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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI V. DURGA RAO & SHRI G. MANJUNATHA
आदेश /O R D E R Per G. MANJUNATHA, AM: This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-16, Chennai, dated 18.12.2018 and pertains to assessment years 2014-15.
The assessee has raised the following grounds of appeal:-
2 I.T.A. No.187 /CHNY/2019 1. The order of the Income Tax Officer, International Taxation — 1(2), Chennai, dated 27.12.2017 for the above assessment years is contrary to the law, facts and in the circumstances of the case. 2. The learned assessing officer erred in treating the capital gain tax liability in the assessment year 2014-2015 in spite of the fact that, the actual capital gain tax liability arises in the year of execution of JDA, which grants possession over the land through irrevocable license which is related to the financial year 2006-2007 relevant to the assessment year 2007-2008. 3. Alternatively, the learned assessing officer erred in ignoring the order of the CIT-Appeal in the assessee’s co-owners case. On the same property and same JDA, the learned CIT-Appeal, decided the issue of point of taxation of IDA agreement and held that the capital gain tax liability arises for the assessment year 2011-2012 only. 4. Alternatively, the learned assessing officer erred in invoking section 50C of the Act in spite of the fact that there was no registration taken place during the year under consideration. Only in the case of registration, AO can invoke 50C of the Act. 5. Alternatively, even if 50C of the Act is invoked, the learned assessing officer, adopted the guideline value at Rs.12000/- per sq.ft instead of Rs.3500/- prevailing at that time [upto 3 1.03.2012, the guideline value of the land is Rs.3500/- per sq.ft]. 6. Alternatively, the learned assessing officer, erred in applying Rs. 12000/- per sq.ft, for the sold area of 40821 sq.ft in spite of the fact that the assessee sold the property as per the registered guideline value prevailed at the date of sale. 7. The learned assessing officer erred in assessing the short term capital gain again on the same transaction [sold area]. 8. The Appellant craves leave to file additional grounds/arguments at the time of hearing.
At the time of hearing, the ld.AR for the assessee submitted that there is a delay of 52 days in filing the appeal before the ld.CIT(A) for which the assessee has explained the reasons, as per which, she was not in station during the period when the
3 I.T.A. No.187 /CHNY/2019 assessment order was served. Because of this, the appeal could not be filed within the statutory time allowed under the Income Tax Act, 1961 (hereinafter the ‘Act’). Although the assessee has explained the reasons, the ld.CIT(A) rejected the explanation offered by assessee and dismissed the appeal without condoning the delay. The ld.AR further submitted that the reasons given by the assessee for not filing the appeal comes within the ambit of reasonable cause as provided under the Act and hence the delay in filing the appeal before the ld.CIT(A) may be condoned to decide the issue involved in the appeal on merits.
The ld.DR on the other hand strongly opposing condonation petition filed by the assessee, submitted that the reasons given for not filing the appeal before the CIT(A) were not in accordance with reasonable cause as provided under the Act and hence the delay in filing the appeal may not be condoned.
Having heard both sides, we find that the reasons given by the assessee for not filing the appeal before the ld.CIT(A) that the appeal could not be filed due to travelling abroad during the period when the order was served is definitely a reasonable cause which comes under the ambit of reasonable cause as
4 I.T.A. No.187 /CHNY/2019 provided under the Act and hence the delay in filing of appeal before the ld.CIT(A) has been condoned and the appeal filed by the assessee is admitted for adjudication.
The brief facts of the case are that the assessee, a non- resident has not filed her return of income within the due date as per Section 139(1) of the Act. The case has been reopened u/s.147 of the Act by issue of notice u/s.148 of the Act dated 16.06.2016. In the mean time, the assessee has filed her return of income on 19.09.2016 declaring a total income of Rs.3,21,97,750/-. In response to notice issued u/s.148 of the Act, the assessee vide letter dated 10.12.2016 intimated to the AO that return filed on 19.09.2016 may be treated as return filed in response to notice issued u/s.148 of the Act. The case has been selected for scrutiny and during the course of assessment proceedings the AO noted that a survey u/s.133A of the Act was conducted in the case of M/s.Paramount Builders (Chennai) Limited by the Investigation Wing on 05.03.2014. During the course of survey, it was ascertained that the assessee and 13 others had entered into Joint Development Agreement (JDA) on 27.06.2006 with M/s. P.S.Srijan Realty for development of property situated at No.137. Velachery Main Road, Velachery,
5 I.T.A. No.187 /CHNY/2019 Chennai. As per the terms of JDA between the parties, the assessee and other 13 co-owners has agreed to share developed property in the ratio of 50% for the developers and 50% for the land owners. The assessee has originally offered capital gain derived from transfer of property in pursuant to JDA for the previous year 2013-14 relevant to assessment year 2014-15. However a revised return was filed on 19.09.2017 by withdrawing the claim of capital gain offered to tax on transfer of property pursuant to JDA based on subsequent decision of ITAT, Chennai in one of co-owners case wherein it was held that the point of taxation for transfer of property is for the assessment year 2007-08 when the assessee has entered into JDA on 27.06.2006 and hand over the physical possession of the property to the builders. The AO was not convinced with this explanation of the assessee and according to him, the point of taxation for impugned JDA transaction fall under the assessment year 2014-15 when the assessee has entered in to an allocation agreement on 10.07.2013 for sharing constructed super built area with the developer and accordingly computed long term capital gain for assessment year 2014-15.
Being aggrieved by the assessment order, the assessee
6 I.T.A. No.187 /CHNY/2019 preferred an appeal before the CIT(A). Before the CIT(A), the assessee has filed appeal with a delay of 52 days for which a petition for condonation of delay explaining the reasons has been filed. The ld.CIT(A) has dismissed the appeal filed by the assessee holding that the reasons given by the assessee for not filing the appeal within the time allowed under the Act does not come under the ambit of reasonable cause as provided under the Act and hence the delay in filing the appeal cannot be condoned. Accordingly dismissed the appeal filed by the assessee. Aggrieved by the order of the ld.CIT(A), the assessee is in appeal before us.
The ld.AR for the assessee at the time of hearing submitted that the issue is squarely covered in favour of the assessee by the series of decisions of ITAT, Chennai in other co-owners case, where on the basis of JDA dated 27.06.2006, the Tribunal held that taxability on transfer of land in pursuant to JDA accrues for assessment year 2007-08 when the assessee has physically hand over land to developer. The facts being identical for the present appeal, by following the decision of the ITAT in other co- owners case, the appeal filed by the assessee may be allowed.
7 I.T.A. No.187 /CHNY/2019 9. The ld.DR on the other hand strongly supporting order of the ld.CIT(A) and AO submitted that although the issue is covered in favour of the assessee by the decision of ITAT, Chennai ‘B’ Bench, in other co-owners case, but fact remains that AO has distinguished the finding recorded by the Tribunal in other co-owners case while concluding the assessment on the ground that the Tribunal has ignored crucial aspect of Section 17(1A) of Indian Registration Act, 1908 read with section 53A of Transfer of Property Act, 1882 to hold that capital gain accrued for the assessment year 2007-08 and hence by taking note of subsequent sharing agreement between the assessee and builders dated 10.07.2013 computed long term capital gain for the assessment year 2014-15. The ld.DR further submitted that as per the amended provisions of section 17(1A) of Indian Registration Act, 1908, unless a document giving possession of any immovable property is not registered as required under the Act, the same cannot be considered as valid document which confers a right and title in the property and hence on the basis of subsequent agreement dated 10.07.2013 on which the parties have agreed for allocation of super built up area, the capital gain on said transaction accrues when both the parties have agreed to allocate respective share in the constructed building. The
8 I.T.A. No.187 /CHNY/2019 ITAT while deciding the appeals filed by other co-owners has not considered this aspect and hence it cannot be said that present appeal is covered by the decision of ITAT in the case of other co- owners. The ld.DR has filed detailed written submissions of the Revenue which is reproduced as under:- 1.1 The Appellant assessee Ms, Faiza Hameed has not filed a return of income for the Assessment year in reference i.e. A.Y.2014-15, within the time allowed u/s 139 of The Incometax Act, 1961.
1.2 The appellant Ms. Faiza Hameed, filed appeal before Commissioner of Income-tax (Appeals)— 16, Chennai on 22.03.2018 belatedly along with a condonation petition, against the Assessment order u/s 143(3) read with Sec.147 dt. 27.12.2017 passed by ITO International Taxation 1(2), Chennai which was served on the appellant on 31.12.2017. The CIT (A) after hearing the case, has dismissed the said appeal of the appellant in ITA No.73/CIT(A)- 16/2017-18 refusing to condone the delay. Further, merits of the case were not adjudicated upon by the CIT (Appeals).
Having voluntarily offering the income to tax by filing the Return of Income, The assessee can not raise a ground of appeal that the income does not belong to the said assessment year
2.1 One of the ‘Grounds of Appeal’ before the Honourable Bench is - “The learned CIT(A) erred in not condoning the delay in filing of appeals by 55 days…..” 2.2 If the Honourable Bench is to condone the delay in fifing of the Appeal before the CIT(A), it will be the Assessment order of the Assessing Officer, the Bench would be adjudicating upon, on merits. The Assessment order was passed on 27-12-2017 u/s 143(3) read with Section 147 of the Incometax Act, 1961 (henceforth in this submissions referred to as ‘The Act’.) based on the return filed by the assessee On 19-09-2016 filed electronically vide an Acknowledgment number 453309770190916 and reiterated and
9 I.T.A. No.187 /CHNY/2019 requested vide a letter dated 10-12-2016, to be treated as a return in response to notice u/s 148 of The Act, dated 16-06-2016.
2.3 As per the return filed on 19-09-2016, the income returned is Rs.3,21,97,750/- which includes Rs.3,14,46,1O8/- towards LTCG on sale of assessee’s share of land at Valacherry, Tambaram Main Road, Chennai for construction of Grand Mall, vide a JDA dated 27- 06-2006 entered into with a developer. The only other effective ground of the assessee before the ITAT, apart from the ground regarding condonation of the delay by The CIT(A) is — The CIT(A) erred in not following the judgement of the Honourable Incometax Appellate Tribunal in the case of Sathak Ahmed Shah [Co-owner case] in ITA No. 401/CHNY/2018 dated 05-10-2018, which is in favour of the assessee.”
2.4 The order of The Honourable ITAT referred to by the Appellant in the above ground of appeal is an order wherein, the Assessment year in which the LTCG on sale of land is to be charged to tax? is decided. The Hon’ble ITAT, following it’s own judgement in the case of another co-owner Mr. Shafiq Mohammed Shah in ITA No.s 945 & 1331/ CHNY/2016 dated 11-05-2017 decided that the LTCG income on sale of land is to be charged to tax in A.Y.2007-08.
2.5 One important fact in this regard is that the assessee has recognised the LTCG income for the A.Y. 2014-15 by payment of Advance tax of Rs.20,00,000/- on 29-03-2014 and Self-Assessment tax of Rs.41,20,000/- on 17-03-2015. In addition to this, apart from recognising such Income and paying the advance tax & self assessment tax, still no return of income was filed voluntarily. 2.6 However, later a Return of Income was filed on 19.09.2016, offering LTCG in question to tax for A.Y.2014-15, by the appellant.
2.7 Further during the assessment proceedings, in response to the notice u/s 142(1) calling for details, issued during the course of the assessment, the appallent submitted a note as under: “In this case of joint development possession of the land was handed over to the developer only for construction purpose. This fact was clearly mentioned in the Joint Development Agreement.
10 I.T.A. No.187 /CHNY/2019 In the case of the above assessee in the clause No. 7.3 “in as much as the construction of the said lands is concerned, the developers shall act as its exclusive licensee of the owners, and shall be entitled to be in occupation of the said lands as and by way of an exclusive licensee of the owners to carry out the construction of the property building. However, the developers shall not be entitled to create any possessory rightover the said lands, which could be construed as transfer of the property within the meaning of The Incometox Act. The developers shall also are not entitled to use the said lands for any other purpose other than the purpose of construction, nor would be entitled to part with it’s allocation in each phase to anyone till the owner’s allocation, in that phase is handed over to the owners.” From the reading of the above clause it can be clearly understood that mere handing over of the land for the construction to the developer shall not be construed as transfer of the property withing the meaning of the IncometaxAct. In this case the possession of the constructed building was given by the D evel per to the owners only onJuly’2013 and hence the capital gain will arise only for the asst. Year 2014-15, as the transfer deemed to have been completed only in this year.”
2.8. Having paid the Advance tax and fifing the Return in response to the notice u/s 148; and agreeing in writing during the course of assessment proceeding as above, the assessee can not take a ground that the LTCG income shall be assessed in A.Y. 2006-07 or for that matter any other Assessment year other than A.Y.2014-15. This ground is nothing but stating that the Income, specifically LTCG income returned to tax as per the Return of Income shall not be assessed, sounds unusual. In case the assessee wants to alter or differ from the income returned to tax through filing of a return of Income, the only option is through filing of another Return of Income, legally termed ‘Revised Return’, for which the eligibility conditions and procedure is laid down in Section 139(5) of The Act; which states that — a Revised return can only be filed when the original return was filed well within due date as per Section 139(1) and the revised return can filed before the completion of the Assessment year or before completion of assessment; whichever is earlier. The Assessee, having not filed the original Return of income
11 I.T.A. No.187 /CHNY/2019 u/s 139(1) in time and the due date for filing of even a belated return of income for the assessment year 2014-15 is over by 31-03-2016, the manual return handed over to the Assessing officer alongwith a letter dated 06-06-2017 filed on 12-06-2017 is invalid and Non-est. There is no other method by which the assessee can correct the income/ Return of income, as has been held by The Apex Court in the case of Goetze (India) Limited Vs CIT. [2016] 284 ITR 323 Therefore, the income of LTCG offered by the assessee to tax for the A.Y. 2014-15 shall be and shall only be assessed in the A.Y. 2014-15 and hence this ground of the assessee may please be dismissed.
3.. Applicability of the order in ITA.NO. 401/Chny!2018 read with order in in ITA No.s 945 & 1331/ Mds/2016 in the case of the co- owners to the case/ appeal of the appellant:
3.1 During the course of the appellate proceedings before the Honourable bench, written submissions were made on behalf of the appellant on 10-12-2020 as per which it was submitted that the case of the appellant is covered by the decisions of the other co-owners cases by the Honourable ITAT, Chennai. It is prayed that based on these judgments, the appeal of the assessee may be allowed.
3.2 The first of the judgments by the Hounorable ITAT out of the 4 cases of the co-owners is delivered on 11-05-2017 in the case of ‘Shafiq Mohammed Shah’ in ITA. No.s 945 & 1331/ Mds./ 2016 which were followed in the case of other 3 co-owner appellants. It is decided by the Hon’ble ITAT B Bench, Chennai vide the order in ITA No. 1331/2016 & 945/2016 in one case of co-owners case of Shri Shafiq Mohammed Shah for Asst. Year 2011-12 wherein it was held at Para 10 (page 35 to37) that the LTCG on sale of land is to be taxed in Financial year 2006-07 relevant to Asst. year 2007-08 considering that the said land was transferred vide JDA entered on June 2006 in view of the provisions of Section 2(47)(v) of The Act read with Sec. 53A of The Transfer of Property Act.
3.3 It is most humbly and respectfully submitted that the Tribunal order has not considered on a very important aspect of the provisions of Section 53A of The Transfer of Property Act, because
12 I.T.A. No.187 /CHNY/2019 of which an error has crept into the order, because of which the said order may not be entitled enough to be applied in the case of the appellant. While deciding the Appeal in ITA No.1331/2016 it is decided that the transaction in JDA falls within the definition of the Section 53A of the Transfer of Property Act, because there was a contract for transfer of land and the land was handed over to the builder and a deposit was paid by the Builder in part performance of the said contract in the form of JDA. Section 53A of TP Act was also extracted on page 17 of the order. However, a particular sentence “not withstanding that the contract, though required to be registered, has not been registered” having been deleted in the amendment to said Act during 2001 and therefore although is not relevant for the period during which the JDA has been executed is considered based on which it is decided that the provisions of Section 53A of Transfer of Property Act and in turn the provisions of Section 2(47) (v) are applicable and the transfer has occurred at the time of the JDA.
3.4 It is submitted that Section 17(1A) of The Registration Act which reads as under is inserted in Section 17 (documents of which Registration is compulsory) of the said Act through S.3 of Act 48 of 2001, to be effective from 24-09-2001:
17 (1A): The documents containing contracts to transfer for consideration, any immovable property for the purpose of Section 53A of the Transfer of Property Act, 1882 (4 of 1882) shall be registered if they have been executed on or after the commencement of Registration and Other Related Laws (Amendment) Act, 2001 and if such documents are not registered on or after such commencement, then, they shall have no effect for the purposes of the said Section 53A.”
3.5 Accordingly, the provisions of Section 53A of TP Act has also been modified in as much as the words “the contract though required to be registered, has not been registered, or” have been omitted w.e.f 24-09-2001, by S.10 of Act 48 of 2001.
13 I.T.A. No.187 /CHNY/2019 3.6 In view of the above legal proposition, any contract to be recognised as an instrument of contract U/s 53A of The TP Act needs to be registered under The Registration Act, 1908. This ratio was also laid down by The Punjab & Haryan High Court in C.S.Atwal Vs CIT [2015] 59 taxmann.com 359 (P&H which inturn was affirmed by the Apex Court, reported in [2017] 86 taxmann.com 94 (SC). However, the said amendment in the Sec. 17 of the Registration Act, 1908, was not properly put forth by the department during the appellate proceedings before Hon’ble ITAT while deciding the appeal in ITA No.1331/2006, because of which an error would have crept into the said order. In view of this, the judgment in ITA No.1331/2006 is not competent on it’s own to be applied to or followed in the case of the present Appeal. In view of this it is prayed that the judgment in ITA No.1331/2006 and in turn, judgement in ITA NO. 401/CHNY/2018 may not be applied to decide the present appeal. As the JDA in question has not been registered under Registration Act, the same is not eligible to be considered u/s 53A of TP Act and in turn Sec. 2(47)(v) of Incometax Act to decide the date of transfer for Section 45 of The Act for deciding the incidence of LTCG on transfer of Land.
3.7. As the Hon’ble ITAT order relied upon by the appallent was delivered prior to the assessment order, the appallent has brought order this order to the knowledge of the assessing officer and has requested for applying the same in her case / assessment. The assessing officer has considered the request of of the assessee / appellant and discussed at 10.2 on page 12 of the assessment order and has clearly differentiated stating that “the said decisions of the Hon’ble ITAT, the effect of the Section 17(1A) of the Indian Registration Act, 1908 after amendment in 2001 has not been taken into consideration”
3.8 As has been brought out by the assessing Officer at paragraphs 7.1 and 7.2 of the assessment order on pages 10 and 11, the transfer of the land has happened on 10-07-2013, the date on which allocation agreement has been entered into between land owner and developer allocating the built up area. Therefore it is prayed that the ground of appeal of the assessee to follow the decision in the case of
14 I.T.A. No.187 /CHNY/2019 the co-owne and decide as to in which assessment year, the LTCG is to be levied; may be dismissed and the assessment order be confirmed.
We have heard both the parties, perused the materials on record and gone through the orders of the authorities below. We find that an identical issue has been considered by the co- ordinate Bench of ITAT in the case of Shri Shafiq Mohammed Shah in ITA No.1331/Mds/2016 vide order dated 11.05.2017, where after considering JDA dated 27.06.2006 between land owners and the developer held that taxability of long term capital gain on transfer of land pursuant to JDA dated 27.06.2006 arises only in the financial year 2006-07 relevant to assessment year 2007-08, when the assessee has entered into JDA with the developer and also hand over physical possession of land to the developer. The said decision has been subsequently followed in series of decisions in other co-owners case including in the cases of Shri Mafaz Mohammad in ITA No.1759/CHNY/2017 vide order dated 01.03.2018, Smt.Kathijathu Nasreen in ITA No.1757/CHNY/2017 vide order dated 01.03.2018 and Shri Sathak Ahmed Shaw in ITA No.401/CHNY/2018 vide order dated 05.10.2018. The facts being identical in the present case and also the transaction of capital gain arises out of JDA dated 27.06.2006 between the assessee and other 13 co-owners, we
15 I.T.A. No.187 /CHNY/2019 are of the considered view that the issue involved in the present appeal is squarely covered in favour of assessee by the decision of ITAT in the above cases and by respectfully following the decision of the co-ordinate bench of ITAT, we are of the considered view that long term capital gain on transfer of land in pursuant to JDA dated 27.06.2006 accrues for the assessment year 2007-08, when the assessee has physically hand over the land to the developer, but not for the assessment year 2014-15 as considered by the ld.AO on the basis of subsequent sharing agreement dated 10.07.2013. Therefore, we direct the AO to delete additions made towards computation of long term capital gain on transfer of land in pursuant to JDA for the impugned assessment year.
In the result, appeal filed by the assessee is allowed.
Order pronounced on 8th January, 2021 at Chennai.
Sd/- Sd/- (वी दुगा� राव) (जी. मंजुनाथ) (V. Durga Rao) (G. MANJUNATHA) लेखा सद�य /ACCOUNTANT MEMBER �याियक सद�य/Judicial Member चे�ई/Chennai, �दनांक/Dated, the 8th January, 2021 RSR
16 I.T.A. No.187 /CHNY/2019
आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु� (अपील)/CIT(A) 4. आयकर आयु� /CIT 5. िवभागीय �ितिनिध/DR 6. गाड� फाईल/GF.