RAMEYSH RAMDAS,CHENNAI vs. ITO, CHENNAI

आदेश / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER

This is an appeal filed by the assessee against the order of

the Commissioner of Income-tax (Appeals)-16, Chennai in appeal

No.73/CIT(A)-16/A.Y 2012-13 dated 24.03.2017 for the assessment

year 2012-13.

Mr.N.P.Vijayakumar represented on behalf of the Assessee, 2.

and Mr.AR.V.Sreenivasan represented on behalf of the Revenue.

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who along with his mother owned a residential house at plot No.140,

Door No.59, MGR Road, Kalaskshetra Colony, Besant Nagar, Chennai.

It was a submission that the assessee and his mother entered into

Joint Development Agreement with M/s.Chaitanya Eastlyn on

13.07.2011 with a proposal to demolish the existing building and

construct residential Apartments in the said land. Consequent to the

agreement, the assessee had received part consideration of `40 lakhs

on 13.07.2011. It was a submission that as per the agreement,

assessee was to receive 50% of the super-built area along with

monetary compensation. It was a submission that assessee had

entered into Supplementary agreement dated 18.07.2012 and as per

the said Supplementary agreement, the assessee was to receive two

flats each measuring 1450 sq.ft along with `1,13,38,767/-. It was a

submission that assessee had filed his return of income for assessment

year 2013-14 disclosing the long term capital gains on the transfer of

the property. The ld. Assessing Officer was of the view that the capital

gains was liable to assessed during the assessment year 2012-13. It

was submitted by the ld.A.R that the only dispute in the appeal was

the year in which the capital gains was liable to be assessed. It was

further submitted by the ld.A.R that assessee had disclosed the long

term capital gains during the assessment year 2013-14 and paid taxes

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thereon. In the return of income for assessment year 2013-14, the

assessee had made a claim u/s.54EC of the Act and benefit of

deduction u/s.54 in respect of residential flats allotted to the assessee.

It was a submission that without considering the return of income for

assessment year 2013-14, the ld. Assessing Officer had assessed the

capital gains for assessment year 2012-13 on the ground that the

possession in the scheduled property had been handed over to the

joint developer and consequently provisions of the section 53A of the

Transfer of Property Act came into play. The ld.A.R placed before us

the list of dates and events as follows:-

Sl.No. Date Event 1 14.07.2011 Appellant through his mother as Power of Attorney and Mrs. Hamsa Ramadass entered into Development Agreement with M/s. Chaitanya Eastlyn, a developer for developing the property. 1. The Development agreement provides for 50% of land and building to the Owners and 50% building and 331/3% of land share in land as remuneration to the builder for construction of building. 2. The Builder to build a super structure after demolishing the existing building in accordance with the specifications agreed. For that purpose the owners should give a license to the Builder to enter into the property. (Clause 10 of agreement). 3. The apartments need to be identified by parties before submitting plan for approval to Corporation of Chennai. (Clause 11) 4. After all process of plan is done, General Power of Attorney to be executed by Owners to obtain approvals. (Clause 12) 5. Payment schedule is provided in Clause 20 of the Development Agreement. 6. There is no irrevocable right in respect of land given to developer under the agreement. There is clause for termination in event Developer fails to complete the Works Contract given to the Developer within 18 months of completion of contract.(Clause-20(b))

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2 08.11.2011 1. Power of Attorney was executed on 08.11.2011. The Power of attorney does not authorize the Builder to sell or develop the land or the building. The Power of attorney clearly states that the right to enter the property would be given only in pursuance of the Power of Attorney and not in pursuance of any Agreement of Sale. It can only mean that if the Developer enters the property it can only as n agent of the owners and not as any transferee. The power of attorney is only for obtaining permission for the specified object. The relevant clause in the power of attorney is as follows: i. To enter upon the said properly with men and material as may be required for the purpose of development work and for that purpose to demolish the existing building and structure standing thereon and erect new buildings, structures etc. as per the plan to be sanctioned and to remove the debris and other materials of the demolished structures and dispose of the same in the manner the Attorney may think fit. ii. To obtain permission or approval from other authorities as may be required for the development and construction of the said new building in accordance with the said agreement and for that purpose to sign such applications, papers, writings, undertakings, appeals etc. as may be required in relation to the said property, development and constructions.

3 01.12.2011 Corporation of Chennai granted permission for demolition. 4 07.02.2012 Corporation of Chennai granted Planning Permission 5 18.07.2012 Supplemental agreement was entered between the parties. The consideration portion contained in original agreement was revised as Builder was now authorized to sell 50% of the undivided share of land instead of 33 1/3% share of land as stated in Development agreement. The consideration for the difference between 50% of undivided share of land and 33 1/3 % share of land was determined at Rs. 10,500/- per square feet and this revised consideration was agreed between the parties. 6 17.08.2012 2nd Power of attorney was granted by Owners to Developer. It is only in this Power of attorney power was granted to the Developer to sell the flats.

The income received from Developer was assessed to tax in Financial year 2012-13. (Assessment year 2013-14) 7 25.01.2013 Assessee made investment of Rs. 40,00,000/- in Rural Electrification Bonds 8 15.07.2013 Assessee filed Income Tax Returns for A.Y 2013-14 and declared the income received by way of capital gains and paid tax of Rs. 81,880/- after considering deduction under Section 54EC and Section 54 of the Act. 9 10.06.2015 Notice issued under Section 156 of the Act calling upon Assessee to produce further information which was provided

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by Assessee 10 26.02.2016 Further notice was issued by Assessing Officer calling for further particulars. 11 15.03.2016 Letter was sent by Auditor of assessee mentioning that capital gains crystallized in the previous year 2012-13. Further documents were produced by letter dated 23.03.2016. 12 23.03.2016 Notice was isused u/s.148 for previous year 2011-12 and A.Y 2012-13. 13 30.03.2016 Return of income filed for assessment year 2012-13. 14 30.12.2016 Order passed by Income Tax officer and demand for Rs.25,25,601/- as capital gains was made by the Income Tax officer. It was shocking to note that the Income Tax officer had summoned and recorded a statement from the personnel of M/s.Chaitanya Eastlyn that possession was taken by them on 01.09.2011. This was done without any intimation to the assessee behind his back and in violation of all principles of natural justice. The letter submitted by assessee from Developer was not relied in the said order. 15 24.03.2017 CIT(A) passed order confirming the order of Income Tax officer.

It was a submission that the assessee had granted a power of attorney

on 08.11.2011 to the Developer for entering into the premises and

obtaining necessary permission for the specified object such as

demolition of construction and approval from other authorities. It was

a submission that as per clause-8 of the said power of attorney, which

was shown at page-21 of the paper book, it was specifically recorded that

the attorney is not entitled to sell or execute any deed for conveying any

portion of the property described in the schedule, or give possession thereof

in any manner under the said power of attorney. It was a submission that in

the second power of attorney dated 17.08.2012, available at page 27 of the

paper book, it was specifically recorded that the attorney was permitted to

present documents for registration and transfer portion of the scheduled

property. The ld.A.R further drew our attention to the Sale Deeds in respect

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of two flats, which had been sold on 23.01.2013 and 02.04.2014 wherein in

the Sale deed, the sale has been executed by the power of attorney and the

power of attorney referred to, is the one dated 17.08.2012. It was a

submission that there is no transfer of property during the assessment year

2012-13 and the transfer having taken place only during the assessment

year 2013-13, the capital gains was liable to be assessed only during the

assessment year 2013-14. It was a submission that the Ld.CIT(A) had

without considering the said facts upheld the assessment of the capital

gains for assessment year 2012-13 by holding that provisions of the section

53EC r.w.s.2(47)(v) of the Income Tax Act, 1961 applied for assessment

year 2012-13.

Officer and the Ld.CIT(A). The ld.D.R drew our attention to page-2 of the

assessment order to submit that as per the Joint Development agreement

dated 13.07.2011, Joint Development Agreement showed the possession

of the property having been handed over to the builder and the assessee

having received consideration.

We have considered the rival submissions. Perusal of the Joint 5.

Development Agreement dated 13.07.2011 shows that possession of

the scheduled property has not been handed over by the assessee to

the builder. As per the Joint Development Agreement, the builder has

been granted only a right to enter into the premises for the purpose of

demolition of the existing building and re-construction. This is very

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clear as per Clause-10 of the Joint Development Agreement. A perusal

of the power of attorney dated 08.11.2011 granted by the assessee to the

developer clearly shows that as per Clause-8, it is specifically barred from

selling or executing any deed for any portion of the property described in the

scheduled property. Thus, it is very clear that neither Joint Development

Agreement, nor the power of attorney granted on 08.11.2011, complied

with the conditions specified in Section 53A of the Transfer of Property Act.

In fact, perusal of the Supplementary agreement entered into on

18.07.2012 shows that the consideration has been clearly determined in

Clauses 1 & 2 and in Clause-3, the owners agreed to execute the power of

attorney in favour of the developer and registered it, authorizing 50% of

undivided land in the scheduled property. Consequent to the said

Supplementary agreement dated 18.07.2012, power of attorney dated

17.08.2012 has been granted to M/s.Chaitanya Eastlyn giving them the

authority to convey, sell, transfer the property described in the scheduled

therein to such prospective purchasers and to issue valid receipt thereon.

This clearly shows that the transfer took place only in August, 2012 by

execution of the power of attorney dated 17.08.2012 in respect of

consideration determined in the Supplementary agreement dated

18.07.2012. Consequently, the facts clearly show that the transfer has

been taken place only during the assessment year 2013-14. Thus, the

capital gain, if any, is leviable only during the assessment year 2013-14

and not during the assessment year 2012-13 as has been determined by the

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ld. Assessing Officer. Accordingly, the levy of capital gains on the above facts for assessment year 2012-13 is unsustainable and consequently deleted.

Order pronounced in the open court after conclusion of hearing on 07th August, 2018, at Chennai.

Sd/- Sd/- (एस जयरामन) ( जॉज� माथन) (S. JAYARAMAN) (GEORGE MATHAN) लेखा सद�य/Accountant Member �या�यक सद�य/JUDICIAL MEMBER चे�नई/Chennai �दनांक/Dated: 07th August, 2018. K S Sundaram आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 3. आयकर आयु�त (अपील)/CIT(A) 5. �वभागीय ��त�न�ध/DR 2. ��यथ�/Respondent 4. आयकर आयु�त/CIT 6. गाड� फाईल/GF