Appeal Details
Counselvise Citation
[2013] 140 COUNSELVISE.COM (IT) 68438 (ITAT-CHANDIGARH)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 9 month(s) 2 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
23-08-2013
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
18-10-2012
Assessment Year
2008-2009
Appeal Filed On
21-11-2011
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, A.M AND MS. SUSHMA CHOWLA, JM ITA NO. 1118/CHD/2011 ASSESSMENT YEAR : 2008-09 SUKHDEV SINGH V I.T.O. WARD 6(3) 4507-B, SECTOR 70 MOHALI MOHALI ABGPS 6787B (APPELLANT) (RESPONDENT) APPELLANT BY SHRI TEJ MOHAN SINGH RESPONDENT BY: SHRI MANJIT SINGH DATE OF HEARING 8.8.2013 DATE OF PRONOUNCEMENT 23.8.2013 O R D E R PER T.R.SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER DATED 1.8 .2011 OF THE LD. CIT(A), CHANDIGARH. 2 IN THIS APPEAL THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: 1.THAT THE ORDERS PASSED BY THE LOWER AUTHORITIES ARE ERRONEOUS, ILLEGAL AND WITHOUT JURISDICTION. THE ORDERS HAVE B EEN PASSED AGAINST THE FACTS OF THE CASE. 2. THAT THE ORDERS PASSED BY THE LOWER AUTHORITY AR E BASED ON WRONG INTERPRETATION OF THE SECTION 45 OF INCOME TA X ACT. 3.THAT THE AUTHORITIES BELOW HAVE FAILED TO APPRECI ATE CORRECTLY, THE CONTENTS OF THE AGREEMENT ENTERED BETWEEN THE P ARTIES. 4. THAT THE AUTHORITIES HAVE ERRED IN CHARGING TAX ON THE ENTIRE CONSIDERATION WHICH HAS NOT EVEN BECOME DUE AS ON D ATE. 5. THAT THE AUTHORITIES HAVE NOT APPRECIATED THE IS SUE THAT THE PORTION OF LAND WHICH STANDS TRANSFERRED ONLY THAT CAN BE BROUGHT TO TAX. 2 6. THAT ON THE CORRECT INTERPRETATION OF THE SECTIO NS AND ON PROPER APPRECIATION OF CLAUSES OF THE AGREEMENT, IT WOULD EMERGE THAT THE TAXING OF THE ENTIRE AMOUNT IS AGAINST LAW. 7. THAT THE ASSESSING OFFICE HAS FALLEN IN ERROR IN INCLUDING THE COST OF FLATS ON ESTIMATION BASIS WHICH COULD NOT B E ASCERTAINED AS NO CONSTRUCTION OR OTHER ACTIVITY HAS BEEN COMME NCED BY THE DEVELOPER AND HENCE NO CAPITAL GAINS COULD BE LEVIE D ON THE COST OF FLATS ON THE DATE OF AGREEMENT. 8. THAT THE PRESENT CASE WAS NOT A CASE WHERE PENAL TY PROCEEDINGS UNDER SECTION 271(1)(C) SHOULD HAVE BEE N INITIATED. 3. GROUNDS NO. 1 TO 7 - AFTER HEARING BOTH THE PARTIES WE FIND THAT THE ASSESSEE IS A MEMBER OF THE PUNJABI COOP H OUSING BUILDING SOCIETY LTD. THE ASSESSEE IS OWNER OF A PL OT MEASURING 500 SQYD AND WAS ENTITLED TO MONETARY CONSIDERATION OF RS. 80 LAKHS AND ONE FURNISHED FLAT MEASURING 2250 SQFT WH ICH HAS BEEN VALUED BY THE ASSESSING OFFICER @ RS. 4500 SQFT. S INCE THE LAND WAS TRANSFERRED TO TATA HOUSING DEVELOPMENT COMPANY LTD. THE ASSESSING OFFICER APPLIED WHO CONSIDERATION AMOUNTI NG TO RS. 1,81,25,000/- TO CAPITAL GAIN TAX WHICH HAS BEEN CONFIRMED BY THE LD. CIT(A). 4 BEFORE US, BOTH THE PARTIES ADOPTED SIMILAR ARGUM ENTS WHICH WERE ADVANCED IN CASE OF SHRI CHARANJIT SINGH ATWAL AND OTHERS IN ITA NO. 448/CHD/2011 AND OTHERS. 5 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN CASE OF SHRI CHARANJIT SINGH ATWAL AND OTHERS IN ITA NO. 44 8/CHD/2011 AND OTHERS AND THE SAME HAS BEEN ADJUDICATED IN PAR A 27 TO 110 WHICH ARE AS UNDER: 3 27 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CA REFULLY GONE THROUGH THE WRITTEN SUBMISSIONS FILED BY BOTH THE P ARTIES IN THE LIGHT OF MATERIAL ON RECORD, PAPER BOOKS AND VARIOUS JUDGMEN TS CITED BY THE PARTIES. THE MAIN ISSUE IS WHETHER ASSESSEE IS LIA BLE TO CAPITAL GAIN TAX IN THE YEAR UNDER CONSIDERATION I.E ASSESSMENT YEAR 2007-08 IN VIEW OF THE JDA. FOR CHARGING CAPITAL GAINS, THE CHARGING SECTION IS 45 AND THE RELEVANT PORTION IS AS UNDER:- SECTION 45. [(1)] ANY PROFITS OR GAINS ARISING FRO M 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 HEA D CAPITAL GAINS, AND SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOU S YEAR IN WHICH THE TRANSFER TOOK PLACE. 28 THE PLAIN READING OF THE ABOVE PROVISION WOULD S HOW THAT CHARGING AN ITEM OF INCOME UNDER THE HEAD CAPITAL GAINS REQUI RE THREE INGREDIENTS I.E. (I) THERE SHOULD BE SOME PROFIT. (II) SUCH PR OFIT MUST BE ARISING ON ACCOUNT OF TRANSFER AND (III) THERE SHOULD BE CAPI TAL ASSET WHICH HAS BEEN TRANSFERRED. THERE IS NO DISPUTE THAT A CAPITA L ASSET WAS INVOLVED AND THERE WAS SOME PROFIT ALSO I.E. WHY ASSESSEE HA S HIMSELF RETURNED INCOME UNDER THE HEAD CAPITAL GAINS;. THE DISPUTE IS MAINLY ON ACCOUNT OF TRANSFER AND THAT TOO WHETHER THE TRANSFER COULD BE COVERED UNDER CLAUSES (II), (V) & (VI) OF SECTION 2(47) SO AS TO BRING INTO PICTURE THE WHOLE OF CONSIDERATION ARISING ON TRANSFER OF SUCH ASSETS. WE SHALL DEAL WITH EACH OF THE ASPECT IN DETAIL AT APPROPRIATE TI ME. 29. APART FROM CHARGING PROVISIONS U/S 45 ANOTHER I MPORTANT PROVISION IS SECTION 48 WHICH DEALS WITH THE MODE O F COMPUTATION AND RELEVANT PORTION READS AS UNDER:- 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 CAPI TAL ASSET THE FOLLOWING AMOUNTS, NAMELY : (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVEL Y IN CONNECTION WITH SUCH TRANSFER; (II) THE COST OF ACQUISITION OF THE ASSET AND THE COST OF ANY IMPROVEMENT THERETO : 4 30 AGAIN PLAIN READING WOULD SHOW THAT CAPITAL GAIN WOULD BE COMPUTED BY CONSIDERING THE FULL VALUE OF CONSIDERATION WHET HER RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER. THEREFORE, I T IS NOT ONLY THE CONSIDERATION RECEIVED WHICH IS RELEVANT BUT THE CO NSIDERATION WHICH HAS ACCRUED IS ALSO RELEVANT. 31. THE EXPRESSION TRANSFER HAS BEEN DEFINED U/S 2(47) OF THE ACT WHICH READS AS UNDER:- 2 (47) [TRANSFER, IN RELATION TO A CAPITAL ASSE T, 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 CAR RIED 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 T HE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A O F 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, COMPAN Y OR OTHER ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT O R ANY ARRANGEMENT OR IN ANY OTHER MANNER WHATSOEVER) WHICH HAS THE EF FECT OF TRANSFERRING, OR ENABLING THE ENJOYMENT OF, ANY IMM OVABLE 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 ;] CLAUSES (V) & (VI) TO SECTION 2(47) OF THE ACT HAVE BEEN INSERTED BY FINANCE ACT, 1987 W.E.F. 1.4.1988. THE PURPOSE OF THIS INSERTION HAS BEEN EXPLAINED BY CBDT IN CIRCULAR NO. 495 DATED 22 .9.1987. THE RELEVANT PART 11.1 AND 11.2 OF THE CIRCULAR READS A S UNDER:- 11.1 THE EXISTING DEFINITION OF THE WORD ' TRANSF ER ' IN SECTION 2(47) DOES NOT INCLUDE TRANSFER OF CERTAIN RIGHTS ACCRUIN G TO A PURCHASER, BY WAY OF BECOMING A MEMBER OR ACQUIRING SHARES IN A CO-OPERATIVE SOCIETY, COMPANY, OR AS WAY OF ANY AGREEMENT OR ANY ARRANGEMENT WHEREBY SUCH ANY BUILDING WHICH IS EITHER BEING CON STRUCTED OR WHICH IS TO BE CONSTRUCTED. TRANSACTIONS OF THE NATURE REFE RRED TO ABOVE ARE NOT 5 REQUIRED TO BE REGISTERED UNDER THE REGISTRATION AC T, 1908. SUCH ARRANGEMENTS CONFER THE PRIVILEGES OF OWNERSHIP WIT HOUT TRANSFER OF TITLE IN THE BUILDING AND ARE A COMMON MODE OF ACQUIRING FLATS PARTICULARLY IN MULTI-STOREYED CONSTRUCTIONS IN BIG CITES. THE DEFI NITION ALSO DOES NOT COVER CASES WHERE POSSESSION IS ALLOWED TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT, OF THE NATURE REFERRED T O IN SECTION 53A OF TRANSFER OF PROPERTY ACT, 1882. NEW SUB-CLAUSES (V) & (VI) HAVE BEEN INSERTED IN SECTION2(47) TO PREVENT AVOIDANCE OF C APITAL GAINS LIABILITY BY RECOURSE TO TRANSFER OF RIGHTS IN THE MANNER REF ERRED 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 ENJOY MENT OF PROPERTY RIGHTS THROUGH WHAT IS COMMONLY KNOWN AS POWER OF ATTORNEY ARRANGEMENTS. THE PRACTICE IN SUCH CASES IS ADOPTED NORMALLY WHER E TRANSFER OF OWNERSHIP IS LEGALLY NOT PERMITTED. A PERSON HOLDIN G THE POWER OF ATTORNEY IS AUTHORIZED THE POWERS OF OWNER, INCLUDI NG THAT OF MAKING CONSTRUCTION. THE LEGAL OWNERSHIP IN SUCH CASES CO NTINUES TO BE WITH THE TRANSFEROR. 32 BEFORE INSERTION OF THE CLAUSE (V) & (VI) TO SE CTION 2(47) OF THE ACT, THE POSITION OF LAW WAS THAT UNLESS AND UNTIL A SALE DEED WAS EXECUTED FOR TRANSFER OF IMMOVABLE PROPERTY, THE SA ME COULD NOT BE CONSTRUED AS TRANSFER FOR THE PURPOSE OF CHARGING C APITAL GAIN TAX. THIS WAS PARTICULARLY SO IN THE LIGHT OF VARIOUS JU DGMENTS PARTICULARLY THE JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF A LAPATI VENKATRAMIAN V CIT (57 ITR 185) (SC). IN THIS CASE IT WAS HELD THAT IN THE CONTEXT OF TRANSFER FOR THE PURPOSE OF CAPIT AL GAIN TAX, WHAT IS MEANT BY TRANSFER IS THE EFFECTIVE CONVEYANCE OF TH E CAPITAL ASSET BY A TRANSFEROR TO THE TRANSFEREE. DELIVERY OF POSSESSI ON AND AGREEMENT TO SELL BY ITSELF COULD NOT CONSTITUTE CONVEYANCE OF T HE IMMOVABLE PROPERTY. IN THE MEANTIME APART FROM THIS DECISIO N A PRACTICE CAME INTO VOGUE BY WHICH CERTAIN PROPERTIES WERE BEING T RANSFERRED WITHOUT EXECUTING THE PROPER SALE DEEDS. THIS WAS BEING DO NE BECAUSE THERE WAS RESTRICTION ON SALE OF PROPERTIES IN VARIOUS TO WNS E.G. IN CASE OF LEASE HOLD PLOTS AND FLATS IN DELHI IF THE SAME WER E TO BE TRANSFERRED, PERMISSION WAS REQUIRED TO BE TAKEN FROM THE GOVERN MENT / DDA AND TRANSFEROR WAS REQUIRED TO PAY 50% OF THE MARKET VA LUE COST (I.E. UNEARNED INCREASE) TO THE GOVERNMENT. TO AVOID SUCH PAYMENTS AND / OR ALSO TO AVOID THE PAYMENT OF STAMP DUTY OR CUMBE RSOME PROCEDURE OF OBTAINING PERMISSION, SOME PROPERTIES WERE BEING SOLD BY WAY OF SALE AGREEMENT AND ALSO EXECUTION OF GENERAL POWER OF ATTORNEY AND POSSESSION WAS GIVEN ON RECEIPT OF FULL CONSIDERATI ON WITHOUT EXECUTING THE PROPER SALE DEEDS ETC. WHICH AS MENTI ONED EARLIER WAS NOT EVEN PERMISSIBLE IN SOME CASES. THESE TRANSACT IONS ARE POPULARLY CALLED POWER OF ATTORNEY TRANSACTIONS. TO AVOID THESE AND TO STOP THE LEAKAGE OF REVENUE, THE PARLIAMENT HAS INSERTED CLAUSES (V) & (VI) 6 TO SECTION 2(47) SO AS SUCH TYPE OF TRANSACTIONS AR E ALSO BE BROUGHT IN TO TAXATION NET. HOWEVER, INTERPRETATIONS OF THESE CLAUSES HAS LED TO LOT OF LITIGATION AND THE MAIN POINT OF LITIGATION WAS THAT AT WHAT POINT OF TIME THE POSSESSION CAN BE SAID TO HAVE BEEN GIV EN. IN THE PRESENT CASE, THE REVENUE HAS MAINLY RELIED ON TWO DECISION S NAMELY (I) CHATURBHUJ DWARKADAS KAPADIA V CIT 260 ITR 491 (BOM .) AND; (II) AUTHORITY FOR ADVANCE RULING (AAR) NEW DELHI IN THE CASE OF JASBIR SINGH SARKARIA 294 ITR 196. 33. IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA V C IT (SUPRA), THE FACTS BEFORE THE HON'BLE BOMBAY HIGH COURT WERE THA T ASSESSEE WHO WAS AN INDIVIDUAL HAD 44/192 UNDIVIDED SHARE IN A N IMMOVABLE PROPERTY IN GREATER BOMBAY WHICH CONSISTED OF VARIO US LANDS AND BUILDINGS. BY AGREEMENT DATED AUGUST 18, 1994, THE ASSESSEE AGREED TO SELL TO FLOREAT INVESTMENT LTD, (HEREIN REFERRED TO FLOREAT) HIS SHARE OF IMMOVABLE PROPERTY FOR A TOTAL CONSIDERATI ON OF RS. 1,85,63,220/- WITH RIGHT TO SAID FLOREAT TO DEVELO P THE PROPERTY IN ACCORDANCE WITH THE RULES / REGULATIONS FRAMED BY L OCAL AUTHORITIES. FOR THIS PURPOSE, THE ASSESSEE ALSO AGREED TO EXECU TE A LIMITED POWER OF ATTORNEY AUTHORIZING FLOREAT TO DEAL WITH THE PR OPERTY AND ALSO OBTAIN PERMISSIONS AND APPROVALS FROM VARIOUS AUTHO RITIES. UNDER CLAUSE 11 OF THE AGREEMENT, IT WAS PROVIDED THAT AF TER FLOREAT WAS GIVEN AN IRREVOCABLE LICENSE TO ENTER UPON THE ASSE SSEES SHARE OF PROPERTY AND AFTER FLORET INVESTMENT HAVE OBTAINED ALL NECESSARY APPROVALS, THE FLORET WAS ENTITLED TO DEMOLISH VARI OUS BUILDINGS FOR SETTLING THE CLAIMS OF THE TENANTS. UNDER CLAUSE 14 OF THE AGREEMENT, THE ASSESSEE WAS ENTITLED TO RECEIVE PROPORTIONATE RENT TILL THE PAYMENT OF LAST INSTALLMENTS AND TILL THAT TIME ASS ESSEE WAS BOUND TO PAY ALL OUTGOINGS. UNDER CLAUSE 20 OF THE AGREEME NT, IT WAS AGREED THAT SALE SHALL BE COMPLETED BY EXECUTION OF CONVEY ANCE, HOWEVER, TILL THE MATTER WAS ADJUDICATED BY THE HON'BLE HIGH COUR T, NO CONVEYANCE WAS EXECUTED. PURSUANT TO THIS AGREEMENT, FLOREAT OBTAINED VARIOUS PERMISSIONS NAMELY (I) CLEARANCE FROM CRZ AUTHORITY DATED FEBRUARY 7, 1996; (II) LETTER FROM ULC FOR REDEVELOPMENT OF PROPERTY DATED APRIL 26, 1995. OTHER PERMISSIONS WERE ALSO OBTAINED DUR ING THE FINANCIAL YEAR ENDING MARCH 31, 1996 RELEVANT TO ASSESSMENT Y EAR 1996-97. BY MARCH, 31, 1996, FLOREAT HAD PAID ALMOST THE ENTIRE CONSIDERATION EXPECT FOR A SMALL SUM OF RS. 9,98,000/-. HOWEVER, THE COMMENCEMENT CERTIFICATE PERMITTING CONSTRUCTION OF THE BUILDING WAS ISSUED ON NOVEMBER 15, 1996. THE POWER OF ATTORNEY WAS EXECUTED ON MARCH 12, 1999. THE QUESTION AROSE WHETHER LIAB ILITY OF THE 7 ASSESSEE FOR CAPITAL GAIN AROSE IN THE ASSESSMENT Y EAR 1996-97 OR 1999-2000. THE OBSERVATION OF THE COURT HAS BEEN S UMMARIZED IN HEAD NOTE AS UNDER:- CLAUSES (V) AND (VI) WERE INTRODUCED IN SECTION 2( 47) OF THE INCOME-TAX ACT, 1961, WITH EFFECT FROM APRIL 1, 198 8. THEY PROVIDE THAT TRANSFER INCLUDES (I) ANY TRANSACTIO N WHICH ALLOWS POSSESSION TO BE TAKEN/RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRA NSFER OF PROPERTY ACT, 1882, AND (II) ANY TRANSACTION ENTERE D INTO IN ANY MANNER WHICH HAS THE EFFECT OF TRANSFERRING OR ENAB LING THE ENJOYMENT OF ANY IMMOVABLE PROPERTY. 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 UND ER THE GENERAL LAW. UNDER SECTION 2(47)(V) ANY TRANSACTION INVOLVI NG ALLOWING OF POSSESSION TO BE TAKEN OVER OR RETAINED IN PART PER FORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A O F THE TRANSFER OF PROPERTY ACT WOULD COME WITHIN THE AMBIT OF SECT ION 2(47)(V). IN ORDER TO ATTRACT SECTION 53A, THE FOLLOWING COND ITIONS NEED TO BE FULFILLED. THERE SHOULD BE A CONTRACT FOR CONSID ERATION ; IT SHOULD BE IN WRITING ; IT SHOULD BE SIGNED BY THE T RANSFEROR ; IT SHOULD PERTAIN TO TRANSFER OF IMMOVABLE PROPERTY ; THE TRANSFEREE SHOULD HAVE TAKEN POSSESSION OF THE PROPERTY ; LAST LY, THE TRANSFEREE SHOULD BE READY AND WILLING TO PERFORM H IS PART OF THE CONTRACT. EVEN ARRANGEMENTS CONFIRMING PRIVILEGES O F OWNERSHIP WITHOUT TRANSFER OF TITLE COULD FALL UNDER SECTION 2(47)(V). SECTION 2(47)(V) WAS INTRODUCED IN THE ACT FROM THE ASSESSM ENT YEAR 1988-89 BECAUSE PRIOR THERETO, IN MOST CASES, IT WA S ARGUED ON BEHALF OF THE ASSESSEE THAT NO TRANSFER TOOK PLACE TILL EXECUTION OF THE CONVEYANCE. ASSESSEES USED TO ENTER INTO AGR EEMENTS FOR DEVELOPING PROPERTIES WITH BUILDERS AND UNDER THE A RRANGEMENT WITH THE BUILDERS, THEY USED TO CONFER PRIVILEGES O F OWNERSHIP WITHOUT EXECUTING CONVEYANCE AND TO PLUG THAT LOOPH OLE, SECTION 2(47)(V) CAME TO BE INTRODUCED IN THE ACT. . HELD, THAT SECTION 2(47)(V) READ WITH SECTION 45 I NDICATES 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 UNDER THE GEN ERAL LAW. IN THIS CASE, THE TEST HAD NOT BEEN APPLIED BY THE DEP ARTMENT. NO REASON HAD BEEN GIVEN WHY THAT TEST HAD NOT BEEN AP PLIED, PARTICULARLY WHEN THE AGREEMENT IN QUESTION, READ A S A WHOLE, SHOWED THAT IT WAS A DEVELOPMENT AGREEMENT. ONCE UN DER CLAUSE 8 OF THE AGREEMENT A LIMITED POWER OF ATTORNEY WAS INTENDED TO BE GIVEN TO THE DEVELOPER TO DEAL WITH THE PROPERTY, T HEN THE DATE OF THE CONTRACT, VIZ., AUGUST 18, 1994, WOULD BE THE R ELEVANT DATE TO DECIDE THE DATE OF TRANSFER UNDER SECTION 2(47)(V) AND, IN WHICH EVENT, THE QUESTION OF SUBSTANTIAL PERFORMANCE OF T HE CONTRACT THEREAFTER WOULD NOT ARISE 34. THE HON'BLE COURT REFERRED TO CLAUSES (V) & (VI) OF SECTION 2(47) AND MADE THE FOLLOWING OBSERVATIONS AT PAGE 499 OF THE REPORT: 8 .. THE ABOVE TWO CLAUSES WERE INTRODUCED WITH EF FECT FROM APRIL 1,1988. THEY PROVIDE THAT TRANSFER INCLUDES (I) ANY TRANSACTION WHICH ALLOWS POSSESSION TO BE TAKEN/RET AINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT, AND (I I) ANY TRANSACTION ENTERED INTO IN ANY MANNER WHICH HAS TH E EFFECT OF TRANSFERRING OR ENABLING THE ENJOYMENT OF ANY IMMOV ABLE PROPERTY (SEE SECTION 269UA(D)). THEREFORE, IN THES E 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 UND ER THE GENERAL LAW (SEE KANGA AND PALKHIVALAS LAW AND PRA CTICE OF INCOME-TAX-VIII EDITION, PAGE 766). THIS TEST IS IM PORTANT TO DECIDE THE YEAR OF CHARGEABILITY OF THE CAPITAL GAI NS. 35 THE ABOVE OBSERVATIONS WERE MADE ON THE BASIS OF OPINION EXPRESSED BY LD. AUTHOR IN THE COMMENTARY THE LAW AND PRAC TICE OF INCOME TAX BY KANGA AND PALKHIVALA EIGHTH EDITION AT PAGE 766. R ELEVANT OBSERVATIONS READ AS UNDER: CLS. (V) AND (VI) OF S. 2(47), INSERTED BY THE FIN ANCE ACT 1987 WITH EFFECT FROM 1 ST APRIL 1988, PROVIDE THAT TRANSFER INCLUDES (A) A NY TRANSACTION WHICH INVOLVES THE ALLOWING OF THE POSSESSION OF AN IMMOV ABLE PROPERTY (S. 269UA(D)) TO BE TAKEN OR RETAINED IN PART PERFORMAN CE OF A CONTRACT OF THE NATURE REFERRED TO IN S.53A OF THE TRANSFER OF PROP ERTY ACT 1882, AND (B) ANY TRANSACTION ENTERED INTO IN ANY MANNER WHICH HAS TH E EFFECT OF TRANSFERRING, OR ENABLING THE ENJOYMENT OF, ANY IMMOVABLE PROPERT Y (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 T HE TRANSFER OF THE IMMOVABLE PROPERTY IS NOT EFFECTIVE OR COMPLETE UND ER GENERAL LAW. 36 FROM THE ABOVE, IT IS CLEAR THAT COURT WAS OF TH E VIEW THAT IN CASE ANY TRANSACTION COVERED BY CLAUSE (V) AND (VI) TO SECTION 2(47) THE LIABILITY FOR CAPITOL GAIN WOULD ARISE ON THE D ATE WHEN SUCH TRANSACTIONS ARE ENTERED INTO. IN THE JUDGMENT AT SOME OTHER PLACES, THE SIMILAR OBSERVATIONS HAVE BEEN MADE. HOWEVER, DESPITE THIS OBSERVATION THE CASE WAS DECIDED IN FAVOUR OF THE A SSESSEE. THE REASON FOR THE SAME HAVE BEEN GIVEN IN THE JUDGMENT ITSELF. FIRSTLY IT IS OBSERVED THAT PROVISION OF SECTION 2(47)(V) OF THE ACT WERE NOT INVOKED BY THE REVENUE ITSELF. THIS BECOMES CLEAR FROM THE FO LLOWING PARA: IT WAS ARGUED ON BEHALF OF THE ASSESSEE THAT THERE WAS NO EFFECTIVE TRANSFER TILL GRANT OF IRREVOCABLE LICENCE. IN THIS CONNECT ION, THE JUDGMENT OF THE HON'BLE SUPREME COURT WERE CITED ON BEHALF OF THE A SSESSEE, 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 QUESTIO N IS A DEVELOPMENT AGREEMENT. SUCH DEVELOPMENT AGREEMENTS DO NOT CONST ITUTE TRANSFER IN GENERAL LAW. THEY ARE SPREAD OVER A PERIOD OF TIME. THEY CONTEMPLATE VARIOUS STAGES. THE BOMBAY HIGH COURT IN VARIOUS JU DGMENTS HAS TAKEN THE VIEW IN SEVERAL MATTERS THAT THE OBJECT OF ENTERING INTO A DEVELOPMENT AGREEMENT IS TO ENABLE A PROFESSIONAL BUILDER / CON TRACTOR TO MAKE PROFITS BY COMPLETING THE BUILDING AND SELLING THE FLATS AT A PROFIT. THAT THE AIM OF THESE PROFESSIONAL CONTRACTORS WAS ONLY TO MAKE PROFITS B Y COMPLETING THE BUILDING AND, THEREFORE, NO INTEREST IN THE LAND STANDS CREA TED IN THEIR FAVOUR UNDER SUCH AGREEMENTS. THAT SUCH AGREEMENTS ARE ONLY A MO DE OF REMUNERATING THE BUILDER FOR HIS SERVICES OF CONSTRUCTING THE BU ILDING (SEE GURUDEV 9 DEVELOPERS V. KURLA KONKAN NIWAS CO-OPERATIVE HOUSI NG SOCIETY [2003] 3 MAH LJ 131). IT IS PRECISELY FOR THIS REASON THAT T HE LEGISLATURE HAS INTRODUCED SECTION 2(47)(V) READ WITH SECTION 45 WH ICH INDICATES THAT CAPITAL GAINS IS TAXABLE IN THE YEAR IN WHICH SUCH TRANSACT IONS ARE ENTERED INTO EVEN IF THE TRANSFER OF IMMOVABLE PROPERTY IS NOT EFFECT IVE 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 QUESTIO N, 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 H AVE COME TO THE CONCLUSION THAT THE TRANSFER TOOK PLACE DURING THE ACCOUNTING YEAR ENDING MARCH 31,1996, AS SUBSTANTIAL PAYMENTS WERE EFFECTE D DURING THAT YEAR AND SUBSTANTIAL PERMISSIONS WERE OBTAINED. IN SUCH CASE S OF DEVELOPMENT AGREEMENTS, ONE CANNOT GO BY SUBSTANTIAL PERFORMANC E OF A CONTRACT. IN SUCH CASES, THE YEAR OF CHARGEABILITY IS THE YEAR I N WHICH THE CONTRACT IS EXECUTED. THIS IS IN VIEW OF SECTION 2 (47)(V) OF T HE ACT. SECONDLY IT IS MENTIONED IN THE ORDER OF THE COURT THAT LAW WAS NOT VERY CLEAR ON THIS POINT AND SINCE THE ASSESSEE HAS ADMI TTED 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 ORDER OF THE TRIBUNAL WHERE CERTAIN DOCUMENTS WERE MENTIONED TO HAVE BEEN EXECUTED BEFORE MARCH 31, 1996 E.G. THE FOLLOWING OBSERVATIO N OF THE TRIBUNAL WAS NOT FOUND CORRECT AS SOMETHING IS DONE ON IST A PRIL, 1997 THEN THE SAME CANNOT FALL IN THE YEAR ENDING 31.3.1996. FROM THE DATES IT IS EVIDENT THAT FROM THE VERY NE XT DAY, I.E., APRIL 1, 1997, FROM THE END OF THE FINANCIAL YEAR ENDING ON MARCH 31, 1996, THE BUILDER WAS USING THE WELL WATER AGAINST PAYMEN T OF RELEVANT CHARGES TO THE ASSESSEE. 37 THUS IT IS VERY CLEAR THAT IN CASES WHERE AN ARR ANGEMENT HAD BEEN ENTERED INTO BY AN ASSESSEE IN TERMS OF CLAUSE (V) OF SECTION 2(47) WHICH HAS EFFECT OF HANDING OVER THE POSSESSI ON THEN THE TRANSFER IS SAID TO HAVE BEEN TAKEN PLACE ON THE DA TE OF ENTERING INTO SUCH ARRANGEMENT. 38. WE DO NOT FIND ANY FORCE IN THE CONTENTION OF T HE LD. COUNSEL FOR THE ASSESSEE THAT JUDGMENT HAS TO BE READ IN T HE CONTEXT OF THE DECISION MADE IN SUCH JUDGMENT. IN FACT, IT IS WEL L SETTLED THAT DOCTRINE OF PRECEDENT WHICH MEANS WHAT NEEDS TO BE FOLLOWED LATER ON PARTICULARLY BY SUBORDINATE TRIBUNALS AND COURTS IS THE RATIO OF A PARTICULAR JUDGMENT GIVEN BY THE HIGHER COURT OR FO RUM. FURTHER, THERE IS NO FORCE IN THE CONTENTION THAT DECISION O F THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKAD AS KAPADIA V CIT (SUPRA) DOES NOT SHOW THAT THE DATE OF AGREEMEN T ITSELF CONSTITUTE 10 THE TRANSFER. AGAIN THERE IS NO FORCE EVEN IN THE CONTENTION THAT IN THAT CASE IT WAS ULTIMATELY DECIDED THAT CAPITAL GA IN TAXES IS CHARGEABLE IN ASSESSMENT YEAR 1999-2000 BECAUSE OF THE REASONS GIVEN IN ABOVE NOTED PARAS PARTICULARLY BECAUSE THE REVENUE ITSELF NEVER INVOKED THE PROVISIONS OF SECTION 2(47)(V) OF THE ACT AND HELD IT TO BE TAXABLE IN ASSESSMENT YEAR 1996-97. NO DOUBT IN THAT CASE ULTIMATELY IT WAS HELD THAT CAPITAL GAIN WAS IN ASS ESSMENT YEAR 1999- 2000 BUT COURT HAD MADE IT VERY CLEAR THAT THIS IS FIRST TIME THAT LAW IS BEING LAID DOWN AND GUIDELINES ARE BEING ISSUED WHI CH MEANS THAT THERE WAS A CONFUSION EARLIER. CLAUSES (V) & (VI) TO SECTION 2(47) WERE INTRODUCED IN THE YEAR ONLY IN 1998. PERHAPS C OURT TOOK A LENIENT VIEW BECAUSE OF THESE REASONS AND HELD THAT CAPITAL GAIN WAS TAXABLE IN ASSESSMENT YEAR 1999-2000. IT IS QUITE CLEAR THAT RATIO OF THE ABOVE DECISION IS THAT IN CASE OF ANY ARRANGEMENTS OR TRANSACTIONS WHEREBY THE OTHER PARTY BECOMES ENTITL ED TO ENJOY THE PROPERTY THEN THAT DATE OF SUCH TRANSACTION ITS ELF NEEDS TO BE CONSTRUED AS THE DATE OF TRANSFER. 39. THE SECOND RELEVANT DECISION CITED BY THE REVEN UE IS BY AUTHORITY FOR ADVANCE RULING (AAR) NEW DELHI IN THE CASE OF JASBIR SINGH SARKARIA (SUPRA) . IN THAT CASE THE ASSESSEE WAS CO-OWNER OF AGRICULTURAL LAND MEASURING ABOUT 27.7 ACRES AND HI S SHARE WAS 4/9. THE CO-OWNER DECIDED TO DEVELOP THE LAND BY CONSTRU CTING RESIDENTIAL COMPLEX THROUGH DEVELOPER AND ENTERED INTO A COLLAB ORATION AGREEMENT ON 8.6.2005 WITH M/S SANTUR DEVELOPER PVT LTD, NEW DELHI (HEREIN AFTER CALLED DEVELOPER). ACCORDING TO TH E TERMS OF AGREEMENT, THE DEVELOPER SHOULD OBTAIN A LETTER OF INTENT FROM THE CONCERNED GOVERNMENT DEPARTMENT AND OBTAIN OTHER PE RMISSIONS AND SANCTIONS FOR DEVELOPING THE LAND AT ITS OWN RISK A ND COST. THE DEVELOPER WAS TO TAKE 84% OF THE BUILT UP AREA AND BALANCE 16% WOULD BELONG TO ASSESSEE AND OTHER CO-OWNER. THE CO NSIDERATION FOR THE AGREEMENT WAS TAKEN AS THE BUILT UP AREA TO BE HANDED OVER TO THE OWNERS FREE OF COST. THE OWNERS WERE ENTITLED TO V ISIT THE SITE IN ORDER TO REVIEW THE PROGRESS OF THE PROJECT. IT WA S CLARIFIED BY CLAUSE 18 THAT OWNERSHIP WOULD REMAIN EXCLUSIVELY WITH THE OWNERS TILL IT VESTS WITH BOTH THE PARTIES AS PER THEIR RESPECTIVE SHARES ON THE COMPLETION OF THE PROJECT. THE OTHER CLAUSES AND TH E STEPS IN THE AGREEMENT WERE THAT A SUM OF RS. 1 CRORE TOWARDS PA YMENT OF EARNEST MONEY AT THE TIME OF ENTERING INTO AGREEMENT; A SPE CIAL POWER OF ATTORNEY WAS TO BE EXECUTED IN FAVOUR OF THE DEVELO PER TO ENABLE TO DEAL WITH THE STATUTORY AUTHORITIES ETC. FOR OBTAIN ING NECESSARY APPROVALS / SANCTIONS; LETTER OF INTENT WAS TO BE OBTAINED NOT LATER 11 THAN MARCH 8, 2006 AND IN CASE OF A FAILURE TO DO S O, THE AGREEMENT SHALL STAND TERMINATED. LETTER OF INTENT IS BASICA LLY A LICENSE GRANTED BY THE DIRECTOR OF TOWN PLANTING TO DEVELOPER OF LA ND FOR THE PURPOSE OF CONSTRUCTING RESIDENTIAL FLATS SUBJECT TO PAYMEN T OF CERTAIN CHARGES AND COMPLIANCE OF OTHER CONDITIONS. IT WAS FURTHER STATED IN THE AGREEMENT THAT ON FULFILLMENT OF THE REQUIREMENT IN THE LETTER OF INTENT, OWNERS WILL HAVE TO EXECUTE IRREVOCABLE GENERAL POW ER OF ATTORNEY IN FAVOUR OF THE DEVELOPER AUTHORIZING THE DEVELOPER T O TOOK AND SELL THE DWELLING UNITS OUT OF DEVELOPERS SHARE AND COLLECT THE MONEY FOR THE SAME. HOWEVER, FINALLY SALE DEEDS COULD BE EXECUTED ONLY AFTER THE OWNER RECEIVED THEIR SHARE OF CONSTRUCTED AREA. TH REE MONTHS LATER, A SUPPLEMENTARY AGREEMENT WAS ENTERED ON SEPTEMBER 15 , 2005 BETWEEN THE ASSESSEE AND OTHER CO-OWNERS AND DEVELO PERS THROUGH WHICH IT WAS AGREED THAT OWNERS WILL SELL THEIR 16% SHARE IN THE BUILT UP AREA TO THE DEVELOPER OR ITS NOMINEE FOR CONSIDE RATION OF RS. 42 CRORES. A SUM OF RS. 2 CRORES WAS RECEIVED. THIS CO LLABORATION AGREEMENT AND BALANCE OF RS. 40 CRORES WAS PAYABLE BY THE DEVELOPER TO THE OWNERS IN SIX INSTALLMENTS FROM MA RCH 06, 2008. THE INSTALLMENTS COULD BE EXTENDED SUBJECT TO PAYMENT O F INTEREST AND FURTHER SUBJECT TO MAXIMUM EXTENSION OF THREE MONTH S. THERE WERE VARIOUS OTHER CLAUSES WHICH ARE NOT RELEVANT FOR OU R PURPOSES. THE QUESTION AROSE WHETHER CAPITAL GAIN ACCRUE / ARISE TO THE ASSESSEE DURING THE FINANCIAL YEAR 2006-07 RELEVANT TO ASSES SMENT YEAR 2007- 08 OR DURING FINANCIAL YEAR 2007-08 RELEVANT TO ASS ESSMENT YEAR 2008- 09. 40. ON THE ABOVE, THE HON'BLE AUTHORITY AFTER REFER RING TO THE PROVISIONS OF SECTION 45 AND OBSERVED AS UNDER:- .THE SECTION CAN BE ANALYSED THUS : (A) TRANSFER OF A CAPITAL ASSET EFFECTED IN THE PRE VIOUS YEAR, (B) RESULTANT PROFITS OR GAINS FROM SUCH TRANSFER, (C) THOSE PROFITS OR GAINS WOULD CONSTITUTE THE INC OME 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 . 12 TWO ASPECTS MAY BE NOTED AT THIS JUNCTURE. FIRSTLY , THE EXPRESSION USED IS ARISING WHICH IS NOT TO BE EQUATED WITH THE EXPRESSION RECEIVED. BOTH THESE EXPRESSIONS AND IN ADDITION THERETO, TH E EXPRESSION ACCRUE ARE USED IN THE INCOME-TAX ACT EITHER COLLECTIVELY OR SEPARATELY ACCORDING TO THE CONTEXT AND NATURE OF THE CHARGING PROVISION. THE S ECOND POINT WHICH DESERVES NOTICE IS THAT BY A DEEMING PROVISION, TH E 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 CONT AINED IN SECTION 45 HAS BEEN CONSIDERED IN DECIDED CASES AND LEADING TE XT BOOKS. THE FOLLOWING STATEMENT OF LAW IN SAMPATH IYENGARS COMMENTARY (1 0TH EDITION REVISED BY SHRI S. RAJARATNAM) BRINGS OUT THE CORRECT LEGAL POSITION : SECTION 45 ENACTS THAT THE CAPITAL GAINS SHALL BY FICTION BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE. SINCE THIS IS A STATUTORY FICTION, THE ACTU AL YEAR IN WHICH THE SALE PRICE WAS RECEIVED, WHETHER IT WAS ONE YEAR, T WO YEARS, THREE YEARS, FOUR YEARS ETC. PREVIOUS TO THE PREVIOUS YEA R OF TRANSFER, IS BESIDE THE POINT. THE ENTIRETY OF THE SUM OR SUMS R ECEIVED IN ANY EARLIER YEAR OR YEARS WOULD BE REGARDED AS THE CAPI TAL GAINS ARISING IN THE PREVIOUS YEAR OF TRANSFER. . . . . IN THE WORDS OF SECTION 45, THE CAPITAL GAI NS ARISING FROM THE TRANSFER 'SHALL BE THE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE'. SO, THE PAYMENTS OF CONSIDER ATION STIPULATED TO BE PAID IN FUTURE WOULD HAVE TO BE ATTRIBUTED, BY STATUTORY MANDATE, TO THE YEAR OF TRANSFER, EVEN AS PAYMENTS MADE PRI OR TO THE YEAR OF TRANSFER. 41. THEREAFTER, THE AUTHORITY REFERRED TO SECTION 2(47) AND OBJECTS OF THE INTRODUCTION OF CLAUSES (V) & (VI) AND ALSO REFERRED TO PARAS 11.1 & 11.2 OF THE BOARD CIRCULAR NO. 495 (WHICH WE HAVE ALREADY DISCUSSED EARLIER). THE HON'BLE AUTHORITY HAS DIS CUSSED VARIOUS IMPLICATIONS OF CLAUSE (V) OF SECTION 2(47) AND ALS O IMPLICATION OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT AS WELL AS OBSERVATIONS OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA V CIT (SUPRA). THE AUTHORITY OBSERVED THA T TO UNDERSTAND THIS PROVISION PROPERLY MEANING OF POSSESSION HAS TO BE UNDERSTOOD PROPERLY AND WENT ON TO DISCUSS THE MEANING OF TERM POSSESSION, AND HOW THE SAME IS TO BE UNDERSTOOD IN THE CONTEXT OF CLAUSE (V). THESE ARE VERY IMPORTANT OBSERVATIONS AND HAVE BEEN DISCU SSED IN MOST ELUCIDATED FASHION. THESE OBSERVATIONS WILL ANSWER MANY OF THE QUESTIONS RAISED BEFORE US AND, THEREFORE, WE ARE E XTRACTING THESE OBSERVATIONS AS UNDER:- MEANING OF POSSESSION AND HOW SHOULD IT BE UNDER STOOD IN THE CONTEXT OF CLAUSE (V) 13 THE NEXT QUESTION IS, IN WHAT SENSE WE HAVE TO UND ERSTAND THE TERM POSSESSION IN THE CONTEXT OF CLAUSE (V) OF SECTION 2(47). SHOULD IT ONLY MEAN THE RIGHT TO EXCLUSIVE POSSESSIONWHI CH THE TRANSFEREE CAN MAINTAIN IN HIS OWN RIGHT TO THE EXCLUSION OF EVERYONE INCLUDING THE TRANSFEROR FROM WHOM HE DERIVED THE POSSESSION ? SU CH A CRITERION WILL BE SATISFIED ONLY AFTER THE ENTIRE SALE CONSIDERAT ION IS PAID AND THE TRANSFEROR HAS FORFEITED HIS RIGHT TO EXERCISE ACT S OF POSSESSION OVER THE LAND OR TO RESUME POSSESSION. IN OUR VIEW, THER E IS NO WARRANT TO PLACE SUCH A RESTRICTED INTERPRETATION ON THE WORD POSSESSION OCCURRING IN CLAUSE (V) OF SECTION 2(47). POSSESSI ON IS AN ABSTRACT CONCEPT. IT HAS DIFFERENT SHADES OF MEANING. IT IS VARIOUSLY DESCRIBED AS A POLYMORPHOUS TERM HAVING DIFFERENT MEANINGS I N DIFFERENT 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 JURISPRUDENC E, PARAGRAPH 51, TWELFTH EDITION, INDIAN REPRINT). SALMOND OBSERVED : TO LOOK FOR A DEFINITION THAT WILL SUMMARIZE THE MEANINGS OF THE TERM POSSESSION IN ORDINARY LANGUAGE, IN ALL AREAS OF LAW AND IN ALL L EGAL SYSTEMS, IS TO ASK FOR THE IMPOSSIBLE. IN THE ABOVE CASE OF ANIL KUM AR BHUNJA [1979] 4 SCC 274, SARKARIA J. SPEAKING FOR A THREE-JUDGE BE NCH ALSO REFERRED TO THE COMMENTS OF DIAS AND HUGHES IN THEIR BOOK ON J URISPRUDENCE THAT IF A TOPIC EVER SUFFERED TOO MUCH THEORIZING IT I S THAT OF POSSESSION. MUCH OF THE DIFFICULTY 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 POSSE SSION BY REFERRING TO THE WELL KNOWN TREATISES ON JURISPRUDENCE (PAGE 278) : POSSESSION, IMPLIES A RIGHT AND A FACT : THE RIG HT TO ENJOY ANNEXED TO THE RIGHT TO PROPERTY AND THE FACT OF T HE REAL INTENTION. IT INVOLVES POWER OF CONTROL AND INTENT TO CONTROL, (SEE DIAS AND HUGHES) 14 . . . . 15. WHILE RECOGNIZING THAT POSSESSION IS NOT A PU RELY LEGAL CONCEPT BUT ALSO A MATTER OF FACT, SALMOND (12TH ED ., 52) DESCRIBES POSSESSION, IN FACT, AS A RELATIONSHIP B ETWEEN A PERSON AND A THING. ACCORDING TO THE LEARNED AUTHO R, THE TEST FOR DETERMINING WHETHER A PERSON IS IN POSSESSION OF ANYTHING IS WHETHER HE IS IN GENERAL CONTROL OF IT. IN SALMONDS JURISPRUDENCE, AT PARAGRAPH 54, WE FI ND AN ILLUMINATING DISCUSSION ON IMMEDIATE AND MEDIAT E POSSESSION. THE LEARNED AUTHOR STATES IN LAW ONE PERSON MAY POSSE SS A THING FOR AND ON ACCOUNT OF SOME ONE ELSE. IN SUCH A CASE THE LA TTER 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 MA Y BE TERMED MEDIATE, WHILE THAT WHICH IS ACQUIRED OR RETAINED DIRECTLY OR PERSONALLY MAY BE DISTINGUISHED AS IMMEDIATE OR DIRECT. SA LMOND MAKES REFERENCE TO THREE TYPES OF MEDIATE POSSESSION. IN ALL CASES OF MEDIATE POSSESSION, TWO PERSONS ARE IN POSSESSION OF THE SAME THING AT THE SAME TIME. AN ALLIED CONCEPT OF CONCURRENT P OSSESSION HAS ALSO BEEN EXPLAINED IN PARAGRAPH 55 OF SALMONDS JURISPR UDENCE IN THE FOLLOWING WORDS : IT WAS A MAXIM OF THE CIVIL LAW THAT TWO PERSONS C OULD NOT BE IN POSSESSION OF THE SAME THING AT THE SAME TIME. AS A GENERAL PROPOSITION THIS IS TRUE : FOR EXCLUSIVENESS IS OF THE ESSENCE OF 14 POSSESSION. TWO ADVERSE CLAIMS OF EXCLUSIVE USE CA NNOT BOTH BE EFFECTUALLY REALIZED AT THE SAME TIME. CLAIMS, HOWEVER, WHICH ARE NOT ADVERSE, AND WHICH ARE NOT, THEREFORE, MUT UALLY DESTRUCTIVE, ADMIT OF CONCURRENT REALIZATION. 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 . ON A FAIR AND REASONABLE INTERPRETATION AND ON ADO PTING THE PRINCIPLE OF PURPOSIVE CONSTRUCTION, IT MUST BE HE LD THAT POSSESSION CONTEMPLATED BY CLAUSE (V) NEED NOT NECESSARILY BE SOLE AND EXCLUSIVE POSSESSION. SO LONG AS THE TRANSFEREE IS, BY VIRTU E OF THE POSSESSION GIVEN, ENABLED TO EXERCISE GENERAL CONTROL OVER TH E PROPERTY AND TO MAKE USE OF IT FOR THE INTENDED PURPOSE, THE MERE F ACT THAT THE OWNER HAS ALSO THE RIGHT TO ENTER THE PROPERTY TO OVERSE E THE DEVELOPMENT WORK OR TO ENSURE PERFORMANCE OF THE TERMS OF AGRE EMENT DOES NOT INTRODUCE ANY INCOMPATIBILITY. THE CONCURRENT POSSE SSION OF THE OWNER WHO CAN EXERCISE POSSESSORY RIGHTS TO A LIMITED EXT ENT AND FOR A LIMITED PURPOSE AND THAT OF THE BUYER/DEVELOPER WHO HAS A G ENERAL CONTROL AND CUSTODY OF THE LAND CAN VERY WELL BE RECONCILED. CL AUSE (V) OF SECTION 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 RES ULTANT ACCRUAL OF CAPITAL GAIN TO A POINT OF TIME WHEN THE CONCURRENT POSSESSION WILL BECOME EXCLUSIVE POSSESSION OF DEVELOPER/TRANSFEREE AFTER HE PAYS FULL CONSIDERATION. FURTHER, IF POSSESSION REFERRED TO IN CLAUSE (V) IS TO BE UNDERSTOOD AS EXCLUSIVE POSSESSION OF THE TRANSFERE E/DEVELOPER, THEN, THE VERY PURPOSE OF THE AMENDMENT EXPANDING THE DEF INITION OF TRANSFER FOR THE PURPOSE OF CAPITAL GAINS MAY BE DEFEATED. T HE 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 S UCH EXCLUSIVE POSSESSION IN HIS OWN RIGHT ONLY AFTER THE ENTIRE A MOUNT IS PAID TO THE OWNER TO THE LAST PIE. THERE IS THEN A POSSIBILITY 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, S AY 10 PER CENT., REMAINS TO BE PAID AND THE DEVELOPER/TRANSFEREE FAI LS TO PAY, LEADING TO A DISPUTE BETWEEN THE PARTIES, THE RIGHT TO EXCLUSI VE AND INDEFEASIBLE POSSESSION MAY BE IN JEOPARDY. IN THIS STATE OF AFF AIRS, THE TRANSACTION WITHIN THE MEANING OF CLAUSE (V) CANNOT BE SAID TO HAVE BEEN EFFECTED AND THE LIABILITY TO PAY CAPITAL GAINS MAY BE INDEF INITELY POSTPONED. TRUE, IT MAY NOT BE PROFITABLE FOR THE DEVELOPER TO ALLOW THIS SITUATION TO LINGER FOR LONG AS THE PROCESS OF TRANSFER OF FLATS TO THE PROSPECTIVE PURCHASERS WILL GET DELAYED. AT THE SAME TIME, 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 PAY MENT OF CAPITAL GAINS TAX ON THE OSTENSIBLE GROUND THAT THE ENTIRE CONSIDERATION HAS NOT BEEN RECEIVED AND SOME BALANCE IS LEFT. THE MI SCHIEF 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 EN TIRETY FOR THE PURPOSE OF DETERMINING THE DATE OF TRANSFER. WHILE ON THE POINT OF POSSESSION, WE WOULD LIKE TO CLARIFY ONE MORE ASPECT. WHAT IS SPOKEN TO IN CLAUSE (V) OF SE CTION 2(47) IS THE 15 TRANSACTION WHICH INVOLVES ALLOWING THE POSSESSIO N TO BE TAKEN. BY MEANS OF SUCH TRANSACTION, A TRANSFEREE LIKE A DEVE LOPER IS ALLOWED TO UNDERTAKE DEVELOPMENT WORK ON THE LAND BY ASSUMING GENERAL CONTROL OVER THE PROPERTY IN PART PERFORMANCE OF THE CONTR ACT. THE DATE OF THAT TRANSACTION DETERMINES THE DATE OF TRANSFER. THE A CTUAL 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 INQUIRIES, WHICH MAY FRUSTRATE THE OBJE CTIVE OF THE LEGISLATIVE PROVISION. IT IS ENOUGH IF THE TRANSFER EE HAS, BY VIRTUE OF THAT TRANSACTION, A RIGHT TO ENTER UPON AND EXERCISE ACT S OF POSSESSION EFFECTIVELY PURSUANT TO THE COVENANTS IN THE CONTRA CT. THAT TANTAMOUNTS TO LEGAL POSSESSION. WE ARE REFERRING TO THIS ASPEC T BECAUSE THE AUTHORIZED REPRESENTATIVE HAS SUBMITTED WHEN HE APP EARED BEFORE US IN THE LAST WEEK OF MAY, 2007, THAT EVEN BY THAT DA TE THE DEVELOPMENT WORK COULD NOT BE COMMENCED FOR WANT OF CERTAIN APP ROVALS, AND THEREFORE, THE DEVELOPER WAS NOT WILLING TO TAKE P OSSESSION OF THE LAND. SUCH AN UNSUBSTANTIATED STATEMENT WHICH IS NOT FOUND IN THE ORIGINAL APPLICATION OR EVEN WRITTEN SUBMISSIONS F ILED EARLIER NEED NOT BE PROBED INTO ESPECIALLY WHEN IT IS NOT HIS CASE THAT THE DEVELOPER WAS NOT ALLOWED TO TAKE POSSESSION IN TERMS OF THE AGREEMENT. 42. AFTER THE ABOVE DISCUSSION, THE AUTHORITY DISCU SSED THE FACTS OF THE CASE BEFORE IT. IT WAS OBSERVED THAT PARAGRAPH 18 OF THE COLLABORATION AGREEMENT PROVIDES THAT ON ISSUANCE O F LETTER OF INTENT, THE OWNERS WILL ALLOW AND PERMIT THE DEVELOPER TO E NTER UPON AND SURVEY THE LAND, ERECT SITE / SALES OFFICE, CARRY O UT THE SITE DEVELOPMENT WORK AND DO ACTIVITIES FOR ADVANCING & SALE PROMOTION, CONSTRUCTION ETC. THE AUTHORITY FURTHER OBSERVED T HAT IF THIS CLAUSE IS READ IN ISOLATION THIS WOULD SUGGEST ON PASSING OF POSSESSION BUT ACCORDING TO AUTHORITY THE OTHER FACTORS ARE TO BE CONSIDERED. CLAUSE 15 PROVIDED THAT ON FULFILLMENT OF THE REQUIREMENTS LAID DOWN IN THE LETTER OF INTENT WHICH IS PROVISIONAL LICENSE, THE OWNERS SHOULD EXECUTE AN IRREVOCABLE GENERAL POWER OF ATTORNEY IN FAVOUR OF THE DEVELOPER ALLOWING INTER ALIA TO BOOK AND SELL THE DWELLING UNIT FAILING UNDER THEIR SHARE. THIS WAS POSSIBLE ONLY AFTER DE POSIT OF REQUISITE CHARGES ETC. AND PERHAPS THERE WAS LITIGATION REGAR DING OWNERSHIP OF LAND WHICH HAS ALSO TO BE WITHDRAWN. THE AUTHORITY HAS DISCUSSED THE SIGNIFICANCE OF GENERAL POWER OF ATTORNEY AND THE T ERMS OF THE GENERAL POWER OF ATTORNEY AT PARA 33 AND THE RELEVANT PORT ION OF THE SAME IS AS UNDER:- A COPY OF THE IRREVOCABLE GPA EXECUTED IN TERMS O F PARAGRAPH 15 OF THE AGREEMENT HAS BEEN FURNISHED BY THE APPL ICANT. IT AUTHORIZES THE DEVELOPER : (I) TO ENTER UPON AND SURVEY THE LAND, PREPARE THE LAYOUT PLAN, APPLY FOR RENEWAL/EXTENSI ON OF LICENCE, SUBMIT THE BUILDING PLANS FOR SANCTION OF THE APPRO PRIATE AUTHORITY AND TO CARRY OUT THE WORK OF DEVELOPMENT OF A MULTI-ST ORIED RESIDENTIAL COMPLEX, (II) TO MANAGE AND CONTROL, LOOK AFTER AN D SUPERVISE THE PROPERTY IN ANY MANNER AS THE ATTORNEY DEEMS FIT AN D PROPER, (III) TO OBTAIN WATER, SEWAGE DISPOSAL AND ELECTRICITY CONNE CTIONS. THE 16 DEVELOPER IS ALSO AUTHORIZED TO BORROW MONEY FOR ME ETING THE COST OF CONSTRUCTION ON THE SECURITY AND MORTGAGE OF LAND F ALLING TO THE DEVELOPERS SHARE. THE OTHER CLAUSES IN THE GPA ARE NOT RELEVANT FOR OUR PURPOSE. THE GPA UNEQUIVOCALLY GRANTS TO THE D EVELOPER A BUNDLE OF POSSESSORY RIGHTS. THE ACTS OF MANAGEMEN T, CONTROL AND SUPERVISION OF PROPERTY ARE EXPLICITLY MENTIONED. I T IS FAIRLY CLEAR THAT THE GPA IS NOT A MERE LICENCE TO ENTER THE LAND FO R DOING SOME PRELIMINARY ACTS IN RELATION TO THE DEVELOPMENT WOR K. THE POWER OF CONTROL OF THE LAND WHICH IS AN INCIDENCE OF POSSES SION AS EXPLAINED SUPRA HAS BEEN CONFERRED ON THE DEVELOPER UNDER THI S GPA. THE DEVELOPER ARMED WITH THE GPA CANNOT BE REGARDED MER ELY AS A LICENSEE OR AN AGENT SUBJECT TO THE CONTROL OF THE OWNERS. HIS POSSESSION CANNOT BE CHARACTERIZED AS PRECARIOUS O R TENTATIVE IN NATURE. THE FACT THAT THE AGREEMENT DESCRIBES THE G PA AS IRREVOCABLE AND AN EXPRESS DECLARATION TO THAT EFFECT IS FOUND IN THE GPA ITSELF IS NOT WITHOUT SIGNIFICANCE. HAVING REGARD TO THE SEC OND AND SUPPLEMENTAL AGREEMENT BY VIRTUE OF WHICH THE ENTIR E DEVELOPED PROPERTY INCLUDING THE OWNERS SHARE HAS BEEN AGREE D TO BE SOLD TO THE DEVELOPER OR HIS NOMINEES FOR VALUABLE MONEY CO NSIDERATION, THE DEVELOPER HAS A VITAL STAKE IN THE ENTIRE PROPERTY. AS FAR AS THE QUALITY OF POSSESSION IS CONCERNED, HE IS ON A HIGHER PEDE STAL THAN A DEVELOPER WHO APPORTIONS BUILT UP AREA WITH THE OW NER. EVEN IF HE IS AN AGENT IN ONE SENSE IN THE COURSE OF DEVELOPING T HE LAND, THAT AGENCY IS COUPLED WITH INTEREST. FOR THESE REASONS , THE PREFIX IRREVOCABLE IS DELIBERATELY CHOSEN. AS DISCUSSED EARLIER, THE OWNER'S LIMITED RIGHT TO ENTER THE LAND AND OVERSEE THE DEV ELOPMENT WORK IS NOT INCOMPATIBLE WITH THE DEVELOPERS RIGHT OF CONT ROL OVER THE LAND WHICH HE DERIVES FROM THE GPA. EXCLUSIVE POSSESSION , AS ALREADY POINTED OUT, IS NOT NECESSARY FOR THE PURPOSE OF SA TISFYING THE INGREDIENTS OF CLAUSE (V) OF SECTION 2(47). WE ARE THEREFORE, OF THE VIEW THAT THE IRREVOCABLE GPA EXECUTED BY THE OWNE RS IN FAVOUR OF THE DEVELOPER MUST BE REGARDED AS A TRANSACTION IN THE EYE OF LAW WHICH ALLOWS POSSESSION TO BE TAKEN IN PART PERFORM ANCE OF THE CONTRACT FOR TRANSFER OF THE PROPERTY IN QUESTION .. 43 THUS, THE ABOVE CLEARLY SHOWS THAT IRREVOCABLE G ENERAL POWER OF ATTORNEY WHICH LEADS TO OVER ALL CONTROL OF THE PR OPERTY IN THE HANDS OF THE DEVELOPER, EVEN IF THAT MEANS NO EXCLUSIVE P OSSESSION BY THE DEVELOPER WOULD CONSTITUTE TRANSFER. IT CAN BE SAID THAT IT HAS TO BE CONSTRUED AS POSSESSION IN TERMS OF CLAUSE (V) OF SECTION 2(47) OF THE ACT. 44 A QUESTION MAY ARISE THAT WHY THE TRANSFER WAS N OT HELD TO BE TAKEN PLACE IN ASSESSMENT YEAR 2006-07 WHEN FIRST AGREEME NT WAS ENTERED INTO ON JUNE 8, 2005. THE SUPPLEMENTARY AGREEMENT WAS ALSO ENTERED INTO ON SEPT 15, 2005 BOTH OF WHICH FALL 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 FIRST AG REEMENT ITSELF CONTAINED A CONDITION THAT LETTER OF INTENT SHOUL D BE PROCURED NOT LATER THAN MARCH 8, 2006. IN CASE OF FAILURE TO DO SO THE AGR EEMENT SHALL STAND TERMINATED. THEREFORE, OBTAINING THE LETTER OF I NTENT WAS THE CRUCIAL FACTOR. IT HAS BEEN EXPLAINED IN THE DECISION THAT THE LET TER OF INTENT BASICALLY IS A 17 LICENSE ISSUED BY THE DIRECTOR OF TOWN AND COUNTRY PLANNING, HARYANA WHICH GIVES PERMISSION FOR CONSTRUCTION OF THE FLATS. TH E OTHER CRUCIAL POINT WAS EXECUTION OF IRREVOCABLE OF GPA WHICH WAS EXECUTED ON MAY 8, 2006 WHICH ACCORDING TO THE LD. AUTHORITY DEPICTS THE INTENTIO N 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 DEVELOP MENT AGREEMENT BUT THE SAME HAS TO BE INFERRED ONLY WHEN THE POSSESSION HA S BEEN HANDED OVER BY THE TRANSFEROR TO THE DEVELOPER WHICH CAN BE INFERR ED FROM THE DOCUMENTS E.G. POWER OF ATTORNEY. AFTER ABOVE DISCUSSION HON' BLE AUTHORITY HAS SUMMARIZED THE DECISION IN PARA 41 WHICH IS AS UND ER: THE FOLLOWING IS THE SUMMARY OF CONCLUSIONS: 1. WHERE THE AGREEMENT FOR TRANSFER OF IMMOVABLE PR OPERTY BY ITSELF DOES NOT PROVIDE FOR IMMEDIATE TRANSFER OF POSSESSION, T HE DATE OF ENTERING INTO THE AGREEMENT CANNOT BE CONSIDERED TO BE THE D ATE OF TRANSFER WITHIN THE MEANING OF CLAUSE (V) OF SECTION 2 (47) OF THE INCOME-TAX ACT. 2. TO ATTRACT CLAUSE (V) OF SECTION 2(47), IT IS NO T NECESSARY THAT THE ENTIRE SALE CONSIDERATION UP TO THE LAST INSTALLMENT SHOUL D 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 AG REEMENT, THE EXECUTION OF THE GPA SHALL BE REGARDED AS THE TRAN SACTION INVOLVING THE ALLOWING OF THE POSSESSION OF LAND TO BE TAKEN IN PART PERFORMANCE OF THE CONTRACT AND THEREFORE, THE TRANSFER WITHIN THE MEA NING 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 DURIN G THAT YEAR. INCIDENTALLY, IT MAY BE MENTIONED THAT DURING THE S AID YEAR, I.E., FINANCIAL YEAR 2006-07, A FINAL LICENSE WAS GRANTED AND THE A PPLICANT/OWNERS RECEIVED NEARLY 2/3RDS OF THE CONSIDERATION. 45. LEGAL POSITION HAS BEEN DISCUSSED IN ABOVE NOTE D PARAS AND NOW LET US DISCUSS THE FACTS OF THE CASE IN THE LIG HT OF ABOVE NOTED LEGAL POSITION. 46 UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESS EE IS A MEMBER OF PUNJABI COOP HOUSE BUILDING SOCIETY LTD. WHICH H AD 96 MEMBERS (NUMBER OF MEMBERS WERE STATED AS 95 DURING ARGUMEN TS BUT CLAUSE 13 OF THE JDA REFERS TO NUMBER OF MEMBERS AS 96). T HE SOCIETY WAS OWNING 21.2 ACRES OF LAND IN VILLAGE KANSAL DISTT. MOHALI ADJACENT TO CHANDIGARH. THERE WERE TWO TYPES OF MEMBERS FIRSTL Y THE MEMBERS WHO WERE OWNING PLOT OF 500 SQYD AND SECONDLY THE M EMBERS WHO ARE HOLDING PLOT OF 1000 SQYD. SOMEWHERE IN 2006 IT WA S DECIDED TO DEVELOP A GROUP HOUSING COMMERCIAL PROJECT AND DO D EVELOPMENT AS PER THE APPLICABLE MUNICIPAL BUILDING BYE-LAWS IN F ORCE AND ACCORDINGLY A BID WAS INVITED THROUGH ADVERTISEMEN T IN THE TRIBUNE 18 DATED 31.5.2006. HASH A DEVELOPER, APPROACHED THE SOCIETY WITH PROPOSAL FOR DEVELOPMENT OF THE PROPERTY. SINCE HA SH DID NOT HAVE SUFFICIENT MEANS TO DEVELOP THE PROPERTY, HASH HAD APPROACHED THDC FOR DEVELOPMENT OF THE PROPERTY BY CONSTRUCTING THE BUILDING AND/OR STRUCTURES TO BE USED FOR INTERALIA RESIDENTIAL, P UBLIC USE AND COMMERCIAL PURPOSES. THIS PROPOSAL WAS DISCUSSED B Y THE SOCIETY IN ITS EXECUTIVE COMMITTEE MEETING ON 4.1.2007. MINUT ES OF THE MEETING ARE PLACED AT PAGE 58 TO 65 OF THE PAPER BOOK. IN THE EXECUTIVE COMMITTEE IT WAS DECIDED TO APPOINT HASH WHO WAS AC TING ALONGWITH THE JOINT DEVELOPER THDC AS JOINT DEVELOPER ON THE TERMS AND CONDITIONS TO BE MENTIONED IN THE JDA. IT WAS FURT HER RESOLVED THAT MEMBER OWING PLOT OF 500 SQYD WOULD RECEIVE A CONSI DERATION OF RS. 82,50,000/- EACH TO BE PAID IN FOUR INSTALLMENTS BY HASH DIRECTLY IN FAVOUR OF THE MEMBERS AND ONE FLAT WITH SUPER AREA OF 2250 SQF TO BE CONSTRUCTED BY THDC. THE MEMBERS WHO HELD THE PLOT OF 1000SQYD WERE TO RECEIVE A CONSIDERATION OF RS. 1,65,00,000/ - AND TWO FLATS CONSISTING OF 2250SQFT TO BE CONSTRUCTED BY THE TH DC. IT WAS FURTHER RESOLVED TO ENTER INTO A JDA WITH THDC/HASH. IT WA S ALSO RESOLVED TO EXECUTE IRREVOCABLE POWER OF ATTORNEY BY THE SOC IETY IN FAVOUR OF THDC FOR THIS PURPOSE. THIS RESOLUTION WAS ULTIMATE LY RATIFIED IN THE GENERAL BODY MEETING HELD BY THE SOCIETY ON 25.2.20 07. PURSUANT TO THE ABOVE RESOLUTION, TRIPARTITE JDA WAS EXECUTED (COPY OF THE SAME IS AVAILABLE AT PAGE 15 TO 54 OF FIRST PAPER BOOK). THROUGH RECITATION CLAUSE IT HAS BEEN MENTIONED THAT OWNER IS IN POSSE SSION OF LAND MEASURING ABOUT 21.2 ACRES OF LAND WHICH HAS COME I N THE PURVIEW OF NAGAR PANCHAYAT, NAYA GAON VIDE NOTIFICATION ISSUED ON 18.10.2006 DULY SUBSTITUTED BY ANOTHER NOTIFICATION DATED 21.1 1.2006 AND THAT NO PART OF LAND OF THE PROPERTY FALLS UNDER FOREST ARE A UNDER THE PUNJAB LAND PRESERVATION ACT. IT HAS BEEN FURTHER RECITED THAT THE SOCIETY HAS AGREED TO ACCEPT THE PROPOSALS OF HASH AND FURT HER EXECUTED THIS AGREEMENT WITH THDC/HASH. HASH WAS RESPONSIBLE TO MAKE PAYMENT TO THE OWNER AS DESCRIBED EARLIER AND THE FLATS WER E TO BE PROVIDED BY THDC. IN CASE OF HASH FAILS TO MAKE THE PAYMENT, T HDC AGREED TO MAKE THE PAYMENTS. COPY OF THE RESOLUTION OF THE E XECUTIVE COMMITTEE OF THE SOCIETY DATED 4.1.2007 AS WELL AS RESOLUTION OF THE GENERAL BODY MEETING OF THE SOCIETY DATED 25.2.2007 WERE MADE PART OF JDA BY WAY OF ANNEXURE. THE SOCIETY AGREED TO E XECUTE AN IRREVOCABLE SPECIAL POWER OF ATTORNEY IN FAVOUR OF THDC AND ALL OTHER NECESSARY DOCUMENTS, AT THE REQUEST OF THE DEVELOPE RS. 19 47 IN CLAUSE 1 OF JDA VARIOUS EXPRESSIONS HAVE BEEN DEFINED. CLAUSE 2 DESCRIBES THE PROJECT AS UNDER: 2.1 THE OWNER HEREBY IRREVOCABLY AND UNEQUIVOCALLY GRANTS AND ASSIGNS IN PERPETUITY ALL ITS RIGHTS TO DEVELOP, CO NSTRUCT, MORTGAGE, LEASE, LICENSE, SELL AND TRANSFER THE PRO PERTY ALONG WITH ANY AND ALL THE CONSTRUCTION, PREMISES, HEREDITAMEN TS, EASEMENTS, TREES THEREON IN FAVOUR OF THDC FOR THE PURPOSE OF DEVELOPMENT, CONSTRUCTION, MORTGAGE, SALE, TRANSFER, LEASE, LICE NSE AND OR EXPLOITATION FOR FULL UTILIZATION OF THE PROPERTY ( RIGHTS) AND TO EXECUTE ALL THE DOCUMENTS NECESSARY TO CARRY OUT, F ACILITATE AND ENFORCE THE RIGHTS IN THE PROPERTY INCLUDING TO EXE CUTE LEASE AGREEMENT, LICENSE AGREEMENTS, CONSTRUCTION CONTRAC TS, SUPPLIER CONTRACTS, AGREEMENT FOR SALE, CONVEYANCE, MORTGAGE DEEDS, FINANCE DOCUMENTS AND ALL DOCUMENTS AND AGREEMENTS NECESSAR Y TO CREATE AND REGISTER THE MORTGAGE, CONVEYANCE, LEASE DEEDS, LICENSE AGREEMENT, POWER OF ATTORNEY, AFFIDAVITS, DECLARATI ON, INDEMNITIES AND ALL SUCH OTHER DOCUMENTS, LETTERS AS MAY BE NECESSA RY TO CARRY OUT, FACILITATE AND ENFORCE THE RIGHTS AND TO REGISTER T HE SAME WITH THE REVENUE/COMPETENT AUTHORITY AND TO APPEAR ON OUR BE HALF BEFORE ALL AUTHORITIES, STATUTORY OR OTHERWISE, AND BEFORE ANY COURT OF LAW (THE DEVELOPMENT RIGHTS). THE OWNER HEREBY HANDS OVER THE ORIGINAL TITLE DEEDS OF THE PROPERTY AS MENTIONED IN THE LIS T ANNEXED HERETO AND MARKED AS ANNEXURE IV AND PHYSICAL, VACA NT POSSESSION OF THE PROPERTY HAS BEEN HANDED OVER TO THDC SIMULTANEOUS TO THE EXECUTION AND REGISTRATION OF T HIS AGREEMENT TO DEVELOP THE SAME AS SET OUT HEREIN. IT IS HEREBY AGREED AND CONFIRMED THAT WHAT IS STAT ED IN THE RECITALS HEREINABOVE, SHALL BE DEEMED TO BE DECLARATIONS AND REPRESENTATIONS ON THE PART OF THE OWNER AS IF THE SAME WERE SET OU T HEREIN VERBATIM AND FORMING AN INTEGRAL PART OF THE AGREEMENT. 2.2 THE PROJECT SHALL COMPRISE OF DEVELOPMENT/CONST RUCTION OF THE PROPERTY INTO THE PREMISES AS PERMISSIBLE UNDER PUN JAB MUNICIPAL BUILDING BYE-LAWS/PUNJAB URBAN DEVELOPMENT AUTHORIT Y OR ANY OTHER COMPETENT AUTHORITY BY THE DEVELOPER AT THEIR OWN C OST AND EXPENSE. THE PROJECT SHALL BE DEVELOPED AS MAY BE SANCTIONED BY THE CONCERNED LOCAL AUTHORITY I.E. DEPARTMENT OF LOCAL BODIES, PUNJAB/PUNJAB URBAN PLANNING AND DEVELOPMENT AUTHO RITY (PUDA) OR ANY OTHER COMPETENT AUTHORITY. 2.3 THE OWNER HEREBY IRREVOCABLY AND UNEQUIVOCALLY GRANTS AND ASSIGNS ALL ITS DEVELOPMENT RIGHTS IN THE PROPERTY TO THDC TO DEVELOP THE PROPERTY AND UNDERTAKE THE PROJECT AT ITS OWN C OSTS, EFFORTS AND EXPENSES WHEREUPON THE DEVELOPER SHALL BE ENTITLED TO APPLY FOR AND OBTAIN NECESSARY SANCTIONS, LICENSES AND PERMISSION S FROM ALL THE CONCERNED AUTHORITIES FOR THE COMMENCEMENT, DEVELOP MENT AND COMPLETION OF THE PROJECT ON THE PROPERTY. 48 CLAUSE 3 DESCRIBES THE OBLIGATIONS OF THE DEVELO PERS & SOCIETY FOR GETTING THE PLANS, ETC. SANCTIONED FROM COMPETE NT AUTHORITY / APPLICATIONS TO BE SIGNED BY OWNER FOR PLANS, DRAWI NGS ETC., CONSTRUCTION. CLAUSE 4 DEALS WITH CONSIDERATION C LAUSES 5 TO 8 DEALS 20 VARIOUS ASPECTS OF PROJECT AND OBLIGATIONS OF SOCIE TY AND DEVELOPER. CLAUSE 9 TALKS ABOUT OWNERSHIP AND RIGHTS AND READ AS UNDER: 9 TRANSFER OF OWNERSHIP/RIGHTS 9.1 THE OWNER SHALL SIMULTANEOUSLY ON RECEIPT OF PAYMEN T AS SET OUT IN CLAUSE 4.1 ABOVE, EXECUTE AN IRREVOCABLE SPE CIAL POWER OF ATTORNEY TO THDC FOR DEVELOPMENT OF THE PROPERTY AU THORIZING THDC TO DO ALL LAWFUL ACTS, DEEDS, MATTERS AND THIN GS PERTAINING TO THE DEVELOPMENT OF THE PROPERTY FOR THE PROJECT ALONG WITH INTERALIA RIGHT TO MORTGAGE THE PROPERTY AND/OR PRE MISES, SELL, LEASE, LICENSE THE PREMISES AND RECEIVE/COLLECT MON IES IN ITS NAME IN RESPECT OF THE SAME AND APPROACH INTERACT, COMMUNICATE WITH THE COMPETENT AUTHORITIES AND FOR DOING ALL AC TS, DEEDS, MATTERS AND THINGS TO BE DONE OR INCURRED BY THDC IN THAT B EHALF AS ALSO TO SIGN ALL LETTERS, APPLICATIONS, AGREEMENTS AND REGI STER THE SAME IF NECESSARY, DOCUMENTS, COURT PROCEEDINGS, AFFIDAVITS AND SUCH OTHER PAPERS CONTAINING TRUE FACTS AND CORRECT PARTICULAR S AS MADE FROM TIME TO TIME BE REQUIRED IN THIS BEHALF. 9.2 THE OWNER SHALL EXECUTE IN FAVOUR OF THDC THE SALE DEED IS IN ACCORDANCE WITH THE PROVISIONS OF CLAUSE 4.1(II) TO CLAUSE 4.1(IV) OF THIS AGREEMENT AND EXECUTE ALL OTHER NECESSARY DOCU MENTS AND PAPERS TO COMPLETE THE AFORESAID TRANSACTION. 9.3 THAT ALL THE ORIGINAL TITLE DEEDS PERTAINING T O PROPERTY AS MENTIONED IN ANNEXURE IV HAS BEEN HANDED OVER TO THDC BY THE OWNER AT THE TIME OF SIGNING OF THIS AGREEMENT AND IN FURTHERANCE OF THE COMMON INTEREST OF THE PARTIES FOR THE DEVEL OPMENT OF THE PROJECT AND EXCEPT THE SALE TRANSACTION MADE BY THE OWNER IN FAVOUR OF THDC AS ET OUT IN CLAUSE 4.1 ABOVE. THD C HEREBY UNDERTAKE AND ASSURE THE OWNER THAT THEY SHALL USE THE TITLE DEEDS ONLY FOR THE PURPOSE OF FURTHERANCE OF THE PROJECT IN THE MANNER THAT IT DOES NOT ADVERSELY EFFECT THE OWNER/ALLOTTEE IN ANY MANNER WHATSOEVER. 49 CLAUSE 10 DESCRIBES THE CONSENT GIVEN BY THE SOC IETY TO THDC FOR RAISING FINANCE FOR DEVELOPMENT AND COMPLETION OF PROJECT. CLAUSE 11 TALKS ABOUT FORMATION OF MAINTENANCE SOCIETY FOR THE PROJECT AFTER ITS COMPLETION. CLAUSE 13 TALKS ABOUT TRANSFER OF RIGHTS WHICH READS AS UNDER: 13 TRANSFER OF RIGHTS THE OWNER HEREIN I.E. THE PUNJABI COOP HOUSE BUILDI NG SOCIETY LTD. ALONG WITH ALL ITS NINETY SIX (96) MEMBERS HAVE GIV EN THEIR EXPRESS, FREE AND CLEAR CONSENT IN WRITING IN THE FORM OF AN AFFIDAVIT/NO OBJECTION CERTIFICATE/CONSENT LETTER WHEREBY THE DE VELOPERS HAVE BEEN ALLOWED TO DEVELOP THE PROPERTY IN ACCORDANCE WITH THE PROJECT AND THAT THDC SHALL BE ENTITLED TO TRANSFER THE RIG HTS OBTAINED UNDER THIS AGREEMENT TO ANY THIRD PARTY AND TO GET THE DE VELOPMENT / CONSTRUCTION WORK COMPLETED ON SUCH TERMS AND CONDI TIONS AS THDC 21 MAY DEEM FIT SO LONG AS IT DOES NOT ADVERSELY EFFEC T THE OWNER IN TERMS OF THEIR RIGHT TO RECEIVE ENTIRE CONSIDERATIO N AS MENTIONED IN THIS AGREEMENT SUBJECT TO ALL OTHER CONDITIONS MENT IONED THEREIN AS WELL. THE OWNER SHALL AT ALL TIMES PROVIDE FULL SU PPORT TO THE DEVELOPERS HEREIN. 50 OTHER CLAUSES PROVIDE FOR TERMINATION, GENERAL P ROVISIONS, DISCLAIMER, PARTIAL INVALIDITY, ARBITRATION, NOTICE S AND FORCE MAJEURE & JURISDICTION. 51 IN ADDITION TO ABOVE AN IRREVOCABLE SPECIAL POWE R OF ATTORNEY HAS ALSO BEEN EXECUTED BY THE SOCIETY IN FAVOUR OF THE DEVELOPERS I.E. THDC. (COPY OF WHICH IS AVAILABLE AT PAGES 40 TO 5 2 OF THE PAPER BOOK IN CASE OF SOCIETY IN ITA NO. 556 OF 2012 AS D ISCUSSED EARLIER IN PARA 25 (COMPLETE COPY OF SUPPLEMENTARY POWER OF AT TORNEY WAS NOT AVAILABLE IN THE PAPER BOOK OF THE ASSESSEE, THEREF ORE, REFERENCE WAS MADE TO THE PAPER BOOK IN CASE OF THE SOCIETY). 52 THE FIRST MAJOR CONTENTION OF THE LD. COUNSEL OF THE ASSESSEE IS THAT THE POSSESSION WAS NOT GIVEN BY THE SOCIETY BE CAUSE ACCORDING TO HIM AS PER CLAUSE 2.1 OF THE JDA THE POSSESSION OF THE PROPERTY WAS TO BE HANDED OVER SIMULTANEOUSLY TO THE EXECUTI ON AND REGISTRATION OF JDA AND SINCE THE JDA WAS NOT REGIS TERED, THEREFORE, THE POSSESSION WAS NOT GIVEN. WE CAN NOT ACCEPT TH IS CONTENTION BECAUSE IN POWER OF ATTORNEY TRANSACTIONS, IT IS NOT NECESSARY TO REGISTER THE JDA IF A SPECIAL POWER OF ATTORNEY HAS BEEN GIVEN AND SAME IS REGISTERED. SECONDLY CLAUSE 9.3 OF THE JDA AS REPRODUCED ABOVE CLEARLY SHOW THAT ORIGINAL TITLE DEED WHICH H AVE BEEN MENTIONED ALONG WITH THE POSSESSION IN PARA 2.1 WHICH ACCORDI NG TO THE LD. COUNSEL OF THE ASSESSEE WERE TO BE HANDED OVER SIMU LTANEOUSLY TO EXECUTION AND REGISTRATION OF THE JDA, IS NOT CORRE CT BECAUSE CLAUSE 9.3 CLEARLY MENTION THAT ORIGINAL TITLE DEED OF THE PROPERTY HAVE BEEN HANDED OVER TO THE THDC AT THE TIME OF SIGNING OF T HIS AGREEMENT BECAUSE CLAUSE 9.3 THERE IS NO MENTION ABOUT REGIST RATION OF JDA. 53 SPECIAL POWER OF ATTORNEY WHICH HAS BEEN EXECUTE D ON 26.2.2007 AND HAS BEEN REGISTERED ALSO. THE IRREVOC ABLE SPECIAL POWER OF ATTORNEY HAS BEEN EXECUTED AS PROVIDED IN CLAUSE 6.7 OF THE JDA WHICH READS AS UNDER: 6.7 THE OWNER SHALL EXECUTE AN IRREVOCABLE SPECIAL POWER OF ATTORNEY GRANTING ITS COMPLETE DEVELOPMENT RIGHTS I N THE PROPERTY IN FAVOUR OF THDC INTERALIA INCLUDING THE RIGHT TO RA ISE FINANCE BY MORTGAGING THE PROPERTY AND REGISTER THE CHARGE WIT H THE COMPETENT 22 AUTHORITY AND EXECUTE REGISTERED SALE DEEDS) AS SET OUT IN CLAUSE 4.1 (II), (III), (IV) AND (V) AND THE OWNER CONFIRMS, U NDERTAKES, DECLARES AND BINDS ITSELF NOT TO REVOKE THE SAME FO R ANY REASON WHATSOEVER OUT OF ITS OWN WILL AND DISCRETION WITHO UT OBTAINING A SPECIFIC PRIOR WRITTEN CONSENT OF THDC OR ANY OF IT S DULY CONSTITUTED ATTORNEYS. THROUGH THIS POWER OF ATTORNEY VARIOUS POWERS HAVE BEEN GIVEN LIKE TO ASSIGN, FILE, AMEND ETC. VARIOUS PLANS, DESIGNS TO REPRESENT BEFORE VARIOUS AUTHORITIES, TO APPOINT ARCHITECT, LAWYERS. SOME OF THE SPECIFIC CLAUSES RELEVANT, ARE EXTRACTED BELOW: (J) TO NEGOTIATE AND AGREE TO ANY/OR TO ENTER INTO AGREEMENT(S) TO CONSTRUCT/SELL AND TO UNDERTAKE CONSTRUCTION/SALE O F THE PREMISES ON THE PROPERTY OR ANY PORTION THEREOF WITH/TO SUCH PE RSONS(S) OR BODY AND FOR SUCH CONSIDERATION AND UPON SUCH TERMS AND CONDITIONS AS THE ATTORNEY DEEM FIT. (N) TO ENTER UPON THE PROPERTY EITHER ALONE OR WITH OTHERS FOR THE PURPOSE OF DEVELOPMENT, COORDINATION, EXECUTION, IM PLEMENTATION OF THE PROJECT AND COMMERCIALIZATION OF THE PROPERTY/P REMISES. (T) TO AMALGAMATE THE PROPERTY WITH ANY OTHER CONTI GUOUS, ADJACENT AND ADJOINING LAND SAND PROPERTIES WHEREIN DEVELOPM ENT AND/OR OTHER RIGHT, BENEFITS AND INTERESTS ARE ACQUIRED AND/OR P ROPOSED TO BE ACQUIRED AND DEVELOPED OR PROPOSED TO BE DEVELOPED BY THDC AND/OR THEIR ASSOCIATE AND/OR GROUP CONCERNS/S AND/OR UTIL IZE THE FSI, FAR, DR AND TDR OF THE CONTIGUOUS, ADJACENT AND ADJOININ G LANDS FOR THE PURPOSE OF CONSTRUCTING BUILDINGS AND/OR STRUCTURES THEREON AND/OR ON THE PROPERTY OR UTILIZE SUCH LANDS AND PROPERTIES FOR MAKING PROVISION OF PARKING SPACES THEREON, AND/OR MAY UTILIZE THE S AME FOR ANY OTHER LAWFUL PURPOSE, AS THDC AND/OR THEIR ASSOCIATE AND/ OR GROUP CONCERNS MAY IN THEIR SOLD, ABSOLUTE AND UNFETTERED DISCRETI ON THINK FIT. (W) TO HAND OVER THE POSSESSION OF THE PROPERTY OR ANY PART OR PORTION THEREOF TO THE AUTHORITIES TO WHOM THE SAME IS REQUIRED TO BE HANDED OVER OR OTHERWISE AND TO EXECUTE AND DELIVER ANY UNDERTAKINGS, DECLARATIONS, AFFIDAVITS, BONDS, DEED S, DOCUMENTS, ETC. AS MAY BE REQUIRED BY THE AUTHORITIES CONCERNED FOR VESTING SUCH A PART OR PORTION IN SUCH AUTHORITY AND TO ADMIT EXEC UTION THEREOF BEFORE THE CONCERNED COMPETENT AUTHORITY AND GET THE SAME REGISTERED WITH THE CONCERNED SUB-REGISTRAR. (Y) REASONABLE OPPORTUNITY OF HEARING SHALL BE GIVE N TO MORTGAGE, ENCUMBER OR CREATE A CHARGE ON THE PROPERTY OR ANY PART OR PORTION THEREOF AND EXECUTE THE NECESSARY SECURITY DOCUMENT S IN FAVOUR OF ANY BANK/FINANCIAL INSTITUTION TO RAISE FUNDS FOR T HE CONSTRUCTION/DEVELOPMENT OF THE PROPERTY AND FOR TH E SAID PURPOSE TO DEPOSIT TITLE DEEDS (IF REQUIRED) IN RESPECT OF THE PROPERTY IN FAVOUR OF SUCH BANK/FINANCIAL INSTITUTION, EXECUTE THE NECESS ARY DOCUMENTS AND REGISTER THE CHARGE CREATED ON THE PROPERTY IF SO R EQUIRED IN THE REVENUE RECORDS AND/OR DESIRED BY THE ATTORNEY. (AA) TO SELL, TRANSFER, LEASE, LICENSE THE PREMISE S THAT MAY BE CONSTRUCTED ON THE PROPERTY ON OWNERSHIP BASIS, LEA SE, LICENSE AND/OR 23 IN ANY OTHER MANNER FOR SUCH PRICE AS THE ATTORNEYS MAY DEEM FIT AND PROPER. TO COLLECT AND RECEIVE FROM THE PURCHASED, TRANSFEREES, LESSEES, LICENSEES OF THE PREMISES, MONIES/PRICE AN D/OR CONSIDERATION AND/OR MAINTENANCE CHARGES AND TO SIGN AND EXECUTE AND/OR GIVE PROPER AND LAWFUL DISCHARGE FOR THE RECEIPTS. (BB) TO EXECUTE FROM TIME TO TIME ALL THE WRITING, AGREEMENT, DEEDS ETC. IN RESPECT OF THE PREMISES WHICH MAYBE CONSTRU CTED ON THE PROPERTY AND ALSO TO EXECUTE AND SIGN CONVEYANCE, T RANSFER OR SURRENDER IN RESPECT OF THE PROPERTY OR ANY PART T HEREOF. (CC) TO SIGN, EXECUTE AND REGISTER THE CONVEYANCES OR ASSIGNMENTS AND/OR POWER OF ATTORNEYS AND/OR OTHER DOCUMENTS A ND/OR AGREEMENTS AND/OR ANY OTHER WRITINGS IN RESPECT OF THE PROPER TY IN PART OR FULL AND/OR THE PREMISES CONSTRUCTED THEREON OR ANY PART THEREOF IN FAVOUR OF ANY PERSON AS THE ATTORNEYS MAY DETERMINE INCLU DING IN FAVOUR OF ANY INDIVIDUAL AND/OR LEGAL ENTITLES AND/OR CO-OPER ATIVE SOCIETY AND/OR LIMITED COMPANY AND/OR ANY OTHER ENTITY THAT MAY BE FORMED FOR SUCH PURPOSE. (DD) TO ISSUE LETTER OF LIEN/NOCS AND TO SIGN DOCU MENTS ON BEHALF OF THE OWNER AS REQUIRED BY THE PROSPECTIVE BUYERS/LEN DING INSTRUCTIONS TO CREATE A CHARGE ON THE ALLOTTED PREMISES. (GG) TO LOOK AFTER AND MAINTAIN THE PROPERTY AND TH E PREMISES CONSTRUCTED THEREON TILL ITS TRANSFER IN FAVOUR OF THE CO-OPERATIVE SOCIETY OR LIMITED COMPANY OR ANY OTHER ORGANISATIO N. 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 RE PRODUCED ABOVE ITSELF SHOWS THAT THE SOCIETY WAS REQUIRED TO GIVE POWERS TO RAISE FINANCE TO MORTGAGE THE PROPERTY AND EVEN THE REGISTRATION OF CHARGE WAS ALSO REQUIRED TO BE GIVEN. FURTHER THROUGH CLAUSE 6.15 IT WAS AG REED THAT DOCUMENTS OF ORIGINAL TITLE DEEDS OF THE PROPERTY WOULD BE HANDE D OVER TO THE DEVELOPER I.E. THDC/HASH SO THAT SAME CAN BE USED IN FURTHERA NCE 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 DEVEL OPMENTAL AND OR OTHER RIGHTS, BENEFITS AND INTEREST WERE ACQUIRED BY THE DEVELOPER OR WOULD BE ACQUIRED IN FUTURE. THIS CLEARLY SHOWS THAT THE SO CIETY WAS UNDER OBLIGATION IN TERMS OF AGREEMENT ITSELF TO ALLOW THE DEVELOPER TO AMALGAMATE THE PROJECT. TOWARDS THE END OF CLAUSE 6.24 IT HAS BEE N CLEARLY STATED THAT IN THE EVENT OF TERMINATION OF JDA, PROVISION OF CLAUS E 6 WOULD BE SURVIVING WHICH CLEARLY SHOWS THAT DEVELOPER CONTINUES TO BE IN POSSESSION FOR THE PURPOSE OF DEVELOPMENT, MORTGAGE ETC. EVEN AFTER TE RMINATION. CLAUSE 8 WHICH DESCRIBES THE OBLIGATION AND UNDERTAKING OF T HE THDC/HASH AND PROVIDES SPECIFICALLY THAT ALL ENVIRONMENTAL CLEARA NCE SHALL BE OBTAINED BY 24 THDC/HASH OUT OF ITS OWN SOURCES. THUS IT WAS CLEA RLY UNDERSTOOD BY THE PARTIES THAT REQUISITE ENVIRONMENTAL CLEARANCES HAD TO BE OBTAINED BEFORE START OF THE PROJECT. CLAUSE 10 AGAIN CASTS SPECIF IC OBLIGATION ON THE OWNER SOCIETY TO GIVE CONSENT TO THDC/HASH TO RAISE FINAN CE FOR THE DEVELOPMENT AND COMPLETION OF THE PROJECT ON THE SECURITY OF TH E PROPERTY BY WAY OF MORTGAGING THE PROPERTY. THUS WHATEVER POWER/AUTHO RIZATION HAVE BEEN GIVEN THROUGH IRREVOCABLE SPECIAL POWER OF ATTORNEY ARE EMANATING FROM THE TERMS AND CONDITIONS AGREED TO AMONG THE PARTIES FR OM THE JDA. 55 THE COMBINED READING OF THE ABOVE CLAUSES OF THE IRREVOCABLE SPECIAL POWER OF ATTORNEY AND JDA CLEARLY SHOW THAT THE DEVELOPER WAS AUTHORIZED TO ENTER UPON THE PROPERTY FOR NOT O NLY FOR THE PURPOSE OF DEVELOPMENT BUT OTHER PURPOSES ALSO. THDC WAS A UTHORIZED TO AMALGAMATE THE PROJECT WITH ANY OTHER PROJECT IN TH E ADJACENT AREA OR ADJOINING AREA AS PER CLAUSE (T) OF THE SPECIAL POW ER OF ATTORNEY. IF THE POSSESSION WAS NEVER GIVEN TO THE DEVELOPER BY THE SOCIETY THEN HOW THE DEVELOPER COULD AMALGAMATE THE PROJECT WIT H ANOTHER PROJECT WHICH MAY BE ACQUIRED LATTER IN THE ADJOINING AREA. THROUGH CLAUSE (W) THDC WAS AUTHORIZED TO HAND OVER THE POSSESSION OF PROPERTY OR PORTION THEREOF TO THE AUTHORITY TO WHOM THE SAME I S REQUIRED. IN LARGE HOUSING SOCIETY PROJECTS SOMETIMES MUNICIPAL AUTHORITIES TAKES SOME PORTION OF LAND FOR THE PURPOSE OF ROADS, PARK S OR OTHER GENERAL UTILITY PURPOSES LIKE INSTALLATION OF ELECTRICITY T RANSFORMERS AND BEFORE SANCTIONING THE PLANS THE DEVELOPER IS REQUIRED TO UNDERTAKE THAT SUCH PORTIONS OF LAND WOULD BE GIVEN FOR SUCH A COMMON P URPOSE. IF POSSESSION WAS NOT GIVEN THEN HOW THDC WAS AUTHORIZ ED TO HAND OVER SUCH LAND OR PORTIONS THEREOF WHICH HAVE NOT BEEN I DENTIFIED IN THE JDA OUT OF THE TOTAL LAND. SIMILARLY THROUGH CLAUS E (Y) THDC HAS BEEN AUTHORIZED TO MORTGAGE, ENCUMBRANCE OR CREATE CHARG E ON THE PROPERTY IN FAVOUR OF ANY BANK OR FINANCIAL INSTIT UTION FOR RAISING THE FUNDS FOR THE PROJECT. IN THE ABSENCE OF POSSESSIO N SUCH POWERS CANNOT BE GIVEN. CLAUSE (AA) CLEARLY AUTHORIZED TH E THDC TO SELL, TRANSFER, LEASE, LICENSE THE PREMISES WHICH WERE TO BE CONSTRUCTED ON OWNERSHIP BASIS AND FURTHER TO RECEIVE MONEYS AGAIN ST SUCH SALE ETC. AND TO ISSUE FINAL RECEIPT. NOWHERE IT IS MENTIONE D IN THIS CLAUSE THAT SUCH SALE DEEDS WERE TO BE SINGED BY THE SOCIETY AS CONFIRMING PARTY. IN THE ABSENCE OF POSSESSION IT IS JUST NOT POSSIBL E FOR THE DEVELOPER TO SELL AND TRANSFER THE PREMISES WHICH WERE TO BE CONSTRUCTED. THIS IS FURTHER CLARIFIED BY CLAUSE (BB) AND (CC) WHICH GIVES THE POWER OF EXECUTION OF CONVEYANCE AND OTHER DOCUMENTS INVOLVI NG IN RESPECT OF 25 THE PREMISES TO BE CONSTRUCTED WITHOUT ANY INTERFER ENCE OF THE SOCIETY BEING MADE CONFIRMING PARTY. ALL THESE CLAUSES CLE ARLY SHOW THAT THE POSSESSION WAS GIVEN BY THE SOCIETY AND/OR ITS MEMB ERS TO THDC/HASH ON THE EXECUTION OF IRREVOCABLE POWER OF ATTORNEY. THROUGH THESE CLAUSES OF JDA AND IRREVOCABLE POWER OF ATTORNEY THE DEVELOPER WAS ABLE TO COMPLETELY CONTROL THE PROPER TY AND MAKE USE OF IT NOT ONLY FOR THE PURPOSE OF DEVELOPMENT BUT A LSO FOR THE PURPOSE OF AMALGAMATION, SALE, MORTGAGE ETC. WHEN THE ABOVE CLAUSES ARE COMPARED ON TOUCH STONE OF THE DISCUSSION ON POSSES SION IN PARA 26 TO 28 IN THE CASE OF JASBIR SINGH SARKARIA (SUPRA) WHICH WE HAVE REPRODUCED ABOVE, IT BECOMES CLEAR THAT THE POSSESS ION HAS BEEN GIVEN. 56 IN THAT DISCUSSION, IT HAS BEEN CLEARLY MENTIONE D THAT THE POSITION CONTEMPLATED BY CLAUSE (V) OF SECTION 2(47 ) OF THE ACT NEED NOT TO BE EXCLUSIVE POSSESSION. WHAT IS REQUIRED I S THAT THE TRANSFEREE BY VIRTUE OF POSSESSION SHOULD BE ABLE T O EXERCISE CONTROL FROM OVERALL INTENDED PURPOSES. WE DO NOT THINK IN THE PRESENT CASE THE ASSESSEE HAS GIVEN ONLY A LICENSE AS CLAIMED BY LD. COUNSEL OF THE ASSESSEE BECAUSE OF THE POWERS OF SELLING, AMALGAMA TING ETC. MENTIONED IN THE JDA AND IRREVOCABLE SPECIAL POWER OF ATTORNEY. THE ISSUE HAS BEEN DISCUSSED IN HE JUDGMENT OF JASB IR SINGH SARKARIA (SUPRA) IN FURTHER DISCUSSION WHICH HAS BEEN MADE I N PARA 33 REGARDING POWER OF ATTORNEY (WHICH HAS BEEN REPRODU CED EARLIER). IN THAT CASE THE POWERS WERE GIVEN TO ENTER UPON AND S URVEY THE LAND, PREPARE LAY OUT PLANS, SUBMIT BUILDING PLAN FOR SAN CTION WITH THE APPROPRIATE AUTHORITIES TO CONTROL, MANAGE AND LOO K AFTER AND SUPERVISE THE PROPERTY, TO OBTAIN WATER AND SEWERAG E, DISPOSAL AND ELECTRICITY CONNECTION. IN THAT CASE THE DEVELOPER WAS AUTHORIZED TO MORTGAGE THE PROPERTY TO OBTAIN MONEY FOR MEETING T HE COST OF CONSTRUCTION ON SECURITY AND MORTGAGE OF LAND FALLI NG ONLY TO THE DEVELOPERS SHARE. IN THAT CASE IT WAS HELD THAT GP A WAS NOT A LICENSE TO ENTER UPON FOR DOING SOME PRELIMINARY ACTS IN RE LATION TO DEVELOPMENT OF WORK BUT THE POWER TO CONTROL THE LA ND HAS ALSO BEEN CONFIRMED. IT HAS ALSO BEEN NOTED THAT THE AGREEME NT DESCRIBED THE POWER OF ATTORNEY AS IRREVOCABLE AND EXTRA DECLARA TION TO THAT EFFECT IN THE POWER OF ATTORNEY IS NOT WITHOUT SIGNIFICANC E. IN CASE BEFORE US, MANY MORE POWERS HAVE BEEN GIVEN TO THDC IN ADD ITION TO POWERS WHICH HAVE BEEN DESCRIBED IN THAT JUDGMENT AND POWE R OF ATTORNEY HAS BEEN DESCRIBED AS IRREVOCABLE IN CLAUSE 6.7 OF JDA. THEREFORE, IT IS CLEAR THAT THE ASSESSEES PLEA THAT THE POSSE SSION WAS TO BE 26 GIVEN ONLY AT THE TIME OF REGISTRATION OF THE JDA, IS NOT CORRECT. ONCE IRREVOCABLE POWER WAS GIVEN THEN IT CANNOT BE SAID THAT THE POSSESSION WAS NOT GIVEN. THE ISSUE REGARDING REVO CATION OF IRREVOCABLE POWER OF ATTORNEY AND CANCELLATION OF T HE JDA WOULD BE DISCUSSED LATER ON WHILE DEALING WITH THAT CONTENTI ON. 57 WE FIND FORCE IN THE SUBMISSIONS OF THE LD. DR F OR THE REVENUE THAT INTERPRETATION OF CLAUSE (V) TO SECTION 2(47) SHOULD BE MADE IN THE LIGHT OF HEYDONS RULE. THERE IS NO FORCE IN T HE OBJECTION OF THE LD. COUNSEL OF THE ASSESSEE THAT THIS CLAUSE SHOULD BE INTERPRETED ON GENERAL RULES OF INTERPRETATION PARTICULARLY IN THE LIGHT OF THE FACT THAT NO REASON HAS BEEN GIVEN FOR THE SAME. HEYDONS RU LE HAS BEEN APPLIED BY THE INDIAN COURTS MANY TIMES. THE RULE WAS APPLIED AND INITIATED IN HEYDONS CASE (1584) 3 CO. REP 7A. TH IS RULE WAS UPHELD BY THE CONSTITUTION BENCH OF HON'BLE APEX COURT IN CASE OF BENGAL IMMUNITY CO. LTD. V STATE OF BIHAR (1955) 2 SCR 60 3 FOR CONSIDERATION OF ARTICLE 286 OF THE CONSTITUTION. IT HAS BEEN HELD IN CASE OF DR. BALIRAM WAMAN HIRAY V. MR. JUSTICE B. LENTIN AND ANOTHER, 176 ITR 1 THAT FOR UNDERSTANDING AMENDMENT IN THE ACT, PERHAPS HEYDONS RULE IS BEST RULE FOR INTERPRETATI ON OF SUCH AMENDMENT. WE FIND THAT WITHOUT MENTIONING THIS RUL E LD. AUTHORITY FOR ADVANCE RULING HAS DISCUSSED THIS ISSUE IN PARA 27 OF THE JUDGMENT WHICH WE HAVE EXTRACTED ABOVE. IT HAS BEE N HELD THAT IF POSSESSION REFERRED TO IN CLAUSE (V) IS TO BE UND ERSTOOD AS EXCLUSIVE BASIS OF THE TRANSFEREE THEN VERY PURPOSE OF THE AM ENDMENT OR ENLARGEMENT OF THE DEFINITION OF TRANSFER WOULD GET DEFEATED. WE ARE REPRODUCING FOLLOWING HEAD NOTE OF THE HON'BLE APEX COURT IN CASE OF DR. BALIRAM WAMAN HIRAY V. MR. JUSTICE B. LENTIN A ND ANOTHER (SUPRA): THE FOLLOWING PRINCIPLES ENUNCIATED IN HEYDONS CA ASE (1584) 3 CO. REP 7A AND FIRMLY ESTABLISHED, ARE STILL IN FULL FO RCE AND EFFECT: THAT FOR THE SURE AND TRUE INTERPRETATION OF ALL STATUTE S IN GENERALS (BE THEY PENAL OR BENEFICIAL, RESTRICTIVE OR ENLARGING OF TH E COMMON LAW), FOUR THINGS ARE TO BE DISCERNED AND CONSIDERED: (1) WHAT WAS THE COMMON LAW BEFORE THE MAKING OF THE ACT; (2) WHAT WAS THE MISCHIEF AND DEFECT FOR WHICH THE COMMON LAW DID NOT PROVIDE; (3 ) WHAT REMEDY PARLIAMENT HAS RESOLVED AND APPOINTED TO CURE THE D ISEASE OF THE COMMON WEALTH AND (4) THE TRUE REASON OF THE REMEDY . AND THEN, THE OFFICE OF ALL THE JUDGES IS ALWAYS TO MAKE SUCH CON STRUCTION AS SHALL SUPPRESS THE EVASIONS FOR THE CONTINUANCE OF THE MI SCHIEF AND PRO PRIVATE COMMANDO AND TO ADD FORCE AND LIFE TO THE C URE AND REMEDY ACCORDING TO THE TRUE INTENT OF THE MAKERS OF THE A CT PRO BONO PUBLIC. THERE IS NOW THE FURTHER ADDITION THAT REGARD MUST BE HAD NOT ONLY TO THE EXISTING LAW BUT ALSO TO PRIOR LEGISLATION AND TO THE JUDICIAL INTERPRETATION THEREOF. 27 58 GOING BY THE HEYDONS RULE OF INTERPRETATION IF WE ANALYZE THE PURPOSE OF CLAUSE (V) OF SECTION 2(47) THEN IT WOUL D EMERGE THAT LAW BEFORE MAKING THE AMENDMENT WAS THAT CAPITAL GAIN C OULD BE CHARGED ONLY IF A TRANSFER HAS BEEN EFFECTED AND TRANSFER W AS INTERPRETED BY VARIOUS COURTS INCLUDING THE DECISION OF HON'BLE SU PREME COURT IN CASE OF ALAPATI VENKATRAMIAN V CIT, 57 ITR 185 (SC) THAT PROPER CONVEYANCE OF THE PROPERTY HAS BEEN MADE UNDER THE COMMON LAW. THE MISCHIEF WAS WITH REGARD TO TRANSFER IN THE SEN SE THAT THERE WAS COMMON PRACTICE THAT PROPERTIES WERE BEING TRANSFER RED IN SUCH A MANNER THAT TRANSFEREE COULD ENJOY THE BENEFIT OF T HE PROPERTY WITHOUT EXECUTION OF THE CONVEYANCE DEED. THIRDLY WE NEED T O EXAMINE THE REMEDY WHICH WAS INSERTION OF CLAUSE (V) AND (VI) S O THAT CASES OF GIVING POSSESSION OF THE PROPERTY, WERE ALSO COVERE D BY THE DEFINITION OF TRANSFER. FOURTHLY, TRUE REASON FOR THIS AMENDM ENT WAS TO PLUG A LOOP HOLE IN THE LAW. THEREFORE, CONSIDERING THE PURPOSE OF INSERTION OF CLAUSE (V) AND (VI) OF SECTION 2(47) AND VARIOUS CLAUSES OF POWER OF ATTORNEY AND JDA IT BECOMES ABSOLUTELY CLEAR THAT T HE SOCIETY HAS HANDED OVER THE POSSESSION OF THE PROPERTY TO THDC/ HASH. 59 SECOND IMPORTANT CONTENTION ON BEHALF OF THE ASS ESSEE IS THAT JDA WAS EXECUTED ON 25.2.2007 AND IF POSSESSION WAS GIVEN THEN HOW THE ASSESSEE WAS HAVING POSSESSION IN TERMS OF LATE R SALE DEEDS EXECUTED ON 2.3.2007 AND 25.4.2007. THE SOCIETY HA S EXECUTED TWO SALE DEEDS FOR CONVEYANCE OF PARTS OF THE TOTAL LA ND. FIRST SALE DEED HAS BEEN EXECUTED ON 2.3.2007 FOR 3.08 ACRES AND RE CITATION CLAUSE (A) READS AS UNDER: CLAUSE (A) - THE VENDOR IS THE ABSOLUTE OWNER AND I N POSSESSION OF LAND TOTAL MEASURING 169 KANAL 7 MARLAS EQUIVALE NT TO APPROX. 21.2 ACRES IN VILLAGE KANSAL, TEHSIL MOHALI AND MORE PAR TICULARLY DESCRIBED IN SCHEDULE A HEREUNDER WRITTEN AND DELINEATED IN G REEN COLOUR BOUNDARY LINE IN THE SHIZRA PLAN ISSUED BY THE PATW ARI DATED 23.2.2007. 60 ACCORDING TO THE LD. COUNSEL OF THE ASSESSEE IF SOCIETY HAD ALREADY GIVEN THE POSSESSION THEN THE SOCIETY WOULD NOT HAVE / HAD POSSESSION ON 2.3.2007 OF THE LAND. AT FACE VALUE THIS ARGUMENT LOOKS ATTRACTIVE BUT WHEN EXAMINED IN TERMS OF POSS ESSION WHICH HAS BEEN EXPLAINED IN CASE OF JASBIR SINGH SARKARIA (SU PRA), ACTUAL REALITY WILL COME FORWARD. IN THIS JUDGMENT CONCEPT OF CON CURRENT POSSESSION HAS ALSO BEEN DISCUSSED AND FOLLOWING EXTRACT OF PA RAGRAPH 55 OF SALMONDS JURISPRUDENCE HAS BEEN EXTRACTED WHICH R EADS AS UNDER: 28 IT WAS A MAXIM OF THE CIVIL LAW THAT TWO PERSONS C OULD NOT BE IN POSSESSION OF THE SAME THING AT THE SAME TIME. AS A GENERAL PROPOSITION THIS IS TRUE: FOR EXCLUSIVENESS IS OF T HE ESSENCE OF POSSESSION. TWO ADVERSE CLAIMS OF EXCLUSIVE USE CA NNOT BOTH BE EFFECTUALLY REALIZED AT THE SAME TIME. CLAIMS, HOW EVER, WHICH ARE NOT ADVERSE, AND WHICH ARE NOT, THEREFORE, MUTUALLY DES TRUCTIVE, ADMIT OF CONCURRENT REALIZATION. HENCE THERE ARE SEVERAL PO SSIBLE CASES OF DUPLICATE POSSESSION. 1 MEDIATE AND IMMEDIATE POSSESSION CROSS-OBJECTIONS -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. THE CONCURRENT POSSESSION OF THE OWNER WHO CAN EXER CISE POSSESSION RIGHT TO A LIMITED EXTENT AND FOR A LIMITED PURPOSE AND THAT OF THE BUYER/DEVELOPER WHO HAS A GENERAL CONTROL AND CUSTO DY OF THE LAND CAN VERY WELL BE RECONCILED. 61 IN FURTHER DISCUSSION IN PARA 26 TO 28 OF THE AB OVE DECISION IT HAS BEEN HELD THAT IT IS NOT NECESSARY IN TERMS OF CLAUSE (V) THAT THE DEVELOPER SHOULD HAVE EXCLUSIVE POSSESSION. THE CO NCURRENT POSSESSION OF THE OWNER IS POSSIBLE WHICH GIVES RIG HTS TO A LIMITED EXTENT FOR A LIMITED PURPOSE. THUS IT IS VERY MUCH POSSIBLE TO HOLD CONCURRENT POSSESSION. MERE RECITATION IN THE SALE DEED TO THE EFFECT THAT THE SOCIETY WAS OWNER OF AND IN POSSESSION OF LAND MEASURING 21.2 ACRES, DOES NOT SHOW THAT THE SOCIETY WAS HAVI NG ACTUAL POSSESSION. WHAT THE SOCIETY WAS HAVING IS ONLY OW NERSHIP RIGHT AND THE POSSESSION WAS ONLY CONCURRENT AS THE POSSESSAR Y RIGHT. FURTHER IT IS A STANDARD CLAUSE IN THE CONVEYANCE DEED AND IT DOES NOT PROVE OR INDICATE ANYTHING EXCEPT THAT A PORTION OF LAND MEASURING 3.08 ACRES, HAS BEEN SOLD / CONVEYED TO THE DEVELOPER. I N THE LIGHT OF THIS POSITION, THIS CONTENTION IS REJECTED. 62 WE FIND NO FORCE IN THE NEXT CONTENTION OF THE L D. COUNSEL OF THE ASSESSEE THAT POSSESSION IF AT ALL WAS GIVEN SHOULD BE HELD TO BE ONLY A LICENSE AS DEFINED IN SECTION 52 OF INDIAN EASEME NT ACT BECAUSE CLEARLY AS PER SECTION 52 OF THIS ACT, WHERE ONE PE RSON GRANTS TO ANOTHER OR MANY OTHER PERSONS TO DO SOMETHING UPON IMMOVEABLE PROPERTY WHICH IN THE ABSENCE OF SUCH RIGHT WOULD B E UNLAWFUL. 63 HERE IN CASE BEFORE US, THE RIGHT HAS NOT BEEN G IVEN FOR THE PURPOSE OF DOING SOMETHING BUT ALL THE POSSIBLE RIG HTS IN PROPERTY INCLUDING RIGHT TO SELL, RIGHT TO AMALGAMATE THE PR OJECT WITH ANOTHER PROJECT IN THE ADJOINING AREA WHICH MAY BE ACQUIRED LATER, RIGHT TO 29 MORTGAGE ETC. CLEARLY SHOW THAT RIGHTS GIVEN BY THE SOCIETY ARE MUCH MORE LARGER THAN WHAT IS COVERED IN THE TERM LICEN SE. 64 FOURTH CONTENTION IS THAT THE MONEY RECEIVED AT THE TIME OF EXECUTION OF JDA CAN BE TERMED AS ADVANCE AND WHATEVER MONEY HAS BEEN RECEIVED HAS ALREADY BEEN SHOWN AS CAPITAL GAIN. WE FIND NO FORCE IN THIS SUBMISSION BECAUSE SECTION 45 WHICH HAS BEEN EXTRACTED ABOVE C LEARLY PROVIDE FOR TAXING OF PROFITS AND GAINS ARISING FROM THE TRANSF ER. WE HAVE ALREADY DISCUSSED THE IMPLICATION OF SECTION 45 R.W.S. 48 W HILE DISCUSSING THE LEGAL POSITION. WE HAD ALSO DISCUSSED THIS ISSUE IN THE LIGHT OF THE DECISION IN CASE OF JASBIR SINGH SARKARIA (SUPRA) AND POINTED O UT 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 PARTICULAR YEAR. 65 WE WOULD LIKE TO DISCUSS THIS ASPECT OF THE ISSU E IN LITTLE MORE DETAIL AND TRY TO UNDERSTAND WHY THE WHOLE OF THE CONSIDER ATION IS REQUIRED TO BE TAXED. AT THE COST OF REPETITION LET US AGAIN REPR ODUCE THE OBSERVATIONS OF THE LD. AUTHORITY IN CASE OF JASBIR SINGH SARKARIA (SUPRA) WHICH WE HAVE EARLIER EXTRACTED AT PARA 40 AND THE RELEVANT PORTI ON IS AS UNDER: 40. ON THE ABOVE, THE HON'BLE AUTHORITY AFTER REFE RRING TO THE PROVISIONS OF SECTION 45 AND OBSERVED AS UNDER:- .THE SECTION CAN BE ANALYSED THUS : (A) TRANSFER OF A CAPITAL ASSET EFFECTED IN THE PRE VIOUS YEAR, (B) RESULTANT PROFITS OR GAINS FROM SUCH TRANSFER, (C) THOSE PROFITS OR GAINS WOULD CONSTITUTE THE INC OME 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. FIRSTLY , THE EXPRESSION USED IS ARISING WHICH IS NOT TO BE EQUATED WITH THE EXPRESSION RECEIVED. BOTH THESE EXPRESSIONS AND IN ADDITION THERETO, TH E EXPRESSION ACCRUE ARE USED IN THE INCOME-TAX ACT EITHER COLLECTIVELY OR SEPARATELY ACCORDING TO THE CONTEXT AND NATURE OF THE CHARGING PROVISION. THE S ECOND POINT WHICH DESERVES NOTICE IS THAT BY A DEEMING PROVISION, TH E 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 CONT AINED IN SECTION 45 HAS BEEN CONSIDERED IN DECIDED CASES AND LEADING TE XT BOOKS. THE FOLLOWING 30 STATEMENT OF LAW IN SAMPATH IYENGARS COMMENTARY (1 0TH EDITION REVISED BY SHRI S. RAJARATNAM) BRINGS OUT THE CORRECT LEGAL POSITION : SECTION 45 ENACTS THAT THE CAPITAL GAINS SHALL BY FICTION BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE. SINCE THIS IS A STATUTORY FICTION, THE ACTU AL YEAR IN WHICH THE SALE PRICE WAS RECEIVED, WHETHER IT WAS ONE YEAR, T WO YEARS, THREE YEARS, FOUR YEARS ETC. PREVIOUS TO THE PREVIOUS YEA R OF TRANSFER, IS BESIDE THE POINT. THE ENTIRETY OF THE SUM OR SUMS R ECEIVED IN ANY EARLIER YEAR OR YEARS WOULD BE REGARDED AS THE CAPI TAL GAINS ARISING IN THE PREVIOUS YEAR OF TRANSFER. . . . . IN THE WORDS OF SECTION 45, THE CAPITAL GAI NS ARISING FROM THE TRANSFER 'SHALL BE THE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE'. SO, THE PAYMENTS OF CONSIDER ATION STIPULATED TO BE PAID IN FUTURE WOULD HAVE TO BE ATTRIBUTED, BY STATUTORY MANDATE, TO THE YEAR OF TRANSFER, EVEN AS PAYMENTS MADE PRI OR TO THE YEAR OF TRANSFER. 66 THE ABOVE CLEARLY SHOWS THAT IT IS BECAUSE OF EX PRESSION USED IN SECTION 45 THAT IS ARISING WHICH CANNOT BE EQUATE D WITH RECEIPT. IN THIS RESPECT THE LD. AUTHORITY HAS QUOTED A VERY OLD DEC ISION OF HON'BLE MADRAS HIGH COURT IN CASE OF T.V. SUNDARAM IYENGAAR AND SO NS LTD. V. CIT, 37 ITR 26 (MAD). AT PARA 13 OF THE SAID DECISION IS EXTRA CTED 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 CONST RUING SECTION 12 B OF THE INDIAN INCOME-TAX ACT, 1922 CLARIFIED THE IMPOR T OF THE EXPRESSION ARISE AS FOLLOWS SECTION 12B DOES NOT REQUIRE THAT PROFITS SHOULD HAVE BEEN ACTUALLY RECEIVED. IT IS SUFFICIENT IF THEY HAVE ARISEN. THR OUGHOUT THE INCOME-TAX ACT THE WORDS ACCRUE AND ARISE ARE USED IN CONTRADI STINCTION 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 ACCR UING ARE GENERAL WORDS DESCRIPTIVE OF A RIGHT TO RECEIVE PROFITS. SEE ALSO CIT V. ANAMALLAIS TIMBER TRUST LTD. TO ATT RACT THE OPERATION OF SECTION 12B IT IS THEREFORE SUFFICIENT IF THE PROFI TS AROSE. THEY NEED NOT HAVE BEEN ACTUALLY RECEIVED. 14. THUS THE CRITERION OF RIGHT TO RECEIVE THE PROF ITS / GAINS WAS APPLIED IN THAT CASE. 15. THE LEGAL POSITION DOES NOT THEREFORE ADMIT OF ANY DOUBT THAT THE ACTUAL RECEIPT OF THE ENTIRE SALE CONSIDERATION DURING THE YEAR OF TRANSFER IS NOT NECESSARY FOR THE PURPOSE OF COMPUTING CAPITAL GAIN S. FURTHER THE EXPRESSION ARISING HAS BEEN DEFINED IN THE ADVANCED LAW LEXICON BY P. RAMANATHA AIYER EDITED BY Y.V. CHANDR ACHUD, FORMER CHIEF JUSTICE OF INDIA: 31 THE WORDS ARISING OR ACCRUING DESCRIBE A RIGHT T O RECEIVE PROFITS, AND THAT THERE MUST BE A DEBT OWED BY SOMEBODY. LD. COMMISS IONER OF INCOME TAX, WEST BENGAL-II, CALCUTTA V. HINDUSTAN HOUSING AND L AND 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. COM MISSIONER 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 AC QUIRES 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 DEFINITIONS SH OW THAT IT (I.E. ACCRUAL) IS NOT EQUAL TO THE RECEIPT OF INCOME. IN FACT IT IS A STAGE BEFORE THE POINT OF TIME 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 ACCRUA L OR AROUSAL OF INCOME HAS ALSO BEEN DISCUSSED BY THE LD. AUTHOR S. RAJARA TNAM IN THE COMMENTARY OF LAW OF INCOME TAX BY SAMPATH IYENGAR XITH EDITI ON 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 I NCREASE. ARISING MEANS COMING INTO EXISTENCE OR NOTICE OR PRESENTING ITSE LF. ACCRUE CONNOTES GROWTH OR ACCUMULATION WITH A TANGIBLE SHAPE SO AS TO BE RECEIVABLE. IN A SECONDARY SENSE, THE TWO WORDS TOGETHER MEAN TO BE COME A PRESENT AND ENFORCEABLE RIGHT 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 PART ICULAR CASE. IT WILL INDEED BE DIFFICULT TO DISTINGUISH BETWEEN THE TWO WORDS, BUT IT IS CLEAR THAT BOTH THE WORDS ARE USED IN CONTRADISTINCTION TO THE WORD RE CEIVE AND INDICATE A RIGHT TO RECEIVE. THEY REPRESENT A STAGE ANTERIOR TO THE POINT OF TIME WHEN THE INCOME BECOMES RECEIVABLE AND CONNOTE A CHARACTER O F THE INCOME, WHICH IS MORE OR LESS INCHOATE AND WHICH IS SOMETHING LESS T HAN A RECEIPT. AN UNENFORCEABLE CLAIM TO RECEIVE AN UNDETERMINED OR U NDEFINED SUM DOES NOT GIVE RISE TO ACCRUAL. 68 THEREFORE, IT IS NOT ONLY THE MONEY WHICH HAS B EEN RECEIVED BY THE ASSESSEE WHICH IS REQUIRED TO BE TAXED BUT THE CONS IDERATION WHICH HAS ACCRUED TO THE ASSESSEE IS ALSO REQUIRED TO BE TAXE D. IN VIEW OF THIS, THIS CONTENTION IS REJECTED. 69 THE FIFTH CONTENTION MADE BY THE LD. COUNSEL FO R THE ASSESSEE WAS THAT SINCE SECTION 53A OF THE TRANSFER OF PROPE RTY ACT ITSELF HAS UNDERGONE AMENDMENT W.E.F. 24.9.2001 BY WHICH THE A GREEMENT REFERRED TO IN THAT SECTION IS REQUIRED TO BE REGIS TERED AND THEREFORE, 32 NOW IN SECTION 2(47)(V) ONLY THE AMENDED PROVISIONS CAN BE READ. WE FIND NO FORCE IN THIS CONTENTION. IT IS WELL KNOWN THAT SECTION 53A OF THE TRANSFER OF PROPERTY ACT WAS PASSED ON EQUITABL E DOCTRINE SO AS TO PROTECT THE TAKING OVER OR RETENTION OF THE POSS ESSION BY THE TRANSFEREE. IT WAS NOT A SOURCE BY WHICH TITLE OF IMMOVABLE PROPERTY COULD BE ACQUIRED. SECTION 53A OF TP ACT READ AS U NDER:- 53A. PART PERFORMANCE.- WHERE ANY PERSON CONTRACTS TO TRANSFER FOR CONSIDERATION ANY IMMOVEABLE PROPERTY BY WRITING SI GNED BY HIM OR ON HIS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTI TUTE 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 POSSESSIO N IN PART PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT I N FURTHERANCE OF THE CONTRACT, AND THE TRANSFEREE HAS PERFORMED OR IS WILLING TO P ERFORM HIS PART OF THE CONTRACT, THEN, NOTWITHSTANDING THAT THE CONTR ACT, [***]WHERE THERE IS AN INSTRUMENT OF TRANSFER, THAT THE TRANSFER HAS NOT BEEN COMPLETED IN THE MANNER PRESCRIBED THEREFOR BY THE LAW FOR TH E 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 W HICH THE TRANSFEREE HAS TAKEN OR CONTINUED IN POSSESSION, OTHER THAN A RIGHT EXPRESSLY PROVIDED BY THE TERMS OF THE CONTRACT 70 A PLAIN READING OF THE ABOVE PROVISION SHOWS THAT IT PROVIDES A SAFETY MEASURE OR A SHIELD IN THE HANDS OF THE TRAN SFEREE TO PROTECT THE POSSESSION OF ANY PROPERTY WHICH HAS BEEN GIVEN BY THE TRANSFEROR AS LAWFUL POSSESSION UNDER A PARTICULAR AGREEMENT O F SALE. THIS POSITION OF LAW WAS INCORPORATED IN THE DEFINITION OF TRANSFER BY INSERTION OF CLAUSES (V) & (VI) IN SECTION 2(47) OF THE ACT. IT IS IMPORTANT TO NOTE THAT CLAUSE (V) USES THE EXPRESSI ON CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF T.P. ACT, THER EFORE, CLEARLY THE IDEA IS THAT AN AGREEMENT WHICH PROVIDES SOME DEFEN SE IN THE HANDS OF TRANSFEREE WAS INCORPORATED UNDER THE DEFINITION OF TRANSFER IN THE INCOME TAX ACT. NOW ORIGINALLY SECTION 53A OF T.P. ACT PROVIDED THAT EVEN IF THE CONTRACT THOUGH REQUIRED TO BE REGISTE RED HAS NOT BEEN REGISTERED, WHICH MEANS THE RIGHT OF DEFENDING THE POSSESSION WAS AVAILABLE EVEN IF THE CONTRACT WAS NOT REGISTERED B UT BY AMENDMENT ACT 48 OF 2001, THE EXPRESSION THOUGH REQUIRED TO BE REGISTERED HAS NOT BEEN REGISTERED, HAS BEEN OMITTED WHICH MEANS FOR THE PURPOSE OF POSSESSION U/S 53A OF T.P. ACT, A PERSON HAS TO PROVE THAT POSSESSION HAS BEEN GIVEN UNDER A REGISTERED AGREEM ENT. IN OTHER 33 WORDS, NOW U/S 53A OF T.P. ACT, THE AGREEMENT REFER RED IS REQUIRED TO BE REGISTERED. THIS REQUIREMENT CANNOT BE READ IN C LAUSE (V) OF SECTION 2(47) BECAUSE THAT REFERS ONLY TO THE CONT RACT OF THE NATURE OF SECTION 53A OF T.P. ACT WITHOUT GOING INTO THE CONT ROVERSY WHETHER SUCH AGREEMENT IS REQUIRED TO BE REGISTERED OR NOT. THE LD. COUNSEL FOR THE ASSESSEE HAD REFERRED TO THE DECISION OF HO N'BLE SUPREME COURT IN THE CASE OF SURANA STEELS V DCIT 237 ITR 777 (SC) FOR THE PROPOSITION THAT WHEN A SECTION OF A PARTICULAR STA TUTE IS INTRODUCED INTO ANOTHER ACT IT MUST BE READ IN THE SAME SENSE AS IT BORE IN THE ORIGINAL ACT. THE CAREFUL PERUSAL OF THAT JUDGMENT WOULD SHOW THAT SITUATION IS APPLICABLE ONLY WHEN A PARTICULAR PROV ISION OF AN ACT HAS BEEN INCORPORATED IN THE LATER ACT. IN THAT CASE A QUESTION AROSE THAT FOR THE PURPOSE OF MAT PROVISION WHAT IS THE MEANI NG OF PAST LOSSES OR UNABSORBED DEPRECIATION. IT WAS FOUND THAT IN E XPLANATION TO SECTION 115J CLAUSE (IV), THE FOLLOWING EXPRESSION WAS USED:- (IV) THE AMOUNT OF THE LOSS OR THE AMOUNT OF DEPREC IATION WHICH WOULD BE REQUIRED TO BE SET OFF AGAINST THE P ROFIT OF THE RELEVANT PREVIOUS YEAR AS IF THE PROVISIONS OF CLAU SE (B) OF THE FIRST PROVISO TO SUB SECTION (I) OF SECTION 205 OF THE COMPANIES ACT, 1956 (1 OF 1956) ARE APPLICABLE. 71 THE HON'BLE APEX COURT REFERRED TO THE PRINCIPLE S OF STATUTORY INTERPRETATION BY SHRI G.P.SINGH AND EXTRACTED FOLL OWING PIECE: SECTION 115J, EXPLANATION CLAUSE (IV), IS A PIECE OF LEGISLATION BY INCORPORATION. DEALING WITH THE SUBJECT, JUSTICE G.P. SINGH STATES IN PRINCIPLES OF STATUTORY INTERPRETATION (7 TH EDITION, 1999). INCORPORATION OF AN EARLIER ACT INTO A LATER ACT IS A LEGISLATIVE DEVICE ADOPTED FOR THE SAKE OF CONVENIENCE IN ORDER TO AVOID VERBATIM REPRODUCTION OF THE PROVISIONS OF THE EARL IER ACT INTO THE LATER. WHEN AN EARLIER ACT OR CERTAIN OF ITS PR OVISIONS ARE INCORPORATED BY REFERENCE INTO A LATER ACT, THE PRO VISIONS SO INCORPORATED BECOME PART AND PARCEL OF THE LATER AC T AS IF THEY HAD BEEN 'BODILY TRANSPOSED INTO IT'. THE EFFECT OF INCORPORATION IS ADMIRABLY STATED BY LORD ESHER, M.R. : 'IF A SUB SEQUENT ACT BRINGS INTO ITSELF BY REFERENCE SOME OF THE CLA USES OF A FORMER ACT, THE LEGAL EFFECT OF THAT, AS HAS OFTEN BEEN HELD, IS TO WRITE THOSE SECTIONS INTO THE NEW ACT AS IF THEY HA D BEEN ACTUALLY WRITTEN IN IT WITH THE PEN, OR PRINTED IN IT.(P.233) EVEN THOUGH ONLY PARTICULAR SECTIONS OF AN EARLIER ACT ARE INCORPORATED INTO LATER, IN CONSTRUING THE INCORPOR ATED SECTIONS IT MAY BE AT TIMES NECESSARY AND PERMISSIBLE TO REF ER TO OTHER PARTS OF THE EARLIER STATUTE WHICH ARE NOT INCORPOR ATED. AS WAS STATED BY LORD BLACKBURN: 'WHEN A SINGLE SECTION OF AN ACT OF PARLIAMENT IS INTRODUCED INTO ANOTHER ACT, I THI NK IT MUST BE READ IN THE SENSE IT BORE IN THE ORIGINAL ACT FROM WHICH IT WAS TAKEN, AND THAT CONSEQUENTLY IT IS PERFECTLY LEGITI MATE TO REFER TO 34 ALL THE REST OF THAT ACT IN ORDER TO ASCERTAIN WHAT THE SECTIONS MEANT, THOUGH THOSE OTHER SECTIONS ARE NOT INCORPOR ATED IN THE NEW ACT. (P.244) 72 ON THE BASIS OF ABOVE OBSERVATION, IT WAS HELD T HAT MEANING OF PAST LOSSES OR UNABSORBED DEPRECIATION HAS TO BE TA KEN SAME AS WAS DEFINED IN THE COMPANIES ACT. IN THIS CASE IT IS C LEAR THAT PROVISION ITSELF REFERS TO CLAUSE (B) OF SUB SECTION (1) OF SECTION 205 OF COMPANYS ACT 1956 AND THEREFORE, SAME MEANING WAS GIVEN TO PAST LOSSES OR UNABSORBED DEPRECIATION AS IS GIVEN UNDER THE COMPANIES ACT, 1956. 73 IN CASE OF CLAUSE (V) TO SECTION 2(47), CLEARLY THE EXPRESSION USED IS CONTRACT OF THE NATURE REFERRED TO IN SECT ION 53A OF T.P. ACT, WHICH MEANS IT IS NOT A CASE OF INCORPORATION OF ON E PIECE OF LEGISLATION INTO ANOTHER PIECE OF LEGISLATION. IF T HAT WAS THE INTENTION OF THE PARLIAMENT, OBVIOUSLY CLAUSE (V) WOULD CONTA IN THE EXPRESSION CONTRACT AS DEFINED UNDER SECTION 53A OF TRANSFER OF PROPERTY ACT, 1882. FURTHER, IT IS SETTLED POSITION OF LAW THAT ANY INTERPRETATION WHICH COULD RENDER A PARTICULAR PROVISION REDUNDANT SHOULD BE AVOIDED. IF THE CONTENTION OF THE LD. COUNSEL WAS T O BE ACCEPTED, OBVIOUSLY THE PROVISIONS OF CLAUSE (V) OF SECTION 2 (47) OF THE ACT WOULD BECOME REDUNDANT IN THE SENSE THAT REGISTRATI ON OF AGREEMENT WOULD AGAIN BE MADE COMPULSORY BUT SINCE PROPERTIES WERE BEING SOLD IN THE MARKET ON POWER OF ATTORNEY BASIS THROUGH UNREGISTERED AGREEMENTS WHICH WOULD MAKE THIS PROVISION REDUNDAN T. THIS POSITION WE HAVE ALREADY DISCUSSED EARLIER WHILE DISCUSSING THE HEYDONS RULE IN THE INTERPRETATIONS OF THIS CLAUSE. FURTHER THE ISSUE OF INTERPRETATION OF CLAUSE (V) AND AMENDMENT TO SECTI ON 53A OF THE TRANSFER OF PROPERTY ACT CAME FOR CONSIDERATION BEF ORE THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SURESH CHANDER AGGARWAL VS ITO 48 SOT 2010. THE TRIBUNAL DISCUSSED THIS ISSUE AT PAGE 7 AND AFTER QUOTING THE PROVISIONS OF SECTION 2(47) AND ALSO SE CTION 53A BEFORE AND AFTER AMENDMENT AS WALL AS PARA NOS. 11.1 TO 11 .2 OF THE BOARDS CIRCULAR NO. 495 DATED 22.9.1987 OBSERVED AS UNDER: - THE ABOVE CLEARLY SHOWS THAT THERE WAS CERTAIN SIT UATION WHERE PROPERTIES WERE BEING TRANSFERRED WITHOUT REGISTRAT ION OF TRANSFER INSTRUMENTS AND PEOPLE WERE ESCAPING TAX LIABILITIE S ON TRANSFER OF SUCH PROPERTIES BECAUSE THE SAME COULD NOT BE BROUGHT IN THE DEFINITION OF 'TRANSFER' PARTICULARLY IN MANY STATES OF THE COUNT RY PROPERTIES WERE BEING HELD BY VARIOUS PEOPLE AS LEASED PROPERTIES W HICH WERE ALLOTTED BY THE VARIOUS GOVT. DEPARTMENTS AND TRANSFERS OF S UCH LEASE WERE NOT 35 PERMISSIBLE. PEOPLE WERE TRANSFERRING SUCH PROPERTI ES BY EXECUTING AGREEMENT TO SELL AND GENERAL POWER OF ATTORNEY AS WELL AS WILL AND RECEIVING FULL CONSIDERATION, BUT SINCE THE AGREEME NT TO SELL WAS NOT REGISTERED AND THOUGH FULL CONSIDERATION WAS RECEIV ED AND EVEN POSSESSION WAS GIVEN, STILL THE SAME TRANSACTIONS C OULD NOT BE SUBJECTED TO TAX BECAUSE THE SAME COULD NOT COVERED BY THE DEFINITION OF 'TRANSFER'. TO BRING SUCH TRANSACTIONS WITHIN TH E TAX NET, THIS AMENDMENT WAS MADE. IT HAS TO BE APPRECIATED THAT C LAUSE (V) IN SECTION 2(47) DOES NOT LIFT THE DEFINITION OF PART PERFORMANCE FROM SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882. RATHER, IT DEFINES ANY TRANSACTION INVOLVING ALLOWING OF POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANC E OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER O F PROPERTY ACT. THIS MEANS SUCH TRANSFER IS HOT REQUIRED TO BE EXACTLY S IMILAR TO THE ONE DEFINED U/S.53A OF THE TRANSFER OF PROPERTY ACT, OT HERWISE LEGISLATURE WOULD HAVE SIMPLY STATED THAT TRANSFER WOULD INCLUD E TRANSACTIONS DEFINED IN SEC. 53A OF THE TRANSFER OF PROPERTY ACT . BUT THE LEGISLATURE IN ITS WISDOM HAS USED THE WORDS 'OF A CONTRACT, OF THE NATURE REFERRED IN SECTION 53A'. THEREFORE, IT IS ONLY THE NATURE W HICH HAS TO BE SEEN. AS DISCUSSED ABOVE, THE PURPOSE OF INSERTION OF CLA USE (V) WAS TO TAX THOSE TRANSACTIONS WHERE PROPERTIES WERE BEING TRAN SFERRED BY WAY OF GIVING POSSESSION AND RECEIVING FULL CONSIDERATION. THEREFORE, IN OUR HUMBLE OPINION, IN THE CASE OF A TRANSFER WHERE POS SESSION HAS BEEN GIVEN AND FULL CONSIDERATION HAS BEEN RECEIVED, THE N SUCH TRANSACTION NEEDS TO BE CONSTRUED AS 'TRANSFER'. THEREFORE, THE AMENDMENT MADE IN SECTION 53A BY WHICH THE REQUIREMENT OF REGISTRATIO N HAS BEEN INDIRECTLY BROUGHT ON THE STATUTE NEED NOT BE APPLIED WHILE CO NSTRUING THE MEANING OF 'TRANSFER' WITH REFERENCE TO THE INCOME- TAX ACT. 8. THE ABOVE SITUATION FURTHER BECOMES CLEAR IF WE REFER TO THE CELEBRATED DECISION OF HON'BLE SUPREME COURT IN THE CASE OF PODAR CEMENT (P.) LTD. (SUPRA}. IN THAT CASE, THE ASSESSE E WAS OWNER OF FOUR FLATS IN A BUILDING CALLED 'SILVER ARCH'/ON NEPEAN SEA ROAD, BOMBAY. OUT OF THESE FOUR FLATS, TWO WERE PURCHASED DIRECTL Y FROM THE BUILDERS, MALABAR INDUSTRIES PVT. LTD., AND TWO WERE PURCHASE D BY ITS SISTER CONCERNS WHICH WERE LATER PURCHASED BY THE ASSESSEE . THE POSSESSION OF THE FLATS WAS TAKEN AFTER FULL PAYMENT OF CONSID ERATION. THE FLATS WERE LET OUT. THE ASSESSEE CONTENDED THAT THE RENTA L INCOME FROM THESE FLATS WAS ASSESSABLE AS 'INCOME FROM OTHER SOURCES' BECAUSE THE ASSESSEE WAS NOT THE LEGAL OWNER BECAUSE THE TITLE 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 NOTE D THAT SECTION 27 HAD BEEN AMENDED VIDE CLAUSE 3(A) WHEREIN WHEN A PE RSON WAS ALLOWED TO TAKE POSSESSION OF THE BUILDING IN PART PERFORMANCE OF THE NATURE REFERRED TO IN SECTION 53A, SUCH PERSON SHAL L BE DEEMED TO BE THE OWNER. IT WAS FURTHER OBSERVED THAT FOR ALL PRA CTICABLE PURPOSES THE ASSESSEE WAS THE OWNER AND POSSIBLY THERE CANNOT BE TWO OWNERS OF SAME PROPERTY AT THE SAME TIME. IN FACT, THE AMENDM ENTS TO SECTION 27 WERE MADE LATER ON BUT WERE TAKEN INTO COGNIZANCE O N THE BASIS OF ABOVE PRINCIPLE AND ULTIMATELY IT WAS HELD AS UNDER : 'HENCE, THOUGH UNDER THE COMMON LAW 'OWNER' MEANS A PERSON WHO HAS GOT VALID TITLE LEGALLY CONVEYED TO HIM AFT ER COMPLY WITH THE REQUIREMENTS OF LAW SUCH AS THE TRANSFER OF PRO PERTY ACT, THE REGISTRATION ACT, ETC., IN THE CONTEXT SECTION 22 OF THE INCOME- TAX ACT, 1961, HAVING REGARD TO THE GROUND REALITIE S AND FURTHER HAVING REGARD TO THE OBJECT OF THE INCOME-TAX ACT, NAMELY, TO TAX THE INCOME, 'OWNER' IS A PERSON WHO IS ENTITLED TO RECEIVE INCOME FROM THE PROPERTY IN HIS OWN RIGHT. THE REQU IREMENT OF REGISTRATION OF THE SALE DEED IN THE CONTEXT OF SEC TION 22 IS NOT 36 WARRANTED.' THUS, FROM THE ABOVE, IT IS CLEAR THAT IT IS NOT NE CESSARY TO GET THE INSTRUMENT OF TRANSFER REGISTERED FOR THE PURPOSE O F INCOME-TAX ACT WHEN A PERSON HAS GOT A VALID LEGALLY CONVEYED AFTE R 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 ITS 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 D EED WAS NOT EXECUTED. THE ASSESSEE CLAIMED DEPRECIATION WHICH W AS DENIED BY THE DEPARTMENT. AFTER GREAT DISCUSSION, IT WAS OBSERVED THAT FOR ALL PRACTICABLE PURPOSES AND FOR THE PURPOSE OF INCOME- TAX ACT, THE ASSESSEE SHALL BE CONSTRUED AS OWNER OF THE PROPERT Y. IN FACT, IT WAS HELD AS UNDER: - 'HELD, REVERSING THE JUDGMENT OF THE HIGH COURT, TH AT THE FINDING OF FACT ARRIVED AT IN THE CASE AT HAND WAS THAT THO UGH A DOCUMENT OF TITLE WAS NOT EXECUTED BY THE HOUSING BOARD IN F AVOUR OF THE ASSESSEE, THE HOUSES WERE ALLOTTED TO THE ASSESSEE BY THE HOUSING BOARD, PART PAYMENT RECEIVED AND POSSESSIO N DELIVERED SO AS TO CONFER DOMINION OVER THE PROPERTY ON THE A SSESSEE WHEREAFTER THE ASSESSEE HAD IN ITS OWN RIGHT ALLOTT ED THE QUARTERS TO THE STAFF AND THEY WERE BEING ACTUALLY USED BY T HE STAFF OF THE ASSESSEE. THE ASSESSEE WAS ENTITLED TO DEPRECIATION IN RESPECT OF THE SEVEN HOUSES IN RESPECT OF WHICH THE ASSESSE E HAD NOT OBTAINED A DEED OF CONVEYANCE FROM THE VENDOR ALTHO UGH IT HAD TAKEN POSSESSION AND MADE PART PAYMENT OF THE CONSI DERATION'. THUS, FROM THE ABOVE TWO DECISIONS, IT BECOMES ABSO LUTELY CLEAR THAT FOR THE PURPOSE OF THE INCOME-TAX ACT THE GROUND RE ALITY HAS TO BE RECOGNIZED AND IF ALL THE INGREDIENTS OF TRANSFER HAVE BEEN COMPLETED, THEN SUCH TRANSFER HAS TO BE RECOGNIZED. MERELY B ECAUSE THE PARTICULAR INSTRUMENT OF TRANSFER HAS NOT BEEN REGI STERED WILL NOT ALTER THE SITUATION. THIS POSITION IS FURTHER STRENGTHENE D BY THE FACT THAT LEGISLATURE ITSELF HAS INSERTED CLAUSE (V) TO SECTI ON 2(47) AND WHILE REFERRING TO THE PROVISIONS OF SECTION 53A, REFEREN CE HAS BEEN MADE BY STATING THAT CONTRACTS IN THE NATURE OF SECTION 53 A SHOULD ALSO BE COVERED BY THE DEFINITION OF 'TRANSFER'. THEREFORE, IN OUR HUMBLE VIEW, THE AMENDMENT TO SEC. 53A OF THE TRANSFER OF PROPER TY ACT, WHEREBY THE REQUIREMENT OF THE DOCUMENTS NOT BEING REGISTER ED HAS BEEN OMITTED, WILL NOT ALTER THE SITUATION FOR HOLDING T HE TRANSACTION TO BE A TRANSFER U/S.2(47)(V) IF ALL OTHER INGREDIENTS HAVE BEEN SATISFIED. 74 THUS, IT IS CLEAR THAT NON REGISTRATION OF AGREE MENT CANNOT LEAD TO THE CONCLUSION THAT PROVISION OF SECTION 2(47) ( V) IS NOT APPLICABLE. SIMILAR VIEW HAS BEEN TAKEN BY ITAT COCHIN BENCH OF THE TRIBUNAL IN CASE OF G.SREENIVASAN VS DCIT 28 TXMANN.COM 200 (CO CH.) AND ITAT PUNE BENCH IN THE CASE OF MAHESH NEMICHANDRA GANESH WADE V ITO 21 TAXMANN.COM 136 (PUNE). IN VIEW OF THIS LEGAL P OSITION, THIS CONTENTION IS REJECTED. 37 75 THE NEXT CONTENTION WAS THAT THE DECISION OF HON 'BLE BOMBAY HIGH COURT IN CASE OF CHATURBHUJ DWARKADAS KAPADIA (SUPR A) IS NOT APPLICABLE PARTICULARLY BECAUSE ULTIMATELY IN THAT CASE IT WAS HELD THAT CAPITAL GAIN TAX SHOULD BE CHARGED IN ASSESSMENT YEAR 1999-2000 WHER EAS AGREEMENT WAS EXECUTED IN AUGUST, 1994. 76 WE HAVE ALREADY DISCUSSED THE IMPLICATIONS OF TH E DECISION IN CASE OF CHATURBHUJ DWARKADAS KAPADIA (SUPRA) IN PARA 33 TO 38. 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 NEXT CONTENTION IS THAT IT IS NECESSARY FOR INVOKING OF SECTION 2(47)(V) OF THE ACT TO COMPLY WITH THE PROV ISIONS OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT TO THE EXTENT T HAT THERE SHOULD BE WILLINGNESS ON THE PART OF THE TRANSFEREE TO PERFOR M HIS PART OF THE CONTRACT. 78 IN THIS ASPECT WE HAVE NO QUARREL WITH THE PROPOSITION THAT FOR INVOKING SECTION 53A PF T.P. ACT READ WITH CLAUSE ( V) OF SECTION 2(47), THE TRANSFEREE HAS TO PERFORM OR IS WILLING TO PERF ORM HIS PART OF THE CONTRACT. IN THIS RESPECT AS REFERRED TO BY LD. CO UNSEL FOR THE ASSESSEE, THE COMMENTS OF THE LD. AUTHOR IN THE COM MENTARY BY MULLA DINSHAN FREDERICK MULLA VIDE PARA 16 ARE CLEAR AN D SHOWS THAT THIS REQUIREMENT HAS TO BE ABSOLUTE AND UNCONDITIONAL. SOME OBSERVATIONS HAVE BEEN MADE IN THE CASE OF GENERAL GLASS COMPANY PVT LTD VS DCIT (SUPRA). IN THAT CASE IT WAS HELD THAT WILLINGNESS TO PERFORM FOR THE PURPOSE OF SECTION 53A IS SOMETHING MORE THAN A STATEMENT OF INTENT AND IT IS UNQUALIFIED AND UNCON DITIONAL WILLINGNESS ON THE PART OF THE TRANSFEREE TO PERFORM HIS OBLIGA TION. IN THAT CASE THE TRANSFEREE HAS AGREED TO MAKE CERTAIN PAYMENTS IN INSTALLMENTS IN CONSIDERATION OF THE DEVELOPMENT AGREEMENT BUT SUCH PAYMENTS WERE NOT MADE. LATER ON, THE AGREEMENT WAS MODIFIED AND MORE TIME WAS GIVEN TO THE TRANSFEREE FOR PAYMENT OF SUCH INSTALL MENTS. HOWEVER, THE INSTALLMENTS WERE NOT PAID EVEN UNDER THE MODI FIED TERMS AND THAT IS WHY IT WAS ULTIMATELY HELD THAT SUCH AGREEM ENT CANNOT BE CONSTRUED AS TRANSFER. 79 THE SECOND DECISION REFERRED TO BY LD. COUNSEL F OR THE ASSESSEE IS K. RADIKA V DCIT (SUPRA). IN THIS CASE , SIMILAR 38 OBSERVATIONS WERE MADE, THOUGH IT IS NOT POINTED OU T IN WHAT RESPECT THE TRANSFEREE HAS FAILED TO PERFORM HIS PART BUT I T HAS BEEN OBSERVED THAT THE FACTS OF THE CASE SHOWS THAT TRANSFEREE HA S NOT PERFORMED HIS PART OF THE CONTRACT. 80 THE THIRD JUDGMENT RELIED UPON BY THE LD. COUNSE L FOR THE ASSESSEE IS IN THE CASE OF DCIT V TEJ SINGH (SUPRA) . IN THAT CASE LAND WAS ACQUIRED BY THE GOVERNMENT AND THE MATTER WENT FOR LITIGATION. DURING THE PENDENCY OF LITIGATION, THE ASSESSEE ENTERED INTO A DEVELOPMENT AGREEMENT WITH A DEVELOPER FOR THE PU RPOSE OF DEVELOPMENT OF THE PROPERTY, HOWEVER, IT WAS CLARIF IED IN THE AGREEMENT THAT THERE IS LITIGATION IN RESPECT OF AC QUISITION OF PROPERTY AND THE DEVELOPER HAS TO TAKE CLEARANCE FROM THE G OVERNMENT IN THE MATTER OF DENOTIFICATION OF THE LAND. IT WAS HELD THAT SINCE THE LAND WAS UNDER COMPULSORY ACQUISITION AND NO COMPENSATIO N HAS BEEN RECEIVED, THEREFORE, THERE COULD NOT BE ANY CAPITAL GAIN TAX U/S 2(47) (III) WHICH DEALS WITH THE COMPULSORY ACQUISITION. IT WAS FURTHER OBSERVED THAT ASSESSEE COULD NOT HAVE GIVEN POSSESS ION UNLESS AND UNTIL THE LAND WAS DENOTIFIED. SINCE FACTS OF THE CASE ARE DIFFERENT THAN THE CASE IN HAND AND THEREFORE, SAME ARE NOT RELEVANT FOR OUR PURPOSE. 81 NOW COMING TO THE FACTS, FIRSTLY IT WAS CONTENDE D THAT DEVELOPER I.E TRANSFEREE HAS NOT OBTAINED VARIOUS PERMISSIONS WH ICH WERE REQUIRED TO BE TAKEN BY THE DEVELOPER AS PER CLAUSES 3.1, 7.9, 8.4 AND 8.6 OF THE JDA. THIS IS NOT CORRECT AS POINTED OUT BY THE LD. CIT DR THAT ASSESSEE HAD ALREADY GOT THE MUNICIPAL PLAN SANCTIONED BUT I N THE MEANTIME PIL WAS FILED BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT AGAINST THE IMPLEMENTATION OF THE PROJECT. INITIALLY, THE CONS TRUCTION WAS BANNED BY THE HON'BLE HIGH COURT. HOWEVER, LATER ON IT WAS O BSERVED IN THE CWP NO. 20425 OF 2010 AND AS CLARIFIED BY THE ORDER OF THE HON'BLE SUPREME COURT THAT REFUSAL OF SANCTION UNDER THE ENVIRONMEN T (PROTECTION) ACT, THE SOCIETY HAVE SOUGHT A REVIEW OF THE ORDER BECAU SE THE FINDINGS ARRIVED WERE EX.PARTE. NO ORDER IN THE MATTER HAS BEEN PASSED BY THE COMPETENT AUTHORITY PERHAPS BECAUSE OF THE ORDER OF HIGH COURT. IN THE INTERIM ORDER PASSED IN THE PIL IT HAS BEEN CLARI FIED BY THE HON'BLE SUPREME COURT VIDE ORDER DATED 31.1.2012 PERMITTING THE CONCERNED AUTHORITY UNDER THE DIFFERENT STATUTES GOVERNING TH E MATTER TO THEIR RESPECTIVE JURISDICTION TO BE DECIDED IN ACCORDANCE WITH LAW. THUS, IT BECOMES CLEAR THAT DEVELOPER I.E. THDC HAS APPLIED FOR VARIOUS PERMISSIONS BEFORE THE RELEVANT AUTHORITIES AND IN SOME CASES 39 PERMISSION WERE DECLINED ON EX.PARTE BASIS AND IN S OME CASES THE SAME WERE DECLINED IN VIEW OF THE HIGH COURT ORDER BANNI NG THE CONSTRUCTION. AFTER THE CLARIFICATION OF THE ORDER OF THE HIGH CO URT BY HON'BLE SUPREME COURT BY ORDER DATED 31.1.2012, THE AUTHORITIES HAV E ALREADY BEEN PERMITTED TO EXAMINE THE ISSUE ON MERITS UNDER VARI OUS LAWS. FURTHER IN THE JDA THERE IS A CLAUSE 26 WHICH DEALS WITH THE F ORCE MAJEURE CLAUSES. THE CLAUSE 26 (I) TO (V) READS AS UNDER:- FORCE MAJEURE I) NONE OF THE PARTIES SHALL BE LIABLE TO THE OTHER PARTY OR BE DEEMED TO BE IN BREACH OF THIS AGREEMENT BY REASONS OF ANY DELAY IN PERFORMING OR ANY FAILURE TO PERFORM, ANY OF ITS OW N OBLIGATIONS IN RELATION TO THE AGREEMENT, IF THE DELAY OR FAILURE IS DUE TO ANY EVENT OF FORCE MEJEURE. EVENT OF FORCE MAJEURE IS ANY EVENT CAUSED BEYOND THE PARTIES REASONABLE CONTROL. THE F OLLOWING SHALL BE REGARDED AS ISSUES BEYOND THE PARTIES REASONABLE CONTROL. II) FOR THE PURPOSES OF THIS CLAUSE, AN EVENT OF FO RCE MAJEURE SHALL MEAN EVENTS OF WAR, WAR LIKE CONDITIONS, BLOCKADES, EMBARGOES, INSURRECTION, GOVERNMENTAL DIRECTIONS, RIOTS, STRIK ES, ACTS OF TERRORISM, CIVIL COMMOTION, LOCK-OUTS, SABOTAGE, PL AGUES OR OTHER EPIDEMICS, ACTS OF GOD INCLUDING FIRE, FLOODS, VOLC ANIC ERUPTIONS, TYPHOONS, HURRICANES, STORMS, TIDAL WAVES, EARTHQUA KE, LANDSLIDES, LIGHTNING, EXPLOSIONS AND OTHER NATURAL CALAMITIES, PROLONGED FAILURE OF ENERGY, COURT ORDERS / INJUNCTIONS, CHAR GE OF LAWS, ACTION AND / OR ORDER BY STATUTORY AND / OR GOVERNMENT AUT HORITY, THIRD PARTY ACTIONS AFFECTING THE DEVELOPMENT OF THE PROJ ECT, ACQUISITION / REQUISITION OF THE PROPERTY OR ANY PART THEREOF B Y THE GOVERNMENT OR ANY OTHER STATUTORY AUTHORITY AND SUCH CIRCUMSTA NCES AFFECTING THE DEVELOPMENT OF THE PROJECT (EVENT OF FORCE MAJE URE). III) ANY PARTY CLAIMING RESTRICTION ON THE PERFORMA NCE OF ANY OF ITS OBLIGATIONS UNDER THIS AGREEMENT DUE TO THE HAPPENI NG OR ARISING OF AN EVENT OF FORCE MAJEURE HEREOF SHALL NOTIFY THE O THER PARTY OF THE HAPPENING OR ARISING AND THE ENDING OF CEASING OF S UCH EVENT OR CIRCUMSTANCE WITH THREE (3) DAYS OF DETERMINING THA T AN EVENT OF FORCE MAJEURE HAS OCCURRED. IN THE EVENT ANY PARTY ANTICIPATES THE HAPPENING OF AN EVENT OF FORCE MAJEURE, SUCH PA RTY SHALL PROMPTLY NOTIFY THE OTHER PARTY. IV) THE PARTY CLAIMING EVENT OF FORCE MAJEURE CONDI TIONS SHALL, IN ALL INSTANCES AND TO THE EXTENT IT IS CAPABLE OF DOING SO, USE ITS BEST EFFORTS TO REMOVE OR REMEDY THE CAUSE THEREOF AND M INIMIZE THE ECONOMIC DAMAGE ARISING THEREOF. V) EITHER PARTY MAY TERMINATE THIS AGREEMENT AFTER GIVING THE OTHER PARTY A PRIOR NOTICE OF FIFTEEN (15) DAYS IN WRITIN G OF THE EVENT OF FORCE MAJEURE CONTINUES FOR PERIOD OF NINETY (90) DAYS. IN THE EVENT OF TERMINATION OF THIS AGREEMENT ALL OBLIGATI ONS OF THE PARTIES UNTIL SUCH DATE SHALL BE FULFILLED. 40 82 THE COMBINED READING OF THESE CLAUSES SHOW THAT IF ANY OF THE PARTY COULD NOT PERFORM ITS PART OF THE OBLIGATION BECAUS E OF THE UNFORESEEN CIRCUMSTANCES WHICH INCLUDED GOVERNMENT DIRECTIONS, COURT ORDERS, INJUNCTIONS ETC. SUCH PARTY WOULD NOT BE LIABLE TO OTHER PARTY. IN VIEW OF FORCE MAJEURE CLAUSE WHICH INCLUDED COURT INJUNCTIO N IT CAN NOT BE SAID THAT THDC IS NOT WILLING TO PERFORM ITS OBLIGATION. IN FACT DEVELPERS I.E. THDC/HASH WERE PERUSING THE ISSUE OF PERMISSIONS/SA NCTIONS VIGOROUSLY. THESE ASPECTS BECOME FURTHER CLEAR IF T HE JUDGMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CWP NO. 204 25 OF 2010 VIDE ORDER DATED MARCH 26, 2012 IS PERUSED. PARAS 3, 4, 22, 25 & 26 OF THE JUDGMENT READ AS UNDER:- 3. THE BROAD CONTOURS OF THE PRESENT PROCEEDING HA VING BEEN OUTLINED, WE MAY NOW PROCEED TO TAKE NOTE OF THE SP ECIFIC CONTENTIONS OF THE CONTESTING PARTIES AS MADE BEFOR E US. HOWEVER, BEFORE WE DO SO, IT MAY BE APPROPRIATE TO MENTION THE SOMEWHAT CONFLICTING STAND OF THE PARTIES WITH REGA RD TO THE PRESENT STAGE OF THE APPLICATIONS FILED UNDER THE P ROVISIONS OF THE ENVIRONMENT (PROTECTION) ACT AS WELL AS THE WIL D LIFE (PROTECTION) ACT. WHILE THE PETITIONER, WHO IS SUPP ORTED BY THE RESPONDENT NO.6-CHANDIGARH ADMINISTRATION, ASSERTS THAT NECESSARY SANCTION/PERMISSION UNDER BOTH THE ACTS H AVE BEEN REFUSED BY ORDERS PASSED BY THE COMPETENT AUTHORITI ES, THE PROMOTERS OF THE PROJECT CONTEND TO THE CONTRARY. T HE FACTS, AS UNFOLDED BEFORE US, INDICATE THAT AGAINST THE REFUS AL OF SANCTION UNDER THE ENVIRONMENT (PROTECTION) ACT, THE RESPOND ENTS HAVE SOUGHT A REVIEW OF THE ORDER ON THE GROUND THAT THE FINDINGS ARRIVED AT, WHICH HAVE FORMED THE BASIS OF THE REFU SAL, ARE EX- PARTE. NO ORDER IN THE REVIEW MATTER HAS BEEN PASSE D BY THE COMPETENT AUTHORITY, PERHAPS, BECAUSE OF THE INTERI M ORDER PASSED IN THE PIL WHICH HAS BEEN CLARIFIED BY THE H ON'BLE SUPREME COURT BY ORDER DATED 31.1.2012 PERMITTING T HE CONCERNED AUTHORITY UNDER THE DIFFERENT STATUTES GO VERNING THE MATTER TO EXERCISE THEIR RESPECTIVE JURISDICTIONS I N ACCORDANCE WITH LAW. INSOFAR AS THE WILD LIFE (PROTECTION) ACT IS CONCERNED, IT APPEARS THAT THE REJECTION HAS BEEN MADE BY THE CHIEF WILD LIFE WARDEN WHO, THE RESPONDENTS CLAIM, IS MERELY A RECOMMENDING AUTHORITY AND IS REQUIRED TO FORWARD H IS RECOMMENDATION TO THE CENTRAL GOVERNMENT. AS THE RE JECTION UNDER THE WILD LIFE (PROTECTION) ACT HAS BEEN MADE BY AN AUTHORITY NOT COMPETENT TO DO, THE PROMOTERS OF THE PROJECT HAVE SOUGHT A REVIEW OF THE ORDER WHICH IS STILL PENDING FOR THE SAME REASON(S) AS NOTICED ABOVE. 4. ON THESE FACTS WE ARE OF THE VIEW THAT IT WOULD BE PRUDENT ON OUR PART TO TAKE THE VIEW THAT THE ISSUE WITH REGAR D TO CLEARANCE/SANCTION UNDER THE TWO ENACTMENTS I.E. EN VIRONMENT (PROTECTION) ACT AND WILD LIFE (PROTECTION) ACT IS PRESENTLY PENDING AND AS THE PROMOTERS OF THE PROJECT HAVE SU BMITTED THEMSELVES TO THE JURISDICTION OF THE AUTHORITIES U NDER THE SAID ENACTMENTS WE SHOULD REFRAIN FROM ADDRESSING OURSEL VES ON ANY OF THE ISSUES CONNECTED WITH EITHER OF THE TWO STAT UTORY ENACTMENTS AS ANY SUCH EXERCISE, EVEN THOUGH MAY BE UNINTENDED, MAY HAVE THE EFFECT OF FETTERING THE JU RISDICTION OF 41 STATUTORY AUTHORITIES FUNCTIONING UNDER THE TWO REL EVANT STATUTES. 22. INSOFAR AS THE PROVISIONS OF THE ENVIRONMENT (P ROTECTION) ACT AND THE WILD LIFE (PROTECTION) ACT ARE CONCERNE D, IT NEED NOT BE EMPHASISED THAT EVERY PROJECT ATTRACTING THE PROVISIONS OF THE PERIPHERY CONTROL ACT AND/OR THE PROVISIONS OF THE 1995 ACT MUST SATISFY THE ECOLOGICAL CONCERNS OF THE ARE A IN THE LIGHT OF THE PROVISIONS OF THE TWO STATUES IN QUESTION. A S ALREADY HELD BY US, A PUBLIC TRUST HAS BEEN BESTOWED ON THE AUTH ORITIES BY PROVISIONS OF THE SAID ACTS WHICH CAST ON SUCH AUTH ORITIES A DUTY TO INTERDICT ANY PROJECT OR ACTIVITY WHICH EVE N REMOTELY SEEMS TO CREATE AN IMBALANCE IN THE PRISTINE ECOLOG Y AND ENVIRONMENT OF THE AREA ON WHICH THE CITY OF CHANDI GARH IS SITUATED OR FOR THAT MATTER IN THE IMMEDIATE VICINI TY THEREOF. AS ALREADY OBSERVED, NECESSARY CLEARANCES UNDER THE AF ORESAID TWO ENACTMENTS, INSOFAR AS THE RESPONDENTS ARE CONCERNE D, ARE PRESENTLY PENDING BEFORE THE CONCERNED AUTHORITIES AND, THEREFORE, IT WOULD BE HIGHLY INCORRECT ON OUR PART TO ENTER INTO ANY FURTHER DISCUSSION ON THE AFORESAID ASPECT OF T HE CASE. 25. WE ALSO HASTEN TO EMPHASISE THAT A MORE RIGOROU S REGULATED DEVELOPMENT IN WHAT ARE NOW THE REMNANTS OF THE PER IPHERY AND THE AREAS ADJOINING TO IT IS THE NEED OF THE HOUR F OR WHICH THE STAKEHOLDERS I.E. THE ADMINISTRATION OF CHANDIGARH, THE STATES OF PUNJAB AND HARYANA AS ALSO THE AUTHORITIES UNDER THE ENVIRONMENT (PROTECTION) ACT AND THE WILD LIFE PROT ECTION ACT HAVE TO DEMONSTRATE THE NEED TO ENGAGE THEMSELVES I NTENSIVELY AND NOT ACQUIRE A PLACID APPROACH INDICATING AN ELO QUENT ACQUIESCENCE TO THE VIOLATION OF THE 1995 ACT, PERI PHERY CONTROL ACT AND THE PERIPHERY POLICY. 26. WE THUS CONCLUDE ON THE AFORESAID NOTE BY HOLDI NG AND OBSERVING THAT THE PROVISIONS OF THE PERIPHERY CONT ROL ACT AND THE 1995 ACT ARE COMPLEMENTARY TO EACH OTHER AND TH E PROVISIONS OF THE TWO STATUTES WOULD APPLY TO THE H OUSING PROJECT IN QUESTION. THE RESPONDENTS, THEREFORE, WI LL HAVE TO COMPLY WITH ALL THE REQUIREMENTS SPELT OUT BY BOTH THE AFORESAID STATUTES. AS THE REQUIREMENT OF CLEARANCES UNDER TH E WILD LIFE (PROTECTION) ACT AND ENVIRONMENT (PROTECTION) ACT I S NOT A CONTENTIOUS ISSUE, AND AS WE HAVE ALREADY HELD THAT THE PROCESS OF GRANT OF SUCH CLEARANCES IS PENDING BEFORE THE A PPROPRIATE AUTHORITIES UNDER THE RESPECTIVE ACTS, THE SAME WIL L NOW HAVE TO BE BROUGHT TO ITS LOGICAL CONCLUSION KEEPING IN MIN D OUR OBSERVATIONS AND DIRECTIONS CONTAINED HEREINABOVE. 83 THE COMBINED READING OF THE ABOVE PARAS IN THE O RDER OF HON'BLE HIGH COURT CLEARLY SHOWS THAT DEVELOPER THD C/ HASH I.E. TRANSFEREE HAVE MADE THEIR SINCERE EFFORTS FOR OBTA INING THE NECESSARY PERMISSIONS / SANCTIONS WHICH WERE REQUIRED UNDER T HE JDA. HOWEVER, SOME OF THE SANCTIONS COULD NOT BE TAKEN I N TIME BECAUSE OF THE LITIGATION BY WAY OF PIL BUT SINCE NONE OF THE PARTY WAS LIABLE TO THE OTHER PARTY IN VIEW OF THE CLAUSE 26 DEALING WI TH FORCE MAJEURE IT CANNOT BE SAID THAT DEVELOPER WAS NOT WI LLING TO PERFORM HIS PART OF CONTRACT. IN ANY CASE NO SPECIFIC EVID ENCE HAS BEEN SHOWN 42 US TO PROVE THAT THDC / HASH WERE DECLINING TO PERF ORM PARTICULAR OBLIGATION PROVIDED IN JDA. IN VIEW OF THIS DISCUS SION, IT CANNOT BE SAID THAT TRANSFEREE I.E. DEVELOPER THDC/HASH IS NO T WILLING TO PERFORM HIS PART OF CONTRACT. 84 SECONDLY, IT WAS CONTENDED THAT PAYMENTS HAVE N OT BEEN MADE AS PER THE JDA. HOWEVER, AGAIN THIS IS NOT CORRECT. AS PER CLAUSE 4(IV) OF THE JDA, THE INSTALLMENT FOR RS. 31,92,75, 000/- WAS REQUIRED TO BE PAID. THE CLAUSE 4(IV) READ AS UNDER:- IV) PAYMENT BEING RS. 31,92,75,000/- (RUPEES ONE C RORE NINETY TWO LACS SEVENTY FIVE THOUSAND ONLY) CALCULA TED @ RS. 24,75,000/- (RS. TWENTY FOUR LACS SEVENTY FIVE THOU SAND ONLY) PER PLOT HOLDER OF 500 SQ. YARDS AND (RS. 49,50,000 /- (RS. FORTY NINE LACS FIFTY THOUSAND ONLY) AS PER PLOT HOLDER O F 1000 SQUARE YARDS TO BE MADE TO THE OWNER AND / OR THE RESPECTI VE MEMBERS OF THE OWNER (AS THE CASE MAY BE) WITHIN SIX(6) MON THS FROM THE DATE OF EXECUTION OF THIS AGREEMENT OR WITHIN TWO ( 2) MONTHS FROM THE DATE OF APPROVAL OF THE PLANS / DESIGN AN D DRAWINGS AND GRANT OF THE FINAL LICENCE TO DEVELOP WHERE UPO N THE CONSTRUCTION CAN COMMENCE, WHICHEVER IS LATER, AGAI NST WHICH THE OWNER SHALL EXECUTE A REGISTERED SALE DEED FOR LAND OF EQUIVALENT VALUE BEING 6.36 ACRES OUT OF THE PROPER TY AS DEMARCATED IN GREEN COLOUR (ALSO HATCHED IN GREEN C OLOUR) IN THE DEMARCATION PLAN ANNEXED HERETO AS ANNEXURE V A ND BEARING KHASRA NOS. 123/15, 123/6, 123/7 (BALANCE P ART), 123/3 (PART), 123//4//1, 123///4//1/2, 123//4/2, 123/5/1, 123//5/2, 123//5/3, 112/24/24 (PART) 85 THE CAREFUL READING OF THE SAID CLAUSE OF THE JD A WOULD SHOW THIS PAYMENT WAS REQUIRED TO BE MADE WITHIN A PERIO D OF SIX MONTHS FROM THE DATE OF EXECUTION OF THIS AGREEMENT OR WIT HIN TWO MONTHS FROM THE DATE OF APPROVAL OF PLAN / SANCTION AND DR AWING GRANT OF FINAL LICENSE TO DEVELOP WHERE UPON THE CONSTRUCTION CAN COMMENCE, WHICHEVER IS LATER. THUS, THIS INSTALLMENT WAS DEPE NDENT ON TWO CONTINGENCIES FIRST THE EXPIRATION OF A PERIOD OF S IX MONTHS FROM THE DATE OF AGREEMENT OR ALTERNATIVELY ON THE EXPIRATIO N OF A PERIOD OF TWO MONTHS FROM THE DATE OF APPROVAL OF PLANS / DESIGN S DRAWING ETC. LEADING TO GRANT OF FINAL LICENSES WHICH CAN LEAD T O COMMENCEMENT OF CONSTRUCTION, WHICHEVER IS LATER. THE MATTER WAS TA KEN UP BY WAY OF PIL BY CERTAIN CITIZENS AND ADMINISTRATION OF THE U NION TERRITORY BEFORE THE HON'BLE HIGH COURT WHICH INITIALLY STAYE D THE SANCTION OF SUCH PLAN ETC. THIS LED TO SITUATION WHERE CONSTRU CTION COULD NOT BE COMMENCED AND HENCE PAYMENT WAS NOT REQUIRED TO BE MADE IN VIEW OF THE PENDING LITIGATION. THE CLAUSES OF FORCE MA JEURE CAME INTO OPERATION AND THEREFORE, IT CANNOT BE SAID THAT TH E DEVELOPER IS NOT WILLING TO PERFORM ITS PART OF THE CONTRACT. IN AN Y CASE THERE IS NO 43 DEFAULT ON THE PART OF THE DEVELOPER AS PAYMENT WAS NOT YET DUE AS PER CLAUSE 4(I)(IV) OF JDA. 86 THIS POSITION WAS INFORMED TO THE SOCIETY BY LET TER DATED 4.2.2011 BY HASH BUILDER, COPY OF WHICH HAS BEEN FI LED AT PAGES 23 & 24 OF THE PAPER BOOK DEALING WITH THE ADDITIONAL EV IDENCE. THROUGH THIS LETTER IT HAS BEEN CLEARLY STATED THAT SINCE P ERMISSION IS PENDING FROM THE MINISTRY OF ENVIRONMENT AND FOREST DEPARTM ENT AND THEREFORE CONSTRUCTIONS COULD NOT COMMENCE. THESE PERMISSION S WERE PENDING BECAUSE OF THE PIL FILED BY SHRI AALOK JAGGA BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT. ALL THESE FACTS CLEAR LY SHOWS THAT IN VIEW OF CLAUSE 4.1(IV) READ WITH CLAUSE 26(V) OF TH E JDA, HASH BUILDER WERE NOT REQUIRED TO MAKE THE PAYMENT AND I T CANNOT BE SAID THAT THEY WERE NOT WILLING TO PERFORM THEIR PART OF THE CONTRACT ON THIS ASPECT. THEREFORE, THIS CONTENTION IS REJECTED. 87 SEVENTH CONTENTION IS THAT REVENUE WRONGLY HELD THAT EVEN CLAUSE (VI) OF SECTION 2(47) IS APPLICABLE. WE FIND NO FORCE IN T HIS CONTENTION. CLAUSE (VI) TO SECTION 2(47) READS AS UNDER: ANY TRANSACTION (WHETHER BY WAY OF BECOMING A MEMB ER OF, OR ACCRUING SHARES IN, A COOPERATIVE SOCIETY, COMPANY OR OTHER ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT OR ANY ARRANGEME NT OR IN ANY OTHER MANNER WHATSOEVER) WHICH HAS THE EFFECT OF TRANSFER RING, OR ENABLING THE ENJOYMENT OF, ANY IMMOVABLE PROPERTY. 88 THE PLAIN READING OF THE PROVISION SHOWS THAT AN Y TRANSACTION BY WAY OF BECOMING A MEMBER OR ACQUIRING SHARES IN THE COOPER ATIVE SOCIETY OR SHARES IN THE COMPANY WHICH HAS THE EFFECT OF TRANSFERRING O R ENABLING THE ENJOYMENT OF ANY IMMOVEABLE PROPERTY WOULD BE COVERED BY THE DEF INITION OF TRANSFER. IN THE CASE BEFORE US, INITIALLY THE MEMBERS OF THE SOCIET Y WERE HOLDING SHARES IN THE SOCIETY FOR OWNERSHIP OF PLOT OF 500 SQYD OR 1000 S QYD. THIS MEMBERSHIP WAS SURRENDERED TO THE SOCIETY VIDE RESOLUTION OF THE S OCIETY PASSED IN THE EXECUTIVE COMMITTEE ON 4.1.2007 WHICH WAS LATER RAT IFIED IN THE GENERAL BODY MEETING OF THE SOCIETY ON 25.1.2007, SO THAT THE SO CIETY COULD ENTER INTO JDA. IN THE JDA THE SOCIETY HAS AGREED TO TRANSFER THE L AND. THEREFORE, TECHNICALLY IT CAN BE SAID THAT THE DEVELOPER I.E. THDC/HASH HA S PURCHASED THE MEMBERSHIP OF THE MEMBERS IN THE SOCIETY WHICH WOUL D LEAD TO ENJOYMENT OF THE PROPERTY AND IN THAT TECHNICAL SENSE, CLAUSE (VI) O F 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 TA XED AND NOTIONAL INCOME 44 I.E. THE MONEY TO BE RECEIVED LATER, CAN NOT BE TAX ED. IN THIS REGARD RELIANCE WAS PLACED ON CERTAIN SUPREME COURT DECISIONS AND O THER CASES FOR THE PROPOSITION THAT NOTIONAL INCOME CANNOT BE TAXED. THERE IS NO NEED TO DISCUSS THE CASES RELIED ON BY THE LD. COUNSEL OF THE ASSES SEE BECAUSE IT IS SETTLED POSITION OF LAW THAT NO NOTIONAL INCOME CAN BE TAXE D. THOUGH THERE IS NO QUARREL THAT IT IS A SETTLED 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 T HAT RIGOR OF TAX IN CASE OF CAPITAL GAIN WOULD COME INTO PLAY ON THE TRANSFER O F CAPITAL ASSET AND TOTAL CONSIDERATION WHICH IS ARISING ON SUCH TRANSFER, HA S TO BE TAXED. SECTION 48 CLEARLY TALKS ABOUT FULL CONSIDERATION RECEIVED OR ACCRUING AS RESULT OF TRANSFER. THIS ASPECT WE HAVE ALREADY DISCUSSED IN DETAIL AT PARAS 64 TO 68. 90 SECOND ASPECT OF THIS CONTENTION WAS THAT IF CO NSIDERATION WHICH HAS NOT BEEN RECEIVED WAS TO BE TAXED THEN THE ASSE SSEE WOULD BE DEPRIVED FOR CLAIMING EXEMPTION U/S 54 AND 54EC. A S OBSERVED ABOVE AS PER SECTION 45 R.W.S 48 WHOLE OF THE CONSIDERATION, RECEIVED OR ACCRUED HAS TO BE TAXED. EVERY PERSON IS SUPPOSED TO KNOW THE LAW AND IF THE TRANSACTION IS STRUCTURED IN SUCH A WAY FOR THE TR ANSFER OF CAPITAL ASSET THAT SOME OF THE CONSIDERATION WOULD BE RECEIVED LA TER THEN SUCH PERSON IS SUPPOSED TO KNOW THE CONSEQUENCES OF THE DENIAL OF SUCH BENEFITS. HOWEVER, IF THE SECTION IS INTERPRETED IN THE MANNE R SUGGESTED BY THE LD. COUNSEL OF THE ASSESSEE THEN NO PERSON WOULD PAY CA PITAL GAIN TAX ON TRANSFER OF A PROPERTY. THIS WILL BE CLEAR FROM A SIMPLE EXAMPLE. LET US ASSUME IF A SELLS THE PROPERTY TO B FOR A CONSI DERATION OF RS. 100 CRORES AND RECEIVE ONLY A CONSIDERATION OF 1.00 CRO RE AND IT IS MENTIONED IN THE TRANSFER INSTRUMENT THAT BALANCE OF CONSIDER ATION WOULD BE PAID AFTER 20 YEARS THEN NO TAX CAN BE LEVIED ON SUCH BA LANCE CONSIDERATION OF RS. 99.00 CRORES WHICH HAS NOT BEEN RECEIVED AS PER THE CONTENTION OF THE LD. COUNSEL OF THE ASSESSEE . BUT IN THAT CASE NO TAXES CAN BE LEVIED EVEN AFTER 20 YEARS BECAUSE NO TRANSFER CAN BE SAID TO HAVE TAKEN PLACE AFTER 20 YEARS AND REVENUE CANNOT DO ANY THING BECA USE CAPITAL GAIN CAN BE CHARGED U/S 45 ONLY ON TRANSFER OF CAPITAL ASSET . WE DO NOT THINK THAT THIS KIND OF INTERPRETATION CAN BE MADE WHILE INTER PRETING SECTION 45 R.W.S. 48 BY INVOKING THE RULE THAT THERE CAN NOT B E ANY TAX ON NOTIONAL RECEIPT. GENERALLY SPEAKING IT IS ONLY THE REAL INC OME WHICH CAN BE TAXED BUT THIS HAS TO BE UNDERSTOOD SUBJECT TO LIMITATIONS. COMMENTING ON THESE LIMITATIONS, THE LD. AUTHOR SHRI S. RAJARATNAM IN T HE COMMENTARY OF LAW OF INCOME TAX BY SAMPAT IYENGARS VOLUME 1, (11 TH EDITION) HAS OBSERVED AT PAGE 343 AS UNDER:- 45 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 BECA USE OF CERTAIN CONDUCT BASED ON THE IPSE DIXIT OF A PARTICULAR ASSESSEE CA NNOT BE ACCEPTED. IN DETERMINING THE QUESTION WHETHER IT IS HYPOTHETICAL INCOME OR WHETHER REAL INCOME HAS MATERIALIZED OR NOT, VARIOUS FACTORS WIL L HAVE TO BE TAKEN INTO ACCOUNT. IT WOULD BE DIFFICULT AND IMPROPER TO EXTEND THE C ONCEPT OF REAL INCOME TO ALL CASES DEPENDING UPON THE SELF-SERVING STATEMENT OF THE ASSESSEE. WHAT HAS REALLY ACCRUED TO THE ASSESSEE H AS 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 R EALIZATION IN A REALISTIC MANNER, BUT ONCE ACCRUAL TAKES PLACE, ON THE CONDUCT OF THE PARTIES SUBSEQUENT TO THE YEAR OF CLOSING, AN INCOM E WHICH HAS BEEN ACCRUED CANNOT BE MADE NO INCOME. 91 THE ABOVE POSITION CAN BE UNDERSTOOD BY EXAMININ G SOME OF THE PROVISIONS OF THE ACT WHICH WOULD SHOW THAT CONCEPT OF NOTIONAL INCOME CAN NOT BE EXTENDED IF SPECIFIC PROVISION IS AVAILABLE IN THE ACT. FOR EXAMPLE IN CASE OF INCOME FROM HOUSE PROP ERTY, THE INCOME HAS TO BE DETERMINED AS PER SECTION 23. SECTION 22 OF THE INCOME TAX ACT PROVIDES THAT IT IS THE ANNUAL VALUE OF THE PRO PERTY WHICH CAN BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. SECTOR 23 PRESCRIBES THE METHOD FOR DETERMINING THE ANNUA L VALUE. SECTION 23(1)(A) READS AS UNDER:- 23. (1) FOR THE PURPOSES OF SECTION 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 PROPERTY OR ANY PART OF THE PROPERTY IS L ET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM REFERRED TO IN CLAU SE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE; OR. 92 ON THIS ASPECT THE SETTLED POSITION OF THE LAW I S THAT THE ANNUAL VALUE HAS TO BE DETERMINED EVEN IF THE PROPERTY IS NOT L ET OUT. THIS POSITION HAS BEEN DISCUSSED BY THE LD. AUTHOR CHATURVEDI & PITHI SARIAS IN COMMENTARY OF INCOME TAX LAW (FIFTH EDITION) 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 PRO PERTY 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 HYPOTHET ICAL TENANT WOULD PAY WHICH IS TO BE OBJECTIVELY ASCERTAINED ON A REASONA BLE BASIS IRRESPECTIVE OF THE FACT WHETHER THE PROPERTY IS LET OUT OR NOT [SU LTAN BROS. PR. LTD. V. CIT, (1964) 51 ITR 353 (SC); JAMNADAS PRABHUDAS V. CIT, (1951)20 ITR 160(BOM); D.M. VAKIL V. CIT, (1946) 14 ITR 298, 302 (BOM); CIT V. BIMAN 46 BEHARI SHAW, SHEBAIT, (1968) 68 ITR 815 (CAL); SRI SRI RADHA GOVINDA JEW V. CIT, (1972) 84 ITR 150, 156 (CAL); CIT V. GANGA PROPERTIES LTD., (1970) 77 ITR 637, 647 (CAL); LIQUIDATOR, MAHMUDABAD PROPE RTIES LTD. V. CIT, (1972) 83 ITR 470 (CAL), AFFIRMED, (1980) 124 ITR 3 1 (SC); CIT 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 SA MGHAM LAL V. CIT, (1936) 4 ITR 250 (LAH); NEW DELHI MUNICIPAL COMMITT EE V. NAND KUMAR BUSSI, (1977) TAX LR 2130 (DEL)] 93 SIMILAR VIEW HAS BEEN EXPRESSED BY SHRI N.A. PAL KHIVALA IN HIS COMMENTARY ON THE LAW LAND PRACTICE OF INCOME TAX, VOLUME 2 (EIGHTH EDITION) BY KANGA AND PALKHIVALAS OBSERVATION AT P AGES 22 & 23. AGAIN EVEN SHRI S. RAJARATNAM IN THE COMMENTARY OF LAW OF INCOME TAX BY SAMPAT IYENGARS VOLUME 2, (11 TH EDITION) EXPRESSED IDENTICAL VIEWS IN HIS COMMENTARY AT PAGE 2738. 94 IN ALL THE LEADING COMMENTARIES CITED ABOVE, IT HAS BEEN OBSERVED THAT ANNUAL VALUE IS TO BE COMPUTED WHETHE R PROPERTY HAS BEEN LET OUT OR NOT. THIS MEANS THAT NOTIONAL VALU E OF THE PROPERTY HAS TO BE CHARGED TO THE INCOME TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. FROM THE ABOVE, IT BECOMES CLEAR THAT THOUGH THERE IS NO REAL INCOME FROM LETTING OUT OF THE PROPERTY, STILL THE NOTIONAL ANNUAL VALUE IS SUBJECTED TO TAX UNDER THE HEAD IN COME FROM HOUSE PROPERTY. HOWEVER, WE MAY MENTION THAT U/S 23(1)( C) OF THE ACT IF THE PROPERTY IS LET OUT AND THEN REMAINED VACANT FO R SOME PART OF THE YEAR OR FOR WHOLE OF THE YEAR THEN VACANCY ALLOWANC E CAN BE CLAIMED. HERE, IT IS IMPORTANT TO NOTE THAT IF PROPERTY IS N OT LET OUT, THEN NOTIONAL INCOME BECOMES CHARGEABLE TO THE TAX BECAU SE OF PROVISIONS OF SECTIONS 22 AND 23 (1)(A) OF THE ACT. SIMILARL Y, UNDER THE MAT PROVISIONS, IT IS BASICALLY THE NOTIONAL INCOME WH ICH IS BEING SUBJECTED TO CHARGE UNDER THE HEAD INCOME FROM BUS INESS AND PROFESSION. A BUSINESSMAN MAY HAVE INCOME OF RS. 100/- BUT BECAUSE OF HIGHER DEPRECIATION ALLOWABLE UNDER THE INCOME-TAX ACT OR SOME OTHER WEIGHTED DEDUCTIONS SAY FOR EXAMPLE IN C ASE OF EXPENDITURE ON SCIENTIFIC RESEARCH, THE TAXABLE INC OME AS PER THE PROVISIONS OF THE ACT MAY BE ZERO BUT STILL BECAUSE OF THE MAT PROVISIONS, TAX HAS TO BE CHARGED ON BOOK PROFITS. SIMILARLY IN THE CASE OF PRESUMPTIVE TAX PROVISIONS E.G. U/S 44AD IF A PERSON IS CIVIL CONTRACTOR AND DOES NOT MAINTAIN BOOKS OF ACCOUNT A ND HIS TURNOVER IS LESS THAN RS. 60 LAKHS THEN THE PROFIT WOULD BE PRE SUMED TO BE 8% OF TURNOVER EVEN IF HE HAS SUFFERED A LOSS. ANOTHER EXAMPLE OF SECTION 2(22)(E) CAN BE TAKEN. UNDER THIS PROVISION A LOAN OR ADVANCE GIVEN BY CERTAIN COMPANIES TO A SUBSTANTIAL SHARE HOLDER IS TO BE TREATED AS 47 DEEMED DIVIDEND. SUCH LOAN UNDER THE NORMAL ACCOUN TING PRINCIPLE OR ON COMMERCIAL PRINCIPLES CANNOT BE REGARDED AS INCO ME BUT BECAUSE OF THIS SPECIFIC PROVISION REGARDING DEEMED DIVIDEN D SUCH AMOUNT HAS TO BE TREATED AS INCOME OF THE PERSON RECEIVING SUC H LOANS. 95 THE ABOVE POSITION OF LAW MAKES IT ABSOLUTELY CL EAR THAT THEORY OF REAL INCOME IS SUBJECT TO THE PROVISIONS OF THE ACT AND WHENEVER ANY SPECIFIC PROVISIONS OF THE ACT IS THERE FOR CHA RGING OF A PARTICULAR ITEM OF INCOME, THEN THE SAME HAS TO BE CHARGED ACC ORDINGLY. IT MAY BE SOMETIMES HARD TO THE ASSESSEES BUT AGAIN IT HA S BEEN HELD IN NUMEROUS DECISIONS THAT FISCAL STATUES HAVE TO BE I NTERPRETED ON THE BASIS OF LANGUAGE USED AND THERE IS NO SCOPE FOR EQ UITY OR INTENT. LD. AUTHOR SHRI S. RAJARATNAM IN THE COMMENTARY OF LAW OF INCOME TAX BY SAMPAT IYENGARS VOLUME 1, PAGE 236 IN THIS REGA RD HAS OBSERVED AS UNDER:- ONCE IT IS SHOWN THAT THE CASE OF THE ASSESSEE COM ES WITHIN THE LETTER OF THE LAW, HE MUST BE TAXED, HOWEVER, GREAT THE HARDSHIP MAY APPEAR TO THE JUDICIAL MIND. CONSIDERATIONS OF HARD SHIP, INJUSTICE OR ANOMALIES DO NOT PLAY ANY USEFUL ROLE IN CONSTRUING TAXING STATUTES UNLESS THERE BE SOME REAL AMBIGUITY. THUS, ANY BENE VOLENT CONSTRUCTION IN FAVOUR OF THE ASSESSEE HAS BEEN HEL D TO BE UNCALLED FOR. 96 THEREFORE, IT CAN BE SAID THAT GENERALLY SPEAKIN G NOTIONAL INCOME COULD NOT BE SUBJECTED TO TAX BUT WHENEVER T HERE IS A SPECIFIC PROVISION, THE SAME HAS TO BE TAXED. NOW, IN CASE OF CAPITAL GAIN, SECTION 45 READ WITH SECTION 48 VERY CLEARLY PROVID ES THAT IT IS THE PROFIT ARISING FROM THE TRANSFER OF A CAPITAL AS SET WHICH WOULD BE SUBJECTED TO CHARGE OF CAPITAL GAIN TAX AND SECTION 48 CLEARLY PROVIDES FOR TAKING THE TOTAL CONSIDERATION INTO ACCOUNT WHI LE COMPUTING THE CAPITAL GAINS. THIS ASPECT WE HAVE ALREADY DISCUSS ED IN DETAIL AT PARA NO. 64 TO 68 FROM WHICH IT BECOMES CLEAR THAT IT IS THE WHOLE CONSIDERATION WHETHER RECEIVED OR ACCRUED, WHICH HA S TO BE TAXED UNDER THE CAPITAL GAIN ONCE TRANSFER OF THE CAPITAL ASSET TAKES PLACE. ACCORDINGLY, THERE IS NO FORCE IN THIS PART OF THE CONTENTION. 97 NOW LET US EXAMINE THE ISSUE OF TAXABILITY OF FL AT ON THE BASIS OF ABOVE PRINCIPLES. RELEVANT PORTION OF CLAUSE 4 OF THE JDA WHICH DEALS WITH CONSIDERATION ARE AS UNDER: 48 4. CONSIDERATION 4.1 IT IS SPECIFICALLY UNDERSTOOD AND AGREED AMONGS T 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 AUTHO RITY AND THE OWNER SHALL HAVE NO OBJECTION TO THE SAME IN WHATSOEVER MANNER. IN CONSIDERATION OF THE OWNER GRANTING AND ASSIGNING, ITS DEVELOPMENT RIGHT S IN THE PROPERTY, IRREVOCABLY AND IN PERPETUITY, TO THDC TO DEVELOP T HE PROPERTY AND FOR TRANSFER OF THE PROPERTY UPON THE SURRENDER OF ALLO TMENT RIGHTS OF 500 SQ. YARDS AND/OR 1000 SQ. YARDS (AS THE CASE MAY BE) B Y ITS MEMBERS TO THE OWNER, VIDE RESOLUTION DATED 04.01.2007 AND 25.02.2 007 (COPY ATTACHED AS PER ANNEXURE I & II), HASH IS COMMITTED TO PAY TO T HE 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 FORT Y TWO LACS FIFTY THOUSANDS ONLY) CALCULATED @ RS. 82,50,000/- (RUPEE S 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 FIV E LACS ONLY) PAYABLE TO 30 MEMBERS HAVING PLOT OF 1000 SQ. YARDS EACH AND R S. 3,30,00,000/- (RUPEES THREE CRORES THIRTY LACS ONLY) PAYABLE TO T HE OWNER FOR THE 4 PLOTS OF 500 SQ. YARDS EACH, WHICH SHALL TANTAMOUNT TO TH E 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 PR OPERTY 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 SA ME. IT IS EXPRESSLY PROVIDED THAT AS RESOLVED BY THE OWNER, THE TOTAL A MOUNT 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 AN D 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 FIFTY THOUSAN D ONLY) AND ONE HUNDRED AND TWENTY NINE (129) FLATS CONSISTING OF S UPER AREA OF 2250 SQ. FEET (FLATS); ONE FLAT EACH FOR SIXTY FIVE MEMBER S HAVING A PLOT OF 500 SQ. YARDS, TWO FLATS 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 LIST ANNEXED WITH THIS AGREEMENT AS SCHEDULE B (SALE TR ANSACTION) IT IS EXPRESSLY AGREED BETWEEN THE DEVELOPERS THAT HASH SHALL BE RESPONSIBLE FOR MAKING ALL PAYMENTS TO THE OWNER AN D/OR THE RESPECTIVE MEMBERS OF THE OWNER (AS THE CASE MAY BE) AS PER TH E NEGOTIATED AND AGREED TERMS BETWEEN THE OWNER AND HASH, HASH EXPRE SSLY UNDERTAKES TO MAKE TIMELY PAYMENTS OF THE PAYMENT TO THE OWNER AN D / OR THE RESPECTIVE MEMBERS OF THE OWNER (AS THE CASE MAY BE) AS UNDER: 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 LIST ANNEXED WITH THIS AGREEMENT AS SCHEDULE B ATTACHED HEREIN (HEREINAFTER REFERRED TO AS THE ALLOTTEES). THE SPECIFICATIONS OF THE FLATS WOULD BE PROVIDED BY THE DEVELOPERS TO THE OWNER AND MORE PA RTICULARLY DESCRIBED IN THE SCHEDULE C ATTACHED HEREIN (HEREINAFTER REFERRE D TO AS THE SPECIFICATIONS). THE ALLOTMENT LETTERS SHALL BE I SSUED 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 O BTAINING FINAL 49 LICENSE/PERMISSION FOR THE DEVELOPMENT OF THE PROJE CT FROM THE COMPETENT AUTHORITY. THEREAFTER, THE POSSESSION OF THE FLATS SHALL BE HANDED OVER TO THE ALLOTTEES WITHIN THIRTY(30) MONTHS FORM THE DATE O F ISSUANCE OF THE ALLOTMENT LETTER. IT IS EXPRESSLY PROVIDED THAT THE PAYMENT TO BE MAD E BY HASH TO THE OWNER AND/OR TO THE RESPECTIVE MEMBERS OF THE OWNER (AS THE CASE MAY BE) AND THE FLATS TO BE ALLOTTED TO THE ALLOTTE ES AS SET OUT IN THIS CLAUSE 4.2 SHALL HEREINAFTER BE COLLECTIVELY REFERR ED TO AS THE ENTIRE CONSIDERATION 98 FROM THIS CLAUSE IT BECOMES ABSOLUTELY CLEAR THA T EACH MEMBER HAVING 500 SQYD OF PLOT WAS ENTITLED TO RECEIVE ONE FURNISHED FLAT MEASURING 2250SQFT AND MEMBERS HAVING 1000SQYD FLAT WERE ENTITLED TO RECEIVE TWO FURNISHED FLATS. THUS UPON EXECUTIO N OF THE JDA VESTED RIGHT CAME TO SUCH MEMBERS TO RECEIVE SUCH FLATS. ONCE THIS VESTED RIGHT ARISES OUT OF THE ABOVE CONTRACT IT CAN EASIL Y BE SAID THAT THIS RIGHT HAS ALSO ACCRUED TO THE ASSESSEE. CLAUSE 4.2 MAKES IT ABSOLUTELY CLEAR THAT DEVELOPER I.E. THDC/HASH WAS TO ALLOT THE LETTERS OF ALLOTMENT WITHIN 45 DAYS FROM FINAL SANC TION FROM THE COMPETENT AUTHORITY AND SUCH FLATS WERE PART OF ENT IRE CONSIDERATION. MERELY BECAUSE SUCH ALLOTMENT LETTER HAS NOT BEEN G IVEN BECAUSE OF SANCTIONS / PERMISSIONS COULD NOT BE OBTAINED BECAU SE OF PUBLIC INTEREST LITIGATION BEFORE THE HON'BLE PUNJAB & HAR YANA HIGH COURT, IT CANNOT BE SAID THAT SUCH RIGHT HAS NOT ACCRUED. TH OUGH IT MAY BE HARD ON THE ASSESSEE BUT IT IS WELL SETTLED THAT TA XATION AND EQUITY ARE STRANGERS. FURTHER COMMENTING ON THIS ASPECT SHRI RAJARATHNAM IN HIS COMMENTARY HAS OBSERVED AT PAGE 5164 AS UNDER: IT IS HARD ON THE OWNERS WHEN REQUIRED TO PAY TAX, WHEN HANDING OVER THE POSSESSION FOR PURPOSES OF CONSTRUCTION WITHOUT BEING ABLE TO ENJOY THE CONSTRUCTION, WHICH IS YET TO COMMERCE OR IN THE PROCESS OF CONSTRUCTION BEING PUT UP BY THE DEVELOPER, BUT THE SOLUTION LIES IN STATUTORY CLARIFICATION IN SUCH CASES. IN VIEW OF THE INCREASING SCALE OF SUCH DEVELOPMENT AGREEMENTS TO SOLVE THE HOUSING PROBLEM IN THE CITIES, A STATUTORY CLARIFICATION OR CIRCULAR IS OV ERDUE. 99 THESE COMMENTS AND THE OTHER DETAILED DISCUSSION ON THIS ASPECT CLEARLY SHOW THAT CAPITAL GAIN TAX HAS TO BE PAID ON THE TOTAL CONSIDERATION ARISING ON TRANSFER WHICH WOULD INCLU DE THE CONSIDERATION WHICH HAS BEEN RECEIVED AS WELL AS TH E CONSIDERATION WHICH HAS AROSEN AND BECOME DUE AND MAY BE RECEIVED LATER ON. IN VIEW OF THIS DISCUSSION THIS CONTENTION IS REJECTED . 50 100 NINTH CONTENTION IS THAT THE ASSESSEE HAS ALREA DY TERMINATED THE AGREEMENT AND HAS REVOKED THE POWER OF ATTORNEY. WE FIND NO FORCE IN THIS SUBMISSIONS. 101 IN THIS REGARD LD. COUNSEL OF THE ASSESSEE HAS RELIED 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-COMP ANY ENTERED INTO A DEVELOPMENT AGREEMENT WITH DIPITI BUILDERS FOR THE DEVELOPMENT RIGHTS FOR A CONSIDERATION OF RS. 16.11 CRORES. DIPITI 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 SH OWN ONLY AT RS. 16.11 CRORES. IT WAS EXPLAINED THAT BEFORE DIPITI BUILDE RS COULD START THE DEVELOPMENT /CONSTRUCTION WORK, ENTIRE PROPERTY COM PRISING OF PLOT NO. 256 & 257 WAS SOLD TO A THIRD PARTY M/S FINANCIAL TECHNOL OGY LTD. BY A TRIPARTITE CONVEYANCE DEED EXECUTED ON 5.7.2007 FOR RS. 29.11 CRORES AND THEREFORE, ADDITIONAL CONSIDERATION OF RS. 13 CRORES HAS BEEN OFFERED TO TAX IN ASSESSMENT YEAR 2008-09. THIS EXPLANATION WAS REJE CTED BY THE ASSESSING OFFICER BECAUSE ACCORDING TO HIM IT WAS A CASE OF T RANSFER 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 B EFORE THE BENCH. THE CASE LAW RELIED ON BY THE DEPARTMENT WAS REJECTED B ECAUSE SAME WAS RELEVANT TO ACCRUAL OF INTEREST. THE BENCH FOLLOWE D 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 FINALLY SETTLED AT RS. 1.00 CRORE AND THE TRIBUNAL HELD THAT THE CONSIDERATION OF RS. 1.00 CRORE HAS TO BE ACCEP TED. 102. FROM THE ABOVE DECISION IT IS NOT CLEAR WHETHE R IN CASE OF KALAPTARU CONSTRUCTION OVERSEES PVT LTD. (SUPRA) WHICH HAS BE EN FOLLOWED IN ABOVE CASE, WAS CONCERNING CAPITAL GAIN OR NOT? SECONDLY IT IS NOT CLEAR THAT WHETHER THE AMENDED CONSIDERATION I.E. SETTLEMENT F OR 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 SECTION 45 R.W.S. 48, ARE ABSOLUTELY CLEAR AND THERE IS NO AMBIGUITY THAT ONC E A CAPITAL ASSET IS TRANSFERRED THEN WHOLE OF THE CONSIDERATION RECEIVE D OR ACCRUING HAS TO BE CONSIDERED FOR THE PURPOSE OF TAXATION IN THE YEAR IN WHICH THE TRANSFER HAS TAKEN PLACE. WE FURTHER FIND THAT IN THE JDA THERE IS A CLAUSE FOR TERMINATION OF THE AGREEMENT. RELEVANT CLAUSE 14 READS AS UNDE R: 51 TERMINATION 14(I) SAVE AND EXCEPT THE PROVISION OF CLAUSE 26, THDC SHALL AT ALL TIMES HAVE THE RIGHT TO TERMINATE THIS AGREEMENT IN THE E VENT THERE IS ANY MATERIAL BREACH OF THE REPRESENTATIONS, WARRANTIES, UNDERTAK INGS, DECLARATIONS, COVENANTS AND/OR OBLIGATIONS GIVEN BY THE OWNER UND ER THIS AGREEMENT AFTER GIVING THIRTY (30) DAYS WRITTEN NOTICE FOR RECTIFIC ATION 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 UPT O 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 NO T 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 A GREES TO EXECUTE A REGISTERED SALE DEED FOR LAND OF EQUIVALENT VALUE I N FAVOUR OF THDC. (II) IN THE EVENT ALL THE REQUISITE GOVERNMENT AND STATUTORY APPROVALS, AUTHORIZATIONS, CONSENTS, LICENSES, APPROVALS OF AL L 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 FINAL PLANS/DESIGNS AND DRAWINGS TO THE COMPETENT AUTHORITY FOR APPROVAL THEN THDC MAY AS I TS SOLE DISCRETION EITHER DECIDE THAT IT DOES NOT DESIRE TO UNDERTAKE AND COMPLETE THE PROJECT AND HENCE TERMINATE THIS AGREEMENT AFTER GIVING THI RTY (30) DAYS WRITTEN NOTICE IN THIS REGARD OR DECIDE TO WAIT FOR ANY FUR THER TIMES DEEMED FIT BY THDC FOR THE GRANT OF THE AFORESAID APPROVALS AND L ICENSES. IN THE EVENT THE AGREEMENT IS TERMINATED BY THDC, ALL THE LANDS REGI STERED IN THE NAME OF THDC AS PER THE TERMS OF THIS AGREEMENT UPTO THE DA TE 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 TRANSF ERRED BY THE OWNER IN FAVOUR OF THDC. UPON THE TERMINATION, THE OWNER SH ALL REFUND TO THDC THE ADJUSTABLE ADVANCE/EARNEST MONEY MENTIONED IN CLAUS E 4.1(I) ABOVE WITHIN ONE MONTH OF SUCH TERMINATION. IN THE EVENT OF FAI LURE 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. (III) IN THE EVENT THDC IS UNABLE TO DEVELOP THE PR OPERTY DUE TO REFUSAL/NON GRANT OF APPROVALS, CONSENTS, PERMISSIO N, LICENSES OR REVOCATION OF THE SAME BY THE APPROPRIATE STATUTORY AUTHORITY, THEN THDC MAY AT ITS SALE DISCRETION TERMINATE THIS AGREEMENT. IN THE E VENT 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 TE RMINATION SHALL REMAIN WITH THDC AND THE BALANCE LANDS TO BE TRANSFERRED T O 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 CLAUS E 4.1(I) ABOVE WITHIN ONE MONTH OF SUCH TERMINATION. IN THE EVENT OF FAI LURE 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. 52 (IV) THE OWNER SHALL HAVE THE RIGHT TO TERMINATE TH E AGREEMENT ONLY IN THE EVENT OF DEFAULT BY THE DEVELOPERS FOR MAKING THE P AYMENT 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 WRITTEN NOTICE FOR RECTIFICATION OF SUCH BREACH OR ANY FURT HER TIME AS MAY BE DESIRED BY THE OWNER. IN THE EVENT THE AGREEMENT IS TERMIN ATED BY OWNER, ALL THE LANDS REGISTERED IN THE NAME OF THDC AS PER THE TER MS 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. UPO N 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), (II) AND (III). THE POWER FOR TERMINATION B Y THE OWNER HAS BEEN MENTIONED IN CLAUSE 14(IV) ONLY. READING OF THIS C LAUSE WOULD SHOW THAT RIGHT TO TERMINATE WITH THE OWNER I.E. THE SOCIETY WAS AVAILABLE ONLY IN CASE OF DEFAULT IN MAKING THE PAYMENT. THE ISSUE REGARD ING DEFAULT FOR MAKING PAYMENT HAS ALREADY BEEN DISCUSSED BY US IN PARAS 8 4 TO 86 ABOVE WHILE DISCUSSING THE ISSUE OF WILLINGNESS 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. I N ANY CASE WE FURTHER FIND THAT CLAUSE 20 OF THE JDA REFERS TO ARBITRATION AND IT IS CLEARLY PROVIDED THAT ALL THE DISPUTES UNDER IT SHOULD BE REFERRED TO THE ARBITRATION. 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 SCRUTINY OF LAW. HER E IT IS ALSO PERTINENT TO NOTE THAT THOUGH IT WAS STATED THAT IRREVOCABLE POWER OF ATTORNEY HAS BEEN REVOKED AND SOME DOCUMENTS HAVE BEEN FILED BEFORE U S 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 REPRO DUCE CLAUSE 6.7 AGAIN WHICH IS AS UNDER: 6.7 THE OWNER SHALL EXECUTE AN IRREVOCABLE SPECIAL POWER OF ATTORNEY GRANTING ITS COMPLETE DEVELOPMENT RIGHTS I N THE PROPERTY IN FAVOUR OF THDC INTERALIA INCLUDING THE RIGHT TO RA ISE FINANCE BY MORTGAGING THE PROPERTY AND REGISTER THE CHARGE WIT H THE COMPETENT AUTHORITY AND EXECUTE REGISTERED SALE DEEDS) AS SET OUT IN CLAUSE 4.1 (II), (III), (IV) AND (V) AND THE OWNER CONFIRMS, U NDERTAKES, DECLARES AND BINDS ITSELF NOT TO REVOKE THE SAME FO R ANY REASON WHATSOEVER OUT OF ITS OWN WILL AND DISCRETION WITHO UT OBTAINING A SPECIFIC PRIOR WRITTEN CONSENT OF THDC OR ANY OF IT S DULY CONSTITUTED ATTORNEYS. 53 104 THE ABOVE CLEARLY SHOWS THAT THIS POWER OF ATTO RNEY COULD NOT BE REVOKED FOR ANY REASON WITHOUT OBTAINING SPECIFI C PRIOR WRITTEN CONSENT OF THDC/HASH. NO DOCUMENT SHOWING THE CONS ENT OF THDC FOR REVOCATION OF THIS IRREVOCABLE POWER OF ATTORNE Y HAS BEEN PRODUCED BEFORE US. WE FAIL TO UNDERSTAND THAT IN THE ABSENCE OF SUCH DOCUMENT HOW THE ASSESSEE CAN CLAIM THAT THIS POWER OF ATTORNEY HAS BEEN REVOKED. AS DISCUSSED EARLIER WH ILE CONSIDERING THE LEGAL POSITION, WE WOULD AGAIN RECALL THE WORDS OF HON'BLE AUTHORITY FOR ADVANCE RULING IN CASE OF JASBIR SING H SARKARIA (SUPRA) WHEREIN AT PARA 33 OF THE DECISION WHILE DISCUSSING THE ISSUE IN RESPECT OF POWER OF ATTORNEY, IT WAS HIGHLIGHTED T HAT EXECUTION OF IRREVOCABLE POWER OF ATTORNEY IS OF SIGNIFICANT NAT URE AND THE WORDS IRREVOCABLE ARE VERY IMPORTANT. THE EXPRESSION IRREVOCABLE ITSELF SHOWS THAT NORMALLY SUCH ATTORNEY CANNOT BE REVOKED . THEREFORE, NO COGNIZANCE CAN BE TAKEN IN RESPECT OF REVOCATION O F THE IRREVOCABLE POWER OF ATTORNEY. IN THE ABSENCE OF SPECIFIC CONS ENT AS PROVIDED IN CLAUSE 6.7 OF THE JDA FROM THDC. 105 WE MAY ALSO NOTE THAT CIT D.R HAS POINTED OUT T HAT TOTAL CONSIDERATION WAS TO BE DETERMINED AS UNDER: (I) CONSIDERATION IN CASH (RS. 82,50,000 X 129 PLOTS) RS. 106,42,50,000/- (II) CONSIDERATION IN KIND (RS. 101,25,000/- X 129 PLOTS) RS. 130,61,25,000/- TOTAL RS. 237,03,75,000/- AVERAGE COST OF CONSIDERATION RS. 11.18 CRORES PER ACRE (TOTAL CONSIDERATION OF RS. 237.03 CRORES DIVIDED B Y 21.2 ACRES OF LAND) IT IS CLAIMED ON BEHALF OF THE ASSESSEE THAT JDA HA S BEEN CANCELLED AND THE DEVELOPER HAS BEEN ALLOWED TO RETAIN THE PROPERTY W HICH HAS ALSO BEEN CONVEYED TO DEVELOPER THROUGH TWO SALE DEEDS. IF THAT IS SO THEN WHAT WOULD HAPPEN TO THE BALANCE CONSIDERATION BECAUSE I N SUCH SITUATION THE ASSESSEE HAS RECEIVED CONSIDERATION OF ONLY ABOUT RS. 5 CRORESS PER ACRE BECAUSE THE ASSESSEE HAS REGISTERED LAND MEASURING 3.08 ACRES FOR RS. 15.48 CRORES THROUGH FIRST CONVEYANCE DEED, WHEREAS CONSIDERATION AS PER ORIGINAL AGREEMENT WAS RS. 11.18 CRORES PER ACRE AS SHOWN ABOVE. THE DIFFERENCE IS BECAUSE OF NON RECEIPT OF CONSIDERATI ON IN KIND AND THE ASSESSEE HAS NOT SHOWN ANY EVIDENCE THAT IT HAS MAD E THE CLAIM FOR RECEIPT 54 OF BALANCE CONSIDERATION. THIS LEADS TO THE CONCLU SION THAT THERE WAS NO CANCELLATION OF THE JDA. 106 SOME ARGUMENTS WERE MADE BY BOTH THE PARTIES TH AT IF THE CONTRACT IS FINALLY STAND ABANDONED THEN WHAT WOULD HAPPEN. TH E CONTENTION ON BEHALF OF THE ASSESSEE IS THAT IF THE CONTRACT IS ABANDONE D 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 FILE REVISED RETURN OR MAKE A PETITION U/S 264 AND SOME RELIEF WAS POSSIBLE IN CASE OF THE ASSESSEE. HOWEVER, IF REVENUE FAILS TO TAX THE TOTAL CONSIDERATION IN THE YEAR OF TRANSFER THEN S AME CANNOT BE SUBJECTED TO TAX IN ANY OTHER YEAR. WE FIND 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 PARTIE S FOR VARIOUS ASPECTS. IN THAT CASE IT WAS OBSERVED AT PARA 39 AS UNDER: WE HAVE TO ADVERT TO ONE ASPECT WHICH HAS CAUSED S OME CONCERN TO US. WHAT WILL HAPPEN IF DURING THE YEAR FOLLOWING THE O NE IN WHICH THE DEEMED TRANSFER TOOK PLACE, THE PROPOSED VENTURE COLLAPSES FOR REASONS SUCH AS REFUSAL OF PERMISSIONS, THE DEVELOPER FACING FINANC IAL CRUNCH ETC. BY THAT TIME, THE OWNER WOULD HAVE RECEIVED ONLY A PART OF THE AGREED CONSIDERATION, BUT HE IS OBLIGED TO FILE THE RETURN SHOWING THE EN TIRE 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 SITUATI ON COULD BE AVOIDED IF THE CONTENTION OF THE APPLICANT IS ACCEPTED. ON DEEP C ONSIDERATION, HOWEVER, WE FIND THAT THE CONSTRUCTION OF THE RELEVANT PROVI SION SHOULD NOT BE CONTROLLED BY GIVING UNDUE IMPORTANCE TO SUCH HYPOT HETICAL 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 SATISFIED ABOUT THE ABILITY OF TRANSFEREE /DEVELOPER TO FULFIL THE CONTRACT. IN SPITE OF THAT, IF SUCH RATE SITUATION S TAKE PLACE, THE OWNER/TRANSFEROR WILL NOT BE WITHOUT REMEDY. HE CA N FILE A REVISED RETURN AND MAKE OUT A CASE FOR EXCLUSION OR REDUCTION OF I NCOME. HOWEVER, IF THE TIME-LIMIT FOR FILING A REVISED RETURN EXPIRES, THE DIFFICULTY WILL ARISE. IT IS FOR PARLIAMENT OR THE CENTRAL GOVERNMENT TO PROVIDE A R EMEDY TO THE ASSESSEE IN SUCH CASES. MOREOVER, THE OTHER SIDE OF THE PIC TURE 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: IT IS HARD ON THE OWNERS WHEN REQUIRED TO PAY TAX, WHEN HANDING OVER THE POSSESSION FOR PURPOSES OF CONSTRUCTION WI THOUT BEING ABLE TO ENJOY THE CONSTRUCTION, WHICH IS YET TO COMMERCE OR IN THE PROCESS OF CONSTRUCTION BEING PUT UP BY THE DEVELOPER, BUT THE SOLUTION LIES IN STATUTORY CLARIFICATION IN SUCH CASES. IN VIEW OF THE INCREASING SCALE OF SUCH DEVELOPMENT AGREEMENTS TO SOLVE THE HOUSING PROBLEM IN THE CITIES, A STATUTORY CLARIFICATION OR CIRCULAR IS OV ERDUE. 55 WE MAY MENTION HERE THAT NO DOUBT SOMETIMES AN ASSE SSEE MAY BE PUT IN A DIFFICULT SITUATION AND AS MENTIONED BY HON'BLE AUT HORITY IN CASE OF JASBIR SINGH SARKARIA (SUPRA) AS WELL AS LD. AUTHOR SHRI R AJARATNAM IT IS FOR THE LEGISLATURE TO TAKE CORRECTIVE STEPS. HOWEVER, IT MAY NOT BE OUT OF PLACE THAT IF CONSIDERING THE DIFFICULTY THE INTERPRETATION GI VEN BY THE LD. COUNSEL OF THE ASSESSEE IS ACCEPTED THEN THE REVENUE MAY NOT BE AB LE TO TAX SUCH ASSESSEES WHEN THESE DIFFICULTIES ARE REMOVED. FOR EXAMPLE IN THE PRESENT CASE IF TOMORROW WHEN ALL PERMISSIONS ARE OBTAINED AND CONSTRUCTION IS COMPLETED AND IF NO TAXES ARE HELD TO BE PAYABLE TH EN 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 O F THE ASSESSEE THAT THE TRANSFER HAS ALREADY TAKEN PLACE ON THE DATE WHEN I RREVOCABLE POWER OF ATTORNEY WAS EXECUTED. IN THAT SITUATION THE REVEN UE WILL HAVE NO REMEDY. 107 THE ABOVE CLEARLY SHOWS THAT SUCH HYPOTHETICAL CONSIDERATION CANNOT BE CONSIDERED FOR GIVING TRUE MEANING TO A PARTICUL AR PROVISION. IT HAS ALSO BEEN OBSERVED THAT IN SOME GENUINE CASES THE DIFFIC ULTIES 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 WILL NOT MAKE ANY DIFFERENCE BECAUSE TOTAL CONS IDERATION 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 B EEN 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 T HIS ANALYSIS, WE ARE OF THE OPINION THAT EITHER THE JDA HAS NOT BEEN CANCEL LED OR IN ANY CASE THE SAME CANNOT BE CONSIDERED FOR DETERMINING THE TAXAT ION OF CAPITAL GAIN. ACCORDINGLY THIS CONTENTION IS REJECTED. 108 THE NEXT CONTENTION OF THE ASSESSEE IS THAT EVE N IF THE WHOLE CONSIDERATION HAS TO BE TAXED THEN VALUE OF THE FLA TS CANNOT BE TAKEN AT RS. 4,500/- PER SQ. FEET. IT IS ALSO POINTED OUT THAT IN VIEW OF THE AGREEMENT BETWEEN THE HASH & THDC CONSIDERATION HAS BEEN SHOWN AT RS. 2,000/- PER SQ. FEET FOR 126 FLATS WHEREAS I T IS RS. 4,500/- PER SQ. FEET FOR THREE FLATS. WE FIND NO FORCE IN THESE SUBMISSIONS. THE ASSESSEE HAS FILED ALONG WITH THE WRITTEN SUBMISSIO NS COPY OF THE ADDENDUM OF AGREEMENT BETWEEN THDC AND HASH BY JOIN T DEVELOPER (AT PAGE 265 & 266) AND THIS ISSUE IS DISCUSSED IN CLAUSE 5 WHICH IS AS UNDER:- 56 5. CLAUSES 4.1, 4.2, 4.3 AND 4.4 ON THE PAGE NOS. 18 AND 19 OF THE AGREEMENT SHALL STAND AMENDED, MODIFIED AND SUBSTI TUTED BY THE FOLLOWING:- 4.1 IT IS EXPRESSLY AGREED AND UNDERSTOOD BY AND BE TWEEN THE PARTIES HERETO (A) IN THE RATIO OF 72,28 BETWEEN THDC AND HASH I N CASE GROSS SALES PROCEEDS DOES NOT EXCEED RS. 1272 CRORES; (B) IN THE RATIO OF 70: 30 BETWEEN THDC AND HASH IN CASE GROSS SALES PROCEEDS IS EQUAL TO RS. 1272 CROR ES; (C) IN ADDITION (B), IN THE RATIO OF 60: 40 BETWE EN THDC AND HASH IN RESPECT OF GROSS SALES PROCEEDS I N EXCESS OF RS. 1272 CRORES. IT IS AGREED THAT THE MINIMUM GUARANTEED AMOUNT FR OM THE GROSS SALES PROCEEDS FOR THDC AND HASH IS RS. 890.40 CROR ES AND RS. 225.76 CRORES RESPECTIVELY. THE MINIMUM GUARANTEED AMOUNT OF RS. 225.76 CRORES TO HASH INCLUDES RS. 58.88 CRORES THA T SHALL BE EXPENDED BY THDC TOWARDS CONSTRUCTION OF 126 FLATS EQUIVALENT TO 2,83,500 SQ. FT,, WHICH FLATS ARE TO BE ALLOTTED IN THE NAMES OF THE MEMBERS OF THE SOCIETY OR OTHERWISE, AS THE CASE MA Y BE, CALCULATED AS RS. 2000 PER SQ. FT. FOR THE AREA 2,83,500 SQ. F T. AND THE 72% SHARE OF 3 FLATS OF 2250 SQ. FT. TO BE PURCHASED BY HASH @ RS, 4500/- PER SQ. FT. SHOULD THE APPLICATION OF THE RATIO STIPULA TED IN (A) ABOVE RESULT IN HASH BEING ENTITLED TO A SUM GREATER THAN THE MI NIMUM GUARANTEED AMOUNT AND THDC BEING ENTITLED TO A SUM LESS THAN T HE MINIMUM GUARANTEED AMOUNT, THDC SHALL-BE ENTITLED TO THE EN TITLEMENT OF HASH WHICH IS IN EXCESS OF ITS MINIMUM, GUARANTEED AMOUNT UNTIL THDC ACHIEVES ITS MINIMUM GUARANTEED AMOUNT.-THE SA ME IS ILLUSTRATED IN ANNEXURE I HERETO. 109 THE ABOVE CLEARLY SHOWS THAT HASH WAS ENTITLED TO TOTAL PROCEEDS OF RS. 225.76 CRORES OUT OF TOTAL PROCEEDS OF THE PROJECT WHICH WERE AGREED TO BE SHARED BY THDC AND HASH BUT THE PORTION OF HASH INCLUDES A SUM OF RS. 58.88 CRORES WHICH WAS R EQUIRED TO BE SPENT TOWARDS CONSTRUCTION OF 126 FLATS EQUIVALENT TO 283500 SQUARE FEET AREA WHICH WERE TO BE ALLOTTED TO THE MEMBERS OF THE SOCIETY. THUS, IT IS CLEAR THAT FIGURE OF RS. 2,000/- PER SQ . FEET REPRESENTS ONLY THE COST OF CONSTRUCTIONS TO BE INCURRED BY THDC WH ICH WAS DEBITED TO THE ACCOUNT OF HASH. FURTHER, HASH HAS AGREED TO P URCHASE THREE FLATS @ 4,500/- PER SQUARE FEET. SOME NEWS REPORTS WERE QUOTED BEFORE US IN ONE OF THE CASES TO SHOW THAT VARIOUS BROKERS HAD ISSUED VARIOUS ADVERTISEMENTS FOR SALE OF THESE FLATS AND THESE FLATS WERE ULTIMATELY TO BE SOLD AT RS. 7,000/- TO RS. 10,000/ - PER SQUARE FEET. THIS ALSO BECOMES CLEAR FROM THE ADDENDUM OF AGREEM ENT IN TERMS OF TOTAL PROCEEDS OF 1272 CRORES. IN ANY CASE IF T HE COST OF 57 CONSTRUCTION IS RS. 2,000/-, THEN COST OF LAND WHI CH HAS BEEN PAID TO THE SOCIETY IS ALSO TO BE ADDED TO THE COST OF THE FLAT BECAUSE THIS PORTION OF CONSIDERATION IN ANY CASE WAS RECEIVED O R TO BE RECEIVED LATER BY THE SOCIETY IN CASH. CONSIDERING THE PRES ENT MARKET VALUE OF THE FLATS IN AND AROUND CHANDIGARH AREA WHICH IS RS . 4,000/- TO 12,000/- PER SQUARE FEET WE ARE OF THE OPINION THAT VALUE OF THE FLAT AT RS. 4,500/- PER SQUARE FEET IS ABSOLUTELY FAIR. IN ANY CASE M/S HASH HAS AGREED TO PURCHASE THE FLATS AT THIS RATE FROM M/S THDC. IT MAY BE NOTED AS POINTED OUT BY THE LD. DR FOR THE REVEN UE SOME OF THE NEWS REPORT CLIPPINGS FILED BY VARIOUS ASSESSEES CL EARLY SHOWS THAT FLATS WERE BOOKED IN THE TATA CAMLEOT (THIS WAS THE NAME WHICH WAS GIVEN TO THE PROJECT WHICH WAS TO BE DEVELOPED ON THE LAND OF TWO SOCIETIES) IN THE PRE LAUNCH OFFER IN THE RANGE OF RS. 7500 TO 8000 PER SQFT. IT IS A COMMON KNOWLEDGE THAT RATES IN P RE LAUNCH OFFER ARE LOWER THAN THE RATES WHEN BOOKINGS OPEN FOR THE PUB LIC. CONSIDERING THESE FACTS WE ARE OF THE OPINION THAT ASSESSING OF FICER HAS ESTIMATED THE VALUE OF THE FLATS ON MOST REASONABLE BASIS. I N VIEW OF THESE OBSERVATIONS THIS CONTENTION IS REJECTED. 110 THE LD. COUNSEL FOR THE ASSESSEE HAD MADE SOME SUBMISSIONS ON THE ISSUE OF DEDUCTION U/S 54F. HE HAS POINTED OUT THAT THIS ISSUE HAS BEEN REJECTED WRONGLY BY CIT(A). HOWEVER, CAREFULLY PERUSAL OF THE GROUN DS OF APPEAL SHOW THAT NO GROUND IN RESPECT OF DEDUCTION U/S 54F HAS BEEN RAI SED BEFORE US AND, THEREFORE, WE DECLINE TO ADJUDICATE THIS ISSUE AND ALL THE ARGUME NTS MADE IN THIS BEHALF ARE REJECTED. THOUGH REFERENCE WAS MADE TO GROUND NO. 2.3 IN THIS REGARD. THE PERUSAL OF GROUNDS NO. 2.3 WOULD SHOW THAT REFEREN CE HAS BEEN MADE ONLY TO SECTION 54 AND SECTION 54EC. SECTION 54 DEALS WITH DEDUCTION IN CASE THE ASSESSEE BEING AN INDIVIDUAL OR HUF, TRANSFERS THE RESIDENTI AL HOUSE AND IN CASE BEFORE US, THE ASSESSEE HAS TRANSFERRED THE PLOT. THEREFORE, IT CANNOT BE SAID THAT DEDUCTION U/S 54F AND 54 IS SAME. SINCE NO GROUND HAS BEEN R AISED FOR DEDUCTION U/S 54F, WE REJECT THIS CONTENTION. FOLLOWING THE ABOVE ORDER WE DECIDE THE ISSUE AGAIN ST THE ASSESSEE. 6. GROUND NO. 8 THROUGH THIS GROUND THE ASSESSEE HAS CHALLENGED THE ISSUE REGARDING PENALTY U/S 271(1)(C ) OF THE ACT. 7 BOTH THE PARTIES WERE HEARD. 58 8 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT ONLY PENALTY PROCEEDINGS HAVE BEEN INITIATED AND THE PRE SENT ORDER DEALS WITH THE ASSESSMENT AND THEREFORE, THIS ISSU E IS PRE-MATURE AND ACCORDINGLY THE SAME IS DISMISSED AS INFRUCTUO US. 9 IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 23.8.2013 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 23.8.2013 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR
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