Income Tax Appellate Tribunal - Chandigarh
Balvir Singh Ghunas, Barnala vs Assessee on 31 October, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIG ARH BENCH ' A', CHANDIG ARH
BEFORE SHRI BHAVNESH S AINI, JUDICI AL MEMBER AND
SHRI T.R. SOOD, ACCOUNTANT MEMBER
ITA No. 407/Chd/2014
Assessment Years : 2007-08
Balvir Singh Ghunas V A.C.I.T. Circle
s/o Nahar Singh Sangrur
VPO Ghunas
Tehsil Tapa
Distt. Barnala
BJTPS 4929M
(Appellant) (Respondent)
Appellant by: Shri D.K. Goyal
Respondent by: Shri J.S. Nagar
Date of hearing 29.10.2014
Date of Pronouncement 31.10.2014
O R D E R
PER T.R. SOOD, A.M
This appeal is directed against the order of Ld CIT(A), Patiala dated 31.1.2014.
2. In this appeal the assessee has raised the following grounds:
"1 Because the order of upholding the order of Assessing officer is erroneous, inapposite to the provisions of law, unreasonable and unsustainable.
2 Because the order of upholding the order of Assessing officer of assumption of jurisdiction of reassessment u/s 147 through issuance of notice u/s 148 is erroneous, inapposite to the provisions of law, unreasonable , unsustainable and without recording any independent satisfaction.
3 Because the order of upholding the order of Assessing officer of charging the capital gain in individual had instead of charging in the hands of Society of which the assessee is a member and the transaction of transfer was made by the Society and not by the assessee.
4 Because the order of upholding the order of Assessing officer of charging the whole Long Term Capital Gain (deemed) in the present year is dehors the 'm aterial f acts' containg 'm aterial particulars'.
5 Because the order of upholding the order of Assessing officer of not allowing the deduction u/s 54F of the Act is 2 erroneous, unreasonable, unwarranted, unsustainable and inapposite to the provisions of law.
6 Because the order of upholding the order of Assessing officer of wrongly calculating the indexed cost of acquisition at Rs. 81,426/- instead of Rs. 91,986/- as claimed by assessee is erroneous, un-reasonable, un-warranted and un-sustainable."
3 Ground No. 1 is of general in nature and does not require any specific adjudication.
4 Ground No. 2 - After hearing both the parties we find that originally revised return was processed u/s 143(1). Later on the department while investigating the issues relating to group housing societies found that a society had 95 present and Ex-
MLAs in Punjabi Co-op House Building Society Ltd. (in short PCHBS) and have entered into a development agreement with Tata Housing Development Company (in short THDC) and received certain consideration. This information was received from JCIT, Range-VI, Molhali through Addl CIT, Sangrur vide his letter F. No. JCIT/R-VI/2009-10/MHL/144434 dated 29.9.2009. Therefore a notice u/s 148 was issued.
5 On appeal reopening was upheld by the Ld. CIT(A) by following the decision of Hon'ble Supreme Court in case of ACIT V. Rajesh Jhaveri Stock Brokers P Ltd., 291 ITR 500.
6 Before us, the Ld. Counsel for the assessee fairly agreed that this issue is covered against the assessee by the decision of the Tribunal in case of Shri Charanjit Singh Atwal and others in ITA No. 448/Chd/2011 and others.
7 On the other hand, the Ld. DR for the revenue supported the order of the Ld. CIT(A).
8 After considering the rival submissions we find that in case of Shri Charanjit Singh Atwal and others (supra) the Tribunal has decided the issue regarding reopening of the 3 assessment against the assessee because originally the return was only processed u/s 143(1) and the revenue had definite information that certain land has been transferred by the Members of PCHBS following the decision of ACIT V. Rajesh Jhaveri Stock Brokers P Ltd., (supra). Following that decision we decide this issue against the assessee.
9 Grounds No. 3 & 4 - After hearing the rival submissions we find that the assessee is a Member of Punjabi Co-op House Building Society Ltd. The assessee was holding a plot of 500 sqyd. The Society had transferred the developmenbt rights of land belonging to various members to THDC and also handed over the possession, therefore total consideration was subject to tax comprising the cash amount to be received at Rs.
82,50,000/- and cost of the flat measuring 2250 sqft amounting to Rs. 1,01,25,000/-. W hole consideration was subjected to capital gain tax after reducing the cost of acquisition.
10 On appeal action of the Assessing officer was confirmed by the Ld. CIT(A).
11 Before us, the Ld. Counsel for the assessee fairly admitted that the issue is covered against the assessee by the decision of the Tribunal in case of Charanjit Singh Atwal (supra).
12 On the other hand, the Ld. DR for the revenue supported the order of the Ld. CIT(A).
13 After considering the rival submissions we find that identical issue came up for consideration of the Tribunal in case of Charanjit Singh Atwal (supra). This particular issue was adjudicated vide para 27 to 110 which are as under:
4"27. W e have considered the rival submissions and carefully gone through the written submissions filed by both the parties in the light of material on record, paper books and various judgments cited by the parties. The main issue is whether assessee is liable to capital gain tax in the year under consideration i.e assessm ent year 2007-08 in view of the JDA. For charging capital gains, the charging section is 45 and the relevant portion is as under:-
Section 45. [(1)] Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections [54, 54B, [ [54D, [54E, [54EA, 54EB,] 54F [ 54G and 54H], be chargeable to income-tax under the head "Capital gains", and shall be deemed to be the income of the previous year in which the transfer took place.
28 The plain reading of the above provision would show that charging an item of income under the head 'Capital gains" require three ingredients i.e. (i) there should be some profit. (ii) Such profit must be arising on account of transfer and (iii) there should be capital asset which has been transferred. There is no dispute that a capital asset was involved and there was some profit also i.e. why assessee has himself returned income under the head 'capital gains;.
The dispute is mainly on account of transfer and that too whether the transfer could be covered under clauses (ii), (v) & (vi) of section 2(47) so as to bring into picture the whole of consideration arising on transfer of such assets. W e shall deal with each of the aspect in detail at appropriate time.
29. Apart from charging provisions u/s 45 another important provision is section 48 which deals with the mode of computation and relevant portion reads as under:-
48. The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :--
(i) expenditure incurred wholly and exclusively in connection with such transfer;
(ii) the cost of acquisition of the asset and the cost of any improvement thereto:
30 Again plain reading would show that capital gain would be computed by considering the full value of consideration whether received or accruing as a result of the transfer. Therefore, it is not only the consideration received which is relevant but the consideration which has accrued is also relevant.
31. The expression 'transfer' has been defined u/s 2(47) of the Act which reads as under:-
2 (47) ["transfer", in relation to a capital asset, includes,--
(i) the sale , exchange or relinquishment of the asset ; or
(ii) the extinguishment of any rights therein ; or
(iii) the compulsory acquisition thereof under any law ; or
(iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment ;] [or] [(iva) the maturity or redemption of a zero coupon bond; or] 5 [(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or
(vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property.
Explanation.--For the purposes of sub-clauses (v) and (vi), "immovable property" shall have the same meaning as in clause (d) of section 269UA;] Clauses (v) & (vi) to section 2(47) of the Act have been inserted by Finance Act, 1987 w.e.f. 1.4.1988. The purpose of this insertion has been explained by CBDT in Circular No. 495 dated 22.9.1987. The relevant part 11.1 and 11.2 of the circular reads as under:-
" 11 . 1 Th e ex is t i ng d ef i ni t io n o f t h e w or d " tr a n s fer " i n s ec ti o n 2( 4 7) do es n ot i nc l ud e tr ans fe r of c er ta i n r ig h ts ac c r u i n g t o a pur c h as er , by w ay of bec o m in g a m e mb er or ac q u ir in g s har es i n a c o- o p er at iv e s oc i et y , c om p any , or as w ay o f a ny a gr e e me n t o r a ny ar r an g em e nt w h er e by s uc h a ny bu i l d in g wh ic h is e it h er b e in g c ons tr uc t ed or w h ic h is to be c ons tr uc t e d. Tr ans ac t i o ns of t he na t ur e r ef er r e d t o a bo v e ar e n o t r e qu ir e d t o be r e gis t er e d un d er t h e Re g is tr at i o n Ac t , 19 0 8 . Suc h ar r an g e me nts c on f er t h e pr iv i l e ges of ow n er s h i p w it h ou t tr a ns f er o f t it l e i n t he bu i l di n g a nd ar e a c o m m on mo d e of ac qu ir i ng f la t s pa r t ic ul ar ly i n mu l ti- s tor ey ed c o ns tr uc ti o n s i n b i g c i tes . T h e d ef i n it i on a ls o do es no t c ov er c as es w h er e pos s es s i on is a l lo w ed to b e t ak en or r e ta i ne d in p ar t p er f or m anc e of a c o n tr ac t, o f t h e n a t ur e r e f er r e d to i n s ec ti o n 53 A of Tr ans fer of Pr op er ty Ac t, 18 8 2. N ew s ub- c l a us es ( v ) & ( v i) h av e b e en i ns er te d i n s ec t io n 2( 47) t o p r e v en t av o i d anc e of c ap i ta l g a ins l i a bi l i ty b y r ec o ur s e t o tr a ns f er o f r i g hts in t h e m an n er r ef er r ed t o a b ov e .
11 . 2 Th e n ew ly i ns er t e d s ub- c l a us e ( v i) o f s ec t i on 2( 4 7) has br o u g ht i n t o t he a m b it o f tr ans f er ", t h e p r ac t ic e o f e nj oy m en t of pr o p er ty r ig h ts t hr o u gh w h at is c o m m on l y k n ow n as P ow er of At t or n ey ar r a ng e me n t s . T he p r ac t ic e i n s uc h c as es is a d op t e d nor m a l ly w h er e tr ans f er of ow n er s h i p is le ga l ly n ot pe r m i tt ed . A per s o n h o ld i ng t h e p ow er o f at to r n ey is a ut h or i ze d th e p o wer s of ow n er , i nc l ud i ng t h at of m ak in g c o ns tr uc ti o n. T he le g al o w ner s h i p i n s uc h c as es c o n ti n u es to be w i th t h e tr a ns fer or . "
32 Before insertion of the clause (v) & (vi) to section 2(47) of the Act, the position of law was that unless and until a sale deed was executed f or transfer of imm ovable property, the sam e could not be construed as transfer for the purpose of charging capital gain tax. This was particularly so in the light of various judgments particularly the judgment of Hon'ble Apex Court in the case of Alapati Venkatramian v CIT (57 ITR 185) (SC). In this case it was held that in the context of transfer for the purpose of capital gain tax, what is m eant b y transfer is the eff ective conveyance of the capital asset by a transferor to the transferee. Delivery of possession and agreement to sell by itself could not constitute conveyance of the im m ovable property. In the meantime apart from this decision a practice came into vogue by which certain properties were being transferred without executing the proper sale deeds. This was being done because there was restriction on sale of properties in various towns e.g. in case of lease hold plots and flats in Delhi if the same were to be transferred, permission was required to be taken from the Government / DDA and transferor was required to pay 50% of the market value - cost (i.e. unearned increase) to the Government. To avoid such payments and / or also to avoid the paym ent of stam p duty or cum bersome procedure of obtaining permission, some properties were being 6 sold by way of sale agreement and also execution of General Power Of Attorney and possession was given on receipt of full consideration without executing the proper sale deeds etc. which as mentioned earlier was not even permissible in some cases. These transactions are popularly called "power of attorney"
transactions. To avoid these and to stop the leakage of Revenue, the Parliament has inserted clauses (v) & (vi) to section 2(47) so as such type of transactions are also be brought in to taxation net. However, interpretations of these clauses has led to lot of litigation and the main point of litigation was that at what point of time the possession can be said to have been given. In the present case, the Revenue has mainly relied on two decisions namely (i) Chaturbhuj Dwarkadas Kapadia v CIT 260 ITR 491 (Bom.) and; (ii) Authority for Advance Ruling (AAR) New Delhi in the case of Jasbir Singh Sarkaria 294 ITR 196.
33. In the case of Chaturbhuj Dwarkadas Kapadia v CIT (supra), the facts before the Hon'ble Bombay High Court were that assessee who was an individual had 44/192 undivided share in an immovable property in Greater Bombay which consisted of various lands and buildings. By Agreement dated August 18, 1994, the assessee agreed to sell to Floreat Investment Ltd, (herein referred to 'Floreat') his share of immovable property for a total consideration of Rs. 1,85,63,220/- with right to said Floreat to develop the property in accordance with the rules / regulations framed by local authorities. For this purpose, the assessee also agreed to execute a limited power of attorney authorizing Floreat to deal with the property and also obtain permissions and approvals from various authorities. Under clause 11 of the agreement, it was provided that after Floreat was given an irrevocable license to enter upon the assessee's share of property and after Floret investment have obtained all necessary approvals, the Floret was entitled to demolish various buildings for settling the claims of the tenants. Under clause 14 of the agreement, the assessee was entitled to receive proportionate rent till the pa ym ent of last installm ents and till that tim e assessee was bound to pay all outgoings. Under clause 20 of the Agreement, it was agreed that sale shall be completed by execution of conveyance, however, till the matter was adjudicated by the Hon'ble High Court, no conveyance was executed. Pursuant to this agreem ent, Floreat obtained various permissions namely (i) clearance from CRZ Authority dated February 7, 1996; (ii) letter from ULC for redevelopment of property dated April 26, 1995. Other perm issions were also obtained during the f inancial year ending March 31, 1996 relevant to assessment year 1996-97. By March, 31, 1996, Floreat had paid almost the entire consideration expect for a small sum of Rs. 9,98,000/-. However, the commencement certificate permitting construction of the building was issued on November 15, 1996. The power of attorney was executed on March 12, 1999. The question arose whether liability of the assessee for capital gain arose in the assessm ent year 1996-97 or 1999-2000. The observation of the Court has been summarized in head note as under:-
"Clauses (v) and (vi) were introduced in section 2(47) of the Income-tax Act, 1961, with effect from April 1, 1988. They provide that "transfer" includes (i) any transaction which allows possession to be taken/retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882, and (ii) any transaction entered into in any manner which has the effect of transferring or enabling the enjoyment of any immovable property. Therefore, in these two cases capital gains would be taxable in the year in which such transactions are entered into, even if the transfer of the immovable property is not effective or complete under the general law. Under section 2(47)(v) any transaction involving allowing of possession to 7 be taken over or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act would come within the ambit of section 2(47)(v). In order to attract section 53A, the following conditions need to be fulfilled. There should be a contract for consideration ; it should be in writing ; it should be signed by the transferor ; it should pertain to transfer of immovable property ; the transferee should have taken possession of the property ; lastly, the transferee should be ready and willing to perform his part of the contract. Even arrangements confirming privileges of ownership without transfer of title could fall under section 2(47)(v). Section 2(47)(v) was introduced in the Act from the assessment year 1988-89 because prior thereto, in most cases, it was argued on behalf of the assessee that no transfer took place till execution of the conveyance. Assessees used to enter into agreements for developing properties with builders and under the arrangement with the builders, they used to confer privileges of ownership without executing conveyance and to plug that loophole, section 2(47)(v) came to be introduced in the Act.
................
Held, that section 2(47)(v) read with section 45 indicates that capital gains was taxable in the year in which such transactions were entered into even if the transfer of immovable property is not effective or complete under the general law. In this case, the test had not been applied by the Department. No reason had been given why that test had not been applied, particularly when the agreement in question, read as a whole, showed that it was a development 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 to decide the date of transfer under section 2(47)(v) and, in which event, the question of substantial performance of the contract thereafter would not arise......"
34. The Hon'ble Court referred to clauses (v) & (vi) of section 2(47) and made the following observations at page 499 of the report:
" ...... .. T h e a b o v e t w o c l a u s e s w e r e i n t r o d u c e d w i t h e f f e c t from April 1,1988. They provide that "transfer" includes (i) any transaction which allows possession to be taken/retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, and (ii) any transaction entered into in any manner which has the effect of transferring or enabling the enjoyment of any immovable property (see section 269UA(d)). Therefore, in these two cases capital gains would be taxable in the year in which such transactions are entered into, even if the transfer of the immovable property is not effective or complete under the general law (see Kanga and Palkhivala's Law and Practice of Income-tax-VIII edition, page 766). This test is important to decide the year of chargeability of the capital gains."
35 T he a bo v e o bs e r va t i ons wer e m ade o n th e b as is of op i n io n ex pr es s e d b y L d. a u t hor i n th e c om m ent ar y - " T he L a w an d P r ac tic e of Inc om e T ax b y K a n ga a nd P a lk hi v a la E i gh th E d it i on at p ag e 7 6 6. Re l e va n t obs er v at i o ns r e a d as u nd er :
" Cls . ( v ) an d ( v i) o f s . 2( 4 7) , i ns er t ed by t h e Fi na nc e Ac t 19 8 7 w it h e ff ec t st fr o m 1 A pr i l 1 98 8 , p r ov id e t ha t " tr ans fe r " i nc l u des ( a) a ny tr a ns ac t i on 8 wh ic h i nv olv es t h e a l l ow i ng of t h e p os s es s i on of a n im m ov a b l e p r op er ty ( s . 2 6 9U A( d) ) t o be t a k en or r et a i ne d in p ar t per f or m a nc e o f a c o nt r ac t of th e n at ur e r e fer r e d t o i n s .5 3 A o f th e tr a ns f er o f Pr op er ty Ac t 1 88 2, a n d ( b) a ny tr a ns ac t io n e nt er ed i nt o i n any m a nn er w h ic h h as t he ef fec t o f tr a ns f er r i n g, or e na b l i ng th e e n j oy m e nt of , any i mm ov ab l e p r o p e r ty ( s . 26 9 UA ( d) ) . Th er ef or e i n th es e tw o c as es c a p it a l g ai ns w o ul d b e t ax a b l e i n t h e y e ar i n w h ic h s uc h tr a ns ac t i ons ar e en t er e d i nt o , ev e n i f th e tr a ns f er of t he i m mov ab l e pr o p er ty is n ot ef fec t iv e or c o mp l et e un d er ge n er al la w. "
36 From the above, it is clear that Court was of the view that in case any transaction covered by clause (v) and (vi) to section 2(47) the liability for capitol gain would arise on the date when such transactions are entered into. In the judgment at some other places, the similar observations have been made. However, despite this observation the case was decided in favour of the assessee. T he r e a s on f or t h e s am e ha v e b e en g i v en i n th e j u dgm en t its e lf . Fir s t l y i t is o bs er ve d t h at pr o v is i on o f s ec ti on 2( 47) ( v ) of the Ac t wer e n ot i n vok e d b y t he R e v e nu e i ts elf . T h is bec om es c l ea r f r om the f ol l o wi ng p ar a:
" It was ar g ue d o n be ha l f of th e as s es s e e th at t her e w as n o ef f ec t iv e tr a ns f er t i l l gr a nt o f ir r ev oc a b le l ic e nc e . I n t h is c on n ec t i on , th e j ud gm e nt of th e Ho n' b le S u pr em e C o ur t we r e c i te d on be h a lf of t he as s es s e e, b ut a ll th os e ju d gm e nt we r e pr i or t o i ntr od uc t io n o f t he c o nc e p t o f d ee m ed tr a ns f er u/s 2( 4 7) ( v ) . In t his m at t er , th e ag r e e me n t i n q ues t i on is a dev e l op m en t a gr ee m e nt . S uc h dev e l op m en t agr e e me nts do no t c o ns t i tu te tr a ns f er i n g e ne r a l l a w. T h ey ar e s pr ea d ov er a pe r i o d o f t i m e . Th ey c on t em p l at e v ar i ous s ta ges . Th e Bo m b ay H ig h C o ur t in v ar io us j ud g me n ts h as tak e n th e v i ew in s ev er a l ma tt er s t ha t t he ob j ec t o f en t er i n g i n to a d ev e l op m en t a gr ee m en t i s to e n ab l e a pr o f e s s i on a l bu i l de r / c o ntr ac t or to mak e pr of i ts by c o m pl et i ng t he b u i ld i ng a n d s e ll i n g th e f la ts a t a pr of i t. T ha t t he ai m o f t hes e pr o f es s i o n al c on tr ac t o r s was on ly t o m ak e pr o f its by c o m p le t in g t he bu i l d in g a nd , t her e fo r e, n o i nt er es t i n th e l a nd s t an ds c r e at e d i n t he ir f av o ur u n der s uc h agr e e me nts . Th a t s uc h a gr e e m en ts ar e o n ly a mo d e o f r e mu n er a t i ng t h e bu i l de r for his s er v i c es of c ons tr uc t i ng th e b u il d i ng ( s ee G ur u d ev Dev e lo p er s v . Ku r l a K onk a n N i w as C o- op er at iv e H o us in g S oc ie ty [2 0 03 ] 3 Ma h LJ 1 3 1) . I t is pr ec is e ly fo r t h is r e a s on t h at t he L e g is la tu r e h as i ntr od uc e d s ec ti o n 2( 47) ( v ) r e a d w it h s ec t i on 45 wh ic h in d ic at e s th at c ap i ta l g a i ns is t ax a b le in t he y ear in w h ic h s uc h tr ans ac ti o n s ar e en t er e d i nt o ev en i f t h e tr a ns f er o f im m ov a b l e pr o p er ty is n ot e ff ec tiv e or c om p l et e u n der th e g en er a l l aw . In t h is c as e t h at t e st h as n o t bee n app li ed b y t he D ep a r t men t . No re a son h a s be en gi v en w h y t h at t e st ha s not b ee n appl i e d, p a rt i cu la r ly w h en t he ag r ee me nt in q u est ion , re ad a s a w ho l e, sho w s t h at it i s a d e ve lo pme nt a g re em ent . Th er e is a dif f e r en ce b et w e en t h e cont r act o n t he o ne h an d a nd t he pe rf o rm an c e on t he ot he r h and . In th is c as e , t he Tr i b un a l as we l l as th e D ep ar tm e nt h av e c om e t o t he c onc l us io n th a t th e tr an s f er to o k pl ac e dur i n g th e ac c o un t in g y e ar e nd i n g Mar c h 3 1, 19 9 6, as s ub s ta nt i a l pay m en ts w er e e ff ec t ed d ur in g t h at y ea r an d s ubs ta n t ia l per m i s s i ons wer e ob ta i n ed . I n s uc h c as es of d ev e l op m e nt a gr e e me n ts , on e c a nn o t g o by s u bs t a nt i a l p er f or ma nc e o f a c on tr ac t . In su ch c as e s, t h e y ea r of ch ar ge ab il it y i s t h e y ea r in w h ic h t h e co nt ra ct is e xe cut ed . Th i s i s i n vi ew of s ect ion 2 ( 4 7 ) ( v ) of t h e A ct . "
S ec o n d l y it is m ent io n ed in t h e or de r of th e Co ur t t h at la w wa s not ver y c l ear on t h is p o in t a nd s inc e t he as s es s e e h as a dm itt e d an d p a id c ap i ta l ga i n in t h e As s es s m e nt ye ar 1 99 9- 20 0 0, th er ef or e , t ax was h e l d t o b e c har g e ab l e i n As s es s m ent ye a r 19 9 9- 20 0 0.
T hir dl y c er t ai n s h or t c om in gs wer e a ls o no t ed i n t h e o r d e r o f t h e Tribunal where certain documents were mentioned to have been executed before March 31, 1996 e.g. the following observation of the Tribunal was not found correct as something is done on Ist April, 1997 then the sam e cannot f all in the year ending 31.3.1996.
"From the dates it is evident that from the very next day, i.e., April 1, 1997, from the end of the financial year ending on March 31, 9 1996, the builder was using the well water against payment of relevant charges to the assessee."
37 Thus it is very clear that in cases where an arrangement had been entered into by an assessee in terms of clause (v) of Section 2(47) which has effect of handing over the possession then the transfer is said to have been taken place on the date of entering into such arrangement.
38. W e do not find any force in the contention of the Ld. Counsel for the assessee that judgment has to be read in the context of the decision made in such judgment. In fact, it is well settled that doctrine of precedent which means what needs to be followed later on particularly by subordinate Tribunals and Courts is the ratio of a particular judgment given by the higher Court or Forum. Further, there is no force in the contention that decision of the Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia v CIT (supra) does not show that the date of agreement itself constitute the transfer. Again there is no force even in the contention that in that case it was ultimately decided that capital gain taxes is chargeable in Assessm ent year 1999- 2000 because of the reasons given in above noted paras particularly because the Revenue itself never invoked the provisions of section 2(47)(v) of the Act and held it to be taxable in Assessm ent year 1996-97. No doubt in that case ultimately it was held that capital gain was in assessm ent year 1999-2000 but Court had made it very clear that this is first time that law is being laid down and guidelines are being issued which means that there was a confusion earlier. Clauses (v) & (vi) to section 2(47) were introduced in the ye ar only in 1998. Perhaps Court took a lenient view because of these reasons and held that capital gain was taxable in Assessment year 1999-2000. It is quite clear that ratio of the above decision is that in case of any arrangements or transactions whereby the other party becomes entitled to enjoy the property then that date of such transaction itself needs to be construed as the date of transfer.
39. The second relevant decision cited by the Revenue is by Authority for Advance Ruling (AAR) New Delhi in the case of Jasbir Singh Sarkaria (supra). In that case the assessee was co-owner of agricultural land measuring about 27.7 acres and his share was 4/9. The co-owner decided to develop the land by constructing residential complex through developer and entered into a Collaboration agreement on 8.6.2005 with M/s Santur Developer Pvt Ltd, New Delhi (herein after called 'Developer'). According to the terms of agreement, the Developer should obtain a letter of intent from the concerned government department and obtain other permissions and sanctions for developing the land at its own risk and cost. The Developer was to take 84% of the built up area and balance 16% would belong to assessee and other co-owner. The consideration for the agreement was taken as the built up area to be handed over to the owners free of cost. The owners were entitled to visit the site in order to review the progress of the project. It was clarified by clause 18 that ownership would remain exclusively with the owners till it vests with both the parties as per their respective shares on the completion of the project. The other clauses and the steps in the agreement were that a sum of Rs. 1 crore towards paym ent of earnest m one y at the tim e of entering into agreement; a special power of attorney was to be executed in favour of the Developer to enable to deal with the Statutory authorities etc. for obtaining necessary approvals / sanctions; letter of intent was to be obtained not later than March 8, 2006 and in case of a failure to do so, the agreement shall stand terminated. Letter of intent is basically a license granted by the Director of Town Planting to Developer of land for the purpose of constructing residential f lats subject to pa ym ent of certain charges and compliance of other conditions. It was further stated in the agreem ent that on fulf illm ent of the requirem ent in the letter of intent, owners will have to execute irrevocable general power of 10 attorney in favour of the Developer authorizing the Developer to took and sell the dwelling units out of developer's share and collect the money for the same. However, finally sale deeds could be executed only after the owner received their share of constructed area. Three months later, a supplementary agreem ent was entered on September 15, 2005 between the assessee and other co-owners and Developers through which it was agreed that owners will sell their 16% share in the built up area to the Developer or its nominee for consideration of Rs. 42 crores. A sum of Rs. 2 crores was received. T his collaboration agreement and balance of Rs. 40 crores was pa yable b y the Developer to the owners in six installments from March 06, 2008. The installments could be extended subject to paym ent of interest and f urther subject to maximum extension of three months. There were various other clauses which are not relevant for our purposes. The question arose whether capital gain accrue / arise to the assessee during the f inancial year 2006-07 relevant to assessm ent year 2007-08 or during financial year 2007-08 relevant to assessm ent year 2008-09.
40. On the above, the Hon'ble Authority after referring to the provisions of section 45 and observed as under:-
" ... ... ... . The s ec t io n c a n b e an a ly s ed t h us :
( a) tr ans fe r of a c ap i ta l as s et e ff ec te d i n t he pr ev i o us y e ar , ( b) r es u lt a nt pr of i ts or g a ins fr o m s uc h tr ans fer , ( c ) th os e pr o fi ts or ga i ns w o u ld c o ns t it u t e t he i nc om e of th e as s es s e e/ tr a ns f er or ( d) s uc h i nc om e s ha l l be d e em e d t o be th e inc o me o f t he s a m e pr ev i o us y e ar i n wh ic h t he tr a ns f er h a d tak e n p lac e .
Two as pec ts m ay b e n ot e d at th is ju nc tur e . Fir s t ly , t h e ex pr es s i o n us e d is " ar is in g " w h ic h is no t to b e e qu a te d w it h th e ex pr es s io n " r ec eiv e d ". Bo t h th es e ex pr es s i ons an d in a d d it i on t h er e t o , th e ex pr es s i on " ac c r u e " ar e us e d in t he I nc om e- tax Ac t e it h er c o ll ec tiv e ly or s ep ar at e ly ac c or d in g t o t he c o nt ex t an d na tu r e o f t he c h ar g i n g pr o v is io n . Th e s ec o nd p o in t w h ic h d es er v es n ot ic e is t ha t by a d ee m i ng pr ov is io n , th e pr o fi ts or ga i ns t h at hav e ar is e n wo u l d be tr e at e d as t h e i nc om e of th e pr ev io us y e ar i n wh ic h th e tr ans fe r t ook p l ac e. Th a t me a ns , t he i nc o m e o n ac c o un t o f ar is a l of c a p it a l g a i n s ho u l d b e c h ar ge d t o tax in th e s a m e pr ev i o us y e ar in wh ic h t h e tr a ns f e r was ef fec t ed or de e me d to hav e t ak e n p l ac e .
Th e e ff ec t an d a m b i t of th e d e e mi n g pr ov is i o n c o nt a i ne d in s ec t i on 4 5 has b ee n c o ns i der e d in d ec i de d c as es a n d l e ad i ng t ex t bo ok s . Th e fo l l ow i n g s t at e me n t o f l aw i n Sa m pa t h Iy en g ar 's Co m me n tar y ( 1 0t h Ed it i o n-- Rev is ed by Sh r i S. R a j ar a t na m) br in gs o ut th e c or r ec t le g a l pos i t i on :
" S ec t i on 4 5 e n ac ts t ha t t h e c a p it a l ga i ns s ha l l by f ic t i o n 'b e de e me d t o b e th e i nc o m e of t h e pr ev i o us y ea r in w h ic h t h e tr a ns f er t o ok pl ac e '. S inc e t h is is a s t at u t or y f ic t i on , t he ac t ua l y ear i n wh ic h th e s a l e pr ic e w as r ec e iv ed , wh et h er i t was on e y ear , t wo y ear s , t hr e e y ear s , f ou r y e ar s etc . pr ev i o us t o th e pr ev i o us y e ar o f tr a ns fer , is bes i d e t he po i nt . Th e en t ir e ty o f t he s um or s u ms r ec e iv e d i n a ny e ar l ier y e a r or y e ar s wo u l d b e r eg ar d ed as t he c a pi ta l g a i ns ar is i ng i n t he pr ev i o us y e ar o f tr a ns f er .
. . . . I n t he wo r ds of s ec t i on 4 5, t h e c a p it a l ga i ns ar is i ng fr om th e tr a ns f er 's h a l l be t he i nc o m e of t he pr ev i ous y e ar i n wh ic h th e 11 tr a ns f er to ok pl ac e'. S o, t h e p ay m en ts o f c ons i d er a t io n s t i p u la te d to b e pa i d i n fu tur e wo u l d hav e to b e at tr i b ut e d, by s ta t ut or y ma n da t e, t o th e y e ar of tr a ns f er , ev e n as p ay m e nts ma d e pr ior t o th e y e ar of t r a ns f er . "
41. Thereafter, the Authority referred to section 2(47) and objects of the introduction of clauses (v) & (vi) and also referred to paras 11.1 & 11.2 of the Board Circular No. 495 (which we have already discussed earlier). The Hon'ble Authority has discussed various implications of clause (v) of section 2(47) and also implication of section 53A of the Transfer of Property Act as well as observations of Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia v CIT (supra). The Authority observed that to understand this provision properly meaning of 'possession' has to be understood properly and went on to discuss the meaning of term 'possession, and how the same is to be understood in the context of clause (v). These are very important observations and have been discussed in most elucidated fashion. These observations will answer many of the questions raised before us and, therefore, we are extracting these observations as under:-
" Me an ing of " po ss e s sio n" and how shou l d it b e u nd er st o od in t h e cont e xt of cl au se ( v ) Th e n ex t qu es t i o n is , in w h at s ens e w e h a v e t o u nd er s ta n d th e te r m " p os s es s i on " i n t he c o nt ex t of c la u s e ( v ) o f s ec t i o n 2( 47) . S ho u l d it o n ly m ea n th e r i gh t to ex c l us iv e p os s es s i o n-- wh ic h t h e tr a ns f er e e c a n m a in t a in in h is ow n r i g ht t o t h e ex c l us io n of ev er y o n e inc l u d in g t he tr a ns f er or fr o m wh o m he der iv e d t he pos s es s i on ? S uc h a c r it er i on w i l l b e s at is f i ed on ly af ter t h e e nt i r e s a le c o ns i der a ti o n is pa i d a nd t h e tr ans fe r o r h as f or f e it e d h is r ig ht to ex er c is e ac ts o f pos s es s io n ov er t he l an d o r to r es u me pos s es s i on . I n o ur v i ew , t her e is n o w a r r a nt t o pl ac e s uc h a r es tr ic te d in t er pr e ta t i on o n t he wor d " p o s s es s io n " oc c ur r i n g i n c l aus e ( v ) o f s ec t i on 2( 4 7) . P os s es s io n is an abs tr ac t c onc e pt . It has d if f er e nt s h a des of m ea n in g . I t is v a r i ous ly d es c r i b e d as " a po ly m or p h ous t er m h a v i ng d if f er e n t m e an i n g s i n d iff er e nt c o nt ex t s "
( pe r R . S. Sar k ar i a J . i n Su p er in t en d en t an d Re m e mbr a nc e o f Le g a l Af f ai r s , W . B. v . A ni l K u mar B h un j a [1 9 79 ] 4 SC C 27 4 a nd as a wor d of " o pe n tex t ur e " ( s e e Sa l m on d on J u r is pr u d enc e , p ar a gr a p h 51 , T w el ft h E d it i on , I nd i a n r e pr i nt) . S al m o n d obs er v ed : " to l o ok f or a d ef i n it i on t h at wi l l s u m mar i ze t he me a n in gs o f t h e ter m " pos s es s i on " i n or d i nar y l an g ua g e, i n a l l ar e as o f l aw an d i n a ll l eg a l s y s t e ms , is t o a s k for th e i mp os s ib l e ". I n t he a bov e c as e of A ni l K um ar B hu n j a [ 1 97 9 ] 4 SC C 2 74 , Sa r k ar ia J . s p e ak i n g f or a thr e e- ju d ge B e nc h a l s o r ef er r ed t o t he c om m e nts of D ias a nd Hu g hes i n t he ir b ook o n J ur is pr ud e nc e t ha t " i f a t o p ic ev er s uf fer e d to o m uc h t h eor i zi n g it is th a t of 'p o s s es s i o n '" . Muc h o f t he d i ff ic u lt y is c aus e d by t he f ac t t ha t pos s es s i on is n ot a p ur e l eg a l c onc e pt , as po i nt e d ou t by S a lm on d . T he le ar ne d j u dg e th e n ex pl a i ne d t he c on n ot at i o n of t he ex pr es s i o n " p os s es s i on " by r e fe r r in g to t h e w e ll k no w n tr ea t is es on ju r is pr u d enc e ( p a ge 27 8 ) :
" 'P o s s es s i on ', i m pl i es a r ig h t an d a f ac t : t he r i gh t to en j oy an n ex e d to th e r i gh t to pr op er ty a n d t he fac t o f t h e r e a l i nt en t io n . It inv o lv es po w er of c on tr ol an d i nt e nt t o c o ntr o l, ( s ee D i as a n d Hu g hes ) 14 . . . .
15 . W h i le r ec o g ni zi n g t ha t 'p os s es s i on ' is no t a p ur ely le g a l c onc e pt b u t a ls o a m at ter of f ac t , S a l mo n d ( 1 2t h E d ., 5 2) des c r i b es p os s es s i o n, i n f ac t , as a r e la t i ons h i p be tw e en a per s o n a n d a t hi n g. A c c or d i n g t o t h e l e ar ne d a ut h or , t he tes t for d et er m in i ng 'w h e th er a per s o n is i n p os s es s io n of any t hi n g is w he t her he is in ge n er a l c o n tr o l of it '."12
In S a lm o nd 's J ur is p r ud e nc e , at par a gr ap h 54 , w e f i n d a n i l lu m i na t in g dis c us s i on o n " im m e di a te " a n d " me d ia t e p os s es s io n ". Th e l ea r n e d a ut ho r s tat es " i n la w o ne pe r s o n m ay p os s es s a t hi n g for a nd o n ac c o u nt o f s om e o ne e ls e. I n s u c h a c as e th e l at ter is i n pos s es s i on by th e ag enc y o f h i m w h o s o ho l ds t h e t h i ng o n h is be h a lf . Th e pos s es s i o n t h us h e ld by on e m a n t hr ou g h a n ot h er m a y be t er m ed me d i at e, w h il e t h at w h ic h is ac q u ir ed or r et a in e d d ir ec t ly or per s o na l ly m ay b e dis t in g u is h e d as 'i m me d ia t e o r di r ec t '. "
S al m o nd mak es r e fe r e nc e t o t hr ee ty p es of me d i at e p os s es s i o n. I n a ll c as es o f " me d i at e pos s es s i on ", t w o p er s ons ar e in p os s es s i o n of th e s a m e th i ng at t he s am e t im e. A n a ll i e d c onc ep t of c onc ur r e n t pos s es s i on has a ls o be e n ex p l a in e d i n par agr a p h 5 5 o f Sa l m on d 's J ur is pr u de nc e i n t he f o ll o wi n g wo r ds :
" It was a m ax im o f t h e c iv i l la w t h at tw o p er s ons c o u ld n ot b e i n p os s es s i on o f th e s am e t hi n g at t h e s am e t i me . As a ge n er al pr op os it i o n th is is tr ue : fo r ex c l us i v en es s is o f t he es s e nc e of pos s es s i on . Two a dv er s e c la i ms of ex c l us iv e us e c an n ot b ot h b e e ff ec tu a lly r ea l i ze d a t t h e s a me t i me . Cl a i ms , ho w ev er , w hic h ar e n ot adv er s e, a nd w h ic h ar e n o t, th er ef or e, m u tu a l ly des tr uc t iv e , a d mi t of c o nc ur r e n t r ea l i za t i o n. H e nc e , t her e ar e s ev er a l p o s s i bl e c as es o f du p l ic a t e p os s es s io n.
1. Me d i at e a nd i m me d i at e pos s es s i on c o- ex is t in r es p ec t of t h e s a m e t h in g as a lr e ady ex p l ai ne d .
2. T wo or m or e p e r s ons m ay p os s es s th e s a m e th i ng in c om m on , jus t as t h ey may ow e i t i n c om m o n .... "
O n a f a ir a nd r e as on ab l e i nt er pr e t at i on a n d on a d op t in g th e pr inc i p le o f pur p os iv e c o ns tr uc t i on , it m us t be h e ld t ha t pos s es s i o n c on t em p l at ed by c l aus e ( v ) ne e d n o t n ec es s ar i ly b e s o le a nd ex c lus iv e p os s es s io n. S o l o ng as t he tr ans f er e e is , by v ir t u e o f t h e pos s es s i on g iv e n , e n ab l e d t o ex er c is e g en er a l c o nt r o l ov er t he pr o p er ty a n d t o m ak e us e of i t f or t he i n te nd e d pur p os e , th e m e r e fac t t ha t t h e o wn er has a ls o th e r i gh t t o en ter t he pr o p er ty t o ov er s e e th e d ev e l op me n t w or k or t o e ns ur e p er for m a nc e o f t he ter ms of agr e em e nt do es no t i n tr o d uc e any i nc o m p at i bi l i ty . T he c onc ur r e nt pos s es s i o n o f t he o wn er w h o c an ex er c is e p os s es s o r y r i gh ts t o a l i m it e d ex t en t a n d for a l i m it e d pur p os e a nd t h at of t he buy er /d ev e lo p er w h o has a g e ner a l c o nt r o l a nd c us t ody o f t h e l a nd c an v er y we l l be r ec o n c i le d . C l aus e ( v ) of s e c ti o n 2 ( 4 7) w i l l hav e it s fu l l p lay ev e n in s uc h a s i tu at i o n. Th er e is no w ar r an t to p os t p on e th e op er at i o n of c l a us e ( v ) a nd t h e r es u l ta n t ac c r u a l of c a p it a l ga i n to a p o in t of t i m e w he n t h e c o nc ur r en t p os s es s i o n w i l l b ec o m e ex c lus iv e p os s es s i o n of d ev e l o per /tr a ns f e r ee af ter he pay s f u ll c ons i d er a t io n .
Fur th er , if " p os s es s io n " r ef er r e d to in c la us e ( v ) is t o b e un d er s t o od as ex c l us iv e pos s es s i on o f th e tr a ns fer e e/ d ev e l op e r , th e n, th e v er y p ur p os e of th e a me n dm e nt ex p a nd i n g t h e de f in i ti on of tr ans fe r f or th e p u r pos e of c a p it a l ga i ns m ay b e d ef e at ed . T h e r eas o n is t his : th e o w ner o f th e pr o per ty c a n v er y we l l c o nt e nd , a s is b e i ng c on t en d ed i n th e pr es en t c as e , t ha t th e d ev e l o per w il l ha v e s uc h ex c l us iv e pos s e s s i on i n h is ow n r ig h t o n ly a ft er t h e e nt ir e am o un t is pa i d t o t he ow n er to t h e l as t p ie . Th er e is t h en a pos s i b i li ty of s ta g ger i ng t he l as t i ns t a lm e nt of a s ma l l am o un t t o a d is t an t d at e, m ay b e, wh e n t h e e nt ir e bu i l d i ng c o m p lex ge ts r e ad y . Ev en if s o m e a mo u nt , s ay 10 p er c e nt ., r em a ins t o b e p ai d a n d th e dev e l op er /tr ans f er e e f a ils to p ay , l ea d in g to a d is pu t e b et we e n t h e par t ies , t he r i gh t t o e x c l us iv e a nd in d ef e a s i bl e p os s es s io n m ay be i n j eo p ar dy . I n t h is s ta te of af fa ir s , t he tr a ns ac t io n w i th i n t he me a n in g of c l aus e ( v ) c an n ot b e s a i d t o h av e b e en ef f ec t ed a nd t he l ia b i l ity t o pay c a p it a l ga i ns m ay be in d ef i ni t e ly pos tp o ne d . Tr u e, it may n ot be pr of i ta b l e for th e d ev e lo p er t o al l ow t his s i tu at i o n t o l in g er f or l o ng as th e pr oc es s o f tr a ns f er o f fl a ts to t h e pr os pec t iv e 13 pur c h as er s w il l g e t d e l ay e d. At t h e s a me t i me , t he ot he r s i de o f t he p ic t ur e c an n ot be ov er - lo ok ed . T her e is a pos s i b i li ty o f t he ow n er wi t h t he c on n iv anc e of t h e tr a ns f er ee pos tp o ni n g t he p ay m e nt of c ap i ta l ga i ns t ax o n t he os t e ns ib l e gr o u n d t ha t t he e nt ir e c ons i d er a t io n h as n o t be e n r ec e iv e d an d s o me b a la nc e is l ef t. T h e m is c h i ef s ou g ht t o b e r e me d i ed , w il l t h en per p et u at e. W e ar e, th er ef or e of t he v ie w t ha t p os s es s i o n giv e n t o th e d ev e lo p er s ne e d no t r i p en its e lf in to e x c l us iv e p os s es s io n o n p ay m e nt o f a l l th e i ns t a lm e nts i n en t ir et y for t h e p ur p os e o f de t er m i n in g t he d at e of tr a ns f er .
W hil e o n th e p o in t of pos s es s i on , we w o u ld l ik e t o c l ar ify o n e mo r e as p ec t . W hat is s pok e n t o i n c l a us e ( v ) of s ec t io n 2( 4 7) is t h e " tr a ns ac t i on " wh ic h inv o lv es a ll o wi n g t he p os s es s io n t o b e t ak en . B y me a ns of s uc h t r a ns a c ti o n, a tr ans fer e e l ik e a d ev e lo p er is a ll o w ed to u nd er tak e dev e l op me n t w or k on t he l a n d by as s u m in g ge n er a l c on tr ol ov er t h e pr o pe r ty i n p ar t p er for m an c e o f t he c o ntr ac t. T h e da t e of th a t tr a ns ac t i o n d et er m in es t he da t e o f tr ans fe r . T he ac t u a l da t e o f t ak i n g p hy s ic a l p os s es s i o n or th e i ns t a nc es of pos s es s o r y ac ts ex er c is e d is no t v er y r e lev a nt . T he as c e r ta i n me nt o f s uc h d at e , if c a ll e d f or , le a ds to c om p l ic at ed i nq u ir ies , wh ic h may fr us tr at e t he ob j ec t iv e of th e l eg is l at iv e p r ov is i on . I t is e no u gh i f t h e tr a ns f er e e has , by v ir tu e o f th at t r ans ac ti o n, a r ig h t t o en t er up o n an d ex er c i s e ac ts o f p os s es s i o n e ff ec t iv e ly pu r s u a nt t o the c ov e n an ts i n t h e c on tr ac t . Tha t t an t am ou n ts to le g a l p os s es s i on . W e ar e r e f er r in g t o th is as p ec t b ec aus e th e a ut ho r i ze d r e pr e s en t at iv e h as s u bm i tt ed wh e n h e a pp e ar ed b ef or e u s in t he l as t w eek o f May , 20 0 7, t h at ev e n by t h at da te t he dev e l op m en t w or k c o u ld n ot be c o mm e nc e d for w an t of c er ta i n a ppr ov a ls , a nd t h er e f or e , th e d ev e l op er w as " no t w i l l in g t o t ak e p os s es s i o n o f t he l an d ". S uc h an uns u bs t a nt i at ed s t at e me n t w h ic h is n ot fo u nd i n t h e o r i g i na l ap p l ic a t io n or ev e n w r it t en s ub m is s io ns f i l ed ear l i er n ee d n ot be pr o b e d i nt o es p ec i a l l y w he n i t is n ot h is c as e t h at t he d ev e lo p e r was n o t a ll o we d t o t a k e p os s es s i on in t er m s o f th e a gr ee m en t. "
42. After the above discussion, the Authority discussed the facts of the case before it. It was observed that paragraph 18 of the Collaboration Agreement provides that on issuance of letter of intent, the owners will allow and permit the Developer to enter upon and survey the land, erect site / sales office, carry out the site development work and do activities for advancing & sale promotion, construction etc. The Authority further observed that if this clause is read in isolation this would suggest on passing of possession but according to Authority the other factors are to be considered. Clause 15 provided that on fulfillment of the requirements laid down in the letter of intent which is provisional license, the owners should execute an irrevocable general power of attorney in favour of the developer allowing inter alia to book and sell the dwelling unit failing under their share. This was possible only after deposit of requisite charges etc. and perhaps there was litigation regarding ownership of land which has also to be withdrawn. The Authority has discussed the significance of general power of attorney and the terms of the general power of attorney at para 33 and the relevant portion of the same is as under:-
" A c o py o f th e ir r e v oc a b l e G P A ex ec u t ed i n te r ms o f par a gr ap h 1 5 of t h e a gr e em e nt h as b e en f ur n is h e d by th e ap p l ic a n t. I t au t hor i ze s the d ev e l o per : ( i) to e n ter up o n a nd s ur v ey th e la n d, pr e p ar e t he l ay o ut pl a n, a p p ly f o r r en e wa l /ex t ens i on of l ic enc e , s ub m i t t h e bu i l d in g p l ans f o r s anc t io n o f th e a p pr o pr ia te au th or i ty an d t o c ar r y o u t th e w or k of dev e l op m en t of a m ul ti- s t or ie d r es i de n t ia l c om p l ex , ( i i) to ma n ag e an d c o ntr o l, l ook a ft er a nd s u per v is e th e pr op er ty in a ny ma n ner as th e at t or n ey d e ems f it a n d pr o per , ( i i i) to o bt a in w a ter , s ew a ge d is p os al a n d e l ec tr ic ity c o nn ec ti o ns . Th e d ev e lo p er is a ls o 14 au t hor i ze d t o b or r o w mo n ey f or m ee t in g t h e c os t of c o ns tr uc t i on on t h e s ec ur ity a n d mo r t ga g e of l an d f al l i ng t o t he dev e l op er 's s har e . Th e ot h er c l a us es i n t h e G PA ar e no t r e l ev an t f or our pur p os e. T h e G P A u n eq u iv oc a l ly gr an ts t o t he d ev el o pe r a b u nd l e of pos s es s or y r i g hts . The ac ts o f m a na ge m en t, c o ntr o l a nd s up er v is i on o f pr o per t y ar e ex p l ic i t ly m en t i on e d. I t is f a ir ly c l ea r th at th e G P A is n ot a mer e l ic e nc e t o e nt e r th e l a nd for do i n g s om e pr e li m i nar y ac ts i n r e l at i o n t o th e de v e lo p me n t w or k . Th e po w er of c o ntr o l of t h e la n d wh ic h is an in c i de nc e o f p os s es s i on as ex p l a in e d s u pr a h as be e n c o nf er r ed o n t he d ev el o p er un d er th is G P A . Th e d ev e l o per ar m e d wi t h th e G P A c a nn ot be r e g ar de d me r e ly as a lic e ns e e or a n a ge n t s u b jec t to t h e c o ntr o l o f t h e ow n er s . H is p os s es s i o n c an n ot b e c h ar ac t e r i ze d as pr ec ar io us or te nt a tiv e i n na t ur e . T he f ac t t ha t th e a gr e em e nt d es c r i bes t he G P A as ir r ev oc a b l e a nd a n ex pr es s d ec l ar at i on t o th a t eff ec t is fo u nd i n t he G P A its e l f is no t w it h ou t s ig n if i c anc e . H av i n g r e g ar d to th e s ec on d an d s u p p le m en t al a gr ee m en t by v ir t u e o f w h ic h t h e en t ir e d ev e l o pe d pr o per ty i nc lu d i ng t h e o wn er s ' s h ar e has b e e n agr e e d t o b e s ol d t o th e d ev e lo p er o r h is n om i n ees fo r v a l ua b l e mo n ey c ons i d er a t io n , th e d ev e l o per h as a v it a l s tak e i n t h e en t ir e pr o p er ty . As far as t h e qu a l ity of p os s es s i on is c o nc er n e d, h e i s on a hi g he r p e des ta l th a n a dev e l op er wh o ap p or t i ons b u il t u p ar e a w it h t h e ow n er . Ev en i f he is a n ag e n t i n o ne s e ns e in t he c our s e of dev e l op i ng th e l a nd , t h at ag e nc y is c o up l ed w it h i nt er es t. For t h es e r e as o ns , t h e pr ef ix " i r r ev oc ab l e " is de l i be r a te ly c h os e n. A s d is c us s e d e ar l ie r , th e o w ner 's l i m it e d r ig h t to e n ter t h e l an d a nd ov er s e e th e d ev e lo p me n t wor k is n o t i nc o m pa t ib l e w i th th e dev e lo p er 's r i g ht of c on tr ol ov er t he l an d wh ic h h e d er iv es fr o m th e G P A. Ex c lus iv e p os s es s i o n, as a lr ea dy po i nt e d ou t, is no t n ec es s ar y f or th e p ur pos e o f s at is fy i n g t h e i ngr e d ie nts of c l aus e ( v ) of s ec t io n 2( 4 7) . W e ar e t he r e for e , o f th e v i ew t ha t t he ir r ev oc ab l e G P A ex ec ut ed b y th e o wn er s i n fav o u r of t he d ev e l o per m us t b e r e g ar de d as a tr a ns ac t io n i n t h e ey e o f l aw w h ic h a l l ows pos s es s io n t o b e t ak en i n p ar t p er f or ma nc e o f th e c o ntr ac t f or tr a ns f er of t h e p r o p er ty i n q ues t io n ...... .. "
43 Thus, the above clearly shows that irrevocable general power of attorney which leads to over all control of the property in the hands of the Developer, even if that means no exclusive possession by the Developer would constitute transfer. It can be said that it has to be construed as 'possession' in terms of clause
(v) of section 2(47) of the Act.
44 A qu es ti o n m a y ar is e th at wh y t h e t r a ns f e r was n ot h e ld t o be tak e n p lac e i n As s e s s m ent ye a r 20 0 6- 07 whe n f ir s t agr e em ent was en t er e d i nt o on J u n e 8, 2 00 5 . T h e s up p le m entar y a gr eem e nt w as als o en t er e d i nt o o n S e pt 15 , 2 00 5 b ot h of wh ic h f a l l i n F in a nc ia l Ye a r 2 0 05- 06 r e l e v an t to As s es s m ent ye ar 2 0 06 - 0 7. T he n wh y tr ans f er was no t c ons tr ue d i n As s es s m ent ye ar 2 0 06 - 0 7 i t was b ec aus e t he f ir s t agr e em ent i ts elf c on t a in e d a c o n di t io n th a t " le tt er of i nt e nt" s h ou l d be pr oc ur e d n o t la ter t ha n Mar c h 8, 2 00 6 . I n c as e of f a i lur e to d o s o t h e agr e em ent s h a l l s t an d t er m in at e d. T h er ef or e , ob t ai n i ng th e " l et ter of i nt en t" was th e c r uc i a l f ac tor . I t h as be e n e x p la i ne d i n t he d ec is i on th a t th e " l et ter of in te n t" b as ic a l l y is a l ic e ns e is s ue d b y t h e Dir ec tor o f T own an d C o un tr y P l a nn i n g, Har ya n a wh ic h g i ves per m is s io n f or c o ns tr uc t i on of t he f l ats . T he ot he r c r uc i a l p oi n t was ex ec u t io n of ir r e v oc a b le of G P A wh ic h was ex ec u te d o n Ma y 8, 2 0 06 wh ic h ac c or d i ng t o t h e l d . a ut h or i t y de p ic ts t h e in te n t io n of t he h a nd i ng o v er o f th e pos s es s io n . T h er ef or e , it b ec om es ver y c le ar t ha t i t is n ot n ec es s ar y th a t t r a ns f er wo ul d tak e p lac e o n th e s i gn i n g of d e v el o pm ent a gr e e m ent bu t th e s am e ha s t o be i nf er r ed o n l y wh e n t he p os s es s io n h as be e n ha n d ed o v er b y t h e tr a ns f er or t o t he d e v e lo p er wh ic h c a n b e i nf er r ed f r om the doc um ents e. g. P o wer of A tt or n e y. Af t er ab o v e d is c us s io n H o n' b le a ut ho r it y h as s um m ar i ze d t h e dec is i on in par a 41 wh ic h is as u n der :
" T he f o l l o wi ng is th e s um m ar y of c onc l us i on s :
1. W her e t he a gr ee m en t for tr a ns f er of i m mo v ab l e pr op er t y by i ts e lf do es n ot pr ov id e fo r i mm e d ia te tr a ns f er of p os s es s i o n, th e d at e of 15 en t er i n g i n to th e a gr e em e nt c an n ot be c o n s i der e d t o b e t he d at e o f tr a ns f er w it h in th e m ea n i ng of c l a us e ( v ) of s ec t i o n 2 ( 4 7) o f th e Inc o me- Tax Ac t .
2. To at tr ac t c l aus e ( v ) of s ec t i o n 2( 4 7) , i t is no t nec es s ar y t h at t he en t ir e s a le c o ns i der a ti on up t o t he las t i ns ta l l me nt s ho u l d be r ec e iv ed by th e o wn er .
3. In th e i ns t a nt c as e, h a v i ng r e g ar d t o t h e t er ms of th e tw o ag r e e m en ts an d t h e ir r ev oc a bl e G P A ex ec ut e d p ur s u a nt to th e agr e e me nt , th e ex ec u ti o n o f t he G P A s ha l l be r eg ar d ed as t he " tr a ns ac t i o n i nv olv i ng th e a l l ow i n g o f t h e pos s es s i on " of l a n d t o b e tak e n i n par t per f or m a nc e o f t he c on tr ac t an d t h er e f or e , th e t r a ns f er wi t hi n th e me a n in g o f s ec t i o n 2( 47) ( v ) m us t b e d e em e d to hav e t ak e n p l ac e on th e d at e o f ex ec u t io n of s uc h G P A. T h e ir r ev oc a b l e G P A was ex ec u te d o n May 8, 2 00 6 , i .e ., dur i n g t he pr ev i o us y e ar r e l ev an t to th e as s es s m e nt y e ar 20 0 7- 08 a n d t h e c ap i t a l ga i ns mus t b e he l d to hav e ar is en d ur i ng t h at y e ar . I nc id e nt a l ly , i t may b e m en t io n ed t ha t dur i n g t he s a id y ea r , i .e ., f i n anc i a l y e ar 2 0 0 6- 0 7 , a f i n al l ic ens e w as gr a n te d a nd t he a p p lic a nt /o w ner s r ec e iv ed n e ar ly 2/ 3r ds of th e c ons i d er a t io n . "
45 . Legal position has been discussed in above noted paras and now let us discuss the facts of the case in the light of above noted legal position.
46 Undisputed facts of the case are that the assessee is a Member of Punjabi Coop House Building Society Ltd. which had 96 members (Number of members were stated as 95 during arguments but clause 13 of the JDA refers to number of members as 96). The Society was owning 21.2 acres of land in village Kansal Distt. Mohali adjacent to Chandigarh. T here were two t ypes of mem bers firstly the members who were owning plot of 500 sqyd and secondly the m embers who are holding plot of 1000 sqyd. Somewhere in 2006 it was decided to develop a Group Housing commercial project and do development as per the applicable municipal building bye-laws in force and accordingly a bid was invited through advertisement in the Tribune dated 31.5.2006. HASH a developer, approached the Society with proposal for developm ent of the property. Since Hash did not have suff icient m eans to develop the property, Hash had approached T HDC f or development of the property by constructing the building and/or structures to be used for interalia residential, public use and commercial purposes. This proposal was discussed by the Society in its Executive Committee meeting on 4.1.2007. Minutes of the meeting are placed at page 58 to 65 of the paper book. In the Executive committee it was decided to appoint Hash who was acting alongwith the joint developer THDC as joint developer on the terms and conditions to be mentioned in the JDA. It was f urther resolved that m em ber owing plot of 500 sqyd would receive a consideration of Rs. 82,50,000/- each to be paid in four installments by Hash directly in favour of the members and one flat with super area of 2250 sqf to be constructed by THDC. The m em bers who held the plot of 1000sqyd were to receive a consideration of Rs. 1,65,00,000/- and two flats consisting of 2250sqft to be constructed by the THDC. It was further resolved to enter into a JDA with THDC/HASH. It was also resolved to execute irrevocable Power of attorney by the Society in favour of THDC for this purpose. This resolution was ultimately ratified in the General Body meeting held by the Society on 25.2.2007. Pursuant to the above resolution, tripartite JDA was executed (copy of the same is available at page 15 to 54 of first paper book). Through recitation clause it has been mentioned that owner is in possession of land measuring about 21.2 acres of land which has com e in the purview of Nagar Panchayat, Na ya Gaon vide Notification issued on 18.10.2006 duly substituted by another notification dated 21.11.2006 and that no part of land of the property falls under Forest Area under the Punjab Land Preservation Act. It has been further recited that the Society has 16 agreed to accept the proposals of Hash and further executed this agreement with THDC/HASH. Hash was responsible to make pa ym ent to the owner as described earlier and the f lats were to be provided by THDC. In case of Hash fails to make the payment, THDC agreed to m ake the pa ym ents. Cop y of the resolution of the Executive Committee of the Society dated 4.1.2007 as well as resolution of the General Body Meeting of the Society dated 25.2.2007 were made part of JDA by way of annexure. The Society agreed to execute an irrevocable Special Power of Attorney in favour of THDC and all other necessary documents, at the request of the developers.
47 In clause 1 of JDA various expressions have been defined. Clause 2 describes the project as under:
"2.1 The owner hereby irrevocably and unequivocally grants and assigns in perpetuity all its rights to develop, construct, mortgage, lease, license, sell and transfer the property along with any and all the construction, premises, hereditaments, easements, trees thereon in favour of THDC for the purpose of development, construction, mortgage, sale, transfer, lease, license and or exploitation for full utilization of the Property (Rights) and to execute all the documents necessary to carry out, facilitate and enforce the Rights in the Property including to execute Lease Agreement, License Agreements, Construction Contracts, Supplier Contracts, Agreement for sale, Conveyance, Mortgage Deeds, finance documents and all documents and agreements necessary to create and register the mortgage, conveyance, lease deeds, license agreement, Power of Attorney, affidavits, declaration, indemnities and all such other documents, letters as may be necessary to carry out, facilitate and enforce the Rights and to register the same with the revenue/Competent authority and to appear on our behalf before all authorities, statutory or otherwise, and before any court of law (the 'Development Rights'). The owner hereby hands over the original title deeds of the Property as mentioned in the list Annexed hereto and marked as Annexure IV and physical, vacant possession of the property has been handed over to THDC simultaneous to the execution and registration of this agreement to develop the same as set out herein.
It is hereby agreed and confirmed that what is stated in the recitals hereinabove, shall be deemed to be declarations and representations on the part of the Owner as if the same were set out herein verbatim and forming an integral part of the agreement.
2.2 The Project shall comprise of development/construction of the Property into the premises as permissible under Punjab Municipal Building Bye-laws/Punjab Urban Development Authority or any other Competent Authority by the Developer at their own cost and expense. The Project shall be developed as may be sanctioned by the concerned local authority i.e. Department of Local Bodies, Punjab/Punjab Urban Planning and Development Authority (PUDA) or any other Competent Authority.
2.3 The owner hereby irrevocably and unequivocally grants and assigns all its Development Rights in the property to THDC to develop the property and undertake the project at its own costs, efforts and expenses whereupon the Developer shall be entitled to apply for and obtain necessary sanctions, licenses and permissions from all the concerned authorities for the commencement, development and completion of the project on the property."17
48 Clause 3 describes the obligations of the developers & Society for getting the plans, etc. sanctioned from competent authority / applications to be signed by owner for plans, drawings etc., construction. Clause 4 deals with consideration clauses 5 to 8 deals various aspects of project and obligations of Society and Developer. Clause 9 talks about ownership and rights and read as under:
"9 Transfer of ownership/Rights 9.1 The owner shall simultaneously on receipt of Payment as set out in Clause 4.1 above, execute an irrevocable Special Power of Attorney to THDC for development of the property authorizing THDC to do all lawful acts, deeds, matters and things pertaining to the development of the property for the project along with interalia right to mortgage the property and/or premises, sell, lease, license the premises and receive/collect monies in it's name in respect of the same and approach interact, communicate with the Competent authorities and for doing all acts, deeds, matters and things to be done or incurred by THDC in that behalf as also to sign all letters, applications, agreements and register the same if necessary, documents, court proceedings, affidavits and such other papers containing true facts and correct particulars as made from time to time be required in this behalf.
9.2 The owner shall execute in favour of THDC the sale deed is in accordance with the provisions of clause 4.1(ii) to Clause 4.1(iv) of this Agreement and execute all other necessary documents and papers to complete the aforesaid transaction.
9.3 That all the original title deeds pertaining to property as mentioned in Annexure IV has been handed over to THDC by the owner at the time of signing of this Agreement and in furtherance of the common interest of the Parties for the development of the Project and except the Sale Transaction made by the Owner in favour of THDC as et out in Clause 4.1 above. THDC hereby undertake and assure the owner that they shall use the title deeds only for the purpose of furtherance of the Project in the manner that it does not adversely effect the Owner/Allottee in any manner whatsoever."
49 Clause 10 describes the consent given by the Society to THDC for raising finance for developm ent and completion of project. Clause 11 talks about formation of maintenance Society for the project after its completion. Clause 13 talks about transfer of rights which reads as under:
"13 Transfer of Rights The owner herein i.e. The Punjabi Coop House Building Society Ltd. along with all its ninety six (96) members have given their express, free and clear consent in writing in the form of an Affidavit/No Objection Certificate/Consent Letter whereby the Developers have been allowed to develop the property in accordance with the Project and that THDC shall be entitled to transfer the rights obtained under this agreement to any third party and to get the development / construction work completed on such terms and conditions as THDC may deem fit so long as it does not adversely effect the Owner in terms of their right to receive Entire consideration as mentioned in this agreement subject to all other conditions mentioned therein as well. The owner shall at all times provide full support to the Developers herein."18
50 Other clauses provide for termination, General provisions, Disclaim er, Partial Invalidit y, Arbitration, Notices and Force Majeure & Jurisdiction.
51 In addition to above an irrevocable Special Power of Attorney has also been executed by the Society in favour of the developers i.e. THDC. (Copy of which is available at pages 40 to 52 of the paper book in case of Society in ITA No. 556 of 2012 as discussed earlier in para 25 (complete copy of Supplementar y Power of Attorney was not available in the paper book of the assessee, therefore, reference was made to the paper book in case of the Society).
52 The first major contention of the ld. counsel of the assessee is that the possession was not given by the Society because according to him as per clause 2.1 of the JDA the possession of the property was to be handed over simultaneously to the execution and registration of JDA and since the JDA was not registered, therefore, the possession was not given. W e can not accept this contention because in "Power of Attorney"
transactions, it is not necessary to register the JDA if a special Power of Attorney has been given and same is registered. Secondly clause 9.3 of the JDA as reproduced above clearly show that original title deed which have been mentioned along with the possession in para 2.1 which according to the ld. counsel of the assessee were to be handed over simultaneously to execution and registration of the JDA, is not correct because clause 9.3 clearly mention that original title deed of the property have been handed over to the THDC at the time of signing of this agreement because clause 9.3 there is no mention about registration of JDA.
53 Special Power of Attorney which has been executed on 26.2.2007 and has been registered also. The irrevocable special Power of Attorney has been executed as provided in clause 6.7 of the JDA which reads as under:
"6.7 The Owner shall execute an irrevocable special Power of Attorney granting its complete Development Rights in the Property in favour of THDC interalia including the right to raise finance by mortgaging the property and register the charge with the Competent Authority and execute registered sale deeds) as set out in Clause 4.1 (ii), (iii), (iv) and (v) and the Owner confirms, undertakes, declares and binds itself not to revoke the same for any reason whatsoever out of its own will and discretion without obtaining a specific prior written consent of THDC or any of its duly constituted attorneys."
Through this Power of Attorney various powers have been given like to assign, file, amend etc. various plans, designs to represent bef ore various authorities, to appoint architect, Lawyers. Som e of the specific clauses relevant, are extracted below:
(j) To negotiate and agree to any/or to enter into agreem ent(s) to construct/sell and to undertake construction/sale of the Premises on the Property or any portion thereof with/to such persons(s) or body and for such consideration and upon such terms and conditions as the Attorney deem fit.
(n) To enter upon the Property either alone or with others for the purpose of development, Coordination, execution, implementation of the Project and commercialization of the Property/Prem ises.19
(t) To amalgamate the Property with any other contiguous, adjacent and adjoining land sand properties wherein development and/or other right, benefits and interests are acquired and/or proposed to be acquired and developed or proposed to be developed by T HDC and/or their associate and/or group concerns/s and/or utilize the FSI, FAR, DR and TDR of the contiguous, adjacent and adjoining lands for the purpose of constructing buildings and/or structures thereon and/or on the Property or utilize such lands and properties for making provision of parking spaces thereon, and/or may utilize the same for any other lawful purpose, as THDC and/or their associate and/or group concerns may in their sold, absolute and unfettered discretion think fit.
(w) To hand over the possession of the Property or any part or portion thereof to the authorities to whom the same is required to be handed over or otherwise and to execute and deliver any undertakings, declarations, affidavits, bonds, deeds, documents, etc. as may be required by the authorities concerned for vesting such a part or portion in such authority and to admit execution thereof before the concerned Competent Authority and get the same registered with the concerned sub-registrar.
(y) Reasonable opportunity of hearing shall be given to mortgage, encumber or create a charge on the Property or any part or portion thereof and execute the necessary security documents in favour of any bank/financial institution to raise funds for the construction/development of the Property and for the said purpose to deposit title deeds (if required) in respect of the Property in favour of such bank/financial institution, execute the necessary documents and register the charge created on the Property if so required in the revenue records and/or desired b y the Attorne y.
(aa) To sell, transfer, lease, license the Premises that may be constructed on the Property on ownership basis, lease, license and/or in any other manner for such price as the Attorneys may deem fit and proper. To collect and receive from the purchased, transferees, lessees, licensees of the Premises, monies/price and/or consideration and/or maintenance charges and to sign and execute and/or give proper and lawful discharge for the receipts.
(bb) To execute from tim e to tim e all the writing, agreem ent, deeds etc. in respect of the prem ises which m aybe constructed on the Propert y and also to execute and sign conveyance, transf er or surrender in respect of the Property or any part thereof.
(cc) To sign, execute and register the conveyances or assignm ents and/or Power of Attorney' s and/or other docum ents and/or agreements and/or any other writings in respect of the Property in part or full and/or the Premises constructed thereon or any part thereof in favour of any person as the Attorneys may determine including in favour of any individual and/or legal entitles and/or Co-operative Society and/or Limited Company and/or any other entity that may be formed for such purpose.
(dd) To issue letter of lien/NOC's and to sign documents on behalf of the Owner as required by the prospective buyers/lending instructions to create a charge on the allotted premises.
(gg) To look after and maintain the Property and the Premises constructed thereon till its transfer in favour of the Co-operative Society or Limited Company or any other Organisation.
54 It is p er t i ne n t t o no t e th a t p o wer / au th or i za t i on wh ic h h a ve b e en g i ve n b y th e S oc i et y t o th e d e ve l o per , wer e i n f ac t we r e r e q u ir e d t o be 20 g i ve n i n t er m s of v ar i ous c l a us es of t h e J DA . C la us e 6 . 7 r e pr od uc ed ab o v e i ts elf s h o ws t ha t t he S oc ie t y was r e q u ir e d t o gi v e po we r s t o r a is e f in anc e t o m or tg a ge th e pr o per t y a n d e v en t h e r e g is tr at i o n of c h ar g e was a ls o r e q uir e d to b e g i v en . F ur th er thr o u g h c la us e 6. 1 5 it was agr e e d th at d oc um ents of or i g in a l ti t le d e eds of th e pr o p er t y wo u l d b e ha n de d o ver t o t he d e v e lo p e r i .e . T H DC /H A S H s o t ha t s am e c a n b e u s ed in f ur th er a nc e of d e v e lo pm ent of t h e Pr oj ec t as we l l as s ec ur it y f or t he m one y p a id b y th e o wn er . T hr o u gh c l au s e 6. 2 4 i t was a gr e e d th a t de v e l op er T HDC /H A S H was a l wa ys pe r m itt ed b y o wn er to am al gam at e th e pr o per t y wi th an y ot h er c o nt i gu o us , adj a c en t a n d a dj o i n in g la n d a nd th e pr o p er t i es wh er ei n d e v e lo pm en ta l a nd or ot her r i g hts , be n ef its a nd i nt er es t wer e ac q u ir ed b y t h e d e v e lo p er or wo u ld b e ac q u ir ed i n f utur e . T his c l e ar l y s h o ws t h at t h e S oc i et y was u nd er ob l i ga t io n in t er m s of agr e em ent its e lf t o a ll o w t h e de v e l op er to am al g am ate t h e p r oj ec t. T owar ds t h e en d of c l aus e 6. 24 i t has b ee n c le ar l y s t a te d t h at i n t he e ve n t of t er m i na t io n of J D A, pr o v is io n of c l aus e 6 wo u ld b e s u r v i v in g wh ic h c l e ar l y s h o ws th at de v e l op er c on t in u e s to b e in p os s es s i o n f or th e pur p os e of de v e lo pm e nt , m or tg ag e e tc . e v e n af ter t er m in at i o n. C l aus e 8 wh ic h des c r i b es t h e o b li g at i on a n d un d er t a k ing of t h e T HD C/ H A SH a n d pr o v i d es s p ec if ic a ll y t ha t a l l e n v ir onm en t a l c l ear a nc e s ha l l be ob ta i ne d b y T HDC /H A S H o ut of its o wn s o ur c es . T h us i t was c le ar l y u n de r s to o d b y t h e p ar t i es t h at r e q u is i t e e n v ir onm en ta l c l ear a nc es h a d t o b e ob ta i ne d bef or e s t ar t of t he pr o j ec t . C la us e 10 ag a in c as ts s pec if ic ob l i ga t i on o n th e o wn er Soc i et y t o g i v e c ons e nt t o T HDC / HA S H t o r a is e f i n anc e f or the de v e l opm en t an d c o m plet i o n of t h e pr oj ec t o n t he S ec ur it y of th e pr o p er t y b y wa y o f m or tga g i ng t h e pr o p er t y. T hus wha t e ver po we r / a ut hor i za t i o n h a ve be e n g i ve n t hr ou gh ir r e voc a b le s p ec i a l Po wer of At t or n e y ar e em ana t in g f r om th e t er m s an d c o n d it i ons ag r ee d t o am ong t h e p ar t i es f r o m the J D A .
55 The combined reading of the above clauses of the Irrevocable Special Power of Attorney and JDA clearly show that the developer was authorized to enter upon the property for not only for the purpose of development but other purposes also. THDC was authorized to amalgamate the project with any other project in the adjacent area or adjoining area as per clause (t) of the special Power of Attorne y. If the possession was never given to the developer by the Society then how the developer could amalgamate the project with another project which may be acquired latter in the adjoining area. Through clause (w) THDC was authorized to hand over the possession of property or portion thereof to the authority to whom the same is required. In large Housing Society Projects sometimes Municipal authorities takes some portion of land for the purpose of roads, parks or other general utility purposes like installation of electricity transformers and before sanctioning the plans the developer is required to undertake that such portions of land would be given for such a common purpose. If possession was not given then how THDC was authorized to hand over such land or portions thereof which have not been identified in the JDA out of the total land. Similarly through clause (y) T HDC has been authorized to m ortgage, encumbrance or create charge on the property in favour of any bank or financial institution for raising the funds for the project. In the absence of possession such powers cannot be given. Clause (aa) clearly authorized the THDC to sell, transfer, lease, license the premises which were to be constructed on ownership basis and further to receive m oneys against such sale etc. and to issue final receipt. Nowhere it is mentioned in this clause that such sale deeds were to be singed by the Society as confirming party. In the absence of possession it is just not possible for the developer to sell and transfer the premises which were to be constructed. This is further clarified by clause (bb) and (cc) which gives the power of execution of conveyance and other documents involving in respect of the premises to be constructed without any interference of the Society being m ade conf irm ing party. All these clauses clearly show that the possession was given by the Society and/or its members to THDC/HASH on the execution of irrevocable 21 Power of Attorney. Through these clauses of JDA and irrevocable Power of Attorney the developer was able to completely control the property and make use of it not only for the purpose of development but also for the purpose of amalgamation, sale, mortgage etc. W hen the above clauses are compared on touch stone of the discussion on possession in para 26 to 28 in the case of Jasbir Singh Sarkaria (supra) which we have reproduced above, it becomes clear that the possession has been given.
56 In that discussion, it has been clearly mentioned that the position contemplated by clause (v) of section 2(47) of the Act need not to be exclusive possession. W hat is required is that the transferee by virtue of possession should be able to exercise control from overall intended purposes. W e do not think in the present case the assessee has given only a license as claimed by ld. counsel of the assessee because of the powers of selling, amalgamating etc. mentioned in the JDA and irrevocable Special Power of Attorney. The issue has been discussed in he judgm ent of Jasbir Singh Sarkaria (supra) in further discussion which has been made in para 33 regarding Power of Attorney (which has been reproduced earlier). In that case the powers were given to enter upon and survey the land, prepare lay out plans, submit building plan for sanction with the appropriate authorities to control, manage and look after and supervise the propert y, to obtain water and sewerage, disposal and electricity connection. In that case the developer was authorized to mortgage the property to obtain money for meeting the cost of construction on security and mortgage of land falling only to the developer's share. In that case it was held that GPA was not a license to enter upon for doing some preliminary acts in relation to development of work but the power to control the land has also been confirmed. It has also been noted that the agreement described the Power of Attorney as irrevocable and extra declaration to that effect in the Power of Attorney is not without significance. In case before us, many more powers have been given to THDC in addition to powers which have been described in that judgment and Power of Attorney has been described as irrevocable in clause 6.7 of JDA. Therefore, it is clear that the assessee's plea that the possession was to be given only at the time of registration of the JDA, is not correct. Once irrevocable power was given then it cannot be said that the possession was not given. The issue regarding revocation of irrevocable Power of Attorney and cancellation of the JDA would be discussed later on while dealing with that contention.
57 W e find force in the submissions of the ld. DR for the revenue that interpretation of clause (v) to section 2(47) should be m ade in the light of He ydon's Rule. There is no force in the objection of the ld. counsel of the assessee that this clause should be interpreted on general rules of interpretation particularly in the light of the fact that no reason has been given for the same. He ydon's Rule has been applied by the Indian Courts m any tim es. The Rule was applied and initiated in He ydon's case (1584) 3 Co. Rep 7a. This Rule was upheld by the Constitution Bench of Hon'ble Apex Court in case of Bengal Immunity Co. Ltd. V State of Bihar (1955) 2 SCR 603 for consideration of Article 286 of the Constitution. It has been held in case of Dr. Baliram W aman Hiray V. Mr. Justice B. Lentin and another, 176 ITR 1 that for understanding am endm ent in the Act, perhaps Heydon's Rule is best rule for interpretation of such amendment. W e find that without mentioning this rule Ld. Authority For Advance Ruling has discussed this issue in para 27 of the judgment which we have extracted above. It has been held that if 'possession' referred to in clause (v) is to be understood as exclusive basis of the transferee then very purpose of the amendment or enlargement of the definition of transfer would get defeated. W e are reproducing following head note of the Hon'ble Apex Court in case of Dr. 22 Baliram W aman Hiray V. Mr. Justice B. Lentin and another (supra):
"The following principles enunciated in Heydon"s caase (1584) 3 Co. Rep 7a and firmly established, are still in full force and effect:
"that for the sure and true interpretation of all statutes in generals (be they penal or beneficial, restrictive or enlarging of the common law), four things are to be discerned and considered: (1) what was the common law before the making of the Act; (2) what was the mischief and defect for which the common law did not provide; (3) what remedy Parliament has resolved and appointed to cure the disease of the common wealth and (4) the true reason of the remedy. And then, the office of all the judges is always to make such construction as shall suppress the evasions for the continuance of the mischief and pro private commando and to add force and life to the cure and remedy according to the true intent of the makers of the Act pro bono public." There is now the further addition that regard must be had not only to the existing law but also to prior legislation and to the judicial interpretation thereof."
58 Going by the He ydo n's Rule of interpretation if we analyze the purpose of clause (v) of Section 2(47) then it would emerge that law before making the amendment was that capital gain could be charged only if a transfer has been effected and transfer was interpreted by various Courts including the decision of Hon'ble Supreme Court in case of Alapati Venkatramian V CIT, 57 ITR 185 (SC) that proper conve yance of the property has been m ade under the common law. The mischief was with regard to transfer in the sense that there was common practice that properties were being transferred in such a manner that transferee could enjoy the benef it of the property without execution of the conveyance deed. Thirdly we need to examine the remedy which was insertion of clause (v) and (vi) so that cases of giving possession of the property, were also covered by the def inition of transf er. Fourthly, true reason for this amendment was to plug a loop hole in the law. Therefore, considering the purpose of insertion of clause (v) and
(vi) of section 2(47) and various clauses of Power of Attorney and JDA it becomes absolutely clear that the Society has handed over the possession of the property to THDC/HASH.
59 Second important contention on behalf of the assessee is that JDA was executed on 25.2.2007 and if possession was given then how the assessee was having possession in terms of later sale deeds executed on 2.3.2007 and 25.4.2007. The Society has executed two sale deeds for conve yance of parts of the total land. First sale deed has been executed on 2.3.2007 for 3.08 acres and recitation clause (A) reads as under:
Clause (A) - The vendor is the absolute owner and in possession of land total measuring 169 kanal 7 marlas equivalent to approx. 21.2 acres in Village Kansal, Tehsil Mohali and more particularly described in Schedule A hereunder written and delineated in green colour boundary line in the Shizra Plan issued by the Patwari dated 23.2.2007."
60 According to the ld. counsel of the assessee if Society had already given the possession then the Society would not have / had possession on 2.3.2007 of the land. At face value this argument looks attractive but when examined in terms of possession which has been explained in case of Jasbir Singh Sarkaria (supra), actual reality will come forward. In this judgment concept of concurrent possession has also been discussed and following extract of paragraph 55 of Salmond's Jurisprudence has been extracted which reads as under:
23"It was a maxim of the civil law that two persons could not be in possession of the same thing at the same time. As a general proposition this is true: for exclusiveness is of the essence of possession. Two adverse claims of exclusive use cannot both be effectually realized at the same time. Claims, however, which are not adverse, and which are not, therefore, mutually destructive, admit of concurrent realization. Hence there are several possible cases of duplicate possession.
1 Mediate and immediate possession Cross-objections- exist in respect of the same thing as already explained.
2 Two or more persons may possess the same thing in common; just as they may owe it in common.
The concurrent possession of the owner who can exercise possession right to a limited extent and for a limited purpose and that of the buyer/developer who has a general control and custody of the land can very well be reconciled."
61 In further discussion in para 26 to 28 of the above decision it has been held that it is not necessary in terms of clause (v) that the developer should have exclusive possession. The concurrent possession of the owner is possible which gives rights to a limited extent for a limited purpose. Thus it is very much possible to hold concurrent possession. Mere recitation in the sale deed to the effect that the Society was owner of and in possession of land measuring 21.2 acres, does not show that the Society was having actual possession. W hat the Society was having is only ownership right and the possession was only concurrent as the possessary right. Further it is a standard clause in the conveyance deed and it does not prove or indicate anything except that a portion of land m easuring 3.08 acres, has been sold / conve yed to the developer. In the light of this position, this contention is rejected.
62 W e find no force in the next contention of the ld. counsel of the assessee that possession if at all was given should be held to be only a license as defined in Section 52 of Indian Easement Act because clearly as per Section 52 of this Act, where one person grants to another or many other persons to do something upon immoveable property which in the absence of such right would be unlawful.
63 Here in case before us, the right has not been given for the purpose of doing something but all the possible rights in property including right to sell, right to amalgamate the project with another project in the adjoining area which may be acquired later, right to mortgage etc. clearly show that rights given by the Society are much more larger than what is covered in the term "license".
64 Fo ur t h c o nt en t i on is t ha t th e m o ne y r ec e i ve d at t h e tim e of ex ec u ti o n of J D A c a n be t er m ed as ad v a nc e an d wh at e ver m on e y h as be e n r ec e i ve d h as a lr ea d y b e en s h o wn as c ap i ta l g a i n. W e f ind n o f or c e i n th is s ubm is s io n be c aus e Sec t io n 4 5 wh i c h h as b e en ex tr ac t e d a bo v e c l ear l y pr o vi d e f or tax i ng of pr of i ts a n d g a i ns ar is i n g f r om the tr ans f er . W e hav e al r e a d y d is c us s e d th e im pl ic at i o n of S ec t i o n 4 5 r . w.s . 4 8 wh i le d is c us s i ng th e le g al p os it i on . W e had a ls o dis c us s ed th is is s u e i n th e l ig h t of t he d ec is i o n in c as e of J as bi r S i n gh S ar k ar i a ( s upr a) an d p o in te d ou t t h at wh e n S ec t i on 45 is r e a d a l o ng wi t h S ec t i on 4 8 it b ec om e s c l ear th at wh o le of t he c on s i der at i o n wh ic h is r e c e i ve d or ac c r u e d is to b e tax e d onc e c a p it a l as s et is t r a ns f er r e d i n a p ar t ic u lar ye ar .
65 W e wo u l d l ik e t o d is c us s th is as p ec t of t he is s u e i n l i tt l e m or e de t ai l an d tr y to un der s t an d wh y t h e wh o le of th e c o ns id er at i on is 24 r eq u ir ed t o b e t ax ed . At t h e c os t of r ep et i t io n l et us a ga i n r e pr o d u c e t h e obs er v at i o ns of t he L d . a ut h or it y in c as e of J as b ir S i ng h Sa r k ar i a ( s upr a) wh ic h we ha v e ear l i er ex tr ac t e d a t par a 4 0 a nd t he r e l e va nt p or t i o n is as un d er :
"4 0 . O n t h e a b o v e , t h e H o n ' b l e A u t h o r i t y a f t e r r e f e r r i n g t o t h e provisions of section 45 and observed as under:-
" ... ... ... . The s ec t io n c a n b e an a ly s ed t h us :
( a) tr ans fe r of a c ap i ta l as s et e ff ec te d i n t he pr ev i o us y e ar , ( b) r es u lt a nt pr of i ts or g a ins fr o m s uc h tr ans fer , ( c ) th os e pr o fi ts or ga i ns w o u ld c o ns t it u t e t he i nc om e of th e as s es s e e/ tr a ns f er or ( d) s uc h i nc om e s ha l l be d e em e d t o be th e inc o me o f t he s a m e pr ev i o us y e ar i n wh ic h t he tr a ns f er h a d tak e n p lac e .
Two as pec ts m ay b e n ot e d at th is ju nc tur e . Fir s t ly , t h e ex pr es s i o n us e d is " ar is in g " w h ic h is no t to b e e qu a te d w it h th e ex pr es s io n " r ec eiv e d ". Bo t h th es e ex pr es s i ons an d in a d d it i on t h er e t o , th e ex pr es s i on " ac c r u e " ar e us e d in t he I nc om e- tax Ac t e it h er c o ll ec tiv e ly or s ep ar at e ly ac c or d in g t o t he c o nt ex t an d na tu r e o f t he c h ar g i n g pr o v is io n . Th e s ec o nd p o in t w h ic h d es er v es n ot ic e is t ha t by a d ee m i ng pr ov is io n , th e pr o fi ts or ga i ns t h at hav e ar is e n wo u l d be tr e at e d as t h e i nc om e of th e pr ev io us y e ar i n wh ic h th e tr ans fe r t ook p l ac e. Th a t me a ns , t he i nc o m e o n ac c o un t o f ar is a l of c a p it a l g a i n s ho u l d b e c h ar ge d t o tax in th e s a m e pr ev i o us y e ar in wh ic h t h e tr a ns f e r was ef fec t ed or de e me d to hav e t ak e n p l ac e .
Th e e ff ec t an d a m b i t of th e d e e mi n g pr ov is i o n c o nt a i ne d in s ec t i on 4 5 has b ee n c o ns i der e d in d ec i de d c as es a n d l e ad i ng t ex t bo ok s . Th e fo l l ow i n g s t at e me n t o f l aw i n Sa m pa t h Iy en g ar 's Co m me n tar y ( 1 0t h Ed it i o n-- Rev is ed by Sh r i S. R a j ar a t na m) br in gs o ut th e c or r ec t le g a l pos i t i on :
" S ec t i on 4 5 e n ac ts t ha t t h e c a p it a l ga i ns s ha l l by f ic t i o n 'b e de e me d t o b e th e i nc o m e of t h e pr ev i o us y ea r in w h ic h t h e tr a ns f er t o ok pl ac e '. S inc e t h is is a s t at u t or y f ic t i on , t he ac t ua l y ear i n wh ic h th e s a l e pr ic e w as r ec e iv ed , wh et h er i t was on e y ear , t wo y ear s , t hr e e y ear s , f ou r y e ar s etc . pr ev i o us t o th e pr ev i o us y e ar o f tr a ns fer , is bes i d e t he po i nt . Th e en t ir e ty o f t he s um or s u ms r ec e iv e d i n a ny e ar l ier y e a r or y e ar s wo u l d b e r eg ar d ed as t he c a pi ta l g a i ns ar is i ng i n t he pr ev i o us y e ar o f tr a ns f er .
. . . . I n t he wo r ds of s ec t i on 4 5, t h e c a p it a l ga i ns ar is i ng fr om th e tr a ns f er 's h a l l be t he i nc o m e of t he pr ev i ous y e ar i n wh ic h th e tr a ns f er to ok pl ac e'. S o, t h e p ay m en ts o f c ons i d er a t io n s t i p u la te d to b e pa i d i n fu tur e wo u l d hav e to b e at tr i b ut e d, by s ta t ut or y ma n da t e, t o th e y e ar of tr a ns f er , ev e n as p ay m e nts ma d e pr ior t o th e y e ar of t r a ns f er . "
66 T he a bo v e c le ar l y s h o ws th a t i t is bec a us e of ex pr es s i on us e d in S ec t i on 45 th a t is " ar is in g" wh ic h c a n no t b e e q ua te d wi th " r ec e i pt" . I n th is r es p ec t t he l d. a ut h or i t y h as qu o te d a v er y o l d d ec is io n of Ho n' b le Ma dr as H ig h C ou r t i n c as e of T .V . S un d ar a m I ye n ga ar a n d S o ns Lt d. V. CIT , 37 IT R 2 6 ( M ad) . At p ar a 13 of t h e s a i d dec is i on is ex tr ac t e d i n th e f ol l o wi ng m an ner :
" 13 . In T. V . Su n da r a m Iy e n gar a n d S ons L td . V . CIT [ 19 5 9] 3 7 ITR 2 6, a D iv is i on B e nc h o f t h e Ma dr as H i gh C ou r t wh i l e c o ns tr u i n g s ec t i on 1 2 B of th e In d ia n Inc o me- t ax Ac t , 1 9 22 c l ar if i ed th e im p or t o f t he ex pr es s io n " ar is e " a s fo l l ows 25 " Sec t io n 1 2 B d o es n ot r eq u ir e th a t pr of i ts s ho u ld hav e b e en a c tu a l ly r ec e iv e d. I t is s uf f ic ie nt if t h ey h av e ar is en . Thr o ug h ou t t he Inc o me - t ax Ac t t he wor ds "a c c r u e ' a n d " ar is e " ar e us ed i n c o n tr a d is t i nc t i o n t o t h e wor d " r ec eiv e " a nd i nd ic at e a r i g ht to r ec e iv e. T h is was ex pl a i ne d by Fr y L.J ., i n C o lq u ho u n v . Br ook s . Th e l e ar n e d j u dg e o bs er v e d :
' I t hi nk , th er ef or e, t h at t h e wor ds " a r is e or ac c r u i ng " ar e ge n er a l wor ds des c r i pt iv e o f a r i g ht t o r ec eiv e pr o fi ts . ' S ee a ls o CI T v . An a m a ll a is T i mb er Tr us t L t d. T o at tr ac t t he o pe r at i on of s ec t i on 1 2 B it is t h er ef or e s u ff ic i en t if th e pr o f its ar os e . T h ey n e ed n ot hav e b e en ac t ua l ly r ec e iv e d. "
14 . Th us th e c r i t er io n o f r i gh t t o r ec eiv e t he pr o f its / ga i ns w as ap p l ie d in th at c as e .
15 . Th e l e ga l pos i t io n d o es n ot th er ef or e a d m it of a ny d ou b t t ha t th e ac t u al r ec e ip t o f t h e en t ir e s a l e c o ns id er at i on d ur in g t h e y e ar of " tr a ns fer " i s no t n ec es s ar y f or t he pur p o s e of c o m p ut i ng c a p it a l ga i ns . "
Fur th er t he ex pr es s io n ar is in g h as b ee n d ef i ne d i n t he Ad v a nc ed La w Lex ic o n b y P. Ram a na t ha A i ye r e d it e d b y Y. V . C ha n dr ac h u d, For m er Ch i ef J us t ic e of I nd i a:
" Th e w or ds " Ar is i n g o r ac c r ui n g " d es c r i be a r i gh t t o r ec e iv e pr o f it s , a n d th at t h er e m us t b e a de bt o w ed by s o me bo dy . Ld . Co m m is s i on er o f Inc o me T ax , W es t B e ng a l- I I, C a lc ut ta V. H i nd us t a n Ho us i ng a n d L an d Dev e lo p m en t T r us t Lt d . AI R 1 98 6 S. C 18 0 5, 18 0 7. "
T he ex pr es s io n " ac c r ua l of inc om e" h as be e n def in e d in t he s am e Lex ic o n as u nd er :
" Ac c r ua l of i nc o me . E. D J as s o on & C. L td . V L d . Co m m is s io ner of Inc o me Tax , AI R 19 54 S .C 4 7 0 qu ot e d - I nc om e m ay ac c r u e t o a n as s es s e e wi t ho u t t h e ac tu a l r ec ei p t of t h e s a me . If t h e as s es s e e ac q u ir es a r ig ht to r e c e iv e t h e i nc om e, th e inc o me c an be s ai d t o h av e ac c r u e d t o h i m t h ou g h it may b e r ec e iv ed l a ter on i ts b e in g as c er t a in e d. Th e b as ic c onc e pt i on i s tha t h e m us t hav e a c qu ir e d a r i g ht t o r ec e iv e th e i nc o m e. B h og i l al V I nc o m e T ax L d . C o mm i s s i on er , A IR 1 9 56 B o m 4 1 1, 41 4 ( I nc o m e Tax Ac t ( 11 of 1 9 92) Ss . 1 6( 1) an d ( 3) } "
67 T he c om bi ne d r e a d in g of t h es e t wo def in i t i ons s h o w th at it ( i. e. ac c r u a l) is n o t e q ua l t o t he r ec e ip t of inc om e. I n f ac t i t is a s ta g e bef o r e th e p o in t of t im e wh e n th e inc om e bec om e s r ec e i v ab l e. I n o th er wor ds , onc e t he v es t ed r i gh t s c om e to a per s o n t he n i t c a n b e s a id t h at s uc h r i gh t o r i nc om e h as a c c r ue d to s uc h p er s o n. T h e c onc e pt of ac c r ua l or ar o us a l of inc om e h as a ls o be e n d is c us s ed b y t h e ld . a u th or S. Raj ar at nam in th e c om m ent ar y of L a w o f Inc om e T ax b y S a m path I ye n g ar X It h E d it i o n b y d i s c us s i n g t h e m ea n i ng of " ac c r u e d an d ar is e" at pa g e 1 30 0 i t h as be e n o bs er ve as un d er :
" ( 1) I m por ta n t pr i nc i p l es .- ( a) Mea n i ng - 'Ac c r ue ' me a ns 't o ar is e or s pr in g as a n at ur a l gr o wt h or r es u l t ', to c om e by w ay of i n c r eas e '. 'A r is in g ' me a ns 'c o m i ng i nt o ex is t e nc e or no t ic e or pr es e n ti n g its e lf '. 'A c c r ue ' c o n no t es gr o wt h or ac c u mu l at i o n w it h a t a ng i b le s ha p e s o as t o be r ec eiv a b le . I n a s ec o n da r y s e ns e , t he t wo w or ds t og e th er m ea n 't o bec o me a pr es en t an d e nf or c ea b le r ig ht ' a n d 't o bec o m e a pr es e n t r ig ht of d em a n d '. In t he Ac t , t h e t wo w or ds ar e u s ed s y n o ny m o us ly w i t h eac h ot h er t o d en o te th e s am e id e a or i de as v er y s im i l ar , a nd t h e d i ff er e nc e l ies o nly i n t his th a t on e is m or e a ppr o p r i at e t ha n t h e o th er , wh en ap p l ie d , t o a p ar t ic u l ar c as e . I t w i l l i nd e e d b e d if f ic u l t t o d is t i ng u is h be tw e en t h e tw o w or d s , bu t i t is c le ar t ha t bo t h th e w or ds ar e u s ed in c on tr ad is t inc t io n to t h e wor d 'r ec e iv e ' a nd i nd ic at e a r i g ht t o r e c e iv e . Th ey r e pr es e n t a s ta ge a nt er io r t o t he p oi nt of ti m e w h en th e i nc o m e bec o mes r ec eiv a b le a nd c on n ot e a c h ar ac t er o f th e i nc om e , wh ic h is mo r e or l es s inc h oa t e an d w hic h is s o me th i ng l es s t h a n a r ec e i pt . An un e nf or c ea b l e c l a im t o r ec e iv e a n u nd e ter m in e d or un d ef i ne d s um d oes no t g iv e r is e to ac c r u a l. "26
68 T her ef or e , i t is n o t o n l y t h e m on e y wh ic h has b e en r ec e i ve d b y th e as s es s e e wh ic h is r e q uir e d to b e t ax e d bu t th e c o ns id er at i o n wh ic h has ac c r u ed to t he as s es s e e is als o r e qu ir ed t o b e t ax ed . I n v i e w of th is , t h is c o nt e nt i on is r ej ec t e d.
69 The fifth contention made by the Ld. Counsel for the assessee was that since section 53A of the Transfer of Property Act itself has undergone amendment w.e.f. 24.9.2001 by which the agreement referred to in that section is required to be registered and therefore, now in section 2(47)(v) only the amended provisions can be read. W e find no force in this contention. It is well known that section 53A of the Transfer of Property Act was passed on equitable doctrine so as to protect the tak ing over or retention of the possession by the transferee. It was not a source by which title of immovable property could be acquired. Section 53A of TP Act read as under:-
53A. Part performance.- Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer 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 possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that the contract, [***]where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract"
70 A plain reading of the above provision shows that it provides a safety measure or a shield in the hands of the transferee to protect the possession of any property which has been given by the transferor as lawful possession under a particular agreement of sale. This position of law was incorporated in the definition of 'transfer' by insertion of clauses (v) & (vi) in section 2(47) of the Act. It is important to note that clause (v) uses the expression "contract of the nature referred to in section 53A of T.P. Act, therefore, clearly the idea is that an agreement which provides some defense in the hands of transferee was incorporated under the definition of 'transfer' in the Income Tax Act. Now originally section 53A of T.P. Act provided that even if "the contract though required to be registered has not been registered", which means the right of defending the possession was available even if the contract was not registered but by Amendment Act 48 of 2001, the expression "though required to be registered has not been registered", has been omitted which means for the purpose of possession u/s 53A of T.P. Act, a person has to prove that possession has been given under a registered agreement. In other words, now u/s 53A of T.P. Act, the agreement referred is required to be registered. T his requirement cannot be read in clause (v) of section 2(47) because that refers only to the contract of the nature of section 53A of T.P. Act without going into the controversy whether such agreement is required to be registered or not. The Ld. Counsel for the assessee had referred to the decision of Hon'ble Supreme Court in the case of Surana Steels v DCIT 237 ITR 777 (SC) for the proposition that when a section of a particular statute is introduced into another Act it must be read in the same sense as it bore in the original Act. The careful perusal of that judgment would show that situation is applicable only when 27 a particular provision of an Act has been incorporated in the later Act. In that case a question arose that for the purpose of MAT provision what is the meaning of past losses or unabsorbed depreciation. It was found that in explanation to section 115J clause (iv), the following expression was used:-
"(iv) the amount of the loss or the amount of depreciation which would be required to be set off against the profit of the relevant previous year as if the provisions of clause (b) of the first proviso to sub section (i) of section 205 of the Companies Act, 1956 (1 of 1956) are applicable.
71 The Hon'ble Apex Court referred to the Principles of Statutory Interpretation by Shri G.P.Singh and extracted following piece:
" Section 115J, Explanation clause (iv), is a piece of legislation by incorporation. Dealing with the subject, Justice G.P. Singh states in Principles of Statutory Interpretation (7th edition, 1999).
Incorporation of an earlier Act into a later Act is a legislative device adopted for the sake of convenience in order to avoid verbatim reproduction of the provisions of the earlier Act into the later. W hen an earlier Act or certain of its provisions are incorporated by reference into a later Act, the provisions so incorporated become part and parcel of the later Act as if they had been "bodily transposed into it". The effect of incorporation is admirably stated by LORD ESHER, M.R. : "If a subsequent Act brings into itself by reference some of the clauses of a former Act, the legal effect of that, as has often been held, is to write those Sections into the new Act as if they had been actually written in it with the pen, or printed in it.(p.233) Even though only particular Sections of an earlier Act are incorporated into later, in construing the incorporated Sections it may be at times necessary and permissible to refer to other parts of the earlier statute which are not i n c or p or a te d . As wa s s t a te d b y L O R D B L A C K B U R N : "W hen a single Section of an Act of Parliament is introduced into another Act, I think it must be read in the sense it bore in the original Act from which it was taken, and that consequently it is perfectly legitimate to refer to all the rest of that Act in order to ascertain what the Sections meant, though those other Sections are not incorporated in the new Act. (p.244)
72 On the basis of above observation, it was held that meaning of past losses or unabsorbed depreciation has to be taken same as was defined in the Companies Act. In this case it is clear that provision itself refers to clause (b) of sub section (1) of section 205 of Com pan y's Act 1956 and theref ore, same meaning was given to past losses or unabsorbed depreciation as is given under the Companies Act, 1956.
73 In case of clause (v) to section 2(47), clearly the expression used is "contract of the nature referred to in section 53A of T.P. Act", which means it is not a case of incorporation of one piece of legislation into another piece of legislation. If that was the intention of the Parliament, obviously clause (v) would contain the expression "contract as defined under section 53A of Transfer of Property Act, 1882". Further, it is settled position of law that any 28 interpretation which could render a particular provision redundant should be avoided. If the contention of the Ld. counsel was to be accepted, obviously the provisions of clause (v) of section 2(47) of the Act would become redundant in the sense that registration of agreement would again be made compulsory but since properties were being sold in the m arket on "power of attorney" basis through unregistered agreements which would make this provision redundant. This position we have already discussed earlier while discussing the Heyd on's Rule in the interpretations of this clause. Further the issue of interpretation of clause (v) and amendment to section 53A of the Transfer of Property Act came for consideration before the Mumbai Bench of the Tribunal in the case of Suresh Chander Aggarwal vs ITO 48 SOT 2010. The Tribunal discussed this issue at page 7 and after quoting the provisions of section 2(47) and also section 53A before and after amendment as wall as para Nos. 11.1 to 11.2 of the Board's Circular No. 495 dated 22.9.1987 observed as under:-
" Th e a b ov e c l ea r ly s ho ws t h at th er e w as c er t a in s i tu a ti o n w h er e pr o p er t i es w er e b e in g tr ans f er r e d w i th o ut r eg is tr a t io n o f tr a ns fer i ns tr u me nts a nd p eo p l e w er e es c a pi n g t ax l i ab i l it i es o n tr a ns fer o f s uc h pr o p er t i es b ec a us e t h e s a m e c o ul d no t b e br o ug ht i n th e de f in i t io n o f "tr a ns f er " p ar t ic u lar ly in m a ny S ta t es of t he c ou ntr y pr o p er t i es w er e b e in g he l d by v ar i o us p e op l e as le as ed pr o p er t i e s wh ic h w er e a ll o tt e d by th e v ar i ous G ov t. D e par t me n ts a n d t r a ns f e r s of s uc h l eas e w er e n ot per m is s i bl e . P e op l e w er e tr a ns fer r i n g s u c h pr o p er t i es by ex ec u t i ng a gr e e me n t t o s e l l an d g e ne r a l po w er of at tor n ey as we l l as W i l l a nd r ec e iv i n g f u l l c ons i d er a t io n , b ut s i nc e th e a gr e e me n t t o s e ll w as n ot r e g is t er e d a nd t h ou g h f u ll c ons i d er a t io n was r ec e iv e d an d ev en p os s e s s i on w as g iv e n, s t il l t he s am e tr ans ac t i o ns c o u ld n ot b e s ub j ec t e d t o t ax b ec a us e t h e s a me c ou l d n ot c ov er ed by th e d ef i n it i on o f " tr ans f er ". To br i n g s uc h tr a ns ac t i ons w i th i n t he tax n et , th is am e nd m en t w as m ad e . It h as t o be ap pr ec ia t ed t h at c l aus e ( v ) i n s ec ti o n 2( 4 7) do es n ot l if t th e de f in i t io n of pa r t per f or ma nc e fr o m s ec t io n 53 A of t he T r a ns f er of Pr op er ty Ac t , 1 88 2 . Ra th er , it de f in es a n y tr ans ac ti o n i nv o lv i n g a ll o wi n g of p os s es s io n of a ny i m mov a bl e pr o p er ty t o b e t ak en or r et a in e d in pa r t per f or ma nc e o f a c o ntr ac t o f t he na t ur e r ef er r e d t o i n s ec t i o n 5 3 A of th e Tr ans f er of Pr o per ty Ac t . Th is m e ans s uc h tr a ns f er is h ot r eq u ir ed t o b e ex ac tly s i m i l ar to th e o n e d ef i ne d u/s .5 3 A of t h e Tr ans f e r of Pr op er ty Ac t, o th e r wis e l eg is l at ur e w ou l d hav e s i m ply s t at e d t h at tr ans fe r w o ul d i nc l ud e tr a ns ac t i o ns d e fi n ed i n s ec . 5 3 A of t he Tr a ns f er of Pr o p er ty Ac t . B ut t he l e g is la tur e i n i ts wis d om has us e d t he wor ds " o f a c o ntr ac t , of t h e na t ur e r ef er r ed i n s ec t i on 53 A " . Th er ef or e, it is on ly t h e n at ur e wh ic h has t o b e s e en . As d is c us s ed ab ov e, t he pur p os e of i ns er t io n o f c l aus e ( v ) w as t o tax t hos e tr ans ac ti o ns w her e pr op er t ies w er e be i n g t r a ns f er r e d b y way of g iv in g pos s es s io n an d r ec e iv i ng f ul l c o ns i d er at i o n. Th er e f or e , i n o ur h um b le o p in i o n, i n t h e c a s e of a tr a ns fer w her e pos s es s i on has be e n g iv en an d f u l l c ons i d er a t io n h as be en r ec e iv e d, t he n s uc h tr ans ac ti o n n ee ds to b e c o ns tr u ed as "tr a ns f e r ".
Th er e f or e , th e a me n dm e nt m a de i n s ec ti on 5 3 A by wh ic h th e r eq u ir e me nt of r e g is t r at i on h as b e en i nd i r ec t ly br o u gh t on th e s ta tu t e n e ed n ot b e ap p l ie d wh i l e c o ns t r u in g t h e me a n in g o f "tr a ns f er " w it h r e f er e n c e to t h e Inc o me - t ax A c t.
8. T he a b ov e s i tu a ti on f ur t h er bec o m es c l ear i f we r e fe r t o th e c e le br at e d d ec is io n o f Ho n' b l e Su pr e me C o ur t i n th e c as e o f P od ar Ce m en t ( P. ) L t d. ( s u p r a}. I n t h at c as e, t he as s es s e e w as ow n er of fo ur f l ats in a b u il d i n g c a l le d " Si lv er Ar c h " /o n N ep e an S ea Ro a d, B om b ay . O u t o f t h es e fo ur fl a ts , tw o w er e pur c h as ed d ir ec t ly f r o m th e B u il d er s , Ma l ab ar In d us tr i es Pv t . Lt d. , a nd t wo w er e pur c h as e d by i ts s is ter c onc er ns wh ic h w er e la t er p ur c has e d by t he as s es s e e. Th e pos s es s i on o f t he f l ats w as tak e n a ft er fu l l p ay me nt o f c ons i d er a t io n . T he f l a ts w er e le t o ut . T he a s s es s e e c o nt e nd e d t h at th e r e nt a l inc o me fr o m t h es e f l ats w as as s es s a b l e as " inc o me fr om ot h er s o ur c es " bec a u s e th e as s es s ee wa s not th e l e ga l o w n er bec a us e t he t it l e of th e p r o p er ty h ad n ot b e en c o nv ey e d t o th e C o-
29op er at iv e S oc ie ty w hi c h was f or me d by t h e p ur c has er s o f th e f la ts . Th e H o n' b le C o ur t n o te d th a t s ec t i on 2 7 h ad b e en am e nd e d v i d e c l aus e 3 ( a) wh er e in w he n a p er s on was a l lo we d t o t ak e p os s es s io n of th e b u i l di n g i n pa r t p er f or m anc e of t h e n at ur e r ef er r ed to i n s ec t i on 53 A , s uc h p er s on s ha l l b e d e e me d to b e t h e ow n er . It w as fur th er o bs er v e d th a t f or a ll pr ac t ic a b le p ur p os es t h e as s es s e e w a s th e o wn er a n d p os s i b ly th er e c a nn o t b e two ow ne r s of s am e pr o p er ty a t t h e s a m e ti m e. I n f ac t , t h e am e nd m en ts to s ec ti o n 2 7 wer e m ad e l a ter o n b ut w er e t ak en in t o c o gn i za n c e o n t he b as is o f ab ov e pr i nc i p l e an d u l ti m at e ly i t was h e l d as u n der :
"H e nc e , t h o ug h un d e r th e c om m o n l a w " ow n er " m e ans a per s o n w ho has go t v a li d t it l e l e g al ly c o nv ey e d t o h i m af t er c om p ly w i th th e r eq u ir em e nts of l aw s uc h a s th e Tr ans fer of Pr op er ty Ac t, t h e R eg is tr a t i on Ac t , e tc . , in t h e c o nt ex t s ec t i on 2 2 o f t h e I nc o me - t ax Ac t , 1 9 61 , hav i ng r e gar d to t he gr o u n d r e a li t ies a nd f u r th er h av i ng r e gar d t o th e o b jec t o f t he Inc o me- t ax Ac t , na m e ly , t o t ax t he i nc om e, "o w ner " is a per s o n wh o is e n ti t le d t o r ec e iv e i nc o m e fr o m th e pr op er ty i n h is o w n r ig ht . T h e r eq u ir em e nt o f r e g is t r at i on o f t h e s a l e de e d i n th e c o nt ex t of s ec t i on 22 is no t w ar r an t ed . "
Th us , fr o m t he ab ov e, it is c l ea r th a t i t is n ot nec es s ar y t o g et t h e i ns tr u me nt of tr ans f er r e g is t er ed f or t he p u r pos e o f Inc o me - t ax A c t wh e n a p er s o n h as g ot a v a l i d l eg a l ly c o nv ey ed aft er c o m p ly in g w it h th e r e qu ir e m en ts of t h e l aw .
9. S im i l ar ly , in t he c a s e of My s or e Mi n er a ls L td . v . CIT [ 1 99 9] 2 3 9 ITR 7 7 5/ 1 06 T ax m a n 16 6 ( S C) , t h e as s es s e e ha d p ur c has e d for t he us e of its s t a ff s ev e n lo w inc o me gr ou p h o us es fr o m a Ho us in g B o ar d . T h e p ay m e nt h a d b e en m a d e an d i n t ur n pos s es s i on of th e h o us es w as tak en ov er by th e as s es s e e. T h e ac t ua l c onv ey anc e d ee d w as no t ex ec ut e d. T he as s es s ee c l a i me d de pr ec ia t io n wh ic h w as de n ie d by th e d ep ar tm e nt . Af t er gr e at d is c us s i on , i t w as o bs er v e d t h at f or a l l pr ac t ic ab l e p ur pos es a n d f or th e p ur p os e of Inc o m e- t ax Ac t , t he as s es s ee s h al l b e c o ns tr u ed as ow n er of t h e pr op er ty . I n fac t, it w as h e ld as u n der :
-
"H e l d, r ev er s i n g t he j ud g me n t of th e H i g h Co ur t , t ha t t he fi n d in g of f ac t ar r iv e d at i n t he c as e a t h a nd was th at th o u gh a doc u m en t of t it l e w a s n ot ex ec ut e d by t h e Ho us in g B o ar d in fav o ur of t h e as s es s ee , t he h o us es w er e a l l ot te d t o th e as s es s e e by t he H ou s i ng B o ar d , par t pay me n t r ec e iv ed a nd pos s es s i on d el iv er ed s o as to c o nf er d om i n i on ov e r t he pr o p er ty o n th e as s es s ee w her e af t er t h e as s es s e e h ad i n its ow n r ig h t a l l ot te d th e qu ar ter s t o t he s t af f an d th ey w er e be i n g ac t ua l ly us e d by t h e s t af f of th e as s es s e e. T h e as s es s e e w as e nt i tl e d to d e pr ec i at i o n i n r es pec t o f t he s ev e n ho us es i n r es p ec t of wh ic h t he as s es s e e h ad no t o bt a i ne d a de e d of c o nv ey a nc e f r o m t h e v e n dor a l th o ug h i t h a d t ak en pos s es s i on a n d m ad e par t p ay me nt of t he c o ns id er at i on " .
Th us , fr om t h e ab ov e tw o d ec is i o ns , it b e c om es a bs ol u te ly c l e ar th at f or th e p ur pos e o f t h e I nc o me- t ax Ac t t he gr o un d r e a l ity h as to be r ec og n i ze d a nd i f a ll th e i ngr e d ie n ts of tr a ns fer h av e b e en c om p l et e d, t h en s uc h tr a ns f er h as to b e r ec o g n i ze d . Mer e ly bec a us e t h e p ar t ic u l ar i ns tr u me n t of tr ans f er h as no t b ee n r eg is te r e d wi l l n ot a lt er th e s i tu at i o n. T h is p os it i o n is f ur t h er s tr e n gt he n e d by t he f ac t th a t le g is la tu r e i ts e lf has i ns er t e d c la us e ( v ) t o s ec t i o n 2( 4 7) a nd w h i le r e f er r in g t o t he p r ov is i ons o f s ec t i on 53 A , r ef er enc e h as b ee n m ad e by s ta t in g th a t c o n tr ac ts i n t he na t ur e of s ec t io n 5 3 A s ho ul d a ls o b e c ov er ed by th e d e fi n it i o n o f "tr a ns f er " . Th er ef or e, i n o ur hu m b le v i ew , t he a me n d me nt t o s ec . 53 A o f t h e Tr ans f er of Pr o per ty Ac t , wh er eb y th e r e qu ir e me n t o f t he doc u me n ts n ot b e i ng r eg is ter e d h as b e en o m it te d, wi l l n o t a lt er t he s it u at i on for ho l d in g t he t r a ns ac t i on t o b e a tr ans fe r u/s . 2( 4 7) ( v ) if a ll ot her i ngr e d ie nts h av e be e n s at is fi e d. "30
74 Thus, it is clear that non registration of agreement cannot lead to the conclusion that provision of section 2(47) (v) is not applicable. Similar view has been taken by ITAT Cochin Bench of the Tribunal in case of G.Sreenivasan Vs DCIT 28 Txmann.com 200 (Coch.) and ITAT Pune Bench in the case of Mahesh Nemichandra Ganeshwade v ITO 21 Taxmann.com 136 (Pune). In view of this legal position, this contention is rejected.
75 T he n ex t c o nt en t i on w as t ha t t h e d ec is io n of Ho n' b le B om ba y H i g h Co ur t in c as e of C ha tu r bh uj D war k ad as K a pa d ia ( s u pr a) is no t ap p l ic ab l e par t ic u l ar l y bec a us e u lt im at e l y in th a t c as e it wa s h e l d t ha t c ap i t a l g a in tax s h o ul d b e c ha r ge d i n As s es s m ent ye a r 19 9 9- 20 0 0 wher e as agr e em ent was ex ec ut ed in Au g us t , 1 99 4 .
76 W e have a lr e a d y d is c us s e d t h e im pl ic at i o ns of th e d ec is io n in c as e of Ch at ur bh uj D w ar k ad as K a pa d i a ( s u pr a) i n p ar a 3 3 t o 3 8. W e h ad a ls o ex am in e d wh y i n th at c as e c ap i ta l ga in was no t h el d to b e c har g e ab l e i n As s es s m ent ye a r 1 9 95- 9 6.T h er e is n o n e ed to r e p ea t t he s am e a n d i n v i e w of t h e s a id obs er v at i ons , w e r ej ec t t his c on t en t io n.
77 The next contention is that it is necessary for invoking of section 2(47)(v) of the Act to comply with the provisions of section 53A of the Transfer of Property Act to the extent that there should be willingness on the part of the transferee to perform his part of the contract.
78 In this aspect we have no quarrel with the proposition that for invoking section 53A pf T.P. Act read with clause (v) of section 2(47), the transferee has to perform or is willing to perform his part of the contract. In this respect as referred to by Ld. Counsel for the assessee, the comments of the Ld. Author in the commentary by Mulla - Dinshan Frederick Mulla vide para 16 are clear and shows that this requirement has to be absolute and unconditional. Some observations have been made in the case of General Glass Company Pvt Ltd Vs DCIT (supra). In that case it was held that willingness to perform for the purpose of section 53A is something more than a statement of intent and it is unqualified and unconditional willingness on the part of the transferee to perform his obligation. In that case the transferee has agreed to m ake certain paym ents in installm ents in consideration of the developm ent agreement but such paym ents were not m ade. Later on, the agreement was modified and more time was given to the transferee for payment of such installments. However, the installments were not paid even under the m odified terms and that is why it was ultimately held that such agreement cannot be construed as transfer.
79 The second decision referred to by Ld. Counsel for the assessee is K. Radika v DCIT (supra). In this case, similar observations were made, though it is not pointed out in what respect the transferee has failed to perform his part but it has been observed that the facts of the case shows that transferee has not performed his part of the contract.
80 The third judgment relied upon by the Ld. Counsel for the assessee is in the case of DCIT v Tej Singh (supra). In that case land was acquired by the government and the matter went for litigation. During the pendency of litigation, the assessee entered into a Development agreement with a Developer for the purpose of developm ent of the property, however, it was clarif ied in the agreement that there is litigation in respect of acquisition of property and the developer has to take clearance from the government in the matter of denotification of the land. It was held that since the land was under compulsory acquisition and no compensation has been received, therefore, there could not be any capital gain tax u/s 2(47) 31
(iii) which deals with the compulsory acquisition. It was further observed that assessee could not have given possession unless and until the land was denotified. Since facts of the case are different than the case in hand and therefore, same are not relevant for our purpose.
81 Now coming to the facts, firstly it was contended that Developer i.e transferee has not obtained various permissions which were required to be tak en by the Developer as per clauses 3.1, 7.9, 8.4 and 8.6 of the JDA. This is not correct as pointed out by the Ld. CIT DR that assessee had already got the municipal plan sanctioned but in the meantime PIL was filed before the Hon'ble Punjab & Haryana High Court against the im plem entation of the project. Initially, the construction was banned by the Hon'ble High Court. However, later on it was observed in the CW P No. 20425 of 2010 and as clarified by the order of the Hon'ble Supreme Court that refusal of sanction under the Environment (Protection) Act, the society have sought a review of the order because the findings arrived were ex.parte. No order in the matter has been passed by the competent authority perhaps because of the order of High Court. In the interim order passed in the PIL it has been clarified by the Hon'ble Supreme Court vide order dated 31.1.2012 permitting the concerned authority under the different statutes governing the matter to their respective jurisdiction to be decided in accordance with law. Thus, it becomes clear that developer i.e. T HDC has applied for various permissions before the relevant authorities and in some cases permission were declined on ex.parte basis and in some cases the same were declined in view of the High Court order banning the construction. After the clarification of the order of the High Court by Hon'ble Supreme Court by order dated 31.1.2012, the authorities have already been permitted to examine the issue on merits under various laws. Further in the JDA there is a clause 26 which deals with the Force Majeure clauses. The clause 26 (i) to (v) reads as under:-
FORCE MAJEURE
i) None of the parties shall be liable to the other Party or be deemed to be in breach of this Agreement by reasons of any delay in performing or any failure to perform, any of its own obligations in relation to the Agreement, if the delay or failure is due to any Event of Force Mejeure. Event of Force Majeure is any event caused be yond the parties reasonable control. The f ollowing shall be regarded as issues beyond the Parties reasonable control.
ii) For the purposes of this Clause, an Event of Force Majeure shall mean events of war, war like conditions, blockades, embargoes, insurrection, Governmental directions, riots, strikes, acts of terrorism, civil commotion, lock-outs, sabotage, plagues or other epidemics, acts of God including fire, floods, volcanic eruptions, t yphoons, hurricanes, storm s, tidal waves, earthquake, landslides, lightning, explosions and other natural calam ities, prolonged f ailure of energy, court orders / injunctions, charge of laws, action and / or order by statutory and / or governm ent authority, third party actions affecting the development of the Project, acquisition / requisition of the Property or any part thereof by the government or any other statutory authority and such circumstances affecting the development of the project (Event of Force Majeure).
iii) Any Party claiming restriction on the performance of any of its obligations under this agreement due to the happening or arising of an Event of Force Majeure hereof shall notify the other Party of the happening or arising and the ending of 32 ceasing of such event or circumstance with three (3) days of determining that an Event of Force Majeure has occurred. In the event any Party anticipates the happening of an Event of Force Majeure, such Party shall promptly notify the other party.
iv) The Party claiming Event of Force Majeure conditions shall, in all instances and to the extent it is capable of doing so, use its best efforts to remove or remedy the cause thereof and minimize the economic damage arising thereof.
v) Either Party may terminate this Agreement after giving the other Party a prior notice of f if teen (15) days in writing of the Event of Force Majeure continues for period of ninety (90) da ys. In the event of termination of this Agreement all obligations of the Parties until such date shall be fulfilled.
82 The combined reading of these clauses show that if any of the party could not perform its part of the obligation because of the unforeseen circumstances which included government directions, court orders, injunctions etc. such party would not be liable to other part y. In view of Force Majeure clause which included Court Injunction it can not be said that THDC is not willing to perform its obligation. In fact Develpers i.e. THDC/HASH were perusing the issue of permissions/sanctions vigorously. T hese aspects becom e f urther clear if the judgm ent of the Hon' ble Punj ab & Har yana High Cour t in CW P No. 20425 of 2010 vide order dated March 26, 2012 is perused. Paras 3, 4, 22, 25 & 26 of the judgment read as under:-
3. The broad contours of the present proceeding having been outlined, we may now proceed to take note of the specific contentions of the contesting parties as made before us. However, before we do so, it may be appropriate to mention the somewhat conflicting stand of the parties with regard to the present stage of the applications filed under the provisions of the Environment (Protection) Act as well as the W ild Life (Protection) Act. W hile the petitioner, who is supported by the respondent No.6-Chandigarh Adm inistration, asserts that necessary sanction/permission under both the Acts have been refused by orders passed by the competent authorities, the promoters of the project contend to the contrar y. T he facts, as unf olded bef ore us, indicate that against the refusal of sanction under the Environment (Protection) Act, the respondents have sought a review of the order on the ground that the findings arrived at, which have formed the basis of the refusal, are ex-parte.
No order in the review matter has been passed by the com petent authority, perhaps, because of the interim order passed in the PIL which has been clarified by the Hon'ble Supreme Court by order dated 31.1.2012 permitting the concerned authority under the different statutes governing the matter to exercise their respective jurisdictions in accordance with law. Insofar as the W ild Life (Protection) Act is concerned, it appears that the rejection has been made by the Chief W ild Life W arden who, the respondents claim, is merely a recommending authority and is required to forward his recommendation to the Central Government. As the rejection under the W ild Life (Protection) Act has been made by an authority not competent to do, the promoters of the project have sought a review of the order which is still pending for the same reason(s) as noticed above.
4. On these facts we are of the view that it would be prudent on our part to take the view that the issue with regard to clearance/sanction under the two enactments i.e. Environment (Protection) Act and W ild Life (Protection) Act 33 is presently pending and as the promoters of the project have submitted themselves to the jurisdiction of the authorities under the said enactments we should refrain from addressing ourselves on any of the issues connected with either of the two statutory enactments as any such exercise, even though may be unintended, may have the effect of fettering the jurisdiction of statutory authorities functioning under the two relevant statutes.
22. Insofar as the provisions of the Environment (Protection) Act and the W ild Life (Protection) Act are concerned, it need not be emphasised that every project attracting the provisions of the Periphery Control Act and/or the provisions of the 1995 Act must satisfy the ecological concerns of the area in the light of the provisions of the two statues in question. As already held by us, a public trust has been bestowed on the authorities by provisions of the said Acts which cast on such authorities a duty to interdict any project or activity which even remotely seems to create an imbalance in the pristine ecology and environment of the area on which the city of Chandigarh is situated or for that matter in the immediate vicinity thereof. As already observed, necessary clearances under the aforesaid two enactments, insofar as the respondents are concerned, are presently pending before the concerned authorities and, therefore, it would be highly incorrect on our part to enter into any further discussion on the aforesaid aspect of the case.
25. W e also hasten to emphasise that a more rigorous regulated development in what are now the remnants of the periphery and the areas adjoining to it is the need of the hour for which the stakeholders i.e. the Administration of Chandigarh, the States of Punjab and Haryana as also the authorities under the Environment (Protection) Act and the W ild Life Protection Act have to demonstrate the need to engage themselves intensively and not acquire a placid approach indicating an eloquent acquiescence to the violation of the 1995 Act, Periphery Control Act and the Periphery Polic y.
26. W e thus conclude on the aforesaid note by holding and observing that the provisions of the Periphery Control Act and the 1995 Act are complementary to each other and the provisions of the two statutes would apply to the housing project in question. The respondents, therefore, will have to comply with all the requirements spelt out by both the aforesaid statutes. As the requirement of clearances under the W ild Life (Protection) Act and Environment (Protection) Act is not a contentious issue, and as we have already held that the process of grant of such clearances is pending before the appropriate authorities under the respective Acts, the same will now have to be brought to its logical conclusion keeping in mind our observations and directions contained hereinabove.
83 The combined reading of the above paras in the order of Hon'ble High Court clearly shows that Developer THDC/ HASH i.e. transferee have made their sincere efforts for obtaining the necessary permissions / sanctions which were required under the JDA. However, some of the sanctions could not be taken in time because of the litigation by way of PIL but since none of the party was liable to the other party in view of the clause 26 dealing with FORCE MAJEURE it cannot be said that Developer was not willing to perform his part of contract. In any case no specific evidence has been shown us to prove that THDC / HASH were declining to perform particular obligation provided in JDA. In view of this 34 discussion, it cannot be said that transferee i.e. Developer THDC/HASH is not willing to perform his part of contract.
84 Secondly, it was contended that paym ents have not been made as per the JDA. However, again this is not correct. As per clause 4(iv) of the JDA, the installment for Rs. 31,92,75,000/- was required to be paid. The clause 4(iv) read as under:-
"iv) Payment being Rs. 31,92,75,000/- (Rupees One Crore ninety two lacs seventy five thousand only) calculated @ Rs. 24,75,000/- (Rs. Twenty Four lacs seventy five thousand only) per plot holder of 500 Sq. yards and (Rs. 49,50,000/-
(Rs. Forty nine lacs fifty thousand only) as per plot holder of 1000 square yards to be made to the Owner and / or the respective members of the Owner (as the case may be) within six(6) months from the date of execution of this agreement or within two (2) months from the date of approval of the plans / Design and Drawings and grant of the final licence to develop where upon the construction can commence, whichever is later, against which the Owner shall execute a registered sale deed for land of equivalent value being 6.36 acres out of the Property as demarcated in green colour (also hatched in green colour) in the Demarcation Plan annexed hereto as Annexure V and bearing Khasra nos. 123/15, 123/6, 123/7 (balance part), 123/3 (part), 123//4//1, 123///4//1/2, 123//4/2, 123/5/1, 123//5/2, 123//5/3, 112/24/24 (part)"
85 The careful reading of the said clause of the JDA would show this pa ym ent was required to be m ade within a period of six months from the date of execution of this agreement or within two months from the date of approval of plan / sanction and drawing grant of final license to develop where upon the construction can commence, whichever is later. Thus, this installment was dependent on two contingencies first the expiration of a period of six months from the date of agreement or alternatively on the expiration of a period of two months from the date of approval of plans / designs drawing etc. leading to grant of final licenses which can lead to commencement of construction, whichever is later. The matter was taken up by way of PIL by certain citizens and Administration of the Union T erritory bef ore the Hon'ble High Court which initially sta yed the sanction of such plan etc. This led to situation where construction could not be comm enced and hence paym ent was not required to be made in view of the pending litigation. The clauses of force majeure came into operation and therefore, it cannot be said that the developer is not willing to perform its part of the contract. In an y case there is no default on the part of the developer as pa ym ent was not yet due as per clause 4(i)(iv) of JDA.
86 This position was informed to the Society by letter dated 4.2.2011 by HASH Builder, copy of which has been filed at pages 23 & 24 of the paper book dealing with the additional evidence. Through this letter it has been clearly stated that since permission is pending from the Ministry of Environment and Forest Department and therefore constructions could not commence. These permissions were pending because of the PIL filed by Shri Aalok Jagga before the Hon'ble Punjab & Haryana H igh Court. All these f acts clearly shows that in view of clause 4.1(iv) read with clause 26(v) of the JDA, HASH Builder were not required to m ake the pa ym ent and it cannot be said that they were not willing to perform their part of the contract on this aspect. Therefore, this contention is rejected.
87 S e ve nt h c o nt e nt i on is th at r e v e nu e wr on g l y he l d th a t e ve n c l aus e ( v i) of S ec t i on 2( 47 ) is a p pl ic ab l e. W e f ind no f or c e in th is c o nt e nt i on . Cl a us e ( vi) to Sec t io n 2( 4 7) r e ads as u n der :
35" any tr a ns ac t io n ( w h et h er by way o f b ec om i n g a m em b er of , or ac c r u i n g s h ar es i n, a c o op er at iv e s oc i ety , c o mp a ny or o th er as s oc i at i o n of p er s o ns or by way o f any a gr ee m e nt or any ar r an g em e nt o r i n a ny oth er ma n ner w h ats o ev er ) wh ic h h as t he e f fec t of tr a ns f er r in g , or en a b li n g th e e n joy m en t of , a ny i mm ov a b le pr o p er ty ".
88 T he p l a in r e a d in g of t he pr o v is io n s ho ws th at a n y tr a ns ac t io n b y wa y of bec om in g a M em ber or ac qu ir i ng s h ar es i n t h e C o o per at i v e S oc i e t y or s har es in t h e c om pa n y wh ic h h as t he ef f ec t of tr a ns f er r i ng or e n ab l i ng t h e enj o ym e n t of a n y im m o ve a b le pr o p er t y wo u l d be c o ver e d b y t he d ef i n it i on of tr a ns f er . In t he c as e bef or e us , i n it i al l y t h e M em ber s of th e So c i et y wer e ho l d in g s h ar es i n th e S oc i et y f or o wn er s hi p of p l ot of 5 0 0 s q yd or 1 00 0 s q yd . T h is m em ber s h ip wa s s ur r e n d er e d t o t h e S oc i e t y v id e r e s o lu t io n of th e S oc ie t y p as s ed in th e Ex ec ut i v e Com m itt ee on 4 . 1. 20 0 7 wh ic h was la ter r at if i e d in th e G en er a l B od y M ee t in g of th e S oc ie t y o n 25 .1 . 20 0 7, s o t ha t t h e s oc ie t y c ou l d en te r in t o J D A . In t he J D A th e Soc i et y h as a gr e e d to tr ans f e r th e la n d. T he r ef o r e , tec hn ic a l l y i t c a n be s a id t ha t t he d e v e lo p er i . e. T HDC/ H A SH h as p ur c has e d t h e m em ber s h i p of t h e M em ber s i n t he s oc i et y wh ic h wo u ld l e a d t o e nj o ym en t of t he pr o pe r t y a n d i n t h at t ec h n ic a l s e ns e, c l aus e ( v i) of S ec t io n 2( 4 7) is ap p l ic a b l e.
89 E ig h th c on t en t io n is th at s i nc e th e Soc i et y h as t r a ns f er r e d t he l an d t hr o ug h J D A o n a pr o - r a ta b as is , th er ef or e , on l y wh a te v er m on e y is r ec e i v e d a ga i ns t wh ic h s a l e d ee ds ha v e a ls o b ee n ex ec ut e d, c an be tax e d a nd n ot i on a l inc om e i. e. t he m on e y t o be r ec e i ve d la te r , c an no t b e tax e d. I n t h is r eg ar d r el i a nc e was pl ac e d on c er ta i n S upr em e C o ur t dec is i ons a nd ot h er c as es f or t he pr o p o s it i o n t ha t n ot i o na l i nc om e c an n ot b e t ax ed . T her e is n o n e ed t o d is c u s s the c as es r el i e d o n b y t h e l d. c o uns e l of t h e as s es s e e b ec a us e i t is s et t le d p os i t io n of l a w th at n o no t io n a l i nc om e c an be tax e d. T h ou g h th e r e is no q uar r e l t h at it is a s et t le d pr i nc ip l e of l a w th a t n ot i on a l i nc om e c an n o t b e t ax e d b u t i n c as e of c a pi t al g a in , Sec t i on 4 5 wh ic h is c h ar g i ng S ec t i o n a n d S ec ti on 4 8 wh ic h is c om pu t at i on s ec t i on , m ak es it a bs o lu te l y c l ea r t ha t r ig or of tax i n c as e of c ap i ta l g ai n wo ul d c om e i nt o pl a y o n t h e tr a ns f er of c ap i ta l as s e t a nd t o ta l c o ns i d er a t io n wh ic h is ar is in g o n s uc h t r a ns f er , h a s to b e tax e d. Sec t io n 48 c l ear l y ta lk s ab o ut f u l l c o ns i der a ti o n r ec e i v ed or ac c r u i n g as r es u l t of t r ans f er . T his as p ec t we h a ve a lr e ad y d is c u s s ed i n de t ai l a t p ar as 64 t o 6 8.
90 Second aspect of this contention was that if consideration which has not been received was to be taxed then the assessee would be deprived for claiming exemption u/s 54 and 54EC. As observed above as per Section 45 r.w.s 48 whole of the consideration, received or accrued has to be taxed. Every person is supposed to know the law and if the transaction is structured in such a way for the transfer of capital asset that some of the consideration would be received later then such person is supposed to know the consequences of the denial of such benefits. However, if the section is interpreted in the manner suggested by the ld. counsel of the assessee then no person would pay capital gain tax on transfer of a property. This will be clear from a simple example. Let us assume if "A" sells the property to "B" for a consideration of Rs. 100 crores and receive only a consideration of 1.00 crore and it is mentioned in the transfer instrument that balance of consideration would be paid after 20 years then no tax can be levied on such balance consideration of Rs. 99.00 crores which has not been received as per the contention of the ld. counsel of the assessee . But in that case no taxes can be levied even af ter 20 years because no transf er can be said to have tak en place af ter 20 years and Revenue cannot do any thing because capital gain can be charged u/s 45 only on transfer of capital asset. W e do not think that this kind of interpretation can be made while interpreting Section 45 r.w.s. 48 by invok ing the rule that t h e r e c a n n o t b e a n y t a x o n n o t i o n a l r e c e i p t . G en er a l l y s p eak i n g it is on l y t h e r e a l i nc om e wh ic h c a n b e t ax e d b ut t h is h as t o b e u nd er s t o od s ubj ec t to l im ita t io ns . Com m ent in g o n t h es e l im it at i o ns , t he Ld . A ut ho r 36 S hr i S. R aj ar at n am in th e Com m entar y of L a w of Inc om e T ax b y S am pat th I ye n g ar 's Vo l um e 1 , ( 1 1 E di t io n) h as obs er v ed at p a ge 3 4 3 as u n der :-
" 5. R es er v at i o ns o n r ea l i nc om e th e or y. - W hethe r ac c r u a l of i nc om e h as t ak en p la c e or n ot , m us t b e j u dg e d o n t h e pr i nc ip l e of th e r e a l i nc om e t he or y. Af t er ac c r ua l , n on- c har g i ng of tax o n th e s am e b ec a us e of c e r ta i n c on d uc t b as e d on t he i ps e dix i t of a par t ic u l ar as s es s e e c an n ot b e ac c e pt ed . I n de t er m in i ng th e qu es ti o n whe t her i t is h yp ot h et ic a l i nc om e or whe t her r e a l i nc om e has m at er i a li ze d or n ot , va r i o us f ac tor s wi l l ha v e to b e t ak en i n t o ac c o u nt . It w ould be dif f ic ult a nd imp rop e r t o ex t en d t h e con c ept of r e al in co me t o a ll ca s es d ep end ing upo n t he se l f - se rv i ng st at e m ent of t he as s es s ee . W h at ha s r e al l y a c cr ue d t o t he a s se s s ee h a s t o be f oun d out a nd w hat ha s ac c ru ed mu st be con si de r ed f r om t h e point of v iew or r ea l in com e t a k ing t he prob ab il it y o r i mp ro bab il it y of re a liz at i o n in a r e al ist i c man n er , but on c e a cc ru al t a ke s pl a ce , o n t h e c ondu ct of t h e p a rt i e s sub s equ ent t o t h e yea r of clo si ng, an i n com e w hic h ha s b ee n ac c ru ed c ann ot b e m ad e " n o inc om e' ."
91 The above position can be understood by examining some of the provisions of the Act which would show that concept of notional income can not be extended if specific provision is available in the Act. For example in case of income from house property, the income has to be determ ined as per section 23. Section 22 of the Income Tax Act provides that it is the annual value of the property which can be taxed under the head "income from house property". Sector 23 prescribes the method for determining the annual value. Section 23(1)(a) reads as under:-
23 . ( 1) For t h e p ur p os es o f s ec t i on 22 , th e a n nu a l v a lu e o f any pr o p er ty s ha l l b e de e me d t o b e --
( a) th e s um fo r w h ic h th e pr o p er ty m i gh t r eas o n ab ly b e ex p ec t ed t o l et fr o m y ear t o y e ar ; or
(b) where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable; or..........
92 O n t h is as pec t t he s e tt l ed pos i ti o n of th e l a w is t ha t t he an n ua l v a lu e h as t o b e d et er m in ed e v e n if t h e p r op er t y is n ot l et o u t. T his pos i t io n h as b e en d is c us s e d b y th e L d. a ut hor Ch at ur v e di & P it h i s ar ia 's i n Com m enta r y of Inc o m e T ax La w ( f if th ed i ti on) V o lum e 1 i n t h is r es p ec t at p a ges 12 7 5 & 1 2 76 obs er v e d as u nd er :
" A nn u a l v a l ue- de t er m i na t io n o f - Sec t i on 2 3( 1 ) ( a) pr ov i d es t ha t f or t he pur p os es of s ec ti o n 22 , th e a nn u a l v a lu e o f any pr o pe r ty s h a ll b e de e me d to b e th e s um f or w h ic h t h e pr op er ty m i g ht r e as o n a b ly b e ex p ec te d t o l et fr o m y ear t o y e ar . T h e wor d us e d is 'm i g ht ' a n d no t 'c an ' or 'i s '. I t is t h us a not i o na l i nc o me t o be g at h er e d fr o m wh at a hy p o th et ic a l t en a nt wo u ld pay wh ic h is to b e ob j ec t iv e ly as c er ta i ne d o n a r eas o n ab l e b as is ir r es pec t iv e of th e f ac t wh et h er t he pr op er ty is l et ou t or n ot [ S u lt a n Br os . P r . Lt d . v . CIT , ( 1 9 64) 51 I TR 3 5 3 ( S C) ; J a m na d as Pr ab h ud as v . CI T, ( 1 9 51) 2 0 ITR 16 0( B om) ; D. M. Vak i l v . CIT , ( 1 9 46) 14 ITR 2 9 8, 3 0 2( Bo m) ; C IT v . B i ma n B e har i S ha w, Sh e ba i t, ( 1 9 6 8) 68 I TR 81 5 ( C a l) ; Sr i Sr i R a dh a G ov in d a J e w v . CIT , ( 1 9 72) 8 4 IT R 1 50 , 1 5 6 ( Ca l) ; CIT v . G a n ga Pr o per t ies L t d. , ( 19 70) 7 7 IT R 63 7, 6 4 7 ( C al ) ; L iq u id a tor , Ma h m ud a b ad P r o p er t i es L t d. v . CIT , ( 19 7 2) 83 IT R 4 7 0 ( C a l) , af f ir m e d, ( 19 8 0) 1 2 4 ITR 31 ( S C) ; C IT v . Zor os tr i an B u i ld i ng S oc ie ty Lt d. , ( 1 97 6) 1 0 2 I TR 49 9 ( B o m) ; C .J . G eor ge V. C IT, ( 1 9 73 ) 92 I TR 1 37 37 ( K er ) ; D. C. A n an d & S ons v . CIT , ( 19 8 1) 1 3 1 ITR 7 7 ( D e l) . Als o s e e, CIT v . P ar b u tty C hu r n L a w, ( 1 9 65) 57 I TR 6 0 9 , 61 9 ( C a l) ; I n t he m at ter of Kr is hn a L al Se a l, AI R 19 3 2 C a l 8 36 ; La l l a Ma l S a m gh a m La l v . C IT , ( 19 3 6) 4 IT R 2 50 ( La h) ; N ew D e l h i Mu n ic ip a l Co m m it te e v . N an d K u m ar B us s i , ( 1 9 77) T ax LR 21 3 0 ( D el) ] "
93 S im il ar v i e w h as be e n ex pr es s ed b y S hr i N. A. Pa lk h i va l a in h is c om m ent ar y o n th e L a w la n d Pr ac t ic e of In c om e T ax , Vo l um e 2 ( E ig h th ed i t io n) b y K an g a an d P a lk hi v a la 's o bs er va t i on a t p a g es 2 2 & 2 3. A ga i n e ve n S hr i S. R aj ar a tn am in th e C om m ent ar y of L a w of Inc om e Tax b y th S am pat I ye n g ar 's V ol um e 2, ( 11 ed i ti o n) ex pr es s e d i d en t ic a l v i e ws i n h is c om m ent ar y a t pa g e 2 73 8.
94 In all the leading commentaries cited above, it has been observed that annual value is to be computed whether property has been let out or not. This means that notional value of the property has to be charged to the Income Tax under the head "incom e from house property". From the above, it becom es clear that though there is no real income from letting out of the property, still the notional annual value is subjected to tax under the head "incom e from house property". However, we m ay m ention that u/s 23(1)(c) of the Act if the property is let out and then rem ained vacant f or som e part of the ye ar or for whole of the year then vacancy allo wa nce can be claim ed. Here, it is im portant to note that if property is not let out, then notional income becomes chargeable to the tax because of provisions of sections 22 and 23 (1)(a) of the Act. Sim ilarly, under the Mat provisions, it is basically the notional income which is being subjected to charge under the head "income from business and profession". A businessman may have income of Rs. 100/- but because of higher depreciation allowable under the Income-tax Act or some other weighted deductions say for example in case of expenditure on scientific research, the taxable income as per the provisions of the Act may be zero but still because of the Mat provisions, tax has to be charged on book profits. Similarly in the case of presumptive tax provisions e.g. u/s 44AD if a person is civil contractor and does not maintain books of account and his turnover is less than Rs. 60 lakhs then the profit would be presumed to be 8% of turnover even if he has suffered a loss. Another example of Section 2(22)(e) can be taken. Under this provision a loan or advance given by certain companies to a substantial share holder is to be treated as deemed dividend. Such loan under the normal accounting principle or on commercial principles cannot be regarded as income but because of this specific provision regarding deemed dividend such amount has to be treated as income of the person receiving such loans.
95 The above position of law makes it absolutely clear that theory of real income is subject to the provisions of the Act and whenever any specific provisions of the Act is there for charging of a particular item of income, then the same has to be charged accordingly. It m ay be som etim es hard to the assessee's but again it has been held in numerous decisions that Fiscal statues have to be interpreted on the basis of language used and there is no scope for equity or intent. Ld. Author Shri S. Rajaratnam in the Comm entary of Law of Incom e Tax by Sam pat I yengar's Volum e 1, page 236 in this regard has observed as under:-
" O nc e i t is s h o wn t h at th e c as e o f th e as s es s ee c om es w i th i n t he l et ter o f t he l a w, h e m us t b e t ax ed , ho wev er , gr e at th e h ar ds h i p may a pp e ar t o t h e j ud ic i a l m i nd . C o ns i d e r at i ons of h ar ds h i p, i nj us tic e or a n om a l ies d o no t p l ay any us ef u l r o le i n c o ns tr u i ng tax i ng s t at ut es u n les s th er e b e s o m e r e al a mb i g u ity . T hus , any be n ev o l e nt c o ns tr uc t i o n in f av o ur of t he as s es s e e h as b e en h e ld to b e u nc al l e d for .38
96 Therefore, it can be said that generally speaking notional income could not be subjected to tax but whenever there is a specific provision, the same has to be taxed. Now, in case of capital gain, section 45 read with section 48 very clearly provides that it is the profit "arising" from the transfer of a capital asset which would be subjected to charge of capital gain tax and section 48 clearly provides for taking the total consideration into account while computing the capital gains. This aspect we have already discussed in detail at para No. 64 to 68 from which it becomes clear that it is the whole consideration whether received or accrued, which has to be taxed under the capital gain once transfer of the capital asset takes place. Accordingly, there is no force in this part of the contention.
97 Now let us examine the issue of taxability of flat on the basis of above principles. Relevant portion of clause 4 of the JDA which deals with consideration are as under:
"4. CONSIDERATION
4. 1 It is s pec i f ic a l ly u n der s to o d a nd agr e ed am on gs t th e Par t ies t h at THD C s h a l l us e i ts e x per t is e a nd its Br a n d n a me an d / or a ny ot her br a n d n a m e a t i ts d is c r et i on t o d ev el o p t h e Pr op er ty i n to th e Pr em is es as per a pp l ic ab l e b u i ld i n g by e- la ws o f t he C om p et e nt Au t hor i ty a nd th e O wn er s h al l h av e n o o bj ec ti o n t o th e s a m e in w ha ts oev er m an ner . In c ons i d er a t io n o f t he O wn er gr a nt i n g an d as s ig n in g , i ts Dev e lo pm e nt Ri g hts in th e P r o p er ty , ir r ev oc ab ly an d i n p er pe t ui ty , to T HD C to de v e lo p th e P r o p er ty a n d f or tr a ns f er o f th e Pr o per ty u p on t h e s ur r e nd er o f a ll o tm e nt r ig hts of 5 0 0 s q. y ar ds a nd /o r 10 0 0 s q. y ar ds ( as th e c a s e m ay be) by its me m ber s t o t he O w n er , v id e r es o l ut i on d a te d 0 4. 0 1. 20 07 a n d 25 . 02 .2 0 07 ( c o py a tt a c he d a s p er A n nex ur e I & I I) , H A SH is c o m m i tt ed to pay t o t h e O wn er a nd / or t h e r es p ec tiv e m em b er s of t he O w n er ( as t h e c as e m ay be) a to t a l a m ou n t o f Rs . 1 06 , 42 ,5 0 ,0 0 0/- ( R up e es O ne Hu n dr e d S ix Cr or es F or ty T w o L ac s F if ty T ho us an ds O n ly ) c a lc u l at e d @ Rs . 8 2 ,5 0, 0 0 0/- ( R u pe es E i g hty T wo Lac s F i fty T ho us an ds O nl y ) p ay a b l e to 6 5 m em b er s h av i n g p lo t of 5 0 0 s q. y a r ds eac h , Rs . 1 ,6 5, 0 0, 0 00 /-
( Ru p ees O n e Cr or e Si x ty F iv e Lac s O n ly ) pa y ab l e t o 30 m em b er s hav i n g p lo t o f 10 0 0 s q . y ar ds eac h a nd Rs . 3 ,3 0, 0 0 ,0 0 0/- ( Ru p e es Th r e e Cr or es Th ir ty L ac s O nly ) p ay ab l e t o th e O wn er for th e 4 p l ots of 5 00 s q . y ar ds eac h , w h ic h s h a l l t an t am o un t to th e fu l l a nd fi n a l p ay m en t t o th e O wn er an d / or th e r es p ec t iv e m e mb er s o f t he O w ner ( as t he c as e m ay be) i n a ma n ne r s et o u t her e i n b e lo w ( 'P a y me n t ') . F ur t h er , t h e t r a ns f er , s a le a n d c onv ey anc e o f 21 .2 a c r es of l a nd o f th e Pr op er ty s ha l l b e ma d e by t h e O wn er i n f av o ur o f TH DC pr o r a ta t o t he Pa y me n t r ec eiv e d by t he O w n er an d /or t he r es p ec t iv e me m b er s of t he O w n e r ( as t he c as e m ay be ) fr om HA S H by ex ec ut i ng s a l e de e ds a nd r e g is t er i ng t h e s a me . It is ex p r es s ly pr ov i d ed t h at as r es o lv ed by th e O w n er , t he t o ta l am o un t p ay a b le by HA S H t o t h e O w n er a nd / or th e r es p ec tiv e me m be r s o f t he O w n er ( as th e c as e may b e) fo r as s i gn m en t of t he Dev e lo p m en t Ri g hts an d f or tr a ns f er a nd s a l e o f 21 . 2 ac r es of l an d o f t he Pr o pe r ty s ha l l be Rs . 10 6 ,4 2, 5 0, 0 00 /- ( R u pe es O n e H u ndr e d Six Cr or es F or ty T w o L ac s Fif ty Th ous a nd on ly ) a nd o ne h un dr ed an d t w en t y ni n e ( 1 2 9) f la ts c o n s is t i n g of S u per Ar e a of 2 2 50 S q . f e et ( 'F l a ts ') ; o ne f la t eac h f or s i x ty f iv e me m b er s h av i ng a pl ot of 5 00 s q . y ar ds , tw o f l ats for t he ( t hir ty ) 3 0 me m b er s hav i n g a pl o t o f 1 00 0 s q. y a r ds a n d 4 f l ats t o th e O w ne r for t he 4 p l ots of 50 0 s q . y ar ds e ac h as p er l is t an nex e d w it h t h is A gr e e me n t as Sc he d u le B ( 'S a l e Tr a ns ac t io n ') It is ex pr es s ly a gr ee d b et we e n th e D ev e l op er s t h at H A SH s h a ll be r es p o ns ib l e f or m ak in g a l l p ay m e nts to t he O wn er a nd /or t he r es pec t iv e me m b er s o f t h e O wn e r ( as t h e c as e m ay b e) as p er th e ne g ot i at ed a nd 39 agr e e d t er ms b et we e n t he O w n er an d H A SH , H A SH ex pr es s ly un d e r tak es to mak e t i m e ly p ay m en ts o f t h e P ay me n t to t h e O w n er a n d / or t he r es p ec tiv e m e m ber s o f t he O wn er ( as t h e c as e m ay be ) as u nd er :
4. 2 As r es o lv e d by t he O wn er , TH DC e i th er b y its e lf or a l on g w it h HA S H s h a l l a l l ot th e Fl ats i n t he n am e of me m b er s o f t he O w ne r as p er l is t an n ex e d w i th th is Agr e em e nt as Sc he d u le B a tt ac he d her e i n ( he r e i na ft er r e fer r e d t o as t he 'A l l o t te es ') . T he s p ec if ic at i ons o f t h e f l ats wo u ld be p r ov i de d by th e D ev e l op er s t o t he O wn er a n d m or e par t i c u lar ly des c r i b ed in t h e Sc h e du l e C a tt ac h e d h er ei n ( h er e i n af ter r ef er r ed to as th e 'S p e c if ic at i ons ') . The A l lo t me nt l et te r s s ha l l b e is s u e d to t h e A l lo tt e es ( m e mb er s o f th e O w n er ) w it h in f or ty - f iv e ( 45 ) day s fr om th e da t e of s a nc t i o n of t he b u i l di n g p la ns / Des i gn an d Dr aw i ng an d o n ob t ai n i ng f in a l l ic e ns e/ p er m is s i on f or t h e dev e l op m en t of th e Pr o jec t fr o m th e C om p et e nt A ut ho r i ty . T her e af ter , th e p os s es s i o n of t he f l ats s ha l l b e h a nd e d ov er to th e A l l ot te es wi t hi n t h ir ty ( 3 0) mo n ths f o r m t h e da t e of is s u a nc e o f t h e A l lo t me n t Le tt er .
It is expressly provided that the Payment to be made by HASH to the Owner and/or to the respective members of the Owner (as the case may be) and the Flats to be allotted to the Allottees as set out in this Clause 4.2 shall hereinafter be collectively referred to as the 'Entire Consideration' 98 From this clause it becomes absolutely clear that each Mem ber having 500 sq yd of plot was entitled to receive one f urnished f lat m easuring 2250sqft and Mem bers having 1000sqyd flat were entitled to receive two furnished flats. Thus upon execution of the JDA vested right came to such Members to receive such flats. Once this vested right arises out of the above contract it can easily be said that this right has also accrued to the assessee. Clause 4.2 makes it absolutely clear that developer i.e. T HDC/HASH was to allot the letters of allotm ent within 45 da ys from final sanction from the competent authority and such flats were part of entire consideration. Merely because such allotment letter has not been given because of sanctions / permissions could not be obtained because of Public Interest Litigation before the Hon'ble Punjab & Haryana High Court, it cannot be said that such right has not accrued. Though it may be hard on the assessee but it is well settled that taxation and equity are strangers. Further commenting on this aspect Shri Rajarathnam in his commentary has observed at page 5164 as under:
"It is hard on the owners when required to pay tax, when handing over the possession for purposes of construction without being able to enjoy the construction, which is yet to commerce or in the process of construction being put up by the developer, but the solution lies in statutory clarification in such cases. In view of the increasing scale of such development agreements to solve the housing problem in the cities, a statutory clarification or circular is overdue."
99 These comments and the other detailed discussion on this aspect clearly show that capital gain tax has to be paid on the total consideration arising on transfer which would include the consideration which has been received as well as the consideration which has arosen and become due and may be 40 received later on. In view of this discussion this contention is rejected.
10 0 Ni n th c o nt en t i on is th at th e as s es s e e has a lr e a d y t er m in at e d t h e agr e em ent a n d h as r e v ok ed t he P o wer of A tt or n e y. W e f in d no f o r c e i n th is s u bm is s i o ns .
10 1 In th is r e gar d ld . c o uns e l of th e as s es s e e h as r e li e d o n t h e dec is i on of M um ba i B enc h of t h e T r i b un a l i n c as e of Ch em os yn Lt d. V AC IT ( s u pr a ) . In t ha t c as e th e as s es s e e- Com pa n y was o wn er of t wo p lo ts b e ar i n g 2 5 6 & 2 57 i n G u n da b a li A n dh er i M um ba i. T h e as s es s e e- c om pan y e n t er e d i nt o a d e v e lo pm en t agr e e m ent wi t h Di p it i Bu i l d er s f o r th e d e ve l opm e nt r i g ht s f or a c ons i d er a t io n of Rs . 16 .1 1 c r or es . D ip i t i B ui l d er s h ad a ls o a g r ee d t o c ons tr uc t 1 8 00 0 s qf t c ar p et ar e a f or th e be n ef i t of as s es s e e on pl o t No . 2 56 . In the r et ur n of inc om e to t al c ons i d er a t io n was s h o wn o n l y at Rs . 1 6 .1 1 c r or es . I t was ex p l ai n ed th a t bef or e D i p it i B u i ld er s c o u ld s t ar t t h e de v e l opm en t /c o ns tr uc t io n wor k , en t ir e pr o p er t y c om pr i s i ng of pl o t n o . 25 6 & 25 7 was s o l d to a t h ir d par t y M/s F i n anc i a l T ec h n ol og y Lt d . b y a tr i p ar t i t e c o n v e ya nc e d e ed ex ec u t ed on 5. 7. 2 0 07 f or Rs . 2 9 .1 1 c r or es an d t h er ef o r e, a d d it i on a l c o ns i de r at i on of Rs . 13 c r or es h as be e n of f er e d t o t ax i n As s es s m en t ye a r 20 08- 0 9. T his ex p la n at i on wa s r ej ec t e d b y t h e As s es s i n g O f f ic er b ec a us e ac c or d i ng t o h im i t was a c as e of t r a n s f er u /s 2( 4 7) ( v) a n d t ot a l c ons i d er a t io n h as t o be c h ar ge d i n t h e ye a r of tr ans f er . T h e T r i bu n a l af ter c o ns id er i ng th e pr o v is i o ns of s ec t io n 45 & 4 8 p os ed a qu e s ti o n t o its e lf th at wh at s h o u ld be t he c ons i d er a t io n i n th e c as e b ef or e t he B enc h. T he c as e l a w r el i e d o n b y t h e De p ar tm en t was r ej ec t e d bec a us e s am e was r el e v an t t o ac c r u a l of in t er es t. T he B enc h f o ll o we d t he dec is io n of K al p tar u Co ns t r uc t io n O v er s ees P v t L t d. 1 3 SO T 1 94 . I n th at c a s e t h e as s es s e e h ad a gr ee d t o s e ll t o i ts s ubs i d iar y e q u it y s h ar es f or a c ons i d er a t io n of Rs . 1. 2 5 c r or es wh ic h wa s f in al l y s et t le d a t R s . 1. 0 0 c r or e a nd th e T r i bu n a l he l d t ha t t he c o ns i d e r at i on of Rs . 1. 0 0 c r or e h as to b e ac c e pt ed .
10 2 . Fr om th e ab o v e d ec is io n i t is n ot c l e ar wh et h er i n c as e of K al a pt ar u C ons tr uc t io n O v er s e es P v t Lt d. ( s upr a) whic h h as be en f ol l o wed i n a bo v e c as e, was c o nc er ni n g c a p it a l g a in or n ot ? S ec o nd l y it is n ot c l ea r t ha t whe t her th e am end e d c o n s i der at i o n i .e . s e tt l em en t f or Rs . 1 .0 0 c r or e was m ad e i n t h e s am e ye ar or n ot ? As o bs e r ve d ear l i er wh i l e d is c us s i n g th e i s s ue of no t io n al i nc o m e that pr o v is i o ns of s ec t i on 45 r . w.s . 4 8, ar e a bs o l ut e l y c l e ar an d t h er e is no am bi g ui t y t h at o nc e a c ap i ta l as s et is t r a ns f er r ed th e n wh o le of t he c o ns id er at i on r ec e i v ed or ac c r u i n g h as t o be c o ns id er ed f o r t he p ur p o s e of t ax at i on i n t he year i n wh ic h t h e tr ans f er h as tak en p l ac e . W e f ur ther f in d t h at i n t h e J D A t h er e is a c l a us e f or t er m in at i on of t he agr e em en t. R e l e va n t c l aus e 1 4 r e a ds as u nd er :
" T er m ina ti o n " 14 ( i) S a ve a n d ex c ep t t he pr o v is io n of c l aus e 26 , T HDC s h a l l at al l tim es h a ve th e r i g ht t o ter m in at e t h is A gr eem en t i n t he e ve n t th er e is a n y m ater ia l br e ac h of t he r e pr es en ta t io n s , war r a nt i es , u n de r tak i ngs , dec l ar at i ons , c o ve n an t s an d/ or o bl i g at i ons g i v en b y t h e O wn er un d er t h is A gr e em en t af t er g i v in g th ir t y ( 3 0) d a ys wr it te n n ot ic e f or r ec t if ic a ti o n of s uc h br eac h . I n t he e v en t t h e A gr e em ent is ter m i na t io n b y T H DC , a ll th e l an ds r eg is te r e d i n t h e nam e of T HDC as per th e ter m s of t his Agr e em ent up t o t he da t e of t he te r m ina ti o n s h a l l r em a in wi th T HD C an d t h e b a la nc e l an ds to b e tr a ns f er r e d t o T H DC as p er th e ter m s of t h is A gr e em ent s h a ll no t b e tr a ns f er r ed b y t h e O wn er i n f a v our of T H DC . Up on t h e ter m i na t io n, t he O wn er s ha l l r ef u n d to T H DC t he A dj us ta b l e A d va nc e/ E ar nes t M on e y m en t io n ed i n c l au s e 4. 1( i) a b o ve wi th i n o ne m onth of s uc h t er m in a ti o n. I n th e e v en t of f a il ur e of t he O wn er t o r ef u nd th e s a i d am oun t, t h e O wn er h er eb y a gr e es to ex ec ut e a r e g is t er e d s a le de e d f or l an d of eq u i v a le nt v al u e i n f a v o ur o f T HDC .41
( i i) In t h e e v en t a l l t he r e qu is i te go v er nm ent an d s ta t ut or y a p pr o v a ls , au t hor i za t i o ns , c ons e nts , l ic e ns es , a p pr o v a ls of a l l t h e p l a ns / des i g ns an d Dr a wi n gs as m a y be r e q ui r e d f or th e d e v e lo pm en t of t h is Pr op er t y i n r e la t io n t o t he Pr oj e c t an d t o u n der t ak e th e Pr oj ec t a r e no t gr a n te d wi t hi n n in e ( 9) m on th s of th e s u bm is s i on o f the f in a l p la ns / D es i g ns a n d Dr a wi n gs to t he C om pet e nt A ut h or it y f or a p pr o v a l th e n T HD C m ay a s its s o le d is c r et i on e it h er dec i d e t h at it d oes no t des ir e t o u nd er t a k e an d c om pl et e t h e Pr oj ec t an d h enc e t er m i na te th is A gr e em en t af ter g i vi n g th ir t y ( 3 0) d a ys wr it te n n ot ic e i n th is r eg ar d or d ec id e t o wa it f or a n y f ur th er t im es d eem e d f it b y T HD C f or th e gr a nt of t he af or es a i d ap pr o v als an d lic e ns e s . In t he e ve n t th e A gr e em en t is t er m in a te d b y T HDC, a l l t he l a nds r eg is ter e d in th e n am e of T HDC as p er t h e t er m s of th is Ag r e em en t u pt o t he d at e of t h e t er m in at i on s h al l r em ai n wi t h T HDC an d t h e b a la nc e l a nds to b e tr a ns f er r e d to T HD C as p er th e t er m s of th i s A gr e em en t s h a l l n ot be tr a ns f er r e d b y th e O wn er in f a v o ur of T HDC. Up o n t he t er m in at i on , th e O wn er s ha l l r ef u nd t o T HDC th e A dj u s ta b le A d va nc e/ E ar nes t M on e y m en t io n ed i n c l au s e 4. 1( i) a b o ve wi th i n o ne m onth of s uc h t er m in a ti o n. I n th e e v en t of f a il ur e of t he O wn er t o r ef u nd th e s a i d am oun t, t h e O wn er h er eb y a gr e es to ex ec ut e a r e g is t er e d s a le de e d f or l an d of eq u i v a le nt v al u e i n f a v o ur o f T HDC .
( i i i) In t h e e ve n t T HDC i s un ab l e to de v e l op the Pr op er t y du e t o r ef us al / no n gr an t of ap pr o v als , c ons e nt s , p er m is s i o n, l ic en s es o r r e voc a ti o n of t h e s am e b y th e a p pr opr i at e s ta tu t or y a ut h or it y, t he n T HDC m a y at its s a le dis c r et i on ter m i na te th is A gr e em en t. I n t he e v en t t he A gr e em en t is ter m i na t ed b y T H DC , a l l t h e l an ds r e g is t er ed i n t he n am e of T HDC as p er t he ter m s of th is Agr e e m ent u pt o t h e d a te of th e ter m i na t io n s ha l l r e m ain wi t h T HDC a n d t h e b a l anc e l an ds to b e tr a ns f er r e d to T HD C as p er th e t er m s of th is A gr e em en t s h a ll no t b e tr a ns f er r e d b y t h e O wner i n f a vo ur of T HDC. U po n t h e t er m in at i on , t he O wn er s h a ll r ef un d t o T HD C t h e A dj us ta b le A d v anc e / Ear n es t Mo n e y m enti o n ed i n c l a us e 4 .1( i) a b o ve wi th i n on e m ont h of s uc h te r m in at i on . In t h e e ve n t of f ai lur e of th e O wn er t o r ef u n d the s ai d am ou n t, t he O wn er her e b y a gr e es t o ex e c ut e a r e g is t er ed s al e d e ed f or l a nd of e qu i v al e nt v a lu e i n f a vo ur of T HDC .
( i v) T he o wn er s h a ll ha v e th e r i g ht t o t er m in at e th e A gr eem e nt o n l y i n th e e v en t of d ef a u lt b y th e D e ve l o per s f or m ak ing t he Pa ym ent in ac c or d a nc e wit h t he t er m s of t hi s Ag r e em ent a n d t h e a l lo tm ent of F la ts wi t hi n t h e t im e per i o d as m ent i on e d i n t h is A gr e em en t af t er g i v i ng T hir t y ( 30 ) da ys wr it t en n ot i c e f or r ec t if ic at i on of s uc h br e ac h or a n y f ur th er tim e as m a y be d es ir ed b y th e O wn er . I n th e e ve nt t he A gr ee m ent is ter m i na te d b y O wn er , al l t h e l an ds r eg is ter ed i n th e n am e of T HDC as per t h e t er m s of t h is A gr e em en t up t o t h e d at e of t h e t er m in a ti o n s h a ll r em ai n wi t h T HD C an d t h e ba l a nc e l a n ds t o be tr a ns f er r ed t o T HD C as per t h e ter m s of t h is A gr e em en t s ha l l n ot b e tr a ns f er r e d b y th e O wn er i n f av o ur of T HDC. U po n t h e te r m in at i on , th e O wner s ha l l f or f ei t th e A dj us ta b l e A d va nc e/ E ar n es t M on e y m e nt i on ed in c la us e 4( i) . "
10 3 T he r ea d i ng of t he ab o v e c l aus e wo u l d s h o w t h at p o wer o f ter m i na t io n has b ee n g i ve n in m an y c ir c um s ta nc es t o T HDC v i d e c l aus e 14( i) , ( i i) a n d ( i i i) . T he po we r f or t er m in at i on b y t h e o wn er h as b e en m enti o n ed i n c l a us e 1 4( i v) o n l y. Re a d in g of th is c la us e wo ul d s ho w t ha t r i gh t t o ter m i na t e wi t h th e o wn er i. e. t h e S oc i e t y was a va i l ab l e on l y i n c as e of def au l t in m ak ing t he p a ym e n t. T h e is s u e r e g ar d i n g d ef au l t f or m ak in g pa ym e nt h as a lr e a d y be e n d is c us s ed b y u s i n P ar as 8 4 t o 86 42 ab o v e wh i le d is c us s i ng t he is s u e of wi l l i ng n es s o n th e pa r t of th e tr a ns f er e e t o p er f or m its p ar t of th e c o ntr ac t W e hav e a lr e a d y he l d t h at th er e was n o d ef a u lt o n t he pa r t of d e v e lo p e r i. e. T HD C/ H A SH i n m ak in g th e p a ym e n t, t h er ef or e, t he as s es s e e h a d n o r i g ht t o t er m in a te t h e c on tr ac t . In a n y c as e we f ur th er f in d th a t c l aus e 2 0 of t he J D A r e f er s t o Ar b itr at i o n an d i t is c l ear l y pr o v i de d t ha t a l l t he d is p ut es un d er i t s ho u l d be r ef er r e d to th e a r b itr at i o n. T her ef or e , if the S oc i e t y h ad s om e gr ie v a nc e it wa s du t y b o u n d to g i v e a n ot ic e f or a p po i ntm e nt of an Ar b itr at or t o t he de v e lo p er . I n t he ab s enc e of s uc h n ot ic e t he ter m i na t io n wi l l no t s t an d s c r u t in y of la w. H er e it is a ls o per t in e nt to n ot e th at t h ou g h i t was s t at e d th at ir r e voc a b le P o wer of A tt or ne y ha s be en r e vok e d a nd s om e do c um ents h a v e be e n f i l ed b ef or e us f or r e v oc a t io n bu t c l a us e 6 . 7 of t h e J D A wh ic h we ha v e r e pr o d uc e d e ar l ier c l ear l y pr o v i d es t h at s uc h Po wer of At tor n e y c a n no t b e r e vok e d. W e r ep r od uc e c l aus e 6 .7 a g a in wh ic h is as u n de r :
"6.7 The Owner shall execute an irrevocable special Power of Attorney granting its complete Development Rights in the Property in favour of THDC interalia including the right to raise finance by mortgaging the property and register the charge with the Competent Authority and execute registered sale deeds) as set out in Clause 4.1 (ii), (iii), (iv) and (v) and the Owner confirms, undertakes, declares and binds itself not to revoke the same for any reason whatsoever out of its own will and discretion without obtaining a specific prior written consent of THDC or any of its duly constituted attorneys."
104 The above clearly shows that this Power of Attorney could not be revoked for any reason without obtaining specific prior written consent of THDC/HASH. No document showing the consent of THDC for revocation of this irrevocable Power of Attorney has been produced before us. W e fail to understand that in the absence of such document how the assessee can claim that this Power of Attorney has been revoked. As discussed earlier while considering the legal position, we would again recall the words of Hon'ble Authority for Advance Ruling in case of Jasbir Singh Sarkaria (supra) wherein at para 33 of the decision while discussing the issue in respect of Power of Attorney, it was highlighted that execution of irrevocable Power of Attorney is of significant nature and the words "irrevocable" are very important. The expression "irrevocable" itself shows that normally such attorney cannot be revoked. Therefore, no cognizance can be taken in respect of revocation of the irrevocable Power of Attorney. In the absence of specif ic consent as provided in clause 6.7 of the JDA from THDC.
10 5 W e m a y als o no t e th at CIT D. R h as p o in te d ou t t h at t o ta l c ons i d er a t io n was t o be de ter m i ne d as u n d er :
(i) Consideration in cash Rs. 106,42,50,000/-
(Rs. 82,50,000 x 129 plots)
(ii) Consideration in kind Rs. 130,61,25,000/-
(Rs. 101,25,000/- x 129 plots)
Total Rs. 237,03,75,000/-
Av e r a ge c ost of c on s ide r at i on R s. 1 1. 1 8 c r or es p e r ac r e ( T ota l c o ns i der a ti o n o f Rs . 23 7. 0 3 c r or es d i v i de d b y 21 .2 ac r es of l an d) It is c l a im ed o n be h alf of t h e as s es s e e t h at J DA h as b ee n c a nc e l l ed a n d th e de v e l op er h as be en a l l o we d t o r et a i n t he pr o per t y wh ic h ha s a ls o 43 be e n c on v e ye d t o d e v e lo p er th r o u gh t wo s a le d e eds . If t h at is s o t h e n wh at wo u l d ha p pe n to th e b al a nc e c o ns i der at i o n b ec a us e i n s uc h s it u at i on th e as s es s e e h as r ec e i v e d c o ns id er a t io n of on l y ab o ut Rs . 5 c r or es s per ac r e b ec aus e t he as s es s ee h as r e gis t er e d l a nd m eas ur i ng
3. 0 8 ac r es f or Rs . 15 . 48 c r or es th r o u gh f ir s t c o n ve ya n c e de e d, wher e as c ons i d er a t io n as per or ig i n al a gr eem en t wa s Rs . 1 1. 1 8 c r o r es p e r ac r e as s h o wn ab o v e. T he d if f er e nc e is b ec a us e of n o n r ec e i pt of c ons i d er a t io n i n k in d an d t he a s s es s e e has n ot s h o wn a n y e v i d en c e th at it h as m ad e t h e c la im f or r ec e ip t of b al a nc e c ons i d er a t io n . T h is l e ads t o th e c o nc lus i on t h at t h er e was n o c a nc el l at i o n of t h e J D A. 10 6 S om e ar g um ents wer e m ad e b y b ot h th e p ar t i es th a t if t he c on tr ac t is f i na l l y s t an d ab a nd o ne d t h en wh at wo u l d h ap p en . The c on t en t io n on b eh a lf o f the as s es s e e is t h at if th e c on tr ac t is ab a n do n ed th e n t he as s es s e e wo u ld h a ve p ai d tax i n t he ye a r of t r a ns f er a n d wo ul d be l ef t wi t h no r ec o u r s e f or r e l i ef . T he c on t en t io n on b e ha lf of t he De p ar tm en t was th at th e as s es s e e c o u l d a l wa ys f i le r e v is e d r e t ur n or m ak e a pe t it i on u /s 26 4 a nd s om e r e l i ef was p os s ib l e in c as e of t he as s es s e e. Ho we v er , i f r e ve n ue f a i ls to t ax t he t ot a l c o ns id er at i o n i n t he ye ar of tr ans f er th e n s am e c a n no t b e s ubj ec te d to t ax i n a n y ot h er ye a r . W e f ind t h at t h is q u es ti o n was s er i ous l y c on s i der e d b y t h e L d. A ut hor i t y f or A d va nc e Ru l i ng i n c as e of J as b ir S i n gh Ka ta r i a ( s u pr a) wh ic h h as be e n r el i e d o n b y b o t h t h e p ar ti es f or v ar i ous as pec ts . I n t h at c as e i t was o bs er v ed a t p ar a 39 as un d er :
"W e ha ve t o a d ver t t o on e as p ec t wh i c h h as c aus e d s om e c o nc er n to us . W hat wi ll ha p pe n if dur i n g th e ye a r f ol l o wi n g th e o n e i n wh i c h th e de em ed tr a ns f er to ok p lac e, t h e pr op os ed v en t ur e c o l l aps es f or r eas o ns s uc h as r ef us a l of pe r m is s io ns , t he d e ve l o p er f ac i ng f in a nc ia l c r u nc h e tc . B y t h at t im e, t h e o wn er wo u ld h a ve r ec e i ve d o n l y a p ar t of t h e a gr e e d c ons i d er a t io n , b ut h e is o bl i g ed t o f i l e t h e r e tur n s h o wi n g t he en tir e c ap i ta l g a in b as e d on th e f u l l s a le pr ic e wh et h er or n ot r ec e i ve d dur i n g th e ye ar of d e em ed tr ans f er . In s uc h an e v en t ua l it y, har ds h ip m a y b e c aus e d t o th e o wn er wh o wou l d h a v e p a id f ul l tax . No do u bt , s uc h a s it u at i on c o u l d b e a v o i de d if t h e c o n te nt i o n of t he a pp l ic a nt is ac c ep t ed . O n de e p c o ns i d er at i o n, h o we v er , we f i n d th at t he c o ns tr uc t io n of t he r e le v a nt pr o v is i o n s ho u ld n ot b e c o nt r o l l ed b y g i v i n g u n du e im po r ta nc e to s uc h h yp o t he t ic a l s it u at i ons . N or m al l y, t he o wn er ex ec ut es a P o we r of At tor n e y or d oes s i m ilar ac t to lef t t h e tr a ns f er ee t ak e pos s es s i on on l y af ter th e bas ic per m i s s i ons ar e gr an t ed a nd h e is s at is f i e d a b ou t t h e ab i l it y of tr ans f er e e /d e ve l o per to f ulf i l t he c on tr ac t . I n s p i te of th at , if s uc h r a t e s it u at i ons t ak e p l ac e, th e o wn er / tr a ns f er or wi l l n ot b e wi t ho ut r em ed y. H e c a n f i l e a r e v is e d r et ur n a n d m ak e o ut a c as e f or ex c l us i o n or r e d uc t i on of inc om e. H o we v er , if th e ti m e- lim it f or f i l i ng a r e v is e d r et ur n ex p ir es , t he d if f ic ul t y wi l l ar is e . It is f or Pa r l i am en t or t he C en tr al G o v er nm en t t o pr o vi de a r em ed y to th e as s es s e e in s uc h c as es . Mo r e o v er , t h e o th er s i de of th e p ic t ur e a s de p ic t ed i n p ar agr ap h 2 7 ( s up r a) s h o u ld als o b e k ept in v ie w."
Her e t he c om m ents o f Sh r i R aj ar a t nam q u ot e d at p ar a 51 6 4 a b o ve a r e a ls o r e l e v an t a ga i n:
""It is hard on the owners when required to pay tax, when handing over the possession for purposes of construction without being able to enjoy the construction, which is yet to commerce or in the process of construction being put up by the developer, but the solution lies in statutory clarification in such cases. In view of the increasing scale of such development agreements to solve the housing problem in the cities, a statutory clarification or circular is overdue."
W e m a y m ent io n h er e tha t n o d ou b t s om et i m es an as s es s e e m a y be p ut i n a d if f ic u l t s i tu a ti o n an d as m en ti o ne d b y Ho n' b le A ut ho r i t y i n c as e of J as b ir S i ng h S ar k ar i a ( s up r a) as we l l as L d . A ut ho r Shr i Raj ar at n a m it is f or t he l e gis l at ur e t o t ak e c or r ec t i v e s te ps . Ho we v er , it m a y n o t be o ut of pl ac e t ha t if c o ns id er in g t he d if f ic u lt y th e in ter pr et a ti o n g i v en b y th e 44 l d. c ou ns e l of th e as s es s e e is ac c e p te d th en t he R e ve n ue m a y no t be ab l e t o tax s uc h as s es s e es whe n t hes e d if f ic u l t ies ar e r em o v e d. F or ex am p le in t he pr es en t c as e if t om or r o w whe n a l l pe r m is s i o ns ar e ob t ai n ed an d c o ns tr u c ti o n is c om ple t ed an d if n o tax es a r e he l d to be pa ya b l e t h en la t er o n a ls o t h e as s es s e e m ay n ot be s ubj ec t e d to an y t ax un d er t he h e a d " c a pi t a l g a in" bec a us e t h en it c an b e e as il y c on t en d ed on be h a lf of the as s es s e e th a t th e tr a ns f er h a s alr e ad y t ak en p lac e on t he da t e wh en ir r e voc a bl e P o wer of A tt or ne y wa s ex ec u t ed . I n th at s i tu at i o n th e R e ve n ue wi l l h a ve no r em ed y.
10 7 T he a b o ve c l e ar l y s ho ws t h at s uc h h yp o th et ic a l c o ns i der a ti o n c an n ot b e c o ns i der e d f or g i v in g tr u e m ea n in g t o a p ar t ic u l ar pr o v is i on . I t has a ls o be e n obs er v ed t ha t i n s om e g en u i ne c as es th e d if f ic u l t i es m a y ar is e bu t it was f or t h e P ar l i am ent or t he G o ver nm en t t o pr o v id e r em ed y i n s uc h c as es a nd j u d ic i a l f or um s c an no t do a n yt h in g . T her ef o r e, i n v i e w of th e pr o v is io ns of Sec t io n 45 r . w.s . 48 we ar e of t he op i n i on th a t s ubs e qu e nt e v en ts , if at al l a n y wi l l n ot m ak e a n y d if f er e nc e b ec a us e to ta l c ons i de r a t io n r ec e i ve d or ac c r u e d h as t o b e as s es s e d in th e year of tr a ns f er . W e m a y a ls o n ot e t ha t it was s t at ed t h at ir r e v oc ab l e P o wer of At t or n e y h as b e en r e v ok ed b u t th e wor d " ir r e voc a b le" its e lf s ho ws tha t i n th e e ye s of la w s pec i a l P o wer of A tt or n e y c ou l d n o t h a ve b ee n r e vok e d. In v ie w of th is a n a l ys i s , we ar e of the op i n io n th a t e it h er th e J D A has no t be e n c a nc el l e d or in an y c as e th e s am e c an n ot b e c ons i de r ed f or de t er m in in g t h e tax at i on of c ap it a l g a in . Ac c or d i n g l y t h is c o nt en ti o n is r ej ec te d .
108 The next contention of the assessee is that even if the whole consideration has to be taxed then value of the flats cannot be taken at Rs. 4,500/- per sq. feet. It is also pointed out that in view of the agreement between the HASH & THDC consideration has been shown at Rs. 2,000/- per sq. feet for 126 flats whereas it is Rs. 4,500/- per sq. feet for three flats. W e find no force in these submissions. The assessee has filed along with the written submissions copy of the addendum of agreement between THDC and HASH by Joint Developer (at page 265 & 266) and this issue is discussed in clause 5 which is as under:-
"5. Clauses 4.1, 4.2, 4.3 and 4.4 on the page nos. 18 and 19 of the Agreement shall stand amended, modified and substituted by the following:-
4.1 It is expressly agreed and understood by and between the Parties hereto
(a) in the ratio of 72,28 between THDC and HASH in case Gross Sales Proceeds does not exceed Rs. 1272 crores;
(b) in the ratio of 70: 30 between THDC and HASH in case Gross Sales Proceeds is equal to Rs. 1272 crores;
(c) in addition (b), in the ratio of 60: 40 between THDC and HASH in respect of gross sales Proceeds in excess of Rs. 1272 crores.
"It is agreed that the minimum guaranteed amount from the Gross Sales Proceeds for THDC and HASH is Rs. 890.40 crores and Rs. 225.76 crores respectively. The minimum guaranteed amount of Rs. 225.76 crores to HASH includes Rs. 58.88 crores that shall be expended by THDC towards construction of 126 flats equivalent to 2,83,500 sq. ft,, which flats are to be allotted in the names of the members of the Society or otherwise, as the case may be, calculated as Rs. 2000 per sq. ft. for the area 2,83,500 sq. ft. and the 72% share of 3 flats of 2250 Sq. ft. to be purchased by HASH @ Rs, 4500/- per sq. ft. Should the application of the ratio 45 stipulated in (a) above result in HASH being entitled to a sum greater than the minimum guaranteed amount and THDC being entitled to a sum less than the minimum guaranteed amount, THDC shall-be entitled to the entitlement of HASH which is in excess of its minimum, guaranteed amount until THDC achieves its minimum g u a r a n t e e d a m o u n t . - T h e s a m e i s i l l u s t r a t e d i n A n n e x u r e I h e r e t o ."
109 The above clearly shows that HASH was entitled to total proceeds of Rs. 225.76 crores out of total proceeds of the project which were agreed to be shared by THDC and HASH but the portion of HASH includes a sum of Rs. 58.88 crores which was required to be spent towards construction of 126 flats equivalent to 283500 square feet area which were to be allotted to the m em bers of the societ y. Thus, it is clear that f igure of Rs. 2,000/- per sq. feet represents only the cost of constructions to be incurred by THDC which was debited to the account of HASH. Further, HASH has agreed to purchase three Flats @ 4,500/- per square feet. Some news reports were quoted before us in one of the cases to show that various brokers had issued various advertisements for sale of these flats and these flats were ultimately to be sold at Rs. 7,000/- to Rs. 10,000/- per square feet. This also becomes clear from the addendum of agreement in terms of total proceeds of 1272 crores. In any case if the cost of construction is Rs. 2,000/-, then cost of land which has been paid to the society is also to be added to the cost of the flat because this portion of consideration in any case was received or to be received later by the society in cash. Considering the present market value of the flats in and around Chandigarh area which is Rs. 4,000/- to 12,000/- per square feet we are of the opinion that value of the flat at Rs. 4,500/- per square feet is absolutely fair. In any case M/s HASH has agreed to purchase the flats at this rate from M/s THDC. It may be noted as pointed out by the ld. DR for the revenue some of the News report clippings filed by various assessees clearly shows that flats were booked in the "Tata Camleot" (this was the name which was given to the Project which was to be developed on the land of two societies) in the Pre Launch offer in the range of Rs. 7500 to 8000 per sqft. It is a common knowledge that rates in Pre Launch offer are lower than the rates when bookings open for the Public. Considering these facts we are of the opinion that Assessing Officer has estimated the value of the flats on most reasonable basis. In view of these observations this contention is rejected.
110 The Ld. Counsel for the assessee had made some submissions on the issue of deduction u/s 54F. He has pointed out that this issue has been rejected wrongly by CIT(A). However, carefully perusal of the grounds of appeal show that no ground in respect of deduction u/s 54F has been raised before us and, therefore, we decline to adjudicate this issue and all the arguments made in this behalf are rejected. Though reference was made to ground No. 2.3 in this regard. The perusal of grounds No. 2.3 would show that reference has been made only to Section 54 and Section 54EC. Section 54 deals with deduction in case the assessee being an individual or HUF, transfers the residential house and in case before us, the assessee has transferred the plot. Therefore, it cannot be said that deduction u/s 54F and 54 is same. Since no ground has been raised for deduction u/s 54F, we reject this contention."
Following the same we decide this issue against the assessee.
14 Ground No. 5 - The assessee had claimed deduction u/s 54F which was denied by the authorities below because there 46 was no evidence available with the assessee to show that the assessee has actually purchased a house or used the sale consideration money towards cost of construction.
15 Both the parties were heard.
16 After considering the rival submissions we find that this issue was also adjudicated in case of Charanjit Singh Atwal (supra) vide para 167 to 169 which are as under:
" 16 7 Af t er h ear i n g b ot h p ar ti es we f in d t h is is s u e has b e en adj ud ic at e d b y L d. C IT ( A p pe a ls ) v i de p ar a 6 .1 3 t o 6. 1 4, wh ic h ar e as u nd er :-
" 6. 1 3 Th e Ld . C ou ns el f or t he a p p el l a nt h as a ls o ar g ue d t ha t th e a pp e l la n t is e nt it l ed t o d ed uc ti o n u/s 5 4F to t h e ex t e nt o f i nv es tm e nt i n th e ne w as s et , as r e inv es t m en t in f l at . F or t h e s ak e o f c onv e n ie nc e, pr ov is i o ns o f s ec t i o n 54 F of t he Ac t ar e r ep r o d uc e d b e lo w:
" 54F . Ca pit al g ai n on t ra nsf e r of c ert a in cap it a l a ss et s not t o b e ch a rg ed in c a s e o f i nv e st m ent i n re sid ent i al hou s e.
( 1) Su b j ec t to th e pr o v is io ns of s ub - s ec t io n ( 4) , wh er e, i n th e c as e o f an ap p e ll an t b e in g a n i n d iv i d u a l or a H i nd u un d iv id e d fa m i ly , t h e c ap i ta l g a i n ar is es fr o m t h e tr a ns fer of a ny l o n g- t er m c a p it a l as s et , n ot b e i ng a r es i d en t ia l ho us e ( h er e aft er i n t h is s ec t io n r ef er r e d t o as t he or i g in a l as s e t) , a n d th e ap p e l l an t has , w it h in a p er io d of o ne y e ar be f or e or t w o y e ar s a ft er t he d at e on wh ic h t he tr ans fe r to ok p l ac e p ur c has e d , or has w it h i n a pe r i od of t hr e e y ear s a ft er t h at da t e c ons tr uc t ed , a r es i de n ti a l ho us e ( he r e af t er i n th is s ec t i on r ef er r ed t o as t h e new as s e t) , th e c ap i ta l ga i n s ha l l be d ea l t w i th i n ac c or da nc e w i th th e fo l l ow i ng p r ov is i ons o f t h is s ec t i on , t ha t is t o s ay ,-
( a) if th e c os t o f t he a s s et is n ot l es s t ha n t he ne t c ons i d er a t io n i n r es p ec t of th e or ig i na l as s e t, th e wh o le o f s uc h c a p it a l ga i n s ha l l n ot b e c har ge d u nd er s ec t i on 45 ;
( b) if t h e c os t o f th e n ew as s et is l es s th a n th e n et c ons i d er a t io n i n r es p e c t o f th e or ig i n al as s e t, s o muc h of t h e c ap i ta l g a i n as be ar s t o th e w h ol e o f th e c a p it a l ga i n t h e s a m e pr o p or t i on as t h e c os t of th e ne w as s e t be ar s t o th e n e t c o n s i der at i o n, s ha l l no t be c h ar g e d un d er s ec t i o n 4 5;
Pr ov id e d t ha t n ot h i ng c on ta i n ed i n t his s u b - s ec t i on s h a ll ap p ly w her e-
a) th e a pp e l la n t-
i) ow ns mor e th a n on e r es id e nt i a l h o us e , ot h er t h an th e n ew as s e t, o n t he da te of tr a ns f er of t h e or ig i n al as s e t; or ii ) pur c h as e a ny r es id e nt i al h o us e , o t her t ha n t he n ew as s e t, wi t hi n a pe r i o d of on e y e ar a ft er t h e da t e of tr a ns f er o f t he or i g i na l as s et ; or 47 iii ) c ons tr uc ts a ny r es i de nt i a l ho us e, o t her t h an t h e ne w as s et , w i th i n a p er io d of t hr ee y e ar s a ft er th e da t e of tr a ns f er o f th e or ig i n al as s e t; a n d
b) th e i nc o m e fr o m s uc h r es id e nt i a l ho us e, o th er th a n t h e on e r es i de nt i a l ho us e ow n ed o n t h e da te o f tr a ns f er o f th e or ig i na l as s et , i s c ha r g e ab l e un d er th e he a d " Inc o me fr o m h ous e pr op er ty ".
Ex pl a n at i on - For t h e p ur pos es o f th is s ec t i on , " ne t c o ns id er at i o n ", in r el at i o n to th e tr a ns f er o f a c a p it a l as s e t, m ea ns t h e f u ll v a lu e o f t h e c o ns id er at i on r ec e iv e d or ac c r u i ng as a r es u l t o f t h e tr a ns f er o f t h e c ap i ta l as s et as r e duc e d by a ny ex p en d it ur e i nc ur r e d wh o l ly a nd ex c lus iv e ly i n c on n ec t i on w i th s uc h tr a ns f er .
6. 1 4 S ub s ec t i on ( 1) o f s e c ti o n 5 4 F a l l ows ex e mp t io n of lo n g ter m c a p it a l g ai ns fr o m tax , i f th e n et c ons i der at i o n o n t r a ns f er of l on g t er m c ap i ta l a s s et is inv es te d i n t h e p ur c has e of a ne w r es id e nt i a l h o us e w it h i n a p er io d of on e y ea r be f or e or t w o y e ar s af ter or i n c o ns tr uc ti on o f a ne w r es id e nt i al h o us e w i th i n a per i o d of 3 y ea r s fr o m th e d at e o f t he tr a n s fer o f t he lo n g ter m c ap i ta l as s e t. In t he i ns t a nt c as e , t he c o ns tr uc t io n of t h e f l at , wh ic h t h e a p pe l l a nt is to b e g iv e n, h as n o t y et s ta r t ed a nd s o i t c an n ot b e s a id t ha t th e a mo u nt h as be e n i nv es t ed i n a n ew r es id e nt i a l h o us e f or a l lo w in g b en ef i t u /s 54 F of t he Ac t. H enc e, th e a pp e l la n t is n ot e l i g ib l e for de d uc t i on u/s 5 4 F "
16 8 B ot h p ar t i es a d op t ed s im il ar a r g um en ts b ef or e us as in c as e of S hr i Ch ar anj i t S in g h A t wa l.
16 9 Af t er c ons i d er i n g th e r i v a l s ubm is s io ns , we f i n d Ld . C IT ( A) h as adj u dic a te d t h e is s u e c or r ec t l y an d has g i ve n t h e r e as on f o r r ej ec ti o n of de d uc t i on u nd er s ec t i on 54 / 5 4 F. T h er ef or e, we f i n d n ot h in g wr o ng wi t h th e or der of L d. C IT ( A) a nd c onf ir m th e s am e. H e nc e t h is gr ou n d is r ej ec te d . "
Following the above we decide this issue against the assessee.
17 Ground No. 6 - After hearing the rival submissions we find that the Assessing officer has adopted cost of construction at Rs. 81,426/- by indexing the original cost at Rs. 72,641/-. Perusal of the impugned shows that this ground has not been adjudicated by the Ld. CIT(A), therefore we set aside the order of Ld. CIT(A) and remit this issue to his file with a direction to adjudicate this ground.
18 In the result, appeal of the assessee is partly allowed for statistical purposes only.
Order pronounced in the open court on 31.10.2014 Sd/- Sd/-
(BHAVNESH S AI NI) (T.R. SOOD)
JUDICI AL MEMBER ACCOUNTANT MEMBER
Dated: 31.10.2014
SURESH
Copy to: The Appellant/The Respondent/The CIT/The CIT(A)/The DR 48