Smt. Lokamma, Bangalore V. Dy.C.I.T., Bangalore

ITA 563/BANG/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9274 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-09-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 01-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAMALADHAR
• Assessee Lawyers: V CHANDRASHEKAR
• Keywords: Capital asset; Tangible material
• Section: 133A; 148; 54; 12; 10; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE S HRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER I.T . A. NO S . 563 TO 565 /BANG/20 15 (ASSESSMENT YEAR : 20 08 - 09 ) 1. SMT. LOKAMMA, N O .81, 50 FEET ROAD, NEAR GOV ERNMENT SCHOOL, DODDANEKKUNDI, BANGALORE - 560 037 . 2. SHRI N.A. BABU REDDY, DODDANEKKUNDI, BANGALORE - 37. 3. SMT. JAYAMMA, DODDANEKKUNDI, BANGALORE - 37. . APPELLANT S . VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 7(1), BANGALORE. .. RESPONDENT. APPELLANT S BY : SHRI V. CHANDRA SHEKAR, ADVOCATE. R E SPONDENT BY : SHRI KAMALADHAR, STANDING COUNSEL. DATE OF H EARING : 27.09.2016. DATE OF P RONOUNCEMENT : 09 .1 1 .201 6 . O R D E R PER SHRI VIJAY P AL RAO, J .M . : THESE ARE THREE APPEALS BY THE RELATED ASSESSE E S WHO ARE BROTHER AND TWO SISTERS ARISING FROM THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) FOR THE ASSESSMENT YEAR 2008 - 09. 2 IT A NO S . 563 TO 565 /BANG/201 5 2. TH E ISSUE INVOLVED IN ALL THESE THREE APPEALS ARE IDENTICAL AND ARISING FROM COMMON FACTS. THE COMMON GROUNDS ARE RAISED IN THESE APPEALS WHICH ARE AS UNDER : 3 IT A NO S . 563 TO 565 /BANG/201 5 4 IT A NO S . 563 TO 565 /BANG/201 5 3. A SURVEY UNDER SECTION 133A WAS CONDUCTED IN THE CASE OF M/S. H . N. VIJAY R AGHAVA R EDDY & CO. ON 16.8.2012. DURING THE COURSE OF SURVEY IT WAS NOTED THAT THE ASSESSEE HAD ENTERED INTO A JOINT DEVELOPMENT AGREEMENT (JDA) DT.27.7.2007 WITH M/S. H . N. VIJAY R AGHAVA REDDY & CO. THE ASSESSEE FURTHER ENTERED INTO AN AGREEMENT DT.22.8.2007 FO R THE DEVELOPMENT OF THEIR LAND TOGETHER MEASURING ABOUT 12.8 GUNTAS IN S.NO.175 & 174/3, K.R. PURAM HOBLI, BANGALORE EAST TALUK. THE ASSESSEE RECEIVED NON - REFUNDABLE DEPOSIT OF RS.10 LAKHS AND WERE ENTITLED TO RECEIVE 43% OF TOTAL BUILT UP AREA AND CAR P ARKING AREA (1/3 RD SHARE OF EACH). THE ASSESSING OFFICER WAS OF THE VIEW THAT IN VIEW OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. T.K.DAYALU 202 TAXMAN 531 THE TRANSFER OF PROPERTY TOOK PLACE ON THE DATE OF JDA AND T HE LONG TERM CAPITAL GAIN (LTCG) IS TAXABLE FOR THE ASSESSMENT YEAR 2008 - 09. ACCORDINGLY, THE ASSESSING OFFICER REOPENED THE ASSESSMENT OF ALL THREE ASSESSES. THE ASSESSE E S HAVE CHALLENGED THE REOPENING ON THE GROUND THAT THE REASONS RECORDED BY THE ASSE SSING OFFICER DO NOT REVEAL THAT THERE IS A TRANSFER AS PER THE JDA AND OTHER RELEVANT RECORD. THE LD. AR OF THE ASSESSES HAS SUBMITTED THAT THE LAND IN QUESTION WAS AN 5 IT A NO S . 563 TO 565 /BANG/201 5 AGRICULTURE LAND AND WAS CONVERTED TO NON - AGRICULTURE LAND ACTUALLY ON 16.11.2009. T HEREFORE PRIOR TO THE CONVERSION FROM AGRICULTURE TO NON - AGRICULTURE, IT CANNOT BE TREATED AS TRANSFER. HE HAS FURTHER SUBMITTED THAT THE PROJECT PLAN WAS SANCTIONED BY THE LOCAL AUTHORITY IN THE YEAR 2010 AND THEREFORE PRIOR TO THE CONVERSION AND SANCTI ON OF PLAN IT WAS NOT CERTAIN WHETHER THE JDA WOULD BE FRUCTIFIED OR NOT. THUS THE LD. AR AS ASSERTED THAT IT DOES NOT CONSTITUTE A TRANSFER AS PER SECTION 2(47) OF THE ACT PRIOR TO THE AGRICULTURE LAND WAS CONVERTED INTO NON - AGRICULTURE LAND AND FURTHER TIL L THE PLANS WERE SANCTIONED BY THE LOCAL AUTHORITY. HENCE THE REOPENING IS WITHOUT ANY MATERIAL TO FORM THE BELIEF THAT THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. THE LD. AR HAS FURTHER CONTENDED THAT THE LAND WAS ANCESTRAL PROPERTY AND AS A RES ULT OF PARTITION OF OLD HUF, 3 NEW HUF WERE CAME INTO EXISTENCE. THEREFORE THE ASSESSMENT IF ANY SHOULD HAVE BEEN IN THE NAME OF HUF AND NOT IN THE NAME OF INDIVIDUALS. THUS THE REOPENING AND REASSESSMENT IN THE NAME OF INDIVIDUALS IS BAD IN LAW. HE HAS RELIED UPON THE FOLLOWING DECISIONS : 6 IT A NO S . 563 TO 565 /BANG/201 5 I. CIT VS. K. ADINARAYANA MURTHY 65 ITR 607 (SC) II. P N SASHI KUMAR VS. CIT 170 ITR 80 (KER) III. M R PATTABHIRAM (HUF) VS. ACIT IN ITA NO.262/BANG/2013 DT.21.11.2014. 4. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THA T APART FROM JDA THE ASSESSES HAVE ALSO EXECUTED GENERAL POWER OF ATTORNEY (GPA) IN FAVOUR OF THE DEVELOPER AND THEREFORE THE A SSESSEE HAS TRANSFERRED ALL THE RIGHTS AS WELL AS POSSESSION OF THE LAND IN FAVOUR OF THE DEVELOPER. HE HAS FURTHER CONTENDED T HAT AS PER JDA AND GPA EXECUTED BY THE ASSESSE E S THE DEVELOPER IS ENTITLED TO 57% OF THE SUPER BUILT UP AREA IN THE BUILDING TO BE CONSTRUCTED ALONG WITH THE UNDIVIDED SHARE IN THE LAND. THE DEVELOPER WAS ALSO ENTITLED TO HOLD OR SELL, LEASE OR OTHERWISE DI SPOSE OF ITS SHARE OF CONSTRUCTED AREA WITH 57% SHARE IN THE SCHEDULED PROPERTY. THUS THE LD. DR HAS SUBMITTED THAT THE CONDITIONS PRESCRIBED UNDER SECTION 2(47) OF I.T. ACT R.W.S. 53A OF THE TRANSFER OF PROPERTY ACT ARE SATISFIED TO CONSTITUTE THE TRANS ACTION AS TRANSFER. IN FURTHERANCE OF JDA, THE ASSESSEE AND DEVELOPER ALSO SIGNED A MEMORANDUM DT.14.11.2007 UNDER WHICH THE DEVELOPER PAID AN ADVANCE OF RS.10 LAKHS TO THE ASSESSEE. THUS THE CONTEN T S OF JDA, MEMORANDUM OF AGREEMENT 7 IT A NO S . 563 TO 565 /BANG/201 5 AS WELL AS GPA CONSTI TUTE TRANSFER AS CONSIDERATION IN PART WAS RECEIVED BY THE AS SESSEE AND POSSESSION WAS GIVEN TO THE DEVELOPER AT THE TIME OF AGREEMENT. HE HAS RELIED UPON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT AND OTHERS VS. DINESH D. RANKA (2016) 380 ITR 440 (KAR) AND SUBMITTED THAT HON'BLE HIGH COURT HAS AGAIN REITERATED THAT TRANSFER INCLUDES EXTINGUISHMENT OF RIGHTS IN THE CAPITAL ASSET ON THE DATE OF JDA AND CONSEQUENTLY THE CAPITAL GAIN IS ASSESSABLE IN THE ASSESSMENT YEAR RELEVANT TO T HE FINANCIAL YEAR IN WHICH THE JDA HAS BEEN EXECUTED. THUS THE LD. DR HAS SUBMITTED THAT REOPENING IS VALID IN VIEW OF THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. T.K.DAYALU (SUPRA) AND FURTHER THE ASSESSEE DID NOT DISCLOSE T HE JDA IN THE RETURN OF INCOME FILED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE HAS GIVEN MUCH EMPHASIS ON THE CLAUSES OF THE JDA AS WELL AS GPA WHETHER IT IS STATED THAT THE POSSESSION GIVEN TO THE DEVELOPER FOR EXECUTION OF THE PROJECT DOES NOT AMOUNT TO TRANSFER OF THE PROPERTY IN QUESTION AS IT WOULD NOT BE CONSTRUED AS DELIVERY OF POSS ESSION IN PART PERFORMANCE OF ANY 8 IT A NO S . 563 TO 565 /BANG/201 5 AGREEMENT OF SALE UNDER SECTION 53A OF TRANSFER OF PROPERTY ACT. THUS THE LD. COUNSEL ASSERTED THAT THE POSSESSION IS ONLY FOR ALLOWING DEVELOPER TO PERFORM HIS PART AND DOES NOT CONSTITUTE THE TRANSFER UNDER SECTION 53A. HE HAS ALSO CONTENDED THAT THE ADVANCE OF RS.10 LAKHS ITSELF IS NOT ENOUGH WHEN TH E EXECUTION OF JDA WAS SUBJECT TO VARIOUS CONDITIONS AND UNCERTAINTIES LIKE CONVERSION OF LAND TO NON - AGRICULTURAL USE AND SANCTION OF PLAN. WE FIND THAT THE ADVANCE IN CASH MAY NOT BE NECESSARY TO CONSTITUTE THE CONSIDERATION AS PER THE TERMS OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT AS WELL AS UNDER SECTION 2(47) OF THE ACT. A CONSIDERATION MAY BE A PR O MISE, IT MAY BE IN CASH OR ANY IN KIND. THEREFORE RECEIVING 47% OF THE CONSTRUCTED AREA IN THE PROJECT ITSELF IS A CONSIDERATION AGAINST THE TRANSF ER OF LAND IN QUESTION. AS REGARDS THE OBJECTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSMENT IS BAD IN LAW AS FRAMED ON THE INDIVIDUAL IN STEAD OF HUF, WE FIND THAT THE JDA, GPA AS WELL AS MEMO OF AGREEMENT WERE EXECUTED BY THE ASSESSES IN THEI R INDIVIDUAL CAPACITY. FURTHER IN RESPONSE TO THE NOTICE UNDER SECTION 148, THE ASSESSES FILED THEIR RETURN OF INCOME AND DECLARED CAPITAL GAINS ONLY ON NON - REFUNDABLE DEPOSIT OF RS.10 LAKHS. THE SAID RETURNS OF 9 IT A NO S . 563 TO 565 /BANG/201 5 INCOME WERE FILED IN THE CAPACITY OF INDIV IDUAL AND THEREFORE THE ASSESSEE DID NOT OBJECT TO THE INITIATION OF PROCEEDINGS UNDER SECTION 148 AGAINST THEIR INDIVIDUAL CAPACITY. SINCE ALL THE DOCUMENTS WERE EXECUTED BY THE ASSESSE E S IN THEIR INDIVIDUAL CAPACITY AND FURTHER RETURN OF INCOME WAS ALSO FILED IN THE INDIVIDUAL CAPACITY THEREFORE WE DO NOT FIND ANY SUBSTANCE IN THE CONTENTION OF THE LD. COUNSEL OF THE ASSESSEE THAT THE ASSESSMENT SHOULD HAVE BEEN FRAMED IN THE NAME OF HUF INSTEAD OF THE INDIVIDUAL. 6. AS REGARDS THE OBJECTION OF T HE LD. AR THAT TILL THE AGRICULTURE LAND IS CONVERTED INTO A NON - AGRICULTURE LAND THERE CANNOT BE A TRANSFER. THE JDA BETWEEN THE PARTIES IS TO DEVELOP THE HOUSING PROJECT ON THE AGRICULTURAL LAND AFTER CONVERSION OF THE SAME TO NON - AGRICULTURE USE. IN O RDER TO APPLY THE PROVISIONS OF SECTION 53A OF TRANSFER OF PROPERTY ACT, THE TRANSACTION SHALL CONSTITUTE TRANSFER OF CAPITAL ASSET. THIS CAN BE ASCERTAINED FROM THE TERMS AND CONDITIONS OF THE AGREEMENT WITH REASONABLE CERTAINTY. THE CERTAINTY OF THE TR ANSFER IN THIS CASE IS DEPENDING UPON THE CONVERSIONOF AGRICULTURAL LAND TO NON - AGRICULTURE USE WHICH IS NOT IN THE CONTROL OF THE PARTIES TO THE AGREEMENT THEREFORE THE 10 IT A NO S . 563 TO 565 /BANG/201 5 ENFORCEABILITY OF THE AGREEMENT ITSELF IS DEPENDENT AS WELL AS THE PERFORMANCE OF THE RESPECTIVE PART OF THE PARTIES UNDER THE AGREEMENT IS DEPENDENT ON THE CONDITION THAT THE AGRICULTURE LAND IS CONVERTED INTO NON - AGRICULTURE USE. THUS IF THE E NFORCEABILITY OF THE AGREEMENT IS DEPENDING ON CERTAIN CONDITION NOT IN THE CONTROL OF THE PART IES TO THE AGREEMENT THEN ONLY ON HAPPENING OF SUCH EVENT IT BECAME VALID OTHERWISE IT CANNOT BE ENFORCED. FURTHER THE CONSIDERATION IN THE SHAPE OF CONSTRUCTED AREA WOULD BECOME IMPOSSIBLE ONCE THE PROJECT ITSELF CANNOT BE FRUCTIFIED FOR WANT OF CONVERSION OF AGRICULTURE LAND TO NON - AGRICULTURE LAND AND CONSEQUENTLY APPROVAL OF PLAN. THEREFORE PRIOR TO THE CONVERSION OF AGRICULTURE LAND TO NON - AGRICULTURE IT CANNOT BE A TRANSFER IN TERMS OF SECTION 2(47) OF THE INCOME TAX ACT. THE PLAN WAS SANCTIONED BY T HE LOCAL AUTHORITY IN THE YEAR 2010 AND THEREFORE PRIOR TO THE CONVERSION AND SANCTION OF PLAN IT WAS NOT CERTAIN WHETHER JDA WOULD FRUCTIFIES OR NOT. HENCE IT DOES NOT CONSTITUTE TRANSFER WHEN THE TRANSACTION ITSELF IS SUBJECTED TO THE OCCURRENCE OF AN EVENT WHICH IS NOT CERTAIN. THE ASSESSING OFFICER HAS REOPENED ASSESSMENT BY RECORDING REASONS AS UNDER : 11 IT A NO S . 563 TO 565 /BANG/201 5 AS IT IS CLEAR FROM THE REASONS RECORDED THAT THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT ON THE BASIS OF JDA DT.27.7.2007 WITHOUT APPLYING ITS MIND ON THE FACT THAT AS ON THE DATE OF JDA THE PROPERTY IN QUESTION WAS AN AGRICULTURE LAND AND WITHOUT CONVERSION OF THE SAME TO NON - AGRICULTURE USE THE JDA ITSELF WOULD NOT BE GIVEN EFFECT. THE DECISION OF HON'BLE HIGH COURT IN THE CASE OF CIT VS. DR. T.K. DAYALU (SUPRA) IS BASED ON THE FACT THAT THE PART PERFORMANCE UNDER THE JDA WAS NOT 12 IT A NO S . 563 TO 565 /BANG/201 5 SUBJECTED TO ANY CONDITION , FAILURE OF SUCH WOULD RENDER THE AGREEMENT VOID AND U NFORCEABLE UNDER LAW. IN CASE OF CIT VS. DINESH D RANKA (SUPRA), I T WAS AN UNDIS PUTED FACT THAT THE JDA WAS EXECUTED ON 19.10.1995 WHEREAS THE ASSESSMENT OF CAPITAL GAINS WAS BROUGHT TO TAX FOR THE ASSESSMENT YEAR 1999 - 2000. THE ENTIRE LAND WAS CONVERTED FROM AGRICULTURE TO HOUSING PURPOSE IN THE YEAR 1992 ITSELF. SUBSEQUENTLY TH E PLAN WAS APPROVED AND RENEWED ON 19.2.1998. THUS IN THE CASES BEFORE HON'BLE HIGH COURT THERE WAS NO DISPUTE REGARDING THE CONVERSION OF THE LAND TO NON - AGRICULTURE USE AS ON THE DATE OF JDA WHEREAS IN THE CASE ON HAND IT IS UNDISPUTED FACT THAT THE LAN D IN QUESTION WAS AN AGRICULTURE LAND ON THE DATE OF JDA AND IT WAS CONVERTED INTO NON - AGRICULTURE USE ON 6.11.2008 AND THEREFORE THE TRANSFER OF CAPITAL ASSET IN QUESTION CANNOT BE COMPLETED PRIOR TO THE CONVERSION OF THE LAND. EVEN IF ON EXAMINATION OF RECORD, THE INTENTION OF THE PARTIES IS ESTABLISHED THAT THE PARTIES TO THE DOCUMENTS HAD INTENTION TO TREAT THE TRANSACTION AS CONCLUDED IT IS A DEBATABLE ISSUE AND THEREFOR E THE REOPENING WITHOUT APPLICATION OF MIND ON THE CRUCIAL FACT OF CONVERSION OF A GRICULTURE LAND TO NON - AGRICULTURE LAND ON SUBSEQUENT DATE NOT 13 IT A NO S . 563 TO 565 /BANG/201 5 FALLING UNDER THE ASSESSMENT YEAR DOES NOT CONSTITUTE A TANGIBLE MATERIAL TO FORM A BELIEF THAT THE INCOME ASSESSABLE TO TAX FOR THE YEAR UNDER CONSIDERATION HAS ESCAPED ASSESSMENT. ACCORDING LY, WE HOLD THAT THE REOPENING IS NOT VALID AND CONSEQUENTIAL REASSESSMENT IS QUASHED. 8. IN THE RESULT, THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 9TH DAY OF NOV., 201 6 . SD/ - ( S. JAYARAMAN ) ACCOUNTANT MEMBER SD/ - ( VIJAY PAL RAO ) JUDICIAL MEMBER BANGALORE, DT. 09 .11.2016. *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE. BY ORDER ASST. REGISTRAR, ITAT, BA NGALORE