Appeal Details
Counselvise Citation
[2017] 128 COUNSELVISE.COM (IT) 4647 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
8 month(s) 13 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
08-05-2017
Appeal Filed By
Department
Bench Allotted
A
Assessment Year
2007-2008
Appeal Filed On
26-08-2016
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , ! ' . #$ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER . / ITA NO. 2101/MDS/2016 / ASSESSMENT YEAR : 2007-08 M/S. SUMERU SOFT P. LTD ., THE INCOME-TAX OFFICER, NO.50, CAPITAL PLACE, CORPORATE WARD-6(4), SOUTH BOAG ROAD, V. CHENNAI. T. NAGAR, CHENNAI 600 017. PAN AAECS2260F ( /APPELLANT) (/ RESPONDENT) AND . / ITA NO. 2484/MDS/2016 / ASSESSMENT YEAR : 2007-08 THE INCOME-TAX OFFICER, M/S. SUMERU SOFT P. LTD ., CHENNAI. CHENNAI. V. PAN AAECS2260F ( /APPELLANT) (/ RESPONDENT) ASSESSEE BY : SHRI S. SRIDHAR, ADVOCATE DEPARTM ENT BY : SHRI ANJENEYALU, CIT ! ' # $%& / DATE OF HEARING : 14.02.2017 '( # $%& / DATE OF PRONOUNCEMENT: 08.05.2017 ( / O R D E R - - ITA 2101 & 2484/16 2 PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE CROSS APPEALS BY THE ASSESSEE AND BY THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A PPEALS) DATED 30.5.2016 FOR THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE HAS RAISED VARIOUS GROUNDS, WHICH A RE REQUIRED OUR ADJUDICATION, ARE AS FOLLOWS:: 2. THE CIT(APPEALS) ERRED IN CONFIRMING THE REASSESSMENT ORDER PASSED U/S.143(3) R/W 147 OF THE ACT AND OUGHT TO HAVE APPRECIATED THAT THE ORDER OF REASSESSMENT UNDER CONSIDERATION WAS PASSED OUT OF TIME, INVALID, PASSED WITHOUT JURISDICTION AND NOT SUSTAINABLE BOTH ON FACTS AND IN LAW. 4. THE CIT(APPEALS) ERRED IN CONFIRMING THE ASSESSMENT OF LTCG RELATING TO THE TRANSACTION THE APPELLANT HAD WITH M/S. PARSVANATH DEVELOPERS LTD. IN THE PREVIOUS YEAR RELATING TO THE ASSESSMENT YEAR UNDER CONSIDERATION WITHOUT ASSIGNING PROPER REASON S AND JUSTIFICATION. 8. THE CIT(APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF 93,730/- BEING THE EXPENSES ESTIMATED FOR EARNING OF THE TAX FREE INCOME FOR MAINTAINING THE INVESTMENT PORTFOLIO ON THE APPLICA TION OF SEC.14A OF THE ACT R/W RULE 8D OF THE INCOME TAX RULES, 1962 IN THE COMPUTATION OF TAXABLE TOTAL INC OME WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 12. THE CIT(APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF 7,95,000/- BEING THE EXPENSES INCURRED FOR BUSINESS PROMOTION/ADVERTISEMENT IN - - ITA 2101 & 2484/16 3 SPONSORING CRICKET TOURNAMENTS AND A CORPORATE BOX IN THE CRICKET STADIUM BY RECORDING CRYPTIC FINDING S IN PARA 5.4.1 OF THE IMPUGNED ORDER IN THE COMPUTATION OF TAXABLE TOTAL INCOME WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 2.1 THE REVENUE HAS RAISED THE FOLLOWING GROUND : 2.2. THE LD. CIT (A) FAILED TO APPRECIATE THAT TH E AO HAS ADOPTED SALE CONSIDERATION OF 42,16,24,000/- AS VALUE OF 27% OF SHARE OF CONSTRUCTED AREA AS PER CLAUSES 12.1 AND 12.4 OF JV AGREEMENT WHICH REPRESENTS MARKET VALUE OF PROPERTY ON DATE OF TRANSFER. 2.3 THE LD.CIT(A) HAS FAILED TO APPLY THE DECISIO N OF KARNATKA HIGH IN (2012) 26 TAXMANN .COM 166 IN CIT VS. VED PRAKASH RAKHRA 210 TAXMANN 605 WHICH HAS CLEARLY HELD THAT THE CONSIDERATION RECEIVED IS MAR KET VALUE ON THE DATE OF AGREEMENT AND THE SAME HAS TO BE TAKEN WHILE COMPUTING CAPITAL GAINS. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMP ANY HAD FILED A RETURN OF INCOME ON 30.10.2007 DECLARING TO TAL INCOME OF 37,91,560/-, WHICH WAS PROCESSED U/S.143(1) OF THE ACT. THE ASSESSMENT WAS REOPENED BY ISSUING A NOTICE U/S.148 OF THE ACT ON 26.3.2014. THE ASSESSEE HAD ENTERED INTO A JOIN T VENTURE AGREEMENT WITH M/S. PARSVNATH DEVELOPERS LTD. AND H AD RECEIVED 7,02,54,000/-. POSSESSION AS WELL AS DEVELOPMENT RIGHTS WERE GIVEN DURING FINANCIAL YEAR 2006-07 ITS ELF TO M/S. - - ITA 2101 & 2484/16 4 PARSVNATH DEVELOPERS LTD. AND AMOUNT RECEIVED OF 7,02,54,000/- WAS SHOWN AS A LIABILITY IN THE BALAN CE SHEET. THE ASSESSEE OBJECTED TO THE REOPENING BEFORE THE AO BY STATING THAT A NOTICE U/S.143(2) OF THE ACT DATED 9.1.2015 PROPOSING TO TAX LONG TERM CAPITAL GAINS ON THE APPLICATION OF S EC.2(47)(V) OF THE ACT WITH REGARD TO THE TRANSACTION ENTERED INTO WITH M/S. PARSVNATH DEVELOPERS LTD., NEW DELHI IS BAD IN LAW. THE SAID NOTICE / PROPOSAL WAS ASSAILED ON VARIOUS FACETS IN THE REPLY DATED 11.3.2015. ON THE FACTS OF THE CASE, THE REO PENING OF THE PROCEEDINGS AT THE FAG END OF THE LIMITED PERIOD OF SIX YEARS FROM THE END OF THE ASSESSMENT YEAR UNDER CONSIDERATION IN TERMS OF SEC.147 OF THE ACT IS BAD IN LAW INASMUCH AS THE NO TICE ISSUED FOR REOPENING ON 28.3.2014 DID NOT CONTAIN THE REAS ON FOR ASSUMPTION FOR JURISDICTION U/S.147 OF THE ACT. FU RTHER, THE REASSESSMENT PROCEEDINGS COMMENCED WITHOUT TANGIBLE MATERIAL IS ALSO NOT SUSTAINABLE IN LAW INASMUCH AS THE REAS ON TO BELIEVE ESCAPEMENT OF INCOME SHOULD HAVE A LINK WITH THE MA TERIALS IN SUPPORT THEREOF. IN THE ABSENCE OF SUCH MATERIALS JUSTIFYING THE ESCAPEMENT OF INCOME, THE PRESENT PROCEEDINGS WOULD FALL TO THE GROUND. THE PARTICIPATION IN THE - - ITA 2101 & 2484/16 5 PRESENT PROCEEDINGS WOULD NOT CONFER THE JURISDICTI ON FOR FRAMING THE RE-ASSESSMENT INASMUCH AS THE ASSESSEE IS PARTI CIPATING AS WELL AS RESPONDING TO THE QUERIES ISSUED IN ORDER T O PROTECT THEIR INTEREST AND HENCE THERE SHOULD NOT BE ANY ADVERSE INFERENCE ON THEIR RESPONSES TO THE VARIOUS NOTICES ISSUED IN TH E PRESENT ASSESSMENT PROCEEDINGS. THERE WAS COMPLETE DISCLOS URE OF THE MATERIAL FACTS FOR THE PURPOSE OF FRAMING THE ASSES SMENT IN THE ORIGINAL RETURN OF INCOME FILED ON 30.10.2007 AND H ENCE THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCL OSE FULLY AND TRULY SUCH FACTS FOR FRAMING THE ASSESSMENT. 3.1 ACCORDING TO THE AO, THE ASSESSEE HAS NOT FURNI SHED ANY REPLY IN RESPONSE TO LETTER DATED 11.3.2015. THE A SSESSEE HAS STATED IN ITS LETTER DATED 16.3.2015 THAT THE NOTIC E ISSUED FOR RE- OPENING ON 28.3.2014, DID NOT CONTAIN THE REASON FO R REOPENING U/S.147 OF THE ACT. THE ASSESSEE HAS NOT ASKED FOR REASONS FOR REOPENING. BUT AT THE TIME OF PERSONAL APPEARANCE OF THE ASSESSEES REPRESENTATIVE ON 9.9.2014, THE REASONS FOR RE- OPENING THE ASSESSMENT IS INFORMED TO HIM AND REQUE STED TO FURNISH THE DETAILS CALLED FOR VIDE NOTICE U/S.142( 1) DATED 3.9.2014. IN THE ABOVE NOTICE U/S.142(1), THE ASSE SSEE IS - - ITA 2101 & 2484/16 6 REQUESTED TO FURNISH THE COPY OF PURCHASE DEED OF L AND AT ALATHUR AND COPY OF POWER OF ATTORNEY, IF ANY EXECUTED IN F AVOUR OF M/S. PARSVNATH BUILDERS AND THEREFORE, IT IS CLEAR THAT THE REASONS FOR SCRUTINY HAVE BEEN INFORMED TO THE ASSESSEE. 4. REGARDING REOPENING OF ASSESSMENT, LD.A.R SUBMIT TED BEFORE US THAT THERE IS NO FRESH MATERIAL TO RE-OPE N THE ASSESSMENT. ONLY ON THE BASIS OF DOCUMENTS ALREADY ON RECORD WAS USED FOR THE PURPOSE OF REOPENING OF ASSESSMENT , AND AFTER FOUR YEARS OF ENDING OF THE RELEVANT TO ASSESSMENT YEAR, RE-OPEN OF ASSESSMENT IS BAD IN LAW. LD.A.R PRAYED THAT TH OUGH THERE WAS NO ASSESSMENT, AND ONLY PROCESSING OF RETURN U/ S.143(1) OF THE ACT, THE RE-ASSESSMENT CANNOT BE VALID. HE REL IED IN THE JUDGEMENT OF DELHI HIGH COURT IN THE CASE OF CIT V S. ORIENT CRAFT LTD., IN 354 ITR 536(DEL.). HE ALSO SUBMITTED THAT REASONS FOR REOPENING REQUESTED BY THE ASSESSEE FOR NOT FUR NISHING TO THE ASSESSEE, AS SUCH RE-ASSESSMENT HAS TO BE QUASHED. FOR THIS PURPOSE HE RELIED ON THE JUDGEMENT OF GKN DRIVESHAFTS (INDIA) LTD. VS. ITO IN [2003] 259 ITR 19 (SC ). 4.1 ON THE OTHER HAND, LD.D.R SUBMITTED THAT RE-A SSESSMENT IS VALID IN VIEW OF JUDGMENT OF SUPREME COURT IN TH E CASE OF - - ITA 2101 & 2484/16 7 RAJESH JHAVERI STOCK BROKERS P. LTD., IN [2007] 29 1 ITR 500 (SC). 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE MAIN CONTENTION OF LD.A.R IS THAT IN THIS CASE THE RETURN WAS PROCESSED U/S.143(1) OF THE ACT. THE ASS ESSEE HAS FURNISHED ALL DETAILS TO THE AO AT THE TIME OF FILI NG OF RETURN OF INCOME AND ACCORDING TO THE A.R, THERE WAS NO FAIL URE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS NECESSARY FOR THE PURPOSE OF ASSESSMENT. HE SUBMITTED THAT THE R EOPENING VIDE NOTICE U/S.148 OF THE ACT DATED 26.03.2014, IT IS ONLY A CHANGE OF OPINION. HE SUBMITTED THAT THE AO GOING THROUGH THE SAME DOCUMENTS, WHICH WERE ALREADY ON RECORD, WANTE D TO RE- OPEN THE ASSESSMENT, WHICH IS NOTHING BUT REVIEW OF THE EARLIER OPINION, WHICH IS NOT POSSIBLE U/S.147 OF THE ACT. IN THIS CASE, THE ASSESSMENT WAS REOPENED AFTER RECORDING THE REA SONS THAT THERE WAS AN OUTSTANDING LIABILITY IN THE BALANCE S HEET AT ` 7,02,54,000/- TOWARDS INVESTMENT. IT WAS NOTICED B Y THE ASSESSING OFFICER FROM THE AGREEMENT THAT THE PROPE RTY HAS BEEN TRANSFERRED THROUGH JOINT VENTURE AGREEMENT DATED 1 0.09.2006 WITH M/S.PARSVANATH DEVELOPERS LTD., FOR WHICH THE ASSESSEE - - ITA 2101 & 2484/16 8 HAD RECEIVED THE SAID AMOUNT. ACCORDING TO A.O, TH IS JOINT VENTURE WAS RESULTED IN CAPITAL GAIN TO THE ASSESSE E, WHICH WAS NOT OFFERED TO TAXATION. 5.1 ADMITTEDLY IN THIS CASE, THERE WAS NO ASSESS MENT U/S.143(3) OF THE ACT. IT IS A SETTLED LAW THAT O N THE BASIS OF MATERIAL, PRIMA FACIE, AVAILABLE BEFORE THE ASSESS ING OFFICER, OPINED THAT INCOME CHARGEABLE TO TAX HAS ESCAPED AS SESSMENT CAN BE FORMED. THE WORD REASON IN THE PHRASE REA SON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IN CASE THE ASSESSING OFFICER HAS A CAUSE OR JUSTIFICATION TO KNOW OR SUP POSE THAT INCOME HAS ESCAPED ASSESSMENT, ACTION U/S 148 CAN B E TAKEN. BUT OBVIOUSLY, THERE SHOULD BE RELEVANT MATERIAL ON WHICH A REASONABLE MAN COULD HAVE FORMED A REQUISITE BELIEF . WHETHER THIS MATERIAL(S) WOULD CONCLUSIVELY PROVE THE ESCAP EMENT OF INCOME IS NOT THE CONCERN AT THAT PARTICULAR STAGE. SO WHAT IS REQUIRED IS THE SUBJECTIVE SATISFACTION OF THE ASSE SSING OFFICER BASED ON OBJECTIVE MATERIAL EVIDENCE. THE REASON WA S RECORDED AS DISCUSSED ABOVE. THE ARGUMENT OF THE LD.AR IS TH AT WHERE - - ITA 2101 & 2484/16 9 THERE WAS NO FRESH TANGIBLE MATERIAL TO REOPEN THE ASSESSMENT U/S 147, NO ACTION COULD BE TAKEN AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE ASSESSEE HAS DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR THAT ASSESSMENT YE AR, INTER ALIA. 5.2 AS SEEN FROM THE REASONS RECORDED, IT GIVES A CLEAR PICTURE THAT THE ASSESSING OFFICER HAS GOT MATERIAL EVIDENCE TO FORM HIS OPINION FOR TAKING RECOURSE TO SECTION 147 R.W.S 148 OF THE ACT. THERE CANNOT BE TWO OPINIONS. AT THE POINT OF TIME WHEN THE REASONS ARE RECORDED, FORMING OPINION OF ESCAP EMENT OF INCOME IS ONLY RELEVANT. HENCE, THIS PLEA OF THE L D.AR IS NOT TENABLE IN THE EYES OF LAW. IT IS TRUE THAT U/S 147 , THE ASSESSING OFFICER CAN EITHER ASSESS OR RE-ASSESS BUT FOR TAKI NG ACTION THERE UNDER, HE HAS TO RECORD REASONS THAT INCOME CHARGEA BLE TO TAX HAS ESCAPED ASSESSMENT . IT IS ALSO MANDATED BY SEC TION 148(2) TO RECORD REASONS IN WRITING. THE REASSESSMENT PROC EEDINGS U/S 147 ARE FURTHER SUBJECT TO SECTIONS 148,149,150,151 ,152 AND 153. BUT IN THE PRESENT CASE, WE ARE REQUIRED TO DE CIDE THE LIMITED ISSUE REGARDING THE VALIDITY OF PROCEEDINGS UNDERTAKEN - - ITA 2101 & 2484/16 10 AFTER FOUR YEARS OF THE ASSESSMENT YEAR IN QUESTION . THE ASSESSING OFFICER IS REQUIRED TO SEE IF THE CONDITI ONS LAID IN EXPLANATION 2(C) ARE SATISFIED BECAUSE IN THIS CASE NO ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT. IN CASE, (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED; O R (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW RATE; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECTIVE OF EXCESS RELIEF UNDER THIS ACT; OR (IV)EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED, THEN TH E ASSESSING OFFICER WOULD HAVE VALID COGNIZANCE U/S 1 47 OF THE ACT. THE REASONS RECORDED BY THE ASSESSING OFFICER CLEARLY SPEAK FOR THE UNDER ASSESSMENT OF TAX HENCE, THE CO NDITIONS LAID ABOVE STAND FULFILLED IN SO FAR AS RE-ASSESSMENT PR OCEEDINGS ARE CONCERNED. IN SO FAR AS THE REASONS RECORDED, EXTRA CTED IN THE EARLIER PORTION OF THIS ORDER, WE ARE SATISFIED THA T THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESC APED ASSESSMENT. THIS FACT CONFERS JURISDICTION ON HIM T O REOPEN THE ASSESSMENT. THE POWER TO RE-ASSESS POST 1ST APRIL, 1989 ARE MUCH WIDER THAN THESE USED TO BE BEFORE. BUT STILL THE SCHEMATIC INTERPRETATION OF THE WORDS REASON TO BELIEVE FAI LING WHICH - - ITA 2101 & 2484/16 11 SECTION 147 WOULD GIVE ARBITRARILY POWERS TO THE AS SESSING OFFICER TO REOPEN THE ASSESSMENT ON THE BASIS OF ME RE CHANGE OF OPINION, WHICH CANNOT BE, PER SE A REASON TO REOPE N THE CASE. THE ACT HAS NOT GIVEN POWER TO THE ASSESSING OFFICE R TO REVIEW BUT HAS ONLY GIVEN POWER TO RE-ASSESS. THERE IS A C ONCEPTUAL DIFFERENCE BETWEEN THE TWO ASPECTS AS THE ASSESSING OFFICER HAS NO POWER AT ALL TO REVIEW THE ASSESSMENT. THE REASS ESSMENT, AS STATED ABOVE, HAS TO BE BASED ON FULFILLMENT OF CER TAIN PRE- CONDITIONS BUT THE CONCEPT CHANGE OF OPINION HAS TO BE TAKEN INTO CONSIDERATION OTHERWISE IT MAY GIVE UNBRIDLED POWER TO AN ASSESSING OFFICER TO REOPEN ANY AND EVERY ASSESSMEN T ORDER WHICH WOULD SIMPLY AMOUNT TO A REVIEW. THE CONCEPT CHANGE OF OPINION IS AN IN-BUILT TEST TO CHECK THE ABUSE OF POWER BY THE ASSESSING OFFICER. SO, NOW ONLY WHEN THE ASSESSING OFFICER HAS A TANGIBLE MATERIAL TO BASE HIS CONCLUSION THAT THE RE IS AN ESCAPEMENT OF INCOME FROM ASSESSMENT AND THE REASON S RECORDED HAVE A LINK WITH THE FORMATION OF HIS BELI EF, HE HAS THE POWER U/S 147 OF THE ACT. 5.3 IN THE PRESENT CASE, THE ASSESSEE HAS NOT SHO WN CAPITAL GAIN ARISING OUT OF JOINT VENTURE AGREEMENT DATED - - ITA 2101 & 2484/16 12 10.09.2006 WITH M/S.PARSVANATH DEVELOPERS LTD., THO UGH THE ASSESSEE HAS RECEIVED AN AMOUNT OF ` 7,02,54,000/. AS PER EXPLANATION 2 OF SECTION147, IT IS VERY CLEAR THAT DUE TO NON- DISCLOSURE OF CAPITAL GAIN BY THE ASSESSEE, THE INC OME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THE ASSE SSEE HAS NOT PRODUCED ANYTHING BEFORE THE COMMISSIONER OF IN COME TAX (APPEALS) TO SHOW AS TO HOW THERE IS NO TRANSFER O F IMPUGNED PROPERTY IN ASSESSMENT YEAR AND HOW THE PROVISIONS OF SECTION 2(47)(V) IS NOT APPLICABLE. HENCE, THE ACTION OF C OMMISSIONER OF INCOME TAX (APPEALS) AND THAT OF ASSESSING OFFICER IS FULLY COVERED BY THE PROVISIONS OF EXPLANATION 1 TO SECTI ON 147 OF THE ACT IS NOT CORRECT. THE SAID PROVISION READS AS U NDER: PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUN TS BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD W ITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFF ICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO. IT IS POSSIBLE THAT WITH DUE DILIGENCE OF THE ASSES SING OFFICER WOULD HAVE ASCERTAINED THIS FACT AT THE TIME OF ASS ESSMENT, IF ANY ALSO, BUT IN VIEW OF THE EXPLANATION (1) IT DOE S NOT MEAN THAT THERE WAS NO DEFAULT ON THE PART OF THE ASSESSEE. HENCE, REOPENING U/S.147 IS HELD TO BE VALID. THE ASSESSE E HAS TRIED TO - - ITA 2101 & 2484/16 13 TAKE SHELTER UNDER THE EXCEPTION PROVIDED IN THAT S ECTION. BUT AS STATED ABOVE, WHEN THE ASSESSEE HAS NOT DISCLOSED F ULLY AND TRULY THE FACTS NECESSARY FOR THE ASSESSMENT AND TH ERE IS NO ASSESSMENT U/S.143(3) OF THE ACT, THIS PROVISO WIL L NOT COME TO ITS RESCUE. CONSEQUENTLY, WE HOLD THAT THE ENTIRE R EASSESSMENT PROCEEDING IN THIS CASE IS VALID AND THEREFORE, THE ACTION OF THE ASSESSING OFFICER IS UPHELD. 5.4 IN OUR CONSIDERED OPINION, THE ISSUE IS SQUARE LY COVERED BY THE JUDGEMENT OF SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS P. LTD., [2007] 291 ITR 500(SC ) WHEREIN IT WAS HELD THAT THE AO HAD JURISDICTION TO ISSUE NOTICE U /S.148 FOR BRINGING TO TAX INCOME ESCAPING ASSESSMENT IN AN INTIMATION UNDER SEC.143(1)(A) ON THE GROUND THAT THE CLAIM OF DEDUC TION BY THE ASSESSEE WAS NOT ACCEPTABLE AS THE CONDITIONS FOR AL LOWANCE NOT FULFILLED. FAILURE TO TAKE STEPS U/S.143(3) OF THE ACT WILL NOT RENDER THE AO POWERLESS TO INITIATE REASSESSMENT PROCEEDING S WHEN INTIMATION U/S.143(1) HAS BEEN ISSUED. FURTHER, IN THIS CASE IT IS TO BE NOTED THAT THERE WAS NO ASSESSMENT U/S.143(3) OF THE ACT, IT CANNOT BE SAID THAT THERE IS A CHANGE OF OPINION BY REOPENING - - ITA 2101 & 2484/16 14 THE ASSESSMENT. THE ASSESSEE FAILS ON THIS GROUND OF RE- OPENING. 5.5 ONE MORE ARGUMENT OF THE LD. AR IS THAT THE AS SESSING OFFICER HAS NOT FURNISHED THE REASONS FOR REOPENING OF ASSESSMENT. AS SUCH THE RE-ASSESSMENT IS BAD IN LA W. IN OUR CONSIDERED OPINION, THERE IS NO MATERIAL ON RECORD TO SUGGEST THAT THE ASSESSEE HAS ASKED FOR REASONS FOR REOPENI NG AFTER FILING RETURN OF INCOME IN RESPONSE TO NOTICE ISSUE D U/S.148 OF THE ACT. IF THE ASSESSING OFFICER FAILED TO FURNISH TH E REASONS FOR REOPENING OF ASSESSMENT TO THE ASSESSEE, THEN ONLY THE ASSESSEE IS HAVING GRIEVANCE. ON THE OTHER HAND, IN THE PRESENT CASE THERE IS NO WRITTEN REQUEST MADE BY THE ASSESS EE AFTER FILING THE RETURN OF INCOME FOR REASONS RECORDED FO R REOPENING AND THEN ALSO AFTER PARTICIPATING THE RE-ASSESSMENT PROCEEDINGS, NOW THE ASSESSEE CANNOT RAISE THAT GROUND. ACCORDIN GLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS REJECTED. 6. NOW THE NEXT GROUND FOR OUR CONSIDERATION IS WI TH REGARD TO BRINGING TO TAX THE LONG TERM CAPITAL GAINS BY A PPLYING THE PROVISIONS OF SEC.2(47)(V) OF THE ACT. - - ITA 2101 & 2484/16 15 6.1 THE AO BROUGHT TO TAX THE LONG TERM CAPITAL GAINS AGGREGATING TO ` 39,77,60,547/- ON THE APPLICATION OF SEC.2(47)(V) READ WITH SEC.45 OF THE ACT, ARE THAT THE ASSESSEE OBJECTED TO THE ADDITION BEFORE THE AO BY STATING THAT SUMERU S OFT PVT. LTD. HAS PURCHASED AN EXTENT OF 31 ACRES 78 CENTS APPR OXIMATELY AGRICULTURAL PUNJA LAND IN VILLAGE KARUNGULLIPALLAM, ALATHUR PANCHAYAT BOARD LIMITS,THIRUPORU PANCHAYAT UNION, TALUK CHING LEPUT, KANCHIPURAM DISTRICT ON 9.6.2001. DURING THE ASSESSMENT YEAR,SUMERU SO FT PVT. LTD. ENTERED INTO A JOINT VENTURE AGREEMENT WI TH PARSVANATH DEVELOPERS LIMITED FOR DEVELOPING A MULTI FACILITY COMPLEX CONSISTING OF IT/TIES PARKS, COMMERCIAL, SERVICE AN D RESIDENTIAL APARTMENTS. THE AGREEMENT WAS ENTERED INTO ON 10.9 .2006 AND PURSUANT TO THE AGREEMENT, A REFUNDABLE SECURITY DE POSIT OF 7,02,54,000/- WAS RECEIVED DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2007-08. ACCORDING TO LD.A.R, THE STATUS OF THE PROPERTY TILL DATE REMAINS VACANT WITH NO DEVEL OPMENT WORK. THE DEVELOPERS HAVE NOT CARRIED OUT ANY ACTIVITY RE LATING TO CONSTRUCTION, AS THEY FEEL THAT THE PROJECT MAY NOT BE SUCCESSFUL.UNDER THE CIRCUMSTANCES, SUMERU SOFT PVT . LTD. MAY BE CALLED UPON TO RETURN THE REFUNDABLE SECURITY DE POSIT - - ITA 2101 & 2484/16 16 AND THE REFUNDABLE DEPOSIT HAVE TO BE REFUNDED TO T HE DEVELOPERS ON COMPLETION OF THE PROJECT AS PER CLAU SE 10.2 OF THE AGREEMENT. AS REGARDS THE POWERS OF ATTORNEY, ACCORDING TO PARA 16.1 OF THE JOINT VENTURE AGREEMENT, TWO POWER S OF ATTORNEY ARE CONTEMPLATED. ONE IS FOR THE LIMITED PURPOSE O F OBTAINING VARIOUS APPROVALS AND OTHER FOR AUTHORIZING DEVELOP ERS TO EXECUTE SALE DEEDS IN RESPECT OF UNDIVIDED SHARE OF THEIR PORTION OF THE LAND. REGARDING THE POSSESSION OF THE LAND /TITLE DEEDS, PARA NO.18 OF THE JOINT VENTURE AGREEMENT WAS CONTE MPLATED THAT LEGAL, PHYSICAL POSSESSION OF THE PROJECT LAND SHALL TAKE PLACE ON FINALIZING OF THE BUILDING PLANS AND IDEN TIFICATIONS OF AREAS OF THE OWNERS ON THE PLANS, THE LEGAL PHYSICA L POSSESSION OF THE PROJECT LAND SHALL BE DEEMED TO HAVE BEEN TR ANSFERRED TO THE DEVELOPERS IN TERMS OF THIS AGREEMENT. ACCOR DING TO THE ASSESSEE, PERMISSION IS GRANTED TO THE BUILDER TO E NTER THE PREMISES AND CONSTRUCT THE BUILDING AND THE POSSESS ION IS RETAINED BY THE LAND OWNER, WHICH WILL BE HANDED OV ER AS AND WHEN THE BUILT UP AREA IS CONSTRUCTED AND DELIVERED AND THE TRANSFER WILL TAKE PLACE ONLY IN THE YEAR IN WHICH BUILT UP AREA IS RECEIVED AND NOT BEFORE, AS THE CONSIDERATION IS RE CEIVABLE IN - - ITA 2101 & 2484/16 17 BUILD UP AREA TO BE CONSTRUCTED AND HANDED OVER BY THE DEVELOPER TO THE LAND OWNER. 6.2 THE ASSESSING OFFICER OBSERVED THAT THE ASSESSE E COMPANY RECEIVED AN AMOUNT OF 7.02 CRORES AS INTEREST FREE DEPOSIT AT THE TIME OF SIGNING THE AGREEMENT AND IT IS MUTUALLY AGREED BY BOTH THE PARTIES THAT THE CONSIDERATION O F SALEABLE AREAS ARE TO BE SHARED AMONG THEM AS UNDER: OWNERS : 27% DEVELOPERS : 73% THE AO FURTHER OBSERVED THAT OUT OF THE 27% EARMARK ED FOR THE OWNERS, 4.5% OF THE AREAS OF THE PROJECT SHALL BE S OLD BACK BY THE OWNERS TO THE DEVELOPER AND THE COST OF THE ABO VE SHALL BE PAID BY THE DEVELOPER BY THE WAY OF ADJUSTMENT OUT OF THE INTEREST FREE DEPOSIT OF 7.02 CRORES. THE AO OBSERVED THAT THE OWNERS HAVE ALLOWED THE DEVELOPER TO ENTER UPON THE PROJECT OF THE LAND FOR THE PURPOSE OF CONSTRUCTION AND HAVE A LLOWED THE DEVELOPER TO PEN A SITE OFFICE THEREON AND THE OWNE RS AGREED THAT THE DEVELOPER MAY IN THEIR OWN CAN RAISE ANY L OAN FOR DEVELOPMENT AND CONSTRUCTION OF THE PROJECT FROM AN Y BANKS / FINANCIAL INSTITUTIONS AND FOR THAT PURPOSE THE DEV ELOPER SHALL - - ITA 2101 & 2484/16 18 DEPOSIT THE TITLE DEED OF THE PROJECT LAND WITH BAN KS / FINANCIAL INSTITUTIONS. 6.3 ACCORDING TO THE AO, AS PER THE ABOVE AGREEMENT THE ASSESSEE COMPANY, M/S. SUMERU SOFT P. LTD. EXECUTED GENERAL POWER OF ATTORNEY IN FAVOUR OF THE DEVELOPER, M/S. PARSVANATH DEVELOPERS ON 12.9.2006 AND THE SAME WAS REGISTERED BEFORE THE SUB-REGISTRAR, MYLAPORE VIDE DOC. NO. 1515/2006 DATED 12.9.2006 HAS GIVEN THE RIGHTS TO THE DEVELOPER AS MENTIONED IN THE JOINT VENTURE AGREEMENT. THE AO OBSERVED THAT THE TRANSFER IN TERMS OF SEC.2(47)(V) OF THE ACT, TOOK PLACE ON THE DATE OF EXECUTION OF THE JOINT VENTURE AGREEMENT DATED 10.9 .2006. THE GENERAL POWER OF ATTORNEY EXECUTED BY THE ASSESSEE ON 12.9.2006 IN FAVOUR OF THE DEVELOPER UNEQUIVOCALLY GRANTED BUNDLE OF POSSESSORY RIGHTS INCLUDING THE RIGHT TO MORTGAGE THE 77.5% OF THE PROPERTY AND RAISE LOANS FROM BANKS TO THE DEVELOPER. THE IRRECOVERABLE POWER OF ATTORNEY EXE CUTED BY THE ASSESSEE IN FAVOUR OF THE DEVELOPER HAS TO BE REGAR DED AS TRANSACTION IN THE EYE OF LAW WHICH ALLOWED POSSESS ION TO BE TAKEN IN PART PERFORMANCE OF THE CONTRACT OF THE TR ANSFER. - - ITA 2101 & 2484/16 19 6.4 ACCORDING TO LD. ASSESSING OFFICER, THE TRANSFE R IN TERMS OF SEC.2(47)(V) OF THE ACT, TOOK PLACE ON THE DATE OF EXECUTION OF THE JOINT VENTURE AGREEMENT DATED 10.9.2006. THE GENER AL POWER OF ATTORNEY EXECUTED BY THE ASSESSEE ON 12.9.2006 IN F AVOUR OF THE DEVELOPER UNEQUIVOCALLY GRANTED BUNDLE OF POSSESSOR Y RIGHTS INCLUDING THE RIGHT TO MORTGAGE THE 77.5% OF THE PR OPERTY AND RAISE LOANS FROM BANKS TO THE DEVELOPER. THE IRREC OVERABLE POWER OF ATTORNEY EXECUTED BY THE ASSESSEE IN FAVOU R OF THE DEVELOPER HAS TO BE REGARDED AS TRANSACTION IN THE EYE OF LAW WHICH ALLOWED POSSESSION TO BE TAKEN IN PART PERFOR MANCE OF THE CONTRACT OF THE TRANSFER. THE AO WAS OF THE OPINIO N THAT AFTER GENERAL POWER OF ATTORNEY WAS EXECUTED, THE RIGHT O F PHYSICAL POSSESSION AS WELL AS LEGAL RIGHTS, I.E., THE RIGHT TO MORTGAGE WAS GIVEN. HENCE, AS PER SEC. 2(47)(V) OF THE ACT, TRA NSFER TOOK PLACE ON THE DATE OF EXECUTION OF THE JOINT VENTURE AGREE MENT DATED 10.9.2006. THE CAPITAL GAIN ARISED IN THE ABOVE TR ANSACTION WAS NOT ADMITTED IN THE RETURN FILED FOR AY 2007-08. T HEREFORE, THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY SUCH FACTS FOR FRAMING THE ASSESSMENT. NO CONFIRMA TION LETTER HAS BEEN RECEIVED FROM M/S. PARSVNATH DEVELOPERS AS - - ITA 2101 & 2484/16 20 MENTIONED BY THE ASSESSEE VIDE ITS LETTER DATED 16. 3.2015. THE INSPECTOR OF INCOME-TAX HAD AN ENQUIRY ABOUT THE PR ESENT POSITION OF THE ABOVE PROPERTY. THE ITI VISITED TO THE SITE AT KARUM KUZHI PALLAM VILLAGE ON 19.2.2015 AND FURNISH ED THE REPORT, WHEREIN IT WAS CONCLUDED THAT THE PROPERTY HAS BEEN TRANSFERRED AND COMPUTED THE CAPITAL GAINS AT 39,77,60,547/-. AGAINST THIS, THE ASSESSEE WENT IN APPEAL BEFORE TH E CIT(APPEALS). 6.5 THE LD. AR SUBMITTED, BEFORE THE CIT(APPEALS), THAT THE ENTIRE ORDER OF THE AO IS VEHEMENTLY ASSAILED IN TH E PRESENT APPEAL ON VARIOUS FACETS AND ACCORDING TO THE ASSES SEE, THE RECKONING OF TRANSFER IN THE PREVIOUS YEAR RELATING TO THE ASST. YEAR UNDER CONSIDERATION BASED ON THE PRESUMPTION O F GIVING POSSESSION TO THE DEVELOPER UPON ENTERING INTO THE SAID JV IS NOT CORRECT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE. THE AO HAD NOT CONSIDERED THE SUBSEQUENT EVENTS SO AS T O PRESUME THE DEEMED TRANSFER FOR THE PURPOSE OF TAXING LTCG IN RELATION THERETO. IN THE LETTER DATED 16.3.2015, THE ASSESS EE HAD BROUGHT TO THE NOTICE OF THE AO THAT THE PROPOSED PROJECT O F BUILDING RESIDENTIAL AND COMMERCIAL SPACE HAD NEVER TOOK OFF AND HENCE, - - ITA 2101 & 2484/16 21 THE TAXATION OF CAPITAL GAINS ON THE PRESUMPTION OF DEEMED TRANSFER OF 73% OF UNDIVIDED SHARE OF LAND IN FAVOU R OF THE DEVELOPER IS CONSEQUENTLY NOT CORRECT. THE SUBSEQU ENT EVENT OF THE NON DEVELOPMENT OF THE LAND IN QUESTION IS VERY RELEVANT FACTOR FOR CONSIDERATION IN THE REOPENED ASSESSMENT UNDER CONSIDERATION AND THE REOPENING OF THE ASSESSMENT T OOK PLACE FROM THE ISSUANCE OF A REOPENING NOTICE ON THE ASSE SSEE ON 26.3.2014 INASMUCH AS EVEN AFTER THE LAPSE OF NEARL Y EIGHT YEARS, THE PROPOSED PROJECT NEVER IMPLEMENTED. HEN CE, THE PRESUMPTION OF DEEMED TRANSFER IN SUCH CIRCUMSTANCE S WOULD FALL TO THE GROUND. THE TAXATION OF DEEMED TRANSFER AS PER SEC.2(47)(V) OF THE ACT COULD BE PRESSED INTO SERVI CE ONLY IN THE CONTEXT OF A SUCCESSFUL JOINT DEVELOPMENT ARRANGEME NT AND NOT OTHERWISE. THE AO WHILE REJECTING THE STAND OF THE ASSESSEE HAD PLACED RELIANCE ON THE INCOME TAX INSPECTORS ( ITI) SITE VISIT REPORT AND OBSERVED THAT THE PROPERTY UNDER CONSIDE RATION WAS TRANSFERRED IN FAVOUR OF THE DEVELOPER IN THE PREVI OUS YEAR RELATING TO THE ASST. YEAR UNDER CONSIDERATION BASE D ON THE POSSESSION. EFFECTIVELY, THE ITIS REPORT WAS BACK ED BY FEW PHOTOGRAPHS TAKEN AND SENT FOR THE CONSIDERATION OF THE AO AND - - ITA 2101 & 2484/16 22 THE REPORT OF THE ITI AND THE PHOTOGRAPHS TAKEN BY HIM WHICH FORMED PART OF HIS REPORT WERE NOT FURNISHED TO THE ASSESSEE AT ANY STAGE. THEREFORE, THE RELIANCE ON THE SAID REP ORT WOULD GET VITIATED IN THE LIGHT OF THE ADMITTED GROSS VIOLATI ON OF THE PRINCIPLES OF NATURAL JUSTICE. EVEN ON THE OBSERVA TIONS/EXTRACTS OF THE SAID REPORT REPRODUCED IN THE IMPUGNED/RE-AS SESSMENT ORDER, THERE WAS ABSOLUTELY NO INDICATION OF THE DE VELOPMENT OF THE PROPERTY/PROGRESS ON THE DEVELOPMENT OF THE PRO PERTY. IT IS TO BE KEPT IN MIND THAT THE ITI HAD APPARENTLY VISI TED THE SITE AFTER LAPSE OF 9 YEARS AND EVEN GOING BY THE SAID REPORT, IT IS CLEARLY ESTABLISHED THAT THE JOINT VENTURE AGREEMENT UNDER CONSIDERATION IS A FAILED ARRANGEMENT. THE ASSESSEE IN ORDER TO FORTIFY THEIR STAND HAS PLACED ON RECORD A BUNCH OF PHOTOGRAPHS T AKEN ON 18.12.2015 AND THE SAID PHOTOGRAPHS WOULD ESTABLISH THE FAILED ATTEMPT OF THE PARTIES IN DEVELOPING THE PROPERTY E VEN AFTER A LAPSE OF NEARLY 9 YEARS. ACCORDING TO ASSESSEE, TH E PLANNING PERMISSION FOR CONSTRUCTION OF THE BUILDINGS IN THE SAID PROPERTY WAS NOT APPLIED BY THE DEVELOPER AND HENCE, NOT OBT AINED. THEREFORE, THE DEVELOPMENT OF THE PROJECT IS ONLY O N PAPER EVEN ON THIS DATE AND ACCORDING TO THE ASSESSEE, THE JV AGREEMENT - - ITA 2101 & 2484/16 23 HAD ONLY VISUALIZED THE SHARING RATIO OF HOUSING CU M COMMERCIAL PROJECT WITHOUT DETAILING THE FINER ASPECTS OF THE PROJECT. IN FACT, THERE WAS NO MENTION ABOUT THE PROPOSED AREA OF CON STRUCTION OF RESIDENTIAL AS WELL AS COMMERCIAL IN THE SAID JV AG REEMENT. THE PROJECT IN THE JV AGREEMENT COULD NOT BE EQUATED TO ANY PROJECT EXECUTED BY THE PARTIES WITH DETAILED SPECIFICATION S FOR THE PURPOSE OF PRESUMING THE APPLICABILITY OF SEC.2(47) (V) OF THE ACT AND THE JV AGREEMENT UNDER CONSIDERATION IS NOT AKI N TO THE AGREEMENTS WHICH COULD BE PRESUMED TO BE THE AGREEM ENTS FOR THE PURPOSE OF RECKONING TRANSFER AND CONSEQUENTIAL COMPUTATION OF LTCG. THE AO APPARENTLY PLACED RELI ANCE ON THE FAILURE OF THE ASSESSEE IN GETTING A CONFIRMATI ON LETTER FROM THE DEVELOPER TO JUSTIFY HIS COMPUTATION OF LTCG AN D BECAUSE OF THE FAILED PROJECT, THE DIFFICULTY IN OBTAINING THE CONFIRMATION LETTER UNDER THE COMPLEX SITUATION WAS NOT APPRECIATED BY THE AO IN THE IMPUGNED ORDER. THE ASSESSEE ARGUED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(A) THAT THERE WAS NO PRO HIBITION FOR THE AO TO CROSS VERIFY WITH THE DEVELOPER INDEPENDE NTLY IN ORDER TO ASCERTAIN THE CORRECTNESS OF THE ASSESSEES SUBM ISSIONS. THE FAILURE OF THE AO IN CONDUCTING CROSS VERIFICATION WITH THE - - ITA 2101 & 2484/16 24 DEVELOPER INDEPENDENTLY WOULD VITIATE HIS DECISION COMPLETELY. THEREFORE, THE PRESUMPTION OF TRANSFER U/S.2(47)(V) OF THE ACT IS NOT CORRECT AND IS LIABLE TO BE INTERFERED WITH IN CANCELLING THE RE- ASSESSMENT UNDER CONSIDERATION IN ALL RESPECTS. 7. THE ASSESSEE SUBMITTED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(A) THAT THE TAXATION OF LTCG ESPECIALLY IN THE CONTEXT OF THE LEGAL PRESUMPTION OF DEEMED TRANSFER CANNOT BE CONSIDERED AS AUTOMATIC ON THE E NTERING INTO THE RELATED AGREEMENTS AS WELL AS PUTTING THE OTHER PARTY/DEVELOPER INTO POSSESSION FOR IMPLEMENTING TH E ARRANGEMENT/AGREEMENT. THE EVENTS WHICH WOULD OCCU R AFTER THE EXECUTION OF THE ARRANGEMENT/AGREEMENT FOR DEVE LOPMENT ARE VERY MUCH RELEVANT FOR THE PURPOSE OF INVOKING THE DEEMED TRANSFER PROVISIONS IN THE ACT AND THE FAILURE OF T HE IMPLEMENTATION OF THE PROJECT FOR VARIOUS REASONS I NCLUDING FINANCIAL REASON WOULD BE DECISIVE FOR THE PURPOSE OF CONSIDERING THE APPLICABILITY OF THE DEEMED TRANSFER PROVISIONS UNDER THE ACT. THE ASSESSEE PLACED RELIANCE ON THE JUDGEMENT OF TH E PUNJAB & HARYANA HIGH COURT RENDERED IN THE CASE OF C.S.ATWA L IN [2015] 378 ITR 244(P&H) DATED 22.7.2015 WHEREIN HELD THAT FOR THE - - ITA 2101 & 2484/16 25 PURPOSE OF CONSIDERING THE SCOPE OF THE SAID SEC.2( 47)(V) OF THE ACT AND ACCORDING TO THE COURT, THE COMPLIANCE OF T HE CONDITIONS PRESCRIBED IN SEC.53A OF THE T.P. ACT, WOULD BE PAR AMOUNT FOR APPLYING THE PROVISIONS OF SEC.2(47)(V) OF THE ACT INASMUCH AS THE FAILURE TO ESTABLISH THE COMPLIANCE OF THE COND ITIONS IN SEC.53A OF THE T.P. ACT, THE PRESUMPTION FOR TRANSF ER UNDER THE ACT WOULD FALL TO THE GROUND. ACCORDING TO THE COU RT, THE PROVISIONS OF THE T.P. ACT, NAMELY SEC.53A OF THE T .P. ACT WERE BODILY LIFTED AND INCORPORATED IN SEC.2(47)(V) OF T HE ACT AND HENCE, THE REQUIREMENT OF COMPLYING WITH THE CONDIT IONS PRESCRIBED IN THE SAID SEC.53A OF THE T.P. ACT WOUL D BE CRUCIAL. AS PER THE PROVISIONS IN SEC.53A OF THE T.P. ACT, T HE REGISTRATION OF THE SALE AGREEMENT/JOINT DEVELOPMENT AGREEMENT I S MANDATED AND NON REGISTRATION OF THE SAID DOCUMENT WOULD BE FATAL TO APPLY THE SAID PROVISIONS OF THE T.P. ACT, READ WITH SEC. 17 OF THE REGISTRATION ACT. ON THE FACTS OF THE CASE, IT IS AN ADMITTED POSITION THAT THE JOINT VENTURE AGREEMENT IS NOT A REGISTERED DOCUMENT AND HENCE THE PROVISIONS OF SEC.53A OF THE T.P. ACT, CANNOT BE INVOKED SO AS TO APPLY SEC.2(47)(V) OF TH E ACT TO COMPUTE THE LTCG FOR THE PURPOSE OF TAXATION. IN T HE LIGHT OF THE - - ITA 2101 & 2484/16 26 LAW DECLARED BY THE COURT IN THE ABOVE MENTIONED DE CISION, THE COMPUTATION OF CAPITAL GAINS IN THE IMPUGNED ORDER IS NOT JUSTIFIED AND THE ASSESSEE PLEADS FOR CANCELLING THE RE-ASSES SMENT FRAMED FOR THE ASST. YEAR 2007-08 IN THE INTEREST O F JUSTICE. IT WAS ARGUMENT OF THE ASSESSEE THAT THE ENCUMBRANCE C ERTIFICATE OBTAINED FOR THE PERIOD COVERING FROM 1.1.1989 TO 5 .1.2016, THERE IS NO INDICATION OF CREATION OF CHARGE/TRANSFER BY THE ASSESSEE IN FAVOUR OF ANY OTHER PARTY WHICH WOULD NEGATE THE PR ESUMPTION OF TRANSFER BY THE AO IN THE IMPUGNED ORDER. MOREOVER , THE COMPUTATION OF LTCG WHICH IS EXTRACTED FULLY AS PAR T OF THIS NOTES OF ARGUMENT IS WHOLLY INACCURATE AND NOT IN T UNE WITH THE FACTS OF THE CASE. THIS ARGUMENT IS CANVASSED WITH OUT PREJUDICED TO THE MAIN ARGUMENTS ADVANCED IN THE PR ECEDING PARAGRAPHS ON THE NON APPLICABILITY OF SEC.2(47)(V) OF THE ACT. THE AO EQUATED THE SECURITY DEPOSIT RECEIVED TO THE EXTENT OF 7.02 CRORES TO THE VALUE OF CONSTRUCTED AREA OF 4.5 % OF THE TOTAL ENTITLEMENT OF THE CONSTRUCTED AREA TO THE ASSESSEE AT 27% AND ACCORDINGLY THE AO PROCEEDED TO QUANTIFY THE VALUE OF THE 27% OF THE CONSTRUCTED AREA AT 42,15,24,000/- FOR ADOPTING SUCH SUM AS SALE CONSIDERATION FOR THE TRANSFER OF 73% O F UDS IN LAND - - ITA 2101 & 2484/16 27 IN FAVOUR OF THE DEVELOPER. THE SAID APPROACH OF T HE AO WAS BASED ON CLAUSE 12.4 OF THE JOINT VENTURE AGREEMENT WHICH IS EXTRACTED HEREIN AFTER FOR IMMEDIATE REFERENCE : 12.4 OUT OF THE 27% AREAS EARMARKED FOR THE OWNER S, 4.5% OF THE AREAS OF THE PROJECT SHALL BE SOLD BACK BY THE OWNERS TO THE DEVELOPERS OR THEIR NOMINEES TOGETHER WITH PROPORTIONATE UNDIVIDED SHARE OF LAND @ 1000/- (RUPEES ONE THOUSAND PER SQ.FT.) SUCH 4.5% OF AREA SHALL BE OUT OF EACH CATEGORY I.E. RESIDENTIAL APARTMENTS, SERVICE APARTMENTS, COMMERCIAL COMPLEX AND IT PARK. THE CONSIDERATION AMOUNT FOR THE PURC HASE OF SAID 4.5% OF THE AREAS OUT OF OWNERS DESIGNATED AREAS SHALL BE PAID BY THE DEVELOPER BY WAY OF ADJUSTMENT OUT OF THE INTEREST FREE DEPOSIT AMOUNT IN TERMS OF CLAUSE 10.1. SUCH AMOUNT, IF ANY, EXCEEDI NG THE AMOUNT OF INTEREST FREE DEPOSIT SHALL BE PAID B Y THE DEVELOPER AT THE TIME OF COMPLETION OF THE 50% OF T HE PROJECT AND THEREAFTER THE OWNER WILL BE ENTITLED T O ONLY 22.5% OF THE DEVELOPED AREA OF THE PROJECT. PROVID ED THAT THE BUY PACK OF 4.5% OF BUILT UP AREA AT THE R ATE OF 1000/- PER SQ.FT. IN TERMS OF THIS AGREEMENT WILL BE A PRE-CONDITION FOR THE OWNERS TO EXECUTE THE POWER O F ATTORNEY TO ENABLE THE DEVELOPERS TO EXECUTE SALE D EEDS IN RESPECT OF 73% OF THE PROJECT LAND IN UNDIVIDED SHARES TO PROSPECTIVE PURCHASERS OF THE DEVELOPERS DESIGNA TED AREAS. 7.1 IT WAS PLEA OF THE ASSESSEE THAT ON THE PLAIN R EADING OF THE SAID CLAUSE WOULD CLEARLY INDICATE THE PERVERSI TY OF FACTS IN THE IMPUGNED ORDER PASSED BY THE AO AND THE SECURIT Y DEPOSIT WAS WRONGLY EQUATED TO THE VALUE OF THE BUY BACK AR RANGEMENT ENVISAGED IN CLAUSE 12.4. AS PER CLAUSE 10.2, THE SECURITY - - ITA 2101 & 2484/16 28 DEPOSIT WAS PROVIDED BY THE DEVELOPER FOR THE PERFO RMANCE OF THE CONTRACTED TERMS AND AS PER THE SAID CLAUSE, TH E SECURITY DEPOSIT WAS REFUNDABLE ON ACHIEVING CERTAIN MILESTO NES IN THE PROPOSED PROJECT. THERE ARE TWO METHODS OF ARRIVIN G AT THE SALE CONSIDERATION IN THE CONTEXT OF DEEMED TRANSFER AND ONE ACCEPTABLE METHOD IS IN OBTAINING A CERTIFICATE FR OM THE DEVELOPER / CONTRACTOR TO ESTIMATE THE COST OF CONS TRUCTION OF THE AREA RELATABLE TO THE LAND OWNER WHICH WOULD CONSTI TUTE THE SALE CONSIDERATION FOR THE SURRENDER OF THE PERCENTAGE O F UDS IN LAND IN FAVOUR OF THE DEVELOPER. THE SAID METHOD WOULD POSE SOME DIFFICULTIES TO ADOPT FOR THE PURPOSE OF QUANTIFYIN G LTCG FOR TAXATION AND AS PER THE JV AGREEMENT, THERE WAS NO INDICATION ON THE EXACT AREA IN TERMS OF SQ.FT. ALLOCABLE TO F AVOUR OF THE LAND OWNER AS WELL AS FOR THE DEVELOPER. IN FACT, THERE IS ABSOLUTELY NO INDICATION ON THE TOTAL AREA OF THE RESIDENTIAL AND COMMERCIAL TO BE CONSTRUCTED AND IN THE ABSENCE OF THE SAID FIGUR E, THE ASCERTAINMENT OF THE COST OF CONSTRUCTION OF THE PO RTION RELATABLE TO THE LAND OWNER WOULD BECOME IMPOSSIBLE. THE OT HER METHOD IS TO ASCERTAIN THE STAMP DUTY VALUE / GUIDELINE VA LUE SO AS TO QUANTIFY THE VALUE / SALE CONSIDERATION OF THE UDS IN LAND - - ITA 2101 & 2484/16 29 SURRENDERED IN FAVOUR OF THE DEVELOPER UNDER THE JV AGREEMENT WHICH METHOD IS ALSO LEGALLY PERMISSIBLE AS PER SEC .50C OF THE ACT. THE ASSESSEE ALSO PLEADED BEFORE THE CIT(A) T HAT ALTERNATIVELY APPROPRIATE DIRECTIONS MAY BE GIVEN TO THE AO TO QUANTIFY/REVISE THE LTCG FOR THE PURPOSE OF TAXATIO N IN ACCORDANCE WITH SEC.50C OF THE ACT. THE SAID STAND OF THE ASSESSEE IS ALTERNATIVE TO THE MAIN STAND OF THE NO N APPLICABILITY OF SEC.2(47)(V) OF THE ACT. 7.2 THE CIT(APPEALS) OBSERVED THAT THE CAPITAL GAI NS ARE TAXABLE IN THE YEAR OF POSSESSION OF PROPERTY AND N OT TRANSFER OF TITLE UNDER THE IT ACT. FURTHER, THE CIT(APPEALS) OBSERVED THAT THE POSSESSION IS HANDED OVER TO M/S. PARSVNATH DEV ELOPERS BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. THE TRIBUNAL, MUMBAI BENCH IN THE CASE OF GRIPWELL INDUSTRIES LTD . V. ITO [284 ITR (AT) 188] HAS HELD THAT WHERE THERE IS AN AGREE MENT OF SALE BETWEEN THE ASSESSEE AND THE VENDEE AND THE PHYSICA L POSSESSION OF THE FACTORY ALONG WITH FACTORY LAND, BUILDING AND OTHER ASSETS IS ACTUALLY GIVEN IN ONE FINANCIAL YEA R WHEREAS THE LEGAL TITLE TO THE PROPERTY IS TRANSFERRED IN THE N EXT FINANCIAL YEAR, THE CAPITAL GAINS WOULD BE DEEMED TO ACCRUE IN THE YEAR IN WHICH - - ITA 2101 & 2484/16 30 THE POSSESSION IS ACTUALLY GIVEN AND NOT IN THE LAT ER YEAR WHEN THE LEGAL TRANSFER OF TITLE IS EFFECTED. THIS JUDG MENT IS OF GREAT IMPORTANCE FOR ALL PERSONS POSSESSING PROPERTY AND INTERESTED IN TRANSFERRING IT. 7.3 THE CIT(APPEALS) OBSERVED THAT THE SUBMISSION O F THE ASSESSEE IS THAT THE AO HAS RELIED UPON THE REPORT OF IT INSPECTOR, A COPY OF WHICH WAS NOT FURNISHED TO THE ASSESSEE. IT MUST BE BORNE IN MIND THAT THE SAID REPORT WITH PHO TOGRAPHS ARE NOT RELEVANT, AS THE SAME WERE OBTAINED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHEREAS THIS IS ENTIRELY A LEGAL ISSUE. FURTHER, THE CIT(APPEALS) OBSERVED THAT THE PLEA OF THE ASSESSEE IS THAT THE JV AGREEMENT IS NOT AKIN TO OT HER AGREEMENTS. HOWEVER, LAW IS APPLICABLE ALIKE TO AL L SUCH AGREEMENTS. BEFORE THE CIT(APPEALS), IT WAS THE SU BMISSION OF THE ASSESSEE THAT IT IS A FAILED PROJECT BUT THE AF ORESAID JV AGREEMENT WAS NEVER CANCELLED AND THE MONEY RECEIVE D WAS NOT REFUNDED AND THE CIT(APPEALS) OBSERVED THAT THE ASSESSEE DID NOT FURNISH ANY CONFIRMATION LETTER FROM THE DE VELOPER. ACCORDING TO THE CIT(APPEALS), THE ONUS IS ON THE A SSESSEE TO - - ITA 2101 & 2484/16 31 PROVE ITS CONTENTIONS. FURTHER, THE LD. AR RELIE D ON THE DECISION OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF C .S.ATWAL DATED 22.7.2015, WHEREIN IT IS HELD THAT COMPLIANCE OF PROVISIONS OF SEC.53A IS CRUCIAL FOR APPLYING PROVISIONS OF SE C.2(47)(V) OF THE ACT AND SUBMITTED THAT JV AGREEMENT IS NOT A REGIST ERED DOCUMENT AND THEREFORE, PROVISION OF SEC.2(47)(V) D O NOT APPLY AS CONDITION OF SEC.53A OF T.P.ACT CANNOT BE APPLI ED. THE CIT(APPEALS) RELIED ON THE JUDGMENT IN THE CASE OF SURAJ LAMPS & INDUSTRIES PVT. LTD. (183 (2011) DLT 1(SC)). THE GIST OF THE CASE LAW WAS REPRODUCED IN PARAS 5.2.7 OF LD.CIT(A) S ORDER. 7.4 ACCORDING TO THE CIT(APPEALS), OBSERVED THAT UN LESS THERE IS A PROPER REGISTERED SALE DEED, OF AN IMMOV ABLE PROPERTY DOES NOT PASS. THE SUPREME COURT HAS HOWEVER REITE RATED THAT WHICH ARE CREATED PURSUANT TO SEC.53A OF THE TP ACT , 1882 DEALING WITH DOCTRINE OF PART PERFORMANCE, AN IRREV OCABLE RIGHT OF A PERSON HOLDING A POWER OF ATTORNEY GIVEN FOR CONS IDERATION COUPLED WITH INTEREST AS PER SEC.202 OF THE CONTRAC T ACT, 1872 AND DEVOLUTION OF INTEREST PURSUANT TO A WILL. THE REFORE, NO DOUBT, A PERSON STRICTLY MAY NOT HAVE COMPLETE OWNE RSHIP RIGHTS - - ITA 2101 & 2484/16 32 UNLESS THERE IS A DULY REGISTERED SALE DEED, HOWEVE R, CERTAIN RIGHTS CAN EXIST IN AN IMMOVABLE PROPERTY PURSUANT TO THE PROVISIONS OF SEC.53A OF THE TP ACT, 1882, SEC.202 OF THE CONTRACT ACT, 1872. THERE ALSO TAKES PLACE DEVOLU TION OF INTEREST AFTER THE DEATH OF THE TESTATOR IN TERMS O F A WILL. 7.5 THE CIT(APPEALS) OBSERVED THAT IN CASE OF JOINT DEVELOPMENT AGREEMENT, QUESTION ARISES WHEN THE INC IDENT OF CAPITAL GAINS TAX ARISES. IT PURELY DEPENDS UPON T HE TERMS OF DEVELOPMENT AGREEMENT. WHEN THE AGREEMENT IS OF SU CH A NATURE THAT POSSESSION IS GIVEN IN PART PERFORMANCE OF A CONTEST, THE LIABILITY OF CAPITAL GAINS TAX WILL ARISE ON TH E HANDING OVER OF SUCH POSSESSION. IT IS NOT THE CASE OF THE ASSESSE E THAT ONLY A LICENSE IS GIVEN TO THE DEVELOPER AND POSSESSION SH ALL BE GIVEN ON COMPLETION OF PROJECT. IT IS NOT NECESSARY THAT ENTIRE SALE PROCEEDS BE RECEIVED BY THE OWNER TO ATTRACT THE PR OVISION OF SEC.2(47)(V) OF THE ACT. THEREFORE, ACCORDING TO T HE CIT(APPEALS), THE ACTION OF THE AO IN HOLDING THAT THE PROPERTY HAS BEEN TRANSFERRED AND THE TRANSACTION WOULD ATTR ACT CAPITAL GAINS U/S.2(47)(V) OF THE ACT IS JUSTIFIED. WHILE COMPUTING THE CAPITAL GAINS, THE AO HAS ADOPTED SALE CONSIDERATIO N, BEING - - ITA 2101 & 2484/16 33 42,15,24,000/- AS VALUE OF 27% OF SHARE OF CONSTRUC TED AREA AS PER CLAUSES 12.1 AND 12.4 OF THE JV AGREEMENT. AC CORDING TO THE CIT(APPEALS), STAMP VALUE OF THE AFORESAID LAND HAS ALSO TO BE KEPT IN CONSIDERATION WHILE CALCULATING CAPITAL GAINS AS PER REQUIREMENTS OF SEC.50C. THE ALTERNATE GROUND OF T HE ASSESSEE IS REGARDING CALCULATION OF LONG TERM CAPITAL GAINS IN ACCORDANCE WITH THE PROVISIONS OF SEC.50C OF THE ACT. THEREFO RE, HE DIRECTED THE AO TO APPLY THE PROVISIONS OF SEC.50C WHILE COM PUTING LTCG AND PARTLY ALLOWED THE GROUND OF APPEAL. AGAI NST THIS FINDINGS OF THE CIT(A), BOTH ARE IN APPEAL BEFORE U S. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL AVAILABLE ON RECORD WITH REFERENCE TO THE CONTENTIO NS OF THE ASSESSEE WITH REGARD NON-CHARGEABILITY OF CAPITAL G AINS IN RESPECT OF THE LAND. WE HAVE ALSO GONE THROUGH THE VARIOUS CASE LAW CITED BY THE PARTIES AND CONSIDERED THE ADDITIO NAL EVIDENCE FILED BY THE ASSESSEE. ACCORDING TO THE AUTHORISED REPRESENTATIVE, WHICH WAS NOT 'TRANSFERRED' BUT ONL Y GIVEN FOR DEVELOPMENT. WE MAY REFER TO THE PROVISIONS OF SECT ION 2(47)(V) WHICH READS AS FOLLOWS :- - - ITA 2101 & 2484/16 34 '(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)' 8.1. THE IMPORTANCE OF THE WORD 'TRANSFER' IS DUE T O THE REASON THAT UNDER THE CHARGING SECTION, VIZ., SECTION 45, AND THE CAPITAL GAIN IS TAXABLE ON 'TRANSFER OF A CAPITAL ASSET'. P RECISELY, THIS SECTION PRESCRIBES THAT 'ANY PROFITS OR GAINS ARISI NG FROM THE TRANSFER OF A CAPITAL ASSET EFFECTED IN THE PREVIOU S YEAR SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD CAPITAL GAI NS AND SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE'. 8.2 THUS, THE FUNDAMENTAL FEATURES WHICH DETERMINE THE TAXABILITY OF CAPITAL GAIN, ARE THAT THE GAIN OUGHT TO BE FROM THE TRANSFER OF A CAPITAL ASSET. THIS SECTION HAS A LAR GE SCOPE OF ITS OPERATION DUE TO THE PRESENCE OF DEEMING PROVISION WHICH SAYS THAT THE GAIN SHALL BE THE DEEMED INCOME OF THAT PR EVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE. THIS PHRASE CAN B E INTERPRETED IN THE MANNER THAT THE TOTAL PROFITS MAY ACTUALLY B E RECEIVED IN ANY OTHER YEAR, BUT FOR THE PURPOSES OF SECTION 45, THE GAIN SHALL BE THE DEEMED INCOME OF THE YEAR OF TRANSFER OF THE CAPITAL - - ITA 2101 & 2484/16 35 ASSET. IT SHALL NOT BE OUT OF CONTEXT, AT THIS JUNC TURE, TO MENTION AN OBSERVATION OF THE HON'BLE AUTHORITY FOR ADVANCE RULINGS IN THE CASE OF JASBIR SINGH SARKARIA, IN RE [2007] 294 ITR 196 (AAR), THAT THE EXPRESSION USED IN SECTION 45 IS 'A RISING', WHICH CANNOT BE EQUATED WITH THE EXPRESSION 'RECEIVED' OR EVEN WITH THE EXPRESSION 'ACCRUED' AS BEING USED IN THE STATU TE. THE POINT WHICH DESERVES NOTICE IS THAT THE AMOUNT OR THE CON SIDERATION SETTLED MAY NOT BE FULLY RECEIVED OR MAY NOT TECHNI CALLY ACCRUE BUT IF IT ARISES FROM THE AGREEMENT IN QUESTION, TH EN THE DEEMING PROVISIONS SHALL COME INTO OPERATION. ANOTHER POINT IS ALSO EQUALLY NOTICEABLE THAT BY THE PRESENCE OF THE DEEM ING PROVISION, THE INCOME ON ACCOUNT OF ACCRUAL OF THE CAPITAL GAIN SHOULD BE CHARGED TO TAX IN THE SAME PREVIOUS YEAR IN WHICH THE TRANSFER WAS EFFECTED OR DEEMED TO HAVE TAKEN PLACE . DUE TO THE PRESENCE OF THIS STATUTORY FICTION, THE ACTUAL YEAR IN WHICH THE ENTIRE SALE CONSIDERATION IS RECEIVED, IS BESIDE TH E POINT BUT WHAT NEEDS TO BE JUDGED IS THE POINT OF TIME AT WHICH TH E TRANSFER TOOK PLACE EITHER BY HANDING OVER OF THE POSSESSION OR B Y ALLOWING THE ENTRY INTO THE PREMISES OR BY MAKING THE CONSTR UCTIVE - - ITA 2101 & 2484/16 36 PRESENCE OF THE VENDEE NEVERTHELESS DULY SUPPORTED BY A LEGAL DOCUMENT. 8.3 BUT THE ISSUE DOES NOT GET SETTLED ONLY BY THE INTERPRETATION OF SECTION 45 AND SECTION 2(47)(V) B ECAUSE THE DEFINITION OF 'TRANSFER' DOES NOT MERELY PRESCRIBES ALLOWING OF POSSESSION BUT ALSO THAT IT MUST BE RETAINED IN PAR T PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT. THEREFORE, IT IS FURTHER REQUISITE TO DEAL WITH THE RELEVANT SECTION CONTAINED IN THE TRANSFER OF PROPERTY ACT. THE TRANSFER OF PROPERTY ACT CONTAINS SECTION 53A UNDER THE HEADING 'PART PERFORMANCE' AND, FOR DECIDING TH E CASE IN HAND, IT IS NECESSARY TO QUOTE THE IMPUGNED SECTION VERBATIM AS FOLLOWS : 'WHERE ANY PERSON CONTRACTS TO TRANSFER FOR CONSIDE RATION ANY IMMOVABLE PROPERTY BY WRITING SIGNED BY HIM OR ON H IS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTITUTE THE TRANSFE R CAN BE ASCER TAINED WITH REASONABLE CERTAINTY, AND THE TRANSFERE E HAS, IN PART PERFORMANCE OF THE CONTRACT, TAKEN POSSESSION OF TH E PROPERTY OR ANY PART THEREOF, OR THE TRANSFEREE, BEING ALREADY IN P OSSESSION, CONTINUES 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 HIS PART OF THE CONTRACT, THEN, NOTWITHSTANDING THAT THE CONTRACT, THOUGH REQUIRED TO BE REGISTERED, HAS NOT BEEN REGISTERED, OR, WHERE THERE IS AN INST RUMENT OF TRANSFER, THAT THE TRANSFER HAS NOT BEEN COMPLETED IN THE MAN NER PRESCRIBED THEREFOR BY THE LAW FOR THE TIME BEING IN FORCE, TH E TRANS FEROR OR ANY PERSON CLAIMING UNDER HIM SHALL BE DEBARRED FROM EN FORCING AGAINST THE TRANSFEREE AND PERSONS CLAIMING UNDER HIM ANY R IGHT IN RESPECT OF - - ITA 2101 & 2484/16 37 THE PROPERTY OF WHICH THE TRANSFEREE HAS TAKEN OR C ONTINUED IN POSSESSION, OTHER THAN A RIGHT EXPRESSLY PROVIDED B Y 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.' 8.4 THE DOCTRINE OF 'PART PERFORMANCE' IS UNDOUBT EDLY BASED UPON THE DOCTRINE OF EQUITY. IF ONE PARTY HAS PERFO RMED HIS PART OF DUTY THEN EQUITY DEMANDS THAT THE OTHER PARTY SH ALL ALSO PERFORM HIS PART OF THE OBLIGATION. IF ONE PARTY ST OOD BY HIS WORDS THEN IT IS EXPECTED FROM THE OTHER PARTY TO ALSO ST AND BY HIS PROMISE. NATURALLY AN INEQUITABLE CONDUCT OF ANY PE RSON HAS NO SANCTION IN THE EYE OF LAW. 8.5 IN THE LIGHT OF THE INGREDIENTS OF THIS SECTION , WHICH HAS BEEN ARGUED FROM BOTH THE SIDES, NOW WE PROCEED TO EXAMINE THE FACTUAL MATRIX OF THE CASE IN HAND, HEREINBELOW : (A) STARTING WORDS OF SECTION 53A ARE 'WHERE ANY PE RSON CONTRACTS' WHICH MEANS JUST THE EXISTENCE OF A CONT RACT. THE ASSESSEE IS THE 'PERSON' WHO HAS ENTERED INTO A CONTRACT WITH THE DEVELOPER VIDE AGREEMENT DATED 10 TH SEPTEMBER, 2006. (B) THIS SECTION SAYS 'TO TRANSFER', WHICH MEANS TH E SAID CONTRACT IS IN RESPECT OF A TRANSFER AND NOT FOR AN Y OTHER - - ITA 2101 & 2484/16 38 PURPOSE. THE TERM 'TRANSFER' IS TO BE READ ALONG WI TH THE SECTION 45 AND SECTION 2(47)(V) OF THE INCOME-TAX A CT. IT IS PERTINENT TO CLARIFY THAT ONE MUST NOT FORGET TO ID ENTIFY THE ISSUE OF CAPITAL GAIN WITH THE TERM 'TRANSFER' AS D EFINED IN SECTION 54 OF THE TRANSFER OF PROPERTY ACT. AT THE COST OF ELABORATION, WE MAY LIKE TO ADD THAT IN THE PAST TH ERE WAS A LONG LINE OF PRONOUNCEMENTS; WHILE DECIDING INCOM E-TAX CASES, THAT UNLESS AND UNTIL A SALE DEED IS EXECUTE D AND THAT TOO IT IS REGIS TERED, TRANSFER CANNOT BE SAID TO HAVE BEEN EFFECTED. THE CONSEQUENCE OF THE SAID CATENA O F DECISIONS WAS THAT NO CAPITAL GAIN TAX WAS DIRECTED TO BE LEVIED SO LONG AS THE 'TRANSFER' HAS NOT TAKEN PLAC E AS PER THE GENERALLY ACCEPTED CONNOTATION OF THE TERM UNDE R THE TRANSFER OF PROPERTY ACT. THE RESULTANT POSITION WA S THAT THE LEVY OF CAPITAL GAINS TAX THUS RESULTED IN MAJO R AMENDMENTS IN THE INCOME-TAX STATUTE. THE MAIN OBJECTIVE OF THOSE AMENDMENTS WAS TO ENACT THAT FOR THE PURPOSES OF CAPITAL GAINS, THE TRANS ACTION INVOLVI NG TRANSFER OF THE NATURE REFERRED ARE NOT REQUIRED TO BE REGIS TERED UNDER THE REGISTRATION ACT. SUCH ARRANGEMENT DOES NOT INCLUDE TRANSFER OF CERTAIN RIGHTS VESTING TO A PURCHASER ; HOWEVER SUCH 'TRANSFER' DOES CONFER CER TAIN PRIVILEGES OF CONSTRUCTIVE OWNERSHIP WITH CONNECTED BUNDLE OF RIGHTS. INDEED IT IS A DEPARTURE FROM THE COMMONLY UNDERSTOOD MEANING OF THE DEFINITION 'TRAN SFER' WHILE INTERPRETING THIS TERM FOR TAX PURPOSE. ON TH E FACTS OF THIS CASE, THE DEVELOPER HAS GOT BUNDLE OF RIGHTS A ND - - ITA 2101 & 2484/16 39 THEREUPON ENTERED INTO THE PROPERTY. THEREAFTER, WE HAVE TO SEE WHAT HAS HAPPENED AND WHAT STEPS THE TRANSFE REE HAS TAKEN TO DISCHARGE THE OBLIGATION ON HIS PART. IF TRANSFEREE HAS TAKEN ANY STEPS TO CONSTRUCT THE FLA TS, UNDISPUTEDLY THEN, UNDER THE PROVISION OF THE INCOM E-TAX ACT A 'TRANSFER' HAS DEFINITELY TAKEN PLACE. (C) THE EXISTENCE OF THE 'CONSIDERATION' IS THE ESS ENCE OF THE CONTRACT. IN THIS CASE THE AMOUNT OF CONSIDERAT ION HAS TO BE PAID TO THE ASSESSEE IN THE FORM OF CASH AS W ELL AS IN KIND, I.E., THE FLATS TO BE CONSTRUCTED BY THE D EVELOPERS TO BE HANDED OVER TO THE OWNERS. (D) NEXT IS THE IMPORTANT PHRASE, I.E., 'TERMS NECE SSARY TO CONSTITUTE THE TRANSFER CAN BE ASCERTAINED WITH REA SONABLE CERTAINTY'. ACCORDING TO US, IN THIS CASE, THE TERM S AND CONDITIONS OF THE CONTRACT WERE UNAMBIGUOUS AND CLE ARLY SPOKE ABOUT THE RIGHTS AND DUTIES WITH CERTAINTY OF BOTH THE SIGNING PARTIES. WE ARE CONCERNED MAINLY WITH T WO CERTAINTIES ; ONE IS PASSING OF SUBSTANTIAL CONSIDE RATION AND THE SECOND IS PASSING OVER OF POSSES SION. AS F AR AS THE PAYMENT OF CONSIDERATION IS CONCERNED, WE HAVE ALREADY NOTICED THAT IT IS IN THE FORM OF BOTH CASH AS WELL AS KIND AND PAYMENT MADE TO THE ASSESSEE HAS BEEN BROUGHT ON RECORD BY THE LOWER AUTHORITIES AND THE SAME WAS EXAMINED AND CONSIDERED BY THE COMMISSIONER OF INCOME-TAX (APPEALS). THERE WAS A PAYMENT OF RS. - - ITA 2101 & 2484/16 40 7,02,54,000/- VIDE JOINT VENTURE AGREEMENT DATED 10.06.2006 AS INTEREST FREE DEPOSITS ON SIGNING THE AGREEMENT. (E) THE OTHER FACTOR WHICH GOVERNS THE HAPPENING O F TRANSFER IS THE HANDING OVER OF POSSESSION. THIS SE CTION SAYS 'AND THE TRANSFEREE HAS, IN PART PERFORMANCE O F THE CONTRACT, TAKEN POSSESSION OF THE PROPERTY OR ANY P ART THEREOF, OR THE TRANSFEREE, BEING ALREADY IN POSSES SION CONTINUES IN POSSESSION IN PART PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT IN FURTHERANCE OF TH E CONTRACT'. RETENTION OF POSSESSION IS ONE KIND OF T HE FACET OF PART PERFORMANCE OF THE CONTRACT. THE AGREEMENT IN QUESTION CAN BE SAID TO BE A DISTINCT TRANSACTION T HAT HAS GIVEN RISE TO THE EVENT OF ALLOWING THE CONTRACTOR TO ENTER INTO THE PROPERTY. WHAT IS CONTEMPLATED BY SECTION 2(47)(V) IS A TRANSACTION WHICH HAS DIRECT AND IMME DIATE BEARING ON ALLOWING THE POSSESSION TO BE TAKEN IN P ART PERFORMANCE. IT IS AT THAT POINT OF TIME THAT THE D EEMED TRANSFER TAKES PLACE. ACCORDING TO US THE POSSESSIO N AS CONTEMPLATED IN CLAUSE (V) NEED NOT NECESSARILY BE SOLE AND EXCLUSIVE POSSESSION, SO LONG AS THE TRANSFEREE IS ENABLED TO EXERCISE GENERAL CONTROL OVER THE PROPER TY AND TO MAKE USE OF IT FOR THE INTENDED PURPOSE. THE MER E FACT THAT THE ASSESSEE OWNER HAS ALSO THE RIGHT TO ENTER THE PROPERTY TO OVERSEE THE DEVELOPMENT WORK OR TO ENSU RE PERFORMANCE OF THE TERMS OF THE AGREEMENT, DID NOT - - ITA 2101 & 2484/16 41 RESTRICT THE RIGHTS OF THE DEVELOPER OR DID NOT INT RO DUCE ANY INCOMPATIBILITY. IN A SITUATION LIKE THIS WHEN THERE IS A CONCURRENT POSSESSION OF BOTH THE PARTIES, EVEN THE N CLAUSE (V) HAS ITS FULL ROLE TO PLAY. THERE IS NO W ARRANT TO POSTPONE THE OPERATION OF CLAUSE (V) TO THAT POINT OF TIME WHEN THE CONCURRENT POSSESSION WOULD BECOME EXCLUSI VE POSSESSION OF THE DEVELOPER. ANY OTHER INTERPRETATI ON, I.E., POSSESSION MEANS EXCLUSIVE POSSESSION, SHALL DEFEAT THE PURPOSE OF AMENDMENT. THE POSSIBILITY OF STAG GERIN G OF PAYMENT LINKED WITH POSSESSION IS RULED OUT BY THIS AMENDMENT SO THAT THE TAXABILITY OF GAIN MAY NOT BE SHIFTED TO AN UNCERTAIN DISTANT DATE. WE HAVE NO HESITATION IN SAYING THAT EVEN IF SOME PART OF CONSIDERATION REMAINS TO BE PAID, THE TRANSACTION S HALL NOT AFFECT THE LIABILITY OF THE CAPITAL GAINS TAX SO AS TO POSTPONE THE SAME INDEFINITELY. WHAT IS MEANT IN CL AUSE (V) IS THE 'TRANSFER' WHICH INVOLVES ALLOWING THE POSSESSION SO AS TO ALLOW DEVELOPER TO UNDERTAKE DEVELOPMENT WORK ON THE SITE. IT IS A GENERAL CONTR OL OVER THE PROPERTY IN PART PERFORMANCE OF THE CONTRACT. T HE DATE OF THAT TRANSACTION DETERMINES THE DATE OF TRANSFER . TO OUR UNDERSTANDING OF THE LANGUAGE OF THE ACT, IT IS ENO UGH IF THE TRANSFEREE HAS, BY VIRTUE OF THE IMPUGNED TRANS ACTION, A RIGHT TO ENTER UPON AND EXERCISE THE ACT OF POSSE SSION EFFECTIVELY, THEN SUCH AN ACT AMOUNTS TO LEGAL POSS ESSION OVER THE PROPERTY. - - ITA 2101 & 2484/16 42 (F) THE LAST NOTICEABLE INGREDIENT IS, 'THE TRANSFE REE HAS PERFORMED OR IS WILLING TO PERFORM HIS PART OF THE CONTRACT'. TO ASCERTAIN THE EXISTENCE OF WILLINGNESS ON THE PA RT OF THE TRANSFEREE ONE MUST NOT PUT STOP AT ONE EVENT B UT THE WILLINGNESS IS TO BE JUDGED BY THE SERIES OF ACTION S OF THE TRANSFEREE. THE TRANSFEREES SURVEY THE LAND AND TO ATTRACT PURCHASER PUT UP HOARDINGS PLUS SALES OFFICE AND CA RRY OUT SITE DEVELOPMENT WORK. LANDSCAPING, SALES PROMOTION , EXECUTION OF CONSTRUCTION AND COMPLETION OF PROJECT ARE ALL INCI DENTAL TO DEMONSTRATE THE WILLINGNESS OF THE TRANSFEREE. ON ONE HAND, THE JOINT DEVELOPMENT AGREEMENT GRANTS BUNDLE OF POSSESSOR RIGHTS TO THE DEVELOPER SIMULTANEOUSLY AND ON THE OTHER HAND TRANSFEREE'S GESTURE OF PAYMENT OF CONSIDERATION CO UPLED WITH DEVELOPMENT WORK CAN BE SAID TO BE A POSITIVE STEP TOWARDS THE WILLINGNESS TO FULFIL THE COMMITMENT. F ACTS OF THIS CASE THUS SUGGEST THAT THE DEVELOPER HAD NEVER INTENDED TO WALK-OUT OF THE PROJECT. (G) FROM THE DEVELOPMENT AGREEMENT, IT IS MORE THAN CLEAR THAT IT WAS AN AGREEMENT FOR CONSTRUCTION OF RESIDENTIAL/COMMERCIAL FLATS ON THE PROPERTY OWNED BY THE ASSESSEE. IN LIEU OF THE RIGHT GIVEN TO THE DEVELOP ER THEREUNDER, THE ASSESSEE WAS TO RECEIVE 27 PER CENT . OF THE CONSTRUCTED AREA OF ALL THE FLOORS. FURTHER, EV EN THE VACANT AND PEACEFUL POSSESSION OF THE PROPERTY HAD BEEN DELIVERED TO THE ASSESSEE VIDE CLAUSE NO.18 TO 18.4 OF - - ITA 2101 & 2484/16 43 THIS JV AGREEMENT. UNDER THE CIRCUMSTANCES, THERE W AS INDEED AN EXCHANGE OF PROPERTY WHICH AMOUNTED TO A TRANSFER WITHIN THE MEANING OF SECTION 2(47)(V) OF THE ACT AND THE GAIN RESULTING FROM SUCH TRANSFER WAS INDEE D TAXABLE IN THE YEAR IN WHICH THE DEVELOPMENT AGREEM ENT GIVING VACANT AND PEACEFUL POSSESSION OF THE PROPER TY TO THE DEVELOPER WAS ENTERED INTO BY THE ASSESSEE, AS HELD BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA V. CIT [2003] 260 ITR 491 (BOM) AND IN THE SEVERAL DECISIONS OF THE JURISDICTIONAL INCOME-TAX APPELLATE TRIBUNAL, HYDER ABAD, INCLUDING THAT IN THE CASE OF DR. MAYA SHENOY, SECUNDERABAD IN 124 TTJ 692. SINCE THE DEVELOPMENT AGREEMENT IN THE ASSESSEE'S CASE HAS BEEN EXECUTED ON 10TH SEPTEMBER, 2006 AND THE VACANT AND PEACEFUL POSSESSION ALSO WAS GIVEN IN ON THE SAME DATE ITSEL F, SUCH GAINS WERE INDEED TO BE TAXED IN THE FINANCIAL YEAR 2006-07, RELEVANT TO THE ASSESSMENT YEAR 2007-08. (H) AS REGARDS THE CONTENTION OF THE ASSESSEE'S REPRESENTATIVE THAT THE SAID DECISIONS ARE NOT APPL ICABLE TO THE ASSESSEE'S CASE, IT IS CLEAR THAT NO REASONS FOR SUCH VIEW COULD BE EVER FURNISHED BY HIM. SIMILARLY, THE RE IS NO MERIT IN THE CONTENTION THAT THE DEVELOPMENT AGREEM ENT COULD NOT HAVE COME INTO FORCE UNLESS AND UNTIL THE JV - - ITA 2101 & 2484/16 44 AGREEMENT HAS BEEN CANCELLED. AS DISCUSSED IN THE ASSESSMENT ORDER, THE ASSESSEE HAD INDEED BEEN PAID RS. 7,02,54,000/- ON SIGNING THE JV AGREEMENT. UNDE R THE CIRCUMSTANCES, IT CANNOT BE DISPUTED THAT THERE WAS A PROMISE TO PAY WHICH HAS NOT BEEN SHOWN AS HAVING REMAINED UNFULFILLED. IT IS AN ESTABLISHED JUDICIAL PROPOSITION THAT THE CONSIDERATION MAY BE FUTURISTI C ALSO, AS HELD BY THE SUPREME COURT IN THE CASE JUGALKISHO RE SARAF V. RAW COTTON CO. LTD. REPORTED IN AIR 1955 S C 376. ACCORDINGLY, THERE IS NO MERIT IN SUCH CONTENT ION OF THE REPRESENTATIVE OF THE ASSESSEE. AS REGARDS THE ARGUMENT THAT THE AGREEMENT UNDER REFERENCE HAD BEE N EXECUTED ONLY FOR THE PURPOSE OF GETTING PERMISSION S FROM VARIOUS DEPARTMENTS FOR CONSTRUCTION, THE VERY TERM S OF THE AGREEMENT BELIE ANY SUCH CLAIM AS THE DEVELOPME NT AGREEMENT GIVES ABSOLUTE RIGHTS TO THE BUILDERS, IN CLUDING POSSESSION, DULY SPECIFIED THE CONSIDERATION TO BE RECEIVED BY THE ASSESSEE ON SUCH EXCHANGE. AS REGAR DS THE CASE LAW CITED BY THE AUTHORISED REPRESENTATIVE , - - ITA 2101 & 2484/16 45 EVIDENTLY THOSE STAND ON A SET OF DIFFERENT FACTS A ND HENCE CANNOT BE CONSIDERED IN THE FACTS OF THE PRESENT CA SE. 8.6 TO SUM UP THE OWNERS HAVE ENTERED INTO AN AGRE EMENT FOR DEVELOPMENT OF THE PROPERTY AND CERTAIN RIGHTS WERE ASSIGNED TO THE DEVELOPER WHO IN TURN HAD MADE THE SUBSTANTIAL PAYMENT AND CONSEQUENTLY ENTERED INTO THE PROPERTY AND THEREAFTER THE TRANSFEREE HAS TAKEN STEPS IN RELATI ON TO CONSTRUCTION OF THE BUILDING, THEN IT IS TO BE CONS IDERED AS TRANSFER UNDER SECTION 2(47)(V) OF THE INCOME-TAX A CT. THE FACT THAT THE LEGAL OWNERSHIP CONTINUED WITH THE OWNERS TO BE TRANSFERRED TO THE DEVELOPER AT A FUTURE DISTANT DA TE REALLY DOES NOT AFFECT THE APPLICABILITY OF SECTION 2(47)(V) AS PER THE REASONS ASSIGNED HEREINABOVE. THE TRANSFEREE WAS UNDISPUTED LY WILLING TO PERFORM ITS PART OF THE CONTRACT, IN THIS CIRCUM STANCE WE HAVE TO HOLD THAT THERE IS TRANSFER UNDER SECTION 2(47)( V) OF THE ACT IN A.Y 2007-08. THUS, THE POSSESSION AND CONTROL OF TH E PROPERTY IS ALREADY VESTED WITH THE TRANSFEREE AND THE IMPUG NED DEVELOPMENT AGREEMENT HAS NOT BEEN DULY CANCELLED A ND IT IS STILL IN OPERATION, IT HAS TO BE DECIDED THAT THERE IS A TRANSFER - - ITA 2101 & 2484/16 46 UNDER SECTION 2(47)(V) OF THE ACT IN F.Y.2006-07 RE LEVANT TO AY 2007-08. 9. WE HAVE TO SEE THE REAL INTENTION OF THE PARTIE S. AS PER THE WELL KNOWN CANNON OF CONSTRUCTION OF DOCUMENT, THE INTENTION GENERALLY PREVAILS OVER THE WORD USED AND THAT SUCH A CONSTRUCTION PLACED ON THE WORD IN A DEED AS IS MOS T AGREEABLE TO THE INTENTION OF THE PARTIES. THERE ARE GROUNDS APPEARING FROM THE FACE OF THE INSTRUMENT AFFORDING PROOF OF THE REAL INTENTION OF THE PARTIES, THEN THAT INTENTION WOULD PREVAIL AGAINST THE OBVIOUS AND ORDINARY MEANING OF THE WORDS USED. ENTERING INTO THE PROPERTY AND HANDING OVER OF THE POSSESSIO N WAS INSTANTANEOUS THUS ENTIRE CONSPECTUS OF THE CASE HA S ATTRACTED THE PROVISION OF SECTION 45 OF THE ACT ON FULFILMEN T OF CONDITIONS LAID DOWN IN SECTION 53A OF THE TRANSFER OF PROPERT Y ACT. IN OUR OPINION, THE REAL INTENTION OF THE PARTIES HEREIN I S TO BE SEEN. 9.1 ACCORDINGLY, WE DECIDE THE ABOVE ISSUE RELATIN G TO TRANSFER OF PROPERTY UNDER SECTION 2(47)(V) OF THE INCOME-TAX ACT IN FAVOUR OF THE DEPARTMENT. WE ALSO HOLD THAT CLAU SE (47) OF - - ITA 2101 & 2484/16 47 SECTION 2 WAS AMENDED BY THE FINANCE ACT, 1987 WITH EFFECT FROM APRIL 1, 1988 BY INSERTING NEW SUB-CLAUSES (V) AND (VI) THEREUNDER. THESE TWO NEW SUB-CLAUSES PROVIDE THAT 'TRANSFER' INCLUDES (I) ANY TRANSACTION WHICH ALLOWS POSSESSIO N TO BE RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE N ATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT ; AND (II) ANY TRANSACTION ENTERED INTO IN ANY MANNER WHICH HAS TH E EFFECT OF TRANSFERRING OR ENABLING THE ENJOYMENT OF ANY IMMOV ABLE PROPERTY. THEREFORE, UNDER THESE TWO SUB-CLAUSES, T HE CAPITAL GAIN WOULD BE TAXABLE IN THE YEAR IN WHICH SUCH TRA NSACTIONS ARE ENTERED INTO EVEN IF THE TRANSFER OF THE IMMOVA BLE PROPERTY IS NOT EFFECTIVE OR COMPLETE UNDER THE GENERAL LAW. THE ASSESSEE ENTERED INTO AN AGREEMENT WITH THE BUILDER /DEVELOPER FOR DEVELOPMENT OF THE IMPUGNED LAND AND CONSTRUCT ION OF FLATS THEREON. FURTHER, THE ASSESSEE ACTED ON THE IMPUGNE D AGREEMENT BY ACCEPTING FROM THE BUILDER/DEVELOPER P AYMENTS IN THE FINANCIAL YEAR 2006-07. IN VIEW OF THE FACTS AN D CIRCUMSTANCES DISCUSSED ABOVE, ALL THE CONDITIONS O F SUB- CLAUSE (V) OF SECTION 2(47) ARE SATISFIED IN THIS C ASE AND THEREFORE, IT HAS TO BE INFERRED THAT A 'TRANSFER' DID TAKE PLACE - - ITA 2101 & 2484/16 48 WITHIN THE MEANING OF SECTION 2(47)(V). THE ARGUMEN T THAT THE DEEDS IN RESPECT OF THE SALE OF FLATS WERE NOT REGISTERED/EXECUTED IS NOT A RELEVANT CONSIDERATION SO FAR AS PROVISIONS OF SUB-CLAUSE (V) OF SECTION 2(47) ARE C ONCERNED. THE COMPLETION OF 'TRANSFER' OF AN IMMOVABLE PROPER TY AS PER THE GENERAL LAW IS NOT A REQUIREMENT FOR THE APPLIC ABILITY OF THE PROVISIONS OF SUB-CLAUSE (V) OF SECTION 2(47). THUS , THIS GROUND IS DISMISSED. 10. NOW THE QUESTION BEFORE US IS WITH REGARD TO QUANTIFICATION OF CAPITAL GAINS. THE AO CONSIDERED THE AMOUNT RECEIVED BY THE ASSESSEE ` 7,02,54,000/- AS TOWARDS 4.5% OF THE CONSTRUCTED AREA AND THEREBY DETERMINED THE SAL ES CONSIDERATION AT ` 42,15,24,000/-. IN OUR OPINION, THIS METHODOLOGY FOLLOWED BY THE AO IS NOT CORRECT. AS P ER CLAUSE 12.4 OF THE JV AGREEMENT, THE ASSESSEE SHALL BE SOL D BACK TO THE DEVELOPER 4.5% AREAS OF PROJECT WITH PROPORTION ATE UNDIVIDED SHARE OF LAND AT ` 1,000/- PER SQ. FEET AND THE CONSIDERATION AMOUNT FOR THE SAID 4.5% OF THE AREA OF THE ASSESSEE SHALL BE PAID BY THE DEVELOPER BY WAY OF A DJUSTMENT - - ITA 2101 & 2484/16 49 OUT OF THE INTEREST FREE DEPOSIT PAID TO THE ASSESS EE BY DEVELOPER AT ` 7,02,54,000/- AS PER CLAUSE NO.10.1 OF JVA. THUS, IT DOES NOT MEAN THAT THE COST OF 4.5% OF THE AREA OF THE PROJECT WAS VALUED AT ` 7,02,54,000/-. ON THIS ISSUE, THE CIT(APPEALS) OBSERVED THAT THE VALUE OF SHARE OF CO NSIDERATION OF 27% OF SALEABLE OR SUPER-BUILT AREA INCLUDING PA RKING PLACES OF THE PROJECT ALLOTTED TO THE ASSESSEE ON TRANSFER OF UNDIVIDED SHARE OF 73% OF LAND SURRENDERED IN FAVOUR OF DEVEL OPER TO BE VALUED ON THE BASIS OF GUIDELINE VALUE OF SAID UNDI VIDED SHARE OF LAND ALLOTTED TO THE DEVELOPER. IN OUR CONSIDER ED OPINION, THIS IS ALSO NOT APPROPRIATE METHOD TO DETERMINE THE CON SIDERATION RECEIVABLE BY THE ASSESSEE ON ACCOUNT OF JVA DATED 10.09.2006. IN OUR CONSIDERED OPINION, COST OF CON STRUCTION OF BUILT-UP AREA OF 27% OF SALEABLE OR SUPER-BUILT ARE A INCLUDING PARKING PLACES OF THE PROJECT ALLOTTED TO THE ASSES SEE TO BE ASCERTAINED BY THE ASSESSING OFFICER AFTER EXAMININ G THE RELEVANT RECORD OF COST OF CONSTRUCTION INCURRED OR TO BE INCURRED BY THE DEVELOPER. ACCORDINGLY, THIS SAID COST OF C ONSTRUCTION WOULD CONSTITUTE AS SALE CONSIDERATION RECEIVED BY THE ASSESSEE IN KIND AND THAT SHOULD BE BROUGHT TO TAX IN THE - - ITA 2101 & 2484/16 50 ASSESSMENT YEAR 2007-08. IF NECESSARY, HE COULD TAK E ASSISTANCE OF DVO OR ANY EXPERTS SO AS TO ARRIVE TH E COST OF CONSTRUCTION OF 27% OF CONSTRUCTED AREA, WHICH WOUL D BE TRANSFERRED TO THE ASSESSEE. THUS, THE ISSUE IS REM ITTED TO THE ASSESSING OFFICER FOR THE LIMITED PURPOSE OF DETERM INING THE SALE CONSIDERATION AND TO COMPUTE THE CAPITAL GAINS ACCORDINGLY AFTER GIVING OPPORTUNITY OF HEARING TO THE ASSESEEE . THE ISSUE RELATING TO THE COMPUTATION OF CAPITAL GAINS IN BOT H THE APPEALS IS REMITTED TO THE ASSESSING OFFICER FOR FRESH CONS IDERATION. 11. THE NEXT GROUND FOR OUR CONSIDERATION IS WITH R EGARD TO THE ISSUE OF DISALLOWANCE OF 93,730/- U/S.14A R.W.RULE 8D OF THE IT RULES. 11.1 THIS GROUND IS NOT PRESSED BY THE LD. AR BEFO RE US. ACCORDINGLY, THIS GROUND IS DISMISSED AS NOT PRESSE D. 12. THE NEXT GROUND IS WITH REGARD TO THE ISSUE OF DISALLOWANCE OF 7,95,000/- BEING THE PAYMENT MADE TO M/S. TNCA U/S.37(1) OF THE ACT, THE AO OBSERVED THAT THE ASSESSEE - - ITA 2101 & 2484/16 51 HAS OFFERED EXPLANATION ONLY REGARDING THE TNCA SPO NSORSHIP. THE OTHER EXPENSES VIZ. SUMERU SOFT TROPHY-5 APPEAR S TO BE OF THE NATURE OF DONATION, WHICH IS NOT ALLOWABLE EXPE NDITURE. AS REGARDS THE SPONSORSHIP FOR TNCA, THE AO OBSERVED T HAT THE ASSESSEE HAS SPONSORED ONE OF THE SPECIAL BOXES IN M.A. CHIDAMABARAM STADIUM DURING 2007-08 FOR 60 LAKHS. AS PER THE CONDITIONS, THE SPONSORSHIP IS FOR A PERIOD OF SIX YEARS. THE AIR-CONDITIONED SPECIAL BOX IS FOR USAGE BY NOT MOR E THAN 15 PERSONS DURING TEST AND ONE DAY INTERNATIONAL MATCH ED. THE SPONSOR WILL BE ALLOWED TO HAVE HIS NAME BOARD ON T OP OF THE BOX FACING THE GROUND, THE SIZE AND DESIGN SHOULD BE GO T APPROVED BY THE TNCA. SPONSORING A SPECIAL BOX OR SPONSORIN G OTHER SPORTS TOURNAMENT WOULD NOT IN ANY WAY FURTHER THE CAUSE OF THE ASSESSEES BUSINESS AND IT IS NOT AN EXPENDITURE RE QUIRED FOR THE CARRYING ON OF ITS BUSINESS OF SOFTWARE DEVELOPMENT . THEREFORE, ACCORDING TO THE AO, THE CONTENTION OF THE ASSESSEE THAT THE EXPENDITURE WAS REQUISITE FOR THE PURPOSE OF ADVERT ISEMENT IS NOT ACCEPTABLE. IT WOULD NOT BE OUT OF PLACE TO MENTIO N THAT THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY SHRI K.V. AIYAPPAN IS ALSO THE VICE PRESIDENT OF THE TAMILNADU CRICKET ASSOCIATION - - ITA 2101 & 2484/16 52 (TNCA). THEREFORE, ACCORDING TO THE AO, THE EXPEND ITURE HAS BEEN INCURRED ONLY FOR EXTRANEOUS REASONS, RATHER THAN FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE COMPANY. AGAINST THIS, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(AP PEALS). 12.1 THE CIT(APPEALS) OBSERVED THAT THE ASSESSEE HA S ONLY FIVE CLIENTS, VIZ., M/S. INFOSYS, M/S. STANDARD CHA RTERED BANK, M/S. SCOPE INTERNATIONAL, THE CANCER INSTITUTE, M/S . SUNDARAM BNP PARIBAS AND AN OVERSEAS CLIENT, M/S. SIGNATURE SENIOR LIVING, USA. SPONSORING ANY SPORTS EVENT OR A SPEC IAL BOX EVEN IF VIEWED ON TV CHANNELS OR MEDIA DOES NOT ADVERTIS E ITS NAME AS ITS PRODUCT IS NOT FOR MASS CONSUMPTION BUT FOR VERY SELECTIVE CLIENTS. THEREFORE, ACCORDING TO THE CIT(APPEALS ), THE ACTION OF THE AO IN DISALLOWING EXPENDITURE TOWARDS TNCA SPON SORSHIP IS JUSTIFIED. 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIALS ON RECORD. THE ABOVE EXPENDITURE INCURRED BY THE ASSESSEE CANNOT BE CONSIDERED AS INCURRED WHOLLY AN D EXCLUSIVELY INCURRED FOR THE PURPOSE OF ASSESSEES BUSINESS. - - ITA 2101 & 2484/16 53 THIS EXPENDITURE IS NOTHING BUT CHARITY OR DONATION , WHICH CANNOT BE ALLOWED AS A DEDUCTION WHILE COMPUTING THE INCOM E OF THE ASSESSEE. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(APPEALS) AND THE SAME IS CONFIRMED. THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 14. IN THE RESULT, BOTH THE APPEALS BY THE ASSESSE E AND THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 08 TH MAY, 2017 AT CHENNAI. SD/- SD/- ( ! ) ! * . + ,-. ) ( / 0 1 2% ) ( DUVVURU RL REDDY ) (CHANDRA POOJARI) < => /JUDICIAL MEMBER ,& =>/ACCOUNTANT MEMBER /,< ' /CHENNAI, D= /DATED, THE 08 TH MAY, 2017. K S SUNDARAM =,E # $FG H,G$ /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ! I$ () /CIT(A) 4. ! I$ /CIT 5. GJK $ L /DR 6. K. M' /GF.
