Deputy Commissioner Of Income Tax, Central Circle- 2(2), Bangalore V. Sri Sai Lakshmi Industries Private Limited, Bangalore

ITA 1624/BANG/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 6875 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 10-07-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Capital Gains
• Section: 64; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B. R. BASKARAN, ACCOUNTANT MEMBER ITA No.1624/Bang/2019 Assessment Year :2014-15 The Deputy Commissioner of Income Tax, Central Circle – 2(2), Bengaluru. Vs. M/s. Sri Sai Lakshmi Industries Pvt. Ltd., Hoskote Road, Kannamangals Village, White Field, Bengaluru–560 020. PAN : AAECS 6488 B APPELLANTRESPONDENT Assessee by :Shri.V. Sridhar, CA Revenue by:Shri.Sumer Singh Meena, CIT(DR)(ITAT), Bengaluru. Date of hearing:10.03.2022 Date of Pronouncement:15.03.2022 O R D E R Per N. V. Vasudevan, Vice President : This is an appeal by the Revenue against order dated 29.03.2019 of CIT(A)-14, Bengaluru, relating to Assessment Year 2014-15. 2. The assessee entered into a Joint Development Agreement (JDA for short) dated: 3.4.2013 with M/s Assetz Whitefield Homes P.Ltd., (hereinafter called Developer, for short) and the same was registered before the Sub- Registrar on 2.7.2013. The agreement was for development of 22 acres and 23 guntas of land in various Survey Numbers situated at Kannamangala Village, Bidarahalli Hobli, Bangalore East Taluk, Bangalore Dist (hereinafter referred to as ‘the property’). As per the JDA, the parties were to share what is defined as “Project Revenue” between the Developer and the assessee in the ratio of ITA No.1624/Bang/2019 Page 2 of 17 70 : 30 respectively. The “Project Revenue” meant the aggregate of the amounts attributable to Base Sale Price, Initial club membership admission fees, car park charges, delayed interest payment and any other amount collected from the purchasers of units, but excluded certain items like deposits with BWSSB, BESCOM, maintenance fee etc., as specified in clause 5.1(b) of the agreement. The assessee received refundable interest free deposit of Rs.31,15,35,000/- from the Developer as security to ensure appropriate performance by the Developer, which is to be recovered by the Developer directly and by way of deduction from the Owner’s share of Project Revenue. 3. The assessee did not declare any income under the head “Capital Gain” in the Return of Income filed for Assessment year 2014-15. The facts regarding the JDA came to light in the course of Assessment Proceedings. The AO in the order of assessment concluded that there was a transfer of the property by the assessee under the JDA within the meaning of Section 2(47)(v) of the Income tax Act, as held by the Hon’ble High Court of Karnataka in the case of CIT Vs. Dr. T.K.Dayalu 202 Taxman 531(Karnataka)”. 4. Before CIT(A), the assessee contended that the AO erred in concluding that there was a transfer of the property by the assessee under JDA. It was submitted that the Karnataka High Court in the case of Dr. T.K.Dayalu (supra) has referred to the decision of the Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia vs. CIT (2003) 260 ITR 491 (Bom) in which it was held that the date relevant for attracting capital gain having regard to the definition under s. 2(47) of the Act is the date of passing of or transferring of “complete control over the property” in favour of the developer. The decision of the Hon’ble Bombay High Court has observed that if the contract read as a whole ITA No.1624/Bang/2019 Page 3 of 17 indicates that at the time of entering into JDA there is transfer of complete control over the property in favour of the developer, the date of entering into JDA has to be considered to be relevant for recognising the transfer of land by the land owner. Thus, the essence of the decision is that the transfer of land u/s 2(47) of the Act may be considered when there is transfer of complete control (or, in other words privileges of ownership) over the asset by the owner to the developer. It was submitted that even in the case of Dr. Dayalu (supra), it was conceded that as per the clause in the JDA, on the date of original agreement dt. 26th Jan., 1996, possession had been handed over and a sum of Rs. 45 lakhs has been paid in addition to the structure which the assessee was entitled free of cost. Further, as per the agreement, actual possession of the property was handed over on 30th May, 1996 and an affidavit was also filed to that effect. On these admitted facts. It was concluded that the date of entering of the development agreement would be construed to be the date of transfer of land by the land owner. Therefore, the reliance placed on the decision of the Karnataka High Court in the case of Dr. T.K. Dayalu (supra) by the Assessing Officer is not correct as the above judgement does not suggest that the date of entering into development agreement would be construed as the date of transfer of land by the land owner, irrespective of the terms of Development agreement, particularly when there is no intention to “transfer” the land by the land owner to the developer. 5. The CIT(A), after noticing that under para 3.2 of the JDA, only a licence was given to the develop to develop the property and that such permission cannot be equated with delivery of possession in part performance under the JDA within the meaning of section 53-A of the Transfer of Property Act, 1882, held that on a combined reading of the relevant clauses of the JDA that the possession was retained by the assessee and not passed on to the developer. He ITA No.1624/Bang/2019 Page 4 of 17 held that the transferee has not taken possession of the property and as such the main ingredient of the jurisdictional High Court’s decision remains unfulfilled. Accordingly, the CIT(A) held that there was no transfer of the property and therefore no capital gain can be brought to tax in the relevant Assessment Year. 6. Aggrieved by the order of the CIT(A), the Revenue is in appeal before the Tribunal. The learned DR relied on the order of the AO while the learned Counsel for the assessee relied on the order of the CIT(A) and the following decisions in which it had been held that if there is no delivery of possession in part performance of an Agreement for Sale within the meaning of section 53A of the Transfer of Property Act, 1882, there cannot be a transfer within the meaning of section 2(47)(v) of the Act. The following were the cases cited in this regard: COMMISSIONER OF INCOME TAX vs. BALBIR SINGH MAINI & ORS. (2017) 398 ITR 531 (SC). CIT Vs. Sadia Shaikh - TS-5855-HC-2013 (Bombay-O) Pr. CIT V. Infinity Infotech Parks Ltd., (2018) 407 ITR 137 (Cal.) Pr. CIT V. Infinity Infotech Parks Ltd., (2018) 407 ITR 137 (Cal.) Infinity Infotech Parks Ltd., (2018) 407 ITR 137 (Cal.). Lakshmi Swarupa Vs. ITO (2019) 174 ITD 54 (Bang) SMC DCIT V. Hema Mohanlal (2018) 54 CCH 0393 (Cochin) Fibras Infratch P Ltd. Vs. ITO (2014) 98 DTR 0281 = (2014) 64 (Hyd) MS. K. RADHIKA & ORS. vs. DEPUTY COMMISSIONER OF INCOME TAX (2012) 149 TTJ (Hyd) 736 INCOME TAX OFFICER vs. FINIAN ESTATES DEVELOPERS (P) LTD. (2011) 142 TTJ (Del) 545 ITA No.1624/Bang/2019 Page 5 of 17 CIT Vs. Charanjit Singh Atwal ((2015) 234 TAXMAN 0069 (P&H). 7. We have carefully considered the rival submissions. The various clauses in the Development Agreement has to be seen to ascertain what was the Agreement between the parties. The relevant clauses in the Development Agreement are extracted below : Clauses 3.1 to 3.4 of the JDA provides as follows: 3.1 Post receipt of a portion of the refundable interest free deposit referred to in Clause 4.2 and in consideration of the other mutual rights and obligations specified in this Agreement, as on the date of this Agreement, the Owner hereby permits the Developer to enter as a licensee and develop the JD property in the manner and subject to the terms and conditions set forth in this Agreement. In consideration of the Developer’s Revenue and other mutual rights and obligations specified in this Agreement, the Developer hereby accepts the right to enter and agrees to develop the JD property in the manner and subject to the terms and conditions set forth in this Agreement. Until conveyed to the purchasers of the units in the Project, the Owner shall own the entire JD property and the Developer shall own all structures, units, buildings and other infrastructure constructed, erected or installed by the Developer on the JD property pursuant to this Agreement. (emphasis supplied) 3.2 Under and in terms of this Agreement, the Owner grants the Developer, its agents, servants, associates and any Person claiming through or under the Developer, permission and authorisation to enter the JD property to develop the same. Owner shall not part with, and does not intend to part with possession in favour of Developer, at any point of time during the development of the JD property. Nothing herein shall be construed as transfer or sale of the JD property or any part thereof by the Owner in favour of the Developer, delivery of part-possession under Section 53-A of the Transfer of Property Act, 1882 or “transfer” under Section 2(47) of the Income Tax Act, 1961.(emphasis supplied) ITA No.1624/Bang/2019 Page 6 of 17 3.3 Except as specifically and expressly provided under this Agreement, the Owner cannot revoke the right, permission and authorisation granted to the Developer under this Agreement, until Completion of the Project and Final Settlement. 3.4 It is hereby clarified that the Developer has no ownership rights in the JD property. It is further clarified that the Developer shall not be entitled to transfer undeveloped land. (emphasis supplied) Clause 4.1 Refundable Interest Free Deposit The Developer has agreed to pay as security to ensure appropriate performance by the Developer of its obligations towards the Project, a refundable interest free deposit of Rs.1,38,00,000/- (One Crore Thirty Eight Lakhs) per acre of the JD Property. The total amount of refundable interest free deposit is Rs.31,15,35,000 (Rupees Thirty One Crores Fifteen Lakhs Thirty Five Thousand). Clause 4.6 Refund of refundable interest free deposit The refundable interest free deposit paid by the Developer to the Owner shall be recovered by the Developer directly and by way of deduction from the Owner’s Revenue, in the manner prescribed below. The Owner shall issue a cheque in favour of the Developer as and when the trigger events described below in sub-clauses (a) to (e) are met. In the event the Owner fails to refund the refundable interest free deposit within 15 (fifteen) days from the same becoming due in accordance with the provisions of this Clause 4.6, the Developer shall be entitled to recover the refundable interest free deposit from the Reconciliation Cash Escrow Account along with interest at the rate of 24% (Twenty Four Percent) per annum. (a)First instalment of Rs.2,82,18,750/- (Two Crores Eighty Two Lakhs Eighteen Thousand Seven Hundred and Fifty), upon the Owner having received the Owner’s revenue of Rs.2,82,18,750/- (Two Crores Eighty Two Lakhs Eighteen Thousand Seven Hundred and Fifty); ITA No.1624/Bang/2019 Page 7 of 17 (b)Second instalment of Rs.2,82,18,750 (Two Crores Eighty Two Lakhs Eighteen Thousand Seven Hundred and Fifty), upon receipt of one third of the revenue in the Cash Escrow Account before any further disbursement of the Owner’s Revenue. (c)Third instalment of Rs.2,82,18,750 (Two Crores Eighty Two Lakhs Eighteen Thousand Seven Hundred and Fifty), after receipt of two thirds of the revenue in the Project Escrow Account before any further disbursement of the Owner’s Revenue. (d)Fourth instalment of Rs.2,82,18,750 (Two Crores Eighty Two Lakhs Eighteen Thousand Seven Hundred and Fifty), after receipt of 95% of the revenue in the Cash Escrow Account before any further disbursement of the Owner’s Revenue. (e)Fifth instalment of all remaining refundable interest free deposit, on the day falling 6 months after the Final Settlement. For the purposes of this Clause 4.6, ‘revenue’ shall mean the launch price multiplied by the Saleable Area. Clause 5.1 Revenue (a)The Parties agree that the term “Base Sale Price” shall mean sale price of the units including additional charges on account of floor rise and preferred location charges if any, calculated after excluding (i) car park cost, (ii) club house membership fees, (iii) any interest payments or penalties paid by third party purchasers for delay in making payments for purchase of the units in the Project, (iv) transfer fees collected from purchasers of units for transfer of allotted units, (v) money collected towards deposits with statutory authorities such as BWSSB and BESCOM (vi) money collected towards legal fees and other charges for documents, stamping and registering the conveyance of units to purchasers, (vii) money collected for maintenance fee and sinking fund (viii) money collected towards payment of Taxes in relation to the Project (ix) amounts collected in relation to escalation in Taxes/addition of Taxes ITA No.1624/Bang/2019 Page 8 of 17 (that may be paid on account of the impending levy of goods and services tax); and (xi) Other amounts; Clause 5.2 Revenue Share (a)Subject to the other provisions of this Agreement, the Project Revenue shall be shared between the Developer and the Owner in the ratio of 70 (Seventy) : 30 (Thirty) respectively. The Owner shall be entitled to 30% (Thirty Percent) of the Project Revenue herein referred to as “Owner’s Revenue” and the Developer shall be entitled to 70% (Seventy Percent) of the Project Revenue, herein referred to as “Developer’s Revenue” for developing the project. (b)In addition to the Developer’s Revenue, the Developer shall also be entitled to all revenues generated from the Project which have been excluded from the definition of Project Revenue in sub-clause (i) to (vi) of Clause 5.1(b). The Developer shall be entitled to retain such amount and also use such amounts for the purposes of making payments to the relevant persons, including statutory authorities. (c)The Parties agree that all amounts from the Project shall be deposited and dealt with in accordance with Clause 6. 11 Clause RIGHTS OF THE DEVELOPER 11.2 The Developer shall own all structures, units, buildings and other infrastructure constructed, erected or installed pursuant to this Agreement but shall not own or possess the JD Property. The Ownership/title of the built up area of the Project will be transferred by the Developer. The proportionate undivided share in the JD Property will be sold/transferred by the Owner, through the Developer acting as Power of Attorney holder. 11.3 The Developer shall be entitled to raise loans for development of the Project and fulfill the Developer’s obligations under this Agreement, by creating Encumbrance or mortgage on not more than 70% (Seventy Percent) of the JD Property as security for the loans that may be raised by it for ITA No.1624/Bang/2019 Page 9 of 17 development of the Project, pursuant to the Power of Attorney, subject to a maximum outstanding of Rs.60,00,00,000 (Rupees Sixty Crores) at any given point of time. For the purpose of clarity, the right to Encumber or mortgage the JD Property in itself does not provide the Developer with any rights over the land and is purely to facilitate the raising of finance or the development of the JD Property and to fulfil the Developer’s obligations under this Agreement. The charge over the land encumbered or mortgaged shall be released by the Developer upon termination of the agreement or Completion of the Project, whichever is earlier. (emphasis supplied) Clause 13. POWER OF ATTORNEY 13.1 The Owner shall, simultaneously with the execution of this Agreement, execute and register a power of attorney in favour of the Developer, to do all acts and deeds in relation to the rights, obligations and entitlements under this Agreement and as contemplated under the power of attorney (“Power of Attorney”). It is clarified that the powers provided under the Power of Attorney are administrative in nature. (emphasis supplied)” 8. From a reading of the above clauses of the JDA, it is clear that the Developer will take possession of the property for the specific purpose of development only, that too after satisfying the conditions like obtaining approvals etc. The clause also provides that possession given to the develop cannot be regarded as delivery of possession in part performance of Agreement for Sale as contemplated under section 53-A of the Transfer of Property Act, 1882. The Hon’ble Supreme Court in the case ofCOMMISSIONER OF INCOME TAX vs. BALBIR SINGH MAINI & ORS. (2017) 398 ITR 531 (SC) on identical clause in a JDA held as follows: “23. A reading of the JDA in the present case would show that the owner continues to be the owner throughout the agreement, and has at no stage purported to transfer rights akin to ownership to the developer. At the highest, possession alone is given under the agreement, and that too for a ITA No.1624/Bang/2019 Page 10 of 17 specific purpose -the purpose being to develop the property, as envisaged by all the parties. We are, therefore, of the view that this clause will also not rope in the present transaction.” 9. In a decision rendered on identical clause in a JDA, Bengaluru ITAT in the case of Dr. Krishna Prasad Mikkilineni Vs. DCIT ITA No.929/Bang/2018, order dated 31.01.2022, it was held as follows: “6. We heard the parties and perused the record. We notice that the assessee, along with other co-owners, has entered into a joint development agreement on 30.3.2019 with M/s. Arun Shelters Pvt Ltd. The following clauses of the agreement are relevant and they have been extracted by Ld. CIT(A) also:- 1 SCOPE OF THE AGREEMENT AND THE RELATIONSHIP BETWEEN THE PARTIES: 1.1 The agreement shall be one for the development of the schedule property jointly by the parties hereto, with the owners undertaking to do acts, deeds and things as may be required of them and having hereby granted permission to the developer to enter upon the schedule property. remain thereon and carry out all operations necessary for the concept, commencement, execution and completion of the project, and the developer, in pursuance of the said permission, having entered upon the schedule property and hereby undertaking to carry out all operations necessary for the commencement, execution and completion of the project at the cost, expense and effort of the developer, in accordance with the terms and conditions set out herein. .................................................................... .................................................................... 11. MISCELLANEOUS 11.1 In terms of the permission granted by the owners to the developer to enter upon the schedule property under clause 1.1, the developer may remain on the schedule property for the execution of the project including housing workmen and security personnel and storage of material,. the developer shall remove its men and material and vacate the schedule property on the completion of the project or on termination or rescission of this agreement for any reason whatsoever; notwithstanding the use of the schedule property by the ITA No.1624/Bang/2019 Page 11 of 17 developer for the project, the possession of the schedule property shall always be with the owners and the developer shall not claim any right in this regard. 7. The Ld. CIT(A) even though considered the above said clauses of the agreement took the view that the above said clauses contradict with the various clauses of general power of attorneygiven to M/s. Arun Shelters Pvt. Ltd. However, a careful perusal of the above said clauses would show that the assessee has retained the possession of the scheduled property and it is clearly stated so in clause 11.1 extracted above. It is further stated that the developer shall not claim any right in this regard. In clause 1.1 extracted above also, it is clearly stated that the developer is granted only permission to enter upon the scheduled property. 8. An identical issue was considered by the coordinate bench in the case of Anugraha Shelters Pvt. Ltd. (supra), wherein it was held that there is difference between permissive possession and legal possession. In the case of permissive possession, the developer enters the scheduled property on behalf of the owner and not in the independent capacity of purchaser of the property. For the sake of convenience, we extract below the relevant observations made in the above cited case by the coordinate bench:- “10. We notice that the assessee has entered into a joint development agreement on 29.12.2005 and on the very same day a supplementary joint development agreement was also entered. Both the agreements have been registered with the registration authorities. The last paragraph in page 4 of the supplementary joint development agreement is relevant here and the same reads as under:- “The I Party or Owners hereby undertake to conveyor transfer at the cost of the II Party or Developers 65% share of undivided interest in the Schedule property to the II party or Developers at their request to their nominees or buyers located by them at rates which may be decided by the II Party or Developers and hereby grant them exclusive rights to construct the residential apartments as per the sanctioned plan to obtained from the sanctioning authorities based on the approved plan. For this purpose, the I Party or Owner hereby grant them irrevocable permission and license including authority to the II Party or Developers to enter upon the Schedule Property for the purpose of construction residential apartments as per the sanctioned plan to be obtained. The II Party or Developers shall enter upon the Schedule Property for ITA No.1624/Bang/2019 Page 12 of 17 commencing the preliminary work and continue to exercise the said right throughout the construction period until the completion the entire project. This license however shall not be construed as possession delivered in part performance under Section 53 of Transfer of Property Act nor any property right shall be deemed to vest in favour of the II Party or Developers, save as expressly provided in this agreement. The I Party or Owners shall not enter into any agreement with any party to sell 65% of undivided share in schedule property or any part thereof which is allotted to the II Party or Developers except to the nominees of the II Party or Developers or the buyers located by them.” We notice that the AO has also extracted the above cited clause in the assessment order, but conveniently omitted the a portion of the paragraph highlighted above. 10. A careful perusal of the above said paragraph of the agreement would show that the developer is granted irrevocable permission and license to enter the scheduled property for the purpose of construction of residential apartments as per the plan to be obtained. It is specifically been mentioned that the license so granted shall not be considered as possession delivered in part performance of the contract u/s 53(sic. 53A) of Transfer of property Act nor any property right shall be deemed in favour of developer. 11. We notice that the AO has invoked the provisions of sec.2(47)(v) of the Act, which reads as under:- “2(47) “transfer” in relation to a capital asset includes .................... (v) 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 referred to in Section 53A of the Transfer of Property Act, 1882 (4 of 1882).” The provisions of section 53A of the Transfer of property Act reads as under:- “53A. Part performance.—Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the ITA No.1624/Bang/2019 Page 13 of 17 contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that 2[***] where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: 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.” 11.A careful perusal of the above said provision would show that the transferee should have taken possession in part performance of the contract and has done same act in furtherance of the contract. In the instant case, development agreement clearly specified on the possession of the property was not given and what was given is only license to enter the property. The question whether granting of such kind of license would amount to “Possession” within the meaning of sec.53A of Transfer of Property Act r.w.s sec. 2(47)(v) of Income tax Act was examined by the Bangalore SMC bench of Tribunal in the case of Smt. Lakshmi Swarupa vs ITO (ITA No.2278/Bang/2018 dated 12.10.2018). The relevant observations made and decision taken by the Tribunal in the above said case are extracted below:- “4. Clause 1 of the JDA provides as follows: "1) PERMISSION FOR DEVELOPMENT: 1.1) The Owner is in possession and enjoyment of the Schedule Property. The Owner hereby authorize the Promoter for the purpose of development, to enter upon the Schedule Property and develop the same, however the authority so granted does not in any manner be construed as delivery of possession by the Owner in part performance of this agreement under Section 53-A of the Transfer of Property Act or under Section 2(47)(iv) of the Income Tax Act, 1961. 1.2) The Owner hereby agrees not to interfere or interrupt in the course of construction and development of the Schedule Property ITA No.1624/Bang/2019 Page 14 of 17 and/or commit any act or omission having the effect of delaying or stopping the work that has to be done under this Agreement. However, the Owner shall always be entitled to inspect the progress of the work and type of work which is being done on the Schedule Property." .............. 9. I have carefully considered the rival submissions. Sec.45 of the Act lays down that profits and gains arising out of transfer of capital asset effected in the previous year shall be chargeable to income tax under the head "capital gains" and shall be deemed to be the income of the previous year in which the transfer took place. It is thus clear that there should be transfer during the previous year to attract charge to tax on capital gain. Sec.2(47) of the Act defines "Transfer" for the purpose of the Act. It reads thus: "Sec.2 (47) "transfer", in relation to a capital asset, includes,-- (i)the sale, exchange or relinquishment of the asset; or (ii)the extinguishment of any rights therein ; or (iii)the compulsory acquisition thereof under any law ; or (iv)in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in trade of a business carried on by him, such conversion or treatment ; or (iva) the maturity or redemption of a zero coupon bond; or (v)any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or (vi)any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. ITA No.1624/Bang/2019 Page 15 of 17 Explanation [1]: For the purposes of sub-clauses (v) and (vi), "immovable property" shall have the same meaning as in clause (d) of section 269UA;" 10. The clause that was invoked by the revenue authorities in the case of the Assessee is Sec.2(47)(v) of the Act. Under the general law, transfer of immovable property of the value of rupees one hundred and upwards can take place only by a registered deed. If no registered deed is executed in respect of such property, legal title or ownership is not effectively conveyed to the transferee although transferee might have paid entire consideration and/or obtained possession from the transferor in pursuance of contract of sale. "Transfer" in section 2(47) also envisaged execution of registered deed in such circumstances. Capital gains become liable to be charged to tax only if they arise as a result of "transfer" of capital asset and the date on which they arise is date of "transfer". If as a result of mutual arrangement by parties or otherwise, no registered deed is executed even after transaction is completed by delivery of possession and receipt of consideration, capital gains tax would escape assessment altogether or if such execution of registered sale- deed is postponed, the capital gains tax would also be postponed. In several cases it suited the parties to complete such transactions without execution of registered deed and thereby evade payment of tax on capital gains. It is in order to plug this loophole that cl. (v) was inserted in section 2(47) to lay down that transfer would include any transaction involving allowing of possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of Transfer of Property Act. Thus, the Provisions of Sec.53A of the Transfer of Property Act, 1882 stand incorporated into the provisions of the Income Tax Act, 1961. If that be so then the Tax authorities for coming to a conclusion that provisions of Sec.53A of the Transfer of Property Act, 1882 are attracted to a particular transaction have to come to a conclusion the transaction/agreement in question is such that the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee, has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract. ITA No.1624/Bang/2019 Page 16 of 17 11. In the present case, the clause in the JDA regarding possession clearly states that what is given is not possession contemplated u/s.53A of the Transfer of Property Act and that it is merely a license to enter the property for the purpose of carrying out development. Further, the subsequent MOU dated 16.8.2006 and delivery of legal possession on 22.4.2006 clearly shows that there was no transfer within the meaning of Sec.2(47)(v) of the Act during the previous year relevant to AY 2006-07. Therefore, invocation of the provisions of Sec.2(47)(v) in the facts and circumstances of the present case on the basis of clause-1 of the JDA, in my view was not proper. The possession in the present is traced to the joint development agreement which is in the nature of permissive possession and not possession in part performance of agreement for sale. In the present case, there is no document by which the revenue can come to the conclusion that there was delivery of possession. The mere fact that development of the property cannot be done without possession cannot be the basis to come to a conclusion that possession was delivered in part performance of the agreement for sale in the manner laid down in Sec.53A of the Transfer of Property Act. Such possession as I have already held is on behalf of the Assessee and not in the independent capacity of purchaser of the property. 12. For the reasons given above, I hold that there was no transfer during the previous year relevant to AY 2006-07. Therefore, capital gain on transfer of the property cannot be assessed in AY 2006-07. The assessment of capital gain in AY 2006-07 is therefore held to be bad and deleted.” 13. In the instant case also, we have noticed that the assessee has given permissive possession and not “legal possession” as contemplated within the meaning of sec.53A of the Transfer of Property Act. Hence we hold that the provisions of sec.53A of the Transfer of Property Act are not applicable to the impugned Joint Development Agreement. In this view of the matter, the provisions of sec.2(47)(v) of the Act are also not applicable. Hence the tax authorities are not justified in invoking the above said provision and consequently, the capital gains assessed in the hands of the assessee is liable to be deleted.” 10. In the instant case also we notice that the assessee has given only permissive possession and not legal possession. Accordingly, following the ITA No.1624/Bang/2019 Page 17 of 17 above said decision of the coordinate bench, we hold that transfer has not taken place during the year under consideration. Accordingly, capital gain is not assessable in the hands of the assessee during the year under consideration. We therefore uphold the order of the CIT(A). 10. In the result, the appeal filed by the Revenue is dismissed. Pronounced in the open court on the date mentioned on the caption page. Sd/- Sd/- Bangalore. Dated: 15.03.2022. /NS/* Copy to: 1.Appellants2.Respondent 3.CIT4.CIT(A) 5.DR6.Guard file By order Assistant Registrar, ITAT, Bangalore. (B. R. BASKARAN) (N. V. VASUDEVAN) Accountant Member Vice President