ITO, CHENNAI V. Gautham Kumar Jain, CHENNAI

ITA 613/CHNY/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6094 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 15-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Capital asset

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.612/MDS/2016 ' (' / ASSESSMENT YEAR : 2008-09 THE INCOME TAX OFFICER, COMPANY WARD 5(1), CHENNAI - 600 034. V. SHRI VIKAS KUMAR JAIN, NO.123, MINT STREET, SOWCARPET, CHENNAI - 600 034. PAN : AAFPJ 3255 P (*+/ APPELLANT) (,-*+/ RESPONDENT) ./ ITA NO.613/MDS/2016 ' (' / ASSESSMENT YEAR : 2008-09 THE INCOME TAX OFFICER, COMPANY WARD 5(1), CHENNAI - 600 034. V. SHRI GAUTHAM KUMAR JAIN, NO.123, MINT STREET, SOWCARPET, CHENNAI - 600 034. PAN : AAHPJ 1281 B (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SHRI AR.V. SREENIVASAN, JCIT ,-*+ . / / RESPONDENTS BY : SHRI S. SRIDHAR, ADVOCATE 0 . 1$ / DATE OF HEARING : 31.07.2017 2!( . 1$ / DATE OF PRONOUNCEMENT : 27.09.2017 2 I.T.A. NO.613/MDS/16 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: BOTH THE APPEALS OF THE REVENUE ARE DIRECTED AGA INST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) -3, CHENNAI, DATED 18.01.2016 AND PERTAIN TO ASSESSMENT YEAR 2008- 09. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IN BOTH THE APPEALS IS ASSESSMENT OF PROFIT ON TRANSFER OF LAND. 3. SHRI AR.V. SREENIVASAN, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEES ENTERE D INTO A JOINT DEVELOPMENT AGREEMENT ON 20.10.2007 WITH M/S VIJAY SHANTHI BUILDERS LTD. FOR DEVELOPMENT OF PROPERTY AT CHETTI PEDU IN MEVALUR KUPPAM VILLAGE, SRIPERUMBUDUR TALUK, KANCHEEPURAM D ISTRICT. ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER FO UND THAT AS PER THE AGREEMENT, THE DEVELOPER ACCEPTED TO DEVELOP TH E PROPERTY AFTER GETTING NECESSARY PLAN SANCTIONED BY CMDA / LOCAL B ODY. THE DEVELOPER IS ENTITLED TO GET 60% OR 65% IN THE PROP OSED CONSTRUCTION AND OWNER TO GET 35% OR 40% AS THE CAS E MAY BE. ACCORDING TO THE LD. D.R., THE DEVELOPER HAS ALSO P AID ` 2.50 CRORES BEING THE INTEREST FREE REFUNDABLE DEPOSIT. ON 20. 10.2007, THE 3 I.T.A. NO.613/MDS/16 ASSESSEES ALSO HANDED OVER THE ORIGINAL DOCUMENT OF TITLE TO THE DEVELOPER. SINCE THE ORIGINAL DOCUMENT OF TITLE WA S HANDED OVER, THE ASSESSING OFFICER FOUND THAT THERE WAS TRANSFER OF PROPERTY BETWEEN THE ASSESSEES AND M/S VIJAY SHANTHI BUILDER S LTD. HENCE, ACCORDING TO THE LD. D.R., THE GAIN ARISING OUT OF SUCH TRANSFER HAS TO BE ASSESSED DURING THE YEAR UNDER C ONSIDERATION. HOWEVER, ON APPEAL BY THE ASSESSEES, THE CIT(APPEAL S) FOUND THAT THE JOINT DEVELOPMENT AGREEMENT WAS CANCELLED BY WA Y OF SUPPLEMENTARY AGREEMENT AND THE LAND WAS SOLD ON OU TRIGHT SALE. THE CIT(APPEALS) FURTHER FOUND THAT THE JOINT DEVEL OPMENT AGREEMENT DOES NOT RESULT IN TRANSFER OF CAPITAL AS SET IN THE YEAR UNDER CONSIDERATION, THEREFORE, NO CAPITAL GAIN ARI SING IN THE YEAR UNDER CONSIDERATION. ACCORDINGLY, HE DELETED THE A DDITION MADE BY THE ASSESSING OFFICER IN THE CASE OF BOTH THE ASSES SEES. THE LD. D.R. SUBMITTED THAT IN VIEW OF JOINT DEVELOPMENT AG REEMENT, THE TRANSFER TOOK PLACE DURING THE YEAR UNDER CONSIDERA TION, THEREFORE, THE CIT(APPEALS) IS NOT JUSTIFIED IN DELETING THE A DDITION MADE BY THE ASSESSING OFFICER. 4. ON THE CONTRARY, SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSEES, SUBMITTED THAT NO DOUBT, THE ASSESSEES A LONG WITH CO- 4 I.T.A. NO.613/MDS/16 OWNERS ENTERED INTO A JOINT DEVELOPMENT AGREEMENT W ITH M/S VIJAY SHANTHI BUILDERS LTD. FOR DEVELOPMENT OF PROPERTY. SUBSEQUENTLY, THE JOINT DEVELOPMENT AGREEMENT WAS CANCELLED BY WA Y OF SUPPLEMENTARY AGREEMENT AND THE PROPERTY WAS SOLD O N OUTRIGHT SALE. REFERRING TO THE ORDER OF THE CIT(APPEALS), THE LD.COUNSEL SUBMITTED THAT AFTER REPRODUCING THE JOINT DEVELOPM ENT AGREEMENT, THE CIT(APPEALS) FOUND THAT THERE WAS NO TRANSFER O F CAPITAL ASSET DURING THE YEAR UNDER CONSIDERATION. IN FACT, ACCO RDING TO THE LD. COUNSEL, THE CIT(APPEALS) PLACED HIS RELIANCE ON TH E DECISION OF THIS TRIBUNAL IN VIJAYA PRODUCTIONS (P.) LTD. V. ADDL CI T 17 TAXMAN.COM 223. ACCORDING TO THE LD. COUNSEL, AS PER THIS JOI NT DEVELOPMENT AGREEMENT, THE ASSESSEES HANDED OVER ALL THE ORIGIN AL DOCUMENTS OF TITLE TO THE DEVELOPER. 5. REFERRING TO CLAUSE (31) OF THE AGREEMENT AT PAG E 42 OF THE PAPER-BOOK, THE LD.COUNSEL FOR THE ASSESSEES SUBMIT TED THAT THE DEVELOPMENT AGREEMENT SHOULD NOT BE CONSTRUED AS DE LIVERY OF POSSESSION BEING PART PERFORMANCE UNDER SECTION 53A OF TRANSFER OF PROPERTY ACT. THE POSSESSION SHALL CONTINUE TO BE WITH OWNERS OF THE LAND. THE DEVELOPER WAS GIVEN ONLY A LICENCE T O DEVELOP THE LAND. IN VIEW OF THIS, THE LD.COUNSEL CONTENDS THA T THE POSSESSION OF 5 I.T.A. NO.613/MDS/16 PROPERTY WAS NOT HANDED OVER TO THE DEVELOPER AND W HAT WAS GIVEN TO THE DEVELOPER IS ONLY A LICENCE TO CONSTRUCT THE BUILDING AND THE POSSESSION ALWAYS REMAINED WITH THE OWNERS. THEREF ORE, ACCORDING TO THE LD. COUNSEL, THERE WAS NO TRANSFER WITHIN TH E MEANING OF SECTION 2(47) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). HENCE, AS RIGHTLY FOUND BY THE CIT(APPEALS), ACCORD ING TO THE LD. COUNSEL, THERE CANNOT BE ANY CAPITAL GAIN ARISING F OR CONSIDERATION DURING THE YEAR UNDER CONSIDERATION. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. FOR THE PURPOSE OF ASSESSING CAPITAL GAIN, THERE SHALL BE TRANSFER OF CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(47) OF THE ACT. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 2(47) OF THE ACT WHICH READS AS FOLLOWS:- (47) TRANSFER, IN RELATION TO A CAPITAL ASSET, INCL UDES, (I) THE SALE, EXCHANGE OR RELINQUISHMENT OF THE ASSE T ; 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 6 I.T.A. NO.613/MDS/16 (IVA) THE MATURITY OR REDEMPTION OF A ZERO COUPON B OND ; OR (V) ANY TRANSACTION INVOLVING THE ALLOWING OF THE P OSSESSION 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 WAY OF BECOMING A MEMBER OF, OR ACQUIRING SHARES IN, A CO-OPERATIVE SOCIETY, COM PANY OR OTHER ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT O R ANY ARRANGEMENT OR IN ANY OTHER MANNER WHATSOEVER) WHIC H HAS THE EFFECT OF TRANSFERRING, OR ENABLING THE ENJOYMENT O F, ANY IMMOVABLE 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 CLARIFIE D THAT TRANSFER INCLUDES AND SHALL BE DEEMED TO HAV E ALWAYS INCLUDED DISPOSING OF OR PARTING WITH AN ASSET OR A NY INTEREST THEREIN, OR CREATING ANY INTEREST IN ANY ASSET IN A NY MANNER WHATSOEVER, DIRECTLY OR INDIRECTLY, ABSOLUTELY OR C ONDITIONALLY, VOLUNTARILY OR INVOLUNTARILY, BY WAY OF AN AGREEMEN T (WHETHER ENTERED INTO IN INDIA OR OUTSIDE INDIA) OR OTHERWIS E, NOTWITHSTANDING THAT SUCH TRANSFER OF RIGHTS HAS BE EN CHARACTERISED AS BEING EFFECTED OR DEPENDENT UPON O R FLOWING FROM THE TRANSFER OF A SHARE OR SHARES OF A COMPANY REGISTERED OR INCORPORATED OUTSIDE INDIA ; 7. IN THIS CASE, THE ASSESSEES HANDED OVER THE ORIG INAL DOCUMENTS OF TITLE DEEDS AT THE TIME OF EXECUTION O F JOINT DEVELOPMENT AGREEMENT ALONG WITH OTHER CO-OWNERS. CLAUSE (31) OF THE JOINT DEVELOPMENT AGREEMENT READS AS FOLLOWS:- (31) SUCH PERMISSION TO ENTIRE SCHEDULE A PROPERTY S HALL HOWEVER NOT BE CONSTRUED AS DELIVERY OF POSSESSION UNDER SE CTION 53A OF THE TRANSFER OF PROPERTY ACT. THE LEGAL POSSESSION OF THE 7 I.T.A. NO.613/MDS/16 SCHEDULE A PROPERTY, SHALL CONTINUE TO VEST WITH TH E OWNERS. THE DEVELOPER IS ONLY PERMITTED TO ENTER UPON THE SCHED ULE A PROPERTY BY WAY OF LICENCE TO DEVELOP THE SAME. 8. IN VIEW OF THE ABOVE, THERE WAS A CLEAR UNDERSTA NDING BETWEEN THE PARTIES. WHAT WAS GIVEN TO THE DEVELOP ER IS ONLY A LICENCE TO DEVELOP THE LAND AND THE POSSESSION OF P ROPERTY WILL CONTINUE TO BE WITH THE OWNERS OF THE LAND INCLUDIN G THE ASSESSEE. A SUBSEQUENT AGREEMENT WAS APPEARED TO HAVE BEEN EN TERED ON 19 TH APRIL, 2010, A COPY OF WHICH IS AVAILABLE AT PAGE 48 OF THE PAPER-BOOK. AS PER THIS SUPPLEMENTARY AGREEMENT, T HE PARTIES AGREED TO SELL THE LAND INSTEAD OF DEVELOPMENT. IN VIEW OF CLAUSE (31) OF THE JOINT DEVELOPMENT AGREEMENT, IT IS OBVI OUS THAT THERE WAS NO TRANSFER OF PROPERTY DURING THE YEAR UNDER CONSI DERATION CONSEQUENT TO THE JOINT DEVELOPMENT AGREEMENT. SUB SEQUENTLY, THE JOINT DEVELOPMENT AGREEMENT WAS SUBSTITUTED BY SUPP LEMENTARY AGREEMENT WHEREIN THE PARTIES AGREED TO SELL THE PR OPERTY ON OUTRIGHT SALE. 9. WHEN THE APPEAL OF SHRI PRAVIN KUMAR JAIN, ONE O F THE CO- OWNERS OF THE PROPERTY, CAME BEFORE THIS TRIBUNAL I N I.T.A. NO.764/MDS/2016, THIS TRIBUNAL VIDE ITS ORDER DATED 23.06.2017, REMITTED THE MATTER BACK TO THE FILE OF THE ASSESSI NG OFFICER. 8 I.T.A. NO.613/MDS/16 HOWEVER, THERE WAS NO DISCUSSION ABOUT CLAUSE (31) OF THE JOINT DEVELOPMENT AGREEMENT. EVEN IF WE CONSIDER THAT TH E SUBSEQUENT SUPPLEMENTARY AGREEMENT IS A SUSPICIOUS ONE, THE JO INT DEVELOPER HAS NO RIGHT TO RETAIN THE PROPERTY AS PART PERFORM ANCE OF CONTRACT FOR SALE OR AS AN ARRANGEMENT TO ENJOY THE PROPERTY . IN OTHER WORDS, THE DEVELOPER WAS GIVEN ONLY A LICENCE TO DEVELOP T HE PROPERTY AND THE POSSESSION OF PROPERTY CONTINUES TO REMAIN WITH THE LAND OWNERS INCLUDING THE ASSESSEES. THIS FACTUAL ASPECT IS CR UCIAL FOR DECIDING WHETHER THE CAPITAL GAIN IS TO BE ASSESSED IN THE H ANDS OF THE ASSESSEES FOR THE YEAR UNDER CONSIDERATION OR IN TH E SUBSEQUENT YEAR. THEREFORE, IN VIEW OF CLAUSE (31) IN THE JOI NT DEVELOPMENT AGREEMENT, IT IS CERTAIN THAT THERE WAS NO TRANSFER OF CAPITAL GAIN DURING THE YEAR UNDER CONSIDERATION. 10. IN THE CASE OF SHRI UTTAM KUMAR JAIN, ONE OF TH E CO-OWNERS, CLAUSE (31) IN THE JOINT DEVELOPMENT AGREEMENT WAS NOT BROUGHT TO THE NOTICE OF THE BENCH. THE TRIBUNAL HAS NOT CONS IDERED CLAUSE (31) OF THE JOINT DEVELOPMENT AGREEMENT. THEREFORE , THE ORDER OF THIS TRIBUNAL IN THE JOINT OWNERS CASE, WHEREIN TH E CRUCIAL, FACTUAL ASPECT WAS NOT CONSIDERED IS NOT APPLICABLE AT ALL. 9 I.T.A. NO.613/MDS/16 11. IN VIEW OF SPECIFIC CLAUSE IN (31) OF THE JOINT DEVELOPMENT AGREEMENT, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THERE WAS NO TRANSFER DURING THE YEAR UNDER CONSIDERATION. H ENCE, THERE CANNOT BE ANY ASSESSMENT OF CAPITAL GAIN DURING THE YEAR UNDER CONSIDERATION. ACCORDINGLY, THE ORDER OF THE CIT(A PPEALS) IS CONFIRMED. 12. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE DISMISSED. ORDER PRONOUNCED ON 27 TH SEPTEMBER, 2017 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 27 TH SEPTEMBER, 2017. KRI. . ,156 76(1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 81 () /CIT(A)-3, CHENNAI 4. PRINCIPAL CIT, CHENNAI- 5, CHENNAI 5. 69 ,1 /DR 6. :' ; /GF.