CHIRANJI LAL GARG vs. COMMISSIONER OF INCOME TAX BATHINDA & ORS

ITA/311/2015HC Punjab & HaryanaPHHC01109953201502 November 20156 pages
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What were the facts?

The assessee, Chiranji Lal Garg, filed an appeal before the High Court of Punjab and Haryana against an order of the Income Tax Appellate Tribunal (ITAT), Amritsar Bench, for the assessment year 2007-08. The appeal was filed with a delay of 578 days, which was condoned by the Court. The dispute pertains to the taxability of consideration receivable under a Joint Development Agreement (JDA) dated February 25, 2007, under the head 'Capital gains'. The assessee challenged the ITAT's upholding of the Assessing Officer's order. The High Court noted that the facts and issues were identical to a previous case, ITA No. 200 of 2013 (C.S.Atwal vs. The Commissioner of Income Tax, Ludhiana and another).

What did the High Court hold?

The High Court observed that the facts and issues in this appeal were identical to those decided in C.S.Atwal's case (ITA No. 200 of 2013). In that case, the Court had concluded that no possession had been given by the transferor to the transferee of the entire land in part performance of the JDA so as to fall within Section 53A of the TPA. The possession delivered, if any, was as a licensee for development, not as a transferee. Furthermore, Section 53A of the TPA, by incorporation, is embodied in Section 2(47)(v) of the Act, requiring all essential ingredients of Section 53A to be fulfilled. Since the JDA, executed after September 24, 2001, was not registered, it did not fall under Section 53A of the TPA, and consequently, Section 2(47)(v) of the Act did not apply. The Court also noted the assessee's submission that capital gains tax had already been paid on amounts received, and sale deeds executed. In view of the cancellation of the JDA, no further amount was received. The Court held that the Tribunal and authorities below were incorrect in holding the assessee liable for capital gains tax on the remaining land for which no consideration was received and which stood cancelled. The issue of exigibility to capital gains tax was decided in favour of the assessee, rendering the question of exemption under Section 54F academic. The appeals were allowed.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the Tribunal erred in upholding the Assessing Officer's order to tax the entire consideration receivable under the JDA as capital gains. 2. Whether the Tribunal erred in holding that there was a 'transfer' of immovable property under Section 2(47)(v) of the Income Tax Act, 1961 (the Act), read with Section 53A of the Transfer of Property Act, 1882 (TPA). 3. Whether the Tribunal erred in holding that the registration requirement of the JDA under Section 53A of the TPA could not be read into Section 2(47)(v) of the Act. 4. Whether the Tribunal erred in holding that the registration of the JDA was not necessary if a power of attorney was registered. 5. Whether the Tribunal erred in giving a wider connotation to 'possession' under Section 2(47)(v) of the Act read with Section 53A of the TPA, including concurrent possession or right to enter possession. 6. Whether the Tribunal erred in holding that possession was given by the society to the developers, who held concurrent possession. 7. Whether the Tribunal erred in holding that possession was given as developers had the authority to enter and deal with the property. 8. Whether the Tribunal erred in holding that a 'transfer' occurred under Section 2(47)(v) of the Act despite the absence of 'unconditional willingness' from the developers. 9. Whether the Tribunal erred in holding that 'unconditional willingness' was not absent due to the applicability of the 'Force Majeure' clause. 10. Whether the Tribunal exceeded its jurisdiction by adjudicating civil disputes between JDA parties, including findings on developer's compliance, payments, efforts for approvals, and the validity of JDA cancellation. 11. Whether the Tribunal erred in holding that a transfer occurred despite the JDA's termination/cancellation by the society. 12. Whether the Tribunal erred in holding that a transfer occurred under Section 2(47)(vi) of the Act. 13. Whether the Tribunal erred in not holding that there was no 'transfer' under Section 2(47)(ii) of the Act. 14. Whether the Tribunal erred in taxing the entire consideration as hypothetical/notional income. 15. Whether the Tribunal erred in taxing the value of a flat as part of the consideration. 16. Whether the Tribunal erred in upholding the valuation of the flat at ₹4500/- per square feet. 17. Whether the Tribunal erred in not adjudicating the claim for exemption under Section 54F due to inadvertent mention of Sections 54 and 54EC. 18. Whether the Tribunal erred in holding that exemption under Section 54F was not available on the value of the flat. 19. Whether the Tribunal's findings were perverse. 20. Whether the demand for income tax was justified given a previous ruling of the High Court. 21. Whether the demand was justified once the question of no capital gains was decided in favour of the assessee. Assessee's contentions: The assessee argued that the Tribunal erred on multiple grounds concerning the definition of 'transfer', the applicability of Section 53A of the TPA, the interpretation of 'possession', the existence of 'unconditional willingness', and the Tribunal exceeding its jurisdiction. The assessee also contended that the entire consideration was hypothetical income and that exemption under Section 54F was wrongly denied. The assessee relied on the High Court's ruling in ITA No. 200 of 2013. Revenue's contentions: The judgment does not explicitly record the revenue's arguments.

Which sections of the Income-tax Act were involved?

Section 2(47),Section 2(47)(v),Section 2(47)(vi),Section 2(47)(ii),Section 53A,Section 54F,Section 260A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision:2.11.2015 Chiranji Lal Garg ……Appellant Vs. Commissioner of Income tax, Bathinda and another …..Respondents CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE RAMENDRA JAIN

1.

Whether Reporters of local papers may be allowed to see the judgment?

2.

To be referred to the Reporters or not?

3.

Whether the judgment should be reported in the Digest? Present: Mr. Sumeet Mahajan, Sr. Advocate with Mr. Amit Kohar, Advocate for the appellant. Mr. G.S.Hooda, Advocate for the revenue. Ajay Kumar Mittal, J. CM No.18311 CII of 2015

1.

There is a delay of 578 days in filing the appeal. Notice of the application was given to the respondents. After hearing learned counsel for the parties and for the reasons stated in the application, the delay in filing

the appeal is condoned. CM stands disposed of. ITA No.311 of 2015

2.

This appeal has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 12.9.2013, Annexure A.1 passed by the Inco

The order continues below.

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