M/s Jaico Automobile Engineering Company Pvt Ltd , Bangalore V. The Deputy Commissioner of Income Tax Circle-11(5), Bangalore

ITA 933/BANG/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3167 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-09-2021
• Assessment Year: 2007-2008
• Appeal Filed On: 25-04-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Gift; Business income; Deemed to accrue or arise in india; Advance ruling; Corroborative evidences; Set aside; Capital Gains
• Section: 143(3); 234B; 192; 13; 22; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI , JUDICIAL MEMBER IT A NO. 933/BANG/2017 ASSESSMENT YEAR: 2007 - 08 M/S. JAICO AUTOMOBILE ENGINEERING COMPANY PVT. LTD., 9/10, II STAGE, D.K. INDUSTRIAL AREA, MAHADEVAPURA, BANGALORE 560 048. PAN: AAACJ 5640E VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(5), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : S MT. SHEETAL BORKAR, ADVOCATE RESPONDENT BY : SHRI MUZAFFAR HUSSAIN, CI T(DR)(ITAT), B ENGALURU. DATE OF HEARING : 08 . 0 9 .202 1 DATE OF PRONOUNCEMENT : 11 . 1 0 .202 1 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE CIT(APPEALS) DATED 17.12.2014 ON THE FOLLOWING GROU NDS:- L. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN UPHOLDING THE DISALLOWANCE OF TR AVEL EXPENDITURE TO THE EXTENT CONFIRMED BY HIM. (RS.1,6 8,371). 2. THE LEARNED COMMISSIONER (A) ERRED IN UPHOLDING THE INTEREST EXPENDITURE TO THE EXTENT OF RS.17,26, 100/-. 3. THE LEARNED COMMISSIONER (A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSMENT STOOD SET ASIDE EVE N ITA NO.933/BANG/2017 PAGE 2 OF 40 THOUGH THERE IS NO SPECIFIC FINDING IN THE INCOME-T AX APPELLATE TRIBUNAL'S ORDER AND THUS THE APPELLANT H AD A RIGHT TO CHALLENGE THE DISALLOWANCE AND HE OUGHT TO HAVE GIVEN A FINDING IN THIS REGARD. 4. THE LEARNED COMMISSIONER (A) OUGHT TO HAVE APPRECIATED THAT IN THE LIGHT OF THE JUDGMENT OF TH E HON'BLE SUPREME COURT IN THE CASE OF S.A.BUILDERS LTD., VS. CIT (288 ITR 1), THE ADVANCES WERE IN THE COURSE OF BUS INESS AND IN THE INTEREST OF BUSINESS AND CONSEQUENTLY TH E DEDUCTION AS CLAIMED WAS LIABLE TO BE ALLOWED IN FU LL ESPECIALLY WHEN THE APPELLANT HAD SUFFICIENT NON-IN TEREST BEARING FUNDS. 5. THE LEARNED COMMISSIONER (A) ERRED IN UPHOLDING THE IMPUGNED ADDITION OF RS.25,76,253/- TOWARDS ALL EGED UNDISCLOSED SCRAP SALE. 6. THE LEARNED COMMISSIONER (A)OUGHT TO HAVE REFRAINED FROM UPHOLDING THE COMPUTATION OF CAPITAL GAINS ON THE TRANSFER OF PROPERTY TO M/S.GOPALAN ENTERPRI SES. 7. ON THE FACTS THE LEARNED COMMISSIONER (A) OUGHT TO HAVE ALLOWED THE COST OF PURCHASE OF STEEL CLAIMED BY THE APPELLANT WHILE COMPUTING THE CAPITAL GAINS. 8. THE LEARNED COMMISSIONER (AL OUGHT TO HAVE APPRECIATED THAT THE AMOUNT OF RS.3,36,29,479/- BEI NG THE SURPLUS ON ACCOUNT OF SALE OF IMPROVEMENTS HAVING O FFERED UNDER THE HEAD 'INCOME FROM OTHER SOURCES' AND THE SAME WAS NOT LIABLE TO BE ADDED WHILE COMPUTING THE CAPI TAL GAINS. 9. THE LEARNED COMMISSIONER (A) OUGHT TO HAVE REFRAINED FROM UPHOLDING THE COMPUTATION OF CAPITAL GAINS IN RESPECT OF ALLEGED TRANSFER OF PROPERTY TO IDEB- RS.43,61,72,341/-. 10. THE LEARNED COMMISSIONER (A) OUGHT TO HAVE APPRECIATED THAT THE PROVISIONS OF SEC.2(47)(V) RWS SEC.53A OF THE TRANSFER OF PROPERTY ACT HAS NO APPL ICATION ITA NO.933/BANG/2017 PAGE 3 OF 40 TO THE AGREEMENT OF SALE EXECUTED BETWEEN THE APPEL LANT AND IDEB AND CONSEQUENTLY THERE WAS NO TRANSFER IN THE RELEVANT ASSESSMENT YEAR TO SUBJECT THE CAPITAL GAI NS IF ANY FOR TAXATION IN THE RELEVANT YEAR. 11. THE LEARNED COMMISSIONER (A) OUGHT TO HAVE APPRECIATED THAT THE AGREEMENT TO SELL EXECUTED BET WEEN THE APPELLANT AND IDEB WAS NOT ACTED UPON ULTIMATEL Y AND THERE WAS NO TRANSFER OF IMMOVABLE ASSET TO ATTRACT THE PROVISIONS OF SEC.45 OF THE ACT. 12. THE LEARNED COMMISSIONER (A)ERRED IN NOT CONSIDERING THE SUBMISSIONS OF THE APPELLANT AND TH E CASE LAW CITED TO SUPPORT ITS CASE WHILE UPHOLDING THE A DDITION AND ACCORDINGLY THE ORDER OF THE COMMISSIONER (A)WA S OPPOSED TO LAW AND LIABLE TO BE SET ASIDE WITH REGA RD TO THIS ISSUE. 13. THE LEARNED COMMISSIONER (A) OUGHT TO HAVE APPRECIATED THAT THE JUDGMENT OF THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. DR.T.K.DAYALU REPORTED IN 60 DTR (KAR) 403 WAS DISTINGUISHABLE AND THE LEARNED COMMISSIONER (A) OUGHT TO HAVE REFRAINED FROM FOLLO WING THE JUDGMENT TO JUSTIFY THE COMPUTATION OF CAPITAL GAINS. 14. THE LEARNED COMMISSIONER (A)FAILED TO APPRECIAT E THAT THE PROPERTY IN QUESTION WAS SUBSEQUENTLY SOLD TO ANOTHER PARTY AND THE CAPITAL GAINS THEREFROM HAD B EEN OFFERED BY THE APPELLANT AND THERE WAS NO OMISSION AND ACCORDINGLY THE CAPITAL GAINS AS ASSESSED IN THE RE LEVANT YEAR IS OPPOSED TO LAW AND ACCORDINGLY LIABLE TO BE DELETED. 15. THE LEARNED COMMISSIONER (A) ERRED IN SURMISING THE POSSESSION BEING HANDED OVER TO IDEB WHEN THE PARTIES TO THE TRANSACTION DENIED FOR HAVING PROVID ED POSSESSION TO THE ALLEGED TRANSFEREE AND CONSEQUENT LY THE APPLICATION OF PROVISIONS OF SEC.2(47)(V)R.W.S.53A OF THE TRANSFER OF PROPERTY ACT IS OPPOSED TO LAW AND ACCORDINGLY THE IMPUGNED THE CAPITAL GAINS AS COMPU TED AND UPHELD IS LIABLE TO BE DELETED. ITA NO.933/BANG/2017 PAGE 4 OF 40 16. ON THE FACTS THE LEARNED COMMISSIONER (A)OUGHT TO HAVE ACCEPTED THE EXPLANATION AND SUBMISSIONS MADE BY THE APPELLANT AND REFRAINED FROM UPHOLDING THE IMPU GNED ADDITIONS. 17. WITHOUT PREJUDICE, THE LEARNED COMMISSIONER (A)ERRED IN NOT GIVING ANY FINDING WITH REGARD TO L EVY OF INTEREST U/S.234A, 234B AND 234C OF THE ACT. 18. THE LEARNED COMMISSIONER (A)OUGHT TO HAVE APPRECIATED THAT INTEREST UNDER SECTION 234A, 234B AND 234C OF THE ACT ARE NOT LEVIABLE IN THE CASE OF THE APPELLANT. 19. WITHOUT PREJUDICE, THE INTERESTS LEVIED ARE EXC ESSIVE AND LIABLE TO BE DELETED IN TOTO. 20. WITHOUT PREJUDICE, THE ADDITIONS ARE EXCESSIVE , ARBITRARY AND UNREASONABLE AND LIABLE TO BE DELETED IN TOTO. 21. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING OF THE APPEAL THE APPELLANT PRA YS THAT THE APPEAL MAY BE ALLOWED. 2. ORIGINALLY THE ASSESSEES APPEAL IN ITA NO.1057/ BANG/2010 WAS DISPOSED OF BY THIS TRIBUNAL VIDE ORDER DATED 30.4. 2012 WHEREIN CERTAIN ISSUES WERE REMANDED BACK TO THE AO FOR FRESH DECIS ION. THE AO WHILE GIVING EFFECT TO THE ORDER OF THE TRIBUNAL IN HIS O RDER U/S. 143(3) R.W.S. 254 OF THE ACT, CONFIRMED THE ADDITIONS. AGAINST THIS, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE ADDITIONS. NOW AGAIN THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL IN THE SECOND ROUND. 3. GROUND NOS.2 TO 4 ARE WITH REGARD TO SUSTAINING THE ADDITION OF INTEREST EXPENDITURE AT RS.17,26,100. THE AO HAS A DDED BACK A SUM OF RS.17,26,100 BEING 11% (SBI LENDING RATE) ON A SUM OF RS.1,56,91,814/- HOLDING IT TO BE THE INTEREST ATTRIBUTABLE TO THE A DVANCE MADE BY THE ASSESSEE COMPANY TO ITS DIRECTOR SRI B.S.CHADHA. T HE INTEREST OF ITA NO.933/BANG/2017 PAGE 5 OF 40 RS.17,26,100 WAS DISALLOWED OUT OF THE INTEREST CLA IMED ALLEGING THAT THE INTEREST WAS NOT ATTRIBUTABLE TO THE BUSINESS REQUI REMENT AND THE BORROWED FUNDS HAD BEEN DIVERTED FOR NON-BUSINESS PURPOSES. 4. IT IS SUBMITTED THAT THE AMOUNT ADVANCED TO SRI B.S.CHADHA STOOD AT RS.1,56,91,814 ON THE LAST DATE OF THE ACCOUNTING Y EAR. AT THE TIME THE ASSESSEE COMPANY HAD ALSO OWED SRI CHADHA. THE ASS ESSEE FOR THE SAKE OF CONVENIENCE HAS MADE SEPARATE ACCOUNT FOR THE AM OUNT OWED TO SRI CHADHA AND ALSO THE AMOUNT RECEIVABLE FROM HIM. BO TH THE ACCOUNTS SHOULD BE COMBINED AND CONSIDERED SINCE IT IS A RUN NING ACCOUNT BETWEEN THE ASSESSEE COMPANY AND SRI CHADHA. SUCH A COMBI NED READING OF BOTH THE ACCOUNTS WOULD CLEARLY SHOW THAT AT THE END OF THE ACCOUNTING YEAR, THE BALANCE OUTSTANDING FROM SRI CHADHA WOULD BE ONLY A SMALL AMOUNT AND THE ASSESSEE HAD ADEQUATE NON-INTEREST BEARING FUND S FOR SUCH ADVANCE MADE TO SRI CHADHA. THUS, THE ASSUMPTION THAT THE INTEREST BEARING FUNDS HAD BEEN DIRECTED TO SRI CHADHA WAS INCORRECT AND C ONSEQUENTLY THE DISALLOWANCE OF INTEREST ON THE LOAN BORROWED TO TH E EXTENT OF RS.17,26,100 WAS TOTALLY UNCALLED FOR. THE ASSESSEE RELIES ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT (LARGE TAX PAYER UNIT) VS. RELIANCE INDUSTRIES LTD REPORTED IN (2019) 307 CTR 0121 (SC) . IN FACT, MOST DISALLOWANCES HAD BEEN IN THE PAST AS IT WAS F ULLY SATISFIED THAT THE BORROWED FUNDS WERE UTILIZED EXCLUSIVELY FOR BUSINE SS AND THUS THE INTEREST CLAIMED WAS LIABLE TO BE ALLOWED IN TOTO U/S.36(1)( III) OR U/S.37 OF THE ACT. WITHOUT PREJUDICE, EVEN IF SUCH DISALLOWANCE IS CAL LED FOR, IT CAN ONLY BE ON THE NET OF THE BALANCE AND TO THE EXTENT THE NET OF THE BALANCE INCLUDED NET OF OPENING BALANCE. INTEREST IN RELATION TO SUCH O PENING BALANCE CANNOT BE DISALLOWED AS THERE WAS NO DISALLOWANCE IN THE PAST AS HELD BY THE HONBLE HIGH COURT IN THE CASE OF SRI DEV ENTERPRISES REPORTED IN 192 ITR 165 . ITA NO.933/BANG/2017 PAGE 6 OF 40 ACCORDINGLY, IT IS SUBMITTED THAT THE DISALLOWANCE OF INTEREST MAY KINDLY BE DELETED. 5. THE LD. DR SUBMITTED THAT IT IS APPARENT THAT TH E AMOUNT OF RS. 17,26,100 HAS BEEN ADDED BACK TO THE FINAL COMPUTAT ION OF INCOME ALTHOUGH THERE IS NO SPECIFIC DISCUSSION BY THE AO ON THIS ISSUE. IT IS CLEAR FROM THE ASSESSMENT ORDER U/S 143(3) R.W.S. 254 R.W .S 144 OF THE ACT (WHICH IS PRESENTLY UNDER ADJUDICATION) THAT THE IM PUGNED ASSESSMENT HAS BEEN PASSED IN PURSUANCE TO THE DIRECTIONS OF THE ITAT VIDE ITS ORDER DATED 30/04/2012. A PERUSAL OF THE ITATS ORDER REVEALS THAT NO SPECIFIC DISCUSSION ON THIS ISSUE OR DIRECTIONS ON THIS REGA RD HAVE BEEN GIVEN IN THIS REGARD. IT IS APPARENT THEREFORE THAT, THE SAID ISS UE HAS ATTAINED FINALITY AT THE LEVEL OF AO'S ORIGINAL ASSESSMENT ORDER AND THE CIT(A)'S ORDER. IN THESE FACTS AND CIRCUMSTANCES, IT WAS INCUMBENT UPON THE AO TO SUSTAIN THE EXISTING POSITION IN HIS IMPUGNED ORDER. IN THIS BA CKGROUND THE ISSUE RAISED, THEREFORE, DOES NOT REMAIN A SUBJECT MATTER OF ADJU DICATION. IN THESE FACTS & CIRCUMSTANCES NO INTERFERENCE IS CALLED FOR. THE AS SESSEE'S GROUNDS OF APPEAL ON THIS FRONT DOES NOT EMANATE FROM THE ORDE R OF THE ITAT, WHICH FORMS THE BASIS OF THE IMPUGNED ORDER U/S 143(3) R. W.S. 254. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. AS RIGHTLY POINTED OUT BY THE LD. DR, THE INTEREST EXPENDITURE TO THE TUNE OF RS.17,26,100 IS NOT SUBJECT MATTER FOR CONSIDERATIO N BEFORE THE AO THROUGH THE DIRECTIONS OF THE TRIBUNAL. THE ASSESSEE HAS N OT AGITATED THIS GROUND BEFORE THE TRIBUNAL IN THE EARLIER OCCASION. AS SU CH, THERE WAS NO DIRECTION ON THIS ISSUE BY THE TRIBUNAL SO AS TO BE TAKEN UP BY THE AO IN THE SECOND ROUND IN THE PROCEEDINGS U/S. 143(3) R.W.S. 254 OF THE ACT. HENCE THERE IS NO MERIT IN THE ARGUMENT OF THE LD. AR FOR THE ASSE SSEE THAT THERE WAS DISALLOWANCE OF THE SAID AMOUNT BY THE AO IN HIS SE COND ROUND OF ORDER. ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS DISALLO WED. ITA NO.933/BANG/2017 PAGE 7 OF 40 7. GROUND NO.5 IS REGARDING ADDITION SUSTAINED BY T HE CIT(APPEALS) OF RS.25,76,253 TOWARDS UNDISCLOSED SCRAP SALE. 8. WITH REGARD TO THE IMPUGNED ADDITION ON ACCOU NT OF THE ALLEGED SCRAP SALE, IN THE COURSE OF SURVEY, IT WAS FOUND T HAT DETAILS TOWARDS SCRAP SALES AMOUNTING TO RS. 25,76,253 WAS NOT ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNTS. THE AO ALSO HAD OBSERVED THAT T HE SCRAP SALES TO THE TUNE OF RS.31,45,974 HAD BEEN RECORDED IN THE BOOKS OF ACCOUNTS. IT WAS ALSO OBSERVED THAT SRI S.C. AJMEERA, ON ENQUIRY, HA S SUBMITTED THAT OUT OF RS.25,76,253, THE ASSESSEE COMPANY HAD DECLARED RS. 10 LAKHS WHICH INCLUDED THE SCRAP SALES SHOWN IN THE BOOKS OF ACCO UNTS. HOWEVER, ACCORDING TO THE AO, THERE WAS NO PROOF PROVIDED BY THE ASSESSEE COMPANY TO ACCEPT THE STATEMENT OF SRI AJMEERA AND THEREFORE HEMADE THE ADDITION OF RS.25,76,253/-. 9. IN THIS REGARD, IT IS SUBMITTED THAT UNDISPUTEDL Y THE ASSESSEE COMPANY HAD DECLARED SCRAP SALES TO THE TUNE OF RS. 31,45,974 IN THE BOOKS OF ACCOUNTS AND OFFERED FOR TAXATION. THE AL LEGED UNACCOUNTED SCRAP SALES FOUND IN THE COURSE OF SURVEY WAS NOTHING BUT THE VARIOUS DATES OF SALE RECORDED FROM APRIL TO DECEMBER, 2006 AND JANU ARY, 2007. THE PARTY TO WHOM SUCH SALES WERE MADE HAD ALSO BEEN NOTED. THE SALES RECORDED IN THE BOOKS OF ACCOUNTS WERE ALSO WITH THE SAME PA RTY. IN OTHER WORDS, ALL THESE SALES HAVE BEEN RECORDED IN THE BOOKS OF ACCO UNTS WHICH FORM PART OF THE TOTAL SALES OF RS.31,45,984 AS DECLARED. TH E VARIATIONS IN DATES WERE ONLY ON ACCOUNT OF THE DATES OF DISPATCH OR DELIVER Y AND THE DATES ON WHICH THE AMOUNTS WERE RECEIVED. IN THE CIRCUMSTANCES, T HE IMPUGNED ADDITION IS TOTALLY UNCALLED FOR AND THE SAME REQUIRES TO BE DE LETED. IN THE ALTERNATIVE, THE STATEMENT OF SRI AJMEERA SHOULD HAVE BEEN GIVEN CREDENCE TO AND AT LEAST RS.10 LAKHS SHOULD HAVE BEEN ALLOWED OUT OF R S.25,76,253 AND IF AT ALL ANY ADDITION WAS REQUIRED, IT COULD ONLY BE IN RESPECT OF THE BALANCE. ITA NO.933/BANG/2017 PAGE 8 OF 40 10. THE LD. DR SUBMITTED THAT THE ASSESSEE'S SUBMIS SIONS ON THE ISSUE ARE NOT ONLY VAGUE BUT ALSO UNSUPPORTED BY CLEAR DO CUMENTARY EVIDENCE OR JUSTIFIABLE EXPLANATIONS IN SPITE OF THE OPPORTUNIT IES AND CLEAR DIRECTIONS OF THE TRIBUNAL WHILE SETTING ASIDE THE ISSUE FOR FRE SH EXAMINATION BEFORE THE AO. IN SUCH CIRCUMSTANCES, IT WAS INCUMBENT UPON TH E ASSESSEE TO PRODUCE THE RELEVANT PARTY PARTICULARS, CONFIRMATIO NS OF ACCOUNT AND BANK DETAILS WITH REGARD TO THE SCRAP-SALES. IT IS EVIDE NT FROM THE AO'S ORDER THAT, IN SPITE OF ADEQUATE OPPORTUNITIES, THE ASSESSEE FA ILED TO ESTABLISH THE VERACITY OF SCRAP SALES TO THE EXTENT OF RS. 25,76, 253. 11. FURTHER, THE AO HAS CLEARLY BROUGHT ON RECORD T HE QUESTIONS POSED TO SHRI. S. K. AJMERA DURING THE SURVEY OPERATION ( VIDE QUESTION NO. 5 OF THE STATEMENT RECORDED) REGARDING THE IMPUGNED SALES, I N RESPECT TO WHICH IT WAS ONLY STATED BY HIM THAT, AN AMOUNT OF RS. 10 LA KHS WAS INCLUDED IN THE UNDISCLOSED SALES, DECLARED/OFFERED FOR TAX. THE A O, HOWEVER, HAS RECORDED A CLEAR FINDING THAT NO SUCH INCOME TO THE EXTENT OF RS. 10 LAKHS WAS FOUND TO HAVE BEEN OFFERED FOR TAX. THE ASSESSE E HAS FAILED TO COUNTER THIS STAND OF THE AO SO AS TO ESTABLISH THAT SUCH U NDISCLOSED SALES WERE OFFERED/SUBJECTED TO TAX BY THE ASSESSEE POST-SURVE Y DISCLOSURE. 12. THE AO HAS PLACED ON RECORD THAT DURING THE SUR VEY, OUT OF THE TOTAL SCRAP SALES OF RS. 57,22,227, AN AMOUNT OF ONLY RS. 31,45,974 WAS FOUND TO BE RECORDED, WHICH FIGURE MATCHED WITH THE LEDGE R ACCOUNT, AS PER ANNEXURE-1 OF THE SAID ORDER. IT WAS THEREFORE ABUN DANTLY CLEAR THAT NO PART OF THE AMOUNT OF RS. 25,76,253 WAS EITHER OFFERED F OR TAXATION OR CLEARLY EVIDENCED/EXPLAINED, DURING THE ORIGINAL OR SUBSEQU ENT ASSESSMENT PROCEEDINGS. 13. IT IS OBSERVED FROM PARAS 14-19 OF THE TRIBUNAL S ORDER (CITED SUPRA ) THAT AFTER CERTAIN OBSERVATIONS AGAINST THE RELIEF OF RS. 10 LAKHS GIVEN BY THE ITA NO.933/BANG/2017 PAGE 9 OF 40 CIT(A), THEREBY THE ISSUE WAS REMANDED BACK TO THE AO FOR FRESH EXAMINATION. IT WAS THEREFORE IMPERATIVE FOR THE AS SESSEE TO PRODUCE SPECIFIC AND VALID DETAILS/EVIDENCES IN SUPPORT OF ITS CLAIM AND JUSTIFYING EVEN THE PARTIAL RELIEF ALLOWED BY THE CIT(A). IT I S CLEAR THAT THE ASSESSEE HAS FAILED TO DO SO. IN THESE CIRCUMSTANCES, THERE IS NO REASON TO INTERFERE IN THE AO'S ORDER ON THIS ISSUE. 14. IN THE COURSE OF THE PROCEEDINGS BEFORE THE CIT (APPEALS), THE ASSESSEE HAS NOT PLACED ANY FRESH OR RELIABLE EVIDE NTIARY DOCUMENT OR CONFIRMATORY DETAILS FROM RESPECTIVE PARTIES. THE E XTRACT OF SCRAP-SALES ANNEXED WITH THE WRITTEN SUBMISSION IS NOT SUPPORTE D BY EITHER PROOF OF PAYMENT BY CHEQUE OR PARTY CONFIRMATIONS. EVEN IF T HESE WERE TO BE PRESUMED AS CASH SALES, THERE IS NO CORRESPONDING O R ADEQUATE PROOF TO ACCEPT THE SAME. IN THIS BACKGROUND, THE ADDITION T O THE EXTENT OF RS. 25,76,253/- WAS UPHELD BY THE CIT(APPEALS). 15. WE HAVE HEARD THE RIVAL SUBMISSIONS. IN THE AS SESSMENT YEAR UNDER CONSIDERATION, IT WAS PLACED ON RECORD BY THE AO TH AT DURING THE COURSE OF SURVEY OUT OF TOTAL SCRAP SALES OF RS.57,22,227 ONL Y AN AMOUNT OF RS.31,45,974 WAS RECORDED AND THE BALANCE AMOUNT OF RS.25,76,253 WAS NOT RECORDED AND THE REASONS FOR NOT OFFERING THE S AME TO TAX WAS NOT EXPLAINED BY THE ASSESSEE. THE TRIBUNAL REMANDED T HIS ISSUE TO THE AO ON THE REASON THAT THE ASSESSEE DID NOT FURNISH ANY E VIDENCE TO SUBSTANTIATE ITS CLAIM THAT INCOME HAD ALREADY BEEN OFFERED TO T AX IN EARLIER YEARS AND IT WAS NOT CLEAR AS TO WHETHER EARLIER RECORD AVAILABL E WITH THE AO HAD BEEN CONSIDERED WHILE ARRIVING AT THE CONCLUSION THAT NO EVIDENCE WAS PRODUCED BY THE ASSESSEE. HOWEVER, IN THE REMAND PROCEEDING S ALSO, THE ASSESSEE FAILED TO PRODUCE RELEVANT EVIDENCE IN RESPECT OF I TS CLAIM. EVEN AFTER GOING THROUGH THE DOCUMENTS AVAILABLE WITH THE AO I N THE FORM OF PART ITA NO.933/BANG/2017 PAGE 10 OF 40 LEDGER ACCOUNT AND PROFIT & LOSS ACCOUNT SUBMITTED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS, IT WAS FOUND BY THE AO THAT ONLY SCRAP SALE TO THE EXTENT OF RS.31,45,974 OUT OF TOTAL SCRAP SALE OF RS.57,22,227 WAS CREDITED IN THE LEDGER ACCOUNT AS SCRAP SALE AND TH E BALANCE WAS NOT OFFERED FOR TAXATION. HENCE THE LOWER AUTHORITIES RIGHTLY BROUGHT TO TAX THE BALANCE AMOUNT OF RS.25,76,253 WHICH IS BASED ON MA TERIAL FOUND DURING THE COURSE OF SURVEY AND THE ASSESSEE WAS NOT ABLE TO RECONCILE THE SAME, EVEN AFTER PROVIDING OPPORTUNITY OF HEARING BEFORE THE LOWER AUTHORITIES. THEREFORE, THE ADDITION IS JUSTIFIED AND THIS GROUN D IS DISMISSED. 16. GROUND NOS. 6 TO 8 ARE REGARDING SUSTAINING ADD ITION OF CAPITAL GAIN ON TRANSFER OF PROPERTY TO M/S. GOPALAN ENTERPRISES AT RS.3,36,24,479. 17. THE ASSESSEE HAS RECEIVED RS.14CRORES FROM M/S.GOPALAN ENTERPRISES FOR AGREEING TO TRANSFER THE LAND AND B UILDING VIDE AGREEMENT DATED 29.11.2006. THE SALE AGREEMENT WAS FOR TRANS FER OF LAND FOR RS.9 CRORES AND RS.5 CRORES WAS TOWARDS IMPROVEMENT. FU RTHER, THE CONSIDERATION FOR SALE OF LAND WAS SPLIT INTO CONSI DERATION FOR LAND OF RS.7,20,00,000 AND CONSIDERATION FOR BUILDING OF RS .1,80,00,000. AS AGAINST THE CONSIDERATION OF RS.9 CRORES, THE ASSES SEE CLAIMED DEDUCTION TOWARDS COST OF LAND AND COST OF BUILDING, BROKERAG E AND LEGAL CHARGES IN THE FOLLOWING MANNER: A) VALUE OF LAND RS.1,39,78,550 B) VALUE OF BUILDING AS PER BLDG BLOCK (REDUCED FROM BLOCK OF ASSET) RS.1,80,00,000 C) INDEXED COST OF LAND RS.1,42,47,093 D) BROKERAGE AND LEGAL CHARGES RS. 22,21,360 18. THUS, CAPITAL GAIN OF RS.5,55,31,547 WAS O FFERED FOR TAXATION. IN RESPECT OF RS.5 CRORES FOR IMPROVEMENT, THE ASSESSE E CLAIMED AN AMOUNT ITA NO.933/BANG/2017 PAGE 11 OF 40 OF RS.1,63,70,521 AS EXPENSES TOWARDS COST OF FENCI NG OF THE PROPERTY. THE INCOME ARISING THEREFROM TO THE TUNE OF RS.3,30 ,29,479 WAS OFFERED AS INCOME FROM OTHER SOURCES UNDER THE HEAD MISCELLANE OUS RECEIPTS. THE AO HAS HOWEVER WHILE CONCLUDING THE ASSESSMENT CONS IDERED THE ENTIRE SALE CONSIDERATION OF RS.14 CRORES UNDER THE HEAD CAPITAL GAINS AND AFTER GIVING DEDUCTION FOR THE EXPENDITURE CLAIMED TOWARD S COST OF PURCHASE OF LAND AND BUILDING AS INFLATED BY COST INFLATION IND EX, DETERMINED THE CAPITAL GAINS AT RS.10,55,31,547 AFTER FURTHER ALLOWING THE EXPENDITURE TOWARDS BROKERAGE AND LEGAL CHARGES. WHILE DOING SO, THE A O DID NOT ALLOW THE COST OF IMPROVEMENT BY WAY OF FENCING TO THE TUNE OF RS. 1,63,70,521/- ALLEGING THE ASSESSEE HAD NOT PROVED THE EXPENDITURE TOWARDS IMPROVEMENT BY WAY OF FENCING MADE. WHEN THE MATTER WAS TAKEN UP TO T HE CIT (APPEALS), THE SAME WAS UPHELD. ON FURTHER APPEAL TO THE TRIBUNAL , THE TRIBUNAL RESTORED THE MATTER BACK TO THE FILE OF THE AO FOR FRESH ADJ UDICATION. 19. IN THE REMAND PROCEEDINGS, THE AO VIRTUALLY REP EATED THE FINDING MADE IN THE ORIGINAL ASSESSMENT WITH REGARD TO ALLO WANCE OF RS.1,63,70,521. IT WAS REITERATED THAT THE ASSESSE E HAD NOT PROVED DETAILS FOR COST OF IMPROVEMENT BY WAY OF FENCING BY PROVID ING THE DETAILS OF VENDORS WHO HAD SUPPLIED STEEL AND DETAILS WITH REG ARD TO NAMES AND ADDRESSES OF PARTIES WHO HAD SOLD STEEL AND ALSO TH E DETAILS WITH REGARD TO THE EXPENSES INCURRED FOR CONSTRUCTION OF THE COMPO UND BY WAY OF FENCING. THE ALTERNATE PLEA THAT THE ASSESSEE HAVING OFFERED RS.3,30,29,479 AS INCOME ON ACCOUNT OF IMPROVEMENT AS AFORESAID WAS N OT GIVEN A SET-OFF IN DETERMINATION OF CAPITAL GAINS. IN OTHER WORDS, HA VING TAKEN THE FULL CONSIDERATION OF RS.14 CRORES FOR THE PURPOSE OF CO MPUTATION OF CAPITAL GAINS, IT IS SUBMITTED THAT THE AO SHOULD HAVE EXCL UDED THE INCOME DERIVED BY WAY OF RS.3,30,29,479 WHICH HAS BEEN OFFERED AND REQUIRES TO BE DELETED FROM THE TOTAL INCOME. ITA NO.933/BANG/2017 PAGE 12 OF 40 20. FURTHER, IT IS SUBMITTED THAT THE AO SHOULD HAV E ALLOWED THE CLAIM FOR FENCING. IT WAS AN UNDISPUTED FACT THAT THE PREMISE S HAD A SOLID FENCING WITH STEEL BARBED WIRE ALL OVER THE AREA COVERING T HE AREA SOLD OF 1,19,049 SQ.FT. THIS HAS ALSO BEEN TAKEN NOTICE OF BY THE C IT(APPEALS) IN HIS ORDER DATED 30.06.2010. THOUGH THE CIT(APPEALS) HAS CONC URRED WITH THE AO THAT THE ASSESSEE DID NOT GIVE ANY DETAILS WITH REG ARD TO THE EXPENSES INCURRED, THERE WAS NO DENIAL OF EXISTENCE OF THE B OUNDARY FENCING WITH BARBED WIRE WHICH COULD NOT HAVE COME ON ITS OWN WI THOUT ANY EXPENDITURE. IT WAS ALSO A FACT THAT THE COST OF B UILDING ESTIMATED DID NOT INCLUDE COST OF FENCING. THUS, EVEN IF EVIDENCE WA S NOT LET IN, THE EXISTENCE OF FENCE CANNOT BE DENIED, WHICH COST AND AS INFLAT ED BY COST INFLATION INDEX IS REQUIRED TO BE ESTIMATED TO ALLOW THE EXPE NDITURE UNDER SECTION 48(2) OF THE ACT, ACCORDING TO THE ASSESSEE. ACCORD INGLY, THE CAPITAL GAINS FOR TRANSFER OF PROPERTY TO M/S. GOPALAN ENTERPRISE S IS REQUIRED TO BE COMPUTED BY GIVING A REASONABLE EXPENDITURE TOWARDS FENCING AND ALSO BY REDUCING RS.3,30,29,479 FROM CAPITAL GAINS AS COMPU TED BY THE AO. 21. THE LD. DR SUBMITTED THAT THE ORIGINAL AGREEMEN T DATED 11/08/2006 BETWEEN THE ASSESSEE AND M/S. GOPALAN ENTERPRISES, WITH REGARD TO THE OF LAND AND BUILDING, WAS FOR A CONSIDERATION OF RS. 1 9,44,38,720. THE SAME IS STATED TO HAVE BEEN SUBSEQUENTLY REVISED VIDE AG REEMENT EXECUTED ON 29/11/2006 FOR AN AMOUNT OF RS. 14 CRORES. IT IS FU RTHER SEEN THAT THE SAID REVISED AGREEMENT WAS AGAIN SPLIT IN TWO PARTS I.E. , RS. 9 CRORES FOR THE LAND AND RS. 5 CRORES FOR THE IMPROVEMENTS. THE REVISED AGREEMENT IN ITSELF PROVIDES THAT THE LATTER AMOUNT OF RS. 5 CRORES WAS STATED TO BE THE CONSIDERATION FOR COMPOUND WALL; BUILDING, SHEDS AN D THAT THE PURCHASER HAD AGREED TO PURCHASE SUCH ITEMS ON 'AS IS WHERE I S' BASIS. 22. HE SUBMITTED THAT A PERUSAL OF THE CONTENTS AND CONDITIONS OF THE REVISED AGREEMENT CLEARLY INDICATES THAT THE CONSID ERATION IS FOR BUILDING ITA NO.933/BANG/2017 PAGE 13 OF 40 /SHEDS AND COMPOUND WALLS WHICH ARE ADMITTEDLY APPU RTENANT TO THE LAND IN QUESTION. IT IS ABUNDANTLY CLEAR THAT THESE RECEIPT S ARE INTRINSICALLY TOWARDS THE ITEMS WHICH FORM ESSENTIAL PART OF FIXED IMMOVA BLE PROPERTY, AND THEREFORE, NECESSARY CONSTITUENTS OF THE SALE CONSI DERATION FOR THE LAND. THE LAND AND BUILDING ALONG WITH THE COMPOUND WALL COUL D NOT BE ARTIFICIALLY SEGREGATED MERELY FOR THE PURPOSE OF BREAKING UP TH E TOTAL SALE CONSIDERATION. IT IS NOT THE CASE OF THE ASSESSEE T HAT IF LAND PORTION WAS TO BE SOLD TO M/S GOPALAN ENTERPRISES, THE OTHER FIXED ITEMS OF BUILDING / SHED OR COMPOUND WALL COULD HAVE BEEN SOLD TO SOME OTHER ENTITY. IT IS THEREFORE ABSOLUTELY CLEAR THAT THE TOTAL CONSIDERATION OF RS . 14 CRORES PERTAINED TO THE SINGLE UNIT OF PROPERTY INCLUSIVE OF THE LAND A ND BUILDING APPURTENANT ALONG WITH THE BOUNDARY WALL/FENCING. 23. THE ASSESSEE, APART FROM CERTAIN GENERAL STATEM ENTS ON THE ISSUES AT HAND, HAS NOT MADE A STRONG CASE FOR SPLITTING A ND SEGREGATING THE CONSIDERATION OF RS. 14 CRORES. THE AO, ON THE OTHE R HAND HAS NOT DISPUTED THE GENUINENESS OF THE REVISED AGREEMENT VIS-A-VIS THE ORIGINAL AGREEMENT, BUT HAS RAISED PLAUSIBLE ISSUES IN RESPECT OF THE A RTIFICIAL SPLIT OF THE CONSIDERATION WHICH ESSENTIALLY RELATES TO ONE SING LE UNIT OF PROPERTY. 24. IT IS THEREFORE TO BE HELD THAT THE IMPROVEMENT S IN THE FORM OF COMPOUND WALL, BUILDING SHEDS, ETC., ARE INTRINSIC ALLY A PART AND PARCEL OF THE LAND PROPERTY AS A WHOLE WHICH WAS SOLD BY THE ASSESSEE. ACCORDINGLY THE PROVISIONS OF LTCG ARE ATTRACTED TO THE ENTIR E RECEIPT OF RS. 14 CRORES. THE AO'S ACTION ON THIS ACCOUNT IS THEREFORE TO BE UPHELD. 25. REGARDING THE ASSESSEES CLAIM OF RS.1,63,70,52 1 AS EXPENSES PURPORTEDLY TOWARDS LEVELING, BOUNDARY WORK AND FEN CING, DISALLOWANCE WAS MADE IN THE ABSENCE OF VALID EVIDENCE TO JUSTIFY TH E SAID EXPENDITURE. THE CIT(A) UPHELD THE AO'S ORDER. THE ASSESSEE HAD CLEA RLY FAILED TO ESTABLISH ITA NO.933/BANG/2017 PAGE 14 OF 40 ITS CLAIM DURING THE ASSESSMENT OR APPELLATE STAGE OR EVEN DURING THE SURVEY OPERATION, WHEREIN SHRI AJMERA (WHOSE STATEM ENT WAS RECORDED) FAILED TO FURNISH REQUISITE PROOF OR EXPLANATION IN THIS RESPECT. THE ITAT IN ITS ORDER HAS REMANDED THE ISSUE TO THE AO, PRIMARI LY DIRECTING NECESSARY VERIFICATIONS OUGHT TO BE CONDUCTED IN RESPECT OF P ARTIES TO WHOM THE ASSESSEE HAD STATEDLY MADE THE PAYMENTS TOWARDS PUR CHASE OF STEEL ETC. FOR CONSTRUCTION OF THE FENCING WALL. 26. IN THE BACKGROUND OF THE ITAT DIRECTIONS, THE A O HAS STATED THAT DURING THE HEARING ON 26/02/2014, THE ASSESSEE WAS SPECIFICALLY REQUIRED TO PRODUCE 'INVOICES AND OTHER SUPPORTING EVIDENCES FO R PURCHASE OF STEEL ALONGWITH DETAILS OF PARTIES INCLUDING NAMES, ADDRE SS, PAN AND LEDGER EXTENTS'. THE ASSESSEE FAILED TO FURNISH THE REQUIS ITE EVIDENTIARY DOCUMENTS BEFORE THE AO NOR BEFORE THE CIT(APPEALS) . THUS, THE CIT(A) UPHELD THE ACTION OF THE AO. 27. REGARDING THE ALTERNATE PLEA OF THE ASSESSEE TH AT AO HAVING TAKEN FULL CONSIDERATION OF RS.14 CRORES FOR COMPUTING LT CG, HE SHOULD HAVE EXCLUDED THE INCOME OFFERED TO THE EXTENT OF RS.3,3 0,29,479 WHICH WAS PURPORTEDLY DECLARED AS INCOME ON ACCOUNT OF SALE O F IMPROVEMENT. THE CIT(A) FOUND IT PRIMA FACIE ACCEPTABLE THAT IF IT EMANATES FROM THE AOS ORDER THAT THE SAME AMOUNT WAS SUBJECTED TO TAX UND ER BOTH THE HEADS I.E., CAPITAL GAINS BY THE AO AS WELL AS SALE OF IMPROVEM ENTS OFFERED BY THE ASSESSEE AND DIRECTED THE AO FOR APPROPRIATE RECTIF ICATION AFTER DUE VERIFICATION OF FACTS. 28. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD ON THIS ISSUE. IN THIS CASE, THE CIT(APPEALS) HAS GIVEN A FINDING AS ARGUED BY THE LD. DR IN PARA 21 TO 27 HEREINABOVE. THUS, IT MEANS THAT ACTUALLY THE CIT(APPEALS) DECIDED THE ISSUE IN FAVOUR OF ASS ESSEE AND OBSERVED ITA NO.933/BANG/2017 PAGE 15 OF 40 THAT THE ASSESSEE CLAIMED THE INCURRING EXPENDITURE OF RS.1,63,70,571 AS EXPENSES TOWARDS LEVELLING, BOUNDARY WORK AND FENCI NG, BUT FAILED TO FURNISH ANY EVIDENCE SUPPORTING THESE EXPENSES AND HENCE UPHELD THE DISALLOWANCE. EVEN BEFORE US, THERE IS NO IOTA OF EVIDENCE IN SUPPORT OF THE CLAIM OF THE ASSESSEE. HENCE, ON THIS COUNT, THERE IS NO ERROR IN THE ORDER OF CIT(APPEALS). 29. THE OTHER CONTENTION OF THE LD. AR IS THAT THE SUM OF RS.3,30,29,479 SHOULD HAVE BEEN EXCLUDED FROM THE COMPUTATION OF L ONG TERM CAPITAL GAIN AS IT WAS OFFERED AS INCOME FROM OTHER SOURCES. AD MITTEDLY, THE CIT(APPEALS) HAS GIVEN RELIEF ON THIS COUNT BY OBSE RVING THAT THE SAID AMOUNT CANNOT BE TAXED TWICE; ONCE AS CAPITAL GAIN AND ANOTHER AS INCOME FROM OTHER SOURCES AND PRIMA FACIE ACCEPTED THE ARGUMENT OF THE ASSESSEE. HOWEVER, HE DIRECTED THE AO TO TAKE APPR OPRIATE RECTIFICATION ACTION AFTER DUE VERIFICATION OF THE FACTS AND AFTE R AFFORDING NECESSARY OPPORTUNITY TO THE ASSESSEE IN THIS REGARD. BEING SO, THE ASSESSEE CANNOT HAVE ANY GRIEVANCE ON THIS COUNT. HOWEVER, WE MAKE IT CLEAR THAT THE AO HAS TO CARRY OUT THE DIRECTIONS OF THE CIT(APPEALS) IN PARA 9.4 OF HIS ORDER. WITH THESE OBSERVATIONS, THIS GROUND OF THE ASSESSE E IS DISMISSED. 30. GROUND NOS. 9 TO 16 ARE WITH REGARD TO SUSTAINI NG THE CAPITAL GAIN IN RESPECT OF TRANSFER OF PROPERTY TO IDEB OF RS.43,61 72,341. 31. THE ASSESSEE HAD EXECUTED A JDA WITH IDEB ON 30 .03.2007 FOR DEVELOPING 1,93,879 SQ.FT. OF LAND. ON THE VERY SA ME DAY, THERE WAS A GENERAL POWER OF ATTORNEY [GPA] TO THE SAID COMPANY IN CONNECTION WITH DEVELOPMENT OF THE PROPERTY. ALSO, A SALE AGREEMEN T WAS EXECUTED ON THE SAME DAY WITH IDEB FOR TRANSFER OF LAND AND BUILDIN G TO BE BUILT WHICH WOULD FALL INTO THE OWNERS SHARE IN THE JDA TO THE DEVEL OPER. ALL THE AGREEMENTS ITA NO.933/BANG/2017 PAGE 16 OF 40 ARE PLACED IN THE PAPER BOOK. THE LD. AR SUBMITTED THAT FROM THE JDA, IT COULD BE NOTICED THAT IT WAS AGREED TO BETWEEN THE PARTIES THAT POSSESSION WOULD BE GIVEN TO THE DEVELOPER IN PURSUANCE OF THE AGREEMENT ON OR BEFORE 30.11.2007. THE REASON FOR FIXING THE DATE WAS ON THE BASIS OF PAYMENT OF REFUNDABLE SECURITY DEPOSIT OF RS.35 CRO RES. IN CLAUSE 8 THE SCHEME OF PAYMENT OF REFUNDABLE SECURITY DEPOSIT HA S BEEN PROVIDED WHICH IS AT PAGE NOS.133 AND 134 OF THE PAPER BOOK. THE DEVELOPER HAD PAID RS.15 CRORES WHILE THE AGREEMENT WAS EXECUTED. WIT H REGARD TO BALANCE RS.20 CRORES HE WAS TO PAY RS.10 CRORES BEFORE 05.0 5.2007 AND BALANCE RS.10 CRORES ON OR BEFORE 30.11.2007. THUS, IT WAS SPECIFICALLY AGREED TO BETWEEN THE PARTIES THAT POSSESSION WOULD BE GIVEN TO THE DEVELOPER ONLY AFTER RECEIPT OF FULL CONSIDERATION BY WAY OF REFUNDABLE SECURITY DEPOSIT WHICH WAS ON 30.11.2007. THE RELEVANT CLAUSE (F) (PAGE 124 OF PB) IS EXTRACTED HEREIN BELOW: F. THAT THE OWNER SHALL DELIVER THE POSSESSION OF THE SCHEDULE PROPERTY ON OR BEFORE 30.11.2007. 32. ACCORDING TO LD. AR, U/S. 2(47)(V) OF THE ACT, ANY TRANSACTION INVOLVING THE ALLOWING POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF TH E NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882 ( 4 OF 1882). IN PARA 8 IN THE JUDGMENT OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT & ANR. VS. DR.T.K.DAYALU, REPORTED IN (2011) 60 DTR 0 403/(2011) 202 TAXMAN 0531 , THE HONBLE HIGH COURT OF KARNATAKA REFERRED TO T HE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA VS. CIT, REPORTED IN (2003) 260 ITR 491 WHEREIN TAKING POSSESSION WAS ALSO A CONDITION PRECEDENT TO CONSIDER THE DEFINITION OF T RANSFER UNDER SECTION 2(47)(V) OF THE I.T. ACT. IN T.K. DAYALUS CASE SUPRA , POSSESSION OF THE ITA NO.933/BANG/2017 PAGE 17 OF 40 PROPERTY WAS ALSO GIVEN WITHIN THE SAME FINANCIAL Y EAR I.E., ON 30.05.1996 AND CONSEQUENTLY THE HONBLE HIGH COURT HAS HELD TH AT TRANSFER WAS COMPLETE FOR THE PURPOSE OF INCOME-TAX AND THE CAPI TAL GAIN WAS ASSESSABLE TO TAX FOR THE ASSESSMENT YEAR 1997-98. FURTHER, THE ITAT, BENGALURU BENCH, BENGALURU IN THE CASE OF VEMANNA REDDY (HUF) VS. ITO, REPORTED IN 114 TTJ 246/1 DTR 321 HAS OBSERVED THAT GIVING POSSESSION TO THE TRANSFEREE WAS A CONDITION PRECED ENT TO APPLY SECTION 2(47)(V) OF THE I.T. ACT AND THE HONBLE HIGH COURT OF KARNATAKA IN ITS JUDGMENT IN THE CASE OF VEMANNA REDDY CONFIRMED THE SAME. THUS, IT WAS CLEARLY CONTEMPLATED THAT POSSESSION WAS TO BE HAND ED OVER ONLY ON 30.11.2007 OR EARLIER IF THE BALANCE RS.10 CRORES W AS TO BE PAID EARLIER. THUS, THERE WAS NO POSSESSION CONTEMPLATED ON OR BE FORE 31.03.2007. 33. THE LD. AR SUBMITTED THAT IN THIS CASE, THE LAS T PAYMENT OF REFUNDABLE DEPOSIT WAS MADE ONLY ON 19.09.2007 AS P ER THE LEDGER EXTRACT IN THE BOOKS OF THE ASSESSEE. ACCORDINGLY, EVEN BY APPLYING THE PROVISIONS OF SECTION 2(47)(V) OF THE ACT, THERE WAS NO TRANS FER TO JUSTIFY THE COMPUTATION OF CAPITAL GAINS IN THE RELEVANT YEAR. THE JUDGMENT OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT & ANR VS. DR.T.K.DAYALU (2011) 60 DTR (KAR) 403 WILL HAVE NO APPLICATION. ON THE OTHER HAND, THE DECISION OF THE ITAT, BENGALURU BENCH, BENGALURU IN THE CASE OF CIT & ANR VS. N. VEMANNA REDDY DT. 18.08.2014 IN ITA NO.591/2 008 WOULD APPLY REPORTED IN 1 DTR 321, WHICH WAS CONFIRMED BY THE H IGH COURT OF KARNATAKA. EVEN ASSUMING THAT POSSESSION HAS BEEN GIVEN ON 30.11.2007, CAPITAL GAIN WOULD ARISE FOR THE ASSESS MENT YEAR 2008-09 AND NOT FOR THE RELEVANT ASSESSMENT YEAR. THUS, THE LD . AR SUBMITTED THAT ON THIS GROUND ALONE THE IMPUGNED COMPUTATION OF CAPIT AL GAINS AS MADE IS REQUIRED TO BE DELETED. IN FACT, POSSESSION OF THE ENTIRE PROPERTY CONTINUED IN THE HANDS OF THE ASSESSEE AND THE FACTORY WAS CO NTINUED TO BE RUN BY ITA NO.933/BANG/2017 PAGE 18 OF 40 THE ASSESSEE, AND THE PROFIT/LOSS THEREFROM HAS BEE N DECLARED BY THE ASSESSEE IN THE IT RETURNS IN LATER YEARS WHICH IS VERIFIABLE IN THE IT RECORDS. IN FACT, IDEB DID NOT CARRY OUT ANY DEVELOPMENTAL A CTIVITIES WHICH IS A CONDITION PRECEDENT TO DECIDE THE TRANSFER. IN OTH ER WORDS, THERE WAS NO PERFORMANCE OF THE CONTRACT BY WAY OF DEVELOPMENT O F THE PROPERTY BY IDEB DURING THE RELEVANT YEAR OR EVEN SUBSEQUENT YEARS A LSO AND CONSEQUENTLY THEY HAVE AGREED FOR CANCELLATION OF THE AGREEMENT. 34. THE LD. AR SUBMITTED THAT EVEN BY TAKING INTO A CCOUNT ALL THE AGREEMENTS IN TOTALITY, THERE WAS NO TRANSFER IN THE RELEVANT YEAR. IT IS SUBMITTED THAT THE DEVELOPMENT AGREEMENT COULD NOT BE CONSTRUED AS AGREEMENT FOR TRANSFER OF PROPERTY AS CONTEMPLATED UNDER SECTION 53A OF THE TRANSFER OF PROPERTY ACT AS PER CLAUSE 9 (AT PA GE 129 OF THE PB). FURTHER, THE GPA WAS REFERRED TO IN CLAUSE 11 AT PA GE 138 WHEREIN IT WAS CATEGORICALLY MENTIONED THAT THE GPA WAS GIVEN FOR CONSTRUCTION OF THE PROPERTY AND FOR ENABLING DEVELOPMENT OF LAND IN TH E SCHEDULE PROPERTY AND TO OBTAIN NECESSARY CLEARANCE, PERMISSION, SANCTION FROM IT DEPARTMENT WHENEVER NECESSARY. THIS IS FURTHER STRENGTHENED B Y RECORDING AT PAGE 103 THAT THE GPA EXECUTED WOULD NOT BE REVOKED UNTI L THE SCHEDULE PROPERTY IS COMPLETED AND UNTIL THE JDA AND THE AGR EEMENT TO SELL STOOD TERMINATED. IN OTHER WORDS, IT IS CLEAR BY THE PAR TIES THAT THE GPA WAS OPERATIVE ONLY DURING THE TENURE OF THE DEVELOPMENT OF THE PROPERTY. THE SALE AGREEMENT IS AGAIN IN RESPECT OF SHARES OF THE SUPERSTRUCTURE FALLEN INTO THE ASSESSEE WHICH WAS YET TO BE DECIDED AND T HUS THE SALE AGREEMENT HAS NO RELEVANCE FOR DETERMINATION OF TRANSFER OF ALLEGED UNDIVIDED SHARE WHICH WAS TO BE TRANSFERRED TO IDEB . MOREOVER, IN THE JDA THE CONSIDERATION FOR TRANSFER IS INDETERMINABL E. IN SUCH CIRCUMSTANCES, BY NO STRETCH OF IMAGINATION SECTION 53A OF THE TRANSFER OF PROPERTY ACT COULD BE APPLIED AND CONSEQUENTLY THE PROVISIONS OF SECTION ITA NO.933/BANG/2017 PAGE 19 OF 40 2(47)(V) OF THE ACT CANNOT BE APPLIED TO JUSTIFY DE TERMINATION OF CAPITAL GAINS IN THE RELEVANT ASSESSMENT YEAR. RELIANCE WAS PLAC ED ON THE JUDGMENT REFERRED TO SUPRA AND ALSO IN THE FOLLOWING CASES: SRI RAVINDER SINGH ARORA VS. ACIT (ITAT, HYD BENCH DT. 20.07.2012). C.S. ATWAL VS. CIT (P&H) DT. 22.07.2015 IN ITA NO.2 00/2013. 35. HE DREW OUR ATTENTION TO THE JUDGMENT OF CIT VS. BALBIR SINGH MAINI , 398 ITR 531 (SC), THE HONBLE APEX COURT IN PARA 18 OF THE JUDGMENT CONSIDERED THE CONDITIONS TO BE SATISFIED UNDER SEC TION 53A OF THE TRANSFER OF PROPERTY ACT. THE HONBLE APEX COURT CONSIDERED THE JUDGMENT IN THE CASE OF SHRIMANT SHAMRAO SURYAVANSHI & ANR VS. PRALHAD BHAI ROBA SURYAVANSHI (D) BY LRS & ORS (2002) 3 SCC 676 AT 68 2 WHEREIN THE CONDITION OF TAKING POSSESSION HAS BEEN MADE AS A C ONDITION PRECEDENT. ALSO, THE HONBLE APEX COURT OBSERVED THAT THE TRAN SFEREE MUST HAVE DONE SOME ACT IN FURTHERANCE OF THE CONTRACT AND THE TRA NSFEREE MUST PERFORM OR BE WILLING TO PERFORM HIS PART OF THE CONTRACT. ES SENTIALLY, IN THE CASE OF IDEB, IT HAD NOT PERFORMED THE CONTRACT OR WAS WILL ING TO PERFORM THE CONTRACT. MERE MAKING PAYMENT OF PART OF SECURITY DEPOSIT CANNOT BE SAID TO BE PERFORMANCE OF THE CONTRACT. ESSENTIALLY THE CONTRACT WAS TO DEVELOP THE PROPERTY. ON THIS COUNT, THERE WAS NO PERFORMA NCE WHICH HAS BEEN CARRIED OUT BY IDEB ESPECIALLY BEFORE THE END OF TH E FINANCIAL YEAR RELATED TO THE RELEVANT ASSESSMENT YEAR. 36. SIMILARLY, IT IS FURTHER REITERATED BY THE HON BLE SUPREME COURT IN THE CASE OF M/S.SESHASAYEE STEELS P. LTD VS. ACIT (2020) 421 IT R 0046 (SC) THAT TAKING POSSESSION HAS BEEN MADE A CONDITION PR ECEDENT TO APPLY ITA NO.933/BANG/2017 PAGE 20 OF 40 SECTION 53A OF THE TRANSFER OF PROPERTY ACT. IN TH E SAID JUDGMENT, IT IS ALSO OBSERVED AS FOLLOWS:- CLAUSE 16 IS CRUCIAL, AND THE EXPRESSION USED IN C LAUSE 16 IS THAT THE PARTY OF THE FIRST PART HEREBY GIVES PERMISSIO N TO THE PARTY OF THE SECOND PART TO START CONSTRUCTION ON THE LAND. CLAUSE 16 WOULD, THEREFORE, LEAD TO THE POSITION THAT A LICEN SE WAS GIVEN TO ANOTHER UPON THE LAND FOR THE PURPOSE OF DEVELOPING THE LAND INTO FLATS AND SELLING THE SAME. SUCH LICENSE CANNOT BE SAID TO BE POSSESSION WITHIN THE MEANING OF SECTION 53A, WHI CH IS A LEGAL CONCEPT, AND WHICH DENOTES CONTROL OVER THE LAND AN D NOT ACTUAL PHYSICAL OCCUPATION OF THE LAND. THIS BEING THE CA SE, SECTION 53A OF THE T.P. ACT CANNOT POSSIBLY BE ATTRACTED TO THE FACTS OF THIS CASE FOR THIS REASON ALONE. 37. SHE DREW OUR ATTENTION TO CLAUSE 6.1 OF THE JOI NT DEVELOPMENT AGREEMENT AND ACCORDING TO HER, IT MAKES CLEAR THAT MERE ALLOWING ENTRANCE OF THE DEVELOPER INTO THE PREMISES OF THE ASSESSEE WAS NOT TO BE CONSTRUED AS TRANSFER AS CONTEMPLATED UNDER SECTION 53A OF THE TRANSFER OF PROPERTY ACT. THE RELEVANT CLAUSE 6.1 READS AS UND ER:- 6.1. IN PURSUANCE TO THE AGREEMENT REACHED AND THE CONSIDERATION RESERVED HEREOF AND THE OBLIGATIONS U NDERTAKEN HEREIN BY EACH PARTY HERETO THE OWNER SHALL IRREVOC ABLY PERMIT THE DEVELOPER OR THEIR AGENTS OR CONTRACTORS OR ARC HITECTS OR SURVEYORS OR WORKERS OR PERSONS CLAIMING UNDER THEM TO ENTER THE SCHEDULE PROPERTY FOR UNDERTAKING THE DEVELOPMENT O F THE SAME AND THE OWNER COVENANTS TO THE DEVELOPER THAT SUCH PERMISSION SHALL NOT BE REVOKED UNTIL ALL THE OBJEC TS OF THIS AGREEMENT ARE FULFILLED AS THE DEVELOPER SHALL BE I NCURRING EXPENDITURE FOR CONSTRUCTION PROVIDED HOWEVER THAT, NOTHING HEREIN CONTAINED SHALL BE CONSTRUED AS DELIVERY OF POSSESSION IN PART PERFORMANCE OF ANY AGREEMENT FOR SALE UNDER SE C 53A OF THE TRANSFER OF PROPERTY ACT AND UNDER SECTION 2(47 )(V) OF THE INCOME TAX ACT. IT IS CLARIFIED THAT THE RIGHT OF ENTRY INTO THE SCHEDULE PROPERTY IS FOR PERMISSIVE POSSESSION AND FOR ITA NO.933/BANG/2017 PAGE 21 OF 40 UNDERTAKING DEVELOPMENT AND CARRYING OUT CONSTRUCTI ON WORKS THEREOF. 38. THE LD. AR SUBMITTED THAT IN THE JUDGMENT OF THE SUPREME COURT REFERRED TO SUPRA, THE HONBLE COURT ALSO OBSERVES THAT TO CONTEMPLATE TRANSFER, THE RIGHTS OF THE OWNER STOOD EXTINGUISHE D ON ACCOUNT OF THE AGREEMENT. IN THE CASE OF THE APPELLANT, IT DID NO T HAPPEN. THE PROPERTY CONTINUED TO BE IN THE CONTROL OF THE ASSESSEE ESPE CIALLY DURING THE FINANCIAL YEAR RELATED TO THE ASSESSMENT YEAR 2007- 08. ACCORDINGLY, IN LIGHT JUDGMENT OF THE SUPREME COURT IN THE CASE OF M/S.SESHASAYEE STEELS P. LTD, (SUPRA) , NO TRANSFER CAN BE CONTEMPLATED TO APPLY SECTION 45 OF THE ACT TO BRING TO TAX THE CAPITAL GAINS SO COMPUTED B Y THE REVENUE. 39. CONSEQUENTLY, IT WAS SUBMITTED BY THE LD. AR THAT THE CAPITAL GAIN OF RS.43,61,72,341 BROUGHT TO TAX IN THIS RELEVANT YEAR IS WITHOUT JURISDICTION. THE AOS VIEW THAT HANDING OVER POSS ESSION TO THE DEVELOPER WAS NOT REALLY REQUIRED WHEN THE ASSESSEE CEASED TO HAVE CONTROL OVER THE PROPERTY BY VIRTUE OF THE AGREEMENT, IT IS SUBMITT ED THAT IN ORDER TO APPLY THE PROVISIONS OF SECTION 2(47)(V) OF THE ACT, TO D ETERMINE TRANSFER, HAVING OVER POSSESSION WAS A CONDITION PRECEDENT AS HELD B Y THE JURISDICTIONAL HIGH COURT IN THE CASE OF VEMANNA REDDY REFERRED TO SUPRA . ACCORDINGLY, THE OBSERVATION OF THE AO IN THIS REGARD IS OPPOSED TO LAW AND THE CAPITAL GAIN AS DETERMINED WAS WITHOUT JURISDICTION AND LIA BLE TO BE DELETED. 40. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT DU RING THE COURSE OF SURVEY, IT WAS NOTICED THAT THE ASSESSEE HAD RECEIV ED AN AMOUNT OF RS. 30 CRORES FORM M/S. LDEB INVESTMENTS PVT. LTD. (LDEB) IN PURSUANCE TO A JOINT DEVELOPMENT AGREEMENT WITH IDEB ON 30.03.2007. THE AO OBSERVED THAT ITA NO.933/BANG/2017 PAGE 22 OF 40 DURING THE COURSE OF SURVEY, FOLLOWING THREE REGIST ERED AGREEMENTS I DOCUMENTS WERE FOUND:- (I) JOINT DEVELOPMENT AGREEMENT BETWEEN ASSESSEE-COMPAN Y AND LDEB, DATED 30.03.2007. (II) AGREEMENT FOR SALE BETWEEN THE ASSESSEE-COMPANY AND M/S IDEB DATED 30.03.2007. (III) GENERAL POWER OF ATTORNEY EXECUTED BY THE ASSESSEE COMPANY IN FAVOUR OF M/S IDEB DATED 30.03.2007. 41. THE AO, AFTER A DETAILED ANALYSIS OF THE AFORE SAID AGREEMENTS CAME TO THE CONCLUSION THAT THE TRANSFER WAS EFFECTIVE I N THE CURRENT ASSESSMENT YEAR IN TERMS OF SECTION 2(47) OF THE ACT AND THERE FORE THE IMPUGNED TRANSACTION WAS EXIGIBLE TO LTCG. THE AO ACCORDINGL Y PROCEEDED TO ASSESS CAPITAL GAINS AT THE FIGURE OF RS. 43,61,72, 341. 42. THE ASSESSEE'S CORE CONTENTIONS ARE SUMMARISED AS UNDER:- - THE AMOUNT HAD BEEN RECEIVED AS ADVANCE AND ONCE TH E SALE DEEDS GET EXECUTED, IT WILL BE TAKEN AS CAPITAL GAI NS. - THE MONIES SO RECEIVED BY THE ASSESSEE ARE IN THE N ATURE OF ADVANCES ONLY. THE CAPITAL GAIN ON THIS TRANSACTION SHALL RISE ONLY AFTER THE CONSTRUCTED AREA IS PHYSICALLY HANDE D OVER TO THE ASSESSEE. FURTHER, TILL DATE THE ENTIRE LAND AN D BUILDING IS IN THE POSSESSION OF THE ASSESSEE AND HAS NOT HANDED O VER THE PHYSICAL POSSESSION TO THE DEVELOPER. THE DEVELOPER HAS NOT TAKEN ANY PLAN SANCTION / APPROVAL FOR ANY CONSTRUC TION IN THE LAND SO GIVEN. HOWEVER, TO SECURE THE ADVANCES GIVE N, THE DEVELOPER HAS ENTERED INTO AN AGREEMENT OF SALE WIT H THE ASSESSEE AND THIS DOES NOT CONSTITUTE A SALE. - THE POINT WHERE THE CAPITAL GAINS ARE DEEMED TO ACC RUE WILL PURELY DEPEND ON THE TERMS OF THE JOINT DEVELOPMENT AGREEMENT. WHERE THE AGREEMENT IS OF SUCH NATURE TH AT ITA NO.933/BANG/2017 PAGE 23 OF 40 POSSESSION IS GIVEN IN PART PERFORMANCE OF A CONTRA CT, THE LIABILITY OF CAPITAL GAINS TAX WILL ARISE ON THE HA NDING OVER OF SUCH POSSESSION TO THE BUILDER. - IN THE PRESENT CASE, POSSESSION IS THEREFORE NOT HA NDED OVER. WHERE THE POSSESSION IS NOT TRANSFERRED BUT DEFERRE D UNTIL THE CONSTRUCTION IS COMPLETE, THE LIABILITY TO CAPITAL GAINS TAX WILL ARISE IN THE YEAR IN WHICH THE DEVELOPER COMPLETES THE CONSTRUCTION. - WHERE THE LANDOWNER AND BUILDER EXECUTE JOINT DEVEL OPMENT AGREEMENT, IF THE CONSIDERATION IS RECEIVABLE IN BU ILT-UP AREA TO BE CONSTRUCTED AND HANDED OVER BY THE BUILDER TO THE LANDOWNER, IT IS ADVISABLE TO AVOID THE APPLICABILI TY OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT. THIS CAN BE AC HIEVED BY MENTIONING IN THE AGREEMENTS THAT LICENSE IS GRANTE D TO THE BUILDER TO ENTER THE PREMISES AND CONSTRUCT THE BUI LDING. THE POSSESSION IS RETAINED BY THE LANDOWNER, WHICH WILL BE HANDED OVER AS AND WHEN THE BUILT-UP AREA IS CONSTRUCTED A ND DELIVERED. BY THIS STIPULATION, THE TRANSFER WILL T AKE PLACE ONLY IN THE YEAR IN WHICH THE BUILT UP AREA IS RECEIVED AND NOT BEFORE. 43. THEREFORE IN THE ASSESSEES CASE, THE TAX INCID ENCE ON CAPITAL GAINS WILL ARISE ONLY WHEN THE POSSESSION OF THE BUILT UP AREA IS HANDED OVER TOGETHER WITH OCCUPANCY CERTIFICATE BY THE DEVELOPE R. RELIANCE WAS PLACED ON THE FOLLOWING JUDGMENTS OF THE HON'BLE MADRAS HI GH COURT:- - CIT V. JEELANI BASHA, 256 ITR 282 - R. VIJAYAKSHME V. APPU HOTELS LTD. 257 ITR 4 44. THE LD. DR SUBMITTED THAT THE CRUCIAL FINDINGS OF FACT RECORDED BY THE AO WITH REGARD TO THE CONTENTS OF THE JDA; AGREEMEN T TO SALE, EXECUTION OF GENERAL POWER OF ATTORNEY (ALL DATED ON 30/03/2007 ) CLEARLY INDICATE THAT THE ASSESSEE HAD FOR ALL PRACTICAL PURPOSES DIVES TED ITS CORE RIGHTS IN THE IMPUGNED PROPERTY IN FAVOUR OF IDEB AGAINST SPECI FICALLY DETERMINED ITA NO.933/BANG/2017 PAGE 24 OF 40 CONSIDERATION IN CASH AND KIND, (SUPER BUILT AREA) AS PER THE TERMS SPECIFIED, IN THE RESPECTIVE INSTRUMENTS, DULY SIGN ED BY BOTH THE PURCHASER AND THE SELLER. 45. BY VIRTUE OF THE JDA DATED 30103/2007, (CLAUSE I-C) THE ASSESSEE PERMITTED IDEB THE RIGHTS OF DEVELOPMENT OF THE SIT E AND THAT SUCH RIGHT WAS IRREVOCABLE. THE CONSIDERATION WAS FULLY DET ERMINABLE IN TERMS OF SUB-CLAUSE (D) OF CLAUSE 1, BY VIRTUE OF WHICH 1,4 8,333 SQ. FT OF THE SUPER BUILT-UP AREA IN THE PROPOSED COMPLEX, WAS TO BE DE VELOPED AND DELIVERED TO THE ASSESSEE. A CLAUSE PROVIDING FOR COMPENSATIO N @ 3000 PER SQ. FT. WAS ALSO PROVIDED THEREIN. THE SUB-CLAUSE (E) OF C LAUSE I OF THE JDA PROVIDED FOR THE PAYMENT OF INTEREST-FREE REFUNDAB LE DEPOSIT OF RS. 35,00,000 TO THE ASSESSEE. OUT OF THIS AN AMOUNT O F RS. 15,00,000 WAS ACTUALLY PAID ON THE DATE OF THE AGREEMENT ITSELF. THE JDA AT SUB-CLAUSE F) OF CLAUSE - I SPECIFICALLY PROVIDED FOR EXECUTION O F AN IRREVOCABLE GENERAL POWER OF ATTORNEY TO 'DEVELOP; ALIENATE; SALE, CON VEY AND LEASE THE CONSTRUCTED AREA. THE CONTENTS OF THE AQREEMENTS T O SALE AND THE GPA EXECUTED ON THE SAME DATED I.E. 30/03/2007 ALSO CLE ARLY INDICATE SIMILAR CONDITIONS, WHICH CRYSTALLIZE INTO A VALID TRANSFER OF PROPERTY, DURING THE YEAR UNDER CONSIDERATION. 46. IT IS OBVIOUS FROM THE ABOVE AGREEMENTS / INST RUMENTS THAT ALL THE BASIC INGREDIENTS OF A VALID TRANSFER AS ENVISAGED UNDER SECTION 2(47) OF THE I.T. ACT R.W.S. 53A OF THE TRANSFER OF PROPERTY ACT , ARE DULY SATISFIED IN THE PRESENT CASE. THE AO THEREFORE RIGHTFULLY INVOKED T HE PROVISIONS OF SECTION 45 OF THE I.T. ACT, CHARGING CAPITAL GAINS TAX ON T HE IMPUGNED TRANSACTION BETWEEN THE APPELLANT AND IDEB. 47. SECTION 45 OF THE I.T. ACT PROVIDES AS UNDER:- ITA NO.933/BANG/2017 PAGE 25 OF 40 '(1) ANY PROFITS AND GAINS ARISING FROM THE TRANSFE R OF A CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR SHALL . BE C HARGEABLE TO INCOME TAX UNDER THE HEAD 'CAPITAL GAINS ',AND S HALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE.' 48. THE SECTION 2(47) OF THE I.T. ACT CLEARLY EXPRE SS THAT, 'TRANSFER' IN RELATION TO A CAPITAL ASSET INCLUDES:- (V) ANY TRANSACTION INVOLVING THE ALLOWING OF TH E POSSESSION OF ANY IMMOVEABLE 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 O(1882),' OR . 49. SECTION 53A OF THE T.P. ACT, 1882, STIPULATES A S UNDER:- '53A. PART PERFORMANCE WHERE ANY PERSON CONSTRUCTS TO TRANSFER FOR CONSIDERATION ANY IMMOVEABLE PROPERTY BY WRITIN G SIGNED BY HIM OR ON HIS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTITUTE THE TRANSFER CAN BE ASCERTAINED WITH REASONABLE CER TAINTY, AND THE TRANSFEREE HAS, IN PART PERFORMANCE OF THE CONTRACT TAKEN POSSESSION OF THE PROPERTY OR ANY PART THEREOF,' OR THE TRANSFEREE, BEING ALREADY IN POSSESSION, CONTINUES IN POSSESSIO N IN PART PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT I N FURTHERANCE OF THE CONTRACT, AND THE TRANSFEREE HAS PERFORMED O R IS WILLING TO PERFORM HIS PART OF THE CONTRACT, THEN, NOTWITHSTAN DING THAT THE CONTRACT, THOUGH REQUIRED TO BE REGISTERED, HAS NOT BEEN REGISTERED, OR, WHERE THERE IS AN INSTRUMENT OF TRA NSFER, THAT THE TRANSFER HAS NOT BEEN COMPLETED IN THE MANNER PRESC RIBED THEREFORE BY THE LAW FOR THE TIME BEING IN FORCE, T HE TRANSFEROR OR ANY PERSON CLAIMING UNDER HIM SHALL BE DEBARRED FRO M ENFORCING AGAINST THE TRANSFEREE AND PERSONS CLAIMING UNDER H IM ANY RIGHT IN RESPECT OF THE PROPERTY OF WHICH THE TRANSFEREE HAS TAKEN OR CONTINUED IN POSSESSION, OTHER THAN A RIGHT EXPRESS LY PROVIDED BY THE TERMS OF THE CONTRACT.' 50. IN VIEW OF THE EXPRESS AGREEMENTS ENTERED IN WR ITING AND IN BACKGROUND OF THE RELEVANT PROVISIONS OF THE I.T. A CT AND THE T.P. ACT, THE ITA NO.933/BANG/2017 PAGE 26 OF 40 IMPUGNED TRANSACTION CONSTITUTE VALID TRANSFER AND THE AO'S ACTION OF CHARGING CAPITAL GAINS IN TERMS OF SECTION 45 OF TH E I.T. ACT IS TO BE UPHELD. 51. REGARDING THE POSSESSION, THE LD. DR SUBMITTED THAT THE ASSESSEE'S PRIMARY CONTENTION IS THAT IN SPITE OF THE IMPUGNE D AGREEMENTS AND OTHER FACTS BROUGHT ABOVE, THE ASSESSEE HAS NOT PASSED ON THE FINAL POSSESSION AND THEREFORE THE TRANSACTION IN QUESTION IS NOT EX IGIBLE TO CAPITAL GAINS UNDER THE PROVISIONS OF I.T. ACT. HE SUBMITTED THA T IT IS EVIDENTLY CLEAR FROM THE CONTENTS OF THE JDA AND POA DATED 30/03/2007 TH AT THE ASSESSEE HAS PROVIDED TO THE PURCHASER, IDEB, ALL FACILITIES OF ENTRY, DEVELOPMENT AND EVEN SALE OF THE CONSTRUCTED BUILT-UP AREA. SUCH UN HINDERED ACCESS PROVIDED TO THE PURCHASER IS VERY MUCH IN THE NATUR E OF POSSESSION, EVEN IF THE WORD AS SUCH HAS NOT BEEN MENTIONED IN THE JDA. IN THIS CONTEXT SUB- CLAUSE-C OF CLAUSE-I OF THE JDA, GIVES IRREVOCABLE RIGHT OF DEVELOPMENT TO THE PURCHASER, WHICH IS AS UNDER:- DEVELOPMENT IN PURSUANCE TO THE AGREEMENT REACHED AND THE CONSI DERATION RESERVED HEREOF AND THE OBLIGATIONS UNDERTAKEN HERE IN BY EACH PARTY HERETO, THE OWNER SHALL IRREVOCABLY PERMIT TH E DEVELOPER OR THEIR AGENTS OR CONSTRUCTORS OR ARCHIT ECTS OR SURVEYORS OR WORKERS OR PERSONS CLAIMING UNDER THE M TO ENTER THE SCHEDULE PROPERTY [OR UNDERTAKING THE DEVELOPMENT OF THE SAME AND THE OWNER COVENANTS TO THE DEVELOPER THAT SUCH PERMISSION SHALL NOT BE REVOKED UNTIL ALL THE OBJE CTS O[THIS AGREEMENT ARE FULFILLED AS THE DEVELOPER SHALL BE I NCURRING EXPENDITURE [OR CONSTRUCTION ' 52. THE GENERAL POWER OF ATTORNEY EXECUTED WITH THE PURCHASERS ALSO GIVES IRREVOCABLE POWERS OF NOT ONLY POSSESSION B UT, EVEN ALIENATE & SALE OF THE CONSTRUCTED AREA. THE RELEVANT PORTION OF TH IS POWER OF ATTORNEY IS EXTRACTED AS UNDER:- ITA NO.933/BANG/2017 PAGE 27 OF 40 GENERAL POWER OFATTORNEY SIMULTANEOUSLY ON THE EXECUTION OF THIS AGREEMENT, THE OWNER SHALL EXECUTE A REGISTERED IRREVOCABLE POWER OF ATT ORNEY INTERALIA EMPOWERING THE DEVELOPER TO ALIENATE, SELL, CONVEY AND LEASE THE 'DEVELOPERS CONSTRUCTED AREA' AND OWNERS CONSTRUCTED AREA JAR ENABLING THE DEVELOPMENT OF TH E LAND IN THE SCHEDULE PROPERTY AND TO OBTAIN CLEARAN CE, PERMISSIONS, SANCTIONS FROM THE INCOME TAX DEPARTME NT WHENEVER NECESSARY ... ' 53. THE LD. DR SUBMITTED THAT IT IS ABUNDANTLY CLEA R THEREFORE THAT THE RIGHTS OF POSSESSION HAVE BEEN ALIENATED TO LDEB IN LETTER AND SPIRIT. THE CONTENTIONS OF THE ASSESSEE IN THIS REGARD ARE THER EFORE NOT TENABLE WITH REGARD TO TRANSFER OF POSSESSION. 54. HE FURTHER SUBMITTED THAT APART FROM DISPUTING THE YEAR OF TAXABILITY IN RESPECT OF THE IMPUGNED TRANSACTION, IT IS NOT THE ASSESSEE'S CASE THAT THE AGREEMENTS DATED 30/03/2007 WITH IDEB WERE NOT ENFO RCED OR CONTINUED IN THE SUBSEQUENT YEARS. IT IS ALSO NOT THE ASSESSEE'S CONTENTION THAT THE AFORECITED AGREEMENTS WERE EITHER CANCELLED OR THAT THE DEPOSITS RECEIVED FROM IDEB WERE REFUNDED AT A LATER DATE. THEREFORE THE TRANSACTION OF SALE / JDA WITH IDEB REMAINED INTACT, WITHOUT THE ASSESSEE HAVING DULY DECLARED THE TRANSACTIONS AS LIABLE TO CAPITAL GAINS. THE AO IN THIS REGARD HAS RECORDED IDEB IN ITS LETTER DATED 11/03/2014 HAD EX PRESSLY ADMITTED THAT THE JDA DATED 30/03/2007 REMAINED IN FORCE AND WAS NOT CANCELLED. 55. IN THESE FACTS & CIRCUMSTANCES THE AGREEMENT BE TWEEN THE ASSESSEE AND IDEB REMAINING EFFECTIVE, THE TRANSACT IONS ENTERED BY WAY OF THE JDA DATED 30/03/2007 WOULD UNDISPUTABLY CONSTIT UTE A 'TRANSFER' IN TERMS OF THE SECTION 2(47) OF THE I.T. ACT R.W.S. 5 3A OF THE T.P. ACT, 1982. THE AO'S ACTION ON THIS ACCOUNT IS THEREFORE TO BE UPHELD. HE SUBMITTED ITA NO.933/BANG/2017 PAGE 28 OF 40 THAT IN THE PECULIAR FACTS AND CIRCUMSTANCES, THE P RESENT CASE IS SQUARELY COVERED BY THE RATIO OF THE JURISDICTIONAL HON'BLE KARNATAKA HIGH COURT'S ORDER IN THE CASE OF CIT & OTHERS VS. DR. T. K. DAYALU ( SUPRA ). IT WAS UNEQUIVOCALLY HELD IN THE SAID JUDGMENT THAT THE YE AR OF SIGNING OF THE JDA SHOULD BE THE PRIMARY CONSIDERATION FOR DETERMINING THE YEAR OF CHARGE OF CAPITAL GAINS. WHILE THE PRESENT CASE SATISFIES THE LEGAL REQUIREMENTS LAID DOWN BY THE AFORESAID THE LEGAL REQUIREMENTS, THERE IS ALSO NO DOUBT THAT A SIGNIFICANT CONSIDERATION (IN FORM OF CASH AND PROP OSED BUILT-UP AREA) HAS ALSO EXCHANGED HANDS BETWEEN THE PURCHASERS AND SEL LER, ACCOMPANIED WITH CORRESPONDING TRANSFER OF RIGHTS OF ACCESS / D EVELOPMENT / CONSTRUCTION AND SALE OF THE IMPUGNED PROPERTY. THEREFORE, THE AOS ACTION IN RESPECT OF CHARGING OF CAPITAL GAINS ON THE BASIS OF JDA DATED 30.3.2007 WITH IDEB IS TO BE UPHELD. 56. WE HAVE HEARD BOTH THE PARTIES AND ALSO PERUSED THE CASE-RECORDS IN THE LIGHT OF THE COMPILATION FILED AND PRECEDENT S CITED BY BOTH THE PARTIES. WE DEAL WITH THE CONTENTIONS OF THE ASSESSEE WITH R EGARD NON-CHARGEABILITY OF CAPITAL GAINS IN RESPECT OF THE LAND, WHICH WAS NOT 'TRANSFERRED' BUT ONLY GIVEN FOR DEVELOPMENT. WE MAY REFER TO THE PROVISIO NS OF S. 2(47)(V) WHICH READS AS FOLLOWS:- '2. . . . . . . (47) . . . . . . (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 S. 53A OF THE TRANSFER OF PROPERTY ACT, 1882 (4 OF 1982)' 57. THE IMPORTANCE OF THE WORD 'TRANSFER' IS DUE TO THE REASON THAT UNDER THE CHARGING SECTION, VIZ. SECTION 45, THE CAPITAL GAIN IS TAXABLE ON 'TRANSFER ITA NO.933/BANG/2017 PAGE 29 OF 40 OF A CAPITAL ASSET'. PRECISELY, THIS SECTION PRESCR IBES THAT 'ANY PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HE AD CAPITAL GAINS AND SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YE AR IN WHICH THE TRANSFER TOOK PLACE. 58. THUS THE FUNDAMENTAL FEATURES WHICH DETERMINE T HE TAXABILITY OF CAPITAL GAIN ARE THAT THE GAIN OUGHT TO BE FROM THE TRANSFER OF A CAPITAL ASSET. THIS SECTION HAS A LARGE SCOPE OF ITS OPERAT ION DUE TO THE PRESENCE OF DEEMING PROVISION WHICH SAYS THAT THE GAIN SHALL BE THE DEEMED INCOME OF THAT PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PL ACE. THIS PHRASE CAN BE INTERPRETED IN THE MANNER THAT THE TOTAL PROFITS MA Y ACTUALLY BE RECEIVED IN ANY OTHER YEAR, BUT FOR THE PURPOSES OF S. 45, THE GAIN SHALL BE THE DEEMED INCOME OF THE YEAR OF TRANSFER OF THE CAPITAL ASSET . IT SHALL NOT BE OUT OF CONTEXT, AT THIS JUNCTURE, TO MENTION AN OBSERVATIO N OF THE HON'BLE AUTHORITY OF ADVANCE RULINGS IN THE CASE OF JASBIR SINGH SARK ARIA, IN RE [2007] 164 TAXMAN 108 (AAR - NEW DELHI), THAT THE EXPRESSION U SED IN SEC. 45 IS 'ARISING', WHICH CANNOT BE EQUATED WITH THE EXPRESS ION 'RECEIVED' OR EVEN WITH THE EXPRESSION 'ACCRUED' AS BEING USED IN THE STATUTE. THE POINT WHICH DESERVES NOTICE IS THAT THE AMOUNT OR THE CONSIDERA TION SETTLED MAY NOT BE FULLY RECEIVED OR MAY NOT TECHNICALLY ACCRUE BUT IF IT ARISES FROM THE AGREEMENT IN QUESTION, THEN THE DEEMING PROVISIONS SHALL COME INTO OPERATION. ANOTHER POINT IS ALSO EQUALLY NOTICEABLE THAT BY THE PRESENCE OF THE DEEMING PROVISION, THE INCOME ON ACCOUNT OF ARI SAL OF THE CAPITAL GAIN SHOULD BE CHARGED TO TAX IN THE SAME PREVIOUS YEAR IN WHICH THE TRANSFER WAS EFFECTED OR DEEMED TO HAVE TAKEN PLACE. DUE TO THE PRESENCE OF THIS STATUTORY FICTION, THE ACTUAL YEAR IN WHICH THE ENT IRE SALE CONSIDERATION IS RECEIVED, IS BESIDE THE POINT BUT WHAT NEEDS TO BE JUDGED IS THE POINT OF TIME AT WHICH THE TRANSFER TOOK PLACE EITHER BY HAN DING OVER OF THE ITA NO.933/BANG/2017 PAGE 30 OF 40 POSSESSION OR BY ALLOWING THE ENTRY INTO THE PREMIS ES OR BY MAKING THE CONSTRUCTIVE PRESENCE OF THE VENDEE NEVERTHELESS DU LY SUPPORTED BY A LEGAL DOCUMENT. 59. BUT THE ISSUE DO NOT GET SETTLED ONLY BY THE IN TERPRETATION OF S. 45 AND S. 2(47)(V) BECAUSE THE DEFINITION OF 'TRANSFER ' NOT MERELY PRESCRIBES ALLOWING OF POSSESSION BUT TO BE RETAINED IN PART P ERFORMANCE OF A CONTRACT OF THE NATURE REFERRED IN S. 53A OF THE TRANSFER OF PROPERTY ACT. THEREFORE, IT IS FURTHER REQUISITE TO DEAL WITH THE RELEVANT SECT ION CONTAINED IN TRANSFER OF PROPERTY ACT. 60. THE TRANSFER OF PROPERTY ACT CONTAINS S.53A UND ER THE HEADING 'PART PERFORMANCE' AND, FOR DECIDING THE CASE IN HA ND, IT IS NECESSARY TO QUOTE THE IMPUGNED SECTION VERBATIM AS FOLLOWS:- 'WHERE ANY PERSON CONTRACTS TO TRANSFER FOR CONSIDE RATION ANY IMMOVABLE PROPERTY BY WRITING SIGNED BY HIM OR ON H IS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTITUTE THE TR ANSFER CAN BE ASCERTAINED WITH REASONABLE CERTAINTY, AND THE TRANSFEREE HAS, IN PART PERFORMANCE OF THE CONTRACT, TAKEN POSSESSION OF THE PROPERTY OR ANY PART THEREOF, OR THE TRANSFEREE, BEING ALREADY IN POSSESSION, CONTINUES IN POSSESSIO N IN PART PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT I N FURTHERANCE OF THE CONTRACT, AND THE TRANSFEREE HAS PERFORMED OR IS WILLING TO P ERFORM HIS PART OF THE CONTRACT. THEN, NOTWITHSTANDING THAT THE CONTRACT, THOUGH REQ UIRED TO BE REGISTERED, HAS NOT BEEN REGISTERED, OR, WHERE THER E IS AN INSTRUMENT OF TRANSFER, THAT THE TRANSFER HAS NOT B EEN COMPLETED IN THE MANNER PRESCRIBED THEREFOR BY THE LAW FOR THE T IME BEING IN FORCE, THE TRANSFER OR ANY PERSON CLAIMING UNDER HI M SHALL BE DEBARRED FROM ENFORCING AGAINST THE TRANSFEREE AND PERSONS CLAIMING UNDER HIM ANY RIGHT IN RESPECT OF THE PROP ERTY OF WHICH ITA NO.933/BANG/2017 PAGE 31 OF 40 THE TRANSFEREE HAS TAKEN OR CONTINUED IN POSSESSION , OTHER THAN A RIGHT EXPRESSLY PROVIDED BY THE TERMS OF THE CONTRA CT: PROVIDED THAT NOTHING IN THIS SECTION SHALL EFFECT THE RIGHTS OF A TRANSFEREE FOR CONSIDERATION WHO HAS NO NOTICE OF T HE CONTRACT OR OF THE PART PERFORMANCE THEREOF.' 61. THE DOCTRINE OF 'PART PERFORMANCE' IS UNDOUBTED LY BASED UPON THE DOCTRINE OF EQUITY. IF ONE PARTY HAS PERFORMED HIS PART OF DUTY THEN EQUITY DEMANDS THAT THE OTHER PARTY SHALL ALSO PERFORM HIS PART OF THE OBLIGATION. IF ONE PARTY STOOD BY HIS WORDS THEN IT IS EXPECTED FR OM THE OTHER PARTY TO ALSO STAND BY HIS PROMISE. NATURALLY AN INEQUITABLE COND UCT OF ANY PERSON HAS NO SANCTION IN THE EYES OF LAW. 62. IN THE LIGHT OF THE ABOVE, NOW WE PROCEED TO EX AMINE THE FACTUAL MATRIX OF THE PRESENT CASE IN HAND. 63. THE STARTING WORDS OF SECTION 53A ARE WHERE A PERSON CONTRACTS, WHICH MEANS JUST THE EXISTENCE OF THE CONTRACT. TH E ASSESSEE IS A PERSON WHO HAS ENTERED INTO A CONTRACT WITH THE DEVELOPER VIZ., IDEB INVESTMENTS (P) LTD. ON 30.3.2007. THIS SECTION SAYS 'TO TRANSFER' MEANS THE SAID CONTRACT IS IN RESPECT OF A TRANSFER AND NOT FOR AN Y OTHER PURPOSE. THE TERM 'TRANSFER' IS TO BE READ ALONG WITH THE S. 45 AND S . 2(47)(V) OF IT ACT. IT IS PERTINENT TO CLARIFY THAT ONE MUST NOT MISTAKE TO I DENTIFY THE ISSUE OF CAPITAL GAIN WITH THE TERM 'TRANSFER' AS DEFINED IN S. 54 O F TRANSFER OF PROPERTY ACT. AT THE COST OF ELABORATION, WE MAY LIKE TO ADD THAT IN THE PAST THERE WAS A LONG LINE OF PRONOUNCEMENTS; WHILE DECIDING INCOME TAX CASES, THAT UNLESS AND UNTIL A SALE DEED IS EXECUTED AND THAT TOO IT I S REGISTERED, TRANSFER CANNOT BE SAID TO HAVE BEEN EFFECTED. THE CONSEQUEN CE OF SAID CATENA OF DECISIONS WAS THAT NO CAPITAL GAIN TAX WAS DIRECTED TO BE LEVIED SO LONG AS ITA NO.933/BANG/2017 PAGE 32 OF 40 'TRANSFER' TOOK PLACE AS PER THE GENERALLY ACCEPTED CONNOTATION OF THE TERM UNDER TRANSFER OF PROPERTY ACT. THE RESULTANT POSIT ION WAS THAT THE LEVY OF CAPITAL GAIN TAX THUS RESULTED IN MAJOR AMENDMENTS IN THE INCOME-TAX STATUTE. THE MAIN OBJECTIVE OF THOSE AMENDMENTS WAS TO ENACT THAT FOR THE PURPOSES OF CAPITAL GAINS, THE TRANSACTION INVOLVIN G TRANSFER OF THE NATURE REFERRED ARE NOT REQUIRED TO BE REGISTERED UNDER RE GISTRATION ACT. SUCH ARRANGEMENT DOES NOT INCLUDE TRANSFER OF CERTAIN RI GHTS VESTING TO A PURCHASER; HOWEVER SUCH 'TRANSFER' DOES CONFER CERT AIN PRIVILEGES OF CONSTRUCTIVE OWNERSHIP WITH CONNECTED BUNDLE OF RIG HTS. INDEED IT IS A DEPARTURE FROM THE COMMONLY UNDERSTOOD MEANING OF T HE DEFINITION 'TRANSFER' WHILE INTERPRETING THIS TERM FOR TAX PUR POSE. ON THE FACTS OF THIS CASE, THE DEVELOPER HAS GOT BUNDLE OF RIGHTS AND TH EREUPON ENTERED INTO THE PROPERTY. THEREAFTER, WE HAVE TO SEE WHAT HAS HAPPE NED AND WHAT STEPS THE TRANSFEREE HAS TAKEN TO DISCHARGE THE OBLIGATIO N ON HIS PART. IF TRANSFEREE HAS TAKEN ANY STEPS TO CONSTRUCT THE FLA TS, UNDISPUTEDLY THEN, UNDER THE PROVISION OF INCOME TAX ACT A 'TRANSFER' HAS DEFINITELY TAKEN PLACE. 64. THE ARGUMENT OF THE LD. AR ON THIS ISSUE BEFORE US IS THAT POSSESSION WAS NOT GIVEN ON OR BEFORE 31.3.2007. T HE DEVELOPER HAD PAID ONLY RS.15 CRORES AS REFUNDABLE SECURITY DEPOSIT ON EXECUTION OF JDA. THE BALANCE OF RS.20 CRORES WAS PAYABLE ON OR BEFORE 30 .11.2007 IN TWO INSTALMENTS AS DISCUSSED ABOVE. IT WAS SPECIFICALL Y AGREED BETWEEN THE PARTIES THAT POSSESSION WOULD BE GIVEN TO THE DEVEL OPER ONLY AFTER RECEIPT OF FULL CONSIDERATION BY WAY OF REFUNDABLE SECURITY DE POSIT WHICH WAS ON 30.11.2007 OR EARLIER. THE CONTENTION OF THE LD. AR SECTION 2(47)(V) OF THE ACT CANNOT BE APPLIED TO THE FACTS OF THE PRESENT C ASE. THE JUDGMENT OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V. DR. T.K. DAYALU (SUPRA) WILL HAVE NO APPLICATION AND CAPITAL GAIN ARISES O NLY IN AY 2008-09 ITA NO.933/BANG/2017 PAGE 33 OF 40 AND NOT IN AY 2007-08. THIS PROPOSITION OF THE LD. AR IS TOTALLY MISCONCEIVED. 65. THE EXISTENCE OF A CONSIDERATION IS ESSENCE OF THE CONTRACT. IN THE PRESENT CASE, THE LAND OWNER I.E. THE ASSESSEE WILL GET 1,48,333 SQ.FT. AREA IN THE SAID COMPLEX TO BE CONSTRUCTED ON THE SCHEDU LE PROPERTY WHICH INCLUDES PROPORTIONATE COMMON AREAS AND AMENITIES A LONG WITH 1 COVERED CAR PARKING SLOT FOR EVERY 1000 SQ.FT. OF SUPER BUI LT UP AREA IN THE SAID COMPLEX ALONG WITH THE RIGHT TO RETAIN THE OWNERSHI P OF THE PROPORTIONATE SHARE / UNDIVIDED SHARE, RIGHT, TITLE, INTEREST IN THE LAND IN THE SCHEDULE PROPERTY. IN ADDITION TO THIS, THE ASSESSEE HAS TO RECEIVE AS PER CLAUSE 8 OF THE JDA A SUM OF RS.35 CRORES AS A REFUNDABLE SECUR ITY DEPOSIT. OUT OF THIS, THE ASSESSEE RECEIVED RS.15 CRORES BEFORE 30. 3.2007. AS PER CLAUSE 8(2) OF THE JDA, THE BALANCE RS.20 CRORES TO BE REC EIVED IS, RS.10 CRORES ON OR BEFORE 15.5.2007 AND RS.10 CRORES ON OR BEFOR E 30.11.2007. 66. THE NEXT IMPORTANT PHASE I.E., TERMS NECESSARY TO CONSTITUTE THE TRANSFER CAN BE ASCERTAINED WITH REASONABLE CERTAI NTY. IN THIS CASE, THE TERMS AND CONDITIONS OF THE CONTRACT WERE UNAMBIGUO US THUS CLEARLY SPOKEN ABOUT THE RIGHTS AND DUTIES WITH CERTAINTY OF BOTH THE SIGNING PARTIES. WE ARE CONCERNED MAINLY WITH TWO CERTAINTIES; (I) PASSING OF CONSIDERATION; & (II) PASSING OVER OF POSSESSION. IN THE PRESENT CASE, OUT OF REFUNDABLE SECURITY DEPOSIT, THE ASSESSEE HAS RECEIVED RS.15 C RORES BY 30.3.2007 AND THE BALANCE RS.20 CRORES WAS TO BE RECEIVED BY ON O R BEFORE 30.11.2007. ITA NO.933/BANG/2017 PAGE 34 OF 40 67. THE LAST NOTICEABLE INGREDIENT IS, 'THE TRANSFE REE HAS PERFORMED OR IS WILLING TO PERFORM HIS PART OF THE CONTRACT'. TO AS CERTAIN THE EXISTENCE OF WILLINGNESS ON THE PART OF THE TRANSFEREE ONE MUST NOT PUT STOP AT ONE EVENT BUT WILLINGNESS IS TO BE JUDGED BY THE SERIES OF AC TION OF THE TRANSFEREE/TRANSFEREE. IT IS EVIDENTLY CLEAR FROM THE CONTENTS OF THE JDA AND POA DATED 30/03/2007 THAT THE ASSESSEE HAS PROVIDED TO THE PURCHASER M/S LDEB ALL FACILITIES OF ENTRY, DEVELOPMENT AND E VEN SALE OF THE CONSTRUCTED BUILT-UP AREA. SUCH UNHINDERED ACCESS P ROVIDED TO THE PURCHASER IS VERY MUCH IN THE NATURE OF POSSESSION, EVEN IF THE WORD AS SUCH HAS NOT BEEN MENTIONED IN THE JDA. IT WOULD BE APPROPRIATE IN THIS CONTEXT TO EXTRACT THE SUB-CLAUSE-C OF CLAUSE-I OF THE JDA, WHICH GIVES IRREVOCABLE RIGHT OF DEVELOPMENT TO THE PURCHASER. DEVELOPMENT 'IN PURSUANCE TO THE AGREEMENT REACHED AND THE CONS IDERATION RESERVED HEREOF AND THE OBLIGATIONS UNDERTAKEN HERE IN BY EACH PARTY HERETO, THE OWNER SHALL IRREVOCABLY PERMIT TH E DEVELOPER OR THEIR AGENTS OR CONSTRUCTORS OR ARCHIT ECTS OR SURVEYORS OR WORKERS OR PERSONS CLAIMING UNDER THE M TO ENTER THE SCHEDULE PROPERTY [OR UNDERTAKING THE DEVELOPMENT OF THE SAME AND THE OWNER COVENANTS TO THE DEVELOPER THAT SUCH PERMISSION SHALL NOT BE REVOKED UNTIL ALL THE OBJE CTS OF THIS AGREEMENT ARE FULFILLED AS THE DEVELOPER SHALL BE I NCURRING EXPENDITURE FOR CONSTRUCTION ..' 68. THE GENERAL POWER OF ATTORNEY EXECUTED WITH THE PURCHASERS ALSO GIVES IRREVOCABLE POWERS OF NOT ONLY POSSESSION B UT, EVEN ALIENATE & SALE OF THE CONSTRUCTED AREA. THE RELEVANT PORTION OF TH IS POWER OF ATTORNEY IS EXTRACTED AS UNDER:- ITA NO.933/BANG/2017 PAGE 35 OF 40 GENERAL POWER OF ATTORNEY 'SIMULTANEOUSLY ON THE EXECUTION OF THIS AGREEMENT, THE OWNER SHALL EXECUTE A REGISTERED IRREVOCABLE POWER OF ATTORNEY INTERALIA EMPOWERING THE DEVELOPER TO ALI ENATE, SELL, CONVEY AND LEASE THE 'DEVELOPERS CONSTRUCTED AREA' AND OWNERS CONSTRUCTED AREA JAR ENABLING THE DEVELOPMENT OF THE LAND IN THE SCHEDULE PROPERTY AN D TO OBTAIN CLEARANCE, PERMISSIONS, SANCTIONS FROM THE INCOME T AX DEPARTMENT WHENEVER NECESSARY ..... '. 69. IT IS ABUNDANTLY CLEAR THEREFORE THAT, THE RIGH TS OF POSSESSION HAVE BEEN ALIENATED TO IDEB IN LETTER AND SPIRIT. THE CO NTENTIONS OF THE ASSESSEE IN THIS REGARD ARE THEREFORE NOT TENABLE WITH REGAR D TO TRANSFER OF POSSESSION. APART FROM DISPUTING THE YEAR OF TAXAB ILITY IN RESPECT OF THE IMPUGNED TRANSACTION, IT IS NOT THE ASSESSEE'S CASE THAT THE AGREEMENTS DATED 30/03/2007 WITH IDEB WERE NOT ENFORCED OR CON TINUED IN THE SUBSEQUENT YEARS. IT IS ALSO NOT THE ASSESSEE'S CON TENTION THAT THE AFORECITED AGREEMENTS WERE EITHER CANCELLED OR THAT THE DEPOSITS RECEIVED FROM IDEB WERE REFUNDED AT A LATER DATE. THEREFORE THE TRANSACTION OF SALE / JDA WITH IDEB REMAINED INTACT, WITHOUT THE ASSESSEE HAVING DULY DECLARED THE TRANSACTIONS AS LIABLE TO CAPITAL GAINS. THE A O IN THIS REGARD HAS RECORDED IN PARA 8.5.5 OF HIS ORDER THAT LDEB IN I TS LETTER DATED 11/03/2014 HAD EXPRESSLY ADMITTED THAT THE JDA DATED 30/03/200 7 REMAINED IN FORCE AND WAS NOT CANCELLED. IN THESE FACTS & CIRCUMSTAN CES THE AGREEMENT BETWEEN THE ASSESSEE AND IDEB REMAINING EFFECTIVE, THE TRANSACTIONS ENTERED BY WAY OF THE JDA DATED 30/03/2007 WOULD UN DISPUTABLY CONSTITUTE A 'TRANSFER' IN TERMS OF THE SECTION 2(47) OF THE I .T. ACT R.W.S. 53A OF THE T.P. ACT, 1982. THE ORDERS OF THE LOWER AUTHORITIES ON THIS ACCOUNT IS THEREFORE TO BE UPHELD. ITA NO.933/BANG/2017 PAGE 36 OF 40 70. IN THE PRESENT CASE, WE ARE OF THE CONSIDERED O PINION THAT IT IS SQUARELY COVERED BY THE RATIO OF THE JURISDICTIONA L HON'BLE KARNATAKA HIGH COURT'S JUDGMENT IN THE CASE OF CIT & OTHERS V. DR. T. K. DAYALU (2011) 60 DTR (KAR) 403 WHEREIN IT WAS UNEQUIVOCALLY HELD THAT THE YEAR OF SIGNING OF THE JDA SHOULD THE PRIMARY CONSIDERATION FOR DETERM INING THE YEAR OF CHARGE OF CAPITAL GAINS WHILE THE PRESENT CASE SATI SFIES THE LEGAL REQUIREMENTS LAID DOWN BY THE AFORESAID JUDGMENT, THERE IS ALSO NO DOUBT THAT A SIGNIFICANT CONSIDERATION IN THE FORM OF CAS H AND PROPOSED BUILT-UP AREA HAS ALSO EXCHANGED HANDS BETWEEN THE PURCHASER S AND SELLER, ACCOMPANIED WITH CORRESPONDING TRANSFER OF RIGHTS O F ACCESS / DEVELOPMENT / CONSTRUCTION AND SALE OF THE IMPUGNED PROPERTY. 71. BY VIRTUE OF THE JDA DATED 30103/2007, (CLAUSE I-C) THE ASSESSEE PERMITTED IDEB THE RIGHTS OF DEVELOPMENT OF THE SIT E AND SUCH RIGHT WAS IRREVOCABLE. THE CONSIDERATION WAS FULLY DETERMI NABLE IN TERMS OF SUB- CLAUSE (D) OF CLAUSE 1, BY VIRTUE OF WHICH 1,48,3 33 SQ. FT OF THE SUPER BUILT- UP AREA IN THE PROPOSED COMPLEX, WAS TO BE DEVELOPE D AND DELIVERED TO THE ASSESSEE. A CLAUSE PROVIDING FOR COMPENSATION @ 300 0 PER SQ. FT. WAS ALSO PROVIDED THEREIN. THE SUB-CLAUSE E OF CLAUSE I OF THE JDA PROVIDED FOR THE PAYMENT OF INTEREST-FREE REFUNDABLE DEPOSIT OF RS. 35,00,000 TO THE ASSESSEE. OUT OF THIS AN AMOUNT OF RS. 15,00,000 W AS ACTUALLY PAID ON THE DATE OF THE AGREEMENT ITSELF. THE JDA (AT SUB-CLAU SE F) OF CLAUSE - I SPECIFICALLY PROVIDED FOR EXECUTION OF AN IRREVOCA BLE GENERAL POWER OF ATTORNEY TO 'DEVELOP; ALIENATE; SALE, CONVEY AND LEASE THE CONSTRUCTED AREA. THE CONTENTS OF THE AGREEMENTS TO SALE AND T HE GENERAL POWER OF ATTORNEY EXECUTED ON THE SAME DATED I.E. 30/03/2007 ALSO CLEARLY INDICATE SIMILAR CONDITIONALITIES, WHICH CRYSTALLIZE INTO A VALID TRANSFER OF PROPERTY, DURING THE YEAR UNDER CONSIDERATION. ITA NO.933/BANG/2017 PAGE 37 OF 40 72. IN THIS CASE, JDA HAS BEEN REGISTERED AND ASSES SEE HAS GIVEN POWER OF ATTORNEY ON 30.3.2007. AS PER POWER OF AT TORNEY ALSO, THE ASSESSEE HAS GIVEN THE RIGHT TO THE DEVELOPER TO EX ECUTE AGREEMENT OR SALE DEEDS OR OTHER CONVEYANCE IN RESPECT OF SCHEDULE PR OPERTY AND TO DO ALL ACTS, DEEDS AND THINGS WITH THE SAID DEVELOPER AS C ONSIDERED NECESSARY OR ANY OTHER MANNER AS DEEMED FIT SO AS TO FULLY AND E FFECTUALLY CONVEY THE SAME. THIS ISSUE IS ALSO COVERED AGAINST THE ASSESS EE BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. BALBIR SINGH MAINI, 391 ITR 531 (SC) AS JDA & POA HAS BEEN REGISTERED AND READING OF TH ESE REGISTERED DOCUMENTS SHOW THAT THE PRESENT ASSESSEE BEING OWNER OF THE LAND HAS PARTED WITH OWNERSHIP OF LAND TO THE DEVEL OPER AND DEVELOPER HAS THE RIGHT TO DEVELOP, ALIENATE, SALE, CONVEY AND T RANSFER THE CONSTRUCTED AREA AND THERE IS VALID TRANSFER OF RIGHTS BY THE L ANDLORD TO THE DEVELOPER.BY THE SAME GPA, THE ASSESSEE HAS ALSO GIVEN RIGHT TO THE DEVELOPER TO SELL UPTO 115000 SQ.FT. BUILT UP AREA OF THE ASSESSEES SHARE OF CONSTRUCTED AREA ALSO. THUS, HE HAS GIVEN THE BUNDLE OF RIGHTS THRO UGH GPA IN FAVOUR OF THE DEVELOPER INCLUDING RIGHT TO SELL THE PROPERTY. 73. THE POINT PERTAINS TO THE FIXATION OF 'MATERIAL DATE' FOR THE PURPOSE OF ASSESSING THE CAPITAL GAIN. THERE IS NO DISPUTE WIT H REGARD TO THE FACT THAT THE ASSESSEE HAS ENTERED THE AGREEMENT ON 30.3.2007 . AS PER CLAUSE 5.3 OF THE SAID AGREEMENT, THE BUILDER WOULD COMMENCE T HE DEVELOPMENT OF PROPERTY ON THE DELIVERY OF THE POSSESSION OF THE L AND. HOWEVER, IN THE CLAUSE 6.1, IT IS ALSO MENTIONED 'HOWEVER THAT NOTH ING HEREIN CONTAINED SHALL BE CONSTRUED AS DELIVERY OF POSSESSION IN PAR T PERFORMANCE OF ANY AGREEMENT FOR SALE UNDER S. 53A OF THE T.P. ACT AND U/S. 2(47)(V) OF THE I.T. ACT'. FURTHER AS PER CLAUSE 5.2 OF THE AGREEMENT, T HE POSSESSION OF VACANT LAND WAS HANDED OVER TO THE DEVELOPER ONLY ON 30.11 .2007. ACCORDINGLY, IT IS CONTENDED BY THE ASSESSEE THAT IT HAS NOT GIVEN POSSESSION OF THE LAND ITA NO.933/BANG/2017 PAGE 38 OF 40 AS CONTEMPLATED IN SEC. 53A OF THE TRANSFER OF PROP ERTY ACT. IT IS THE CONTENTION OF THE ASSESSEE THAT THE POSSESSION WAS HANDED OVER ONLY ON 30.11.2007. 74. IN THIS REGARD, WE MAY EXTRACT BELOW THE RELEVA NT PORTION OF THE JDA:- THE OWNER SHALL DELIVER THE VACANT POSSESSION OF T HE SCHEDULE PROPERTY TO THE DEVELOPER BEFORE 30/11/2007. PRIOR TO DELIVERY OF VACANT POSSESSION, THE OWNER SHALL REMO VE ALL STRUCTURES ON THE SCHEDULE PROPERTY. 75. THUS, IT IS SEEN THAT THE ABOVE CLAUSES SHOW TH AT THE HANDING OVER OF THE POSSESSION OF THE CONSTRUCTED AREA TO THE ASSES SEE. THERE MAY NOT BE ANY DISPUTE THAT THE INCOME TAX DEPARTMENT IS CONCE RNED WITH THE HANDING OVER THE POSSESSION OF THE VACANT LAND TO THE BUILD ER UNDER THE DEVELOPMENT AGREEMENT. AS PER THE ASSESSEE, THE POS SESSION OF VACANT LAND WAS HANDED OVER THE DEVELOPER ONLY ON 30.11.20 07, I.E., UPON RECEIVING THE ENTIRE SECURITY DEPOSIT. 76. IT IS A WELL SETTLED PROPOSITION OF LAW THAT TH E SUBSTANCE SHALL PREVAIL OVER THE FORM. THOUGH IT IS MENTIONED IN THE AGREEM ENT THAT THE POSSESSION OF LAND SHALL BE HANDED OVER ONLY AFTER RECEIPT OF SECURITY DEPOSIT, YET THE BUILDER, UNDER PRACTICAL CIRCUMSTANCES, CANNOT STAR T CONSTRUCTION UNLESS THE PHYSICAL POSSESSION OF LAND IS HANDED OVER TO HIM. HENCE, FOR ALL PRACTICAL PURPOSES, WE ARE OF THE VIEW THAT THE PHYSICAL POSS ESSION WAS HANDED OVER TO THE BUILDER AFTER ENTERING INTO THE AGREEMENT DA TED 30.3.2007 AND RIGHT TO ENTRY INTO THE PROPERTY CANNOT BE CONSTRUED AS PERM ISSIVE POSSESSION WHEN THE DEVELOPER HAS A RIGHT TO ALIENATE THE SAME TO O THERS BY WAY OF SALE, MORTGAGE, GIFT, LOAN OR OTHERWISE DISPOSE OF THE SA ME. ITA NO.933/BANG/2017 PAGE 39 OF 40 77. IN OUR OPINION, AS HELD BY THE SUPREME COURT IN THE CASE OF ALAPATI VENKATARAMIAH V. CIT, 57 ITR 185 (SC) , TO ATTRACT LIABILITY TO TAX U/S. 45, IT IS SUFFICIENT IF IN THE ACCOUNTING YEAR PROFITS HAVE A RISEN OUT OF TRANSFER OF CAPITAL ASSET. IN OTHER WORDS, IF THE ASSESSEE HAD A RIGHT TO RECEIVE THE PROFIT IN THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE IS LIABLE TO PAY CAPITAL GAINS TAX ON TRANSFER OF CAPITAL ASSET. ACTUAL RECEIPT OF PROFIT IS NOT A RELEVANT CONSIDERATION. ONCE THE PROFITS HAV E ARISEN IN THE ACCOUNTING YEAR OUT OF THE TRANSFER OF CAPITAL ASSE T, IT WOULD BE SUFFICIENT TO ATTRACT LIABILITY U/S. 45 OF THE ACT. THE CONTENT ION OF THE ASSESSEE IS THAT THERE WAS NO TRANSFER IN THE ASSESSMENT YEAR UNDER CONSIDERATION AS THE POSSESSION OF THE PROPERTY HAS NOT BEEN GIVEN TO TH E DEVELOPER. IN THE PRESENT CASE, THE ASSESSEE EXECUTED REGISTERED JDA ALONG WITH REGISTERED GPA WHICH AUTHORIZES THE DEVELOPER A PROVISIONAL PE RMISSION TO ENTER INTO THE LAND AND AUTHORIZING THEM TO DEVELOP, EXECUTE S ALE DEED OR OTHER CONVEYANCE IN RESPECT OF THE IMPUGNED PROPERTY AND AUTHORIZE TO SELL THE CONSTRUCTED AREA OF BOTH THE ASSESSEE AS WELL AS TH E DEVELOPER. AS SUCH, THERE IS A TRANSFER IN TERMS OF SECTION 45 R.W.S. 2 (47) OF THE ACT. ACCORDINGLY, WE DECIDE THIS GROUND AGAINST THE ASSE SSEE IN FAVOUR OF THE DEPARTMENT. 78. GROUND NOS. 17 TO 20 ARE WITH REGARD TO INTERES T U/S. 234A, 234B & 234C OF THE ACT WHICH ARE MANDATORY AND CONSEQUENTI AL IN NATURE. AS SUCH, NO ADJUDICATION OF THESE GROUNDS IS WARRANTED . ITA NO.933/BANG/2017 PAGE 40 OF 40 79. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS DI SMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF OCTOBER, 2021. SD/- SD/- ( BE ENA PILLAI ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 11 TH OCTOBER, 2021. / DESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.