DILIP ANAND VAZIARNI, MUMBAI v. ITO 18(1)(3), MUMBAI

ITA 3096/MUM/2012 | 2001-2002
Pronouncement Date: 14-11-2014 | Result: Allowed

Appeal Details

RSA Number 309619914 RSA 2012
Assessee PAN ABCPV2159A
Bench Mumbai
Appeal Number ITA 3096/MUM/2012
Duration Of Justice 2 year(s) 6 month(s) 7 day(s)
Appellant DILIP ANAND VAZIARNI, MUMBAI
Respondent ITO 18(1)(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 14-11-2014
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 14-11-2014
Date Of Final Hearing 05-11-2014
Next Hearing Date 05-11-2014
Assessment Year 2001-2002
Appeal Filed On 07-05-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND VIVEK VARMA (JM) . . ./I.T.A. NO.3096/MUM/2012 ( / ASSESSMENT YEAR : 2001-02) DILIP ANAND VAZIRANI 66/1512 ADARSH NAGAR MIG COLONY BENGAL CHEMICALS WORLI MUMBAI-400030 / VS. INCOME TAX OFFICER-18(1(3) MUMBAI. ( / APPELLANT) .. ( ! / RESPONDENT) ./ '# ./PAN/GIR NO. :ABCPV2159A $ / APPELLANT BY SHRI VIMAL PUNAMIYA ! % $ /RESPONDENT BY SHRI JEETENDRA KUMAR & ' % () / DATE OF HEARING : 5.11.2014 *+ % () /DATE OF PRONOUNCEMENT : 14.11.2014 / O R D E R PER B.R.BASKARAN ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DATED 29- 03-2012 PASSED BY LD CIT(A)-29 MUMBAI AND IT RELAT ES TO THE ASSESSMENT YEAR 2001-02. 2. THE ISSUES URGED BEFORE US IS WHETHER THE LD CIT (A) WAS JUSTIFIED IN LAW IN CONFIRMING THAT THE CAPITAL GAIN IS ASSESSABLE IN T HE ASSESSMENT YEAR 2001-02 AND IF THE ANSWER TO THE ABOVE QUESTION IS YES THE N WHETHER THE COMPUTATION OF CAPITAL GAIN APPROVED BY LD CIT(A) IS CORRECT IN LA W. 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. WE SHALL FIRST NARRATE THE EVENTS AS TO HOW THE ASSESSEE ACQUIRED THE PROPERTY . THE FATHER OF THE ASSESSEE NAMED SHRI ANAND VAZIRANI WAS ORIGINALLY H ABITANT OF PAKISTAN AND HE ITA 3096/MUM/2012 2 OWNED CERTAIN LAND THERE. PURSUANT TO INDO-PAKISTA N PARTITION SHRI ANAND VAZIRANI MIGRATED TO INDIA ALONG WITH HIS FAMILY ME MBERS DURING 1947 AND LEFT HIS PROPERTY IN PAKISTAN. IN 1954 HE APPLIED FOR COMP ENSATION AND ALLOTMENT OF ANY EVACUEES PROPERTY UNDER THE THE DISPLACED PERSONS (CLAIM AND REHABILITATION) ACT 1954. THE SAID APPLICATION WAS NOT PROCESSED TILL 1989 AND HENCE HE WROTE TWO LETTERS TO SETTLEMENT COMMISSION. THEREAFTER HE FILED A WRIT PETITION BEFORE HONBLE HIGH COURT OF BOMBAY AND THE HIGH COURT VI DE ITS ORDER DATED 22.11.1989 DIRECTED THE SETTLEMENT COMMISSION TO A LLOT PROPERTY AT 21 BUND GARDEN ROAD PUNE TO SET OFF THE VALUE PAYABLE TO M R. ANAND VZIRANI. ON 30-5- 1990 THE CENTRAL GOVERNMENT ALSO DIRECTED THE MAHA RASHTRA GOVERNMENT TO ALLOT PROPERTY. PENDING ALLOTMENT SHRI ANAND VAZIRANI P ASSED AWAY ON 30-03-1992. THERE AFTER THE ASSESSEE HEREIN PURSUED THE MATTER BY MAKING SEVERAL APPLICATIONS PETITION ETC TO THE SETTLEMENT COMMIS SION AND THE GOVERNMENT OF MAHARASHTRA. ON 08-9-994 & 01.7.1995 THE SETTLEME NT COMMISSION PASSED ORDERS AGAINST THE ASSESSEE ON THE REASONING THAT T HE LAND VALUE WAS HIGHER THAN THE COMPENSATION AMOUNT. UPON THE WRIT PETITI ON FILED BY THE ASSESSEE HONBLE HIGH COURT QUASHED THE ORDER OF THE SETTLEM ENT COMMISSION ON 24.4.1996. AGAIN THE SETTLEMENT COMMISSION DISMIS SED THE CASE. AGAIN THE ASSESSEE FILED WRIT PETITION BEFORE HONBLE HIGH CO URT IN 1997 AND THE HIGH COURT VIDE ITS ORDER DATED 13.8.1998 DIRECTED THE SETTLEMENT COMMISSION TO ALLOT PROPERTY TO THE LEGAL HEIRS OF SHRI ANAND VAZ IRANI ON PAYMENT OF DIFFERENTIAL AMOUNT AS COMPENSATION. THE SETTLEMENT COMMISSION FILED SLP BEFORE HONBLE SUPREME COURT AND ON 19.4.1999 THE SAID SLP WAS DI SMISSED BY THE APEX COURT. THE REVIEW PETITION FILED BY THE SETTLEMENT COMMISSION WAS DISMISSED BY THE HONBLE SUPREME COURT ON 18.8.1999. THE ASSESS EE PAID THE DIFFERENTIAL AMOUNT ON 1.4.2000 & 4.4.2000. FINALLY THE SETTLE MENT COMMISSION PASSED FINAL ORDER IN FAVOUR OF THE LEGAL HEIRS ON 24.4.20 00 AND THE POSSESSION LETTER WAS GIVEN ON 15.5.2000. 4. IN THE MEAN TIME THE ASSESSEE ALSO TOOK S TEPS TO SELL THE PROPERTY AND THE EVENTS RELATING THERETO ARE NARRATED HERE UNDER. T HE ASSESSEE ENTERED INTO A MEMORANDUM OF UNDERSTANDING (MOU) ON 05-08-1994 WIT H M/S RADIANT BUILDER FOR DEVELOPMENT OF PROPERTY. ACCORDING TO THE ASSE SSEE A RIGHT WAS CREATED IN THE FAVOUR OF HIM AND OTHER LEGAL HEIRS IN RESPECT OF THE IMPUGNED PROPERTY BY THE ORDER PASSED BY HONBLE HIGH COURT IN 1989 AND HENCE HE ENTERED INTO A ITA 3096/MUM/2012 3 MOU TO DEVELOP THE PROPERTY. SUBSEQUENTLY THE ASS ESSEE ENTERED INTO ANOTHER MOU WITH M/S MURALI REALTORS ON 26.12.1995 & 17.5.1 996 AND A DEED OF CONFIRMATION WAS ALSO EXECUTED ON 13.11.1997. THER EAFTER THE ASSESSEE ALSO APPLIED TO THE INCOME TAX DEPARTMENT SEEKING CLEARA NCE U/S 269UL AND THE INCOME TAX DEPARTMENT ALSO ISSUED A CERTIFICATE ON 15.9.1998. THERE AFTER THE ASSESSEE EXECUTED SUPPLEMENTARY MOU ON 29.3.2000 AN D THE DEVELOPMENT AGREEMENT WAS EXECUTED ON 25.9.2000 WITH M/S MURALI REALTORS. THEREAFTER ON 10.2.2001 THE ASSESSEE CANCELLED THE MOU ENTERED WI TH M/S RADIANT BUILDER EARLIER IN 1994. BETWEEN 2000 TO 2005 THE ASSESSE E PURCHASED THE TENANCY RIGHTS OF VARIOUS TENANTS. IN 2005 THE ASSESSEE R ECEIVED SUBSTANTIAL PAYMENTS FROM M/S MURLI REALTORS AND THE POSSESSION WAS HAND ED OVER. FINALLY THE ASSESSEE EXECUTED SALE DEED ON 19.5.2007 IN FAVOUR OF M/S MURALI REALTORS. ACCORDING TO THE ASSESSEE SINCE THE SUBSTANTIAL AM OUNT WAS RECEIVED AND THE POSSESSION WAS ALSO HANDED OVER BY MARCH 2005 THE CAPITAL GAIN WAS OFFERED IN THE ASSESSMENT YEAR 2005-06. THE LEGAL HEIRS OF MR . ANAND VAZIRANI WERE THE ASSESSEE HEREIN HIS MOTHER AND HIS SISTER. THE AS SESSEES MOTHER DIED IN BETWEEN AND HIS SISTER EXECUTED RELEASE DEED IN FAV OUR OF THE ASSESSEE. ACCORDINGLY THE ASSESSEE HEREIN BECAME THE FULL OWN ER OF THE PROPERTY. 5. THE DEPARTMENT CARRIED OUT A SURVEY OPERATIO N IN THE HANDS OF M/S MURLI REALTORS WHEREIN THEY NOTICED THE DEVELOPMENT AGRE EMENT DATED 25-09-2000 ENTERED BETWEEN THE ASSESSEE HEREIN AND M/S MURLI R EALTORS. IN THAT AGREEMENT THE CONSIDERATION WAS SHOWN AT RS.8 60 00 000/-. U PON RECEIPT OF THE SAID INFORMATION THE ASSESSING OFFICER OF THE ASSESSEE REOPENED THE ASSESSMENT RELATING TO THE ASSESSMENT YEAR 2001-02 I.E. THE YEAR UNDER CONSIDERATION BY ISSUING NOTICE U/S 148 OF THE ACT. THE ASSESSING O FFICER NOTICED THAT THE SETTLEMENT COMMISSION HAD GIVEN THE LETTER OF POSSE SSION TO THE ASSESSEE ON 15.5.2000 AND THE DEVELOPMENT AGREEMENT WAS ENTERED INTO BETWEEN THE ASSESSEE AND M/S MURLI REALTOR ON 25.9.2000. THE A SSESSING OFFICER TOOK THE VIEW THAT THE ASSESSEE HAS TRANSFERRED THE PROPERTY WITHIN THE MEANING OF SEC. 2(47)(V) AND 2(47)(VI) OF THE ACT ON 25.9.2000 AND ACCORDINGLY HELD THAT THE CAPITAL GAIN ARISING ON SUCH TRANSFER IS ASSESSABLE AS SHORT TERM CAPITAL GAIN IN THE ASSESSMENT YEAR 2001-02. THE ASSESSEE SUBMITTE D THAT HE HAD OFFERED THE CAPITAL GAIN IN THE ASSESSMENT YEAR 2005-06 AS THE POSSESSION OF THE PROPERTY WAS ACTUALLY GIVEN IN THAT YEAR AND MAJOR CONSIDERA TION WAS RECEIVED IN THAT YEAR. ITA 3096/MUM/2012 4 FURTHER THE SALE DEED WAS EXECUTED SUBSEQUENTLY ON 19.6.2007 CONFIRMING THE SAID TRANSFER. HOWEVER THE SAID CONTENTIONS DID N OT FIND FAVOUR WITH THE ASSESSING OFFICER. ACCORDINGLY THE ASSESSING OFFI CER COMPUTED THE SHORT TERM CAPITAL GAIN AS UNDER AND ASSESSED THE SAME IN AY 2 001-02. TOTAL CONSIDERATION 8 60 00 000 LESS:- AMOUNT PAID TO RBI 1 35 34 380* CASH PAYMENT TO TENANTS 1 14 50 000 CHEQUE PAYMENT TO TENANTS 84 00 000 PAID TO RADIANT BUILDERS 65 43 899 ------------------ 3 99 28 2 79 ---------------- SHORT TERM CAPITAL GAIN 4 60 71 721 ======== (* TO THE SETTLEMENT COMMISSION TOWARDS DIFFERENTIA L PRICE) THE ASSESSEE MET THE ABOVE SAID EXPENSES OUT OF THE ADVANCE OF RS.4 56 67 167/- RECEIVED FROM M/S MURLI REALTORS F ROM TIME TO TIME. 6. THE LD CIT(A) ALSO CONFIRMED THE VIEW TAKEN BY THE ASSESSING OFFICER. PARAGRAPH 5.3 OF HIS ORDER READS AS UNDER:- 5.3 THE SALE OF PROPERTY HAS BEEN EFFECTED BY A D EVELOPMENT AGREEMENT DATED 25.9.2000. THE SALE HAS TO BE CONCLUDED AS C OMPLETE ON THIS DATE FOR THE FOLLOWING REASONS:- (1) DEVELOPMENT AGREEMENT HAS BEEN SIGNED ON THIS DATE CONSIDERATION IS QUANTIFIED AND POSSESSION HAS BEEN GIVEN TO THE BUYER. (2) PART OF THE CONSIDERATION AMOUNT HAS BEEN RECEI VED OR DEEMED TO HAVE BEEN RECEIVED. (3) THERE IS PART PERFORMANCE OF THE CONTRACT AND A S PER PROVISIONS OF SECTION 2(47) R.W.S. 53A THE TRANSFER OF PROPER TY IS REGARDED AS COMPELETE ONCE THE POSSESSION IS GIVEN AND TRANS FEREE IS READY AND WILLING TO PERFORM HIS PART OF THE CONTRA CT. APPARENTLY THE TAX AUTHORITIES HAVE APPLIED THE RA TIO LAID DOWN BY HONBLE JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF CHA TURBHUJ DWARAKADAS KAPADIA OF BOMBAY VS. CIT (2003)(260 ITR 491). AGGRIEVED THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. ITA 3096/MUM/2012 5 7. THE LD COUNSEL APPEARING FOR THE ASSESSEE MR. VIMAL PUNMIYA SUBMITTED THAT THE VIEW TAKEN BY THE TAX AUTHORITIES TO ASSES S THE CAPITAL GAIN IN ASSESSMENT YEAR 2001-02 IS AGAINST THE PECULIAR FAC TS PREVAILING IN THE INSTANT CASE AND THEY HAVE REACHED SUCH A CONCLUSION WITHOU T PROPERLY APPRECIATING THE FACTS. HE SUBMITTED THAT THE TAX AUTHORITIES ARE U NDER THE IMPRESSION THAT THE POSSESSION OF THE PROPERTY WAS GIVEN TO THE DEVELOP ER ON THE DATE OF EXECUTION OF DEVELOPMENT AGREEMENT AND FURTHER THE DEVELOPER HAS ALSO IMMEDIATELY STARTED THE ACTIVITIES. HOWEVER THE FACT REMAINS THAT THE ASSESSEE HAD GIVEN ONLY THE LICENCE TO THE DEVELOPER TO ENTER THE PROPERTY. HE FURTHER SUBMITTED THAT THE ADVANCE RECEIVED FROM THE DEVELOPER WAS FULLY USED TO PAY THE DIFFERENTIAL PRICE TO THE SETTLEMENT COMMISSION TO PURCHASE TENANCY R IGHTS FROM THE TENANTS TO RELIEVE FROM THE EARLIER MOU ENTERED WITH M/S RADIA NT BUILDERS ETC. FURTHER THE DEVELOPER ALSO DID NOT START THE DEVELOPMENT WORK I N TERMS OF THE DEVELOPMENT AGREEMENT. FURTHER THERE WAS DELAY IN GETTING APPR OVAL FROM MUNICIPAL AUTHORITIES AND THERE WAS FURTHER DELAY SINCE THE CLAIMS OF THE TENANTS NEED TO SETTLED. ACCORDINGLY THE LD A.R SUBMITTED THAT TH E DEVELOPER COULD NOT START THE WORK IN THE YEAR RELEVANT TO THE ASSESSMENT YEAR 20 01-02. ONCE ALL THE HURDLES WERE CLEARED THE ASSESSEE RECEIVED MAJOR PART OF T HE CONSIDERATION ON HIS OWN ACCOUNT ONLY IN THE YEAR RELEVANT TO THE ASSESSMEN T YEAR 2005-06 AND ACCORDINGLY THE POSSESSION WAS ALSO GIVEN TO THE DE VELOPER DURING THAT YEAR. ACCORDINGLY THE ASSESSEE OFFERED THE CAPITAL GAIN IN THAT YEAR ONLY. SUBSEQUENTLY THE CONVENYANCE DEED WAS EXECUTED ON 19.5.2007 IN FAVOUR OF THE DEVELOPER M/S MURLI REALTOR. THE LD A.R SUBMIT TED THAT THE DECISION RENDERED BY THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CHATURBHUJ DWARAKADAS KAPADIA (SUPRA) IS NOT APPLICABLE TO THE FACTS PREVAILING IN THE INSTANT CASE. HE SUBMITTED THAT ONE OF THE CONDIT IONS PRESCRIBED IN THE ABOVE SAID CASE WAS THAT THE DEVELOPER SHOULD BE WILLING TO PERFORM AS PER THE CONTRAT. HOWEVER THE DEVELOPER DID NOT PERFORM A S PER THE CONTRACT AND HENCE THE SAID CONDITION WAS NOT SATISFIED. THE LD A.R S UBMITTED THAT IN THE ABSENCE OF ANY POSITIVE ACTION FROM THE SIDE OF DEVELOPER T O PERFORM IN TERMS OF THE CONTRACT DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2001-02 THE ASSESSEE WAS NOT SURE THAT THE DEVELOPER WOULD COMP LY WITH THE TERMS OF THE DEVELOPMENT AGREEMENT. FURTHER THE ASSESSEE HAS N OT GIVEN POSSESSION TO THE DEVELOPER BUT GAVE ONLY LICENCE TO ENTER INTO THE PROPERTY. ACCORDINGLY HE ITA 3096/MUM/2012 6 SUBMITTED THAT THE TAX AUTHORITIES ARE NOT CORRECT IN LAW IN ASSESSING THE CAPITAL GAIN IN AY 2001-02. THE LD A.R ALSO INVITED OUR AT TENTION TO VARIOUS CLAUSES OF THE DEVELOPMENT AGREEMENT AND ALSO DREW SUPPORT FRO M VARIOUS CASE LAWS TO SUPPORT HIS CONTENTIONS. 8. ON THE CONTRARY THE LD D.R SHRI JEETENDRA KUM AR SUBMITTED THAT THE ASSESSEE HAD RECEIVED SUBSTANTIAL AMOUNT BY VIRTUE OF THE DEVELOPMENT AGREEMENT WHERE AS IN THE CASE LAWS RELIED UPON BY THE ASSESSEE THE CONSIDERATION PAID TO THE OWNERS OF THE PROPERTY WA S NOT SUBSTANTIAL. FURTHER BY GIVING LICENCE TO ENTER THE PROPERTY THE ASSESSEE HAS GIVEN POSSESSION TO THE DEVELOPER. ACCORDINGLY THE LD D.R SUBMITTED THAT THE PROVISIONS OF SEC. 2(47)(V) AND 2(47)(VI) SHALL SQUARE APPLY TO THE IMPUGNED TR ANSACTION AND HENCE THE LD CIT(A) WAS JUSTIFIED IN CONFIRMING THE ASSESSMENT O F CAPITAL GAIN IN AY 2001-02. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFUL LY PERUSED THE RECORD. WE FEEL IT PERTINENT TO HIGHLIGHT CERTAIN FACTS WHICH WERE REITERATED BY LD A.R DURING THE COURSE OF HIS ARGUMENTS. THERE IS NO DISPUTE W ITH REGARD TO THE FACT THAT THE IMPUGNED PROPERTY WAS OCCUPIED BY MANY TENANTS AND THEY HELD TENANCY RIGHTS. THE PAYMENTS MADE BY THE ASSESSEE TO THE TENANTS TO PURCHASE THE SAID TENANCY RIGHT WERE ALLOWED AS DEDUCTION BY THE ASSE SSING OFFICER HIMSELF WHILE COMPUTING THE SHORT TERM CAPITAL GAIN. THE ASSESSE E HAS PLACED COPIES OF AGREEMENTS ENTERED WITH VARIOUS TENANTS FOR VACATIN G THE PROPERTY AT PAGES 177 TO 220 OF THE PAPER BOOK FILED BY HIM. A PERUSAL O F THE SAID AGREEMENTS SHOWS THAT THE ASSESSEE HAS STARTED ENTERING INTO THE AGR EEMENTS WITH THE TENANTS FROM 2002 ONWARDS. WE NOTICE THAT THE ASSESSEE HAS PURC HASED TENANCY RIGHTS IN JANUARY 2005 ALSO. THESE FACTS SHOW THAT THE TENA NTS WERE OCCUPYING THE PROPERTY TILL THAT DATE. IN THE MEAN TIME THE DE VELOPER WAS APPROACHING THE PUNE MUNICIPAL CORPORATION FOR THE JOINT DEVELOPMEN T OF THE IMPUGNED PROPERTY. IT IS STATED THAT THE BUILDING PERMISSION WAS GIVEN VIDE COMMENCEMENT CERTIFICATE BEARING NO.4679 DATED 19.9.2001 BUT IT WAS REVISED VIDE REVISION CERTIFICATE NO.0131 DATED 3.10.2003 AND THERE WERE SUBSEQUENT R EVISIONS ALSO. IT IS FURTHER STATED THAT THE DEVELOPER OBTAINED PLINTH COMPLETIO N FROM PUNE MUNICIPAL CORPORATION ON 26.3.2002 AND PART COMPLETION WAS IS SUED ON 5.1.2004. ALL THESE FACTS SHOW THAT THE DEVELOPER DID NOT COMMENCE THE WORK OF DEVELOPMENT IN THE YEAR RELEVANT TO THE ASSESSMENT YEAR 2001-02. ITA 3096/MUM/2012 7 10. WE HAVE ALREADY NOTICED THAT THE ASSESSEE HA D ENTERED INTO MOU WITH M/S MURLI REALTORS IN THE YEAR 1995 AND HAS STARTE D RECEIVING ADVANCE AMOUNTS FROM IT. WE HAVE FURTHER NOTICE THAT THE ADVANCE A MOUNT OF ABOUT RS.4.56 CRORES WAS FULLY UTILIZED TO MEET THE EXPENSES MEANING TH EREBY THE CONSIDERATION OF RS.8.60 CRORES INCLUDED THE EXPENDITURE TO BE MET B Y THE ASSESSEE. ACCORDING TO THE ASSESSEE HE HAD RECEIVED THE ADVANCE ON HIS OWN ACCOUNT ONLY IN 2005 I.E. THE ADVANCES RECEIVED EARLIER WERE USED TO ME ET THE EXPENSES. THE ASSESSEE HAS PLACED LEDGER ACCOUNT COPY RELATING TO THE ADVANCE PAYMENTS FROM THE BOOKS OF M/S MURLI REALTORS AT PAGES 221 TO 227 OF THE PAPER BOOK. A PERUSAL OF THE SAME SHOWS THAT THE ASSESSEE HAD REC EIVED ADVANCE AMOUNT OF RS.2.90 CRORES PRIOR TO 1.4.2000. IT IS PERTINENT TO NOTE THAT THE DEVELOPMENT AGREEMENT ITSELF WAS ENTERED ON 25.9.2000 ONLY. DU RING THE FINANCIAL YEAR 1.4.2000 TO 31.3.2001 THE ASSESSEE HAS RECEIVED A SUM OF RS.1.57 CRORES. IN FY 2001-02 HE RECEIVED A SUM OF RS.30 LAKHS ONLY. IN FY 2002-03 NO ADVANCE WAS RECEIVED. IN FY 2003-04 HE RECEIVED A SUM OF RS.25.00 LAKHS ONLY. FINAL PAYMENT OF RS.3.07 CRORES WAS MADE TO THE ASSESSEE ONLY IN FY 2004-05. HENCE THE ASSESSEE CLAIMS THAT THE DEVELOPMENT AGR EEMENT WAS REALLY GIVEN EFFECT TO ONLY IN THE FINANCIAL YEAR 2004-05 RELEV ANT TO THE ASSESSMENT YEAR 2005-06. 10. FURTHER OUR ATTENTION WAS INVITED TO THE FOLL OWING CLAUSES OF THE DEVELOPMENT AGREEMENT DATED 25.9.2000 WHICH IS PLA CED AT PAGES 102 TO 117 OF THE PAPER BOOK:- (A) AS PER CLAUSE 5 THE OWNERS (ASSESSEE HEREIN) HAS AGREED TO EXECUTE A POWER OF ATTORNEY IN FAVOUR OF THE DEVELOPER. (B) AS PER CLAUSE 6 THE OWNER HAS TO GET THE DEED OF TRANSFER EXECUTED BY THE GOVERNMENT OF MAHARASHTRA IN HIS FAVOUR. TH E EXPENSES TO BE INCURRED IN CONNECTION THERE WITH SHALL BE BORNE BY THE OWNER. (C) AS PER CLAUSE 15 THE OWNERS HAVE EXECUTED L ICENCE IN FAVOUR OF THE DEVELOPER TO CARRY OUT CONSTRUCTION ACTIVITIES. HO WEVER THE POSSESSION OF THE PROPERTY SHALL BE DELIVERED BY THE OWNERS UPON EXECUTION OF CONVEYANCE DEED IN FAVOUR OF THE DEVELOPER OR THEIR NOMINEES. ACCORDINGLY IT WAS CONTENDED THAT THE LEGAL POSSES SION (COMPLETE CONTROL OVER THE PROPERTY) WAS NOT GIVEN TO THE DEVELOPER AND HE WAS GIVEN ONLY THE LICENCE TO CARRY OUT THE WORK. ITA 3096/MUM/2012 8 11. THE LD A.R ALSO PLACED RELIANCE ON FEW CASE LA WS TO SUPPORT HIS CONTENTION THAT THE CAPITAL GAIN NEED NOT BE ASSESS ED IN THE YEAR IN WHICH THE DEVELOPMENT AGREEMENT WAS ENTERED I.E. THE YEAR O F ASSESSMENT SHOULD BE DECIDED ON THE BASIS OF FACTS PREVAILING IN EACH CA SE. WE SHALL BRIEFLY DISCUSS ABOUT THOSE CASE LAWS:- (A) ACIT VS.MRS. GEETADEVI PASARI (2007)(14 SOT 6 3)(MUM)(URO)- IN THIS CASE THE ASSESSEE EXECUTED AN AGREEMENT OF SA LE CUM DEVELOPMENT WITH A BUILDER ON 29.3.1994 TO DEVELOP THE PROPERTY. THE DEVELOPER AFTER OBTAINING THE COMMENCEMENT CERTIFICAATE FROM THE MUNICIPAL CORPOR ATION PAID THE BALANCE CONSIDERATION. THE ASSESSEE HANDED OVER THE POSSES SION OF THE PREMISES TO THE DEVELOPER ON 10.4.1998. ON ANALYSIS OF THE FACTS P REVAILING IN THIS CASE THE TRIBUNAL CAME TO THE CONCLUSION THAT THE POSSESSION WAS GIVEN ONLY ON 10.4.1998. ACCORDINGLY THE TRIBUNAL HELD AS UNDER :- IN THESE CIRCUMSTANCES WHEN ONLY A SMALL PORTIO N OF SALE CONSIDERATION WAS RECEIVED AS EARNEST/DEPOSIT MONEY AND WHEN THE DEVELOPER COULD NOT HAVE THEREFORE EXERCISED HIS RIGHTS UNDER THE CONTRACT WHICH WERE TO CRYSTALLIZE ON MAKING THE PA YMENTS AFTER THE RECEIPT OF NO OBJECTION CERTIFICATE FROM THE AUTHOR ITIES IT CANNOT BE SAID THAT THERE IS ANYTHING TO INDICATE LEAVE ASIDE ESTABLIS H PASSING OF OR TRANSFERRING OF COMPLETE CONTROL OVER THE PROPERTY IN FAVOUR OF THE DEVELOPER WHICH IS SINE QUA NON FOR TAKING THE DAT E OF CONTRACT AS RELEVANT FOR THE PURPOSE OF DECIDING THE YEAR OF CHARGEABILI TY OF CAPITAL GAINS. THEREFORE ON THE FACTS OF THE PRESENT CASE THE DA TE OF DEVELOPMENT AGREEMENT WOULD NOT REALLY BE RELEVANT TO DECIDE TH E YEAR OF CHARGEABILITY. ACCORDING TO LD A.R THE ABOVE SAID ORDER OF TRIBUN AL HAS SINCE BEEN APPROVED BY THE HONBLE BOMBAY HIGH COURT IN INCOME TAX APPE AL NO.861 OF 2007 VIDE ITS ORDER DATED 10.7.2008 AFTER CONSIDERING ITS EARLIE R DECISION RENDERED IN THE CASE OF CHATURBHUJ DWARAKADAS KAPADIA. HOWEVER THE COP Y OF THE ORDER OF THE HIGH COURT WAS NOT FURNISHED. (B) DR. ARVIND S PHADKE VS. ADDL. CIT (2014)(46 TAXMANN.COM 335)(PUNE) - IN THIS CASE THE DEVELOPMENT AGREEME NT WAS ENTERED ON 13.9.2007 AND THE PHYSICAL POSSESSION WAS GIVEN ON 1.3.2008. THE TRIBUNAL HELD THAT THE DATE OF TRANSFER SHOULD BE TAKEN AS T HE DATE ON WHICH PHYSICAL POSSESSION WAS GIVEN. ITA 3096/MUM/2012 9 (C) BINJUSARIA PROPERTIES (P) LTD VS. ACIT (2014) (45 TAXMANN.COM 115)(HYD) - IN THIS CASE THE ASSESSEE ENTERED INT O A DEVELOPMENT AGREEMENT CUM GENERAL POWER OF ATTORNEY WITH A DEVELOPER ON 2 ND FEBRUARY 2006. HOWEVER THE BUILDER DID NOT START THE WORKS AS PER THE AGREEMENT. THE AO ASSESSED THE CAPITAL GAINS IN AY 2006-07 OBSERVING THAT THE TRANSFER HAD TAKEN PLACE IN AY 2006-07. THE TRIBUNAL NOTICED THAT THE ASSESSEE HAS GIVEN ONLY PERMISSIVE POSSESSION TO THE DEVELOPER VIDE THE DEVELOPMENT AGREEMENT. FURTHER THE DEVELOPER DID NOT CARRY ON ANY DEVELOP MENT ACTIVITY ON THE PROPERTY AS PER THE DEVELOPMENT AGREEMENT. ACCORDINGLY THE TRIBUNAL HELD THAT THERE WAS NO TRANSFER OF PROPERTY BY VIRTUE OF DEVELOPMEN T AGREEMENT GIVING RISE TO CAPITAL GAIN IN AY 2006-07. IT IS PERTINENT TO NO TE THAT THE TRIBUNAL HAD PLACED RELIANCE ON THE THIRD MEMBER DECISION RENDERED IN T HE CASE OF VIJAYA PRODUCTIONS (P) LTD VS. ADDL. CIT (2012)(134 ITD 19 ). (D) S. RANJITHA REDDDY VS. DCIT (2013)(35 TAXMANN .COM 415)(HYD) - IN THIS CASE THE ASSESSEE HAD GIVEN LICENCE TO THE DE VELOPER TO CARRY ON DEVELOPMENT ACTIVITIES. HOWEVER THE DEVELOPER DID NOT COMMENCE CONSTRUCTION ACTIVITIES. THE TRIBUNAL HELD THAT THE WILLINGNES S TO PERFORM CONTEMPLATED IN SEC. 53A OF THE ACT IS SOMETHING MORE THAN A STATEMENT O F INTENT; IT IS THE UNQUALIFIED AND UNCONDITIONAL WILLINGNESS ON THE PART OF THE VE NDEE TO PERFORM ITS OBLIGATIONS. UNLESS THE PARTY HAS PERFORMED OR IS WILLING TO PER FORM ITS OBLIGATIONS UNDER THE CONTRACT AND IN THE SAME SEQUENCE IN WHICH THESE A RE TO BE PERFORMED IT CANNOT BE SAID THAT THE PROVISIONS OF SECTION 53A OF THE T RANSFER OF PROPERTY ACT WILL COME INTO PLAY ON THE FACTS OF THT CASE. SINCE THE DEVELOPER DID NOT COMMENCE THE CONSTRUCTION ACTIVITIES THE TRIBUNAL HELD THAT THERE WAS NO TRANSFER OF PROPERTY ON THE DATE OF EXECUTION OF DEVELOPMENT AGREEMENT. IDENTICAL VIEWS HAVE BEEN EXPRESSED IN THE FOLLOWING CASES ALSO BY THE HYDERA BAD BENCH OF TRIBUNAL:- (I) SMT. P PRATHIMA REDDY VS. ITO (25 TAXMANN.COM 264)(HYD) (II) FIBARS INFRATECH (P) LTD VS. ITO (46 TAXMANN .COM 313)(HYD) (III) SURESH KUMAR D SHAH VS. DCIT (16 TAXMANN.COM 324)(HYD) (IV) RAVINDER SINGH ARORA VS. ACIT (24 TAXMANN.COM 346)(HYD) (E) JCIT VS. M/S GOKHALE & GADRE ENTERPRISES (ITA NO.2335 & 2336/MUM/2000 DATED 23-08-2005)(MUM ITAT) - IN THI S CASE THE ASSESSEE ENTERED INTO AN AGREEMENT ON 30.12.1992 FOR SALE OF DEVELOPMENT RIGHTS. THE ITA 3096/MUM/2012 10 TRIBUNAL NOTICED THAT THE POSSESSION WAS GIVEN ON 6 .5.1994. ACCORDINGLY IT WAS HELD THAT THE CAPITAL GAIN WOULD ARISE IN AY 1995-9 6 AND NOT IN AY 1993-94 AS OPINED BY THE ASSESSING OFFICER. 12. THUS WE NOTICE THAT THE ASSESSEE HAD RECEIVE D ADVANCE AMOUNTS MUCH EARLIER TO THE EXECUTION OF DEVELOPMENT AGREEMENT PROBABLY ON THE STRENGTH OF THE MOU. THE PROPERTY WAS ENCUMBERED WITH TENANCY RIGHTS OF MANY PERSONS AND THE RELEASE OF TENANCY RIGHT WAS COMPLETED ONLY IN JANUARY 2005. FURTHER THE APPROVAL FROM MUNICIPAL CORPORATION WAS ALSO GO T DELAYED AND THE PLANS WERE REVISED SUBSEQUENT TO AY 2000-01. THE SURROUNDING CIRCUMSTANCES SHOW THAT THE DEVELOPER DID NOT START THE WORK OF DEVELOPMENT IN THE YEAR RELEVANT TO AY 2001-02. AS PER THE TERMS OF DEVELOPMENT AGREEMENT THE ASSESSEE HAS GIVEN ONLY LICENCE TO ENTER INTO THE PROPERTY MEANING TH EREBY THE POSSESSION WAS NOT GIVEN IN THE YEAR RELEVANT TO AY 2001-02. IN VIEW OF THE PECULIAR FACTS NARRATED ABOVE THE ASSESSEE HAS CONTENDED THAT THE TAX AUTH ORITIES ARE NOT CORRECT IN HOLDING THAT THE TRANSFER OF PROPERTY TOOK PLACE IN THE YEAR RELEVANT TO AY 2001- 02. THE VARIOUS CASE LAWS DISCUSSED ABOVE ALSO SUP PORT THE VIEW TAKEN BY THE ASSESSEE. HENCE WE AGREE WITH THE CONTENTIONS OF THE ASSESSEE IN THIS REGARD. ACCORDINGLY WE HOLD THAT THE TRANSFER OF PROPERTY DID NOT TAKE PLACE ON THE DATE OF EXECUTION OF DEVELOPMENT AGREEMENT AND ACCORDING LY THE TAX AUTHORITIES ARE NOT JUSTIFIED IN ASSESSING THE CAPITAL GAIN IN AY 2 001-02. ACCORDINGLY WE SET ASIDE THE ORDERS OF TAX AUTHORITIES ON THIS ISSUE. 13. SINCE WE HAVE HELD THAT THE TRANSFER OF PROPER TY DID NOT TAKE PLACE IN THE FINANCIAL YEAR RELEVANT TO AY 2001-02 WE DO NOT FI ND IT NECESSARY TO ADDRESS OTHER ISSUES RELATING TO COMPUTATION OF CAPITAL GAI NS. 14. IN THE RESULT THE APPEAL FILED BY THE ASSES SEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 14TH NOV 2014. *+ & -. 14TH NOV 2014 + % /' 0 SD SD ( / VIVEK VARMA) ( . . / B.R. BASKARAN) / JUDICIAL MEMBER / ACCOUNTANT MEMBER & ' MUMBAI: 14TH NOV 2014. ITA 3096/MUM/2012 11 . . ./ SRL SR. PS !'#$% &%'# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT. 3. & 1( ( ) / THE CIT(A)- CONCERNED 4. & 1( / CIT CONCERNED 5. 2/ (3 ) 3 & ' / DR ITAT MUMBAI CONCERNED 6. / 4' / GUARD FILE. 5 & / BY ORDER TRUE COPY 6 ' (ASSTT. REGISTRAR) ) 3 & ' /ITAT MUMBAI