Income Tax Appellate Tribunal - Hyderabad
Bujunuri Jogi Reddy, Hyderabad vs Dy. Commissioner Of Income Tax, Central ... on 31 January, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "A", HYDERABAD
BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER
AND
SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER
ITA Nos.1774/Hyd/2017
Assessment Year: 2008-09
DCIT, Vs. Agamati Ram Reddy,
Central Circle-1(3), Hyderabad.
Hyderabad. PAN: ACZPA 4107 H
(Appellant) (Respondent)
C.O. No.03/Hyd/2018
(Arising out of ITA Nos.1774/Hyd/2017)
Assessment Year: 2008-09
Agamati Ram Reddy, Vs. DCIT,
Hyderabad. Central Circle-1(3),
PAN: ACZPA 4107 H Hyderabad.
(Cross Objector) (Appellant in appeal)
ITA Nos.1775/Hyd/2017
Assessment Year: 2008-09
DCIT, Vs. Bujunuri Jogi Reddy,
Central Circle-1(3), Hyderabad.
Hyderabad. PAN: AGQPB 2894 M
(Appellant) (Respondent)
C.O. No.38/Hyd/2017
(Arising out of ITA Nos.1775/Hyd/2017)
Assessment Year: 2008-09
Bujunuri Jogi Reddy, Vs. DCIT,
Hyderabad. Central Circle-1(3),
PAN: AGQPB 2894 M Hyderabad.
(Cross Objector) (Appellant in appeal)
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Assessee by: Sri A.V. Raghuram
Revenue by: Smt. Nivedita Biswas, CIT-DR
Date of hearing: 17/01/2019
Date of pronouncement: 31/01/2019
ORDER
PER Smt. P. Madhavi Devi, J.M.:
The above are the Revenue's appeals and the Cross Objections of the assessee's for the assessment year 2008-09 against the separate orders of CIT(A)-11, Hyderabad dated 10/08/2017. The issues involved in both the appeals of the Revenue and the Cross Objections of the assessees are common, since they are co-owners of a property, and therefore, they were heard and are disposed of by this common and consolidated order.
2. Brief facts of the case are that the assessees are individuals. They are co-owners of a piece of land. They gave their land for development to Janapriya Engineers Syndicated Ltd. There was a search and seizure operation u/s 132 of the Act at the business premises of the Janapriya Group, during which the above fact had come to light. The A.O. was of the opinion that the assessees were liable for capital gains on the basis of the development agreement. Since the assessees had not filed any returns of income for the assessment year under consideration, the AO issued a notice u/s 148 of the Act and in response to the same, the 3 assessees filed their returns of income but did not disclose any capital gains. During the assessment proceedings, the A.O. held that since the assessees have entered into development agreement and have given the possession of the land, they were liable for capital gains tax. The same was confirmed by the CIT(A) and the matter travelled upto the ITAT. The Tribunal in ITA No.407/H/2011 and others, discussed the issue at length and at para 14(f) of its order, observed that considering the fact that the assessee's part of development agreement was ultimately cancelled as the developer did not take steps to construct the flats, the CIT(A) has to verify the activities undertaken by the developer and also whether the possession was given to him and to verify the revenue records in whose name the property stands and who is paying the land revenue on the said property and to verify the genuineness of cancellation agreement, if any, duly executed. Consequent to this direction of the Tribunal, the CIT(A) reconsidered the issue.
3. The CIT(A) considered the assessee's contention that since the project did not progress as originally contracted and contemplated, the parties have re-negotiated all terms and conditions of development agreement and entered into a fresh agreement on 05/04/2010 cancelling the original development agreement dated 04/03/2008. He also observed that as per the fresh agreement, 1 Acre 19 Guntas of land was sold by the assessee to the developer as per the re-negotiated development agreement dated 05/04/2010 and the capital gains arising 4 on sale of land vide deed dated 05/04/2010, has been offered to tax by the assessee for the relevant assessment years. The CIT(A) therefore, accepted the assessee's contention that there is no intention on the part of the transferee to act in terms of the initial development agreement dated 04/03/2008. He also considered that the land sold vide deed dated 05/04/2010 resulted in capital gains, which has been offered to tax in the return of income filed for that year. Therefore, he held that there is no 'transfer' within the meaning of section 2(47) on account of the development agreement dated 04/03/2008 and accordingly deleted the addition of capital gains brought to tax by the A.O. Aggrieved by this finding of the CIT(A) giving relief to the assessee, the Revenue is in appeal before us by raising the following grounds of appeal:-
"1. The Ld. CIT(A) has failed to marshal the facts on the points / directions given by the Hon'ble ITAT.
2. The Ld. CIT(A) has grossly erred in not abiding by the directions of the Hon'ble ITAT issued at para 14(f) of ITAT order No.407/Hyd/2011, dated 2-7-2012 by not verifying the property details in the Revenue records and by not verifying the genuineness of the cancellation agreement dated 5/4/2010 which was registered having no legal scrutiny.
3. The Ld. CIT(A) has grossly erred in holding that there was no transfer within the meaning of section 2(47) of the IT Act, 1961 without appreciating that the intentions of both the parties continued to remain the same, as out of total land admeasuring 2.10 guntas as per the initial registered agreement dated 4/3/2008, about Ac. 1.20 guntas was purportedly sold to the same party and the remaining land renegotiated between the same parties for redevelopment through unregistered deed dated 5/4/2010 which was only a colourable device to postpone the tax liability to a distant date.5
4. The Ld. CIT(A) has erred in relying on the new unregistered deed dated 5/4/2010 without considering the initial registered development agreement dated 4/3/2008, which clearly stated that the agreement was final and there won't be any further agreement in this regard."
4. Learned Departmental Representative relied upon the grounds of appeal raised by the Revenue and also referred to the finding of the ITAT to argue that ITAT had given the finding that there is a transfer of the property and directed the CIT(A) to verify as to whether there was a cancellation of agreement.
5. On the other hand, Learned Counsel for the Assessee, supported the orders of the Authorities below. He submitted that the subsequent agreements were not registered only due to the directions of the Income Tax Department and for this purpose he has drawn our attention to the relevant papers in the paper book.
6. Having regard to the rival contentions and the material on record, we find that the ITAT at para 14(f), 15 and 16 of its order dated 02/07/2012 (supra) has directed as under:-
"14......
(a).........
............
...........
(f) The last noticeable ingredient is, "the transferee has performed or is willing to perform his part of the contract". To ascertain the existence of willingness on the part of the transferee one must not put stop at one event but willingness is to be judged by the series of action of the transferee. The transferees survey the land and to attract purchases put 6 up hoardings plus sales office and carry out site development work. Landscaping, sales promotion, execution of construction and completion of project are all incidental to demonstrate the willingness of the transferee. On one hand, the power of attorney grants bundle of possessor rights to the developer simultaneously and on the other hand transferee's gesture of payment of consideration coupled with development work can be said to be a positive step towards willingness to fulfil the commitment. Facts of this case thus suggest that the developer had never intended to walk-out of the project. However, whether the developer has performed its part of the contract by taking steps to construct the flats or not has to be verified by the lower authorities. The lower authorities have also not verified the parties concerned regarding the development agreement. It is also required to verify the fact with regard to the possession the property in whose hand it is vested with and also required to verify the revenue records in whose name the property stands and who is paying the land revenue on the said property to the concerned authorities and also directed to verify the genuineness of the cancellation agreement, if any duly executed.
15. To sum up the owners have entered into an agreement for development of the property and certain rights were assigned to the developer who in turn had made the substantial payment and consequently entered into the property and thereafter if the transferee has taken any steps in relation to construction of the flats, then it is to be considered as transfer u/s. 2(47)(v) of the I.T. Act. The fact that the legal ownership continued with the owners to be transferred to the developer at a future distant date really does not affect the applicability of s. 2(47)(v) as per the reasons assigned hereinabove. If the transferee was undisputedly willing to perform its part of the contract, then we have to hold that there is transfer u/s. 2(47)(v) of the Act. Thus, if the possession and control of the property is already vested with the transferee and the impugned development agreement has not been duly cancelled and it is still in operation, it has to be decided that there is a transfer u/s. 2(47)(v) of the Act. We have to see the real intention of the parties. As per the well known cannon of construction of document, the intention generally prevails over the word used and that such a construction placed on the word in a deed as is most agreeable to the intention of the parties. If there are grounds appearing from the face of the instrument affording proof of the real intention of the parties, then that intention would prevail against the obvious and ordinary meaning of the words used. Entering into the property and handing over of the possession was instantaneous thus entire conspectus of the case has attracted the provision of S. 45 of the Act on fulfilment of conditions laid down in section 53A of the Transfer of Property Act. In our opinion, the real intention of the parties herein to be seen.
16. Accordingly, we set aside the above issue relating to transfer of property u/s. 2(47)(v) of the IT Act to the file of the CIT(A) to decide the same afresh in light of the above observations and after considering the ratio laid down by the Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia vs. CIT (supra) and also the order of the Tribunal in the case of Dr. Maya Shenoy V/s. ACIT(124 TTJ (Hyd) 692). 7
He is also directed to consider the order of the Tribunal Pune Bench in the case of Dyaneshwar N Mulik vs. ACIT, 98 TTJ 179 wherein held that Clause (47) of s. 2 was amended by the Finance Act, 1987 w.e.f. 1st April, 1988 by inserting new sub-cls. (v) and (vi). These two new sub-clauses provide that 'transfer' includes (i) any transaction which allows possession to be retained in part performance of a contract of the nature referred to in s. 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. Therefore, under these two sub-clauses, the capital gain 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. The assessee entered into an agreement with the builder/developer KPE for development of the impugned land and construction of flats thereon. Also, the assessee signed a general power of attorney in favour of the builder/developer on 20th June, 1996 and gave possession of the property to the builder/developer. Further, the assessee acted on the impugned agreement by accepting from the builder/developer payments by cheques on different dates in the financial year 1997-98 aggregating to Rs. 48,00,000 as admitted in his letter dt. 22nd Feb., 2001 addressed to the AO. In para 4(b) of the above mentioned letter, the assessee admitted that the valuation of the amenities/complexes constructed by the builder/developer in terms of the second agreement of 20th June, 1996 was Rs. 38,11,934 as on 7th Jan., 1999. In view of the facts and circumstances discussed above, all the conditions of sub-cl. (v) of s. 2(47) are satisfied in this case and therefore, it has to be inferred that a 'transfer' did take place within the meaning of s. 2(47)(v). The argument that the deeds in respect of the sale of flats were not registered/executed is not a relevant consideration so far as provisions of sub-cl. (v) of s. 2(47) are concerned. The completion of 'transfer' of an immovable property as per the general law is not a requirement for the applicability of the provisions of the subcl. (v) of s. 2(47). Further, the assessee's plea that subsequently he filed suits which were pending, against the builder/developer with the prayer that the agreements with the builder/developer be declared as cancelled, is merely about suits which were pending and which represent a subsequent event and, therefore, it does not affect the above inference. - Chaturbhuj Dwarkadas Kapadia vs. CIT (2003) 180 CTR (Bom) 107 : (2003) 260 ITR 491 (Bom) relied on."
7. Thus, it can be seen that consequent to the directions of the ITAT, the CIT(A) was to decide the appeal afresh after affording a reasonable opportunity of being heard to the assessee. We find that the CIT(A) had considered the fact that the development agreement was subsequently cancelled as the transferee had not taken any steps to fulfil its part of the contract and on fresh negotiations, a fresh agreement dated 8 05/04/2010 was entered into, cancelling the original development agreement dated 04/03/2008. He also observed that the fresh agreement has been acted upon by selling 1-Acre 19-Guntas of land to the developer and only 1-Acre was given for development and the assessee has offered the capital gains on sale of land to tax. These are matters of record and the CIT(A), whose powers are coterminous with the powers of the Assessing Officer, has considered the evidence to come to the conclusion that there is no transfer as per the initial development agreement dated 04/03/2008. Assessee also filed the paper book containing the copies of the development agreement dated 04/03/2008 and the subsequent agreement dated 05/04/2010 whereby the earlier development agreement was cancelled. At page 85 of the PB is the letter of the Sub-Registrar wherein it is said that due to the instructions of the Income Tax Department vide Letter dated 28/08/2010, registration of these lands is prohibited. We find that the CIT(A) has taken cognisance of the unregistered document after due verification and has given relief to the assessee. The returns of income for the A.Y. 2009-10, 2010-11 and 2012-13 are also filed before us at pages 86 to 103 of the PB wherein it is seen that the assessee has offered income from capital gains for the A.Y. 2011-12 for the land sold on 31/03/2011. Since the Revenue has not been able to bring any material on record contrary to the finding of the CIT(A), we do not see any reason to interfere with the decision of the CIT(A).
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8. In the result, the Revenue's appeals are dismissed.
9. Assessee has filed the following Cross Objections:-
"1. The Ld. CIT(A) erred in not adjudicating the issue of retrospective operation of sub-section 5A to section 45 of the Income Tax Act, 1961, inserted by the Finance Act, 2017, which was specifically raised by the Respondent.
2. The CIT(A) ought to have held that the capital gains in the present case is not chargeable to tax in the assessment year under consideration even as per sub-section 5A to section 45 of the Act, which operates retrospectively, being clarificatory and remedial in nature.
3. The Ld. CIT(A) ought to have appreciated that liability for developer did not accrue as the Developer has not constructed, as held by the SC in the case of CIT vs. Balbir Singh Maini, and therefore, ought to have held capital gains does not arise this assessment year."
10. As regards Grounds No. 1 and 2 are concerned, we find that these grounds are already decided against the assessee in the case of Smt. G. Sailaja vs. ITO in ITA Nos. 51 & 570/Hyd/2016 and others, dated 30/11/2017 wherein the Coordinate Bench (to which both of us are signatories) has held that the amendment of sub- section 5A to section 45 of the IT Act, 1961 is not retrospective effect in nature. Therefore, Grounds No. 1 and 2 are rejected. As regards Ground No.3 is concerned, it has already been considered by the CIT(A) and though he did not give any specific finding that the liability for development agreement did not accrue as the developer has not contracted, he has clearly considered the cancellation of the deed and has held that since there is no transfer, there is no capital 10 gains. In view of the same, we do not see any reason to adjudicate this ground at this stage.
11. Conclusively, both the Revenue's appeals as well as the assessee's cross objections are dismissed.
Pronounced in the open Court on 31 st January, 2019.
Sd/- Sd/-
(S. RIFAUR RAHMAN) (P. MADHAVI DEVI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, Dated: 31 st January, 2019
OKK
Copy to:-
1) Shri Agamati Ram Reddy, H.No.2 -3-35, Sri Sai Residence,
Amberpet, Hyderabad.(ii) Sri Bujunuri Jogi Reddy, Ashoka Satya, 2-2-7/1, Sivam Road, Bagh Amberpet, Hyderabad.
2) DCIT, Central Circle -1(3), 7 t h Floor, Aayakar Bhavan, Basheerbagh, Hyderabad.
3) The CIT(A)-11, Hyderabad 4) The Pr. CIT-11, Hyderabad 5) The DR, ITAT, Hyderabad 6) Guard File