Smt. P. Prathima Reddy, Hyderabad V. The ITO, Ward 6(4), Hyderabad

ITA 1393/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66245 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 10-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 04-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS
• Assessee Lawyers: V SIVA KUMAR
• Keywords: Capital asset; Advance ruling; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1393/HYD/2010 ASSESSMENT YEAR 2007-08 SMT. P. PRATHIMA REDDY HYDERABAD PAN: AAMPY0337N VS. INCOME TAX OFFICER WARD-6(4) HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI V. SIVA KUMAR RESPONDENT BY: SMT. NIVEDITA BISWAS DATE OF HEARING: 30.08.2012 DATE OF PRONOUNCEMENT: 14.09.2012 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-IV, HYDERABAD DATED 9.8.2010 FOR ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS AGAINST LAW, WEIGHT OF EVIDENCE AN D PROBABILITIES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING ASSESSMENT OF CAPITAL GAIN FOR ASST. YEAR 2007-08 IN THE CASE OF THE APPELLANT. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE PROVISIONS OF SEC. 2(47)( V) ARE APPLICABLE IN THE CASE OF THE APPELLANT WHEREAS DEEMED TRANSFER AS CONTEMPLATED IN THE SAID PROVISION APPLIES ONLY TO CASES WHERE POSSESSION IS GIVEN IN CONNECTION WITH A CONTRACT TO TRANSFER FOR CONSIDERATION AS CONTEMPLATED UNDER SECTION 53A OF TRANSFER OF PROPERTY ACT AND NOT OTHERWISE. 4. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) OUGHT TO HAVE NOTED THAT ON A PROPER APPRECIATION O F THE TERMS OF THE JOINT DEVELOPMENT AGREEMENT OR THE SUPPLEMENTARY AGREEMENT, NO EVENT RESULTING IN I.T.A. NO. 1393/HYD/2010 SMT. P. PRATHIMA REDDY ===================== 2 TRANSFER OF PROPERTY TOOK PLACE IN THE PREVIOUS YEA R RELEVANT TO ASST. YEAR 2007-08 AND CONSEQUENTLY HE OUGHT TO HAVE DELETED THE CAPITAL GAINS ASSESSED IN THE IMPUGNED ORDER. 5. HE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) GROSSLY ERRED IN SUSTAINING THE ASSESSMENT OF CAPIT AL GAINS INCOME ON UNSUSTAINABLE FINDINGS OF FACT AND LAW WHICH ARE ALSO DIAGONALLY OPPOSITE WITH THE AO'S FINDINGS - THE AO HOLDING THAT THE FIRST STAGE OF CA PITAL GAINS AROSE BECAUSE THE BUILDER HANDED OVER POSSESSION OF SEVEN FLATS AND THE CIT(A) HOLDING TH AT POSSESSION OF FLATS WAS NOT TAKEN BY ASSESSEE AND Y ET SUSTAINING ASSESSMENT HOLDING THAT POSSESSION OF LA ND WAS GIVEN BY THE ASSESSEE. 6. WITHOUT PREJUDICE TO THE GROUNDS RAISED ABOVE, HAVING HELD THAT CAPITAL GAINS IS ASSESSABLE IN AY 2007-08, THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE COST OF CONSTRUCTION AT RS. 925/- PER SQ. FT DETERMINED ARBITRARILY BY THE ASSESSING OFFICER. 7. WITHOUT PREJUDICE TO THE GROUNDS RAISED ABOVE, THE LEARNED CIT(A), HAVING HELD THAT CAPITAL GAIN IS ASSESSABLE IN AY 2007-08, OUGHT TO HAVE DIRECTED ALLOWANCE OF THE SUM OF RS. 5,00,000/- PAID, THROUG H DD NO. 754761 DATED 3-9-04 DRAWN ON VIJAYA BANK BANGALORE, BY THE APPELLANT TO THE SELLER AT THE TI ME OF PURCHASE OF THE LAND TOWARDS BORE WELL, GATE WITH COMPOUND WALL ETC. 8. WITHOUT PREJUDICE TO THE GROUNDS RAISED ABOVE, THE LEARNED CIT(A), HAVING HELD THAT CAPITAL GAIN IS ASSESSABLE IN AY 2007-08, OUGHT TO HAVE DIRECTED ALLOWANCE OF THE SUM OF RS. 1,61,300/- INCURRED BY THE APPELLANT AS DEVELOPMENT CHARGES FOR MAKING PAYMENT TO LABOURERS TOWARDS CUTTING OF TREES, SHRUBS, BUSHES AND LEVELLING OF LAND PURCHASED BY HER. 9. FOR THE ABOVE GROUNDS AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT THE APPEAL BE ALLOWED. THE APPELLANT CRAVES LEAVE TO AD TO, AMEND OR MODIFY THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF THE APPEAL, IF IT IS CONSIDERED NECESSAR Y. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS P URCHASED PLOT OF LAND ADMEASURING 4848 SQUARE FEET (SFT) SFT ON 3.9. 2004 FOR A CONSIDERATION OF RS. 18,34,075. THE PROPERTY WAS G IVEN FOR JOINT I.T.A. NO. 1393/HYD/2010 SMT. P. PRATHIMA REDDY ===================== 3 DEVELOPMENT FOR CONSTRUCTION OF RESIDENTIAL FLATS T O ONE MR. C. JANARDHANA REDDY VIDE JOINT DEVELOPMENT AGREEMENT ( JDA) DATED 21.12.2005. LATER SUPPLEMENTARY AGREEMENT WAS ALS O ENTERED BETWEEN THESE TWO PARTIES ON 3.4.2006 AS PER WHICH ASSESSEE 'S SHARE WORKED OUT TO 7 FLATS IN LIEU OF TRANSFER OF 57% UNDIVIDED RIG HT OVER THE LAND. THE LOWER AUTHORITIES WERE OF THE OPINION THAT THE ASSE SSEE'S RIGHT TO RECEIVE CONSIDERATION WAS DETERMINED BY SUPPLEMENTARY AGREE MENHT DATED 3.4.2006 AND IN VIEW OF THE ORDER OF THE TRIBUNAL, CHENNAI BENCH IN THE CASE OF R. KALANIDHI VS. ITO (122 TTJ 405) IT WAS H ELD THAT THE ASSESSEE IS LIABLE FOR TAX ON CAPITAL GAIN IN THE ASSESSMENT YEAR 2007-08. AGAINST THIS FINDING OF THE LOWER AUTHORITIES, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE ASSESSEE ALSO HAS A GRIEVANCE WITH REGARD TO NO N ALLOWING DEDUCTION TOWARDS PAYMENT OF RS. 5 LAKHS BY DD NO. 754761 DATED 3.9.2004 DRAWN ON VIJAYA BANK, BANGALORE TO THE SEL LER AT THE TIME OF PURCHASE OF LAND TOWARDS BORE-WELL, GATE WITH COMPO UND WELL, ETC. THE ASSESSEE ALSO HAS A GRIEVANCE WITH REGARD TO NON AL LOWING DEDUCTION TOWARDS RS. 1,61,300 INCURRED BY THE ASSESSEE AS DE VELOPMENT CHARGES FOR MASKING PAYMENT TO LABOURERS TOWARDS CUTTING OF TREES, SHRUBS, BUSHES AND LEVELLING OF LAND. FURTHER, THE ASSESSE E'S GRIEVANCE IS THAT THE CIT(A) ERRED IN HOLDING THE COST OF CONSTRUCTIO N AT RS. 925 PER SFT ON THE BASIS OF COST OF CONSTRUCTION TO THE BUILDER . 5. THE LEARNED AR SUBMITTED THAT THE ASSESSEE FILED RE TURN FOR A.Y. 2007-08 DECLARING NIL INCOME. THE ASSESSEE'S CONTE NTION THAT THE DEVELOPMENT AGREEMENT ITSELF DID NOT RESULT IN A TR ANSFER WAS NOT ACCEPTED BY THE ASSESSING OFFICER. THE ASSESSING O FFICER DID NOT ALSO ACCEPT THE CONTENTION OF THE ASSESSEE THAT IF AT AL L CAPITAL GAIN WERE TO BE ASSESSED ON THE PREMISE THAT THE DEVELOPMENT AGREEM ENT RESULTED IN TRANSFER, THE ASSESSMENT SHOULD BE FOR A.Y. 2006-07 AND NOT 2007-08. APART FROM PLEADING THAT THE DEVELOPMENT AGREEMENT DID NOT RESULT IN TRANSFER OF ANY CAPITAL ASSET NOR EVEN 'DEEMED TRAN SFER' ENVISAGED IN SEC. 2(47) OF THE I.T ACT, THE ASSESSEE ALSO INVITE D ATTENTION OF THE ASSESSING OFFICER TO THE FACT THAT IT WAS SPECIFICA LLY AGREED BETWEEN THE I.T.A. NO. 1393/HYD/2010 SMT. P. PRATHIMA REDDY ===================== 4 ASSESSEE AND THE DEVELOPER, IN CLAUSE 11 OF THE JOI NT DEVELOPMENT AGREEMENT THAT MAKING THE PROPERTY AVAILABLE TO THE DEVELOPER FOR CONSTRUCTION OF THE RESIDENTIAL APARTMENTS SHALL NO T BE CONSTRUED AS DELIVERY OF POSSESSION. THE ASSESSING OFFICER, HOWE VER, PROPOSED TO ASSESS CAPITAL GAIN IN THE A.Y. 2007-08 BY TREATING THE COST OF CONSTRUCTION OF THE 7 FLATS FALLING TO THE SHARE OF THE ASSESSEE AS FULL VALUE OF CONSIDERATION. HE PROPOSED TO ADOPT THE C OST OF CONSTRUCTION AT RS. 925 PER SFT WHICH WAS STATED TO BE THE COST TO THE BUILDER AS PER INFORMATION IN THE BUILDER' RETURN OF INCOME. THE A SSESSING OFFICER WAS OF THE VIEW THAT CAPITAL GAIN AROSE ON ACCOUNT OF R ELINQUISHMENT OF ASSESSEE'S RIGHT IN 57% OF LAND IN FAVOUR OF THE DE VELOPER, SRI C. JANARDHAN REDDY. 6. THE AR SUBMITTED THAT THE TRANSACTION BETWEEN THE A SSESSEE AND THE DEVELOPER MAY NOT BE TREATED AS RESULTING IN RE LINQUISHMENT OF ASSESSEE'S RIGHT. THE ASSESSEE POINTED OUT THAT SAL E, EXCHANGE AND RELINQUISHMENT ARE INCLUDED IN CLAUSE (I) OF SEC. 2 (47) WHICH INCLUSIVELY DEFINES TRANSFER. HOWEVER, SALE, EXCHANGE OR RELIN QUISHMENT REQUIRE A REGISTERED DEED BECAUSE THESE MODES OF TRANSFER ARE NOT INCLUDED IN 'DEEMED TRANSFER' DEFINED IN SEC. 2(47)(V). IN THE ABSENCE OF SUCH A DEED OF RELINQUISHMENT, THE ASSESSEE CANNOT BE TAXE D BY TREATING THE TRANSACTION AS RELINQUISHMENT. THE ASSESSEE PLEADE D THAT NO EVENT WHICH RESULTED IN TRANSFER OF CAPITAL ASSET OCCURRE D IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2007-08. THE ASSESSEE F ILED A LETTER DATED 4-11-2009 FROM THE BUILDER AS PER WHICH THE BUILDER STATED THAT THE COST OF CONSTRUCTION WAS RS. 650. 7. THE AR SUBMITTED THAT THE ASSESSING OFFICER TREATED THE TRANSACTION AS ONE OF RELINQUISHMENT AND ASSESSED T HE ASSESSEE TO SHORT TERM CAPITAL GAIN. IN PARA (B) ON PAGE 4 OF THE AS SESSMENT ORDER, HE RELIED ON THE DECISIONS OF THE HON'BLE ITAT IN THE ASSESSEE'S CASE OF SRI S. RAGHURAM REDDY VS ITO IN ITA NO. 296/HYD/2003 DA TED 30-07- 2004 DECIDED BY HYDERABAD BENCH OF THE ITAT AND THE CASE OF SMT. VASAVI PRATAP CHAND VS. DCIT 89 ITR 73(DEL) AND HEL D THAT THE FACTS I.T.A. NO. 1393/HYD/2010 SMT. P. PRATHIMA REDDY ===================== 5 OF THE ASSESSEE'S CASE ARE IN PARI MATERIA WITH THE FACTS IN THE ABOVE MENTIONED CASES. 8. THE AR SUBMITTED THAT THE ASSESSING OFFICER HELD TH AT IN CASES OF DEVELOPMENT AGREEMENT, CAPITAL GAIN AROSE IN TWO ST AGES, THE FIRST STAGE BEING ON RECEIVING POSSESSION OF CONSTRUCTED SPACE BY THE LAND LORD AND THE SECOND STAGE ON SALE OF THE CONSTRUCTED SPACE. HE ASSESSED SHORT TERM CAPITAL GAIN BY TREATING THE COST OF CONSTRUCT ION AS FULL VALUE OF CONSIDERATION. THE ASSESSING OFFICER DID NOT ALLOW THE CLAIM OF THE ASSESSEE THAT AN AMOUNT OF RS. 1,61,300 SPENT ON CU TTING TREES, CLEARING BUSHES AND LEVELLING OF LAND STATING THAT THERE WAS NO SUFFICIENT EVIDENCE. HE IGNORED THE CLAIM OF THE ASSESSEE THA T EVEN AS PER THE BUILDER'S LETTER DATED 4-11-2009 FILED BEFORE THE A SSESSING OFFICER THE COST OF CONSTRUCTION WAS RS. 650/- PER SFT. TOTAL I NCOME WAS DETERMINED AT RS. 63,26,293 ADOPTING THE COST OF CO NSTRUCTION AT RS. 925 PER SFT. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE COMMISSIONER OF INCOME TAX (APPEALS). THE LEARNED CIT(APPEALS) R ELIED ON SEVERAL CASES DECIDED BY VARIOUS COURTS AND THE ITAT. ON T HE BASIS OF THESE DECISIONS, HE HELD THAT THE CONSIDERATION TO BE REC EIVED BY THE ASSESSEE WAS FINALLY DETERMINED ONLY IN THE SUBSEQUENT SUPPL EMENTARY AGREEMENT DATED 3-4-2006. THE CIT (APPEALS) FAILED TO APPRECIATE THAT CLAUSE 3 OF THE JDA ALREADY FIXED THE RATIO OF BUIL T-UP AREA FALLING TO THE SHARE OF THE ASSESSEE AT 43% OF THE TOTAL BUILT-UP AREA. THE SUPPLEMENTARY AGREEMENT MERELY FACILITATED DEMARCAT ION OF THE INDIVIDUAL FLATS FAILING TO THE SHARE OF OWNER AND DEVELOPER BY IDENTIFYING THE FLATS BY THE FLAT NUMBERS WHICH BEC AME AVAILABLE BY THEN. THE CIT(A) NEGATED THE ASSESSEE'S CLAIM THAT NO EVENT RESULTING IN TRANSFER TOOK PLACE IN THE PREVIOUS YEAR RELEVAN T TO A.Y. 2007-08. 9. THE AR FURTHER SUBMITTED THAT IN CONFIRMING THE ADD ITION MADE BY THE ASSESSING OFFICER, THE CIT(A) OUGHT TO HAVE APPRECIATED THE SUBMISSION OF THE ASSESSEE THAT THE SUPPLEMENTARY A GREEMENT DID NOT RESULT IN ANY FRESH DETERMINATION OF CONSIDERATION BUT MERELY FACILITATED IDENTIFICATION OF THE FLATS FALLING TO THE SHARE OF THE ASSESSEE TO THE I.T.A. NO. 1393/HYD/2010 SMT. P. PRATHIMA REDDY ===================== 6 EXTENT OF 43% OF TOTAL BUILT-UP AREA EVEN AS AGREED TO IN THE JOINT DEVELOPMENT AGREEMENT DATED 21-12-2005. HE CONFIRM ED THE ASSESSMENT ON AN ENTIRELY DIFFERENT GROUND VIZ., TH AT THE DEVELOPMENT AGREEMENT RESULTED IN TRANSFER. HE ALSO CONFIRMED T HE ASSESSABILITY OF THE GAIN IN A.Y. 2007-08 ON THE PREMISE THAT THE C ONSIDERATION WAS DETERMINED BY THE SUPPLEMENTARY AGREEMENT. 10. THE AR FURTHER SUBMITTED THAT IN THE CASE OF S. RAG HURAM REDDY RELIED UPON BY THE ASSESSING OFFICER, IT WAS PLEADE D ON BEHALF OF THE ASSESSEE THAT THE ASSESSING OFFICER AND CIT(A) ERRE D IN HOLDING THAT POSSESSION OF LAND WAS HANDED OVER. IT WAS PLEADED THAT THERE IS NO QUESTION OF HANDING OVER POSSESSION OF THE ENTIRE L AND AS THE DEVELOPER WAS ENTITLED ONLY FOR A PERCENTAGE OF UNDIVIDED SHA RE WHICH CANNOT NOT BE IDENTIFIED. IT WAS ALSO PLEADED THAT IT WAS NOT POSSIBLE TO IDENTIFY WHICH PART OF THE LAND WOULD GO TO THE DEVELOPER AN D WHICH PART WOULD BELONG TO THE LANDLORD. AFTER CONSIDERING DETAILED SUBMISSIONS THE ITAT HELD THAT IN THE SAID CASE ALSO, ONLY A TEMPOR ARY PERMISSION TO ENTER AND CONSTRUCT WAS GIVEN TO THE BUILDER. IT W AS ALSO HELD THAT IT WAS ALSO NOT A CASE OF EXCHANGE BECAUSE AS PER SEC. 118 OF TRANSFER OF PROPERTY ACT, AN EXCHANGE PRESUPPOSES EXISTENCE OF TWO ASSETS AT THE SAME TIME. IT WAS HELD THAT TRANSFER TOOK PLACE ON LY ON FULFILMENT OF THE TERMS OF CONTRACT. IT HAS BEEN HELD THAT MERE HAND ING OVER OF POSSESSION DOES NOT AMOUNT TO TRANSFER. THE APPLIC ATION OF SEC. 2(47)(V) REQUIRES 'ALLOWING' OF THE POSSESSION OF A N IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANC E OF A CONTRACT OF THE NATURE REFERRED TO IN SEC. 53A OF THE TRANSFER OF PROPERTY ACT, 1882 SEC. 53A OF THE TRANSFER OF PROPERTY ACT APPLIES WH ERE THE TRANSFEREE HAS, IN PART PERFORMANCE OF THE CONTRACT TAKEN POSS ESSION OF THE PROPERTY OR ANY PART THEREOF. THE ITAT HELD THAT SI GNING OF ALL AGREEMENT TO BUILD OR DEVELOP CANNOT BE CONSIDERED A PART PERFORMANCE OF THE CONTRACT AS CONTEMPLATED UNDER SEC. 53A OF T HE TRANSFER OF PROPERTY ACT. THE ITAT HELD IN THAT CASE THAT THE Y EAR OF TRANSFER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE IS TO BE HE LD AS THE PREVIOUS YEAR I.T.A. NO. 1393/HYD/2010 SMT. P. PRATHIMA REDDY ===================== 7 1991-92 RELEVANT TO THE A.Y. 1992-93 I.E., THE YEAR IN WHICH THE BUILDER HANDS OVER POSSESSION OF FLATS TO THE OWNER. 11. THE LEARNED AR SUBMITTED THAT IN THE OTHER CASE REL IED ON BY THE ASSESSING OFFICER, VIZ., SMT. VASAVI PRATAP CHAND V S DCIT (89 ITD 73) (DEL), THE ITAT REJECTED THE CONTENTION OF THE ASSE SSEE THAT LAND WAS TRANSFERRED ON THE DATE OF COLLABORATION AGREEMENT. THE ASSESSING OFFICER HAVING NOTICED THE DECISION IN THE CASE OF S. RAGHURAM REDDY AND SMT. VASAVI PRATAP CHAND (SUPRA) AND HAVING ADM ITTED THAT THE FACTS OF THE ASSESSEE'S CASE ARE IN PARI MATERIA WI TH THE FACTS OF THE SAID CASES, THE ASSESSING OFFICER OUGHT TO HAVE FOLLOWED THE RATIO OF THE SAID DECISIONS OF THE ITAT. THE CIT(A) OUGHT TO HAVE H ELD THAT THE ASSESSMENT AS MADE BY THE ASSESSING OFFICER IS UNSU STAINABLE. 12. THE AR FURTHER SUBMITTED THAT IN THE CASE OF DR. US HA MOHANDAS VS ITO (ITA NO. 595/HYD/2010 DATED 12.11.2010) THE ASSESSEE ENTERED INTO AN AGREEMENT OF SALE-CUM-GPA ON 7.9.2001 FOR S ALE OF 5 ACRES OF DRY AGRICULTURAL LAND FOR A TOTAL CONSIDERATION OF RS. 60 LAKHS. SHE RECEIVED A SUM OF RS. 1 LAKH AS ADVANCE MONEY. AS PER THE TERMS OF THE AGREEMENT, THE ASSESSEE AUTHORISED THE VENDEE TO CA RRY OUT SUCH DEVELOPMENT WORKS AS THE VENDEE MAY DEEM FIT TILL S UCH TIME THE PROPERTY SOLD OUT IN PART OR IN FULL AND TILL THAT DATE THE VENDOR AND VENDEE WOULD IN JOINT POSSESSION OF THE LAND THE PO SSESSION LETTER WAS GIVEN ON 15-09-2004 WHICH SPECIFICALLY STATES THAT THE VENDEE HAS MADE FULL AND FINAL PAYMENT AS PER THE TERMS OF THE AGRE EMENT DATED 7-9-201 AND POSSESSION OF THE SAID DRY AGRICULTURAL LAND WA S HANDED OVER TO THE VENDEE ABSOLUTELY. THE ASSESSEE DECLARED CAPITAL GA IN IN THE A.Y. 2005- 06. THE ITAT HYDERABAD HELD THAT MERELY BECAUSE THE VENDOR HAS ALLOWED THE VENDEE TO CARRY OUT DEVELOPMENT WORKS, AS HE DEEMED FIT, ON THE BASIS OF THE AGREEMENT DATED 7-9-2001, IT CA NNOT BE SAID THAT 'TRANSFER' IS COMPLETION ON THE DATE OF AGREEMENT I TSELF. ON THE DATE OF AGREEMENT, THE ASSESSEE RECEIVED ONLY A SUM OF RS. L LAKH AS ADVANCE MONEY OUT OF THE TOTAL CONSIDERATION OF RS. 60 LAKH S AND THE BALANCE CONSIDERATION OF RS. 59 LAKHS WAS AGREED TO BE PAID WITHIN TWO YEARS I.T.A. NO. 1393/HYD/2010 SMT. P. PRATHIMA REDDY ===================== 8 FROM THE DATE OF ENTERING INTO THE AGREEMENT AND HA NDING OVER ABSOLUTE POSSESSION WAS ALSO LINKED TO THE FULL AND FINAL SE TTLEMENT OF THE CONSIDERATION AS PER THE AGREEMENT. ON THE DATE OF AGREEMENT, ABSOLUTE POSSESSION WAS NOT HANDED OVER TO THE VEND EE TO THE EXCLUSION OF THE ASSESSEE VENDOR. WHAT WAS GIVEN BY THE ASSE SSEE VENDOR AT THE TIME OF ENTERING INTO THE AGREEMENT TO THE VENDEE I S ONLY A PERMISSIVE POSSESSION, TO THE LIMITED EXTENT ENABLING THE VEND EE TO CARRY OUT DEVELOPMENT WORKS AS HE DEEMED FIT SO AS TO MAKE TH E LAND SALEABLE ONE EITHER IN ITS ENTIRETY OR IN PARTS. ON THE FAC TS OF THE CASE, THE ITAT HELD THAT IT HAD NO HESITATION IN HOLDING THAT 'TRA NSFER' TOOK PLACE ON 15-09-2004 WHEN ABSOLUTE POSSESSION WAS HANDED OVER BY THE ASSESSEE TO THE VENDEE UPON RECEIVING FULL AND FINAL PAYMENT OF CONSIDERATION AS PER THE TERMS OF THE AGREEMENT AND CONSEQUENTLY, TH E ASSESSEE IS LIABLE TO CAPITAL GAINS TAX ONLY IN THE ASSESSMENT YEAR 20 05-06. 13. THE AR SUBMITTED THAT THE ASSESSEE AND THE VENDOR H AVE SPECIFICALLY AGREED, AS PER CLAUSE 11 OF THE JDA, T HAT THE MAKING AVAILABLE OF THE PROPERTY TO THE DEVELOPER SHALL NO T BE CONSTRUED AS DELIVERY OF POSSESSION. IT IS ALSO SUBMITTED THAT T HE ASSESSEE HAS NOT RECEIVED ANY ADVANCE OR PART PAYMENT CONSEQUENT TO THE ENTERING OF JOINT DEVELOPMENT AGREEMENT. IT IS SUBMITTED THAT O N THE FACTS OF THE ASSESSEE'S CASE, THE RATIO OF THE DECISION OF THE I TAT IN THE CASE OF DR, USHA MOHANDAS (SUPRA) APPLIES TO THE ASSESSEE'S CAS E. CONSEQUENTLY THE ORDER OF THE CIT(A) UPHOLDING THE ASSESSMENT OF CAPITAL GAIN IN THE A.Y. 2007-08 IS ERRONEOUS AND THE ASSESSMENT MAY BE DIRECTED TO BE QUASHED. 14. THE AR FURTHER SUBMITTED THAT IN THE CASE OF DCLT V S G. RAGHURAM (39 SOT 406) (HYD), THE TRIBUNAL TOOK SUPP ORT FROM THE DECISION OF DELHI BENCH OF ITAT IN THE CASE OF SMT. VASAVI PRATAP CHAND (SUPRA) IN COMING TO A CONCLUSION ABOUT THE F ULL VALUE OF CONSIDERATION. THE ITAT ALSO REJECTED THE SUBMISSIO N OF THE ASSESSEE THAT THE DECISION OF THE TRIBUNAL, HYDERABAD BENCH IN THE CASE OF SMT. SHANTA VIDYA SAGAR ANNAN IN ITA NO. 885/HYD/2003 DA TED 9-6-2006 I.T.A. NO. 1393/HYD/2010 SMT. P. PRATHIMA REDDY ===================== 9 FAVOURS HIM. THE SAID DECISION RELATES TO EXIGIBILI TY OF CAPITAL GAIN ON HANDING OVER OF POSSESSION IN THE CASE OF DEVELOPME NT AGREEMENT. THE AFORESAID DECISION ALSO SUPPORTS THE ASSESSEE CASE. 15. THE AR SUBMITTED THAT IN THE LIGHT OF THE FACTS AND THE DECISIONS OF THE ITAT NARRATED IN THE PRECEDING PARAS, THE CI T(A) ERRED IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER IN LEV YING TAX ON CAPITAL GAIN FOR THE A.Y. 2007-08. THE CIT(A) ALSO ERRED IN HOLDING THAT THE CONSIDERATION TO BE RECEIVED BY THE ASSESSEE WAS DE TERMINED ONLY IN THE SUPPLEMENTARY AGREEMENT. THE TRIBUNAL MAY KINDLY P ASS APPROPRIATE ORDERS HOLDING THAT TRANSFER DID NOT TAKE PLACE IN A.Y. 2007-08. THE AR FURTHER SUBMITS THAT THERE ARE OTHER DECISIONS H OLDING THAT TRANSFER AS PER SEC. 2(47)(V) OCCURS IN THE YEAR OF ENTERING INTO DEVELOPMENT AGREEMENT. IN MOST OF THESE CASES IT WAS HELD THAT POSSESSION WAS GIVEN TO THE DEVELOPER IN THE YEAR OF DEVELOPMENT AGREEME NT. THE AR SUBMITTED THAT IN THE CASE OF THE ASSESSEE AS ALREA DY SUBMITTED, THE EXECUTION OF JOINT DEVELOPMENT AGREEMENT AND GPA DI D NOT RESULT. IN ANY EVENT GIVING RISE TO DEEMED TRANSFER UNDER SEC. 2(47)(V) OF THE IT ACT. THE AR SUBMITTED THAT IN CASES WHERE THERE AR E DECISIONS FAVOURING THE ASSESSEE AND ALSO FAVOURING THE RESPO NDENT-DEPARTMENT, THE TRIBUNAL MAY HOLD IN FAVOUR OF THE ASSESSEE ON THE STRENGTH OF WELL ACCEPTED PRINCIPLES OF JURISPRUDENCE. THE AR ALSO PRAYED THAT IN CASE THE ITAT CANNOT PERSUADE ITSELF TO ACCEPT THE ASSES SEE'S PLEA THAT THERE NO TAXABLE EVENT OCCURRED IN THE PREVIOUS YEAR RELE VANT TO A.Y. 2007- 08, IT IS MOST HUMBLY PRAYED THAT THE QUESTION WHET HER THE JOINT DEVELOPMENT AGREEMENT ENTERED INTO BETWEEN THE ASSE SSEE AND THE DEVELOPER ON 21-12-2005 GAVE RISE TO LIABILITY TO C APITAL GAINS ASSESSABLE IN THE HANDS OF THE ASSESSEE FOR THE A.Y. 2007-08, MAY KINDLY BE REFERRED TO A SPECIAL BENCH OF THE TRIBUNAL U/S. 25 5(3) OF THE I.T ACT. 16. THE DR SUBMITTED THAT SUBMITTED THAT THE DEFINITIO N OF THE TERM 'TRANSFER' HAS BEEN SPECIFICALLY EXTENDED IN SUB-CL AUSE (V) OF SECTION 2(47) AS UNDER: I.T.A. NO. 1393/HYD/2010 SMT. P. PRATHIMA REDDY ===================== 10 'ANY TRANSACTION INVOLVING THE ALLOWING OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERR ED TO IN SEC. 53 A OF THE TRANSFER OF PROPERTY ACT, 1882.' 17. THE DR FURTHER SUBMITTED THAT THE RELEVANT CONDITIO NS FOR A TRANSFER UNDER SEC. 53 OF THE TRANSFER OF PROPERTY ACT ARE AS UNDER: THAT THERE SHOULD BE A CONTRACT FOR CONSIDERATION. THAT THE CONTRACT SHOULD BE IN WRITING THAT THE CONTRACT SHOULD BE SIGNED BY THE TRANSFERO R. THAT THE CONTRACT SHOULD PERTAIN TO TRANSFER OF IMM OVABLE PROPERTY. THAT THE TRANSFEREE SHOULD TAKE THE POSSESSION OF T HE PROPERTY AND THE TRANSFEREE SHOULD BE READY AND WILLING TO P ERFORM HIS PART OF CONTRACT. 18. THE DR SUBMITTED THAT IT WAS IN THE LIGHT OF THE AB OVE PROVISIONS THAT THE AUTHORITY FOR ADVANCE RULING IN THE CASE O F JS SARKARIA (294 ITR 196) HAD OPINED IN RESPECT OF AN IRREVOCABLE PO WER OF ATTORNEY ALSO THAT A TRANSFER IS TO BE DEEMED AS TAKEN PLACE IN C ONSEQUENCE OF A TRANSACTION WHICH HAS DIRECT AND IMMEDIATE BEARING ON ALLOWING THE POSSESSION TO BE TAKEN IN PART PERFORMANCE OF THE C ONTRACT. HON'BLE DELHI HIGH COURT IN THE CASE OF ASHOK KAPOOR HUF (2 13 CTR 241) OPINED THAT TRANSFER TAKES PLACE WHEN THE ASSESSEE ENTERS INTO DEVELOPMENT AGREEMENT. IT HAS FURTHER BEEN HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF AJAY JAGATI (215 CTR 3 16) THAT POSSESSION IS THE CRUX OF THE MATTER IN DECIDING WHETHER THERE IS A TRANSFER OR NOT. EVEN THE PUNE BENCH OF THE ITAT IN THE CASE OF MULI K (98 TTJ 179) HAVE OPINED THAT TRANSFER TAKES PLACE ONCE A GPA IS GIVEN TO THE DEVELOPER. FURTHER, THE HON'BLE CHENNAI BENCH OF TH E ITAT IN THE CASE OF R. KALANIDHI VS. ITO (122 TTJ 405) HAVE OPINED T HAT IF TOTAL CONSIDERATION IS AGREED AND POSSESSION IS HANDED OV ER, PROVISIONS OF SEC. 2(47)(V) WOULD BE ATTRACTED. THE DECISION OF THE DELHI BENCH OF ITAT IN THE CASE OF SATYAVATHI VERMA (123 TTJ 97) G OES FURTHER TO PROPOUND THAT FOR INVOKING THE PROVISIONS OF SEC 2( 47)(V) , IT IS A MUST THAT THE TRANSFEREE HAS NO PART LEFT TO PERFORM IN THE CONTRACT AND THAT THE TRANSFEROR HAS PERFORMED OR IS WILLING TO PERFO RM THE CONTRACT. IT IS I.T.A. NO. 1393/HYD/2010 SMT. P. PRATHIMA REDDY ===================== 11 ONLY IN THE CASES WHERE THE TRANSFER HAS A RIGHT TO REVOKE THE POWER OF ATTORNEY AND THE POSSESSION IS NOT COMPLETE THAT IT CAN BE SAID THAT A LICENSE WAS GIVEN AND THERE WAS NO TRANSFER, AS HEL D IN THE CASE OF ASIAN DISTRIBUTORS (70 TTJ 88) BY THE MUMBAI ITAT. 19. THE DR FURTHER SUBMITTED THAT IF WE ANALYSE THE CAS E OF THE ASSESSEE IN THE LIGHT OF THE RATIO OF CASE LAWS MEN TIONED ABOVE, IT IS CLEAR THAT THE ASSESSEE HAD INDEED GIVEN HER PLOT FOR DEV ELOPMENT TO SRI JANARDHAN REDDY BY WAY OF A DEVELOPMENT AGREEMENT. ADMITTEDLY, THE ASSESSEE ALSO ALLOWED THE POSSESSION OF THE SAID PL OT FOR CONSTRUCTION AND THEREBY PERFORMED ALL THAT WAS TO BE DONE BY HE R UNDER THE CONTRACT AND LEFT NO PART UNPERFORMED. IN PURSUANCE OF THE SAID CONTRACT, THE TRANSFEROR ALSO PERFORMED ALL THAT WA S REQUIRED BY WAY OF THE SAID AGREEMENT AND WAS EVEN TO WILLING TO PERFO RM THE SAME IN THE TIMES TO COME. SINCE THE DEVELOPMENT AGREEMENT SO S IGNED BY BOTH THE PARTIES HAS BEEN DULY ACTED UPON, IN THE LIGHT OF T HE CASE LAWS DISCUSSED ABOVE, IT CANNOT BE DENIED THAT THERE WAS INDEED A TRANSFER. 20. THE DR ALSO SUBMITTED THE CONTENTION OF THE ASSESSE E THAT THE TRANSFER SHOULD BE CONSIDERED AS HAVING TAKEN PLACE IN THE ASST YEAR 2006-07 AND NOT 2007-08, AS THE ORIGINAL AGREEMENT WAS SIGNED ON 21.12.2005, IT IS CLEAR THAT THE SUPPLEMENTARY AGRE EMENT WAS ENTERED INTO 3.4.2006, WHEREIN THE ASSESSEE'S SHARE OF 7 FL ATS (43% SHARE IN LAND) WAS FINALLY DETERMINED, WHEREAS THE DEVELOPER WAS TO GET 9 FLATS (57% IN LAND). THEREFORE, IT IS CLEAR THAT THE CONS IDERATION TO BE RECEIVED BY THE ASSESSEE WAS DETERMINED ONLY IN THE SUBSEQUE NT SUPPLEMENTARY AGREEMENT DT 3.4.2006 AND THE SAID CONSIDERATION WA S TO BE THE FINAL CONSIDERATION TO BE RECEIVED FOR THE TRANSFER. IN V IEW OF THE DECISION OF THE HON'BLE CHENNAI BENCH OF ITAT IN THE CASE OF KA LANIDHI (SUPRA) , THE TOTAL CONSIDERATION HAVING BEEN AGREED UPON AND POSSESSION ALSO HAVING BEEN GIVEN, THERE WAS A TRANSFER LIABLE TO C APITAL GAINS IN VIEW OF THE AGREEMENT DATED 3.4.2006. HE SUBMITTED THAT THE RE IS NO INFIRMITY IN THE VIEW OF THE ASSESSING OFFICER THAT TRANSFER IN THIS CASE HAS TO BE I.T.A. NO. 1393/HYD/2010 SMT. P. PRATHIMA REDDY ===================== 12 CONSIDERED AS HAVING TAKEN PLACE IN THE FINANCIAL Y EAR 2006-07 RELEVANT TO ASST YEAR 2007-08. 21. THE DR FURTHER SUBMITTED THAT THE BANGALORE BENCH O F THE ITAT IN THE CASE OF VEMANNA REDDY (114 TTJ 246) HAVE OPI NED THAT TRANSFER U/S. 2 (47)(V) TAKES PLACE WHEN POSSESSION OF VACAN T LAND IS GIVEN AND NOT WELL CONSTRUCTED FLATS ARE GIVEN. A SIMILAR VIE W HAS BEEN TAKEN BY THE JURISDICTIONAL ITAT, HYDERABAD IN THE CASE OF D R. T. ACHYUT RAO VS. ACIT (106 ITD 388). THE JURISDICTIONAL ITAT IN THE SAID CASE WERE CONCERNED WITH A SALE CUM DEVELOPMENT AGREEMENT DT 22.8.1997. THE SAID AGREEMENT HOWEVER, WAS MODIFIED BY A SUPPLEMEN TARY AGREEMENT ON 15.10.1997, WHEREIN THE EARLIER AGREED CONSIDERA TION WAS REDUCED. SINCE IN THE SAID CASE THE POSSESSION OF THE LAND H AD BEEN HANDED OVER IN THE RELEVANT ASST YEAR, THE ITAT OPINED THAT THE RE WAS NO RIGHT LEFT TO THE TRANSFEROR OTHER THAN THE RIGHT TO RECEIVE THE CONSIDERATION IN THE MANNER LAID DOWN IN THE AGREEMENT, THE TRANSACTION ENTERED INTO BY THE PARTIES THROUGH THE AGREEMENTS IN THE F.Y. 1997-98 WAS A TRANSACTION ENVISAGED U/S. 53A OF THE TRANSFER OF PROPERTY ACT. THEY HELD THAT THE ASSESSEE WAS NOT RIGHT IN CONTENDING THAT THE CAPIT AL GAIN WOULD ARISE IN THE ASST YEAR 2001-02 ON THE ACCOUNT THAT THE POSSE SSION OF BUILT UP AREA WAS GIVEN TO HIM ONLY DURING THE SAID ASST YEA R. THEY HELD THAT THE TRANSFER HAD TAKEN PLACE IN THE YEAR WHEN THE AGREE MENT WAS ENTERED INTO AND THE POSSESSION OF VACANT LAND WAS GIVEN BY THE ASSESSEE AND NOT WHEN THE CONSTRUCTED FLATS WERE GIVEN BY THE AS SESSEE. THE ITAT NOTED THAT IT WAS NOT A CASE OF TRANSFER BY SALE OR EXCHANGE, IN SO FAR AS THE CONSIDERATION WAS MENTIONED IN THE AGREEMENT AN D RECEIVING POSSESSION THE STIPULATED BUILT UP AREA WAS ONLY A MODE OF RECEIVING THAT CONSIDERATION, IN ADDITION TO THE RIGHT TO HAV E ALTERNATIVE ACCOMMODATION DURING THE PERIOD. 22. THE DR SUBMITTED THAT IN THE CASE OF DR MAYA SHENOY (23 DTR 140), JURISDICTIONAL ITAT, HYDERABAD HAVE OPINED TH AT THERE WAS A TRANSFER U/S. 2(47)(V), AS THE AGREEMENT GAVE ABSOL UTE RIGHTS TO THE BUILDER. THEY EVEN CLARIFIED THAT THE CONSIDERATION MAY BE FUTURISTIC, AS I.T.A. NO. 1393/HYD/2010 SMT. P. PRATHIMA REDDY ===================== 13 HELD BY THE SUPREME COURT IN THE CASE REPORTED IN A IR 1955 SUPREME COURT 376. THE EFFECTIVE DATE OF TRANSFER THEREFORE , WAS HELD TO BE THE DATE WHEN THE POSSESSION WAS HANDED OVER. IT WAS HE LD THAT EVEN IF THE ASSESSEE RECEIVES A RIGHT TO RECEIVE THE CONSIDERAT ION, THOUGH IT MAY BE QUANTIFIED OR RECEIVE IT LATER, THE SAID FACTORS WI LL NOT RETARD/STALL THE ACCRUAL OF CAPITAL GAINS. IN THE CASE OF THE PRESEN T ASSESSEE IT IS CLEAR THAT THE RIGHT TO RECEIVE THE CONSIDERATION HAD BEE N FINALLY QUANTIFIED IN THE SHAPE OF 7 FLATS. BESIDES, THE ASSESSEE HAD ALS O GIVEN THE REQUIRED POSSESSION OF THE LAND. ACCORDINGLY, HE SUBMITTED T HAT THERE IS NO REASON TO INTERFERE WITH THE FINDINGS OF THE CIT(A) THAT THERE WAS TRANSFER LIABLE TO CAPITAL GAINS IN THE ASST YEAR 2 007-08. 23. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE REVENUE HAS PLACED HEAVY RELIANCE ON T HE JDA DATED 21.12.2005 AND THE SUPPLEMENTARY AGREEMENT DATED 3. 4.2006. ACCORDING TO THE REVENUE, THE SHARE OF THE ASSESSEE IN THE CONSTRUCTED FLATS WAS DETERMINED VIDE SUPPLEMENTARY AGREEMENT D ATED 3.4.2006. ACCORDING TO THE DR IN THE A.Y. 2006-07 THERE IS NO FULFILMENT OF CONDITIONS LAID DOWN U/S. 53A OF THE TRANSFER OF PR OPERTY ACT AND THE CONDITIONS OF SECTION 53A OF THE TRANSFER OF PROPER TY ACT ARE FULFILLED ONLY IN A.Y. 2007-08 AND IT HAS TO BE TAXED ACCORDI NGLY. FOR CLARITY, WE WILL REPRODUCE THE SECTION 53A OF THE TRANSFER OF P ROPERTY ACT. '53A. 1[ PART PERFORMANCE.- WHERE ANY PERSON CONTRAC TS TO TRANSFER FOR CONSIDERATION ANY IMMOVEABLE PROPER TY BY WRITING SIGNED BY HIM OR ON HIS BEHALF FROM WHIC H THE TERMS NECESSARY TO CONSTITUTE THE TRANSFER CAN BE ASCERTAINED WITH REASONABLE CERTAINTY, AND THE TRANSFEREE HAS, IN PART PERFORMANCE OF THE CONTRACT , TAKEN POSSESSION OF THE PROPERTY OR ANY PART THEREO F, OR THE TRANSFEREE, BEING ALREADY IN POSSESSION, CONTIN UES IN POSSESSION IN PART PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT IN FURTHERANCE OF THE CONTRACT, AND T HE TRANSFEREE HAS PERFORMED OR IS WILLING TO PERFORM H IS PART OF THE CONTRACT, THEN, NOTWITHSTANDING THAT TH E CONTRACT, THOUGH REQUIRED TO BE REGISTERED, HAS NOT BEEN REGISTERED, OR, WHERE THERE IS AN INSTRUMENT OF TRA NSFER, THAT THE TRANSFER HAS NOT BEEN COMPLETED IN THE MAN NER PRESCRIBED THEREFOR BY THE LAW FOR THE TIME BEING I N FORCE, THE TRANSFEROR OR ANY PERSON CLAIMING UNDER HIM SHA LL BE I.T.A. NO. 1393/HYD/2010 SMT. P. PRATHIMA REDDY ===================== 14 DEBARRED FROM ENFORCING AGAINST THE TRANSFEREE AND PERSONS CLAIMING UNDER HIM ANY RIGHT IN RESPECT OF THE PROPERTY OF WHICH THE TRANSFEREE HAS TAKEN OR CONTI NUED IN POSSESSION, OTHER THAN A RIGHT EXPRESSLY PROVIDE D BY THE TERMS OF THE CONTRACT: PROVIDED THAT NOTHING IN THIS SECTION SHALL AFFECT THE RIGHTS OF A TRANSFEREE FOR CONSIDERATION WHO HAS NO NOTICE OF THE CONTRACT OR OF THE PART PERFORMANCE THEREOF.]' 24. A PLAIN READING OF THE SECTION 53A OF THE TRANSFER OF PROPERTY ACT SHOWS THAT IN ORDER THAT A CONTRACT CAN BE TERM ED TO BE 'OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER O F PROPERTY ACT' IT IS ONE OF THE NECESSARY PRECONDITIONS THAT TRANSFEREE SHOULD HAVE OR IS WILLING TO PERFORM HIS PART OF THE CONTRACT. THIS A SPECT HAS BEEN DULY TAKEN NOTE OF BY THE HON'BLE BOMBAY HIGH COURT IN T HE CASE OF CHATURBHUJ DWARKADAS KAPADIA VS. CIT (260 ITR 491) (BOM) WHEREIN THEIR LORDSHIPS OBSERVED AS FOLLOWS: THAT, IN ORDER TO ATTRACT SECTION 53A, THE FOLLOWI NG CONDITIONS NEED TO BE FULFILLED. (A) THERE SHOULD BE CONTRACT FOR CONSIDERATION; (B) IT SHOULD BE IN WRITING; (C) IT SHOULD BE SIGNED BY THE TRANSFEROR; (D) IT SHOULD PERTAIN TO THE TRANSFER OF IMMOVABLE PROPERTY; (E) THE TRANSFEREE SHOULD HAVE TAKEN POSSESSION OF PROPERTY; (F) LASTLY, TRANSFEREE SHOULD BE READY AND WILLING TO PERFORM THE CONTRACT. 25. ELABORATING UPON THE SCOPE OF EXPRESSION 'HAS PERFO RMED OR IS WILLING TO PERFORM', THE OFT QUOTED COMMENTARY 'MUL LA-THE TRANSFER OF PROPERTY ACT' (9TH EDN.: PUBLISHED BY BUTTERWORTHS INDIA), AT P. 448, OBSERVES THAT: THE DOCTRINE OF READINESS AND WILLINGNESS IS AN EMPHATIC WAY OF EXPRESSION TO ESTABLISH THAT THE TRANSFEREE ALWAYS ABIDES BY THE TERMS OF THE AGREEM ENT AND IS WILLING TO PERFORM HIS PART OF THE CONTRACT. PART PERFORMANCE, AS A STATUTORY RIGHT, IS CONDITIONED U PON THE TRANSFEREE'S WILLINGNESS TO PERFORM HIS PART OF THE CONTRACT IN TERMS COVENANTED THERE UNDER. WILLINGNESS TO PERFORM THE ROLES ASCRIBED TO A PART Y, IN A CONTRACT IS PRIMARILY A MENTAL DISPOSITION. HOWEVER , I.T.A. NO. 1393/HYD/2010 SMT. P. PRATHIMA REDDY ===================== 15 SUCH WILLINGNESS IN THE CONTEXT OF SECTION 53A OF T HE ACT HAS TO BE ABSOLUTE AND UNCONDITIONAL. IF WILLINGNES S IS STUDDED WITH A CONDITION, IT IS IN FACT NO MORE THA N AN OFFER AND CANNOT BE TERMED AS WILLINGNESS. WHEN THE VENDEE COMPANY EXPRESSES ITS WILLINGNESS TO PAY THE AMOUNT, PROVIDED THE (VENDOR) CLEARS HIS INCOME TAX ARREARS, THERE IS NO COMPLETE WILLINGNESS BUT A CONDITIONAL WILLINGNESS OR PARTIAL WILLINGNESS WHIC H IS NOT SUFFICIENT. IN JUDGING THE WILLINGNESS TO PERFORM, THE COURT MU ST CONSIDER THE OBLIGATIONS OF THE PARTIES AND THE SE QUENCE IN WHICH THESE ARE TO BE PERFORMED.. 26. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS SO EX PRESSED IN THIS COMMENTARY ON THE PROVISIONS OF THE TRANSFER O F PROPERTY ACT. IT IS THUS CLEAR THAT 'WILLINGNESS TO PERFORM' FOR THE PU RPOSES OF SECTION 53A IS SOMETHING MORE THAN A STATEMENT OF INTENT; IT IS THE UNQUALIFIED AND UNCONDITIONAL WILLINGNESS ON THE PART OF THE VENDEE TO PERFORM ITS OBLIGATIONS. UNLESS THE PARTY HAS PERFORMED OR IS W ILLING TO PERFORM ITS OBLIGATIONS UNDER THE CONTRACT, AND IN THE SAME SEQ UENCE IN WHICH THESE ARE TO BE PERFORMED, IT CANNOT BE SAID THAT T HE PROVISIONS OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT WILL CO ME INTO PLAY ON THE FACTS OF THAT CASE. IT IS ONLY ELEMENTARY THAT, UNL ESS PROVISIONS OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT ARE SAT ISFIED ON THE FACTS OF A CASE, THE TRANSACTION IN QUESTION CANNOT FALL WIT HIN THE SCOPE OF DEEMED TRANSFER UNDER SECTION 2(47)(V) OF THE IT AC T. LET US THEREFORE CONSIDER WHETHER THE TRANSFEREE, ON THE FACTS OF TH E PRESENT CASE, CAN BE SAID TO HAVE 'PERFORMED OR IS WILLING TO PERFORM' I TS OBLIGATIONS UNDER THE AGREEMENT. 27. IN THE LIGHT OF THE ABOVE PROVISIONS SECTION 53A OF THE TRANSFER OF PROPERTY ACT, IF WE EXAMINE THE JDA DATED 21.12.200 5 AND THE SUPPLEMENTARY AGREEMENT DATED 3.4.2006 THE UNDISPUT ED FACT IS THAT THE ASSESSEE GIVEN POSSESSION OF THE PROPERTY VIDE CLAUSE NO. 6. HOWEVER, THE CONSIDERATION RECEIVABLE BY THE ASSESS EE IN THE FORM OF FLATS IS SPECIFICALLY DETERMINED BY THE SUPPLEMENTA RY AGREEMENT DATED 3 RD APRIL, 2006. BEING SO, THERE IS NO PROGRESS PURSU ANT TO THE I.T.A. NO. 1393/HYD/2010 SMT. P. PRATHIMA REDDY ===================== 16 DEVELOPMENT AGREEMENT IN THE A.Y. 2006-07 AND NOTHI NG HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE TO SHOW THAT THE DEVELOPMENT ACTIVITIES AND DETERMINATION OF THE CONSIDERATION I N A.Y. 2006-07 AND NO MATERIAL IS BROUGHT ON RECORD REGARDING THE CONS TRUCTION COST INCURRED IN THE YEAR 2006-07. HENCE IT IS TO BE IN FERRED THAT NO INVESTMENT WAS MADE BY THE DEVELOPER IN CONSTRUCTIO N ACTIVITIES DURING THE A.Y. 2006-07 AND THE INCURRING OF THE COST OF C ONSTRUCTION BY THE DEVELOPER SHOWS THAT ACTIVITIES ARE TAKEN PLACE THR OUGH SUPPLEMENTARY AGREEMENT DATED 3.4.2006 AND CONSEQUENT TO THE SUPP LEMENTARY AGREEMENT THE TRANSFER HAS TAKEN PLACE. IN THE A.Y . 2006-07 IT IS NOT POSSIBLE TO SAY WHETHER THE DEVELOPER PREPARED TO C ARRY OUT THAT PART OF THE AGREEMENT TO ITS LOGICAL END. THE DEVELOPER IN THE A.Y. 2006-07 HAD NOT SHOWN HIS READINESS OR HAVING MADE PREPARATION FOR COMPLIANCE OF THE AGREEMENT. UNLESS THE DEVELOPER TAKEN A STEP F OR PERFORMANCE OF THE AGREEMENT WHICH ARE PRIMARY INGREDIENTS THAT MA KE A PERSON ELIGIBLE AND ENTITLED TO MAKE A CONSTRUCTION. WE H AVE TO SEE THE ACT AND CONDUCT OF THE PARTIES IN PERFORMING THE AGREEMENT. BEING SO, IN A.Y. 2006-07 WE CANNOT HOLD THAT THERE IS A TRANSFER. O N THE CONTRARY, THE CONSIDERATION WAS DECIDED BY SUPPLEMENTARY AGREEMEN T DATED 3.4.2006 AND THE ASSESSEE'S SHARE IN THE CONSTRUCTE D AREA OF RESIDENTIAL FLATS HAS BEEN EARMARKED SPECIFICALLY. WHEN WE SEE THE JDA ALONG WITH THE SUPPLEMENTARY AGREEMENT IT HAS TO BE INFERRED T HAT THE BUILDERS WILLINGNESS TO PERFORM HIS OBLIGATION UNDER THE AGR EEMENT IS TO BE ACTED UPON THROUGH SUPPLEMENTARY AGREEMENT DATED 3.4.2006 . IN SUCH A SITUATION IT IS ONLY THE ACTUAL PERFORMANCE OF TRAN SFEREES OBLIGATION WHICH CAN GIVE RISE TO THE SITUATION ENVISAGED IN S ECTION 53A OF THE TRANSFER OF PROPERTY ACT. AS IT IS NOT POSSIBLE TO HOLD THAT THE TRANSFEREE IS WILLING TO PERFORM HIS OBLIGATION IN THE A.Y. 2006-07 THOUGH THE JDA WAS ENTERED ON 21.12.2005. IN OUR O PINION, AS THE CONDITIONS LAID DOWN IN SECTION 53A OF TRANSFER OF PROPERTY ACT WERE SATISFIED IN A.Y. 2007-08, CAPITAL GAIN HAS TO BE T AXED IN A.Y. 2007-08 ONLY. AS THE WILLINGNESS TO PERFORM THE CONTRACT H AS BEEN SPECIFICALLY RECOGNISED VIDE SUPPLEMENTARY AGREEMENT DATED 3.4.2 006. IN OUR I.T.A. NO. 1393/HYD/2010 SMT. P. PRATHIMA REDDY ===================== 17 OPINION, ONLY ON FULFILMENT OF THE CONDITIONS LAID DOWN U/S. 53A OF THE TRANSFER OF PROPERTY ACT THE CAPITAL GAIN HAS TO BE CHARGED. IN OUR OPINION THE REVENUE AUTHORITY JUSTIFIED IN BRINGING THE TRANSACTION INTO CAPITAL GAIN IN A.Y. 2007-08 AND THE SAME IS CONFIR MED. 28. THE NEXT GROUND IS WITH REGARD TO DETERMINATION OF COST OF CONSTRUCTION AT RS. 925 PER SFT WHILE DETERMINING T HE CONSIDERATION WITH REGARD TO TRANSFER OF LONG TERM CAPITAL ASSET. THE LOWER AUTHORITIES CONSIDERED THE COST OF CONSTRUCTION INCURRED BY THE BUILDER AT RS. 925 PER SFT FOR DETERMINING THE VALUE OF CONSIDERATION OF 850 SFT RELATING TO ASSESSEE'S SHARE IN RESIDENTIAL FLATS. THIS IS BAS ED ON THE COST OF CONSTRUCTION ADMITTED BY THE BUILDER IN HIS RETURN OF INCOME. 29. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. SIMILAR ISSUE CAME BEFORE THIS TRIBUNAL IN THE CASE OF B. NARASIMHA REDDY & ORS. IN ITA NOS. 535-540/HYD/2011 AND 410/HYD/2011, THE TRIBUNAL VIDE ORDER DATED 5.7.201 2 HELD AS FOLLOWS: '11. IN OUR OPINION, THIS IS A SETTLED ISSUE. IN T HE CASE OF HYDERABAD CO-OPERATIVE CENTRAL TRADING SOCIETY LTD. , HYDERABAD VS. ACIT, IN ITA NO. 15/HYD/2008 FOR ASSESSMENT YEAR 2001-02, THE CO-ORDINATE BENCH OF T HE TRIBUNAL VIDE ORDER DATED 30.5.2008 HELD AS FOLLOWS : '12. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD. THE FIRST ISSUE TO BE RESOL VED IS AS TO WHAT WOULD BE THE PROPER APPROACH TO ADOPT THE S ALES CONSIDERATION. ACCORDING TO THE LEARNED COUNSEL IT SHOULD BE THE SALES PRICE OF 23000 SFT ADOPTED IN THE DEVE LOPER'S CASE MINUS THE ELEMENT OF PROFIT AND COST OF LAND. ACCORDING TO THE ASSESSING OFFICER IT SHOULD BE THE COST OF CONSTRUCTION ADOPTED IN THE DEVELOPER'S CASE MINUS THE COST OF LAND. IN OUR VIEW, ADOPTING EITHER OF THE APPROACHES MAY CAUSE INJUSTICE TO EITHER. THE SALES CONSIDERATION 'IN THE CASE OF DEVELOPER'S CASE CANN OT BE ADOPTED BECAUSE WHILE SELLING THE PROPERTIES, THE DEVELOPER MAY HAVE CONSIDERED SEVERAL FACTORS LIKE THE FLOOR ON WHICH A PARTICULAR PREMISES IS SITUATED, P ERSONAL RELATIONSHIP BETWEEN THE BUYER AND THE DEVELOPER AN D SO ON. IN FACT, IN SUCH TRANSACTIONS, WHAT THE ASSESSE E IS RECEIVING IN CONSIDERATION OF TRANSFERRING THE LAND IS SOME CONSTRUCTED PROPERTY. IF THE ASSESSEE ITSELF HAD I.T.A. NO. 1393/HYD/2010 SMT. P. PRATHIMA REDDY ===================== 18 CONSTRUCTED THE PROPERTY, IT CAN BE PRESUMED THAT T HE ASSESSEE ALSO MUST HAVE INCURRED, BY AND LARGE, THE SAME COST. THUS, BY SAVING THIS COST, THE ASSESSEE IS GE TTING THE PROPERTY OF EQUAL VALUE IN LIEU OF THE LAND TRANSFE RRED. THEREFORE, WE ARE OF THE VIEW THAT IT IS THE ACTUAL COST OF CONSTRUCTION ONLY WHICH SHOULD BE, ADOPTED AS THE S ALES CONSIDERATION IN THE CASE OF THE ASSESSEE. THE SAME APPROACH WAS ADOPTED IN THE CASE OF PRABANDHAM PRAKASH DECIDED BY THE HYDERABAD BENCH OF THE TRIBU NAL AND REPORTED (2008) 22 SOT 58. ACCORDINGLY, WE DO N OT ACCEPT THE APPROACH SUGGESTED BY THE LEARNED COUNSE L. 13. HOWEVER, THE COST OF CONSTRUCTION AS DETERMINED IN THE CASE OF THE DEVELOPER AND ADOPTED BY THE ASSESSING OFFICER CANNOT BE ACCEPTED. THIS IS BECAUSE, THE BO OK RESULTS IN THE CASE OF THE DEVELOPER ARE REJECTED A ND THE PROFIT IN HIS CASE HAS BEEN WORKED OUT ON THE BASIS OF THE VALUE OF THE PORTION RETAINED BY HIM. AS PER THE TO TAL COST OF CONSTRUCTION AT RS. 5,28,87,503 ADOPTED BY THE ASSESSING OFFICER, THE COST PER SFT WORKS OUT TO RS . 912 PER SFT. CONSIDERING THE FACT THAT THE BOOK RESULTS IN THE CASE OF THE DEVELOPER ARE REJECTED AND ALSO CONSIDERING THE FACT THAT THERE MAY HAVE BEEN CERTAIN OVERHEADS DEBITED TO THE SAID COST WHICH MAY NOT HAVE A BEARING ON THE PORTI ON RECEIVED BY THE ASSESSEE, IT WOULD BE FAIR TO ADOPT THE COST AT RS. 850 PER SFT FOR THE PURPOSE OF SALES CONSIDE RATION IN THE CASE OF THE ASSESSEE. WE DIRECT ACCORDINGLY.' 12. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO CONSIDER THE ABOVE ORDER AND ALSO PRICE INFLATION F OR EACH ASSESSMENT YEAR FROM 2001-02 TO 2008-09 AND DETERMINE THE COST OF CONSTRUCTION PER FLAT TO BE R ECEIVED BY THE ASSESSEE. IN OTHER WORDS, THE ASSESSING OFF ICER IS DIRECTED TO CONSIDER THE BASE INDEX AS PER THE ORDE R OF THE TRIBUNAL (CITED SUPRA) AND THEREAFTER HE HAS TO WOR K OUT THE PRICE INFLATION INDEX AND DETERMINE THE VALUE O F THE FLATS TO BE RECEIVED BY THE ASSESSEE AS CONSIDERATI ON AND DECIDE THEREUPON AFTER GIVING REASONABLE OPPORTUNIT Y OF HEARING TO THE ASSESSEE. ASSESSEE'S APPEALS AS W ELL AS REVENUE APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES .' 30. IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL, WE REMI T THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER ON SIMILA R DIRECTION. HOWEVER, WHILE DETERMINING THE VALUE OF CONSIDERATION IT SHA LL NOT GO ABOVE RS. 925 PER SFT. THIS GROUND IS PARTLY ALLOWED FOR STA TISTICAL PURPOSES. I.T.A. NO. 1393/HYD/2010 SMT. P. PRATHIMA REDDY ===================== 19 31. THE NEXT GROUND IS WITH REGARD TO DISALLOWANCE OF E XPENDITURE OF RS. 5 LAKHS AND RS. 1,61,300 PAID TO LABOURERS FOR ARRIVING THE COST OF ACQUISITION. NO DETAILS HAVE BEEN PRODUCED BEFORE THE LOWER AUTHORITIES REGARDING THIS EXPENDITURE. AS SUCH IT WAS DISALLO WED. BEFORE US ALSO THE ASSESSEE WAS NOT ABLE T O LEAD ANY EVIDENCE TO SHOW INCURRING OF THIS EXPENDITURE TOWARDS COST OF ACQUISITION. IN THE AB SENCE OF ANY EVIDENCE IN SUPPORT OF THE EXPENDITURE, WE ARE INCLINED TO D ISMISS THIS GROUND. 32. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH SEPTEMBER, 2012. SD/ - (SAKTIJIT DEY) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 14 TH SEPTEMBER, 2012 TPRAO COPY FORWARDED TO: 1. SMT. P. PRATHIMA REDDY, C/O. M/S. KBS & ASSOCIATES, CHARTERED ACCOUNTANTS, 6-2-940, F. NO. 403, PADMAJA CHAMBERS, KHAIRATABAD, HYDERABAD-500 004. 2. INCOME TAX OFFICER, WARD - 6(4), I.T. TOWERS, AC GUARDS, HYDERABAD. 3. THE CIT(A) - IV, HYDERABAD. 4. THE CIT - III, HYDERABAD. 5. THE DR A BENCH, ITAT, HYDERABAD