Income Tax Appellate Tribunal - Pune
Shri Prakash Rajaram Bolgamwar,, vs Department Of Income Tax on 10 April, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER
AND MS SUSHMA CHOWLA, JUDICIAL MEMBER
ITA No.179/PN/2014
Assessment Year: 2003-04
Income Tax Officer,
Ward - 2(3), Solapur .... Appellant
Vs.
Shri Prakash Rajaram Bolgamwar,
102, Antrolikar Nagar No.1,
Hotgi Road, Solapur,
Dist - Solapur .... Respondent
PAN: AJRPB9000H
Appellant by : Shri B.C. Malakar
Respondent by : Shri S.N. Doshi
Date of hearing : 24-02-2015
Date of pronouncement : 10-04-2015
ORDER
PER SUSHMA CHOWLA, JM:
This appeal filed by the Revenue is against the order of CIT(A)-III, Pune, dated 20.11.2013 relating to assessment year 2003-04 against order passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961.
2. The Revenue has raised the following grounds of appeal:-
1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in treating the capital gain arising out of the acquisition of land bearing Survey No. 312 (Old) & 130 (New), situated at Majrewadi, Dist Solapur, as Long Term Capital Gain.
2. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in not observing that as per the Power of Attorney given to the assessee by Shri Suresh S Bhaiyya, there was no mention of any possession given to the assessee.
3. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred to ignore the fact that no possession was given to the assessee which is as per Point '0' of the Development Agreement dated 18.01.1996.2 ITA No.179/PN/2014
Shri Prakash Rajaram Bolgamwar
4. As per the Development Agreement, 1996, only right given was to permit technicians, architects and engineers to enter and verify the property.
5. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in not observing page No.30 of Sale Deed dated 31.08.2000, wherein it is clearly written that the possession of the said property was given on 31.08.2000, i.e., on the same day of the agreement.
6. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in not observing the 7/12 extract wherein the name of the assessee is reflected in the name "others" which do not prove the ownership in the name of the assessee.
3. The only issue raised in the present appeal is in relation to the treatment of gain arising on sale of rights in the property.
4. The brief facts of the case are that Survey under section 133A of the Act was carried out at the premises of assessee on 21.03.2006. During the course of Survey, statement of assessee was recorded, in which he admitted to have received compensation of Rs.3,21,10,358/- from Maharashtra Housing and Development Authority (MHADA) towards acquisition of land admeasuring 80307 sq. mtrs. In the return of income filed pursuant to notice under section 148 of the Act, the assessee declared total income of Rs.2,92,89,040/- and agricultural income of Rs.1,57,350/-. The assessee had acquired development rights in the land situated at Survey No.312 (old) / 130 (new), Majarewadi, Jule Solapur, vide agreement dated 18.01.1996, under which the consideration was fixed at Rs.45,00,000/-. The said property was owned by one Shri Suresh S. Bhaiyya. Another supplementary development agreement of land was executed on 26.07.1999. It was admitted that out of total consideration of Rs.45,00,000/-, sum of Rs.31,00,000/- was paid up to 26.07.1999. The assessee ultimately purchased the land vide Sale Deed dated 31.08.2000 for consideration of Rs.23,92,000/- and stamp duty of Rs.2,23,000/- was paid. Subsequently, out of this land, MHADA acquired land admeasuring 80307 sq. mtrs. and paid compensation of Rs.3,21,10,358/- on 14.12.2002. As per the assessee, income on account of compensation received was to be assessed as income from long term capital gain, whereas the Assessing Officer was of the view that the 3 ITA No.179/PN/2014 Shri Prakash Rajaram Bolgamwar transaction between the parties was completed by handing over the possession vide Sale Deed dated 31.08.2000, as initially no possession was given to the assessee and only permission was given to carry out the development works and other transactions, and hence it was Short Term Capital Gains. On the other hand, claim of the assessee was that it was in possession of the land since 18.01.1996. The Assessing Officer held that the income was assessable as income from short term capital gain.
5. The CIT(A) examined the terms of Development Agreement, Power of Attorney and supplementary Development Agreement and also final Sale Deed. It was noted by the CIT(A) that under the Development Agreement dated 18.01.1996, the appellant was given the right to develop land and for this, Power of Attorney dated 18.01.1996 was executed. Under the said Power of Attorney, the permission for conversion of land as non-agricultural, division of land into plots and their sale, execution of sale deeds / agreements of sale and also acceptance of consideration was given to the assessee. The agreement also reflected that the expenses towards development of land had to be borne by the assessee including the expenses incurred for permission of NA, architecture, labour, masons, etc. The original Development Agreement was not a registered document, but the Power of Attorney even dated was registered with Sub- Registrar, Solapur North. Another supplementary Development Agreement dated 17.07.1999 was executed before the Tahsildar and Executive Magistrate, Solapur North, under which development of plots was intended. The said agreement stated that property was in the possession of second party i.e. the purchaser and the entire property along with easement rights was given in possession to the first party by the second party on 18.01.1996 by executing the Development Agreement and Power of Attorney, which agreement was still in existence. The CIT(A) was of the view that the assessee had acquired certain rights vide the Development Agreement and had also shown that assessee had part possession of the property although the vendors still retains his ownership or 4 ITA No.179/PN/2014 Shri Prakash Rajaram Bolgamwar other rights. The CIT(A) further observed that no doubt, the sale deed dated 31.08.2000 mentioned that the appellant had purchased the land permanently and physical possession of the land was delivered perpetually by way of ownership for consideration of Rs.23,92,000/-, but the assessee had acquired certain rights in the property, which amounted to part possession vide the earlier documents. The land was also mutated in 7/12 records in the name of assessee by way of entry No.1777, dated 04.11.1996. The CIT(A) was of the view that the assessee had acquired effective rights over the land as per section 53A of the Transfer of Property Act. Reliance was placed on the ratio laid down by the Hon'ble Bombay High Court in Chaturbhuj Dwarkadas Kapadia Vs. CIT, (2003) 260 ITR 491 (Bom) and it was held that since the rights over the property vested with the assessee as per Irrevocable Power of Attorney and Development Agreement dated 18.01.1996, therefore, there was effective transfer of impugned property on that date and the compensation receipts were to be taxed as income from long term capital gain in the hands of the assessee.
6. The Revenue is in appeal against the order of CIT(A).
7. The learned Departmental Representative for the Revenue pointed out that the issue arising in the present appeal is whether the gains are to be assessed as short term or long term capital gains. The case of the Assessing Officer was that the possession was given on 31.08.2000 i.e. on the date on sale deed was executed, whereas the case of the assessee was that the possession was given in 1996 on the execution of Development Agreement. It was pointed out by the learned Departmental Representative for the Revenue that both the Development Agreements do not mention giving of possession and only Power of Attorney was only registered. The learned Departmental Representative for the Revenue further pointed out that the ratio laid down by Hon'ble Bombay High Court in Chaturbhuj Dwarkadas Kapadia Vs. CIT (supra) was distinguishable as there was no handing over of possession in the case of assessee and hence, no performance of contract.
5ITA No.179/PN/2014
Shri Prakash Rajaram Bolgamwar
8. The learned Authorized Representative for the assessee drew our attention to the English translation, copies of different agreements executed between the parties. It was pointed out that as per the Development Agreement dated 18.01.1996, possession was given to the assessee though under clause
(o), it conferred only ownership rights in the said property. Further, the sale deed talks about absolute ownership and the perpetual ownership were given to the assessee. Further, reference was made to the terms of supplementary Development Agreement dated 26.07.1999, wherein it has been mentioned that the assessee was to take possession from MHADA. Further, the name of assessee was recorded in other relevant documents i.e. 7/12 extracts. The award for payment of compensation is placed at page 7 of the Paper Book and the award has been given to the Power of Attorney holder and even cheque was issued to the said person i.e. the assessee. Our attention was also drawn to the wealth tax orders placed at page 15 of the Paper Book. Reliance was placed on the ratios laid down in the following cases:-
a) Chaturbhuj Dwarkadas Kapadia Vs. CIT, (2003) 260 ITR 491 (Bom)
b) ICI Ltd. Vs. DCIT (2002) 80 ITD 58 (Cal)
c) Jasbir Singh Sarkaria, In Re (2007) 294 ITR 196 (AAR)
d) Charanjit Singh Atwal Vs. ITO (2013) 36 taxmann.com 10 (Chandigarh - Trib)
9. We have heard the rival contentions and perused the record. The assessee in the present case had acquired the development rights of land in question from one Shri Suresh S Bhaiyya in terms of an agreement dated 18.01.1996, consequent to which even a registered Irrevocable Power of Attorney was executed in favour of the assessee. Clause (c) of the said agreement clearly stated that if the assessee contradicted any provisions of the Act relating to development and construction, then the agreement would be cancelled and the transferor would have right to take over the possession of the land. The contention of the assessee in this regard, was that as per the Development Agreement and Power of Attorney executed on 18.01.1996, the possession of the land was given. The assessee had also furnished on record 6 ITA No.179/PN/2014 Shri Prakash Rajaram Bolgamwar the mutation (pherphar) in the Records of Rights effective from 18.01.1996 mutated on 04.11.1996 which establish that the assessee had acquired rights in the said property as the property was also mutated in the name of assessee. The CIT(A) had examined the documents executed by the assessee vis-à-vis the said property and observed as under:-
"3.2. I have considered the submissions made on behalf of the appellant, the objections of the Assessing Officer and the legal position with regard to transfer of a capital asset. The crux of the issue is the determination of the correct date of transfer of the land in question. Since this issue involves examination of the development agreement, POA and supplementary development agreement and the final sale deed, I have examined the impugned documents which have been got translated into English by the appellant through Shri Mukund Madhavrao Kulkarni, Advocate Solapur and filed during the course of appellate proceedings. Pages 17 to 21 of the paper book, relate to the development agreement dated 18.1.1996 wherein admittedly, against the consideration of Rs.5 lakhs received till that date (Rs.40 lakhs received vide post-dated cheques dated 1.7.1996. 1.1.1997 and 11.71997) the appellant was given the rights to develop the land under the Talegaon Dabhade scheme of Govt. of Maharashtra. For development of the scheme, vide POA dated 18.1.1996 the appellant was to get the permission for conversion of land as non- agricultural, division of land in to plots, sale of the same, execution of sale deeds and agreements of sale as also accepting the consideration for the plots sold. The POA also gave the appellant the power to enter into agreement for development of plot and getting the necessary sanctions. Both the agreements also show that all the expenses towards development of the land are to be borne by the appellant. Para 3 of the irrevocable POA, which is a registered document clearly mentions that the executee (namely, the appellant) has to bear entire expenses for development of the property. The development agreement also clearly states that expenses for permission of N.A (Clause F), architecture, engineer, labour, masons, etc. (Clause G) agreement, POA, sale deed of plots/flats, stamp duty, registration fee, etc (Clause M) have to be borne by the appellant. It is also seen from the record that, although the development agreement dated 18.1.1996 is not a registered document, the POA of even date has been registered with Sub Registrar (Solapur North) vide registration No. 1/96 dated 18.1.1996. I have also examined the supplementary development agreement dated 17.7.1999 which has been executed before the Tahsildar and Executive Magistrate, (Solapur North) and by which the development of plots has been intended. This agreement really clinches the issue that the property is under the possession of the first party to the document viz. the appellant. It is mentioned therein "The said property is in my possession (second party) and I am enjoying the fruits of said property. I also assure you that other than me no one is the owner and possessor of said property. The entire property mentioned above with elementary rights are given in possession to 1st party by 2nd party on 18.01.1996 by executing a registered Development agreement and Power of Attorney before Sub-Registrar North Solapur, Solapur vide registered agreement is still in existence and it is continuing" It also mentions, to quote "The above mentioned property is given to 1st party by 2nd party to carve plot and implement schemes as per law hence to execute the same this supplementary agreement is made and given to 1st party. The 2nd party assures and gives undertaking that while executing sale deed or Development agreement, wherever his 7 ITA No.179/PN/2014 Shri Prakash Rajaram Bolgamwar signatures are required he will do so." As per this agreement, the 2nd party Shri Sureshkumar Shreekishan Bhaiyya acknowledges the receipt of Rs.31 lakhs by cash and through cheque as a consideration for the agreement.
10. The finding of the CIT(A) vide paras 4.3.3 and 4.3.4 was as under:-
3.3 A reading of these three documents as mentioned in the preceding paragraphs shows that the appellant has acquired certain rights viz. the development rights by which he is authorised to get the land converted for non agricultural use, take sanctions and permissions for construction of row houses (subsequently plots) as per the Talegaon Dabhade scheme.
As already mentioned, the POA which is a registered document, mentions the rights acquired by the appellant for taking the various permissions, implementation of the row house scheme, division of the lands into plots, selling the plots and accepting the sale consideration of the plots. Therefore, reading of the three documents together [irrespective of clause O of the development agreement dated 18.1.1996] clearly shows that the appellant has part possession over the property although the vendor still retains his ownership or other rights. No doubt the sale deed dated 31.8.2000 mentions that the appellant has purchased the land permanently and physical possession of the land is delivered perpetually by way of ownership for a consideration of Rs.23,92,000/-, but the appellant is seen to have acquired certain rights in the properly which amounts to part possession vide the earlier documents. This was also the view endorsed by the Third Member decision of ITAT Mumbai in the case of Rubab M Kazerani vs JCIT reported in 91 ITD 429. Subsequently, this view has been endorsed by the Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia reported in 260 ITR 491B and Pune ITAT in Dynaneshwar M Mulik vs DCIT reported in 98 TTJ 179. This view is also supported by the decision of the Authority for Advance Ruling in the case of Jasbir Singh Sarkanya cited supra which held that "the actual date of taking physical possession or the instances of possession acts exercised is not very relevant. The ascertainment of such date, if called for, leads to complicated inquiries which may frustrate the objective of the legislative provision it is enough if the transferee has, by virtue of that transaction, a right to enter upon and exercise acts of possession effectively pursuant to the covenants in the contract That tantamounts to legal possession." The court further held that "A developer armed with GPA cannot be regarded merely as a licensee or an agent subject to the control of the owners. His possession cannot be characterized as precarious or tentative in nature. The fact that the agreement describes the GPA as irrevocable and an express declaration to that effect is found in the GPA itself is not without significance. Therefore, the irrevocable GPA executed by the owners in favour of the developer must be regarded as a transaction in the eye of law which allows the possession to be taken in part performance of the Contract for transfer of the property in question".
3.4. It is also seen that the land stands mutated in the 7/12 records in the name of the appellant by way of entry no. 1777 dated 04.11,1996. This proves beyond doubt that the appellant has acquired effective rights over the land as per sec. 53A if the Transfer of Property Act. Undoubtedly, the sale deed executed as on 31.08.2000 grants control and possession of the land to the appellant as 'absolute owner. However, the arrangement confirming the privileges of ownership without transfer of title has been held by the Bombay High Court to fall within the purview of sec.2(47)(v). Accordingly, respectfully following the decision of the Hon'ble Bombay 8 ITA No.179/PN/2014 Shri Prakash Rajaram Bolgamwar High Court in Chaturbhuj Dwarkadas Kapadia's case and other cases referred supra, it is held that the rights over the property vested with the appellant as per the irrevocable POA and development agreement dated 18.1.1996 and therefore, there was effective transfer on impugned property on that date. The Assessing Officer is directed to treat the compensation receipts as long term capital gains in the hands of the appellant. Grounds 1, 3 and 4 stand allowed."
11. The assessee before us has furnished an Explanation of the notings made in the Record of Right in Form No.6D. As per the entries made in "Nature of Rights" in "Record of Right in Form 6D" in pursuance of Development Agreement and Irrevocable Power of Attorney registered with Sub-Registrar of Solapur on 19.01.1996 the name of Shri Prakash R Bolgamwar is recorded in "other rights". As per the commentary on "7/12 Extract and Recording of Rights" by Adv. Sadanand Mankar on Pg No 104 Para 15 of this commentary, the examples of other rights are stated as under:-
a) The name of Karta of HUF is shown as occupier and names of other legal heirs are recorded under other rights,
b) Banks, Financial institutions, Pathasantha who have provided the loans,
c) Special privileges, right of getting water, right of way,
d) Where the share in land is undivided or conditional and controlled,
e) Transfer prohibited under Rehabilitation Act or similar legislations the same shall be recorded.
12. In view thereof, where the name of the assessee is recorded in other rights pursuant to signing of Development Agreement and the registration of Irrevocable Power of Attorney, it implies that the assessee had acquired the rights in the said property and since possession had already been given to the assessee, in view of the provisions of section 2(47)(v) of the Act, there was part performance of the contract under section 53A of the Transfer of Property Act and thus, where the assessee had acquired rights in the said property and also received possession, the ownership in the said property starts from 18.01.1996.
13. In the facts of the present case, where the possession of land had been given to the assessee in line with the terms agreed upon between the parties consequent to which an irrevocable Power of Attorney was executed, which has not been cancelled till date and also where the land was mutated in 7/12 records 9 ITA No.179/PN/2014 Shri Prakash Rajaram Bolgamwar in the name of assessee by way of entry No.1777, dated. 04.11.1996 establishes the case of assessee of having acquired rights over the land as per section 53A of the Transfer of Property Act. The arrangement between the parties confirms the handing over of the possession of land though in the sale deed executed on 31.08.2000, the control and possession of land was given to the assessee as absolute owner. Applying the ratio laid down by the Hon'ble Bombay High Court in Chaturbhuj Dwarkadas Kapadia Vs. CIT (supra), where the assessee had acquired certain rights over the property under the Development Agreement and the irrevocable Power of Attorney and the part possession of the property having been given to the assessee, we hold that there was effective transfer on the date of execution of Agreement dated 18.01.1996. Consequently, the assessee acquired certain rights in the said property from 18.01.1996 and the compensation received by the assessee in view thereof, is to be taxed in the hands of the assessee as income from long term capital gains. We uphold the order of CIT(A) and dismiss the grounds of appeal raised by the Revenue.
14. In the result, the appeal of the Revenue is dismissed.
Order pronounced on this 10th day of April, 2015.
Sd/- Sd/-
(G.S. PANNU) (SUSHMA CHOWLA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Pune, Dated: 10 th April, 2015.
GCVSR
Copy of the order is forwarded to: -
1) The Department;
2) The Assessee;
3) The CIT(A)-III, Pune
4) The CIT-III, Pune
5) The DR "B" Bench, I.T.A.T., Pune;
6) Guard File.
By Order
//True Copy//
Assistant Registrar
I.T.A.T., Pune