Smt. Malathi Louis, CHENNAI v. ITO, CHENNAI

ITA 207/CHNY/2014 | 2010-2011
Pronouncement Date: 23-04-2014 | Result: Dismissed

Appeal Details

RSA Number 20721714 RSA 2014
Assessee PAN AMSPM6045P
Bench Chennai
Appeal Number ITA 207/CHNY/2014
Duration Of Justice 3 month(s)
Appellant Smt. Malathi Louis, CHENNAI
Respondent ITO, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 23-04-2014
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 23-04-2014
Date Of Final Hearing 19-02-2014
Next Hearing Date 19-02-2014
Assessment Year 2010-2011
Appeal Filed On 22-01-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH CHE NNAI . . . ! ' # $ BEFORE DR. O.K. NARAYANAN VICE PRESIDENT & SHRI VIKAS AWASTHY JUDICIAL MEMBER S.P. NO. 17/MDS/2014 & I.T.A. NO. 207/MDS/2014 ASSESSMENT YEAR : 2010-11 SMT. MALATHI LOUIS NO.27 ZION STREET MOGAPPAIR WEST CHENNAI-600 037 [PAN: AMSPM 6045 P] ( !% /APPELLANT) VS THE INCOME TAX OFFICER WARD-XIII(4) CHENNAI ( &'!% /RESPONDENT) / APPELLANT BY : SHRI S.SRIDHAR ADVOCATE / RESPONDENT BY : SHRI SHAJI P. JACOB ADDL.CIT / DATE OF HEARING : 19-02-2014 / DATE OF PRONOUNCEMENT : 23-04-2014 #( / O R D E R PER VIKAS AWASTHY J.M: THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-VII CHE NNAI DATED 27-12-2013 RELEVANT TO THE ASSESSMENT YEAR (AY) 201 0-11. I.T.A. NO. 207/MDS/2014 & S.P.NO. 17/MDS/2014 2 2. THE ONLY ISSUE IN APPEAL IS WHETHER THE CAPITAL GAIN ON SALE OF FLATS ALONG WITH UN-DIVIDED SHARE IN LAND BY THE ASSESSEE IS A LONG TERM CAPITAL GAIN OR SHORT TERM CAPITAL GAIN. THE FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE PURCHASED LAND ON 05-03-2007 FOR A CONSIDERATION OF ` 10 01 385/-. THEREAFTER THE ASSESSEE ENTERED INTO A JOINT VENTURE AGREEMENT WITH M/S.RAJUS FLAT PROMOTERS PVT. LIMITED (HEREIN AFTER REFERRED TO AS THE BUILDER) ON 07-04-2008 FOR CONSTRUCTION OF RESIDENTIAL FLATS ON THE AFORESAID LAND. AS PER THE JOINT VENTURE AGREEMENT THE ASSESSEE WAS TO GET FO UR FLATS IN THE BUILDING. A SUPPLEMENTARY AGREEMENT DT.24-08-2009 WAS EXECUTED BETWEEN THE ASSESSEE AND A DEVELOPER WITH DETAILS OF CONSIDERATION SHARING OF FLATS AND THE TOTAL BUILT UP AREA. AS PER THE SUPPLEMENTARY AGREEMENT OUT OF TOTAL BUILT UP AREA OF 9 128 SQ. FT. THE ASSESSEE WAS ENTITLED TO GET 4 290 SQ. FT. THE BUILDER ALLOTTED FOUR FLATS WITH THE BUILT UP AREA OF 4 136 SQ. FT. THERE WAS A SHORT FALL OF 154 SQ. FT. THE BUILDER COMPENSATE D THE ASSESSEE FOR THE SHORT FALL OF 154 SQ. FT. @ 3000 PER SQ. FT AND THUS PAID A SUM OF ` 4 62 000/- FOR THE SHORT FALL. IN THE RETURN OF IN COME FOR THE AY.2010-11 THE ASSESSEE OFFERED TO TAX SHORT TERM CAPITAL GAIN FROM SALE OF ONE FLAT. TO DETERMINE THE CAPITAL GA IN THE ASSESSEE TOOK THE DATE OF ORIGINAL JOINT VENTURE AGREEMENT I .E. 07-04-2008. I.T.A. NO. 207/MDS/2014 & S.P.NO. 17/MDS/2014 3 AS REGARDS OTHER THREE FLATS THE ASSESSEE CONTENDED THAT THEY WERE SOLD IN THE PERIOD RELEVANT TO THE AY.2011-12 THEREFORE GAIN ARISING FROM THE SALE OF FLAT WILL BE OFFERED TO TA X IN THE NEXT AY AS LONG TERM CAPITAL GAIN. THE ASSESSING OFFICER DURI NG THE COURSE OF ASSESSMENT HELD THAT THE SUPPLEMENTARY AGREEMENT GAVE DETAILS OF THE SHARING RATIO AND THE CONSIDERATION THEREFORE THE DATE OF SUPPLEMENTARY AGREEMENT WOULD BE CONSIDERED TO DETERMINE THE CAPITAL GAINS. SINCE THE FLATS WERE SOLD WITHIN THE PERIOD OF THIRTY SIX MONTHS FROM THE DATE OF SUPPLE MENTARY AGREEMENT I.E. 24-08-2009 THE GAIN ON SALE OF ALL THE FOUR FLATS IS SHORT TERM CAPITAL GAIN. AGGRIEVED AGAINST THE ASSESSMENT ORDER DATED 29-01- 2013 PASSED U/S.143(3) R.W.S. 147 OF THE INCOME TAX ACT 1961 (HEREIN AFTER REFERRED TO AS THE ACT) THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE CIT(APPEALS). THE CIT(APPEALS) OBSERVED THAT THE ASSESSEE ENTERED INTO JOINT VENTURE AGREEMENT WITH THE BUILDER SALE DEED WITH THE BUYERS RELATING TO TRANSFER OF U N-DIVIDED SHARE OF LAND WERE EXECUTED BY THE BUILDER ON THE BASIS OF G ENERAL POWER OF ATTORNEY [GPA] EXECUTED BY ASSESSEE. THE CONSTR UCTION AGREEMENT BETWEEN THE BUYER AND THE BUILDER WAS SEP ARATELY EXECUTED. THE SALE DEEDS DT.23-04-2010 22-01-2010 08-04- 2010 AND 17-05-2010 WERE EXECUTED BY THE BUILDER ON THE BASIS OF I.T.A. NO. 207/MDS/2014 & S.P.NO. 17/MDS/2014 4 IRREVOCABLE GPA EXECUTED BY THE ASSESSEE IN FAVOUR OF THE DEVELOPER. THE CIT(APPEALS) HELD THAT THE TRANSFER IN TERMS OF SECTION 2(47)(V) TOOK PLACE ON THE DATE OF EXECUTIO N OF THE JOINT VENTURE AGREEMENT I.E. 07-04-2008 & 24-08-2009. T HE GPA EXECUTED BY THE ASSESSEE IN FAVOUR OF THE DEVELOPER UNEQUIVOCALLY GRANTED BUNDLE OF POSSESSORY RIGHTS TO THE ASSESSEE . THE IRREVOCABLE POWER OF ATTORNEY EXECUTED BY THE ASSES SEE IN FAVOUR OF THE DEVELOPER HAS TO BE REGARDED AS TRANSACTION IN THE EYE OF LAW WHICH ALLOWED POSSESSION TO BE TAKEN IN PART PE RFORMANCE OF THE CONTRACT OF THE TRANSFER. THE CIT(APPEALS) FUR THER POINTED OUT THAT AS PER THE JOINT VENTURE AGREEMENT DT.07-04-20 08 THE DEVELOPER PAID ` 28.00 LAKHS ON VARIOUS DATES TO THE ASSESSEE. OUT OF THE SUM OF ` 28.00 LAKHS ` 10.00 LAKHS WAS NON-REFUNDABLE ADVANCE AND THE REMAINING 18.00 LAKHS WAS REFUNDABL E EARNEST MONEY DEPOSIT. AGGRIEVED AGAINST THE ORDER OF THE CIT(APPEALS) TH E ASSESSEE HAS COME IN APPEAL BEFORE THE TRIBUNAL. 3. SHRI S.SRIDHAR APPEARING ON BEHALF OF THE ASSES SEE REITERATING THE FACTS OF THE CASE SUBMITTED THAT ON E FLAT WAS SOLD BY THE ASSESSEE IN THE AY.2010-11 AND THREE FLATS WERE SOLD IN THE SUBSEQUENT AY. ON THE FLAT SOLD IN AY.2010-11 THE ASSESSEE HAS I.T.A. NO. 207/MDS/2014 & S.P.NO. 17/MDS/2014 5 EARNED SHORT TERM CAPITAL GAIN WHEREAS ON THE FLAT S SOLD IN AY.2011-12 IT IS LONG TERM CAPITAL GAIN. THE LD.CO UNSEL FURTHER SUBMITTED THAT THE DATE OF FIRST JOINT VENTURE AGRE EMENT DT.07-04- 2008 SHOULD BE TAKEN INTO CONSIDERATION TO DETERMIN E THE CAPITAL GAINS. THE SUPPLEMENTARY AGREEMENT DT.24-08-2009 I S ONLY CLARIFICATORY IN NATURE AND DOES NOT SUBSTITUTE ORI GINAL AGREEMENT. 4. ON THE OTHER HAND SHRI SHAJI P.JACOB APPEARING ON BEHALF OF THE DEPARTMENT SUBMITTED THAT SINCE ALL THE CONT RACTUAL TERMS WERE DETAILED IN JOINT VENTURE AGREEMENT DT.24-08-2 009 THEREFORE SUBSEQUENT AGREEMENT IS THE VALID AGREEMENT. THE A SSESSEE GAVE POSSESSION OF LAND TO THE DEVELOPER ON THE BAS IS OF THE SUBSEQUENT AGREEMENT. THE ASSESSEE GAVE POWER OF A TTORNEY TO THE BUILDER/DEVELOPER ON THE BASIS OF WHICH THE DEV ELOPER TRANSFERRED UN-DIVIDED SHARE IN LAND AND BUILT UP A REA TO THE BUYERS. THE LD.DR CONTENDED THAT THERE WERE TWO TRA NSACTIONS. THE FIRST TRANSFER WAS BETWEEN THE ASSESSEE AND THE DEVELOPER ON THE DATE OF EXECUTION OF JOINT DEVELOPMENT AGREEMEN T DT.24-08-2009 ACCORDING TO WHICH ASSESSEE EXCHANGED 53% UN-DIVIDED SHARE IN LAND WITH 47% BUILT UP AREA. T HE CAPITAL GAIN ON EXCHANGE OF 53% UN-DIVIDED SHARE IN LAND WITH 47 % BUILT UP AREA TOOK PLACE IN THE AY.2010-11. THE SECOND TRAN SACTION TOOK I.T.A. NO. 207/MDS/2014 & S.P.NO. 17/MDS/2014 6 PLACE WHEN FOUR FLATS RECEIVED BY THE ASSESSEE WERE SOLD SUBSEQUENTLY. OUT OF THESE FOUR FLATS SALE AGREEM ENT IN RESPECT TWO FLATS WERE ENTERED INTO DURING THE FINANCIAL YE AR 2009-10 AND THE CONSIDERATION WAS RECEIVED. THUS CAPITAL GAIN ON SALE OF THESE TWO FLATS IS SHORT TERM CAPITAL GAIN TAXABLE IN AY.2010-11. THE LD.COUNSEL FOR THE ASSESSEE OBJECTED TO THE THE ORY OF TWO TRANSACTION PUT FORWARD BY THE DR. THE LD.COUN SEL CONTENDED THAT THE DR IS IMPROVING THE CASES OF ASSESSING OFF ICER WHICH IS NOT PERMISSIBLE IN LAW. THE TWO TRANSACTION THEORY WAS NEVER RAISED EITHER AT THE ASSESSMENT STAGE OR AT THE FIR ST APPELLATE STAGE. MOREOVER THE GPA WAS EXECUTED AT THE TIME OF EXECUTION OF FIRST JOINT VENTURE AGREEMENT. THE SUBSEQUENT A GREEMENT IS ONLY MODIFICATION OF THE ORIGINAL AGREEMENT AND IS NOT ALTOGETHER A NEW AGREEMENT. IN SUPPORT OF HIS CONTENTIONS THE LD.DR PLACED REL IANCE ON THE FOLLOWING CASE LAWS: I. ACIT VS. SHRI AKKINENI NAGARJUNA RAO (ITA NO.534/HYD/2004 AY.2000-2001); DECIDED ON 13-04-2012; II. SMT. SOWCAR JANAKI VS. ITO (ITA NO.615/MDS/12 AY.2003-04); DECIDED ON 29-08-2013; I.T.A. NO. 207/MDS/2014 & S.P.NO. 17/MDS/2014 7 III. ACIT VS.SHRI JAIVIJAY SINGH K. CHUHAN (ITA NO.2108/AHD/2002 AY.1997-98); DECIDED ON 28-03-2012; IV. ORIENT TRADING COMPANY LTD. VS. CIT REPORTED AS 224 ITR 371 (SC). 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES. WE HAVE ALSO PE RUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DECI SIONS ON WHICH THE LD.DR HAS PLACED RELIANCE. BEFORE WE PROCEED W ITH THE MERITS OF THE CASE IT IS ESSENTIAL TO RECAPITULATE THE CH RONOLOGY OF EVENTS AND RELEVANT PROVISIONS OF LAW. SINCE THE ISSUE RE LATES TO THE DETERMINATION OF CAPITAL GAINS IT IS ESSENTIAL TO SEE THE LIST OF DATES AND EVENTS. S.NO. DATE EVENT 1. 05-03-2007 ASSESSEE PURCHASED LAND FROM MR.S.D.K ATHIRVELU AND HIS WIFE DHARANI BAI FOR A CONSIDERATION OF ` 10 01 385/- 2. 07-04-2008 ASSESSEE ENTERED INTO A JOINT VENTURE DEVELOPMENT AGREEMENT WITH M/S.RAJUS FLAT PROMOTERS PVT. LIMITED (HEREIN AFTER REFERRED TO AS THE BUILDER) FOR CONSTRUCTION OF RESIDENTIAL FLATS ON THE LAND. 3. 06-02-2008 PAYMENT OF ` ONE LAKH RECEIVED FROM THE BUILDER 4. 17-03-2008 PAYMENT OF ` ONE LAKH RECEIVED FROM THE BUILDER 5. 07-04-2008 PAYMENT OF ` 10.00 LAKHS RECEIVED FROM THE BUILDER 6. 08-04-2008 PAYMENT OF ` 16.00 LAKHS RECEIVED FROM THE BUILDER 7. 24-08-2009 SUPPLEMENTARY AGREEMENT EXECUTED BETW EEN THE ASSESSEE AND THE BUILDER I.T.A. NO. 207/MDS/2014 & S.P.NO. 17/MDS/2014 8 8. FLATS SOLD TO THE BUYERS: NAME OF BUYER DATE OF AGREEMENT FOR SALE OF USL DATE OF CONSTRUCTION AGREEMENT DATE OF SALE DEED A. G.VINOD KUMAR 05-01-2010 05-01-2010 22-01-2010 B. R.SARAVANAN 26-03-2010 26-03-2010 08-04-2010 C. J.RAMESH KUMAR 23-04-2010 31-03-2010 23-04-2010 D. K.SUJITH KUMAR 15-04-2010 15-04-2010 17-05-2010 SECTION 2(47) OF THE ACT DEFINES THE TERM TRANSFER IN RELATION TO CAPITAL ASSETS. THE SAME IS RE-PRODUCED HEREIN BEL OW: SECTION 2(47) : ['TRANSFER' IN RELATION TO A CAP ITAL ASSET INCLUDES (I) THE SALE EXCHANGE OR RELINQUISHMENT OF THE A SSET ; 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-TRA DE OF A BUSINESS CARRIED ON BY HIM SUCH CONVERSION OR TREATMENT ;] [OR] [(IVA) THE MATURITY OR REDEMPTION OF A ZERO COUPO N BOND; OR] [(V) ANY TRANSACTION INVOLVING THE ALLOWING OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED I N PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT 1882 ( 4 OF 1882) ; OR (VI) ANY TRANSACTION (WHETHER BY WAY OF BECOMING A MEMBER OF OR ACQUIRING SHARES IN A CO-OPERATIVE SOCIETY I.T.A. NO. 207/MDS/2014 & S.P.NO. 17/MDS/2014 9 COMPANY OR OTHER ASSOCIATION OF PERSONS OR BY WAY O F ANY AGREEMENT OR ANY ARRANGEMENT OR IN ANY OTHER MANNER WHATSOEVER) WHICH HAS THE EFFECT OF TRANSFER RING OR ENABLING THE ENJOYMENT OF ANY IMMOVABLE PROPERT Y. [EXPLANATION 1].FOR THE PURPOSES OF SUB-CLAUSES (V ) AND (VI) 'IMMOVABLE PROPERTY' SHALL HAVE THE SAME MEANING AS IN CLAUSE (D) OF SECTION 269UA.] [EXPLANATION 2.FOR THE REMOVAL OF DOUBTS IT IS HE REBY CLARIFIED THAT 'TRANSFER' INCLUDES AND SHALL BE DEE MED TO HAVE ALWAYS INCLUDED DISPOSING OF OR PARTING WITH A N ASSET OR ANY INTEREST THEREIN OR CREATING ANY INTE REST IN ANY ASSET IN ANY MANNER WHATSOEVER DIRECTLY OR INDIRECTLY ABSOLUTELY OR CONDITIONALLY VOLUNTARIL Y OR INVOLUNTARILY BY WAY OF AN AGREEMENT (WHETHER ENTE RED INTO IN INDIA OR OUTSIDE INDIA) OR OTHERWISE NOTWITHSTANDING THAT SUCH TRANSFER OF RIGHTS HAS BE EN CHARACTERISED AS BEING EFFECTED OR DEPENDENT UPON O R FLOWING FROM THE TRANSFER OF A SHARE OR SHARES OF A COMPANY REGISTERED OR INCORPORATED OUTSIDE INDIA;] SECTION 53A OF THE TRANSFER OF PROPERTY ACT 1882 E XPLAINS THE TERM PART PERFORMANCE. THE SAME IS RE-PRODUCED H EREIN BELOW: 53A. PART PERFORMANCE: WHERE ANY PERSON CONTRACTS TO TRANSFER FOR CONSIDER ATION ANY IMMOVABLE PROPERTY BY WRITING SIGNED BY HIM OR ON H IS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTITUTE THE TR ANSFER CAN BE ASCERTAINED WITH REASONABLE CERTAINTY AND THE TR ANSFEREE HAS IN PART PERFORMANCE OF THE CONTRACT TAKEN POS SESSION OF THE PROPERTY OR ANY PART THEREOF OR THE TRANSFEREE BEING ALREADY IN POSSESSION CONTINUES IN POSSESSION IN P ART I.T.A. NO. 207/MDS/2014 & S.P.NO. 17/MDS/2014 10 PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT I N FURTHERANCE OF THE CONTRACT AND THE TRANSFEREE HAS PERFORMED OR IS WILLING TO PERFORM HIS PART OF THE CONTRACT THEN NOTWITHSTANDING THAT THE CONTRACT THOUGH REQUIRED TO BE REGISTERED HAS NOT BEEN REGISTERED OR WHERE THER E IS AN INSTRUMENT OF TRANSFER THAT THE TRANSFER HAS NOT B EEN COMPLETED IN THE MANNER PRESCRIBED THERE FOR BY THE LAW FOR THE TIME BEING IN FORCE THE TRANSFEROR OR ANY PERS ON 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 O R CONTINUED IN POSSESSION OTHER THAN A RIGHT EXPRESSLY PROVIDE D BY THE TERMS OF THE CONTRACT: PROVIDED THAT NOTHING IN THIS SECTION SHALL AFFECT THE RIGHTS OF A TRANSFEREE FOR CONSIDERATION WHO HAS NO NOTICE OF T HE CONTRACT OR OF THE PART PERFORMANCE THEREOF. 6. AS PER SUPPLEMENTARY AGREEMENT DT.24-08-2009 TH E ASSESSEE IS ENTITLED TO 4 290 SQ. FT. FROM THE TOT AL BUILT UP AREA OF 9 128 SQ. FT. THE BUILDER HAS CONSTRUCTED TOTAL NI NE FLATS OUT OF WHICH FOUR FLATS HAVING BUILT UP AREA OF 4 136 SQ. FT. WERE ALLOTTED TO THE ASSESSEE. FOR THE SHORT FALL OF 154 SQ. FT. T HE BUILDER PAID A SUM OF ` 4 62 000/- @ ` 3 000/- PER SQ. FT. TO THE ASSESSEE. AS PER ASSESSEES OWN ADMISSION THE ASSESSEE HAS EXECUTED GPA IN FAVOUR OF THE BUILDER IN RESPECT OF THE SALE OF FLA TS AND UNDIVIDED SHARE IN LAND. THE DATES OF EXECUTION OF VARIOUS A GREEMENTS AND THE PAYMENTS RECEIVED MENTIONED ABOVE HAVE NOT BEEN DISPUTED I.T.A. NO. 207/MDS/2014 & S.P.NO. 17/MDS/2014 11 BY THE ASSESSEE. OUT OF THE TOTAL PAYMENT OF ` 28.00 LAKHS RECEIVED ON VARIOUS DATES IN THE YEAR 2008 ` 10.00 LAKHS WAS TOWARDS NON-REFUNDABLE ADVANCE AND REMAINING AMOUNT OF ` 18.00 LAKHS WAS TOWARDS REFUNDABLE EARNEST MONEY DEPOSIT. THE SALE AGREEMENT IN RESPECT OF UN-DIVIDED SHARE IN LAND AN D CONSTRUCTION AGREEMENT WITH BUYERS HAVE BEEN EXECUTED BY THE BUI LDER. IN THE BACKGROUND OF THESE FACTS AND THE PROVISIONS OF SEC TION 2(47) CLAUSE (V) WHICH DEALS WITH THE TRANSFER IN RELATI ON TO CAPITAL ASSET ANY TRANSACTION INVOLVING THE POSSESSION OF ANY IMM OVEABLE PROPERTY IN PART PERFORMANCE OF CONTRACT OF THE NAT URE REFERRED TO IN SECTION 53A OF THE TP ACT 1882 SHALL BE CONSIDERED AS TRANSFER. THE FACT THAT THE ASSESSEE HAD HANDED OVER THE POSS ESSION OF LAND TO THE BUILDER FOR CONSTRUCTION OF RESIDENTIAL APARTMENTS AND HAD RECEIVED ` 28.00 LAKHS TOWARDS PART CONSIDERATION WHICH WAS SUBSEQUENTLY ADJUSTED AT THE TIME OF PAYMENT OF SAL E CONSIDERATION CLEARLY INDICATE THAT THE ASSESSEE HAD SOLD THE LAN D IN QUESTION TO THE BUILDER WITHIN A PERIOD OF THIRTY SIX MONTHS FR OM THE DATE OF ITS ACQUISITION. THE CONTENTION OF THE LD.COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAS EARNED SHORT TERM CAPITAL GAI N ON THE SALE OF ONE FLAT AND LONG TERM CAPITAL GAIN ON THE SALE OF THREE FLATS IS UNTENABLE. THE AGREEMENTS IN RESPECT OF SALE OF UN -DIVIDED SHARE IN LAND AND CONSTRUCTION OF FLATS AND THEREAFTER SA LE DEED WERE ALL I.T.A. NO. 207/MDS/2014 & S.P.NO. 17/MDS/2014 12 EXECUTED BY THE BUILDER EVEN IN RESPECT OF THE FLAT S ALLOTTED TO THE ASSESSEE. IT IS NOT THE CASE OF THE ASSESSEE THAT THE ASSESSEE HAD MADE ANY EFFORT FOR THE SALE OF FLATS OR HAD TA KEN ANY STEPS TO SELL THE FLATS OR TO MEET THE PROSPECTIVE BUYERS OF THE FLATS. ALL EFFORTS TO SELL THE FLATS WERE UNDERTAKEN BY THE BU ILDER. DE FACTO THE BUILDER WAS IN POSSESSION OF THE FLATS AND THE LAND. THE LD.DR IN ORDER TO SUPPORT HIS CONTENTIONS HAS PLACED RELI ANCE ON THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL I N THE CASE OF SMT. SOWCAR JANAKI VS. ITO IN ITA NO.615/MDS/12 (SUPRA). THE BENCH WHILE DECIDING THE SIMILAR ISSUE HELD AS UNDE R: 12. IN RESPECT OF THE ISSUE OF WHETHER THERE IS A TRANSFER WITHIN THE MEANING OF SECTION 2(47) OR NOT IN RESPECT OF P ROPERTY GIVEN FOR DEVELOPMENT THE COMMISSIONER OF INCOME T AX (APPEALS) HAD CONSIDERED THE SUBMISSIONS OF THE ASS ESSEE AND HELD THAT THERE IS A TRANSFER WITHIN THE MEANIN G OF SECTION 2(47) AFTER EXAMINING THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH THE DEVELOPER OBSERVING AS UNDER:- 4 . 2 THE AR ARGUED THAT THE AO HAS WRONGLY PRESUMED TH AT THE POSSESSION OF THE PROPERTY WAS HANDED OVER TO THE DEVELOPER/BUILD ER D U RING T HE FINANCIAL YEAR WHEREAS THE CLAUSE 5 OF THE AGREEMENT STATES T HAT THE ASSESSEE SHALL HANDOVER THE VACANT POSSESSION ON OR BEFORE 31 . 03. 2 003 AND HENCE THE RECORDED FACTS ARE WRONG . FURTHER THE AR PO I NTED OUT THAT THE AO HAS I NFERRED THAT T HE CONSIDE R ATION OF RS.1 CRORE WAS NOT RETURNABLE CONSIDERATIO N WHEREAS CLAUSE 3 OF THE AGREEM E NT CL EARLY STATES THAT IT IS A REFUNDABLE/ADJUSTMENT ADVANCE WH I CH HAS A L SO BEEN REPRODUCED BY THE AO IN PAGE NO 4 OF THE ORDER. HE ALSO SUBMITTED T H AT THE APPELLANT OBTAINED POSSESSION OF 6 FLATS MUCH LATER BASED ON P LANNING PERMIT ISSUED ON 07.07 . 2003 AND HENCE THE AO HAD NO EVIDENCE T O S T AT E THAT SUCH HANDING OVER OF FLATS TOOK PLACE DURING FINANCIAL YEAR ' RELEVANT TO ASSESSMENT YEAR 2003-04. ON CAREFUL CONSIDERATION I FIND THAT I N THE CASE OF M/S T.V. S U NDARAM IYENGAR & SONS LTD VS CIT (37ITR 2 6 IN S I MILAR CIRCUMSTANCES THE HON'BLE HIGH COURT MADRAS HELD THAT: ' A S ON THE FACTS THERE WAS NOTHING TO SHOW THAT THE PRI CE WAS TO BE OF AN Y FUTURE TIME THE PRICE OF THE ASSETS TRANSFERRED TO COMPANY C BE C AME PAYABLE FORTHWITH VIZ . IN THE ACCOUNTING YEAR THE SSESSEES OBTAINED I.T.A. NO. 207/MDS/2014 & S.P.NO. 17/MDS/2014 13 THE RIGHT TO RECEIVE THE PRICE IN THE ACCOUNTING YE AR AND THE CAPITAL GAINS IN RESPECT OF THE SALE OF THOSE ASSETS AROSE IN THAT TEAR: (EMPHA SIS SUPPLIED) WHAT THE PARTIES DID SUBSEQUENT TO THAT YEAR DID NO T HAVE ANY BEARING ON THE LIABILITY OF THE ASSESSEES TO TAX IN RESPECT OF THA T YEAR. THERE WAS THEREFORE MATERIAL TO SUPPORT THE ASSESSMENTS MADE ON THE ASS ESSEES . ' 4.3 ON THE ISSUE OF TAXABILITY IN THE HANDS OF LAND OWNERS IN RESPECT OF DEVELOPMENT AGREEMENTS THE MUMBAI HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA V. CIT R EPORTED IN 260 ITR 491 HELD THAT: 'THE ABOVE OBSERVATION MAKES IT CLEAR THAT THE AGREEMENT READ AS A WHOLE WAS TAKEN TO HAVE PASSED COMPLETE CONTROL OVER THE PROPERTY IN F AVOUR OF THE DEVELOPER. IN SUCH A CASE THE DATE OF THE CONTRACT ALONE WAS HEL D TO BE RELEVANT TO DECIDE THE YEAR OF CHARGEABILITY. (EMPHASIS SUPPLIED)' 4 . 4. THE AR PLACED RELIANCE ON THE JURISDICTIONAL HIG H COURT DECISION IN THE CASE OF CIT VS G. SAROJA TC . A.217 OF 2004 TO ARGUE THAT NO SALE CONSIDERATION WAS RECEIVED DURING THE YEAR IN THE C ASE OF THE APPELLANT AND HENCE PROVISION OF SECTION 53A OF TRANSFER OF PROPE RTY ACT IS NOT ITA NOS. 615 TO 617 &972/MDS//2012 ATTRACTED. THE ARGUMENTS OF THE AR ARE REPRODUCED HEREUNDER: SECTION 2(47)(V) OF THE INCOM E TAX ACT CAN BE INVOKED ONLY UPON SATISFACTION OF THE INGREDIENTS O F SECTION 53A OF THE TRANSFER OF PROPERTY ACT. THE INGREDIENTS OF SECTIO N 53A OF TRANSFER OF PROPERTY ACT REQUIRE THAT THE TRANSFEROR SHOULD HAV E RECEIVED CONSIDERATION EITHER IN PART OR IN FULL FOR ' TRANSFER OF THE PROPERTY. IN THE ABOVE CASE THE CONSIDERATION IS 65% OF PLINTH AREA TO BE BUILT AND THE RECEIPT OF ` L CRORE WAS A PERFORMANCE DEPOSIT AND THE SAME WAS SETTLED BY THE DEVELOPER ONCE THE AMOUNTS WERE RECEIVED BY HIM UPON SALE OF EARMARKED FLATS. THE OTHER INGREDIENT OF HANDING OVER POSSESSION TO THE DEVELO PER HAS ALSO NOT BEEN DONE. IN THE ABSENCE OF THE ABOVE TWO REQUIREMENTS INVOKING SECTION 2(47)(V) IS NOT TENABLE IN LAW. BUT ANALYSIS OF THE FACTS OF THE CASE OF THE APPELLANT REVEAL THAT A SUBSTANTIAL SUM WAS PAID AS ADVANCE AND AS HELD IN THE DECISION RELIED ON BY THE AR WRITTEN AGREEMENT WAS EXECUTED IN THE YEAR CONCERNED WHICH CONSTITUTE 'ESSENTIAL INGREDIENT ' TO DECIDE THE YEAR OF CHARGEABILITY OF CAPITAL GAIN. 4.5 IN VIEW OF THE DECISIONS REPORTED IN 37 ITR 26 & 260 ITR 491 IT IS CLEAR THAT CONSIDERING THE FACTS OF THE CASE OF THE APPEL LANT T HE CHARGEABILITY OF CAPITAL GAIN AROSE ON EXECUTION OF THE AGREEMENT OF SALE AND JOINT DEVELOPMENT DATED 30.12 . 2002 AS THE APPELLANT OBTAINED TH E RIGHT TO RECEIVE THE PRICE ON THIS DATE AND HENCE CHARGEABI L ITY TO TA X AROSE AS A CONSEQUENCE. THE SUBSEQUENT DATE OF ACTUAL HAND L NG OVER OF VACANT POSSESSION OR SUBSEQUENT RECEIPT OF CONSTRUCTED FLATS DO NOT CHAN GE THE CHARGEABILITY IN VIEW OF THE JUDICIAL PRONOUNCEMENTS ON THIS ISSUE A ND HENCE OBJECTIONS RAISED BY THE AR WITH REGARD TO BRINGING TO TAX CAPITAL GA IN ON SALE OF THE PROPERTY IN QUESTION DO NOT SURVIVE. THESE QROU N D S O F A P P E A L ARE DISMISSED. 5 . GROUND NOS . 4 TO 7 DEALS WITH TRANSFER OF OWNERSHIP RIGHTS OVER THE PR OPERTY. IN GROUND NO.4 THE APPELLANT SUBMITTED THAT THE PO SSESSION HAD B E EN HANDED OVER TO M/S. GOLDEN CONSTRUCTIONS ONLY TO ENABLE FU RTHERANCE OF THE PROJECT AND THERE WAS NO TRANSFER OF ANY OWNERSHIP RIGHTS I NTENDED OR ACTUAL OVER THE SAID PROPERTY. IN GROUND NO.5 IT WAS SUBMITTED THAT THE POWER OF ATTORNEY ISSUED IN FAVOUR OF M/S. GOLDEN CONSTRUCTIONS WAS N OT AN IRREVOCABLE ONE. IN GROUND NO.6 IT WAS S UBMITTED THAT THE AMOUNT OF RS.L CRORE PAID TO THE APPEL L ANT WAS ONLY A REFUNDABLE / ADJUSTABLE ADVANCE AND NOT IN THE NATURE OF A CONSIDERATION PA I D BY THE BUILD E R AND IT IS IN THE NATURE OF PERFORMANCE S ECURITY DEPOSIT F OR DELIVERING THE CONTRACT. ) N GROUND NO. 7 IT WAS SUBMITTED THAT THE PL A NNING PERMIT ITSELF HAD BEEN ISSUED ONLY ON 26.05.2 003 I.T.A. NO. 207/MDS/2014 & S.P.NO. 17/MDS/2014 14 CONSTRUCTION A P P ROVAL ON 07.07.2003 WORK PERMIT ISSUED ON 04.07.20 03 AND HE N CE NONE OF THE CONDITIONS LAID IN TRANSF E R OF PROPERTY ACT IS SATISFIED FO R INVOK I NG THE PROVISIONS OF SECTION 2(47)(V)J(VI) FOR AY 2 003 - 0 4 . THE AO RELIED ON THE P R OVISIONS OF SECTION 2(47)(V) AND HIGHLIG H TED THE CLAUSES IN A G R E E MENT F OR S ALE AND FOR JOINT DEVELOPMENT IN PARA 5 AND FURNISH ED P OINTS IN PARA 6 OF THE ASSESSMENT ORDER TO HOLD THAT THE TRA NSACTION ENT ERED INTO BY THE APPELLANT WITH THE PROMOTER M /S GOLD E N CONSTRUCTIONS AM O U NT E D TO ' DE E MED TRANSFER' AND CAPITAL GAIN IS TA X ABLE THIS YEAR . O N CA R EFU L CONS I D ER A T ION I FIND THAT THE JUDGMENT OF BOMBAY HIGH COURT I N C H AT URBHUJ D WA R K ADAS KAPADIA V. CI T (260 IT R 49 1) HAS CLEARLY HE L D THAT C H A RG EA BIL IT Y TO TAX AR ISES ON THE DATE AGREEMEN T I S ENTE R E D INTO A ND ON EX ECU T I O N OF AGR E E MEN T T HE APP E L LA NT OBT A IN ED R I GH T T O RE C E I VE CO N SI D E RA TI ON A ND HENC E RES PECT F ULLY FO L L O W ING TH E JUD G ME NT I CONF IRM T H E S TAND OF T HE AO THA T TRANSFER OF TH E PROPE R T Y IN Q UE S TIO N HAS TA KEN P L A C E I N THE REL E V A NT FINANCIA L YEAR ON E X ECUTION OF AGREEMENT FOR SALE AN D FOR JOINT DEV E LOPMENT . HENCE THES E GROUNDS OF THE APPELLANT A R E D ISMISSED . 13. ON GOING THROUGH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE CLAUSES OF THE AGREEME NT OF SALE AND JOINT DEVELOPMENT AGREEMENT DATED 30.12.20 02 READ WITH SUPPLEMENTAL AGREEMENT DATED 15.02.2003 AND PO WER OF ATTORNEY DATED 30.12.2002 EXECUTED BY THE ASSESSEE IN FAVOUR OF THE BUILDER AUTHORISING THE BUILDER TO SELL AND REGISTER THE FLATS IN THE NAME OF PROSPECTIVE BUYERS WE ARE OF THE VIEW THAT THERE IS A TRANSFER WITHIN THE MEANING OF SECTION 2 (47) BY VIRTUE OF ENTERING INTO AN AGREEMENT OF SALE AND JOINT DEV ELOPMENT. AS PER CLAUSE 5 OF THE AGREEMENT OF SALE AND JOINT DEVELOPMENT THE OWNER SHALL HANDOVER VACANT POSSES SION OF THE SCHEDULE C MENTIONED PROPERTY ALONG WITH ORIG INAL TITLE DEEDS PERTAINING TO THE SCHEDULE MENTIONED PROPERTY ON OR BEFORE 31.03.2003. THOUGH THE ASSESSEE SUBMITS THAT THE POSSESSION WAS GIVEN AT LATER POINT OF TIME I.E. AF TER 31.03.2003 THERE IS NO EVIDENCE ON RECORD TO SUGGE ST THAT THE POSSESSION WAS GIVEN AT A LATER POINT OF TIME EVEN THOUGH THE CONSTRUCTION PERMIT WAS GIVEN BY THE MUNICIPAL AUTH ORITIES ON 11.07.2003 AND PLANNING PERMIT WAS GIVEN ON 26.05.2 003 AND DEMOLITION CERTIFICATE ON 19.02.2003. AS PER CLAUSE 21OF THE AGREEMENT THE PROMOTER SHALL PAY THE OWNER I.E. TH E ASSESSEE I.T.A. NO. 207/MDS/2014 & S.P.NO. 17/MDS/2014 15 A SUM OF ` 15 000/- PER MONTH FROM THE DATE OF GETTING VACANT POSSESSION OF THE SCHEDULE C PROPERTY TILL THE D ATE OF COMPLETION OF THE FLAT FOR HER ALTERNATE ACCOMMODAT ION. SUPPLEMENTAL AGREEMENT WAS ENTERED INTO ON 15.02.20 03 BY THE ASSESSEE WITH THE PROMOTER WHEREIN THE ASSESSE E AUTHORIZES THE PROMOTER TO SELL THE OTHER FLATS ALL OTTED TO HER SHARE FULLY DESCRIBED IN SCHEDULE C. THE PROMOTER IS ALSO AUTHORIZED TO RECEIVE ADVANCE SALE CONSIDERATION E TC. AND OTHER AMOUNTS AND TO SIGN SALE DEEDS AND OTHER DOCU MENTS IN RESPECT OF THE FLATS MENTIONED IN SCHEDULE C. THE ASSESSEE ALSO GAVE POWER OF ATTORNEY TO THE PROMOTER MR. J.R AJKUMAR PALSINGH ON 30.12.2002 REGISTERED IN THE OFFICE OF THE SUB- REGISTRAR ANNA NAGAR VIDE DOCUMENT NO.1560/2002 EMPOWERING THE PROMOTER TO SELL THE FLATS ON BEHALF OF THE ASSESSEE. ALL THESE GO TO SHOW THAT THERE IS A TRAN SFER WITHIN THE MEANING OF SECTION 2(47) OF THE ACT BY VIRTUE O F ENTERING INTO AN AGREEMENT OF SALE AND JOINT DEVELOPMENT BY THE ASSESSEE WITH MR.J. RAJKUMAR PALSINGH IN THE ASSESS MENT YEAR 2003-04. IN THE CIRCUMSTANCES WE UPHOLD THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN HOLDING THAT THERE IS A TRANSFER WITHIN THE MEANING OF SECTION 2 (47) OF THE ACT IN RESPECT OF THE PROPERTY. THUS GROUNDS OF AP PEAL NOS.4 AND 5 ARE DECIDED AGAINST THE ASSESSEE. SIMILAR VIEW HAS BEEN TAKEN BY THE AHMEDABAD BENCH AND HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS.SHRI JAIVIJAY SINGH K. CHUHAN (SUPRA) AND ACIT VS. SHRI AKKINENI NAGARJUNA RAO (SUPRA). I.T.A. NO. 207/MDS/2014 & S.P.NO. 17/MDS/2014 16 7. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PR ESENT CASE AND THE WELL SETTLED LAW WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE HAS EARNED SHORT TERM CAPITAL GAIN ON THE TRANSACTION. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CI T(APPEALS). HENCE THE APPEAL OF THE ASSESSEE IS DISMISSED. 8. THE ASSESSEE HAS FILED PETITION FOR STAY OF OUTS TANDING DEMAND. SINCE THE APPEAL OF THE ASSESSEE HAS BEEN ADJUDICATED THE STAY PETITION HAS BECOME INFRUCTUOUS AND THE SA ME IS DISMISSED AS SUCH. ORDER PRONOUNCED ON WEDNESDAY THE 23 RD APRIL 2014 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) (VIKAS AWA STHY) ( . . . ) ( ! ) / VICE PRESIDENT ! '# / JUDICIAL MEMBER $ /CHENNAI %'& /DATED: 23 RD APRIL 2014 TNMM ''(!)*+* /COPY TO: 1. APPELLANT 2. /RESPONDENT 3. ' ' -. /CIT(A) 4. ' ' /CIT 5. */0!!12 /DR 6. 0345 /GF