Sri. Tejas, Bangalore V. ITO, Bangalore

ITA 647/BANG/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7466 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-03-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 27-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H L SOWMYA ACHAR
• Keywords: Capital asset; Question of law
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NOS.647 & 648/BANG/2015 ASSESSMENT YEAR : 2007-08 SHRI TEJAS PAN: AKBPT 3433F SRI NARAYANASWAMY PAN: ACZPN 1342H NO.258, 2 ND FLOOR, MARAPPA COMPOUND, BELATHUR, BANGALORE 560 067. VS. THE INCOME TAX OFFICER, WARD 7(2), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SMT. SHEETAL, ADVOCATE RESPONDENT BY : SMT. H.L. SOWMYA ACHAR, ADDL. CIT(DR) DATE OF HEARING : 18.09.2017 DATE OF PRONOUNCEMENT : 13.10.2017 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THESE APPEALS ARE PREFERRED BY THE ASSESSEE AGA INST THE RESPECTIVE ORDERS OF CIT(APPEALS) ON COMMON GROUNDS . WE, HOWEVER, FOR THE SAKE OF REFERENCE, EXTRACT THE GROUNDS IN ITA N O.647/BANG/2015:- 1. THE LEARNED CIT (APPEALS) ERRED IN PASSING THE ORDER IN THE MANNER IN WHICH HE DID. ITA NOS.647 & 648/BANG/2015 PAGE 2 OF 11 2. THE LEARNED CIT (APPEALS) OUGHT TO HAVE APPRECI ATED THAT THE ASSESSING OFFICER HAVING FAILED TO DEMONSTRATE HOW THE CASE WAS SELECTED FOR SCRUTINY, THE CONSEQUENTIAL ASSESS MENT ORDER IS BAD IN LAW AND ACCORDINGLY HE OUGHT TO HAVE DELETED THE ADDITION. 3. THE LEARNED CIT (APPEALS) FURTHER OUGHT TO HAVE APPRECIATED THAT THE TRANSFER ITSELF HAVING NOT BEE N COMPLETED AS NO TRANSFEREE WAS IDENTIFIED, NO CAPITAL GAINS AROS E IN THE HANDS OF THE APPELLANT TO BE DECLARED AND CONSEQUENTLY TO BE TAXED IN THE APPELLANT'S HANDS. 4. THE LEARNED CIT (APPEALS) OUGHT TO HAVE APPRECI ATED THAT THE CAPITAL GAIN TAX SHOULD BE LEVIED ONLY ON COMPL ETION OF THE ENTIRE TRANSACTION WHEN THE SUPER BUILT-UP AREA IS HANDED OVER TO THE APPELLANT AS PER THE AGREEMENT. 5. THE LEARNED CIT (APPEALS) ERRED IN NOT CONSIDER ING THE RELIANCE PLACED BY THE APPELLANT ON THE JURISDICTIO NAL HIGH COURT JUDGMENT IN THE CASE OF SRI N.VEMANNA REDDY IN ITA NO.591/08 DATED 18.08.2014. 6. WITHOUT PREJUDICE, THE TRANSACTION HAVING NOT B EEN COVERED BY THE DEFINITION OF 'TRANSFER' EITHER WITH IN THE MEANING OF SECTION 2(47) OF THE ACT OR SECTION 53A OF THE T RANSFER OF PROPERTY ACT, NO CAPITAL GAIN AROSE IN THE HANDS OF THE APPELLANT. 7. WITHOUT PREJUDICE, THE ADDITION AS CONFIRMED BY THE LEARNED CIT (APPEALS) IS ARBITRARY, EXCESSIVE AND O UGHT TO BE DELETED IN TOTO. 8. THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING T HE LEVY OF INTEREST UNDER SECTIONS 234A AND 234B OF THE ACT. 9. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE UR GED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT THE APPEA L MAY BE ALLOWED. SINCE BOTH THESE APPEALS WERE HEARD TOGETHER AND TH E ISSUES INVOLVED THEREIN ARE THE SAME, THESE ARE BEING DISPOSED OF T HROUGH THIS CONSOLIDATED ORDER. ITA NOS.647 & 648/BANG/2015 PAGE 3 OF 11 2. THOUGH VARIOUS GROUNDS ARE RAISED IN THIS APPEA L, BUT THEY ALL RELATE TO THE YEAR OF CHARGEABILITY OF CAPITAL GAIN ACCRUE D ON TRANSFER OF LAND UNDER THE JOINT DEVELOPMENT AGREEMENT (JDA) TO THE BUILDE R FOR CONSTRUCTING THE PROPERTY. 3. THE FACTS BORNE OUT FROM THE RECORD ARE THAT SHR I TEJAS AND HIS FATHER SHRI NARAYANASWAMY ENTERED INTO JDA WITH M/S . SAI CONSTRUCTION ON 03.11.2006. CONSEQUENT TO SIGNING THE JDA, BOTH TH E ASSESSES HAVE TRANSFERRED 62% UNDIVIDED SHARE IN A LAND OUT OF 23 GUNTAS IN A LAND SITUATED AT BELATHUR VILLAGE, BIDRAHALLI HOBLI, BAN GALORE EAST TALUK, BANGALORE, IN LIEU OF TRANSFER OF 62% OF UNDIVIDED SHARE TO THE BUILDER, THE ASSESSEE TO RECEIVE 38% OF SUPER BUILT UP AREA TO B E DEVELOPED BY THE BUILDER. ON THE BASIS OF THE JDA, THE AO HAS CALCU LATED THE LONG TERM CAPITAL GAIN AT RS.1,48,69,650 AND TAXED IT IN THE IMPUGNED ASSESSMENT YEAR. 4. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( APPEALS) WITH THE SUBMISSION THAT THE ASSESSEE HAS NOT TRANSFERRED TH E POSSESSION OF THE LAND IN THE IMPUGNED ASSESSMENT YEAR, THEREFORE, TH E CAPITAL GAIN CANNOT BE CHARGED IN THE IMPUGNED ASSESSMENT YEAR AS PER T HE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. DR. T.K. DAYALU, 14 TAXMANN.COM 120 (KAR) AND CIT V. SHRI N. VEMANA REDDY IN ITA NO.591/2008 DATED 18.08.2014. ITA NOS.647 & 648/BANG/2015 PAGE 4 OF 11 5. THE LD. CIT(APPEALS) WAS NOT CONVINCED WITH THE CONTENTIONS OF THE ASSESSEE AND HE ACCORDINGLY CONFIRMED THE ORDER OF THE AO TAXING THE LONG TERM CAPITAL GAIN IN THE IMPUGNED ASSESSMENT YEAR. NOW THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND DURING THE COURSE OF HEARING, THE LD. COUNSEL FOR T HE ASSESSEE HAS INVITED OUR ATTENTION TO THE JDA AND SHARING AGREEM ENT IN WHICH IT HAS BEEN MENTIONED THAT PLAN WAS SANCTIONED ON 31.1 0.2007 AND BEFORE THE SANCTION OF PLAN, THERE WAS NO QUESTION OF HANDING OVER OR TRANSFER OF THE LAND TO THE BUILDER. SINCE THE LAND WAS NOT TRANSFERRED TO THE BUILDER IN THE IMPUGNED ASSESSME NT YEAR, THE CAPITAL GAIN CANNOT BE CHARGED. AT THE MOST, THE C APITAL GAIN CAN ONLY BE HELD TO HAVE BEEN ACCRUED IN THE YEAR OF HA NDING OVER OF POSSESSION OF THE LAND. THE LD. COUNSEL FOR THE AS SESSEE FURTHER INVITED OUR ATTENTION TO THE DATES & EVENTS, ACCORD ING TO WHICH, THE CONVERSION ORDER WAS PASSED ON 12.09.2007 AND BUILD ING PLAN WAS SANCTION ON 28.07.2007 AND CONSTRUCTION WAS STARTED ON 11.11.2007, MEANING THEREBY THAT THE LAND CANNOT BE TRANSFERRED BEFORE THE SANCTION OF PLAN OR THE CONVERSION ORDER. IT MEANS THE LAND WAS TRANSFERRED ONLY IN THE AY 2008-09. IN SUPPORT OF THESE CONTENTIONS, HE RELIED UPON THE JUDGMENTS OF THE HON'BLE JURISD ICTIONAL HIGH COURT IN THE CASES OF CIT V. T.K. DAYALU, 202 TAXMAN 531 AND CIT V. N. VEMANNA REDDY IN ITA NO.519/2008. ITA NOS.647 & 648/BANG/2015 PAGE 5 OF 11 6. THE LD. DR PLACED RELIANCE UPON THE ORDER OF CIT (APPEALS). 7. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWE R AUTHORITIES, THE JDA DATED 03.11.2006 AND SHARING AGREEMENT DATED 11 .02.2008, WE FIND THAT THE AO HAS CHARGED THE LONG TERM CAPITAL GAIN DURING THE IMPUGNED ASSESSMENT YEAR ON THE BASIS OF THE JDA WITHOUT ASC ERTAINING THE FACT AS TO WHEN THE POSSESSION OF THE LAND WAS TRANSFERRED. A S PER THE SHARING AGREEMENT APPEARING AT PAGES 49 TO 58 OF THE ASSESS EES COMPILATION, WE FIND THAT THE PLAN WAS SANCTIONED BY THE BDA VIDE L ETTER NO.65/2007-08 DATED 31.10.2007. ACCORDING TO THE ASSESSEE, THE C ONVERSION ORDER WAS PASSED ON 12.09.2007 AND BUILDING CONSTRUCTION STAR T DATE WAS 11.11.2007. FROM A PERUSAL OF THE DETAILS, WE FIND THAT THE BDA PLAN WAS NOT SANCTIONED IN THE IMPUGNED ASSESSMENT YEAR NOR THE CONVERSION ORDER WAS PASSED. THOUGH ASSESSEE HAS SPECIFICALLY CONTENDED THAT POS SESSION OF THE LAND WAS NOT TRANSFERRED TO THE BUILDER, BUT THE REVENUE DID NOT BRING ANYTHING ON RECORD TO DEMOLISH THE CONTENTIONS OF THE ASSESSEE, AS THE ASSESSEE IN SUPPORT OF ITS CONTENTIONS TAKES SUPPORT FROM THE D ATE OF CONVERSION ORDER AND BUILDING PLAN SANCTIONED. IN THE ABSENCE OF AN Y EVIDENCE ON BEHALF OF THE REVENUE, WE ARE OF THE VIEW THAT BEFORE THE SAN CTION OF THE BUILDING PLAN, POSSESSION OF THE LAND IS NOT TRANSFERRED. I F THE REVENUE HAS SOMETHING IN ITS POSSESSION TO DEMONSTRATE THAT POS SESSION OF LAND WAS TRANSFERRED TO THE ASSESSEE IN THE IMPUGNED ASSESSM ENT YEAR, THEN ONLY THE LONG TERM CAPITAL GAIN CAN BE CHARGED IN THE IM PUGNED ASSESSMENT YEAR. SINCE NOTHING IS PLACED ON RECORD ON BEHALF OF THE REVENUE IN THIS ITA NOS.647 & 648/BANG/2015 PAGE 6 OF 11 REGARD, WE FIND NO JUSTIFICATION TO IGNORE THE CONT ENTIONS OF THE ASSESSEE. THROUGH THE SHARING AGREEMENT IT HAS BEEN ESTABLISH ED THAT BUILDING PLAN WAS SANCTIONED ON 31.10.2007, THEREFORE BEFORE THE SANCTIONING OF THE BUILDING PLAN, TRANSFER OF THE LAND CANNOT BE EFFEC TED. IN THE LIGHT OF THESE FACTS, WE ARE OF THE CONSIDERED VIEW THAT POSSESSIO N OF LAND WAS NOT TRANSFERRED TO THE BUILDER IN THE IMPUGNED ASSESSME NT YEAR. 8. WE HAVE ALSO CAREFULLY EXAMINED THE JUDGMENT OF THE VARIOUS HIGH COURTS ON THE POINT OF YEAR OF CHARGEABILITY AND IT HAS BEEN REPEATEDLY HELD BY VARIOUS HIGH COURTS THAT YEAR OF CHARGEABILITY S HALL BE THE YEAR IN WHICH THE POSSESSION OF LAND WAS TRANSFERRED. THIS ASPEC T WAS EXAMINED BY THIS BENCH OF THE TRIBUNAL IN THE CASE OF SMT. UMA NARENDRA IN ITA NO.2305/BANG/2016 IN WHICH IT WAS HELD THAT THE YEAR OF CHARGEABILIT Y IS THE YEAR IN WHICH THE POSSESSION OF LAND IS TRANSFERRED . THE RELEVANT PARAS OF THE ORDER OF THE TRIBUNAL ARE EXTRACTED HEREUNDER:- 12. IN THE CASE OF T.K. DAYALU (SUPRA) , THE HON'BLE JURISDICTIONAL HIGH COURT HAS CATEGORICALLY HELD THAT THE RELEVANT YEAR FOR TAXING THE CAPITAL GAIN IS THE YEAR IN WHICH THE POSSESSION WA S HANDED OVER IN TERMS OF THE JDA TO THE DEVELOPER. THIS VIEW WAS A GAIN CONCURRED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT V. N. VEMANNA REDDY IN ITA NO.501/2008 DATED 18.08.2014. THE RELEVANT OBSERVATIONS OF THE HONBLE HIGH COURT IN THE CASE OF N. VEMANNA REDDY (SUPRA) IS EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- 3. THIS COURT, IN THE CASE OF COMMISSIONER VS. D.K. DAYAL REPORTED IN 202 TAXMAN 531 , AFTER NOTICING THE CASE LAW ON THE POINT, HAS HELD THAT THE DATE ON WHICH POSSESSION W AS HANDED OVER TO THE DEVELOPER IS RELEVANT AND THEREFORE, TH E CAPITAL GAIN TAX IS PAYABLE FOR THE ASSESSMENT YEAR IN WHICH THE POSSESSION WAS HANDED OVER IN TERMS OF THE JOINT DEVELOPMENT A GREEMENT. ITA NOS.647 & 648/BANG/2015 PAGE 7 OF 11 THEREFORE, ON MERE ENTERING INTO A JOINT DEVELOPMEN T AGREEMENT THERE IS NO TRANSFER. THE TRANSFER IN THE INCOME TAX ACT TAKES PLACE ON THE DATE THE POSSESSION OF THE PROPERTY IS DELIVERED THOUGH NOT A REGISTERED DOCUMENT IS EXECUTED CONVEY ING THE TITLE. 4. IN THE INSTANT CASE, THE AUTHORITIES HAVE HELD T HAT THE CAPITAL GAIN TAX IS PAYABLE IN THE ASSESSMENT YEAR 1995-96 WHEN THE JOINT DEVELOPMENT AGREEMENT WAS ENTERED INTO BY THE ASSES SEE WITH THE DEVELOPER FOR TRANSFER OF 66% INTEREST IN AN UNDIVI DED IMMOVABLE PROPERTY AND POSSESSION OF THE LAND WAS HANDED OVER AND NOT WHEN THE BUILT UP AREA WAS COMPLETED AND HANDED OVE R TO THE ASSESSEE IN THE ASSESSMENT YEAR 1998-99. HENCE, WE ANSWER THE SUBSTANTIAL QUESTION OF LAW RAISED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE .. 13. THE VIEW TAKEN BY THE HIGH COURT HAS NOW BEEN APPROVED BY THE HONBLE APEX COURT IN THE CASE OF CIT V. BALBIR SIN GH MAINI IN CIVIL APPEAL NO.15619 OF 2017 VIDE ITS JUDGMENT DATED 04. 10.2017 THAT WITHOUT ACQUIRING A RIGHT TO RECEIVE INCOME, NO PRO FIT OR GAIN ARISES FROM TRANSFER OF A CAPITAL SO AS TO ATTRACT SECTION S 45 & 48 OF THE INCOME-TAX ACT. THE RELEVANT OBSERVATIONS OF THE H ONBLE APEX COURT ARE EXTRACTED HEREUNDER:- 23. A READING OF THE JDA IN THE PRESENT CASE WOUL D SHOW THAT THE OWNER CONTINUES TO BE THE OWNER THROUGHOUT THE AGREEMENT, AND HAS AT NO STAGE PURPORTED TO TRANSFER RIGHTS AK IN TO OWNERSHIP TO THE DEVELOPER. AT THE HIGHEST, POSSESSION ALONE IS GIVEN UNDER THE AGREEMENT, AND THAT TOO FOR A SPECIFIC PURPOSE -THE PURPOSE BEING TO DEVELOP THE PROPERTY, AS ENVISAGED BY ALL THE PARTIES. WE ARE, THEREFORE, OF THE VIEW THAT THIS CLAUSE WILL A LSO NOT ROPE IN THE PRESENT TRANSACTION. 24. THE MATTER CAN ALSO BE VIEWED FROM A SLIGHTLY DIFFERENT ANGLE. SHRI VOHRA IS RIGHT WHEN HE HAS REFERRED TO SECTIONS 45 AND 48 OF THE INCOME TAX ACT AND HAS THEN ARGUED THAT S OME REAL INCOME MUST ARISE ON THE ASSUMPTION THAT THERE IS TRANSFER OF A CAPITAL ASSET. THIS INCOME MUST HAVE BEEN RECEIVED OR HAVE ACCRUED UNDER SECTION 48 AS A RESULT OF THE TRANS FER OF THE CAPITAL ASSET. 25. THIS COURT IN E.D. SASSOON & CO. LTD. V. CIT, (1955) 1 SCR 313 AT 343 HELD: ITA NOS.647 & 648/BANG/2015 PAGE 8 OF 11 IT IS CLEAR THEREFORE THAT INCOME MAY ACCRUE TO AN ASSESSEE WITHOUT THE ACTUAL RECEIPT OF THE SAME. IF THE ASSESSEE ACQUIRES A RIGHT TO RECEIVE THE INCOME, TH E INCOME CAN BE SAID TO HAVE ACCRUED TO HIM THOUGH IT MAY BE RECEIVED LATER ON ITS BEING ASCERTAINED. THE BASIC CONCEPTION IS THAT HE MUST HAVE ACQUIRED A RIGHT TO RECEIVE THE INCOME. THERE MUST BE A DEBT OWED TO HIM BY SOMEBODY. THERE MUST BE AS IS OTHERWISE EXPRESSED DEBITUM IN PRESENTI, SOLVENDUM IN FUTURO; SEE W.S. TRY LTD. V. JOHNSON (INSPECTOR OF TAXES) [(1946) 1 AER 5 32 AT P. 539], AND WEBB V. STENTON, GARNISHEES [11 QBD 51 8 AT P. 522 AND 527]. UNLESS AND UNTIL THERE IS CREATED IN FAVOUR OF THE ASSESSEE A DEBT DUE BY SOMEBODY IT CANNOT BE SAID THAT HE HAS ACQUIRED A RIGHT TO RECEIVE THE INCOME OR THAT INCOME HAS ACCRUED TO HIM. 26. THIS COURT, IN COMMISSIONER OF INCOME TAX V. E XCEL INDUSTRIES, (2014) 13 SCC 459 AT 463-464 REFERRED T O VARIOUS JUDGMENTS ON THE EXPRESSION ACCRUES, AND THEN HEL D: 14. FIRST OF ALL, IT IS NOW WELL SETTLED THAT INC OME TAX CANNOT BE LEVIED ON HYPOTHETICAL INCOME. IN CIT V. SHOORJI VALLABHDAS AND CO. [CIT V. SHOORJI VALLABHDAS AND C O., (1962) 46 ITR 144 (SC)] IT WAS HELD AS FOLLOWS: (IT R P. 148) INCOME TAX IS A LEVY ON INCOME. NO DOUBT, THE INCOME TAX ACT TAKES INTO ACCOUNT TWO POINTS OF TIM E AT WHICH THE LIABILITY TO TAX IS ATTRACTED, VIZ., T HE ACCRUAL OF THE INCOME OR ITS RECEIPT; BUT THE SUBSTANCE OF THE MATTER IS THE INCOME. IF INCOME DOES NOT RESULT AT ALL, THERE CANNOT BE A TAX, EVEN THOUGH IN BOOKKEEPING, AN ENTRY IS MADE ABOUT A HYPOTHETICAL INCOME, WHICH DOES NOT MATERIALISE. WHERE INCOME HAS, IN FACT, BEEN RECEIVED 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, HOWEVER, THE INCOME CAN BE SAID NOT TO HAVE RESULTED AT ALL, THERE IS OBVIOUSLY 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. ITA NOS.647 & 648/BANG/2015 PAGE 9 OF 11 15. THE ABOVE PASSAGE WAS CITED WITH APPROVAL IN MO RVI INDUSTRIES LTD. V. CIT [MORVI INDUSTRIES LTD. V. CI T, (1972) 4 SCC 451 : 1974 SCC (TAX) 140 : (1971) 82 ITR 835] I N WHICH THIS COURT ALSO CONSIDERED THE DICTIONARY MEANING O F THE WORD ACCRUE AND HELD THAT INCOME CAN BE SAID TO ACCRUE WHEN IT BECOMES DUE. IT WAS THEN OBSERVED THAT: (SCC P. 454 , PARA 11) 11. THE DATE OF PAYMENT DOES NOT AFFECT THE A CCRUAL OF INCOME. THE MOMENT THE INCOME ACCRUES, THE ASSESSEE GETS VESTED WITH THE RIGHT TO CLAIM THAT AMOUNT EVE N THOUGH IT MAY NOT BE IMMEDIATELY. 16. THIS COURT FURTHER HELD, AND IN OUR OPINION MO RE IMPORTANTLY, THAT INCOME ACCRUES WHEN THERE ARISES A CORRESPONDING LIABILITY OF THE OTHER PARTY FROM WHO M THE INCOME BECOMES DUE TO PAY THAT AMOUNT. 17. IT FOLLOWS FROM THESE DECISIONS THAT INCOME AC CRUES WHEN IT BECOMES DUE BUT IT MUST ALSO BE ACCOMPANIED BY A CORRESPONDING LIABILITY OF THE OTHER PARTY TO PAY T HE AMOUNT. ONLY THEN CAN IT BE SAID THAT FOR THE PURPOSES OF TAXABI LITY THAT THE INCOME IS NOT HYPOTHETICAL AND IT HAS REALLY ACCRUE D TO THE ASSESSEE. 18. INSOFAR AS THE PRESENT CASE IS CONCERNED, EVEN IF IT IS ASSUMED THAT THE ASSESSEE WAS ENTITLED TO THE BENEF ITS UNDER THE ADVANCE LICENCES AS WELL AS UNDER THE DUTY ENTITLEM ENT PASSBOOK, THERE WAS NO CORRESPONDING LIABILITY ON THE CUSTOMS AUTHORITIES TO PASS ON THE BENEFIT OF DUTY-FREE IMPORTS TO THE ASSESSEE UNTIL THE GOODS ARE ACTUALLY IMPORTED AND MADE AVAILABLE FOR CLEARANCE. THE BENEFITS REPRESENT, AT BEST, A HYPOTHETICAL INC OME WHICH MAY OR MAY NOT MATERIALISE AND ITS MONEY VALUE IS, THER EFORE, NOT THE INCOME OF THE ASSESSEE. 27. IN THE FACTS OF THE PRESENT CASE, IT IS CLE AR THAT THE INCOME FROM CAPITAL GAIN ON A TRANSACTION WHICH NEVER MATERIALI ZED IS, AT BEST, A HYPOTHETICAL INCOME. IT IS ADMITTED THAT, FOR WANT OF PERMISSIONS, THE ENTIRE TRANSACTION OF DEVELOPMENT ENVISAGED IN THE JDA FELL THROUGH. IN POINT OF FACT, INCOME DID NOT RESULT AT ALL FOR THE AFORESAID REASON. THIS BEING THE CASE, IT IS CLEAR THAT THERE IS NO P ROFIT OR GAIN WHICH ARISES FROM THE TRANSFER OF A CAPITAL ASSET, WHICH COULD BE BROUGHT TO TAX UNDER SECTION 45 READ WITH SECTION 48 OF THE IN COME TAX ACT. ITA NOS.647 & 648/BANG/2015 PAGE 10 OF 11 28. IN THE PRESENT CASE, THE ASSESSEE DID NOT ACQUI RE ANY RIGHT TO RECEIVE INCOME, INASMUCH AS SUCH ALLEGED RIGHT WAS DEPENDENT UPON THE NECESSARY PERMISSIONS BEING OBTAINED. THIS BEIN G THE CASE, IN THE CIRCUMSTANCES, THERE WAS NO DEBT OWED TO THE ASSESS EES BY THE DEVELOPERS AND THEREFORE, THE ASSESSEES HAVE NOT AC QUIRED ANY RIGHT TO RECEIVE INCOME UNDER THE JDA. THIS BEING SO, NO PRO FITS OR GAINS AROSE FROM THE TRANSFER OF A CAPITAL ASSET SO AS TO ATTRACT SECTIONS 45 AND 48 OF THE INCOME TAX ACT. 14. SINCE IT HAS NOT BEEN ESTABLISHED BY THE REVENU E THAT POSSESSION WAS EVER TRANSFERRED TO THE TRANSFEREE AND NOW THE JDA HAS BEEN CANCELLED AND THE MATTER HAS BEEN REFERRED TO THE ARBITRATOR FOR SETTLEMENT OF THE DISPUTE, WE ARE OF THE VIEW THAT NO CAPITAL GAIN HAS ACCRUED IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF THE JDA. WHATEVER AMOUNT WAS RECEIVED ON EXECUTION OF THE JDA, IT WAS ONLY A REFUNDABLE SECURITY WHICH CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE AS LONG TERM CAPITAL GAIN. ACCORDINGLY THE ORDER OF THE CI T(APPEALS) IS SET ASIDE AND THE ADDITIONS CONFIRMED THEREIN ARE DELET ED. 9. IN THE LIGHT OF THESE FACTS, WE ARE OF THE CONSI DERED VIEW THAT THE LAND WAS NOT TRANSFERRED IN THE IMPUGNED ASSESSMENT YEAR , THEREFORE THE LONG TERM CAPITAL GAIN CANNOT BE CHARGED IN THE IMPUGNED ASSESSMENT YEAR. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(APPE ALS) AND DELETE THE ADDITIONS MADE THEREIN. HOWEVER, THE REVENUE IS AT LIBERTY TO TAX THE LONG TERM CAPITAL GAIN IN THE YEAR OF TRANSFER OF LAND T O THE BUILDER. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE S ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF OCTOBER, 2017. SD/- SD/- ( A.K. GARODIA ) ( SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 13 TH OCTOBER, 2017. / D ESAI S MURTHY / ITA NOS.647 & 648/BANG/2015 PAGE 11 OF 11 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.