Shafiq Mohamed Shah, CHENNAI V. ITO, CHENNAI

ITA 945/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4628 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 16-03-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 12-04-2016
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: D ANAND; S VIDYA
• Keywords: Capital asset; Principle of natural justice; Deemed to accrue or arise in india; Cost of acquisition; Date of conversion
• Section: 45(2); 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . ' # , $ #% BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . /ITA NO. 1331/MDS/2016 / ASSESSMENT YEAR : 2011-12 THE INCOME-TAX OFFICER, NON CORPORATE WARD-3(3), CHENNAI 34. ( /APPELLANT) V. SHRI SHAFIQ MOHAMMED SHAH, NO.58, VEERABADRAN STREET NUNGAMBAKKAM CHENNAI 600 034. PAN AAJPS3460P (/ RESPONDENT) . /ITA NO. 945/MDS/2016 / ASSESSMENT YEAR : 2011-12 SHRI SHAFIQ MOHAMMED SHAH, CHENNAI 600 034. ( /APPELLANT) V. THE INCOME-TAX OFFICER, NON CORPORATE WARD-3(3), CHENNAI 34. (/ RESPONDENT) DEPARTMENT BY : SHRI SUPRIYO PAL, JCIT ASSESSEE BY : SHRI D. ANAND, ADVOCATE & MS. S. VIDYA, CA !' / DATE OF HEARING : 03.04.2017 #$ !' / DATE OF PRONOUNCEMENT : 11.05.2017 - - ITA1331 & 945/16 2 & / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE CROSS APPEALS BY THE REVENUE AND BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE CO MMISSIONER OF INCOME-TAX(APPEALS)-4,CHENAAI DATED 08.02.2016. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 4, CHENNAI 600 034 DATED 08.02.2016 IN I.T.A. NO. 226/2013-14/A.Y.2011-12/CIT(A)4 FOR THE ABOVE MENTIONED ASSESSMENT YEAR IS CONTRARY TO LAW, FACTS, AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE CIT(APPEALS) ERRED IN CONFIRMING THE CLAIM O F DEDUCTION U/S.24(A) OF THE ACT TO THE EXTENT OF 4,20,000/- IN THE COMPUTATION OF INCOME FROM HOUSE PROPERTY WHICH FORMED PART OF THE COMPUTATION OF TAXABLE TOTAL INCOME WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 3. THE CIT(APPEALS) WENT WRONG IN RECORDING THE FINDINGS IN THIS REGARD IN PARA 7 OF THE IMPUGNED ORDER WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 4. THE CIT(APPEALS) ERRED IN SUSTAINING THE CLAIM O F THE LONG TERM CAPITAL LOSS SUFFERED FROM SALE OF SHARES OF M/S. PARAMOUNT BUILDERS P. LTD. TO THE EXTENT OF 1,07,45,847/- AS SHAM IN THE COMPUTATION OF TAXABLE TOTAL INCOME WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. - - ITA1331 & 945/16 3 5. THE CIT(APPEALS) WENT WRONG IN RECORDING THE FINDINGS IN THIS REGARD IN PARA 10 OF THE IMPUGNED ORDER WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION AND OUGHT TO HAVE APPRECIATED THAT TH ERE WAS NO CONCESSION FOR DISMISSING THE SAID GROUND OF APPEAL THEREBY VITIATING THE FINDINGS RECORDED IN RELATION THERETO. 6. THE CIT(APPEALS) ERRED IN CONFIRMING THE ASSESSMENT OF LONG TERM CAPITAL GAINS RELATING TO THE JDA IN OVERLOOKING THE DETAILED FACTUAL SUBMISSIONS MADE AS WELL AS IN NOT PROPERLY APPRECIATING THE FACT OF REPORTING OF SUCH LONG TER M CAPITAL GAINS IN THE RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2014-15 WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 7. THE CIT(APPEALS) FAILED TO APPRECIATE THAT THE SURVEY REPORT AS WELL AS THE REMAND REPORT WERE NOT PROPERLY TAKEN NOTE OF IN RECORDING THE WRONG FINDI NGS IN PARA 12 TO PARA 15 OF THE IMPUGNED ORDER. 8. THE CIT(APPEALS) FAILED TO APPRECIATE THAT THE FINDING IN PARA 12 OF THE IMPUGNED ORDER ON THE PRESUMPTION OF SALE OF THE AREA RELATED TO THE JOIN T LAND OWNERS INCLUDING THE APPELLANT WAS WRONG, ERRONEOUS, UNJUSTIFIED, INCORRECT AND NOT SUSTAINAB LE IN LAW AND OUGHT TO HAVE APPRECIATED THAT THE PRESUMPTION OF THE REPORTING OF THE LONG TERM CAPITAL GAINS IN THE ASSESSMENT YEAR 2014-15 RELATABLE TO THE BALANCE PORTION RETAINED BY THE CO - OWNERS INCLUDING THE APPELLANT WAS ALSO WRONG, ERRONEOUS, UNJUSTIFIED, INCORRECT AND NOT SUSTAINAB LE IN LAW. 9. THE CIT(APPEALS) FAILED TO APPRECIATE THAT THE COMPUTATION ATTEMPTED IN PARA 13 OF THE IMPUGNED ORDER FOR THE PURPOSE OF REVISING THE LONG TERM CAPITAL GAINS COMPUTED BY THE ASSESSING OFFICER - - ITA1331 & 945/16 4 WAS WRONG, ERRONEOUS, UNJUSTIFIED, INCORRECT AND NO T SUSTAINABLE IN LAW. 10. THE CIT(APPEALS) FAILED TO APPRECIATE THAT THE DIRECTIONS GIVEN IN PARA 15 OF THE IMPUGNED ORDER WERE WHOLLY UNJUSTIFIED, BAD IN LAW AND OUTSIDE THE POWERS VESTED IN THE APPELLATE JURISDICTION, THEREB Y VITIATING THE DIRECTIONS RECORDED FOR PASSING RE- ASSESSMENT ORDERS FOR THE OTHER CO-OWNERS. 11. THE CIT(APPEALS) FAILED TO APPRECIATE THAT THER E WAS NO PROPER OPPORTUNITY GIVEN BEFORE PASSING OF THE IMPUGNED ORDER AND ANY ORDER PASSED IN VIOLATION OF THE PRINCIPLES NATURAL JUSTICE WOULD B E NULLITY IN LAW. 2.1 THE REVENUE HAS RAISED FOLLOWING GROUND : 2. THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE AC TION OF THE ASSESSING OFFICER IN INVOKING THE PROVISIONS OF SECTION 45(2) AND THEREBY TREATING A PORTION OF GAI NS AS BUSINESS PROFIT IS UNTENABLE OVERLOOKING THE FACT T HAT THE ASSET WAS ORIGINALLY OWNED AS A CAPITAL ASSET AND A S PER THE CONTENTS OF JOINT VENTURE AGREEMENT IT GOT CONV ERTED INTO STOCK-IN-TRADE AS ON 27.06.2006 AND ACCORDINGL Y, A PORTION OF THE PROFIT BEING THE DIFFERENCE BETWEEN THE INDEXED COST OF ACQUISITION AND THE MARKET VALUE OF THE PROPERTY ON THE DATE OF CONVERSION GETS CLASSIFIED AS LONG TERM CAPITAL GAINS U/S.45(2) AND THE SUBSEQUEN T DIFFERENCE BETWEEN THE SALE VALUE OF THE PROPERTY A ND THE MARKET VALUE OF THE ASSET SOLD ON 27.6.2006 GET S CLASSIFIED AS BUSINESS PROFIT U/S.28. HE HAS FURTH ER ERRED IN DIVERTING THE ASSESSING OFFICER TO TREAT T HE GAINS ON EXECUTING OF JOINT VENTURE AGREEMENT AS LONG TER M CAPITAL GAINS. - - ITA1331 & 945/16 5 3. AT THE TIME OF HEARING, THE LD. AR SUBMITTED THA T THE ASSESSEE IS NOT PRESSING GROUND NOS. 2, 3, 4, 5 AND THEREFORE, WE DISMISS GROUND NOS. 2, 3, 4, 5 AS NOT PRESSED. 4. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILE D HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12 ON 14.6.2012 ADMITTING A TAXABLE INCOME OF 14,41,921/-. SUBSEQUENTLY, THE ORDER U/S.143(3) OF THE ACT WAS P ASSED ON 5.3.2014 ARRIVING AT A TAXABLE INCOME OF 1,25,49,533/-. THE CONTENTIOUS ISSUES WHICH FORMED THE ENHANCED VA LUE TO THE TAXABLE INCOME, WERE ON ACCOUNT OF IGNORING THE ASSESSEES CLAIM OF LONG TERM CAPITAL LOSS(LTCL) ON SALE OF SHARES IN M/S. PARAMOUNT BUILDERS (CHENNAI) LTD. AMOUNTING TO 1,07,45,847/- AND INVOKING THE PROVISIONS OF SEC.45(2), THEREBY TREATING A PORTION OF GAIN ON SA LE OF ASSET AT VELACHERY AS BUSINESS PROFITS. ADDITIONALLY, TH E INTEREST CLAIMED U/S.24(A) OF THE ACT OF 4,20,000/- WAS ALSO DISALLOWED ON THE FINDING THAT THE LOAN DID NOT REL ATE TO THE PROPERTY THAT FETCHED RENTAL INCOME. - - ITA1331 & 945/16 6 4.1 THE ASSESSEE ALONG WITH 14 OTHER FAMILY MEMBERS HAD ENTERED INTO A JOINT DEVELOPMENT AGREEMENT(JDA) WITH M/S. P.S. SRIJAN REALTY, IN RESPECT OF LAND AT 137, SEETHARAM NAGAR MAIN ROAD, CHENNAI 600 042 FOR DEVELOPMENT OF A COMMERCIAL-CUM-RESIDENTIAL COMPLEX . THE COMMERCIAL PORTION IS NAMED PARAMOUNT GRAND MA LL. THE JDA WAS ENTERED ON 27.6.2006, WHICH WAS LATER MODIFIED INTO A SUPPLEMENTARY AGREEMENT DATED 10.7.2013. IN LIEU OF TRANSFER OF 50% UNDIVIDED SH ARE OF LAND BY THE 15 CO-OWNERS, THE LAND OWNERS WERE JOIN TLY ALLOTTED 78,400 SQ. FT. OF COMMERCIAL AREA, 15875 S Q.FT. OF FOOD STREET AND 36537 SQ. FT. OF RESIDENTIAL AREA IN THE PROJECT. THE CO-OWNERS OF LAND FAILED TO OFFER THE LTCG THAT HAD ARISEN ON TRANSFER OF 50% LAND FOR A CONSIDERAT ION WORTH THE COST OF 1,30,812 SQ.FT. HENCE, AN ACTION U/S.133A OF THE ACT WAS CONDUCTED IN THE PREMISES OF M/S. PARAMOUNT BUILDERS (CHENNAI) LTD. ON 05.03.2014 BY THE INVESTIGATION UNIT. AS A CONSEQUENCE, THE ASSESSEE FILED THE RETURN OF INCOME FOR THE ASST. YEAR 2014-15 - - ITA1331 & 945/16 7 ELECTRONICALLY ON 4.5.2015 ADMITTING A TAXABLE INCO ME OF 4,63,04,570/-. 4.2 THE ASSESSEE SUBMITTED THAT THE SALE DEED EXECUTED DURING F.Y. 2010-11 WAS UNDERTAKEN ON BEHA LF OF THE CO-OWNERS IN PURSUANCE OF THE JDA AND IT WAS BY MISTAKE THAT THE ASSESSEE OFFERED THE CAPITAL GAIN IN HIS IT RETURNS. CONSEQUENT TO THE SURVEY UNDERTAKEN ON 5.3.2014, IT WAS EXPLAINED AND ACCEPTED BY THE DEPA RTMENT THAT THE CAPITAL GAIN ARISES DURING F.Y. 2013-14. SINCE THE CAPITAL GAINS ON THE ENTIRE TRANSACTION COVERED IN THE JDA HAD BEEN OFFERED TO ASSESSMENT IN A.Y. 2014-15 IN R ESPECT OF EACH OF THE CO-OWNERS IN PROPORTION TO THEIR SHA RE OF OWNERSHIP, THE CAPITAL GAINS BROUGHT TO TAX DURING THE A.Y. 2011-12 IS SUPERFLUOUS AND HENCE, MAY BE IGNORED. THE COPY OF THE SURVEY REPORT WAS PROVIDED BY THE LD. A R IN SUPPORT OF HIS CLAIM. 4.3 SINCE A FRESH EVIDENCE OR FACT WAS BROUGHT ON R ECORD BEFORE CIT(A), REMAND REPORT WAS SOUGHT FROM THE IT O, NCW 3(3) ON 22.1.2016 BB CIT(A). ON 26.1.2016, THE AO - - ITA1331 & 945/16 8 SUBMITTED A REMAND REPORT, DRAWING REFERENCE FROM T HE SURVEY REPORT OF THE OFFICE OF THE DGIT (INV.), CHE NNAI, STATING THAT THE CAPITAL GAINS THAT HAD ARISEN IN J DA IS TO BE ASSESSED IN A.Y. 2014-15, SINCE THE DEEMED TRANSFER WAS UNDERTAKEN IN OCTOBER, 2013. THE ASSESSEE HAS SUBM ITTED BEFORE THE CIT(APPEALS) THE CONTENTS OF THE ASSESSM ENT ORDER, SURVEY REPORT, THE COPY OF THE JDA DATED 27. 6.2006, THE STATEMENT OF FACTS AND GROUNDS OF APPEAL, THE A DDITIONAL EVIDENCES AND WRITTEN SUBMISSION. THE CIT(APPEALS) HAS EXAMINED THE REMAND REPORT, THE COPY OF THE SALE DE ED DATED 15.12.2010 FOR 2,50,00,000/-, THE COPY OF AGREEMENT FOR SALE-CUM-CONSTRUCTION DATED 15.12.201 0 AND THE COMPUTATION OF INCOME OFFERING CAPITAL GAIN S IN A.Y. 2014-15 OF THE ASSESSEE. 4.4 REGARDING THE CORRECTNESS OF INVOKING THE PROVI SIONS OF SEC.45(2) OF THE ACT IN DETERMINING THE TAXABILI TY OF GAINS ON SALE OF LAND DURING F.Y. 2010-11 TO SHRI SALIL B ANSAL AND OTHERS FOR 2,50,00,000/-, IN WHICH THE LAND OWNERS RECEIVED 1,25,00,000/-, THE CIT(APPEALS) OBSERVED THAT THE SURVEY REPORT OF THE DGIT (INV.) HAD CLEARLY HE LD THAT - - ITA1331 & 945/16 9 THE TRANSACTION RESULTS IN LTCG. ACCORDING TO THE CIT(APPEALS), SINCE THE OFFICE OF THE DGIT (INV.), HAD ENDORSED THAT THE RESULTANT GAIN CANNOT BE TERMED A S BUSINESS PROFIT, WHILE THE AO HAD NOT ILLUSTRATED O THERWISE, THE ACT OF INVOKING PROVISIONS OF SEC.45(2) THEREBY TREATING A PORTION OF GAINS AS BUSINESS PROFIT, IS UNTENABLE. ACCORDINGLY, THE CIT(APPEALS) DIRECTED THE AO TO TR EAT THE GAINS ON EXECUTION OF JDA AS LTCG. 4.5 ACCORDING TO THE AO,, THE TRANSACTIONS INVOLVIN G SALE OF SHARES OF M/S. PARAMOUNT BUILDERS (CHENNAI) LTD. AND THE LOSS GENERATED ON TRANSFER TO RELATIVES IS FABR ICATED TO SUIT THE ASSESSEES NEEDS. SHARES OF M/S. PARAMOUN T BUILDERS (CHENNAI) LTD. NUMBERING 7,94,212/- WERE S OLD FOR A CONSIDERATION OF ` 3/- PER SHARE TO THE ASSESSEES BROTHERS-IN-LAW SHRI A.IMRAN, SHRI A. QAMARAN AND S HRI A. BURHAN, ALL SONS OF SHRI ATHAULLAH. THE AO RELIED ON THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF M/ S. KILLICK NIXON LTD. VS. DCIT IN ITA NO. 5518 OF 2010 DATED 6.3.2012 AND HELD THE TRANSACTIONS TO BE SHAM AND A COLOURABLE DEVICE LOOKING AT HUMAN PROBABILITIES. - - ITA1331 & 945/16 10 4.6 THE CIT(A) OBSERVED THAT THE ASSESSEE HAD NOT PROVIDED ANY DOCUMENTARY EVIDENCE TO PROVE THAT THE TRANSACTIONS ARE GENUINE AND WERE NOT INVENTED FOR THE PURPOSE OF SUPPRESSING TAXABLE LTCG ON SALE OF PROP ERTY AT VELACHERY. ON THE CONTRARY, THE AO HAS ILLUSTRA TED THAT THE TRANSACTIONS WITH RELATIVES ARE PRETENCE TO RED UCE THE LIABILITY TO TAX. THEREFORE, THE CIT(APPEALS) AGREE D WITH THE AO AND HIS ACTION TO IGNORE THE LTCL OF 1,07,45,847/- IS SUSTAINED. 4.7 BEFORE THE CIT(APPEALS), THE ASSESSEE SOUGHT DELETION OF ASSESSMENT OF LTCG ON SALE OF ASSET FOR 1,25,00,000/-, WHEN THE SAME IS COMPRISED IN THE COMPOSITE TRANSACTION COVERED UNDER JDA AND THE RES ULTANT GAIN OFFERED ENTIRELY IN A.Y. 2014-15. THE ASSESSE E RELIES ON THE RELEVANT CONTENT OF THE SURVEY REPORT WHICH STATES THAT SINCE THE SALE CONSIDERATION OF 2,50,00,000/- IS TAKEN INTO ACCOUNT IN THE HANDS OF ALL THE CO-OWNER S OF THE LAND FOR THE PURPOSE OF CALCULATION OF CAPITAL GAIN S IN THE F.Y. 2013-14, THE ASSESSING OFFICER IS REQUESTED TO IGNORE - - ITA1331 & 945/16 11 THE CAPITAL GAINS OFFERED IN THE HANDS OF SHRI SHAF IQ MOHAMED SHAH IN F.Y. 2010-11. 4.8 AFTER PERUSING THE JDA, THE CONTENTS OF THE SAL E DEED, THE COMPONENTS OF CONSTRUCTED AREA EARMARKED FOR THE OWNERS OF LAND AND THE CONTENTS OF THE SURVEY R EPORT, THE CIT(APPEALS) WAS OF THE OPINION THAT THE FINDIN G OF THE OFFICE OF THE DGIT (INV.), ON THIS ISSUE IS NOT IN ORDER. ACCORDING TO THE CIT(APPEALS), AS PER THE TERMS OF THE SUPPLEMENTARY AGREEMENT DATED 10.7.2013, THE OWNERS OF LAND GOT POSSESSION OF 78400 SQ.FT. OF COMMERCIAL M ALL AREA, 15875 SQ.FT. OF COMMERCIAL FOOD STREET AREA AND 36537 SQ.FT. OF RESIDENTIAL AREA IN ALL TOTALLING 1 ,30,812 SQ.FT. OF CONSTRUCTED AREA IN THE RESIDENTIAL-CUM-COMMERCI AL PROJECT PARAMOUNT GRAND MALL, VELACHERY. THE CIT(APPEALS) OBSERVED THAT OUT OF THE SAME, A MAJOR PORTION WAS RETAINED BY THE OWNERS OF LAND AND THE BALANCE PORTION WAS SOLD JOINTLY ALONG WITH THE DEVELOPER T O OUTSIDE PARTIES. THE CO-OWNERS OF LAND HAD THUS SOLD 8568 SQ.FT. OF FOOD STREET COMMERCIAL BUILDING AND THE PROPERTY SOLD DURING F.Y. 2010-11 TO SHRI SALIL BANSAL AND SHRI J AYESH - - ITA1331 & 945/16 12 AGARWAL FORMS PART OF THIS AREA SOLD JOINTLY. THE CAPITAL GAIN OFFERED TO TAX IN A.Y. 2014-15 RELATES TO THE ASSET RETAINED BY THE ASSESSEE AND 14 OTHER CO-OWNERS AND HAS NO CONNECTION WITH THE PROPERTY SOLD DURING THE YEAR U NDER CONSIDERATION. ACCORDING TO THE CIT(APPEALS), THIS TRANSACTION IS UNDERTAKEN SEPARATELY AND THE SALE P ROCEEDS HAVE BEEN RECEIVED BY THE ASSESSEE. 4.9 THE CIT(APPEALS) OBSERVED THAT AS PER THE JDA, THE DEVELOPERS HAD PAID A REFUNDABLE SECURITY DEPOSIT O F 11.50 CRORES AND THE SAME WERE TO BE APPROPRIATED AGAINST SALE PROCEEDS OF A PORTION OF THE LAND OWNE RS SHARE IN CONSTRUCTED SPACE. IN ORDER TO REFUND THE DEPOSIT, THE CO-OWNERS OF LAND HAD TRANSFERRED 36537 SQ.FT. OF RESIDENTIAL AREA AND 4284 SQ.FT. OF COMMERCIAL AREA FOOD STREET DURING THE YEAR. THEREFORE, ACCORDING TO TH E CIT(A), THE TOTAL SALE CONSIDERATION RECEIVED BY THE CO-OWN ERS IS 22,71,223/- AND DIRECTED THE AO TO ADOPT THIS VALUE OF 22,71,79,223/- AS THE SALE CONSIDERATION FOR THE PU RPOSE OF COMPUTING THE LTCG FOR THE A.Y. 2011-12 AND COMP UTE THE LIABILITY AFTER REDUCING THE INDEXED COST OF AC QUISITION - - ITA1331 & 945/16 13 THAT CORRESPONDS TO THE ASSET SOLD AND SELLING EXPE NSES OF 1,09,45,602/-. 4.10. THE CIT(APPEALS) FURTHER OBSERVED THAT IN RES PECT OF THE COMMERCIAL AREA IN MALL AND FOOD STREET, WHICH ARE RETAINED BY THE CO-OWNERS, THE COMPUTATION OF LTCG SHALL BE UNDERTAKEN IN A.Y. 2014-15 TO THE EXTENT OF THE VALUE IN MONEYS WORTH RECEIVED IN THE FORM OF CONSTRUCTED S PACE AND RETAINED BY THE ASSESSEE AND OTHER CO-OWNERS. ACCORDING TO THE CIT(APPEALS), IT IS CLEAR FROM THE DOCUMENTS PROVIDED THAT THE CAPITAL GAINS ON THE AS SETS TRANSFERRED BY THE ASSESSEE IN THE FORM OF LAND AND BUILDING RELATES TO A.Y. 2011-12 ONLY. THE LIABILITY TO TAX IN THE HANDS OF THE ASSESSEE IS FASTENED TO THE EXTENT OF 17% OF THE TOTAL GAINS IN TANDEM WITH THE SHARE OF OWNERSH IP HE POSSESSES IN THE IMPUGNED ASSET. ACCORDINGLY, THE CIT(APPEALS) HAS NOT ACCEPTED THE REQUEST OF THE AS SESSEE FOR DELETION OF LTCG AND IN EXERCISE OF THE POWERS CONFERRED ON THE CIT(APPEALS) U/S.150(1) OF THE ACT , HE DIRECTED THE AO TO PASS RELEVANT REASSESSMENT ORDER IN RESPECT OF THE GAINS THAT HAD ARISEN IN THE HANDS O F 14 OTHER - - ITA1331 & 945/16 14 CO-OWNERS, CONSEQUENT TO TRANSFER OF THEIR PROPORTI ONATE SHARE IN 36537 SQ.FT. OF RESIDENTIAL AREA AND 4284 SQ.FT. OF COMMERCIAL AREA FOOD STREET DURING THE F.Y. 2010- 11 FOR A TOTAL SALE CONSIDERATION RECEIVED BY THE CO-OWNERS OF ` 2,,71,79,223/-. AGAINST THIS, BOTH ARE IN APPEAL B EFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD WITH REFERENCE TO THE CONTENTIONS OF THE ASSESSEE WITH REGARD NON-CHARGEA BILITY OF CAPITAL GAINS IN RESPECT OF THE LAND IN THE ASSE SSMENT YEAR UNDER CONSIDERATION. WE HAVE ALSO GONE THROUGH THE VARIOUS CASE LAWS CITED BY THE PARTIES. ACCORDING T O THE AUTHORISED REPRESENTATIVE FOR ASSESSEE, THE LAND WA S NOT 'TRANSFERRED' IN THIS ASSESSMENT YEAR 2011-2012 AND IT WAS ACTUALLY TRANSFERRED IN THE A.Y 2007-08 VIDE DEVEL OPMENT AGREEMENT DT.27TH DAY OF JUNE 2006. WE MAY REFER TO THE PROVISIONS OF SECTION 2(47)(V) WHICH READS AS FOLLO WS : '(V) ANY TRANSACTION INVOLVING THE ALLOWING OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED I N PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882 (4 OF 188 2)' - - ITA1331 & 945/16 15 6. THE IMPORTANCE OF THE WORD 'TRANSFER' IS DUE TO THE REASON THAT UNDER THE CHARGING SECTION, VIZ., SECTION 45, AND THE CAPITAL GAIN IS TAXABLE ON 'TRANSFER OF A CAPITAL ASSET'. P RECISELY, THIS SECTION PRESCRIBES THAT 'ANY PROFITS OR GAINS ARISI NG FROM THE TRANSFER OF A CAPITAL ASSET EFFECTED IN THE PREVIOU S YEAR SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD CAPITAL GAI NS AND SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE'. 7. THUS, THE FUNDAMENTAL FEATURES WHICH DETERMINE THE TAXABILITY OF CAPITAL GAIN, ARE THAT THE GAIN OUGHT TO BE FROM THE TRANSFER OF A CAPITAL ASSET. THIS SECTION HAS A LAR GE SCOPE OF ITS OPERATION DUE TO THE PRESENCE OF DEEMING PROVISION WHICH SAYS THAT THE GAIN SHALL BE THE DEEMED INCOME OF THAT PR EVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE. THIS PHRASE CAN BE I NTERPRETED IN THE MANNER THAT THE TOTAL PROFITS MAY ACTUALLY BE R ECEIVED IN ANY OTHER YEAR, BUT FOR THE PURPOSES OF SECTION 45, THE GAIN SHALL BE THE DEEMED INCOME OF THE YEAR OF TRANSFER OF THE CA PITAL ASSET. IT SHALL NOT BE OUT OF CONTEXT, AT THIS JUNCTURE, TO M ENTION AN OBSERVATION OF THE HON'BLE AUTHORITY FOR ADVANCE RU LINGS IN THE CASE OF JASBIR SINGH SARKARIA, IN RE [2007] 294 ITR 196 (AAR), - - ITA1331 & 945/16 16 THAT THE EXPRESSION USED IN SECTION 45 IS 'ARISING' , WHICH CANNOT BE EQUATED WITH THE EXPRESSION 'RECEIVED' OR EVEN W ITH THE EXPRESSION 'ACCRUED' AS BEING USED IN THE STATUTE. THE POINT WHICH DESERVES NOTICE IS THAT THE AMOUNT OR THE CON SIDERATION SETTLED MAY NOT BE FULLY RECEIVED OR MAY NOT TECHNI CALLY ACCRUE BUT IF IT ARISES FROM THE AGREEMENT IN QUESTION, TH EN THE DEEMING PROVISIONS SHALL COME INTO OPERATION. ANOTHER POINT IS ALSO EQUALLY NOTICEABLE THAT BY THE PRESENCE OF THE DEEM ING PROVISION, THE INCOME ON ACCOUNT OF ACCRUAL OF THE CAPITAL GAI N SHOULD BE CHARGED TO TAX IN THE SAME PREVIOUS YEAR IN WHICH T HE TRANSFER WAS EFFECTED OR DEEMED TO HAVE TAKEN PLACE. DUE TO THE PRESENCE OF THIS STATUTORY FICTION, THE ACTUAL YEAR IN WHICH THE ENTIRE SALE CONSIDERATION IS RECEIVED, IS BESIDE TH E POINT BUT WHAT NEEDS TO BE JUDGED IS THE POINT OF TIME AT WHICH TH E TRANSFER TOOK PLACE EITHER BY HANDING OVER OF THE POSSESSION OR B Y ALLOWING THE ENTRY INTO THE PREMISES OR BY MAKING THE CONSTRUCTI VE PRESENCE OF THE VENDEE NEVERTHELESS DULY SUPPORTED BY A LEGAL D OCUMENT. 8. BUT THE ISSUE DOES NOT GET SETTLED ONLY BY THE INTERPRETATION OF SECTION 45 AND SECTION 2(47)(V) B ECAUSE THE DEFINITION OF 'TRANSFER' DOES NOT MERELY PRESCRIBES ALLOWING OF - - ITA1331 & 945/16 17 POSSESSION BUT ALSO THAT IT MUST BE RETAINED IN PAR T PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT. THEREFORE, IT IS FURTHER REQUISITE TO DEAL WITH THE RELEVANT SECTION CONTAINED IN THE TRANSFER OF PROPERTY ACT. THE TRANSFER OF PROPERTY ACT CONTAINS SECTION 53A UNDER THE HEADING 'PART PERFORMANCE' AND, FOR DECIDING THE CA SE IN HAND, 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 TRANSFE R CAN BE ASCERTAINED WITH REASONABLE CERTAINTY, AND THE TRAN SFEREE HAS, IN PART PERFORMANCE OF THE CONTRACT, TAKEN POSSESSION OF THE PROPERTY OR ANY PART THEREOF, OR THE TRANSFEREE, BEING ALREA DY IN POSSESSION, CONTINUES IN POSSESSION IN PART PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT IN FURTHERANCE OF THE CONTRACT, AND T HE TRANSFEREE HAS PERFORMED OR IS WILLING TO PERFORM HIS PART OF THE CONTRACT, THEN, NOTWITHSTANDING THAT THE CONTRACT, THOUGH REQUIRED TO BE REGISTERED, HAS NOT BEEN REGISTERED, OR, WHERE THERE IS AN INST RUMENT OF TRANSFER, THAT THE TRANSFER HAS NOT BEEN COMPLETED IN THE MAN NER PRESCRIBED THEREFOR BY THE LAW FOR THE TIME BEING IN FORCE, TH E TRANS FEROR OR ANY PERSON CLAIMING UNDER HIM SHALL BE DEBARRED FROM EN FORCING AGAINST THE TRANSFEREE AND PERSONS CLAIMING UNDER HIM ANY R IGHT IN RESPECT OF THE PROPERTY OF WHICH THE TRANSFEREE HAS TAKEN O R CONTINUED IN POSSESSION, OTHER THAN A RIGHT EXPRESSLY PROVIDED B Y THE TERMS OF THE CONTRACT : - - ITA1331 & 945/16 18 PROVIDED THAT NOTHING IN THIS SECTION SHALL AFFECT THE RIGHTS OF A TRANSFEREE FOR CONSIDERATION WHO HAS NO NOTICE OF T HE CONTRACT OR OF THE PART PERFORMANCE THEREOF.' 8.1. THE DOCTRINE OF 'PART PERFORMANCE' IS UNDOUBT EDLY BASED UPON THE DOCTRINE OF EQUITY. IF ONE PARTY HAS PERFO RMED HIS PART OF DUTY THEN EQUITY DEMANDS THAT THE OTHER PARTY SHALL ALSO PERFORM HIS PART OF THE OBLIGATION. IF ONE PARTY STOOD BY H IS WORDS THEN IT IS EXPECTED FROM THE OTHER PARTY TO ALSO STAND BY HIS PROMISE. NATURALLY AN INEQUITABLE CONDUCT OF ANY PERSON HAS NO SANCTION IN THE EYE OF LAW. 8.2 IN THE LIGHT OF THE INGREDIENTS OF THIS SECTIO N, WHICH HAS BEEN ARGUED FROM BOTH THE SIDES, NOW WE PROCEED TO EXAMINE THE FACTUAL MATRIX OF THE CASE IN HAND, HEREIN BELO W: ( A) STARTING WORDS OF SECTION 53A ARE 'WHERE ANY PER SON CONTRACTS' WHICH MEANS JUST THE EXISTENCE OF A CONT RACT. THE ASSESSEE IS THE 'PERSON' WHO HAS ENTERED INTO A CON TRACT WITH THE DEVELOPER VIDE AGREEMENT DATED APRIL 12, 2 006. (B) THIS SECTION SAYS 'TO TRANSFER', WHICH MEANS TH E SAID CONTRACT IS IN RESPECT OF A TRANSFER AND NOT FOR AN Y OTHER PURPOSE. THE TERM 'TRANSFER' IS TO BE READ ALONG WI TH THE - - ITA1331 & 945/16 19 SECTION 45 AND SECTION 2(47)(V) OF THE INCOME-TAX A CT. IT IS PERTINENT TO CLARIFY THAT ONE MUST NOT FORGET TO ID ENTIFY THE ISSUE OF CAPITAL GAIN WITH THE TERM 'TRANSFER' AS D EFINED IN SECTION 54 OF THE TRANSFER OF PROPERTY ACT. AT THE COST OF ELABORATION, WE MAY LIKE TO ADD THAT IN THE PAST TH ERE WAS A LONG LINE OF PRONOUNCEMENTS; WHILE DECIDING INCOME- TAX CASES, THAT UNLESS AND UNTIL A SALE DEED IS EXECUTE D AND THAT TOO IT IS REGISTERED, TRANSFER CANNOT BE SAID TO HA VE BEEN EFFECTED. NO CAPITAL GAIN TAX WAS DIRECTED TO BE LE VIED SO LONG AS THE 'TRANSFER' HAS NOT TAKEN PLACE AS PER T HE GENERALLY ACCEPTED CONNOTATION OF THE TERM UNDER TH E TRANSFER OF PROPERTY ACT. THE RESULTANT POSITION WA S THAT THE LEVY OF CAPITAL GAINS TAX THUS RESULTED IN MAJOR AM ENDMENTS IN THE INCOME-TAX STATUTE. THE MAIN OBJECTIVE OF SE C.2(47)(V) OF THE ACT WAS TO ENACT THAT FOR THE PURPOSES OF CA PITAL GAINS, THE TRANSACTION INVOLVING TRANSFER OF THE NATURE RE FERRED ARE NOT REQUIRED TO BE REGISTERED UNDER THE REGISTRATIO N ACT. SUCH ARRANGEMENT DOES NOT INCLUDE TRANSFER OF CERTA IN RIGHTS VESTING TO A PURCHASER; HOWEVER SUCH 'TRANSFER' DOE S CONFER CERTAIN PRIVILEGES OF CONSTRUCTIVE OWNERSHIP WITH C ONNECTED - - ITA1331 & 945/16 20 BUNDLE OF RIGHTS. INDEED IT IS A DEPARTURE FROM THE COMMONLY UNDERSTOOD MEANING OF THE DEFINITION 'TRANSFER' WHI LE INTERPRETING THIS TERM FOR TAX PURPOSE. ON THE FACT S OF THIS CASE, THE DEVELOPER HAS GOT BUNDLE OF RIGHTS AND TH EREUPON ENTERED INTO THE PROPERTY. THEREAFTER, WE HAVE TO S EE WHAT HAS HAPPENED AND WHAT STEPS THE TRANSFEREE HAS TAKE N TO DISCHARGE THE OBLIGATION ON HIS PART. IF TRANSFEREE HAS TAKEN ANY STEPS TO CONSTRUCT THE FLATS, UNDISPUTEDLY THEN , UNDER THE PROVISION OF THE INCOME-TAX ACT A 'TRANSFER' HAS DE FINITELY TAKEN PLACE. (C) THE EXISTENCE OF THE 'CONSIDERATION' IS THE ESS ENCE OF THE CONTRACT. IN THIS CASE THE AMOUNT OF CONSIDERATION HAS TO BE PAID TO THE ASSESSEE IN THE FORM OF CASH AS WELL AS IN KIND, I.E., THE COMMERCIAL AND RESIDENTIAL AREA TO BE CON STRUCTED BY THE DEVELOPERS TO BE HANDED OVER TO THE OWNERS. (D) NEXT IS THE IMPORTANT PHRASE, I.E., 'TERMS NECE SSARY TO CONSTITUTE THE TRANSFER CAN BE ASCERTAINED WITH REA SONABLE CERTAINTY'. ACCORDING TO US, IN THIS CASE, THE TERM S AND CONDITIONS OF THE CONTRACT WERE UNAMBIGUOUS AND CLE ARLY - - ITA1331 & 945/16 21 SPOKE ABOUT THE RIGHTS AND DUTIES WITH CERTAINTY OF BOTH THE SIGNING PARTIES. WE ARE CONCERNED MAINLY WITH TWO CERTAINTIES; ONE IS PASSING OF SUBSTANTIAL CONSIDER ATION AND THE SECOND IS PASSING OVER OF POSSESSION. AS FAR AS THE PAYMENT OF CONSIDERATION IS CONCERNED, WE HAVE NOTI CED THAT IT IS IN THE FORM OF BOTH CASH AS WELL AS KIND AND PAYMENT MADE TO THE ASSESSEE. THE CONSIDERATION IS AS FOLL OWS: I) THE LAND OWNERS WOULD GET FROM THE DEVELOPERS A REFUNDABLE SECURITY OF ` 11.5 CRORES WITHOUT INTEREST AS PER CLAUSE NO.6.1 OF THE DEVELOPMENT AGREEMENT. OUT OF THIS, ` 5/- CRORES WAS PAID TO MR.M.S.HAMEED ON 27TH DAY OF JUNE, 2006 AND EACH OWNERS ADMITTED AND ACKNOWLEDGED THE RECEIPT OF THEIR PROPORTIONATE SHA RE OF THE ABOVE SAID CONSIDERATION. THE BALANCE ` 6.5 CRROES TO BE PAID WITHIN A WEEK FROM THE DATE OF THE SANCTION OF THE PROPOSED BUILDING DEVELOPMENT PLAN. II) OWNER HAS TO GET 50% OF TITLE OF THE LAND ALON G WITH 50% CONSTRUCTED AREA IN SHOPPING MALL, AND 50% TI TLE IN THE LAND ALONG WITH THE RESIDENTIAL BUILDING. - - ITA1331 & 945/16 22 E) THE ASSESSEE HAS TO HAND OVER THE POSSESSION OF THE LAND ON THE RECEIPT OF SECURITY DEPOSIT AS MENTIONED IN CLA USE 6 OF THE AGREEMENT AND THEREAFTER THE DEVELOPER COMPLETES TH E CONSTRUCTION IN ACCORDANCE WITH THE SANCTION PLAN A ND TO ALLOW THE DEVELOPER TO REMAIN IN OCCUPATION OF THE LAND F OR THE PURPOSE OF SAID CONSTRUCTION AND ALLIED ACTIVITIES DURING T HE CONTINUATION OF THE DEVELOPMENT AGREEMENT. THE DEVELOPER HAS TO PA Y THE CORPORATION TAX, WATER AND OTHER TAXES AS BEING PAI D BY THE OWNERS FROM THE DATE OF OBTAINING THE VACANT POSITI ON OF THE PROPERTY TILL THE DEVELOPMENT ON THE SAID LAND. TH E TIME FOR COMPLETION OF THE DEVELOPMENT WORK WOULD BE 30 MONT HS FROM THE DATE OF BOOMI POOJA AFTER OBTAINING THE MUNICIP AL SANCTION PLAN FOR THE PROPOSED BUILDING. IF THERE IS A DELAY BEYOND THE CONTROL OF THE DEVELOPER I.E. BY GOD ACT, SUCH PERI OD WOULD BE EXTENDED. HOWEVER, IF THE DELAY IS ATTRIBUTABLE TO THE DEVELOPER, THE DEVELOPER HAS TO PAY AN AMOUNT OF ` 5 PER SQ. FT. PER MONTH TO THE DEVELOPER FOR FIRST FOUR MONTHS AND ` 20 PER SQ. FT THEREAFTER. (F) THE OTHER FACTOR WHICH GOVERNS THE HAPPENING OF TRANSFER IS THE HANDING OVER OF POSSESSION. THIS SECTION SAYS ' AND THE TRANSFEREE HAS, IN PART PERFORMANCE OF THE CONTRACT , TAKEN - - ITA1331 & 945/16 23 POSSESSION OF THE PROPERTY OR ANY PART THEREOF, OR THE TRANSFEREE, BEING ALREADY IN POSSESSION CONTINUES IN POSSESSION IN PART PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT I N FURTHERANCE OF THE CONTRACT'. RETENTION OF POSSESSI ON IS ONE KIND OF THE FACET OF PART PERFORMANCE OF THE CONTRACT. T HE AGREEMENT IN QUESTION CAN BE SAID TO BE A DISTINCT TRANSACTIO N THAT HAS GIVEN RISE TO THE EVENT OF ALLOWING THE CONTRACTOR TO ENT ER INTO THE PROPERTY. WHAT IS CONTEMPLATED BY SECTION 2(47)(V) IS A TRANSACTION WHICH HAS DIRECT AND IMMEDIATE BEARING ON ALLOWING THE POSSESSION TO BE TAKEN IN PART PERFORMANCE. IT IS AT THAT POINT OF TIME THAT THE DEEMED TRANSFER TAKES PLACE. ACCOR DING TO US THE POSSESSION AS CONTEMPLATED IN CLAUSE (7) NEED NOT N ECESSARILY BE SOLE AND EXCLUSIVE POSSESSION, SO LONG AS THE TR ANSFEREE IS ENABLED TO EXERCISE GENERAL CONTROL OVER THE PROPER TY AND TO MAKE USE OF IT FOR THE INTENDED PURPOSE. THE MERE F ACT THAT THE ASSESSEE OWNER HAS ALSO THE RIGHT TO ENTER THE PROP ERTY TO OVERSEE THE DEVELOPMENT WORK OR TO ENSURE PERFORMAN CE OF THE TERMS OF THE AGREEMENT, DID NOT RESTRICT THE RIGHTS OF THE DEVELOPER OR DID NOT INTRODUCE ANY INCOMPATIBILITY. IN A SITUATION LIKE THIS WHEN THERE IS A CONCURRENT POSSESSION OF BOTH THE - - ITA1331 & 945/16 24 PARTIES, EVEN THEN CLAUSE (7) HAS ITS FULL ROLE TO PLAY. THERE IS NO WARRANT TO POSTPONE THE OPERATION OF CLAUSE 2(47)(V ) TO THAT POINT OF TIME WHEN THE CONCURRENT POSSESSION WOULD BECOME EXCLUSIVE POSSESSION OF THE DEVELOPER. ANY OTHER INTERPRETATI ON, I.E., POSSESSION MEANS EXCLUSIVE POSSESSION, SHALL DEFEAT THE PURPOSE OF AMENDMENT. THE POSSIBILITY OF STAGGERING OF PAYMENT LINKED WITH POSSESSION IS RULED OUT BY THIS AMENDME NT SO THAT THE TAXABILITY OF GAIN MAY NOT BE SHIFTED TO AN UNCERTA IN DISTANT DATE. WE HAVE NO HESITATION IN SAYING THAT EVEN IF SOME P ART OF CONSIDERATION REMAINS TO BE PAID, THE TRANSACTION S HALL NOT AFFECT THE LIABILITY OF THE CAPITAL GAINS TAX SO AS TO POS TPONE THE SAME INDEFINITELY. WHAT IS MEANT IN CLAUSE (V) OF SECTIO N 2(47) IS THE 'TRANSFER' WHICH INVOLVES ALLOWING THE POSSESSION S O AS TO ALLOW DEVELOPER TO UNDERTAKE DEVELOPMENT WORK ON THE SITE . IT IS A GENERAL CONTROL OVER THE PROPERTY IN PART PERFORMAN CE OF THE CONTRACT. THE DATE OF THAT TRANSACTION DETERMINES T HE DATE OF TRANSFER. TO OUR UNDERSTANDING OF THE LANGUAGE OF T HE ACT, IT IS ENOUGH IF THE TRANSFEREE HAS, BY VIRTUE OF THE IMPU GNED TRANSACTION, A RIGHT TO ENTER UPON AND EXERCISE THE ACT OF - - ITA1331 & 945/16 25 POSSESSION EFFECTIVELY, THEN SUCH AN ACT AMOUNTS TO LEGAL POSSESSION OVER THE PROPERTY. ( G) THE LAST NOTICEABLE INGREDIENT IS, 'THE TRANSFER EE HAS PERFORMED OR IS WILLING TO PERFORM HIS PART OF THE CONTRACT'. TO ASCERTAIN THE EXISTENCE OF WILLINGNESS ON THE PART OF THE TRANSFEREE ONE MUST NOT PUT STOP AT ONE EVENT BUT T HE WILLINGNESS IS TO BE JUDGED BY THE SERIES OF ACTIONS OF THE TRA NSFEREE. THE DEVELOPER MADE AN APPLICATION FOR PROJECT APPROVAL TO CHENNAI METROPOLTIAN DEVELOPMENT AUTHORITY,CHENNAI ON 03.04 .2007 AND GOT APPROVAL ON 11.04.2008 AS PER APPROVAL LETTER NO.C3/7853/2007 DATED 11.04.2008 WHICH IS KEPT ON R ECORD AT PAPER BOOK AT PAGE NO.62.THE TRANSFEREES SURVEY THE LAND AND TO ATTRACT PURCHASER PUT UP HOARDINGS PLUS SALES OF FICE AND CARRY OUT SITE DEVELOPMENT WORK. LANDSCAPING, SALES PROMO TION, EXECUTION OF CONSTRUCTION AND COMPLETION OF PROJECT ARE ALL INCIDENTAL TO DEMONSTRATE THE WILLINGNESS OF THE TR ANSFEREE. ON ONE HAND, THE DEVELOPMENT AGREEMENT GRANTS BUNDLE O F POSSESSOR RIGHTS TO THE DEVELOPER SIMULTANEOUSLY AN D ON THE OTHER HAND TRANSFEREE'S GESTURE OF PAYMENT OF CONSI DERATION COUPLED WITH DEVELOPMENT WORK CAN BE SAID TO BE A P OSITIVE STEP - - ITA1331 & 945/16 26 TOWARDS THE WILLINGNESS TO FULFILL THE COMMITMENT. FURTHER, AS PER SURVEY REPORT SUBMITTED BY INSPECTOR OF INCOME-TAX WHICH WAS CONDUCTED ON 05.03.2014 CONFIRMED THE FOLLOWING FAC TS:- AS PER THE CONDITIONS LAID DOWN IN THE JVA, THE TRA NSFER OF THE PROPERTY AS EXPRESSED IN ARTICLE VII, PARAGRAP HS 7.1 TO 7.4 OF THE SAID AGREEMENT, HAD GOT EFFECTED IMMEDI ATELY ON THE BUILDING PLAN BEING SANCTIONED BY APPROPRIATE AUTHORITIES AND AFTER PAYMENT OF SECURITY DEPOSIT TO TH E OWNERS. THEREFORE, THE LIABILITY TO TAX ON CAPITAL GA INS HAD ARISEN DURING THE FINANCIAL YEAR 2006-07 ITSELF. HOWEV ER, THE LAND OWNERS HAVE POSTPONED THE SHARE OF 1,30,812 SQ.FT. CONSTRUCTED BUILDING WAS HANDED OVER TO THE LAND OWNERS IN OCTOBER, 2013. THE LANDOWNERS HAVE NOT PAI D ANY TAX ON CAPITAL GAINS TILL THE DATE OF SURVEY. THER EFORE, THE TAX ON CAPITAL GAINS WAS NOT PAID EITHER IN THE F. Y 2006-07 OR IN THE FY 2013-14. FACTS OF THIS CASE THUS SUGGEST THAT THE DEVELOPER HAD NEVER INTENDED TO WALK-OUT OF THE PROJECT. THE POSSESSION WAS WITH DEVELOPER FROM THE DATE OF 27 TH JUNE, 2006 AS PER CLAUSE 7.1 TO 7.4 OF THE DEVELOPMENT AGREEMENT . (H) FROM THE DEVELOPMENT AGREEMENT, IT IS MORE THA N CLEAR THAT IT WAS AN AGREEMENT FOR CONSTRUCTION OF RESIDENTIAL/COMMERCIAL FLATS ON THE PROPERTY OWNED BY THE - - ITA1331 & 945/16 27 ASSESSEE. IN LIEU OF THE RIGHT GIVEN TO THE DEVELOP ER THEREUNDER, THE ASSESSEE WAS TO RECEIVE 50 PER CENT OF THE CONS TRUCTED AREA OF BOTH COMMERCIAL AND RESIDENTIAL AREAS. FURTHER, EVEN THE VACANT AND PEACEFUL POSSESSION OF THE PROPERTY HAD BEEN DELIVERED TO THE DEVELOPER ON 27TH JUNE, 2006 AFTER RECEIVING SUBSTANTIAL AMOUNT OF ` 11.5 CRORES AS INTEREST FREE SECURITY DEPOSIT. UNDER THE CIRCUMSTANCES, THERE WAS INDEED AN EXCHANGE OF PROPERTY WHICH AMOUNTED TO A TRANSFER WITHIN THE MEANING OF SECTION 2(47)(V) OF THE ACT ON 27.06.2006 AND THE G AIN RESULTING FROM SUCH TRANSFER WAS INDEED TAXABLE IN THE YEAR I N WHICH THE DEVELOPMENT AGREEMENT ENTERED WHICH WAS COUPLED WIT H BY GIVING VACANT AND PEACEFUL POSSESSION OF THE PROPER TY TO THE DEVELOPER. THIS VIEW OF OURS IS SUPPORTED BY THE JU DGEMENT OF BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKAD AS KAPADIA V. CIT [2003] 260 ITR 491 (BOM) WHEREIN HEL D THAT: UNDER SECTION 2(47)(V) READ WITH SECTION 45 INDICA TES THAT CAPITAL GAINS WAS TAXABLE IN THE YEAR IN WHICH SUCH TRANSAC TIONS WERE ENTERED INTO EVEN IF THE TRANSFER OF IMMOVABLE PROP ERTY IS NOT EFFECTIVE OR COMPLETE UNDER THE GENERAL LAW. IN THI S CASE, THE TEST HAD NOT BEEN APPLIED BY THE DEPARTMENT. NO REASON H AD BEEN GIVEN WHY THAT TEST HAD NOT BEEN APPLIED, PARTICULA RLY WHEN THE AGREEMENT IN QUESTION, READ AS A WHOLE, SHOWED THAT IT WAS A - - ITA1331 & 945/16 28 DEVE-LOPMENT AGREEMENT. ONCE UNDER CLAUSE 8 OF THE AGREEMENT A LIMITED POWER OF ATTORNEY WAS INTENDED TO BE GIVEN TO THE DEVELOPER TO DEAL WITH THE PROPERTY, THEN THE DATE OF THE CONTRACT, VIZ., AUGUST 18, 1994, WOULD BE THE RELEVANT DATE T O DECIDE THE DATE OF TRANSFER UNDER SECTION 2(47)(V) AND, IN WHI CH EVENT, THE QUESTION OF SUBSTANTIAL PERFORMANCE OF THE CONTRACT THEREAFTER WOULD NOT ARISE. THIS POINT HAD NOT BEEN CONSIDERED BY ANY OF THE AUTHORITIES BELOW. THE ASSESSEE HAD PAID THE CAPITA L GAINS TAX FOR THE ASSESS-MENT YEAR 1999-2000 . FROM MERE SUBSTANT IAL COMPLIANCE OF THE AGREEMENT, ONE COULD NOT INFER TR ANS-- FER IN THE ACCOUNTING YEAR ENDING MARCH 31, 1996. THERE WERE M ISTAKES APPA-RENT ON THE FACE OF THE RECORD, IN THE ORDER O F THE TRIBUNAL. ACCORDING TO THE TRIBUNAL, THE LETTER DATED FEBRUAR Y 18, 1999, SHOWED THAT THE BUILDER CAME INTO POSSESSION ON THE DAY NEXT TO MARCH 31, 1996, I.E., APRIL 1, 1997. THE DAY NEXT T O MARCH 31, 1996, WOULD BE APRIL 1, 1996, AND NOT APRIL 1, 1997 , AND EVEN IF APRIL 1, 1997, WERE TAKEN AS A TYPING MISTAKE, IT C OULD ONLY BE READ AS APRIL 1, 1996, AND IF APRIL 1, 1996, WAS TH E DATE ON WHICH THE DEVELOPER CAME INTO POSSESSION, THEN THE POSSES SION WAS RECEIVED BY THE DEVELOPER DURING THE FINANCIAL YEAR 1996-97 CORRESPONDING TO THE ASSESSMENT YEAR 1997-98 . THER EFORE, THIS FINDING OF THE TRIBUNAL WAS ERRONEOUS. TAKING INTO ACCOUNT THE TOTALITY OF THE CIRCUMSTANCES THE TRIBUNAL WAS NOT JUSTIFIED IN CONCLUDING THAT THE APPELLANT HAD TRANSFERRED THE P ROPERTY DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1 996-97. FURTHER, MADRAS HIGH COURT IN THE CASE OF D.KASTURI VS. CIT (251 ITR 532) WHEREIN HELD THAT: - - ITA1331 & 945/16 29 THE ASSESSEE ENTERED INTO A SALE AGREEMENT ON MARC H 29, 1993, WITH A FIRM, C, PROVIDING FOR THE DELIVERY OF HER P ROPERTY TO C ON RECEIPT OF THE AGREED SALE CONSIDERATION, WHICH, IN FACT, WAS RECEIVED BY HER IN AUGUST, 1993. C HAD TAKEN DELIVERY OF THE PROPERTY DURING 1993-94. THE ASSESSEE EXECUTED A POWER OF ATTORNEY ON AUGUST 17, 1993, IN FAVOUR OF THE TWO PARTNERS OF C AFTER OBTA INING THE CLEARANCE FOR THE SALE OF PROPERTY UNDER CHAPTER XXC OF THE I NCOME-TAX ACT, 1961. THE PARTNERS OF C WHO HAD OBTAINED POWER OF A TTORNEY STARTED SELLING THE PROPERTY IN PARTS TO OTHERS ON OR AFTER MARCH, 1995, BY EXECUTING THE SALE DEEDS, DESCRIBING THEMSELVES AS THE AGENTS OF THE ASSESSEE. ORIGINALLY, SHE FILED THE RETURN FOR THE ASSESSMENT YEAR 1994-95 ADMITTING THE CAPITAL GAIN BY TREATING THE TRANSFER OF POSSESSION TO C IN AUGUST, 1993, AS A TRANSFER UNDE R SECTION 2(47)(V) OF THE ACT. SUBSEQUENTLY, SHE CLAIMED THAT THERE WA S NO TRANSFER RELEVANT FOR THE ASSESSMENT YEAR 1994-95 AND THAT T HE ACTUAL TRANSFERS WERE MADE IN THE ASSESSMENT YEAR 1995-96 WHEN THE POWER OF ATTORNEY HOL-DERS EXECUTED REGISTERED SALE DEEDS IN FAVOUR OF OTHERS. THIS CLAIM WAS REJECTED BY THE DEPARTMEN T. ON A WRIT PETITION : HELD, REJECTING THE CLAIM OF THE ASSESSEE, THAT THE INGREDIENTS OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882, WERE SATISFIED WHEN THE ASSESSEE HAD PUT C IN POSSESSION OF THE PR OPERTY IN AUGUST, 1993, AFTER RECEIPT OF THE FULL SALE CONSID ERATION. THE SUBSEQUENT EXECUTION OF THE SALE DEEDS BY THE POWER OF ATTORNEY HOLDERS DID NOT MILITATE AGAINST THE OPERATION OF S ECTION 53A OF THE TRANSFER OF PROPERTY ACT. AND ALSO BY THE SEVERAL DECISIONS OF THE INCOME-TAX APPELLATE TRIBUNAL INCLUDING THAT IN THE CASE OF DR. MAYA SHE NOY, - - ITA1331 & 945/16 30 SECUNDERABAD VS. ACIT (124 TTJ 692 (HYD.) ) WHEREIN HELD THAT: ASSESSEE OWNER OF LAND HAVING PARTED WITH POSSESS ION OF LAND UNDER A DEVELOPMENT AGREEMENT FOR CONSTRUCTION OF FLATS H AVING HANDED OVER POSSESSION OF VACANT LAND TO DEVELOPER ON PROMISE T O BE HANDED OVER 45 PER CENT OF CONSTRUCTED AREA, IT WAS A CASE OF T RANSFER BY EXCHANGE WITHIN THE MEANING OF S.2(47)(I); PROPERTY WAS HAND ED OVER IN PART PERFORMANCE U/S.53A OF THE TP ACT AND IT COULD NOT BE SAID THAT THE TRANSACTION WAS WITHOUT CONSIDERATION; POSSESSION O F LAND BEING HANDED OVER TO DEVELOPER ONLY IN DECEMBER, 1999, TH E TRANSFER TOOK PLACE IN DECEMBER, 1999, HENCE CAPITAL GAIN ACCRUED AND WAS CHARGEABLE IN A.Y 2000-01 AND NOT IN A.Y 2001-02; T RANSFER OF LAND AND TRANSFER OF FLATS ALLOTTED IN CONSIDERATION OF TRANSFER OF LAND ARE TWO TRANSACTIONS AND NOT ONE FOR PURPOSES OF CHARGE OF CAPITAL GAINS. IN VIEW OF THE ABOVE, THE LAND IS ONE CAPITAL ASSET TRANSFERRED BY THE ASSESSEE AND THE CONSTRUCTED AREA ALLOTTED TO T HE ASSESSEE IN CONSIDERATION FOR THE TRANSFER OF LAND CONSTITUT E A DIFFERENT CAPITAL ASSET FOR THE ASSESSEE. THE TWO CAPITAL ASS ET TRANSFERRED ON THE DIFFERENT DATES WOULD CONSTITUTE TWO DIFFERE NT TRANSACTIONS FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS UND ER THE ACT. IT IS NOT A CONVERSION OF AN ASSET FROM ONE FORM TO AN OTHER. SUCH A CONVERSION IS DEEMED TO BE A TRANSFER ONLY WHEN C APITAL ASSET IS CONVERTED INTO STOCK IN TRADE BY A PERSON. IN TH E INSTANT CASE, IT IS NOT IN DISPUTE THAT THE LAND HELD BY THE ASSE SSEE WAS HIS - - ITA1331 & 945/16 31 CAPITAL ASSET. IT CANNOT ALSO BE DISPUTED THAT THE CONSTRUCTED AREA ACQUIRED BY THE ASSESSEE ON THE COMPLETION OF THE PROJECT BY DEVELOPER WERE ALSO HIS CAPITAL ASSET. THE ACQU ISITION OF A NEW ASSET MAY HAVE BEEN BY ANY MODE, BUT SIMPLY BEC AUSE NEW ASSET CAME TO HIM BY WAY OF CONSIDERATION FOR T RANSFER OF EARLIER ASSET, THE TRANSFER OF NEW ASSET DOES NOT C EASED TO BE A TRANSFER AS PER SEC.2(47)(V) OF THE ACT CONSTITUTIN G ALTOGETHER A NEW TRANSACTION. THE ARGUMENT OF THE AR THAT COMME NCING FROM THE DATE OF TRANSFERRING THE LAND TO THE DEVEL OPER AND ENDING ON THE DATE WHEN THE ASSESSEE SOLD HIS SHARE OF CONSTRUCTED AREA CONSTITUTE A SINGLE TRANSACTION WH ICH CANNOT BE ACCEPTED AS THIS CONTENTION EASILY DEFEAT VERY CHAR GING PROVISION OF SEC.45 OF THE ACT BY POSTPONING THE SALE OF NEW ASSET INDEFINITELY. SUCH A SITUATION IS NOT ENVISAGED UN DER THE ACT. AS PER THE DEVELOPMENT AGRRMENT THE ASSESSEE HAS NO CL AIM OVER THE LAND WHICH HAS BEEN GIVEN TO THE DEVELOPER AND HE MAY NOT S3ELL ANY CONSTRUCTED AREA COMING TO HIS SHARE. IN THAT CASE, DESPITE THERE BEING TRANSFER OF LAND U/S.2(47)(V) O F THE ACT, THE ASSESSEE COULD ESCAPE THE LIABILITY OF THE CAPITAL GAINS TAXES. THEREFORE, AS MENTIONED EARLIER IT IS NOT POSSIBLE TO TREAT THE TWO - - ITA1331 & 945/16 32 TRANSACTIONS AS ONE TRANSACTIONS WHICH IS TOO FALLA CIOUS. ACCORDINGLY WE HOLD THE TRANSFER OF LAND IN CONSIDE RATION OF THE CONSTRUCTED AREA CONSTITUTE ONE TRANSACTION WHICH G IVING RISE TO THE CAPITAL GAINS IN THE F.Y 2006-07 RELEVANT TO A. Y 2007-08 AND THE SALE OF CONSTRUCTED AREA ALONG WITH UNDIVIDED S HARE IN LAND BY THE ASSESSEE CONSTITUTE ANOTHER TRANSACTION DUE RISE TO THE CAPITAL GAINS WHICH MAY BE SHORT TERM CAPITAL GAINS OR LONG TERM CAPITAL GAINS AS THE CASE MAY BE DEPENDING UPON PER IOD FOR WHICH THE ASSESSEE HELD THE CONSTRUCTED AREA WITH H IM AND THE CONSTRUCTED AREA RECEIVED BY THE ASSESSEE CANNOT BE TREATED IT AS STOCK IN TRADE IN THIS CASE. SINCE THE DEVELOPM ENT AGREEMENT IN THE ASSESSEE'S CASE HAS BEEN EXECUTED ON 27-06- 2006 AND THE VACANT AND PEACEFUL POSSESSION ALSO WA S GIVEN VIDE THIS DEVELOPMENT AGREEMENT ITSELF, SUCH LONG T ERM CAPITAL GAINS WERE INDEED TO BE TAXED IN THE FINANCIAL YEAR 2006-07, RELEVANT TO THE ASSESSMENT YEAR 2007-08. (I) AS REGARDS THE CONTENTION OF THE D.,R THAT TH E SAID DECISIONS ARE NOT APPLICABLE TO THE ASSESSEE'S CASE , IT IS CLEAR THAT NO REASONS FOR SUCH VIEW COULD BE EVER FURNISH ED BY HIM. - - ITA1331 & 945/16 33 SIMILARLY, THERE IS NO MERIT IN THE CONTENTION THAT THE DEVELOPMENT AGREEMENT COULD NOT HAVE COME INTO FORC E UNLESS AND UNTIL THE BUILDER DEPOSITED RS. 11.5 CRO RES. AS DISCUSSED IN EARLIER PARA, THE LAND OWNER HAD INDEE D BEEN PAID RS. 5 CROES ON THE DATE OF SIGNING THE AGREEME NT BALANCE ` 6.5 CRORES WITHIN A WEEK FROM THE DATE OF THE SANCT ION OF THE PROPOSED BUILDING PLAN. THERE IS NO EVIDENCE TO SH OW THAT THIS WAS NOT PAID TO THE LAND OWNERS. UNDER THESE CIRCUMSTANCES, IT CANNOT BE DISPUTED THAT THERE WAS A PROMISE TO PAY WHICH HAS NOT BEEN SHOWN AS HAVING REMAINED UNFULFILLED. IT IS AN ESTABLISHED JUDICIAL PROPOSIT ION THAT THE CONSIDERATION MAY BE FUTURISTIC ALSO, AS HELD BY TH E SUPREME COURT IN THE CASE JUGALKISHORE SARAF V. RAW COTTON CO. LTD. REPORTED IN AIR 1955 SC 376. ACCORDINGLY, THERE IS NO MERIT IN SUCH CONTENTION OF THE REPRESENTATIVE OF THE ASSESS EE. AS REGARDS THE ARGUMENT OF THE DR THAT THE AGREEMENT U NDER REFERENCE HAD BEEN EXECUTED ONLY FOR THE PURPOSE OF GETTING PERMISSIONS FROM VARIOUS DEPARTMENTS FOR CONSTRUCTI ON, THE VERY TERMS OF THE AGREEMENT BELIE ANY SUCH CLAIM AS THE DEVELOPMENT AGREEMENT GIVES ABSOLUTE RIGHTS TO THE BUILDERS, - - ITA1331 & 945/16 34 INCLUDING POSSESSION, DULY SPECIFIED THE CONSIDERAT ION TO BE RECEIVED BY THE ASSESSEE ON SUCH EXCHANGE. AS REGAR DS THE CASE LAW CITED BY THE D.R, EVIDENTLY THOSE STAND ON A SET OF DIFFERENT FACTS AND HENCE CANNOT BE CONSIDERED IN T HE FACTS OF THE PRESENT CASE. 9. TO SUM UP THE OWNERS HAVE ENTERED INTO AN AGREEMENT FOR DEVELOPMENT OF THE PROPERTY AND CERTAIN RIGHTS WERE ASSIGNED TO THE DEVELOPER WHO IN TURN HAD MADE THE SUBSTANTIAL PAYMENT AND CONSEQUENTLY ENTERED INTO THE PROPERTY AND THEREAFT ER THE TRANSFEREE HAS TAKEN STEPS IN RELATION TO CONSTRUCT ION OF THE BUILDING INCLUDING PROJECT PLAN APPROVAL ON 11.04.2 008, THEN IT IS TO BE CONSIDERED AS TRANSFER UNDER SECTION 2(47)(V) OF THE INCOME-TAX ACT. THE FACT THAT THE LEGAL OWNERSHIP C ONTINUED WITH THE OWNERS TO BE TRANSFERRED TO THE DEVELOPER AT A FUTURE DISTANT DATE REALLY DOES NOT AFFECT THE APPLICABILITY OF SE CTION 2(47)(V) AS PER THE REASONS ASSIGNED HEREINABOVE. THE TRANSFERE E WAS UNDISPUTEDLY WILLING TO PERFORM ITS PART OF THE CON TRACT, IN THIS CIRCUMSTANCE WE HAVE TO HOLD THAT THERE IS TRANSFER UNDER SECTION 2(47)(V) OF THE ACT. THUS, THE POSSESSION AND CONTR OL OF THE PROPERTY IS ALREADY VESTED WITH THE TRANSFEREE AND THE IMPUGNED - - ITA1331 & 945/16 35 DEVELOPMENT AGREEMENT HAS NOT BEEN DULY CANCELLED A ND IT IS STILL IN OPERATION, IT HAS TO BE DECIDED THAT THERE IS A TRANSFER UNDER SECTION 2(47)(V) OF THE ACT. WE HAVE TO SEE THE REA L INTENTION OF THE PARTIES. AS PER THE WELL KNOWN CANNON OF CONSTR UCTION OF DOCUMENT, THE INTENTION GENERALLY PREVAILS OVER THE WORD USED AND THAT SUCH A CONSTRUCTION PLACED ON THE WORD IN A DEED AS IS MOST AGREEABLE TO THE INTENTION OF THE PARTIES. THE RE ARE GROUNDS APPEARING FROM THE FACE OF THE INSTRUMENT AFFORDING PROOF OF THE REAL INTENTION OF THE PARTIES, THEN THAT INTENTION WOULD PREVAIL AGAINST THE OBVIOUS AND ORDINARY MEANING OF THE WOR DS USED. ENTERING INTO THE PROPERTY AND HANDING OVER OF THE POSSESSION WAS INSTANTANEOUS THUS ENTIRE CONSPECTUS OF THE CAS E HAS ATTRACTED THE PROVISION OF SECTION 45 OF THE ACT ON FULFILMENT OF CONDITIONS LAID DOWN IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT. IN OUR OPINION, THE REAL INTENTION OF THE PART IES HEREIN IS TO BE SEEN. 10. ACCORDINGLY, WE DECIDE THE ABOVE ISSUE RELATIN G TO TRANSFER OF PROPERTY UNDER SECTION 2(47)(V) OF THE INCOME-TAX ACT IN FAVOUR OF THE ASSESSEE. WE ALSO HOLD THAT CLAUSE (47) OF SECTION 2 WAS AMENDED BY THE FINANCE ACT, 1987 WITH EFFECT FROM - - ITA1331 & 945/16 36 APRIL 1, 1988 BY INSERTING NEW SUB-CLAUSES (V) AND (VI) THEREUNDER. THESE TWO NEW SUB-CLAUSES PROVIDE THAT 'TRANSFER' INCLUDES (I) ANY TRANSACTION WHICH ALLOWS POSSESSIO N TO BE RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE N ATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT ; AND (II) ANY TRANSACTION ENTERED INTO IN ANY MANNER WHICH HAS TH E EFFECT OF TRANSFERRING OR ENABLING THE ENJOYMENT OF ANY IMMOV ABLE PROPERTY. THEREFORE, UNDER THESE TWO SUB-CLAUSES, T HE CAPITAL GAIN WOULD BE TAXABLE IN THE YEAR IN WHICH SUCH TRA NSACTIONS ARE ENTERED INTO EVEN IF THE TRANSFER OF THE IMMOVABLE PROPERTY IS NOT EFFECTIVE OR COMPLETE UNDER THE GENERAL LAW. THE AS SESSEE ENTERED INTO AN AGREEMENT WITH THE BUILDER/DEVELOPE R FOR DEVELOPMENT OF THE IMPUGNED LAND AND CONSTRUCTION O F FLATS THEREON. ALSO, THE ASSESSEE SIGNED A DEVELOPMENT AG REEMENT DATED 27.06.2006 IN FAVOUR OF THE BUILDER/DEVELOPER AND GAVE POSSESSION OF THE PROPERTY TO THE BUILDER/DEVELOPER . FURTHER, THE ASSESSEE ACTED ON THE IMPUGNED AGREEMENT BY ACCEPTI NG FROM THE BUILDER/DEVELOPER PAYMENTS BY CHEQUES ON DIFFER ENT DATES IN THE FINANCIAL YEAR 2006-07 RELEVANT ASSESSMENT YEAR 2007-08. IN VIEW OF THE FACTS AND CIRCUMSTANCES DISCUSSED ABOVE , ALL THE - - ITA1331 & 945/16 37 CONDITIONS OF SUB- CLAUSE (V) OF SECTION 2(47) ARE SATISFIED IN THIS CASE AND THEREFORE, IT HAS TO BE INFERRED THAT A 'T RANSFER' DID TAKE PLACE WITHIN THE MEANING OF SECTION 2(47)(V). THE A RGUMENT THAT THE DEEDS IN RESPECT OF THE SALE OF FLATS WERE NOT REGISTERED/EXECUTED IS NOT A RELEVANT CONSIDERATION SO FAR AS PROVISIONS OF SUB-CLAUSE (V) OF SECTION 2(47) ARE C ONCERNED. THE COMPLETION OF 'TRANSFER' OF AN IMMOVABLE PROPERTY A S PER THE GENERAL LAW IS NOT A REQUIREMENT FOR THE APPLICABIL ITY OF THE PROVISIONS OF SUB-CLAUSE (V) OF SECTION 2(47). THUS , THE TAXABILITY OF LONG TERM CAPITAL GAINS ONLY TAXED IN THE F.Y 20 06-07 RELEVANT TO A.Y 2007-08 AND ORDERED ACCORDINGLY. 11. NOW COMING TO THE COMPUTATION OF SHORT TERM CA PITAL GAINS ON SELLING OF ASSESSEES SHARE OF RESIDENTIAL AND COMMERCIAL CONSTRUCTED AREA, THE LD. AR SUBMITTED T HAT CO- OWNERS OF THE LAND HAVE TRANSFERRED 36,537 SQ.FT. O F RESIDENTIAL AREA AND 4284 COMMERCIAL AREA CALLED AS FOOD STREET DURING THE FINANCIAL YEAR RELEVANT TO THE A.Y 2011-12 AND THE FINDINGS OF THE CIT(APPEALS) IN PARA -14 OF HIS ORDER IS IRRELEVANT AND BAD IN LAW. IN OUR CONSIDERED OPINION, THE GAIN ON THE TRANSFER OF THE ASESSEES SHARE IN CONSTRUCTED AREA IS TO BE BROUG HT IN TAX AS - - ITA1331 & 945/16 38 SHORT TERM CAPITAL GAINS AFTER GIVING DUE DEDUCTION AS ENUMERATED IN SEC.48 OF THE ACT. THE ASSESSING OFF ICER HAS TO CONSIDER THIS ISSUE OF COMPUTATION OF CAPITAL GAINS ON ASSESSEES SHARE OF CONSTRUCTION AREA ALONG WITH UNDIVIDED SHA RE IN LAND WHICH WAS ACTUALLY TRANSFERRED BY THE ASSESEEE IN T HIS ASSESSMENT YEAR. IN OTHER WORDS, THE ASSESSING OFFI CER CANNOT BRING INTO TAX ENTIRE SHARE OF CONSTRUCTED AREA ALO NG WITH UNDIVIDED SHARE IN LAND ONLY ON RECEIPT BASIS AS TR ANSFERRED UNLESS THERE IS ACTUAL TRANSFER IN TERMS OF SEC.45 OF THE ACT. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO TAX THE GAINS ARISING FROM TRANSFER OF CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR ALONE IN THE RELEVANT ASSESSMENT YEAR 2011-12. 12. FURTHER, THE DIRECTION OF THE CIT(APPEALS) IN PARA -15 THAT ASSESSING OFFICER HAS TO PASS RELEVANT ORDERS IN RE SPECT OF 14 OTHER CO-OWNERS SO AS TO BRING GAINS INTO TAXATION IN THEIR RESPECTIVE HANDS. THE CIT(APPEALS) CANNOT DECIDE T HE ISSUE BEHIND THE BACK OF THE CO-OWNERS WITHOUT HEARING TH EM. MORE SO, WHERE THEY ARE THIRD PARTY TO THE LITIGATION BE FORE HIM. ACCORDINGLY, WE VACATE THAT FINDINGS. - - ITA1331 & 945/16 39 13. SINCE WE HAVE HELD THAT THERE WAS A TRANSFER U/S.45 IN THE A.Y 2007-08 AND THE LONG TERM CAPITAL GAINS TO BE C OMPUTED IN TERMS OF SEC.2(47)(V) OF THE ACT IN THE A.Y 2007-08 AND SHORT TERM CAPITAL GAINS TO BE COMPUTED IN TRANSFER OF CA PITAL ASSET IN THE RESPECTIVE PREVIOUS YEARS WHEN THE TRANSFER OF CONSTRUCTED AREA WHEN IT WAS ACTUALLY TAKEN PLACE, THERE IS NO QUESTION OF COMPUTING ANY BUSINESS ON THE IMPUGNED ISSUE. ACCOR DINGLY, THE FINDINGS OF THE CIT(APPEALS) ON APPLICABLILITY OF S EC.45(2) IS INFRACTUOUS. 14. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL OF REVENUE IS DISMISSED AS INFRACTUOUS. ORDER PRONOUNCED ON 11 TH MAY, 2017 AT CHENNAI. SD/- SD/- ( %. ' ) ( ( ) * %! ) (G. PAVAN KUMAR) (CHANDRA POOJARI) ; <= /JUDICIAL MEMBER >' <=/ACCOUNTANT MEMBER (>; /CHENNAI, C< /DATED, THE 11 TH MAY, 2017. K S SUNDARAM <>D EF G>F /COPY TO: <>D EF G>F / COPY TO: 1 . / APPELLANT 3. H () / CIT(A) 5. FIJ K / DR 2. / RESPONDENT 4. H / CIT 6. JL M / GF