A.B.V.S. Prakash, Hyderabad V. ACIT, Central Circle-1, Hyderabad

ITA 462/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74598 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 05-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: V SHIV KUMAR
• Keywords: Capital asset; Search and seizure
• Section: 54F; 153A; 32; 132

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. 462/HYD/2013 ASSESSMENT YEAR 2008-09 SRI A.B.V.S. PRAKASH HYDERABAD PAN: AFFPA8139Q VS. THE ASST. CIT CENTRAL CIRCLE-1 HYDERABAD [APPELLANT] [RESPONDENT] APPELLANT BY: SRI V. SHIV KUMAR RESPONDENT BY: SRI SOLGY JOSE T. KOTTARAM DATE OF HEARING: 27.02.2014 DATE OF PRONOUNCEMENT: 27.02.2014 ORDER PER CHANDRA POOJARI, AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-I, HYDERABAD DATED 19.12.2012 F OR ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED CIT(A) IS AGAINST LAW, WEI GHT OF EVIDENCE AND PROBABILITIES OF THE CASE. 2. THE LEARNED CIT(A) ERRED IN SUSTAINING THE ASSESSME NT OF THE ASSESSING OFFICER WHO HELD THAT AS PER THE DEVE LOPMENT AGREEMENT DATED 13-11-2007 ENTERED INTO BY THE ASSE SSEE, TRANSFER OF CAPITAL ASSET BEING LAND OWNED BY THE A SSESSEE OCCURRED IN THE PREVIOUS YEAR RELEVANT TO ASST. YEA R 2008- 09. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE STIPULATIONS AND COVENANTS IN VARIOUS CLAUSES OF TH E DEVELOPMENT AGREEMENT CLEARLY SHOW THAT PARTIES TO THE AGREEMENT DID NOT CONTEMPLATE HANDING OVER POSSESSI ON OF ITA NO. 462/HYD/2013 SRI A.B.V.S. PRAKASH ===================== 2 THE IMMOVABLE PROPERTY SOUGHT TO BE DEVELOPED NOR W AS POSSESSION HANDED OVER IN FACT DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2008-09 AND CONSEQUENTLY, HE ERRED IN SUSTAINING ASSESSMENT OF SHORT TERM CAPITAL GAIN IN THE CASE OF THE ASSESSEE. 4. WITHOUT PREJUDICE TO THE GROUNDS TAKEN ABOVE, THE L EARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE SEQUENCE OF EVENTS AND THE CONDUCT OF THE ASSESSEE IN RELATION TO THE IMPUGNED LANDED PROPERTY LEAD TO THE CONCLUSION THA T THE ASSESSEE AND SRI A. SRINIVASA RAO, THE OWNER OF THE ADJOINING PLOT OF LAND HAVE ACQUIRED THE PLOTS WITH A VIEW TO EXPLOIT THE SAME FOR GAINING PROFITS AND ACCORDINGL Y THE CIT(A) OUGHT TO HAVE DIRECTED THAT NO INCOME IS ASS ESSABLE IN THE ASSESSEE'S HANDS FOR THE A.Y. 2008-09 BECAUS E THE ASSESSEE DID NOT DERIVE OR RECEIVE ANY INCOME FROM THE SAID PROPERTY IN THE SAID YEAR. 5. FOR THE ABOVE GROUNDS AND SUCH OTHER GROUNDS THAT M AY BE URGED AT THE TIME OF HEARING, THE APPELLANT PRAYS T HAT THE APPEAL BE ALLOWED. THE APPELLANT CRAVES LEAVE TO AD D TO, AMEND OR MODIFY THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF THE APPEAL, IF IT IS C ONSIDERED NECESSARY. 6. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD F ILED HIS ORIGINAL RETURN OF INCOME ON 29.9.2008 SHOWING AN I NCOME OF RS. 7,94,909. A SEARCH AND SEIZURE OPERATION U/S. 1 32 OF THE ACT WAS CONDUCTED IN THE CASES OF PRATIMA EDUCATION AL SOCIETY GROUP ON 10.9.2009, COVERING THE TRUSTEES AND RELAT ED PERSONS ALSO. THE ASSESSEE IS ALSO ONE OF THE PERS ONS RELATED TO THE GROUP IN WHOSE CASE THE SEARCH WAS CONDUCTED . THEREAFTER, A NOTICE U/S. 153A OF THE ACT WAS ISSUED ON 17.2.2011 FOR THE A.YS. 2004-05 TO 2009-10, IN RESP ONSE TO WHICH THE ASSESSEE FILED A LETTER DATED 2.9.2011, S TATING THAT ITA NO. 462/HYD/2013 SRI A.B.V.S. PRAKASH ===================== 3 THE RETURNS ORIGINALLY FILED MAY BE TREATED AS THE RETURNS FILED IN RESPONSE TO THE NOTICE. 7. THE ASSESSEE IS DERIVING INCOME BY WAY OF SALARY FR OM M/S. PACT SECURITIES AND FINANCIAL SERVICES. DURING THE COURSE OF SEARCH OPERATION AT HIS RESIDENCE ON 10-9-2009, A COPY OF A DEVELOPMENT AGREEMENT WAS SEIZED (ANNEXURE A/ABVSP/RES/01 - PAGES 47 TO 68). AS PER THE SAME, T HE ASSESSEE HAD ENTERED INTO A DEVELOPMENT AGREEMENT W ITH A DEVELOPER, SMT. R. MADHAVI, ON 13-11-2007 FOR THE DEVELOPMENT OF LAND AT SURVEY NO. 96 TO 102, PUPPAL GUDA, RAJENDRANAGAR MANDAL, RANGA REDDY DISTRICTS, ADMEAS URING 238 SQ. YARDS, PURCHASED FOR RS. 5,21,320/- (INCLUD ING REGISTRATION COST) ON 4-9-2006. AS PER THE SAID AG REEMENT, THE ASSESSEE, ALONG WITH ONE MORE PERSON, WHO HELD THE ADJOINING THE LANDS, HAD GRANTED RIGHTS TO THE DEVELOPER FOR MAKING A RESIDENTIAL COMPLEX THEREON. IN CONSIDERATION OF S UCH RIGHTS, THE DEVELOPER HAD AGREED TO GIVE AS CONSIDERATION 2 5% OF THE FULLY DEVELOPED BUILT UP SPACE IN THE FORM OF RESID ENTIAL UNITS. ACCORDINGLY, FLAT NOS. 101, 203 AND 402 WERE ALLOCATED TO THE ASSESSEE'S SHARE, ALONG WITH THE TERRACE RIG HTS. THE ASSESSING OFFICER OPINED THAT THE CAPITAL GAIN ARIS ING OUT OF SUCH TRANSFER WAS LIABLE TO BE TAXED AS SHORT TERM CAPITAL GAIN. THOUGH THE ASSESSEE DID NOT FILE ANY REPLY TO THE NOTICE ITA NO. 462/HYD/2013 SRI A.B.V.S. PRAKASH ===================== 4 DATED 9-8-2011 IN THIS REGARD, HE OBSERVED THAT DUR ING THE COURSE OF SEARCH, THE ASSESSEE HAD SUBMITTED A COMP UTATION OF CAPITAL GAINS AT RS. 22,04,444/- FOR THE ASSESSM ENT YEAR, CLAIMING DEDUCTION OF RS. 11,58,500/- U/S. 54F OF IN COME-TAX ACT, 1961. 8. THE ASSESSING OFFICER OBSERVED THAT IT IS A WELL ESTABLISHED LAW THAT CAPITAL GAIN ARISES IN THE YEA R IN WHICH POSSESSION OF THE PROPERTY WAS HANDED OVER. HE OPIN ED THAT SINCE THE DEVELOPMENT AGREEMENT HAD BEEN ENTERED IN TO THE ASSESSMENT YEAR 2008-09, THE DEEMED TRANSFER TOOK P LACE ON THAT DATE. HE ALSO NOTED THAT AS PER THE SAID AGREE MENT, THE ASSESSEE HAD HANDED OVER THE VACANT AND PEACEFUL PO SSESSION OF THE ENTIRE LAND TO EXECUTE THE PROJECT, AND THER EFORE AS PER SEC. 2(47)(V) OF THE ACT, SUCH AGREEMENT CONSTITUTE D A TRANSFER. THE ASSESSING OFFICER ALSO NOTED THAT AS PER SEVERAL JUDICIAL PRONOUNCEMENTS, TRANSACTION ALLOWING POSSE SSION CONSTITUTES A TRANSFER WITHIN THE MEANING OF THE SA ID SECTION AND THAT ANY TRANSACTION INVOLVING A TRANSFER OF TI TLE IN FUTURE OR EXCHANGE OF A PROPERTY TO BE PUT UP IN FUTURE, N ECESSARILY CONSTITUTES A TRANSFER UNDER THE SAID SECTION. RELI ANCE IN THIS REGARD WAS PLACED ON THE DECISION OF THE HON'BLE JURISDICTIONAL INCOME-TAX APPELLATE TRIBUNAL IN THE CASE OF SMT. SHANTHA VIDYASAGAR ANNAM VS. ITO (ITA NO. ITA NO. 462/HYD/2013 SRI A.B.V.S. PRAKASH ===================== 5 885/HYD/2003). THE ASSESSING OFFICER ALSO REFERRED TO THE DECISION IN THE CASE OF DR. MAYA SHENOY VS. ACIT (266/HYD/2005). HE NOTED THAT THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF ROHTAK MILLS (138 ITR 195) HAV E OBSERVED THAT ALL THAT IS NECESSARY IS THAT BY THE END OF TH E PREVIOUS YEAR IN QUESTION, THE ASSESSEE MUST HAVE RECEIVED O R BECOME ENTITLED TO RECEIVE THE CONSIDERATION. HE NOTED TH AT AS PER THE HON'BLE INCOME-TAX APPELLATE TRIBUNAL, IF THE DEVELOPMENT AGREEMENT STIPULATES THAT THE LAND IS T RANSFERRED TO THE DEVELOPER ON THE DATE OF AGREEMENT, CAPITAL GAINS WILL BE LEVIABLE IN THE FINANCIAL YEAR TO WHICH THE DATE OF DEVELOPMENT AGREEMENT PERTAINS. ACCORDINGLY, THE SH ORT TERM CAPITAL GAIN WAS TAXED IN THE ASSESSMENT YEAR 2008-09 AND NOT IN THE ASSESSMENT YEAR 2010-11, AS ADMITTED BY THE ASSESSEE. THE ASSESSING OFFICER ALSO DID NOT GRANT THE BENEFIT OF DEDUCTION U/S. 54F, AS IT WAS A CASE OF SHORT TER M CAPITAL GAIN. ON APPEAL, THE CIT(A) CONFIRMED ORDER OF THE AO. TH E PRESENT APPEAL HAS BEEN FILED AGAINST THE ORDER OF THE CIT(A). 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE HAVE CAREFULLY GONE THROUGH THE IMPUGNED JOINT DEVELOPMENT AGREEMENT DATED 13.11.20 07 ENTERED BY THE ASSESSEE WITH DEVELOPER. ON PERUSAL OF VARIOUS CLAUSES OF THE SAID AGREEMENT, WE FIND THAT THERE IS ITA NO. 462/HYD/2013 SRI A.B.V.S. PRAKASH ===================== 6 NO POSSESSION HANDED OVER TO THE DEVELOPER AND ALSO KEPT THE POSSESSION WITH THE ASSESSEE HIMSELF AND ONLY FOR T HE LIMITED PURPOSE OF CARRYING ON CONSTRUCTION IN THE SCHEDULE D PROPERTY BY THE DEVELOPER, PERMISSION WAS GIVEN TO THE DEVELOPER TO ENTER THE PROPERTY. IT CANNOT BE SAID THAT ABSOLUTE POSSESSION OF THE PROPERTY WAS GIVEN TO TH E DEVELOPER, IN OTHER WORDS, ONLY SYMBOLIC POSSESSION HAS BEEN GIVEN TO THE DEVELOPER. FURTHER, THE ASSESSEE HAS NOT RECEIVED ANY CONSIDERATION WHATSOEVER VIDE THE JOIN T DEVELOPMENT AGREEMENT. BEING SO, IT CANNOT BE SAI D THAT THERE IS A TRANSFER IN TERMS OF SECTION 2(47)(V) OF THE ACT AND THE JUDGEMENT OF BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA VS. CIT (260 ITR 491) (BOM) WHEREIN HELD THAT IN CASE OF DEVELOPMENT AGREEMENT, IF THE CONTRACT, READ AS A WHOLE INDICATES PASSING OF OR T RANSFERRING OF COMPLETE CONTROL OVER THE PROPERTY IN FAVOUR OF THE DEVELOPER, THEN DATE OF THE CONTRACT WOULD BE RELEV ANT TO DECIDE THE YEAR OF CHARGEABILITY OF CAPITAL GAIN AN D SUBSTANTIAL PERFORMANCE OF THE CONTRACT WOULD BE IR RELEVANT, CANNOT BE APPLIED TO THIS CASE. 10. MORE SO, THE CO-ORDINATE BENCH IN THE CASE OF MRS. K. RADHIKA VS. DCIT (47 SOT 180) (HYD) (UR) HELD AS FO LLOWS: 46. A PLAIN READING OF THE SECTION 53A OF THE TRANS FER OF PROPERTY ACT SHOWS THAT IN ORDER THAT A CONTRACT CA N BE TERMED TO BE 'OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF ITA NO. 462/HYD/2013 SRI A.B.V.S. PRAKASH ===================== 7 PROPERTY ACT' IT IS ONE OF THE NECESSARY PRECONDITI ONS THAT TRANSFEREE SHOULD HAVE OR IS WILLING TO PERFORM HIS PART OF THE CONTRACT. THIS ASPECT HAS BEEN DULY TAKEN NOTE OF B Y THE HON'BLE BOMBAY HIGH WHEN THEIR LORDSHIPS OBSERVED AS FOLLOW S: THAT, IN ORDER TO ATTRACT SECTION 53A, THE FOLLOW ING CONDITIONS NEED TO BE FULFILLED. (A) THERE SHOULD BE CONTRACT FOR CONSIDERATION; (B) IT SHOULD BE IN WRITING; (C) IT SHOULD BE SIGNED BY THE TRANSFEROR; (D) IT SHOULD PERTAIN TO THE TRANSFER OF IMMOVABLE PROPERTY; (E) THE TRANSFEREE SHOULD HAVE TAKEN POSSESSION OF PROPERTY; (F) LASTLY, TRANSFEREE SHOULD BE READY AND WILLING TO PERFORM THE CONTRACT. 47. ELABORATING UPON THE SCOPE OF EXPRESSION 'HAS P ERFORMED OR IS WILLING TO PERFORM', THE OFT QUOTED COMMENTAR Y 'MULLA- THE TRANSFER OF PROPERTY ACT' (9TH EDN. : PUBLISHED BY BUTTERWORTHS INDIA), AT P. 448, OBSERVES THAT: THE DOCTRINE OF READINESS AND WILLINGNESS IS AN EM PHATIC WAY OF EXPRESSION TO ESTABLISH THAT THE TRANSFEREE ALWA YS ABIDES BY THE TERMS OF THE AGREEMENT AND IS WILLING TO PERFOR M HIS PART OF THE CONTRACT. PART PERFORMANCE, AS A STATUTORY RIGH T, IS CONDITIONED UPON THE TRANSFEREE'S WILLINGNESS TO PE RFORM HIS PART OF THE CONTRACT IN TERMS COVENANTED THERE UNDE R. WILLINGNESS TO PERFORM THE ROLES ASCRIBED TO A PART Y, IN A CONTRACT IS PRIMARILY A MENTAL DISPOSITION. HOWEVER , SUCH WILLINGNESS IN THE CONTEXT OF SECTION 53A OF THE AC T HAS TO BE ABSOLUTE AND UNCONDITIONAL. IF WILLINGNESS IS STUDD ED WITH A CONDITION, IT IS IN FACT NO MORE THAN AN OFFER AND CANNOT BE TERMED AS WILLINGNESS. WHEN THE VENDEE COMPANY EXPR ESSES ITS WILLINGNESS TO PAY THE AMOUNT, PROVIDED THE (VENDOR ) CLEARS HIS INCOME TAX ARREARS, THERE IS NO COMPLETE WILLINGNES S BUT A CONDITIONAL WILLINGNESS OR PARTIAL WILLINGNESS WHIC H IS NOT SUFFICIENT. IN JUDGING THE WILLINGNESS TO PERFORM, THE COURT MU ST CONSIDER THE OBLIGATIONS OF THE PARTIES AND THE SEQUENCE IN WHICH THESE ARE TO BE PERFORMED.. 48. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS S O EXPRESSED IN THIS COMMENTARY ON THE PROVISIONS OF T HE TRANSFER OF PROPERTY ACT. IT IS THUS CLEAR THAT 'WILLINGNESS TO PERFORM' FOR THE PURPOSES OF SECTION 53A IS SOMETHING MORE THAN A STATEMENT OF INTENT; IT IS THE UNQUALIFIED AND UNCONDITIONAL WILLINGNESS ON THE PART OF THE VENDEE TO PERFORM ITS OBLIGATIONS. UNLESS THE PARTY HAS PERFORMED OR IS WILLING TO PERFORM ITS OB LIGATIONS ITA NO. 462/HYD/2013 SRI A.B.V.S. PRAKASH ===================== 8 UNDER THE CONTRACT, AND IN THE SAME SEQUENCE IN WHI CH THESE ARE TO BE PERFORMED, IT CANNOT BE SAID THAT THE PRO VISIONS OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT WILL CO ME INTO PLAY ON THE FACTS OF THAT CASE. IT IS ONLY ELEMENTARY TH AT, UNLESS PROVISIONS OF SECTION 53A OF THE TRANSFER OF PROPER TY ACT ARE SATISFIED ON THE FACTS OF A CASE, THE TRANSACTION I N QUESTION CANNOT FALL WITHIN THE SCOPE OF DEEMED TRANSFER UND ER SECTION 2(47)(V) OF THE IT ACT. LET US THEREFORE CONSIDER W HETHER THE TRANSFEREE, ON THE FACTS OF THE PRESENT CASE, CAN B E SAID TO HAVE 'PERFORMED OR IS WILLING TO PERFORM' ITS OBLIGATION S UNDER THE AGREEMENT. 49. EVEN A CURSORY LOOK AT THE ADMITTED FACTS OF TH E CASE WOULD SHOW THAT THE TRANSFEREE HAD NEITHER PERFORMED NOR WAS IT WILLING TO PERFORM ITS OBLIGATION UNDER THE AGREEME NT IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THE AGREEMENT BASED ON WHICH CAPITAL GAINS ARE SOUGHT TO BE TAXED IN THE P RESENT CASE IS AGREEMENT DATED 11.05.2005 BUT THIS AGREEMENT WAS N OT ADHERED TO BY THE TRANSFEREE. THE TRANSFEREE ORIGIN ALLY MADE A PAYMENT OF RS.10 LAKHS ON 11.5.2005 AND ANOTHER PAY MENT OF RS.90 LAKHS ON THE SAME DAY AS REFUNDABLE SECURITY DEPOSIT. HOWEVER, OUT OF THIS A SUM OF RS.50 LAKHS WAS SAID TO BE REFUNDED BY THE LANDLORD TO THE DEVELOPER ON 5.3.20 09. AS SUCH, THE ASSESSEE HAS RECEIVED ONLY A MEAGER AMOUNT AS R EFUNDABLE SECURITY DEPOSIT WHICH CANNOT BE CONSTRUED AS RECEI PT OF PART OF SALE CONSIDERATION. ADMITTEDLY, THERE IS NO PROGRES S IN THE DEVELOPMENT AGREEMENT IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THE MUNICIPAL SANCTION FOR DEVELOPME NT WAS OBTAINED NOT IN THIS ASSESSMENT YEAR AND IT WAS OBT AINED ONLY ON 17.09.2006 FROM THE HYDERABAD URBAN DEVELOPMENT AUTHORITY. THE SANCTION OF THE BUILDING PLAN IS UTM OST IMPORTANT FOR THE IMPLEMENTATION OF THE AGREEMENT ENTERED BET WEEN THE PARTIES. WITHOUT SANCTION OF THE BUILDING PLAN, THE VERY GENESIS OF THE AGREEMENT FAILS. TO ENABLE THE EXECUTION OF THE AGREEMENT, FIRSTLY, PLAN IS TO BE APPROVED BY THE C OMPETENT AUTHORITY. IN FACT, THE BUILDING PLAN WAS NOT GOT A PPROVED BY THE BUILDER IN THE ASSESSMENT YEAR UNDER CONSIDERAT ION. UNTIL PERMISSION IS GRANTED, A DEVELOPER CANNOT UNDERTAKE CONSTRUCTION. AS A RESULT OF THIS LAPSE BY THE TRAN SFEREE, THE CONSTRUCTION WAS NOT TAKEN PLACE IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THERE IS A BREACH AND BREAK DOWN OF DEVELOPMENT AGREEMENT IN THE ASSESSMENT YEAR UNDER CONSIDERATION. NOTHING IS BROUGHT ON RECORD BY AUTH ORITIES TO SHOW THAT THERE WAS DEVELOPMENT ACTIVITY IN THE PRO JECT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION AND COST OF CONSTRUCTION WAS INCURRED BY THE BUILDER/DEVELOPER. HENCE IT IS TO BE INFERRED THAT NO AMOUNT OF INVESTMENT BY THE DEVELOPER IN THE CONSTRUCTION ACTIVITY DURING THE ASSESSMENT YEA R IN THIS PROJECT AND IT WOULD AMOUNT TO NON-INCURRING OF REQ UIRED COST ITA NO. 462/HYD/2013 SRI A.B.V.S. PRAKASH ===================== 9 OF ACQUISITION BY THE DEVELOPER. IN THE ASSESSMENT YEAR UNDER CONSIDERATION, IT IS NOT POSSIBLE TO SAY WHETHER TH E DEVELOPER PREPARED TO CARRY OUT THOSE PARTS OF THE AGREEMENT TO THEIR LOGICAL END. THE DEVELOPER IN THIS ASSESSMENT YEAR HAD NOT SHOWN ITS READINESS OR HAVING MADE PREPARATION FOR THE COMPLIANCE OF THE AGREEMENT. THE DEVELOPER HAS NOT TAKEN STEPS TO MAKE IT ELIGIBLE TO UNDERTAKE THE PERFORMANCE OF THE AGREEMENT WHICH ARE THE PRIMARY INGREDIENT THAT MAK E A PERSON ELIGIBLE AND ENTITLED TO MAKE THE CONSTRUCTI ON. THE ACT AND CONDUCT OF THE DEVELOPER IN THIS ASSESSMENT YEA R SHOWS THAT IT HAD VIOLATED ESSENTIAL TERMS OF THE AGREEMENT WH ICH TEND TO SUBVERT THE RELATIONSHIP ESTABLISHED BY THE DEVELOP MENT AGREEMENT. BEING SO, IT WAS CLEAR THAT IN THE YEAR UNDER CONSIDERATION, THERE WAS NO TRANSFER OF NOT ONLY TH E FLATS AS SUPERSTRUCTURE BUT ALSO THE PROPORTIONATE LAND BY T HE ASSESSEE UNDER THE JOINT DEVELOPMENT AGREEMENT. AS PER CLAUS E NO. 12.11 AND 19.1 OF DEVELOPMENT AGREEMENT-CUM POWER OF ATTO RNEY, TIME IS THE ESSENCE OF THE CONTRACT AND AS PER CLAU SE NO.12.11 THE SAID PROPERTY IS TO BE DEVELOPED AND HAND OVER THE POSSESSION OF THE OWNERS ALLOCATION TO THE OWNERS AND OR THEIR NOMINEES WITHIN 24 MONTHS FROM THE DATE OF RECEIVIN G THE SANCTION OF THE PLAN FROM HUDA AND MUNICIPALITY/GRA M PANCHAYAT WITH A FURTHER GRACE PERIOD OF 3 MONTHS. BUT THE FACT REMAINS THAT THE TRANSFEREE WAS NOT ONLY FAILED TO PERFORM ITS OBLIGATIONS UNDER THE AGREEMENT, BUT ALSO UNWILLING TO PERFORM ITS OBLIGATIONS IN THE ASSESSMENT YEAR UNDER CONSID ERATION. EVEN OTHERWISE, THE ASSESSING AUTHORITIES HAS NOT B ROUGHT ON RECORD THE ACTUAL POSITION OF THE PROJECT EVEN AS O N THE DATE OF ASSESSMENT OR HE HAS NOT RECORDED THE FINDINGS WHET HER THE DEVELOPER STARTED THE CONSTRUCTION WORK AT ANY TIME DURING THE ASSESSMENT YEAR UNDER CONSIDERATION OR ANY DEVELOPM ENT HAS TAKEN PLACE IN THE PROJECT IN THE RELEVANT PERIOD. HE WENT ON TO PROCEED ON THE SOLE ISSUE WITH REGARD TO HANDING OV ER THE POSSESSION OF THE PROPERTY TO THE DEVELOPER IN PART PERFORMANCE OF THE DEVELOPMENT AGREEMENT-CUM-GENERAL POWER OF ATTORNEY. IN OUR OPINION, THE HANDING OVER OF THE P OSSESSION OF THE PROPERTY IS ONLY ONE OF THE CONDITION U/S 53A O F THE TRANSFER OF PROPERTY ACT BUT IT IS NOT THE SOLE AND ISOLATED CONDITION. IT IS NECESSARY TO GO INTO WHETHER OR NOT THE TRANSFEREE WAS 'WILLING TO PERFORM' ITS OBLIGATION UNDER THESE CONSENT TERM S. WHEN TRANSFEREE, BY ITS CONDUCT AND BY ITS DEEDS, DEMONS TRATES THAT IT IS UNWILLING TO PERFORM ITS OBLIGATIONS UNDER THE A GREEMENT IN THIS ASSESSMENT YEAR, THE DATE OF AGREEMENT CEASES TO BE RELEVANT. IN SUCH A SITUATION, IT IS ONLY THE ACTUA L PERFORMANCE OF TRANSFEREE'S OBLIGATIONS WHICH CAN GIVE RISE TO THE SITUATION ENVISAGED IN SECTION 53A OF THE TRANSFER OF PROPERT Y ACT. ON THESE FACTS, IT IS NOT POSSIBLE TO HOLD THAT THE TR ANSFEREE WAS WILLING TO PERFORM ITS OBLIGATIONS IN THE FINANCIAL YEAR IN WHICH THE CAPITAL GAINS ARE SOUGHT TO BE TAXED BY THE REV ENUE. WE ITA NO. 462/HYD/2013 SRI A.B.V.S. PRAKASH ===================== 10 HOLD THAT THIS CONDITION LAID DOWN UNDER SECTION 53 A OF THE TRANSFER OF PROPERTY ACT WAS NOT SATISFIED IN THIS ASSESSMENT YEAR. ONCE WE COME TO THE CONCLUSION THAT THE TRANS FEREE WAS NOT 'WILLING TO PERFORM', AS STIPULATED BY AND WITH IN MEANINGS ASSIGNED TO THIS EXPRESSION UNDER SECTION 53A OF TH E TRANSFER OF PROPERTY ACT, ITS CONTRACTUAL OBLIGATIONS IN THIS P REVIOUS YEAR RELEVANT TO THE PRESENT ASSESSMENT YEAR, IT IS ONLY A COROLLARY TO THIS FINDING THAT THE DEVELOPMENT AGREEMENT DT. 11. 5.2005 BASED ON WHICH THE IMPUGNED TAXABILITY OF CAPITAL G AIN IS IMPOSED BY THE AO AND UPHELD BY THE CIT(A), CANNOT BE SAID TO BE A 'CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT' AND, ACCORDINGLY, PROVISI ONS OF SECTION 2(47)(V) CANNOT BE INVOKED ON THE FACTS OF THIS CASE CHATURBHUJ DWARKADAS KAPADIA V. CIT'S CASE (SUPRA) UNDOUBTEDLY LAYS DOWN A PROPOSITION WHICH, MORE OFT EN THAT NOT, FAVOURS THE REVENUE, BUT, ON THE FACTS OF THIS CASE, THE SAID JUDGMENT SUPPORTS THE CASE OF THE ASSESSEE INASMUCH AS 'WILLINGNESS TO PERFORM' HAS BEEN SPECIFICALLY RECO GNIZED AS ONE OF THE ESSENTIAL INGREDIENTS TO COVER A TRANSACTION BY THE SCOPE OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT. REV ENUE DOES NOT GET ANY ASSISTANCE FROM THIS JUDICIAL PRECEDENT . THE VERY FOUNDATION OF REVENUE'S CASE IS THUS DEVOID OF LEGA LLY SUSTAINABLE BASIS. 50. THAT IS CLEARLY AN ERRONEOUS ASSUMPTION, AND AN THE PROVISIONS OF DEEMED TRANSFER UNDER SECTION 2(47)(V ) COULD NOT HAVE BEEN INVOKED ON THE FACTS OF THE PRESENT CASE AND FOR THE ASSESSMENT YEAR IN DISPUTE BEFORE US. IN THE PRESEN T CASE, THE SITUATION IS THAT THE ASSESSEE HAS RECEIVED ONLY A MEAGER AMOUNT' OUT OF TOTAL CONSIDERATION, THE TRANSFEREE IS AVOIDING ADHERING TO THE AGREEMENT AND THERE IS NO EVIDENCE BROUGHT ON RECORD BY THE REVENUE AUTHORITIES TO SHOW THAT THER E WAS ACTUAL CONSTRUCTION HAS BEEN TAKEN PLACE AT THE IMPUGNED P ROPERTY IN THE ASSESSMENT YEAR UNDER CONSIDERATION AND ALSO TH ERE IS NO EVIDENCE TO SHOW THAT THE RIGHT TO RECEIVE THE SALE CONSIDERATION WAS ACTUALLY ACCRUED TO THE ASSESSEE. WITHOUT ACCRU AL OF THE CONSIDERATION TO THE ASSESSEE, THE ASSESSEE IS NOT EXPECTED TO PAY CAPITAL GAINS ON THE ENTIRE AGREED SALES CONSID ERATION. WHEN TIME IS ESSENCE OF THE CONTRACT, AND THE TIME SCHEDULE IS NOT ADHERED TO, IT CANNOT BE SAID THAT SUCH A CONTR ACT CONFERS ANY RIGHTS ON THE VENDOR/LANDLORD TO SEEK REDRESSAL UNDER SECTION 53A OF THE TRANSFER OF PROPERTY ACT. THIS A GREEMENT CANNOT, THEREFORE, BE SAID TO BE IN THE NATURE OF A CONTRACT REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPE RTY ACT. IT CANNOT, THEREFORE, BE SAID THAT THE PROVISIONS OF S ECTION 2(47)(V) WILL APPLY IN THE SITUATION BEFORE US. CON SIDERING THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AS DISC USSED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE DES ERVES TO SUCCEED ON REASON THAT THE CAPITAL GAINS COULD NOT HAVE BEEN ITA NO. 462/HYD/2013 SRI A.B.V.S. PRAKASH ===================== 11 TAXED IN THE IN THIS ASSESSMENT YEAR IN APPEAL BEFO RE US. THE OTHER GROUNDS RAISED BY THE ASSESSEES IN THEIR APPE ALS HAVE BECOME IRRELEVANT AT THIS POINT OF TIME AS WE HAVE HELD THAT PROVISIONS OF SECTION 2(47)(V) WILL NOT APPLY TO TH E ASSESSEES IN THE ASSESSMENT YEAR UNDER CONSIDERATION. CONSEQUENT LY, THE APPEAL FILED BY THE REVENUE IN ITA NO. 328 TO 331/H YD/2011 HAVE BECOME INFRUCTUOUS AND DISMISSED ACCORDINGLY.' 11. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE TRIBU NAL, WE ARE INCLINED TO DECIDE THE ISSUE IN FAVOUR OF TH E ASSESSEE. 12. THE OTHER GROUND RAISED BY THE ASSESSEE IS ADDITION AL GROUND WHICH IS NOT EMANATING FROM THE ORDER OF THE CIT(A). BEING SO, WE DECLINE TO ADJUDICATE THE SAME. THIS GROUND IS DISMISSED. 13. IN THE RESULT, ASSESSEE'S APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH FEBRUARY, 2014. SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 27 TH FEBRUARY, 2014 TPRAO COPY FORWARDED TO: 1. SRI A.B.V.S. PRAKASH, F. NO. 501, PLOT NO. 148 & 149, MADHAVI ENCLAVE, FRIENDS COLONY, PUPPALAGUDA, SHAIKPET, HYDERABAD. 2. THE ASST. CIT, CENTRAL CIRCLE-1, 7 TH FLOOR, AAYAKAR BHAVAN, HYDERABAD. 3. THE CIT(A)-I, HYDERABAD. 4. THE CIT (CENTRAL), HYDERABAD. 5. THE DR BENCH 'B', ITAT, HYDERABAD