Mrs. Durdana Khatoon, Hyd, Hyderabad V. Asst, Commissioner of Income Tax, Circle-6(1), Hyderabad

ITA 449/HYD/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1351 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 20-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K E SUNIL BABU
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Capital asset; Gift; Deemed to accrue or arise in india; Additional evidence
• Section: 27; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 449/HYD/2012 ASSESSMENT YEAR 2005-06 MRS. DURDANA KHATOON HYDERABAD PAN: AGMPK8547N VS. THE ASST. CIT CIRCLE-6(1) HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI P. MURALIMOHAN RAO RESPONDENT BY: SRI K.E. SUNIL BABU DATE OF HEARING: 16 .01.2013 DATE OF PRONOUNCEMENT: 15.03.2013 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-IV, HYDERABAD DATED 31.1.2012 FOR ASSESSMENT YEAR 2005-06. 2. THE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS WIT H REGARD TO TREATMENT OF TRANSACTION ENTERED BY THE ASSESSEE IN JOINT DEVELOPMENT AGREEMENT (JDA) FOR DEVELOPMENT OF PROPERTY SITUATE D AT DOOR NO. 1- 8-5777/1, CHIKKADPALLY, HYDERABAD WITH M/S. IMPERIA L CONSTRUCTIONS VIDE AGREEMENT DATED 2-8-2004 AS TRANSFER BY INVOKI NG PROVISIONS OF SECTION 2(47)(V) OF THE INCOME-TAX ACT, 1961 SO AS TO DETERMINE THE LONG TERM CAPITAL GAIN. 3. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE OWNE D A PROPERTY SITUATED AT DOOR NO. 1-8-5777/1, CHIKKADPALLY, HYDE RABAD AND ENTERED INTO A JDA WITH M/S. IMPERIAL CONSTRUCTIONS FOR CO NSTRUCTION OF RESIDENTIAL/COMMERCIAL FLATS ON 2.8.2004. AS PER T HE AGREEMENT, THE ASSESSEE IS ENTITLED FOR 50% OF BUILT UP AREA. AS P ER AGREEMENT AND ALSO VIDE DELIVERY NOTE DATED 7.3.2005, THE ASSESSEE GIV EN VACANT AND PEACEFUL POSITION OF THE PROPERTY TO THE BUILDER. BEING SO, THE ASSESSING OFFICER CONSIDERING THE PROVISIONS OF SECTION 2(47) (V), THE ASSESSEE SAID IT A NO. 449/HYD/2012 MRS. DURDANA KHATOON ================= 2 TO BE EXCHANGED THE PROPERTY FOR CONSIDERATION IN K IND I.E., TO RECEIVE 50% OF THE BUILT UP AREA. ACCORDINGLY, THE ASSESSI NG OFFICER, PLACING RELIANCE ON THE JUDGEMENT OF BOMBAY HIGH COURT IN T HE CASE OF CHATURBHUJDAS DWARKADAS KAPADIA V. CIT (260 ITR 491 ) AND ALSO ON THE DECISION OF THE TRIBUNAL IN THE CASE OF DR. MAY A SHENOY V. CIT (23 DTR 140) (HYD) TREATED THIS TRANSACTION AS 'TRANSFE R OF CAPITAL ASSET' AND COMPUTED THE CAPITAL GAIN ON THIS TRANSACTION A T RS. 3,88,35,451. ON APPEAL THE CIT(A) CONFIRMED THE ORDER OF THE ASS ESSING OFFICER. AGAINST THIS THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LEARNED AR SUBMITTED THAT THE LOWER AUTHORITIES WRONGLY PLACED RELIANCE ON THE JUDGEMENT OF BOMBAY HIGH COU RT IN THE CASE OF CHATURBHUJDAS DWARKADAS KAPADIA (SUPRA) AND ALSO ON THE DECISION OF THE TRIBUNAL IN THE CASE OF DR. MAYA SHENOY (SUPRA) . HE SUBMITTED THAT IN THE PRESENT CASE THERE WAS NO TRANSFER OF PROPER TY AS ENUMERATED IN SECTION 2(47)(V) OF THE ACT, AS IN THIS CASE NO POS SESSION HAS BEEN GIVEN BY THE ASSESSEE TO THE DEVELOPER. WHATEVER THE ASS ESSEE HAS GIVEN IS ONLY A LICENCE TO THE DEVELOPER TO ENTER INTO PLOT FOR THE LIMITED PURPOSE OF CONSTRUCTION OF BUILDING. HE SUBMITTED THAT GIV ING SYMBOLIC POSSESSION OF THE PROPERTY FOR LIMITED PURPOSE OF C ONSTRUCTION CANNOT BE CONSTRUED AS GIVING OF ABSOLUTE POSSESSION OF TH E PROPERTY. HE ALSO FILED ADDITIONAL EVIDENCES AS FOLLOWS: (A) AGREEMENT BETWEEN DURDHANA KHATOON AND M/S. IMPERIA L CONSTRUCTIONS DATED 2 ND AUGUST, 2004. (B) MEMORANDUM OF UNDERSTANDING (MOU) BETWEEN DURDHANA KHATOON AND M/S IMPERIAL CONSTRUCTIONS DATED 2 ND AUGUST, 2004. (C) LEASE DEED WITH M/S. PANTALOON RETAIL (I) LTD. (D) COPY OF INCOME-TAX RETURN FOR THE A.Y. 2005-2006 AL ONG WITH COMPUTATION OF INCOME. (E) COPY OF INCOME-TAX RETURN FOR THE A.Y. 2006-2007 AL ONG WITH COMPUTATION OF INCOME. (F) COPY OF INCOME-TAX RETURN FOR THE A.Y. 2007-2008 AL ONG WITH COMPUTATION OF INCOME. (G) COPY OF INCOME-TAX RETURN FOR THE A.Y. 2008-2009 AL ONG WITH COMPUTATION OF INCOME. IT A NO. 449/HYD/2012 MRS. DURDANA KHATOON ================= 3 (H) DETAILS OF CAPITAL GAINS OFFERED TO TAX FOR THE A.Y S. 2007-2008 ONWARDS. 5. HE ALSO SUBMITTED THAT THE ASSESSEE COULD NOT PRODU CE THE DOCUMENTS IN SL. NOS. (C) TO (H) BEFORE THE LOWER AUTHORITIES AS THESE ARE NOT AVAILABLE AT THE TIME OF PROCEEDINGS BEFORE THE LOWER AUTHORITIES AND REQUESTED TO ADMIT THESE ADDITIONAL EVIDENCES. WE HAVE GONE THROUGH THE ABOVE ADDITIONAL EVIDENCES. CONSIDERIN G THE NATURE OF DOCUMENTS, IN OUR OPINION, THESE DOCUMENTS HAVE NO CONSEQUENCE IN DECIDING THE ISSUE. WE HAVE TO SEE ONLY DEVELOPMEN T AGREEMENT AND DELIVERY NOTE FOR HANDING OVER THE POSSESSION OF TH E PROPERTY FOR CONSTRUCTION. FURTHER THE ASSESSEE HAS PAID THE TAXES ON CAPITAL GAIN IN SUBSEQUENT YEARS, IT CANNOT LEAD TO CONCLUSION T HAT THERE IS NO TRANSFER IN THIS A.Y. 2005-06. THE RIGHT AMOUNT HA S TO BE TAXED IN RIGHT ASSESSMENT YEAR. 6. THE AR, ON APPLICABILITY OF SECTION 2(47)(V) OF THE INCOME TAX ACT, 1961, SUBMITTED THAT THE PROVISIONS OF SECTION 2(47)(V) OF THE INCOME TAX ACT, 1961, DO NOT APPLY TO THE CASE OF T HE ASSESSEE'S CASE OR TO ANY DEVELOPMENT AGREEMENT FOR THAT MATTER OF FAC T. HE SUBMITTED THAT THE RATIO OF FOLLOWING CASE-LAW WAS WRONGLY AP PLIED BY THE ASSESSING OFFICER: (A) CHATURBHUJ DWARAKADAS KAPADIA [(2003) 129 TAXMANN 4 97 (BOM)] (B) DR MAYA SHENOY [(2009) 124 TTJ 692 (HYD)] 7. ACCORDING TO HIM, THE FOLLOWING JUDICIAL DECISIONS AND INTERPRETATION HAVE NOT BEEN BROUGHT TO THE NOTICE OF THE COURTS/APPELLATE AUTHORITIES IN THE COURSE OF THE P RESENTATION/ ARGUMENTS: (A) SMT. K. RADHIKA & OTHERS (65 DTR 250) (HYD) (B) BAISAKHI BHATTACHARJEE VS. SHAYAMAL BOSE & ORS. [20 02 (4) CHN 115) (C) SMT. RAJ RANI DEVI RAMANA VS. CIT (201 ITR 1032 (D) ORDER OF ITAT, HYDERABAD IN THE CASE OF S. RAGHURAM I REDDY IN ITA NO. 296/HYD/2003 DATED 30.7.2004. (E) AVATAR SINGH VS. ITO (270 ITR 92) MP IT A NO. 449/HYD/2012 MRS. DURDANA KHATOON ================= 4 (F) ZUARI ESTATE DEVELOPMENT AND INVESTMENT CO. PVT. LT D. VS. DCIT (2004) 271 ITR 269 (G) ALAPATI VENKATARAMAIAH VS. CIT (1965) 57 ITR 185 (S C) 8. THE AR SUBMITTED THAT IN ALL THE CASES THE ARGUMENT S BEFORE THE APPELLATE FORUMS WAS THAT THE AMENDMENT TO SECTION 2(47) OF THE ACT WAS BROUGHT IN TO PLUG THE LOOP HOLE OF TRANSFERRIN G THE PROPERTY WITHOUT REGISTERING A CONVEYANCE DEED. IT WAS PRESE NTED TO THE COURTS THAT THE TRANSFER OF PROPERTY WAS BEING DONE THROUG H GENERAL POWER OF ATTORNEYS AND THAT THROUGH THIS DEVISE THOUGH THE R EAL OWNER OF THE PROPERTY CHANGES THE REGISTERED OWNER REMAINS THE S AME AND THAT THIS KIND OF TRANSACTIONS WERE OUTSIDE THE PURVIEW OF TH E DEFINITION OF THE WORD 'TRANSFER' UNDER SECTION 2(47) OF THE INCOME T AX ACT. THE AR SUBMITTED THAT THE FOLLOWING EXTRACT FROM THE CASE OF CHATURBHUJ DWARAKADAS KAPADIA SHOWS THE LINE OF ARGUMENTS BEFO RE THE HON'BLE COURT: 'SECTION 2(47)(V) WAS INTRODUCED IN THE ACT FROM ASSESSMENT YEAR 1988- 89 BECAUSE PRIOR THERETO, IN MOST CASES, IT WAS ARGUED ON BEHALF OF THE ASSESSEE THAT NO TRANSFER TOOK PLACE TILL EXECUTION OF THE CONVEYANC E. CONSEQUENTLY, ASSESSEES USED TO ENTER INTO AGREEMEN TS FOR DEVELOPING PROPERTIES WITH THE BUILDERS AND UND ER THE ARRANGEMENT WITH THE BUILDERS, THEY USED TO CON FER PRIVILEGES OF OWNERSHIP WITHOUT EXECUTING CONVEYANC E AND TO PLUG THAT LOOP HOLE, SECTION 2(47)(V) CAME T O BE INTRODUCED IN THE ACT. IT WAS ARGUED BY THE ASSESSE E THAT THERE WAS NO EFFECTIVE TRANSFER TILL GRANT OF IRREV OCABLE LICENCE. [PARA 5]' 9. THE AR FURTHER SUBMITTED THAT THE FACT THAT THE SUB JECT MATTER OF TAXATION BEING THE CONSIDERATION FOR TRANSFER DOES NOT EXIST ON THE DATE CONCLUDED BY THE DEPARTMENT TO BE THE DATE OF TRANS FER HAS NOT BEEN BROUGHT TO THE NOTICE OF THE ADJUDICATING AUTHORITI ES IN ANY OF THESE CASES. THE APEX COURT IN THE CASE OF K.P. VARGHESE (131 ITR 531) LAID DOWN THAT IT IS NOT VERY FICTIONAL ACCRUAL OR RECEI PT OF INCOME WHICH HAS NEVER ACCRUED NOR NEVER RECEIVED, WHICH COULD BE BR OUGHT TO TAX FOR THE PURPOSE OF TAXATION OF CAPITAL GAIN. THE PROVISIONS SEEK TO BRING WITHIN THE NET OF TAXATION ONLY THAT INCOME WHICH HAS ACCR UED OR IS RECEIVED BY THE ASSESSEE AS A RESULT OF THE TRANSFER OF THE CAP ITAL ASSET. IT A NO. 449/HYD/2012 MRS. DURDANA KHATOON ================= 5 10. THE LEARNED AR SUBMITTED THAT THIS ISSUE HAS BEEN C ONSIDERED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE O F K RADHIKA AND OTHERS VS. DCIT (65 DTR 250) (HYD) WHEREIN HELD THA T HANDING OVER OF THE POSSESSION OF PROPERTY IS ONLY ONE OF THE CONDI TIONS U/S. 53A OF THE TRANSFER OF PROPERTY ACT BUT IT IS NOT THE SOLE AND ISOLATED CONDITION AND IT IS NECESSARY TO GO INTO WHETHER OR NOT TRANSFERE E WAS 'WILLING TO PERFORM' ITS OBLIGATION UNDER THE CONSENT TERMS; ON THE FACTS OF THE CASE, PROVISIONS OF SECTION 2(47)(V) OF THE ACT WIL L NOT APPLY IN THE ASSESSMENT YEAR UNDER CONSIDERATION AND CAPITAL GAI NS COULD NOT BE CHARGED IN THE ASSESSMENT YEAR UNDER CONSIDERATION. 11. THE AR SUBMITTED THAT THE METHOD OF COMPUTATION OF FULL VALUE OF CONSIDERATION ITSELF THROWS OPEN SO MANY ANOMALI ES THAT THE VERY BASIS OF TAXATION GOES AGAINST THE PRINCIPLES OF IN COME TAX ACT WHICH SEEKS TO TAX REAL AND CERTAIN INCOME. 12. ACCORDING TO THE AR, THIS BEING THE CASE AN AGREEME NT BEING OUT OF THE SCOPE OF SECTION 53 A OF THE TRANSFER OF PRO PERTY ACT, THE AR SUBMITTED THAT THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT (APPEALS) ERRED IN LAW IN HOLDING THAT THE TRANSACTION IS WIT HIN THE MEANING OF TRANSFER UNDER SECTION 2(47)(V) OF THE ACT. AS STAT ED EARLIER THE CASE AND THE COURSE OF ARGUMENTS BEFORE THE HON'BLE BOMBAY H IGH COURT IS THAT THE AMENDMENT TO THE SECTION 2(47) WHICH DEFINES 'T RANSFER' HAS BEEN MADE WITH A VIEW TO PLUG THE LOOP HOLE OF THE ASSES SES ENTERING INTO DEVELOPMENT WITH BUILDERS AND EVADING TAXES. ACCORD INGLY, THE AR SUBMITTED THAT THIS IS NOT THE ACTUAL LEGAL POSITIO N NOR IS IT THE INTENTION OF THE LEGISLATURE. FURTHER HE SUBMITTED THAT SECT ION 2(47) AS ORIGINALLY INTRODUCED WAS SUBSTITUTED BY THE TAXATION LAWS (AM ENDMENT) ACT, 1984 WITH EFFECT FROM 1-4-1985. THE SECTION WITH EF FECT FROM 1-4-1985 HAD FOUR SUB CLAUSES AS UNDER: ['TRANSFER', IN RELATION TO A CAPITAL ASSET, INCLUD ES,- (I) THE SALE, EXCHANGE OR RELINQUISHMENT OF THE ASS ET; OR (II) THE EXTINGUISHMENT OF ANY RIGHTS THEREIN; OR IT A NO. 449/HYD/2012 MRS. DURDANA KHATOON ================= 6 (III) THE COMPULSORY ACQUISITION THEREOF UNDER ANY LAW; OR (IV) IN A CASE WHERE THE ASSET IS CONVERTED BY THE OWNER THEREOF INTO, OR IS TREATED BY HIM AS, STOCK-IN-TRA DE OF A BUSINESS CARRIED ON BY HIM, SUCH CONVERSION OR TREATMENT;] VIDE TAXATION LAWS (AMENDMENT) ACT, 1984 TWO NEW SU B CLAUSES HAVE BEEN INTRODUCED AND THESE ARE AS UNDER ; (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 N ATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPE RTY ACT, 1882 (4 OF 1882) ; OR (VI) ANY TRANSACTION (WHETHER BY WAY OF BECOMING A MEMBER OF, OR ACQUIRING SHARES IN, A CO-OPERATIVE SOCIETY, COMPANY OR OTHER ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT OR ANY ARRANGEMENT OR IN ANY OTHER MANNER WHATSOEVER) WHICH HAS THE EFFECT OF TRANSFERRING, OR ENABLING THE ENJOYMENT OF, ANY IMMOVABLE PROPERTY. EXPLANATION.-FOR THE PURPOSES OF SUB-CLAUSES (V) AN D (VI), 'IMMOVABLE PROPERTY' SHALL HAVE THE SAME MEAN ING AS IN CLAUSE (D) OF SECTION 269UA;] 13. THESE TWO NEW SUB CLAUSES WERE INTRODUCED BY THE FI NANCE BILL 1987. THE HON'BLE FINANCE MINISTER IN HIS BUDGET SP EECH STATED AS UNDER; (PARA 77 OF THE SPEECH AS PUBLISHED) '77. I UNDERSTAND THAT FOR THE PURPOSE OF TAXATION OF INCOME FROM HOUSES, OUR TAX LAWS MAKE A DISTINCTION BETWEEN THE REAL OWNER WHO IS NOT A LEGAL OWNER AND A LEGAL OWNER WHO IS NOT A REAL OWNER. FOLLOWING THE WELL ESTABLISHED REVENUE TRADITION, WHEN IT COMES TO TAX ING, WE TAX BOTH THE REAL OWNER WHO IS NOT A LEGAL OWNER AND THE LEGAL OWNER WHO IS NOT A REAL OWNER. CONCESSION S AVAILABLE TO A HOUSE OWNER ARE, HOWEVER, GIVEN TO A REAL OWNER, WHO IS ALSO A LEGAL OWNER. I PROPOSE TO SIMP LIFY THE LAW BY CLARIFYING THAT THE REAL OWNER, EVEN IF HE IS NOT THE LEGAL OWNER, WILL PAY THE TAX AND AVAIL OF THE CONCESSIONS AVAILABLE TO THE LEGAL OWNER. I HOPE TH IS PROPOSAL IS ABUNDANTLY CLEAR TO HON'BLE MEMBERS.' IT A NO. 449/HYD/2012 MRS. DURDANA KHATOON ================= 7 14. HE DREW OUR ATTENTION TO THE RELEVANT CLAUSE (CLAUS E 27) OF THE MEMORANDUM EXPLAINING PROVISIONS IN FINANCE BILL 19 87 WHICH STATES THE OBJECTIVE AND PURPOSE OF THE AMENDMENT AS UNDER : SIMPLIFICATION AND RATIONALIZATION OF PROVISIONS ENLARGING THE MEANING OF 'OWNER OF HOUSE PROPERTY' '27. UNDER THE EXISTING PROVISIONS OF SECTION 22 OF THE INCOME TAX ACT, ANY INCOME FROM HOUSE PROPERTY IS CHARGEABLE TO TAX ONLY IN THE HANDS OF THE LEGAL OW NER. AS PER SECTION 27 OF THE INCOME TAX ACT, CERTAIN PERSO NS WHO ARE NOT OTHERWISE LEGAL OWNERS ARE DEEMED TO BE OWNERS FOR THE PURPOSES OF THESE PROVISIONS. UNDER THE TRANSFER OF PROPERTY ACT, THE TRANSFER OF OWNERSHIP CAN BE EFFECTED ONLY BY MEANS OF A REGIST ERED INSTRUMENT. HOWEVER, IN THE RECENT TIMES VARIOUS OT HER DEVICES ARE SOUGHT TO BE EMPLOYED TO TRANSFER ONE'S OWNERSHIP IN PROPERTY. AS A RESULT, THERE ARE SITUA TIONS IN WHICH THE ACTUAL OWNER, SAY, OF AN APARTMENT IN A MULTI-STOREYED BUILDING, OR A HOLDER OF A POWER OF ATTORNEY IS NOT THE LEGAL OWNER OF A PROPERTY. IN S OME CASES, PENDING RESOLUTION OF DISPUTES, THE LEGAL OW NERS AS WELL AS THE BENEFICIAL OWNERS ARE ASSESSED TO TAX I N RESPECT OF THE SAME INCOME. AS A MEASURE OF RATIONALIZATION, THE BILL SEEKS TO ENLARGE FURTHER THE MEANING OF THE EXPRESSION 'OWNER OF HOU SE PROPERTY', GIVEN IN CLAUSE (III) OF SECTION 27 BY P ROVIDING THAT A PERSON WHO COME TO HAVE CONTROL OVER THE PROPERTY BY VIRTUE OF SUCH TRANSACTION AS ARE REFER RED IN CLAUSE (F) OF SECTION 269UA WILL ALSO BE DEEMED TO BE THE OWNER OF THE PROPERTY. THE AMENDMENT ALSO SEEKS TO ENLARGE THE APPLICABILITY OF THIS CLAUSE TO A MEMBE R OF A COMPANY OR OTHER ASSOCIATION OF PERSONS. CORRESPONDING AMENDMENTS HAVE ALSO BEEN PROPOSED IN REGARD TO THE DEFINITION OF 'TRANSFER' IN SECTION 2 (47) OF THE INCOME TAX ACT' SECTION 2(M) OF THE WEALTH TAX ACT DEFINING 'NET WEALTH' AND SECTION 2(XII) OF THE GIF T TAX ACT DEFINING 'GIFT'. THESE AMENDMENTS WILL TAKE EFF ECT FROM 1ST APRIL 1988, AND WILL, ACCORDINGLY, APPLY I N RELATION TO ASSESSMENT YEAR 1988-89 AND SUBSEQUENT YEARS. [CLAUSES 3(9), 6, 77 AND 92] IT A NO. 449/HYD/2012 MRS. DURDANA KHATOON ================= 8 15. THE AR SUBMITTED THAT FROM THE ABOVE IT IS CLEAR TH AT THE INTENTION OF THE LEGISLATURE WAS TO PLUG THE LOOP H OLE IN ESCAPEMENT OF INCOME FROM BEING TAXED UNDER THE HEAD 'HOUSE PROPE RTY' AND ALSO TO AVOID DOUBLE TAXATION AND COMPLEXITIES BETWEEN THE REAL OWNERS AND THE LEGAL OWNERS WHEN IT COMES TO TAXATION OF PROPE RTY INCOME. THE AR PLACED RELIANCE ON THE JUDGMENT AND PRINCIPLES LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF VARGHESE (KP) V I TO (1981) 131 ITR 597 (SC). IN THIS CASE WEIGHT WAS GIVEN TO FINANCE MINISTER'S SPEECH AT THE TIME OF INTRODUCTION OF A BILL BY THE SUPREME C OURT, WHERE EVEN VIOLENCE TO THE PLAIN MEANING OF THE LANGUAGE OF ST ATUTE WAS FOUND PERMISSIBLE WITH REFERENCE TO THE DECLARED OBJECTIV E OF THE PROVISION ON THE BASIS OF THE FINANCE MINISTER'S ASSURANCE THAT THE DEEMING PROVISIONS UNDER SECTION 52(2) (NOW DELETED BY THE FINANCE ACT, 1987 W.E.F. 1-4- 1988) MAY NOT BE INVOKED IN THE CASE OF BONA FIDE TRANSACTIONS. IT WAS FOUND TO BE CLEARLY IN THE NAT URE OF CONTEMPORANEA EXPOSITIO FURNISHING LEGITIMATE AID TO CONSTRUCTION . SUCH A VIEW WAS SOUGHT TO BE SUPPORTED BY THE RULE ADMITTED IN CRAW FORD ON STATUTORY CONSTRUCTION DESCRIBED AS 'PRACTICAL CONSTRUCTION', ALTHOUGH NON CONTROLLING, IS NEVERTHELESS ENTITLED TO CONSIDERAB LE WEIGHT AND IS HIGHLY PERSUASIVE. 16. THE AR FURTHER SUBMITS THAT THE PROVISIONS OF SECTI ON 2(47)(V) OF THE INCOME TAX ACT DO NOT APPLY TO THE CASE OF THE ASSESSEE NOR IS IT THE INTENTION OF THE LEGISLATURE THAT THEY BE SO INTEND ED. THEREFORE, HE PRAYED THAT THE DETERMINATION OF CAPITAL GAINS IN H IS CASE BE QUASHED. WITHOUT PREJUDICE TO THE ABOVE, REGARDING COMPUTATI ON OF CAPITAL GAINS, THE AR SUBMITTED THAT THE ASSESSING OFFICER ACTED A RBITRARILY IN TAKING THE SALE PRICE 17. THE AR SUBMITTED THAT WHATEVER THE SALE PRICE MAY B E, A STANDARD MEASURE OF PROFIT IS NOT A CRITERIA TO DET ERMINE COST. ON THIS COUNT BOTH THE ASSESSING OFFICER AS WELL AS THE LEA RNED FIRST APPELLATE AUTHORITY ERRED ON LAW AND ON FACTS. IT IS NOT NECE SSARY THAT EVERY BUSINESS VENTURE SHOULD RESULT IN PROFIT. WHAT THE ASSESSING OFFICER AND THE LEARNED CIT (APPEALS) DID WAS TO ESTIMATE INCOM E FROM AN ASSET IT A NO. 449/HYD/2012 MRS. DURDANA KHATOON ================= 9 THAT DID NOT EXIST AND THIS IS CONTRARY TO THE PRIN CIPLES OF REAL INCOME AND AGAINST THE LAW LAID DOWN BY VARIOUS JUDICIAL P RONOUNCEMENTS. 18. THE LEARNED AR FURTHER SUBMITTED THAT ON THIS COUNT ALONE THE ASSESSMENT ORDER DESERVES TO BE QUASHED. THE ASSESS ING OFFICER, WHILE NOT TAKING THE REAL COST (THAT DID NOT EXIST) ON TH E DATE OF THE AGREEMENT APPLIED THE IMAGINARY COST TO THE BUILT UP AREA AS WELL AS TO THE PARKING AREA UNIFORMLY IN ARRIVING AT THE FULL VALUE OF CON SIDERATION. THIS ACT OF THE ASSESSING OFFICER IS ARBITRARY AND AGAINST PRIN CIPLES OF ACCOUNTING AND COSTING AS WELL AS DETERMINATION OF REAL INCOME TAXABLE UNDER THE INCOME TAX ACT. THE AR SUBMITTED THAT, HAD THE DEVE LOPMENT AGREEMENT NOT BEEN CANCELLED, THERE IS NO DENIAL TH AT TRANSFER OF HIS LAND HAS TAKEN PLACE AND THAT HE WOULD HAVE GAINED FROM IT. THE ISSUE IS HOW MUCH IS THE REAL GAIN THAT IS TO BE TAXED AND W HAT IS THE CRITERIA IN ARRIVING AT THE REAL CAPITAL GAIN, WHETHER SHORT TE RN OR LONG TERM, THAT IS TO BE TAXED. THE ISSUE IS HOW TO DETERMINE THIS AMO UNT AND WHAT IS THE SCIENTIFIC AND EVIDENTIALLY BASED WAY OF DETERMININ G IT. 19. THE AR SUBMITTED THAT THE ASSESSMENT IS BASED ON IM AGINARY INCOME, ARISING OUT OF WILD ESTIMATES, NOT STEMMING UP FROM FACTS AND THEREFORE DESERVES TO BE QUASHED. THE AR SUBMITTED THAT, ON THE BASIS OF THE ABOVE SUBMISSIONS AND FURTHER SUBMISSIONS TH AT MAY BE PERMITTED BY THE TRIBUNAL TO BE MADE IN THE COURSE OF THE APPELLATE PROCEEDINGS, THE ASSESSMENT OF CAPITAL GAINS IN HIS CASE FOR THE ASSESSMENT YEAR 2005-06 BE HELD TO BE UNTENABLE AND CONTRARY TO THE PROVISIONS OF LAW AND THAT THE SAME MAY BE DIRECTED TO BE DELETED OTHERWISE IT AMOUNTS TO DOUBLE TAXATION AS THE ASSE SSEE HAS OFFERED THE CAPITAL GAIN IN SUBSEQUENT ASSESSMENT YEAR. 20. THE DR SUBMITTED THAT THE ASSESSING OFFICER WAS JUS TIFIED IN BRINGING TO TAX THE TRANSACTION RELATING TO THE DEV ELOPMENT AGREEMENT IN VIEW OF THE PROVISION OF SEC. 2(47) OF THE I.T. ACT. HE RELIED ON THE DECISION OF ITAT PUNE BENCH IN THE CASE OF TAHER AL IMOHAMMED POONAWALA V. ADDL. CIT [2009] 124 TTJ (PUNE) 387 WH EREIN THE TRIBUNAL OBSERVED AS UNDER: IT A NO. 449/HYD/2012 MRS. DURDANA KHATOON ================= 10 'WHERE OWNERS (ASSESSEES) HAD ENTERED INTO AN AGREEMENT FOR DEVELOPMENT OF PROPERTY AND CERTAIN RIGHTS WERE ASSIGNED TO DEVELOPER WHO IN TURN HAD M ADE SUBSTANTIAL PAYMENT AND, CONSEQUENTLY, ENTERED UPON PROPERTY AND CONSTRUCTED FLATS, FACT THAT LEGAL OWN ERSHIP CONTINUED WITH OWNERS TO BE TRANSFERRED TO DEVELOPE R AT A FUTURE DISTANT DATE REALLY WOULD NOT AFFECT APPLI CABILITY OF SECTION 2(47)(V) AND CAPITAL GAIN WOULD ARISE IN YEAR IN WHICH AGREEMENT FOR DEVELOPMENT OF PROPERTY WAS ENTERED INTO .... ' 21. THE LEARNED DR RELIED ON THE DECISION IN THE CASE O F DR. MAYA SHENOY V. ASSTT. CIT [2009] 124 TTJ (HYD.) 692 WHER EIN THE HON'BLE ITAT HYDERABAD OBSERVED AS UNDER: 'DEVELOPMENT AGREEMENT UNDER WHICH DEVELOPER WAS TO HAND OVER 45 PER CENT OF CONSTRUCTED AREA AS CONSIDERATION TO ASSESSEE COULD NOT MERELY AMOUNT T O GRANTING OF LICENCE TO BUILDER TO CARRY ON DEVELOPM ENT ACTIVITIES BUT WOULD BE A CASE OF TRANSFER UNDER SE CTION 2( 47).' THE ITAT AFTER ANALYSING THE ISSUE FURTHER HELD THA T 'IN THE INSTANT CASE, ON FACTS, THE ASSESSEE HAD, I N FACT, EXCHANGED HER PRESENT PROPERTY FOR CONSIDERATION IN KIND WHICH WAS IN THE NATURE OF 4-1/2 FLATS TO BE G IVEN TO HER BY THE DEVELOPER. THUS, IT WAS A CASE OF EXCHAN GE AS UNDERSTOOD IN CLAUSE (I) OF SECTION 2(47). THERE WA S NO FORCE IN THE ARGUMENT THAT THE HANDING OVER OF THE POSSESSION WAS NOT IN PURSUANCE OF PART PERFORMANCE OF THE CONTRACT. POSSESSION OF THE LAND BEING ONE OF TH E INTERESTS IN PROPERTY HAD BEEN TRANSFERRED TO THE DEVELOPER WHO ALSO WOULD BE ENJOYING THE USUFRUCT O F THE LAND. IF THE SHIELD OF SECTION 53A WAS AVAILABLE TO THE DEVELOPER, IT OBVIOUSLY MEANT THAT HANDING OVER OF THE POSSESSION WAS PURSUANT TO THE TRANSFER CONTEMPLATE D UNDER THE TRANSFER OF PROPERTY ACT AND HENCE UNDER CLAUSE (V) OF SECTION 2(47}. IN THE PRESENT CASE, T HIS WAS NOT A SALE TRANSACTION AS MONEY WAS NOT THE CONSIDERATION BUT SOME OTHER VALUABLE CONSIDERATION WAS PASSING TO THE ASSESSEE IN THE FORM OF 4-1/2 FL ATS. THEREFORE, THE TRANSFER IN THE PRESENT CASE WAS FOR CONSIDERATION AND IT WAS IMMATERIAL THAT THE CONSIDERATION MAY BE RECEIVED IN FUTURE. THEREFORE, THE DEVELOPMENT AGREEMENT IN THE PRESENT CASE HAD THE E FFECT OF TRANSFER AS CONTEMPLATED IN SECTION 2(47). (HEAD NOTE)' IT A NO. 449/HYD/2012 MRS. DURDANA KHATOON ================= 11 22. THE LEARNED DR SUBMITTED THAT THE CASE OF THE ASSES SEE IS IDENTICAL TO THAT OF DR. MAYA SHENOY (CITED SUPRA). ACCORDINGLY, THE ASSESSEE WAS LIABLE FOR CAPITAL GAINS IN RESPECT OF THE DEVELOPMENT AGREEMENT BY VIRTUE OF WHICH THE ASSESSEE WAS LIABL E TO GET 50% OF THE CONSTRUCTED AREA. 23. 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 GAINS IN R ESPECT OF THE LAND. WE HAVE ALSO GONE THROUGH THE VARIOUS CASE-LAW CITE D BY THE PARTIES AND CONSIDERED THE ADDITIONAL EVIDENCE FILED BY THE ASS ESSEE. ACCORDING TO AR WHICH WAS NOT TRANSFERRED BUT ONLY GIVEN FOR D EVELOPMENT. WE MAY REFER TO THE PROVISIONS OF S.2(47)(V) WHICH READS A S FOLLOWS:- 2 (47). (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 N ATURE REFERRED TO IN S. 53A OF THE TRANSFER OF PROPERTY AC T, 1882 (4 OF 1982) 24. THE IMPORTANCE OF THE WORD TRANSFER IS DUE TO THE REASON THAT UNDER THE CHARGING SECTION, VIZ. S.45, AND THE CAPI TAL GAIN IS TAXABLE ON TRANSFER OF A CAPITAL ASSET. PRECISELY, THIS SECT ION PRESCRIBES THAT ANY PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAP ITAL ASSET EFFECTED IN THE PREVIOUS YEAR SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD CAPITAL GAINS AND SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE. 25. THUS THE FUNDAMENTAL FEATURES WHICH DETERMINE THE T AXABILITY OF CAPITAL GAIN, ARE THAT THE GAIN OUGHT TO BE FROM TH E TRANSFER OF A CAPITAL ASSET. THIS SECTION HAS A LARGE SCOPE OF ITS OPERAT ION 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 TO TAL PROFITS MAY ACTUALLY BE RECEIVED IN ANY OTHER YEAR, BUT FOR THE PURPOSES OF S. 45, THE IT A NO. 449/HYD/2012 MRS. DURDANA KHATOON ================= 12 GAIN SHALL BE THE DEEMED INCOME OF THE YEAR OF TRA NSFER OF THE CAPITAL ASSET. IT SHALL NOT BE OUT OF CONTEXT, AT THIS JUNC TURE, TO MENTION AN OBSERVATION OF THE HONBLE AUTHORITY OF ADVANCE RUL INGS IN THE CASE OF JASBIR SINGH SARKARIA (164 TAXMANN 108) (AAR, NEW D ELHI), THAT THE EXPRESSION USED IN SEC. 45 IS ARISING, WHICH CANN OT BE EQUATED WITH THE EXPRESSION RECEIVED OR EVEN WITH THE EXPRESSI ON ACCRUED AS BEING USED IN THE STATUTE. THE POINT WHICH DESERVES NOTICE IS THAT THE AMOUNT OR THE CONSIDERATION SETTLED MAY NOT BE FULL Y RECEIVED OR MAY NOT TECHNICALLY ACCRUE BUT IF IT ARISES FROM THE AG REEMENT IN QUESTION, THEN THE DEEMING PROVISIONS SHALL COME INTO OPERATI ON. ANOTHER POINT IS ALSO EQUALLY NOTICEABLE THAT BY THE PRESENCE OF THE DEEMING PROVISION, THE INCOME ON ACCOUNT OF AROUSAL OF THE CAPITAL GAI N SHOULD BE CHARGED TO TAX IN THE SAME PREVIOUS YEAR IN WHICH THE TRANS FER WAS EFFECTED OR DEEMED TO HAVE TAKEN PLACE. DUE TO THE PRESENCE OF THIS STATUTORY FICTION, THE ACTUAL YEAR IN WHICH THE ENTIRE SALE C ONSIDERATION 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 HAN DING OVER OF THE POSSESSION OR BY ALLOWING THE ENTRY INTO THE PREMIS ES OR BY MAKING THE CONSTRUCTIVE PRESENCE OF THE VENDEE NEVERTHELESS DU LY SUPPORTED BY A LEGAL DOCUMENT. 26. BUT THE ISSUE DO NOT GET SETTLED ONLY BY THE INTERP RETATION OF S. 45 AND S. 2(47)(V) BECAUSE THE DEFINITION OF TRANSFER NOT MERELY PRESCRIBES ALLOWING OF POSSESSION BUT TO BE RETAINE D IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED IN S. 53A OF THE TRANSFER OF PROPERTY ACT. THEREFORE, IT IS FURTHER REQUISITE TO DEAL WITH THE RELEVANT SECTION CONTAINED IN TRANSFER OF PROPE RTY ACT. TRANSFER OF PROPERTY ACT CONTAINS S. 53A UNDER THE HEADING PAR T PERFORMANCE AND, FOR DECIDING THE CASE IN HAND, IT IS NECESSARY TO QUOTE THE IMPUGNED SECTION VERBATIM AS FOLLOWS: WHERE ANY PERSON CONTRACTS TO TRANSFER FOR CONSIDERATION ANY IMMOVABLE PROPERTY BY WRITING SIGNED BY HIM OR ON HIS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTITUTE THE TRANSFER CAN BE ASCERTA INED WITH REASONABLE CERTAINTY, IT A NO. 449/HYD/2012 MRS. DURDANA KHATOON ================= 13 AND THE TRANSFEREE HAS, IN PART PERFORMANCE OF 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, AND THE 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 INSTRUMENT OF TRANSFER, THAT THE TRANSFER HAS NOT BEEN COMPLETED IN THE MANNER PRESCRIBED THEREFOR BY THE LAW FOR THE TIME BEING I N FORCE, THE TRANSFER OR ANY PERSON CLAIMING UNDER HIM SHALL BE DEBARRED FROM ENFORCING AGAINST THE TRANSFEREE AND PERSONS CLAIMING UNDER HIM ANY RIGHT IN RESPECT OF THE PROPERTY OF WHICH THE TRANSFEREE HAS TAKEN OR CONTI NUED IN POSSESSION, OTHER THAN A RIGHT EXPRESSLY PROVIDE D BY THE TERMS OF THE CONTRACT: PROVIDED THAT NOTHING IN THIS SECTION SHALL EFFECT T HE RIGHTS OF A TRANSFEREE FOR CONSIDERATION WHO HAS NO NOTICE OF THE CONTRACT OR OF THE PART PERFORMANCE THEREOF. 27. THE DOCTRINE OF PART PERFORMANCE IS UNDOUBTEDLY B ASED UPON THE DOCTRINE OF EQUITY. IF ONE PARTY HAS PERFORMED HIS PART OF DUTY THEN EQUITY DEMANDS THAT THE OTHER PARTY SHALL ALSO PERF ORM 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. 28. IN THE LIGHT OF THE INGREDIENTS OF THIS SECTION, WH ICH HAS BEEN ARGUED FROM BOTH THE SIDES, NOW WE PROCEED TO EXAMI NE THE FACTUAL MATRIX OF THE CASE IN HAND, HEREIN BELOW: (A) STARTING WORDS OF S. 53A ARE WHERE ANY PERSON CONTRACTS WHICH MEANS JUST THE EXISTENCE OF A CONTRACT. THE A SSESSEE IS THE PERSON WHO HAS ENTERED INTO A CONTRACT WITH THE D EVELOPER VIDE AGREEMENT DATED 12.4.2006. IT A NO. 449/HYD/2012 MRS. DURDANA KHATOON ================= 14 (B) THIS SECTIONS SAYS TO TRANSFER 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 S. 45 AND S . 2(47)(V) OF IT ACT. IT IS PERTINENT TO CLARIFY THAT ONE MUST NOT M ISTAKE TO IDENTIFY THE ISSUE OF CAPITAL GAIN WITH THE TERM T RANSFER AS DEFINED IN S. 54 OF TRANSFER OF PROPERTY ACT. AT TH E COST OF ELABORATION, WE MAY LIKE TO ADD THAT IN THE PAST TH ERE WAS A LONG LINE OF PRONOUNCEMENTS; WHILE DECIDING INCOME TAX C ASES, THAT UNLESS AND UNTIL A SALE DEED IS EXECUTED AND THAT T OO IT IS REGISTERED, TRANSFER CANNOT BE SAID TO HAVE BEEN EF FECTED. THE CONSEQUENCE OF SAID CATENA OF DECISIONS WAS THAT NO CAPITAL GAIN TAX WAS DIRECTED TO BE LEVIED SO LONG AS THE TRANS FER HAS NO TAKEN PLACE AS PER THE GENERALLY ACCEPTED CONNOTATI ON OF THE TERM UNDER TRANSFER OF PROPERTY ACT. THE RESULTANT POSIT ION WAS THAT THE LEVY OF CAPITAL GAIN 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 REFERR ED ARE NOT REQUIRED TO BE REGISTERED UNDER REGISTRATION ACT. S UCH ARRANGEMENT DOES NOT INCLUDE TRANSFER OF CERTAIN RI GHTS 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 INTERPRE TING THIS TERM FOR TAX PURPOSE. ON THE FACTS OF THIS CASE, THE DEV ELOPER HAS GOT BUNDLE OF RIGHTS AND THEREUPON ENTERED INTO THE PRO PERTY. THEREAFTER, WE HAVE TO SEE WHAT HAS HAPPENED AND WH AT STEPS THE TRANSFEREE HAS TAKEN TO DISCHARGE THE OBLIGATIO N ON HIS PART. IF TRANSFEREE HAS TAKEN ANY STEPS TO CONSTRUCT THE FLATS, UNDISPUTEDLY THEN, UNDER THE PROVISION OF INCOME TA X ACT A TRANSFER HAS DEFINITELY TAKEN PLACE. (C ) THE EXISTENCE OF THE CONSIDERATION IS THE ES SENCE OF THE CONTRACT. IN THIS CASE THE AMOUNT OF CONSIDERATION HAS TO BE PAID IT A NO. 449/HYD/2012 MRS. DURDANA KHATOON ================= 15 TO THE ASSESSEE IN THE FORM OF CASH AS WELL AS IN K IND I.E., THE FLATS TO BE CONSTRUCTED BY THE DEVELOPERS TO BE HANDED OV ER TO THE OWNERS. (D) NEXT IS THE IMPORTANT PHRASE I.E., TERMS NECES SARY 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 TWO CERTAINTI ES; ONE IS PASSING OF SUBSTANTIAL CONSIDERATION AND SECOND IS PASSING OVER OF POSSESSION. AS FAR AS THE PAYMENT OF CONSIDERATI ON IS CONCERNED, WE HAVE ALREADY NOTICED THAT IT IS IN TH E FORM OF BOTH CASH AS WELL AS KIND AND PAYMENT MADE TO THE ASSESS EE HAS BEEN BROUGHT ON RECORD BY THE LOWER AUTHORITIES AND THE SAME WAS EXAMINED AND CONSIDERED BY THE CIT(A). THERE WAS A PAYMENT OF RS. 50 LAKHS BY CHEQUE ON 19.7.2004 ITSELF. FUR THER, THE BALANCE OF RS. 150 LAKHS WAS TO BE PAID BY 3 EQUAL INSTALMENTS. (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 I N FURTHERANCE OF THE CONTRACT. RETENTION OF POSSESSI ON IS ONE KIND OF THE FACET OF PART PERFORMANCE OF CONTRACT. THE A GREEMENT IN QUESTION CAN BE SAID TO BE A DISTINCT TRANSACTION T HAT HAS GIVEN RISE TO THE EVENT OF ALLOWING THE CONTRACTOR TO ENT ER INTO THE PROPERTY. WHAT IS CONTEMPLATED BY S. 2(47)(V) IS A TRANSACTION WHICH HAS DIRECT AND IMMEDIATE BEARING ON ALLOWING THE POSSESSION TO BE TAKEN IN PART PERFORMANCE. IT IS A T THAT POINT OF TIME THAT THE DEEMED TRANSFER TAKES PLACE. ACCORDIN G TO US THE POSSESSION AS CONTEMPLATED IN CL. (V) NEED NOT NECE SSARILY BE SOLE AND EXCLUSIVE POSSESSION, SO LONG AS THE TRANSFEREE IS ENABLED TO IT A NO. 449/HYD/2012 MRS. DURDANA KHATOON ================= 16 EXERCISE GENERAL CONTROL OVER THE PROPERTY AND TO M AKE USE OF IT FOR THE INTENDED PURPOSE. THE MERE FACT THAT THE AS SESSEE OWNER HAS ALSO THE RIGHT TO ENTER THE PROPERTY TO OVERSEE THE DEVELOPMENT WORK OR TO ENSURE PERFORMANCE OF THE TE RMS OF THE AGREEMENT, DID NOT RESTRICT THE RIGHTS OF THE DEVEL OPER OR DID NOT INTRODUCE ANY INCOMPATIBILITY. IN A SITUATION LIKE THIS WHEN THERE IS A CONCURRENT POSSESSION OF BOTH THE PARTIES, EVE N THEN CL. (V) HAS ITS FULL ROLE TO PLAY. THERE IS NO WARRANT TO P OSTPONE THE OPERATION OF CL.(V) TO THAT POINT OF TIME WHEN THE CONCURRENT POSSESSION WOULD BECOME EXCLUSIVE POSSESSION OF THE DEVELOPER. ANY OTHER INTERPRETATION I.E., POSSESSION MEANS EXC LUSIVE POSSESSION, SHALL DEFEAT THE PURPOSE OF AMENDMENT. THE POSSIBILITY OF STAGGERING OF PAYMENT LINKED WITH PO SSESSION IS RULED OUT BY THIS AMENDMENT SO THAT THE TAXABILITY OF GAIN MAY NOT BE SHIFTED TO AN UNCERTAIN DISTANT DATE. WE HA VE NO HESITATION IN SAYING THAT EVEN IF SOME PART OF CONS IDERATION REMAINS TO BE PAID, THE TRANSACTION SHALL NOT AFFEC T THE LIABILITY OF CAPITAL GAINS TAX SO AS TO POSTPONE THE SAME INDEFI NITELY. WHAT IS MEANT IN CLAUSE (V) IS THE TRANSFER WHICH INVOLVE S ALLOWING THE POSSESSION SO AS TO ALLOW DEVELOPER TO UNDERTAKE DE VELOPMENT WORK ON THE SITE. IT IS A GENERAL CONTROL OVER THE PROPERTY IN PART PERFORMANCE OF THE CONTRACT. THE DATE OF THAT TRANS ACTION DETERMINES THE DATE OF TRANSFER. TO OUR UNDERSTANDI NG OF THE LANGUAGE OF THE ACT, IT IS ENOUGH IF THE TRANSFEREE HAS, BY VIRTUE OF THE IMPUGNED TRANSACTION, HAS 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 TRANSF EREE 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 W ILLINGNESS IS TO BE JUDGED BY THE SERIES OF ACTIONS OF THE TRANSF EREE. THE TRANSFEREES SURVEY THE LAND AND TO ATTRACT PURCHASE S PUT UP IT A NO. 449/HYD/2012 MRS. DURDANA KHATOON ================= 17 HOARDINGS PLUS SALES OFFICE AND CARRY OUT SITE DEVE LOPMENT WORK. LANDSCAPING, SALES PROMOTION, EXECUTION OF CONSTRUC TION AND COMPLETION OF PROJECT ARE ALL INCIDENTAL TO DEMONST RATE THE WILLINGNESS OF THE TRANSFEREE. ON ONE HAND, THE JDA GRANTS BUNDLE OF POSSESSOR RIGHTS TO THE DEVELOPER SIMULTA NEOUSLY AND ON THE OTHER HAND TRANSFEREES GESTURE OF PAYMENT O F CONSIDERATION COUPLED WITH DEVELOPMENT WORK CAN BE SAID TO BE A POSITIVE STEP TOWARDS WILLINGNESS TO FULFIL THE C OMMITMENT. FACTS OF THIS CASE THUS SUGGEST THAT THE DEVELOPER HAD NEVER INTENDED TO WALK-OUT OF THE PROJECT. HOWEVER, WHETH ER THE DEVELOPER HAS PERFORMED ITS PART OF THE CONTRACT BY TAKING STEPS TO CONSTRUCT THE FLATS OR NOT HAS BEEN VERIFIED BY THE LOWER AUTHORITIES AND THE POSSESSION WAS WITH DEVELOPER A S PER DELIVERY NOTE DATED 7.3.2005. (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 LIE U OF THE RIGHT GIVEN TO THE DEVELOPER THERE UNDER, THE ASSESSEE WA S TO RECEIVE 50% OF THE CONSTRUCTED AREA OF ALL THE FLOORS. FURT HER, EVEN THE VACANT AND PEACEFUL POSSESSION OF THE PROPERTY HAD BEEN DELIVERED TO THE DEVELOPER ON 7.3.2005, AS EVIDENCE D BY THE 'DELIVERY NOTE' OF THE SAME DATE. UNDER THE CIRCUMS TANCES, THERE WAS INDEED AN EXCHANGE OF PROPERTY WHICH AMOU NTED TO A TRANSFER WITHIN THE MEANING OF SEC. 2(47)(V) OF THE ACT AND THE GAIN RESULTING FROM SUCH TRANSFER WAS INDEED TAXABL E IN THE YEAR IN WHICH THE DEVELOPMENT AGREEMENT GIVING VACANT AN D PEACEFUL POSSESSION OF THE PROPERTY TO THE DEVELOPER WAS ENT ERED INTO BY THE ASSESSEE, AS HELD BY THE HON'BLE BOMBAY HIGH CO URT IN THE CASE OF CHATURBUJ DWARAKADAS KAPADIA VS. CIT (SUPRA ) AND IN THE SEVERAL DECISIONS OF THE JURISDICTIONAL ITAT, H YDERABAD, INCLUDING THAT IN THE CASE OF DR. MAYA SHENOY, SECU NDERABAD (SUPRA). SINCE THE DEVELOPMENT AGREEMENT IN THE ASS ESSEE'S CASE HAS BEEN EXECUTED ON 2.8.2004 AND THE VACANT AND PE ACEFUL IT A NO. 449/HYD/2012 MRS. DURDANA KHATOON ================= 18 POSSESSION ALSO WAS GIVEN IN 7.3.2005 ITSELF, SUCH GAINS WERE INDEED TO BE TAXED IN THE F.Y. 2004-05, RELEVANT TO THE A.Y. 2005-06. (H) AS REGARDS THE CONTENTION OF THE ASSESSEE'S REP RESENTATIVE THAT THE SAID DECISIONS ARE NOT APPLICABLE TO THE A SSESSEE'S CASE, IT IS CLEAR THAT NO REASONS FOR SUCH VIEW COULD BE EVE R FURNISHED BY HIM. SIMILARLY, THERE IS NO MERIT IN THE CONTENTION THAT THE DEVELOPMENT AGREEMENT COULD NOT HAVE COME INTO FORC E UNLESS AND UNTIL THE BUILDER DEPOSITED RS. 2 CRORES. AS D ISCUSSED IN THE ASSESSMENT ORDER, THE ASSESSEE HAD INDEED BEEN PAID RS. 50 LAKHS BY CHEQUES DATED 19.7.2004 ITSELF. FURTHER, THE ASSESSEE WAS TO RECEIVE 3 INSTALMENTS OF RS 50 LAKHS EACH AT DIFFERENT STAGES. UNDER THE CIRCUMSTANCES, IT CANNOT BE DISP UTED 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, AS H ELD BY THE SUPREME COURT IN THE CASE REPORTED IN AIR 1955 S.C. 376. ACCORDINGLY, THERE IS NO MERIT IN SUCH CONTENTION O F THE REPRESENTATIVE OF THE ASSESSEE. AS REGARDS THE ARGU MENT THAT THE AGREEMENT UNDER REFERENCE HAD BEEN EXECUTED ONLY FO R THE PURPOSE OF GETTING PERMISSIONS FROM VARIOUS DEPARTM ENT FOR CONSTRUCTION, THE VERY TERMS OF THE AGREEMENT BELIE ANY SUCH CLAIM AS THE DEVELOPMENT AGREEMENT GIVES ABSOLUTE R IGHTS TO THE BUILDERS, INCLUDING POSSESSION, DULY SPECIFIED THE CONSIDERATION TO BE RECEIVED BY THE ASSESSEE ON SUCH EXCHANGE. AS REGARDS THE CASE LAWS CITED BY THE AR, EVIDENTLY THOSE STAND ON A SET OF DIFFERENT FACTS AND HENCE CANNOT BE CONSIDERED IN T HE FACTS OF THE PRESENT CASE. 29. 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 PAYM ENT AND CONSEQUENTLY ENTERED INTO THE PROPERTY AND THEREAFT ER THE TRANSFEREE HAS TAKEN STEPS IN RELATION TO CONSTRUCTION OF THE BUILDING, THEN IT IS TO IT A NO. 449/HYD/2012 MRS. DURDANA KHATOON ================= 19 BE CONSIDERED AS TRANSFER U/S. 2(47)(V) OF THE I.T. ACT. THE FACT THAT THE LEGAL OWNERSHIP CONTINUED WITH THE OWNERS TO BE TRA NSFERRED TO THE DEVELOPER AT A FUTURE DISTANT DATE REALLY DOES NOT AFFECT THE APPLICABILITY OF S. 2(47)(V) AS PER THE REASONS ASSIGNED HEREINAB OVE. THE TRANSFEREE WAS UNDISPUTEDLY WILLING TO PERFORM ITS PART OF THE CONTRACT, IN THIS CIRCUMSTANCE WE HAVE TO HOLD THAT THERE IS TRANSFER U/S. 2(47)(V) OF THE ACT. THUS, THE POSSESSION AND CONTROL OF THE PROPER TY IS ALREADY VESTED WITH THE TRANSFEREE AND THE IMPUGNED DEVELOPMENT AG REEMENT HAS NOT BEEN DULY CANCELLED AND IT IS STILL IN OPERATION, I T HAS TO BE DECIDED THAT THERE IS A TRANSFER U/S. 2(47)(V) OF THE ACT. WE HA VE TO SEE THE REAL INTENTION OF THE PARTIES. AS PER THE WELL KNOWN CAN NON OF CONSTRUCTION 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 AGAI NST THE OBVIOUS AND ORDINARY MEANING OF THE WORDS USED. ENTERING INTO T HE PROPERTY AND HANDING OVER OF THE POSSESSION WAS INSTANTANEOUS TH US ENTIRE CONSPECTUS OF THE CASE HAS ATTRACTED THE PROVISION OF S. 45 OF THE ACT ON FULFILMENT OF CONDITIONS LAID DOWN IN SECTION 53A O F THE TRANSFER OF PROPERTY ACT. IN OUR OPINION, THE REAL INTENTION OF THE PARTIES HEREIN IS TO BE SEEN. 30. ACCORDINGLY, WE DECIDE THE ABOVE ISSUE RELATING TO TRANSFER OF PROPERTY U/S. 2(47)(V) OF THE IT ACT IN FAVOUR OF T HE DEPARTMENT. WE ALSO HOLD THAT SUBSECTION (47) OF S. 2 WAS AMENDED BY THE FINANCE ACT, 1987 W.E.F. 1ST APRIL, 1988 BY INSERTING NEW SUB-CL S. (V) AND (VI) THEREUNDER. THESE TWO NEW SUB-CLAUSES PROVIDE THAT 'TRANSFER' INCLUDES (I) ANY TRANSACTION WHICH ALLOWS POSSESSION TO BE R ETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN S. 53A OF THE TRANSFER OF PROPERTY ACT; AND (II) ANY TRANSACTION ENTERED INTO IN ANY MANNER WHICH HAS THE EFFECT OF TRANSFERRING OR ENAB LING THE ENJOYMENT OF ANY IMMOVABLE PROPERTY. THEREFORE, UNDER THESE T WO SUB-CLAUSES, THE CAPITAL GAIN WOULD BE TAXABLE IN THE YEAR IN WHICH SUCH TRANSACTIONS ARE IT A NO. 449/HYD/2012 MRS. DURDANA KHATOON ================= 20 ENTERED INTO EVEN IF THE TRANSFER OF THE IMMOVABLE PROPERTY IS NOT EFFECTIVE OR COMPLETE UNDER THE GENERAL LAW. THE AS SESSEE ENTERED INTO AN AGREEMENT WITH THE BUILDER/DEVELOPER FOR DEVELOP MENT OF THE IMPUGNED LAND AND CONSTRUCTION OF FLATS THEREON. AL SO, THE ASSESSEE SIGNED A DELIVERY NOTE DATED 7.3.2005 IN FAVOUR OF THE BUILDER/ DEVELOPER AND GAVE POSSESSION OF THE PROPERTY TO TH E BUILDER/DEVELOPER. FURTHER, THE ASSESSEE ACTED ON THE IMPUGNED AGREEME NT BY ACCEPTING FROM THE BUILDER/DEVELOPER PAYMENTS BY CHEQUES ON D IFFERENT DATES IN THE FINANCIAL YEAR 2004-05. IN VIEW OF THE FACTS A ND CIRCUMSTANCES DISCUSSED ABOVE, ALL THE CONDITIONS OF SUB-CL. (V) OF S. 2(47) ARE SATISFIED IN THIS CASE AND THEREFORE, IT HAS TO BE INFERRED T HAT A 'TRANSFER' DID TAKE PLACE WITHIN THE MEANING OF S. 2(47)(V). THE ARGUME NT THAT THE DEEDS IN RESPECT OF THE SALE OF FLATS WERE NOT REGISTERED/EX ECUTED IS NOT A RELEVANT CONSIDERATION SO FAR AS PROVISIONS OF SUB-CL. (V) O F S. 2(47) ARE CONCERNED. THE COMPLETION OF 'TRANSFER' OF AN IMMOV ABLE PROPERTY AS PER THE GENERAL LAW IS NOT A REQUIREMENT FOR THE AP PLICABILITY OF THE PROVISIONS OF THE SUB CL. (V) OF S. 2(47). THUS, THIS GROUND IS DISMISSED. 31. IN THE RESULT, ASSESSEE'S APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH MARCH, 2013. SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 15 TH MARCH, 2013 TPRAO COPY FORWARDED TO: 1. MRS. DURDANA KHATOON, C/O. M/S. P. MURALI & CO., CHA RTERED ACCOUNTANTS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD. 2. THE ASST. CIT, CIRCLE - 6(1), HYDERABAD. 3. THE CIT(A) - IV, HYDERABAD. 4. THE CIT - III, HYDERABAD. 5 . THE DR B BENCH, ITAT, HYDERABAD.