DCIT, CHENNAI V. Shri Uttam Kumar Jain, CHENNAI

ITA 2048/CHNY/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9663 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 04-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 09-11-2012
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: S SRIDHAR
• Keywords: Capital asset; Advance ruling
• Section: 2(14); 27; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . ! ' , # '$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . /ITA NO. 2048/MDS/2012 / ASSESSMENT YEAR : 2008-09 THE DEPUTY COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-V(2), CHENNAI 34. ( /APPELLANT) V. SHRI UTTAM KUMAR JAIN, NO.378, MINT STREET, CHENNAI - 79. PAN AAFPJ3254N RESPONDENT) / APPELLANT BY : SHRI P. RADHAKRISHNAN, JCIT / RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE ! / DATE OF HEARING : 04.02.2016 '# ! / DATE OF PRONOUNCEMENT : 13.04.2016 % / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 31 .8.2012. - - ITA 2048/12 2 2. THE MAIN CRUX OF THE GROUND RAISED BY THE REVENU E IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ER RED IN HOLDING THAT THE JOINT VENTURE AGREEMENT DID NOT RE SULT IN TRANSFER OF CAPITAL ASSET IN THE YEAR UNDER CONSIDE RATION AND HENCE NO CAPITAL GAIN HAD ARISEN. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE ALON G WITH SIX OTHERS ENTERED INTO JOINT DEVELOPMENT AGREEMENT(JDA ) WITH M/S. VIJAY SHANTHI BUILDERS (DEVELOPER) FOR THE DEV ELOPMENT OF PROPERTY AT CHETTIPEDU IN MEVALUR KUPPAM VILLAGE, SRIPERUMBUDUR TALUK, KANCHEEPURAM DISTRICT. AS PER THIS JDA, THE DEVELOPER WILL GET 60 TO 65% AND THE LAND OWNER S WILL GET 30 TO 35% AND THE DEVELOPER PAID TO THE OWNERS ` 2.50 CRORES AS INTEREST FREE REFUNDABLE SECURITY DEPOSIT BY WAY OF CHEQUE BEARING NO.117146 DATED 20.10.2007. AT PAGE 3 CLAU SE (2) OF THE SAID AGREEMENTS STATES THAT THE DEVELOPER HAS A CCEPTED TO DEVELOP THE SCHEDULE A MENTIONED PROPERTY AFTER GET TING THE NECESSARY PLAN SANCTION FROM THE CHENNAI METROPOLIT AN DEVELOPMENT AUTHORITY/CORPORATION AND THE CASE MAY BE. AT PAGE 5 PARA. (11) OF THE SAID AGREEMENT STATES THAT THE DEVELOPER SHALL GIVE AN ACKNOWLEDGEMENT IN WRITING TO THE - - ITA 2048/12 3 OWNERS OF HAVING RECEIVED ALL THE ORIGINAL TITLE DE EDS, PERTAINING TO THE SCHEDULE MENTIONED PROPERTY, FOR THE PURPOSE S OF APPLYING AND GETTING PLAN SANCTION, LAY-OUT SANCTION, SUB-DI VISION SANCTION, FOR GETTING VARIOUS PERMISSIONS FROM LOCA L AND STATUTORY AUTHORITIES ETC. FURTHER, IT WAS MENTIO NED THAT ORIGINAL TITLE DEEDS AND ALL RELEVANT DOCUMENTS SHALL BE HAN DED OVER TO THE ASSOCIATION AFTER THE COMPLETION OF THE ENTIRE WORK OF CONSTRUCTION. FURTHER, THE VENDOR/OWNER HAS TO EX ECUTE A GENERAL POWER OF ATTORNEY IN FAVOUR OF SHRI SURESH JAIN, MANAGING DIRECTOR OF THE DEVELOPING COMPANY FOR OBT AINING THE PERMISSIONS AND APPROVAL FROM CONCERNED AUTHORITIES . IT WAS FURTHER NOTICED FROM PARA 16 AT PAGE 7 OF THE JDA T HAT THE OWNERS HAVE GIVEN POWER TO THE DEVELOPER TO ADVERTI SE FOR THE SALE OF FLATS AND NEGOTIATIONS FOR THE SALE WITH THE PROSPECTIVE BUYERS ETC. AND SALE DEEDS WOULD BE EXECUTED BY THE DEVELOPER, THROUGH THEIR POWER OF ATTORNEY AGENT AND THE DEVEL OPER WOULD BE RESPONSIBLE FOR THE TRANSACTIONS WITH THE PROSPE CTIVE BUYERS. IT WAS ALSO MENTIONED THAT THE DEVELOPER AGREES TO CONSTRUCT AND DELIVER THE CONSTRUCTED AREA INCLUSIV E OF COMMON AREAS TO THE OWNERS IN FIT CONDITION FOR OCC UPATION - - ITA 2048/12 4 WITHIN 36 MONTHS FROM THE DATE OF RELEVANT PLAN SAN CTIONS AND OTHER PERMISSIONS REQUIRED FOR CONSTRUCTION FRO M THE STATUTORY AUTHORITIES AND OR HANDING OVER OF VACANT POSSESSION OF THE ENTIRE SCHEDULE A PROPERTY TO THE DEVELOPER, WHICHEVER IS LATER. THUS, ACCORDING TO THE AO, THE LAND OWNERS HAVE GIVEN THE POSSESSION OF THE EN TIRE LAND OWNED BY THEM TO THE DEVELOPER FOR DEVELOPING PURPOSE. HOWEVER, BEFORE THE AO, THE ASSESSEE PL EADED THAT THE DEVELOPER HAS NOT FULFILLED THEIR COMMITME NTS. THIS FACT WAS BROUGHT VIDE LETTER DATED 19.11.2010, WHER EIN THE ASSESSEE HAD ENCLOSED A LETTER DATED 6.7.2009 ADDR ESSED TO MR. SURESH KUMAR JAIN, M.D. OF M/S. VIJAY SHANTH I BUILDERS PVT. LTD., WHEREIN THE ASSESSEE INFORMED T HE DEVELOPER AS FOLLOWS: A) WE ARE HAVING HUGE FINANCIAL COMMITMENT B) AS THING STAND TODAY, IT IS UNLIKELY THAT YOU WILL BE ABLE TO MEET THE DEADLINE OF OCTOBER, 2010 C) INSPITE OF ALL THESE CHANGES, THE PROGRESS IS IN MINIMUM. D) IT IS NOT FEASIBLE TO CONTINUE WITH THIS J.V. AGREEMENT, UNDER THESE CIRCUMSTANCES. HOWEVER, THERE WAS NO CANCELLATION OF JDA DATED 20.10.2007. ACCORDINGLY, THE AO OBSERVED AS UNDER : - - ITA 2048/12 5 1) J.V.AGREEMENT WAS DATED 20.10.2007. 2) TO COMPLETE THE CONSTRUCTION WITHIN 36 MONTHS FR OM THE DATE OF PLAN SANCTIONS, OTHER PERMISSIONS FROM THE STATUTORY AUTHORITIES AND HANDING OVER OF VACANT POSSESSION OF SCHEDULE-A PROPERTY WHICHEVER IS LATE R, WITH A GRACE PERIOD OF 12 MONTHS, BEYOND THE PERIOD STIPULATED IN THE AGREEMENT. 3) AT PARA 11 OF JVA, THE OWNER HAD GIVEN ORIGINAL TITLE DEEDS TO THE DEVELOPER FOR APPLYING PERMISSION W.R. T. BUILDING PLAN AND OTHER PERMISSION FROM THE STATE AUTHORITIES WHICH SHOWS THAT THE POSSESSION OF THE PROPERTY HAVE BEEN TRANSFERRED. 4) PARA 12 OF PAGE 6, BY EXECUTING GENERAL POWER OF ATTORNEY REGISTERED IN FAVOUR OF SRI SURESH JAIN, M .D. OF VIJAY SHANTHI GROUP SHOWS THAT POSSESSIONS HAVE BEE N GIVEN. 5) THE SUPPLEMENTARY AGREEMENT WAS DATED 19.04.2010 WHICH IS 2 YEARS 6 MONTHS FROM THE DATE OF J.V.AGREEMENT. 3.1 FURTHER, THERE WAS SUPPLEMENTARY AGREEMENT DATE D 19.4.2010, WHICH SHOWS THAT IT WAS ONLY A SUBSTITUT ION AND CONTINUATION OF EARLIER JDA AND DIFFERENCE BETWEEN THESE TWO JDA ARE AS FOLLOWS : I) IN THE FIRST AGREEMENT THE PARTIES OF FIRST PART Y HAD RECEIVED ` 2.50 CRORES INTEREST-FREE REFUNDABLE SECURITY DEPOSIT. II) IN THE SUPPLEMENTARY AGREEMENT, IT WAS SHOWN AS SALES FOR A CONSIDERATION OF ` 33 CRORES. - - ITA 2048/12 6 III) IN THE FIRST AGREEMENT, SHARING THE PROCEEDS OF DEVELOPMENT IS IN THE RATION OF 65% & 35% IV) LATER AGREEMENT REVEALS OUTRIGHT SALE. V) IF THE JVA IS CANCELLED THEN THE DEVELOPER WOULD NOT HAVE STARTED ANY CONSTRUCTION IN THE SAID LAND. FO R THE REASONS BEST KNOWN TO THEM, THE OWNERS SAID THAT TH EY HAVE CANCELLED THE JVA AFTER LAPSE OF 2 YEARS AND 6 MONTHS. VI) MAY BE, TO AVOID CAPITAL GAIN AND TO CLAIM DEDU CTION U/S.80IB, THE OWNERS AND THE DEVELOPER WOULD HAVE C ARRIED OUT THE ABOVE METHOD. 3.2 FURTHER, BY DECEMBER, 2011 THE DEVELOPER ALMOST CONSTRUCTED 9 TOWERS EACH HAVING 9 FLOORS, WHICH IS EVIDENT FROM THE FOLLOWING: IN SUPPORT OF THE ABOVE, SAMPLE SALE DEED RECEIVED FROM THE STATE SUB-REGISTRAR OFFICE HAS SHOWN THAT THE POWER OF ATTORNEY HOLDER VIZ. MR. SURESH JAIN, M.D. OF VIJAY SHANTHI BUILDERS (P) LTD . WHICH WAS CONVEYED BY MR. PRAVEEN KUMAR AND 6 OTHERS VIDE DOC. NO.1920/07 IN BOOK-4 OF SL REGISTRAR, PERIAMET AND THE OWNERS (MR. PRAVEEN KUMAR & 6 OTHERS) HAD TRANSFERRED THE UNDIVIDED SHARE OF LAND OF 536.21 SQ.FT. OF SCH-A PROPERTY TO THE PROPOSED PURCHASER OF ONE OF THE FLATS VIZ. SHAIK M D. SHAFIJAN AND DR. N. SADIYA SHAFIJAN VIDE DOC. NO.6175/09 DATED 21.08.2009. SIMILARLY ON 18.11.2010 VIDE DOC. NO.11 356/10 DATED 18.11.2010, THE ABOVE OWNERS/POWER OF ATTORNE Y HOLDER HAVE TRANSFERRED THE UNDIVIDED SALE OF LAND TO SRI. SRINIVASAN, NO.35, 52' D STREET, D.A.E. TOWNSHIP, KALAPAKKAM-603 102 TO THE EXTENT OF 381.78 SQ.FT. - - ITA 2048/12 7 IN BOTH THE SALE DEED AT PAGE 5, IT WAS MENTIONED ABOUT THE JOINT DEVELOPMENT AGREEMENT DATED 20.10.2007 ENTERED BY SH. PRAVEEN KUMAR & 6 OTHERS WITH SHRI SURESH JAIN, M.D. OF M/S. VIJAY SHANTI BUILDERS PVT. LTD. BESIDES THE AB OVE, THE POWER OF ATTORNEY GIVEN BY THE OWNERS IN FAVOUR OF MR. SURESH JAIN, M.D., VIJAY SHANTHI BUILDERS PVT. LTD. VIDE DOC. NO.1635/09 REGISTERED AT SUB-REGISTRAR, SRIPERUMBUDUR, WAS ALSO FIND PLACE IN THE SALE DEED . STRANGELY, THE SUPPLEMENTARY AGREEMENT DATED 19.04.2010 ENTERED INTO BY MR. M PRAVEEN KUMAR P JAIN AND 6 OTHERS WITH MR. SURESH JAIN, M.D. OF VIJ AY SHANTHI BUILDERS (P) LTD. WHICH IS MUCH BEFORE THE SALE DEED EXECUTED IN FAVOUR OF MR. SRINIVASAN, DOES NOT FIND PLACE. MOST IMPORTANTLY, THE SUPPLEMENTARY AGREEMENT DATED 19.04.2010 TALKS ABOUT THE OUTRIGHT PURCHASE OF LAND BY VIJAY SHANTHI BUILDERS LTD. FRO M PRAVEEN KUMAR AND 6 OTHERS FOR CONSIDERATION OF ` 33 CRORES. IF THIS IS FOUND TO BE CORRECT, INSTEAD OF MR. PRAVEEN KUMAR & 6 OTHERS, T HE PRESENT OWNER I.E. MR. SURESH JAIN, M.D. OF VIJAY SHANTHI BUILDERS PVT. LTD. (AS PER SUPPLEMENTARY AGREEMENT DATED 19.04.2010) SHOULD HAVE BEEN EXECUTED THE SALE DEED TO MR. SRINIVASAN. BUT, THE FACT IS OTHERWISE. UNDER THE ABOVE CIRCUMSTANCES, IT IS CON STRUED THAT TO MISGUIDE THE DEPARTMENT, THE ASSESSEE. SHRI . UTTAMCHAND & GROUP ALONG WITH DEVELOPER (MR. SURESH JAIN, M.D., VIJAY SHANTHI BUILDERS LTD.) HAD ENTERE D INTO SUPPLEMENTARY AGREEMENT TO AVAIL CAPITAL GAIN TAX AND TO CLAIM DEDUCTION U/S.80IB OF THE I.T. ACT IT IS OBSERVED THAT THE SALE DEED ISSUED BY THE SUB -REGISTRAR OFFICE CONVEYED BY THE ASSESSEE ALONG WITH THE DEVE LOPER IN FAVOUR OF SHAIK MD. SHAFIJAN AND DR. N. SADIYA SHAF IJAN VIDE - - ITA 2048/12 8 DOC. NO.6175/09 DATED 21.08.2009. SIMILARLY, DOCU MENT NO.11356/10 DATED 18.11.2010 IS IN FAVOUR OF SRINIV ASAN NO.35, 52' D STREET, D.A.E. TOWNSHIP, KALAPAKKAM-603 102 AND BOTH THE SALE DEEDS CONTAINED REFERENCE OF SUPP LEMENTARY AGREEMENT DATED 19.4.2010, WHERE THE ASSESSEE ALLOW ED ALONG WITH 6 OTHERS TO SELL THE ENTIRE FLATS. FROM THIS, THE AO WAS OF THE OPINION THAT THE ASSESSEE HAS ALREADY TRANSFERR ED THE POSSESSION OF THE PROPERTY TO THE DEVELOPER VIDE JD A DATED 20.10.2007 AND THE POWER OF ATTORNEY GIVEN BY THE OWNERS IN FAVOUR OF MR. SURESH JAIN WAS ALSO MENTIONED IN THE SALE DEED. THE ASSESSEE ENTERED INTO SUPPLEMENTARY SALE DEED S O AS TO MISGUIDE THE DEPARTMENT AND TO AVOID CAPITAL GAINS TAX. ACCORDINGLY, HE BROUGHT TO CAPITAL GAINS TAX IN TER MS OF SEC.2(47) IN THE ASST. YEAR 2007-08 IN THE HANDS OF THE ASSESSEE. AGAINST THIS, THE ASSESSEE WENT IN APPE AL BEFORE THE CIT (APPEALS), WHO DELETED THE ADDITION BY OBSE RVING THAT THERE IS NO TRANSFER OF CAPITAL ASSET IN THE A SST. YEAR 2007- 08, IN VIEW OF THE RATIO LAID DOWN BY THE TRIBUNAL IN THE CASE OF VIJAY PRODUCTIONS (P) LTD. V. ADDL. CIT (134 ITD 19 ), WHEREIN IT WAS HELD AS UNDER : - - ITA 2048/12 9 47. ON THE QUESTION OF TREATING THE BUSINESS INCOM E OF RS. 2,28,52,471/- AS INCOME FROM OTHER SOURCES, I FIND THAT THE ASSESSING AUTHORITY HAS NOT DISCUSSED ANYTHING TO T HAT EFFECT. THE LEARNED ACCOUNTANT MEMBER HAS RIGHTLY P OINTED OUT THIS VACUUM IN THE ASSESSMENT ORDER. AT PAGE 32 IN THE COMPUTATION PORTION OF THE ASSESSMENT ORDER, THE AS SESSING OFFICER HAS JUST STATED AS 'INCOME FROM OTHER SOURC ES AS ABOVE'. I AGREE WITH THE VIEW TAKEN BY THE LEARNED ACCOUNTANT THAT THE MATTER SHOULD GO BACK TO THE AS SESSING OFFICER FOR DECIDING THE ISSUE AFRESH IN ACCORDANCE WITH LAW. 48. AFTER CONSIDERING THE TWO QUESTIONS, I AGREE WI TH THE VIEWS OF THE LEARNED ACCOUNTANT MEMBER. 49. I SHOULD ALSO MAKE A REFERENCE TO THE PRAYER OF THE ASSESSEE TO REFRAME THE QUESTIONS. THE REFRAMING IS SOUGHT FOR BY THE ASSESSEE IN THE MATTER OF COMPUTING THE LONG-TERM CAPITAL GAINS, PROVIDED A SITUATION ARISES WHERE TH E JV AGREEMENT HAS RESULTED IN GENERATING LONG-TERM CAPI TAL GAINS IN THE HANDS OF THE ASSESSEE. AS THE ISSUE OF CAPITAL GAINS ITSELF IS DECIDED IN FAVOUR OF ASSESSEE BY TH E THIRD MEMBER AGREEING WITH THE VIEW OF THE LEARNED ACCOUN TANT MEMBER, IN FACT, THIS ISSUE OF COMPUTING LONG-TERM CAPITAL GAINS BECOMES ACADEMIC. I DO NOT THINK IT NECESSARY TO DISCUSS THE MATTER AT THIS JUNCTURE. BUT AS A MATTE R OF FACT, I FIND THAT THE ASSESSING AUTHORITY HAS GROSSLY ERRED IN COMPUTING THE LONG-TERM CAPITAL GAINS ON THE BASIS OF THE PRESENT MARKET VALUE OF A FUTURE ASSET. THE ASSESSI NG OFFICER HAS APPLIED THE CURRENT MARKET VALUE TO A N ON EXISTING PROPERTY. THE METHOD ADOPTED BY THE ASSESS ING AUTHORITY IS ERRONEOUS. 50. THE LEARNED ACCOUNTANT MEMBER PROPOSES DISCOUNT ING THE PROBABLE CONSTRUCTION COST OF THE PROJECT TO NE T PRESENT VALUE (NPV). WHEN NO PROPERTY IS EXISTING, THERE IS NO QUESTION OF ESTIMATING THE PROBABLE COST OF CONSTRU CTION AND DISCOUNTING TO NPV, FOR THE STATUTORY PURPOSE OF CO MPUTING CAPITAL GAINS. NO COMMERCIAL COMPLEX IS AVAILABLE A T THE PARTICULAR POINT OF TIME. THAT BASIC VACUUM IS APPA RENT. IT IS SOMETHING TO COME WITHIN A PERIOD OF THREE TO FOUR YEARS IN - - ITA 2048/12 10 FUTURE. THE EXERCISE SUGGESTED BY THE LEARNED ACCOU NTANT MEMBER IS LIKE A PROJECT FORECAST, RELEVANT FOR COS T AND FINANCE MANAGEMENT. IT CANNOT BE APPLIED TO INCOME- TAX LAW. NO CAPITAL GAINS CAN BE WORKED OUT ON SUCH FOR ECAST. 51. IF AT ALL THERE IS A CASE OF COMPUTING LONG-TER M CAPITAL GAINS IN THE ABOVE SCHEME CONTEMPLATED BY THE ASSES SEE, IT IS TO BE LOOKED INTO AS TO FROM WHOM THE RIGHT IS B EING TRANSFERRED, WHETHER IT IS FROM THE ASSESSEE COMPAN Y TO PEPL OR FROM THE SHAREHOLDERS OF THE ASSESSEE COMPA NY TO PEPL. ALL THESE MATTERS HAVE TO BE DETERMINED ON TH E BASIS OF THE DEVELOPMENT OF THE PROJECT YEAR AFTER YEAR. THE FINAL LINE MAY BE DRAWN ON INDUCTION OF THE AGREED FUNDS AND CONSEQUENTIAL ALLOTMENT OF SHARES TO PEPL AND ON COMPLETION OF THE PROJECT. ANYHOW THE ISSUE WILL HA VE TO BE CONSIDERED AFRESH, AS AND WHEN IT ARISES. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE TRIBUNAL, HYDERABAD BENCH IN THE CASE OF SRI POTLA NAGESWARA RAO V. DCIT IN ITA NO. 1519/HYD/2011 & OTHERS, HELD AS UNDER : 9. IN THE INSTANT CASE, ON 7.3.2003 AN AGREEMENT WAS ENTERED INTO BY THE ASSESSEE WITH M/S . BHAVYA CONSTRUCTIONS PVT. LTD., AND THE PLAN OF THE BUILDING WAS APPROVED ON 31.3.2003. THESE DATES FAL L IN THE PREVIOUS YEAR 2002-03, RELEVANT TO ASSESSMEN T YEAR 2003-04. THUS, IN THIS CASE, THE LAND BEING CA PITAL ASSET WAS TRANSFERRED BY THE ASSESSEE TO THE DEVELOPER DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, VIZ. 2003-04, FOR CONSTRUCTION AND I T IS ENOUGH IF THE ASSESSEE HAS RECEIVED THE RIGHT TO RECEIVE CONSIDERATION ON A LATER DATE, SO AS TO ATT RACT EXIGIBILITY TO TAX ON CAPITAL GAINS DURING THE YEAR UNDER - - ITA 2048/12 11 APPEAL. MERE ACCRUAL OF THE CONSIDERATION, AS IT IS TO BE RECEIVED IN THE SUBSEQUENT YEARS DOES NOT DEFER THE TAXABILITY OF THE CAPITAL GAINS. THE ASSESSEE BEING OWNER OF THE CAPITAL ASSET, HAVING PARTED WITH THE POSSESSION OF THE LAND UNDER A JOINT DEVELOPMENT AGREEMENT, FOR CONSTRUCTION OF RESIDENTIAL FLATS/VI LLAS AND HAVING HANDED OVER THE POSSESSION OF THE VACANT LAND TO THE DEVELOPER ON PROMISE TO BE HANDED OVER FOUR FLATS EQUIVALENT TO 40% OF THE VALUE OF THE PR OPERTY TO BE CONSTRUCTED, IT WAS A CLEAR CASE OF TRANSFER BY EXCHANGE WITHIN THE MEANING OF S.2(47)(I) OF THE AC T. PROPERTY WAS HANDED OVER IN PART PERFORMANCE UNDER S.53A OF THE TRANSFER OF PROPERTY ACT, AND IT COULD NOT BE SAID THAT THE TRANSACTION WAS WITHOUT CONSIDERAT ION. THE POSSESSION OF THE LAND HAVING BEEN HANDED OVER TO THE DEVELOPER IN THE ASSESSMENT YEAR UNDER CONSIDERATION, THE TRANSFER TAKES PLACE IN THE ASSESSMENT YEAR UNDER CONSIDERATION ONLY, AND CONSEQUENTLY THE ASSESSEE IS LIABLE TO BE ASSESSED TO TAX IN RELATION TO THE CAPITAL GAINS IN THE YEAR UN DER CONSIDERATION ITSELF. FOR THIS PURPOSE, WE PLACE RELIANCE ON THE DECISION OF THE COORDINATE BENCHES OF THIS TRIBUNAL IN SMT. MAYA SHENOY V/S. ACIT (2009)124 TTJ(HYD) 692). WE ALSO FIND SUPPORT IN TH IS BEHALF, FROM THE JUDGMENT OF THE HONBLE BOMBAY HIG H COURT IN THE CASE OF CHATURBHUJ DWARKADDAS KAPADIA V/S. CIT (260 ITR 491), WHEREIN IT HAS BEEN HELD TH AT S.2(47)(V) READ WITH S.45 INDICATES THAT CAPITAL GA INS WAS TAXABLE IN THE YEAR IN WHICH SUCH TRANSACTIONS WERE ENTERED INTO EVEN IF THE TRANSFER OF IMMOVABLE PROPERTY IS NOT EFFECTIVE OR COMPLETE UNDER THE GEN ERAL LAW. WE ALSO PLACE RELIANCE IN THIS BEHALF ON THE R ULING OF AUTHORITY FOR ADVANCE RULINGS IN JASBIR SINGH SARKARIA IN RE (294 ITR 196(AAR), TO THE FOLLOWING EFFECT - IN ORDER TO BE TRANSFER WITHIN THE MEANI NG OF CL. (V) OF S.2(47), THERE MUST BE A TRANSACTION UND ER WHICH THE POSSESSION OF IMMOVABLE PROPERTY IS ALLOWED TO BE TAKEN OR ALLOWED TO BE RETAINED. SECONDLY, SUCH TAKING OR RETENTION OF POSSESSION AS IS WELL KNOWN IS A FACET OF THE EQUITABLE DOCTRINE OF PART - - ITA 2048/12 12 PERFORMANCE OF CONTRACT FALLING WITHIN THE SCOPE OF S.53A OF THE TRANSFER OF PROPERTY ACT. THE LEGISLAT URE ADVISEDLY REFERRED TO ANY TRANSACTION WITH A VIEW TO EMPHASIZE THAT IT IS NOT THE FACTUM OF ENTERING INT O AGREEMENT OR FORMATION OF CONTRACT THAT MATERS, BUT IT IS THE DISTINCT TRANSACTION THAT GIVES RISE TO THE EVENT OF ALLOWING THE CONTRACTEE TO ENTER INTO POSSESSION TH AT MATTERS. THAT TRANSACTION IS IDENTIFIABLE BY THE TE RMS OF THE AGREEMENT ITSELF AND IT TAKES PLACE WITHIN THE FRAMEWORK OF THE AGREEMENT. WE MAY ALSO REFER IN TH IS BEHALF TO THE DECISION OF THE HONBLE KARNATAKA HIG H COURT IN THE CASE OF CIT V/S. DR.T.K.DAYALU (202 TAXMAN 531), WHEREIN IT HAS BEEN HELD THAT IT IS WE LL SETTLED POSITION BY NOW THAT THE DATE ON WHICH POSSESSION WAS HANDED OVER TO THE DEVELOPER IS RELEVANT FOR DETERMINATION OF THE YEAR IN WHICH THE CAPITAL GAINS ARE ASSESSABLE TO TAX. IN THIS VIEW O F THE MATTER, WE FIND NO MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT THERE IS NO TAXABILITY OF CAPITAL GAI NS IN THE YEAR UNDER APPEAL. WE ACCORDINGLY REJECT THE GROUNDS OF THE ASSESSEE ON THIS ISSUE. 5. FURTHER, IN THE CASE OF MADATHIL BROTHERS V. DCIT(301 ITR 345), THE MADRAS HIGH COURT OBSERVED AS UNDER : 30. A PERUSAL OF THE DOCUMENTS FILED BEFORE THIS CO URT SHOWS THAT ADMITTEDLY, THE APPELLANT-ASSESSEE WAS P UT IN POSSESSION AND ENJOYMENT OF THE SUIT PROPERTY AS AG REEMENT HOLDER RIGHT FROM JANUARY 1, 1976. THE SUIT FOR SPE CIFIC PERFORMANCE WAS FILED BY THE APPELLANT-ASSESSEE HER EIN BEFORE THE ORIGINAL SIDE OF THIS COURT AND IN TERMS OF THE COMPROMISE MEMO FILED IN THE SUIT, A DECREE WAS PAS SED ON SEPTEMBER 30, 1983, IN FAVOUR OF THIS APPELLANT. IT IS NO DOUBT TRUE THAT AS PART OF THE SETTLEMENT TERMS, TH E PARTIES AGREED TO REVISE THE SALE CONSIDERATION. HOWEVER, T HE SAME WAS DONE WITH REFERENCE TO THE CLAIM UNDER THE AGRE EMENT. THE SALE DEED WAS EXECUTED IN TERMS OF THE SETTLEME NT - - ITA 2048/12 13 REACHED IN THE SUIT PROCEEDINGS. AS SUCH, THERE WAS NO NOVATION OF CONTRACT TO RESULT IN A FRESH AGREEMENT ENTERED INTO. 31. ON THE QUESTION AS TO WHETHER A POSSESSORY RIGH T UNDER THIS AGREEMENT, PER SE, CONFERS AN INTEREST TO CLAI M LONG- TERM CAPITAL GAINS, WE MAY HAVE TO LOOK AT THE DEFI NITION PROVISIONS RELATING TO 'CAPITAL ASSET' UNDER SECTIO N 2(14), 'SHORT-TERM CAPITAL ASSET' UNDER SECTION 2(42A) AND 'TRANSFER' UNDER SECTION 2(47) OF THE INCOME-TAX AC T, 1961. THE RELEVANT PROVISIONS NECESSARY FOR THE PURPOSE O F OUR CONSIDERATION ARE AS FOLLOWS : 'SECTION 2.(14) 'CAPITAL ASSET' 'CAPITAL ASSET' MEANS PROPERTY OF ANY KIND HELD BY AN ASSESSEE, WHETHER OR NOT CONNECTED WITH HIS BUSINES S OR PROFESSION.' 'SECTION 2.(42A) 'SHORT-TERM CAPITAL ASSET' MEANS A CAPITAL ASSET HELD BY AN ASSESSEE FOR NOT MORE THAN THIRTY- SIX MONTHS IMMEDIATELY PRECEDING THE DATE OF ITS TRANSF ER.' 'SECTION 2.(47) 'TRANSFER' IN RELATION TO A CAPITAL ASSET, INCLUDES, (I) THE SALE, EXCHANGE OR RELINQUISHMENT OF THE ASS ET ; 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-TRA DE OF A BUSINESS CARRIED ON BY HIM, SUCH CONVERSION OR TREA TMENT' ; OR THE FOLLOWING CLAUSE WAS INSERTED UNDER THE FINANCE ACT, 1987, WITH EFFECT FROM APRIL 1, 1988 : - - ITA 2048/12 14 '(V) ANY TRANSACTION INVOLVING THE ALLOWING OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED I N PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882 (4 OF 188 2).' 32. A CONJOINT READING OF THE PROVISIONS, AS THEY S TOOD AT THE MATERIAL ASSESSMENT YEAR, SHOW THAT 'CAPITAL ASSET' MEANS 'PROPERTY OF ANY KIND HELD' BY THE ASSESSEE. IT MAY BE SEEN THAT THE INCOME-TAX ACT, 1961, DOES NOT CONTAIN THE DEFINITION OF 'PROPERTY'. IN THE DECISION REPORTED IN AHMED G. H. ARIFF V. CWT [1970] 76 ITR 471 (SC), IN THE CONT EXT OF THE WEALTH-TAX PROCEEDINGS WITH REFERENCE TO THE DEFINI TION OF 'ASSETS' IN SECTION 2(E) TO 'INCLUDE PROPERTY OF AN Y DESCRIPTION', THE APEX COURT HELD THAT 'PROPERTY' I S A TERM OF THE WIDEST IMPORT AND, SUBJECT TO ANY LIMITATION WH ICH THE CONTEXT MAY REQUIRE, IT SIGNIFIED EVERY POSSIBLE IN TEREST THAT A PERSON CAN HOLD OR ENJOY. THE DEFINITION OF 'CAPITA L ASSET' UNDER THE INCOME-TAX ACT, REFERRING TO 'PROPERTY OF ANY KIND' CARRIES NO WORDS OF LIMITATION. THE DEFINITION IS O F THE WIDE AMPLITUDE TO INCLUDE EVERY POSSIBLE INTEREST THAT A PERSON MAY HOLD AND ENJOY. THE MEANING ASCRIBED BY THE APE X COURT TO THE TERM 'PROPERTY' APPLIES WITH EQUAL FOR CE TO THE UNDERSTANDING OF 'CAPITAL ASSET' UNDER THE PROVISIO NS OF THE INCOME-TAX ACT. 33. THE DEFINITION OF 'CAPITAL ASSET' REFERS TO PRO PERTY OF ANY KIND 'HELD' BY AN ASSESSEE. IN CONTRADISTINCTION TO THE WORD 'OWNER' OR 'OWNED' DEFINITION USES THE PHRASE 'HELD '. 34. TOUCHING ON THE MEANING OF THE TERM 'OWNER' IN THE CONTEXT OF ASSESSABILITY OF THE INCOME FROM PROPERT Y UNDER SECTION 22, IN THE DECISION REPORTED IN CIT V. PODA R CEMENT P. LTD. [1997] 226 ITR 625, THE APEX COURT HELD THA T 'OWNER IS THE PERSON WHO IS ENTITLED TO RECEIVE INCOME FRO M THE PROPERTY IN HIS OWN RIGHT.' THE APEX COURT HELD THA T IN THE CONTEXT OF SECTION 9 OF THE 1922 ACT, THE OWNER MUS T BE A PERSON 'WHO CAN EXERCISE THE RIGHTS OF OWNER NOT ON BEHALF OF THE OWNER, BUT IN HIS OWN RIGHT.' THE APEX COURT POINTED OUT TO THE AMENDMENT TO SECTION 27 UNDER THE FINANC E BILL, 1987, TO GET OVER AN OBVIOUS OMISSION TO THE MEANIN G OF THE - - ITA 2048/12 15 WORD 'OWNER' UNDER SECTION 22 THAT EVEN THOUGH IN C OMMON LAW, 'OWNER' MEANS A PERSON WHO HAS GOT VALID TITLE LEGALLY CONVEYED TO HIM AFTER COMPLYING WITH THE REQUIREMEN TS OF LAW UNDER THE TRANSFER OF PROPERTY ACT AND THE REGI STRATION ACT, HAVING REGARD TO THE GROUND REALITIES AND THE OBJECT OF THE ACT, NAMELY, TO TAX INCOME, IN THE CONTEXT OF S ECTION 22, THE OWNER IS THE PERSON WHO IS ENTITLED TO RECEIVE INCOME FROM THE PROPERTY IN HIS OWN RIGHT. ADVERTING TO TH E PROVISIONS OF THE TRANSFER OF PROPERTY ACT UNDER SE CTIONS 53A, 54 AND 55, THE APEX COURT HELD THAT LEGAL TITL E DOES NOT PASS UNLESS THERE IS A DEED OF CONVEYANCE DULY REGI STERED. REFERRING TO THE EFFECT OF SECTION 54, AND SECTION 22 OF THE INCOME-TAX ACT, THE APEX COURT SAID (PAGE 643) : 'T HAT, HOWEVER, WOULD NOT TAKE AWAY THE RIGHT OF THE ASSES SEE TO REMAIN IN POSSESSION OF THE PROPERTY, TO REALISE AN D RECEIVE THE RENTS AND PROFITS THEREFROM AND TO APPROPRIATE THE ENTIRE INCOME FOR ITS OWN USE. THE SO-CALLED VENDOR IS NOT PERMITTED IN LAW TO DISPOSSESS OR TO QUESTION THE T ITLE OF THE ASSESSEE (THE SO-CALLED VENDEE). IT WAS FOR THIS VE RY PRACTICAL PURPOSE THAT THE DOCTRINE OF THE EQUITY O F PART PERFORMANCE WAS INTRODUCED IN THE TRANSFER OF PROPE RTY ACT, 1882, BY INSERTING SECTION 53A THEREIN. THE SECTION SPECIFICALLY ALLOWS THE DOCTRINE OF PART PERFORMANC E TO BE APPLIED TO THE AGREEMENTS WHICH, THOUGH REQUIRED TO BE REGISTERED, ARE NOT REGISTERED AND TO TRANSFERS NOT COMPLETED IN THE MANNER PRESCRIBED THEREFOR BY ANY LAW. THE S ECTION IS, THEREFORE, APPLICABLE TO CASES WHERE THE TRANSFER I S NOT COMPLETED IN A MANNER REQUIRED BY LAW UNLESS SUCH A NON- COMPLIANCE WITH THE PROCEDURE RESULTS IN THE TRANSF ER BEING VOID.' AFFIRMING THE VIEW OF THE RAJASTHAN HIGH COU RT, THE APEX COURT HELD THAT IN THE CONTEXT OF SECTION 22, WHERE THE TRANSFEROR HAD HANDED OVER POSSESSION OF THE PROPER TY PURSUANT TO AN AGREEMENT FOR SALE, 'OWNER IS A PERS ON WHO IS ENTITLED TO RECEIVE INCOME FROM THE PROPERTY.' T HE APEX COURT HELD THAT THE AMENDMENT INTRODUCED BY THE FIN ANCE BILL, 1987, WAS DECLARATORY/CLARIFICATORY IN NATURE AND HENCE, THESE PROVISIONS ARE RETROSPECTIVE IN OPERATION. 35. THE RAJASTHAN HIGH COURT HAD AN OCCASION TO CON SIDER A CASE SIMILAR TO THE ONE THAT WE HAVE ON HAND. APPLY ING THE - - ITA 2048/12 16 AFORESAID DECISION OF THE APEX COURT TO THE CASE DE ALING WITH A QUESTION OF CAPITAL GAINS WHERE POSSESSION WAS GI VEN TO AN AGREEMENT HOLDER, IN THE DECISION REPORTED IN CI T V. VISHNU TRADING AND INVESTMENT CO. [2003] 259 ITR 72 4, THE RAJASTHAN HIGH COURT HELD THAT (726) : 'FOLLOWING T HE VIEW TAKEN BY THEIR LORDSHIPS, WE ARE OF THE VIEW THAT F OR TAXING THE CAPITAL GAIN, REGISTRATION OF THE SALE DEED IS NOT NECESSARY UNDER THE PROVISIONS OF THE INCOME-TAX AC T.' THE SAID DECISION OF THE RAJASTHAN HIGH COURT WAS AGAIN FOLLOWED IN THE DECISION REPORTED IN CIT V. RAJASTH AN MIRROR MANUFACTURING CO. [2003] 260 ITR 503. 36. AGAIN, IN THE DECISION REPORTED IN M. SYAMALA R AO V. CIT [1998] 234 ITR 140, THE ANDHRA PRADESH HIGH COU RT CONSIDERED THE SITUATION, WHERE, UNDER THE AGREEMEN T OF SALE ON MAY 1, 1962, THE ASSESSEE WAS PUT IN POSSES SION OF THE LAND. THE DOCUMENT OF SALE WAS REGISTERED ON JU NE 8, 1979. THE ASSESSEE SOLD THE LAND AFTER CONVERTING I T INTO PLOTS. THE SALE OF THESE LANDS WAS SOUGHT TO BE ASS ESSED AS CAPITAL GAINS. ON A REFERENCE, THE ANDHRA PRADESH H IGH COURT HELD THAT THOUGH THE DOCUMENT WAS REGISTERED ON JUNE 8, 1979, IT RELATED BACK TO THE DATE ON WHICH THE AGREEMENT OF SALE WAS EXECUTED IN FAVOUR OF THE ASS ESSEE BY THE VENDOR. HENCE, THE ASSESSEE WAS DEEMED TO BE THE OWNER OF THE PROPERTY WITH EFFECT FROM 1962. THE AN DHRA PRADESH HIGH COURT POINTED OUT THAT THE ASSESSEE HA D HELD PROPERTY FOR MORE THAN 36 MONTHS ; HENCE, THE CAPIT AL GAINS COULD NOT BE ASSESSED AS SHORT-TERM CAPITAL GAINS. 37. SIMILAR IS THE VIEW EXPRESSED BY THE PUNJAB AND HARYANA HIGH COURT ON THE SCOPE OF SECTION 2(42A) O F THE INCOME-TAX ACT, 1961, IN THE DECISION REPORTED IN C IT V. VED PARKASH AND SONS (HUF) [1994] 207 ITR 148 (P&H). TH ERE, THE ASSESSEE ENTERED INTO AN AGREEMENT FOR PURCHASE OF A FLAT IN THE YEAR 1970. HE WAS PUT IN POSSESSION OF THE FLAT IN THE SAME YEAR. THE ASSESSEE MADE A FINAL PAYMENT IN THE YEAR 1973, I.E., ON FEBRUARY 10, 1973. ON THE SAME DAY, HE SOLD THE PROPERTY AND CLAIMED THE GAIN ARISING THER EFROM AS LONG-TERM CAPITAL GAINS. THE PUNJAB AND HARYANA HIG H COURT TOOK THE VIEW THAT SECTION 2(42A) RELATING TO THE D EFINITION OF - - ITA 2048/12 17 SHORT-TERM CAPITAL GAINS ASSET REFERS TO A CAPITAL ASSET HELD BY AN ASSESSEE FOR NOT MORE THAN 36 MONTHS IMMEDIAT ELY PRECEDING THE DATE OF TRANSFER. THE HIGH COURT TOOK THE VIEW THAT 'AS IS CLEAR FROM A BARE READING OF SECTION 2( 42) OF THE ACT, THE WORD 'OWNER' HAS DESIGNEDLY NOT BEEN USED BY THE LEGISLATURE. THE WORD 'HOLD', AS PER THE DICTIONARY MEANING, MEANS TO POSSESS, BE THE OWNER, HOLDER OR TENANT OF (PROPERTY, STOCK, LAND . . . .). THUS, A PERSON CAN BE SAID TO BE HOLDING THE PROPERTY AS AN OWNER, AS A LESSEE, A S A MORTGAGEE OR ON ACCOUNT OF PART PERFORMANCE OF AN AGREEMENT, ETC. CONVERSELY, ALL SUCH OTHER PERSONS WHO MAY BE TERMED AS LESSEES, MORTGAGEES WITH POSSESSIO N OR PERSONS IN POSSESSION AS PART PERFORMANCE OF THE CO NTRACT WOULD NOT IN STRICT PARLANCE COME WITHIN THE PURVIE W OF 'OWNER'. AS PER THE SHORTER OXFORD DICTIONARY, EDIT ION 1985, 'OWNER' MEANS ONE WHO OWNS OR HOLDS SOMETHING ; ONE WHO HAS THE RIGHT TO CLAIM TITLE TO A THING.' 38. THE HIGH COURT HELD THAT EVEN IF THE AMOUNT WAS NOT PAID IN FULL BY THE ASSESSEE IN TERMS OF THE AGREEM ENT, IT COULD NOT BE CONSTRUED THAT THE ASSESSEE HAD NO RIG HT OR INTEREST IN THE PROPERTY. THE ASSESSEE WAS PUT IN P OSSESSION AS EARLY AS 1970 AND WAS REMAINING IN OCCUPATION AS A MATTER OF RIGHT. THUS, FOR ALL PURPOSES, HE WAS A B ENEFICIAL OWNER FROM THE START. IN THE CONTEXT OF THIS VIEW T AKEN, THE COURT HELD THAT THE CAPITAL GAIN WAS ASSESSABLE AS LONG-TERM CAPITAL GAIN. 39. WE FIND NO REASON TO DIFFER FROM THE VIEW TAKEN BY THE OTHER HIGH COURTS AS STATED ABOVE ON THE SCOPE OF S ECTION 2(47) WITH REFERENCE TO THE LIABILITY UNDER SECTION 45. ALTHOUGH THE DECISION OF THE APEX COURT RELATED TO A CASE OF INCOME ASSESSABILITY AT THE HANDS OF AN OCCUPIER WH O NEED NOT BE AN OWNER IN THE NORMAL CONNOTATION, YET, GIV EN THE SCOPE OF THE DEFINITION PROVISIONS UNDER SECTION 2( 14) AND SECTION 2(47) AND THE EFFECT OF THE AMENDMENT BROUG HT FORTH BY THE INSERTION OF CLAUSE (V) UNDER SECTION 2(47), WE AGREE WITH THE VIEW EXPRESSED BY OTHER HIGH COURTS. - - ITA 2048/12 18 40. LEARNED COUNSEL FOR THE RESPONDENT SUBMITTED TH AT IN THE CONTEXT OF THE DECISION OF THE APEX COURT REPORTED IN ALAPATI VENKATARAMIAH V. CIT [1965] 57 ITR 185, REFERRED TO ABOVE, THE PERIOD OF HOLDING THE PROPERTY HAS TO BE RECKON ED FROM THE DATE OF PASSING OF TITLE. 41. THIS DECISION WAS CONSIDERED BY THIS COURT IN T HE DECISION REPORTED IN MECCANE INDUSTRIES LTD. V. CIT [2002] 254 ITR 175, THAT TRANSFER MEANT EFFECTIVE CONVEYAN CE OF CAPITAL ASSET TO THE TRANSFEREE. IT MAY BE NOTED TH AT THE CASE REPORTED IN MECCANE INDUSTRIES LTD. V. CIT [2002] 2 54 ITR 175 (MAD), RELATED TO THE ASSESSMENT YEAR 1968-69. THIS COURT HELD THAT THE DELIVERY OF POSSESSION OF IMMOV ABLE PROPERTY COULD NOT, BY ITSELF, BE TREATED AS EQUIVA LENT TO CONVEYANCE OF THE IMMOVABLE PROPERTY. THIS COURT HE LD THAT HAVING REGARD TO THE LAW THAT PREVAILED IN THE ASSE SSMENT YEAR CONCERNED, CAPITAL GAINS COULD BE REGARDED ONL Y WHEN THE CONVEYANCE WAS EXECUTED AND NOT AT ANY EARLIER POINT OF TIME. 42. THE DECISION OF THIS COURT REPORTED IN MECCANE INDUSTRIES LTD. V. CIT [2002] 254 ITR 175, NO DOUBT, APPLIED T HE LAW DECLARED BY THE APEX COURT REPORTED IN ALAPATI VENKATARAMIAH V. CIT [1965] 57 ITR 185 THAT CAPITAL GAIN AROSE IN THE YEAR IN WHICH THE DEED WAS REGISTERED. HOWEVER, IT MUST BE NOTED THAT THE DECISION IS DISTINGUISHABLE AS THE SAME WAS WITH REFERENCE TO T HE CHARGEABILITY UNDER SECTION 45 WITH REFERENCE TO 'T RANSFER' AS DEFINED UNDER SECTION 2(47) AS IT THEN STOOD PRIOR TO THE AMENDMENT UNDER THE TAXATION LAWS AMENDMENT ACT, 1984, WITH EFFECT FROM APRIL 1, 1985. HENCE, IT DOE S NOT COVER THE ISSUE ON HAND. 43. IN THE DECISION REPORTED IN ZUARI ESTATE DEVELO PMENT AND INVESTMENT CO. P. LTD. V. J. R. KANEKAR, DEPUTY CIT (ASSESSMENT) [2004] 271 ITR 269 (BOM), THE BOMBAY H IGH COURT CONSIDERED THE EFFECT OF SECTION 2(47) WHICH WAS AMENDED FROM MARCH 1, 1988. THE BOMBAY HIGH COURT H ELD THAT FOR THE TRANSACTION TO AMOUNT TO 'TRANSFER' WI THIN THE MEANING OF SECTION 2(47), THE MINIMUM REQUIREMENTS ARE - - ITA 2048/12 19 THAT THERE HAS TO BE AN AGREEMENT BETWEEN THE PARTI ES SIGNED BY THE PARTIES ; IT SHOULD BE IN WRITING ; I T SHOULD PERTAIN TO TRANSFER OF PROPERTY AND THE TRANSFEREE SHOULD HAVE TAKEN POSSESSION OF THE PROPERTY. REFERRING TO THE DECISION REPORTED IN ALAPATI VENKATARAMIAH V. CIT [ 1965] 57 ITR 185 (SC) WITH REFERENCE TO SECTION 12B OF THE A CT OF 1922, IT POINTED OUT THAT 'TRANSFER' FOR THE PURPOS ES OF THE INCOME-TAX ACT, 1961, REQUIRE FACTS OF CONVEYANCE O F THE CAPITAL ASSETS TO THE TRANSFEREE. DELIVERY OF POSSE SSION OF IMMOVABLE PROPERTY, BY ITSELF, COULD NOT BE TREATED AS EQUIVALENT TO CONVEYANCE OF THE IMMOVABLE PROPERTY. 44. THE DECISION OF THE SUPREME COURT REPORTED IN A LAPATI VENKATARAMIAH V. CIT [1965] 57 ITR 185, ON WHICH TH E TRIBUNAL BASED ITS DECISION AND RELIED ON BY THE RE VENUE IS TO BE UNDERSTOOD WITH REFERENCE TO SECTION 12B OF T HE INDIAN INCOME-TAX ACT, 1922, AND IN THE CONTEXT OF THE PRO VISIONS AS THEY STOOD AT THE MATERIAL TIME. 45. THE PROVISIONS OF SECTION 12B OF THE INDIAN INC OME-TAX ACT, 1922, WHICH CORRESPONDS TO SECTION 45 OF THE 1 961 ACT RELATING TO CAPITAL GAINS LIABILITY BROUGHT TO CHAR GE CAPITAL GAINS 'IN RESPECT OF ANY PROFITS OR GAINS ARISING F ROM SALE, EXCHANGE, RELINQUISHMENT OR TRANSFER OF A CAPITAL A SSET . . .'. THE 1922 ACT CONTAINED A DEFINITION OF 'CAPITAL ASS ET' UNDER SECTION 2(4A). HOWEVER, THERE WAS NO SPECIFIC PROVI SION THEREIN CORRESPONDING TO SECTION 2(47) UNDER THE 19 61 ACT DEFINING 'TRANSFER'. THE PRESENT PROVISION UNDER SE CTION 2(47) DEFINING 'TRANSFER' IS WIDER IN SCOPE AND IS AN INCLUSIVE DEFINITION. TOUCHING ON THE SCOPE OF SECTION 12B, T HE APEX COURT HELD (PAGE 192 OF 57 ITR) : 'BEFORE SECTION 1 2B CAN BE ATTRACTED, TITLE MUST PASS TO THE COMPANY BY ANY OF THE MODES MENTIONED IN SECTION 12B, I.E., SALE, EXCHANG E OR TRANSFER. IT IS TRUE THAT THE WORD 'TRANSFER' IS US ED IN ADDITION TO THE WORD 'SALE' BUT EVEN SO, IN THE CONTEXT TRAN SFER MUST MEAN EFFECTIVE CONVEYANCE OF THE CAPITAL ASSET TO T HE TRANSFEREE. DELIVERY OF POSSESSION OF IMMOVABLE PRO PERTY CANNOT BY ITSELF BE TREATED AS EQUIVALENT TO CONVEY ANCE OF THE IMMOVABLE PROPERTY'. - - ITA 2048/12 20 46. A READING OF SECTION 45 AS IT STANDS TODAY, SHO WS THAT CAPITAL GAINS IS CHARGEABLE ON 'ANY PROFITS OR GAIN S ARISING FROM THE TRANSFER OF THE CAPITAL ASSET . . .'. READ IN THE CONTEXT OF THE DEFINITIONS OF 'CAPITAL ASSET' AND ' TRANSFER' THE SECTION CARRIES NO WORDS OF LIMITATION TO READ THAT A TRANSFER EFFECTED BY A PERSON BACKED UP WITH A TITLE PASSED ON UNDER A REGISTERED DEED ALONE COULD BE CONSIDERED AS RESU LTING IN A PROFIT OR GAIN ASSESSABLE UNDER SECTION 45. ALL T HAT THE PRESENT SECTION LOOKS AT IS THE TRANSFER OF A CAPIT AL ASSET HELD AS UNDERSTOOD UNDER SECTION 2(14) AND UNDER SECTION 2(47). IN THE BACKGROUND OF THE PROVISIONS AS THEY STAND T ODAY, THE DECISION REPORTED IN MECCANE INDUSTRIES LTD. V. CIT [2002] 254 ITR 175 (MAD) RELATING TO THE ASSESSMENT YEAR 1 968-69, OR FOR THAT MATTER, THE DECISION OF THE SUPREME COU RT REPORTED IN ALAPATI VENKATARAMIAH V. CIT [1965] 57 ITR 185, CAN HAVE NO RELEVANCE TO THE ISSUE IN THE MATTER OF UNDERSTANDING THE SCOPE OF SECTION 2(47) AND SECTIO N 45. AS ALREADY SEEN, THE CASE ON HAND HAS TO BE ANALYSED I N THE CONTEXT OF THE PROVISIONS PREVAILING DURING THE REL EVANT POINT OF TIME. IN THE CIRCUMSTANCES, WE DO NOT AGREE WITH THE VIEW TAKEN BY THE TRIBUNAL, APPLYING THE DECISION OF THE APEX COURT IN THE DECISION REPORTED IN ALAPATI VENKATARA MIAH V. CIT [1965] 57 ITR 185 AND THE DECISION OF THIS COUR T REPORTED IN MECCANE INDUSTRIES LTD. V. CIT [2002] 2 54 ITR 175. 47. THE QUESTION THEN IS, WHAT WILL BE THE EFFECT O F THE AMENDMENT BROUGHT FORTH TO SECTION 2(47) BY THE INS ERTION OF SUB-CLAUSE (V) TO SECTION 2(47) RELATING TO THE DEF INITION OF 'TRANSFER' UNDER THE FINANCE ACT 1987, WITH EFFECT FROM APRIL 1, 1988. 48. THIS TAKES US ONCE AGAIN TO THE DECISION OF THE APEX COURT REPORTED IN CIT V. PODAR CEMENT P. LTD. [1997 ] 226 ITR 625. FURTHER, IN THE CASE OF SMT. D. KASTHURI & ANR. V. CIT (323 ITR 40), THE MADRAS HIGH COURT HELD THAT F OR APPLICATION OF SEC.53A, RELEVANT CONSIDERATION WOUL D BE CLAUSES IN THE AGREEMENT BETWEEN PARTIES TO THE AGR EEMENT AND THEIR PERFORMANCE IN TERMS OF THE AGREEMENT. SUBSEQUENT ACT OF ASSESSEE IN EXECUTING POWER OF AT TORNEY - - ITA 2048/12 21 AND DEEDS EXECUTED BY THE POWER HOLDER ON BASIS OF SUCH POWER WOULD NOT IN ANY WAY LATER THE STATUS OF THE PARTIES TO THE AGREEMENT, FOR APPLICABILITY OF SEC.53A OF THE ACT AS HAS BEEN RIGHTLY HELD BY THE LEARNED SINGLE JUDGE. THE ASSESSEE COULD NO LONGER ASSET POSSESSORY RIGHTS AGAINST THE FIRM O WHICH POSSESSION WAS ALREADY GIVEN PURSUANT TO THE AGREEMENT AND THAT TOO AFTER RECEIVING THE FULL SAL E CONSIDERATION. 6. FURTHER, IN THE CASE OF CHATURBHUJ DWARALKDAS KAPADIA V. CIT (260 ITR 491(BOMBAY), WHEREIN IT WAS OBSERVED AS UNDER: THAT SECTION 2(47)(V) READ WITH SECTION 45 INDICAT ES THAT CAPITAL GAINS WAS TAXABLE IN THE YEAR IN WHICH SUCH TRANSACTIONS WERE ENTERED INTO EVEN IF THE TRANSFER OF IMMOVABLE PROPERTY IS NOT EFFECTIVE OR COMPLETE UND ER THE GENERAL LAW. IN THIS CASE, THE TEST HAD NOT BEEN AP PLIED BY THE DEPARTMENT. NO REASON HAD BEEN GIVEN WHY THAT T EST HAD NOT BEEN APPLIED, PARTICULARLY WHEN THE AGREEME NT IN QUESTION, READ AS A WHOLE, SHOWED THAT IT WAS A DEVELOPMENT AGREEMENT. ONCE UNDER CLAUSE 8 OF THE AGREEMENT A LIMITED POWER OF ATTORNEY WAS INTENDED TO BE GIVEN TO THE DEVELOPER TO DEAL WITH THE PROPERTY, T HEN THE DATE OF THE CONTRACT, VIZ., AUGUST 18, 1994, WOULD BE THE RELEVANT DATE TO DECIDE THE DATE OF TRANSFER UNDER SECTION 2(47)(V) AND, IN WHICH EVENT, THE QUESTION OF SUBST ANTIAL PERFORMANCE OF THE CONTRACT THEREAFTER WOULD NOT AR ISE. THIS POINT HAD NOT BEEN CONSIDERED BY ANY OF THE AUTHORI TIES BELOW. THE ASSESSEE HAD PAID THE CAPITAL GAINS TAX FOR THE ASSESSMENT YEAR 1999-2000. FROM MERE SUBSTANTIAL COMPLIANCE OF THE AGREEMENT, ONE COULD NOT INFER TR ANSFER IN THE ACCOUNTING YEAR ENDING MARCH 31, 1996. THERE WE RE MISTAKES APPARENT ON THE FACE OF THE RECORD, IN THE ORDER OF THE TRIBUNAL. ACCORDING TO THE TRIBUNAL, THE LETTER DATED FEBRUARY 18, 1999, SHOWED THAT THE BUILDER CAME INT O POSSESSION ON THE DAY NEXT TO MARCH 31, 1996, I.E., APRIL 1, - - ITA 2048/12 22 1997. THE DAY NEXT TO MARCH 31, 1996, WOULD BE APRI L 1, 1996, AND NOT APRIL 1, 1997, AND EVEN IF APRIL 1, 1 997, WERE TAKEN AS A TYPING MISTAKE, IT COULD ONLY BE READ AS APRIL 1, 1996, AND IF APRIL 1, 1996, WAS THE DATE ON WHICH T HE DEVELOPER CAME INTO POSSESSION, THEN THE POSSESSION WAS RECEIVED BY THE DEVELOPER DURING THE FINANCIAL YEAR 1996-97 CORRESPONDING TO THE ASSESSMENT YEAR 1997-98. THERE FORE, THIS FINDING OF THE TRIBUNAL WAS ERRONEOUS. TAKING INTO ACCOUNT THE TOTALITY OF THE CIRCUMSTANCES THE TRIBU NAL WAS NOT JUSTIFIED IN CONCLUDING THAT THE APPELLANT HAD TRANSFERRED THE PROPERTY DURING THE PREVIOUS YEAR RELEVANT TO T HE ASSESSMENT YEAR 1996-97 . 7. IN THE PRESENT CASE, VIDE JDA DATED 20.10.2007, THE DEVELOPER WILL GET 60 TO 65% OF THE CONSTRUCTED ARE A AND THE ASSESSEE WILL GET 30 TO 35% OF THE CONSTRUCTED AREA. THE ASSESSEE HAS ALSO RECEIVED ` 2.50 CRORES AS INTEREST FREE REFUNDABLE SECURITY DEPOSIT AND THE DEVELOPER AGREED TO DEVELOP THE PROPERTY AFTER GETTING NECESSARY PLA N FROM THE CMDA. FURTHER, IT IS ALSO MENTIONED THAT THE A SSESSEE HAS TO HAND OVER ALL ORIGINAL TITLE DEEDS PERTAININ G TO THE PROPERTY FOR THE PURPOSE OF GETTING PLAN SANCTION F OR CONSTRUCTION. THE ASSESSEE HAS ALSO EXECUTED POWER OF ATTORNEY IN FAVOUR OF SHRI SURESH JAIN, MANAGING DI RECTOR OF THE DEVELOPER COMPANY AND THE DEVELOPER HAS THE RIG HT TO SELL ALL FLATS AND ALSO TO COMPLETE THE ASSESSEES SHARE OF CONSTRUCTION OF FLATS WITHIN 36 MONTHS FROM THE DAT E OF - - ITA 2048/12 23 OBTAINING OF PLAN SANCTIONS. IF THERE IS A FAILURE ON THE PART OF THE DEVELOPER TO HAND OVER THE VACANT POSSESSION OF THE PROPERTY WITHIN THE GRACE PERIOD OF 12 MONTHS, THER E IS A PENALTY CLAUSE THAT ` 20 LAKHS PER MONTH SHALL BE PAYABLE TO THE ASSESSEE. 7.1 FURTHER, BY DECEMBER, 2011, THE DEVELOPER ALMOS T CONSTRUCTED 9 TOWERS EACH HAVING 9 FLOORS, WHICH IS MENTIONED IN PARA 3.2 OF THIS ORDER. ALL THESE SHO W THAT THE JDA ENTERED ON 20.10.2007 ACTUALLY ACTED UPON. SUBSEQUENT AGREEMENTS EXECUTED BY THE PARTIES TOOK ONLY PAPER DOCUMENTS SO AS TO POSTPONE TAX INCIDENCE. I F ONE PARTY IS PERFORMED HIS PART OF DUTY I.E. DEVELOPER SHOWS THAT THE OTHER PARTY ALSO PERFORMED ITS PART OF OBLIGATI ON. THUS, THE TRANSACTION ENTERED INTO BY THE PARTIES HEREIN, WHICH HAVE THE EFFECT OF TRANSFERRING OR ENABLING THE ENJ OYMENT OF ANY IMMOVABLE PROPERTY, THEN CAPITAL GAINS WOULD BE TAXABLE IN THE YEAR IN WHICH THE TRANSACTIONS WERE ENTERED INTO EVEN IF THE TRANSFER OF THE IMMOVABLE PROPERTY WAS NOT EFFECTIVE OR COMPLETE UNDER THE GENERAL LAW. IN OU R OPINION, ALL THE INGREDIENTS OF SEC.2(47)(V) OF THE ACT ARE SATISFIED - - ITA 2048/12 24 AND IT HAS TO BE INFERRED THAT A TRANSFER TOOK PL ACE WITHIN THE MEANING OF SEC.2(47)(V) OF THE ACT. THE COMPLE TION OF TRANSFER OF AN IMMOVABLE PROPERTY UNDER THE GENER AL LAW WAS NOT REQUIRED FOR THE APPLICABILITY OF THE PROVI SIONS OF SEC.2(47)(V) OF THE ACT, AS HELD BY VARIOUS HIGH CO URTS AS DISCUSSED IN EARLIER PARA. ACCORDINGLY, IN THE PRE SENT CASE, THERE IS A TRANSFER U/S.2(47)(V) OF THE ACT IN THE ASST. YEAR 2008-09. ACCORDINGLY, WE REVERSE THE ORDER OF THE CIT(APPEALS) AND RESTORE THAT OF THE AO. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED. ORDER PRONOUNCED ON WEDNESDAY, THE 13 TH OF APRIL, 2016 AT CHENNAI. SD/- SD/- ( $% & ) ( ' ( ) $ ) *%+,-,./01,2345,.62,+778,293 : ;< /JUDICIAL MEMBER ! ;<=>>70.?,.?@A1BA2 ': /CHENNAI, C; /DATED, THE 13 TH APRIL, 2016. MPO* ;D EFGF /COPY TO: /APPELLANT / /RESPONDENT / H 3 /CIT(A)/ H /CIT / FIJ K /DR / JLM /GF.