Mangilal Lakahji Chowdhary, Pune V. Income-tax Officer, Ward - 3(1), Pune

ITA 2791/PUN/2017

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 3945 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 29-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Capital Gains; CHAPTER IV
• Section: 54; 2; 54F; 48; 22

Judgement Text

आयकर अपीलीय अिधकरण “ए” ायपीठ पुणे म । IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR.DIPAK P.RIPOTE, ACCOUNTANT MEMBER आयकरअपीलसं . / ITA No.2791/PUN/2017 िनधा रण वष / Assessment Year: 2013-14 Mangilal Lakahji Chowdhary, 4, Sr.No.19/1, Bharat Vihar, Opp. Karnataka School, Erandwane, Pune 411 004 PAN : ACGPC5231P Vs The Income Tax Officer, Ward-3(1), Pune Appellant/ Assessee Respondent /Revenue Assessee by Smt. Deepa Khare Revenue by Shri Ramnath P. Murkunde – DR Date of hearing 13/09/2022 Date of pronouncement 23/09/2022 आदेश / ORDER Per S.S.Godara, JM: This assessee’s appeal for A.Y.2013-14 arises against the Commissioner of Income Tax(Appeals)-2, Pune’s order dated 28.08.2017 passed in case No.PN/CIT(A)-2/ITO Wd-3(1)/PN/592/2015- 16, in proceedings u/s.143(3) of the Income Tax Act, 1961, in short “the Act”. Heard both the parties. Case file perused. 2. The assessee’s first and foremost substantive grievance challenges correctness of both the lower authorities action making cessation of liability addition of Rs.1,65,000/- u/s.41(1) of the Act. The same admittedly pertains to sundry creditors’ outstanding balances since long. ITA No.2791/PUN/2017 for A.Y. 2013-14 Mangilal L. Chowdhary 2 The Revenue vehemently argued that the assessee had failed to prove the same in the relevant previous year by efflux of time. We find no merit in Revenue’s instant arguments in light of CIT Vs. Sugauli Sugar Works Pvt. Ltd. (1999) 236 ITR 518 (SC) that it is the actual cessation than a deemed one which attracts section 41(1) of the Act. We therefore delete this former addition of Rs.1,65,000/- for the very precise reason. 3. Next comes rent disallowance of Rs.1,20,000/- paid by the assessee to his wife which has been held as a colourable device to reduce taxable income on his behalf. We make it clear that there is no dispute about the assessee having utilized corresponding house property in day- to-day business activity requirements. This admittedly is not the Revenue’s case that the assessee has been managing his business activities from any other place. We accordingly delete rent disallowance of Rs.1,20,000/- in these peculiar circumstances. 4. The assessee does not press for his third substantive ground of challenging section 41(1) - cession of liability addition of Rs.50,000/- representing deposits received from M/s. Shubha Associates keeping in mind the smallness of the amount. Rejected accordingly. 5. Lastly comes the long term capital gains addition issue of Rs.49,22,000/- made in both the lower proceedings. The CIT(A) has rejected the assessee’s arguments as follows :- ITA No.2791/PUN/2017 for A.Y. 2013-14 Mangilal L. Chowdhary 3 “10.2 I have perused the facts of the case as mentioned in the assessment order. I have also gone through the arguments taken on behalf of the appellant. The judicial decisions referred on the issue were also studied. The provision of section 2(47) which defines the term ‘Transfer’ in respect of capital asset reads as under : “Transfer” in relation to capital asset includes – i. The sale, exchange or relinquishment of the asset; or ii. The extinguishment of any rights therein; or iii. The compulsory acquisition thereof under any law; or iv. Assets is converted by the owner or treated by him, as stock in trade; or v. Any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the transfer of property act, 1882; or Transfer of immovable property under agreement to sell. Transfer deemed to be take place on the date on which possession of immovable property is given in pursuance of agreement to sell. Hence capital gains arise in the year in which possession in given to buyer, not the date on which property is registered in the name of buyer. vi. Any transaction (whether by way of becoming member of or acquiring share in, a co-operative society, company or other association of person or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring or enabling the enjoyment of any immovable property Explanations: 1. For the purposes of sub-clauses (v) and (vi), “immovable property” shall have the same meaning as in clause (d) of section 269UA. 2. For the removal of doubts, it is hereby clarified that “transfer” includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India. ITA No.2791/PUN/2017 for A.Y. 2013-14 Mangilal L. Chowdhary 4 10.3 Thus, on a plain reading of the aforesaid provision, it is clear that any transaction which involves allowing the possession of any immovable property in part performance of the contract as referred to in Section 53A of the Transfer of Property Act 1882, is covered under the term 'Transfer'. The clause (vi) of Section 2(47) also states that it covers any agreement or any arrangement which has the effect of transferring or enabling the enjoyment of any immovable property which has the effect of transferring or enabling the enjoyment or any immovable property. 10.4 In the facts of the present case by the development agreement dated 03.09.2012 (duly registered on 11.09.2012), the assessee had given possession of the property to the developer. It is further noticed that the assessee had given an irrevocable power of attorney in favour of the developer as per clause 16 of the agreement which means that the assessee had given irrevocable possession of the property to the developer. Not only that, clause 14 of the development agreement also states that physical and clear possession of the property is being given to the developer. Thus, in the present case, facts clearly indicate that all the ingredients required for transfer as per Section 2(47) of the Act are satisfied in this case. 10.5 The argument taken that the development work could not be progressed because of dispute created by another person who is not a party to the development agreement is immaterial. It is further seen that in the development agreement, there was no clause as such regarding any dispute pending and in fact, the appellant entered into the confirmation deed stating therein that the transaction is of joint venture nature. Not only that all the terms of original agreement was agreed to be continued including the monetary compensation. The AO in the assessment order has also mentioned that the compromise document entered into with the third party (not a part of development agreement) itself shows that the construction was in progress as because clause-2 of compromise document dated 10.07.2015 states as under: "In order to solve some serious difficulties (complications), the assessee along with developer had agreed to transfer the flat in favour of......... still, even though the construction of the building is in progress, if the purchaser is willing to sell the same, the assessee and the developer had shown their willingness to purchase the same. 10.6 These facts clearly indicate that not only possession was handed over by way of development agreement but the construction was also in progress and the alleged dispute as claimed, did not hamper or make any difference to the terms of the development agreement. ITA No.2791/PUN/2017 for A.Y. 2013-14 Mangilal L. Chowdhary 5 10.7 Hon'ble ITAT Mumbai Bench in the case of Mrs. Bertha T. Almeida v. Income-tax Officer in 14 taxmann.com 171 (Mum.) [2011] in identical facts held as under: *Section 2(47) defines 'transfer' in relation of capital asset to mean sale, exchange or relinquishment of the assets etc. Clause (v) of sub-section (47) of section 2 provides that any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contact of the nature referred to in section 53A of the Transfer of Property Act, 1882 shall also be considered as transfer. The Supreme Court in the case of CIT v. Podar Cement (P.) Ltd. [1997] 226 ITR 625/ 92 Taxman 541 has held that owner is a person who is entitled to receive income from the property in his own right and the requirement of registration of sale deed in the context of section 22 is not warranted. Again the Supreme Court in Mysore Minerals Ltd. v.CIT [1999] 239 ITR 775 / 106 Taxman 166 has held that anyone in possession of property in his own right exercising such dominion over the property as would enable others being excluded therefrom and having the right to use and occupy the property in his own right, would be the owner of the building for the purpose of section 32(1) though a formal deed of title may not have been executed and registered. These two judgments clearly demonstrate that even if legal title has not passed to the transferee, the transaction shall still be regarded as the transfer where the property is handed over in part performance of the agreement. It is the prescription of section 53A of the Transfer of Property Act, which has been included in section 2(47) defining the concept of 'transfer'. [Para 9] Coming to the facts of the instant case it is clear that since the assessee entered into agreement with the developers for transfer of the property, handed over the possession who in the mean time constructed flats thereon and also received consideration of Rs. 20 lakhs in cash, it is difficult to hold that there was no transfer under section 2(47). It clearly amounted to transfer giving rise to charge of capital gain. [Para 10] Section 45 provides that any profit or gains arising from the transfer of capital asset effected in the previous year shall, subject to other provisions be chargeable to Income-tax under the head 'Capital gains' and shall be deemed to be the income of the previous year in which the transfer took place. This section clearly explains that income under the head 'Capital gains' is chargeable to tax in the year in which the 'transfer' takes place. ITA No.2791/PUN/2017 for A.Y. 2013-14 Mangilal L. Chowdhary 6 Further section 48 deals with mode of computation of income chargeable under the head 'capital gains'. It provides that the income under this head shall be computed, by deducting from the 'full value of the consideration received or accruing' as a result of 'transfer' of the capital asset, the amount of expenditure incurred wholly and exclusively in connection with such transfer and also the cost of acquisition of the asset together with the cost of any improvement. The mandate of section 48 in terms of full value of consideration is crystal clear which not only encompasses consideration received but also which accrues as a result of the transfer of the capital asset. If a particular amount has accrued to the assessee as a result of transfer of the capital asset, that shall be included in the full value of consideration, even if it is not realized within the year of transfer. In the instant case there is a situation in which the 'full value of consideration' as per these agreement comprises of two parts, namely Rs. 20 lakh in cash and right to allotment of one flat admeasuring 700 sq. ft. (carpet area) in the building to be constructed by the developer on the land transferred by the assessee. As such the value of this flat shall constitute an integral part of the 'full value of consideration'. There is no rationale in arguing that the value of the flat should be excluded simply for the reason that it has not been received so far. As the amount received or accruing as a result of transfer of the capital asset constitutes full value of consideration under section 48, there is no logic in claiming that only the amount received should be included and the value of flat should be excluded. In the instant case the transferee developer had taken over the possession, constructed the building and paid a sum of Rs. 20 lakh to the assessee in cash and had also undertaken to allot a flat in the said building. As such the contention raised on behalf of the assessee through the additional ground that the transfer is not covered under section 2(47)(v) is sans merit and deserves to be rejected. [Para 11]” 10.8 In the present case also, the appellant has entered into an agreement with the developer and handed over the possession who continued with the construction activity thereon. The development agreement was also duly registered. 10.9 Hon'ble ITAT Pune bench in the case of Mahesh Nemichandra Ganeshwade v. Income-tax Officer in 51 SOT 155 has held similar opinion and held that any transaction involving allowing of possession to be taken or retained in part performance of a contract of the nature referred to in Section 53A for the transfer of Property Act 1852 would come within the ambit of expression 'transfer'. The operative portion of the decision of the Hon'ble Bench is reproduced as under: ITA No.2791/PUN/2017 for A.Y. 2013-14 Mangilal L. Chowdhary 7 "Chapter IVE of the Act provides for taxability of capital gains. Section 45(1) provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to tax under the head 'capital gains' and it is further explained that such profits shall be deemed to be the income of the previous year in which the transfer takes place. Insofar as the present case is concerned, the only dispute revolves around the point of time at which the 'transfer' is said to have taken place. The assessee is co-owner of a land which has been the subject- matter of a joint venture agreement dated 12-7-2005 between the assessee and the builder, 'R'. In terms of the said joint venture agreement, assessee and the builder decided to undertake a scheme to develop the said land in cooperation with each other. The assessee on his part brought in the land and the builder constructed the flats thereon in terms of the provisions of the agreement dated 12-7-2005. Notably in terms of the said agreement, the consideration for the land was fixed at Rs.2,50,00,000 which had since been revised upwards to Rs.4,90,00,000 in terms of a subsequently executed correction deed dated 24-7-2007. The moot question is as to whether in terms of clauses (v) and (vi) of section 2(47) an event of 'transfer' had taken place as a result of the execution of the agreement in the instant year on 12-7-2005. The said agreement indeed envisages a transfer, is not disputed by the assessee, only point disputed is the timing of transfer. The point of contention raised by the assessee is that there Is no transfer in terms of giving possession of land to 'R' in this year, inasmuch as such possession is intended only for further development work to be carried out by 'R' Builders jointly with the assessee and not as an independent transferee. The provisions of clauses (v) and (vi) of section 2(47) which provide the meaning of the expression 'transfer' have been exhaustively explained by the Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia v. CIT [2003] 260 ITR 491 / 129 Taxman 497. It has been explained by the High Court that in situations attracting clauses (v ) and (vi) of section 2(47), capital gains will be taxable in the year in which such transactions are entered into even if the transfer of the immovable property is not effected or complete under the general law. It has been explained that in terms of the aforesaid clauses of section 2(47) any transaction involving allowing of possession to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act would come within the ambit of the expression ’transfer'. It has been explained that for this purpose there should be a contract for consideration; it should be in writing; it should be signed by the transferor; it should pertain to transfer of an immovable property; transferee should have taken possession of the property; lastly, ITA No.2791/PUN/2017 for A.Y. 2013-14 Mangilal L. Chowdhary 8 transferee should be ready and willing to perform the part of contract. As per the High Court, even arrangements confirming privileges of ownership without transfer of title also fall under section 2(47). [Para 8] Considered in the above background, the impugned agreement entered on 12-7-2005 which contemplates taking over of possession of the property by 'R' Builders for development fulfils the requirements of section 2(47)(v) as understood and explained by the High Court and, therefore, 'transfer' in terms of section 2(47)(v) has taken place during the year under consideration. The plea of the assessee that there is no transfer in favour of 'R' Builders as an independent transferee is not relevant to determine the question as to whether qua the assessee, a 'transfer' as envisaged under section 2(47)(v) has taken place or not. Even if for the sake of argument it is accepted that 'R' Builders have not taken possession of the property as transferee per se, yet there is a transfer resulting on account of handing over possession qua assessee and such possession is taken by 'R' Builders as part of the joint venture, which is again distinct from the assessee. Be that as it may, the controversy on the timing of the taxability of capital gains in this case is liable to be held in favour of the revenue, Inasmuch as capital gains on transfer of land are liable to be taxed in the instant assessment year on the strength of the agreement dated 12-7-2005. [Para 9]." 10.10 In a recent decision the Hon'ble ITAT Chennai bench in case of Sumeru Soft (P.) Ltd, Vs. Income Tax Officer, Corporate Ward - 6(4) Chennai 82 taxmann.com 5 (Chennai - Trib.) has held that any development agreement which involves transfer of possession is covered under the definition of the transfer within the meaning of Section 2(47)(v) of the IT Act. The relevant portion of the decision of the Hon'ble Bench reads as under : Now the next ground for consideration is with regard to bringing to tax the long-term capital gains by applying the provisions of section 2(47)(v). [Para 6] According to the assessee the property was not 'transferred' but only given for development. One may refer to the provisions of section 2(47)(v). The importance of the word 'transfer' is due to the reason that under the charging section, viz., section 45, and the capital gain is taxable on 'transfer of a capital asset'. Precisely, this section prescribes that 'any profits or gains arising from the transfer of a capital asset effected in the previous year ITA No.2791/PUN/2017 for A.Y. 2013-14 Mangilal L. Chowdhary 9 shall be chargeable to tax under the head capital gains and shall be deemed to be the income of the previous year in which the transfer took place'. [Para 8.1] 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 large scope of its operation due to the presence of deeming provision which says that the gain shall be the deemed income of that previous year in which the transfer took place. This phrase can be interpreted in the manner that the total profits may actually be 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 asset. It shall not be out of context, at this juncture, to mention an observation of the Authority for Advance Rulings in the case of Jasbir Singh Sarkaria, In re [2007] 294 ITR 196/164 Taxman 108 (AAR-New Delhi), that the expression used in section 45 is 'arising', which cannot be equated with the expression 'received' or even with the expression 'accrued' as being used in the statute. The point which deserves notice is that the amount or the consideration settled may not be fully received or may not technically accrue but if it arises from the agreement in question, then the deeming provisions shall come into operation. Another point is also equally noticeable that by the presence of the deeming 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 the point but what needs to be judged is the point of time at which the transfer took place either by handing over of the possession or by allowing the entry into the premises or by making the constructive presence of the vendee nevertheless duly supported by a legal document [Para 8.2] But the issue does not get settled only by the interpretation of section 45 and section 2(47)(v) because the definition of 'transfer' does not merely prescribe allowing of possession but also that it must be retained in part 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 [para 8.3] ITA No.2791/PUN/2017 for A.Y. 2013-14 Mangilal L. Chowdhary 10 The doctrine of 'part performance' is undoubtedly based upon the doctrine of equity. If one party has performed his part of duty then equity demands that the other party shall also perform his part of the obligation. If one party stood by his words then it is expected from the other party to also stand by his promise. Naturally an inequitable conduct of any person has no sanction in the eye of law. [Para 8.4] 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 person contracts' which means just the existence of a contract. The assessee is the 'person' who has entered into a contract with the developer vide agreement dated 10-9-2006. (b) This section says 'to transfer', which means the said contract is in respect of a transfer and not for any other purpose. The term 'transfer' is to be read along with the section 45 and section 2(47)(v). It is pertinent to clarify that one must not forget to identify the issue of capital gain with the term 'transfer' as defined in section 54 of the Transfer of Property Act. At the cost of elaboration, we may like to add that in the past there was a long line of pronouncements; while deciding Income-tax cases, that unless and until a sale deed is executed and that too it is registered, transfer cannot be said to have been effected. The consequence of the said catena of decisions was that no capital gain tax was directed to be levied so long as the ‘transfer’ has not taken place as per the generally accepted connotation of the term under the Transfer of Property Act. The resultant position was that the levy of capital gains tax thus resulted in major amendments in the Income-tax statute. The main objective of those amendments was to enact that for the purposes of capital gains, the transaction involving transfer of the nature referred are not required to be registered under the Registration Act. Such arrangement does not include transfer of certain rights vesting to a purchaser; however such 'transfer' does confer certain privileges of constructive ownership with connected bundle of rights. Indeed it is a departure from, the commonly understood meaning of the definition 'transfer' while interpreting this term for tax purpose. On the facts of this case, the developer has got bundle of rights and thereupon entered into the property. Thereafter, one has to see what has happened and what steps the transferee has taken to discharge the obligation on his part. If transferee has taken any steps to ITA No.2791/PUN/2017 for A.Y. 2013-14 Mangilal L. Chowdhary 11 construct the flats, undisputedly then, under the provision of the Income-tax Act a 'transfer' has definitely taken place. (c) The existence of the 'consideration' is the essence of the contract. In this case the amount of consideration has to be paid to the assessee in the form of cash as well as in kind, i.e., the flats to be constructed by the developers to be handed over to the owners. (d) Next is the important phrase, i.e., 'terms necessary to constitute the transfer can be ascertained with reasonable certainty'. According to us, in this case, the terms and conditions of the contract were unambiguous and clearly spoke about the rights and duties with certainty of both the signing parties. One is concerned mainly with two certainties; one is passing of substantial consideration and the second is passing over of possession. As far as the payment of consideration is concerned, 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 (Appeals). There was a payment of Rs. 7,02,54,000 vide Joint Venture Agreement dated 10-6-2006 as interest free deposits on signing the agreement. (e) The other factor which governs the happening of transfer is the handing over of possession. This section says "and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession continues in possession in part performance of the contract and has done some act in furtherance of the contract". Retention of possession is one kind of the facet of part performance of the contract. The agreement in question can be said to be a distinct transaction that 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 immediate bearing on allowing the possession to be taken in part performance. It is at that point of time that the deemed transfer takes place. According to us the possession 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 property and to make use of it for the intended purpose. The mere fact that the assessee owner has also the right to enter the property to oversee the development work or to ensure performance of the terms of the agreement, did not restrict the rights of the developer or did not introduce any incompatibility. In a situation like this when there is a concurrent possession of both the parties, even then clause (v) has its full role to play. There is no warrant to postpone the operation of clause (v) to that point of time when the concurrent ITA No.2791/PUN/2017 for A.Y. 2013-14 Mangilal L. Chowdhary 12 possession would become exclusive possession of the developer. Any other interpretation, i.e., possession means exclusive possession, shall defeat the purpose of amendment. The possibility of staggering of payment linked with possession is ruled out by this amendment so that the taxability of gain may not be shifted to air uncertain distant date. There is no hesitation in saying that even if some part of consideration remains to be paid, the transaction shall not affect the liability of the capital gains tax so as to postpone the same indefinitely. What is meant in clause (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 control over the property in part performance of the contract. The date of that transaction determines the date of transfer. It is enough if the transferee has, by virtue of the impugned transaction, a right to enter upon and exercise the act of possession effectively, then such an act amounts to legal possession over the property. (f) The last noticeable ingredient is, 'the transferee has performed or is willing to perform his part of the contract'. To ascertain the existence of willingness on the part of the transferee one must not put stop at one event but the willingness is to be judged by the series of actions of the transferee. The transferees survey the land and to attract purchaser put up hoardings plus sales office and carry out site development work. Landscaping, sales promotion, execution of construction and completion of project are all incidental 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 coupled with development work can he said to be a positive step towards the willingness to fulfil the commitment. Facts 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 fats on the property owned by the assessee. In lieu of the right given to the developer thereunder, the assessee was to receive 27 per cent of the constructed area of all the floors. Further, even the vacant and peaceful possession of the property had been delivered by the assessee in terms of this JV Agreement. Under the circumstances, there was indeed an exchange of property which amounted to a transfer within the meaning of section 2(47)(v) and the gain resulting from such transfer was indeed taxable in the year in which the development agreement giving ITA No.2791/PUN/2017 for A.Y. 2013-14 Mangilal L. Chowdhary 13 vacant and peaceful possession of the property to the developer was entered into by the assessee. Since the development agreement in the assessee's case has been executed on 10-9-2006 and the vacant and peaceful possession also was given in on the same date itself, such gains were indeed to be taxed in the financial year 2006-07, relevant to the assessment year 2007-08. (h) There is no merit in the contention that the development agreement could not have come into force unless and until the JV agreement has been cancelled. As discussed earlier, the assessee had indeed been paid Rs.7,02,54,000 on signing the JV agreement. Under 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 futuristic also. Accordingly, there is no merit in such contention of the assessee. As regards the argument that the agreement under reference had been executed only for the purpose of getting permissions from various Departments for construction, the very terms of the agreement belie any such claim as the development agreement gives absolute rights to the builders, including possession, duly specified the consideration to be received by the assessee on such exchange. [Para 8.5] To sum up, the owners have entered into an agreement 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 relation to construction of the building, then it is to be considered as transfer under section 2(47)(v). The fact that the legal ownership continued with the owners to be transferred to the developer at a future distant date really does not affect the applicability of section 2(47)(v). The transferee was undisputedly willing to perform its part of the contract, in this circumstance it is held that there is transfer under section 2(47)(v) in the assessment year 2007-08. Thus, the possession and control of the property is already vested with the transferee and the impugned development agreement has not been duly cancelled and it is still in operation, it has to be decided that there is a transfer under section 2(47)(v) in financial year 2006-07 relevant to assessment year 2007-08. [Para 8.6] One has to see the real intention of the parties. 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 most agreeable to the intention of the parties. There are grounds appearing from the face of the instrument ITA No.2791/PUN/2017 for A.Y. 2013-14 Mangilal L. Chowdhary 14 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 possession was instantaneous thus entire conspectus of the case has attracted the provision of section 45 on fulfilment of conditions laid down in section 53A of the Transfer of Property Act. [Para 9] Accordingly, issue relating to transfer of property under section 2(47)(v) is decided in favour of the Department. Clause (47) of section 2 was amended by the Finance Act, 1987 with effect from 1-4-1988 by inserting new sub-clauses (v) and (vi) thereunder. These two new sub-clauses provide that 'transfer' includes (i) any transaction which allows possession to be retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property A c t ; and (ii) any transaction entered into in any manner which has the effect of transferring or enabling the enjoyment of any immovable property. Therefore, under these two sub-clauses, the capital gain would be taxable in the year in which such transactions are entered into even if the transfer of the immovable 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 construction of flats thereon. Further, the assessee acted on the impugned agreement by accepting from the builder/ developer payments in the financial year 2006-07. In view of the facts and circumstances discussed above, all the conditions of sub-clause (v) of section 2(47) are satisfied in this case and therefore, it has to be inferred that a 'transfer' did take place within the meaning of section 2(47)(v). The argument 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 concerned. The completion of 'transfer' of an immovable property as per the general law is not a requirement for the applicability of the provisions of sub-clause (v) of section 2(47). Thus, this ground is dismissed. [Para 9.1].” 10.11 In the light of aforesaid detailed discussion on the facts of the case as well as decisions cited, I hold that all the conditions of sub- clause (v) and (vi) of Section 2(47) of the IT Act are satisfied in the present case and therefore it is held that 'transfer' has indeed taken place within the meaning of this provision. The argument that there was some dispute with a third party is of no relevance as because it did not hamper the transfer itself and even the construction was in progress as per the development agreement. The AO was therefore perfectly justified in taxing the amount of capital gain during the year under consideration. The order of the AO is therefore confirmed on this point ITA No.2791/PUN/2017 for A.Y. 2013-14 Mangilal L. Chowdhary 15 and it is held that LTCG was rightly taxed at Rs. 49,22,006/-. The grounds 7 and 8 are therefore dismissed. 11. In ground no. 9, the appellant is aggrieved against disallowance of exemption u/s 54F in respect of Long Term Capital Gain. This ground has been taken as an alternative ground which is without prejudice to ground nos. 7 and 8. The AO in the assessment order has disallowed the claim made u/s 54F as because the assessee was found ineligible for the deduction, the fact being that the assessee was already the owner of two residential houses. The appellant on the other hand argued as under : " Without Prejudice to the above submissions, it is submitted that even if capital is to be charged in the year under consideration the assessee would be able to claim deduction u/s 54F since the consideration would be received in the form of constructed flats. The decisions in the case of CIT V K G Rukminiamma 331 1TR 211 (Kar), P K VasantiRangarajan V CIT 252 CTR 336 Mad wherein exemption u/s 54F has been allowed even for more than one flat. Section 54F has been amended by Finance Act 2014 wherein word ”one’ house has been substituted for ‘a’ residential house. Madras High Court in case of CIT V V R Karpagam 373 ITR 127 has held that the amendment is prospective and will not apply to earlier assessment years.” 11.1 I have gone through the facts as well as the provision of Section 54F of the IT Act. The provision to Section 54F clearly states that the deduction shall not be available if an assessee owns more than one residential house on the date of transfer of the original asset. The proviso below sub section (1) of 54F reads as under: "Provided that nothing contained in this sub-section shall apply where- (a) The assessee- (i) Owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) Purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) Constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and ITA No.2791/PUN/2017 for A.Y. 2013-14 Mangilal L. Chowdhary 16 (b) The income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head "Income from house property" 11.2 In view of the facts mentioned by the AO in the assessment order, I hold that the appellant is not eligible for any deduction u/s 54F of the IT Act as because he was already owing two residential houses on the date of the transfer. Since the conditions as laid down in Section 54F is not being fulfilled therefore it is held that the appellant is ineligible for any deduction under the Section. The ground is accordingly dismissed.” 6. Mr. Deepa Khare took us to the assessee’s development agreement herein 11-09-2012 (pages 157 to 174 of paper book). She invited our attention to clause 4 read with clause 18 therein that time formed very much essence of the contract since the vendee M/s. B.L. Associates had to get the corresponding sanction plan from PCMC within 30 days followed by raising of construction on the land. Learned counsel’s case is that the said developer had not undertaken either sanction plan or construction and therefore, this development agreement stood automatically cancelled in terms of clause 18 thereof. She thereafter sought to highlight the fact that there was a supplementary agreement amongst the parties on 18-03-2014 which gave rise to his long term capital gains. This taxpayer is stated to have declared the same in AY 2015-16. Ms. Khare further sought to buttress the point that this assessee’s vendor’s vendor had also initiated civil court proceedings against him which delayed the entire development. She referred to ITA No.2791/PUN/2017 for A.Y. 2013-14 Mangilal L. Chowdhary 17 pages 90 to 123 of the paper book containing the alleged plaint to this effect. 7. We have given our thoughtful consideration to assessee’s foregoing arguments and find no merit therein. We first of all start with the admitted factual position of the assessee having executed a registered development agreement with M/s. B.L. Associates on 11-09-2012. His case all along is that he is assessable only for the latter development agreement of 18-03-2014 once the former development agreement stood annulled since M/s. B.L. Associates had failed to perform the same. All these arguments hardly carry any weight once it has come on record that the parties herein rather executed a latter supplementary agreement to the former one which again stood revived. We also sought to note from the assessee as to whether he had transferred the possession to the developer afresh or not. The reply received is that the builder’s possession continued since 2012 by way of registered development agreement; with all rights and encumbrances which were never disturbed all along. Faced with this situation, we hold that the lower authorities have rightly assessed the assessee for having transferred the capital asset in issue on 11-09-2012. The assessee’s reliance on M/s. Sheshasayee Steels (P) Ltd. Vs. ACIT (2020) 421 ITR 46(SC) stands distinguished once the development agreement herein has remained the same regarding transfer of the asset u/s.2(47) r.w.s. 53A of the Act. We ITA No.2791/PUN/2017 for A.Y. 2013-14 Mangilal L. Chowdhary 18 uphold the impugned long term capital gains addition amounting to Rs.49.22 lakh. Ordered accordingly. Needless to say, the Assessing Officer’s consequential computation shall give due credit to assessee’s capital gains declared in A.Y. 2015-16 (supra) as per law. 8. No other ground or argument has been pressed before us. 9. This assessee’s appeal is partly allowed in above terms. Order pronounced in the open Court on 23 rd September, 2022. Sd/- Sd/- (DIPAK P.RIPOTE) (S S GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; दनांक / Dated : 23 rd September, 2022 Satish आदेश क ितिलिप अ ेिषत / Copy of the Order forwarded to : 1. अपीलाथ / The Appellant. 2. यथ / The Respondent. 3. The CIT(A) concerned. 4. The Pr. CIT concerned. 5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, “ ए” ब च, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाड फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकरअपीलीयअिधकरण, पुणे/ITAT, Pune. ITA No.2791/PUN/2017 for A.Y. 2013-14 Mangilal L. Chowdhary 19 S.No Details Date Initials Designation 1 Draft dictated on 16.09.2022 Sr. PS/PS 2 Draft placed before author 21.09.2022 Sr. PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order