Panyam Cements and Mineral Industries Limited,, Hyderabad v. Addl.CIT,, Kurnool

ITA 694/HYD/2013 | 2008-2009
Pronouncement Date: 28-10-2016 | Result: Partly Allowed

Appeal Details

RSA Number 69422514 RSA 2013
Assessee PAN AABCP2298M
Bench Hyderabad
Appeal Number ITA 694/HYD/2013
Duration Of Justice 3 year(s) 5 month(s) 20 day(s)
Appellant Panyam Cements and Mineral Industries Limited,, Hyderabad
Respondent Addl.CIT,, Kurnool
Appeal Type Income Tax Appeal
Pronouncement Date 28-10-2016
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 28-10-2016
Date Of Final Hearing 27-07-2016
Next Hearing Date 27-07-2016
Assessment Year 2008-2009
Appeal Filed On 08-05-2013
Judgment Text
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 NO. 694/HYD/2013 ASSESSMENT YEAR: 2008-09 PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. CEMENT NAGAR KURNOOL. PAN AABCP 2298 M VS. ADDL. COMMISSIONER OF INCOME-TAX KURNOOL RANGE KURNOOL. (ASSESSEE) (RESPONDENT) ASSESSEE BY : SHRI D.V. ANJANEYULU REVENUE BY : SHRI MOHAN KUMAR SINGHANIA DATE OF HEARING 28-07-2016 DATE OF PRONOUNCEMENT 28-09-2016 O R D E R PER S. RIFAUR RAHMAN A.M.: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(A) - IV HYD ERABAD FOR AY 2008-09. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY IS ENGAGED IN THE MANUFACTURE AND SALE OF CEMENT FILE D ITS RETURN OF INCOME FOR THE AY 2008-09 ON 29/09/2008 DECLARING T OTAL INCOME OF RS. 36 00 051 214/-. AND AFTER SET OFF OF BROUGHT F ORWARD LOSSES RETURNED NIL INCOME. THE RETURN WAS PROCESSED U/S 143(1). SUBSEQUENTLY NOTICES U/S 143(2) AND 142(1) WERE I SSUED CONVERTING THE CASE INTO SCRUTINY. 2.1 IN BRIEF THE ASSESSEE HAS ENTERED INTO JOINT D EVELOPMENT AGREEMENT WITH M/S BHIMSHANKAR REALTORS PVT. LTD. (BRPL) FOR 2 ITA NO. 694/H/13 PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. DEVELOPMENT OF LAND OWNED BY IT. ASSESSEE HAS MODIF IED THE JOINT DEVELOPMENT AGREEMENTS SEVERAL TIMES. THE DETAILS A RE AS BELOW: 1. THE ASSESSEE HAD FIRST ENTERED INTO A DEVELOPME NT AGREEMENT WITH M/S SALARPURIA PROPERTIES PVT. LTD. (SPPL) (IT IS A SISTER CONCERN OF BRPL) ON 21/04/05 FOR DEVELOPMENT OF LAND MEASURING 20 ACRES 18 GUNTAS OWNED BY IT. AS PER TH E AGREEMENT ASSESSEE WAS ENTITLED TO 28% OF THE CONS TRUCTED AREA AND A FURTHER SUM OF RS. 10 CRORES AS REFUNDABLE IN TEREST FREE DEPOSIT OF WHICH A SUM OF RS. 4 CRORES WAS PAID T O THE ASSESSEE VIDE CHEQUE DATED 21/04/05. 2. SUBSEQUENTLY ASSESSEE ENTERED INTO ANOTHER JOI NT DEVELOPMENT AGREEMENT ON 15/10/05 (HEREINAFTER REFE RRED TO AS JDA-1) WITH THE SAME DEVELOPER SPPL. JDA I SUPERSEDED UNDERSTANDING REACHED UNDER THE AGREEMENT DATED 21/ 04/05. UNDER THE JDA - I ASSESSEE ENTERED INTO A DEVELOPMENT AGREEMENT OF THE LAND INTO A RESIDENTIAL-CUM-COMMER CIAL COMPLEX IN WHICH ASSESSEE WAS ENTITLED TO RECEIVE 28% OF TH E COMMERCIAL AREA AND 30% OF THE RESIDENTIAL AREA AND A FURTHER SUM OF RS. 10 CRORES AS INTEREST FREE REFUNDABLE SECURITY DEPOSIT OF WHICH RS. 4 CRORES WAS ALREADY RECEIVED. UNDER THE AGREEMENT DATED 21/04/05 ASSESSEE ALSO EXECUTED A POWER OF ATTORNE Y IN FAVOUR OF SPPL EMPOWERING THE DEVELOPER TO TAKE ALL ACTIO NS ON ITS BEHALF IN PURSUANCE OF JDA. 3. ASSESSEE ENTERED INTO A SUPPLEMENTAL JOINT DEV ELOPMENT AGREEMENT DATED 30/01/2006 UNDER WHICH IT WAS AGR EED THAT THE ENTIRE LAND WOULD BE DEVELOPED AS A RESIDENTIAL COM PLEX ONLY AND THE ASSESSEE WOULD BE ENTITLED TO RECEIVE 20% OF TH E CONSTRUCTED AREA. IN RETURN SPPL AGREED TO PAY 22 CRORES TO TH E ASSESSEE. THE ASSESSEE ALSO EXECUTED A POWER OF ATTORNEY IN F AVOUR OF SPPL EMPOWERING THE DEVELOPER TO TAKE ALL ACTIONS O N ITS BEHALF IN PURSUANCE OF SUPPLEMENT JOINT DEVELOPMENT AGREEM ENT (SJDA I ) AND ALSO ENABLING THE DEVELOPER TO ENTER INTO NEC ESSARY AGREEMENTS ETC. FOR ITS SHARE OF CONSTRUCTED AREA. 3 ITA NO. 694/H/13 PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. 4. ASSESSEE ENTERED INTO SECOND SUPPLEMENTAL JOINT DEVELOPMENT AGREEMENT DATED 03/11/2006 (REFERRED TO AS SJDA II ) WITH THE SAME DEVELOPER SPPL WHEREBY ASSESSEES SHARE IN THE CONSTRUCTED AREA WAS REDUCED TO 13.5%. ASSESSEE ALSO EXECUTED POWER OF ATTORNEY IN FAVOUR OF SPPL EMPOWE RING THE DEVELOPER TO TAKE ALL ACTIONS ON ITS BEHALF IN PURS UANCE OF SJDA II 5. ASSESSEE SIMULTANEOUSLY ENTERED INTO A SUPPLEMEN TAL AGREEMENT DATED 03/11/2006 (REFERRED TO AS SA II ) WHEREBY SPPL AGREED TO PAY A FURTHER SUM OF RS. 21.7 CRORES IN ADDITION TO THE SUM OF RS. 22 CRORES ALREADY PAID TO THE ASS ESSEE OVER AND ABOVE THE CONSTRUCTED AREA DECIDED AS PER THE A GREEMENT DATED 03/11/2006 IN PURSUANCE OF JDA I SJDA I & II . 6. ON 04/11/2006 ASSESSEE SOLD TWO PLOTS OF LAND ONE ADMEASURING 1 ACRE 38 GUNTAS AND ANOTHER IS ADMEASU RING 15 GUNTAS THROUGH REGISTERED SALE DEED TO SPPL FOR WH ICH STAMP VALUE WAS CONSIDERED AT RS. 1 43 09 400 AND RS. 18 75 000/- RESPECTIVELY. SALE DEED ALSO SPECIFIED THAT THE CON SIDERATION WAS TO BE PAID IN TERMS OF JDA I . ASSESSEE ALONG WITH SPPL THEN ENTERED INTO JOINT DEVELOPMENT AGREEMENT ON 18/12/2 007 (HEREAFTER REFERRED TO AS JDA II ) WITH BRPL. AS PER THE JDA II SPPL HAD BEEN SUBJECT TO INTERNAL RESTRUCTURING B ETWEEN GROUP COMPANIES AND ACCORDINGLY THE RIGHTS TITLE A ND INTEREST OBLIGATION UNDER THE JDA I SJDA I & II HAD BEEN TRANSFERRED TO BRPL. IT WAS AGREED THAT THE DEVELOPER WOULD DELIV ER TO THE ASSESSEE 11.655% OF THE RESIDENTIAL DEVELOPMENT UND ERTAKEN IN THE LAND. ASSESSEE ALSO EXECUTED A POWER OF ATTORNE Y IN FAVOUR OF BRPL TO ENABLE IT TO TAKE ALL ACTIONS IN PURSUAN CE TO JDA II . SIMULTANEOUSLY ASSESSEE REVOKED THE POWER OF ATTOR NEY EXECUTED INFAVOUR OF SPPL. 7. ASSESSEE ALSO ENTERED INTO SUPPLEMENTAL AGREEMEN T DATED 18/12/2007 (HEREAFTER REFERRED TO AS SA III ) WHEREBY 4 ITA NO. 694/H/13 PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. BRPL AGREED TO PAY AN ADDITIONAL SUM OF RS. 11 CRO RES IN ADDITION TO THE SUMS OF RS. 22 CRORES AND RS. 21.7 CRORES ALREADY PAID OVER AND ABOVE THE CONSTRUCTED AREA AGREED TO BE DELIVERED UNDER THE AGREEMENT DATED 18/12/2007. 2.2 THE SAID AGREEMENTS ARE IN THE TABULAR FORM AS UNDER: S.NO. NATURE OF DOCUMENT DATE PARTIES (OTHER THAN ASSESSEE 1. JOINT DEVELOPMENT AGREEMENT (JDA I ) 15/10/05 SPPL 2. POWER OF ATTORNEY (POA I ) 15/10/05 SPPL 3. SUPPLEMENTAL JDA (SJDA I ) 30/01/06 SPPL 4. POWER OF ATTORNEY (POA II ) 30/01/06 SPPL 5. SUPPLEMENTAL AGREEMENT (SA- I ) 30/01/06 SPPL 6. SECOND SUPPLEMENTAL JDA (SJDA III ) 03/11/06 SPPL 7. POWER OF ATTORNEY ( POA III ) 03/11/06 SPPL 8. SUPPLEMENTAL AGREEMENT(SA- II ) 03/11/06 SPPL 9. JOINT DEVELOPMENT AGREEMENT (JDA II ) 18/12/07 ASSESSEE & SPPL WITH BRPL 10. POWER OF ATTORNEY (POA I V) 18/12/07 ASSESSEE & SPPL TO BRPL 11. INSTRUMENT OF REVOCATION OF PA 18/12/07 ASSESSEE 12. SUPPLEMENTAL AGREEMENT (SA- III ) 18/12/07 SPPL BRPL 3. ASSESSEE HAD ADMITTED CAPITAL GAIN ON TRANSFER O F LAND FOR THE SUM OF RS. 22 CRORES RECEIVED UNDER JDA I FOR THE AY 2006-07. IT DID NOT ADMIT ANY CAPITAL GAIN ARISING FROM SUBSEQU ENT SJDAS AND JDA II . AO HAS HELD THAT JDA II HAD OVERWRITTEN ALL PRIOR JDAS AND SJDAS EXECUTED WITH SPPL AND THEREFORE DID NOT TA KEN COGNIZANCE OF THESE EARLIER AGREEMENTS. 4. BASED ON THE ABOVE THE AO HAS BROUGHT TO TAX TH E FOLLOWING AS SALE CONSIDERATION. 4.1 AS PER THE SUPPLEMENT AGREEMENT DATED 18/12/200 7 DEVELOPER HAS PAID/AGREED TO PAY THE FOLLOWING AMOUNTS TO THE ASSESSEE IN 5 ITA NO. 694/H/13 PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. ADDITION TO THE SHARE IN SALEABLE AREA TO THE EXTEN T OF 11.655% OF BUILT UP AREA WHICH WORKS OUT TO RS. 3 32 034 SQ.FT AND 1164 SQ.FT. IN TERRACE ALONG WITH NON-REFUNDABLE DEPOSIT OF RS. 54 .1 CRORES. AO ARRIVED THE VALUATION OF 11.655% SALEABLE AREA TAKI NG THE AVERAGE RATE OF 1500/- PER SQ.FT AND ASSUMED RS. 800/- AS C OST OF CONSTRUCTION. THEREFORE THE CONSIDERATION RECEIVED /RECEIVABLE IN TERMS OF MONEY FROM THE DEVELOPERS AND PROSPECTIVE BUYERS IN RESPECT OF THIS PROJECT FOR THE PURPOSE OF CAPITAL GAINS IS ARRIVED AT RS. 88 72 09 200/-. THE AO TREATED THE ABOVE TRANSACTI ON AS LONG TERM CAPITAL GAINS. 5. AGGRIEVED WITH THE ABOVE ORDER OF AO THE ASSESS EE PREFERRED AN APPEAL BEFORE THE CIT(A). 6. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E THE CIT(A) HAS CONCLUDED AS UNDER: 12.0 TO CONCLUDE I HOLD THAT A. THE DEVELOPMENT AGREEMENT(S) ENTERED INTO BY THE ASSESSEE LED TO A TRANSFER OF LAND CHARGEABLE TO CAPITAL GAI NS. B. THE DEVELOPMENT AGREEMENTS WERE NOT INDEPENDENT OF EACH OTHER AND MUTUALLY EXCLUSIVE. THEY WERE TO BE READ IN CONJUNCTION WITH EACH OTHER. C. THE ASSET TRANSFERRED UNDER THESE DEVELOPMENT AG REEMENTS WAS LAND. D. THE POSSESSION OF THE ASSET WAS HANDED OVER TO T HE DEVELOPER ON THE DATE OF THE JDA-I I.E. ON 15.10.2005. E. ACCORDINGLY THE TRANSFER TOOK PLACE ON 15.10.20 05 I.E. DURING THE A.Y. 2006-07 U/S 2(47)(V) OF THE INCOME TAX AC T READ WITH SEC.53A OF THE TRANSFER OF PROPERTY ACT. THE APPEAL IS THEREFORE PARTLY ALLOWED WITH REGAR D TO THE FIRST GROUND OF APPEAL. THE ASSESSING OFFICER IS DIRECTED TO BRING THE LONG-TERM CAPITAL GAIN ON THIS TRANSACTION TO TAX I N THE A.Y. 2006- 07 IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF SEC.150 READ WITH SECTION 153. IN ITS THIRD GROUND OF APPEAL THE ASSESSEE HAS OBJ ECTED TO THE CHARGING OF CAPITAL GAINS ON THE ASSESSEE'S SHARE O F THE CONSTRUCTED AREA AN ASSET NOT IN EXISTENCE THE EX ISTENCE OF 6 ITA NO. 694/H/13 PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. WHICH WAS A PRE-REQUISITE U/S 2(47)(V). THE ASSESSE E HAS RELIED ON THE FOLLOWING DECISIONS: L. AJAY KUMAR SHAH JAGATI V CIT 168 TAXMANN 53(SC) LL. MARYBONG & KYLE TEA INDUSTRIES LTD. V CIT 224 I TR 589 (SC) 13.2 THE ASSESSING OFFICER HAD HELD THAT THE CONSID ERATION FOR THE TRANSFER WAS RECEIVED IN TWO PARTS: I. CASH CONSIDERATION COMPUTED AT RS.54 10 00 000 II. ESTIMATED VALUE OF CONSTRUCTED AREA RS.26 62 09 200 TOTAL RS.80 72 09 200 THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WA S ENTITLED TO RECEIVE 11.655% OF THE BUILT UP AREA AMOUNTING TO 3 32 034 SFT ALONG WITH 1164 SFT OF TERRACE AREA AND THAT APPRO XIMATE SALE PRICE AS PER THE SALE AGREEMENTS ENTERED INTO BY TH E ASSESSEE FOR ITS SHARE OF THE CONSTRUCTED AREA WAS RS.1500/- PER SFT. SHE ESTIMATED THE COST OF CONSTRUCTION AT RS.800/- PER SFT FOR THE SALEABLE AREA AND RS.500/- PER SFT FOR THE TERRACE AREA AND COMPUTED THE CONSIDERATION RECEIVABLE IN KIND (ASSE SSEE'S SHARE OF CONSTRUCTED AREA AND TERRACE AREA) AT RS.26 62 0 9 200. THE TOTAL CONSIDERATION WAS COMPUTED AT RS.80 72 09 200 /-. 13.3 THERE IS NO DOUBT THAT THE ASSESSEE HAS RECEIV ED THE CONSIDERATION FOR TRANSFER OF LAND TO THE DEVELOPER BOTH IN CASH AND IN KIND. THE CASH COMPONENT OF THE CONSIDERATIO N WAS RS.54.10 CRORES. THE VALUE OF THE CONSIDERATION REC EIVED IN KIND ALSO NECESSARILY NEEDS TO BE INCLUDED IN THE COMPUT ATION OF CAPITAL GAINS. THIS VIEW IS ALSO IN CONFORMITY WITH THE JUDICIAL VIEW ON THE ISSUE AS SEEN FROM THE DECISIONS IN THE VARIOUS CASES WHICH HAVE BEEN RELIED UPON EARLIER IN THIS O RDER. 13.4 IT IS IRRELEVANT THAT THE CONSIDERATION IN KIN D I.E THE CONSTRUCTED AREA WAS NOT IN EXISTENCE AT THE TIME OF TRANSFER. WHAT IS OF RELEVANCE IS THAT THERE WAS AN AGREEMENT WITH REGARD TO THIS CONSIDERATION AND THE DEVELOPER WAS WILLING TO PERFORM ITS PART OF THE CONTRACT. INDEED THE SUBSEQUENT EVENTS HAVE SHOWN THAT THE DEVELOPER HAS INDEED PERFORMED ITS PART O F THE CONTRACT AND HANDED OVER THE ASSESSEE'S SHARE OF THE CONSTRU CTED AREA TO IT. 13.5 IN THE CASE OF AJAY KUMAR SHAH JAGATI RELIED ON BY THE AR THE SUPREME COURT HAD REMITTED THE MATTER TO THE IT AT SINCE THE FACTS OF THE CASE RELEVANT TO THE DECISION HAD NO T FULLY BEEN BROUGHT ON RECORD. NO CONCLUSIONS EITHER IN FAVOUR OR AGAINST THE ASSESSEE CAN BE DRAWN ON THE BASIS OF THIS DECISIO N. 7 ITA NO. 694/H/13 PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. 13.6 IN THE CASE OF MARYBONG AND KYEL TEA INDUSTRIE S LTD. THE ASSETS BELONGING TO THE ASSESSEE WERE DESTROYED BY FIRE AND IT RECEIVED COMPENSATION FROM THE INSURERS UNDER POLIC IES OF FIRE INSURANCE THE INSURERS TAKING AWAY THE SALVAGED PR OPERTY. THE COURT HELD THAT THERE WAS NO TRANSFER OF PROPERTY F OR THE PURPOSE OF CAPITAL GAINS UNDER SECTION 45 OF THE INCOME-TAX ACT 1961 AND THE EXCESS OF THE COMPENSATION OVER THE COST OF THE ASSETS IN QUESTION COULD NOT BE BROUGHT TO TAX AS CAPITAL GAINS. THE FACTS AND THE ISSUE IN APPEAL IN THIS CASE ARE ENTI RELY DIFFERENT AND HAVE NO RELEVANCE WITH THE ISSUE IN THE PRESENT APPEAL VIZ. THE INCLUSION OF THE VALUE OF THE CONSTRUCTED AREA IN THE CONSIDERATION FOR THE TRANSFER OF THE ASSET. 13. 7 HOWEVER I FIND THAT THE ASSESSING OFFICER HA S ADOPTED THE VALUE OF THE CONSTRUCTED AREA ON ESTIMATE BASIS. TH E ASSESSING OFFICER IS DIRECTED TO OBTAIN THE ACTUAL COST OF CO NSTRUCTION TO THE DEVELOPER FOR THE PROJECT AND ADOPT THE PROPORTIONA TE COST AS THE VALUE OF THE ASSESSEE'S SHARE OF THE CONSTRUCTED AR EA. THIS GROUND IS PARTLY ALLOWED. 7. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESS EE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: THE ORDER OF THE LEARNED APPELLATE AUTHORITY IN SO FAR AS SUSTAINING THE DISALLOWANCE OF AMOUNT PAID AS PER A RBITRATION AWARD TO THE PREVIOUS BUYER AND ALSO DETERMINING TH E TAXABILITY OF CAPITAL GAINS IN A Y 2006-07 IS ERRONEOUS IN LAW C ONTRARY TO FACTS PROBABILITIES OF THE CASE AND AGAINST THE PR INCIPLES OF EQUITY AND NATURAL JUSTICE. 02. THE LEARNED CIT(A) ERRED IN LAW BY NOT CONSIDER ING THE PAYMENT OF RS. 8.5 CRORES (10 CRORES - RS 1.75 CROR ES) PAID TO THE LITIGANTS OF THE PROPERTY UNDER SEC. 30 & 31 OF ARBITRATION AWARD AWARDED BY THE ARBITRATOR WHICH IS NOTHING BU T IN THE NATURE OF EXPENSES PAID TO PREVIOUS. BUYER TO HAND OVER THE VACANT AND PEACEFUL POSSESSION OF THE PROPERTY TO T HE DEVELOPER WHICH PAYMENT SHALL BE CONSIDERED AS EXPENSES IN RE LATION TO TRANSFER AS PER SEC 48 (I) OR AS COST OF IMPROVEMEN T OF THE ASSET AND ACCORDINGLY ELIGIBLE FOR THE INDEXATION AS PER EXPLANATION (IV) TO SEC. 48 . 03. THE CIT (A) FURTHER ERRED IN LAW DETERMINING TH E LONG TERM CAPITAL GAINS IN THE A Y 2006-07 IGNORING THAT THE AGREEMENTS ENTERED IS WITH THE PURPOSE OF OBTAINING LICENSE I PERMISSION WHICH DOESN'T COME UNDER THE DEFINITION OF TRANSFER U/S 2 (47) READ WITH SECTION 53A OF THE TRANSFER OF PROPERTY A CT. 8 ITA NO. 694/H/13 PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. 04. SUBJECT TO THE ABOVE GROUND NO 3 EVEN IF AT ALL CAPITAL GAINS ARE TO BE TAXED IT SHALL BE ASSESSED IN THE A Y 200 6-07 A Y 2007-08 AND A Y 2008-09 AS AGREEMENTS ARE SIMILAR I N NATURE AND RELINQUISHMENT AND EXTINGUISHMENT TOOK PLACE ON THE BASIS OF SUCH AGREEMENTS. 05. THE ASSESSEE CRAVE TO SUBMIT THAT ALL THE FACTS CONTENTIONS AND CASE LAWS MENTIONED IN THE STATEMENT OF FACTS A CCOMPANIED THESE GROUNDS SHALL BE TREATED AS PART AND PARCEL O F THESE GROUNDS AND SHALL BE DEALT WITH. 06. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING THE ASSESSEE PRAYS THE HONORABLE INCOME TA X APPELLATE TRIBUNAL TO KINDLY ALLOW THE APPEAL. 8. BEFORE US THE LD. AR SUBMITTED THAT THE AO RELY ING ON UNREGISTERED SALE AGREEMENT ENTERED WITH PROSPECTIV E BUYERS DIRECTLY BY THE ASSESSEE IN THE YEAR 2005-06 2006-07 LEVIED CAPITAL GAINS INVOKING THE PROVISIONS OF SECTION 2(47)(V) R.W.S 5 3A OF TRANSFER OF PROPERTY ACT BASED ON ADVANCE AMOUNTS RECEIVED RS. 36 68 50 000/- INSTEAD OF RS. 40.80 CRORES AS PER BOOKS OF ACCOUNT S. BY THESE SALE AGREEMENTS ENTERED THE LAND IS CHARACTERIZED AS I NDUSTRIAL LAND EVIDENCED BY THE JDA'S AND ALSO ACCORDING TO REGIST ERED SALE AGREEMENTS SCHEDULES. 8.1 FURTHER LD. AR SUBMITTED THAT NO POSSESSION WA S HANDED OVER TO THE JDA'S AND PROSPECTIVE BUYERS WHICH IS THE PR IMARY CONDITION TO INVOKE THE PROVISIONS OF SECTION 53A OF TRANSFER OF PROPERTY WHICH FAILS. 8.2 LD. AR SUBMITTED THAT ASSESSEE OFFERED CAPITAL GAINS IN THE YEAR IN WHICH POSSESSION WAS HANDED OVER THROUGH SALE DE EDS. REFER PAGE NO.2 OF VOLUME NO.3 AND ANNEXURE-3 OF THESE SUBMISS IONS. FOR THE AY 2013-14 THE AO DT. 31/03/2016 MADE AN ADDITION OF 37 22 99 688/- AS LONG TERM CAPITAL GAINS BASED ON ANNUA L REPORT SUBMITTED BY THE COMPANY. 8.3 LD. AR SUBMITTED THAT THE PLANS WERE SANCTIONED BY THE APPROPRIATE AUTHORITIES IN LATER YEAR AND THEREAFTE R THE ASSESSEE HANDED OVER THE PERMISSIVE RIGHT TO ENTRY THROUGH J DA'S TO DEVELOP 9 ITA NO. 694/H/13 PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. THE PROPERTY AS PER THE TERMS AND CONDITIONS. SO FA R AS THE PROSPECTIVE BUYERS THERE IS NO HANDING OVER OF POS SESSION OR PERMISSIVE RIGHT TO ENTRY DUE TO ABSENCE OF ASSET A ND AS SUCH SECTION 53A WILL NOT BE APPLICABLE. 8.4 LD. AR SUBMITTED THAT THE ASSESSEE OFFERED TO TAX WHEN THE POSSESSION WAS HANDED OVER TO THE AGREEMENT HOLDERS / BUYERS ACCORDING TO SALE DEED. HE RELIED ON THE FOLLOWING CASE LAWS: A) CIT VS EASTERN CERAMICS LIMITED (BOM) B) FIBARS INFRATECH PVT. LTD VS ITO (HYDERABAD) IN ITA NO. 477/HYD/2013 DT. 03/01/2014 - AY 2007-08 C) SUDHA GIRI VS ITO IN ITA NO. 1578/HYO/2014 DT. 31/07/2015 Y 2005-06 D) SHAM KUMAR VS DIT IN ITA NO. 1604/HYD/2014 AY 2 006-07 DT. 20/03/2015 E) DCIT VS SHAPOORJI PALLONJI BIOTECH PARK{P) LTD- (2011)138 TIJ (HYD) (UO) 62 F) CS ATWAL & ORS. VS. CIT & ANR. [2015] 123 DTR 49 (P&H) G) DHHERAJ AMIN VS. ACIT [2015] 123 DTR 10 (BANG. ) H) CHEMOSYN LTD. VS. ACIT [2012] 139 ITD 68 (MUM. ) I) BIN JUSARIA PROPERTIES (P) LTD. VS. ACIT [2014 ] 106 DTR 321 (HYD.) J) DCIT VS. SHAPOORJI BIOTECH PARK (P) LTD. [2011 ] 138 TTJ 148 (HYD.) 8.5 LD. AR SUBMITTED THAT DISALLOWANCE OF EXPENDIT URE CLAIMED U/S 48(I) BEING PAYMENT MADE TO PREVIOUS AGREEMENT HOLD ER D. KUPENDER REDDY AS PER THE ARBITRATION AWARD DT. 14/07/2005 A GAINST THE MOU'S ENTERED ON 23/06/2003 AND 23/09/2003 OF THE SUBJECT PROPERTY ENTERED WITH JDA. THIS ISSUE HAS NOT COME UP BEFORE AO AS THE ASSESSEE CONTESTED THAT THERE WILL BE NO CAPITAL GA INS FOR THE AY 2008-09. HE BROUGHT TO OUR KNOWLEDGE THE ARBITRATIO N AWARD ( REFER PAGES 127 TO 134 OF PAPER BOOK VOLUME I. ) 10 ITA NO. 694/H/13 PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. 8.6 LD. AR SUBMITTED THAT BEFORE CIT(A) IN CASE TH E AMOUNT IN THREE DIFFERENT YEARS ARE TAXABLE THESE AMOUNTS AR E TO BE CONSIDERED AS EXPENDITURE U/S 48(I) AS THE SAME IS PAID TO PRO VIDE VACANT AND PEACEFUL POSSESSION AND MARKETABLE TITLE. THE CIT(A ) REJECTED THE PLEA RELYING ON CASE LAWS (2005) 275 ITR 231 227 ITR 222 \SC) AND 227 ITR 240(SC) WHICH IS ENTIRELY WITH DIFFERENT SE T OF FACTS I.E OBLIGATION OF DISCHARGE OF MORTGAGE DEBT CREATED. T HE ASSESSEE RELIES ON CASE LAWS ALREADY REFERRED AND ALSO IN THE CASE OF CIT VS. KULDEEP SINGH [2014] 270 CTR PG 561 (DEL) 8.7. THE SUMMARY OF ARGUMENTS OF ASSESSEE ARE AS F OLLOWS: A) THE ASSESSEE CONCEDE TO ASSESS THE FULL CONSIDER ATION RECEIVED THROUGH SURRENDERING/EXTINGUISHMENT/RELINQUISHMENT OF RIGHTS THROUGH THREE JDA'S IN THE YEAR OF RECEIPT AS PER THE CASE LAWS RELIED UPON. B) SINCE THERE IS NO HANDING OVER OF EVEN SYMBOLIC POSSESSION NO EXISTENCE OF ASSET AS STATED SUPRA THE POSSESSION HANDED OVER THROUGH SALE DEEDS LIABLE FOR TAX IN THE YEAR IN WH ICH SALE DEEDS ARE EXECUTED AND IN FACT THE ASSESSEE OFFERED TAX WHENE VER SALE DEEDS ARE EXECUTED I.E FOR AY 2013-14 AND 2014-15. C) AMOUNT PAID TO THE PREVIOUS AGREEMENT HOLDER FOR HANDING OVER OF THE VACANT AND PEACEFUL POSSESSION OF THE LAND TO THE DEVELOPER SHOULD BE ALLOWED AS EXPENSE U/S 48(I). 9. LD. DR ON THE OTHER HAND RELIED UPON THE ORDER S OF CIT(A) AND SUBMITTED THAT THE CIT(A) HAS APPLIED HIS MIND ON T HIS ISSUE THOROUGHLY AND GIVEN FINDINGS. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS ACCEPTED AND PAID CAPITAL GAINS ON THE INITIAL TRANSACTION OF RS. 22 CRORES BUT FAILED TO FOLLOW THE SAME IN THE SUBS EQUENT TRANSACTIONS. 9.1 ON SETTLEMENT AMOUNT OF RS. 10 CRORES TO THE PR EVIOUS AGREEMENT HOLDER HE RELIED HEAVILY ON THE DECISION OF THE CIT(A). 10. CONSIDERED THE SUBMISSIONS OF BOTH THE COUNSELS AND PERUSED THE MATERIAL FACTS ON RECORD. IN THE PRESENT CASE ASSESSEE HAD INITIALLY ENTERED INTO JDA WITH SPPL ON 21/04/2005 TO DEVELOP THE LAND ADMEASURING ACRES 20 AND 18 GUNTAS. AS PER THI S INITIAL 11 ITA NO. 694/H/13 PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. AGREEMENT ASSESSEE WAS ENTITLED TO RECEIVE 28% OF THE CONSTRUCTED AREA WITH REFUNDABLE INTEREST FREE DEPOSIT OF RS. 1 0 CRORES. SUBSEQUENT TO THIS AGREEMENT ASSESSEE HAD ENTERED INTO SEVERAL SUPPLEMENTAL JDAS WITH SPPL AND FINALLY ENTERED INT O SJDA II WITH BRPL WHICH IS THE RELATED CONCERN OF SPPL. AS PER THE TRIPARTITE AGREEMENT AND WITH THE FINAL UNDERSTANDING ASSESSE E HAD AGREED TO RECEIVE 11.655% OF CONSTRUCTED AREA FROM THE DEVELO PER AND RECEIVED A SUM OF RS. 54.1 CRORES IN CONSIDERATION OF SUCH R EARRANGEMENT. AO CONSIDERED JDA II WHICH HAD OVERWRITTEN ALL PREVIOUS JDAS EXECUTED BY THE ASSESSEE WITH THE DEVELOPER AND CON SIDERED THE TERMS AS PER JDA II AS FINAL DEVELOPMENT AGREEMENT AND SINCE THE ASSESSEE HAD ENTERED INTO JDA HE TREATED THE SAME AS TRANSFER OF LAND U/S 2(47)(V) R.W.S. 53A OF THE TRANSFER OF PRO PERTY ACT AND ACCORDINGLY ARRIVED THE SALE CONSIDERATION OF THE L AND AS BELOW: CASH CONSIDERATION RS. 54.1 CRORES ESTIMATED CONSTRUCTED AREA OF 11.655% AS RS. 26.62 CRORES 10.1 AGGRIEVED WITH THE ABOVE ORDER ASSESSEE PREFE RRED APPEAL BEFORE THE CIT(A) IN WHICH THE CIT(A) HAD TAKEN A CONTRARY VIEW THAT THE ASSESSEE HAS INITIALLY ENTERED INTO JDA ON 21/0 4/2005 TRANSFER ALSO HAS TAKEN PLACE IN THAT YEAR 2005-06. ACCORDIN GLY HE GAVE DIRECTIONS TO AO TO DETERMINE THE SALE CONSIDERATIO N FOR AY 2006-07 BY OBSERVING THAT THERE WAS AN AGREEMENT WITH REGAR D TO THE CONSIDERATION AND THE DEVELOPER WAS WILLING TO PERF ORM ITS PART OF THE CONTRACT. HE GAVE DIRECTIONS TO AO TO DETERMINE THE SALE CONSIDERATION ON ACTUAL BASIS INSTEAD OF MAKING EST IMATION. 10.2 AFTER CONSIDERING THE ABOVE TWO VIEWS OF AO AN D CIT(A) AS WELL AS FACTS ON RECORD WE ARE OF THE VIEW THAT NO DOUB T THE ASSESSEE HAD ENTERED INTO JDA ON 21/04/2005 BUT SUBSEQUENTLY MAD E SEVERAL SUPPLEMENTAL JDAS BY RELINQUISHING SOME OF THE SHAR ES IN CONSTRUCTED AREA AND THE FINAL SUPPLEMENTAL JDA WAS ENTERED ON 18/12/2007 WHICH IS FINAL AS OF NOW. THE SUPPLEMEN TAL AGREEMENTS WHICH WERE MADE SUBSEQUENT TO MAKING OF INITIAL JDA ARE MERE 12 ITA NO. 694/H/13 PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. REARRANGEMENTS AND FINALLY THEY AGREED ON THE TERMS OF SJDA II WHICH IS ENTERED ON 18/12/2007. THIS IS A CLASSIC C ASE WHICH SHOWS THAT THERE COULD BE CHANGES IN THE DEVELOPMENT AGRE EMENTS ENTERED INTO BETWEEN THE OWNER AND THE DEVELOPER. IF WE CON SIDER THE FINDINGS OF CIT(A) THEN TAX INCIDENCE WILL OCCUR IN THE YE AR OF FIRST JDA I.E. ON 21/04/2005 WHICH FALLS UNDER AY 2006-07 BUT THE TERMS OF AGREEMENTS WERE CHANGED FROM TIME TO TIME AND IT M AY SO HAPPEN THAT THERE ARE CHANCES OF CANCELLING THE AGREEMENT. IF SUCH EVENTS HAPPEN WHAT WILL BE THE STATUS OF TAX LIABILITY. 10.3 IN THE CASE OF M/S BINJUSARIA PROPERTIES PVT. LTD. ITA NO. 157/HYD/2011 THE COORDINATE BENCH OF THIS TRIBUNAL REFERRING TO THE CASE OF SMT. RADHIKA AND OTHERS DATED 09/08/2011 IN ITA NO. 208/HYD/2011 AND FIBRES INFRATECH PVT. LTD. VS. ITO (ITA NO. 477/HYD/2013 DATED 03/01/2014 OBSERVED AS UNDER: 9. WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF TH E REVENUE AUTHORITIES AND OTHER MATERIAL ON RECORD. THE SHORT DISPUTE ARISING FOR C ONSIDERATION IN THIS CASE RELATES TO THE YEAR OF ASSESSABILITY OF CAPITAL GAINS ARISING ON T HE PROPERTY WHICH WAS SUBJECT MATTER OF A DEVELOPMENT AGREEMENT I.E. WHETHER IT IS ASSESSA BLE IN THE YEAR IN WHICH THE DEVELOPMENT AGREEMENT WAS ENTERED INTO AS DONE BY THE ASSESSING OFFICER OR IN THE RELEVANT SUBSEQUENT YEAR IN WHICH THE AREA DULY DEV ELOPED AND CONSTRUCTED COMING TO THE SHARE OF THE ASSESSEE-OWNER HAS BEEN HANDED OVE R TO THE ASSESSEE. THOUGH IT WAS INITIALLY HELD BY VARIOUS BENCHES OF THE TRIBUNAL T HAT CAPITAL GAINS ARE TO BE ASSESSED IN THE YEAR IN WHICH DEVELOPMENT AGREEMENT HAS BEEN EN TERED INTO BETWEEN THE OWNER AND THE DEVELOPER CONSIDERING THE FACT THAT IN MAN Y CASES THE DEVELOPMENT AGREEMENT WAS NOT ACTED UPON BY THE DEVELOPER DIFFERENT VIEW S HAVE TO BE EXPRESSED AS TO THE YEAR OF ASSESSABILITY BASED ON THE FACTS AND CIRCU MSTANCES OF EACH CASE. THIS POSITION HAS BEEN EXAMINED AT LENGTH IN THE LIGHT OF CASE-LA W ON THE POINT IN THE CASE OF SMT. K.RADHIKA AND OTHERS (SUPRA) AND IT WAS ULTIMATELY HELD BY THE COORDINATE BENCH OF THIS TRIBUNAL AS FOLLOWS- 48. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS SO EXPRESSED IN THIS COMMENTARY ON THE PROVISIONS OF THE TRANSFER OF PROPERTY ACT. IT IS THUS CLEAR THAT 'WILLINGNESS TO PERFORM' FOR THE PURPOSES OF SECTION 53A IS SOMETHI NG MORE THAN A STATEMENT OF INTENT; IT IS THE UNQUALIFIED AND UNCONDITIONAL WILLINGNESS ON THE PART OF THE VENDEE TO PERFORM ITS OBLIGATIONS. UNLESS THE PARTY HAS PERFORMED OR IS WILLING TO PERFORM ITS OBLIGATIONS UNDER THE CONTRACT AND IN THE SAME SEQUENCE IN WHI CH THESE ARE TO BE PERFORMED IT CANNOT BE SAID THAT THE PROVISIONS OF SECTION 53A O F THE TRANSFER OF PROPERTY ACT WILL COME INTO PLAY ON THE FACTS OF THAT CASE. IT IS ONL Y ELEMENTARY THAT UNLESS PROVISIONS OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT ARE SAT ISFIED ON THE FACTS OF A CASE THE TRANSACTION IN QUESTION CANNOT FALL WITHIN THE SCOP E OF DEEMED TRANSFER UNDER SECTION 2(47)(V) OF THE IT ACT. LET US THEREFORE CONSIDER W HETHER THE TRANSFEREE ON THE FACTS OF 13 ITA NO. 694/H/13 PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. THE PRESENT CASE CAN BE SAID TO HAVE 'PERFORMED OR IS WILLING TO PERFORM' ITS OBLIGATIONS UNDER THE AGREEMENT. 49. EVEN A CURSORY LOOK AT THE ADMITTED FACTS OF TH E CASE WOULD SHOW THAT THE TRANSFEREE HAD NEITHER PERFORMED NOR WAS IT WILLING TO PERFORM ITS OBLIGATION UNDER THE AGREEMENT IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THE AGR EEMENT BASED ON WHICH CAPITAL GAINS ARE SOUGHT TO BE TAXED IN THE PRESENT CASE IS AGREEMENT DATED 11.05.2005 BUT THIS AGREEMENT WAS NOT ADHERED TO BY THE TRANSFEREE. THE TRANSFEREE ORIGINALLY MADE A PAYMENT OF RS.10 LAKHS ON 11.5.2005 AND ANOTHER PAY MENT OF RS.90 LAKHS ON THE SAME DAY AS REFUNDABLE SECURITY DEPOSIT. HOWEVER OUT OF THIS A SUM OF RS.50 LAKHS WAS SAID TO BE REFUNDED BY THE LANDLORD TO THE DEVELOPER ON 5.3 .2009. AS SUCH THE ASSESSEE HAS RECEIVED ONLY A MEAGER AMOUNT AS REFUNDABLE SECURIT Y DEPOSIT WHICH CANNOT BE CONSTRUED AS RECEIPT OF PART OF SALE CONSIDERATION. ADMITTEDLY THERE IS NO PROGRESS IN THE DEVELOPMENT AGREEMENT IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THE MUNICIPAL SANCTION FOR DEVELOPMENT WAS OBTAINED NOT IN THIS A SSESSMENT YEAR AND IT WAS OBTAINED ONLY ON 17.09.2006 FROM THE HYDERABAD URBAN DEVELOP MENT AUTHORITY. THE SANCTION OF THE BUILDING PLAN IS UTMOST IMPORTANT FOR THE IMPLE MENTATION OF THE AGREEMENT ENTERED BETWEEN THE PARTIES. WITHOUT SANCTION OF THE BUILDI NG PLAN THE VERY GENESIS OF THE AGREEMENT FAILS. TO ENABLE THE EXECUTION OF THE AGR EEMENT FIRSTLY PLAN IS TO BE APPROVED BY THE COMPETENT AUTHORITY. IN FACT THE BUILDING P LAN WAS NOT GOT APPROVED BY THE BUILDER IN THE ASSESSMENT YEAR UNDER CONSIDERATION. UNTIL PERMISSION IS GRANTED A DEVELOPER CANNOT UNDERTAKE CONSTRUCTION. AS A RESUL T OF THIS LAPSE BY THE TRANSFEREE THE CONSTRUCTION WAS NOT TAKEN PLACE IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THERE IS A BREACH AND BREAK DOWN OF DEVELOPMENT AGREEMENT IN T HE ASSESSMENT YEAR UNDER CONSIDERATION. NOTHING IS BROUGHT ON RECORD BY AUTH ORITIES TO SHOW THAT THERE WAS DEVELOPMENT ACTIVITY IN THE PROJECT DURING THE ASSE SSMENT YEAR UNDER CONSIDERATION AND COST OF CONSTRUCTION WAS INCURRED BY THE BUILDER/DE VELOPER. HENCE IT IS TO BE INFERRED THAT NO AMOUNT OF INVESTMENT BY THE DEVELOPER IN THE CON STRUCTION ACTIVITY DURING THE ASSESSMENT YEAR IN THIS PROJECT AND IT WOULD AMOUNT TO NON-INCURRING OF REQUIRED COST OF ACQUISITION BY THE DEVELOPER. IN THE ASSESSMENT YEA R UNDER CONSIDERATION IT IS NOT POSSIBLE TO SAY WHETHER THE DEVELOPER PREPARED TO C ARRY OUT THOSE PARTS OF THE AGREEMENT TO THEIR LOGICAL END. THE DEVELOPER IN TH IS ASSESSMENT YEAR HAD NOT SHOWN ITS READINESS OR HAVING MADE PREPARATION FOR THE COMPLI ANCE OF THE AGREEMENT. THE DEVELOPER HAS NOT TAKEN STEPS TO MAKE IT ELIGIBLE T O UNDERTAKE THE PERFORMANCE OF THE AGREEMENT WHICH ARE THE PRIMARY INGREDIENT THAT MAK E A PERSON ELIGIBLE AND ENTITLED TO MAKE THE CONSTRUCTION. THE ACT AND CONDUCT OF THE D EVELOPER IN THIS ASSESSMENT YEAR SHOWS THAT IT HAD VIOLATED ESSENTIAL TERMS OF THE A GREEMENT WHICH TEND TO SUBVERT THE RELATIONSHIP ESTABLISHED BY THE DEVELOPMENT AGREEME NT. BEING SO IT WAS CLEAR THAT IN THE YEAR UNDER CONSIDERATION THERE WAS NO TRANSFER OF NOT ONLY THE FLATS AS SUPERSTRUCTURE BUT ALSO THE PROPORTIONATE LAND BY THE ASSESSEE UND ER THE JOINT DEVELOPMENT AGREEMENT. AS PER CLAUSE NO. 12.11 AND 19.1 OF DEVELOPMENT AGR EEMENT-CUM POWER OF ATTORNEY TIME IS THE ESSENCE OF THE CONTRACT AND AS PER CLAU SE NO.12.11 THE SAID PROPERTY IS TO BE DEVELOPED AND HAND OVER THE POSSESSION OF THE OWNER S ALLOCATION TO THE OWNERS AND OR THEIR NOMINEES WITHIN 24 MONTHS FROM THE DATE OF RE CEIVING THE SANCTION OF THE PLAN FROM HUDA AND MUNICIPALITY/GRAM PANCHAYAT WITH A FU RTHER GRACE PERIOD OF 3 MONTHS. BUT THE FACT REMAINS THAT THE TRANSFEREE WAS NOT ON LY FAILED TO PERFORM ITS OBLIGATIONS UNDER THE AGREEMENT BUT ALSO UNWILLING TO PERFORM ITS OBLIGATIONS IN THE ASSESSMENT YEAR UNDER CONSIDERATION. EVEN OTHERWISE THE ASSES SING AUTHORITIES HAS NOT BROUGHT ON RECORD THE ACTUAL POSITION OF THE PROJECT EVEN AS O N THE DATE OF ASSESSMENT OR HE HAS NOT RECORDED THE FINDINGS WHETHER THE DEVELOPER STARTED THE CONSTRUCTION WORK AT ANY TIME DURING THE ASSESSMENT YEAR UNDER CONSIDERATION OR A NY DEVELOPMENT HAS TAKEN PLACE IN 14 ITA NO. 694/H/13 PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. THE PROJECT IN THE RELEVANT PERIOD. HE WENT ON TO P ROCEED ON THE SOLE ISSUE WITH REGARD TO HANDING OVER THE POSSESSION OF THE PROPERTY TO THE DEVELOPER IN PART PERFORMANCE OF THE DEVELOPMENT AGREEMENT-CUM-GENERAL POWER OF ATTORNEY . IN OUR OPINION THE HANDING OVER OF THE POSSESSION OF THE PROPERTY IS ONLY ONE OF THE CONDITION U/S 53A OF THE TRANSFER OF PROPERTY ACT BUT IT IS NOT THE SOLE AND ISOLATED CONDITION. IT IS NECESSARY TO GO INTO WHETHER OR NOT THE TRANSFEREE WAS 'WILLING TO PERFO RM' ITS OBLIGATION UNDER THESE CONSENT TERMS. WHEN TRANSFEREE BY ITS CONDUCT AND BY ITS D EEDS DEMONSTRATES THAT IT IS UNWILLING TO PERFORM ITS OBLIGATIONS UNDER THE AGREEMENT IN T HIS ASSESSMENT YEAR THE DATE OF AGREEMENT CEASES TO BE RELEVANT. IN SUCH A SITUATIO N IT IS ONLY THE ACTUAL PERFORMANCE OF TRANSFEREE'S OBLIGATIONS WHICH CAN GIVE RISE TO THE SITUATION ENVISAGED IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT. ON THESE FACTS IT IS NOT POSSIBLE TO HOLD THAT THE TRANSFEREE WAS WILLING TO PERFORM ITS OBLIGATIONS IN THE FINAN CIAL YEAR IN WHICH THE CAPITAL GAINS ARE SOUGHT TO BE TAXED BY THE REVENUE. WE HOLD THAT THI S CONDITION LAID DOWN UNDER SECTION 53A OF THE TRANSFER OF PROPERTY ACT WAS NOT SATISFI ED IN THIS ASSESSMENT YEAR. ONCE WE COME TO THE CONCLUSION THAT THE TRANSFEREE WAS NOT 'WILLING TO PERFORM' AS STIPULATED BY AND WITHIN MEANINGS ASSIGNED TO THIS EXPRESSION UND ER SECTION 53A OF THE TRANSFER OF PROPERTY ACT ITS CONTRACTUAL OBLIGATIONS IN THIS P REVIOUS YEAR RELEVANT TO THE PRESENT ASSESSMENT YEAR IT IS ONLY A COROLLARY TO THIS FIN DING THAT THE DEVELOPMENT AGREEMENT DT. 11.5.2005 BASED ON WHICH THE IMPUGNED TAXABILITY OF CAPITAL GAIN IS IMPOSED BY THE AO AND UPHELD BY THE CIT(A) CANNOT BE SAID TO BE A 'C ONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT' AND A CCORDINGLY PROVISIONS OF SECTION 2(47)(V) CANNOT BE INVOKED ON THE FACTS OF THIS CAS E CHATURBHUJ DWARKADAS KAPADIA V. CIT'S CASE (SUPRA) UNDOUBTEDLY LAYS DOWN A PROPOSIT ION WHICH MORE OFTEN THAN NOT FAVOURS THE REVENUE BUT ON THE FACTS OF THIS CASE THE SAID JUDGMENT SUPPORTS THE CASE OF THE ASSESSEE INASMUCH AS 'WILLINGNESS TO PERFORM ' HAS BEEN SPECIFICALLY RECOGNIZED AS ONE OF THE ESSENTIAL INGREDIENTS TO COVER A TRANSAC TION BY THE SCOPE OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT. REVENUE DOES NOT GET ANY ASSISTANCE FROM THIS JUDICIAL PRECEDENT. THE VERY FOUNDATION OF REVENUE'S CASE IS THUS DEVOID OF LEGALLY SUSTAINABLE BASIS. 50. THAT IS CLEARLY AN ERRONEOUS ASSUMPTION AND AN THE PROVISIONS OF DEEMED TRANSFER UNDER SECTION 2(47)(V) COULD NOT HAVE BEEN INVOKED ON THE FACTS OF THE PRESENT CASE AND FOR THE ASSESSMENT YEAR IN DISPUTE BEFORE US. IN TH E PRESENT CASE THE SITUATION IS THAT THE ASSESSEE HAS RECEIVED ONLY A MEAGER AMOUNT' OUT OF TOTAL CONSIDERATION THE TRANSFEREE IS AVOIDING ADHERING TO THE AGREEMENT AND THERE IS NO EVIDENCE BROUGHT ON RECORD BY THE REVENUE AUTHORITIES TO SHOW THAT THERE WAS ACTUAL C ONSTRUCTION HAS BEEN TAKEN PLACE AT THE IMPUGNED PROPERTY IN THE ASSESSMENT YEAR UNDER CONSIDERATION AND ALSO THERE IS NO EVIDENCE TO SHOW THAT THE RIGHT TO RECEIVE THE SALE CONSIDERATION WAS ACTUALLY ACCRUED TO THE ASSESSEE. WITHOUT ACCRUAL OF THE CONSIDERATION TO THE ASSESSEE THE ASSESSEE IS NOT EXPECTED TO PAY CAPITAL GAINS ON THE ENTIRE AGREED SALES CONSIDERATION. WHEN TIME IS ESSENCE OF THE CONTRACT AND THE TIME SCHEDULE IS N OT ADHERED TO IT CANNOT BE SAID THAT SUCH A CONTRACT CONFERS ANY RIGHTS ON THE VENDOR/LA NDLORD TO SEEK REDRESSAL UNDER SECTION 53A OF THE TRANSFER OF PROPERTY ACT. THIS AGREEMENT CANNOT THEREFORE BE SAID TO BE IN THE NATURE OF A CONTRACT REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT. IT CANNOT THEREFORE BE SAID THAT THE PROVISIONS OF S ECTION 2(47)(V) WILL APPLY IN THE SITUATION BEFORE US. CONSIDERING THE FACTS AND CIRC UMSTANCES OF THE PRESENT CASE AS DISCUSSED ABOVE WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE DESERVES TO SUCCEED ON REASON THAT THE CAPITAL GAINS COULD NOT HAVE BEEN T AXED IN THE IN THIS ASSESSMENT YEAR IN APPEAL BEFORE US. THE OTHER GROUNDS RAISED BY THE A SSESSEES IN THEIR APPEALS HAVE BECOME IRRELEVANT AT THIS POINT OF TIME AS WE HAVE HELD THAT PROVISIONS OF SECTION 2(47)(V) WILL NOT APPLY TO THE ASSESSEES IN THE ASS ESSMENT YEAR UNDER CONSIDERATION. . 15 ITA NO. 694/H/13 PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. 10. IN THE PRESENT CASE ADMITTEDLY WHAT HAS BEEN EXECUTED BY THE ASSESSEE IS A DEVELOPMENT AGREEMENT-CUM-GENERAL POWER OF ATTORNE Y. A READING OF THE SAID AGREEMENT INDICATES THAT WHAT WAS HANDED OVER BY TH E ASSESSEE TO THE DEVELOPER IS ONLY A PERMISSIVE POSSESSION. CLAUSE 5 OF THE SAID AGR EEMENT DATED 2ND FEBRUARY 2006 ON PAGE 3 THEREOF SPECIFICALLY PROVIDES THAT FIRST P ARTY ON SIGNING OF THIS AGREEMENT HAS PERMITTED THE DEVELOPER TO DEVELOP THE SCHEDULED LA ND (EMPHASIS ADDED). AS PER CLAUSE 9 OF THE SAID AGREEMENT CONSIDERATION RECEIVABLE B Y THE ASSESSEE FROM THE DEVELOPER IS 38% OF THE RESIDENTIAL PART OF THE DEVELOPED AREA (WHICH WAS LATER REDUCED TO 33% BY VIRTUE OF A SUPPLEMENTARY AGREEMENT EXECUTED ON 18.10.2007). THAT BEING SO IT IS ONLY UPON RECEIPT OF SUCH CONSIDERATION IN THE FORM OF DEVELOPED AREA BY THE ASSESSEE IN TERMS OF THE DEVELOPMENT AGREEMENT THE CAPITAL GAI NS BECOMES ASSESSABLE IN THE HANDS OF THE ASSESSEE. WE ARE SUPPORTED IN THIS BEHALF BY THE DECISION OF THE THIRD MEMBER BENCH OF THE TRIBUNAL IN THE CASE OF VIJAYA PRODUCT IONS PVT. LTD. V/S. ADDL. CIT (134 ITD 19). 11. EVEN THOUGH THE ASSESSEE IN TERMS OF RECITAL ON PAGE 2 OF THE SUPPLEMENTARY AGREEMENT DATED 3RD FEBRUARY 2006 WAS TO RECEIVE A REFUNDABLE DEPOSIT OF RS.2 00 00 016 THROUGH TWO CHEQUES THE SAID DEPOS IT WAS TO BE REFUNDED ON THE COMPLETE HANDING OVER OF THE AREA FALLING TO THE SH ARE OF THE FIRST PARTY VIZ. THE ASSESSEE; AND IN THE EVENT OF FAILURE ON THE PART OF THE ASSE SSEE IN REFUNDING SUCH DEPOSIT THE SAME SHALL BE ADJUSTED AT THE TIME OF FINAL DELIVER Y BY THE DEVELOPER AGAINST THE AREA TO BE HANDED OVER TO THE ASSESSEE APPLYING A MUTUALLY AGREEABLE RATE. CONSIDERING THESE SPECIFIC CLAUSES AND PECULIAR FACTS AND CIRCUMSTANC ES OF THE CASE WE ARE OF THE CONSIDERED VIEW THAT THE CAPITAL GAINS IN THE CASE ON HAND ARE LIABLE TO BE TAXED ONLY IN THE YEAR IN WHICH THE DEVELOPED AREA COMING TO TH E SHARE OF THE ASSESSEE HAS BEEN HANDED OVER TO THE ASSESSEE IN TERMS OF THE DEVELO PMENT AGREEMENT. IN THE PRESENT CASE AS THE UNDISPUTED FACTS ON RECORD REVEAL THE DEVELOPER HAS NOT UNDERTAKEN ANY DEVELOPMENTAL ACTIVITY TO EXECUTE THE CONSTRUCTION WORK EVEN TODAY EVEN THOUGH IN THE FINAL SUPPLEMENTAL AGREEMENT DATED 18TH OCTOBER 20 07 PROVIDED EXTENSION OF TIME FOR THE EXECUTION OF THE CONSTRUCTION BY STATING THAT THE CONSTRUCTION ACTIVITY SHOULD BE COMPLETED AND DEVELOPED AREA COMING TO THE SHARE OF THE ASSESSEE SHOULD BE HANDED OVER WITHIN A FURTHER TIME OF 48 MONTHS FROM THE DA TE OF THAT SUPPLEMENTAL AGREEMENT. 12. IT IS AN UNDISPUTED FACT THAT AS ON DATE THERE WAS NO DEVELOPMENTAL ACTIVITY ON THE LAND WHICH IS SUBJECT MATTER OF DEVELOPMENT AGREEME NT. THE PROCESS OF CONSTRUCTION HAS NOT BEEN EVEN INITIATED AND NO APPROVAL FOR THE CON STRUCTION OF THE BUILDING IS OBTAINED. THUS THE SALE CONSIDERATION IN THE FORM OF DEVELOP ED AREA HAS NOT BEEN RECEIVED. MERE RECEIPT OF REFUNDABLE DEPOSIT CANNOT BE TERMED AS R ECEIPT OF CONSIDERATION. FURTHER AS SUBMITTED THE ASSESSING OFFICER CALCULATED THE CA PITAL GAIN ON THE ENTIRE LAND EVEN THOUGH THE ASSESSEE HAS RETAINED 38% SHARE TO ITSEL F. THE VALUATION WAS ALSO DISPUTED. THERE IS THEREFORE NO ACCRUAL OF INCOME IN FAVOUR OF THE ASSESSEE AS PER S.48 OF THE ACT. DUE TO LAPSE ON THE PART OF THE TRANSFEREE THE CON STRUCTION HAS NOT TAKEN PLACE IN THE YEAR UNDER CONSIDERATION AND IT HAS NOT COMMENCED EVEN NOW. IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE WHEREIN WHILE TH E ASSESSEE HAS FULFILLED ITS PART OF THE OBLIGATION UNDER THE DEVELOPMENT AGREEMENT THE DEV ELOPER HAS NOT DONE ANYTHING TO DISCHARGE THE OBLIGATIONS CAST ON IT UNDER THE DEVE LOP AGREEMENT THE CAPITAL GAINS CANNOT BE BROUGHT TO TAX IN THE YEAR UNDER APPEAL MERELY ON THE BASIS OF SIGNING OF THE DEVELOPMENT AGREEMENT DURING THIS YEAR. WE ARE SUPP ORTED IN THIS BEHALF BY THE DECISION OF THE TRIBUNAL DATED 3RD JANUARY 2014 IN THE CASE OF FIBARS INFRATECH PVT. LTD. (SUPRA) WHEREIN IT WAS HELD AS FOLLOWS- 16 ITA NO. 694/H/13 PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. 59. ON THESE FACTS IT IS NOT POSSIBLE TO HOLD THAT THE TRANSFEREE WAS WILLING TO PERFORM ITS OBLIGATIONS IN THE FINANCIAL YEAR IN WHICH THE CAPI TAL GAINS ARE SOUGHT TO BE TAXED BY THE REVENUE. WE HOLD THAT THIS CONDITION LAID DOWN UNDE R SECTION 53A OF THE TRANSFER OF PROPERTY ACT WAS NOT SATISFIED IN THIS ASSESSMENT Y EAR. ONCE WE COME TO THE CONCLUSION THAT THE TRANSFEREE'S 'WILLING TO PERFORM' THE CONT RACT IS ASCERTAINABLE IN THE ASSESSMENT YEAR AS STIPULATED BY AND WITHIN THE MEANINGS ASSI GNED TO THIS EXPRESSION UNDER SECTION 53A OF THE TRANSFER OF PROPERTY ACT ITS CONTRACTUA L OBLIGATIONS IN THIS PREVIOUS YEAR RELEVANT TO THE PRESENT ASSESSMENT YEAR IT IS ONLY A COROLLARY TO THIS FINDING THAT THE DEVELOPMENT AGREEMENT DT. 15.12.2006 BASED ON WHIC H THE IMPUGNED TAXABILITY OF CAPITAL GAIN IS IMPOSED BY THE AO AND UPHELD BY THE CIT(A) CANNOT BE SAID TO BE A 'CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT' AND ACCORDINGLY PROVISIONS OF SECTION 2(47)(V) CANNOT BE INVOKED ON THE FACTS OF THIS CASE. THE JUDGEMENT IN THE CASE OF CHATURBHUJ DWARKADAS K APADIA V. CIT (SUPRA) UNDOUBTEDLY LAYS DOWN A PROPOSITION WHICH MORE OFTEN THAT NOT FAVOURS THE REVENUE BUT ON THE FACTS OF THIS CASE THE SAID JUDGMENT SUPPORTS THE CASE OF THE ASSESSEE INASMUCH AS 'WILLINGNESS TO PERFORM' HAS BEEN SPECIFICALLY RECO GNIZED AS ONE OF THE ESSENTIAL INGREDIENTS TO COVER A TRANSACTION BY THE SCOPE OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT. THE REVENUE DOES NOT GET ANY ASSISTANCE FROM T HIS JUDICIAL PRECEDENT. THE VERY FOUNDATION OF REVENUE'S CASE IS THUS DEVOID OF LEGA LLY SUSTAINABLE BASIS. 60. THAT IS CLEARLY AN ERRONEOUS ASSUMPTION AS THE PROVISIONS OF DEEMED TRANSFER UNDER SECTION 2(47)(V) COULD NOT HAVE BEEN INVOKED ON THE FACTS OF THE PRESENT CASE AND FOR THE ASSESSMENT YEAR IN DISPUTE BEFORE US. IN THE PRESEN T CASE THE SITUATION IS THAT THE ASSESSEE HAS NOT RECEIVED ANY CONSIDERATION AND TH ERE IS NO EVIDENCE BROUGHT ON RECORD BY THE REVENUE AUTHORITIES TO SHOW THAT THERE WAS A CTUAL CONSTRUCTION TAKEN PLACE AT THE IMPUGNED PROPERTY IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND ALSO THERE IS NO EVIDENCE TO SHOW THAT THE RIGHT TO RECEIVE THE SALE CONSIDERATION WAS ACTUALLY ACCRUED TO THE ASSESSEE. WITHOUT ACCRUAL OF THE CONSIDERATION TO THE ASSESSEE THE ASSESSEE IS NOT EXPECTED TO PA Y CAPITAL GAINS ON THE ENTIRE AGREED SALES CONSIDERATION. WHEN TIME IS ESSENCE OF THE CO NTRACT AND THE TIME SCHEDULE IS 30 MONTHS TO COMPLETE CONSTRUCTION WITH ADDITIONAL GRA CE PERIOD OF 6 MONTHS IT CANNOT BE SAID THAT SUCH A CONTRACT CONFERS ANY RIGHTS ON THE VENDOR/LANDLORD TO SEEK REDRESSAL UNDER SECTION 53A OF THE TRANSFER OF PROPERTY ACT. THIS AGREEMENT CANNOT THEREFORE BE SAID TO BE IN THE NATURE OF A CONTRACT REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT. IT CANNOT THEREFORE BE SAID THAT TH E PROVISIONS OF SECTION 2(47)(V) WILL APPLY IN THE SITUATION BEFORE US. CONSIDERING THE F ACTS AND CIRCUMSTANCES OF THE PRESENT CASE AS DISCUSSED ABOVE WE ARE OF THE CONSIDERED V IEW THAT THE ASSESSEE DESERVES TO SUCCEED ON THE REASON THAT THE CAPITAL GAINS COULD NOT HAVE BEEN TAXED IN THE IN THIS ASSESSMENT YEAR IN APPEAL BEFORE US. 13. IN THE LIGHT OF THE FOREGOING DISCUSSION WE SE T ASIDE THE IMPUGNED ORDERS OF THE REVENUE AUTHORITIES AND HOLD THAT THE CAPITAL GAINS ON THE PROPERTY IN QUESTION CANNOT BE BROUGHT TO TAX IN THE YEAR UNDER APPEAL AND CON SEQUENTLY DELETE THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A ). ASSESSEES GROUNDS ON THIS ISSUE ARE ALLOWED. 14. IN VIEW OF OUR DECISION ON THE MERITS OF THE IS SUE INVOLVED VIZ. ASSESSABILITY OF CAPITAL GAINS IN THE YEAR UNDER APPEAL WE ARE NOT INCLINED TO GO INTO THE GROUNDS RAISED IN THIS APPEAL ON THE LEGALITY OF INITIATION OR PROCEEDINGS UNDER S.153C OF THE ACT AS THEY HAVE BECOME ONLY OF ACADEMIC INTEREST. THEY ARE AS SUCH REJECTED. 17 ITA NO. 694/H/13 PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. 10.4 IN THE CASE OF ACIT VS. R. SRINIVASA RAO 152 ITD 887 (HYD. TRIB) THE COORDINATE BENCH OF THIS TRIBUNAL REFERRING TO THE CASES OF M/S BINJUSARIA PROPERTIES PVT. LTD. ITA NO. 157/HYD/2011 SMT. RAD HIKA AND OTHERS DATED 09/08/2011 IN ITA NO. 208/HYD/2011 AND FIBRES INFRATECH PVT. LTD. VS. ITO (ITA NO. 477/HYD/2013 DATED 03/01/201 4 OBSERVED AS UNDER: 13. ON GOING THROUGH THE AFORESAID DECISIONS OF TH E COORDINATE BENCH THE RATIO WHICH EMERGES IS UNLESS THERE IS WILLINGNESS ON THE PART OF THE DEVELOPER TO PERFORM HIS PART OF THE CONTRACT THERE CANNOT B E A TRANSFER OF CAPITAL ASSET AS ENVISAGED U/S 2(47)(V) READ WITH SECTION 5 3A OF THE TP ACT. THE RATIO LAID DOWN AS ABOVE SQUARELY APPLIES TO THE FACTS OF THE PRESENT CASE AS THE DEPARTMENT HAS FAILED TO CONTROVERT THE FINDING OF THE LEARNED CIT(A) BY BRINGING MATERIAL ON RECORD TO SHOW THAT THE DEVELO PER HAS TAKEN ANY STEPS TOWARDS DEVELOPMENT ACTIVITY. FURTHER WE MAY OBSER VE THOUGH THE AO REFERRING TO THE DEVELOPMENT AGREEMENT HAS INFERRED THAT POSSESSION OF THE PROPERTY WAS HANDED OVER TO THE DEVELOPER HOWEVER ON GOING THROUGH THE PLEADINGS AND PRAYER OF THE PLAINTIFFS IN THE PLAIN T FILED IN CIVIL COURT A COPY OF WHICH IS AT PAGE 51 OF ASSESSEES PAPER BOOK IT AP PEARS ASSESSEE ALONG WITH OTHERS ARE STILL HAVING PHYSICAL POSSESSION OVER TH E PROPERTY. BE THAT AS IT MAY AFTER CAREFUL CONSIDERATION OF FACTS AND MATER IALS ON RECORD WE ARE OF THE VIEW CIT(A)S ORDER BEING WELL FOUNDED AND WEL L REASONED NEEDS TO BE UPHELD. ANOTHER CRUCIAL ASPECT WHICH NEEDS TO BE CO MMENTED UPON IS THE CIT(A) HAS ALSO HELD THAT THE TRANSACTION WILL NOT ATTRACT CAPITAL GAIN AS THE ASSET TRANSFERRED BEING AN AGRICULTURAL LAND IS NOT A CAPITAL ASSET AS DEFINED U/S 2(14) OF THE ACT. THIS FINDING OF THE LEARNED C IT(A) REMAINS UNCHALLENGED AND UNCONTROVERTED BY THE DEPARTMENT. FOR THIS REAS ON ALSO SHORT TERM CAPITAL GAIN COMPUTED BY THE AO CANNOT BE SUSTAINED . IN VIEW OF THE AFORESAID WE DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE CIT(A). 14. SO FAR AS THE GROUND RAISED BY THE DEPARTMENT C HALLENGING THE VIEW OF CIT(A) TO THE EFFECT THAT THERE CANNOT BE ANY CAPIT AL GAIN IN ABSENCE OF VALUE OF CONSIDERATION RECEIVED OR ACCRUED WE ARE OF THE VIEW THE SAME IS NOT REQUIRED TO BE ADJUDICATED AS IT IS OF MERE ACADEMI C INTEREST IN VIEW OF OUR FINDING THAT THERE IS NO TRANSFER OF CAPITAL ASSET BY THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR. ACCORDINGLY WE UPHOLD TH E ORDER OF THE CIT(A) BY DISMISSING THE GROUNDS RAISED. 15. BEFORE PARTING WE THOUGHT IT NECESSARY TO CLARI FY THE ISSUE WHETHER THERE IS TRANSFER OF CAPITAL ASSET UNDER A DEVELOPMENT AG REEMENT AS CONTEMPLATED U/S 2(47)(V) READ WITH SECTION 53A OF THE T.P. ACT HAS TO BE DECIDED KEEPING IN VIEW THE FACTS INVOLVED IN EACH CASE. RATIO LAID DOWN IN A PARTICULAR CASE CANNOT BE APPLIED UNIFORMLY TO ALL CASES WITHOUT CO NSIDERING THE FACTUAL ASPECT. 10.5 FROM THE ABOVE CASE LAWS THE RATIO LAID DOWN IS THAT MERE WILLINGNESS TO PERFORM IS NOT ENOUGH. THERE HAS TO BE PERFORMANCE OF THE TERMS IN RELATION TO THE AGREEMENT WHICH IS MO RE IMPORTANT. IN THE PRESENT CASE THE DEVELOPER HAS GOT THE PERMISSION FROM THE RELEVANT 18 ITA NO. 694/H/13 PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. AUTHORITIES ONLY ON 22/07/2008. AS PER THE TERMS OF AGREEMENT AS PER CLAUSE 2.5 COMMENCEMENT OF DEVELOPMENT WORK AND OT HER AMENITIES DEVELOPER SHALL COMMENCE THE WORK ON THE SCHEDULE P ROPERTY WITHIN 90 DAYS OF PLAN BEING SANCTIONED. AS PER THIS CLAUS E DEVELOPER CAN COMMENCE THE WORK ONLY AFTER GETTING APPROVAL FROM THE RESPECTIVE AUTHORITIES ONLY THEN THE PART PERFORMANCE OF THE DEVELOPER WHICH LEADS TO ACQUIRING RIGHT TO ENTER INTO THE LAND TO CONSTRUCT THE PROPERTY ONLY TILL THEN DEVELOPER HAS NO RIGHT HENCE MERE WILLINGNESS TO PERFORM IS NOT ENOUGH. WILLING TO PE RFORM AND PERFORMANCE AS PER THE TERMS OF AGREEMENT IS RELEVA NT. IT IS RELEVANT TO NOTE THAT AT THE TIME OF SJDA- II THERE WAS NO PERFORMANCE/ANY ACTION RELATING TO GETTING ANY PERMISSION TO COMMEN CE THE DEVELOPMENT OF PROPERTY. IT CLEARLY SHOWS THAT SEVE RAL MODIFICATIONS TO THE JDAS ARE MERE RE-ALIGNMENTS. 10.6 AS PER THE ABOVE DISCUSSION THE DEVELOPER HAS PERFORMED HIS DUTY ONLY BY GETTING PLAN APPROVAL ON 22/07/2008. T HIS IS PART PERFORMANCE OF THE DEVELOPER. WITH REGARD TO LAND O WNER IT HAS TO MAKE AVAILABLE THE LAND FREE FROM ANY ENCUMBRANCES AND MAKING VACANT LAND AVAILABLE FOR THE DEVELOPER FOR DEVELOP MENT AFTER OBTAINING PLAN APPROVAL IS THE PART PERFORMANCE OF THE LAND OWNER. HENCE BOTH THE EVENTS OF WILLINGNESS TO PERFORM IS OCCURRED IN THE AY 2009-10. IN OUR CONSIDERED VIEW ALL THE JDAS ARE N OT REGISTERED AND THE PROVISIONS OF SECTION 53A WILL NOT APPLY IN THI S CASE. EVEN THOUGH THE PART PERFORMANCES WERE PERFORMED BY THE RESPECT IVE PARTIES IN THE SUBSEQUENT AY. IT IS IMPORTANT TO NOTE THAT ASS ESSEE IS CONCEDING TO PAY THE TAX AS AND WHEN IT RECEIVES CONSIDERATIO N FOR RELINQUISHMENT OF RIGHT BUT THERE IS NO RIGHT IN THOSE THREE AYS AS THE DEVELOPER HAS NOT GOT THE FINAL APPROVAL TO CONSTRU CT THE PROPERTY UNTIL 22/07/2008 AND ALSO NO DEVELOPMENT ACTIVITY WAS CAR RIED ON. SINCE THERE IS NO RIGHT AS SUCH THERE CANNOT BE RELINQU ISHMENT OF RIGHT. IT IS ONLY REARRANGEMENT OF TERMS OF AGREEMENT BETWEEN LA ND LORD/OWNER AND THE DEVELOPER. AS PER THE ABOVE DISCUSSION WE ARE OF THE VIEW THAT THE TAX INCIDENCE ON TRANSFER OF PROPERTY WILL NOT ARISE FOR THIS AY 19 ITA NO. 694/H/13 PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. 2008-09. AS THE DEVELOPER HAS NOT SHOWN ANY WILLIN GNESS TO PERFORM UNTIL AY 2009-10 IN OUR CONSIDERED VIEW TRANSFER HAS NOT TAKEN PLACE AS PER THE PROVISIONS OF SECTION 2(47)(V) R.W.S. 53 A OF THE TRANSFER OF PROPERTIES ACT DURING THE AY 2008-09. ACCORDINGLY THE ADDITION ON ACCOUNT OF CAPITAL GAINS IN AY 2008-09 IS DELETED. 11. AS REGARDS THE ASSESSEES CLAIM OF RS. 10 00 00 000/- PAID TO THE LITIGANTS OF THE PROPERTY U/S. 30 & 31 OF ARBIT RATION AWARD CLAIMED TO BE IN THE NATURE OF COST OF IMPROVEMENT OF LAND ELIGIBLE FOR INDEXATION UNDER EXPLANATION (IV) TO SEC. 48. THE A SSESSEE HAD ENTERED INTO AN AGREEMENT WITH SRI D. KRUPENDER RED DY & OTHERS TO SELL A PORTION OF THE LAND VIDE MOU DTD. 23.6.2003 AND 23.09.2003. SUBSEQUENTLY IN VIEW OF THE NON PERFORMANCE OF THE CONTRACT SRI KRUPENDER REDDY & OTHERS FILED A PETITION BEFORE TH E ARBITRATION TRIBUNAL AND THE TWO PARTIES ARRIVED AT A COMPROMIS E UNDER WHICH THE ASSESSEE AGREED TO PAY A SUM OF RS. 10 CRORES TO SR I KRUPENDER REDDY AND OTHERS. THE ARBITRATION COURT PASSED ORDE RS ON 14.7.2005 ACCEPTING THE COMPROMISE PETITION. IN THE REMAND RE PORT DTD. 5.5.2011 THE ASSESSING OFFICER SUBMITTED THAT THE PAYMENT MA DE BY THE ASSESSEE WAS IN THE NATURE OF COMPENSATION FOR BREA CH OF CONTRACT AND THAT THERE WAS NO NEXUS BETWEEN THE MOUS WITH S RI KRUPENDER REDDY & OTHERS ON ONE HAND AND THE TRANSACTIONS WIT H THE DEVELOPERS (WHETHER SPPL OR BRPL) ON THE OTHER HAND AND THEREF ORE THE PAYMENT COULD NOT BE TAKEN INTO CONSIDERATION AS CO ST OF IMPROVEMENT. 11.2 IN RESPONSE TO THE ASSESSING OFFICER'S OBSERV ATIONS THE AR SUBMITTED THAT THE PAYMENT HAD BEEN MADE TO ENSURE THAT THE PROPERTY WAS FREE FROM ANY ENCUMBRANCE AND FOR OBTA INING VACANT POSITION AND THEREFORE WAS AN ALLOWABLE DEDUCTION W HILE COMPUTING THE CAPITAL GAINS. THE AR ALSO RELIED ON THE FOLLOW ING DECISIONS: I NITA A PATEL VS. ITO 128 ITR 24 (MUM) II. NAOZAR CHENOY VS. CIT 234 ITR 95 (AP) III. CIT VS. ABRAR ALVI 247 ITR 312 (BOM] IV. CIT V BRADFORD TRADING CO. P. LTD. (2003) 261 I TR 222(MAD) 20 ITA NO. 694/H/13 PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. 11.3 IN HIS SUBMISSION DATED 28.1. 2013 THE ASSESS ING OFFICER HAS ALSO SUBMITTED THAT THE ASSESSEE HAD RECEIVED RS.1. 25 CRORES FROM SRI D. KRUPENDER REDDY AS SALE CONSIDERATION AND TH AT A SUM OF RS.8 25 000/- WAS ALREADY CLAIMED AS A DEDUCTION WH ILE ADMITTING LONG TERM CAPITAL GAINS OF RS.22 CRORES FOR A. Y. 2 006-07 AND THAT WITHOUT PREJUDICE TO THE PLEA THAT THE PAYMENT WERE NOT ALLOWED AS A DEDUCTION AT ALL THE QUANTUM OF DEDUCTION WAS TO B E CONFINED TO THE FOLLOWING: PAYMENT TO SRI D. KRUPENDER REDDY RS.10 00 00 000 LESS: AMOUNT RECEIVED FROM HIM RS.1 25 00 000 LESS: AMOUNT CLAIMED IN RETURN RS. 8.25 000 RS. 1 33 25 000 BALANCE RS. 8 16 75 000 11.3 CIT(A) REFERRING TO FEW CASE LAWS OBSERVED TH AT IN THE ASSESSEES CASE THE ENCUMBRANCE WAS CREATED BY THE ASSESSEE ITSELF THROUGH ITS MOUS ENTERED INTO IN 2003. WHILE IT IS TRUE THAT THE JDAS REQUIRED VACANT POSSESSION TO BE HANDED OVER THIS BY ITSELF IS NOT OF MUCH CONSEQUENCE. WHAT IS RELEVANT IN THE LIGHT OF THE DECISION IN THE CASE OF ROSHAN BABU MOHAMMED HUSSAIN MERCHANT IS TH E MANNER IN WHICH THE OBLIGATION TO PAY KRUPENDER REDDY & OTHER S WAS CREATED. FOLLOWING THE DECISION IN THE CASE OF ROSHAN BABU M OHAMMED HUSSAIN MERCHANT AND THE DECISIONS OF THE SUPREME C OURT CITED THEREIN THE ASSESSEE'S CLAIM IN THIS REGARD IS REJ ECTED. 12. CONSIDERED THE SUBMISSIONS OF BOTH THE COUNSELS AND PERUSED THE MATERIAL FACTS ON RECORD AS WELL AS THE ORDERS OF REVENUE AUTHORITIES. 12.1 IN THE CASE OF NAOZAR CHENOY VS. CIT 234 ITR 95 (AP) THE HONBLE AP HIGH COURT HAS HELD AS FOLLOWS: AS REGARDS THE AMOUNT WHICH WAS EMBEZZLED BY THE P ERSON WHO WAS ENTRUSTED WITH THE JOB TO ASSIST THE AGENT OF THE A SSESSEE IN SELLING THE PROPERTY THE ASSESSEE IS NOT ENTITLED FOR THE DEDU CTION OF THE SAID AMOUNT AS HE LOST THE AMOUNT IN THE CAPACITY AS AN OWNER AND NOT IN THE COURSE OF 21 ITA NO. 694/H/13 PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. TRANSACTION AND IT IS ALSO NOT INCIDENTAL TO THE TR ANSACTION. AS REGARDS THE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS PAYMEN T OF THE AMOUNT TO THE TENANTS FOR VACATING THE PREMISES WHICH IS THE SUB JECT-MATTER OF SALE TRANSACTION IT HAS NEXUS WITH THE TRANSACTION AS W ITHOUT THE TENANTS VACATING THE PREMISES THE BUILDING CANNOT BE SOLD. THEREFOR E THE SAID EXPENDITURE WAS INCURRED FOR EFFECTING THE TRANSACTION AND THER EFORE HE IS ENTITLED FOR DEDUCTION OF THE AMOUNTS INCURRED TOWARDS VACATION OF THE TENANTS IN COMPUTING THE CAPITAL GAIN OF THE BUILDING SOLD. 12.2 IN THE CASE OF CIT VS. ABRAR ALVI 247 ITR 31 2 (BOM] THE BOMBAY HIGH COURT HAS HELD AS FOLLOWS: THE TRIBUNAL CAME TO THE CONCLUSION THAT WHAT WAS TRANSFERRED VIDE SALE DEED DT. 2ND MAY 1992 WAS NOT THE TENANCY RIGHTS BUT THE BUILDING ITSELF AND THEREFORE WHAT WAS TO BE ALLOWED AS DEDUCTION FOR WORKING OUT THE CAPITAL GAINS WAS NOT THE COST OF TENANCY BUT THE C OST OF OWNERSHIP RIGHTS. IN VIEW OF THE SAID FINDING THE TRIBUNAL REMANDED THE MATTER BACK TO THE AO TO WORK OUT THE MARKET VALUE OF THE BUILDING AS ON 4TH AUG. 1983 AND ALLOW AS A DEDUCTION THE COST OF THE ASSET SOLD TO WORK OUT THE CAPITAL GAINS. THIS IS A PURE FINDING OF FACT. NO INTERFERENCE IS CALLED FOR . HENCE THE APPEAL IS DISMISSED. 12.3 CIT V BRADFORD TRADING CO. P. LTD. (2003) 261 ITR 222(MAD) THE MADRAS HIGH COURT HAS HELD AS UNDER: AMOUNT PAID BY ASSESSEE TO A THIRD PARTY TO SETTLE THE PRE-EXISTING CLAIMS AGAINST TRANSFER OF THE ASSETS AS ALSO LITIGATION E XPENSES CONSTITUTED EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR TRA NSFER OF CAPITAL ASSET AND WAS DEDUCTIBLE IN COMPUTATION OF CAPITAL GAINS; AMO UNT REIMBURSED BY VENDEE TO ASSESSEE TOWARDS SUCH CLAIM CONSTITUTED PART OF SALE CONSIDERATION BUT DEDUCTIBLE WHILE COMPUTING CAPITAL GAINS. 12.4 RESPECTFULLY FOLLOWING THE RATIOS LAID DOWN IN THE AFORESAID DECISIONS AND THE RELEVANT ARBITRATION SETTLEMENT WAS ARRIVED AT TO CLEAR THE VACANT LAND FREE FROM ALL ENCUMBRANCES. N O DOUBT THE ASSESSEE ITSELF ENTERED INTO THE TRANSACTION BUT LE ADING TO BREACH OF CONTRACT TERMS IT HAS TO INCUR THIS COST WHICH IS NOTHING BUT PART OF THE ASSOCIATED RIGHTS ON THE PROPERTY. UNLESS IT IS SET TLED THE LAND CANNOT BE HELD TO BE FREE FROM ENCUMBRANCES. IN OUR CONSID ERED VIEW THE PAYMENT IS DIRECTLY RELATING TO THE TRANSFER OF PRO PERTY. HENCE IT NEEDS TO BE TREATED AS EXPENSES RELATED TO THE TRAN SFER OF PROPERTY. ACCORDINGLY AO IS DIRECTED TO ALLOW THIS EXPENDITU RE AS EXPENSES 22 ITA NO. 694/H/13 PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. ASSOCIATED WITH TRANSFER OF PROPERTY. ACCORDINGLY THIS GROUND IS ALLOWED. 13. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER 2016 SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAH MAN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD DATED: 28 TH SEPTEMBER 2016 KV COPY TO:- 1) PANYAM CEMENTS AND MINERAL INDUSTRIES LTD. C/O M/S ANJANEYULU & CO. CAS. 30 BAGHYALAKSH MI NAGAR GANDHI NAGAR HYDERABAD 500 080 2) ADDL. CIT KURNOOL RANGE KURNOOL. 3) CIT(A) - IV HYDERABAD 4 CIT - III HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE I.T.A.T. HYDE RABAD. 6) GUARD FILE