Shri Manmohan Singh Sathiala, Amritsar. V. The Income-tax Officer, Amritsar.

ITA 491/ASR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0564 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 25-07-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A N ARORA
• Keywords: Capital asset; Question of law; Competent authority
• Section: 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NO.491(ASR)/2014 ASSESSMENT YEAR: 2007-08 SH. MANMOHAN SINGH SATHIALA 347-A, GREEN AVENUE, AMRITSAR. PAN:AQYPS0994D VS. ITO, WARD 5(3), AMRITSAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. VIPUL ARORA (CA.) RESPONDENT BY: SH. A.N. ARORA (DR.) DATE OF HEARING: 26.05.2016 DATE OF PRONO UNCEMENT: 11.07.2016 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORDER OF LEARNED CIT(A), AMRITSAR DATED 12.05.2014 FOR ASST. YEAR 2007-08. 2. THE ASSESSEE HAS TAKEN A NUMBER OF GROUNDS IN THE F ORM OF SUB- GROUNDS, BUT AT THE TIME OF HEARING THE LEARNED AR WITHDREW GROUND NOS.2.2, 2.4, 2.5, 2.8 & 3 AND REQUESTED THAT THESE GROUNDS MAY BE DISMISSED AS NOT PRESSED. 3. THE LEARNED AR ALSO INVITED OUR ATTENTION TO AN APP LICATION FOR ADDITIONAL GROUND OF APPEAL WHICH READS AS UNDER: (I) THAT THE INCOME TAX PAID ON CAPITAL GAINS ON A CCOUNT OF THE CAPTIONED INCOME/SALE PROCEEDS OF RS.33 LACS IN AY 2009-10 MAY BE ALLOWED TO BE ADJUSTED WITH THE TAX PAYABLE AS DETE RMINED BY AO FOR AY 2007-08 AND AY 2008-09. ITA NO.491 (ASR)/2014 ASST. YEAR : 2007-08 2 4. THE LEARNED AR SUBMITTED THAT THIS BEING A LEGAL GR OUND, THE ASSESSEE WAS PERMITTED TO TAKE UP THIS GROUND AT TH IS STAGE. 5. THE LEARNED DR DID NOT RAISE OBJECTION AGAINST THE ADMISSION OF ADDITIONAL GROUND AND FINDING THE ISSUE RAISED AS A DDITIONAL GROUND A LEGAL ONE THE SAME WAS ADMITTED. 6. AT THE OUTSET, THE LEARNED AR SUBMITTED THAT THE CA SE OF THE ASSESSEE IS COVERED BY THE ORDER OF PUNJAB & HARYANA HIGH CO URT VIDE ITS ORDER DATED 22 ND JULY, 2015 IN THE CASE OF C.S. ATTWAL VS. CIT LUDHIANA & ORS. IT WAS SUBMITTED THAT HONBLE COURT HAS HELD THAT CAPITAL GAIN IS TO BE CHARGED ONLY ON THE AMOUNT WH ICH HAS BEEN RECEIVED BY THE OWNERS ON THE PART TRANSFER OF LAND FOR WHICH SALE DEEDS HAVE BEEN EXECUTED. 7. EXPLAINING THE FACTS OF THE CASE, THE LEARNED AR SU BMITTED THAT THE ASSESSEE HAD ENTERED INTO A JOINT DEVELOPMENT AGREE MENT THOUGH THE CO-OPERATIVE HOUSE BUILDING SOCIETY LTD. IN WHICH A PPELLANT WAS ALSO A MEMBER. HE SUBMITTED THAT TRIPARTITE AGREEME NT WAS ENTERED INTO BETWEEN THE SOCIETY, M/S HASH BUILDERS PVT. LT D. AND M/S TATA HOUSING DEVELOPMENT CORPORATION LTD. 8. THE LEARNED AR SUBMITTED THAT ASSESSING OFFICER HAD MADE AN ADDITION ON ACCOUNT OF LONG TERM CAPITAL GAIN APPLY ING PROVISIONS OF SEC. 2(47) OF THE INCOME TAX ACT, WHEREAS DUE TO A DISPUTE AMONGST THE PARTIES THE ASSESSEE DID NOT RECEIVE THE ENTIRE SALE CONSIDERATION AND RECEIVED ONLY A PART OF THE SALE CONSIDERATION AS WAS RECEIVED BY ITA NO.491 (ASR)/2014 ASST. YEAR : 2007-08 3 OTHER MEMBERS OF THE SOCIETY. HE SUBMITTED THAT HON BLE PUNJAB & HARYANA HIGH COURT HAS HELD THAT ONLY THE AMOUNT RE CEIVED IS TO BE CONSIDERED FOR THE PURPOSES OF CALCULATION OF LONG TERM CAPITAL GAINS. THE LEARNED AR, IN THIS RESPECT FILED A COPY OF THE JUDGMENT OF HONBLE PUNJAB & HARYAN HIGH COURT. 9. THE LEARNED DR, HEAVILY PLACED HIS RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 10. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THROU GH THE MATERIAL PLACED ON RECORD. WE FIND THAT IN SIMILAR FACTS AN D CIRCUMSTANCES OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF C.S ATWAL AND VS. CIT, LUDHIANA & ANOR HAS HELD IN FAVOUR OF ASSESSEE. THE RELEVANT EXTRACTS OF THE ORDER ARE REPRODUCED BELOW . 39. IT WOULD BE APT TO NOTICE UNDISPUTED FACTS AS DISC ERNIBLE FROM THE RECORD OF THE CASE. THE ASSESSEE IS A MEMBER OF PUNJABI COOPERATI VE HOUSE BUILDING SOCIETY LIMITED WHO OWNED 21.2 ACRES OF LAND IN VILLAGE KANSAL, DIS TRICT MOHALI. CERTAIN MEMBERS WERE OWNING PLOTS MEASURING 500 SQUARE YARDS WHEREA S OTHERS WERE HOLDING PLOTS OF 1000 SQUARE YARDS. ON ADVERTISEMENT HAVING BEEN FLO ATED BY THE SOCIETY TO DEVELOP A GROUP HOUSING COMMERCIAL PROJECT AND DO DEVELOPMENT AS PER THE MUNICIPAL BUILDING BYE-LAWS, HASH - A DEVELOPER APPROACHED THEM WITH P ROPOSAL FOR THE DEVELOPMENT OF THE PROPERTY. HASH IN TURN DUE TO PAUCITY OF FUNDS WITH IT FOR CONSTRUCTING THE BUILDING AND/OR STRUCTURES ENTERED INTO AN AGREEMENT WITH TH DC FOR THE SAID PURPOSE. THE EXECUTIVE COMMITTEE OF THE SOCIETY DECIDED TO APPOI NT HASH ALONG WITH THE JOINT DEVELOPER THDC IN TERMS OF JDA. IT WAS RESOLVED THA T MEMBERS OF THE SOCIETY OWNING PLOTS MEASURING 500 SQUARE YARDS WOULD RECEIVE RS. 82,50,000/- EACH TO BE PAID BY HASH IN FOUR INSTALLMENTS AND ONE FLAT WITH SUPER A REA OF 2250 SQUARE FEET TO BE CONSTRUCTED BY THDC. THE MEMBERS OWNING PLOTS OF 10 00 SQUARE YARDS WERE TO RECEIVE DOUBLE THE AMOUNT OF SETTLEMENT OF PLOT HOLDERS OF 500 SQUARE YARDS. FOR THIS PURPOSE, IRREVOCABLE POWER OF ATTORNEY WAS ALSO AGREED TO BE EXECUTED FOR THIS PURPOSE. THE RESOLUTION OF THE EXECUTIVE COMMITTEE WAS RATIFIED IN THE GENERAL BODY MEETING HELD ON 25.2.2007 PURSUANT TO WHICH TRIPARTITE JDA WAS E XECUTED ON THE SAME DAY. THE POSSESSION OF THE OWNERS ON LAND MEASURING 21.2 ACR ES WAS RECOGNIZED VIDE THIS JDA. HASH WAS RESPONSIBLE TO MAKE THE PAYMENT FAILING WH ICH IT WAS THE RESPONSIBILITY OF THDC. A COPY OF JDA DATED 25.2.2007 HAS BEEN ANNEXE D AS ANNEXURE A.2 WITH ITA NO.200 OF 2013. IT MAY BE ADVANTAGEOUS TO BROADLY R EFER TO VARIOUS CLAUSES OF JDA DATED 25.2.2007 AND IRREVOCABLE SPECIAL POWER OF AT TORNEY DATED 26.2.2007. A PLAIN ITA NO.491 (ASR)/2014 ASST. YEAR : 2007-08 4 READING OF JDA DATED 25.2.2007 SPELLS OUT THAT CLAU SE 1 THEREOF HAS DEFINED VARIOUS EXPRESSIONS. CLAUSE 2 ENUMERATES THE DESCRIPTION OF THE PROJECT. CLAUSE 3 DESCRIBES THE OBLIGATIONS OF THE DEVELOPERS FOR GETTING BUILDING PLANS, DESIGNS, DRAWINGS ETC. SANCTIONED FROM COMPETENT AUTHORITY. CLAUSE 4 DEALS WITH CONSIDERATION WHEREAS CLAUSES 5 TO 8 ARE RELATING TO VARIOUS ASPECTS OF P ROJECT AND OBLIGATIONS OF SOCIETY AND DEVELOPERS. UNDER CLAUSE 9 OF JDA, THE METHOD OF TR ANSFER OF OWNERSHIP AND RIGHTS HAVE BEEN PRESCRIBED. CLAUSE 10 SPEAKS ABOUT CONSEN T GIVEN BY THE SOCIETY TO THDC FOR RAISING FINANCE FOR DEVELOPMENT AND COMPLETION OF PROJECT. OTHER CLAUSES PROVIDE FOR GENERAL PROVISIONS, DISCLAIMER PARTIAL INVALIDI TY, FORMATION OF MAINTENANCE SOCIETY FOR THE PROJECT AFTER ITS COMPLETION, TRANSFER OF R IGHTS, NOTICES AND JURISDICTION WHEREAS TERMINATION UNDER CLAUSE 14 AND FORCE MAJEURE UNDER CLAUSE 26 ARE ALSO MATERIAL CLAUSES WHICH HAD BEEN STRENUOUSLY REFERRED BY THE APPELLANTS. IN ADDITION TO JDA DATED 25.2.2007, IRREVOCABLE REGISTERED SPECIAL POW ER OF ATTORNEY DATED 26.2.2007 HAD ALSO BEEN EXECUTED BY THE SOCIETY IN FAVOUR OF THDC . VARIOUS RELEVANT CLAUSES A, B, D AND OTHER CONDITIONS RELIED UPON BY THE PARTIES HAV E ALREADY BEEN REPRODUCED IN THE EARLIER PART OF THE JUDGMENT. 40. UNDER CLAUSE 2.1 OF JDA, THE POSSESSION OF THE PRO PERTY WAS TO BE HANDED OVER SIMULTANEOUSLY WITH THE EXECUTION AND REGISTRATION OF THE SAID AGREEMENT. THE JDA DATED 25.2.2007 WAS NEVER REGISTERED AND THEREFORE, THE PRESUMPTION OF DELIVERY OF POSSESSION TO THE DEVELOPERS CANNOT BE ASSUMED. THE DELIVERY OF TITLE DEEDS WOULD NOT NECESSARILY RAISE PRESUMPTION OF DELIVERY OF POSSES SION AS THESE ARE TWO DISTINCT ACTIONS. FURTHER, THE IRREVOCABLE REGISTERED SPECIA L POWER OF ATTORNEY ALSO RECORDS THAT ON 26.2.2007 (I.E. THE DATE OF ITS EXECUTION AND RE GISTRATION), THE POSSESSION CONTINUED TO BE WITH THE MEMBERS OF THE SOCIETY. STILL FURTHE R, EVEN THE TWO SALE DEEDS EXECUTED BETWEEN THE PARTIES ON 2.3.2007 AND 25.4.2007 IN RE SPECT OF 3.08 ACRES AND 4.62 ACRES RESPECTIVELY CLEARLY STIPULATES THAT POSSESSION WAS DELIVERED UNDER THE SAID INSTRUMENTS WHICH WOULD SHOW THAT THE PARTIES HAD AGREED FOR PR O-RATA TRANSFER OF LAND. A COMBINED READING OF THE VARIOUS CLAUSES OF JDA DATE D 25.2.2007 AND IRREVOCABLE REGISTERED SPECIAL POWER OF ATTORNEY DATED 26.2.200 7 CLEARLY SHOWS THAT THE DEVELOPER WAS ENTITLED TO ENTER UPON THE PROPERTY FOR THE PUR POSES OF DEVELOPMENT ETC. FOR INVOKING SECTION 53A OF 1882 ACT, IT WAS MANDATORY TO ESTABLISH THAT POSSESSION IN PART PERFORMANCE OF AN AGREEMENT WAS DELIVERED BY THE TR ANSFEROR TO THE TRANSFEREE. SECTION 53A OF 1882 ACT DOES NOT DEFINE ANY CONTRACT BUT RE LATES TO A PARTICULAR NATURE OF CONTRACT WHERE TRANSFEREE IS ENTITLED TO PROTECT HI S POSSESSION WHEN HE HAS BEEN DELIVERED THE SAME IN PART PERFORMANCE OF A CONTRAC T. IN OTHER WORDS, THE SOCIETY OR ITS MEMBERS HAD NEVER PARTED POSSESSION OF THE PROPERTY THOUGH UNDER JDA AND THE SPECIAL POWER OF ATTORNEY, THE DEVELOPER WAS GIVEN POWER TO RAISE FINANCE BY MORTGAGING THE PROPERTY AND FOR THE PURPOSE OF REGI STRATION OF THE CHARGE THEREON. IF AT ALL, IT IS TO BE HELD THAT POSSESSION WAS DELIVERED TO THE DEVELOPERS THEN IT WOULD BE AS A LICENCEE ONLY. THE DEVELOPER WAS AUTHORIZED TO AMAL GAMATE THE PROJECT AND IN THE EVENT OF TERMINATION OF JDA, PROVISIONS OF CLAUSE 6 THERE OF WERE AGREED TO BE SURVIVING. THE ENVIRONMENTAL CLEARANCE WAS THE RESPONSIBILITY OF T HE DEVELOPER THDC/HASH OUT OF ITS OWN SOURCES. THE TRIBUNAL HAD SOUGHT TO RAISE PRESU MPTION OF DELIVERY OF POSSESSION WHICH ON THE BASIS OF PRECEDING ANALYSIS OF FACTUAL MATRIX INVOLVED HEREIN WAS LEGALLY NOT PERMISSIBLE. THE JDA DATED 25.2.2007 TO BE COVE RED UNDER SECTION 53A OF 1882 ACT WAS REQUIRED TO BE A REGISTERED INSTRUMENT EVEN FOR PURPOSES OF ENFORCING CIVIL LAW RIGHTS. ONCE IT WAS EMBODIED IN SECTION 2(47)(V) OF THE ACT BY INCORPORATION, ALL THE LEGAL REQUIREMENTS OF SECTION 53A OF 1882 ACT HAD T O BE COMPLIED WITH. IN THE ABSENCE OF REGISTRATION OF SUCH AN AGREEMENT, THE SAME WAS NOT ENFORCEABLE UNDER GENERAL LAW ITA NO.491 (ASR)/2014 ASST. YEAR : 2007-08 5 KEEPING IN VIEW THE PROVISIONS OF SECTIONS 17(1A) A ND 49 OF THE 1908 ACT AND AT THE SAME TIME, THE TRANSACTION WOULD NOT FALL UNDER SEC TION 2(47)(V) OF THE ACT. 41. UNDER JDA DATED 25.2.2007, IT WAS THE OBLIGATION O F THE DEVELOPERS TO PREPARE, SUBMIT AND OBTAIN SANCTION OF THE PLANS, DESIGNS AN D DRAWINGS FOR CONSTRUCTION OF THE PROJECT FROM THE COMPETENT AUTHORITY WHICH WAS TO B E WITHIN THE PRESCRIBED TIME. THE COSTS FOR NECESSARY APPROVALS WERE ALSO TO BE BORNE BY THEM. IT WAS ALSO THE OBLIGATION OF THE DEVELOPERS TO MAKE TIMELY PAYMENT OF THE CON SIDERATION IN THE MANNER SET OUT THEREIN WHICH WAS AN ESSENCE OF THE JDA. ADDITIONAL LY, IT WAS THE RESPONSIBILITY OF THE DEVELOPERS TO OBTAIN REQUISITE GOVERNMENT AND STATU TORY APPROVALS, SANCTIONS OF ALL DRAWINGS AND PLANS REQUIRED FOR DEVELOPMENT OF THE PROJECT AND ALSO TO UNDERTAKE THE PROJECT WITHIN SIX MONTHS OF THE HANDING OVER OF TH E FINAL PLANS, DESIGNS AND DRAWINGS TO THE DEVELOPER FOR SUBMISSION OF THE SAME TO THE COMPETENT AUTHORITY FOR OBTAINING THE APPROVAL WHICH WAS TO BE DONE BY HASH AND THDC WITH IN THE PRESCRIBED TIME SCHEDULE. THE EXTERNAL DEVELOPMENT CHARGES, LICENCE FEE, CLU CHARGES AND ANY OTHER RELATED CHARGES WERE THE LIABILITY OF THDC. 42. APART FROM ABOVE, HASH/THDC HAD MADE PAYMENT OF AD JUSTABLE ADVANCE OF RS. 3 LAKHS TO THE PLOT HOLDER OF 500 SQUARE YARDS BESIDE S MAKING PAYMENT OF RS. 12 LAKHS AND RS. 18 LAKHS AS FIRST AND SECOND INSTALLMENTS R ESPECTIVELY. THDC DEFAULTED IN MAKING PAYMENT OF THIRD INSTALLMENT OF RS. 24.75 LA KHS AS REQUIRED UNDER CLAUSE 4.1(IV) OF THE JDA. IT WAS DOUBLE THE AFORESAID AMOUNT FOR PLOT HOLDER OF 1000 SQUARE YARDS. THE PROJECT WAS DELAYED DUE TO VARIOUS SUBSEQUENT D EVELOPMENTS. A PUBLIC INTEREST LITIGATION BEARING CWP NO.20425 OF 2010 WAS FILED I N THIS COURT WHERE CONSTRUCTION/DEVELOPMENT OF THE PROJECT WAS STAYED VIDE ORDER DATED 20TH JANUARY 2011. ON 26.3.2012, THIS COURT HAD DIRECTED THE DEV ELOPERS TO OBTAIN ADDITIONAL PERMISSION UNDER THE PUNJAB NEW CAPITAL (PERIPHERY) CONTROL ACT, 1952. SUBSEQUENTLY, IN CWP NO.18253 OF 2009 TITLED 'COURT ON ITS OWN MOTION V. UT, CHANDIGARH AND OTHERS, THIS COURT VIDE ORDER DATED 14.5.2012 DIRECTED STAY OF CONSTRUCTION IN THE ENTIRE CATCHMENT AREA OF SUKHNA LAKE AS PER SURVEY OF INDIA RECORD INCLUDING THE PROJECT UNDER CONSIDERATION. DEMOLITI ON OF THE EXISTING STRUCTURE AFTER 11.3.2011 WAS ALSO ORDERED. HOWEVER, THE APEX COURT VIDE ORDER DATED 22.5.2012 GRANTED STATUS QUO AND DIRECTED THAT NO CONSTRUCTIO N SHOULD BE UNDERTAKEN IN THE AREA AND STAYED DEMOLITION OF THE EXISTING STRUCTURE. TH E DEVELOPERS WHO WERE NOT PARTY IN CWP NO.18253 OF 2009 WERE ALSO IMPLEADED THEREIN. T HE SOCIETY IN THE MEANTIME ISSUED LETTER DATED 28.1.2011 TO HASH FOR PAYMENT O F THIRD INSTALLMENT AS PER CLAUSE 4.1(IV) OF THE JDA. VIDE LETTER DATED 4.2.2011, HAS H STATED THAT THE THIRD INSTALLMENT WOULD BECOME DUE ONLY AFTER OBTAINING PERMISSION TO COMMENCE CONSTRUCTION WHICH WAS STILL PENDING WITH THE MINISTRY OF ENVIRONMENT AND FORESTS. THE HIGH COURT VIDE ORDER DATED 28.1.2011 HAD ALREADY RESTRAINED THE DE VELOPERS TO START CONSTRUCTION. THE SOCIETY NOT SATISFIED WITH THE STAND TAKEN BY THE D EVELOPERS SENT LEGAL NOTICE DATED 11.5.2011 TO THEM STATING THEREIN THAT TIME WAS THE ESSENCE OF JDA AND THERE WAS DELAY ON THEIR PART TO OBTAIN NECESSARY APPROVAL FROM THE COMPETENT AUTHORITY. THE SOCIETY GAVE 30 DAYS TIME TO THE DEVELOPERS TO MAKE PAYMENT OF THE THIRD INSTALLMENT FAILING WHICH THE JDA WAS LIABLE TO BE TERMINATED. ON FAILU RE OF THE DEVELOPERS TO PAY THE INSTALLMENT, THE SOCIETY DECIDED TO TERMINATE THE J DA VIDE RESOLUTION DATED 13.6.2011 AND CANCELLED THE SPECIAL POWER OF ATTORNEY ON 31.1 0.2011 WHICH WAS EARLIER EXECUTED IN FAVOUR OF THE DEVELOPERS. THUS, WILLINGNESS TO P ERFORM THEIR PART OF THE CONTRACT WAS ABSENT ON THE PART OF THE DEVELOPERS OR IT COULD NO T BE PERFORMED BY THEM WHICH WAS ONE OF THE CONDITION PRECEDENT FOR APPLYING SECTION 53A OF THE 1882 ACT. UNDER CLAUSE ITA NO.491 (ASR)/2014 ASST. YEAR : 2007-08 6 26 OF THE JDA DATED 25.2.2007, PRINCIPLE OF FORCE M AJEURE HAD BEEN PROVIDED FOR, WHICH WOULD BE APPLICABLE WITH FULL VIGOUR IN THE C IRCUMSTANCES NOTICED EARLIER. HOWEVER, THE HAYDON'S RULE, IN THE FACTS AS NARRATE D HEREINBEFORE, WOULD NOT BE ATTRACTED. 43. IN VIEW OF PRECEDING ANALYSIS, IT IS REITERATED TH AT FROM THE CUMULATIVE EFFECT OF COVENANTS CONTAINED IN JDA DATED 25.2.2007 READ WIT H REGISTERED SPECIAL POWER OF ATTORNEY DATED 26.2.2007, IT CANNOT BE HELD THAT TH E MANDATORY REQUIREMENTS OF SECTION 53A OF 1882 ACT WERE COMPLIED WITH WHICH STOOD INCO RPORATED IN SECTION 2(47) (V) OF THE ACT. ONCE THAT WAS SO, IT COULD NOT BE SAID THA T THE ASSESSEE-APPELLANTS WERE LIABLE TO CAPITAL GAINS TAX IN RESPECT OF REMAINING LAND W HICH WAS NOT TRANSFERRED BY THEM TO THE DEVELOPER/BUILDER BECAUSE OF SUPERVENING EVENT NOT ON ACCOUNT OF ANY VOLITION ON THEIR PART. 44. VIEWED FROM ANOTHER ANGLE, IT CANNOT BE SAID THAT ANY INCOME CHARGEABLE TO CAPITAL GAINS TAX IN RESPECT OF REMAINING LAND HAD ACCRUED OR ARISEN TO THE APPELLANT-ASSESSEE IN THE FACTS OF THE CASE. CONSIDERING THE ISSUE OF TAXABILITY OF INCOME WITH REGARD TO ITS ACCRUAL OR RECEIPT AS THE BASIS FOR CHARGING INCOME TAX, THE APEX COURT IN COMMISSIONER OF INCOME TAX, BOMBAY CITY V. MESSRS S HOORJI VALLABHDAS & CO. (1962) 46 ITR 144 (SC) OBSERVED THAT INCOME TAX IS A LEVY ON INCOME AND WHERE NO INCOME RESULTS EITHER UNDER ACCRUAL SYSTEM OR ON THE BASIS OF RECEIPT, NO INCOME TAX IS EXIGIBLE. THE RELEVANT OBSERVATIONS READ THUS:- 'INCOME TAX IS A LEVY ON INCOME. NO DOUBT, THE INCO ME-TAX ACT TAKES INTO ACCOUNT TWO POINTS OF TIME AT WHICH THE LIABILITY T O TAX IS ATTRACTED, VIZ., THE ACCRUAL OF THE INCOME OR ITS RECEIPT; BUT THE SUBST ANCE OF THE MATTER IS THE INCOME, IF INCOME DOES NOT RESULT AT ALL, THERE CAN NOT BE A TAX, EVEN TOUGH IN BOOK-KEEPING, AN ENTRY IS MADE ABOUT A 'HYPOTHETICA L INCOME' WHICH DOES NOT MATERIALIZE. WHERE INCOME HAS, IN FACT, BEEN RECEIV ED AND IS SUBSEQUENTLY GIVEN UP IN SUCH CIRCUMSTANCES THAT IT REMAINS THE INCOME OF THE RECIPIENT, EVEN THOUGH GIVEN UP, THE TAX MAY BE PAYABLE. WHERE, HOW EVER, THE INCOME CAN BE SAID NOT TO HAVE RESULTED AT ALL, THERE IS OBVIOUSL Y NEITHER ACCRUAL NOR RECEIPT OF INCOME, EVEN THOUGH AN ENTRY TO THAT, EFFECT MIGHT, INCINERATION CIRCUMSTANCES, HAVE BEEN MADE IN THE BOOKS OF ACCOUNT.' THIS PRONOUNCEMENT WAS APPLIED BY THE SUPREME COURT IN GODHRA ELECTRICITY CO. LIMITED V. CIT, (1997) 225 ITR 746 (SC) AND FOLLOWE D BY THE CALCUTTA HIGH COURT IN CIT V. BALARAMPUR COMMERCIAL ENTERPRISES LIMITED,(2 003) 262 ITR 439 (CAL.). 45. RELYING UPON DECISION IN MESSRS SHOORJI VALLABHDAS & CO.'S CASE (SUPRA), THE SUPREME COURT IN CIT V. EXCEL INDUSTRIES LIMITED (2 013) 358 ITR 295 (SC) HELD THAT INCOME TAX CANNOT BE LEVIED ON HYPOTHETICAL INCOME. INCOME ACCRUES WHEN IT BECOMES DUE BUT IT MUST ALSO BE ACCOMPANIED BY A CORRESPOND ING LIABILITY OF THE OTHER PARTY TO PAY THE AMOUNT. ONLY THEN CAN IT BE SAID THAT FOR T HE PURPOSES OF TAXABILITY, THE INCOME IS NOT HYPOTHETICAL AND IT HAS REALLY ACCRUED TO TH E ASSESSEE. IT WAS OBSERVED AS UNDER:- '17. FIRST OF ALL, IT IS NOW WELL SETTLED THAT INCO ME TAX CANNOT BE LEVIED ON HYPOTHETICAL INCOME. IN COMMISSIONER OF INCOME TAX V. SHOORJI VA LLABHDAS AND CO., [1962] 46 ITR 144 (SC) IT WAS HELD AS FOLLOWS:- ITA NO.491 (ASR)/2014 ASST. YEAR : 2007-08 7 'INCOME-TAX IS A LEVY ON INCOME. NO DOUBT, THE INCO ME-TAX ACT TAKES INTO ACCOUNT TWO POINTS OF TIME AT WHICH THE LIABILITY T O TAX IS ATTRACTED, VIZ., THE ACCRUAL OF THE INCOME OR ITS RECEIPT; BUT THE SUBST ANCE OF THE MATTER IS THE INCOME. IF INCOME DOES NOT RESULT AT ALL, THERE CAN NOT BE A TAX, EVEN THOUGH IN BOOK-KEEPING, AN ENTRY IS MADE ABOUT A 'HYPOTHETICA L INCOME', WHICH DOES NOT MATERIALISE. WHERE INCOME HAS, IN FACT, BEEN RECEIV ED AND IS SUBSEQUENTLY GIVEN UP IN SUCH CIRCUMSTANCES THAT IT REMAINS THE INCOME OF THE RECIPIENT, EVEN THOUGH GIVEN UP, THE TAX MAY BE PAYABLE. WHERE, HOW EVER, THE INCOME CAN BE SAID NOT TO HAVE RESULTED AT ALL, THERE IS OBVIOUSL Y NEITHER ACCRUAL NOR RECEIPT OF INCOME, EVEN THOUGH AN ENTRY TO THAT EFFECT MIGHT, IN CERTAIN CIRCUMSTANCES, HAVE BEEN MADE IN THE BOOKS OF ACCOUNT.' 18. THE ABOVE PASSAGE WAS CITED WITH APPROVAL IN MO RVI INDUSTRIES LTD. V. COMMISSIONER OF INCOME-TAX (CENTRAL), [1971] 82 ITR 835 (SC) IN WHICH THIS COURT ALSO CONSIDERED THE DICTIONARY MEANING OF THE WORD 'ACCRUE' AND HELD THAT INCOME CAN BE SAID TO ACCRUE WHEN IT BECOMES D UE. IT WAS THEN OBSERVED THAT: '............... THE DATE OF PAYMENT ............ D OES NOT AFFECT THE ACCRUAL OF INCOME. THE MOMENT THE INCOME ACCRUES, THE ASSESSEE GETS VE STED WITH THE RIGHT TO CLAIM THAT AMOUNT EVEN THOUGH IT MAY NOT BE IMMEDIA TELY.' 19. THIS COURT FURTHER HELD, AND IN OUR OPINION MOR E IMPORTANTLY, THAT INCOME ACCRUES WHEN THERE 'ARISES A CORRESPONDING LIABILIT Y OF THE OTHER PARTY FROM WHOM THE INCOME BECOMES DUE TO PAY THAT AMOUNT.' 20. IT FOLLOWS FROM THESE DECISIONS THAT INCOME ACC RUES WHEN IT BECOMES DUE BUT IT MUST ALSO BE ACCOMPANIED BY A CORRESPONDING LIABILITY OF THE OTHER PARTY TO PAY THE AMOUNT. ONLY THEN CAN IT BE SAID THAT FO R THE PURPOSES OF TAXABILITY THAT THE INCOME IS NOT HYPOTHETICAL AND IT HAS REAL LY ACCRUED TO THE ASSESSEE.' 46. WE SUMMARIZE OUR CONCLUSIONS AS UNDER:- 1. PERUSAL OF THE IDA DATED 25.2.2007 READ WITH SALE D EEDS DATED 2.3.007 AND 25.4.2007 IN RESPECT OF 3.08 ACRES AND 4.62 ACRES RESPECTIVELY WOULD REVEAL THAT THE PARTIES HAD AGRE ED FOR PRO- RATA TRANSFER OF LAND. 2. NO POSSESSION HAD BEEN GIVEN BY THE TRANSFEROR TO T HE TRANSFEREE OF THE ENTIRE LAND IN PART PERFORMANCE OF JDA DATED 25 .2.2007 SO AS TO FALL WITHIN THE DOMAIN OF SECTION 53A OF 1882 ACT. 3. THE POSSESSION DELIVERED, IF AT ALL, WAS AS A LICEN CEE FOR THE DEVELOPMENT OF THE PROPERTY AND NOT IN THE CAPACITY OF A TRANSFEREE. 4. FURTHER SECTION 53A OF 1882 ACT, BY INCORPORATION, STOOD EMBODIED IN SECTION 2(47)(V) OF THE ACT A ND ALL THE ESSENTIAL INGREDIENTS OF SECTION 53A OF 1882 ACT WERE REQUIRED TO BE FULFILL ED. IN THE ABSENCE OF REGISTRATION OF JDA DATED 25.2.2007 HAVI NG BEEN EXECUTED AFTER 24.9.2001, THE AGREEMENT DOES NOT FA LL UNDER SECTION 53A OF 1882 ACT AND CONSEQUENTL Y SECTION 2(47)(V) OF THE ACT DOES NOT APPLY. ITA NO.491 (ASR)/2014 ASST. YEAR : 2007-08 8 5. IT WAS SUBMITTED BY LEARNED COUNSEL FOR THE ASSESSE E - APPELLANT THAT WHATEVER AMOUNT WAS RECEIVED FROM THE DEVELOPER, CA PITAL GAINS TAX HAS ALREADY BEEN PAID ON THAT AND SALE DEEDS HAVE A LSO BEEN EXECUTED. IN VIEW OF CANCELLATION OF JDA DATED 25.2.2007, NO FURTHER AMOUNT HAS BEEN RECEIVED AND NO ACTION THER EON HAS BEEN TAKEN. IT WAS URGED THAT AS AND WHEN ANY AMOUNT IS RECEIVED, CAPITAL GAINS TAX SHALL BE DISCHARGED THEREON IN AC CORDANCE WITH LAW. IN VIEW O F THE AFORESAID STAND, WHILE DISPOSING OF THE APPEA LS, WE OBSERVE THAT THE ASSESSEE APPELLANTS SHALL REMAI N BOUND BY THEIR SAID STAND. 6. THE ISSUE OF EXIGIBILITY TO CAPITAL GAINS TAX HAVIN G BEEN DECIDED IN FAVOUR OF THE ASSESSEE, THE QUESTION OF EXEMPT ION UNDER SECTION 54F OF THE ACT WOULD NOT SURVIVE ANY LONGER AND HAS BEE N RENDERED ACADEMIC. 7. THE TRIBUNAL AND THE AUTHORITIES BELOW WERE NOT RIG HT IN HOLDING THE ASSESSEE- APPELLANT TO BE LIABLE TO CAPITAL GAINS TAX IN RESP ECT OF REMAINING LAND MEASU RING 13.5 ACRES FOR WHICH NO CONSIDERATION HAD BEEN RECEIVED AND WHICH STOOD CANCELLED AND INC APABLE OF PERFORMANCE AT PRESENT DUE TO VARIOUS ORDERS PASSED BY THE SUPREME COURT AND THE HIGH COURT IN PILS. THEREFORE , THE APPEALS ARE ALLOWED. 47. CONSEQUENTLY, THE SUBSTANTIAL QUESTIONS OF LAW AS R EPRODUCED IN THE BEGINNING OF THE JUDGMENT ARE ANSWERED IN THE MANNER INDICATED H EREINBEFORE AND THE APPEALS OF THE ASSESSEE ARE DISPOSED OF ACCORDINGLY. IN VIEW OF THE ABOVE ORDER OF HON,BLE PUNJAB & HARY ANA HIGH COURT WE HOLD THAT ONLY AMOUNT RECEIVED AS CONSIDERATION DURING THE YEAR UNDER CONSIDERATION IS TO BE CONSIDERED AS SALE CON SIDERATION FOR THE PURPOSE OF CALCULATION OF CAPITAL GAIN TAX. 11. AS REGARDS THE ADDITIONAL GROUND RASIED BY LEAREND AR REGADING ADJUSTMENT OF TAX PAYABLE ON THE SALE CONSIDERATION OF RS.33 LACS IN ASST. YEAR 2009-10 WITH THE TAX PAYABLE AS DETERMIN ED BY A.O. FOR ASST. YEAR 2007-08 AND 2008-09. WE FIND THAT SIMILA R ISSUE HAS BEEN DECIDED BY THE HONBLE ITAT, CHENNAI BENCH D THIRD ITA NO.491 (ASR)/2014 ASST. YEAR : 2007-08 9 MEMBER DECISION IN ITA NO.1058/2010 IN THE CASE OF R. NATARAJAN VS. ACIT AND WHICH HAS HELD AS UNDER: 19. THE INCOME-TAX DEPARTMENT IS COLLECTING TAX NO T FOR ITSELF. IT IS COLLECTING TAX FOR THE SOVEREIGN STATE, THAT IS, UNION OF INDIA. UNION OF INDIA AS THE SOVEREIGN AUTHORITY DOES NOT REQUIRE TO LEVY TAX ON AN AMOUNT RETURNED BY MISTAKE. THE SOVEREIGN AUTHORITY DOES NOT WANT TO TAKE ADVANTAGE OF A MISTAKE COMMIT TED BY AN INNOCUOUS ASSESSEE. IT IS NOT THE POLICY OF THE SOV EREIGN STATE TO CRAVE FOR UNDUE ENRICHMENT. 20. WHEN, UNDER THESE CIRCUMSTANCES, LEVY OF TAX O N THE SUM OF RS.4,28,750/- IS ALTOGETHER IMPERMISSIBLE FOR TH E ASSESSMENT YEAR 2007-08, HOW THE PRAYER OF THE ASSESSEE COULD BE BRUSHED ASIDE? IF THE INCOME-TAX ACT AUTHORIZES A DESIGNATE D AUTHORITY TO COLLECT TAX FOR STATE, THE SAME ACT ALWAYS PERMITS THE SAID AUTHORITY TO RECTIFY ANY PROCEEDINGS, WHICH HAS RES ULTED IN DOUBLE TAXATION. WHEN THE INCOME OF RS.4,28,750/- HAS BEEN ASSESSED FOR THE ASSESSMENT YEAR 2008-09, THE ASSESSMENT OF THE SAME AMOUNT FOR THE IMPUGNED ASSESSMENT YEAR 2007-08 IS A MISTAKE APPARENT FROM THE RECORDS. THE ASSESSING AUTHORITY COULD HAVE CORRECTED IT AND IF NOT, THE COMMISSIONER OF INCOME -TAX (APPEALS) COULD HAVE GIVEN A DIRECTION TO RECTIFY SUCH A MIST AKE APPARENT FROM THE RECORDS. THERE IS NO GREAT QUESTION OF LAW INVOLVED IN THIS. - SEE MORE AT: HTTP://TAXGURU.IN/INCOME- TAX/INCOME - TAXED.HTML#STHASH.ESPIGBB7.DPUF 23. IT IS A SETTLED PRINCIPLE OF JURISPRUDENCE THAT DELIVERY OF JUSTICE SHOULD NOT BE FETTERED BY TECHNICALITIES. W HERE THERE IS A GLARING INSTANCE OF INJUSTICE WRIT LARGE ON THE FAC E OF THE RECORDS, IT IS THE BOUNDEN DUTY OF THE TRIBUNAL TO STAND BY THE SIDE OF JUSTICE TO REDRESS THE GRIEVANCE OF A HAPLESS ASSESSEE. ITA NO.491 (ASR)/2014 ASST. YEAR : 2007-08 10 THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE JUDICIAL PRECEDENT, WE DIRECT THE ASSESSING OFFICER TO ADJUS T THE TAX PAYABLE AS DETERMINED BY ASSESSING OFFICER FOR ASST . YEARS: 2007- 08 AND 2008-09 AGAINST THE TAX DEPOSITED BY ASSESSE E IN ASST. YEAR: 2009-10 PROVIDED THE NECESSARY REFUND OR OTHE R ADJUSTMENT HAS NOT BEEN MADE FOR EXTRA TAX PAID BY ASSESSEE IN ASST. YEAR 2009-10. 12. IN VIEW OF THE ABOVE, THE APPEAL FILED BY ASSES SEE IS PARTLY ALLOWED AND PARTLY ALLOWED FOR STATISTICAL PURPSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11.07.2016. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 11.07.2016. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY