M/S JAICO AUTOMOBILE ENGINEERING COMPANY PVT LTD ,BANGALORE vs. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-11(5), BANGALORE

Originally the assessee’s appeal in ITA No.1057/Bang/2010 was disposed of by this Tribunal vide order dated 30.4.2012 wherein certain issues were remanded back to the AO for fresh decision. The AO while giving effect to the order of the Tribunal in his order u/s. 143(3) r.w.s. 254 of the Act, confirmed the additions. Against this, the assessee went in appeal before the CIT(A) who confirmed the additions. Now again the assessee is in appeal before the Tribunal in the second round. 3. Ground Nos.2 to 4 are with regard to sustaining the addition of interest expenditure at Rs.17,26,100. The AO has added back a sum of Rs.17,26,100 being 11% (SBI lending rate) on a sum of Rs.1,56,91,814/- holding it to be the interest attributable to the advance made by the assessee company to its director Sri B.S.Chadha. The interest of

Ground No.5 is regarding addition sustained by the CIT(Appeals) of Rs.25,76,253 towards undisclosed scrap sale. 8. With regard to the impugned addition on account of the alleged scrap sale, in the course of survey, it was found that details towards scrap sales amounting to Rs. 25,76,253 was not accounted for in the regular books of accounts. The AO also had observed that the scrap sales to the tune of Rs.31,45,974 had been recorded in the books of accounts. It was also observed that Sri S.C. Ajmeera, on enquiry, has submitted that out of Rs.25,76,253, the assessee company had declared Rs.10 lakhs which included the scrap sales shown in the books of accounts. However, according to the AO, there was no proof provided by the assessee company to accept the statement of Sri Ajmeera and therefore hemade the addition of Rs.25,76,253/-. 9. In this regard, it is submitted that undisputedly the assessee company had declared scrap sales to the tune of Rs.31,45,974 in the books of accounts and offered for taxation. The alleged unaccounted scrap sales found in the course of survey was nothing but the various dates of sale recorded from April to December, 2006 and January, 2007. The party to whom such sales were made had also been noted. The sales recorded in the books of accounts were also with the same party. In other words, all these sales have been recorded in the books of accounts which form part of the total sales of Rs.31,45,984 as declared. The variations in dates were only on account of the dates of dispatch or delivery and the dates on which the amounts were received. In the circumstances, the impugned addition is totally uncalled for and the same requires to be deleted. In the alternative, the statement of Sri Ajmeera should have been given credence to and at least Rs.10 lakhs should have been allowed out of Rs.25,76,253 and if at all any addition was required, it could only be in respect of the balance.

The ld. DR submitted that the assessee's submissions on the issue are not only vague but also unsupported by clear documentary evidence or justifiable explanations in spite of the opportunities and clear directions of the Tribunal while setting aside the issue for fresh examination before the AO. In such circumstances, it was incumbent upon the assessee to produce the relevant party particulars, confirmations of account and bank details with regard to the scrap-sales. It is evident from the AO's order that, in spite of adequate opportunities, the assessee failed to establish the veracity of scrap sales to the extent of Rs. 25,76,253. 11. Further, the AO has clearly brought on record the questions posed to Shri. S. K. Ajmera during the survey operation (vide question No. 5 of the statement recorded) regarding the impugned sales, in respect to which it was only stated by him that, an amount of Rs. 10 lakhs was included in the undisclosed sales, declared/offered for tax. The AO, however, has recorded a clear finding that no such income to the extent of Rs. 10 lakhs was found to have been offered for tax. The Assessee has failed to counter this stand of the AO so as to establish that such undisclosed sales were offered/subjected to tax by the assessee post-survey disclosure. 12. The AO has placed on record that during the survey, out of the total scrap sales of Rs. 57,22,227, an amount of only Rs. 31,45,974 was found to be recorded, which figure matched with the ledger account, as per annexure-1 of the said order. It was therefore abundantly clear that no part of the amount of Rs. 25,76,253 was either offered for taxation or clearly evidenced/explained, during the original or subsequent assessment proceedings.

It is observed from paras 14-19 of the Tribunal’s order (cited supra) that after certain observations against the relief of Rs. 10 lakhs given by the

In the course of the proceedings before the CIT(Appeals), the assessee has not placed any fresh or reliable evidentiary document or confirmatory details from respective parties. The extract of scrap-sales annexed with the written submission is not supported by either proof of payment by cheque or party confirmations. Even if these were to be presumed as cash sales, there is no corresponding or adequate proof to accept the same. In this background, the addition to the extent of Rs. 25,76,253/- was upheld by the CIT(Appeals).

We have heard the rival submissions. In the assessment year under consideration, it was placed on record by the AO that during the course of survey out of total scrap sales of Rs.57,22,227 only an amount of Rs.31,45,974 was recorded and the balance amount of Rs.25,76,253 was not recorded and the reasons for not offering the same to tax was not explained by the assessee. The Tribunal remanded this issue to the AO on the reason that the assessee did not furnish any evidence to substantiate its claim that income had already been offered to tax in earlier years and it was not clear as to whether earlier record available with the AO had been considered while arriving at the conclusion that no evidence was produced by the assessee. However, in the remand proceedings also, the assessee failed to produce relevant evidence in respect of its claim. Even after going through the documents available with the AO in the form of part

Ground Nos. 6 to 8 are regarding sustaining addition of capital gain on transfer of property to M/s. Gopalan Enterprises at Rs.3,36,24,479.

The assessee has received Rs.14crores from M/s.Gopalan Enterprises for agreeing to transfer the land and building vide agreement dated 29.11.2006. The sale agreement was for transfer of land for Rs.9 crores and Rs.5 crores was towards improvement. Further, the consideration for sale of land was split into consideration for land of Rs.7,20,00,000 and consideration for building of Rs.1,80,00,000. As against the consideration of Rs.9 crores, the assessee claimed deduction towards cost of land and cost of building, brokerage and legal charges in the following manner: a) Value of Land Rs.1,39,78,550 b) Value of Building as per Bldg Block (reduced from block of asset) Rs.1,80,00,000 c) Indexed cost of land Rs.1,42,47,093 d) Brokerage and legal charges Rs. 22,21,360

Thus, capital gain of Rs.5,55,31,547 was offered for taxation. In respect of Rs.5 crores for improvement, the assessee claimed an amount

In the remand proceedings, the AO virtually repeated the finding made in the original assessment with regard to allowance of Rs.1,63,70,521. It was reiterated that the assessee had not proved details for cost of improvement by way of fencing by providing the details of vendors who had supplied steel and details with regard to names and addresses of parties who had sold steel and also the details with regard to the expenses incurred for construction of the compound by way of fencing. The alternate plea that the assessee having offered Rs.3,30,29,479 as income on account of improvement as aforesaid was not given a set-off in determination of capital gains. In other words, having taken the full consideration of Rs.14 crores for the purpose of computation of capital gains, it is submitted that the AO should have excluded the income derived by way of Rs.3,30,29,479 which has been offered and requires to be deleted from the total income.

Further, it is submitted that the AO should have allowed the claim for fencing. It was an undisputed fact that the premises had a solid fencing with steel barbed wire all over the area covering the area sold of 1,19,049 sq.ft. This has also been taken notice of by the CIT(Appeals) in his order dated 30.06.2010. Though the CIT(Appeals) has concurred with the AO that the assessee did not give any details with regard to the expenses incurred, there was no denial of existence of the boundary fencing with barbed wire which could not have come on its own without any expenditure. It was also a fact that the cost of building estimated did not include cost of fencing. Thus, even if evidence was not let in, the existence of fence cannot be denied, which cost and as inflated by Cost Inflation Index is required to be estimated to allow the expenditure under Section 48(2) of the Act, according to the assessee. Accordingly, the capital gains for transfer of property to M/s. Gopalan Enterprises is required to be computed by giving a reasonable expenditure towards fencing and also by reducing Rs.3,30,29,479 from capital gains as computed by the AO. 21. The ld. DR submitted that the original agreement dated 11/08/2006 between the assessee and M/s. Gopalan Enterprises, with regard to the of land and building, was for a consideration of Rs. 19,44,38,720. The same is stated to have been subsequently revised vide agreement executed on 29/11/2006 for an amount of Rs. 14 crores. It is further seen that the said revised agreement was again split in two parts i.e., Rs. 9 crores for the land and Rs. 5 crores for the improvements. The revised agreement in itself provides that the latter amount of Rs. 5 crores was stated to be the consideration for compound wall; building, sheds and that the purchaser had agreed to purchase such items on 'as is where is' basis. 22. He submitted that a perusal of the contents and conditions of the revised agreement clearly indicates that the consideration is for building

The other contention of the ld. AR is that the sum of Rs.3,30,29,479 should have been excluded from the computation of long term capital gain as it was offered as income from other sources. Admittedly, the CIT(Appeals) has given relief on this count by observing that the said amount cannot be taxed twice; once as capital gain and another as income from other sources and prima facie accepted the argument of the assessee. However, he directed the AO to take appropriate rectification action after due verification of the facts and after affording necessary opportunity to the assessee in this regard. Being so, the assessee cannot have any grievance on this count. However, we make it clear that the AO has to carry out the directions of the CIT(Appeals) in para 9.4 of his order. With these observations, this ground of the assessee is dismissed.

Ground Nos. 9 to 16 are with regard to sustaining the capital gain in respect of transfer of property to IDEB of Rs.43,6172,341.

The assessee had executed a JDA with IDEB on 30.03.2007 for developing 1,93,879 sq.ft. of land. On the very same day, there was a General Power of Attorney [GPA] to the said company in connection with development of the property. Also, a sale agreement was executed on the same day with IDEB for transfer of land and building to be built which would fall into the owner’s share in the JDA to the developer. All the agreements

According to ld. AR, u/s. 2(47)(v) of the Act, any transaction involving the allowing possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882). In Para 8 in the judgment of the Hon’ble High Court of Karnataka in the case of CIT & Anr. vs. Dr.T.K.Dayalu, reported in (2011) 60 DTR 0403/(2011) 202 Taxman 0531, the Hon’ble High Court of Karnataka referred to the Bombay High Court judgment in the case of Chaturbhuj Dwarkadas Kapadia vs. CIT, reported in (2003) 260 ITR 491 wherein taking possession was also a condition precedent to consider the definition of transfer under Section 2(47)(v) of the I.T. Act. In T.K. Dayalu’s case supra, possession of the

The ld. AR submitted that in this case, the last payment of refundable deposit was made only on 19.09.2007 as per the Ledger extract in the books of the assessee. Accordingly, even by applying the provisions of Section 2(47)(v) of the Act, there was no “transfer” to justify the computation of capital gains in the relevant year. The judgment of the Hon’ble High Court of Karnataka in the case of CIT & Anr vs. Dr.T.K.Dayalu (2011) 60 DTR (Kar) 403 will have no application. On the other hand, the decision of the ITAT, Bengaluru Bench, Bengaluru in the case of CIT & Anr vs. N. Vemanna Reddy dt. 18.08.2014 in ITA No.591/2008 would apply reported in 1 DTR 321, which was confirmed by the High Court of Karnataka. Even assuming that possession has been given on 30.11.2007, capital gain would arise for the assessment year 2008-09 and not for the relevant assessment year. Thus, the ld. AR submitted that on this ground alone the impugned computation of capital gains as made is required to be deleted. In fact, possession of the entire property continued in the hands of the assessee and the factory was continued to be run by

The ld. AR submitted that even by taking into account all the agreements in totality, there was no “transfer” in the relevant year. It is submitted that the development agreement could not be construed as agreement for transfer of property as contemplated under Section 53A of the Transfer of Property Act as per Clause 9 (at Page 129 of the PB). Further, the GPA was referred to in Clause 11 at Page 138 wherein it was categorically mentioned that the GPA was given for construction of the property and for enabling development of land in the schedule property and to obtain necessary clearance, permission, sanction from IT Department whenever necessary. This is further strengthened by recording at Page 103 that the GPA executed would not be revoked until the schedule property is completed and until the JDA and the agreement to sell stood terminated. In other words, it is clear by the parties that the GPA was operative only during the tenure of the development of the property. The sale agreement is again in respect of shares of the superstructure fallen into the assessee which was yet to be decided and thus the sale agreement has no relevance for determination of transfer of alleged undivided share which was to be transferred to IDEB. Moreover, in the JDA the consideration for transfer is indeterminable. In such circumstances, by no stretch of imagination Section 53A of the Transfer of Property Act could be applied and consequently the provisions of Section

He drew our attention to the judgment of CIT vs. Balbir Singh Maini, 398 ITR 531 (SC), the Hon’ble Apex Court in Para 18 of the judgment considered the conditions to be satisfied under Section 53A of the Transfer of Property Act. The Hon’ble Apex Court considered the judgment in the case of Shrimant Shamrao Suryavanshi & Anr vs. Pralhad Bhairoba Suryavanshi (D) by LRs & Ors (2002) 3 SCC 676 at 682 wherein the condition of taking possession has been made as a condition precedent. Also, the Hon’ble Apex Court observed that the transferee must have done some act in furtherance of the contract and the transferee must perform or be willing to perform his part of the contract. Essentially, in the case of IDEB, it had not performed the contract or was willing to perform the contract. Mere making payment of part of security deposit cannot be said to be performance of the contract. Essentially the contract was to develop the property. On this count, there was no performance which has been carried out by IDEB especially before the end of the financial year related to the relevant assessment year.

Similarly, it is further reiterated by the Hon’ble Supreme Court in the case of M/s.Seshasayee Steels P. Ltd vs. ACIT (2020) 421 ITR 0046 (SC) that taking possession has been made a condition precedent to apply

The ld. AR submitted that in the judgment of the Supreme Court referred to supra, the Hon’ble Court also observes that to contemplate transfer, the rights of the owner stood extinguished on account of the agreement. In the case of the Appellant, it did not happen. The property continued to be in the control of the assessee especially during the financial year related to the assessment year 2007-08. Accordingly, in light judgment of the Supreme Court in the case of M/s.Seshasayee Steels P. Ltd, (supra), no transfer can be contemplated to apply Section 45 of the Act to bring to tax the capital gains so computed by the Revenue.

Consequently, it was submitted by the ld. AR that the capital gain of Rs.43,61,72,341 brought to tax in this relevant year is without jurisdiction. The AO’s view that handing over possession to the developer was not really required when the assessee ceased to have control over the property by virtue of the agreement, it is submitted that in order to apply the provisions of Section 2(47)(v) of the Act, to determine “transfer”, having over possession was a condition precedent as held by the jurisdictional High Court in the case of Vemanna Reddy referred to supra. Accordingly, the observation of the AO in this regard is opposed to law and the capital gain as determined was without jurisdiction and liable to be deleted.

On the other hand, the ld. DR submitted that during the course of survey, it was noticed that the assessee had received an amount of Rs. 30 crores form M/s. lDEB Investments Pvt. Ltd. (lDEB) in pursuance to a joint development agreement with IDEB on 30.03.2007. The AO observed that

The AO, after a detailed analysis of the aforesaid agreements came to the conclusion that the transfer was effective in the current Assessment year in terms of section 2(47) of the Act and therefore the impugned transaction was exigible to LTCG. The AO accordingly proceeded to assess capital gains at the figure of Rs. 43,61,72,341.

The Assessee's core contentions are summarised as under:- - The amount had been received as advance and once the sale deeds get executed, it will be taken as capital gains. - The monies so received by the Assessee are in the nature of advances only. The capital gain on this transaction shall rise only after the constructed area is physically handed over to the assessee. Further, till date the entire land and building is in the possession of the assessee and has not handed over the physical possession to the developer. The developer has not taken any plan sanction / approval for any construction in the land so given. However, to secure the advances given, the developer has entered into an agreement of sale with the assessee and this does not constitute a sale. - The point where the capital gains are deemed to accrue will purely depend on the terms of the Joint Development Agreement. Where the agreement is of such nature that

By virtue of the JDA dated 30103/2007, (clause I-C) the Assessee permitted IDEB the rights of development of the site and that such right was irrevocable. The consideration was fully determinable in terms of sub-clause (d) of clause 1, by virtue of which 1,48,333 sq. ft of the super built-up area in the proposed complex, was to be developed and delivered to the assessee. A clause providing for compensation @ 3000 per sq. ft. was also provided therein. The sub-clause (e) of clause I of the JDA provided for the payment of interest-free refundable deposit of Rs. 35,00,000 to the Assessee. Out of this an amount of Rs. 15,00,000 was actually paid on the date of the agreement itself. The JDA at sub-clause f) of clause - I specifically provided for execution of an irrevocable General Power of Attorney to "develop; alienate; sale, convey and lease the constructed area. The contents of the aqreements to sale and the GPA executed on the same dated i.e. 30/03/2007 also clearly indicate similar conditions, which crystallize into a valid transfer of property, during the year under consideration.

It is obvious from the above agreements / instruments that all the basic ingredients of a valid transfer as envisaged under section 2(47) of the I.T. Act r.w.s. 53A of the Transfer of Property Act, are duly satisfied in the present case. The AO therefore rightfully invoked the provisions of section 45 of the I.T. Act, charging capital gains tax on the impugned transaction between the appellant and IDEB.

Section 45 of the I.T. act provides as under:-

Regarding the possession, the ld. DR submitted that the assessee's primary contention is that in spite of the impugned agreements and other facts brought above, the assessee has not passed on the final possession and therefore the transaction in question is not exigible to capital gains under the provisions of I.T. Act. He submitted that it is evidently clear from the contents of the JDA and POA dated 30/03/2007 that the Assessee has provided to the purchaser, IDEB, all facilities of entry, development and even sale of the constructed built-up area. Such unhindered access provided to the purchaser is very much in the nature of possession, even if the word as such has not been mentioned in the JDA. In this context sub- clause-c of clause-I of the JDA, gives irrevocable right of development to the purchaser, which is as under:- “Development In pursuance to the agreement reached and the consideration reserved hereof and the obligations undertaken herein by each party hereto, the OWNER shall irrevocably permit the DEVELOPER or their agents or constructors or architects or surveyors or workers or persons claiming under them to enter the Schedule property [or undertaking the development of the same and the OWNER covenants to the DEVELOPER that such permission shall not be revoked until all the objects o[this Agreement are fulfilled as the DEVELOPER shall be incurring expenditure [or construction …………" 52. The General Power of Attorney executed with the purchasers also gives irrevocable powers of not only possession but, even alienate & sale of the constructed area. The relevant portion of this Power Of Attorney is extracted as under:-

He further submitted that apart from disputing the year of taxability in respect of the impugned transaction, it is not the assessee's case that the agreements dated 30/03/2007 with IDEB were not enforced or continued in the subsequent years. It is also not the assessee's contention that the aforecited agreements were either cancelled or that the deposits received from IDEB were refunded at a later date. Therefore the transaction of sale / JDA with IDEB remained intact, without the assessee having duly declared the transactions as liable to capital gains. The AO in this regard has recorded IDEB in its letter dated 11/03/2014 had expressly admitted that the JDA dated 30/03/2007 remained in force and was not cancelled.

In these facts & circumstances the agreement between the assessee and IDEB remaining effective, the transactions entered by way of the JDA dated 30/03/2007 would undisputably constitute a "transfer" in terms of the section 2(47) of the I.T. Act r.w.s. 53A of the T.P. Act, 1982. The AO's action on this account is therefore to be upheld. He submitted

We have heard both the parties and also perused the case-records in the light of the compilation filed and precedents cited by both the parties. We deal with the contentions of the assessee with regard non-chargeability of capital gains in respect of the land, which was not 'transferred' but only given for development. We may refer to the provisions of S. 2(47)(v) which reads as follows:- "2. . . . . . . (47) . . . . . .

The importance of the word "transfer" is due to the reason that under the charging section, viz. section 45, the capital gain is taxable on "transfer

Thus the fundamental features which determine the taxability of capital gain are that the gain ought to be from the transfer of a capital asset. This section has a large scope of its operation due to the presence of deeming provision which says that the gain shall be the deemed income of that previous year in which the transfer took place. This phrase can be interpreted in the manner that the total profits may actually be received in any other year, but for the purposes of S. 45, the gain shall be the deemed income of the year of transfer of the capital asset. It shall not be out of context, at this juncture, to mention an observation of the Hon'ble Authority of Advance Rulings in the case of Jasbir Singh Sarkaria, In re [2007] 164 Taxman 108 (AAR - New Delhi), that the expression used in sec. 45 is "arising", which cannot be equated with the expression "received" or even with the expression "accrued" as being used in the statute. The point which deserves notice is that the amount or the consideration settled may not be fully received or may not technically accrue but if it arises from the agreement in question, then the deeming provisions shall come into operation. Another point is also equally noticeable that by the presence of the deeming provision, the income on account of arisal of the capital gain should be charged to tax in the same previous year in which the transfer was effected or deemed to have taken place. Due to the presence of this statutory fiction, the actual year in which the entire sale consideration is received, is beside the point but what needs to be judged is the point of time at which the transfer took place either by handing over of the

But the issue do not get settled only by the interpretation of s. 45 and s. 2(47)(v) because the definition of "transfer" not merely prescribes allowing of possession but to be retained in part performance of a contract of the nature referred in s. 53A of the Transfer of Property Act. Therefore, it is further requisite to deal with the relevant section contained in Transfer of Property Act.

The Transfer of Property Act contains S.53A under the heading "Part performance" and, for deciding the case in hand, it is necessary to quote the impugned section verbatim as follows:- "Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, And the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in 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 there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transfer or any person 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 doctrine of "part performance" is undoubtedly based upon the doctrine of equity. If one party has performed his part of duty then equity demands that the other party shall also perform his part of the obligation. If one party stood by his words then it is expected from the other party to also stand by his promise. Naturally an inequitable conduct of any person has no sanction in the eyes of law.

In the light of the above, now we proceed to examine the factual matrix of the present case in hand.

The starting words of section 53A are “where a person contracts”, which means just the existence of the contract. The assessee is a “person” who has entered into a contract with the developer viz., IDEB Investments (P) Ltd. on 30.3.2007. This section says "to transfer" means the said contract is in respect of a transfer and not for any other purpose. The term "transfer" is to be read along with the s. 45 and s. 2(47)(v) of IT Act. It is pertinent to clarify that one must not mistake to identify the issue of capital gain with the term "transfer" as defined in s. 54 of Transfer of Property act. At the cost of elaboration, we may like to add that in the past there was a long line of pronouncements; while deciding income tax cases, that unless and until a sale deed is executed and that too it is registered, transfer cannot be said to have been effected. The consequence of said catena of decisions was that no capital gain tax was directed to be levied so long as

The argument of the ld. AR on this issue before us is that possession was not given on or before 31.3.2007. The developer had paid only Rs.15 crores as refundable security deposit on execution of JDA. The balance of Rs.20 crores was payable on or before 30.11.2007 in two instalments as discussed above. It was specifically agreed between the parties that possession would be given to the developer only after receipt of full consideration by way of refundable security deposit which was on 30.11.2007 or earlier. The contention of the ld. AR Section 2(47)(v) of the Act cannot be applied to the facts of the present case. The judgment of the Hon’ble High Court of Karnataka in the case of CIT v. Dr. T.K. Dayalu (supra) will have no application and capital gain arises only in AY 2008-09

The existence of a consideration is essence of the contract. In the present case, the land owner i.e. the assessee will get 1,48,333 sq.ft. area in the said complex to be constructed on the schedule property which includes proportionate common areas and amenities along with 1 covered car parking slot for every 1000 sq.ft. of super built up area in the said complex along with the right to retain the ownership of the proportionate share / undivided share, right, title, interest in the land in the schedule property. In addition to this, the assessee has to receive as per clause 8 of the JDA a sum of Rs.35 crores as a refundable security deposit. Out of this, the assessee received Rs.15 crores before 30.3.2007. As per clause 8(2) of the JDA, the balance Rs.20 crores to be received is, Rs.10 crores on or before 15.5.2007 and Rs.10 crores on or before 30.11.2007.

The next important phase i.e., “terms necessary to constitute the transfer” can be ascertained with reasonable certainty. In this case, the terms and conditions of the contract were unambiguous thus clearly spoken about the rights and duties with certainty of both the signing parties. We are concerned mainly with two certainties; (i) passing of consideration; & (ii) passing over of possession. In the present case, out of refundable security deposit, the assessee has received Rs.15 crores by 30.3.2007 and the balance Rs.20 crores was to be received by on or before 30.11.2007.

The last noticeable ingredient is, "the transferee has performed or is willing to perform his part of the contract". To ascertain the existence of willingness on the part of the transferee one must not put stop at one event but willingness is to be judged by the series of action of the transferee/transferee. It is evidently clear from the contents of the JDA and POA dated 30/03/2007 that the Assessee has provided to the purchaser M/s lDEB all facilities of entry, development and even sale of the constructed built-up area. Such unhindered access provided to the purchaser is very much in the nature of possession, even if the word as such has not been mentioned in the JDA. It would be appropriate in this context to extract the sub-clause-c of clause-I of the JDA, which gives irrevocable right of development to the purchaser. Development "In pursuance to the agreement reached and the consideration reserved hereof and the obligations undertaken herein by each party hereto, the OWNER shall irrevocably permit the DEVELOPER or their agents or constructors or architects or surveyors or workers or persons claiming under them to enter the Schedule property [or undertaking the development of the same and the OWNER covenants to the DEVELOPER that such permission shall not be revoked until all the objects of this Agreement are fulfilled as the DEVELOPER shall be incurring expenditure for construction ……….." 68. The General Power of Attorney executed with the purchasers also gives irrevocable powers of not only possession but, even alienate & sale of the constructed area. The relevant portion of this Power Of Attorney is extracted as under:-

In the present case, we are of the considered opinion that it is squarely covered by the ratio of the jurisdictional Hon'ble Karnataka High Court's judgment in the case of CIT & Others v. Dr. T. K. Dayalu (2011) 60 DTR (Kar) 403 wherein it was unequivocally held that the year of signing of the JDA should the primary consideration for determining the year of charge of capital gains While the present case satisfies the legal requirements laid down by the aforesaid judgment, there is also no doubt that a significant consideration in the form of cash and proposed built-up area has also exchanged hands between the purchasers and seller, accompanied with corresponding transfer of rights of access / development / construction and sale of the impugned property.

By virtue of the JDA dated 30103/2007, (clause I-C) the Assessee permitted IDEB the rights of development of the site and such right was irrevocable. The consideration was fully determinable in terms of sub- clause (d) of clause 1, by virtue of which 1,48,333 sq. ft of the super built- up area in the proposed complex, was to be developed and delivered to the Assessee. A clause providing for compensation @ 3000 per sq. ft. was also provided therein. The sub-clause e of clause I of the JDA provided for the payment of interest-free refundable deposit of Rs. 35,00,000 to the Assessee. Out of this an amount of Rs. 15,00,000 was actually paid on the date of the agreement itself. The JDA (at sub-clause f) of clause - I specifically provided for execution of an irrevocable General Power of Attorney to "develop; alienate; sale, convey and lease” the constructed area. The contents of the agreements to sale and the General Power of Attorney executed on the same dated i.e. 30/03/2007 also clearly indicate similar conditionalities, which crystallize into a valid transfer of property, during the year under consideration.

In this case, JDA has been registered and assessee has given Power of Attorney on 30.3.2007. As per Power of Attorney also, the assessee has given the right to the developer to execute agreement or sale deeds or other conveyance in respect of schedule property and to do all acts, deeds and things with the said developer as considered necessary or any other manner as deemed fit so as to fully and effectually convey the same. This issue is also covered against the assessee by the judgment of the Hon’ble Supreme Court in the case of CIT v. Balbir Singh Maini, 391 ITR 531 (SC) as JDA & POA has been registered and reading of these registered documents show that the present assessee being owner of the land has parted with ownership of land to the developer and developer has the right to develop, alienate, sale, convey and transfer the constructed area and there is valid transfer of rights by the landlord to the developer.By the same GPA, the assessee has also given right to the developer to sell upto 115000 sq.ft. built up area of the assessee’s share of constructed area also. Thus, he has given the bundle of rights through GPA in favour of the developer including right to sell the property.

The point pertains to the fixation of "material date" for the purpose of assessing the capital gain. There is no dispute with regard to the fact that the assessee has entered the agreement on 30.3.2007. As per clause 5.3 of the said agreement, the builder would commence the development of property on the delivery of the possession of the land. However, in the clause 6.1, it is also mentioned "however that nothing herein contained shall be construed as delivery of possession in part performance of any agreement for sale under s. 53A of the T.P. Act and u/s. 2(47)(v) of the I.T. Act". Further as per clause 5.2 of the agreement, the possession of vacant land was handed over to the developer only on 30.11.2007. Accordingly, it is contended by the assessee that it has not given possession of the land

In this regard, we may extract below the relevant portion of the JDA:- “The OWNER shall deliver the vacant possession of the Schedule Property to the DEVELOPER before 30/11/2007. Prior to delivery of vacant possession, the OWNER shall remove all structures on the Schedule Property.”

Thus, it is seen that the above clauses show that the handing over of the possession of the constructed area to the assessee. There may not be any dispute that the income tax department is concerned with the handing over the possession of the vacant land to the builder under the development agreement. As per the assessee, the possession of vacant land was handed over the developer only on 30.11.2007, i.e., upon receiving the entire security deposit.

It is a well settled proposition of law that the substance shall prevail over the form. Though it is mentioned in the agreement that the possession of land shall be handed over only after receipt of security deposit, yet the builder, under practical circumstances, cannot start construction unless the physical possession of land is handed over to him. Hence, for all practical purposes, we are of the view that the physical possession was handed over to the builder after entering into the agreement dated 30.3.2007 and right to entry into the property cannot be construed as permissive possession when the developer has a right to alienate the same to others by way of sale, mortgage, gift, loan or otherwise dispose of the same.

In our opinion, as held by the Supreme Court in the case of Alapati Venkataramiah v. CIT, 57 ITR 185 (SC), to attract liability to tax u/s. 45, it is sufficient if in the accounting year profits have arisen out of transfer of capital asset. In other words, if the assessee had a right to receive the profit in the assessment year under consideration, the assessee is liable to pay capital gains tax on transfer of capital asset. Actual receipt of profit is not a relevant consideration. Once the profits have arisen in the accounting year out of the transfer of capital asset, it would be sufficient to attract liability u/s. 45 of the Act. The contention of the assessee is that there was no transfer in the assessment year under consideration as the possession of the property has not been given to the developer. In the present case, the assessee executed registered JDA along with registered GPA which authorizes the developer a provisional permission to enter into the land and authorizing them to develop, execute sale deed or other conveyance in respect of the impugned property and authorize to sell the constructed area of both the assessee as well as the developer. As such, there is a transfer in terms of section 45 r.w.s. 2(47) of the Act. Accordingly, we decide this ground against the assessee in favour of the department.

Ground Nos. 17 to 20 are with regard to interest u/s. 234A, 234B & 234C of the Act which are mandatory and consequential in nature. As such, no adjudication of these grounds is warranted.

In the result, the appeal by the assessee is dismissed.