Income-tax Officer, V. Lt. Col. Parshottam Singh Binder,

ITA 1255/PUN/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9168 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 08-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J C JAIN
• Keywords: Capital asset; Salary income; Advance ruling
• Section: 143(3); 54F; 142(1); 133(6); 148; 54; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 12 55 /P U N/201 6 / ASSESSMENT YEAR : 20 0 8 - 09 THE INCOME TAX OFFICER, WARD 11(4), PUNE . / APPELLANT VS. LT. COL. PARSHOTTAM SINGH BINDER, STATION HEAD QUARTERS PALCHAN, P.O. PALCHAN, MANALI, (H.P.) 175103 . / RESPONDENT \ ABBPB7233J . / ITA NO. 2300 /P U N/201 6 / ASSESSMENT YEAR : 20 0 8 - 09 THE INCOME TAX OFFICER, WARD 11(3), PUNE . / APPELLANT VS. BRIG. RAJ VIJAYENDER SINGH, DDGST (PPP & OL) DTE.GE N OF SUP & TPT, QMGS BRANCH, INTEGRATED HQ OF MOD (ARMY), SENA BHAWAN, DHQ PO, NEW DELHI 110011 . / RESPONDENT PAN: A MWPS6474N ASSESSEE BY : SHRI J.C. JAIN REVENUE BY : SHRI VIVEK AGGARWAL ITA NO. 12 55 /P U N/20 1 6 ITA NO. 2300 /PUN/201 6 LT. COL. PARSHOTTAM SINGH BINDER & ANR 2 / DATE OF HEARING : 13 .0 7 . 2017 / DATE OF PRONOUNCEMENT: 26 . 0 7 .201 7 / ORDER PER SUSHMA CHOWLA, J M : BOTH THE APPEALS FILED BY THE REVENUE RELATING TO DIFFERENT ASSESSEE ARE AGAINST SEPARATE ORDERS OF CIT (A) - I , PUNE , DATED 10.03.2016 & 19.07.2016 RE LATING TO ASSESSMENT YEAR 20 0 8 - 09 AGAINST RESPECTIVE ORDER S PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ISSUE ARISING IN B OTH T HE APPEALS RELATING TO DIFFERENT ASSESSEE IS IDENTICAL AND FOR THE SAKE OF C ONVENIENCE, WE PROCEED TO DECIDE BOTH THE APPEALS BY WAY OF THIS CONSOLIDATED ORDER. HOWEVER, REFERENCE IS BEING MADE TO THE FACTS AND ISSUE IN ITA NO.1255/PUN/2016 TO ADJUDICATE THE ISSUE. 3. THE REVENUE IN ITA NO. 12 55 /PUN/201 6 HAS RAISED THE FOLLOWING GROUND S OF APPEAL : - 1. THE ORDER OF THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) IS CONTRARY TO LAW AND ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.1,77,34,396/ - MADE UNDER THE HEAD INCOME FROM CAPITAL GAINS. 3. THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW IN NOT AP PRECIATING THE FACT THAT TRANSFER OF THE CAPITAL ASSET TOOK PLACE IN THE PREVIOUS YEAR AND THE INCOME IS DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR. IN THIS CASE THE ENTIRE CONSIDERATION ACCRUED ON TRANSFER OF CAPITAL ASSET IN ASSESSMENT YEAR 2008 - 09, EVEN THOUGH THE BALANCE PAYMENT OF CASH AND FLAT WAS TO BE RECEIVED IN DUE COURSE OF TIME. SECTION 48 OF THE ACT TAKES INTO CONSIDERATION THE FULL VALUE OF THE CONSIDERATION RECEIVED AS ACCRUING AS RESULT OF THE TRANSFER OF THE CAPITAL ASSET. IN THIS CA SE THE FULL VALUE OF CONSIDERATION HAS ACCRUED TO THE ASSESSEE IN THE ASSESSMENT YEAR 2008 - 09. ITA NO. 12 55 /P U N/20 1 6 ITA NO. 2300 /PUN/201 6 LT. COL. PARSHOTTAM SINGH BINDER & ANR 3 4. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE UNDER THE H E AD INCOME FROM CAPITAL GAINS AT RS. 1,77,34,396/ - . 5. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE HAD FILED THE RET URN OF INCOME DECLARING TOTAL INCOME OF RS.2,81,418/ - . THE ASSESSEE HAD DECLARED INCOME FROM SALARY. THE ASSESSING OFFICER RECORDED REASONS FOR REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT AS INFORMATION WAS RECEIVED THAT THE ASSESSEE WAS MEMBER OF M/S. DEFENCE SERVICES CO - OPERATIVE HOUSE BUILDING SOCIETY LTD., MOHALI (HEREINAFTER REFERRED TO AS SOCIETY) , WHICH WAS HAVING 27.03 ACRE OF LAND IN VILLAGE KANSAL, DIST. SAS NAGAR AND THE SOCIETY HAD ENTERED INTO A TRIPARTITE AGREEMENT WITH M/S. TATA H OUSING DEVELOPING CORPORATION LTD. ( HEREINAFTER REFERRED TO AS THDC ) AND M/S. HASH BUILDERS PVT. LTD. ( HEREINAFTER REFERRED TO AS HASH BUILDERS ) FOR SALE OF LAND TO THEM. THE MEMBERS OF THE SOCIETY IN LIEU OF, HAD TO GET CONSIDERATION IN CASH AS WELL AS IN KIND AS PER THEIR PLOT SIZE. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD RECEIVED RS.32 LAKHS AS HIS PROPERTY SHARE AND PROCEEDINGS WERE INITIATED HOLDING THE ASSESSEE TO BE LIABLE TO CAPITAL GAINS TAX. THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 OF THE ACT AND THEREAFTER, NOTICES UNDER SECTION 143(2) AND 142(1) OF THE ACT WERE ISSUED ALONG WITH QUESTIONNAIRE TO FURNISH THE REQUISITE INFORMATION. IN RESPONSE THERETO, THE ASSESSEE STATED THAT THE JOINT DEVELOPMENT AGREEMENT BETWEE N THE SOCIETY AND THDC AND HASH BUILDERS HAD BEEN TERMINATED. HOWEVER, NO PROOF TO SUBSTANTIATE THE SAME WAS FURNISHED BY THE ASSESSEE. THE ASSESSING OFFICER CALLED FOR INFORMATION FROM THE SOCIETY AND THDC AND HASH BUILDERS UNDER SECTION 133(6) OF THE A CT ITA NO. 12 55 /P U N/20 1 6 ITA NO. 2300 /PUN/201 6 LT. COL. PARSHOTTAM SINGH BINDER & ANR 4 WHETHER THE AGREEMENT FOR SALE HAD BEEN TERMINATED AND ALSO ASKED AS TO HOW MUCH PAYMENT WAS MADE TO THE MEMBERS. THE SOCIETY INFORMED THAT THE COPY OF TERMINATION NOTICE DATED 31.10.2011 WAS SENT TO THDC AND HASH BUILDERS , WHO IN TURN, VIDE LETTER DAT ED 26.02.2014 / 23.02.2014 INFORMED THAT THE AGREEMENT WAS NOT TERMINATED TILL DATE. THE ASSESSING OFFICER CONSIDERED THE FACTUAL ASPECTS OF THE CASE, WHEREIN THE ASSESSEE WAS THE MEMBER OF DEFENCE SERVICES CO - OPERATIVE HOUSE BUILDING SOCIETY AND OWNED 5 0 0 SQ.YDS. OF PLOT IN THE SAID SOCIETY, WHICH IN TURN, OWNED APPROXIMATELY 27.03 ACRE OF LAND IN VILLAGE KANSAL, DISTRICT MOHALI ADJACENT TO CHANDIGARH. THE ASSESSING OFFICER REFERRED TO THE TRIPARTITE JOINT DEVELOPMENT AGREEMENT DATED 27.04.2007 BETWEEN T HE SOCIETY, THDC AND HASH BUILDERS BY WHICH IT WAS AGREED UPON THAT THE SOCIETY, OWNER OF 27.03 ACRES OF LAND SHALL TRANSFER ITS LAND TO THDC, IN LIEU OF MONETARY CONSIDERATION AND ALSO CONSIDERATION IN KIND. AS PER THE AGREEMENT, THE ASSESSEE HAVING PLOT AREA OF 500 SQ. YDS. IN THE SOCIETY WAS TO RECEIVE RS.80 LAKHS AS MONETARY CONSIDERATION AND ONE FURNISHED FLAT ADMEASURING 2250 SQ.FT. TO BE CONSTRUCTED BY THDC. THE TOTAL MONETARY CONSIDERATION RECEIVABLE BY ALL THE INDIVIDUAL MEMBERS OF THE SOCIETY TA KEN TOGETHER WAS RSS.124.72 CRORES. THE ASSESSING OFFICER NOTED THAT IN ADDITION TO THE CONSIDERATION OF RS.80 LAKHS, THE TOTAL COST OF FURNISHED FLAT ADMEASURING 2250 SQ.FT. WOULD BE RS.1,01,25,000/ - . THUS, THE TOTAL CONSIDERATION ACCRUING TO THE ASSESS EE WAS RS.1,81,25,000/ - . THE ASSESSING OFFICER THEN REFERRED TO VARIOUS CLAUSES OF THE JOINT DEVELOPMENT AGREEMENT, COPY OF WHICH IS REPRODUCED AT PAGES 3 TO 9 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER FURTHER NOTES THAT THE ASSESSEE ALONG WITH OTHE R MEMBERS HAD FURNISHED ALLOTMENT LETTERS AND IN TURN, THEIR RIGHTS IN THE LAND IN LIEU OF ENTIRE CONSIDERATION. FURTHER, AS PER PARA 4.1 OF THE AGREEMENT, OWNER GRANTED AND ASSIGNED THE DEVELOPMENT RIGHTS IN THE PROPERTY IRREVOCABLY AND IN PERPETUITY TO ITA NO. 12 55 /P U N/20 1 6 ITA NO. 2300 /PUN/201 6 LT. COL. PARSHOTTAM SINGH BINDER & ANR 5 THE THDC TO DEVELOP THE PROPERTY AND FOR TRANSFER OF PROPERTY UPON THE SURRENDER OF ALLOTMENT RIGHTS BY THE MEMBERS VIDE RESOLUTION DATED 08.03.2007 AND 25.03.2007 . THE ASSESSING OFFICER AFTER CONSIDERING VARIOUS TERMS AGREED UPON CONCLUDED THAT THE MEMBE RS HAD FURNISHED THEIR ALLOTMENT RIGHTS AND THE SOCIETY ON BEHALF OF THE MEMBERS HAD ENTERED INTO A JOINT DEVELOPMENT AGREEMENT IN LIEU OF THE ENTIRE CONSIDERATION AS DESCRIBED IN THE JOINT DEVELOPMENT AGREEMENT. THE RECEIPT OF CONSIDERATION WAS STRUCTURE D AND THE ASSESSEE RECEIVED PART OF THE CONSIDERATION DURING THE FINANCIAL YEAR WHICH WAS NOT DEPENDENT ON WHOSE DEMARCATED LAND WAS REGISTERED. THE ASSESSING OFFICER HELD THAT AFTER SURRENDER OF THE ALLOTMENT RIGHTS, THE ENTIRE PROPERTY WAS TAKEN AS ONE AND PART OF ENTIRE CONSIDERATION WAS DISTRIBUTED AMONGST ALL THE MEMBERS AS PER THE PAYMENT SCHEDULE. HE WAS OF THE VIEW THAT THE ACTUAL DATE OF RECEIPT OF CONSIDERATION DOES NOT DECIDE THE YEAR OF TAXABILITY OF CAPITAL GAINS FOR THE FACT THAT AS PER SECT ION 45 OF THE ACT , ANY PROFITS UNDER THE HEAD CAPITAL GAINS SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE. HE THEN HELD THAT THE JOINT DEVELOPMENT AGREEMENT WAS IN FACT THE SALE AGREEMENT RESULTING INTO TRANSFER OF ASSETS, WHEREIN ALL THE FACTORS OF TRANSFER I.E. CONSIDERATION , SCHEDULE OF PAYMENT, RIGHTS AND LIABILITIES OF EACH OF THE THREE PARTIES AND TERMINATION, INDEMNITY AND ARBITRATION CLAUSES WERE VERY EXHAUSTIVELY MENTIONED IN THE SAID AGREEMENT. THE CAPI TAL GAIN WAS HELD TO HAVE ARISEN IN THE HANDS OF ASSESSEE IN VIEW OF SECTION 2(47)(II), 2(47)(V) AND 2 ( 47 ) (VI) OF THE ACT. HE ALSO REFERRED TO CLAUSES 2.1 OF THE SAID AGREEMENT, WHEREIN THE OWNER HAD HANDED OVER ORIGINAL TITLE DEEDS OF THE PROPERTY AND HA D ALSO HANDED OVER THE PHYSICAL, VACANT POSSESSION OF THE PROPERTY TO THDC , SIMULTANEOUSLY TO THE EXECUTION AND REGISTRATION OF THE AGREEMENT TO DEVELOP THE SAME. THE ASSESSING OFFICER THUS, HELD THAT THE CASE OF ASSESSEE WAS COVERED UNDER SECTION 2(47)(V ) OF THE ACT. HE ALSO HELD ITA NO. 12 55 /P U N/20 1 6 ITA NO. 2300 /PUN/201 6 LT. COL. PARSHOTTAM SINGH BINDER & ANR 6 THAT THE AMOUNTS RECEIVED UNDER THE SAID AGREEMENT COULD NOT BE TREATED AS ADVANCE RECEIVED AND IN ACTUAL WAS THE SALE CONSIDERATION. THE ASSESSING OFFICER FURTHER WAS OF THE VIEW THAT THE VALUE OF FLAT WAS TO BE TAKEN AS PART OF THE FULL VALUE OF THE CONSIDERATION FOR COMPUTING THE CAPITAL GAINS. THE ASSESSING OFFICER THUS, TOOK THE FULL VALUE OF CONSIDERATION AT RS.1,81,25,000/ - AND COMPUTED THE INCOME FROM CAPITAL GAINS IN THE HANDS OF ASSESSEE AT RS. 1,77,34,396/ - . 6. THE C IT(A) CONSIDERED THE PLEA OF ASSESSEE THAT THE JOINT DEVELOPMENT AGREEMENT BETWEEN THE SOCIETY, THDC AND HASH BUILDERS STOOD TERMINATED AND FURTHER THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF SHRI C.S. ATWAL VS. CIT AND OTHERS IN ITA NO.200 O F 2013 (O&M) DECIDED THE ISSUE ON 22.07.2015 IN FAVOUR OF ASSESSEE AND HELD THAT NO CAPITAL GAIN WAS REQUIRED TO PAID IN RESPECT OF REMAINING LAND. THE CIT(A) FURTHER INFORMED THE ASSESSING OFFICER THAT THE ONLY ISSUE TO BE CONSIDERED WAS TAXABILITY OF RS .32 LAKHS RECEIVED BY THE ASSESSEE. THE ASSESSING OFFICER IN THE REPORT DID NOT COMMENT OTHERWISE ON THE SAID ISSUE. THE CIT(A) THUS, HELD THAT SUM OF RS. 32 LAKHS RECEIVED BY THE ASSESSEE WAS TO BE CONSIDERED AS CONSIDERATION IN RESPECT OF ITS RIGHT IN T HE PLOT AND SUBJECT TO CAPITAL GAINS. THE CIT(A) ALSO DIRECTED IN CASE ANY AMOUNT WAS RECEIVED FURTHER, THE ASSESSING OFFICER WOULD BE FREE TO CHARGE THE CAPITAL GAINS AT THAT POINT OF TIME AS PER THE HONBLE HIGH COURTS ORDER. 7. THE NEXT PLEA OF THE ASSESSEE BEFORE THE CIT(A) WAS THAT THE ASSESSING OFFICER HAD NOT ALLOWED THE BENEFIT OF SECTION 54F OF THE ACT, WHEREIN HE HAD PAID RS.32 LAKSH TO M/S. RAHEJA DEVELOPERS PVT. LTD. THE CIT(A) DIRECTED THE ASSESSING OFFICER TO CALCULATE LONG TERM CAPITAL GAINS, IF ANY, AFTER CONSIDERING ITA NO. 12 55 /P U N/20 1 6 ITA NO. 2300 /PUN/201 6 LT. COL. PARSHOTTAM SINGH BINDER & ANR 7 THE SALE CONSIDERATION OF RS.32 LAKHS RECEIVED IN RESPECT OF PLOT IN THE SOCIETY AND AFTER ALLOWING THE DEDUCTION UNDER SECTION 54 OF THE ACT ON ACCOUNT OF INVESTMENT OF RS. 32 LAKHS IN FLAT NO.401, RAHEJA ATHARVA, SECTOR 10 9, GURGAON, WHICH WAS PAID ON 11.02.2008 TO M/S. RAHEJA DEVELOPERS PVT. LTD. THE CIT(A) DELETED THE ADDITION OF RS.1,77,34,396/ - , AGAINST WHICH THE REVENUE IS IN APPEAL. 8. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDER OF HONBLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF SHRI C.S. ATWAL VS. CIT (SUPRA) . HE POINTED OUT THAT THE OTHER OWNERS OF PLOT OF LAND, WHO HAD ALSO ENTERED INTO TRIPARTI TE AGREEMENT WITH THDC AND HASH BUILDERS . HE FILED ON RECORD THE COPY OF ORDER OF HONBLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF SHRI C.S. ATWAL VS. CIT (SUPRA). HE FURTHER POINTED OUT THAT EVEN IN THE CASE OF CO - OPERATIVE HOUSE BUILDING SOCIETY, THE ISSUES HAVE BEEN DECIDED BY THE HONBLE HIGH COURT OF PUNJAB & HARYANA AND IN THIS REGARD, HE PLACED RELIANCE ON THE DECISION OF HONBLE HIGH COURT OF PUNJAB AND HARYANA IN PUNJABI CO - OPERATIVE HOUSE BUILDING SOCIETY VS. CIT & ANR (2016) 386 ITR 116 (P &H) . 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE RELIED ON THE ORDER OF ASSESSING OFFICER. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST ASSESSABILITY OF INCOME FROM LON G TERM CAPITAL GAINS IN THE HANDS OF ASSESSEE. THE ASSESSEE WAS MEMBER OF M/S. DEFENCE SERVICES CO - OPERATIVE HOUSE BUILDING SOCIETY LTD., MOHALI, WHEREIN ITA NO. 12 55 /P U N/20 1 6 ITA NO. 2300 /PUN/201 6 LT. COL. PARSHOTTAM SINGH BINDER & ANR 8 HE HAD PLOT OF LAND OF 500 SQ.YDS. THE SAID SOCIETY ENTERED INTO A TRIPARTITE AGREEMENT WITH THDC AN D HASH BUILDERS FOR SALE OF LAND TO THEM. AS AGAINST THE SALE CONSIDERATION, THE ASSESSEE WAS TO RECEIVE CONSIDERATION IN CASH AND ALSO IN KIND. THE ASSESSEE WAS ENTITLED TO RECEIVE RS.80 LAKHS AND ALSO FLAT OF 2250 SQ.FT. AND THE ASSESSING OFFICER COMPU TED THE VALUE OF SAID FLAT AT RS. 1,01,25,000/ - AND HENCE, COMPUTED FULL CONSIDERATION ACCRUING TO THE ASSESSEE AT RS.1,81,25,000/ - . THE CASE OF ASSESSEE WAS THAT BECAUSE OF CERTAIN ISSUES, THE JOINT DEVELOPMENT AGREEMENT BETWEEN THE SOCIETY, THDC AND HASH BUILDERS WAS TERMINATED. THE ASSESSING OFFICER CALLED FOR INFORMATION UNDER SECTION 133(6) OF THE ACT AND BOTH THE THDC AND HASH BUILDERS VIDE SEPARATE LETTERS INTIMATED THAT THE JOINT DEVELOPMENT AGREEMENT WAS NOT CANCELLED. THE ASSESSING OFFICER IN VI EW OF THE CLAUSES OF JOINT DEVELOPMENT AGREEMENT CONCLUDED THAT THE ASSESSEE THOUGH HAD RECEIVED PART CONSIDERATION BUT IN VIEW OF PROVISIONS OF SECTION 2(47)(V) OF THE ACT, THE CAPITAL GAINS ARISING ON THE SALE OF LAND BY THE ASSESSEE BY WAY OF SURRENDER TO THE SOCIETY AND IN TURN, THE SOCIETY ENTERING INTO TRIPARTITE AGREEMENT, AROSE IN THE INSTANT ASSESSMENT YEAR. HE REFERRED TO VARIOUS CLAUSES OF THE AGREEMENT AND CONCLUDED SO. IT MAY BE POINTED OUT HEREIN ITSELF THAT SIMILAR TRANSACTION OF ENTERING I NTO JOINT DEVELOPMENT AGREEMENT WITH THDC AND HASH BUILDERS WAS UNDERTAKEN BY VARIOUS PERSONS WHO OWNED PLOTS OF LAND AND BY SEVERAL HOUSE BUILDING SOCIETIES WHO OWNED PIECES OF LAND. THE SAID DISPUTE OF ASSESSABILITY OF CAPITAL GAINS IN THE HANDS OF ASSE SSEE IN THE YEAR UNDER CONSIDERATION I.E. IN THE YEAR WHEN PARTIAL CONSIDERATION WAS RECEIVED AND THE AGREEMENT WAS ENTERED INTO BY WHICH, AS PER THE ASSESSING OFFICER, WHEN THE POSSESSION WAS HANDED OVER , THE TRANSFER IS DEEMED TO HAVE TAKEN PLACE UNDER S ECTION 2(47)(V) OF THE ACT, WAS DECIDED BY THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN BUNCH OF APPEALS. ITA NO. 12 55 /P U N/20 1 6 ITA NO. 2300 /PUN/201 6 LT. COL. PARSHOTTAM SINGH BINDER & ANR 9 11. T HE HONBLE HIGH COURT OF PUNJAB & HARYANA IN C.S. ATWAL VS. CIT IN ITA NO.200 OF 2013 (O&M), JUDGMENT DATED 22.07.2015 O N SIMILAR FACTS AND ISSU E AS IN THE CASE OF ASSESSEE HAD DECIDED THE APPEALS. THE HONBLE HIGH COURT HAD REFERRED TO THE FACTS OF THE CASE THAT THERE WAS AN AGREEMENT TO SELL PIECE OF LAND FOR DEVELOPMENT, UNDER WHICH THE SALE CONSIDERATION WAS TO BE PAID IN PARTS AND BESIDE PAR T CASH CONSIDERATION, THE SELLERS WERE ENTITLED TO RECEIVE A FLAT IN THE BUILDING PROPOSED TO BE CONSTRUCTED ON THE SAID PROJECT ITSELF. HOWEVER, BECAUSE OF CERTAIN CLEARANCE NOT BEING GRANTED BY THE STATE AUTHORITIES AND BECAUSE OF INTERVENTION OF THE HO NBLE HIGH COURT OF PUNJAB & HARYANA IN THE DEVELOPMENT OF SAID PROJECT, THE PROJECT WAS SHEL V ED AND THE ASSESSEE HAD NOT RECEIVED BALANCE PART CONSIDERATION NOR THE ASSESSEE HAD RECEIVED THE FLAT IN THE SAID PROJECT. THE PLEA OF ASSESSEE WAS THAT IN VIEW OF VARIOUS OBSTACLES, THE ASSESSEE WAS NOT IN A POSITION TO RECEIVE PART CASH CONSIDERATION AND CONSIDERATION IN THE FORM OF FLAT AND BECAUSE OF THE CIRCUMSTANCES, THE ASSESSEE PLEADED THAT IT COULD NOT BE HELD LIABLE TO PAY THE CAPITAL GAINS ON THE COMPL ETE CONSIDERATION AGREED UPON BETWEEN THE PARTIES. THE ASSESSEE IN THE INDIVIDUAL CASES HAD ALREADY OFFERED CAPITAL GAINS TAX ON THE AMOUNT IT HAD RECEIVED IN THE RESPECTIVE YEARS ON TRANSFER OF PORTION OF LAND. THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN C.S. ATWAL VS. CIT (SUPRA) CONSIDERED THAT THE FOLLOWING ISSUES EMERGED FOR CONSIDERATION AND ADJUDICATION: - 9. THE FOLLOWING ISSUES EMERGE FOR CONSIDERATION AND ADJUDICATION: - (I) SCOPE AND LEGISLATIVE INTENT OF SECTION 2(47)(II), (V) AND (VI) OF TH E ACT; (II) THE ESSENTIAL INGREDIENTS FOR APPLICABILITY OF SECTION 53A OF 1882 ACT; (III) MEANING TO BE ASSIGNED TO THE TERM POSSESSION? (IV) WHETHER IN THE FACTS AND CIRCUMSTANCES, ANY TAXABLE CAPITAL GAINS ARISES FROM THE TRANSACTION ENTERED BY THE ASSESSEE? ITA NO. 12 55 /P U N/20 1 6 ITA NO. 2300 /PUN/201 6 LT. COL. PARSHOTTAM SINGH BINDER & ANR 10 12. THE HONBLE HIGH COURT OF PUNJAB & HARYANA TOOK INTO CO NSIDERATION THE DEFINITION OF TRANSFER UNDER SECTION 2(47) OF THE ACT WITH SPECIAL REFERENCE TO PROVISIONS OF CLAUSE (V) AND (VI) INTRODUCED BY THE FINANCE ACT, 1987 W.E.F. 01.04.1988 AND ALSO NOTED THE DECISIONS OF VARIOUS HONBLE HIGH COURTS AND ALSO HONBLE BOMBAY HIGH COURT IN CHATURBHUJ DWARKADAS KAPADIA VS. CIT (2003) 260 ITR 491 (BOM) AND HELD AS UNDER: - 17. ADVERTING TO CLAUSE (VI) OF SECTION 2(47) OF THE ACT, IT MAY BE NOTICE D THAT THE SCOPE AND AMBIT OF THIS CLAUSE AS EXPLAINED BY CBDT IN ITS CIRCULAR NO.495 DATED 23.9.1987 HAS ALREADY BEEN REPRODUCED ABOVE. ON PERUSAL OF THIS CLAUSE, IT WOULD BE CLEAR THAT IT WAS INTENDED TO COVER THOSE CASES OF TRANSFER OF OWNERSHIP WHERE T HE PROSPECTIVE BUYER BECOMES OWNER OF THE PROPERTY BY BECOMING A MEMBER OF A COMPANY, COOPERATIVE SOCIETY ETC. IN THE PRESENT CASE, JDA WAS EXECUTED BETWEEN THE SOCIETY AND THE DEVELOPERS AND THERE WAS NO TRANSACTION INVOLVING THE DEVELOPER BECOMING MEMBER OF A COOPERATIVE SOCIETY/COMPANY ETC. IN TERMS OF SECTION 2(47) (VI) OF THE ACT. THE SURRENDER OF RIGHT TO OBTAIN PLOT BY THE MEMBERS WAS FOR FACILITATING THE SOCIETY TO ENTER INTO THE JDA WITH THE DEVELOPERS. THERE WAS NO CHANGE IN THE MEMBERSHIP OF THE SOCIETY AS CONTEMPLATED UNDER SECTION 2 (47)(VI) OF THE ACT. EQUALLY CLAUSE (II) OF SECTION 2(47) OF THE ACT HAS NO APPLICABILITY IN AS MUCH AS THERE WAS NO EXTINGUISHMENT OF ANY RIGHTS OF THE ASSESSEE IN THE CAPITAL ASSET AT THE TIME OF EXECUTION OF JDA I N THE ABSENCE OF ANY REGISTERED CONVEYANCE DEED IN FAVOUR OF THE TRANSFEREE IN VIEW OF JUDGMENTS IN ALAPATI VENKATARAMIAH VS. CIT, (1965) 57 ITR 185 (SC) AND ADDITIONAL CIT VS. MERCURY GENERAL CORPORATION (P) LIMITED, (1982) 133 ITR 525 (DELHI). 1 3. IN R ESPECT OF INGREDIENTS FOR APPLICABILITY OF SECTION 53A OF TP ACT, THE SAID PROVISIONS WERE ANALYZED BY THE HONBLE HIGH COURT AND REFERENCE WAS MADE TO VARIOUS DECISIONS AND IT WAS HELD AS UNDER: - 24 THUS, IT WOULD MEAN THAT SECTION 53A OF 1882 ACT HAS BEEN BODILY TRANSPOSED INTO SECTION 2(47)(V) OF THE ACT AND THE EFFECT OF IT WOULD BE THAT SECTION 53A OF 1882 ACT SHALL BE TAKEN TO BE AN INTEGRAL PART OF SECTION 2 (47)(V) OF THE ACT. IN OTHER WORDS, THE LEGAL REQUIREMENTS OF SECTION 53A OF 1882 ACT ARE REQUIRED TO BE FULFILLED SO AS TO ATTRACT THE PROVISIONS OF SECTION 2(47)(V) OF THE ACT. 1 4. THEREAFTER, THE HONBLE HIGH COURT CONSIDERED THE QUESTION OF POSSESSION WHICH WAS ONE OF THE ESSENTIAL CONDITIONS FOR ENFORCEABILITY OF SECTION 53A OF THE TP A CT AND ALSO REFERRED TO THE JUDGMENT DELIVERED BY THE AUTHORITY FOR ADVANCE RULING (AAR) IN RE JASBIR SINGH SARKARIA (2007) 294 ITR 196 (AAR) AND TOOK NOTE OF VARIOUS CLAUSES OF AGREEMENT BETWEEN THE PARTIES ITA NO. 12 55 /P U N/20 1 6 ITA NO. 2300 /PUN/201 6 LT. COL. PARSHOTTAM SINGH BINDER & ANR 11 AND ALSO THE CALUSES OF IRREVOCABLE POWER OF ATT ORNEY ISSUED AND IT WAS THE CASE OF REVENUE BEFORE THE HONBLE HIGH COURT THAT WHERE THE DEVELOPMENT AGREEMENT HAS BEEN EXECUTED FOLLOWED BY REGISTERED SPECIAL POWER OF ATTORNEY AND WHEN READ TOGETHER, SUPPORTED THE VIEW THAT THE PROVISIONS OF SECTION 53A OF THE TP ACT STOOD FULFILLED AND AS A NECESSARY COROLLARY TRANSACTION WAS EXIGIBLE TO CAPITAL GAINS TAX UNDER SECTION 2(47)(V) R.W.S. 45 OF THE ACT IN THE HANDS OF ASSESSEE. AFTER REFERRING TO VARIOUS CLAUSES OF THE AGREEMENT UNDER PARAS 39 TO 42 AND THE HONBLE HIGH COURT CONCLUDED AS UNDER: - 43. IN VIEW OF PRECEDING ANALYSIS, IT IS REITERATED THAT FROM THE CUMULATIVE EFFECT OF COVENANTS CONTAINED IN JDA DATED 25.2.2007 READ WITH REGISTERED SPECIAL POWER OF ATTORNEY DATED 26.2.2007, IT CANNOT BE HELD TH AT THE MANDATORY REQUIREMENTS OF SECTION 53A OF 1882 ACT WERE COMPLIED WITH WHICH STOOD INCORPORATED IN SECTION 2(47) (V) OF THE ACT. ONCE THAT WAS SO, IT COULD NOT BE SAID THAT THE ASSESSEE - APPELLANTS WERE LIABLE TO CAPITAL GAINS TAX IN RESPECT OF REMAINI NG LAND WHICH WAS NOT TRANSFERRED BY THEM TO THE DEVELOPER/BUILDER BECAUSE OF SUPERVENING EVENT NOT ON ACCOUNT OF ANY VOLITION ON THEIR PART. 44. VIEWED FROM ANOTHER ANGLE, IT CANNOT BE SAID THAT ANY INCOME CHARGEABLE TO CAPITAL GAINS TAX IN RESPECT OF RE MAINING LAND HAD ACCRUED OR ARISEN TO THE APPELLANT - ASSESSEE IN THE FACTS OF THE CASE. CONSIDERING THE ISSUE OF TAXABILITY OF INCOME WITH REGARD TO ITS ACCRUAL OR RECEIPT AS THE BASIS FOR CHARGING INCOME TAX, THE APEX COURT IN COMMISSIONER OF INCOME TAX, B OMBAY CITY VS. MESSRS SHOORJI VALLABHDAS & CO. (1962) 46 ITR 144 (SC) OBSERVED THAT INCOME TAX IS A LEVY ON INCOME AND WHERE NO INCOME RESULTS EITHER UNDER ACCRUAL SYSTEM OR ON THE BASIS OF RECEIPT, NO INCOME TAX IS EXIGIBLE. THE RELEVANT OBSERVATIONS READ THUS: - INCOME TAX IS A LEVY ON INCOME. NO DOUBT, THE INCOME - TAX ACT TAKES INTO ACCOUNT TWO POINTS OF TIME AT WHICH THE LIABILITY TO TAX IS ATTRACTED, VIZ., THE ACCRUAL OF THE INCOME OR ITS RECEIPT; BUT THE SUBSTANCE OF THE MATTER IS THE INCOME, IF INCOM E DOES NOT RESULT AT ALL, THERE CANNOT BE A TAX, EVEN TOUGH IN BOOKKEEPING, AN ENTRY IS MADE ABOUT A ' HYPOTHETICAL INCOME ' WHICH DOES NOT MATERIALIZE. WHERE INCOME HAS, IN FACT, BEEN RECEIVED AND IS SUBSEQUENTLY GIVEN UP IN SUCH CIRCUMSTANCES THAT IT REM AINS THE INCOME OF THE RECIPIENT, EVEN THOUGH GIVEN UP, THE TAX MAY BE PAYABLE. WHERE, HOWEVER, THE INCOME CAN BE SAID NOT TO HAVE RESULTED AT ALL, THERE IS OBVIOUSLY NEITHER ACCRUAL NOR RECEIPT OF INCOME, EVEN THOUGH AN ENTRY TO THAT, EFFECT MIGHT, INCINE RATION CIRCUMSTANCES, HAVE BEEN MADE IN THE BOOKS OF ACCOUNT. THIS PRONOUNCEMENT WAS APPLIED BY THE SUPREME COURT IN GODHRA ELECTRICITY CO. LIMITED VS. CIT, (1997) 225 ITR 746 (SC) AND FOLLOWED BY THE CALCUTTA HIGH COURT IN CIT VS. BALARAMPUR COMMERCIAL ENTERPRISES LIMITED, (2003) 262 ITR 439 (CAL.). ITA NO. 12 55 /P U N/20 1 6 ITA NO. 2300 /PUN/201 6 LT. COL. PARSHOTTAM SINGH BINDER & ANR 12 1 5. THE CONCLUSION OF THE HONBLE HIGH COURT THUS, WAS AS UNDER: - 46. WE SUMMARIZE OUR CONCLUSIONS AS UNDER: - 1 . PERUSAL OF THE JDA DATED 25.2.2007 READ WITH SALE DEEDS DATED 2.3.007 AND 25.4.2007 IN RESPE CT OF 3.08 ACRES AND 4.62 ACRES RESPECTIVELY WOULD REVEAL THAT THE PARTIES HAD AGREED FOR PRO - RATA TRANSFER OF LAND. 2 . NO POSSESSION HAD BEEN GIVEN BY THE TRANSFEROR TO THE TRANSFEREE OF THE ENTIRE LAND IN PART PERFORMANCE OF JDA DATED 25.2.2007 SO AS TO FA LL WITHIN THE DOMAIN OF SECTION 53A OF 1882 ACT. 3 . THE POSSESSION DELIVERED, IF AT ALL, WAS AS A LICENCEE FOR THE DEVELOPMENT OF THE PROPERTY AND NOT IN THE CAPACITY OF A TRANSFEREE. 4 . FURTHER SECTION 53A OF 1882 ACT, BY INCORPORATION, STOOD EMBODIED IN SECT ION 2(47)(V) OF THE ACT AND ALL THE ESSENTIAL INGREDIENTS OF SECTION 53A OF 1882 ACT WERE REQUIRED TO BE FULFILLED. IN THE ABSENCE OF REGISTRATION OF JDA DATED 25.2.2007 HAVING BEEN EXECUTED AFTER 24.9.2001, THE AGREEMENT DOES NOT FALL UNDER SECTION 53A OF 1882 ACT AND CONSEQUENTLY SECTION 2(47)(V) OF THE ACT DOES NOT APPLY. 5 . IT WAS SUBMITTED BY LEARNED COUNSEL FOR THE ASSESSEE APPELLANT THAT WHATEVER AMOUNT WAS RECEIVED FROM THE DEVELOPER, CAPITAL GAINS TAX HAS ALREADY BEEN PAID ON THAT AND SALE DEEDS HAVE ALSO BEEN EXECUTED. IN VIEW OF CANCELLATION OF JDA DATED 25.2.2007, NO FURTHER AMOUNT HAS BEEN RECEIVED AND NO ACTION THEREON HAS BEEN TAKEN. IT WAS URGED THAT AS AND WHEN ANY AMOUNT IS RECEIVED, CAPITAL GAINS TAX SHALL BE DISCHARGED THEREON IN ACCORDANCE WITH LAW. IN VIEW OF THE AFORESAID STAND, WHILE DISPOSING OF THE APPEALS, WE OBSERVE THAT THE ASSESSEE APPELLANTS SHALL REMAIN BOUND BY THEIR SAID STAND. 6 . THE ISSUE OF EXIGIBILITY TO CAPITAL GAINS TAX HAVING BEEN DECIDED IN FAVOUR OF THE ASSESSEE, THE QUE STION OF EXEMPTION UNDER SECTION 54F OF THE ACT WOULD NOT SURVIVE ANY LONGER AND HAS BEEN RENDERED ACADEMIC. 7 . THE TRIBUNAL AND THE AUTHORITIES BELOW WERE NOT RIGHT IN HOLDING THE ASSESSEE - APPELLANT TO BE LIABLE TO CAPITAL GAINS TAX IN RESPECT OF REMAINING LAND MEASURING 13.5 ACRES FOR WHICH NO CONSIDERATION HAD BEEN RECEIVED AND WHICH STOOD CANCELLED AND INCAPABLE OF PERFORMANCE AT PRESENT DUE TO VARIOUS ORDERS PASSED BY THE SUPREME COURT AND THE HIGH COURT IN PILS. THEREFORE, THE APPEALS ARE ALLOWED. 16. THE FACTS AND ISSUE ARISING IN THE PRESENT APPEAL BEFORE US ARE IDENTICAL TO THE FACTS AND ISSUE BEFORE THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN C.S. ATWAL VS. CIT (SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT THE CAPITAL GAINS ON SALE OF LAND BY THE ASSESSEE ARISES IN THE PRESENT YEAR ITA NO. 12 55 /P U N/20 1 6 ITA NO. 2300 /PUN/201 6 LT. COL. PARSHOTTAM SINGH BINDER & ANR 13 ONLY TO THE EXTENT OF RS.32 LAKHS RECEIVED BY THE ASSESSEE. THUS, WE UPHOLD THE ORDER OF CIT(A) IN HOLDING THAT SUM OF RS.32 LAKHS IS TO BE CONSIDERED AS CONSIDERATION IN PLACE OF RS.1.81 CRORES IN R ESPECT OF RIGHTS IN THE SAID PLOTS WHICH ARE TO BE SUBJECT TO ASSESSABILITY AS INCOME FROM CAPITAL GAINS. AS AGAINST THE SAID CAPITAL GAINS, THE ASSESSEE HAD CLAIMED DEDUCTION ON ACCOUNT OF FLAT PURCHASED IN M/S. RAHEJA DEVELOPERS PVT. LTD. THE ASSESSEE CLAIMS TO HAVE PAID RS.32 LAKHS TO M/S. RAHEJA DEVELOPERS PVT. LTD., HENCE, THE ASSESSEE IS ENTITLED TO CLAIM THE SAID BENEFIT UNDER SECTION 54F OF THE ACT. 17. BEFORE PARTING, WE MAY ALSO REFER TO THE DECISION OF THE HONBLE HIGH COURT OF PUNJAB & HARYAN A IN THE CASE OF PUNJABI CO - OPERATIVE HOUSE BUILDING SOCIETY VS. CIT & ANR (SUPRA) , WHEREIN IT WAS ALSO HELD THAT SINCE NO POSSESSION HAD BEEN GIVEN BY THE ASSESSEE TO THE TRANSFEREE OF THE ENTIRE LAND IN PART PERFORMANCE OF THE JOINT DEVELOPMENT AGREEMENT AND WHERE THE POSSESSION DELIVERED, IF ANY, AS A LICENCEE FOR DEVELOPMENT OF THE PROPERTY AND NOT IN THE CAPACITY OF TRANSFEREE, THEN THE TRANSACTION DID NOT FALL WITH THE AMBIT OF SECTION 53A OF THE T.P. ACT, 1882 AND CONSEQUENTLY, SECTION 2(47)(V) OF TH E ACT DID NOT APPLY. THE PARTIES THEREIN HAD URGED THAT AS AND WHEN ANY LAND WOULD BE RECEIVED, THEN CAPITAL GAINS TAX WOULD BE DISCHARGED THEREUPON. THE HONBLE HIGH COURT HELD THAT THE ASSESSEE SHOULD REMAIN BOUND BY ITS STAND. FOLLOWING THE SAME PARI TY OF REASONING, WE HOLD THAT IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE IS LIABLE TO PAY CAPITAL GAINS TAX , IF ANY, ON SALE CONSIDERATION OF RS.32 LAKHS AND IN CASE ANY OTHER AMOUNT IS RECEIVED IN SUBSEQUENT YEARS, THEN AS IN THE CASE OF OTHER CO - OPERA TIVE HOUSE BUILDING SOCIETIES, THE ASSESSEE HEREIN ALSO WOULD BE BOUND TO PAY THE CAPITAL GAINS IN THE YEAR OF RECEIVING OF ANY OTHER CONSIDERATION. ACCORDINGLY, WE HOLD SO. THUS, THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. ITA NO. 12 55 /P U N/20 1 6 ITA NO. 2300 /PUN/201 6 LT. COL. PARSHOTTAM SINGH BINDER & ANR 14 18. THE FACTS AND ISSUE IN ITA NO.2300/PUN/2016 ARE IDENTICAL TO THE FACTS AND ISSUE IN ITA NO.1255/PUN/2016 AND OUR DECISION IN ITA NO.1255/PUN/2016 SHALL APPLY MUTATIS MUTANDIS TO ITA NO.2300/PUN/2016. 1 9 . IN THE RESULT, BOTH THE APPEALS OF REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THIS 26 TH DAY OF JU LY , 201 7 . SD/ - SD/ - (ANIL CHATURVEDI ) (SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; D ATED : 26 TH JU LY , 201 7 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - I , PUNE ; 4. / THE PR. CIT - I , PUNE ; 5. , , / DR B , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETAR Y , / ITAT, PUNE