ACIT, CHENNAI V. Gay Travels (P) Ltd., CHENNAI

ITA 1008/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7530 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2017
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 22-12-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 18-04-2016
• Court: TRIBUNAL
• Department Lawyers: JAIRAM RAIPURA
• Assessee Lawyers: K R ADIVARAHAN
• Keywords: Reopening of assessment; Capital asset; Business income; Depreciation; Earning of tax free income; Question of law; Cost of acquisition; Tangible material; Difference of opinion; Competent authority; Revised return; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 14A; 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI , ! ' ! # . $% & '( BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NOS.953 TO 956/MDS./2016 / ASSESSMENT YEARS : 2006-07, 2009-10 TO 2011-12 M/S.GAY TRAVELS P LTD ., OLD NO.61, NEW NO.99/16, UTHAMAR GANDHI SALAI, NUNGAMBAKKAM,CHENNAI-34. VS. THE DCIT, COMPANY CIRCLE II(2) CHENNAI-34 [PAN AAACG 1081 A ] ( )* / APPELLANT) ( +,)* /RESPONDENT) ./ I.T.A.NOS.1007 & 1008/MDS./2016 / ASSESSMENT YEARS : 2009-10 & 2010-11 THE DCIT, COMPANY CIRCLE II(2) CHENNAI-34 VS. M/S.GAY TRAVELS P LTD ., OLD NO.61, NEW NO.99/16, UTHAMAR GANDHI SALAI, NUNGAMBAKKAM,CHENNAI-34. [PAN AAACG 1081 A ] ( )* / APPELLANT) ( +,)* /RESPONDENT) ASSESSEE BY : MR.K.R.ADIVARAHAN, C.A REVENUE BY : MR.JAIRAM RAIPURA, CIT DR / DATE OF HEARING : 27 - 12 - 2016 / DATE OF PRONOUNCEMENT : 15 - 03 - 2017 - / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE CROSS APPEALS OF THE ASSESSEE AND THE REVE NUE AS MENTIONED IN THE TITLE ARE DIRECTED AGAINST THE DI FFERENT ORDERS OF ITA NOS.1007-1008, 953 TO 956/16 :- 2 -: COMMISSIONER OF INCOME-TAX (APPEALS)-6, CHENNAI, FO R ASSESSMENT YEARS 2006-07, 2009-10 TO 2011-12 AND 2009-10 & 2010-11 RESPECTIVELY. SINCE ISSUES INVOLVED IN ALL THESE APPEALS ARE COM MON IN NATURE, THESE APPEALS ARE CLUBBED TOGETHER, HEARD TOGETHER, DISPO SED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. FIRST, WE TAKE UP APPEAL OF ASSESSEE FOR ASSESSMENT YEAR 2006-07 (ITA NO.953/16) 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS THAT CI T(A) ERRED IN SUSTAINING REOPENING OF ASSESSMENT U/S.147 OF THE ACT. 2.1 AS FAR AS THE REOPENING OF ASSESSMENT U/S.147 IS CONCERNED, THE COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS GROU ND IS NOT PRESSED. THUS THIS GROUND IS DISMISSED AS NOT PRESSED. ACCOR DINGLY, THE APPEAL BY ASSESSEEIN ITA NO.953/MDS./16 IS DISMISSED. NEXT WE TAKE UP APPEALS OF ASSESSEE FOR ASSESSMENT YEARS 2009-10 TO 2011-12) (ITA NOS.954 TO 956/16) 3. THE ONLY ISSUE RAISED IN THESE APPEALS IS WITH REGARD TO DISALLOWANCE U/S.14A R.W.R.8D OF THE INCOME TAX RUL ES, 1962. SINCE THE FACTS ARE COMMON IN ALL THESE APPEALS, WE CONSIDER THE FACTS AS NARRATED IN ITA NO.954/16. 4. IN THE ASSESSMENT ORDER, THE AO HAS ALSO COMPUTE D DISALLOWANCE U/S.14A, AS PER THE MANNER PROVIDED IN RULE 8D OF THE INCOME TAX RULES AND DISALLOWED AN AMOUNT OF ` 3,50,363/-. AGGRIEVED, THE ASSESSEE CARRIED THE AP PEAL BEFORE THE LD.CIT(A). DURING THE FIRST APPELLATE PROCEEDINGS, THE LD.A.R SUBMITTED BEFORE THE ITA NOS.1007-1008, 953 TO 956/16 :- 3 -: LD.CIT(A) THAT THE ASSESSEE COMPANY HAD NOT BORROWE D FUNDS FROM BANKS OR OUTSIDERS AND INVESTED IN COMPANIES TO EARN INCOME TAX FREE INCOME AND PLACED RELIANCE IN THE CASE OF CIT VS. M/S.HERO CYCLES LTD . [ (2010)(323 ITR 518 (P&H) ] AND IN THE ORDER OF ITAT MUMBAI BENCH OF TRIBUNAL IN THE CASE OF DAGA GLOBAL CHEMICALS P. LTD., VS. ACIT IN ITA NO.5592/MUM/2012 DATED 01.01.2015. THE LD.CIT(A) CONFIRMED THE DISALLOWANCE OF 2,60,200/- AFTER GIVING RELIEF OF ` 90,163/- TOWARDS EXPENDITURE RELATING TO EXEMPTED INCOME U/S .14A OF THE ACT. AGGRIEVED WITH THE PARTLY RELIEF GIVEN BY THE LD.CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, THE LD.CIT(A) RESTRICTED TH E DISALLOWANCE U/S.14A R.W.S.8D TO THE AMOUNT OF DIVIDEND INCOME EARNED DU RING THE ASSESSMENT YEAR UNDER CONSIDERATION. IN OUR OPINION, THIS VIEW OF THE LD.CIT(A) IS FORTIFIED BY THE JUDGEMENT OF JURISDICTIONAL HIGH C OURT IN THE CASE OF REDINGTON (INDIA) LTD., IN T.C NO.520/16 DATED 23.1 2.2016 WHEREIN HELD THAT:- 13. RELIANCE IS ALSO PLACED ON A DECISION OF THE JU RISDICTIONAL HIGH COURT IN THE CASE OF BEACH MINERALS COMPANY PVT. LTD. VS. ASSISTANT COMM ISSIONER OF INCOME TAX IN TCA NO.681 OF 2013, DATED 2.12.2013. IN THAT CASE, PAYMENTS OF INTEREST BY THE ASSESSEE WERE SOUGHT TO BE DISALLOWED INVOKING THE PROVISIONS OF S.14A O N THE PREMISE THAT THE SAME RELATED TO BORROWINGS THAT HAD BEEN INVESTED AND WOULD YIELD E XEMPT RETURNS. THE ASSESSEE CONTESTED THE DISALLOWANCE U/S 14A ON MULTIPLE GROUNDS. IT WA S CONTENDED THAT THERE WERE SUFFICIENT RESERVES AND SURPLUSES AVAILABLE FOR THE PURPOSE OF INVESTMENTS, AND BORROWED FUNDS, FOR WHICH THE PAYMENT OF INTEREST HAD BEEN INCURRED, HA D NOT BEEN INVESTED. THE ASSESSEE SOUGHT TO DRAW A NEXUS BETWEEN THE BORROWED FUNDS A ND THE INTEREST PAYMENTS, HIGHLIGHTING THE POSITION THAT THE QUANTUM OF AVAIL ABLE FREE FUNDS WAS FAR IN EXCESS OF THE INVESTMENTS MADE. THE BENCH, IN THE LIGHT OF THE AB OVE SUBMISSIONS, REMANDED THE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO BE CONSIDERED DE NOVO AND AFTER CONDUCTING A PROPER ENQUIRY. INTER ALIA A DIRECTION WAS ISSUED TO THE A SSESSEE TO TENDER A PROPER EXPLANATION FOR THE INTEREST PAYMENTS. THE OPEN REMAND WAS MADE IN THE FACTS AND CIRCUMSTANCES OF THAT CASE AND NO CONCLUSION WAS DRAWN BY THE BENCH ON TH E POSITION OF LAW INVOLVED. IN FACT, THE ITA NOS.1007-1008, 953 TO 956/16 :- 4 -: SUBSTANTIAL QUESTION OF LAW RAISED IN THAT CASE FOR THE CONSIDERATION OF THE COURT WAS COUCHED IN GENERAL TERMS AS FOLLOWS WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE. THE INCOME TAR APPELLATE TRIBUNAL IS RIGHT IN LAW IN CONFIRMING TH E DISALLOWANCE UNDER SECTION 11.1 OF THE INCOME TAX ACT, OF AN AMOUNT OF RS.55,0 0.000/- IN RELATION TO ASSESSMENT YEAR 2007- 2008? 14. NOTHING MUCH TURNS ON THE USE OF THE WORD INCL UDABLE AND THE PHRASE UNDER THE ACT IN S. 14A AND WE ARE NOT PERSUADED TO ACCEPT THE EMPHA SIS LAID OR THE INTERPRETATION OF THE SAME BY THE REVENUE. AN ASSESSMENT IN TERMS OF THE INCOME TAX ACT IS SPECIFIC TO AN ASSESSMENT YEAR AND THE RELATED PREVIOUS YEAR. S.4 OF THE ACT, WHICH IMPOSES THE CHARGE TO TAX READS THUS: CHARGE OF INCOME-TAX 4. (1) WHERE ANY CENTRAL ACT ENACTS THAT INCOME TA X SHALL BE CHARGED FOR ANY ASSESSMENT YEAR AT ANY RATE OR RATES, INCOME-TAX AT THAT RATE OR THOSE RATES SHALL BE CHARGED FOR THAT YEAR IN ACCORDANCE WITH A ND SUBJECT TO THE PROVISIONS (INCLUDING PROVISIONS FOR THE LEVY OF ADDITIONAL IN COME-TAX) OF, THIS ACT IN RESPECT OF THE TOTAL INCOME OF THE PREVIOUS YEAR OF EVERY PERSON: PROVIDED THAT WHERE BY VIRTUE OF ANY PROVISION OF T HIS ACT INCOME-TAX IS TO BE CHARGED IN RESPECT OF THE INCOME OF A PERIOD OTHER THAN THE PREVIOUS YEAR, INCOME TAX SHALL BE CHARGED ACCORDINGLY. THUS, WHERE THE STATUTE INDENTED THAT INCOME SHALL BE RECOGNIZED FOR TAXATION IN RESPECT OF ANY PREVIOUS OTHER THAN THAT IMMEDIATELY PRECEDING THE RELEVANT ASSESSMENT YEAR, THE PROVISION SHALL EXPRESSLY STATE SO. THE PROVISIONS OF S.1O IN CHAPTER III OF THE ACT DEALING WITH INCOMES NOT INCLUDED IN TOTAL INCOME COMMENC ES WITH THE PHRASE IN COMPUTING THE TOTAL INCOME OF A PREVIOUS YEAR, ANY INCOME FALLING WITHIN ANY OF THE FOLLOWING CLAUSES SHALL NOT BE INCLUDED. 15. THE EXEMPTION EXTENDED TO DIVIDEND INCOME WOULD RELATE ONLY TO THE PREVIOUS YEAR WHEN THE INCOME WAS EARNED AND NONE OTHER AND CONSE QUENTLY THE EXPENDITURE INCURRED IN CONNECTION THEREWITH SHOULD ALSO BE DEALT WITH IN T HE SAME PREVIOUS YEAR. THUS, BY APPLICATION OF THE MATCHING CONCEPT, IN A YEAR WHER E THERE IS NO EXEMPT INCOME, THERE CANNOT BE A DISALLOWANCE OF EXPENDITURE IN RELATION TO SUCH ASSUMED INCOME. (MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD. VS. CIT (225 ITR 802). HE LANGUAE OF S.14A(1) SHOULD BE READ IN THE CONTEXT AND SUCH THAT IT ADVA NCES THE SCHEME OF THE ACT RATHER THAN DISTORT IT. 5.1 ACCORDINGLY, WE HOLD THAT THE DISALLOWANCE U/S .14A OF THE ACT READ WITH RULE 8D OF INCOME TAX RULES, 1961 TO BE R ESTRICTED TO THE AMOUNT OF EXEMPTED INCOME EARNED DURING THE YEAR BY THE AS SESSEE. THUS, THIS GROUND IN ALL THESE APPEALS OF THE ASSESSEE FOR THE ASSESSMENT YEARS 2009- ITA NOS.1007-1008, 953 TO 956/16 :- 5 -: 10, 2010-11 & 2011-12 ARE ALLOWED. IN THE RESULT, I TA NOS.954 TO 956/MDS./16 ARE PARTLY ALLOWED. REVENUES APPEAL - ITA NO.1007/MDS./2016 FOR A.Y 2009-10 6. THE FIRST ISSUE IN THIS APPEAL IS WITH REGARD TO CANCELLING THE RE-ASSESSMENT BY HOLDING THAT REOPENING IS INVALID. 7. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY FILED ORIGINAL RETURN OF INCOME FOR ASSESSMENT YEAR 2009- 10 ON 28.09.2009 ADMITTING TOTAL INCOME AT ` 1,10,45,979/- AND THE RETURN WAS PROCESSED AND ACCEPTED THE INCOME RETURNED BY THE ASSESSEE VI DE INTIMATION U/S.143(1) OF THE ACT DATED 15.03.2011. IN THE ORI GINAL ASSESSMENT PASSED U/S.143(3) OF THE ACT FOR THE ASSESSMENT YEA R 2007-08, THE AO CATEGORICALLY ACCEPTED THE COMPUTATION OF CAPITAL G AINS AS OFFERED BY THE ASSESSEE IN ITS REVISED RETURN OF INCOME. THE R E-ASSESSMENT PROCEEDINGS WERE INITIATED BY ISSUANCE OF NOTICE U/ S.148 OF THE ACT ON 23.02.2013 ON THE GROUND THAT SINCE THE POSSESSION OF LAND BELONGING TO THE COMPANY HAS BEEN CONVEYED TO THE DEVELOPER I .E RMZ INFOTECH P LTD IN THE YEAR 2008 AND 2009, THE RIGHT TO RECEI VE THE SALE CONSIDERATION IN THE FORM OF SALEABLE BUILT UP AREA OF 1888061.43 SQ.FT AND 167913.28 SQ.FT RESPECTIVELY LIES ONLY IN THOSE YEARS. HOWEVER, THE ASSESSEE HAD OFFERED SALE CONSIDERATION TO THE EXTE NT OF ` 3,36,23,375/- BEING THE GUIDELINE VALUE IN THE ASSE SSMENT YEAR 2007- 08. ITA NOS.1007-1008, 953 TO 956/16 :- 6 -: 7.1 THE ASSESSING OFFICER RECORDED THE REASONS FOR REOPENING OF THE ASSESSMENT FOR THE ASSESSMENT YEAR 2009-10 AS F OLLOWS:- IT IS SEEN THAT THE ASSESSEE COMPANY ALONG WITH FO UR OTHERS OWNED LAND AT PERUNGUDI. THE TOTAL AREA OWNED BY T HE FIVE PERSONS INCLUDING THE ASSESSEE COMPANY WAS 593984 SQ.FT. OF UDS LAND OF WHICH THE ASSESSEES SHARE OF LAND WAS 291743 SQ.FT . OF LAND. FURTHER, A POWER OF ATTORNEY WAS GIVEN BY ALL THE FIVE OWNERS ON 12.05.2006, GIVING POWER TO DISPOSE OF 60% OF UDS S HARE OF THE LAND BY THE DEVELOPERS AND RETAINING THE REMAINING 40% O F UDS SHARE OF LAND BY THE OWNERS OF LAND AND ACTUAL POSSESSION OF THE LAND WAS ALSO GIVEN ON THE SAME DAY AND THIS TRANSACTION INVOLVES THE ASSESSEES SHARE OF LAND TO THE EXTENT OF 291743 SQ.FT. AND TH E ASSESSEE COMPANY HAD TRANSFERRED 60% OF UDS LAND BEING 175046 SQ.FT. TO THE DEVELOPERS RETAINING 40% OF UDS LAND BEING 116697 S Q.FT. IN EXCHANGE OF THE ABOVE TRANSACTION, ALL THE FIVE PER SONS INCLUDING THE ASSESSEE COMPANY HAD TO RECEIVE 688300 SQ.FT. OF BU ILT UP AREA AND THE ASSESSEES SHARE WAS 303817 SQ.FT. OF BUILT UP AREA. WHILE THE ASSESSEE COMPANY WAS ASKED ABOUT THIS, THE ASSESSEE COMPANY REPLIED THAT THE ISSUE HAD BEEN TAKEN DURIN G THE ASSESSMENT PROCEEDINGS OF A.Y 2010-11 AND THE SUBMISSIONS ALR EADY GIVEN MAY BE CONSIDERED FOR THE ASSESSMENT YEAR ALSO. AS SUCH, BASED ON THE ASSESSMENT PROCEEDINGS OF A .Y 2010-11, THE ASSESSMENT IS REOPENED FOR THIS ASSESSMENT YEAR 2009-10 AND ASSESSMENT IS COMPLETED. 7.2 THE ASSESSING OFFICER, IN HIS RE-ASSESSMENT ORDER BROUGHT THE DIFFERENCE OF ` 48,45,69,007/- BEING THE BALANCE COST OF CONSTRUCTION WHICH WAS NOT OFFERED FOR TAX BY THE A SSESSEE AND TAXED IN THE ASSESSMENT YEARS 2009-10 AND 2010-11. AGAINS T THE ASSESSMENT ORDER, THE ASSESSEE WENT IN APPEAL BEFORE THE LD.CI T(A). ITA NOS.1007-1008, 953 TO 956/16 :- 7 -: 7.3 ON APPEAL, THE LD.CIT(A) OBSERVED THAT IN THE ORIGINAL ASSESSMENT ORDER DATED 30.12.2011, THE AO INDEED HA D GIVEN A FINDING WITH RESPECT TO THE APPLICABILITY OF SEC.2( 47)(V) AND HOLDING THE DATE OF JOINT VENTURE AGREEMENT AS VALID TRANSFER F OR THE PURPOSES OF COMPUTATION OF CAPITAL GAINS. IN FACT, THE AO HAS T AKEN THIS AS A YARDSTICK TO BRING ANOTHER PROPERTY TRANSACTION OF THE ASSESSEE, THE HADDOWS ROAD PROPERTY TO TAX IN THE IMPUGNED ASSESS MENT YEAR. FURTHER, LD.CIT(A) RELYING ON THE JUDGMENT OF SUPRE ME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. IN [2010] 320 ITR 561(SC), OBSERVED THAT THE RE-ASSESSMENT PROCEEDINGS HAVE I NDEED UNDERTAKEN A REVIEW OF THE EARLIER DECISION WHEREIN THE AO HAD UNEQUIVOCALLY MENTIONED IN THE ORDER ITSELF THAT THE CHARGE OF CA PITAL GAINS WAS ON THE DATE OF JOINT DEVELOPMENT AGREEMENT(JDA). THER EFORE, LD.CIT(A) HELD THAT THE RE-ASSESSMENT PROCEEDINGS WERE INVAL ID. AGAINST THE ORDER OF LD.CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 8. BEFORE US, THE LD.D.R SUBMITTED THAT THE ASSESS EE ENTERED INTO A JDA ON 12.05.2006 COVERING ASSESSMENT YEAR 2 007-08 AND ALSO POA ON 12.05.2006. WHILE FRAMING THE ASSESSMENT F OR ASSESSMENT YEAR 2010-11, IT CAME TO THE KNOWLEDGE OF THE AO TH AT THE ASSESSEE HAD NOT PROPERLY OFFERED THE CAPITAL GAINS ACCRUED ON THE BASIS OF THIS ITA NOS.1007-1008, 953 TO 956/16 :- 8 -: JDA U/S.24(7)(V) OF THE ACT. IT HAS OFFERED ONLY C APITAL GAINS ON THE BASIS OF GLV OF THE LAND, AS SUCH TO CONSIDER THE E XACT PROFIT AND SALE ON 60% OF LAND, THE ASSESSMENT WAS REOPENED. HE SUB MITTED THAT THE ASSESSMENT WAS VALIDLY REOPENED AND IT IS NOT APPRO PRIATE ON THE PART OF THE LD.CIT(A) TO QUASH THE RE-ASSESSMENT ORDER. HE RELIED ON THE FOLLOWING JUDGEMENTS:- (I) IN THE CASE OF REVATHY CP EQUIPMENT LTD. VS. D CIT REPORTED IN [2000] 241 ITR 856 (MAD) WHEREIN HELD THAT:- IN THE INSTANT CASE, THE ASSESSMENT ORDERS FOR THE YEARS 1983-84 TO 1988-89 EXCLUDING 1984-85 DID NOT INDICATE THAT THE PRIMARY FACTS REQUIRED FOR CLAIMING THE RELIEF UNDER SECTIO N 80-I OF THE ACT HAD BEEN DISCLOSED, AT THE TIME THE ASSESSMENT ORDE RS WERE MADE. THE ASSESSEE HAS NOT PLACED ANY MATERIALS DE HORS THOSE ASSESSMENT ORDERS WHICH WOULD INDICATE SUCH KNOWLED GE ON THE PART OF THE ASSESSING OFFICER. IT WAS ONLY IN THE A SSESSMENT ORDER FOR THE YEAR 1989-90 , ALONG WITH THE MATERIAL FACT S, THE REASONS RELEVANT TO THE ALLOWABILITY OR OTHERWISE OF THE AS SESSEE'S CLAIM FOR DEDUCTION UNDER SECTION 80-I OF THE ACT HAD BEE N SET OUT. THE FACTS STATED THEREIN WOULD CONSTITUTE INFORMATION F OR THE PURPOSE OF SECTION 147 OF THE ACT AND WOULD PROVIDE GROUNDS FOR THE REASONABLE BELIEF WHICH THE ASSESSING OFFICER IS RE QUIRED TO ENTERTAIN BEFORE INITIATING PROCEEDINGS UNDER THAT SECTION. THE NOTICES OF REASSESSMENT WERE VALID. (II) IN THE CASE OF A. L. A. FIRM VS. CIT IN [1976] 102 ITR 622 (MAD) WHEREIN HELD THAT: ITA NOS.1007-1008, 953 TO 956/16 :- 9 -: (1) AS THE INCOME-TAX OFFICER HAD IN THE ORIGINAL A SSESSMENT PROCEEDINGS NOT AT ALL APPLIED HIS MIND TO THE QUES TION AS TO WHETHER THE SURPLUS ON REVALUATION WAS ASSESSABLE O R NOT, THE REASSESSMENT PROCEEDINGS WERE VALID; (2) AS THE STOCK-IN-TRADE OF A FIRM DOES NOT CEASE TO BECOME STOCK- IN-TRADE ON ITS DISSOLUTION AND THERE IS NO AUTHORI TY FOR THE PROPOSITION THAT THE OPTION TO VALUE THE STOCK-IN-T RADE AT COST OR MARKET VALUE WHICHEVER IS LOWER IS AVAILABLE TO THE FIRM EVEN AT THE POINT OF TERMINATION OF THE BUSINESS, THE REVALUATI ON OF THE PROPERTIES AT THE PREVAILING MARKET VALUE WAS JUSTI FIED AND THE ASSESSMENT OF THE PROFIT ARISING ON SUCH EVALUATION WAS JUSTIFIED; (3) THE CIRCULAR OF THE CENTRAL BOARD AS SUCH HAD N O BINDING FORCE WITH REFERENCE TO THE ASSESSMENT IN QUESTION. 8.1 THE LD.D.R SUBMITTED THAT THERE IS N O CHANGE OF OPINION BECAUSE IN ORIGINAL ASSESSMENT THERE IS NO DISCUSSI ON ON THIS ISSUE. FURTHER, LD.D.R SUBMITTED THAT LD.CIT(A) ERRED IN H OLDING THAT THE ISSUE WAS DISCUSSED IN ORGINAL ASSESSMENT WHEREAS THE AS SESSEE HAD NOT DISCLOSED ANY BUSINESS INCOME ON THE SALE OF PERUNG UDI PROPERTY AND THEREFORE , THE QUESTION OF DISCUSSION IN THE ORIGI NAL ASSESSMENT DOES NOT ARISE. THEREFORE, LD.D.R SUBMITTED THAT THE PRE MISE THAT THE ISSUE WAS DISCUSSED IN ORIGINAL ASSESSMENT AND THERE IS A CHANGE OF OPINION IS INCORRECT. FURHTER, LD.D.R SUBMITTED THAT THE LD .CIT(A) HAS DRAWN A PARALLEL OF THE TRANSACTION IN QUESTION WITH THE SA LE OF HADDOWS ROAD PROPERTY. THE PERUNGUDI PROPERTY WAS DEVELOPED ON JOINT DEVELOPMENT BASIS WHEREAS THERE WAS NO JDA IN THE CASE OF HADDOWS ROAD PROPERTY. THEREFORE, THE SECOND PREMISE ON THE BASIS OF WHICH ITA NOS.1007-1008, 953 TO 956/16 :- 10 - : THE CIT(A) HAS HELD THAT THERE IS A CHANGE OF OPINI ON IS ALSO FACTUALLY INCORRECT. 9. ON THE OTHER HAND, LD.A.R SUBMITTED THAT THE AS SESSMENT WAS REOPENED ON THE BASIS OF CHANGE OF OPINION AND ACCORDING TO HIM, THE ORDER OF LD.CIT(A) TO BE UPHELD. HE RELIED ON T HE JUDGEMENT OF SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. IN [2010] 320 ITR 561(SC). ACCORDING TO HIM, IN ORIGINAL ASS ESSMENT ORDER DATED 30.12.2011, THE AO HAS GIVEN A FINDING IN RES PECT OF APPLICABILITY OF SEC.24(7)(V) OF THE ACT AND HOLDING THAT THE DAT E OF JDA WITH THE DATE OF TRANSFER FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS. THE SAME LOGIC IS APPLIED IN THE ASSESSMENT ORDER FOR T HE PURPOSE OF ASSESSING CAPITAL GAINS, IN CASE OF ANOTHER PROPERT Y IN HADDOWS ROAD, FINALLY HE RELIED ON THE ORDER OF LD.CIT(A). 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE MAIN CONTENTION OF LD.A.R IS THAT IN THIS CASE THE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT 30-12-2011. ACC ORDING TO LD. AR, WHILE FRAMING THE ASSESSMENT, THE AO ENQUIRED ABOUT DETAI LS OF IMMOVABLE PROPERTY OWNED, ACQUIRED AND SOLD DURING THE YEAR A ND ALSO ABOUT CAPITAL GAIN IN THE HANDS OF THE ASSESEE. THE ASSESSEE HAS FURNISHED ALL DETAILS TO THE AO AT THE TIME OF ORIGINAL ASSESSMENT AND ACCOR DING TO THE A.R, THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCL OSE ALL MATERIAL FACTS NECESSARY FOR THE PURPOSE OF ASSESSMENT. HE SUBMIT TED THAT THE REOPENING VIDE NOTICE U/S.148 OF THE ACT DATED 23-02-2013, IT IS ONLY A CHANGE OF ITA NOS.1007-1008, 953 TO 956/16 :- 11 - : OPINION. HE SUBMITTED THAT THE AO GOING THROUGH TH E SAME DOCUMENTS, WHICH WERE ALREADY ON RECORD, WANTED TO RE-OPEN THE ASSESSMENT, WHICH IS NOTHING BUT REVIEW OF THE EARLIER ASSESSMENT ORDER, WHICH IS NOT POSSIBLE U/S.147 OF THE ACT. IN THIS CASE, THE ASSESSMENT W AS REOPENED AFTER RECORDING THE REASONS AS STATED EARLIER VIDE NOTICE ISSUED U/S.148 DATED 23- 02-2013. 10.1 ADMITTEDLY IN THIS CASE, THE ORIGINAL ASSESS MENT WAS COMPLETED U/S.143(3) OF THE ACT. IT IS A SETTLED LAW THAT ON THE BASIS OF MATERIAL, PRIMA FACIE, AVAILABLE BEFORE THE ASSESSING OFFICER , OPINED THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT CAN BE FOR MED. THE WORD REASON IN THE PHRASE REASON TO BELIEVE WOULD MEAN CAUS E OR JUSTIFICATION. IN CASE THE ASSESSING OFFICER HAS A CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAS ESCAPED ASSESSME NT, ACTION U/S 148 CAN BE TAKEN. BUT OBVIOUSLY, THERE SHOULD B E RELEVANT MATERIAL ON WHICH A REASONABLE MAN COULD HAVE FORMED A REQUI SITE BELIEF. WHETHER THIS MATERIAL(S) WOULD CONCLUSIVELY PROVE T HE ESCAPEMENT OF INCOME IS NOT THE CONCERN AT THAT PARTICULAR STAGE. SO WHAT IS REQUIRED IS THE SUBJECTIVE SATISFACTION OF THE ASSESSING OFF ICER BASED ON OBJECTIVE MATERIAL EVIDENCE. THE REASON WAS RECORDE D AS DISCUSSED ABOVE. THE ARGUMENT OF THE LD.AR IS THAT U/S 147 IN CASE THE ASSESSMENT ORDER IS COMPLETED U/S 143(3), AS HAS BE EN DONE IN THIS CASE, NO ACTION COULD BE TAKEN AFTER THE EXPIRY OF FOUR YEARS FROM THE ITA NOS.1007-1008, 953 TO 956/16 :- 12 - : END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE ASSE SSEE HAS DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR TH E ASSESSMENT FOR THAT ASSESSMENT YEAR, INTER ALIA. 10.2 AS SEEN FROM THE REASONS RECORDED, IT GIVES A CLEAR PICTURE THAT THE ASSESSING OFFICER HAS GOT MATERIAL EVIDENC E TO FORM HIS OPINION FOR TAKING RECOURSE TO SECTION 147 R.W.S 14 8 OF THE ACT. THERE CANNOT BE TWO OPINIONS. AT THE POINT OF TIME WHEN T HE REASONS ARE RECORDED, FORMING OPINION OF ESCAPEMENT OF INCOME IS ONLY RELEVANT. HENCE, THIS PLEA OF THE LD.AR IS NOT TENABLE IN THE EYES OF LAW. IT IS TRUE THAT U/S 147, THE ASSESSING OFFICER CAN EITHER ASSE SS OR RE-ASSESS BUT FOR TAKING ACTION THERE UNDER, HE HAS TO RECORD REA SONS THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT . IT IS AL SO MANDATED BY SECTION 148(2) TO RECORD REASONS IN WRITING. THE RE ASSESSMENT PROCEEDINGS U/S 147 ARE FURTHER SUBJECT TO SECTIONS 148,149,150,151,152 AND 153. BUT IN THE PRESENT CAS E, WE ARE REQUIRED TO DECIDE THE LIMITED ISSUE REGARDING THE VALIDITY OF PROCEEDINGS UNDERTAKEN AFTER FOUR YEARS OF THE ASSE SSMENT YEAR IN QUESTION. THE ASSESSING OFFICER IS REQUIRED TO SEE IF THE CONDITIONS LAID IN EXPLANATION 2(C) ARE SATISFIED BECAUSE IN THIS C ASE THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT. IN CASE, (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW RATE; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECTIVE OF ITA NOS.1007-1008, 953 TO 956/16 :- 13 - : EXCESS RELIEF UNDER THIS ACT; OR (IV)EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED, THEN THE ASSESSING OFFICER WOULD HAVE VALID COGNIZA NCE U/S 147 OF THE ACT. THE REASONS RECORDED BY THE ASSESSING OFFICER CLEARLY SPEAK FOR THE UNDER ASSESSMENT OF TAX HENCE, THE CONDITIONS L AID ABOVE STAND FULFILLED IN SO FAR AS RE-ASSESSMENT PROCEEDINGS AR E CONCERNED. IN SO FAR AS THE REASONS RECORDED, EXTRACTED IN THE ABOVE PORTION OF THIS ORDER, WE ARE SATISFIED THAT THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THIS F ACT CONFERS JURISDICTION ON HIM TO REOPEN THE ASSESSMENT. THE P OWER TO RE-ASSESS POST 1ST APRIL, 1989 ARE MUCH WIDER THAN THESE USED TO BE BEFORE. BUT STILL THE SCHEMATIC INTERPRETATION OF THE WORDS RE ASON TO BELIEVE FAILING WHICH SECTION 147 WOULD GIVE ARBITRARILY POWERS TO THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT ON THE BASIS OF ME RE CHANGE OF OPINION, WHICH CANNOT BE, PER SE A REASON TO REOPE N THE CASE. THE ACT HAS NOT GIVEN POWER TO THE ASSESSING OFFICER TO REV IEW BUT HAS ONLY GIVEN POWER TO RE-ASSESS. THERE IS A CONCEPTUAL DIF FERENCE BETWEEN THE TWO ASPECTS AS THE ASSESSING OFFICER HAS NO POW ER AT ALL TO REVIEW THE ASSESSMENT. THE REASSESSMENT, AS STATED ABOVE, HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRE-CONDITIONS BUT THE CO NCEPT CHANGE OF OPINION HAS TO BE TAKEN INTO CONSIDERATION OTHERWI SE IT MAY GIVE UNBRIDLED POWER TO AN ASSESSING OFFICER TO REOPEN A NY AND EVERY ITA NOS.1007-1008, 953 TO 956/16 :- 14 - : ASSESSMENT ORDER WHICH WOULD SIMPLY AMOUNT TO A REV IEW. THE CONCEPT CHANGE OF OPINION IS AN IN-BUILT TEST TO CHECK THE ABUSE OF POWER BY THE ASSESSING OFFICER. SO, NOW ONLY WHEN T HE ASSESSING OFFICER HAS A TANGIBLE MATERIAL TO BASE HIS CONCLUS ION THAT THERE IS AN ESCAPEMENT OF INCOME FROM ASSESSMENT AND THE REASON S RECORDED HAVE A LINK WITH THE FORMATION OF HIS BELIEF, HE HA S THE POWER U/S 147 OF THE ACT. 10.3 IN THE PRESENT CASE, THE ASSESSEE HAS SHOWN SALES CONSIDERATION OF PROPERTY ON THE BASIS OF GUIDE LIN E VALUE. AS PER EXPLANATION 2 OF SECTION147 IT IS VERY CLEAR THAT D UE TO DISCLOSE LOWER SALE CONSIDERATION BY THE ASSESSEE, THE INCOME CHAR GEABLE TO TAX HAD ESCAPED ASSESSMENT. THE ASSESSEE HAS NOT PRODUCED ANYTHING BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) TO SHOW AS TO HOW THERE IS A TRANSFER OF IMPUGNED PROPERTY IN EARLIER ASSESS MENT YEAR AND HOW THE PROVISIONS OF SECTION 2(47)(V) IS APPLICABLE. HENCE, THE ACTION OF COMMISSIONER OF INCOME TAX (APPEALS) THAT ASSESSIN G OFFICER IS FULLY NOT COVERED BY THE PROVISIONS OF EXPLANATION 1 TO S ECTION 147 OF THE INCOME TAX ACT IS NOT CORRECT . THE SAID PROVISION READS AS UNDER: PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUN TS BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COUL D WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER ITA NOS.1007-1008, 953 TO 956/16 :- 15 - : WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO. IT IS POSSIBLE THAT WITH DUE DILIGENCE OF THE ASSE SSING OFFICER WOULD HAVE ASCERTAINED THIS FAT AT THE TIME OF ORIGINAL A SSESSMENT ALSO, BUT IN VIEW OF THE EXPLANATION (1) IT DOES NOT MEAN THAT T HERE WAS NO DEFAULT ON THE PART OF THE ASSESSEE. HENCE, REOPENING U/S. 147 IS HELD TO BE VALID. THE ASSESSEE HAS TRIED TO TAKE SHELTER UNDE R THE EXCEPTION PROVIDED BY THE ABOVE STATED PROVISO WHERE AN ASSES SMENT UNDER SUB- SECTION (3) OF SECTION 143 HAS BEEN COMPLETED; NO A CTION CAN BE TAKEN. BUT AS STATED ABOVE, WHEN THE ASSESSEE HAS NOT DISC LOSED FULLY AND TRULY THE FACTS NECESSARY FOR THE ASSESSMENT, THIS PROVISO WILL NOT COME TO ITS RESCUE. CONSEQUENTLY, WE HOLD THAT THE ENTIR E REASSESSMENT PROCEEDING IN THIS CASE IS VALID AND THEREFORE, THE ACTION OF THE ASSESSING OFFICER IS UPHELD. THE ASSESSEE FAILS ON THIS LEGAL ISSUE. THIS GROUND OF THE APPEAL RAISED BY THE REVENUE IS ALLOW ED. 11. THE NEXT GROUND IS WITH REGARD TO A FINDING OF THE LD.CIT(A) THAT THE BUSINESS INCOME IS NOT ASSESSABLE IN THE A SSESSMENT YEAR 2009-10 UNDER QUESTION. THE LD.CIT(A) IGNORED THE F ACT THAT THE PART OF THE PROPERTY WAS REGISTERED IN THE FINANCIAL YEA R 2008-09 RELEVANT TO ASSESSMENT YEAR 2009-10. ITA NOS.1007-1008, 953 TO 956/16 :- 16 - : 12. THE FACTS OF THE CASE ARE THAT THE ASSESSEE AS PER THE VERSION OF THE ASSESSEE, ASSESSEE TRANSFERRED 60% O F UDS OF ITS LAND AT PERUNGUDI TO THE DEVELOPER VIZ. RMZ INFOTECH P L TD., VIDE POA DATED 12.05.2006 IN EXCHANGE FOR BUILT UP AREA TO BE CONS TRUCTED BY THE DEVELOPER AT 40% OF UDS OF LAND AT PERUNGUDI RETAIN ED BY THE ASSESSEE AS PER DEVELOPMENT AGREEMENT DATED 15.12.2 004 AND ASSIGNMENT AGREEMENT DATED 28.02.2006. ADOPTING GL V OF ` 335/- SQ. FT. AS ON THE DATE OF POA DATED 12.05.2006. THE AS SESSEE OFFERED SALES CONSIDERATION AT ` 5,86,40,410/- AND THE LONG TERM CAPITAL GAINS AT ` 3,36,23,335/- IN THE RETURN OF INCOME FOR ASSESSMEN T YEAR 2007- 08. IN THE COURSE OF REGULAR ASSESSMENT PROCEEDING S U/S.143(3) OF THE ACT FOR ASSESSMENT YEAR 2010-11, THE AO DETERMINED THE COST OF CONSTRUCTION AS PER THE DETAILS GIVEN BY THE DEVELO PER AND OBSERVED THAT IT WAS THE SALE CONSIDERATION RECEIVABLE BY TH E ASSESSEE IN KIND FOR THE TRANSFER OF 60% ON UDS OF ITS LAND AT PERUNGUDI , WHICH WAS RECEIVED IN THE ASSESSMENT YEARS 2009-10 & 2010-11 ON THE BASIS OF SALE DEED EXECUTED BY THE ASSESSEE IN FAVOUR OF THE DEVELOPER VIDE SALE DEED NO.3689 OF 2008 DATED 04.09.2008 AND SALE DEED NO.3425 DATED 26.10.2009. THE AO REDUCED THE SALES CONSIDER ATION ADMITTED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2007-08 WHILE C OMPUTING THE LONG TERM CAPITAL GAINS FOR ASSESSMENT YEARS 2009-10 & 2 010-11. ACCORDINGLY, HE ISSUED A NOTICE U/S.148 OF THE ACT DATED 23.12.2013 TO ITA NOS.1007-1008, 953 TO 956/16 :- 17 - : ASSESS THE PROPORTIONATE INCOME FOR ASSESSMENT YEAR 2009-10 AND DISCUSSED AT PARA 7.1 OF THIS ORDER. THE AO OBSERV ED THAT AS PER POA DATED 12.05.2006, THE 60% OF UDS OF ITS LAND AT PER UNGUDI GOT CONVEYED TO RMZ MILLENIA BUSINESS PARK AS CONTEM PLATED UNDER DEVELOPMENT AGREEMENT. THOUGH THE POA IS CLAIMED TO BE IRRECOVERABLE, IT WAS OBSERVED THAT IT HAS THE FOLL OWING CLAUSE: IT IS HEREBY CLARIFIED THAT THE POWERS AND AUTHORI TIES HEREBY GRANTED ARE F IRREVOCABLE AND THAT THIS POWER OF AT TORNEY SHALL CONTINUE TO BE IN FORCE, AND BE FULLY VALID UNTIL T HE SAID RMZ INFOTECH PRIVATE LIMITED HAVE COMPLETED THE PROJECT RMZ MILLENIA BUSINESS PARK AS CONTEMPLATED UNDER THE DEVELOPMENT AGREEMENT AND RMZ INFOTECH PRIVATE LIMI TED HAVE BEEN FULLY CONVEYED THEIR ENTIRE 60% SHARE IN THE S CHEDULE PROPERTY. 12.1 THEREFORE, THE AO OBSERVED THAT THE CONVEYANC E OF THE 60% OF UDS LAND WAS TAKEN PLACE ONLY ON COMPLETION OF C ONSTRUCTION AND IT WAS CONFIRMED BY THE TWO SALE DEEDS DATED 04.09.200 8 AND 26.10.2009 VIDE DOCUMENT NOS.3689/2008 AND 3425/200 9 RESPECTIVELY, EXECUTED BY THE ASSESSEE COMPANY AND FOUR OTHERS DU RING THE FINANCIAL YEAR 2008-09 AND 2009-10 RESPECTIVELY. OU T OF ASSESSEES SHARE OF 60% OF THE UDS OF LAND BEING 355974.71 SFT., 188061 .43 SFT. WAS CONVEYED TO RMZ INFOTECH P LTD. ON 04.09.2008 BY EXECUTING A ND REGISTERING THE SALE DEED ON THE SAME DATE. FURTHER, THE REMAINING PORTI ON OF THE ASSESSEES SHARE OF 60% BEING 167913.28 SFT WAS CONVEYED TO M/ S.RMZ INFOTECH P LTD. ITA NOS.1007-1008, 953 TO 956/16 :- 18 - : BY SALE DEED DT.26/10/2009. THUS THE ASSESSEE COMPA NYS SHARE OF 60% OF UDS LAND AT PERUNGUDI ALONG WITH OTHERS WERE PARTIA LLY CONVEYED IN THE F.Y 2008-09 AND F.Y 2009-10. IT IS SEEN FROM THE ASSESS EES LETTER DT.08.11.2012 AND COPIES OF THE LEASE AGREEMENTS THAT THE ENTIRE BUILDING COMPLEX HAS BEEN LET-OUT DURING THE F.Y 2011-12 AND THE ASSESSE E HAS NOT SOLD THE CONSTRUCTED AREA AT PERUNGUDI. THUS IT IS CLEAR THA T THE TRANSACTIONS MADE BY THE ASSESSE ARE NOTHING BUT EXPLOITATION OF LAND BY ENTERING INTO JOINT DEVELOPMENT AGREEMENT WITH RMZ INFOTECH P. LTD. SIN CE THE POSSESSION OF THE LAND BELONGING TO THE COMPANY HAD BEEN CONVEYED TO THE DEVELOPER I.E. RMZ LNFOTECH P LTD. IN THE YEAR 2008 AND 2009, THE RIGHT TO RECEIVE THE SALE CONSIDERATION IN THE FORM OF SALEABLE BUILT-UP AREA OF 188061.43 SQ.FT. AND 167913.28SQ. FT. RESPECTIVELY, LIES ONLY IN THOSE YEARS. THE CONSTRUCTION OF THE BUILT-UP AREA WAS PARTLY COMPLETED IN THE YEAR 2008 AND FINALLY IN THE YEAR 2009 AS PER COMPLETION CERTIFICATE DT.08/10/20 09 ISSUED BY THE CMDA. ACCORDING TO AO, THE ASSESSEE IS LIABLE TO BE TAXED ON THE COST OF CONSTRUCTION, WHICH IS THE SALE CONSIDERATION RECEI VED IN THE FORM OF BUILT-UP AREA IN THE ASSESSMENT YEARS 2009-10 AND 2010-11. 12.2 IT IS ALSO NOTED BY AO THAT M/S RMZ INFOTECH P LTD. HAD CONSTRUCTED BUILT-UP AREA TO THE TUNE OF SALEABLE AREA OF 6,88, 300SFT. ON THE 40% OF THE UDS OF LAND HELD BY GAY TRAVELS AND OTHERS. THE BUI LT-UP AREA CONSTITUTES 2 BLOCKS VIZ., CAMPUS 2 AND CAMPUS 5 AND THE SALEABLE BUILT UP AREA OF THESE 2 BLOCKS IS 3,63,585SFT. AND 3,24,715 SFT. RESPECTI VELY, AND THE SAME WAS COMPLETED PARTLY IN THE YEAR 2008 AND FINALLY IN TH E YEAR 2009 AS PER THE ITA NOS.1007-1008, 953 TO 956/16 :- 19 - : COMPLETION CERTIFICATE DT.08/10/2009 OF THE CMDA. T HE ASSESSEE WAS ASKED TO FURNISH THE ACTUAL COST OF CONSTRUCTION OF THE B UILT-UP AREA CONSTRUCTED BY RMZ INFOTECH P LTD. BY A.O. DESPITE AMPLE TIME GIV EN TO THE ASSESSEE COMPANY, THEY FAILED TO FURNISH THE COST OF CONSTRU CTION. HENCE, A LETTER WAS SENT TO RMZ INFOTECH P LTD., BANGALORE, REQUESTING THEM TO FURNISH THE COST OF CONSTRUCTION. M/S RMZ INFOTECH P LTD. VIDE LETTE R DT.28M/2013 STATED THAT THE COST OF CONSTRUCTION OF THE BUILT-UP AREA OF 6, 88,300SFT.. WAS ` 1 17,40,74,887/-. BASED ON THIS THE COST OF CONSTRUC TION PER SQ.FT. WORKS OUT TO ` 17,061-. THE COST OF CONSTRUCTION OF THE ASSESSEES TOTAL SHARE OF BUILT-UP AREA OF 303747 SQ.FT. WORKS OUT TO ` 51,81,92,3821-. ACCORDING TO AO.,THIS AMOUNT CONSTITUTES SALE CONSIDERATION RECEIVED BY T HE ASSESSEE IN KIND PARTLY IN A.Y 2009-10 AND FINALLY IN A.Y 2010-11 WHICH SHO ULD HAVE BEEN OFFERED BY THE ASSESSEE FOR TAX IN THE RELEVANT ASSESSMENT YEA RS. HOWEVER THE ASSESSEE HAS OFFERED SALE CONSIDERATION ONLY TO THE EXTENT O F ` 3,36,23,375/- BASED ON THE GUIDE LINE VALUE. THE DIFFERENCE OF ` 48,45,69,0071- BEING THE BALANCE COST OF CONSTRUCTION WHICH WAS NOT OFFERED BY THE A SSESSEE TAXED IN THE A.Y. 2009-10 AND A.Y 201 0-11. 12.3 WITH REGARD TO THE AMOUNT OF ` 7 CR. TREATED AS SALE CONSIDERATION RECEIVED BY THE ASSESSEE COMPANY AND 4 OTHERS, AS MENTIONED IN THE SALE DEEDS, IT IS FOUND THAT THE AMOUNT RECE IVED WAS NON-REFUNDABLE ADVANCE AS PER THE ORIGINAL AGREEMENT WITH MRPL WHI CH WAS IN TURN, ASSIGNED TO RMZ LNFOTECH P. LTD. AND THE ASSESSEE H AS OFFERED ITS SHARE OF ITA NOS.1007-1008, 953 TO 956/16 :- 20 - : ` 3,08,81 ,447/- AS OTHER INCOME IN THE ASSESSMENT YE ARS 2006-07 AND 2007- 08. THEREFORE, NO ADDITION WAS MADE ON THIS COUNT. 12.4 THE AO OBSERVED THAT PER SEC.45(2), THE AMOUN T OF BALANCE COST OF CONSTRUCTION PERTAINING TO AY 2009-10 AND AY 201 0- 11 IS DETERMINED IN PROPORTION TO THE AREA OF UDS OF LAND CONVEYED THRO UGH THE AFORESAID SALE DEEDS WHICH WORKS OUT TO ` 25,59,98,3551- AND ` 22,85,70,652/- RESPECTIVELY. THE AMOUNT ` 22,85,70,652/- BEING THE PROPORTIONATE BALANCE COST OF CONSTRUCTION PERTAINING TO AY 2010-11 HAD BEEN ASSE SSED AS LONG TERM CAPITAL GAINS IN THE RELEVANT ASSESSMENT ORDER. HE OBSERVED THAT THE ASSESSEE HAD ALREADY OFFERED CAPITAL GAIN IN THE AS ST.YEAR 2007-08 AND ALSO HAD RECEIVED BUILT-UP AREA OF 3,03,817SQ.FT ON THE SAME TRANSACTION, THE ABOVE CITED TRANSFER SQUARELY FALLS UNDER CLAUSE (V ) OF SUB SECTION 47 TO SEC 2 OF THE ACT. AND AS PER SEC.45(2), THE CAPITAL GAIN ON THE PROPORTIONATE COST OF CONSTRUCTION PERTAINING TO ASST.YEAR 2009-10, RE QUIRES TO BE TAXED AS BUSINESS INCOME IN THE YEAR IN WHICH THE STOCK-IN-T RADE WAS SOLD. ACCORDINGLY, THE LD. ASSESSING OFFICER COMPUTED THE CAPITAL GAINS. 12.5 AS ABOVE DISCUSSED, THE ASSESSEE OFFERED THE C APITAL GAINS ON THE FACE OF GUIDELINE VALUE WITH REFERENCE TO TH E DATE OF JDA. IN THIS CASE, THE JDA WAS SIGNED ON 12.05.2006, THE INCOME FROM TRANSFER OF ASSET WAS OFFERED DURING THE ASSESSMENT YEAR 2007-0 8. ACCORDINGLY, LD.CIT(A) PLACED RELIANCE ON THE JUDGEMENT OF BOMBA Y HIGH COURT IN ITA NOS.1007-1008, 953 TO 956/16 :- 21 - : THE CASE OF CHATURBHUJ DWARKADAS KAPADIA VS. CIT IN [2003] 260 ITR 491 (BOM) WHEREIN HELD THAT:- UNDER SECTION 2(47)(V) READ WITH SECTION 45 INDICA TES THAT CAPITAL GAINS WAS TAXABLE IN THE YEAR IN WHICH SUCH TRANSACTIONS WERE ENTERED INTO EVEN IF THE TRANSFER OF IMMOVABLE PROPERTY IS NOT EFFECTIVE OR COMPLETE UND ER THE GENERAL LAW. IN THIS CASE, THE TEST HAD NOT BEEN AP PLIED BY THE DEPARTMENT. NO REASON HAD BEEN GIVEN WHY THAT TEST HAD NOT BEEN APPLIED, PARTICULARLY WHEN THE AGREEMENT IN QU ESTION, READ AS A WHOLE, SHOWED THAT IT WAS A DEVE-LOPMENT AGREEMENT. ONCE UNDER CLAUSE 8 OF THE AGREEMENT A L IMITED POWER OF ATTORNEY WAS INTENDED TO BE GIVEN TO THE D EVELOPER TO DEAL WITH THE PROPERTY, THEN THE DATE OF THE CON TRACT, VIZ., AUGUST 18, 1994, WOULD BE THE RELEVANT DATE TO DECI DE THE DATE OF TRANSFER UNDER SECTION 2(47)(V) AND, IN WHI CH EVENT, THE QUESTION OF SUBSTANTIAL PERFORMANCE OF THE CONT RACT THEREAFTER WOULD NOT ARISE. THIS POINT HAD NOT BEEN CONSIDERED BY ANY OF THE AUTHORITIES BELOW. THE ASSESSEE HAD P AID THE CAPITAL GAINS TAX FOR THE ASSESS-MENT YEAR 1999-200 0 . FROM MERE SUBSTANTIAL COMPLIANCE OF THE AGREEMENT, ONE C OULD NOT INFER TRANS-- FER IN THE ACCOUNTING YEAR ENDING MAR CH 31, 1996. THERE WERE MISTAKES APPA-RENT ON THE FACE OF THE RE CORD, IN THE ORDER OF THE TRIBUNAL. ACCORDING TO THE TRIBUNA L, THE LETTER DATED FEBRUARY 18, 1999, SHOWED THAT THE BUILDER CA ME INTO POSSESSION ON THE DAY NEXT TO MARCH 31, 1996, I.E., APRIL 1, 1997. THE DAY NEXT TO MARCH 31, 1996, WOULD BE APRI L 1, 1996, AND NOT APRIL 1, 1997, AND EVEN IF APRIL 1, 1 997, WERE TAKEN AS A TYPING MISTAKE, IT COULD ONLY BE READ AS APRIL 1, 1996, AND IF APRIL 1, 1996, WAS THE DATE ON WHICH T HE DEVELOPER CAME INTO POSSESSION, THEN THE POSSESSION WAS RECEIVED BY THE DEVELOPER DURING THE FINANCIAL YEAR 1996-97 ITA NOS.1007-1008, 953 TO 956/16 :- 22 - : CORRESPONDING TO THE ASSESSMENT YEAR 1997-98 . THER EFORE, THIS FINDING OF THE TRIBUNAL WAS ERRONEOUS. TAKING INTO ACCOUNT THE TOTALITY OF THE CIRCUMSTANCES THE TRIBUNAL WAS NOT JUSTIFIED IN CONCLUDING THAT THE APPELLANT HAD TRANSFERRED TH E PROPERTY DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1996-97. 12.6 FURTHER, LD.CIT(A) RELIED ON THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF R.KALANIDHI VS. CIT IN [2 010] 122 ITD 388 (MDS.) WHEREIN HELD THAT:- ON A FAIR AND REASONABLE INTERPRETATION AND ON ADO PTING THE PRINCIPLE OF PURPOSIVE CONSTRUCTION, IT MUST BE HELD THAT POSSESSION CONTEMPLATED BY CLAUSE (V) NEED NOT NECESSARILY BE SOLE AND EXCLUSIVE POSSESSION. SO LO NG AS THE TRANSFEREE IS, BY VIRTUE OF THE POSSESSION GIVE N, ENABLED TO EXERCISE GENERAL CONTROL OVER THE PROPER TY AND TO MAKE USE OF IT FOR THE INTENDED PURPOSE, THE MER E FACT THAT THE OWNER HAS ALSO THE RIGHT TO ENTER THE PROP ERTY TO OVERSEE THE DEVELOPMENT WORK OR TO ENSURE PERFORMAN CE OF THE TERMS OF AGREEMENT DOES NOT INTRODUCE ANY INCOMPATIBILITY. THE CONCURRENT POSSESSION OF THE O WNER WHO CAN EXERCISE POSSESSORY RIGHTS TO A LIMITED EXT ENT AND FOR A LIMITED PURPOSE AND THAT OF THE BUYER/DEVELOP ER WHO HAS A GENERAL CONTROL AND CUSTODY OF THE LAND CAN V ERY WELL BE RECONCILED. CLAUSE (V) OF SECTION 2(47 ) WI LL HAVE ITS FULL PLAY EVEN IN SUCH A SITUATION. THERE IS NO WARRANT TO POSTPONE THE OPERATION OF CLAUSE (V) AND THE RES ULTANT ACCRUAL OF CAPITAL GAIN TO A POINT OF TIME WHEN THE ITA NOS.1007-1008, 953 TO 956/16 :- 23 - : CONCURRENT POSSESSION WILL BECOME EXCLUSIVE POSSESS ION OF DEVELOPER/TRANSFEREE AFTER HE PAYS FULL CONSIDERATI ON. 27. 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 DEFINITION OF TRANSFER FOR THE PURPOSE OF CAPITAL GAINS MAY BE DEFEATED.' 11. KEEPING IN VIEW THE NATURE OF THE TRANSACTION B ETWEEN THE ASSESSEE AND THE SO-CALLED DEVELOPER, COUPLED W ITH THE TRANSFER AND THE POSSESSION OF THE IMMOVABLE PROPERTIES, WE FIND THAT THE TRANSACTION AMOUNTS TO CONVEYANCE IN FAVOUR OF THE PURCHASER OF THE PROPER TIES AND THE TRANSFER WAS COMPLETED ON THE DATE WHEN THE PURCHASES WERE EXECUTED AND POSSESSION WAS HANDED OVER. BY MEANS OF THESE DOCUMENTS EXECUTED BY THE ASSESSEE, THE ASSESSEE HAD TRANSFERRED ALL MATERIAL RIGHTS AND INTEREST IN THE PROPERTY, COUPLED WITH POSSESSI ON IN FAVOUR OF THE PURCHASER WHICH BY NO MEANS IS OTHER THAN THE TRANSFER OF THE PROPERTIES. AS PER CLAUSE (V) O F SECTION 2(47) OF THE INCOME-TAX ACT, TRANSFER INCLUDES ANY TRANSACTION WHICH ALLOWS POSSESSION TO BE TAKEN/ RE TAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REF ERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT, AND ANY TRANSACTION ENTERED INTO IN ANY MANNER WHICH HAS TH E EFFECT OF TRANSFERRING OR ENABLING THE ENJOYMENT OF ANY IMMOVABLE PROPERTY. THEREFORE, ANY TRANSACTION INVO LVING ALLOWING OF POSSESSION TO BE TAKEN OVER OR RETAINED IN PART PERFORMANCE AS REFERRED TO IN SECTION 53A OF TRANSF ER OF ITA NOS.1007-1008, 953 TO 956/16 :- 24 - : PROPERTY ACT WOULD COME WITHIN THE AMBIT OF SECTION 2(47)( V) OF THE INCOME-TAX ACT. 12. IN THE PRESENT CASE, WHEN THE POSSESSION WAS HA NDED OVER AND TOTAL CONSIDERATION WAS ALSO AGREED UPON B Y THE PARTIES AND THE VENDOR WAS ALLOWED TO ENJOY AND ENT ERTAIN THE PROPERTY FOR THE PURPOSE IT WAS TAKEN OVER, THE N THE TRANSACTION HAS FULFILLED THE CONDITIONS REQUIRED U NDER SECTION 53A OF THE TRANSFER OF PROPERTY ACT AND, TH EREFORE, IT IS COVERED UNDER THE DEFINITION OF TRANSFER UN DER SECTION 2(47)( V) OF THE INCOME-TAX ACT. WE ARE OF THE CONS IDERED VIEW THAT THE ASSESSEE HAS FAILED TO ESTABLISH ANY CASE IN ITS FAVOUR AND, ACCORDINGLY, THE APPEAL OF THE ASSE SSEE IS DEVOID OF MERIT. HENCE, WE CONFIRM THE ORDER OF THE CIT (APPEALS). 12.7 FURTHER, LD.CIT(A) OBSERVED THAT APPLYING THE RATIO OF ABOVE DECISIONS TO THE FACTS OF THE PRESENT CASE OBSERVED THAT IT IS CLEAR THAT THE MOMENT JOINT DEVELOPMENT AGREEMENT WAS EXECUTED AND AN IRREVOCABLE POA WAS SIGNED IN FAVOUR OF THE DEVELOP ER, A RIGHT TO RECEIVE THE DEVELOPED AREA ACCRUED TO THE ASSESSEE COMPANY. AS SUCH, IN VIEW OF THE PROVISIONS OF THE SECTION 2(47)(V) O F THE ACT R.W.S.53A OF THE TRANSFER OF PROPERTY ACT, THE CHARGE OF CAPITAL GAINS CRYSTALLIZES IN THE YEAR OF THE AGREEMENT I.E. A.Y 2007-08. THE CH ARGE OF CAPITAL GAINS IN THE PAST PROCEEDINGS ON THE BASIS OF THE F ORMAL CONVEYANCE OF PROPERTY IN A.Y 2009-10 IS ERRONEOUS AND NOT SUP PORTED BY JUDICIAL PRECEDENCE AS DISCUSSED ABOVE. IN ANY CASE, CAPITA L GAINS IN CASE OF ITA NOS.1007-1008, 953 TO 956/16 :- 25 - : THE ONE OF THE CO-OWNERS HAS BEEN RIGHTLY CONSIDER ED IN THE YEAR OF THE JDA BASED ON APPLICABILITY OF SEC.2(47)(V) OF T HE ACT TO THE FACTS AND CIRCUMSTANCES OF THE CASE. THE RIGHT COURSE OF ACTION WOULD HAVE BEEN FOR THE AO TO REOPEN THE PROCEEDINGS FOR A.Y 2 007-08 AND SUBSTITUTE THE SALE VALUE FROM THE GUIDE LINE VALUE AS OFFERED BY THE ASSESSEE WITH THE COST OF CONSTRUCTION OF ASSESSEE S SHARE INCURRED BY THE DEVELOPER. HENCE THERE IS NO QUESTION OF CHARG EABILITY OF CAPITAL GAINS IN THE PRESENT ASSESSMENT YEAR I.E. A.Y 2009- 10. HENCE, THE LD.CIT(A) ALLOWED THE ASSESSEES CLAIM. FURTHER, LD .CIT(A) OBSERVED THAT THE CHARGEABILITY IS DEPENDENT ON THE ASSET BE ING SOLD OR OTHERWISE TRANSFERRED. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD THAT THE BUILT UP AREA RECEIVED BY THE ASSES SEE COMPANY BY VIRTUE OF JOINT DEVELOPMENT WAS EITHER SOLD OR OTHE RWISE TRANSFERRED. ON THE CONTRARY, THE ASSESSEE COMPANY HAS CATEGORIC ALLY SUBMITTED THAT NOT A SINGLE SQUARE FEET OF THE IMPUGNED PROPE RTY HAS BEEN SOLD. AS SUCH, LD.CIT(A) CAME TO A CONCLUSION THAT THERE IS NO PROFIT AVAILABLE FOR TAXABILITY UNDER THE HEAD BUSINESS. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS ON RECORD. THE LD. AR PLACED HEAVY RELIANCE ON THE J UDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKA DAS KAPADIA V. ITA NOS.1007-1008, 953 TO 956/16 :- 26 - : CIT (260 ITR 491 (BOM.) ) TO SAY THAT THE TRANSFE R OF CAPITAL ASSET WAS TOOK IN EARLIER ASSESSMENT YEAR 2007-08. 13.1 THEIR LORDSHIPS OF THE BOMBAY HIGH COURT WERE EXAMINING THE SCOPE AND IMPORT OF SECTION 2(47)(V) WHICH WAS INTRODUCED W.E.F. 1ST APRIL, 1988. THIS PROVISION, WHICH COVERS ONE OF THE MODES OF DEEMED 'TRANSFER', LAYS DOWN THAT THE SCOPE OF EXPR ESSION 'TRANSFER' INCLUDES 'ANY TRANSACTION INVOLVING THE ALLOWING OF , THE POSSESSION OF ANY IMMOVABLE PROPERTY (AS DEFINED) 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'. ELABORATING UPON THE SCOPE OF SECTION 2(47)(V), THEIR LORDSHIPS OBSERVED AS FOLLOWS: UNDER SECTION 2(47)(V), ANY TRANSACTION INVOLVING ALLOWING OF POSSESSION TO BE TAKEN OR RETAINED IN P ART PERFORMANCE OF THE CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT WOUL D COME WITHIN THE AMBIT OF SECTION 2(47)(V). THAT, IN ORDER TO ATTRACT SECTION 53A, THE FOLLOWING CONDITI ONS NEED TO BE FULFILLED. THERE SHOULD BE CONTRACT FOR CONSIDERATION; IT SHOULD BE IN WRITING; IT SHOULD B E SIGNED BY THE TRANSFEROR; IT SHOULD PERTAIN TO THE TRANSFER OF IMMOVABLE PROPERTY; THE TRANSFEREE SHOU LD HAVE TAKEN POSSESSION OF PROPERTY; LASTLY, TRANSFER EE SHOULD BE READY AND WILLING TO PERFORM THE CONTRACT . THAT EVEN ARRANGEMENTS CONFIRMING PRIVILEGES OF ITA NOS.1007-1008, 953 TO 956/16 :- 27 - : OWNERSHIP, WITHOUT TRANSFER OF TITLE, COULD FALL UN DER SECTION 2(47)(V). 13.2 THEIR LORDSHIPS, HAVING MADE THE ABOVE OBSERV ATIONS, TOOK NOTE OF THE FACT THAT SECTION 2(47)(V) WAS INT RODUCED IN THE ACT W.E.F. ASST. YEAR 1988-89 BECAUSE PRIOR THERETO, IN MOST CASES, IT WAS ARGUED ON BEHALF OF THE ASSESSEE THAT NO TRANSFER T OOK PLACE TILL EXECUTION OF CONVEYANCE. IT WAS ALSO NOTED BY THEIR LORDSHIPS THAT, IN THIS SCENARIO, ASSESSEE USED TO ENTER INTO AGREEMEN TS FOR DEVELOPING PROPERTIES WITH THE BUILDERS AND UNDER ARRANGEMENT WITH THE BUILDERS, THEY USED TO CONFER PRIVILEGES OF OWNERSHIP WITHOUT EXECUTING CONVEYANCE, AND TO PLUG THAT LOOPHOLE, SECTION 2(47 )(V) CAME TO BE INTRODUCED IN THE ACT. 13.3 THERE WAS NO DISPUTE ON WHETHER OR NOT THE CO NDITIONS OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT WERE SA TISFIED ON THE FACTS OF THE CASE BEFORE THE BOMBAY HIGH COURT. IT WAS I N THIS CONTEXT, AND AFTER ELABORATE ANALYSIS OF THE FACTS OF THE CASE B EFORE THEIR LORDSHIPS, THEIR LORDSHIPS ALSO OBSERVED AS FOLLOWS: IF ON A BARE READING OF A CONTRACT IN ITS ENTIRETY , AN AO COMES TO THE CONCLUSION THAT IN THE GUISE OF AGREEMENT FOR SALE, A DEVELOPMENT AGREEMENT IS CONTEMPLATED, UNDER WHICH THE DEVELOPER APPLIES FOR PERMISSION FROM VARIOUS AUTHORITIES, EITHER UNDER ITA NOS.1007-1008, 953 TO 956/16 :- 28 - : POWER OF ATTORNEY OR OTHERWISE AND IN THE NAME OF T HE ASSESSEE, THE AO IS ENTITLED TO TAKE THE DATE OF CONTRACT AS THE DATE OF THE TRANSFER UNDER SECTION 2(47)(V). 13.4 IT IS IMPORTANT TO BEAR IN MIND THAT SECTION 2(47)(V) REFERS TO 'POSSESSION TO BE TAKEN OR RETAINED IN PART PERFORM ANCE OF THE CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A O F THE TRANSFER OF PROPERTY ACT' AND IN THE CASE BEFORE HON'BLE BOMBAY HIGH COURT, THERE WAS NO DISPUTE THAT THE CONDITIONS OF SECTION 53A W ERE SATISFIED. IN OTHER WORDS, THE PROPOSITION LAID DOWN BY THEIR LOR DSHIPS CAN AT BEST BE INFERRED AS THAT WHEN CONDITIONS UNDER SECTION 5 3A ARE SATISFIED, AND WHEN THE ASSESSEE ENTERS INTO A CONTRACT WHICH IS A DEVELOPMENT AGREEMENT, IN THE GARB OF AGREEMENT OF SALE, IT IS THE DATE OF THIS DEVELOPMENT AGREEMENT WHICH IS MATERIAL DATE TO DEC IDE THE DATE OF TRANSFER. HOWEVER, BY NO STRETCH OF LOGIC, THIS LEG AL PRECEDENT CAN SUPPORT THE PROPOSITION THAT ALL DEVELOPMENT AGREEM ENTS, IN ALL SITUATIONS, SATISFY THE CONDITIONS OF SECTION 53A W HICH IS A SINE QUA NON FOR INVOKING SECTION 2(47)(V). 13.5 IN ORDER TO INVOKE THE PRINCIPLES LAID DOWN B Y THE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA ( SUPRA), IT IS, THEREFORE, NECESSARY TO DEMONSTRATE THAT THE CONDIT IONS UNDER SECTION ITA NOS.1007-1008, 953 TO 956/16 :- 29 - : 53A OF THE TRANSFER OF PROPERTY ACT ARE SATISFIED. THIS SECTION IS REPRODUCED BELOW FOR READY REFERENCE: SECTION 53A : PART PERFORMANCE-WHERE ANY PERSON CONTRACTS TO TRANSFER FOR CONSIDERATION ANY IMMOVAB LE PROPERTY BY WRITING SIGNED BY HIM OR ON HIS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTITUTE TRANSFER CA N BE ASCERTAINED WITH REASONABLE CERTAINTY, AND THE TRAN SFEREE HAS, IN PART PERFORMANCE OF THE CONTRACT, TAKEN POS SESSION OF THE PROPERTY OR ANY PART THEREOF, OR THE TRANSFE REE, BEING ALREADY IN POSSESSION, CONTINUES IN POSSESSION IN P ART PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT I N FURTHERANCE OF THE CONTRACT, AND THE TRANSFEREE HAS PERFORMED OR IS WILLING TO PERFORM HIS PART OF THE CONTRACT, THEN, NOTWITHSTANDING THAT THE CONTRACT, THOUGH REQ UIRED TO BE REGISTERED, HAS NOT BEEN REGISTERED, OR, WHERE T HERE IS AN INSTRUMENT OF TRANSFER, THAT THE TRANSFER HAS NO T BEEN COMPLETED IN THE MANNER PRESCRIBED THEREOF BY THE L AW FOR THE TIME BEING IN FORCE, THE TRANSFEROR OR ANY PERS ON 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 TRANS FEREE HAS TAKEN OR CONTINUED IN POSSESSION, OTHER THAN THE RI GHT SPECIFICALLY PROVIDED BY THE TERMS OF THE CONTRACT; PROVIDED THAT NOTHING IN THIS SECTION SHALL AFFECT THE RIGHTS OF A TRANSFEREE FOR CONSIDERATION WHO HAS NO NOTICE OF THE CONTRACT OR OF THE PART PERFORMANCE THEREOF. 13.6 A PLAIN READING OF THE SECTION 53A OF THE TRA NSFER OF PROPERTY ACT SHOWS THAT IN ORDER THAT A CONTRACT CAN BE TERM ED TO BE 'OF THE ITA NOS.1007-1008, 953 TO 956/16 :- 30 - : NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER O F PROPERTY ACT' IT IS ONE OF THE NECESSARY PRECONDITIONS THAT TRANSFEREE SHOULD HAVE OR IS WILLING TO PERFORM HIS PART OF THE CONTRACT. THIS A SPECT HAS BEEN DULY TAKEN NOTE OF BY THE BOMBAY HIGH WHEN THEIR LORDSH IPS OBSERVED AS FOLLOWS: THAT, IN ORDER TO ATTRACT SECTION 53A, THE FOLLOW ING CONDITIONS NEED TO BE FULFILLED. (A) THERE SHOULD BE CONTRACT FOR CONSIDERATION; (B) IT SHOULD BE IN WRITING; (C) IT SHOULD BE SIGNED BY THE TRANSFEROR; (D) IT SHOULD PERTAIN TO THE TRANSFER OF IMMOVABLE PROPERTY; (E) THE TRANSFEREE SHOULD HAVE TAKEN POSSESSION OF PROPERTY; (F) LASTLY, TRANSFEREE SHOULD BE READY AND WILLING TO PERFORM THE CONTRACT. 13.7 ELABORATING UPON THE SCOPE OF EXPRESSION 'H AS PERFORMED OR IS WILLING TO PERFORM', THE OFT QUOTED COMMENTARY 'MUL LA-THE TRANSFER OF PROPERTY ACT' (9TH EDN. : PUBLISHED BY BUTTERWORTHS INDIA), AT P. 448, OBSERVES THAT: THE DOCTRINE OF READINESS AND WILLINGNESS IS AN EM PHATIC WAY OF EXPRESSION TO ESTABLISH THAT THE TRANSFEREE ALWAYS ABIDES BY THE TERMS OF THE AGREEMENT AND IS WILLING TO PERFORM HIS PART OF THE CONTRACT. PART PERFORMANCE, AS A STATUTORY RIGHT, IS CONDITIONED UPON THE TRANSFEREE 'S WILLINGNESS TO PERFORM HIS PART OF THE CONTRACT IN TERMS COVENANTED THERE UNDER. ITA NOS.1007-1008, 953 TO 956/16 :- 31 - : WILLINGNESS TO PERFORM THE ROLES ASCRIBED TO A PART Y, IN A CONTRACT IS PRIMARILY A MENTAL DISPOSITION. HOWEVER , SUCH WILLINGNESS IN THE CONTEXT OF SECTION 53A OF THE AC T HAS TO BE ABSOLUTE AND UNCONDITIONAL. IF WILLINGNESS IS STUDD ED WITH A CONDITION, IT IS IN FACT NO MORE THAN AN OFFER AND CANNOT BE TERMED AS WILLINGNESS. WHEN THE VENDEE COMPANY EXPR ESSES ITS WILLINGNESS TO PAY THE AMOUNT, PROVIDED THE (VE NDOR) CLEARS HIS INCOME TAX ARREARS, THERE IS NO COMPLETE WILLINGNESS BUT A CONDITIONAL WILLINGNESS OR PARTIA L WILLINGNESS WHICH IS NOT SUFFICIENT. IN JUDGING THE WILLINGNESS TO PERFORM, THE COURT MU ST CONSIDER THE OBLIGATIONS OF THE PARTIES AND THE SEQUENCE IN WHIC H THESE ARE TO BE PERFORMED.. 13.8 WE ARE IN AGREEMENT WITH THE VIEWS SO EXPRESS ED IN THIS COMMENTARY ON THE PROVISIONS OF THE TRANSFER OF PRO PERTY ACT. IT IS THUS CLEAR THAT 'WILLINGNESS TO PERFORM' FOR THE PU RPOSES OF SECTION 53A IS SOMETHING MORE THAN A STATEMENT OF INTENT; IT IS THE UNQUALIFIED AND UNCONDITIONAL WILLINGNESS ON THE PART OF THE VENDEE TO PERFORM ITS OBLIGATIONS. UNLESS THE PARTY HAS PERFORMED OR IS W ILLING TO PERFORM ITS OBLIGATIONS UNDER THE CONTRACT, AND IN THE SAME SEQ UENCE IN WHICH THESE ARE TO BE PERFORMED, IT CANNOT BE SAID THAT T HE PROVISIONS OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT WILL CO ME INTO PLAY ON THE FACTS OF THAT CASE. IT IS ONLY ELEMENTARY THAT, UNL ESS PROVISIONS OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT ARE SAT ISFIED ON THE FACTS OF A CASE, THE TRANSACTION IN QUESTION CANNOT FALL WIT HIN THE SCOPE OF DEEMED TRANSFER UNDER SECTION 2(47)(V) OF THE IT AC T. LET US THEREFORE ITA NOS.1007-1008, 953 TO 956/16 :- 32 - : CONSIDER WHETHER THE TRANSFEREE, ON THE FACTS OF TH E PRESENT CASE, CAN BE SAID TO HAVE 'PERFORMED OR IS WILLING TO PERFORM ' ITS OBLIGATIONS UNDER THE AGREEMENT. 14. IN THE PRESENT CASE, THERE IS A DEVELOPMENT AGR EEMENT DATED 15.12.2004 AND POWER OF ATTORNEY DATED 12-05-2006 B ETWEEN THE ASSESSEE AND RMZ INFOTECH, AND AUTHORISED THE DEV ELOPERS TO SELL AND TRANSFER ITS CONSTRUCTED AREA TO THEIR CLIENTS. IT IS NOT MENTIONED THAT THE POSSESSION OF THE PROPERTY WAS HANDED OVER TO THE DEVELOPER. IT IS SPECIFICALLY MENTIONED IN THE JDA IN CLAUSE(1 0) AS FOLLOWS: THE PARTY OF THE FIRST PART ON SIGNING OF THIS DEVELOPMENT AGREEMENT HAS GRANTED PERMISSIVE POSSESSION TO THE PARTY OF THE SECOND PART TO ENTER UPON THE SCHEDULE PROPERTY, FOR THE PURPOSE OF DEVELOPMENT. IT IS AGREED THAT THE PERMISSIVE POSSESSION CONTEMPLATED IN THE FOREGOING CLAUSES AN D ELSEWHERE IN THIS AGREEMENT, IS NOT INTENDED TO AND SHALL NOT AMOUNT TO DELIVERY OF POSSESSION IN PART PERFORMANCE OF THE CONTRACT UNDER THE PROVISIONS OF SEC.53-A OF THE TRANSFER OF PROPERTY ACT, 1882 OR SEC.2(47) OF THE INCOME TAX ACT OF 1961. 14.1 THUS, AS SEEN FROM THE JDA, THE POSSESSION HAS NOT BEEN GIVEN AND ALSO SALE CONSIDERATION IS QUANTIFIED AT 40 % O F SANCTIONABLE CONSTRUCTION AREA. THE ASSESSEE HAS ONLY RECEIVED REFUNDABLE DEPOSIT OF ` 7/- CRORES. AS SUCH, THE ASSESSEE HAS RECEIVED A ME AGRE AMOUNT AS ITA NOS.1007-1008, 953 TO 956/16 :- 33 - : REFUNDABLE DEPOSIT, WHICH CANNOT BE CONSTRUED AS RE CEIPT OF PART OF SALE CONSIDERATION. THERE IS NO EVIDENCE TO SHOW TH AT THE DEVELOPER GOT APPROVAL OF THE BUILDING PLAN FROM THE MUNICIPA LITY FOR CONSTRUCTION OF THE BUILDING. THE SANCTION OF THE BUILDING PLAN IS UTMOST IMPORTANT FOR THE IMPLEMENTATION OF THE AGREEMENT ENTERED BET WEEN THE PARTIES. WITHOUT SANCTION OF THE BUILDING PLAN, THE VERY GEN ESIS OF THE AGREEMENT FAILS. TO ENABLE THE EXECUTION OF THE AGR EEMENT, FIRSTLY, PLAN IS TO BE APPROVED BY THE COMPETENT AUTHORITY. IN FACT, THERE IS NOTHING ON RECORD TO SHOW THAT BUILDING PLAN WAS GO T APPROVED ON OR BEFORE 31.3.2007 IN THE RELEVANT ASST. YEAR 2007-08 . IF PERMISSION IS NOT GRANTED FOR CONSTRUCTION OF THE BUILDING, A DEV ELOPER CANNOT UNDERTAKE CONSTRUCTION. AS A RESULT OF THIS, THE CO NSTRUCTION WAS NOT TAKEN PLACE IN THE ASSESSMENT YEAR 2007-08. NOTHIN G IS BROUGHT ON RECORD TO SHOW THAT THERE WAS DEVELOPMENT ACTIVITY IN THE PROJECT DURING THE ASSESSMENT YEAR 2007-08 OR ANY COST OF C ONSTRUCTION WAS INCURRED BY THE DEVELOPER. HENCE, IT IS TO BE INFE RRED THAT NO AMOUNT OF INVESTMENT IN CONSTRUCTION WAS MADE BY THE DEVEL OPER IN THE CONSTRUCTION ACTIVITY DURING THE ASSESSMENT YEAR 20 07-08 IN THIS PROJECT. 14.2 IT WOULD AMOUNT TO NON-INCURRING OF REQUIRED COST OF ACQUISITION BY THE DEVELOPER IN ASST. YEAR 2007-08 AND IT IS NO T POSSIBLE TO SAY WHETHER THE DEVELOPER PREPARED TO CARRY OUT THOSE P ARTS OF THE ITA NOS.1007-1008, 953 TO 956/16 :- 34 - : AGREEMENT TO THEIR LOGICAL END. THE DEVELOPER IN TH E ASSESSMENT YEAR 2007-08 HAD NOT SHOWN ITS READINESS OR HAVING MADE PREPARATION FOR THE EXECUTION OF THE JDA. IN OTHER WORDS, THE DEVE LOPER HAS NOT TAKEN STEPS TO MAKE IT ELIGIBLE TO UNDERTAKE THE PERFORMA NCE OF THE AGREEMENT WHICH ARE THE PRIMARY INGREDIENT THAT MAK E A PERSON ELIGIBLE AND ENTITLED TO MAKE THE CONSTRUCTION. THE ACT AND CONDUCT OF THE DEVELOPER IN THIS ASSESSMENT YEAR SHOWS THAT IN GREDIENTS ARE NOT FULFILLED. BEING SO, IT WAS CLEAR THAT IN ASSESSM ENT YEAR 2007-08, THERE WAS NO TRANSFER OF NOT ONLY THE FLATS AS SUPERSTRUC TURE BUT ALSO THE PROPORTIONATE LAND BY THE ASSESSEE UNDER THE JDA. FURTHER, THE TIME LIMIT FOR DEVELOPMENT OF THE PROPERTY IS AT 22 MONT HS FROM THE DATE OF COMMENCEMENT OF THE BUILDING CONSTRUCTION SHALL BE RECKONED AFTER THE RECEIPT OF SANCTIONED BUILDING PLAN BY AUTHORIT IES CONCERNED. BEING SO, APPROVAL OF THE BUILDING PLAN IS FOREMOST IMPOR TANT AND FROM THE SANCTIONED PLAN, TIME STARTS FROM COMPLETION OF DEV ELOPMENT OF THE PROJECT AND THEREAFTER, THE DEVELOPER HAND OVER THE POSSESSION OF THE ALLOCATED AREA- DEVELOPED PROPERTY TO THE ASSESSEE. 14.3. BUT THE FACT REMAINS THAT THE DEVELOPER HAD FAILED TO GET THE APPROVAL OF THE PLAN OR PERFORM ITS OBLIGATIONS UND ER THE JDA. EVEN OTHERWISE, THE ASSESSING ASSESSEE HAS NOT BROUGHT ON RECORD THE ACTUAL POSITION OF THE PROJECT EVEN AS ON THE DATE OF ASSESSMENT FOR THE ASSESSMENT YEAR 2007-2008 AND IT HAS NOT SHO WN WHETHER THE ITA NOS.1007-1008, 953 TO 956/16 :- 35 - : DEVELOPER STARTED THE CONSTRUCTION WORK AT ANY TIME DURING THE ASSESSMENT YEAR 2007-08. THE CIT(A) WENT ON TO P ROCEED ON THE SOLE ISSUE WITH REGARD TO ENTERING INTO JDA. FURTHE R, HANDING OVER THE POSSESSION OF THE PROPERTY IS ONLY ONE OF THE CONDI TIONS U/S 53A OF THE TRANSFER OF PROPERTY ACT, BUT IT IS NOT THE SOLE AN D ISOLATED CONDITION. IT WAS STATED BY THE LD. DR THAT THE DEVELOPER HAS NOT TAKEN THE POSSESSION OF THE PROPERTY AND THE DEVELOPER WAS EN TERED INTO ONLY JDA TO DEVELOP THE PROPERTY. IT CANNOT BE PRESUMED THAT ALL THE CONDITIONS REQUIRED U/S.2(47)(V) OF THE ACT ARE FUL FILLED. ON THESE FACTS, IT IS NOT POSSIBLE TO HOLD THAT THE TRANSFER EE WAS WILLING TO PERFORM ITS OBLIGATIONS IN THE FINANCIAL YEAR 2006- 07 RELEVANT TO THE ASST. YEAR 2007-08, IN WHICH THE CAPITAL GAINS ARE SOUGHT TO TAX BY THE ASSESSEE. 15. WE ARE OF THE OPINION THAT THE CONDITION LAID D OWN UNDER SECTION 53A OF THE TRANSFER OF PROPERTY ACT WAS NOT SATISFI ED IN THE ASSESSMENT YEAR 2007-08. ONCE WE COME TO THE CONCLUSION THAT T HE TRANSFEREE WAS NOT 'WILLING TO PERFORM', AS STIPULATED BY AND WITH IN MEANINGS ASSIGNED TO THIS EXPRESSION UNDER SECTION 53A OF THE TRANSFE R OF PROPERTY ACT, ITS CONTRACTUAL OBLIGATIONS IN THIS PREVIOUS YEAR R ELEVANT TO THE PRESENT ASSESSMENT YEAR 2007-08, IT IS ONLY A COROLLARY TO THIS FINDING THAT THE POA DATED 12-05-2006 BASED ON WHICH THE IMPUGNED TA XABILITY OF ITA NOS.1007-1008, 953 TO 956/16 :- 36 - : CAPITAL GAIN IS CONSIDERED BY THE CIT(A) CANNOT BE SAID TO BE A ' CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A O F THE TRANSFER OF PROPERTY ACT ' AND, ACCORDINGLY, PROVISIONS OF SECTION 2(47)(V) CANNOT BE INVOKED ON THE FACTS OF THIS CASE FOR THE ASSES SEMENT YEAR 2007- 2008 AS SOUGHT BY THE ASSESSEE. IN OUR OPINION, IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA V. CIT(SUPRA), UNDOUBT EDLY LAYS DOWN A PROPOSITION WHICH, MORE OFTEN THAT NOT, FAVOURS T HE REVENUE, BUT, ON THE FACTS OF THIS CASE, THE SAID JUDGMENT SUPPORTS THE CASE OF THE ASSESSEE INASMUCH AS 'WILLINGNESS TO PERFORM' HAS B EEN SPECIFICALLY RECOGNIZED AS ONE OF THE ESSENTIAL INGREDIENTS TO C OVER A TRANSACTION BY THE SCOPE OF SECTION 53A OF THE TRANSFER OF PROPERT Y ACT AND THE REVENUE DOES NOT GET ANY ASSISTANCE FROM THIS JUDIC IAL PRECEDENT. 15.1 IN OUR OPINION, THAT IS CLEARLY AN ERRONEOUS ASSUMPTION, AND AN THE PROVISIONS OF DEEMED TRANSFER UNDER SECTION 2(4 7)(V) COULD NOT HAVE BEEN INVOKED ON THE FACTS OF THE PRESENT CASE AND FOR THE ASSESSMENT YEAR IN DISPUTE BEFORE US. IN THE PRESEN T CASE, THE SITUATION IS THAT THE ASSESSEE HAS NOT RECEIVED ANY AMOUNT OUT OF TOTAL CONSIDERATION, THE TRANSFEREE IS AVOIDING ADHERING TO THE AGREEMENT AND THERE IS NO EVIDENCE BROUGHT ON RECORD BY THE R EVENUE AUTHORITIES TO SHOW THAT THERE WAS ACTUAL CONSTRUCTION HAS BEEN TAKEN PLACE AT THE IMPUGNED PROPERTY IN THE ASSESSMENT YEAR 2007-08 AN D ALSO THERE IS NO EVIDENCE TO SHOW THAT THE RIGHT TO RECEIVE THE S ALE CONSIDERATION ITA NOS.1007-1008, 953 TO 956/16 :- 37 - : WAS ACTUALLY ACCRUED TO THE ASSESSEE IN ASSESSMENT YEAR 2007-08. WITHOUT ACCRUAL OF THE CONSIDERATION TO THE ASSESSE E, THE ASSESSEE IS NOT EXPECTED TO PAY CAPITAL GAINS IN THE ASSESSMENT YEAR 20007-2008. THE POA CANNOT, THEREFORE, BE SAID TO BE IN THE NAT URE OF A CONTRACT REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPE RTY ACT. IT CANNOT, THEREFORE, BE SAID THAT THE PROVISIONS OF SECTION 2 (47)(V) WILL APPLY IN THE SITUATION BEFORE US FOR THE ASSESSMENT YEAR 200 7-2008. 15.2 CONSIDERING THE FACTS AND CIRCUMSTANCES OF TH E PRESENT CASE AS DISCUSSED ABOVE, WE ARE OF THE CONSIDERED V IEW THAT THE ASSESSEE DESERVES TO FAIL ON REASON THAT THE CAPITA L GAINS COULD NOT HAVE BEEN TAXED IN THIS ASSESSMENT YEAR 2007-2008 AND IT IS TO BE TAXED IN SUBSEQUENT ASSESSMENT YEAR. 16. IN THE PRESENT CASE, JDA WAS EXECUTED ENVISAGIN G CONSIDERATION MAINLY IN TERMS OF A PORTION OF BUILT-UP AREA. THE HANDING OVER OF POSSESSION OF THE PROPERTY BY THE LAND OWNER TO THE DEVELOPER IS NOT MENTIONED IN THE JDA AND IT IS TO BE CONSTRUED AS D EFERRED TILL THE HANDING OVER OF THE STIPULATED PORTION OF THE MARKE D BUILT UP AREA BY THE DEVELOPER TO THE LAND OWNER. UP TO THAT POINT O F TIME, THE DEVELOPER WAS ONLY LICENSED TO ENTER THE PROPERTY F OR THE LIMITED PURPOSE OF DEVELOPMENT AND CONSTRUCTION AS DISCUSSE D EARLIER. THE TRANSFER DOES NOT TAKE PLACE IMMEDIATELY AND THE LI ABILITY TO CAPITAL GAINS DOES NOT ARISE UNTIL THE BUILT UP AREA EARMAR KED FOR THE LAND ITA NOS.1007-1008, 953 TO 956/16 :- 38 - : OWNER AS CONSTRUCTED AND HANDED OVER. HOWEVER, WHE N THE REGISTRATION OF DOCUMENT TRANSFERRING UNDIVIDED INT EREST IN LAND IS DONE IN FAVOUR OF FLAT OWNER, THEN TO THAT EXTENT LIABIL ITY TO CAPITAL GAINS TAX TO BE PAID BY THE ASSESSEE AS HELD IN THE CASE OF C HATURBHUJ DWARKADAS KAPADIA V. CIT, (260 ITR 491)(BOM.) CIT V. CITIBANK N.A .[261 ITR 570] (BOM) AND IN THE CASE OF R. VIJAYALA KSHMI V. APPU HOTELS P. LTD. [257 ITR 4](MAD). IN OUR OPINION, TH E TRANSACTION EMANATING FROM THE JDA DATED 23.11.2005 CANNOT BE L IABLE TO BE TAXED IN THE ASST. YEAR 2006-07 IN TERMS OF SEC.2(47)(V) OF THE ACT. 16.1 FURTHER, AS HELD BY THE MADRAS HIGH COURT IN THE CASE OF CIT V. G. SAROJA (301 ITR 124) THAT SEC. 2(47)(V) O F THE ACT COMES INTO OPERATION ONLY IF THE CONDITIONS OF SEC.53A OF THE TRANSFER OF PROPERTY ACT ARE SATISFIED AND A WRITTEN AGREEMENT BEING BAS IC REQUIREMENT FOR INVOKING THE PROVISIONS OF SEC.53A OF THE TP ACT, T HERE WAS NO TRANSFER OF PROPERTY U/S.2(47)(V) OF THE ACT. WHEN THE ASSE SSEE WAS THE DEVELOPER IN THE POSSESSION OF THE PROPERTY AS PER WRITTEN AGREEMENT BETWEEN THE ASSESSEE AND THE DEVELOPER AND NO SALE CONSIDERATION RECEIVED DURING THE RELEVANT PERIOD OF TIME AND CAP ITAL GAIN IS NOT ASSESSABLE IN THE ASSESSMENT YEAR . THE CRUX OF TH E JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF G. SAROJA (SUPR) I S THAT SEC.2(47)(V) ITA NOS.1007-1008, 953 TO 956/16 :- 39 - : OF THE ACT COMES INTO THE AID OF THE DEPARTMENT ONL Y IF THE CONDITIONS OF SEC.53A OF THE TP ACT ARE SATISFIED. 16.2 THE MADRAS HIGH COURT IN THE CASE OF R. VIJAYA LAKSHMI V. APPU HOTELS LTD. AND OTHERS(257 ITR 4) HELD THAT DEVELOP MENT AGREEMENT IS EXECUTORY CONTRACT AND NOT BE CONSTRUED AS AN AGREE MENT FOR SALE SIMPLICITOR. FURTHER, IT WAS HELD THAT POSSESSION OF THE PROPERTIES WAS GIVEN TO THE BUILDER UNDER A DEVELOPMENT AGREEMENT FOR CONSTRUCTION FOR A SPECIFIED PERIOD, WHICH IS NOT A PERMANENT TR ANSFER. 17. IN THE CASE OF JASBIR SINGH SARKARIA REPOR TED IN 294 ITR 196 (AAR) AGAIN SCOPE AND IMPLICATION OF CLAUSE (V) OF SECTION 2(47) OF THE ACT HAD BEEN ANALYSED IN ORDER TO DECIDE WHETHER GI VING OF POSSESSION WITH GPA IN FAVOUR OF DEVELOPER AMOUNTS TO TRANSFER TO GIVE RISE TO CHARGEABILITY OF CAPITAL GAIN. IN THE FACT OF ABOVE CASE INITIALLY AGREEMENT WAS ENTERED INTO WITH DEVELOPER FOR SHARI NG OF BUILT-UP AREA. SUBSEQUENTLY, SUPPLEMENTARY AGREEMENT WAS EXE CUTED TO SELL AGREED SHARE IN BUILT-UP AREA ALSO TO DEVELOPER FOR MONEY CONSIDERATION, PAYABLE IN INSTALLMENTS. IN PURSUANT TO ABOVE AGREEMENT GPA WAS EXECUTED TO GIVE TOTAL CONTROL TO DEVELOPER ALONG WITH POWER TO EXECUTE FURTHER AGREEMENTS FOR SALE OF FLATS TO BUYERS. AAR HELD THAT IN VIEW OF THE FACTS AND TERMS OF THE AGREEMENT, TH ERE WAS TRANSFER OF CAPITAL ASSET AND CAPITAL GAIN WAS PAYABLE IN THE Y EAR OF EXECUTION OF ITA NOS.1007-1008, 953 TO 956/16 :- 40 - : GPA, NOTWITHSTANDING THAT SOME OF THE INSTALLMENTS FOR THE CONSIDERATION WERE YET TO BE RECEIVED. IT IS STATED THAT BY VIRTUE OF SUPPLEMENTARY AGREEMENT THIS WAS A CASE OF OUTRIGHT SALE OF LAND AND NOT A CASE OF DEVELOPMENT OF PROPERTY. HOWEVER, I T WAS HELD BY THE AAR IN THE CASE OF JASBIR SINGH SARKARIA, IN RE (20 07) [294 ITR 196] THAT A LICENSE TO THE DEVELOPER TO ENTER UPON THE L AND AND TO DO CERTAIN PRELIMINARY WORK SUCH AS SURVEY, SETTING UP OF SITE /SALES OFFICE AND MAKE NECESSARY ARRANGEMENTS REQUIRED FOR FUTURE CON STRUCTION AND MARKETING DOES NOT AMOUNT TO POSSESSION. 17.1 IN THE CASE OF CIT V. ASHOK KAPOOR (HUF ) (2007) 165 TAXMAN 569 (DEL.) A QUESTION REGARDING TRANSFER OF RIGHTS IN PROPERTY AND CHARGEABILITY OF CAPITAL GAIN HAD COME UP FOR C ONSIDERATION BEFORE THE DELHI HIGH COURT. IN THE ABOVE CASE THE HIGH CO URT HAS TAKEN A VIEW THAT TRANSFER HAS TAKEN PLACE AT THE TIME OF E NTERING INTO THE AGREEMENT WITH THE DEVELOPER FOR THE REASON THAT AS PER THE AGREEMENT THE DEALER HAD AGREED TO ALLOCATE 50% OF SHARE IN THE PROPERTY TO BE BUILT AND THE BUILDER WAS ALLOWED TO SELL THE AREA COMPRISED IN THE BUILDERS ALLOCATION. ON THE BASIS OF CLAUSES OF THE AGREEMENT THE HIGH COURT HAD HELD THAT CLAUSE OF AG REEMENT HAS ALL THE ELEMENTS OF TRANSFER AT THE STAGE OF ENTERING I NTO THE AGREEMENT AND, THEREFORE, THERE WAS INESCAPABLE CONCLUSION TH AT THERE WAS TRANSFER OF PROPERTY BY THE OWNER TO THE DEVELOPER. ITA NOS.1007-1008, 953 TO 956/16 :- 41 - : 17.2 IN THE CASE OF SMT. PRAMEELA KRISHNA V. I TO, (2014) 111 DTR (KAR.) 364/(2014) 221 TAXMAN 485 (KAR.) CONSIDERED BY HIGH COURT OF KARNATAKA THE FACTS WERE THAT AN AGREEMENT WAS ENTE RED INTO BY THE LAND OWNER WITH A DEVELOPMENT COMPANY ON 30-6-1994. AS PER THE AGREEMENT 92% OF UNDIVIDED SHARE IN THE LAND WAS TO BE TRANSFERRED TO THE DEVELOPER AND 8% WAS TO BE RETAINED BY THE L AND OWNER. THE DEVELOPER HAS TO HANDOVER 8% OF BUILT-UP-AREA TO TH E LAND OWNER ALONG WITH CONSIDERATION OF ` 30 LAKHS. ` 10 LAKHS HAVE BEEN PAID DURING THE YEAR. SUBSEQUENTLY THE AGREEMENT WAS MOD IFIED ON 27-2- 1996 AND CONSIDERATION WAS INCREASED TO ` 40 LAKHS IN CASH AND 8.5% OF BUILT-UP-AREA. THE DEVELOPER HAD FURTHER MADE PA YMENT OF ` 25 LAKHS, AGGREGATING TO ` 35 LAKHS OUT OF ` 40 LAKHS PAYABLE. THE DEVELOPER HAD TO CONSTRUCT SEVEN BLOCKS OF THE PROP ERTY. HE HAD PUT UP FOUNDATION FOR ALL SEVEN BLOCKS. HE HAS ALSO CON STRUCTED SUPER STRUCTURE OF FOUR BLOCKS. AT THIS JUNCTURE THE SAID AGREEMENT WAS CANCELLED. ANOTHER BUILDER WAS BROUGHT IN TO COMPLE TE THE CONSTRUCTION. AN AGREEMENT DATED 8-1-2003 WAS EXECU TED ALONG WITH EARLIER BUILDER BEING A CONFIRMING PARTY. THE SUBSE QUENT BUILDER COMPLETED THE PROJECT. PURSUANT TO NOTICE U/S. 148 OF THE ACT THE LAND OWNER FILED RETURN FOR ASSESSMENT YEAR 2003-04 SHOW ING CAPITAL GAIN AND CONTENDED THAT THE POSSESSION OF LAND WAS HANDE D OVER AT THE TIME OF ENTERING INTO THE AGREEMENT DATED 8-1-2003. ALL THE APPELLATE ITA NOS.1007-1008, 953 TO 956/16 :- 42 - : AUTHORITIES EXAMINING THE FACTS HELD THAT POSSESSIO N OF THE LAND HAVE BEEN HANDED OVER PURSUANT TO INITIAL AGREEMENT DATE D 30-6-1994. CONSIDERATION HAD ALSO BEEN SUBSTANTIALLY RECEIVED. SUBSTANTIAL WORK HAS ALSO BEEN DONE BY THE DEVELOPER PURSUANT TO ABO VE AGREEMENT. CONSEQUENTLY THE TRANSFER HAD TAKEN PLACE AT THAT S TAGE. THE HIGH COURT ALSO CONFIRMED THE HOLDING OF LOWER APPELLATE AUTHORITIES. 17.3 IN THE CASE OF CIT V. SMT. RADHA BAI, 272 ITR 264 (DEL.), HOWEVER, IT WAS HELD THAT THOUGH POSSESSION HAD BEE N GIVEN TO THE DEVELOPER ALONG WITH RIGHT TO START THE BOOKING OF VARIOUS FLATS AND TO RECEIVE SALE PRICE ETC. FROM PROSPECTIVE BUYERS BUT LAND OWNERS/ASSESSEE CONTINUED TO BE THE OWNER OF THE LA ND TILL DEVELOPMENT AND RECEIPTS WERE NOT IN THE NATURE OF BUSINESS INCOME FROM JOINT BUSINESS VENTURE WITH DEVELOPER. 17.4 THE SAME VIEW HAS BEEN TAKEN BY THE TRIB UNAL, COCHIN BENCH IN THE CASE OF G. SRINIVSAN V. DCIT (140 ITD 235) A ND PUNE BENCH IN THE CASE OF MAHESH NEMICHANDRA GANESH WADE V. ITO ( 17 ITR (TRIB) 116). 17.5 IN VIEW OF THIS, WE ARE OF THE OPINION THAT T HE AO RIGHTLY BROUGHT THE CAPITAL GAINS INTO TAX IN THE ASSESSMENT YEAR 2 009-10 AND THE SAME IS CONFIRMED, AS THE A.O RIGHTLY REOPENED THE ASSESSMENT FOR THE ASSESSMENT YEAR 2009-2010 AND TAXED IN THE ASSESSME NT YEARS 2009- ITA NOS.1007-1008, 953 TO 956/16 :- 43 - : 10 AND 2010-11. THE ORDER OF THE CIT(A) ON THIS IS SUE IS REVERSED AND FINDINGS OF THE AO IS RESTORED. THE APPEAL OF THE R EVENUE IN ITA NO.1007/MDS./16 IS ALLOWED. REVENUES APPEAL - ITA NO.1008-2016 A.Y 2010-11 18. THE FIRST GROUND IS WITH REGARD TO DELETION OF ADDITION U/S.14A OF THE ACT. 18.1 SINCE WE HAVE HAVE DECIDED THE ISSUE ON THE D ISALLOWANCE U/S.14A OF THE ACT R.W.R.8D IN ASSESSEES APPEAL IN ITA NO.955/16, (A.Y. 2010-11) THIS GROUND OF REVENUE BECOMES INFRU CTUOUS. ACCORDINGLY, THIS GROUND STANDS DISMISSED. 19. THE NEXT GROUND IS WITH REGARD TO DELETION OF ADDITION OF ` 22,85,70,652/- BY HOLDING THAT THE SAME IS NOT ASSE SSABLE IN THE A.Y 2010-11. THE LD.CIT(A) HAS IGNORED THE FACT THAT TH E CONVEYANCE OF UDS WAS MADE BY WAY OF SALE DEED DATED 26.10.2009 V IDE DOCUMENT NO.3425/2009 IN F.Y 2009-10 RELEVANT TO ASSESSMENT YEAR 2010-11. 20. AS SEEN FROM THE FACTS OF THE CASE, THE ASSESS EE ENTERED INTO JDA ON 15.12.2004 AND ASSIGNMENT AGREEMENT DATED 2 8.02.2006 AND ALSO POA FOR TRANSFER OF 60% UDS OF LAND AT PERUNGU DI TO RMZ INFOTECH (P) LTD IN EXCHANGE OF BUILT UP AREA TO BE CONSTRUCTED BY RMZ ITA NOS.1007-1008, 953 TO 956/16 :- 44 - : INFOTECH (P) LTD ON 40% OF THE UDS OF LAND RETAINED BY THE ASSESSEE. THE ASSESSEE OFFERED CAPITAL GAINS ADOPTING GUIDE L INE VALUE (GLV) OF ` 335/- PER SQ. FT. AS ON THE DATE OF POA OF 12.05.20 06, COMPUTING SALE CONSIDERATION OF ` 5,86,40,410/- AND THE CAPITAL GAINS OF ` 3,36,23,375/- FOR ASSESSMENT YEAR 2007-08. THE AO CONSIDERED THE COST OF CONSTRUCTION AT 1706 PER SQ.FT. FOR BUILT UP AREA CONSTRUCTED AT 40% OF UDS OF LAND RETURNED BY THE ASSESSEE AT ` 51,81,92,382/- AND THEREAFTER HE DEDUCTED THE CAPITAL GAINS ALREADY OF FERED FOR ASSESSMENT YEAR 2007-08 AND COMPUTED THE BALANCE AT ` 48,45,69,007/- AS CONSIDERATION FOR TRANSFER OF 60% OF UDS LAND AT PERUNGUDI TO RMZ INFOTECH (P) LTD AND COMPUTED HE C APITAL GAINS FOR ASSESSMENT YEAR 2009-10 & 2010-11 AS FOLLOWS:- F.Y A.Y CAPITAL GAINS 2008 - 09 2009 - 10 `25,59,98,355 2009 - 10 2010 - 11 `22,85,70,652 TOTAL `48,45,69,007 AO CONSIDERED THE DETERMINATION OF CAPITAL GAINS IN THESE TWO ASSESSMENT YEARS BASED ON THE SALE DEED EXECUTED BY THE ASSESSEE IN FAVOUR OF RMZ INFOTECH (P) LTD ON 04.09.2008 AND 26 .10.2009 VIDE DOCUMENT NO.3689/08 & 3425/09 RESPECTIVELY, EXECUTE D BY TE ASSESSEE COMPANY AND FOUR OTHERS DURING THE FOR ASS ESSMENT YEAR ITA NOS.1007-1008, 953 TO 956/16 :- 45 - : 2008-09 & 2009-10, AS DISCUSSED BY THE AO IN ASSESS MENT ORDER AT PARA 5.7 TO 5.14 FOR ASSESSMENT YEAR 2010-11. 21. NOW THE CONTENTION OF THE LD.D.R IS THAT SINCE THE YEAR IN WHICH THE ASSESSEE ENTERED INTO JDA, THERE WAS NO D EVELOPMENT OF WHATSOEVER AND THE ACTUAL TRANSFER TOOK PLACE ONLY ON EXECUTION OF SALE DEED CITED SUPRA AND THE CAPITAL GAINS TO BE C OMPUTED ON THE BASIS OF COST OF CONSTRUCTION INCURRED IN RESPECT O F SHARE OF CONSTRUCTED AREA ALLOTTED TO THE ASSESSEE ON UNDIVIDED SHARE OF LAND OF 40% AND IT CANNOT BE CONSIDERED ON THE DATE OF SIGNING OF JDA AND ALL THE CONDITIONS RELEVANT TO THE TRANSFER IN TERMS OF SEC .2(47)(V) HAS NOT TAKEN PLACE. 22. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN VIEW OF OUR FINDINGS IN ITA NO.1007/MDS ./16 ON THE ISSUE OF TAXING OF THE INCOME ARISING OUT OF THE TRANSFER OF PROPERTY AT PERUNGUDI WAS TAKEN PLACE IN THE ASSESSMENT YEARS 2 009-10 AND 2010- 11 AND IT WAS NOT TAKEN PLACE IN THE ASSESSMENT YEA R 2007-08 AND IT SHOULD CONSIDERED TO BE TAKEN PLACE ONLY ON REGISTR ATION OF SALES DEED CITED SUPRA. ACCORDINGLY, WE REVERSE THE ORDER OF LD.CIT(A) FOR THIS ASSESSMENT YEAR ALSO AND RESTORE TO THE FILE OF LD. ASSESSING OFFICER. HENCE, THIS GROUND RAISED BY THE REVENUE STANDS ALL OWED. ITA NOS.1007-1008, 953 TO 956/16 :- 46 - : 23. IN THE RESULT, BOTH THE APPEALS OF THE REVENU E IN ITA NOS.1007 & 1008/MDS./16 ARE PARTLY ALLOWED AND THE APPEALS OF THE ASSESSEE IN ITA NOS.953/MDS./2016 IS DISMISSED AND IN ITA NOS. 954 TO 956/MDS./12 ARE PARTLY ALLOWED. ORDER PRONOUNCED ON 15 TH MARCH 2017, AT CHENNAI. SD/ - SD/ - ( ! . ' #$% ) ( DUVVURU RL REDDY ) ) & / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER '#( / CHENNAI )* / DATED: 15 TH MARCH, 2017. K S SUNDARAM *#+ , -. /#. / COPY TO: 1 . 01 / APPELLANT 3. 2 () / CIT(A) 5. .34 , 5 / DR 2. ,601 / RESPONDENT 4. 2 / CIT 6. 4% 7 / GF