DCIT CORPORATE CIRCLE 5 (1), Chennai V. SHRI STHAK AHMED SHAW, Chennai

ITA 401/CHNY/2018

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 3976 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 02-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALENDRA MAMIDIPCITD R
• Assessee Lawyers: MRS VIDYAC A
• Keywords: Sale consideration of property below Jantri Value; Capital asset
• Section: 50C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI , . , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER & SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.401/CHNY/2018 / ASSESSMENT YEAR :2014-15 THE DCIT, CORPORATE CIRCLE 5(1), CHENNAI. VS. SHRI SATHAK AHMED SHAW , NEW NO.60,OLD NO.33, VEERABADRAN STREET, NUNGAMBAKKAM,CHENNAI 600 034. [PAN AANPS 0247 C ] ( / APPELLANT) ( /RESPONDENT) ! ' # / APPELLANT BY : MR.SALENDRA MAMIDI,PCIT,D.R $% ! ' # /RESPONDENT BY : MRS.VIDYA,C.A & ' ' () / DATE OF HEARING : 03 - 1 0 - 201 8 * ' () / DATE OF PRONOUNCEMENT : 05 - 1 0 - 201 8 / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-3,CHENNAI IN ITA NO.238/2016-17/CIT(A)-3 DATED 27.10.2017 FOR TH E ASSESSMENT YEAR 2014-15. ITA NO.401/CHNY/2018 :- 2 -: 2. MR.SALENDRA MAMIDI REPRESENTED ON BEHALF OF THE REVENUE AND MRS.VIDYA REPRESENTED ON BEHALF THE OF THE ASSESSEE. 3. IT WAS SUBMITTED BY LD.D.R THAT THE ASSESSEE IS ONE OF THE 13 CO-OWNERS ENTERED INTO JOINT DEVELOPMENT AGREEMENT (JDA) ON 27.06.2006 WITH SRIJAN REALITY FOR DEVELOPMENT OF T HEIR PROPERTY SITUATED AT NO.137,VELACHERY MAIN ROAD, CHENNAI. A S PER THE JDA, THE ASSESSEE HANDED OVER 50% OF THE LAND CONSISTING OF 1,45,478 SQ.FT. TO THE DEVELOPER, AND THE DEVELOPER IN TURN WAS TO HAN D OVER THE 1,30,850 SQ.FT. AREA OF CONSTRUCTED BUILDING CONSIS TS OF RESIDENTIAL AND COMMERCIAL SPACE TO THE LAND OWNER. IT WAS A FURTHE R SUBMISSION THAT CONSEQUENT TO THE JDA, THE ASSESSEE HAD FILED RETUR N OF INCOME FOR ASSESSMENT YEAR 2014-15 DECLARING CAPITAL GAINS. IT WAS A SUBMISSION THAT THE LD. ASSESSING OFFICER HAD INVOKED THE PROV ISIONS OF THE SECTION 50C OF THE ACT AND HAD ARRIVED AT TOTAL TAXABLE INC OME AT 17,84,14,787/-. AGGRIEVED, THE ASSESSEE PREFERRED A N APPEAL BEFORE THE LD.CIT(A). IT WAS A SUBMISSION THAT THE ASSESSE E HAD CHALLENGED THE ADDITION BEFORE THE LD.CIT(A) AND HAD SUBMITTED THAT THE JDA WAS ENTERED ON 27.06.2006 AND THE CAPITAL GAINS HAD ARI SEN ONLY DURING THE ASSESSMENT YEAR 2007-08. IT WAS A FURTHER CONTENTIO N THAT THE LD. ASSESSING OFFICER HAD WRONGLY ADOPTED GUIDELINE VAL UE PERTAINING TO ASSESSMENT YEAR 2014-15 AND WRONGLY INVOKED THE PRO VISIONS OF THE ITA NO.401/CHNY/2018 :- 3 -: SECTION 50C OF THE ACT. FURTHER, THE ASSESSEE HAD R ELIED UPON THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN O NE OF THE CO-OWNERS CASE, NAMELY SHRI SHAFIQ MOHAMMED SHAH VIDE ITA NOS .945 & 1331/MDS./2016 DATED 11.05.2017 WHEREIN PARA NOS.9 & 10 AT PAGES 34 TO 37 ARE EXTRACTED AS FOLLOWS:- 9. TO SUM UP THE OWNERS HAVE ENTERED INTO AN AGREE MENT 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 THEREAFT ER THE TRANSFEREE HAS TAKEN STEPS IN RELATION TO CONSTRUCT ION OF THE BUILDING INCLUDING PROJECT PLAN APPROVAL ON 11.04.2 008, THEN IT IS TO BE CONSIDERED AS TRANSFER UNDER SECTION 2(47)(V) OF THE INCOME- TAX ACT. THE FACT THAT THE LEGAL OWNERSHIP CONTINUE D WITH THE OWNERS TO BE TRANSFERRED TO THE DEVELOPER AT A FUTU RE DISTANT DATE REALLY DOES NOT AFFECT THE APPLICABILITY OF SECTION 2(47)(V) AS PER THE REASONS ASSIGNED HEREINABOVE. THE TRANSFEREE WA S UNDISPUTEDLY WILLING TO PERFORM ITS PART OF THE CON TRACT, IN THIS CIRCUMSTANCE WE HAVE TO HOLD THAT THERE IS TRANSFER UNDER SECTION 2(47)(V) OF THE ACT. THUS, THE POSSESSION AND CONTR OL OF THE PROPERTY IS ALREADY VESTED WITH THE TRANSFEREE AND THE IMPUGNED DEVELOPMENT AGREEMENT HAS NOT BEEN DULY CANCELLED A ND IT IS STILL IN OPERATION, IT HAS TO BE DECIDED THAT THERE IS A TRANSFER UNDER SECTION 2(47)(V) OF THE ACT. WE HAVE TO SEE THE REA L INTENTION OF THE PARTIES. AS PER THE WELL KNOWN CANNON OF CONSTR UCTION OF DOCUMENT, THE INTENTION GENERALLY PREVAILS OVER THE WORD USED AND THAT SUCH A CONSTRUCTION PLACED ON THE WORD IN A DE ED AS IS MOST AGREEABLE TO THE INTENTION OF THE PARTIES. THERE AR E GROUNDS APPEARING FROM THE FACE OF THE INSTRUMENT AFFORDING PROOF OF THE REAL INTENTION OF THE PARTIES, THEN THAT INTENTION WOULD PREVAIL ITA NO.401/CHNY/2018 :- 4 -: AGAINST THE OBVIOUS AND ORDINARY MEANING OF THE WOR DS USED. ENTERING INTO THE PROPERTY AND HANDING OVER OF THE POSSESSION WAS INSTANTANEOUS THUS ENTIRE CONSPECTUS OF THE CASE HA S ATTRACTED THE PROVISION OF SECTION 45 OF THE ACT ON FULFILMENT OF CONDITIONS LAID DOWN IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT . IN OUR OPINION, THE REAL INTENTION OF THE PARTIES HEREIN I S TO BE SEEN. 10. ACCORDINGLY, WE DECIDE THE ABOVE ISSUE RELATIN G TO TRANSFER OF PROPERTY UNDER SECTION 2(47)(V) OF THE INCOME-TA X ACT IN FAVOUR OF THE ASSESSEE. WE ALSO HOLD THAT CLAUSE (47) OF S ECTION 2 WAS AMENDED BY THE FINANCE ACT, 1987 WITH EFFECT FROM A PRIL 1, 1988 BY INSERTING NEW SUB-CLAUSES (V) AND (VI) THEREUNDE R. 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 ACT ; AND (II) ANY TRAN SACTION ENTERED INTO IN ANY MANNER WHICH HAS THE EFFECT OF TRANSFER RING 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 TH E TRANSFER OF THE IMMOVABLE PROPERTY IS NOT EFFECTIVE OR COMPLETE UND ER THE GENERAL LAW. THE ASSESSEE ENTERED INTO AN AGREEMENT WITH TH E BUILDER/DEVELOPER FOR DEVELOPMENT OF THE IMPUGNED L AND AND CONSTRUCTION OF FLATS THEREON. ALSO, THE ASSESSEE S IGNED A DEVELOPMENT AGREEMENT DATED 27.06.2006 IN FAVOUR OF THE BUILDER/DEVELOPER AND GAVE POSSESSION OF THE PROPER TY TO THE BUILDER/DEVELOPER. FURTHER, THE ASSESSEE ACTED ON T HE IMPUGNED AGREEMENT BY ACCEPTING FROM THE BUILDER/DEVELOPER P AYMENTS BY CHEQUES ON DIFFERENT DATES IN THE FINANCIAL YEAR 20 06-07 RELEVANT ASSESSMENT YEAR 2007-08. IN VIEW OF THE FACTS AND C IRCUMSTANCES 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 ITA NO.401/CHNY/2018 :- 5 -: 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 RELEVAN T CONSIDERATION SO FAR AS PROVISIONS OF SUB-CLAUSE (V) OF SECTION 2 (47) ARE CONCERNED. THE COMPLETION OF 'TRANSFER' OF AN IMMOV ABLE 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, THE TAXABILITY OF LONG TERM CAPITAL GAINS ONLY TAXED IN THE F.Y 2006-07 RELEVANT TO A.Y 2007-08 AND ORDERED ACCORDINGLY. IT WAS A SUBMISSION THAT THE LD.CIT(A) HAD PLACED R ELIANCE UPON DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN T HE CASE OF ONE OF CO-OWNERS CASE WHEREIN THE ISSUE WAS DECIDED IN F AVOUR OF ASSESSEE. IT WAS THE CONTENTION OF THE LD.D.R BEFORE US THAT THE LD.CIT(A) HAD FAILED TO CONSIDER THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS.BALBIR SINGH MAINI (398 ITR 531 (SC) ) WHEREIN IT HAS BEEN HELD THAT CAPITAL GA INS ARISING UNDER JDA, WHICH NEVER MATERIALIZED FOR WANT OF NECESSARY PERMISSION, WAS NOTHING BUT A HYPOTHETICAL INCOME. IT WAS A FURTHER SUBMISSION THAT THE JDA WAS COMPLETE, IN THE PRESENT CASE, WHICH WA S IN THE ASSESSMENT YEAR 2014-14, THE INCOME COULD NOT BE AS SESSED TO TAX FOR ASSESSMENT YEAR 2007-08. 4. IN REPLY, THE LD.A.R VEHEMENTLY SUPPORTED THE O RDER OF THE CIT(APPEALS). SHE STRONGLY RELIED UPON THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SHRI SHAFIQ M OHAMMED SHAH ITA NO.401/CHNY/2018 :- 6 -: REFERRED TO SUPRA. SHE ALSO PLACED BEFORE US THE DI STINGUISHED FACTS BETWEEN THE ASSESSEES CASE AND SHRI BALBIR SINGH J UDGEMENT OF SUPREME COURT REFERRED TO SUPRA IS AS FOLLOWS:- SHRI BALBIR SING JUDGEMENT ASSESSEES CASE THE DEVELOPER NOT DONE ANY ACT IN FURTHERANCE OF THE CONTRACT. THE DEVELOPER DID SO MAY ACTS IN FURTHERANCE OF THE CONTRACT. THE DEVELOPER NOT PERFORMED HIS PART OF THE CONTRACT. THE DEVELOPER DID PERFORMED HIS PART OF THE CONTRACT. THE LAND OWNER CONTINUES TO BE THE OWNER THROUGH OUT THE AGREEMENT AND THERE IS NO TRANSFER RIGHTS. TRANSF ER RIGHTS WERE GIVEN TO THE DEVELOPER AS PER JDA. THE JDA FELL THROUGH. THE TRANSACTION NEVER MATERIALIZED INCOME DID NOT ACCRUED AT ALL. THE JDA NOT FELL THROUGH. THE JDA WAS COMPLETED AND THE INCOME ACCRUED IN THIS CASE WHICH IS TAXABLE IN THE A.Y. TH E ASSESSEE DID NOT ACQUIRED ANY RIGHT TO RECEIVE INCOME WHICH WAS DEPENDENT UPON THE NECESSARY PERMISSIONS BEING OBTAINED. THE DEVELOPER ACQUIRED THE RIGHTS TO RECEIVE THE INCOME ON THE DATE OF SIGNING THE JDA. THE ONLY ONE COMMON POINT IN BOTH THE CASE IS THAT THE JDA WAS NOT REGISTERED. BUT ALL OTHER FACTS ARE TOTALLY DIFFERENT. THE DEPARTMENT STARTED TO TAX THE CAPITAL GAINS ON THE BASIS OF THE ACTUAL REGISTRATION DATE OF RESIDENTIAL UNITS AND COMMERCI AL AREA IN THE RESPECTIVE ASSESSMENT YEARS AS PER THE DIRECTIONS OF HON.ITAT IN THEASES CO OWNER CASE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F COMMISSIONER OF INCOME TAX VS.BALBIR SINGH MAINI (398 ITR 531 (SC) ) CLEARLY SHOWS THAT THERE WAS A CASE WHERE THE TRANSACTION NEVER M ATERIALIZED AND CONSEQUENTLY, THE HONBLE SUPREME COURT HAD CATEGOR ICALLY HELD THAT AS THE TRANSACTION DID NOT MATERIALIZE, CAPITAL GAI NS COULD NOT BE TAXED ITA NO.401/CHNY/2018 :- 7 -: ON HYPOTHETICAL INCOME. IN THE PRESENT CASE, ADMITT EDLY THE POSSESSION OF THE PROPERTY IN COMPLIANCE WITH THE JDA HAD ADMI TTEDLY PASSED FROM THE ASSESSEE TO THE DEVELOPER DURING THE ASSESSMENT YEAR 2007-08. THIS IS NOT THE CASE WHERE THE JOINT DEVELOPER WAS BARRED FROM TRANSFERRING ITS SHARE IN THE IMMOVABLE PROPERTY OR ENTERING INTO AGREEMENTS FOR THE TRANSFER OF ITS SHARE IN THE UND IVIDED INTEREST AND THE SUPER CONSTRUCTION BEFORE COMPLETION OF THE PRO JECT. IN FACT, AS PER CLAUSE-6 OF THE AGREEMENT, THE ASSESSEE HANDED OVE R THE POSSESSION OF THE LAND ON RECEIPT OF THE SECURITY DEPOSIT. TH ESE FACTS, WHICH HAVE BEEN BROUGHT OUT IN THE TRIBUNALS ORDER IN THE CAS E OF CO-OWNERS CASE REFERRED TO SUPRA, HAVE NOT BEEN DISPUTED OR DISLOD GED BY THE REVENUE. THIS BEING SO, THE PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS.BALBIR SINGH MAINI (398 ITR 531 (SC) ) CLEARLY DO NOT APPL Y TO THIS CASE IN SO FAR AS THE TRANSACTION HAS GONE THROUGH AND MORE TH AN ANYTHING ELSE POSSESSION OF THE IMMOVABLE PROPERTY HAS ALREADY GO T TRANSFERRED IN LINE WITH THE PROVISIONS OF SEC.2(47)(V) OF THE INC OME TAX ACT, 1961 DURING THE ASSESSMENT YEAR 2007-08 ITSELF. THIS BEI NG SO, RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF CO-OWNERS CASE, THE I.T.O VS. SHRI SHAFIQ MOHAMMED SHAH VIDE ORDER DATED 11.05.2017 REFERRED TO SUPRA, IT I S DIRECTED THAT THE LONG TERM CAPITAL GAINS IS TAXABLE ONLY DURING THE ASSESSMENT YEAR ITA NO.401/CHNY/2018 :- 8 -: 2007-08 AND NOT DURING THE ASSESSMENT YEAR 2014-15. CONSEQUENTLY, THE APPEAL OF THE REVENUE STANDS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED ON 05 TH OCTOBER, 2018, AT CHENNAI. SD/ - SD/ - ( . ) (A.MOHAN ALANKAMONY) ! ' / ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) # ' / JUDICIAL MEMBER - ' / CHENNAI . / DATED: 05 TH OCTOBER, 2018. K S SUNDARAM / ' $(01 2 1( / COPY TO: 1 . ! / APPELLANT 4. & 3( / CIT 2. $% ! / RESPONDENT 5. 145 $(6 / DR 3. & 3( () / CIT(A) 6. 57 8' / GF