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Income Tax Appellate Tribunal, “B’’ BENCH : BANGALORE
Before: SHRI B.R BASKARAN & SMT. BEENA PILLAI
O R D E R PerB.R Baskaran,Accountant Member The revenue has filed this appeal challenging the order dated 29-07-2016 passed by Ld CIT(A)-14, Bangalore and it relates to the assessment year 2006-07. The revenue is aggrieved by the decision of Ld CIT(A) in deleting the addition of Long term capital gains made by the AO.
We heard the parties and perused the record. The AO noticed that the assessee and along with other co-owners have entered into a Joint Development Agreement (JDA) with M/s Dynasty Developers (P) Ltd on 15-12-2005 for development of a property known as “Brindavana” bearing Municipal No.17, Sixteenth Cross, Sadashiva Nagar, Ward No.99, Bangalore measuring 43264 Sq.ft. As per the development agreement, 50% of developed area comprising of apartments, common areas, terrace rights, garden area, basement car parking, surface car parking etc., shall be handed over to the owners of the property. The AO noticed that the assessee held 1/5th share in the property and did not disclose any capital gain. The AO was of the view that the possession of property has been handed over to the developer and hence, as per the decision rendered by Hon’ble Karnataka High Court in the case of CIT vs. Dr. T.K.Dayalu (ITA No.3209 and 3165 of 2005 dated 20-06-2011), the assessee is required to offer capital gains upon entering JDA.
3. Before the AO, the assessee submitted that the developer has not fulfilled the conditions mentioned in JDA and accordingly the co-owners have cancelled the JDA vide notice dated 05-1-2012 issued to the developer. It was submitted that the developer has not changed the status of land, obtain sale deed etc., which were essential for executing JDA. Accordingly it was contended that the JDA was not given effect to. In view of the above submissions, the AO issued summons to M/s Dynasty developers, who furnished copies of JDA, power of attorney, Supplementary Agreement etc. After going through the same, the AO rejected the submissions of the assessee. Accordingly, the AO computed the capital gains at Rs.479.81 lakhs and assessed 1/5th of the same, being the share of assessee amounting to Rs.95.96 lakhs in the hands of the assessee.
4. The Ld CIT(A) deleted the same and hence the revenue has filed this appeal before us.
5. The Ld D.R supported the order passed by the AO. On the contrary, the Ld A.R submitted that the impugned land was earmarked for public use and further the title of ‘assessee and other co-owners’ on the land was not clear. The developer agreed to get the title cleared and also agreed to change the status of land from public to residential. Without these changes, the land could not have been put to the desired use at all. Accordingly he submitted that the possession of land was not given to the developer and accordingly the JDA agreement was not given effect to. Accordingly, he contended that the Ld CIT(A) was justified in cancelling the addition, since no capital gain accrued to the assessee.
6. In the rejoinder, the Ld D.R sought some time to collect certain details. Accordingly the Ld D.R was given ten days time to furnish any details which will upset the findings given by Ld CIT(A). However, till date the Ld D.R has not furnished any details and hence we proceed to dispose of the appeal.
7. We notice that the Ld CIT(A) has cancelled the addition by following the decision rendered by his counterpart in another co- owner’s case. For the sake of convenience, we extract below the observations made and decision taken by Ld CIT(A):-
The property in question, BR1NDAVANA, No 17, 16th cross Sadashivnagar, Ward No. 99, Bangalore, belonged to the Maharaja of Mysore, his Highness Jayachamarajendra Wadiyar, and was part of the Bangalore Palace Orchards. It appears that The maharaja gifted the said property to Maharajkumari Leelavathi Avaru. The Maharajkumari Leelavathi Avaru was married to Sridar K. Basavaraje Urs. They adopted a son Sri K.B. Ramachandra Raje Urs, The Maharajkumari passes away in the year 1958 and the said property devolved on her husband Sirdar K. Basavaraje Urs. The said Sri K. Basavaraje [irs passed away on 30- 09-1980 leaving behind him his rmly surviving heir Sirdar K.B. Ramachandra Raje Urs, the father of the Assessee.
The Assessee, Smt Deepa Malini Devi is the daughter of Late Sri Ramachandra Raje Urs and has become a co -owner of the property by virtue of succession under the Hindu Mithakshara School of inheritance.
The property in question has had a twisted history and the same continues at present. There is no proper documentation of the transactions within the royal family and the ownership of the property is not clear. Presently BDA is claiming it to be art of Palace orchards and is a public park area. There is no Sale deed or Gift deed on record, to show that the property was given by the Maharaja to the Maharajkumari. Reference is drawn to para Ill of the JDA where in even the date of such gift has not been mentioned.
The entire Palace Orchard property was acquired by the ltOA and sadashiva nagar/ palace orchards layout was formed. The Bilndavana, containing the relics of the deceased royalty was retained as a park area. In the COP the said property was marked as PUBLIC USE. That was the reason why the family members did not exploit the land themselves.
At this juncture, in 2005, Mr Jitu Virwani of Dynasty builders, approached the family and offered to get the title deed and sale deed in the name of the family members by using his good offices with the Government of Karnataka and also get the land use changed from Public to residential. Without these changes the land Cannot be used for any purpose at all and has no value.
The AO in his asessmeent order stated that the assessee along with her father Sri.K.11.Ramachandra Raje Urs, brother Sri. Chancluranga Kantharaj IJrs Sisters Smt.Tripurasundari Devi and Sint. Deepamahini Devi entered into it joint development agreement with M/s Dynasty Developers (P) Ltd. The deed was registered with the subregistrar, Gandhinagar, Bangalore on 15- 12-2005 for developing their property known as "Brindavana', bearing Municipal No.1 7, 1611, Cross, Sadashivariagar, Ward-No.99, Bangalore measuring in all 43264 sq.ft. In consideration, the developers agreeing to construct and delivering 50% of the development comprising of apartments, common areas, terrace rights, garden area, basement car parking, surface car parking in the residential building to be constructed and the owners agreed to convey 30% of the undivided share to the Developer or to anyone nominated by the developer. The owners also received a refundable deposit of Rs.25 lakhs and the possession of the land was handed over to the developer for developing and construction of flats. Accordingly, this is a transfer within the meaning of section 2(47) of the Income-tax Act and is liable to pa' Capital Gains lax on the transfer of the property.
9. The AO concluded the assessment by making an addition of Long Term Capital Gains to the extent of Rs.95,96,216. Aggrieved by the order of the AU, the assessee is in appeal before me.
The assessee filed a written submission along with the appeal order of the CIT(Appcals) Mysore (it. 13.03.2014 for AY 2006-07 on 02.06.2016 drawing attention to para 6 of page 5 of the CIT (Appeals), Mysore order wherein the appellant's name has been mentioned as one of the owners.
The CIT(Appeals), Mysore in 234, 235 & 36/CIT(A)MYS/13-14 cit. 13.03.2014 in para 6 observed that: The appellant tiled written submission dt. 25.02.2014 and another written submission dt. 10.03.2014. In this, it is argued by the appellant as follows : Assessees Mr. Chancluranga Kant/i Rj Urs along with his lather Sri K.B. Ramchandra Raje Urs and his sisters Sm!. Tripurasundari Devi, Mrs. Deepanialini Devi and Mrs. Keerhi Maki devi (collectively herein after referred to as owners) have entered in to Joint Development Agreement with Dynasty Developers on 15.12.2005. Under the joint Development Agreement the owners have agreed to bring in the land known as Brincla van situated in Sodnshivnagar, Bongo/ore measuring 44136 sq. ft. including the area occupied by the temple and Brindavan and the builders have agreed to give in exchange 50% of the constructed area and refundable deposit of Rs.25,00,000/-.......... Further, the CIT(Appeals), Mysore concluded the appeal as under :
"6) PERMISSIVE POSSESSION.
6.1) The Owners shall on the Developers securing the change of land use will permit the developers to enter upon the Schedule Property for development; 6.2) The Owners hereby shall permit entry to the Developers into the Schedule Property as a part of the contract granting the Developers or its nominee/s I/IL' rig/it to construct in some of this agreement for Development after the change of' land use. It is specifically understood between the parties that the authority so granted under this clause is not being given or intended ID he given by the Owners in part performance of any agreement as stipulated In Section 53A of the Transfer of Property Act or the Section 2(47)(v) of the Income Tax Act, 1961; 7.1 From the above, it can be seen that tile permission fr entering into the property is to be given after the developer obtains change of land use and the developer could not get tile change of land use done because of the litigation. The details of litigation narrated earlier in this order show peculiar facts that the appellant does not have clear title establishing the ownership even oil date of JDA which could he transferred by the appellants. It cannot be construed that possession is handed over since that is to happen after developer secures (lie change of land use which also did not happen. Hence the facts of the case of the appellants are clearly distinguishable from the case laws relied on by the AO in as much as in the case of the appellant the possession is not handed over and no consideration is received by the appellants. Whatever received is only a refundable deposit which cannot be income of the appellants. Under these facts and circumstances, I am of the considered view that the ,JDA is not resulting in any transfer of the property in as much as there is no possession given nor any consideration received and hence I am of the considered view that tile case law relied is not applicable to the facts of tile case of the appellant and the capital gains cannot be assessed for this year since the contract itself is sub1judice and is not implementable. Hence I direct the AO to delete the addition in these cases.
8. In effect, the appeals are allowed."
The facts remaining the same and the appellant being the co-owner of the same property in dispute, following the decision of CIT(A), Mysore in the case of other co- owners of the property, for judicial consistency, the order of CIT(A) is followed in the case of the appellant also for the impugned assessment year. The appeal filed by the appellant is thus allowed.
In the result, the appeal is allowed.”
7. Under Clause XI(6), the details of permissive possession agreed upon are narrated. The Clauses are as follows:
8. We notice that the Ld CIT(A), who passed the order in the hands of Shri Chanduranga Kanth Raje Urs, has given a finding that the JDA has not resulted in any transfer of property, since the possession was not given. He has given the finding after duly examining the back ground of the case. The Ld CIT(A), in the impugned order, has followed the above said decision of his counterpart, Before us, the revenue did not furnish any material to contradict the findings given by Ld CIT(A). Hence we have no other option, but to confirm the order passed by Ld CIT(A).
In the result, the appeal of the revenue is dismissed.
Order pronounced in the Open Court on 31st July, 2019.