Shri Dhiraj Manilal Thakkar,HUF, Ahmedabad V. The Dy.CIT.,Circle-3, Ahmedabad

ITA 487/AHD/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1180 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 16-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 18-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Keywords: Sale consideration of property below Jantri Value; Value adopted by valuation officer; Capital asset; Fair market value
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD , BEFORE SHRI PRAMOD KUMAR , ACCOUNTANT MEMBER , AND SHRI KUL BHARAT , JUDICIAL MEMBER . ITA. NO. 487 /AHD/201 1 (ASSESSM ENT YEAR:200 7 - 0 8 ) SHRI DHIRAJ MANILAL THAKKAR - HUF 2235, MAHURAT POLE, MANEK CHOWK, AHMEDABAD APPELLANT VS. THE DY. COMMISSIONER OF INCOME TAX CIRCLE - 3 , AHMEDABAD .. . . RESPONDENT [ PAN: AAD H D 1995G ] / BY ASSESSEE : S MT. URVASHI SODHAN , A.R. / BY REVENUE :SHRI P. L. KUREEL, SR . D.R. / DATE OF HEARING : 1 6 .0 7 .2015 / DATE OF PRONOUNCEMENT : 21 .08.2015 O R D E R PER PRAMOD KUMAR , A . M.: BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 10 TH JANUARY, 2011 PASSED BY THE LEARNED CIT(A), IN THE MATTER OF ASSESSMENT UNDER SECTION 143 ( 3 ) OF ITA NO. 4 8 7 /AHD/20 1 1 ( SHRI DHIRAJ MANILAL THAKKAR - HUF VS. D C IT) A.Y. 200 7 - 0 8 - 2 - THE INCOME TAX ACT, 1961 ( THE ACT HEREINAFTER) , FO R THE ASSESSMENT YEAR 2007 - 0 8, ON THE FOLLOWING GROUND S : 1. THE L D . CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS IN DISMISSING THE APPEAL. HE OUGHT TO HAVE ALLOWED THE APPEAL FULLY IN ACCORDANCE WITH THE GROUNDS OF APPEAL RAISED BY THE APPELLANT BEFORE HIM. I. ADDITION ON ACCOUNT OF LONG TERM CAPITAL GAIN U/S. 50C RS.16,64,836/ - 1. THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION ON ACCOUNT OF LONG TERM CAPITAL GAIN U/S.50C OF THE ACT BY OBSERVING THAT THE CORRECT THING IS TO ADOPT THE S TAMP DUTY VALUATION AS ON THE DATE OF SALE OF AGREEMENT. 2. THE LD. A.O HAS ERRED IN LAW AND ON FACTS WHILE FAILING TO CONSIDER THE PROVISIONS OF SECTION 2(47) OF THE ACT. 3. THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS IN FAILING TO CONSIDER THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA 260 ITR 491, WHEREIN IT WAS HELD THAT THE CAPITAL GAIN WAS TAXABLE WHEN THE TRANSFER HAS TAKEN PLACE AS PER THE PROVISION OF SECTION 2(47)(V). 2. BRIEFLY STATED, THE RELEV ANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT WHILE, AS PER AIR INFORMATION AVAILABLE TO HIM, THE ASSESSEE HAD TRANSFERRED AN IMMOVABLE PROPERTY FOR THE ASSESSED VALUE (FOR STAMP DUTY P URPOSES) OF RS.32,65,440/ - , THE ASSESSEE S INCOME TAX RETURN DOES NOT REFLECT ANY SUCH TRANSACTION OR CAPITAL GAINS THEREON. IT WAS IN THIS BACKGROUND THAT THE ASSESSEE WAS APPARENTLY CALLED UPON TO EXPLAIN AS TO WHY CAPITAL GAINS ON SALE OF PROPERTY IS N OT REFLECTED IN THE INCOME TAX RETURN. ACCORDING TO THE ASSESSEE, THIS PROPERTY WAS TRANSFERRED; WITHIN MEANINGS OF SECTION 2(47), ON 23 RD MAY, 2002 SINCE ENTIRE SALE CONSIDERATION WAS RECEIVED ON THAT DAY AND THE POSSESSION OF THE PROPERTY WAS ALSO GIVEN AT THAT POINT OF TIME ITSELF. IT WAS SUBMITTED THAT THE ASSESSEE HAD RECEIVED ENTIRE SALE CONSIDERATION AND ENTERED INTO AN AGREEMENT TO SELL THE SUBJECT PROPERTY ON THAT DAY, I.E. ITA NO. 4 8 7 /AHD/20 1 1 ( SHRI DHIRAJ MANILAL THAKKAR - HUF VS. D C IT) A.Y. 200 7 - 0 8 - 3 - 23.5.2002, BUT, IS THE LEGAL POSITION, THE POSSESSION HAVING BEEN GIVEN O N THAT DAY, THE TRANSFER, UNDER SECTION 2(47), IS REQUIRED TO BE TREATED AS HAVING TAKEN PLACE ON THAT DAY. THE FACT OF FORMAL SALE DEED HAVING BEEN REGISTERED ON 9.2.2007 DOES NOT, THEREFORE, HAVE ANY RELEVANCE FOR DETERMINATION OF CAPITAL GAINS. IT WAS FOR THIS REASON, ACCORDING TO THE ASSESSEE, THAT THE TRANSACTION OF SALE DEED REGISTRATION WAS NOT REFLECTED IN INCOME TAX RETURN. WITHOUT PREJUDICE TO THIS LINE OF ARGUMENT, ASSESSEE FURTHER CONTENDED THAT IF AT ALL THE DATE TRANSFER IS TO BE TAKEN AS 9 .2.2007 AND CAPITAL GAINS ARE TO BE BROUGHT TO TAX ACCORDINGLY, THE VALUATION OF THE PROPERTY MAY BE DONE BY THE DISTRICT VALUATION OFFICER FOR VALUATION AS ON 23.5.2002. NONE OF THESE SUBMISSION, HOWEVER, IMPRESSED THE ASSESSING OFFICER. HE REJECTED THE PLEA OF THE ASSESSEE BY, INTER ALIA, OBSERVING AS FOLLOWS: ASSESSEE'S CONTENTION IS NOT ACCEPTABLE BECAUSE THE ASSESSEE HIMSELF HAS REGISTERED THE TRANSFER AND SALE OF PROPERTY DEED WITH A STAMP DUTY PAYMENT OF RS.1,46,000/ - VOLUNTARILY WHICH IS THE STAM P DUTY AS PER THE STAMP DUTY VALUATION DONE BY THE VALUATION AUTHORITY OF THE STATE GOVT. THUS, THE ASSESSEE HAS ACCEPTED THE VALUATION OF PROPERTY DONE BY THE STATE GOVT. AUTHORITY AT RS.32,65,440/ - . THE PROVISION OF SECTION 50C(2) PROVIDES FOR VALUATION OF THE CAPITAL ASSET BY VALUATION OFFICER OF THE DEPARTMENT WHERE THE ASSESSEE CLAIMS THAT THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER AND THAT THE VALUE SO ADOPTED BY THAT AUT HORITY HAS NOT BEEN DISPUTED IN ANY APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE BEFORE ANY OTHER AUTHORITY COURT OR HIGH COURT. THUS, IT IS THE DISCRETION OF THE ASSESSING OFFICER THAT UNDER THE TWO SITUATIONS HE CAN REFER THE VALUATION TO THE VALUATI ON OFFICER. THERE IS NO SUCH PROVISION TO MAKE REFERENCE FOR VALUATION AT THE INSTANC E OF THE ASSESSEE. IN THE CASE UNDER CONSIDERATION, THE ASSESSEE HAS PAID THE STAMP DUTY AS PER THE VALUATION DONE BY THE STAMP DUTY AUTHORITY WHICH HAS NEVER BEEN CHALLEN GED BY THE ASSESSEE BEFOR E ANY APPELLATE AUTHORITY OF THE STATE GOVT. RATHER THE ASSESSEE HAS ACCEPTED THE VAL UATION BY MAKING THE PAYMENT OF STAMP DUTY AS WORKED OUT BY THE STATE GOVT. AUTHORITY . NOW WHEN UNDER THE I . T. PROVISIONS THE ASSESSEE IS AGAINST THE WALL, HE SUBMITS TH AT THE VALUATION OF STAMP DUTY AUTHORITY IS CHALLENGED AND THEREFORE HE PROPOSES FOR VAL UATION TO BE DONE BY THE VALUATION OFFICER OF THE IT.DEPARTMENT. ASSESSEE'S CLAIM IS PRIMA FACIE REJECTABLE SINCE THERE IS NO SANCTITY OF THE LA W IN RAISING SUCH DEMAND. BEI NG THE ASSESSING OFFICER, IT IS PROPOSED TO ADOPT THE SAME VALUE OF THE PROPERTY AS ADOP TED BY THE STAMP DUTY AUTHORITY OF ITA NO. 4 8 7 /AHD/20 1 1 ( SHRI DHIRAJ MANILAL THAKKAR - HUF VS. D C IT) A.Y. 200 7 - 0 8 - 4 - THE STATE GOVT. AND WHICH IS ACCEPTED BY THE ASSES SEE BY MAKING PAYMENT OF THE SAID STAMP DUTY SO AS TO REGISTER THE TRANSFER OF TH E SAID PROPERTY. THEREFORE, THERE IS NO NEED TO REFER THE VALUATION OF THE PROPERTY TO THE VALUATION OFFICER OF THE DEPARTMENT. CONSIDERING THIS FACT, THE ASSESSEE'S SUG GESTION FOR REFERENCE TO VALUATION OFFICER IS REJECTED. 3 . AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT IN VAIN. LEARNED CIT(A) UPHELD THE STAND OF THE ASSESSING OFFICER AND JUSTIFIED THE SAME ON THE BASIS OF FOLLOWING REASONING: 2.3.1 I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPE LLANT AND OBSERVATION OF THE AO. ADMITTEDLY THE AGREEMENT OF SALE WAS EXECUTED ON 09/02/2007 AND ON THIS DATE THE STAMP DUTY AUTHORITIES HAVE VALUED THE PROPERTY AT RS. 32, 65, 440/ - . THERE IS NO CONTROVERSY IN THIS FACT. THE APPELLANT HAS ARGUED THAT THE TRANSFER HAD TAKEN PLACE & THE POSSESSION WAS GIVEN AND PAYMENT WAS MADE AS PER THE AGREEMENT TO SALE DATED 23/05/2002. ON THIS DATE THE SALE PRICE WAS FIXED AT RS. 13.5 LAKH. THERE IS NO EVIDENCE AS TO WHAT WAS THE FAIR MARKET VALUE OR VALUE AS PER STAMP DUTY AUTHORITIES ON THIS DATE OF AGREEMENT TO SALE. IT IS TRUE THAT FOR THE PURPOSE OF INCOME TAX, TRANSFER OF IMMOVABLE PROPERTY IS COMPLETE WHEN THE PAYMENT IS FULLY MADE AND POSSESSION IS GIVEN AS PER THE AGREEMENT TO SALE. HOWEVER, IT IS ALSO TRUE THAT THE PROPERTIES ARE GENERALLY UNDERVALUED IN THE AGREEMENT TO SALE, AND BECAUSE OF THIS REASON PROVISIONS OF SECTION 50C WAS BROUGHT ON THE STATUTE. AS PER THIS PROVISION, THE VALUATION ADOPTED BY THE STAMP AUTHORITIES IS REQUIRED TO BE TAKEN FOR THE PURPO SE OF CALCULATING CAPITAL GAIN ON THE SALE OF AN IMMOVABLE PROPERTY. IF THE CLAIM OF THE ASSESSEE IS ACCEPTED THEN THE PURPOSE OF SECTION 50C WILL BE DEFEATED BY THE ASSESSEES BY NOT RESORTING TO THE EXECUTION OF SALE DEED AT THE TIME OF SALE AND THEREAFTE R, THEY WILL CLAIM THAT THE VALUATION MADE BY THE STAMP DUTY AUTHORITIES IS NOT APPLICABLE. THE VALUATION OF THE STAMP DUTY AUTHORITIES FOR THIS PROPERTY, ON THE DATE OF SALE AGREEMENT IS NOT AVAILABLE. THE ASSESSEE / AO S H OULD HAVE OBTAINED THE VALUATION FROM THE STAMP DUTY AUTHORITIES AS ON 23 - 5 - 2002. THE CORRECT THING IS TO ADOPT THE STAMP DUTY VALUATION AS ON THE DATE OF SALE AGREEMENT. 2.3.2 FURTHER, THERE IS NO EVIDENCE THAT THE POSSESSION WAS GIVEN ON 23 - 5 - 2002, NEITHER BEFORE THE ASSESSING OFFICER NOR DURING THE APPELLATE PROCEEDINGS SUCH AN EVIDENCE IS GIVEN. IN VIEW OF THIS REASON AND IN THE ABSENCE OF AVAILABILITY OF STAMP DUTY VALUATION OF THIS PROPERTY AS ON THE DATE OF SALE AGREEMENT, THE ACTION OF THE AO IS CONFIRMED AND THIS GROUND OF APPEA L IS DISMISSED. 4. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. ITA NO. 4 8 7 /AHD/20 1 1 ( SHRI DHIRAJ MANILAL THAKKAR - HUF VS. D C IT) A.Y. 200 7 - 0 8 - 5 - 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 6. IN ORDE R TO ADJUDICATE ON THIS APPEAL, IT IS NECESSARY TO APPRECIATE STATUTORY SCHEME OF TAXABILITY OF CAPITAL GAINS UNDER SECTION 45(1), PROFITS AND GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET, EXCEPT IN CERTAIN SPECIFIC SITUATIONS WHICH ARE NOT RELEVANT IN THE PRESENT CONTEXT, ARE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE . THE TRIGGER TO TAXABILITY OF CAPITAL GAINS IS THUS TRANSFER OF THE CAPITAL ASSET. THE EXPRESSION TRANSFER IS DEFINED UNDER SECTION 2(47) AS F OLLOWS: (47) TRANSFER , IN RELATION TO A 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) IN A CASE WHERE THE ASSET IS CONVERTED BY THE OWNER THEREOF INTO, OR IS TREATED BY HIM AS, STOCK - IN - TRADE OF A BUSINESS CARRIED ON BY HIM, SUCH CONVERSION OR TREATMENT;] [OR] [(IVA) THE MATURITY OR REDEMPTION OF A ZERO COUPON BOND; 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 (4 OF 1882); OR (VI) ANY TRANSACTION (WHETHER BY WA Y 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 ENJOYM ENT OF, ANY IMMOV - ABLE PROPERTY. [EXPLANATION 1]. FOR THE PURPOSES OF SUB - CLAUSES (V) AND (VI), 'IMMOVABLE PROPERTY' SHALL HAVE THE SAME MEANING AS IN CLAUSE (D) OF SECTION 269UA.] [EXPLANATION 2. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT T RANSFER 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 ITA NO. 4 8 7 /AHD/20 1 1 ( SHRI DHIRAJ MANILAL THAKKAR - HUF VS. D C IT) A.Y. 200 7 - 0 8 - 6 - OTHERWISE, NOTWITHSTANDING THAT SUCH TRANSFER OF RIGHTS HAS BEEN CHARACTERIZED AS BEING EFFECTED OR DEPENDENT UPON OR FLOWING FROM THE TRANSFER OF A SHARE OR SHARES OF A COMPANY REGISTERED OR INCORPORATED OUTSIDE INDIA;] 7. CLEARLY, THEREFORE, EVEN IN A SITUATION IN WHICH POSSESSION OF AN IMMOVABLE PROPERTY IS ALLOWED TO BE TAKEN IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 55A OF THE ACT, SUCH A POSSESSION BEING GIVEN WILL ALSO AMOUNT TO TRANSFER . ELABORATING UPON THIS ASPECT OF THE MATTER, HON BLE BOMBAY HIGH COURT, IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA VS. CIT(A) (260 ITR 491), HAS OBSERVED AS FOLLO W S: 6. AT THE OUTSET, WE MAY POINT OUT THAT IN THIS CASE, THE ASSESSEE DOES NOT DENY TRANSFER. THE ONLY DISPUTE IN THIS CASE IS WHETHER THE TRANSFER TOOK PLACE DURING THE ACCOUNTING YEAR ENDING 31ST MARCH, 1996 OR WHETHER IT TOOK PLACE DURING THE ACCOUNTING YEAR ENDING 31ST MARCH, 199 9. IN OTHER WORDS, THE DISPUTE IS CONFINED TO THE YEAR OF CHARGEABILITY. UNDER SECTION 2( 47 )( V ), ANY TRANSACTION INVOLVING ALLOWING OF POSSESSION TO BE TAKEN OVER OR RETAINED IN PART - PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF T HE TRANSFER OF PROPERTY ACT WOULD COME WITHIN THE AMBIT OF SECTION 2( 47 )( V ). THAT, IN ORDER TO ATTRACT SECTION 53A, THE FOLLOWING CONDITIONS NEED TO BE FULFILLED. THERE SHOULD BE A CONTRACT FOR CONSIDERATION; IT SHOULD BE IN WRITING; IT SHOULD BE SIGNED B Y THE TRANSFEROR; IT SHOULD PERTAIN TO TRANSFER OF IMMOVABLE PROPERTY; THE TRANSFEREE SHOULD HAVE TAKEN POSSESSION OF THE PROPERTY; LASTLY THE TRANSFEREE SHOULD BE READY AND WILLING TO PERFORM HIS PART OF THE CONTRACT. THAT EVEN ARRANGEMENTS CONFIRMING PRI VILEGES OF OWNERSHIP WITHOUT TRANSFER OF TITLE COULD FALL UNDER SECTION 2( 47 )( V ). 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 CONVEYANCE. CONSEQUENTLY, ASSESSEES USED TO ENTER INTO AGREEMENTS FOR DEVELOPING PROPERTIES WITH THE BUILDERS AND UNDER THE ARRANGEMENT WITH THE BUILDERS, THEY USED TO CONFER PRIVILEGES OF OWNERSHIP WITHOUT EXECUTING CONVEYANCE AND TO PLUG THAT LOOP HOLE, SECTION 2(47)( V ) CAME TO BE INTRODUCED IN THE ACT. ITA NO. 4 8 7 /AHD/20 1 1 ( SHRI DHIRAJ MANILAL THAKKAR - HUF VS. D C IT) A.Y. 200 7 - 0 8 - 7 - IT WAS ARGUED ON BEHALF OF THE ASSESSEE THAT THERE WAS NO EFFECTIVE TRANSFER TILL GRANT OF IRREVOCABLE LICENCE. IN THIS CONNECTION, JUDGMENTS OF THE SUPREME COURT WERE CITED ON BEHALF OF THE ASSESSEE, BUT ALL THOSE JUDGMENTS WERE PRIOR TO INTRODUCTION OF THE CONCEPT OF DEEMED TRANSFER UNDER SECTION 2( 47 )( V ). IN THIS MATTER, AGREEMENT IN QUESTION IS A DEVELOPMENT AGREEMENT. SUCH DEVELOPMENT AGREEMENTS DO NOT CONSTITUTE TRANSFER IN GENERAL LAW. THEY ARE SPREAD OVER A PERIOD OF TIME. THEY CONTEMPLATE VARIOUS STAGES. THE BOMBAY HIGH COURT IN VARIOUS JUDGMENTS HAS TAKEN THE VIEW IN SEVERAL MATTERS THAT THE OBJECT OF ENTERING INTO A DEVELOPMENT AGREEMENT IS TO ENABLE A PROFESSIONAL BU ILDER/CONTRACTOR TO MAKE PROFITS BY COMPLETING THE BUILDING AND SELLING THE FLATS AT A PROFIT. THAT THE AIM OF THESE PROFESSIONAL CONTRACTORS WAS ONLY TO MAKE PROFITS BY COMPLETING THE BUILDING AND, THEREFORE, NO INTEREST IN THE LAND STANDS CREATED IN THEI R FAVOUR UNDER SUCH AGREEMENTS. THAT SUCH AGREEMENTS ARE ONLY A MODE OF REMUNERATING THE BUILDER FOR HIS SERVICES OF CONSTRUCTING THE BUILDING - GURUDEV DEVELOPERS V. KURLA KONKAN NIWAS CO - OPERATIVE HOUSING SOCIETY [2000] 3 ML J 131. IT IS PRECISELY FOR T HIS REASON THAT THE LEGISLATURE HAS INTRODUCED SECTION 2( 47 )( V ) READ WITH SECTION 45 WHICH INDICATES THAT CAPITAL GAINS IS TAXABLE IN THE YEAR IN WHICH SUCH TRANSACTIONS ARE ENTERED INTO EVEN IF THE TRANSFER OF IMMOVABLE PROPERTY IS NOT EFFECTIVE OR COMPL ETE UNDER THE GENERAL LAW. IN THIS CASE THAT TEST HAS NOT BEEN APPLIED BY THE DEPARTMENT. NO REASON HAS BEEN GIVEN WHY THAT TEST HAS NOT BEEN APPLIED, PARTICULARLY WHEN THE AGREEMENT IN QUESTION, READ AS A WHOLE, SHOWS THAT IT IS A DEVELOPMENT AGREEMENT. T HERE IS A DIFFERENCE BETWEEN CONTRACT ON ONE HAND AND PERFORMANCE ON THE OTHER HAND. IN THIS CASE, THE TRIBUNAL AS WELL AS THE DEPARTMENT HAVE COME TO THE CONCLUSION THAT THE TRANSFER TOOK PLACE DURING THE ACCOUNTING YEAR ENDING 31ST MARCH, 1996 AS SUBSTAN TIAL PAYMENTS WERE EFFECTED DURING THAT YEAR AND SUBSTANTIAL PERMISSIONS WERE OBTAINED. IN SUCH CASES OF DEVELOPMENT AGREEMENTS, ONE CANNOT GO BY SUBSTANTIAL PERFORMANCE OF A CONTRACT. IN SUCH CASES, THE YEAR OF CHARGEABILITY IS THE YEAR IN WHICH THE CONTR ACT IS EXECUTED. THIS IS IN VIEW OF SECTION 2( 47 )( V ) OF THE ACT. BEFORE US, IT WAS ARGUED ON BEHALF OF THE ASSESSEE THAT THE DATE ON WHICH POSSESSION IS PARTED WITH BY THE TRANSFEROR IS THE DATE WHICH SHOULD BE TAKEN INTO ACCOUNT FOR DETERMINING THE RELE VANT ITA NO. 4 8 7 /AHD/20 1 1 ( SHRI DHIRAJ MANILAL THAKKAR - HUF VS. D C IT) A.Y. 200 7 - 0 8 - 8 - ACCOUNTING YEAR IN WHICH THE LIABILITY ACCRUES. IT WAS ARGUED ON BEHALF OF THE ASSESSEE THAT IN THIS CASE, IRREVOCABLE LICENCE WAS GIVEN IN TERMS OF THE CONTRACT ONLY DURING THE FINANCIAL YEAR ENDING 31ST MARCH, 1999 AND, THEREFORE, THERE WAS NO TRANS FER DURING THE FINANCIAL YEAR ENDING 31ST MARCH, 1996. ON THE OTHER HAND, IT WAS ARGUED ON BEHALF OF THE REVENUE THAT ONE HAS TO GO BY THE DATE ON WHICH THE DEVELOPER SUBSTANTIALLY PERFORMED THE CONTRACT. IT WAS ARGUED ON BEHALF OF THE DEPARTMENT THAT SINC E SUBSTANTIAL PAYMENTS WERE MADE DURING THE FINANCIAL YEAR ENDING 31ST MARCH, 1996 AND SINCE MAJORITY OF PERMISSIONS WERE OBTAINED DURING THAT YEAR, THE LIABILITY TO PAY CAPITAL GAINS TAX ACCRUED DURING ASSESSMENT YEAR 1996 - 97. IN THIS CASE, THE AGREEMENT IS A DEVELOPMENT AGREEMENT AND IN OUR VIEW, THE TEST TO BE APPLIED TO DECIDE THE YEAR OF CHARGEABILITY IS THE YEAR IN WHICH THE TRANSACTION WAS ENTERED INTO. WE HAVE TAKEN THIS VIEW FOR THE REASON THAT DEVELOPMENT AGREEMENT DOES NOT TRANSFER THE INTEREST I N THE PROPERTY TO THE DEVELOPER IN GENERAL LAW AND, THEREFORE, SECTION 2( 47 )( V ) HAS BEEN ENACTED AND IN SUCH CASES, EVEN ENTERING INTO SUCH A CONTRACT COULD AMOUNT TO TRANSFER FROM THE DATE OF THE AGREEMENT ITSELF. WE HAVE TAKEN THIS VIEW FOR A PRECISE RE ASON. FIRSTLY, WE FIND IN NUMEROUS MATTERS WHERE THE ASSESSING OFFICER AND THE DEPARTMENT GENERALLY PROCEED ON THE BASIS OF SUBSTANTIAL COMPLIANCE OF THE CONTRACT. FOR EXAMPLE, IN THIS VERY CASE, THE DEPARTMENT HAS CONTENDED THAT BECAUSE OF SUBSTANTIAL COM PLIANCE OF THE CONTRACT DURING THE FINANCIAL YEAR ENDING 31ST MARCH, 1996, THE TRANSFER IS DEEMED TO HAVE TAKEN PLACE IN THAT YEAR. SUCH INTERPRETATION WOULD RESULT IN ANOMALY BECAUSE WHAT IS SUBSTANTIAL COMPLIANCE WOULD DIFFER FROM OFFICER TO OFFICER. THE REFORE, IF ON A BARE READING OF A CONTRACT IN ITS ENTIRETY, AN ASSESSING OFFICER COMES TO THE CONCLUSION THAT IN THE GUISE OF AGREEMENT FOR SALE, A DEVELOPMENT AGREEMENT IS CONTEMPLATED, UNDER WHICH THE DEVELOPER APPLIES FOR PERMISSIONS FROM VARIOUS AUTHOR ITIES, EITHER UNDER POWER OF ATTORNEY OR OTHERWISE AND IN THE NAME OF THE ASSESSEE, THEN THE ASSESSING OFFICER IS ENTITLED TO TAKE THE DATE OF THE CONTRACT AS THE DATE OF TRANSFER IN VIEW OF SECTION 2( 47 )( V ). IN THIS VERY CASE, THE DATE ON WHICH THE DEVEL OPER OBTAINED A COMMENCEMENT CERTIFICATE IS NOT WITHIN THE ACCOUNTING YEAR ENDING 31ST MARCH, 1996. AT THE SAME TIME, IF ONE READS THE CONTRACT AS A WHOLE, IT IS CLEAR THAT A DICHOTOMY IS CONTEMPLATED BETWEEN LIMITED POWER OF ATTORNEY AUTHORISING THE DEVEL OPER TO DEAL WITH THE PROPERTY VIDE PARA 8 AND AN IRREVOCABLE LICENCE TO ENTER UPON THE PROPERTY AFTER THE DEVELOPER OBTAINS THE REQUISITE APPROVALS OF VARIOUS AUTHORITIES. IN FACT, THE LIMITED POWER OF ATTORNEY MAY NOT BE ACTUALLY GIVEN, BUT ONCE UNDER CL AUSE 8 OF THE ITA NO. 4 8 7 /AHD/20 1 1 ( SHRI DHIRAJ MANILAL THAKKAR - HUF VS. D C IT) A.Y. 200 7 - 0 8 - 9 - AGREEMENT A LIMITED POWER OF ATTORNEY IS INTENDED TO BE GIVEN TO THE DEVELOPER TO DEAL WITH THE PROPERTY, THEN WE ARE OF THE VIEW THAT THE DATE OF THE CONTRACT VIZ., 18TH AUGUST, 1994 WOULD BE THE RELEVANT DATE OF DECIDE THE DATE OF TRANSFER UNDER SECTION 2( 47 )( V ) AND, IN WHICH EVENT, THE QUESTION OF SUBSTANTIAL PERFORMANCE OF THE CONTRACT THEREAFTER DOES NOT ARISE. THIS POINT HAS NOT BEEN CONSIDERED BY ANY OF THE AUTHORITIES BELOW. NO JUDGMENT HAS BEEN SHOWN TO US ON THIS POINT. THEREFORE, A LTHOUGH THERE IS A CONCURRENT FINDING OF FACT IN THIS CASE, WE HAVE ENUNCIATED THE PRINCIPLES OF APPLICABILITY OF SECTION 2( 47 )( V ). WE DO NOT FIND MERIT IN THE ARGUMENT OF THE ASSESSEE THAT THE COURT SHOULD GO ONLY BY THE DATE OF ACTUAL POSSESSION AND THA T IN THIS PARTICULAR CASE, THE COURT SHOULD GO BY THE DATE ON WHICH IRREVOCABLE LICENCE WAS GIVEN. IF THE CONTRACT, READ AS A WHOLE, INDICATES PASSING OF OR TRANSFERRING OF COMPLETE CONTROL OVER THE PROPERTY IN FAVOUR OF THE DEVELOPER, THEN THE DATE OF THE CONTRACT WOULD BE RELEVANT TO DECIDE THE YEAR OF CHARGEABILITY. 8. WE HAVE NOTED, AS EVIDENT FROM A COPY OF THE INCOME TAX RETURN AND COMPUTATION OF INCOME FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2003 - 04 - COPIES OF WHICH WERE FILED BEFORE US AT P AGES 59 AND 60 OF THE PAPER BOOK, THE ASSESSEE HAD DULY DISCLOSED THE FACT OF THIS SALE TRANSACTION AND RESULTANT CAPITAL GAINS FOR THE RELEVANT ASSESSMENT YEAR. WE HAVE ALSO NOTED THAT THE BUYER I.E. VINOD BANSAL, HAS PAID SOCIETY MAINTENANCE CHARGES FOR THE PERIOD 31.08.2002 TO 31.12.2004 VIDE CHEQUE NUMBERS 032425 AND 032426 DATED 12.01.2005 FOR RS.39,188/ - AND RS.19,028/ - RESPECTIVELY COPIES PLACED BEFORE US AT PAGES 52 AND 53 OF THE PAPER BOOK. THESE DOCUMENTS WERE ALSO SUBMITTED BEFORE THE ASSESSI NG OFFICER VIDE LETTER DATED 19 TH NOVEMBER, 2009, COPY OF WHICH WAS PLACED BEFORE US AT PAGES 40 - 41 OF THE PAPER BOOK. ON THESE FACTS, IN OUR CONSIDERED VIEW, THE ASSESSMENT YEAR IN WHICH THE CAPITAL GAINS ON TRANSFER OF THIS ASSET CAN BE BROUGHT TO TAX I S INDEED ASSESSMENT YEAR 2003 - 04. THE ASSESSING OFFICER WAS CLEARLY IN ERROR IN ADDRESSING HIMSELF TO THE TAXABILITY OF THIS CAPITAL GAIN IN THE ASSESSMENT YEAR BEFORE US I.E. 2007 - 08. ITA NO. 4 8 7 /AHD/20 1 1 ( SHRI DHIRAJ MANILAL THAKKAR - HUF VS. D C IT) A.Y. 200 7 - 0 8 - 10 - 9. IN VIEW OF THE ABOVE DISCUSSIONS, IN OUR CONSIDERED VIEW, THE ERUDI TE DISCUSSIONS ABOUT APPLICABILITY OF SECTION 50C IN THE PRESENT ASSESSMENT YEAR ARE WHOLLY IRRELEVANT AND DO NOT CALL FOR ANY ADJUDICATION. THAT ASPECT OF THE MATTER IS ACADEMIC. ONCE WE HOLD, AS WE HAVE HELD IN THIS CASE, THAT AN ITEM OF INCOME IS NOT TAXABLE IN THE PRESENT ASSESSMENT YEAR, IT IS WHOLLY ACADEMIC TO EXAMINE MODALITIES OF QUANTIFYING THAT INCOME. 10. FOR THE REASONS SET OUT ABOVE, AND BEARING IN MIND ENTIRETY OF THE CASE, WE DELETE THE IMPUGNED LONG TERM CAPITAL GAIN OF RS.16,64,836/ - . THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 11. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 21 ST DAY OF AUGUST, 2015. SD/ - SD/ - ( KUL BHARAT ) ( PRAMOD KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 21 /08/2015 S.K.SINHA / COPY OF ORDER FORWARDED TO: - 1 . / REVENUE 2 . / ASSESSEE 3 . / CONCERNED CIT 4 . - / CIT (A) 5 . , , / DR, ITAT, AHMEDABAD 6 . / GUARD FILE. BY ORDER/ , / ,