tha t re fe rs on ly to the con t rac t o f the na tu re o f sec t ion 53A o f T .P . Ac t w i thou t go ing in to the con t rove rsy whe the r such agreemen t is requ i red to be reg is te red o r no t . The Ld . Counse l f o r the assessee had re fe r red to the dec is ion o f Hon 'b le Sup reme Cour t in the case o f Surana S tee ls v DCIT 237 ITR 777 (SC) fo r the p ropos i t ion tha t when a sec t ion o f a pa r t icu la r s ta tu te is in t roduced in to ano the r Ac t i t mus t be read in the same sense as i t bo re in the o r ig ina l Ac t . The ca re fu l perusa l o f t ha t judgment wou ld show

83

tha t s i t ua t ion is app l icab le on ly when a pa r t icu la r p rov is ion o f an Ac t has been inco rpora ted in the la te r Ac t . In tha t case a ques t ion a rose tha t f o r t he pu rpose o f MAT p rov is ion what i s the mean ing o f pas t l osses o r unabso rbed dep rec ia t i on . I t was found tha t in exp lana t ion to sec t ion 115J c lause ( i v ) , t he fo l lowing express ion was used : -

" ( i v ) the amount o f the loss o r t he amoun t o f dep rec ia t ion wh ich wou ld be requ i red to be se t o f f aga ins t the p ro f i t o f the re levan t p rev ious yea r as i f the p rov is ions o f c lause (b ) o f the f i r s t p rov iso to sub sec t ion ( i ) o f sec t ion 205 o f the Compan ies Ac t , 1956 (1 o f 1956 ) a re app l i cab le .

71 The Hon 'b le Apex Cou r t re fe r red to the P r inc ip les o f S ta tu to ry I n te rp re ta t ion by Sh r i G .P .S ingh and ex t rac ted fo l lowing p iece :

" Sec t ion 115J , Exp lana t ion c lause ( i v ) , i s a p iece o f l eg is la t ion by inco rpo ra t ion . Dea l ing w i th the sub jec t , Jus t ice G .P. S ingh s ta tes in P r inc ip les o f S ta tu to ry In te rp re ta t ion (7 th ed i t ion , 1999 ) . Inco rpo ra t ion o f an ea r l ie r Ac t in to a la te r Ac t i s a l eg is la t i ve dev ice adop ted for the sake o f conven ience in o rde r to avo id ve rba t im rep roduct ion o f the p rov is ions o f the ea r l ie r Ac t in to the la te r . W hen an ea r l ie r Ac t o r ce r ta in o f i t s p rov is ions a re inco rpora ted by re fe rence in to a la te r Ac t , the p rov is ions so inco rpo ra ted become pa r t and pa rce l o f the la te r Ac t as i f they had been "bod i l y t ransposed in to i t " . The e f fec t o f i nco rpo ra t ion is adm i rab ly s ta ted by LORD ESHER, M.R. : " I f a subsequent Ac t b r ings in to i t se l f by re fe rence some o f t he c lauses o f a f o rmer Ac t , the lega l e f f ec t o f tha t , as has o f ten been he ld , i s to wr i te those Sect ions in to the new Act as i f they had been ac tua l l y wr i t ten in i t w i th the pen , o r p r in ted in i t . (p .233 )

Even though on ly pa r t icu la r Sec t ions o f an ea r l ie r Ac t a re inco rpo ra ted in to l a te r , i n cons t ru ing the inco rpora ted Sect ions i t may be a t t imes necessa ry and pe rmiss ib le to re fe r to o ther pa r t s o f the ea r l i e r s ta tu te wh ich a re no t inco rpo ra ted . As was s ta ted by LORD BLACKBURN: "W hen a s ing le Sec t ion o f an Ac t o f Pa r l iamen t i s in t roduced in to ano the r Ac t , I th ink i t must be read in t he sense i t bo re in t he o r ig ina l Ac t f rom wh ich i t was taken , and that consequent l y i t i s pe r fec t l y leg i t imate to re fe r to a l l the res t o f tha t Ac t in o rde r to asce r ta in what the

84

Sect ions meant , though those o ther Sec t ions a re no t i nco rpora ted in the new Ac t . (p .244)

72 On the bas is o f above obse rva t ion , i t was he ld tha t mean ing o f pas t l osses o r unabsorbed dep rec ia t ion has to be taken same as was de f ined in the Compan ies Ac t . In t h i s case i t i s c lea r tha t p rov is ion i t se l f re fe rs to c lause (b ) o f sub sec t ion (1 ) o f sec t ion 205 o f Company 's Ac t 1956 and there fo re , same mean ing was g i ven to pas t l osses o r unabso rbed dep rec ia t ion as is g i ven unde r the Compan ies Ac t ,

1956 .

73 In case o f c lause (v ) t o sec t ion 2 (47) , c lea r ly t he exp ress ion used is "con t rac t o f the na tu re re fe r red to i n sec t ion 53A o f T .P . Ac t " , wh ich means i t i s no t a case o f inco rpo ra t ion o f one p iece o f leg is la t ion in to ano ther p iece o f l eg is la t ion . I f tha t was the in ten t ion o f the Par l iament , obv ious ly c lause (v ) wou ld con ta in the exp ress ion "con t rac t as de f ined unde r sec t ion 53A o f T rans fe r o f P roper ty Ac t , 1882 " . Fur the r , i t i s se t t led pos i t ion o f law tha t any in te rp re ta t ion wh ich cou ld rende r a pa r t i cu la r p rov is ion redundan t shou ld be avo ided . I f the con ten t ion o f the Ld . counse l was to be accep ted , obv ious ly the p rov is ions o f c lause (v ) o f sec t ion 2 (47 ) o f the Ac t wou ld become redundant in the sense tha t reg is t ra t ion o f agreement wou ld aga in be made compu lsory bu t s ince p roper t ies we re be ing so ld in the marke t on "power o f a t to rney" bas is th rough un reg is te red agreemen ts wh ich wou ld make th is p rov is ion redundant . Th is pos i t ion we have a l ready d i scussed ea r l ie r wh i le d i scuss ing the Heydon 's Ru le in the in te rp re ta t ions o f th i s c lause . Fu r the r the i ssue o f i n te rp re ta t ion o f c lause (v ) and amendment to sec t ion 53A o f the T rans fe r o f Prope r t y Ac t came fo r cons ide ra t ion be fo re the Mumba i Bench o f the T r ibuna l i n the case o f Su resh Chander Agga rwa l vs ITO 48 SOT 2010. The T r ibuna l d i scussed th i s i ssue a t page 7 and a f te r quo t ing the p rov is ions o f sec t ion 2 (47) and a l so sec t ion 53A be fo re and a f te r amendmen t as wa l l as pa ra Nos. 11 .1 to 11 .2 o f the Boa rd 's C i rcu la r No . 495 da ted 22 .9 .1987 obse rved as unde r : -

85

"The above clearly shows that there was certain situat ion where properties were being transferred without registrat ion of transfer instruments and people were escaping tax liabi l it ies on transfer of such properties because the same could not be brought in the definit ion of

"transfer" particularly in many States of the country propert ies were being held by various people as leased propert ies which were allotted by the various Govt. Departments and transfers of such lease were not permissible. People were transferring such properties by executing agreement to sell and general power of attorney as well as Wil l and receiving ful l considerat ion, but since the agreement to sell was not registered and though full consideration was received and even possession was given, st i l l the same transactions could not be subjected to tax because the same could not covered by the definit ion of "transfer". To bring such transactions within the tax net, this amendment was made. It has to be appreciated that clause (v) in section 2(47) does not l if t the definit ion of part performance from section 53A of the Transfer of Property Act, 1882. Rather, it def ines 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 the Transfer of Property Act. This means such transfer is hot required to be exactly similar to the one defined u/s.53A of the Transfer of Property Act, otherwise legislature would have simply stated that transfer would include transactions defined in sec. 53A of the Transfer of Property Act. But the legislature in i ts wisdom has used the words "of a contract, of the nature referred in sect ion 53A". Therefore, i t 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 propert ies 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 ful l considerat ion 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 indirect ly 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 i f 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 f lats in a building cal led

"Silver Arch"/on Nepean Sea Road, Bombay. Out of these four f lats, two were purchased direct ly 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 taken after full payment of consideration. The f lats were let out. The assessee contended that the rental income from these

86

f lats was assessable as "income from other sources"

because the assessee was not the legal owner because the tit le of the property had not been conveyed to the Co- operative Society which was formed by the purchasers of the flats. The Hon'ble Court noted that section 27 had been amended vide clause 3(a) wherein when a person was allowed to take possession of the building in part performance of the nature referred to in section 53A, such person shall be deemed to be the owner. It was further observed that for all practicable purposes the assessee was the owner and possibly there cannot be two owners of same property at the same t ime. In fact, the amendments to section 27 were made later on but were taken into cognizance on the basis of above principle and ult imately it was held as under:

"Hence, though under the common law "owner"

means a person who has got valid t it le legally conveyed to him after comply with the requirements of law such as the Transfer of Property Act, the Registrat ion Act, etc., in the context sect ion 22 of the Income-tax Act, 1961, having regard to the ground reali t ies and further having regard to the object of the Income-tax Act, namely, to tax the income, "owner" is a person who is entit led to receive income from the property in his own right. The requirement of registration of the sale deed in the context of sect ion 22 is not warranted."

Thus, from the above, it is clear that i t is not necessary to get the instrument of transfer registered for the purpose of Income-tax Act when a person has got a valid legally conveyed after complying with the requirements of the law.

9. Similarly, in the case of Mysore Minerals Ltd. v. CIT [1999] 239 ITR 775/106 Taxman 166 (SC), the assessee had purchased for the use of i ts staff seven low income group houses from a Housing Board. The payment had been made and in turn possession of the houses was taken over by the assessee. The actual conveyance deed was not executed. The assessee claimed depreciation which was denied by the department. After great discussion, it was observed that for all pract icable purposes and for the purpose of Income-tax Act, the assessee shall be construed as owner of the property. In fact, it was held as 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 t it le 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

87

the property on the assessee whereafter the assessee had in i ts own right allotted the quarters to the staff and they were being actually used by the staff of the assessee. The assessee was entit led to depreciat ion 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 situat ion. This posit ion is further strengthened by the fact that legislature i tself has inserted clause (v) to sect ion 2(47) and while referring to the provisions of section 53A, reference has been made by stating that contracts in the nature of section 53A should also be covered by the definit ion of "transfer". Therefore, in our humble view, the amendment to sec. 53A of the Transfer of Property Act, whereby the requirement of the documents not being registered has been omitted, will not alter the situation for holding the transaction to be a transfer u/s.2(47)(v) i f all other ingredients have been satisf ied."

74 Thus , i t i s c lea r tha t non reg is t ra t ion o f agreement cannot l ead to the conc lus ion tha t p rov is ion o f sec t ion 2 (47 ) ( v ) i s no t app l icab le . S im i la r v iew has been taken by ITAT Coch in Bench o f t he T r ibuna l i n case o f G.S reen ivasan Vs DCIT 28 Txmann .com 200 (Coch . ) and ITAT Pune Bench in the case o f Mahesh Nemichand ra Ganeshwade v ITO 21 Taxmann .com 136 (Pune ) . I n v iew o f th i s lega l pos i t i on , th is con ten t ion i s re jec ted .

75 The next contention was that the decision of Hon'ble Bombay High Court in case of Chaturbhuj Dwarkadas Kapadia (supra) is not applicable part icularly because ult imately in that case it was held that capital gain tax should be charged in Assessment year 1999- 2000 whereas agreement was executed in August, 1994.

76 We have already discussed the implications of the decision in case of Chaturbhuj Dwarkadas Kapadia (supra) in para 33 to 38.

88

We had also examined why in that case capital gain was not held to be chargeable in Assessment year 1995-96.There is no need to repeat the same and in view of the said observations, we reject this contention.

77 The nex t con ten t ion i s tha t i t i s necessa ry fo r invok ing o f sec t ion 2 (47) (v ) o f the Ac t t o comp ly w i th t he p rov is ions o f sec t ion 53A o f the T rans fe r o f P rope r t y Ac t to the ex ten t tha t there shou ld be w i l l i ngness on the pa r t o f the t rans fe ree to pe r fo rm h is pa r t o f the con t rac t .

78 In th is aspec t we have no qua r re l wi th the p ropos i t ion tha t f o r i nvok ing sec t ion 53A p f T .P . Ac t read wi th c lause (v ) o f sec t ion 2 (47 ) , the t rans fe ree has to pe r fo rm o r i s w i l l ing to pe r fo rm h is pa r t o f the con t rac t . In th is respec t as re fe r red to by Ld . Counse l f o r the assessee , the comments o f the Ld . Au tho r in the commenta ry by Mu l la - D inshan F rede r ick Mu l la v ide pa ra 16 a re c lea r and shows tha t th is requ i remen t has to be abso lu te and uncond i t iona l . Some obse rva t ions have been made in the case o f Gene ra l G lass Company Pv t L td Vs DCIT (supra ) . In t ha t case i t was he ld tha t w i l l ingness to pe r fo rm fo r the pu rpose o f sec t ion 53A is someth ing more than a s ta tement o f in ten t and i t i s unqua l i f ied and uncond i t iona l w i l l i ngness on the pa r t o f the t rans fe ree to pe r fo rm h is ob l i ga t ion . In tha t case the t rans fe ree has agreed to make ce r ta in payments in i ns ta l lmen ts in cons idera t ion o f the deve lopment agreemen t bu t such paymen ts we re no t made. La te r on , the agreement was mod i f ied and more t ime was g i ven to t he t rans fe ree fo r payment o f such ins ta l lmen ts . Howeve r , the ins ta l lments we re no t pa id even unde r the mod i f ied te rms and tha t i s why i t was u l t imate ly he ld tha t such agreemen t canno t be cons t rued as t rans fe r .

79 The second dec is ion re fe r red to by Ld . Counse l f o r the assessee i s K . Rad ika v DCIT (sup ra ) . In th is case , s im i la r obse rva t ions we re made , though i t i s no t po in ted ou t in wha t respec t the t rans fe ree has fa i led to pe r fo rm h is pa r t bu t i t has

89

been obse rved tha t the fac t s o f the case shows tha t t rans fe ree has no t pe r fo rmed h is pa r t o f the con t rac t .

80 The th i rd judgment re l ied upon by the Ld . Counse l fo r the assessee is i n the case o f DCIT v Te j S ingh (sup ra) . In tha t case land was acqu i red by the gove rnment and the mat te r wen t f o r l i t i ga t ion . Du r ing the pendency o f l i t i ga t ion , the assessee en te red in to a Deve lopment agreement w i th a Deve lope r f o r the pu rpose o f deve lopment o f the p rope r t y , however , i t was c la r i f ied in the agreemen t tha t the re is l i t i ga t ion in respec t o f acqu is i t ion o f p rope r t y and the deve lope r has to t ake c lea rance f rom the gove rnment in the mat te r o f deno t i f i ca t ion o f the land . I t was he ld tha t s ince the land was unde r compu lso ry acqu is i t ion and no compensa t ion has been rece ived , t he re fo re , there cou ld no t be any cap i ta l ga in tax u /s 2 (47 ) ( i i i ) wh ich dea ls w i th the compu lso ry acqu is i t i on . I t was fu r the r obse rved tha t assessee cou ld no t have g i ven possess ion un less and un t i l the land was denot i f ied . S ince fac ts o f the case a re d i f f e ren t than the case in hand and the re fo re , same are no t re levan t f o r ou r purpose .

81 Now com ing to the fac ts , f i r s t l y i t was con tended tha t Deve loper i .e t rans fe ree has no t ob ta ined va r ious pe rm iss ions wh ich we re requ i red to be taken by the Deve lope r as pe r c lauses 3 .1 , 7 .9 , 8 .4 and 8 .6 o f the JDA. Th is i s no t co r rec t as po in ted ou t by the Ld . C IT DR tha t assessee had a l ready go t the mun ic ipa l p lan sanc t ioned bu t i n t he mean t ime PIL was f i led be fo re the Hon 'b le Pun jab & Haryana H igh Cou r t aga ins t the imp lementa t ion o f the p ro jec t . In i t ia l l y , the cons t ruc t ion was banned by the Hon 'b le H igh Cou r t . Howeve r , l a te r on i t was obse rved in the CW P No. 20425 o f 2010 and as c la r i f ied by the o rde r o f the Hon 'b le Supreme Cour t tha t re fusa l o f sanc t ion unde r the Env i ronmen t (P ro tec t ion ) Ac t , the soc ie t y have sought a rev iew o f the o rde r because the f ind ings a r r i ved were ex .pa r te . No o rde r in the ma t te r has been passed by the competen t au tho r i t y pe rhaps because o f the o rder o f H igh Cou r t . In the in te r im o rde r passed in the P IL i t has been c la r i f ied by the Hon 'b le Sup reme Cour t v ide o rde r da ted

90

31 .1 .2012 perm i t t ing the concerned au tho r i t y unde r the d i f f e ren t s ta tu tes gove rn ing the mat te r to the i r respec t i ve ju r i sd ic t ion to be dec ided in accordance wi th law. Thus , i t becomes c lea r tha t deve lope r i .e . THDC has app l ied fo r va r ious pe rm iss ions be fo re the re levan t au thor i t ies and in some cases pe rm iss ion were dec l ined on ex .par te bas is and in some cases the same were dec l ined in v iew o f the H igh Cour t o rde r bann ing the cons t ruc t ion . A f te r the c la r i f i ca t ion o f the o rde r o f the H igh Cou r t by Hon 'b le Sup reme Cour t by o rde r da ted 31 .1 .2012 , the au tho r i t ies have a l ready been pe rm i t ted to exam ine the i ssue on mer i t s unde r va r ious laws. Fu r ther in the JDA there i s a c lause 26 wh ich dea ls w i th the Fo rce Ma jeure c lauses . The c lause 26 ( i ) to ( v ) reads as unde r : -

FORCE MAJEURE

i ) None o f the pa r t ies sha l l be l iab le to the o the r Pa r t y o r be deemed to be in b reach o f th i s Agreemen t by

reasons o f any de lay in pe r fo rm ing o r any fa i l u re to pe r fo rm, any o f i t s own ob l iga t ions in re la t ion to the Agreemen t , i f the de lay o r f a i l u re is due to any Even t o f Fo rce Me jeu re . Even t o f Fo rce Ma jeu re i s any even t caused beyond the pa r t ies reasonab le con t ro l . The fo l lowing sha l l be rega rded as i ssues beyond the Pa r t ies reasonab le con t ro l .

i i ) Fo r the pu rposes o f th is C lause , an Even t o f Force Ma jeu re sha l l mean even ts o f wa r , wa r l i ke cond i t ions , b lockades, embargoes, insu r rec t ion , Gove rnmenta l d i rec t ions , r io ts , s t r i kes , ac t s o f t e r ro r ism, c iv i l commot ion , lock-ou ts , sabo tage , p lagues o r o the r ep idem ics , ac ts o f God inc lud ing f i re , f loods , vo lcan ic e rup t ions , t yphoons, hu r r i canes , s to rms, t ida l waves , ea r thquake , lands l i des , l i gh tn ing, exp los ions and o the r na tu ra l ca lam i t ies , p ro longed fa i lu re o f ene rgy , cou r t o rde rs / in junc t ions , charge o f laws , ac t ion and / o r o rde r by s ta tu to ry and / o r gove rnment au tho r i t y , th i rd pa r t y ac t ions a f fec t ing the deve lopment o f the Pro jec t , acqu is i t ion / requ is i t ion o f the Prope r t y o r any pa r t thereo f by the gove rnment o r any o the r s ta tu to ry au tho r i t y and such c i r cumstances a f fec t ing the deve lopment o f the p ro jec t (Even t o f Fo rce Ma jeu re ) . i i i ) Any Par t y c la im ing res t r ic t ion on the pe r fo rmance o f any o f i t s ob l i ga t ions unde r th is agreemen t due to the happen ing o r a r is ing o f an Even t o f Fo rce Ma jeu re he reo f sha l l no t i f y t he o ther Pa r t y o f the happen ing o r a r is ing and the end ing o f ceas ing o f such even t o r

91

c i rcumstance wi th th ree (3 ) days o f de te rm in ing tha t an Even t o f Fo rce Ma jeu re has occur red . In the even t any Pa r t y an t ic ipa tes the happen ing o f an Even t o f Force Ma jeu re , such Pa r t y sha l l p rompt l y no t i f y the o the r pa r t y .

i v ) The Par t y c la im ing Even t o f Force Ma jeu re cond i t ions sha l l , i n a l l ins tances and to the ex ten t i t i s capab le o f do ing so , use i t s bes t e f f o r t s to remove o r remedy the cause the reo f and m in im ize the economic damage a r is ing the reo f .

v ) E i the r Pa r t y may te rm ina te th i s Agreement a f te r g i v ing the o ther Pa r t y a p r io r no t ice o f f i f teen (15 ) days in wr i t ing o f the Even t o f Fo rce Ma jeu re con t inues fo r pe r iod o f n ine ty (90 ) days . In the even t o f te rm ina t ion o f th i s Agreement a l l ob l i ga t ions o f the Pa r t ies un t i l such da te sha l l be fu l f i l led .

82 The combined read ing o f these c lauses show tha t i f any o f the pa r t y cou ld no t pe r fo rm i t s pa r t o f the ob l i ga t ion because of the un fo reseen c i r cumstances wh ich inc luded gove rnment d i rec t ions , cou r t o rde rs , i n junc t ions e tc . such pa r t y wou ld no t be l iab le to o the r pa r t y . In v iew o f Force Ma jeu re c lause wh ich inc luded Cour t In junc t ion i t can no t be sa id tha t THDC is no t w i l l i ng to pe r fo rm i t s ob l i ga t ion . In f ac t Deve lpe rs i .e . THDC/HASH were pe rus ing the i ssue o f pe rmiss ions /sanc t ions v igo rous ly . These aspects become fu r the r c lea r i f the judgment o f the Hon 'b le Pun jab & Haryana High Cou r t i n CW P No. 20425 o f 2010 v ide o rder da ted March 26 , 2012 i s pe rused . Pa ras 3 , 4 , 22 , 25 & 26 o f the judgment read as under : -

3 . The b road con tou rs o f the p resen t p roceed ing

hav ing been ou t l ined , we may now p roceed to take

no te o f the spec i f i c con ten t ions o f the con tes t ing pa r t ies as made be fo re us . Howeve r , be fo re we do so , i t may be app rop r ia te to ment ion the somewhat

con f l i c t ing s tand o f the par t ies w i th rega rd to the p resen t s tage o f t he app l ica t ions f i led unde r the p rov is ions o f the Env i ronment (Pro tec t ion ) Ac t as we l l as the W i ld L i f e (P ro tec t ion) Ac t . W h i le the pe t i t ioner , who i s suppo r ted by the respondent No .6 - Chand iga rh Adm in is t ra t ion , asse r ts tha t necessa ry sanc t ion /pe rmiss ion unde r bo th the Ac ts have been

re fused by o rde rs passed by the competen t

au tho r i t ies , the p romote rs o f the p ro jec t con tend to the con t ra ry . The fac ts , as un fo lded be fo re us , i nd ica te tha t aga ins t t he re fusa l o f sanc t ion under the Env i ronmen t (P ro tec t ion ) Ac t , the responden ts have sought a rev iew o f the o rde r on the g round tha t

92

the f ind ings a r r i ved a t , wh ich have f o rmed the bas is o f the re fusa l , a re ex-pa r te . No o rde r in the rev iew mat te r has been passed by the competen t au thor i t y , pe rhaps , because o f the in te r im o rde r passed in the P IL wh ich has been c la r i f ied by the Hon 'b le Supreme Cour t by o rde r da ted 31 .1 .2012 perm i t t ing the conce rned au thor i t y unde r the d i f f e ren t s ta tu tes gove rn ing the mat te r t o exe rc ise the i r respec t i ve ju r i sd ic t ions in acco rdance wi th law. I nso fa r as the W i ld L i f e (Pro tec t ion ) Ac t i s conce rned , i t appea rs tha t the re jec t ion has been made by the Ch ie f W i ld L i f e W arden who, t he respondents c la im, i s mere ly a recommend ing au thor i t y and is requ i red to f o rwa rd h is recommenda t ion to the Cent ra l Governmen t . As the re jec t ion under the W i ld L i f e (Pro tec t ion ) Ac t has been made by an au tho r i t y no t competen t to do , the p romote rs o f the p ro jec t have sought a rev iew o f the o rde r wh ich i s s t i l l pend ing fo r t he same reason (s ) as no t i ced above .

4 . On these fac ts we a re o f the v iew tha t i t wou ld be p ruden t on ou r pa r t t o take the v iew tha t the issue wi th rega rd to c lea rance /sanc t ion unde r the two enac tments i .e . Env i ronment (P ro tec t ion ) Ac t and W i ld L i f e (P ro tec t ion ) Ac t i s p resen t l y pend ing and as the p romo te rs o f t he p ro jec t have submi t ted themse lves to the ju r isd i c t ion o f the au tho r i t ies unde r the sa id enac tments we shou ld re f ra in f rom add ress ing ou rse lves on any o f the i ssues connected w i th e i the r o f the two s ta tu to ry enac tments as any such exe rc i se , even though may be un in tended, may have the e f fec t o f f e t te r ing the ju r i sd ic t ion o f s ta tu to ry au tho r i t ies f unc t ion ing unde r the two re levan t s ta tu tes .

22 . I nso fa r as the p rov is ions o f the Env i ronment (P ro tec t ion ) Ac t and the W i ld L i fe (Pro tec t ion ) Ac t a re conce rned , i t need no t be emphas ised tha t eve ry p ro jec t a t t rac t ing the p rov is ions o f the Per iphe ry Cont ro l Ac t and /o r the p rov is ions o f the 1995 Ac t mus t sa t i s f y the eco log ica l conce rns o f t he a rea in the l i gh t o f t he p rov is ions o f the two s ta tues in ques t ion . As a l ready he ld by us , a pub l i c t rus t has been bes towed on the au tho r i t ies by p rov is ions o f the sa id Ac ts wh ich cas t on such au tho r i t ies a du ty to i n te rd ic t any p ro jec t o r ac t i v i t y wh ich even remote ly seems to c rea te an imba lance in the p r is t ine eco logy and env i ronment o f the a rea on wh ich the c i t y o f Chand iga rh is s i tua ted o r f o r tha t mat te r in the immed ia te v i c in i t y the reo f . As a l ready obse rved , necessa ry c lea rances unde r the a fo resa id two enac tments , i nso fa r as the responden ts a re conce rned , a re p resen t l y pend ing be fo re the conce rned au tho r i t ies and , there fo re , i t wou ld be h igh ly inco r rec t on ou r par t to en te r i n to any f u r the r d iscuss ion on the a fo resa id aspec t o f the case .

93

25 . W e a lso has ten to emphas ise tha t a more r i go rous regu la ted deve lopment in what a re now the remnants o f the pe r iphe ry and the a reas ad jo in ing to i t i s the need o f the hou r f o r wh ich the s takeho lde rs i .e . t he Admin is t ra t ion o f Chand iga rh , t he S ta tes o f Pun jab and Haryana as a lso the au tho r i t ies unde r the Env i ronment (P ro tec t ion ) Ac t and the W i ld L i f e P ro tec t ion Ac t have to demonst ra te the need to engage themse lves in tens ive ly and no t acqu i re a p lac id app roach ind ica t ing an e loquen t acqu iescence to the v io la t ion o f the 1995 Act , Pe r iphe ry Cont ro l Ac t and the Pe r iphe ry Po l icy .

26 . W e thus conc lude on the a fo resa id no te by ho ld ing and obse rv ing tha t the p rov is ions o f t he Pe r iphe ry Cont ro l Ac t and the 1995 Ac t a re complemen ta ry to each o ther and the p rov is ions o f the two s ta tu tes wou ld app ly to the hous ing p ro jec t i n ques t ion . The responden ts , the re fo re , w i l l have to comply w i th a l l the requ i rements spe l t ou t by bo th the a fo resa id s ta tu tes . As the requ i remen t o f c lea rances under t he W i ld L i f e (Pro tec t ion ) Ac t and Env i ronment (P ro tec t ion ) Ac t i s no t a con ten t ious i ssue , and as we have a l ready he ld tha t the p rocess o f g ran t o f such c lea rances i s pend ing be fo re the app rop r ia te au tho r i t ies unde r the respec t i ve Ac ts , the same wi l l now have to be b rough t to i t s l og ica l conc lus ion keep ing in m ind ou r obse rva t ions and d i rec t ions con ta ined he re inabove .

83 The comb ined read ing o f the above pa ras in the o rde r o f Hon 'b le H igh Cour t c lea r l y shows tha t Deve lope r THDC/ HASH i .e . t rans fe ree have made the i r s incere e f fo r t s f o r ob ta in ing the necessa ry pe rmiss ions / sanc t ions wh ich we re requ i red under the JDA. However , some o f the sanc t ions cou ld no t be taken in t ime because o f the l i t i ga t ion by way o f P IL bu t s ince none o f the pa r t y was l i ab le to the o the r pa r t y i n v iew o f the c lause 26 dea l ing w i th FORCE MAJEURE i t canno t be sa id tha t Deve lope r was no t w i l l ing to pe r fo rm h is pa r t o f con t rac t . In any case no spec i f i c ev idence has been shown us to p rove tha t THDC / HASH were dec l in ing to per fo rm pa r t icu la r ob l i ga t ion p rov ided in JDA. In v iew o f th i s d iscuss ion , i t canno t be sa id tha t t rans fe ree i .e . Deve lope r THDC/HASH is no t w i l l i ng to pe r fo rm h is pa r t o f con t rac t .

84 Second ly , i t was con tended tha t payments have no t been made as pe r the JDA. Howeve r , aga in th i s i s no t co r rec t . As pe r c lause 4 ( i v) o f the JDA, the ins ta l lment f o r Rs .

94

31 ,92 ,75 ,000 / - was requ i red to be pa id . The c lause 4 ( i v ) read as unde r : -

" i v ) Paymen t be ing Rs. 31 ,92 ,75 ,000 / - (Rupees One Crore n ine ty two lacs seven ty f i ve thousand on ly ) ca lcu la ted @ Rs . 24 ,75 ,000 / - (Rs . Twenty Four l acs seven ty f i ve thousand on ly ) per p lo t ho lder o f 500 Sq . ya rds and (Rs . 49 ,50 ,000 / - (Rs . Fo r ty n ine lacs f i f t y thousand on ly ) as pe r p lo t ho lde r o f 1000 squa re ya rds to be made to the Owner and / o r the respec t i ve members o f the Owner (as the case may be ) w i th in s i x (6 ) months f rom the da te o f execu t ion o f th i s ag reement o r w i th in two (2 ) months f rom the da te o f app rova l o f t he p lans / Des ign and Draw ings and g ran t o f the f i na l l i cence to deve lop whe re upon the cons t ruc t ion can commence, wh icheve r is la te r , aga ins t wh ich the Owner sha l l execu te a reg is te red sa le deed fo r land o f equ iva len t va lue be ing 6 .36 acres ou t o f the P rope r t y as demarca ted in g reen co lour (a lso ha tched in g reen co lou r ) in the Demarca t ion P lan annexed he re to as Annexu re V and bea r ing Khasra nos . 123 /15 , 123 /6 , 123 /7 (ba lance par t ) , 123 /3 (pa r t ) , 123 / /4 / /1 , 123 / / /4 / /1 /2 , 123 / /4 /2 , 123 /5 /1 , 123 / /5 /2 , 123 / /5 /3 , 112 /24 /24 (pa r t ) "

85 The ca re fu l read ing o f the sa id c lause o f the JDA wou ld show th is payment was requ i red to be made wi th in a per iod o f s i x months f rom the da te o f execu t ion o f th is agreemen t o r w i th in two months f rom the da te o f approva l o f p lan / sanc t ion and d rawing g ran t o f f ina l l i cense to deve lop where upon the cons t ruc t ion can commence, wh icheve r is la te r . Thus , t h i s i ns ta l lmen t was dependent on two con t ingenc ies f i rs t the exp i ra t i on o f a per iod o f s i x mon ths f rom the da te o f agreemen t o r a l te rna t i ve l y on the exp i ra t ion o f a pe r iod o f two mon ths f rom the da te o f app rova l o f p lans / des igns d rawing e t c . l ead ing to g ran t o f f ina l l i censes wh ich can lead to commencement o f cons t ruc t ion , wh icheve r is la te r . The mat te r was taken up by way o f P IL by ce r ta in c i t i zens and Admin is t ra t i on o f t he Un ion Te r r i to ry be fo re the Hon 'b le H igh Cou r t wh ich in i t ia l l y s tayed the sanc t ion o f such p lan e t c . Th is l ed to s i tua t ion whe re cons t ruc t ion cou ld no t be commenced and hence payment was no t requ i red to be made in v iew o f the pend ing l i t i ga t ion . The c lauses o f f o rce ma jeu re came in to ope ra t ion and there fo re , i t canno t be sa id tha t the deve lope r i s no t w i l l i ng to pe r fo rm i t s pa r t o f t he con t rac t . In any case the re

95

i s no de fau l t on the par t o f the deve lope r as payment was no t ye t due as pe r c lause 4 ( i ) ( i v ) o f JDA.

86 Th is pos i t ion was in fo rmed to the Soc ie t y by le t te r da ted 4 .2 .2011 by HASH Bu i lde r , copy o f wh ich has been f i led a t pages 23 & 24 o f the pape r book dea l ing w i th the add i t iona l ev idence . Through th i s le t te r i t has been c lear l y s ta ted tha t s ince pe rmiss ion i s pend ing f rom the Min is t r y o f Env i ronment and Fo res t Depar tment and the re fo re cons t ruc t ions cou ld no t commence. These pe rm iss ions we re pend ing because o f the P IL f i led by Sh r i Aa lok Jagga be fo re the Hon 'b le Pun jab & Haryana High Cou r t . A l l these fac t s c lear l y shows tha t in v iew o f c lause 4 .1 ( i v ) read wi th c lause 26 (v ) o f the JDA, HASH Bu i lde r were no t requ i red to make the payment and i t cannot be sa id tha t they we re no t w i l l ing to pe r fo rm the i r pa r t o f the con t rac t on th is aspec t . The re fo re , th i s con ten t ion is re jec ted .

87 Seventh contention is that revenue wrongly held that even clause (vi) of Section 2(47) is applicable. We f ind no force in this contention. Clause (vi) to Section 2(47) reads as under:

"any transaction (whether by way of becoming a member of, or accruing shares in, a cooperat ive society, company or other associat ion 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".

88 The plain reading of the provision shows that any transaction by way of becoming a Member or acquiring shares in the Cooperat ive Society or shares in the company which has the effect of transferring or enabling the enjoyment of any immoveable property would be covered by the definit ion of transfer. In the case before us, init ially the Members of the Society were holding shares in the Society for ownership of plot of 500 sqyd or 1000 sqyd. This membership was surrendered to the Society vide resolution of the Society passed in the Executive Committee on 4.1.2007 which was later rat if ied in the General Body Meeting of the Society on 25.1.2007, so that the society could enter into JDA. In the JDA the Society has agreed to transfer the land. Therefore, technically it can be said that the developer i .e. THDC/HASH has purchased the

96

membership of the Members in the society which would lead to enjoyment of the property and in that technical sense, clause (vi) of Section 2(47) is applicable.

89 Eighth contention is that since the Society has transferred the land through JDA on a pro-rata basis, therefore, only whatever money is received against which sale deeds have also been executed, can be taxed and notional income i.e. the money to be received later, can not be taxed. In this regard reliance was placed on certain Supreme Court decisions and other cases for the proposit ion that notional income cannot be taxed. There is no need to discuss the cases rel ied on by the ld. counsel of the assessee because it is settled posit ion of law that no notional income can be taxed. Though there is no quarrel that it is a sett led 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 r igor of tax in case of capital gain would come into play on the transfer of capital asset and total considerat ion which is arising on such transfer, has to be taxed. Section 48 clearly talks about full considerat ion received or accruing as result of transfer. This aspect we have already discussed in detail at paras 64 to 68.

90 Second aspec t o f th i s con ten t ion was tha t i f cons idera t ion wh ich has no t been rece ived was to be taxed then the assessee wou ld be dep r i ved fo r c la im ing exempt ion u / s 54 and 54EC. As obse rved above as pe r Sec t ion 45 r .w.s 48 who le o f the cons ide ra t ion , rece ived o r acc rued has to be taxed . Every pe rson is supposed to know the law and i f the t ransac t ion i s s t ruc tu red in such a way fo r t he t rans fe r o f cap i ta l asse t tha t some o f the cons ide ra t ion wou ld be rece ived la te r t hen such pe rson i s supposed to know the consequences o f the den ia l o f such benef i t s . However , i f the sec t ion is i n te rp re ted in t he manner suggested by the ld . counse l o f the assessee then no pe rson wou ld pay cap i ta l ga in tax on t rans fe r o f a p roper t y . Th is w i l l be c lea r f rom a s imp le examp le . Le t us assume i f "A"

se l l s the p rope r t y to "B " f o r a cons ide ra t ion o f Rs . 100 c ro res and rece ive on ly a cons ide ra t ion o f 1 .00 c ro re and i t i s

97

ment ioned in the t rans fe r ins t rumen t tha t ba lance o f cons ide ra t ion wou ld be pa id a f te r 20 yea rs then no tax can be lev ied on such ba lance cons ide ra t ion o f Rs . 99 .00 c ro res wh ich has no t been rece ived as pe r t he con ten t ion o f the ld . counse l o f the assessee . Bu t in tha t case no taxes can be lev ied even a f te r 20 yea rs because no t rans fe r can be sa id to have taken p lace a f te r 20 yea rs and Revenue cannot do any th ing because cap i ta l ga in can be charged u /s 45 on ly on t rans fe r o f cap i ta l asse t . W e do no t th ink tha t th is k ind o f in te rp re ta t ion can be made wh i le in te rp re t ing Sec t ion 45 r .w.s . 48 by invok ing the ru le t ha t the re can no t be any tax on no t iona l rece ip t . Generally speaking it is only the real income which can be taxed but this has to be understood subject to l imitat ions. Commenting on these limitat ions, the Ld. Author Shri S. Rajaratnam in the Commentary of Law of Income Tax by Sampat Iyengar's Volume 1, (11 ^thEdit ion) has observed at page 343 as under:-

"5. Reservations on real income theory. - Whether accrual of income has taken place or not, must be judged on the principle of the real income theory. After accrual , non-charging of tax on the same because of certain conduct based on the ipse dixit of a particular assessee cannot be accepted. In determining the question whether it is hypothetical income or whether real income has material ized or not, various factors will have to be taken into account. It would be difficult and improper to extend the concept of real income to all cases depending upon the self-serving statement of the assessee. What has really accrued to the assessee has to be found out and what has accrued must be considered from the point of view or real income taking the probability or improbability of realization in a realistic manner, 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 pos i t i on can be unde rs tood by examin ing some o f the p rov is ions o f the Ac t wh ich wou ld show tha t concep t o f no t iona l income can no t be ex tended i f spec i f i c p rov is ion i s ava i lab le in the Ac t . Fo r examp le in case o f income f rom house p rope r t y , the income has to be de te rm ined as pe r sec t ion 23 . Sec t ion 22 o f t he Income Tax Ac t p rov ides tha t i t i s the annua l va lue o f the p rope r t y wh ich can be taxed under the head

" income f rom house p rope r t y " . Sec to r 23 p resc r ibes the

98

method fo r de te rm in ing the annua l va lue . Sec t ion 23 (1 ) (a ) reads as unde r : -

23. (1) For the purposes of sect ion 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 p roper ty o r any pa r t o f the p roper ty is le t and the ac tua l ren t rece ived o r rece ivab le by the owner in respec t the reo f i s in excess o f the sum re fe r red to i n c lause (a ) , the amount so rece ived o r rece ivab le ; o r……….

92 On this aspect the settled posit ion of the law is that the annual value has to be determined even if the property is not let out. This posit ion has been discussed by the Ld. author Chaturvedi & Pithisaria's in Commentary of Income Tax Law (f if th edit ion) Volume 1 in this respect at pages 1275 & 1276 observed as under:

"Annual value- determination of - Section 23(1)(a) provides that for the purposes of section 22, the annual value of any property shall be deemed to be the sum for which the property might reasonably be expected to let from year to year. The word used is 'might' and not 'can' or ' is '. It is thus a notional income to be gathered from what a hypothetical tenant would pay which is to be object ively ascertained on a reasonable basis irrespective of the fact whether the property is let out or not [Sultan Bros. Pr. Ltd. v. CIT, (1964) 51 ITR 353 (SC); Jamnadas Prabhudas v. Commissioner Of Income-Tax, Bombay City, (1951)20 ITR 160(Bom); D.M. Vakil v. CIT, (1946) 14 ITR 298, 302(Bom); CIT v. Biman Behari Shaw, Shebait, (1968) 68 ITR 815 (Cal); Sri Sri Radha Govinda Jew v. CIT, (1972) 84 ITR 150, 156 (Cal); CIT v. Ganga Propert ies Ltd., (1970) 77 ITR 637, 647 (Cal); Liquidator, Mahmudabad Propert ies Ltd. v. CIT, (1972) 83 ITR 470 (Cal), aff irmed, (1980) 124 ITR 31 (SC); Commissioner of Income-tax v. Zorostrian Building Society Ltd., (1976) 102 ITR 499 (Bom); C.J. George

V. CIT, (1973) 92 ITR 137 (Ker); D.C. Anand & Sons v. CIT, (1981) 131 ITR 77 (Del). Also see, CIT v. Parbutty Churn Law, (1965) 57 ITR 609, 619 (Cal); In the matter of Krishna Lal Seal, AIR 1932 Cal 836; Lalla Mal Samgham Lal v. Commissioner of Income-tax, (1936)

4 ITR 250 (Lah); New Delhi Municipal Committee v. Nand Kumar Bussi, (1977) Tax LR 2130 (Del)]"

93 Similar view has been expressed by Shri N.A. Palkhivala in his commentary on the Law land Pract ice of Income Tax, Volume 2 (Eighth edit ion) by Kanga and Palkhivala's observation at pages 22 & 23. Again even Shri S. Rajaratnam in the Commentary of Law of

99

Income Tax by Sampat Iyengar's Volume 2, (11 ^thedit ion) expressed identical views in his commentary at page 2738.

94 In a l l the lead ing commenta r ies c i ted above , i t has been obse rved tha t annua l va lue i s to be computed whethe r p rope r t y has been le t ou t o r no t . Th is means tha t no t iona l va lue o f the p rope r t y has to be cha rged to the Income Tax under the head

" income f rom house p rope r t y " . F rom the above , i t becomes c lea r tha t though there i s no rea l income f rom le t t ing ou t o f the p rope r t y , s t i l l the no t iona l annua l va lue is sub jec ted to tax unde r the head " income f rom house p rope r t y " . However , we may ment ion tha t u /s 23 (1 ) (c ) o f the Ac t i f the p rope r t y i s le t ou t and then rema ined vacan t f o r some pa r t o f t he yea r o r f o r who le o f the yea r then vacancy a l l owance can be c la imed . He re , i t i s impo r tan t to no te tha t i f p rope r t y i s no t le t ou t , t hen no t iona l income becomes cha rgeab le to the tax because o f p rov is ions o f sec t ions 22 and 23 (1 ) (a ) o f the Ac t . S im i la r l y , unde r the Ma t p rov is ions , i t i s bas ica l l y t he no t iona l income wh ich is be ing sub jec ted to cha rge under t he head " income f rom bus iness and p ro fess ion" . A bus inessman may have

income o f Rs . 100 / - bu t because o f h ighe r dep rec ia t ion a l lowab le unde r the Income- tax Ac t o r some o ther we igh ted deduct ions say fo r examp le in case o f expend i tu re on

sc ien t i f i c resea rch , the taxab le income as pe r the p rov is ions o f the Ac t may be zero bu t s t i l l because o f the Ma t p rov is ions , tax has to be cha rged on book p ro f i t s . S im i la r l y in the case o f p resumpt i ve tax p rov is ions e .g . u / s 44AD i f a pe rson is c i v i l con t rac to r and does no t ma in ta in books o f account and h i s tu rnove r i s less than Rs . 60 lakhs then the p ro f i t wou ld be p resumed to be 8% o f tu rnover even i f he has su f fe red a loss . Ano the r example o f Sec t ion 2 (22 ) (e ) can be taken . Unde r t h i s p rov is ion a loan o r advance g iven by ce r ta in compan ies to a subs tan t ia l sha re ho lder i s to be t rea ted as deemed d iv idend . Such loan under the norma l accoun t ing p r inc ip le o r on commerc ia l p r inc ip les cannot be rega rded as income but because o f th i s spec i f i c p rov is ion regard ing deemed d iv idend such amount has to be t rea ted as income o f the pe rson

rece iv ing such loans .

100

95 The above pos i t ion o f law makes i t abso lu te l y c lear tha t theory o f rea l income is sub jec t to the p rov is ions o f the Ac t and wheneve r any spec i f i c p rov is ions o f the Ac t i s t he re fo r cha rg ing o f a pa r t i cu la r i t em o f income, then the same has to be cha rged accord ing ly . I t may be some t imes ha rd to the assessee 's bu t aga in i t has been he ld in numerous dec is ions tha t F i sca l s ta tues have to be in te rp re ted on the bas is o f l anguage used and the re i s no scope fo r equ i t y o r in ten t . Ld . Au tho r Sh r i S . Ra ja ra tnam in the Commenta ry o f Law o f Income Tax by Sampa t I yenga r ' s Vo lume 1 , page 236 in th is rega rd has obse rved as under : -

"Once it is shown that the case of the assessee comes within the letter of the law, he must be taxed, however, great the hardship may appear to the judicial mind. Considerat ions of hardship, injustice or anomalies do not play any useful role in construing taxing statutes unless there be some real ambiguity. Thus, any benevolent construction in favour of the assessee has been held to be uncalled for.

96 The re fo re , i t can be sa id tha t genera l l y speak ing no t iona l i ncome cou ld no t be sub jec ted to tax bu t wheneve r the re is a spec i f i c p rov is ion , the same has to be taxed . Now, i n case o f cap i ta l ga in , sec t ion 45 read wi th sec t ion 48 very c lea r l y p rov ides tha t i t i s the p ro f i t "a r is ing" f rom the t rans fe r o f a cap i ta l asse t wh ich wou ld be sub jec ted to cha rge o f cap i ta l ga in tax and sec t ion 48 c lea r l y p rov ides fo r tak ing the to ta l cons ide ra t ion in to account wh i le comput ing the cap i ta l ga ins . Th is aspec t we have a l ready d iscussed in de ta i l a t pa ra No. 64 to 68 f rom wh ich i t becomes c lea r tha t i t i s t he who le cons ide ra t ion whether rece ived o r acc rued , wh ich has to be taxed unde r t he cap i ta l ga in once t rans fe r o f the cap i ta l asse t takes p lace . Acco rd ing ly , the re is no fo rce in th is pa r t o f the con ten t ion .

97 Now le t us exam ine the issue o f taxab i l i t y o f f la t on the bas is o f above p r inc ip les . Re levan t po r t ion o f c lause 4 o f the JDA wh ich dea ls w i th cons ide ra t ion a re as unde r :

101

"4 . CONSIDERATION

4.1 It is specif ical ly 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 al lotment 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 Annexure I & I I), HASH is committed to pay to the Owner and / or the respective members of the Owner (as the case may be) a total amount of Rs. 106,42,50,000/- (Rupees One Hundred Six Crores Forty Two Lacs Fifty Thousands Only) calculated @ Rs. 82,50,000/- (Rupees Eighty Two Lacs Fifty Thousands Only) payable to 65 members having plot of 500 sq. yards each, Rs. 1,65,00,000/- (Rupees One Crore Sixty Five Lacs Only) payable to 30 members having plot of 1000 sq. yards each and Rs. 3,30,00,000/- (Rupees Three Crores Thirty Lacs Only) payable to the Owner for the 4 plots of 500 sq. yards each, which shall tantamount to the full and final payment to the Owner and / or the respective members of the Owner (as the case may be) in a manner set out herein below ('Payment '). Further, the transfer, sale and conveyance of 21.2 acres of land of the Property shall be made by the Owner in favour of THDC pro rata to the Payment received by the Owner and/or the respective members of the Owner (as the case may be) from HASH by executing sale deeds and registering the same. It is expressly provided that as resolved by the Owner, the total amount payable by HASH to the Owner and / or the respective members of the Owner (as the case may be) for assignment of the Development Rights and for transfer and sale of 21.2 acres of land of the Property shall be Rs. 106,42,50,000/- (Rupees One Hundred Six Crores Forty Two Lacs Fif ty Thousand only) and one hundred and twenty nine

(129) f lats consisting of Super Area of 2250 Sq. feet ( 'Flats '); one flat each for sixty f ive members having a plot of 500 sq. yards, two f lats for the (thirty) 30 members having a plot of 1000 sq. yards and 4 flats to the Owner for the 4 plots of 500 sq. yards each as per l ist annexed with this Agreement as Schedule B ('Sale Transaction')

It is expressly agreed between the Developers that HASH shall be responsible for making al l payments to the Owner and/or the respective members of the Owner (as the case may be) as per the negotiated and agreed terms between the Owner and HASH, HASH expressly undertakes to make timely payments of the Payment to the Owner and / or the respective members of the Owner (as the case may be) as under:

102

4.2 As resolved by the Owner, THDC either by itself or along with HASH shall allot the Flats in the name of members of the Owner as per l ist annexed with this Agreement as Schedule B attached herein (hereinafter referred to as the 'Allottees'). The specif icat ions 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 'Specificat ions'). 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 l icense/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.

I t i s exp ress ly p rov ided tha t t he Payment to be made by HASH to the Owner and /o r t o the respec t i ve members o f the Owner (as the case may be) and the F la t s to be a l lo t ted to the A l lo t tees as se t ou t i n th is C lause 4 .2 sha l l he re ina f te r be co l lec t i ve ly re fe r red to as the 'En t i re Cons ide ra t ion '

98 F rom th i s c lause i t becomes abso lu te l y c lear tha t each Member hav ing 500 sqyd o f p lo t was en t i t led to rece ive one fu rn i shed f la t measur ing 2250sqf t and Members hav ing 1000sqyd f la t we re en t i t led to rece ive two fu rn ished f la t s . Thus upon execu t ion o f t he JDA ves ted r i gh t came to such Members to rece ive such f la ts . Once th is ves ted r i gh t a r ises ou t o f the above con t rac t i t can eas i l y be sa id tha t th i s r i gh t has a lso acc rued to the assessee . C lause 4 .2 makes i t abso lu te l y c lea r tha t deve lope r i .e . THDC/HASH was to a l lo t the le t te rs o f a l l o tmen t w i th in 45 days f rom f ina l sanc t ion f rom the competen t au thor i t y and such f l a ts we re pa r t o f en t i re cons ide ra t ion . Mere ly because such a l lo tmen t le t te r has no t been g iven because o f sanc t ions / pe rmiss ions cou ld no t be ob ta ined because o f Pub l ic In te res t L i t i ga t ion be fo re the Hon 'b le Pun jab & Haryana H igh Cou r t , i t canno t be sa id tha t such r i gh t has no t acc rued . Though i t may be ha rd on the assessee bu t i t i s we l l se t t led tha t taxa t ion and equ i t y a re

103

s t range rs . Fur the r comment ing on th is aspec t Sh r i Ra ja ra thnam in h is commen tary has observed a t page 5164 as unde r :

" I t i s ha rd on the owners when requ i red to pay tax , when hand ing ove r t he possess ion fo r purposes o f cons t ruc t ion w i thou t be ing ab le to en joy the cons t ruc t ion , wh ich i s ye t to commerce o r in the p rocess o f cons t ruc t ion be ing pu t up by the deve lope r , bu t the so lu t ion l ies in s ta tu to ry c la r i f i ca t ion in such cases . I n v iew o f the inc reas ing sca le o f such deve lopment ag reemen ts to so lve the hous ing p rob lem in t he c i t ies , a s ta tu to ry c la r i f i ca t ion o r c i r cu la r i s ove rdue . "

99 These comments and the o the r de ta i led d iscuss ion on th i s aspec t c lea r l y show tha t cap i ta l ga in tax has to be pa id on the to ta l cons ide ra t ion a r i s ing on t rans fe r wh ich wou ld inc lude the cons ide ra t ion wh ich has been rece ived as we l l as the cons ide ra t ion wh ich has a rosen and become due and may be rece ived la te r on . In v iew o f th i s d iscuss ion th is con ten t ion i s re jec ted .

100 Ninth contention is that the assessee has already terminated the agreement and has revoked the Power of Attorney. We f ind no force in this submissions.

101 In this regard ld. counsel of the assessee has rel ied on the decision of Mumbai Bench of the Tribunal in case of Chemosyn Ltd. V ACIT (supra). In that case the assessee-Company was owner of two plots bearing 256 & 257 in Gundabali Andheri Mumbai. The assessee-company entered into a development agreement with Dipit i Builders for the development r ights for a consideration of Rs.

16.11 crores. Dipit i Builders had also agreed to construct 18000 sqft carpet area for the benefit of assessee on plot No. 256. In the return of income total consideration was shown only at Rs. 16.11 crores. It was explained that before Dipit i Builders could start the development /construct ion work, ent ire property comprising of plot no. 256 & 257 was sold to a third party M/s Financial Technology Ltd. by a tr ipart ite conveyance deed executed on 5.7.2007 for Rs.

29.11 crores and therefore, additional considerat ion of Rs. 13 crores has been offered to tax in Assessment year 2008-09. This explanation was rejected by the Assessing Off icer because

104

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 rel ied 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 consideration of Rs. 1.25 crores which was f inal ly settled at Rs. 1.00 crore and the Tribunal held that the consideration of Rs. 1.00 crore has to be accepted.

102. From the above decision it is not clear whether in case of Kalaptaru Construction Oversees Pvt Ltd. (supra) which has been followed in above case, was concerning capital gain or not?

Secondly it is not clear that whether the amended consideration i.e. settlement for Rs. 1.00 crore was made in the same year or not? As observed earlier while discussing the issue of notional income that provisions of sect ion 45 r.w.s. 48, are absolutely clear and there is no ambiguity that once a capital asset is transferred then whole of the considerat ion received or accruing has to be considered for the purpose of taxation in the year in which the transfer has taken place. We further f ind that in the JDA there is a clause for termination of the agreement. Relevant clause 14 reads as under:

"Termination

"14(i) Save and except the provision of clause 26, THDC shall at all t imes have the right to terminate this Agreement in the event there is any material breach of the representations, warranties, undertakings, declarations, covenants and/or obligat ions given by the Owner under this Agreement after giving thirty (30) days written notice for rectif ication of such breach. In the event the Agreement is termination 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

105

registered sale deed for land of equivalent value in favour of

THDC.

(i i) In the event al l the requisite government and statutory approvals, authorizations, consents, l icenses, approvals of all the plans/designs and Drawings as may be required for the development of this Property in relation to the Project and to undertake the Project are not granted within nine (9) months of the submission of the f inal plans/Designs and Drawings to the Competent Authority 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 t imes deemed f it by THDC for the grant of the aforesaid approvals and l icenses. In the event the Agreement is terminated by THDC, al l 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.

(i i i ) In the event THDC is unable to develop the Property due to refusal/non grant of approvals, consents, permission, l icenses or revocation of the same by the appropriate statutory authority, then THDC may at its sale discret ion terminate this Agreement. 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.

(iv) The owner shall have the right to terminate the Agreement only in the event of default by the Developers for making the Payment in accordance with the terms of this Agreement and the allotment of Flats within the time period as mentioned in this Agreement after giving Thirty (30) days

106

written notice for rect if ication of such breach or any further t ime as may be desired by the Owner. In the event the Agreement is terminated by Owner, al l 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 forfeit the Adjustable Advance/Earnest Money mentioned in clause 4(i)."

103 The reading of the above clause would show that power of termination has been given in many circumstances to THDC vide clause 14(i), (i i ) and (i i i ). The power for termination by the owner has been mentioned in clause 14(iv) only. Reading of this clause would show that r ight to terminate with the owner i.e. the Society was available only in case of default in making the payment. The issue regarding default for making payment has already been discussed by us in Paras 84 to 86 above while discussing the issue of will ingness on the part of the transferee to perform its part of the contract We have already held that there was no default on the part of developer i.e. THDC/HASH in making the payment, therefore, the assessee had no right to terminate the contract. In any case we further f ind that clause 20 of the JDA refers to Arbitrat ion and it is clearly provided that all the disputes under it should be referred to the arbitrat ion. 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 scrut iny 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 f i led before us for revocation but clause

6.7 of the JDA which we have reproduced earl ier clearly provides that such Power of Attorney cannot be revoked. We reproduce clause 6.7 again which is as under:

"6 .7 The Owner sha l l execu te an i r revocab le spec ia l Power o f A t to rney g ran t ing i t s comple te Deve lopment R igh ts i n the Prope r t y in favour o f THDC in te ra l i a i nc lud ing the r igh t to ra ise f inance by mor tgag ing the p rope r t y and reg is te r the cha rge w i th the Compe ten t Au tho r i t y and execu te reg is te red sa le deeds ) as se t ou t in

Clause 4 .1 ( i i ) , ( i i i ) , ( iv ) and (v ) and the Owner conf i rms , under takes , dec lares and b inds i tse l f not to

107

revoke the same for any reason whatsoever out o f i ts own wi l l and d iscre t ion wi thout obta in ing a spec i f ic pr ior wr i t ten consent of THDC or any o f i ts duly const i tu ted a t torneys."

104 The above c lea r l y shows tha t t h i s Power o f A t to rney cou ld no t be revoked fo r any reason wi thou t ob ta in ing spec i f i c p r io r wr i t ten consen t o f THDC/HASH. No document showing the consen t o f THDC fo r revoca t ion o f th i s i r revocab le Power o f A t to rney has been p roduced be fo re us . W e fa i l to unde rs tand tha t in the absence o f such document how the assessee can c la im tha t th is Power o f A t to rney has been revoked . As d iscussed ea r l i e r wh i le cons ide r ing the lega l pos i t ion , we wou ld aga in reca l l the wo rds o f Hon 'b le Au tho r i t y f o r Advance Ru l ing in case o f Jasb i r S ingh Sarka r ia (sup ra ) whe re in a t pa ra 33 o f the dec is ion wh i le d i scuss ing the issue in respec t o f Power o f A t to rney , i t was h igh l i gh ted tha t execu t ion o f i r revocab le Power o f A t to rney i s o f s ign i f i can t na tu re and the wo rds " i r revocab le "

a re ve ry impor tan t . The express ion " i r revocab le " i t se l f shows tha t norma l l y such a t to rney cannot be revoked . There fo re , no cogn izance can be taken in respec t o f revoca t ion o f t he i r revocab le Power o f A t to rney . In the absence o f spec i f i c consen t as p rov ided in c lause 6 .7 o f the JDA f rom THDC.

105 We may also note that CIT D.R has pointed out that total consideration was to be determined as under:

( i ) Cons ide ra t ion in cash Rs . 106 ,42 ,50 ,000 / - (Rs . 82 ,50 ,000 x 129 p lo ts )

( i i ) Cons ide ra t ion in k ind Rs . 130 ,61 ,25 ,000 / - (Rs . 101 ,25 ,000 / - x 129

p lo t s )

To ta l Rs . 237 ,03 ,75 ,000 / -

Average cost of consideration Rs. 11.18 crores per acre

(Total considerat ion of Rs. 237.03 crores divided by 21.2 acres of land)

108

It is claimed on behalf of the assessee that JDA has been cancelled and the developer has been al lowed to retain the property which has also been conveyed to developer through two sale deeds. If that is so then what would happen to the balance considerat ion because in such situation the assessee has received considerat ion of only about Rs. 5 croress per acre because the assessee has registered land measuring 3.08 acres for Rs. 15.48 crores through f irst conveyance deed, whereas consideration as per original agreement was Rs. 11.18 crores per acre as shown above. The dif ference is because of non receipt of considerat ion in kind and the assessee has not shown any evidence that it has made the claim for receipt of balance considerat ion. This leads to the conclusion that there was no cancellation of the JDA.

106 Some arguments were made by both the parties that if the contract is f inally 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 f i le revised return or make a petit ion u/s 264 and some rel ief 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 f ind 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 wil l happen if during the year fol lowing the one in which the deemed transfer took place, the proposed venture col lapses for reasons such as refusal of permissions, the developer facing f inancial crunch etc. By that t ime, the owner would have received only a part of the agreed consideration, but he is obliged to f i le the return showing the entire capital gain based on the full sale price whether or not received during the year of deemed transfer. In such an eventuality, hardship may be caused to the owner who would have paid full tax. No doubt, such a situation could be avoided if the contention of the applicant is accepted. On

109

deep considerat ion, however, we f ind that the construct ion of the relevant provision should not be control led by giving undue importance to such hypothetical situations. Normally, the owner executes a Power of Attorney or does similar act to left the transferee take possession only after the basic permissions are granted and he is satisf ied about the abil ity of transferee/developer to fulf i l the contract. In spite of that, if such rate situat ions take place, the owner/transferor wil l not be without remedy. He can f i le a revised return and make out a case for exclusion or reduction of income. However, if the time-l imit for f i l ing a revised return expires, the dif f iculty wil l arise. It is for Parl iament or the Central Government to provide a remedy to the assessee in such cases. Moreover, the other side of the picture as depicted in paragraph 27 (supra) should also be kept in view."

Here the comments of Shri Rajaratnam quoted at para 5164 above are also relevant again:

" " I t i s ha rd on the owners when requ i red to pay tax , when hand ing ove r t he possess ion fo r purposes o f cons t ruc t ion w i thou t be ing ab le to en joy the cons t ruc t ion , wh ich i s ye t to commerce o r in the p rocess o f cons t ruc t ion be ing pu t up by the deve lope r , bu t the so lu t ion l ies in s ta tu to ry c la r i f i ca t ion in such cases . I n v iew o f the inc reas ing sca le o f such deve lopment ag reemen ts to so lve the hous ing p rob lem in t he c i t ies , a s ta tu to ry c la r i f i ca t ion o r c i r cu la r i s ove rdue . "

We may mention here that no doubt sometimes an assessee

may be put in a dif f icult situation and as mentioned by Hon'ble Authority in case of Jasbir Singh Sarkaria (supra) as well as Ld. Author Shri Rajaratnam it is for the legislature to take corrective steps. However, it may not be out of place that if considering the dif f iculty the interpretation given by the ld. counsel of the assessee is accepted then the Revenue may not be able to tax such assessees when these dif f icult ies are removed. For example in the present case if tomorrow when al l 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.

110

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 diff icult ies 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 wil l not make any dif ference because total considerat ion 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 the eyes of law special Power of Attorney could not have been revoked. In view of this analysis, we are of the opinion that either the JDA has not been cancelled or in any case the same cannot be considered for determining the taxation of capital gain. Accordingly this contention is rejected.

108 The next con ten t ion o f the assessee is tha t even i f the who le cons ide ra t ion has to be taxed then va lue o f the f la ts cannot be taken a t Rs . 4 ,500 / - per sq . f ee t . I t i s a l so po in ted ou t tha t in v iew o f the agreement be tween the HASH & THDC cons ide ra t ion has been shown a t Rs . 2 ,000 / - pe r sq . f ee t f o r 126 f l a ts whe reas i t i s Rs . 4 ,500 / - pe r sq. f ee t f o r th ree f la ts . W e f ind no fo rce in these subm iss ions . The assessee has f i led a long wi th the wr i t ten submiss ions copy o f the addendum o f agreemen t be tween THDC and HASH by Jo in t Deve lope r (a t page 265 & 266 ) and th is i ssue i s d i scussed in c lause 5 wh ich i s as unde r : -

"5 . C lauses 4 .1 , 4 .2 , 4 .3 and 4 .4 on the page nos . 18 and 19 o f the Agreement sha l l s tand amended, mod i f ied and subs t i tu ted by the fo l lowing: - 4 .1 I t i s exp ress ly agreed and unde rs tood by and be tween the Pa r t ies he re to

(a ) i n the ra t io o f 72 ,28 be tween THDC and HASH in case Gross Sa les P roceeds does no t exceed Rs . 1272 c ro res ;

(b ) in the ra t i o o f 70 : 30 be tween THDC and HASH in

111

case Gross Sa les P roceeds i s equa l to Rs . 1272 c ro res ;

( c ) i n add i t ion (b ) , in the ra t io o f 60 : 40 be tween THDC and HASH in respec t o f g ross sa les P roceeds i n excess o f Rs . 1272 c ro res .

" I t i s ag reed tha t t he min imum gua ran teed amoun t f rom the Gross Sa les P roceeds fo r THDC and HASH i s Rs . 890 .40 c ro res and Rs. 225 .76 c ro res respec t ive l y . The min imum gua ran teed amount o f Rs . 225 .76 c ro res to HASH inc ludes Rs . 58 .88 c ro res tha t sha l l be expended by THDC towards cons t ruc t ion o f 126 f la t s equ iva len t to 2 ,83 ,500 sq . f t , , wh ich f l a ts a re to be a l lo t ted in the names o f the members o f the Soc ie t y o r o the rw ise , as the case may be , ca lcu la ted as Rs. 2000 pe r sq . f t . fo r the a rea 2 ,83 ,500 sq . f t . and the 72% sha re o f 3 f la t s o f 2250 Sq . f t . to be pu rchased by HASH @ Rs , 4500 / - pe r sq . f t . Shou ld the app l i ca t ion o f t he ra t io s t ipu la ted in (a ) above resu l t i n HASH be ing en t i t led to a sum g rea te r than the min imum guaran teed amount and THDC be ing en t i t led to a sum less than the min imum guaran teed amount , THDC sha l l -be en t i t led to the en t i t l ement o f HASH wh ich i s in excess o f i t s min imum, gua ran teed amount un t i l THDC ach ieves i t s min imum gua ran teed amount . -The same i s i l lus t ra ted in Annexu re I he re to ."

109 The above c lea r ly shows tha t HASH was en t i t led to to ta l p roceeds o f Rs . 225 .76 c ro res ou t o f to ta l p roceeds o f the p ro jec t wh ich we re agreed to be sha red by THDC and HASH bu t the po r t ion o f HASH inc ludes a sum o f Rs . 58 .88 c ro res wh ich was requ i red to be spen t towards cons t ruc t ion o f 126 f la t s equ iva len t to 283500 squa re feet a rea wh ich we re to be a l lo t ted to the members o f the soc ie t y . Thus , i t i s c lea r t ha t f i gu re o f Rs . 2 ,000 / - per sq . f ee t rep resen ts on ly the cos t o f cons t ruc t ions to be incur red by THDC wh ich was deb i ted to the accoun t o f HASH. Fu r ther , HASH has agreed to pu rchase th ree F la ts @ 4 ,500 / - pe r squa re fee t . Some news repo r t s we re quo ted be fo re us in one o f the cases to show tha t va r ious b rokers had i ssued va r ious adve r t i sements fo r sa le o f these f la t s and these f la t s were u l t imate ly t o be so ld a t Rs . 7 ,000 / - to Rs . 10 ,000 / - per squa re fee t . Th is a lso becomes c lea r f rom the addendum o f agreemen t in te rms o f to ta l p roceeds o f 1272 c ro res . In any case i f t he cos t o f cons t ruc t ion i s Rs . 2 ,000 / - , then cos t o f land wh ich has been pa id to the soc ie ty i s a lso to be added to t he cos t o f the f la t because th i s po r t ion o f

112

cons ide ra t ion in any case was rece ived o r t o be rece ived la te r by the soc ie t y in cash . Cons ider ing the p resen t marke t va lue o f t he f la ts in and a round Chand igarh a rea wh ich i s Rs . 4 ,000 / - to 12 ,000 / - pe r squa re fee t we a re o f the op in ion tha t va lue o f the f la t a t Rs . 4 ,500 / - pe r squa re fee t i s abso lu te l y f a i r . In any case M/s HASH has agreed to purchase the f la t s a t th is ra te f rom M/s THDC. I t may be no ted as po in ted ou t by the ld . DR fo r the revenue some o f the News repo r t c l ipp ings f i led by va r ious assessees c lea r l y shows tha t f la t s we re booked in the

"Ta ta Camleo t " ( th i s was the name wh ich was g iven to t he P ro jec t wh ich was to be deve loped on the land o f two soc ie t ies ) i n the P re Launch o f fe r in the range o f Rs . 7500 to 8000 per sqf t . I t i s a common knowledge tha t ra tes in P re Launch o f fe r a re lower than the ra tes when book ings open fo r the Pub l i c . Cons ide r ing these fac ts we a re o f t he op in ion tha t Assess ing Of f ice r has es t imated the va lue o f the f la t s on most reasonab le bas is . In v iew o f these obse rva t ions th is con ten t ion is re jec ted .

110 The Ld . Counse l f o r the assessee had made some submiss ions on the issue o f deduct ion u /s 54F. He has po in ted ou t tha t th is i ssue has been re jec ted wrong ly by CIT (A ) . Howeve r , ca re fu l l y pe rusa l o f the g rounds o f appea l show tha t no g round in respec t o f deduc t ion u / s 54F has been ra ised be fo re us and , the re fo re , we dec l i ne to ad jud ica te th is i ssue and a l l the a rgumen ts made in th i s beha l f a re re jec ted . Though re fe rence was made to g round No. 2 .3 in th is rega rd . The pe rusa l o f g rounds No . 2 .3 wou ld show tha t re fe rence has been made on ly to Sec t ion 54 and Sec t ion 54EC. Sec t ion 54 dea ls w i th deduc t ion in case the assessee be ing an ind iv idua l o r HUF, t rans fe rs the res iden t ia l house and in case be fo re us, the assessee has t rans fe r red the p lo t . There fo re , i t canno t be sa id tha t deduct ion u /s 54F and 54 i s same . S ince no g round has been ra i sed fo r deduct ion u /s 54F, we re jec t th is con ten t ion .

113

111 Ground No. 3 - The ld . counse l o f the assessee submi t ted tha t w i thou t p re jud ice t o the issues ra ised in g rounds No. 2 , 5 & 6 , cap i ta l ga in shou ld have been taxed in the hands o f the Soc ie t y wh ich is lega l owner o f the land .

112 On the o the r hand , the ld . DR fo r the revenue subm i t ted tha t the Soc ie t y was ac t ing on beha l f o f t he Members and the Members have sur rende red the i r r igh ts in f avou r o f the Soc ie t y so as to enab le the Soc ie t y to en te r in to JDA fo r t rans fe r o f p rope r t y i n f avou r o f the deve lope r i .e . THDC/HASH. The re fo re , cap i ta l asse t has been so ld by the Members . Fu r the r the cons ide ra t ion was to be rece ived f rom Hash by the ind iv idua l p lo t owners .

113 W e have hea rd the r i va l submiss ions ca re fu l l y and f ind tha t the Soc ie t y was fo rmed by va r ious Members fo r the pu rpose o f pu rchase o f land and to deve lop the same and they a l lo t ted the p lo ts to the Members . The Soc ie t y pu rchased 21 .2 acres o f land and u l t imate ly p lo ts in t he s i zes o f 500sqyd and 1000sqyd were a l lo t ted to va r ious Members . W hen the p roposa l f o r deve lopment o f p roper t y came i t was reso lved in the Genera l Body Meet ing o f the Soc ie t y t ha t the Members wou ld su r rende r the i r r i gh ts in f avou r o f the Soc ie t y so tha t the Soc ie t y can en te r i n to the JDA. Thus i t i s c lea r tha t the Soc ie t y has en te red in to JDA on beha l f o f the Members . I t is the members who a re own ing the p lo ts and the Soc ie t y was on ly a fac i l i ta to r . I t becomes c lea r f rom the JDA tha t payment f o r cons ide ra t ion was to be made to an ind iv idua l p lo t ho lde r and in f ac t cons ide ra t ion was ment ioned in te rms o f pe r Member . Each Member ho ld ing 500sqyd p lo t was to rece ive a sum o f Rs . 82 ,50 ,000 / - and one fu l l y f u rn i shed f la t measur ing 2250 sqf t and the Members ho ld ing 1000sqyd p lo t we re to rece ive moneta ry cons ide ra t ion o f Rs . 1 .65 c ro res p lus two f la t s measu r ing 2250 sqf t . In f ac t the payment o f cheques i s made by Hash by i ssu ing cheques in the name o f i nd iv idua l Member and no t the Soc ie t y . Th is f ac t s tands admi t ted because assessee has f i led a re tu rn dec la r ing cap i ta l ga in aga ins t pa r t money rece ived aga ins t h is p lo t . Thus i t becomes

114

c lea r tha t i t i s the ind iv idua l member who a re l iab le to tax in respec t o f t rans fe r to p lo ts and the Soc ie t y be ing on ly a fac i l i ta to r o r Pos t o f f i ce . Some more de ta i ls have been d iscussed in th is respec t wh i le ad jud ica t ing the appea l o f Pun jab i Coop House Bu i ld ing Soc ie t y L td . i n ITA No. 310 /Chd/2012 and 556 /Chd/2012 wh ich have been ad jud ica ted l i t t le l a te r i n th is o rde r i t se l f . Acco rd ing ly we f ind no fo rce in the submiss ions and th is g round is re jec ted .

114 Ground No. 7 - The i ssue rega rd ing levy o f in te res t u /s 234B and wi thdrawa l u /s 244A (3 ) i s o f consequent ia l na tu re and the Assess ing Of f ice r i s d i rec ted to cha rge in te res t u / s 234B o f the Ac t in acco rdance wi th law. W i thdrawa l o f in te res t u / s 244A (3 ) shou ld a lso be done in accordance wi th l aw.

115 In the result, appeal of the assessee is partly al lowed. ` ITA No. 276/Chd/2012 in case of ACIT V. Satpal Gosain

116 Th is appea l i s d i rec ted aga ins t the o rde r passed by the ld . CIT (A ) - I , Ludh iana da ted 21 .12 .2011 . 117 . In th is appea l the Revenue has ra ised the fo l lowing g rounds:

"1 Tha t the ld . CIT (A ) has e r red in law and on fac t s in de le t ing the add i t ion o f Rs . 3 ,55 ,21 ,070 / - made on accoun t o f cap i ta l ga ins ignor ing the p r inc ip le la id down in the case o f Chatu rbhu j Dwar ikadas Kapad ia V . CIT repo r ted a t 260 ITR 491 (Bom) .

2 Tha t the ld . CIT (A ) has e r red in law and on fac t s i nno t pass ing an o rder i n w2 r i t ing and the re fo re , no t comply ing w i th the Sub Ru le (2 ) o f Ru le 46A wh i le admi t t ing the add i t iona l ev idence igno r ing the dec is ion o f the Ju r i sd ic t iona l Bench o f t he Hon 'b le ITAT, Chand iga rh in the case o f Smt . Su r inde r Kau r da ted 29 .7 .2011 passed in ITA No . 596 /Chd/2011.

3 Tha t the o rder o f the ld . C IT (A ) be se t as ide and tha t o f Assess ing Of f ice r be res to red . "

115

118 The ld . DR fo r the revenue subm i t ted tha t s ince the i ssue invo lved is same as in the case o f l ead case o f Sh r i Cha ran j i t S ingh A twa l and there fo re same arguments may be adopted in th i s case .

119 On the o the r hand , the ld . counse l o f the assessee , Sh r i A jay Vohra a l so submi t ted tha t t he a rguments made by h im in case o f Sh r i Cha ran j i t S ingh A twa l may be adopted in th i s case a lso .

120 Ground No. 1 - In th is case the assessee i s the owner o f 1000 sqy p lo t in Pun jab i Coop Hous ing Bu i ld ing Soc ie t y wh ich has been t rans fer red by the Soc ie t y th rough a JDA to the deve lope r i .e . THDC/HASH. A l l t he fac t s o f the case a re iden t i ca l w i th t he fac t s o f the case o f Sh r i Cha ran j i t S ingh A twa l in ITA No. 448 /Chd /2011. The re fo re , f o l lowing our dec is ion in Pa ra No. 27 to 110 , we dec ide th is i ssue aga ins t the assessee .

121 Ground No. 2 - A f te r hea r ing bo th the pa r t ies we f ind tha t du r ing assessment p roceed ings ce r ta in documen ts we re f i led by way o f add i t iona l ev idence wh ich have been admi t ted by the ld . CIT (A ) and re l ied on fo r reach ing h is conc lus ion . Howeve r , there i s no f ind ing in the o rder why such ev idence has been adm i t ted . The ob jec t ion o f t he revenue is tha t as pe r Ru le 46A(2 ) such add i t i ona l ev idence cou ld no t be adm i t ted w i thou t record ing the reason . The ld . counse l o f the assessee had submi t ted tha t a l l the ev idences were gene ra ted a f te r the assessmen t was ove r and the re fo re , i t was necessa ry to b r ing the same to the no t i ce o f f i r s t appe l la te au tho r i t y and there fo re , the re shou ld no t be any ob jec t ion i f the same have been adm i t ted .

122 A f te r cons ide r ing the r i va l submiss ions we f ind tha t Ru le 46A(2 ) reads as unde r :

"46A(2 ) No ev idence sha l l be admi t ted unde r sub - ru le (1 ) un less the (DC(A) ) (o r as the case may be the Ld . Commiss ione r (Appea ls ) reco rds in w r i t ing the reasons fo r i t s admiss ion .

116

The above c lea r l y shows tha t add i t i ona l ev idence cou ld no t be adm i t ted un less and un t i l the reasons fo r adm iss ion o f t he same a re reco rded in wr i t i ng. Howeve r , impugned o rde r shows tha t no reasons have been reco rded by the ld . C IT (A) in h i s o rde r f o r admiss ion o f add i t iona l ev idence . In the absence o f such an o rde r , adm iss ion o f add i t iona l ev idence i s aga ins t Ru le 46A(2 ) o f the Ac t and the re fo re , th i s g round i s dec ided in f avou r o f the Revenue .

123 W e may no te tha t we have adm i t ted th i s add i t iona l ev idence in case o f Shr i Cha ran j i t S ingh A twa l v ide Pa ra No. 8 & 9 because i t was found tha t add i t iona l ev idence came in to ex i s tence a f te r the comple t ion o f assessment p roceed ings , there fo re , in th is case g round o f revenue aga ins t t he adm iss ion o f add i t iona l ev idence , has been a l lowed on techn ica l bas is bu t add i t iona l ev idence s tands cons idered in case o f Sh r i Cha ran j i t S ingh A twa l and tha t dec is ion has been fo l lowed in the case o f th i s assessee . The re fo re , no ha rm has been caused to the assessee desp i te the fac t tha t adm iss ion o f add i t iona l ev idence has been he ld to be no t va l id .

124 Appea l o f the Revenue in ITA No. 276 /Chd/2012 i s a l lowed.

ITA No. 986 /Chd/2011 - Avta r S ingh Brar V . ITO

125 This is an appeal f i led by the assessee against the order dated 18/08/2011 of CIT (Appeals) Chandigarh.

131 In this appeal various grounds have been raised but disputes raised can be summarized as under:

(i) That despite the issue of notice u/s 148, the assessment order has been framed u/s 143(3) of the Act.

(i i) Confirmation of action of the Assessing Off icer to charge capital gain tax on full value of consideration against the sale of plot through JDA.

(i i i ) The ld. CIT(A) erred in conforming the action of the Assessing Off icer in reject ing the revised return.

117

126 Since the issues raised in this appeal were covered by other group of cases and particularly the lead case in case of Shri Charanjit Singh Atwal in ITA No. 448/Chd/2011 and therefore, we proceeded to hear this appeal on ex-parte basis because in this group of cases it was clarif ied that there appeals will be heard on 1^st

/2^ndMay, 2013 but despite that none appeared on behalf of the assessee.

127 The ld. DR for the revenue was heard.

128 After considering the submissions of the ld. DR for the revenue and relevant material on record, we f ind that in this case assessment order clearly mentions that original ly the return was processed u/s 143(1) and later on a notice u/s 148 was issued.

129 Notice u/s 148 was issued because the Assessing Off icer got the information from the enquiries conducted by the Department in the case of Group Housing Societies that the Society consist ing of 95 members of present and Ex.MLAs of Punajb State Legislative Assembly who had formed a Society known as Punjabi Coop House Building Society Ltd. and that Society has transferred 21.2 acres of land to developers i.e. THDC/HASH.

130 Regarding f irst issue since original return was processed u/s 143(1) the Assessing Off icer could have issued a notice u/s 148 in view of the fresh material/ information received in view of the decision of Hon'ble Apex Court in case of ACIT V. Rajesh Jhaveri Stock Broker Pvt Ltd., 291 ITR 500. As far as the issue regarding passing of order u/s 143(3) of the Act is concerned, the same has been adjudicated by the ld. CIT(A) vide para 8.1 of impugned order which is as under:

" The contention of the appellant that if notice u/s 148 has been issued, assessment could not be made u/s 143(3) is not correct, since assessments under Income Tax Act, 1961 are made only u/s 143(3) or u/s 144. Further, wrong mentioning of the assessment year in the assessment order is an inadvertent mistake and assessment cannot be held invalid merely for this reason in view of provisions of sect ion 292B of the Income Tax Act, 1961. Moreover, the Assessing Officer has already

118

corrected the assessment year in his records, a copy of which has been sent to the appellant also."

131 The ld. CIT(A) has already given the reasons for rejecting this issue and we f ind nothing wrong with the same and accordingly this issue is decided against the assessee.

132 Second issue has been adjudicated in detai l in the case of Shri Charanjit Singh Atwal, ITA No. 448/Chd/2011 in Para No. 27 to 110 and following the same we decide the issue against the assessee.

133 Third issue has been adjudicated by the ld. CIT(A) vide Para

7.1 which is as under:

" During the course of appellate proceedings, the Ld. Counsel for the appellant has fi led a copy of revised return of income for A.Y. 2008-09 and not A.Y. 2007-08, the year for which notice u/s 148 was issued. As the return had been revised for A.Y. 2008-09 and not A.Y. 2007-08, the Assessing Officer was right in not considering the revised return fi led by the appellant for A.Y. 2008-09. Ground of appeal No. 5 is dismissed."

134 We f ind no reason to deviate from the reasoning given by the ld. CIT(A) because there is no evidence to show that return for Assessment year 2007-08 was revised. Therefore, this issue is also decided against the assessee.

135 In the result, the appeal of the assessee is dismissed.

ITA No. 993/Chd/2011 - Smt. Surjit Kaur V. ITO

136 Th is appea l i s d i rec ted aga ins t the o rde r o f ld . C IT (A) ,Chand iga rh da ted 1 .8 .2011 .

137 In th is appea l the assessee has ra ised va r ious g rounds bu t the ld . counse l o f the assessee subm i t ted tha t in th is case the assessee was a Member o f "The Defence Se rv i ces Coop House Bu i ld ing Soc ie t y L td . wh ich was the owner o f 27 .3 ac res o f land . Th is l and was t rans fe r red to deve lope r i .e .

119

THDC/HASH as in case o f Pun jab i coop House Bu i ld ing Soc ie t y . In th is case the cons ide ra t ion fo r ind iv idua l p lo t ho lde r o f 500sqy was Rs. 80 lakhs p lus one fu rn i shed f la t measur ing 2250sqf t . Other f ac t s o f the case a re iden t i ca l t o the case o f Sh r i Cha ran j i t S ingh A twa l , ITA No. 448 /Chd /2011. The ld . counse l o f the assessee subm i t t ed tha t a l l the a rgumen ts made in case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra ) may be cons ide red excep t tha t in th is case the no t ice fo r cance l la t ion o f the JDA was i ssued by The Defence Se rv i ces Coop House Bu i ld ing Soc ie t y L td . ( copy o f wh ich is p laced a t page 34 to 38 o f the pape r book ) .

138 On the o the r hand , the ld . DR fo r the revenue adop ted h is a rguments as in case o f Shr i Cha ran j i t S ingh A twa l (supra) .

139 A f te r cons ide r ing the r i va l submiss ions we f i nd tha t s ince the i ssue regard ing taxab i l i t y o f cap i ta l ga in aga ins t the t rans fe r o f p lo ts to deve lope r , i s iden t i ca l to the i ssues in case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra ) and on ly d i f f e rence i s t ha t he re the assessee i s a Member o f The Defence Se rv i ces Coop House Bu i ld ing Soc ie t y L td . . However , we fu r the r f ind tha t s im i la r Jo in t Deve lopment Agreemen t has been en te red in to by The Defence Se rv i ces Coop House Bu i ld ing Soc ie ty L td . w i th the same deve lope r i .e . THDC/HASH. The i ssue rega rd ing cance l la t ion o f JDA has been dea l t in de ta i l in case o f Sh r i Cha ran j i t S ingh A twa l and the re fo re , the re i s no need to f u r the r exam ine th is i ssue . The re fo re , f o l lowing the dec is ion in case o f Sh r i Cha ran j i t S ingh A twa l (sup ra ) , we dec ide the i ssue aga ins t the assessee .

140 In the resu l t , appea l o f the assessee i s d ism issed .

ITA No. 1064/Chd/2011 - Shri Sucha Singh Langah V DCIT

141 Th is appea l i s d i rec ted aga ins t the o rde r o f ld . C IT (A) ,Chand iga rh da ted 30 .8 .2011 .

120

142 In th is appea l t he assessee has ra ised var ious g rounds o f appea l bu t a t the t ime o f hea r ing the ld . counse l o f the assessee subm i t ted tha t g rounds No. 1 to 3 dea ls w i th reopen ing o f the assessmen t wh ich a re no t p ressed , the re fo re , these g rounds a re d i smissed as no t p ressed .

143 Grounds No. 4 to 11 con ta in the issue rega rd ing t rans fe r o f 1000 sqyd p lo t th rough the Soc ie t y to the deve loper .

144 Bo th the par t i es adop ted iden t ica l a rguments wh ich we re g i ven in the case o f Sh r i Cha ran j i t S ingh A twa l (sup ra ) .

145 A f te r cons ide r ing the r i va l submiss ions we f ind tha t i den t i ca l i ssue has been dea l t in case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra ) and fo l l owing the dec is ion in tha t case we dec ide th i s i ssue aga ins t the assessee .

146 Ground No . 12 rega rd ing deduct ion u / s 54 & 54F was no t p ressed and the re fo re , same is d i sm issed .

147 Ground No. 13 i s rega rd ing cha rg ing o f in te res t u / s 234A, 234B and 234C o f the Ac t . Cha rg ing o f in te res t u / s 234A, 234B and 234C is consequent ia l na tu re and the Assess ing Of f ice r i s d i rec ted to charge in te res t as pe r p rov is ions o f the Ac t .

148 In the resu l t , appea l o f the assessee i s d ism issed . ^ITA No.^1070/Chd/2^{011 - Shri} Madan Moha^{n Mittal V ACIT}

1 49 Th is appea l i s d i rec ted aga ins t the o rde r o f ld . C IT (A) , Chand iga rh da ted 23 .8 .2011 .

1 50 In th is appea l t he assessee has ra ised var ious g rounds o f appea l bu t a t the t ime o f hea r ing the ld . counse l o f the assessee subm i t ted tha t g rounds No. 1 to 3 dea ls w i th reopen ing o f the assessmen t wh ich a re no t p ressed , the re fo re , these g rounds a re d i smissed as no t p ressed .

121

151 Grounds No. 4 to 12 con ta in the issue rega rd ing t rans fe r o f 500sqyd p lo t th rough the Soc ie ty t o the deve loper . Bo th the pa r t ies adop ted iden t i ca l a rguments wh ich were g i ven in case o f Sh r i Cha ran j i t S ingh A twa l (sup ra ) .

152 A f te r cons ide r ing the r i va l submiss ions we f ind tha t i den t i ca l i ssue has been dea l t in case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra ) and fo l l owing the dec is ion in tha t case we dec ide th i s i ssue aga ins t the assessee .

153 Ground No. 13 reads as unde r :

"Tha t the ld . C IT (A ) has fu r the r e r red in upho ld ing the non a l lowance o f bene f i t p rov ided u /s 54 /54F o f the Ac t and c la imed on the amoun t rece ived wh ich i s a rb i t ra ry and un jus t i f ied . "

154 The ld . counse l o f the assessee adop ted the a rguments made in case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra) i n respec t o f deduct ion u /s 54F o f the Ac t .

155 On the o the r hand , the ld . DR fo r the revenue suppo r ted the o rde r o f the ld . C IT (A ) .

156 A f te r cons ider ing the r i va l submiss ions and on ve r i f i ca t ion o f record we f ind tha t t h i s i ssue was ra i sed be fo re the ld . C IT (A) th rough g round No. 11 wh ich reads as unde r :

"Tha t the Assess ing Of f i ce r has fu r ther e r red in no t g iv ing the bene f i t p rov ided u /s 54 o f t he Ac t and c la imed on the amoun t rece ived wh ich i s a rb i t ra ry and un jus t i f ied . "

From above i t becomes c lea r tha t be fo re the ld . CIT (A ) on ly i ssue rega rd ing deduct ion u /s 54 was taken wh ich has been ad jud ica ted by the ld . CIT (A ) v ide Pa ra 7 .1 wh ich reads as unde r :

"7 .1 The appe l lan t has a l so a rgued tha t he was en t i t led fo r deduc t ion u /s 54 . Th is a rgumen t o f the appe l lan t i s no t co r rec t because deduct ion u /s54 is ava i lab le on ly i f cap i ta l ga in a r i ses f rom t rans fe r o f a res iden t ia l house . As the appe l lan t has no t so ld / t rans fe r red any res iden t ia l

122

house , the appe l lan t i s no t en t i t led to deduct ion u / s 54 o f the Ac t . G round o f appea l No . 11 is d ismissed . "

157 F rom the above g round No. 11 ra ised be fo re the ld . C IT (A) i t becomes c lea r tha t the issue regard ing deduct ion u /s 54F was no t ra ised be fo re the ld . C IT (A ) and the re fo re , the same has no t been r igh t l y ad jud ica ted by the ld . CIT (A ) . S ince th i s i ssue was no t ra i sed be fo re the ld . C IT (A ) , the re fo re , the same is no t emanat ing f rom the impugned o rde r and canno t be ad jud ica ted by us .

158 Sect ion 54 o f the Ac t c lea r l y p rov ides fo r deduct ion in a case where the assessee be ing an ind iv idua l o r HUF, t rans fe rs l ong te rm cap i ta l asse t in the na tu re o f res iden t ia l house . S ince in the case be fo re us , the asse t t rans fe r red is a p lo t , the re fo re , deduct ion u / s 54 canno t be a l lowed to be en te r ta ined . In v iew o f th is g round No. 13 is re jec ted .

159 Ground No. 14 is rega rd ing cha rg ing o f in te res t u /s 234B o f the Ac t wh ich i s consequen t ia l na tu re . The Assess ing Of f ice r i s d i rec ted to dec ide the issue in acco rdance wi th law.

160 In the resu l t , appea l o f the assessee i s d ism issed .

ITA No. 1071 /Chd/2011 - Shr i Sur inder S ingh V DCIT

161 Th is appea l i s d i rec ted aga ins t the o rde r o f ld . C IT (A) , Chand iga rh da ted 5 .8 .2011 .

162 In th is appea l t he assessee has ra ised var ious g rounds o f appea l bu t a t the t ime o f hea r ing the ld . counse l o f the assessee subm i t ted tha t g rounds No. 1 to 3 dea ls w i th reopen ing o f the assessmen t wh ich a re no t p ressed , the re fo re , these g rounds a re d i smissed as no t p ressed .

163 Grounds No. 4 t o 12 con ta in the issue rega rd ing levy o f cap i ta l ga in tax fo r t rans fe r o f p lo t th rough the Soc ie ty i n t e rms o f JDA and on ly d i f f e rence i s tha t the assessee is a Member o f

123

Defence Se rv ices Coop House Bu i ld ing Soc ie t y L td . to the deve lope r .

164 Bo th the par t i es adop ted iden t ica l a rguments wh ich we re g i ven in the case o f Sh r i Cha ran j i t S ingh A twa l (sup ra ) .

165 A f te r cons ide r ing the r i va l submiss ions we f ind tha t i den t i ca l i ssue has been dea l t in case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra ) and fo l l owing the dec is ion in tha t case we dec ide th i s i ssue aga ins t the assessee .

166 Ground No. 13 reads as under:

" That the Ld. Commissioner of Income Tax (Appeals) has further erred in upholding the non allowance of benefit provided under section 54/54 F of the Act and claimed on the amount received which is arbitrary and unjusti f ied."

167 After hearing both parties we f ind this issue has been adjudicated by Ld. CIT (Appeals) vide para 6.13 to 6.14, which are as under:-

"6.13 The Ld. Counsel for the appellant has also argued that the appellant is entit led to deduction u/s 54F to the extent of investment in the new asset, as reinvestment in f lat. For the sake of convenience, provisions of section 54 F of the Act are reproduced below:

" 54F. Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house.

(1) Subject to the provisions of sub-section (4), where, in the case of an appellant being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this sect ion referred to as the original asset), and the appellant has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter

124

in this sect ion referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this sect ion, that is to say,-

(a) if the cost of the asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under sect ion 45;

(b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proport ion as the cost of the new asset bears to the net consideration, shall not be charged under section 45;

Provided that nothing contained in this sub- section shall apply where-

a) the appellant- i ) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or ii ) purchase any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or

iii )constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and

b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head "Income from house property".

Explanation - For the purposes of this sect ion,

"net consideration", in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.

125

6.14 Sub section (1) of section 54 F al lows exemption of long term capital gains from tax, if the net consideration on transfer of long term capital asset is invested in the purchase of a new residential house within a period of one year before or two years after or in construction of a new residential house within a period of 3 years from the date of the transfer of the long term capital asset. In the instant case, the construction of the flat, which the appellant is to be given, has not yet started and so it cannot be said that the amount has been invested in a new residential house for al lowing benefit u/s 54 F of the Act. Hence, the appellant is not eligible for deduction u/s 54 F "

168 Both parties adopted similar arguments before us as in case of Shri Charanji t Singh Atwal.

169 After considering the rival submissions, we f ind Ld. CIT(A) has adjudicated the issue correctly and has given the reason for rejection of deduction under section 54 / 54 F. Therefore, we f ind nothing wrong with the order of Ld. CIT(A) and confirm the same. Hence this ground is rejected.

170 Ground No. 14 is rega rd ing cha rg ing o f in te res t u /s 234B o f the Ac t .

171 The Assess ing Of f i ce r i s d i rec ted to dec ide the i ssue o f cha rg ing o f in te res t u /s 234B o f the Ac t , in accordance wi th l aw.

172 In the resu l t , appea l o f the assessee i s d ism issed .

ITA No. 1072 /Chd/2011 - Mrs . Gurdev Kaur V ITO

173 Th is appea l i s d i rec ted aga ins t the o rder o f l d . CIT (A ) , Chand iga rh da ted 1 .8 .2011 .

174 In th is appea l t he assessee has ra ised var ious g rounds o f appea l bu t a t the t ime o f hea r ing the ld . counse l o f the assessee subm i t ted tha t g rounds No. 1 to 3 dea ls w i th reopen ing o f the assessmen t wh ich a re no t p ressed , the re fo re , these g rounds a re d i smissed as no t p ressed .

126

175 Grounds No. 4 t o 12 con ta in the issue rega rd ing levy o f cap i ta l ga in tax fo r t rans fe r o f p lo t th rough the Soc ie ty i n t e rms o f JDA and on ly d i f f e rence i s tha t the assessee is a Member o f De fence Se rv ices Coop House Bu i ld ing Soc ie t y L td . to the deve lope r .

176 Bo th the par t i es adop ted iden t ica l a rguments wh ich we re g i ven in the case o f Sh r i Cha ran j i t S ingh A twa l (sup ra ) .

177 A f te r cons ide r ing the r i va l submiss ions we f ind tha t i den t i ca l i ssue has been dea l t in case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra ) and fo l l owing the dec is ion in tha t case we dec ide th i s i ssue aga ins t the assessee .

178 Ground No. 13 reads as unde r :

"Tha t the ld . CIT(A ) has fu r the r e r red in upho ld ing the non a l lowance o f bene f i t p rov ided u /s 54 /54F o f the Ac t and c la imed on the amount rece ived wh ich i s a rb i t ra ry and un jus t i f ied . "

179 Bo th the pa r t ies we re hea rd . The I ssue has been ad jud ica ted by us in ITA No. 1071 /Chd /2011 wh ich we have dea l t above . I n th is case a lso s im i la r f ind ings have been g iven by ld . C IT (A ) . Fo l lowing ou r ea r l i e r o rde r in ITA No. 1071 /Chd/2011, we d ismiss th is g round .

180 Ground No. 14 is rega rd ing cha rg ing o f in te res t u /s 234B o f the Ac t . The Assess ing Of f ice r i s d i rec ted to dec ide the i ssue o f cha rg ing o f in te res t u / s 234B o f the Ac t , in acco rdance wi th law.

181 In the resu l t , appea l o f the assessee i s d ism issed .

ITA No. 1073 /Chd/2011 - Shr i Tara S ingh Lada l V ACIT

182 Th is appea l i s d i rec ted aga ins t the o rde r o f ld . C IT (A) , Chand iga rh da ted 1 .8 .2011 .

127

183 In th is appea l t he assessee has ra ised var ious g rounds o f appea l bu t a t the t ime o f hea r ing the ld . counse l o f the assessee subm i t ted tha t g rounds No. 1 to 3 dea ls w i th reopen ing o f the assessmen t wh ich a re no t p ressed , the re fo re , these g rounds a re d i smissed as no t p ressed .

184 Grounds No. 4 t o 11 con ta in the issue rega rd ing levy o f cap i ta l ga in tax fo r t rans fe r o f p lo t th rough the Soc ie ty i n t e rms o f JDA.

185 Bo th the par t i es adop ted iden t ica l a rguments wh ich we re g i ven in the case o f Sh r i Cha ran j i t S ingh A twa l (sup ra ) .

186 A f te r cons ide r ing the r i va l submiss ions we f ind tha t i den t i ca l i ssue has been dea l t in case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra ) and fo l l owing the dec is ion in tha t case we dec ide th i s i ssue aga ins t the assessee .

187 Ground No. 12 is rega rd ing cha rg ing o f in te res t u /s 234B o f the Ac t .

188 The Assess ing Of f i ce r i s d i rec ted to dec ide the i ssue o f cha rg ing o f in te res t u /s 234B o f the Ac t , in accordance wi th l aw.

189 In the resu l t , appea l o f the assessee i s d ism issed .

ITA No. 1074 /Chd/2011 - Mrs . Satw inder Kaur Dhal iw al

V ITO

190 Th is appea l i s d i rec ted aga ins t the o rde r o f ld . C IT (A) , Chand iga rh da ted 12 .8 .2011 .

191 In th is appea l t he assessee has ra ised var ious g rounds o f appea l bu t a t the t ime o f hea r ing the ld . counse l o f the assessee subm i t ted tha t g rounds No. 1 to 3 dea ls w i th reopen ing o f the assessmen t wh ich a re no t p ressed , the re fo re , these g rounds a re d i smissed as no t p ressed .

128

192 Grounds No. 4 t o 13 con ta in the issue rega rd ing levy o f cap i ta l ga in tax fo r t rans fe r o f p lo t th rough the Soc ie ty i n t e rms o f JDA.

193 Bo th the par t i es adop ted iden t ica l a rguments wh ich we re g i ven in the case o f Sh r i Cha ran j i t S ingh A twa l (sup ra ) .

194 A f te r cons ide r ing the r i va l submiss ions we f ind tha t i den t i ca l i ssue has been dea l t in case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra ) and fo l l owing the dec is ion in tha t case we dec ide th i s i ssue aga ins t the assessee .

195 Ground No. 14 reads as unde r :

"Tha t the ld . CIT(A ) has fu r the r e r red in upho ld ing the non a l lowance o f bene f i t p rov ided u /s 54 /54F o f the Ac t and c la imed on the amount rece ived wh ich i s a rb i t ra ry and un jus t i f ied . "

196 The ld . counse l o f the assessee adop ted the a rguments made in case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra) i n respec t o f deduct ion u /s 54F o f the Ac t .

197 On the o the r hand , the ld . DR fo r the revenue suppo r ted the o rde r o f the ld . C IT (A ) .

198 A f te r cons ide r ing the r i va l submiss ions and on ve r i f i ca t ion o f reco rd we f ind tha t th is i ssue was ra ised be fo re the ld . CIT (A ) th rough g round No . 11 wh ich reads as unde r :

"Tha t t he ld . CIT(A ) has fu r the r e r red in no t g iv ing the bene f i t p rov ided u /s 54 o f the Ac t and c la imed on the amoun t rece ived wh ich i s a rb i t ra ry and un jus t i f ied . "

199 Th is i ssue has been ad jud ica ted by the ld . C IT (A ) v ide pa ra 5 .14 and we have dea l t w i th s im i la r i ssue in ITA No. 1070 /Chd/2011 above in pa ra No. 153 to 158 . Fo l lowing tha t dec is ion we dec ide th is i ssue aga ins t the assessee .

200 Ground No. 15 - Th is g round is rega rd ing cha rg ing o f i n te res t u / s 234B o f t he Ac t wh ich i s o f consequent ia l na tu re .

129

The Assess ing Of f i ce r i s d i rec ted to cha rge the in te res t as pe r p rov is ions o f law.

201 In the resu l t , appea l o f the assessee i s d ism issed .

ITA No. 1088 /Chd/2011 - Smt. Neena Chaudhary V ITO ITA No. 1089 /Chd/2011 - Smt. Kr ishna Raghu V ITO ITA No. 1090 /Chd/2011 - Sh . Gaurav Raghu V ITO

202 These appea ls a re d i rec ted aga ins t the o rde r o f ld . C IT (A) , Chand igarh da ted 1 .8 .2011 and 26 .8 .2011 .

203 In a l l these th ree appea ls common issues have been ra ised . The i ssues ra i sed a re summar ized as unde r :

( i ) Reopen ing o f the assessmen t

( i i ) Taxab i l i t y o f cap i ta l ga in ( i i i ) Den ia l o f deduc t ion u /s 54F o f the Ac t .

204 The f i r s t i ssue rega rd ing reopen ing o f the assessment ra ised th rough g round No. 1 & 2 was no t p ressed be fo re us and there fo re , the same is dec ided aga ins t the th ree assessees .

205 Second issue : In a l l these cases the assessees a re Members o f De fence Se rv i ces Coop House Bu i ld ing Soc ie t y L td . Smt . Neena Chaudha ry was owner o f a p lo t measu ing 300sqyd and Smt . K r i shna Raghu and Sh r i Gaurav Raghu a re owner o f the p lo t measu r ing 250 sqyd each . In th i s case a l so the p lo ts we re sur rende red by the ind iv idua l members in f avou r o f the Soc ie t y so as the deve lopment agreemen t can be en te red in to w i th the deve lope r i .e . THDC/HASH. The members who were hav ing 300sqyd were to rece ive cash cons ide ra t ion o f Rs . 48 lakhs and fu rn i shed f la t measu r ing 1350 sqf t whereas the members hav ing 250 sqyd p lo t we re to rece ive 34 lakhs in cash and a f la t measu r ing 1350 sqf t . The who le o f cash

130

cons ide ra t ion as we l l as the va lue o f f la t has been sub jec ted to cap i ta l ga in tax .

206 Bo th the pa r t ies submi t ted tha t the a rgumen ts g iven in case o f Shr i Cha ran j i t S ingh Awa l (sup ra) shou ld be adop ted in th i s case a l so .

207 A f te r cons ide r ing the r i va l submiss ions we f ind tha t i den t i ca l i ssue has been dea l t in case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra ) and fo l l owing the dec is ion in tha t case we dec ide th i s i ssue aga ins t the assessee .

208 Th i rd issue is rega rd ing deduct ion u / s 54F. Bo th the pa r t ies made s im i la r a rguments as in the case o f Shr i Cha ran j i t S ingh A twa l (sup ra ) .

209 A f te r cons ider ing the r i va l subm iss ions we f ind tha t a care fu l pe rusa l o f the g rounds ra i sed be fo re the ld . CIT (A ) shows tha t th is i ssue was no t ra i sed be fo re the f i rs t appe l la te au tho r i t y and the same has the re fo re , been no t ad jud ica ted by the ld . CIT (A ) . Thus th i s i ssue i s no t emanat ing f rom the impugned o rde r and acco rd ing ly we re fuse to en te r ta in th is i ssue and th i s g round i s d i smissed .

210 In the resu l t , ITAs No. 1088 , 1089 and 1090/Chd /2011 a re d ism issed .

ITA No. 1092 /Chd/2011 - Sh. Balw inder S ingh Bhunder

V . DCIT

211 Th is appea l i s d i rec ted aga ins t the o rde r o f ld . C IT (A) , Chand iga rh da ted 1 .8 .2011 .

212 In th is appea l t he assessee has ra ised var ious g rounds o f appea l bu t a t the t ime o f hea r ing the ld . counse l o f the assessee subm i t ted tha t g rounds No. 1 to 3 dea ls w i th reopen ing o f the assessmen t wh ich a re no t p ressed , the re fo re , these g rounds a re d i smissed as no t p ressed .

131

213 Grounds No. 4 t o 12 con ta in the issue rega rd ing levy o f cap i ta l ga in tax fo r t rans fe r o f p lo t th rough the Soc ie ty i n t e rms o f JDA.

214 Bo th the par t i es adop ted iden t ica l a rguments wh ich we re g i ven in the case o f Sh r i Cha ran j i t S ingh A twa l (sup ra ) .

215 A f te r cons ide r ing the r i va l submiss ions we f ind tha t i den t i ca l i ssue has been dea l t in case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra ) and fo l l owing the dec is ion in tha t case we dec ide th i s i ssue aga ins t the assessee .

216 Ground No. 13 is rega rd ing cha rg ing o f in te res t u /s 234B o f the Ac t .

217 The Assess ing Of f i ce r i s d i rec ted to dec ide the i ssue o f cha rg ing o f in te res t u /s 234B o f the Ac t , in accordance wi th l aw.

218 In the resu l t , appea l o f the assessee i s d ism issed .

ITA No. 1099 /Chd/2011 - Sh . Ra jesh Singha l V . ITO ITA No. 1100 /Chd/2011 - Smt. Neera j V . ITO

219 These appea ls a re d i rec ted aga ins t the o rde r o f ld . C IT (A) , Chand igarh da ted 1 .8 .2011 .

220 In bo th these appea ls va r ious g rounds have been ra ised bu t a t the t ime o f hear ing the ld . counse l o f the assessee submi t ted tha t on ly two issues a re invo lved wh ich a re as under :

( i ) Taxab i l i t y o f cap i ta l ga in

( i i ) Den ia l o f deduc t ion u /s 54F o f the Ac t

221 F i rs t i ssue - In these cases bo th the assessees a re members o f De fence Se rv i ces Coop House Bu i ld ing Soc ie t y

132

Ltd . and has en te red in to a deve lopmen t agreement w i th the deve lope r i .e . THDC/HASH. The assessee is owner o f 250 sqyd p lo t each and were en t i t led to cash cons ide ra t ion o f Rs . 40 lakhs and fu rn ished f la t o f 1150 sqf t . The who le cash cons ide ra t ion and va lue o f the f la t has been sub jec ted to be cap i ta l ga in tax by the Assess ing Of f ice r and con f i rmed by the ld . CIT (A ) .

222 Bo th the pa r t ies adop ted s im i la r a rguments g i ven in the case o f Shr i Cha ran j i t S ingh A twa l ( supra ) .

223 A f te r cons ide r ing the r i va l submiss ions we f ind tha t i den t i ca l i ssue has been dea l t in case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra ) and fo l l owing the dec is ion in tha t case we dec ide th i s i ssue aga ins t the assessee .

224 Second issue i s rega rd den ia l o f deduct ion u / s 54F o f the Ac t . Bo th the pa r t ies we re hea rd . The Issue has been ad jud ica ted by us in ITA No. 1071 /Chd /2011 wh ich we have dea l t above . I n th is case a lso s im i la r f ind ings have been g iven by ld . C IT (A ) . Fo l lowing ou r ea r l i e r o rde r in ITA No. 1071 /Chd/2011, we d ismiss th is g round .

225 In the resu l t , bo th the appea ls a re d ism issed .

ITA No. 1156/CHD/2011 - Smt. Surjit Kaur Vs. ITO, Mohali

226 This appeal is directed against the order of CIT (Appeals) Chandigarh dated.23.08.2011.

227 This appeal is late by 22 days. The ld. counsel of the assessee submitted that delay is because the assessee is an il l i terate lady and was staying in a vil lage where she fell sick and could not consult a Lawyer and an aff idavit to this effect has been f i led.

228 The CIT-DR left the matter of condonation of delay to the discretion of the Bench.

133

229 After considering the rival submissions we are sat isf ied that the assessee had suff icient reason for not f i l ing the appeal within the limitation period. Considering the fact that the appeal is late for 22 days only we condone the delay.

230 In this appeal various grounds have been raised but the ld. counsel of the assessee submitted that only three disputes are involved in this appeal which are as under:

(i) Reopening of assessment (i i) Taxability of capital gain (i i i ) Denial of deduction u/s 54F of the Act

231 First issue regarding reopening of assessment was not pressed before us, therefore, the same is dismissed as not pressed.

232 Regarding second issue the assessee is a member of Punjabi Coop Housing Building Society Ltd. and was owner of 500 sqyd plot. The Society had entered into an agreement for development with THDC/HASH and was entit led for cash consideration of Rs. 82,50,000/- and furnish a f lat of 2250 sqft. Whole of cash consideration and value of furnish f lat was subjected to capital gain tax by the Assessing Off icer and confirmed by the ld. CIT(A).

233 Both the parties adopted identical arguments which were given in the case of Shri Charanjit Singh Atwal (supra).

234 A f te r cons ide r ing the r i va l submiss ions we f ind tha t i den t i ca l i ssue has been dea l t in case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra ) and fo l l owing the dec is ion in tha t case we dec ide th i s i ssue aga ins t the assessee .

235 Th i rd i ssue i s rega rd ing den ia l o f deduct ion u /s 54F - Bo th the pa r t ies we re hea rd . The I ssue has been ad jud ica ted by us in ITA No. 1071 /Chd/2011 wh ich we have dea l t above . I n th i s case a lso s im i la r f ind ings have been g iven by ld . CIT (A) .

134

Fo l lowing ou r ea r l ie r o rde r in ITA No . 1071 /Chd/2011, we d ism iss th i s g round .

236 In the resu l t , appea l o f the assessee i s d ism issed .

ITA No. 1178/CHD/2011 - Mrs. Bibi Jagir Kaur Vs. ITO, Mohali

237 This appeal is directed against the order of CIT (Appeals) Chandigarh dated.23.08.2011.

238 In this appeal various grounds have been raised but at the time of hearing the ld. counsel of the assessee submitted that mainly two disputes are involved in this appeal which are as under:

(i) Reopening of assessment (i i) Taxability of capital gain

239 First issue - The ld. counsel of the assessee submitted with reference to reasons for reopening that perusal of the reasons would show that the Assessing Off icer has issued notice u/s 148 to bring to tax Rs. 15 lakhs received during Financial Year 2006-07. In the re-assessment he has accepted capital gain of Rs. 15 lakhs but at the same t ime has taxed total capital gain at Rs. 1,62,33,044/-. From this it becomes clear that the Assessing Off icer has not assessed the income for which the reasons were recorded u/s 147 which would mean that there were no reason to believe to show any income had escaped the assessment. This clearly shows that the Assessing Off icer has no reason to believe that income has escaped the assessment. In this regard he rel ied on the following decisions:

CIT V. Atlas Cycle Industries (1989) 180 ITR 319 (PH) CIT V. Gardhara Singh (2008) 173 Taxman 46 (PH)

Ranbaxy Laboratories V CIT (2011) 336 ITR 136 (Delhi) CIT V. Jet Airways (I) Ltd. (2011) 331 ITR 236 (Bom) CIT V. Shri Ram Singh (2008) 306 ITR 243 (Raj)

135

240 On the other hand, the ld. DR for the revenue submitted that f irst of all original return was processed u/s 143(1), therefore, in view of the decision of Hon'ble Supreme Court in case of ACIT V. Rajesh Jhaveri Stock Broker Pvt Ltd. 291 ITR 500 (S.C), notice u/s 148 can be issued particularly because the department has made enquiries in respect of Group Housing Societ ies and information was available that Punjabi Coop Housing Building Society Ltd. has transferred land, therefore, issuance of notice u/s 148 is just if ied. In any case at the time of recording the reasons, it is not necessary to reach a fool proof conclusion that particular item of income has escaped. What is required under the Act is only prima facie reasons. He also supported the order of the ld. CIT(A).

241 We have heard the rival submissions carefully. We do not f ind any force in the submissions of the ld. counsel of the assessee. The ld. CIT(A) has adjudicated this issue vide para 5.2 to 5.4 which are as under:

5.2 "I have considered the facts of the case. It is seen that there was information available with the Assessing Off icer that the appellant, being a member of M/s Punjabi Co-Operative House Building Society Ltd. Mohali (who had 21.2 acres of land in vil lage Kansal and had entered into an agreement with TATA and HASH for sale of land ), had received Rs. 15 Lacs as consideration in this year and was liable to pay capital gain tax on sale of land. The appellant had declared Rs. 15 Lacs only as the sale considerat ion for the purposes of calculation of capital gain on sale of land in the return of income fi led on 11.01.2010 and the correct value of capital gain had not been declared. As the full value of consideration was at least Rs. 1,83,75,000/- (82,50,000/- as monetary considerat ion and Rs. 1,01,25,000/- as cost of furnished f lat of 2250 sq. feet), the Assessing Off icer formed his reasons to believe that some income had escaped assessment and so issued notice u/s 148 of the Act.

5.3 The appellant has also contended that the reasons recorded do not disclose the date on which these were recorded. This issue was raised before the Assessing Officer also and has been duly dealt with in para 25 (page 17) of the assessment order. I have gone through the assessment records and find that notice u/s 148 was issued in this case on 07.12.2009. A notice u/s 148 cannot be issued without recording reasons and the reasons recorded are on fi le and so it cannot be said that the reasons were recorded after issuing the notice. The fact that no date is mentioned on the reasons recorded does not mean that reasons recorded are pre-dated. Moreover, the appellant has not come out with any evidence that the reasons were, in fact, recorded after issue of notice u/s 148. In may also be mentioned that in view of provisions of sect ion 292 B

136

of the Act, the notice issued u/s 148 cannot be held invalid merely on the ground that no date was mentioned on the reasons recorded. Hence, the arguments taken by the appellant in this regard are rejected.

5.4It has been held by Hon'ble Supreme Court in the case of ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (291 ITR 500) that at the stage of issue of notice u/s 148, the only question to be seen is whether there was relevant material, on the basis of which a reasonable person could have formed the requisite belief. Whether material would conclusively prove escapement of income is not the concern at the stage of issue of notice u/s

148. It is so because the formation of belief is within the realm of the subject ive satisfact ion of the Assessing Officer. In view of this judgment of Hon'ble Supreme Court and by respectful ly following the same, the action of the Assessing Officer of reopening the assessment is upheld. Grounds of appeal No. 2 & 3 are dismissed."

242 First of all admittedly the original return was processed u/s 143(1) and further from the enquiries made by the Department information was available that Punjabi Coop Housing Building Society Ltd. has transferred 21.2 acres of land through JDA to the developers i.e. THDC/HASH which means that the Assessing Off icer had reasons to the believe that income has escaped. As observed by the ld. CIT(A) once the preliminary information is available then in view of the decision of Hon'ble Supreme Court in case of ACIT V. Rajesh Jhaveri Stock Broker Pvt Ltd. (supra), not ice u/s 148 can be issued because no assessment u/s 143(3)has been framed original ly.

243 Perusal of the reasons recorded by the Assessing Off icer show that Assessing Off icer has referred to the agreement entered into by the Society which shows that certain consideration has been received. He has referred to a sum of Rs. 15 Lakhs received in Financial Year 2006-07. But basical ly what he is referring is to the escapement of capital gains. It is settled posit ion of law that at the time of reopening what is required is prima facie reasons and not conclusive proof for reopening the assessment. In this regard the recent observations of the Hon'ble Punjab & Haryana High Court in case of Arun Kumar Goyal V CIT, ITA No. 54/2012 vide order dated 21.11.2012, is important and relevant paras No. 12 to 14 reads as under:

137

"12 The re is , howeve r , a sea -change a f te r the amendmen t in Sec t ion 147 fo r de te rmin ing ju r i sd ic t iona l scope fo r re -assessment o f t he escaped income. The Hon 'b le Sup reme Cour t in Ra jesh Jhave r i 's case (sup ra ) has exp la ined and la id down tha t unde r the subs t i tu ted Sect ion 147

"ex i s tence o f on ly the f i r s t cond i t i on su f f i ces . In o ther wo rds i f the Assess ing Of f i ce r fo r whatever reason has reason to be l ieve tha t income has

escaped assessmen t i t con fe rs ju r isd i c t ion to reopen the assessmen t " . I t was fu r the r he ld tha t " so long as the ing red ien ts o f Sec t ion 147 a re fu l f i l led , t he Assess ing Of f i ce r i s f ree to in i t i a te p roceed ings u /s 147 and fa i lu re to t ake s teps u /s 143(3) w i l l no t rende r the Assess ing Of f ice r power less to in i t ia te re - assessmen t p roceed ings even when in t imat ion u / s 143 (1 ) had been issued . " . \

13 The express ion " reason to be l ieve " thus cannot be res t r i c t i ve l y cons t rued to say as i f the Assess ing O f f ice r i s ob l iga ted f i rs t l y to f ina l l y ascer ta in t he fac tum o f escaped income on the bas is o f admiss ib le ev idence and then on ly to issue shown cause to the assessee . The Hon 'b le Supreme Cour t he ld tha t the f ina l ou tcome o f the p roceed ings in i t ia ted u / s 147 i s no t re levan t and what i s o f re levance is the

ex is tence o f reasons to make the Assess ing O f f ice r be l ieve tha t the re has been unde r -assessmen t o f the assessee 's income fo r a par t i cu la r yea r .

14 I t i s exp l ic i t f rom the pos t -amendment dec is ions c i ted above tha t once the re a re reasons fo r t he Assess ing O f f ice r to be l ieve , whethe r such reasons o r ig ina te ou t o f the reco rd a l ready sc ru t in i zed fo r o therw ise , he sha l l be w i th in h is competence to in i t ia te t he re -assessment p roceed ings . The fo rmat ion o f be l ie f by the Assess ing O f f ice r mus t a lways be ten ta t ive and no t a f i rm o r f ina l conc lus ion as the la t te r w i l l nega te the very ob jec t o f g iv ing an oppo r tun i t y o f hea r ing to the assessee as i t w i l l amount to pos t -dec is iona l hea r ing . "

10 F rom the above i t emerges tha t on ly requ i rement f o r reopen ing the assessment i s tha t the re shou ld be a reason to be l ieve tha t income has escaped assessment and such reasons shou ld be p r ima fac ie reason and there i s no requ i rement t ha t the Assess ing Of f i ce r shou ld f ina l l y asce r ta in t he fac tum o f the escapement o f income a t t he s tage o f i ssu ing o f no t i ce i t se l f . Even Hon 'b le Sup reme Cour t in case o f Raymond W oo len M i l l s V ITO, 236 ITR 34 has c lear l y he ld tha t a t t he s tage o f reopen ing o f

138

assessmen t wha t i s requ i red i s tha t the re shou ld be some p r ima fac ie mate r ia l on the bas is o f wh ich the Depa r tmen t wou ld reopen the case . Head no te o f the dec is ion reads as unde r :

" In de te rmin ing whethe r commencement o f re - assessmen t p roceed ings was va l id i t has on ly to be seen whethe r there was p r ima fac ie some ma ter ia l on the bas is o f wh ich the Depa r tment cou ld reopen the case . The su f f i c iency o r co r rec tness o f the ma te r ia l i s no t a th ing to be cons ide red a t t h i s s tage . He ld , tha t the case o f the Revenue was tha t the assessee was charg ing to i t s p ro f i t and loss account , f i sca l du t ies pa id du r ing the yea r as we l l as labou r cha rges , power , fue l , wages, chemica ls e t c . Howeve r , wh i le va lu ing i t s c los ing s tock the e lements o f f i sca l du ty and the o the r d i rec t manufac tu r ing cos ts we re no t i nc luded . Th is resu l ted in unde rva lua t ion o f i nven to r ies and unde rs ta tement o f p ro f i t s . Th is i n fo rmat ion was ob ta ined by the Revenue in a subsequent yea r 's assessmen t p roceed ings . The commencement o f

reassessmen t p roceed ings was va l i d . "

244 In view of the above legal posit ion and the facts that original return was processed u/s 143(1) and no assessment was made u/s 143(3) of the Act the Assessing Off icer was justif ied in issuing the notice u/s 148. The case law rel ied on by the ld. counsel of the assessee is not relevant because even if assessment has not been completed on capital gain of Rs. 15 lakhs but on larger amount of capital gain because of full value of consideration, the addition st i l l remains under the head "capital gain" for which reasons were recorded. Thus it can not be said that the Assessing Off icer has not assessed the income for which the reasons have been recorded. Further once an item of income was found to have escaped assessment during recording of the reasons then other items of income can also be examined. In any case in the case before us only larger amount of capital gain has been charged to tax in the reassessment proceedings. In view of this we confirm the action of the ld. CIT(A) for upholding the reopening of the assessment.

245 Second issue is regarding taxabil ity of capital gain for transfer of plot to the Society in terms of JDA.

139

246 In respect of second issue bo th the pa r t ies adop ted iden t i ca l a rguments wh ich were g i ven in the case o f Sh r i Cha ran j i t S ingh A twa l (supra) .

247 A f te r cons ide r ing the r i va l submiss ions we f ind tha t i den t i ca l i ssue has been dea l t in case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra ) and fo l l owing the dec is ion in tha t case we dec ide th i s i ssue aga ins t the assessee .

248 In the resu l t , appea l o f the assessee i s d ism issed .

ITA No. 1204/CHD/2011 - Mr. Balramji Dass Tandon Vs.

ACIT

249 This appeal is directed against the order of CIT(Appeals) Chandigarh dated.02.09.2011.

\

250 In this appeal various grounds have been raised but at the time of hearing the ld. counsel of the assessee submitted that in this case there are f ive disputes which are as under:

(i) Reopening of the assessment (i i) Taxability of capital gain (i i i ) Adjustment of taxes which has been paid in future years

(iv) Capital gain should have been levied in the hands of the Society and not in the hands of the assessee.

(v) Index cost of acquisit ion

251 Regarding First issue the ld. counsel of the assessee referred to page 12 to 14 of paper book which is copy of notice and copy of the reasons recorded and pointed out that copy of the reasons would clearly show that no date has been mentioned in the reasons, therefore, same cannot be said to have been recorded before issuance of notice. It was also pointed out by him that these reasons were supplied by the Department when the same were asked by the assessee.

140

252 On the other hand, the ld. DR for the revenue strongly rel ied on the order of ld. CIT(A) and submitted that even if the date was not put on the reasons same should be construed as a mistake which has to be ignored in view of Section 292B of the Act.

253 In the rejoinder, the ld. counsel of the assessee submitted that fatal mistake of not putting the date cannot be ignored in view of Section 292B part icularly in the light of the decision of Hon'ble Punjab & Haryana High Court in case of CIT V. Norton Motors, 275

ITR 595.

254 We have heard the rival submissions carefully and do not f ind any force in the submissions of the ld. counsel of the assessee. First of al l if the assessee had objection against the reasons recorded by the Assessing Off icer same should have been pointed out to the Assessing Off icer in the l ight of the decision of Hon'ble Supreme Court in case of GKN Driveshafts (India) Ltd. V ITO and Others, 259 ITR 19. This is particularly so because in the case before us, the reasons were supplied to the assessee by the Assessing Off icer when the same were asked for. The Hon'ble Supreme Court has clearly held that when a notice u/s 148 is issued the assessee has the right to ask for the reasons for reopening the assessment. Once such reasons are supplied the assessee is required to f i le return as well as object ions if any before the Assessing Off icer and the Assessing Off icer is duty bound to deal such object ions. Despite of this clarif ication and the law no objections have been f i led before the Assessing Off icer. Further the issue regarding reopening has been adjudicated by the ld. CIT(A) vide para 5.1 to 5.2.3 which are as under:

"5.1 During the course of appellate proceedings, the Ld. Counsel for the appellant has f i led a written submission, mainly submitt ing therein that the return of income was voluntari ly revised by the appellant before issuance of notice u/s 148. The Ld. Counsel for the appellant has also submitted that no date is mentioned on the reasons recorded by the Assessing Off icer and so the provisions of section 148(2) have been violated. The Ld. Counsel has relied upon the judgment of Hon'ble ITAT, Chandigarh in the case of Sh. Karanvir Singh Ghosal in ITA No. 377/Chd/2002 and of Hon'ble Punjab & Haryana High Court in the case of Sh. Baldev Singh Giani (248

ITR 266).

141

5.2 I have considered the facts of the case. It is seen that there was information available with the Assessing Off icer that the appellant, being a member of M/s Punjabi Co-operative House Building Society Ltd. Mohali (who had 21.2 acres of land in vi l lage Kansal and had entered into an agreement with TATA and HASH for sale of land), had received Rs. 15 Lacs as consideration in this year and was liable to pay capital gain tax on sale of land. The appellant had declared Rs. 15 Lacs only as the sale considerat ion for the purposes of calculation of capital gain on sale of land in the return of income fi led on 30.10.2009. This return is non-est in the eyes of law, as it is not a revised return u/s 139 (5) of the Act and so the contention of the appellant that the return of income was revised before issuance of notice u/s 148 of the Act is not relevant. The correct value of capital gain had not been declared in the return of income f i led by the appellant and since the ful l value of considerat ion was at least Rs. 1,83,75,000/- (82,50,000/- as monetary considerat ion and Rs. 1,01,25,000/- as value of furnished f lat of 2250 sq. feet), the Assessing Off icer formed her reasons to believe that some income had escaped assessment and so issued notice u/s 148 of the Act.

5.2.1 The appellant has also contended that the reasons recorded do not disclose the date on which these were recorded. This issue was never raised before the Assessing Officer; though the appellant had requested the Assessing Officer to int imate the reasons for issuing notice u/s 148 vide his letter dated 6.08.2010 and the Assessing Off icer had provided the same vide letter dated 25 ^thAugust 2010. I called for the assessment records from the office of the Assessing officer and perused the same. I f ind that the reasons for init iating action for reassessment are duly recorded by the assessing off icer and these are available on records. In fact, a copy of the reasons recorded was supplied to the appellant on his request. Therefore it is clear that the reasons for init iating reassessment proceedings were recorded by the assessing officer. Of course, the note wherein such reasons are contained does not bear any date. I t is mandatory that the reasons for reopening the assessment must be recorded by the assessing off icer before the issue of notice under section

148. Therefore, the issue is - whether one can infer from the absence of the date on the note that the note was actually recorded after and not before the issue of notice under section 148? If the assessing office had not recorded this note before the issue of notice under section 148 and fudged the records and put this note in the fi le later on, what would have prevented her from putting a date on this note prior to the date of issue of the notice. In fact, such a safeguard would have certainly been taken by a person who had a dishonest intention. The very fact that this was not done shows the absence of mala f ide on the part of the assessing off icer. In a routine manner, she omitted to put a date on the note recorded. Many persons do not put date below their signatures. The fact that no date is mentioned on the reasons recorded does not mean that reasons were recorded after the issue of not ice under sect ion 148. Moreover, the appellant has

142

not come out with any evidence that the reasons were, in fact, recorded after issue of notice u/s 148. It may also be mentioned that in view of provisions of section 292B of the Act, the notice issued u/s 148 cannot be held invalid merely on the ground that no date was mentioned on the reasons recorded. The facts of the case of Hon'ble Punjab & Haryana High Court relied upon by the Ld. Counsel for the appellant are dist inguishable, since in that case, the records of the department did not contain the reasons recorded by the Assessing Off icer. Therefore that was a case of non-recording of reasons and not a case where the reasons are duly recorded but while signing the note, the assessing off icer has not dated it. Hence, the arguments taken by the appellant in this regard are rejected.

5.2.2 The appellant has also rel ied upon the decision of Hon'ble ITAT, Chandigarh Bench in the case of Shri Karanvir Singh Gosal in ITA No. 377/Chd/2002. In that case, the Hon'ble ITAT has merely set aside the matter to the fi le of CIT

(A) to give a finding on the validity of init iat ion of proceedings u/s 148. The Hon'ble ITAT had not given any finding in that case. Hence, the ratio of this judgment also does not apply to the facts of the instant case.

5.2.3 It has been held by Hon'ble Supreme Court in the case of ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (291 ITR

500) that at the stage of issue of notice u/s 148, the only question to be seen is whether there was relevant material, on the basis of which a reasonable person could have formed the requisite belief. Whether material would conclusively prove escapement of income is not the concern at the stage of issue of notice u/s 148. It is so because the formation of belief is within the realm of the subject ive satisfaction of the Assessing Officer. The various judgments quoted by the Ld. Counsel for the appellant are dist inguishable on facts. In view of this judgment of Hon'ble Supreme Court (291 ITR 500) and by respectfully fol lowing the same, the action of the Assessing Officer of reopening the assessment is upheld. Grounds of appeal No. 2,3 & 13 are dismissed."

255 From above it becomes clear that the reasons were recorded prior to date of issuing the notice. We have also perused the judgment of Hon'ble Punjab & Haryana High Court in case of Norton Motors (Supra). In that case the assessee was a partnership f irm consisting of many partners. The Constitution of the f irm was changed many t imes and last ly it was changed on March 15, 1978 whereby the prof it was to be divided into the ratio of one third among three partners. However, as per the return the prof it was divided equally among f ive partners. Accordingly notice was issued by the Ld. Commissioner to the assessee requir ing it to show as to why Registrat ion may not be withdrawn. Ultimately the Ld.

143

Commissioner directed the Assessing Off icer to distribute the prof its among three partners. The assessee f i led an appeal before the Tribunal. The Tribunal noted that the Ld. Commissioner has proposed the cancellat ion of the registrat ion granted to the f irm on the ground of violation of conditions of the partnership deed in the matter of allocation of shares but ult imately did not cancel the Registrat ion and therefore, the Ld. Commissioner could not have directed the ITO to change share al location among the partners. Against this order the Revenue f i led an appeal before the Hon'ble High Court and defended the order in view of Section 292B. Hon'ble High Court after referring Section 292B observed as under:

"A reading of the above reproduced provision makes it clear that a mistake, defect or omission in the return of income, assessment, not ice, summons or other proceeding is not sufficient to invalidate an action taken by the competent authority, provided that such return of income, assessment, notice summons or other proceeding is in substance and effect in conformity with or according to the provisions of the Act. To put it differently, section 292 B can be relied upon for resist ing a challenge to the notice, etc., only if there is a technical defect or omission in it. However, there is nothing in the plain language of that section from which i t can be inferred that the same can be relied upon for curing a jurisdictional defect in the assessment notice, summons or other proceeding. In other words, if the notice, summons or other proceeding taken by an authority suffers from an inherent lacuna affect ing his/ its jurisdict ion, the same cannot be cured by having resort to section 292B."

256 From above it becomes clear that what can be saved in view of Section 292B, is a mistake or defect or omission in an assessment, notice, summons or other proceedings. But the same could not be invoked to val idate for curing jurisdict ional defect. In our view the fact of not mentioning the date is not a jurisdict ional defect and it can be treated as a simple case of mistake or typographical mistake of omission. Therefore, the ld. CIT(A) has correctly adjudicated the issue and accordingly we confirm his order.

257 In respect of second issue of chargeabil ity of capital gain - A f te r cons ide r ing the r i va l subm iss ions we f ind tha t i den t ica l i ssue has been dea l t in case o f Sh r i Cha ran j i t S ingh A twa l ( supra ) and fo l lowing the dec is ion in tha t case we dec ide th is i ssue aga ins t the assessee .

144

258 Third issue - After going through the record, we f ind that this issue has not been adjudicated by the ld. CIT(A), therefore, in the interest of justice, we remand this matter to the f i le of ld. CIT(A) for adjudicat ion of the issue regarding adjustment of taxed paid in future years.

259 Fourth issue - Both the parties were heard.

260 After considering the rival submissions we f ind that this issue has also been adjudicated by us while adjudicating Ground No. 3 in case of Shri Charanjit Singh Atwal (supra) and following that order, we reject this ground.

261 5 ^thissue - The ld. counsel of the assessee submitted that the Assessing Off icer has not allowed full cost of acquisit ion and benefit of indexation before calculat ing capital gain.

262 On the other hand, the ld. DR for the revenue supported the order of the Assessing Off icer.

263 After considering the rival submissions we f ind that we have already confirmed the charging of capital gain tax on whole of the considerat ion, therefore, whole cost of acquisit ion has to be considered. Since the detai ls are not available therefore, we set aside the issue to the f i le of Assessing Off icer with a direct ion to compute the capital gain tax after al lowing full cost of acquisit ion after applying inf lation index on the same.

264 In the result, appeal of the assessee is allowed for stat ist ical purposes.

ITA No. 1205/CHD/2011 - Mrs. Satwant Kaur Sandhu Vs.

DCIT

265 This appeal is directed against the order of CIT(Appeals) Chandigarh dated.23.09.2011.

145

266 In this appeal various grounds have been raised but at the time of hearing the ld. counsel of the assessee submitted that there are four disputes involved in this appeal which are as under:

(i) Chargeabil ity of capital gain (i i) Mistake in calculat ing the cost of acquisit ion (i i i ) Interest u/s 234B

(iv) Deduction u/s 54F

267 In respect of f irst issue - Bo th the par t ies adop ted iden t i ca l a rgumen ts wh ich we re g i ven in the case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra ) .

268 A f te r cons ide r ing the r i va l submiss ions we f ind tha t i den t i ca l i ssue has been dea l t in case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra ) and fo l l owing the dec is ion in tha t case we dec ide th i s i ssue aga ins t the assessee .

269 Second issue - The ld. counsel of the assessee submitted that the Assessing Off icer has not allowed full cost of acquisit ion and benefit of indexation before calculating capital gain.

270 On the other hand, the ld. DR for the revenue supported the order of the Assessing Off icer.

271 After considering the rival submissions we f ind that we have already confirmed the charging of capital gain tax on whole of the consideration, therefore, whole cost of acquisit ion has to be considered. Since the details are not available therefore, we set aside the issue to the f i le of Assessing Off icer with a direction to compute the capital gain tax after allowing ful l cost of acquisit ion after applying inf lation index on the same.

272 Third issue i s rega rd ing den ia l o f deduct ion u / s 54F o f the Ac t . Bo th the pa r t ies we re hea rd . The Issue has been ad jud ica ted by us in ITA No. 1071 /Chd /2011 wh ich we have dea l t above . I n th is case a lso s im i la r f ind ings have been g iven by ld . C IT (A ) . Fo l lowing ou r ea r l i e r o rde r in ITA No. 1071 /Chd/2011, we d ismiss th is g round .

146

273 Fourth issue is regarding chargeabil ity of interest u/s 234B which is of consequential in nature and the Assessing Off icer is directed to decide this issue in accordance with law.

274 In the result, appeal of the assessee is dismissed.

ITA No. 1219/CHD/2011 - Mr. Santosh Chaudhary Vs. DCIT,

275 This appeal is directed against the order of CIT (Appeals)- Chandigarh dated.20.09.2011

276 In this appeal various grounds have been raised but at the time of hearing, the ld. counsel of the assessee submitted that only three disputes are involved in this appeal which are as under:

(I) Reopening of assessment (i i) Chargeabil ity of capital gain (i i i ) Deduction u/s 54F

277 Since the issues raised in this appeal were covered by other group of cases and particularly the lead case in case of Shri Charanjit Singh Atwal in ITA No. 448/Chd/2011 and therefore, we proceeded to hear this appeal on ex-parte basis because in this group of cases it was clarif ied that there appeals will be heard on 1^st

/2^ndMay, 2013 but despite that none appeared on behalf of the assessee.

278 The ld. DR for the revenue was heard.

279 In this case original return was processed u/s 143(1) and information came from the Department that the assessee is a Member of Punjabi Coop Housing Building Society Ltd. which has transferred the land to the developer i.e. THDC/HASH. Since the original return was processed u/s 143(1) and notice u/s 148 was issued, the issue regarding reopening of the assessment has been adjudicated by the ld. CIT(A) vide para 4.2 to 4.2.3 of impugned order which are as under:

"4.2 I have considered the facts of the case. The contention of the appellant that the preliminary objections against issue

147

of notice u/s 148 were not disposed off by the Assessing Officer is not correct. The object ion raised by the appellant has been reproduced in para 4.1 of the assessment order and the Assessing Off icer has duly disposed off the object ion in para 5 of the assessment order as under:

"As regards the objection of the assessee mentioned above that the income has not been quantif ied which had escaped assessment, it is stated that the total income escaped from the assessment has duly been quantif ied in para 2 & para 3 of the reasons for reopening the case under sect ion 147/148 of I.T. Act. The complete details of the total consideration to be received and the manner in which to be received have been mentioned in the reasons for reopening the case u/s 147/148 of the I.T. Act. Therefore the object ions raised in this regard are not sustainable.

4.2.1 As per the decision of the Apex Court in the case of GKN Driveshafts (India) Ltd. (supra), the prel iminary objection against issue of notice u/s 148 of the Act has to be disposed off by passing a speaking order and this has been done by the Assessing Officer even before discussing about the disal lowance / additions in the assessment order. Further, as per the reasons recorded, the appellant 's income exceeded the maximum amount chargeable to tax.

4.2.2 It is seen that there was information available with the Assessing Off icer that the appellant, being a member of M/s Punjabi Co-operative House Building Society Ltd. Mohali (who had 21.2 acres of land in vil lage Kansal and had entered into an agreement with TATA and HASH for sale of land), had received Rs. 15 lakhs as consideration in this year and was liable to pay capital gain tax on sale of land. The appellant had declared Rs. 15 Lacs only as the sale considerat ion for the purposes of calculat ion of capital gain on sale of land in the return of income f i led and the correct value of capital gain had not been declared. As the full value of consideration was at least Rs. 1,83,75,000/- (82,50,000/- as monetary consideration and Rs. 1,01,25,000/- as cost of furnished f lat of 2250 sq. feet), the Assessing Off icer formed his reasons to believe that some income had escaped assessment and so issued notice u/s 148 of the Act.

4.2.3 It has been held by Hon'ble Supreme Court in the case of ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (291 ITR

500) that at the stage of issue of notice u/s 148, the only question to be seen is whether there was relevant material, on the basis of which a reasonable person could have formed the requisite belief. Whether material would conclusively prove escapement of income is not the concern at the stage of issue of notice u/s 148. It is so because the formation of belief is within the realm of the subject ive satisfaction of the Assessing Officer. In view of this judgment of Hon'ble Supreme Court and by respectfully fol lowing the same, the action of the Assessing Officer of reopening the assessment is upheld. Ground of appeal No. 1 is dismissed. "

148

280 After considering the submissions of the ld. DR for the revenue and the material on record, we f ind nothing wrong in the order of ld. CIT(A) because original return was processed u/s 143(1) and therefore, issuance of notice u/s 148 is justif ied particularly in view of the decision of Hon'ble Supreme Court in case of ACIT V. Rajesh Jhavery Stock Broker (supra). Further the issue regarding objections raised has been dealt by the ld. CIT(A) and we decline to interfere in his order.

281 Second issue - A f te r cons ide r ing the subm iss ions of the ld. DR for the revenue and the material on record, we f ind tha t i den t i ca l i ssue has been dea l t in case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra ) and fo l l owing the dec is ion in tha t case we dec ide th i s i ssue aga ins t the assessee .

282 Th i rd issue - Bo th the pa r t ies we re hea rd . The I ssue has been ad jud ica ted by us in ITA No. 1071 /Chd/2011 wh ich we have dea l t above . I n th is case a lso s im i la r f ind ings have been g iven by ld . CIT (A ) . Fo l lowing ou r ea r l i e r o rde r in ITA No. 1071 /Chd/2011, we d ismiss th is g round .

283 In the result, appeal of the assessee is dismissed.

ITA No. 1223/CHD/2011- Mr. Tej Prakash Singh Vs. DCIT

284 This appeal is directed against the order of CIT (Appeals)-, Chandigarh dated.28.09.2011

285 In this appeal various grounds have been raised but at the time of hearing, the ld. counsel of the assessee submitted that only three disputes are involved in this appeal which are as under:

(I) Chargeabil ity of capital gain (i i) Deduction u/s 54F

149

(i i i ) Reopening of assessment

286 The issue regarding reopening of the assessment was not pressed before us and the same is dismissed as not pressed.

287 In respect second issue regarding chargeability of capital gain - both the parties submitted identical arguments which were given in the case of Shri Charanjit Singh Atwal (supra).

288 A f te r cons ide r ing the r i va l submiss ions we f ind tha t i den t i ca l i ssue has been dea l t in case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra ) and fo l l owing the dec is ion in tha t case we dec ide th i s i ssue aga ins t the assessee .

289 Rega rd ing th i rd issue the ld . counse l o f the assessee made identical arguments which were given in the case of Shri Charanjit Singh Atwal (supra).

290 On the other hand, the ld. DR for the revenue strongly rel ied on the order of the ld. CIT(A).

291 After considering the rival submissions we f ind that this issue has been adjudicated by the ld. CIT(A) vide para 6.1 and 6.2 which are as under:

"6.1 Brief facts on the issue are that the appellant had claimed before the Assessing Officer that he had invested the amount of Rs. 51 Lacs for purchase of residential house and so deduction of this amount should be allowed out of long term capital gain u/s 54 F of the Act. The Assessing Off icer noticed that only Rs. 14 Lacs had been invested before due date of f i l ing of return and so he restr icted deduction u/s 54 F to Rs.

14 Lacs.

6.2 As per the provisions of section 54F(4), the deduction u/s 54 F is to be allowed only of the amount which has been deposited in the capital gain scheme or invested in purchase of residential property before the due date of f i l ing of return of income. It is seen that only Rs. 14 Lacs has been invested before the due date of f i l ing of return and so deduction u/s 54 F is to be restricted Rs. 14 Lacs. The Assessing Off icer has right ly calculated the deduction u/s 54 F at Rs. 14 Lacs and his action in this regard is upheld. Grounds of appeal No. 4 & 5 are dismissed."

150

292 The above clearly shows that benefit of Section 54F has been denied because the assessee had invested only a sum of Rs. 14 lakhs before due date of f i l ing of return. Section 54F clearly provides that if a residential house is purchased within two years from the date on which transfer took place then deduction has to be allowed. In the case before us, we have held that whole of the consideration to be taxable therefore, if the assessee has invested any further sum within a period of two years from the date of transfer then the same has to be allowed u/s 54F of the Act. Therefore, we set aside the order of the Ld. CIT(A) and remit the matter to the f i le of Assessing Off icer with a direction to verify whether any further payments have been made by the assessee and if so then deduction has to be al lowed accordingly .

293 In the result, appeal of the assessee is dismissed.

ITA No. 1238/CHD/2011- Sh. Ranjit Singh Vs. The ITO,

294 This appeal is directed against the order of CIT (Appeals), Chandigarh dated 11.11.2011.

295 In this appeal various grounds have been raised but at the time of hearing, the ld. counsel of the assessee submitted that only three disputes are involved in this appeal which are as under:

(I) Reopening of assessment (i i) Chargeabil ity of capital gain in respect of f lat to be received by the assessee on hypothetical basis @ Rs. 4500 sqft (i i i ) Deduction u/s 54F

296 First issue regarding reopening of assessment was not pressed by the ld. counsel of the assessee and the same is dismissed as not pressed.

297 In addit ion to above an application dated 1.5.2013 has been made for admission of addition ground which are as under:

"1 That the ld. CIT(A) has further erred in upholding the addition of Rs. 80,00,000/- as the alleged consideration

151

received in cash which in fact has not been received ti l l date except Rs. 32,00,000/- and as such the addition upheld is i l legal, arbitrary and unjustif ied.

2 That the ld. CIT(A) has erred in holding hat the transaction was squarely covered by the provisions of section 2(47) r.w.s. 45 and 48 which is arbitrary and unjustif ied.

4 That in any case, Section 53A of the Transfer of Property Act is not applicable to unregistered documents as in the instant case and as such the addition made and sustained on the basis of an unregistered agreement is i l legal, arbitrary and unjustif ied."

298 The ld. counsel of the assessee submitted that in above two grounds assessee has challenged the levy of capital gain and various aspect of such capital gain. However, he admitted that arguments in respect of these additional grounds and the ground No. 1 of the assessee's appeal in respect of considering Rs. 4500/- as cost of f lat on hypothetical basis, are identical as given in the case of Shri Charanjit Singh Atwal (supra).

299 On the other hand, the ld. DR for the revenue left it to the discretion of the Bench.

300 After considering the rival submissions we f ind that two additional grounds in respect of charging of capital gain, have been raised which has been argued in detai l in case of Shri Chranjit Singh Atwal (supra) and therefore, the same are admitted therefore, these addit ions were deleted.

301 Since both the parties adopted identical arguments as in the case of Shri Chranjit Singh Atwal (supra). In this case also we following the decision of Shri Charanjit Singh Atwal, decide the issue raised in grounds No. 1,2 & 3 and additional grounds i.e. issue of chargeability of capital gain against the transfer of plot of 500 sqyd, held by the assessee in Defence Services Coop House Building Society Ltd., against the assessee.

302 In respect of third issue, the ld. counsel of the assessee referred to the submissions made before the ld. CIT(A) and rel ied on the same.

152

303 On the other hand, the ld. DR for the revenue also rel ied on the order of the ld. CIT(A).

304 After considering the rival submissions we f ind that the ld. CIT(A) has summarized the submissions of the ld. counsel of the assessee in respect of deduction u/s 54F as under:

"During the year under consideration and out of part consideration received, the appellant constructed residential house and invested an amount of Rs. 32 Lacs on its construction. In the course of assessment proceeding, necessary evidence was produced before the Ld. A.O. vide our letter dated 13.12.2010. Photo copy of the said letter is enclosed marked as Annexure "A". In the computation chart f i led with the return of income on 17/12/2009, the long term capital gain of Rs. 26,36,402/- was worked out as per return f i led and the assessee claimed exemption u/s 54 F for Rs. 26,36,402/- i.e. to the extent of Long Term capital gain as shown in the return and the same was allowed. Copy of Computation chart is enclosed marked as Annexure "B"

However, while computing the long term capital gain in the assessment order passed u/s 143(3)/147, the Ld. A.O. has wrongly restr icted the claim of exemption u/s 54F at Rs. 26,36,402/- instead allowing to the extent of Rs. 32 Lacs i.e. the amount which was invested in the construct ion of residential house and evidence for which was provided by the appellant and examined by the Ld. A.O. As such the exemption u/s 54 F is wrongly allowed at Rs. 26,36,402/- instead of Rs.

32 Lacs on this account for which necessary evidence was provided in the course of assessment proceedings. Even the assessee had fi led an application for rectif icat ion u/s 154 for this purpose vide letter dated 27.01.2011 duly acknowledged by the Ld. A.O. on 31.01.2011 and ti l l date no rect if ication order either making the amendment or refusing to allow the claim has been passed. Whereas, as per provisions of sub Section 8 of Section 154, the Ld. A.O. was duly bound to passed the order within a period of six months from the end of month in which the applicat ion was received by him. In this case the period of six month has already been expired on 31.07.2011 and no order has been passed, as such the contention of assessee stands accepted and the appellant is entit led to further exemption to the extent of Rs. 563,598/-. Copy of application of rectif icat ion fi led u/s 154 dated 27.01.2011 is enclosed marked as annexure 'C'.

In view of above submission the order of the Ld. Income Tax Officer VI(2) Ludhiana is against law and facts of the case as such is l iable to be quashed and humbly preyed that the returned income of the appellant be accepted and appeal be allowed."

153

305 We further f ind that the ld. CIT(A) adjudicated the issue vide para 6 which is as under:

"5. After going through the facts of the issue and submissions of the appellant reproduced as above. The AO is directed to verify the same from the relevant record and dispose of appellant 's pending applicat ion u/s 154 as per law. "

306 We f ind nothing wrong in the above f inding of the ld. CIT(A) and therefore, we direct the Assessing Off icer to verify the claim and allow the same accordingly .

307 In the result, appeal of the assessee is part ly allowed for statistical purposes.

ITA No. 3/CHD/2012 - Mr. Bhag Singh Sidhu Vs. The DCIT, Punjab

308 This appeal is directed against the order of CIT (Appeals)- II, Ludhiana dated.24.10.2011.

309 In this appeal various grounds have been raised but at the time of hearing, the ld. counsel of the assessee submitted that only three disputes are involved in this appeal which are as under:

(I) Reopening of assessment (i i) Chargeabil ity of capital gain (i i i ) Deduction u/s 54F

310 First issue of reopening the assessment was not pressed before us and the same is dismissed as not pressed.

311 In respect of second issue regarding chargeabili ty of capital gain both the part ies adopted identical arguments which were given in the case of Shri Charanjit Singh Atwal (supra).

312 A f te r cons ide r ing the r i va l submiss ions we f ind tha t i den t i ca l i ssue has been dea l t in case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra ) and fo l l owing the dec is ion in tha t case we dec ide th i s i ssue aga ins t the assessee .

154

313 Third issue regarding deduction u/s 54F, ld. counsel of the assessee adopted identical arguments as in the case of Shri Chranjit Singh Atwal (supra).

314 On the other hand, the ld. DR for the revenue supported the order of the ld. CIT(A).

315 After considering the rival submissions we f ind that the issue regarding Section 54F has been adjudicated by the ld. CIT(A) vide para 5.7p which is as under:

"As regards applicabil ity of Section 54F, there are certain condit ions which are attached with Section 54F also which have to be fulf i l led before which exemption under that section is available to the assessee. The assessee has not even tr ied to make any claim by showing that he has fulf i l led the said conditions to be eligible for exemption u/s 54F. So exemption cannot be given in such a situation u/s 54F."

Relevant port ion of Section 54F reads as under:

"54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereinafter in this sect ion referred to as the original asset), and the assessee has, within a period of one year before or two year after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this sect ion, that is to say-,

(a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under sect ion 45;

(b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proport ion as the cost of the new asset bears to the net consideration, shall not be charged under sect ion 45;

Provided that nothing contained in this sub-section shall apply where -

(a) the assessee,-

(i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or

155

(i i) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or

(i i i ) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and

(b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head "Income from house property".

The above clearly shows that certain condit ions are required to be fulf i l led part icularly the condition that the assessee is required to purchase the house within a period of two years from the date of transfer. No material has been furnished before us to show that the assessee has purchased such a new house or even constructed a new house and accordingly we f ind no merit in the claim for deduction u/s 54F of the Act. Therefore, we f ind nothing wrong with the order of the ld. CIT(A) and confirm the same.

316 In the resu l t , appea l o f t he assessee is a l lowed fo r s ta t is t i ca l pu rposes .

ITA No. 765/CHD/2012- Ms. Manmohan Kaur Vs. The ACIT,

317 This appeal is directed against the order of CIT (Appeals), Chandigarh dated.08.05.2012

318 In this appeal various grounds have been raised but at the time of hearing, the ld. counsel of the assessee submitted that only three disputes are involved in this appeal which are as under:

(i) Chargeabil ity of capital gain (i i) Deduction u/s 54F

(i i i ) Levy of interest u/s 234B/234C

319 In respect of issue No. 1 regarding chargeability of capital gain - both the parties adopted identical arguments which were given in the case of Shri Charanjit Singh Atwal (supra).

156

320 After considering the rival submissions we f ind that the assessee is a Member of Defence Services Coop House Building Society Ltd. and was holding a plot of 500 sqyd. The Society sold the land to the developer THDC/HASH. Al l the facts are identical with the facts in case of Shri Charanjit Singh Atwal (supra) except that in this case the value of 2250 sqft to be received by the assessee has been adopted at the rate of Rs. 5000 per sqft. Following the decision of Shri Charanjit Singh Atwal (supra) we decide the issue against the assessee. However, we see no reason for adoption of Rs.5000/- per sqft rate for the f lat in this case whereas in other cases the value of the f lat has been taken at Rs. 4500 per sqft, therefore, we set aside the order of the ld. CIT(A) and remit the matter back to the f i le of Assessing Officer with a direction to adopt the value of 4500 per sqft in respect of 2250 sqft f lat which is to be received by the assessee.

321 Third issue is regarding denial of deduction u/s 54F of the Act. Both the parties were heard. The issue has been adjudicated by us in ITA no. 1071/Chd/2011 which we have dealt above. In this case also similar f indings have been given by the ld. CIT(A). Following our earlier order in ITA No. 1071/Chd/2011, we dismiss this ground.

322 Third issue regarding chargeability of interest u/s 234B and 234C is of consequential nature and the Assessing Off icer is directed to decide the issue in accordance with law.

323 In the result, appeal of the assessee is allowed for stat ist ical purposes.

ITA No. 858/CHD/2011- Mr. Shri Parminder Singh Mavi Vs. ITO

324 This appeal is directed against the order of CIT (Appeals), Chandigarh dated.30.07.2012

325 In this appeal following grounds are raised:

"1 That the learned CIT(A) has erred in law and on facts in upholding reopening of proceedings U/s 144/147 which were

157

not valid as no copy of the reasons recorded were furnished to the appellant.

2 That the learned CIT(A) has taxed capital gain on notation considerat ion not received by the appellant which is erroneous in law. Handing over of possession of property was conditional in order to enable the builder to obtain necessary permission from the Govt. Agencies. There is no transfer of property as envisaged u/s 2(47) (vi) of the Income Tax Act

1961.

3 That the Learned CIT(A) has fal len in error in including the cost of f lats on estimation basis which could not be ascertained as no construct ion or other activity has been commenced by the Developer and hence no capital gains could be levied on the cost of f lats on the date of the agreement i.e.27.04.2007. That, the Assessing Off icer has fallen in error and has misconstrued the terms of the agreement dated 27.04.2007.

4 That the learned CIT(A) has also not allowed deduction u/s 54 F which was eligible to the applicant since, he has included the cost of proposed f lat in the sale consideration."

326 Out of above, grounds No. 1& 4 were not pressed before us and same are dismissed as not pressed.

327 Grounds No. 2 & 3 - Bo th the par t ies adop ted iden t i ca l a rgumen ts wh ich we re g i ven in the case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra ) .

328 A f te r cons ide r ing the r i va l submiss ions we f ind tha t i den t i ca l i ssue has been dea l t in case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra ) and fo l l owing the dec is ion in tha t case we dec ide th i s i ssue aga ins t the assessee .

329 In the resu l t , appea l o f the assessee i s d ism issed .

ITA No. 196/CHD/2013- Mr. Amrik Singh Vs. The ITO

330 This appeal is directed against the order of CIT (Appeals)- II,Ludhiana dated.21.12.2012

331 In this appeal various grounds have been raised but at the time of hearing, the ld. counsel of the assessee submitted that only dispute is regarding chargeabili ty of capital gain.

158

332 Bo th the par t i es adop ted iden t ica l a rguments wh ich we re g i ven in the case o f Sh r i Cha ran j i t S ingh A twa l (sup ra ) .

333 A f te r cons ide r ing the r i va l submiss ions we f ind tha t i den t i ca l i ssue has been dea l t in case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra ) and fo l l owing the dec is ion in tha t case we dec ide th i s i ssue aga ins t the assessee .

334 In the resu l t , appea l o f the assessee i s d ism issed .

ITA No. 1301/CHD/2012- Mr. Devinder Singh Cheema Vs.ITO

335 This appeal is directed against the order of CIT (Appeals)- II, Ludhiana dated.15.11.2012

336 In this appeal various grounds have been raised but at the time of hearing, the ld. counsel of the assessee submitted that only two disputes are involved in this appeal which are as under:

(i) Chargeabil ity of capital gain (i i) Deduction u/s 54 F

337 Regarding issue No. 1 in respect of chargeabil ity of capital gain - A f te r cons ide r ing the r i va l submiss ions we f ind tha t i den t i ca l i ssue has been dea l t in case o f Sh r i Cha ran j i t S ingh A twa l ( sup ra ) and fo l l owing the dec is ion in tha t case we dec ide th i s i ssue aga ins t the assessee .

338 Rega rd ing deduct ion u /s 54F the ld . counse l o f the assessee po in ted ou t tha t the issue rega rd ing deduct ion u / s 54F was ra i sed be fo re the ld . CIT (A ) by way o f add i t iona l g round bu t the same has no t been ad jud ica ted .

339 On the o the r hand , the ld . DR fo r t he revenue re l ied on the o rde r o f the ld . C IT (A ) .

159

340 Regard ing i ssue No. 2 in respec t o f deduct ion u /s 54F wh ich was ra ised by way o f add i t i ona l ground be fo re the ld . C IT (A) has no t been ad jud ica ted by the ld . CIT (A) , t he re fo re , we se t as ide the o rde r o f l d . C IT (A) and rem i t the mat te r back to h is f i le w i th a d i rec t ion to dec ide the i ssue a f te r p rov id ing adequate oppo r tun i t y to the assessee .

341 In the resu l t , appea l o f the assessee i s pa r t l y a l lowed fo r s ta t is t i ca l pu rposes .

ITA No. 556/CHD/2012- The Punjabi Coop House Building Society Ltd. V DCIT

342 This appeal is directed against the order of CIT (Appeals), Chandigarh dated.12.12.2011.

343 In this appeal various grounds have been raised but at the time of hearing, the ld. counsel of the assessee submitted that only two disputes are involved in this appeal which are as under:

(i) Reopening of assessment (i i) Chargeabil ity of capital gain

344 First issue regarding reopening of assessment was not pressed before us and the same is dismissed as not pressed.

345 Second issue regarding chargeability of capital gain - During the assessment proceedings the Assessing Off icer noticed that the assessee society has also transferred four plots which were owned by the Society along with plots of the Members for which resolution was passed by the Society for surrender of membership rights by the Members, to the developer i.e. THDC/HASH by execution of a JDA. First ly i t was submitted that on the basis of mutuality the Society had basically purchased land and allotted the plots to the Members, therefore, on principal of mutuality in respect of transfer of four plots could not be subjected to tax. Secondly even if such income was to be taxed the same should have been taxed under the head "business and profession" The Assessing Off icer did not agree with the submissions and observed that since the plots have been

160

transferred to the outsiders therefore, principal of mutuality wil l not apply and since it is a case of transfer of property same has to be subjected to tax under the head "capital gain". Other arguments that this is not a case of transfer, are similar to the arguments made in case of Shri Charanjit Singh Atwal (supra) which were also rejected.

346 On appeal the ld. CIT(A) adjudicated this issue on similar l ine as in the case of Shri Charanjit Singh Atwal (supra). Further it was observed by the ld. CIT(A) in paras 3.2 and 3.2.1 as under:

"3.2 I have considered the submission of the Ld. Counsels for the appellant. The Society entered into a joint development agreement with HASH and THDC on 25.02.2007, as per which it was agreed that the Society, owner of 21.2 Acres of land, would transfer all its land to HASH in l ieu of monetary considerat ion and consideration in kind. As per clause 2.1 of this document, the owner, at the time of agreement, irrevocably and unequivocally granted and assigned in perpetuity all its rights to develop, construct, mortgage, lease l icense, sel l and transfer the property i.e.21.2 Acres of land alongwith any or al l the construction, premises, hereditaments, easements, trees thereon in the favour of THDC for the purpose of development, construction, mortgage, sale, lease, l icense and / or exploitat ion for full uti l ization of the property and to execute all the documents necessary to carry out, faci l itate and enforce the rights in the property. Thus, the owner has irrevocably and unequivocally granted and assigned in perpetuity all the rights of the owner in l ieu of considerat ion which includes monetary consideration and immovable property, termed as "entire consideration" in the agreement. The appellant society was left with four plots of 500 sq. yards, which had not been allotted to any of the members. These four plots were also transferred to HASH in l ieu of monetary consideration and consideration in kind. The appellant society was to receive Rs. 3,30,00,000/- in addition to four f lats of 2250 sq. ft each, worth Rs. 4,05,00,000/-

.

3.2.1 The contention of the appellant is that the amount received by the appellant from HASH was assessable as business income and not as capital gains. This contention of the appellant is not acceptable because this is not a case where plots of the land have been al lotted to the members of the appellant society. Plots have been transferred to a third party and therefore the profi t arising from sale / transfer of these plots is l iable to be taxed as capital gains in the hands of the society."

347 Before us, both the part ies adopted similar arguments which were given in the case of Shri Charanjit Singh Atwal (supra).

161

348 After considering the rival submissions we f ind that the Society has purchased 21.2 aces of land in vi l lage Kansal. The land was developed into various plots and the plots in the size of 500sqyd and 1000sqyd were al lotted to 95 members. These members through a General Body Meeting resolution dated 4.1.2007 agreed to surrender the rights of their plots so that the Society could enter into JDA with the developer i.e. THDC/HASH for development and transfer of the property. It seems that four plots were there which were not al lotted. These plots obviously would become property of the Society because same remained un-al lotted. It is a common practice that cooperative housing societies purchase a particular piece of land and develop the same into plots. Some plots always remain un-al lotted because at that point of t ime some new members may join the Society to whom such plots could be allotted. If such plots have not been allotted then they would obviously be the property of the Society. In other words, the Society was owner of such plots on the date of entering the JDA. The issue regarding ownership came for considerat ion before the Hon'ble Supreme Court in case of CIT V. Podar Cement Pvt Ltd. and others, 226 ITR 625 wherein it was held as under:

"Hence, though under the common law "owner" means a person who has got valid t i t le legally conveyed to him after complying with the requirements of law such as the Transfer of Property Act, the Registrat ion Act, etc., in the context of section 22 of the Income-tax Act, 1961, having regard to the ground realit ies and further having regard to the object of the Income tax Act, namely, to tax the income, "owner" is a person who is entit led to receive income from the property in his own right. The requirement of registrat ion of the sale deed in the context of section 22 is not warranted."

349 In the case before us when the plots remain unallotted and obviously legal ownership and beneficial ownership belonged to the Society. Had the plots been al lotted to some members before entering into the JDA then it could have been said that the plots have already been allotted and therefore, the Society was not responsible for the same. Once the plots were owned by the assessee obviously the transfer of the same would lead to arising of prof it which has to be taxed u/s 45. We are of the opinion that lower authorit ies have correctly rejected the arguments that income from such plots, if any, should be charged under the head "business

162

prof its" because it is a sett led law that if an income falls under specif ic head of income contained in Section 14 under Chapter IV then the same has to be taxed under that head. We have already dealt with the other arguments in case of Shri Charanji t Singh Atwal (supra) and following the same we decide the issue against the assessee.

350 In the result, appeal of the assessee is dismissed.

ITA No. 310/CHD/2012- DCIT V. Punjabi Cooperative Housing Building Society

351 This appeal is directed against the order of CIT (Appeals), Chandigarh dated.12.12.2011.

352 In this appeal following grounds have been raised:

"1 On the facts and in the circumstances and in law the ld. CIT(A) has erred in allowing appeal of the assessee without appreciat ing the facts of the case.

2 On the facts and in the circumstances and in law, the ld. CIT(A) has erred in allowing rel ief to the appellant society, even though the land has been registered in the name of the society in Land Records and members of the society are only shareholders.

3 On the facts and in the circumstances, the ld. CIT(A) has erred in allowing rel ief to the appellant society even though the society had entered into agreement with the Developers with the due approval of the member who had surrendered their r ights in their respective plots."

353 A t the t ime o f hea r ing, the ld . DR fo r the revenue po in ted ou t tha t on ly d i spu te revenue has i s tha t the ld . C IT (A) has de le ted the add i t i on on p ro tec t i ve bas is made in respec t o f deve lopment sa le cons ide ra t ion o f Rs . 234 c ro res .

354 Be fo re us the ld . DR fo r the revenue re l i ed on the g rounds o f appea l .

163

355 On the o the r hand , the ld . counse l o f the assessee adop ted the a rguments made in case o f Shr i Cha ran j i t S ingh A twa l ( sup ra ) in respec t o f g round no . 3 in tha t appea l .

356 A f te r cons ider ing the r i va l submiss ions we f ind tha t in the assessmen t o rder i t has been obse rved by the Assess ing Of f ice r tha t to p reven t leakage o f revenue en t i re cons idera t ion o f Rs . 234 c ro res cons is t ing o f mone ta ry cons ide ra t ion to be rece ived by the members and cons ide ra t ion in the fo rm o f f la t s to be rece ived by the members , was assessed on p ro tec t i ve bas is in the hands o f the soc ie t y .

357 W e have a l ready ad jud ica ted th is i ssue v ide pa ra No. 111 to 113 in re la t ion to g round no . 3 incase o f Sh r i Cha ran j i t S ingh A twa l (sup ra ) whe re i t has been he ld tha t i t i s ind iv idua l member who is respons ib le f o r pay ing the taxes . W e wou ld re i te ra te tha t the p lo ts we re a l lo t ted by the soc ie t y to the ind iv idua l members and i t was the members who su r rende red the i r r i gh ts in the p lo t s in f avou r o f the Soc ie t y so tha t the Soc ie t y cou ld en te r in to JDA fo r t rans fe r o f p rope r ty i n f avour o f the deve loper i .e . THDC/HASH. Cons idera t ion has been f i xed in te rms o f pe r member depend ing upon the s ize o f p lo ts he ld by such members . There fo re , i t was the ind iv idua l member who was owner o f the p rope r t y wh ich has been t rans fe r red to the Soc ie t y th rough deve lope r and accord ing ly i t i s on ly the ind iv idua l member who has to be cha rged unde r the head "cap i ta l ga in " in respec t o f t rans fe r o f such p lo t s . S ince we have a l ready he ld tha t i t i s the ind iv idua l members who a re l i ab le to pay the taxes , the re fo re , i n ou r op in ion , p ro tec t i ve add i t ion made in the hands o f the soc ie t y , needs to be de le ted and has been r igh t l y de le ted by the ld . CIT (A ) . Acco rd ing ly we f i nd no th ing wrong wi th the o rde r o f the ld . C IT (A) in th is respec t and con f i rm the same.

358 In the resu l t , appea l o f the revenue i s d ism issed .

359 In the result,

164

O rde r p ronounced on 29 .7 .2013

Sd/- Sd/-

(SUSHMA CHOWLA) (T.R. SOOD)

JUDICIAL MEMBER ACCOUNTANT MEMBER

165