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ITA No. 328/2018 C/W ITA No. 330/2018 ITA No. 332/2018 ITA No. 334/2018
IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 10TH DAY OF JANUARY, 2023 PRESENT THE HON'BLE MR JUSTICE P.S.DINESH KUMAR AND THE HON'BLE MR JUSTICE G BASAVARAJA INCOME TAX APPEAL NO. 328 OF 2018 C/W INCOME TAX APPEAL NO. 330 OF 2018 INCOME TAX APPEAL NO. 332 OF 2018 INCOME TAX APPEAL NO. 334 OF 2018
IN ITA NO. 328 OF 2018
BETWEEN:
MRS. MARGRIT GOVERDHAN W/O. LATE VASANTH MADHAV GOVERDHAN # 44, (97) KASTURBA ROAD CROSS BENGLAURU-560 001 PAN: AEAPG 5028A …APPELLANT
(BY SHRI. V. CHANDRA SHEKAR, ADVOCATE FOR SHRI. M. LAVA, ADVOCATE)
AND:
THE INCOME TAX OFFICER WARD 1(2)(1) BMTC BUILDING, 80 FEET ROAD KORAMANGALA, 6TH BLOCK BENGALURU-560 095 …RESPONDENT
(BY SHRI. K.V. ARAVIND, SENIOR STANDING COUNSEL)
Digitally signed by YASHODHA N Location: HIGH COURT OF KARNATAKA
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ITA No. 328/2018 C/W ITA No. 330/2018 ITA No. 332/2018 ITA No. 334/2018
THIS ITA IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 13.12.2017 PASSED IN ITA NO. 1355/BANG/2015 AND CROSS OBJECTION NO. 95/BANG/2017, FOR THE ASSESSMENT YEAR 2009-2010 [VIDE ANNEXURE-A], PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ANSWER THE SAME IN FAVOUR OF THE APPELLANT AND TO ALLOW THE APPEAL BY SETTING ASIDE THE FINDINGS THEREIN TO THE EXTENT AGAINST THE APPELLANT IN THE COMMON ORDER PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, ‘A’ BENCH, BANGALORE IN ITA NO.1355/BANG/2015 AND CROSS OBJECTION NO.95/BANG/2017 DATED:13.12.2017 RELATING TO THE ASSESSMENT YEAR:2009-2010 [VIDE ANNEXURE-A] AND ETC.
IN ITA NO. 330 OF 2018
BETWEEN:
DR. ARVIND GOVERDHAN REP BY HIS GPA HOLDER MRS. MARGRIT GOVERDHAN #44, (97) KASTURBA ROAD CROSS BENGALURU-560 001. PAN: AGUPG 9327J …APPELLANT
(BY SHRI. V. CHANDRA SHEKAR, ADVOCATE FOR SHRI. S. ANNAMALAI, ADVOCATE)
AND:
THE INCOME TAX OFFICER WARD 1(2)(1) BMTC BUILDING, 80 FEET ROAD KORAMANGALA, 6TH BLOCK BENGALURU-560 095 …RESPONDENT
(BY SHRI. K.V. ARAVIND, SENIOR STANDING COUNSEL)
THIS ITA IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 13.12.2017 PASSED IN ITA N/O. 1353/BANG/2015 AND CROSS OBJECTION NO. 93/BANG/2017, FOR THE ASSESSMENT YEAR 2010-2011 [VIDE ANNEXURE-A], PRAYING TO FORMULATE THE SUBSTANTIAL
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QUESTIONS OF LAW STATED THEREIN AND ANSWER THE SAME IN FAVOUR OF THE APPELLANT AND TO ALLOW THE APPEAL BY SETTING ASIDE THE FINDINGS THEREIN TO THE EXTENT AGAINST THE APPELLANT IN THE COMMON ORDER PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, ‘A’ BENCH, BANGALORE IN ITA NO.1353/BANG/2015 AND CROSS OBJECTION NO. 93/BANG/2017 DATED: 13.12.2017 RELATING TO THE ASSESSMENT YEAR: 2010-2011 [VIDE ANNEXURE-A] AND ETC.
IN ITA NO. 332 OF 2018
BETWEEN:
MRS. MONIKA GOVERDHAN REP BY HER GPA HOLDER MRS MARGRIT GOVERDHAN # 44, (97), KASTURBA ROAD CROSS BENGLAURU-560 001 PAN: AFNPK 1319J …APPELLANT
(BY SHRI. V. CHANDRA SHEKAR, ADVOCATE FOR SHRI. S. ANNAMALAI, ADVOCATE)
AND:
THE INCOME TAX OFFICER WARD 1(2)(1), BMTC BUILDING 80 FEET ROAD, KORAMANGALA 6TH BLOCK BENGALURU-560 095 …RESPONDENT
(BY SHRI. K.V. ARAVIND, SENIOR STANDING COUNSEL)
THIS ITA IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 13.12.2017 PASSED IN ITA NO. 1354/BANG/2015 AND CROSS OBJECTION NO. 94/BANG/2017, FOR THE ASSESSMENT YEAR 2009-2010 [VIDE ANNEXURE-A], PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ANSWER THE SAME IN FAVOUR OF THE APPELLANT AND TO ALLOW THE APPEAL BY SETTING ASIDE THE FINDINGS THEREIN TO THE EXTENT AGAINST THE APPELLANT IN THE COMMON ORDER PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL,
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‘A’ BENCH, BANGALORE IN ITA NO.1354/BANG/2015 AND CROSS OBJECTION NO. 94/BANG/2017 DATED: 13.12.2017 RELATING TO THE ASSESSMENT YEAR: 2009-2010 [VIDE ANNEXURE-A] AND ETC.
IN ITA NO. 334 OF 2018
BETWEEN:
MRS. ANITA GOVERDHAN LOEBBERT REP BY HER GPA HOLDER MRS. MARGRIT GOVERDHAN # 44, (97), KASTURBA ROAD CROSS BENGLAURU-560 001 PAN: ABUPL 4623P …APPELLANT
(BY SHRI. V. CHANDRA SHEKAR, ADVOCATE FOR SHRI. S. ANNAMALAI, ADVOCATE)
AND:
THE INCOME TAX OFFICER WARD 1(2)(1) BMTC BUILDING, 80 FEET ROAD KORAMANGALA, 6TH BLOCK BENGALURU-560 095 …RESPONDENT
(BY SHRI. K.V. ARAVIND, SENIOR STANDING COUNSEL)
THIS ITA IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 13.12.2017 PASSED IN ITA NO. 1356/BANG/2015 AND CROSS OBJECTION NO. 96/BANG/2017, FOR THE ASSESSMENT YEAR 2009-2010 [VIDE ANNEXURE-A], PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ANSWER THE SAME IN FAVOUR OF THE APPELLANT AND TO ALLOW THE APPEAL BY SETTING ASIDE THE FINDINGS THEREIN TO THE EXTENT AGAINST THE APPELLANT IN THE COMMON ORDER PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, ‘A’ BENCH, BANGALORE IN ITA NO.1356/BANG/2015 AND CROSS OBJECTION NO. 96/BANG/2017 DATED: 13.12.2017 RELATING TO THE ASSESSMENT YEAR: 2009-2010 [VIDE ANNEXURE-A] AND ETC.
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ITA No. 328/2018 C/W ITA No. 330/2018 ITA No. 332/2018 ITA No. 334/2018
THESE ITAs, COMING ON FOR FINAL HEARING, THIS DAY, P.S.DINESH KUMAR J., DELIVERED THE FOLLOWING:
JUDGMENT
These four appeals by the assessees challenging the common order dated 13.12.2017 in ITA No.1355/Bang/2015 (Cross Objn.No.95/Bang/2017), ITA No.1353/BANG/2015 (Cross Objn.No.93/BANG/2017), ITA No. 1354/BANG/2015 (Cross Objn.No.94/BANG/2017 and ITA No. 1356/BANG/2015 (Cross Objn.No.96/BANG/2017), passed by the ITAT1, ‘A’ Bench, Bangalore, have been admitted to consider the following questions of law:
In ITAs No.328/2018, 332/2018 and 334/2018: 1. Whether the Tribunal was justified in law in holding that the transfer of the capital asset took place in the assessment year 2009-2010 as against the assessment year 2014-2015 and consequently passed a perverse order on the facts and circumstances of the case?
1 Income Tax Appellate Tribunal
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Whether the reopening of the assessment and the consequent assessment proceedings are valid in law on the facts and circumstance of the case? 3. Whether the Tribunal was justified in law in not adjudicating the issue of cost of the capital asset on 01.04.1981 and consequential indexed cost of acquisition to be allowed on the facts and circumstances of the case?
In ITA No.330/2018: 1. Whether the Tribunal was justified in law in holding that the transfer of the capital asset took place in the assessment year 2010-2011 as against the assessment year 2014-2015 and consequently passed a perverse order on the facts and circumstance of the case? 2. Whether the reopening of the assessment and the consequent assessment proceedings are valid in law on the facts and circumstance of the case? 3. Whether the Tribunal was justified in law in not adjudicating the issue of cost of the capital asset on 01.04.1981 and consequential indexed cost of acquisition to be allowed on the facts and circumstances of the case?
Heard Shri V.Chandrashekar, learned Advocate for the appellants-assessees and K.V.Aravind, learned Senior Standing Counsel for the respondent-Revenue.
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Brief facts of the case are, appellants, Mrs.Margrit Goverdhan and her three children are joint owners of property bearing No.44, situated at Kasturba Road, Bengaluru. It originally belonged to Mrs.Margrit Goverdhan’s husband Dr.Vasanth Madhav Goverdhan. After his death, property devolved upon his wife and children. They entered into a JDA2 dated November 27, 2008 with M/s Ashed Properties and Investments Pvt. Ltd., for development of the property. In the said agreement, land owners were entitled for 60% of the built up area with proportionate undivided interest and the developer for remaining 40%.
The assessees filed return of income in respect of A.Y.32009-10. The A.O.4 held that JDA was executed in the financial year relevant to A.Y and they were liable to pay Capital Gains tax.
2 Joint Development Agreement 3 Assessment Year 4 Assessing Officer
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The CIT(A)5 reversed the finding of the A.O. The ITAT allowed the appeal and concurred with the view taken by the A.O. Hence, these appeals.
Shri Chandrashekar, for the assessees submitted inter alia that AO has proceeded on an incorrect premise that through the JDA, possession of the entire property had been handed over to the developer with certain permissions, privileges, access etc.,. The CIT(A) has rightly reversed AO’s findings by holding that the assessees had not parted with possession of the property as contemplated under Section 53A of the TP Act6. The ITAT also fell in error in reversing CIT(A)’s findings and concurring with the AO’s view on the ground that JDA was executed on November 27, 2008 and pursuant thereto, builder was in possession of the property in question and further that the
5 Commissioner of Income Tax (Appeals)-I 6 Transfer of Property Act,1882,
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issue is covered by the decision of this Court in CIT Vs. Dr.T.K.Dayalu7
Adverting to Clause 14.3 of the JDA, he argued that power to alienate would come into effect only upon completion of owners constructed area and building being complete in all respects for human habitation and subject to issuance of clearance and occupation certificate. With these submissions, he prayed for allowing these appeals.
Shri K.V.Aravind, learned Senior Standing Counsel for the Revenue opposing the appeals submitted that possession of land has been transferred simultaneously with the execution of JDA. Nothing would stop the developer from alienating the property on the strength of GPA which was executed simultaneously with the JDA. Therefore, there
7 202 Taxman 531 (Kar)
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is no error in the order passed by the ITAT. With these submissions, he prayed for dismissal of these appeals.
We have carefully considered rival submissions and perused the records.
In substance, Shri Chandrashekar’s argument is, JDA contains an express Clause to the effect that nothing contained in the JDA would be construed as transfer of possession under Section 53A of the T.P. Act and the developer would get the power to alienate only after completion of the building in all respects. Hence, there was no transfer of interest in the A.Y.2009-10.
According to the Revenue, the liability to pay capital gains tax stems out of the JDA. We have carefully perused the JDA. The relevant Clauses read as follows: “ Clause-6: PERMISSIVE POSSESSION:
6.1 XXXX 6.2 The OWNER shall irrevocably permit and authorize the DEVELOPER to enter upon the Schedule B Property and to
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develop the same along with remainder portion of Schedule A Property by demolishing the existing structure and constructing the said Building thereon as per Sanctioned plan, subject to the terms of this Agreement. The owner shall not revoke the permission so granted, subject to due compliance of the terms agreed by the DEVELOPER, till completion of the entire project as the agency created is one coupled with interest in so far as the Developers will be incurring expenditure for construction of Building in the Schedule A Property, having been permitted to develop by obtaining Plan Sanction, License etc, provided however that, nothing herein contained shall be construed as delivery of possession in part performance of any Agreement of Sale under Section 53-A of the Transfer of property Act, 1908 or Section 2(47)(V) of the Income Tax, 1961; ” “Clause-14: POWER TO SELL UNDIVIDED SHARE AND CONVEYANCE AND CONSTRUCTION AGREEMENT:
14.1. The OWNER hereby gives her express consent to the DEVELOPER and shall execute a power of attorney in favour of Developer empowering them to enter into agreements with the prospective purchasers to enter into agreement, subject to the terms, conditions and the spirit of this agreement, to sell her share in the undivided 40% (Forty percent) in the land comprised in the schedule A property and the DEVELOPER will also be entitled to enter into construction contracts or such other contracts with prospective purchaser of her share in the undivided 40% share in land and receive sale price and cost of construction without having to render accounts to the OWNER;
14.2. On signing of this Development Agreement, the OWNER shall execute a General power of Attorney in favour of the
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DEVELOPER of their nominees, empowering the DEVELOPER or their nominee/s to approach the Bangalore Development Authority, City Municipal Council, BESCOM, Bangalore Water supply and Sewerage Board or such other agency or Competent Authorities and get the required permissions and sanctions, and for appointing the Contractors Civil Engineers, Architects, Consultants or for performing or executing the performance of all acts as desired by the DEVELOPER, for the effective development and completion of the project:
14.3. The OWNER shall also at the time of execution of this joint Development Agreement, execute a power of Attorney in favour of the DEVELOPER or their nominee/s. empowering them to execute conveyances, transfer or deed of lease, license tenancies or otherwise dispose off upto an extent of 40% (Forty percent) undivided interest in favour of the Developers or is nominee/s with or without the corresponding constructed area in the saleable super built up area portion thereof. The said power however shall come into effect only on completion of the construction of the Owners’ constructed area that is on Developers obtaining a Architect Certificate that building is completed in all respects fit for human habitation subject however to obtain/issue of clearance, connections and occupation certificate; (Emphasis Supplied)
Clause 21: PAYMENT OF PROPERTY TAXES:
The OWNER shall pay all the taxes, levies and cess in respect of the SCHEDULE PROPERTY upto the date of the completion of the developed area and upto the date when the proportionate undivided interest in land in the SCHEDULE PROPERTY is handed
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over to the DEVELOPER. In the event of failure of the OWNER to pay the same the DEVELOPER. In the event of failure of the OWNER to pay the same the DEVELOPER shall pay and recover the same from the OWNER and all expenses for preparing and obtaining necessary licenses and sanctioned plan shall be that of the DEVELOPER; ”
Under Clause 6.2 of the agreement, it is made clear that delivery of possession shall not be construed as part performance of the agreement of sale under Section 53A of the T.P Act.
Clause 14.3 makes it clear that power to alienate would come into effect after the building is complete in all respects for human habitation and subject to issuance of clearance and occupation certificate.
Clause No.21 also makes it clear that owners of the property are liable to pay all taxes, levies and cess in respect of schedule property till the date of development.
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A combined reading of Clauses 6.2, 14.1 to 14.3 and 21 makes it clear that the delivery of possession to the developer is only for the performance of development/construction. Therefore, the view taken by the A.O and the ITAT that transfer was effected in the A.Y.2009-10 and making the assessees liable for payment of capital gains tax is perverse and untenable.
In view of the above, these appeals merit consideration and hence following: ORDER i) Appeals are allowed; ii) Orders dated 13.12.2017 in ITA No.1355/Bang/2015 (Cross Objn.No.95/Bang/2017), ITA No.1353/BANG/2015 (Cross Objn.No.93/BANG/2017), ITA No. 1354/BANG/2015 (Cross Objn.No.94/BANG/2017) and ITA No. 1356/BANG/2015 (Cross Objn.No.96/BANG/2017),
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passed by the ITAT, ‘A’ Bench, Bangalore, are set aside; iii) Orders dated 24.08.2015 in ITAs No.279/BR/CIT(A) 1/2014-15, 280/BR/CIT(A) 1/2014-15, 281/BR/CIT(A) 1/2014-15 & 282/BR/CIT(A) 1/2014- 15, passed by the CIT (A) are restored; and iv) The questions of law are answered in favour of the assessees and against the Revenue.
No costs.
Sd/- JUDGE
Sd/- JUDGE
YN List No.: 1 Sl No.: 54