SHEHAB S BOHRA,MUMBAI vs. ITO 20(3)(3), MUMBAI

आदेश / O R D E R Per Manoj Kumar Aggarwal (Accountant Member) 1. These are cross appeals by assessee as well as revenue for Assessment Year [AY] 2010-11 which contest the order of Ld. Commissioner of Income Tax (Appeals)-32 [CIT(A)], Mumbai Appeal No. CIT(A)-32/IT-117/20(3)(3)/2013-14 dated 23/03/2015. The assessment for impugned AY was framed u/s 143(3) on 13/03/2013 by Ld. Income Tax Officer 17(1)(3) [AO], Mumbai. First we take up assessee’s appeal ITA No. 3171/M/2015 where the assessee has raised six grounds of appeal. Since Ground No. 1 contest the very taxability of the impugned transaction and goes to the root of the matter and therefore, we take up the same first. The said ground reads as follows:- 1. The Learned Commissioner of Income Tax (Appeals) erred in confirming that capital gain on alleged transfer of two immovable property owned by the appellant at Dadar (E), Mumbai is assessable in the impugned assessment year. 2.1 Facts as emanating from the record are that the assessee being resident individual deriving Business Income, House Property Income and Capital Gain was assessed u/s 143(3) for impugned AY on

ITA Nos. 3171/M/2015 & 3692/M/2015 Shehab S.Bohra Assessment Year-2010-11 13/03/2013 at Rs.2,49,06,890/- as against returned income of Rs.1,450/- filed by the assessee on 23/11/2010. 2.2 Pursuant to receipt of Annual Information Return [AIR] information, it was noted that the assessee had sold 2 properties situated at Dadar (East) to Kapil Group [developer] on 16/01/2010. The sale consideration of the same was Rs. 65 Lacs and Rs. 100 Lacs as against market value of Rs.102.05 Lacs & Rs.146.91 Lacs. 2.3 The assessee explained that it inherited the two adjoining plots with structures upon demise of his father. One plot with structure was situated at city survey no. 47/26 bearing plot no. 48C ad-measuring about 382 square Yards [First Property] with various tenants and second plot bearing city survey no. 48/26 bearing plot no. 48B ad-measuring about 485 square Yards [Second Property] with tenant known as Dadar Motor Works. The development rights of the first and second property were agreed to be sold for a consideration of Rs.65 Lacs and Rs.100 Lacs respectively vide separate registered agreement dated 16/01/2010. 2.4 The assessee drew attention to the fact that the development rights of the first property were sold to the developer for Rs.65 Lacs against small token amount of Rs 2.50 Lacs and the balance amount was payable in various installments only after obtaining 100% consent of the tenants for redevelopment of the property. Similarly, the development right of the second property were sold for Rs.1 crores against small token payment of Rs.3.50 Lacs whereas the balance payment was payable in various installments only after obtaining 100% consent of the tenants of the said property and after getting sanction of the building plans and commencement certificate from the government. Therefore,

ITA Nos. 3171/M/2015 & 3692/M/2015 Shehab S.Bohra Assessment Year-2010-11 the development rights were given on various conditions which had to be fulfilled before receipt of full consideration. However, these conditions, as per assessee’s contentions, remain unfulfilled since the consent of the respective tenants could not be received and consequently permission of government authority for redevelopment of the properties was not taken. Further, the assessee never gave the possession or title of the said properties and received mere advance against the same and therefore, the transactions were not assessable to ‘Capital Gains’ in the impugned AY. However, not convinced, Ld. AO concluded that capital gains arose to assessee in the impugned AY and since the market value of the property on the date of agreement was more, the provisions of Section 50C were attracted. The assessee, while objecting to the market valuation adopted by the Ld. AO, submitted valuation as on 01/04/1981 and reiterated the stand that the consent of the tenants could not be obtained and the developer had filed eviction suits against tenant before appropriate court and the same were pending. Nevertheless, the assessee, at present, as owner of the building was receiving rent and paying property tax to the government and had not handed over the physical possession of the property and therefore, the transactions were not assessable to capital gains tax. The assessee further contended that the provisions of Section 50C applied only to transfer of any building or land and could not be applied to development rights being granted by the assessee. However, Ld. AO opined that the assessee through registered agreement, granted absolute, complete and unfettered development rights to the developer to develop the said properties for consideration and further noted that the respective agreements were

ITA Nos. 3171/M/2015 & 3692/M/2015 Shehab S.Bohra Assessment Year-2010-11 irrevocable and hence, there was transfer of capital assets chargeable to tax in terms of Section 2(47) and judgment of Hon’ble Bombay High Court rendered in Dwarkadas Kapadia [129 Taxman 497]. The Ld. AO also opined that the provisions of Section 50C were applicable to such transaction. Finally, the Ld. AO computed capital gains of Rs.2,48,96,500/- after applying the provisions of Section 50C and added the same to the income of the assessee. 3.1 Aggrieved, the assessee contested the same with partial success before Ld. CIT(A) vide impugned order dated 23/03/2015 where the assessee reiterated the said contentions and drew attention to the fact that twin conditions of execution of written agreement and handing over the possession had to be cumulatively satisfied so as to bring the case within the ambit of Section 2(47) of the Income Tax Act read with Section 53A of the Transfer of Property Act. Since the possession was not handed over and the properties were under complete control of the assessee and the assessee received mere advance payments, no transfer took place and hence, no capital gains arose to the assessee. The assessee drew attention to various clauses of the agreement to substantiate his stand. Without prejudice, the assessee also contested the valuation adopted by Ld. AO in adopting fair market value of the property in terms of Section 50C. 3.2 The Ld. CIT(A) after considering assessee’s submission, terms of the agreement and cited order of Hon’ble Bombay High Court, reached a conclusion that the assessee passed on complete control over the said property to the developer by way of an irrevocable registered agreement and the payment of balance consideration or possession was not

ITA Nos. 3171/M/2015 & 3692/M/2015 Shehab S.Bohra Assessment Year-2010-11 material to determine the taxability of the said transactions and therefore, the transactions were rightly brought to tax by Ld. AO. 3.3 The Ld.CIT(A) further concluded that the provisions of Section 50C were applicable to these transactions and since the assessee objected to the fair market value adopted by Ld. AO, the provisions of Section 50C(2) were applicable. Hence Ld. CIT(A), in terms of provisions of Section 50C(2), directed the Ld. AO to refer the matter of valuation to District Valuation Officer [DVO] as per the objections raised by assessee during assessment proceedings. Aggrieved, the assessee as well as revenue is in further appeal before us. The revenue, by way of solitary effective ground of appeal, is aggrieved by the action of Ld. CIT(A) in directing the Ld. AO to refer the matter of valuation of cost of acquisition as well as fair market value of development rights to District Valuation Officer [DVO] whereas the assessee is aggrieved, inter-alia, by action of Ld. CIT(A) in concluding that the said transactions were taxable in the impugned AY. The assessee, in other grounds, has contested the applicability of Section 50C to the impugned transaction and also the valuation adopted by the lower authorities. 4.1 The Ld. Counsel for assessee [AR] primarily reiterated the said contentions before us and drew our attention to various clauses of the development agreement to contend that transfer did not take place in terms of Section 2(47) and the assessee merely received advance payment against the transfer of development rights. It was further contended that the possession was never parted by the assessee since consent of the respective tenants could never be obtained and suits in this regard were already pending before appropriate court by the

ITA Nos. 3171/M/2015 & 3692/M/2015 Shehab S.Bohra Assessment Year-2010-11 developer. Further, the assessee was continuously receiving rent from the tenants and reflecting the same in his tax returns and therefore the transactions could not be assessed to tax in the impugned AY since transfer was not complete. 4.2 Per contra, Ld. DR drew our attention to the fact that the contract was irrevocable and the same could not be backed put by the respective parties and the assessee, by way of said agreement, handed over the complete control over the property to the developer and hence the transactions was rightly brought to tax by Ld. AO. 5. We have heard the rival contentions and perused relevant material on record. A perusal of development agreement dated 16/01/2010 with respect to property bearing Plot No. 48B ad-measuring 485 square Yards as placed on record reveals that the assessee has entered into development agreement with the builder namely Kapil Group. As per Clause-3, the owner has granted absolute, complete and unfettered development rights to develop the property for certain consideration. Pursuant to Clauses 4 to 7, the developer has been given wide powers to deal with the property in certain manner. As per Clause 9, the consideration for the same has been fixed as Rs.1 crores out of which an aggregate amount of Rs.3,50,001/- was payable on or before the execution of the agreement. The balance amounts were payable in installments of Rs. 8 Lacs, 30 Lacs & Rs.58,49,999/- after receiving consent of the tenants. Pursuant to clause 10, all the benefits in the said property in future belonged to the developer whereas clauses 11 & 12 deals with consent of the tenants. Vide Clause 13, the owner upon receipt of installment of Rs 8 Lacs, grants to the developer irrevocable

ITA Nos. 3171/M/2015 & 3692/M/2015 Shehab S.Bohra Assessment Year-2010-11 license to enter into the said property and remain in possession of the said property until the development of the said property. For ready reference, the relevant clauses are reproduced below:- 3. The owner grants to Developers and the Developers avail and acquire from the Owner the absolute, complete and unfettered development rights to develop the said property for the consideration and on the terms set out herein. xxxxxxxxxxxxxxxxx 9. In consideration of availing and acquiring absolute, complete and unfettered development rights to develop the said property the Developers shall pay to the owners the sum of Rs.1,00,00,000/-(Rupees one Crores only). The consideration shall be paid by the Developers to the Owners in the following manner:- (a) Rs.50,001/- (Rupees Fifty thousand One only) paid prior to the execution hereof the receipt where of the Owner hereby admits & acknowledges and acquits and releases the Developers from the same and from every part thereof] (b) Rs.3,00,000/-(Rupees Three lacs only) paid on or before the execution of this agreement. (c) Rs.8,00,000/-(Rupees Eight lacs only) shall be payable after obtaining the 100% consent of the tenants for the redevelopment of the said property. (d) Rs.30,00,000/-(Rupees Thirty lacs only) shall be payable within two months from the date of obtaining the consent thereof. (e) Rs.58,49,999/- (Rupees Fifty-Eight Lacs Forty Nine Thousand Ninety Nine only) Being the balance amount shall be payable after sanction of the plans and obtaining the Commencement Certificate or within six months from the date of obtaining the consent of the tenants. 10. All the benefits as are available in respect of the said property or which may be available in future shall belong to the Developers alone and the Owners shall not have any claim or demand in respect thereof. 11. Without prejudice to the responsibility of the Owners to obtain consent/no objection of the Tenants/occupiers to the redevelopment of the said property by the Developers, the Owners agree and confirm that the Developers are entitled to enter into negotiations with Tenants/occupiers with a view to avail vacant possession of such tenements on such terms costs as the Developers may deem fit. 12. The owner covenant and undertake that the owners shall: (i) At the cost of the developers obtain consents of tenants / occupants to redevelopment of the said property by the developer. (ii) Endeavour to effect demolition of the said building on such terms as may be agreed with the tenants / occupants and are acceptable to the developers.

ITA Nos. 3171/M/2015 & 3692/M/2015 Shehab S.Bohra Assessment Year-2010-11 (iii) bear and pay fees of Architect, RCC consultant and all other professionals engaged in various activities / affairs pertaining to the said property till te date hereof as their cost. (iv) bear and pay the municipal taxes, rates and outgoing in respect of the said property till the date hereof as their cost. Thereafter the same shall be borne and paid by the developers. 13. The Owner shall on receipt of the consideration mentioned in clause 9(c) above grants to the Developers irrevocable license to enter into the said property and remain in possession of the said property until the development of the said property is complete in all respects and until the Developers shall have sold and transferred units/shops/premises/parking spaces/any other rights in the new building/s to be constructed on the said property and shall have realized all the amounts receivable in respect thereof and until the new building/s together with the said property is transferred to the organization of purchaser/s of unit/s and shop/s.

The terms of development agreement of the other property is quite identical to above except for minor variations. 6. Proceeding further, we find that, in terms of charging Section 45, any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to Income Tax under the head Capital Gains and shall be deemed to be the income of the previous year in which the transfer took place. The assessee, by way of development agreements, granted development rights under the said properties to the developer. Undisputedly, these rights constituted capital assets in the hands of the assessee. The only question to be decided by us is whether the transfer has been effected in terms of Section 2(47) or not. For the sake of convenience, the meaning of ‘transfer’ as enumerated in Section 2(47) is reproduced below:-

Section 2(47):- As per Section. 2(47) of Income Tax Act, 1961, unless the context otherwise requires, the term “transfer”, in relation to a capital asset, includes- (i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein; or (iii) the compulsory acquisition thereof under any law; or

ITA Nos. 3171/M/2015 & 3692/M/2015 Shehab S.Bohra Assessment Year-2010-11 (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment; or (iva) the maturity or redemption of a zero coupon bond; or (v) any transaction involving the allowing of the 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; or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. (emphasis being supplied by us) Upon perusal of the same, we find that case of the assessee, at the most, could fall under sub-clause-(v) i.e. any transaction involving the allowing of the 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. 7. The prime contention of the Ld. AR is that the assessee has received mere advance against the development agreement whereas no possession has been handed over by him since consent of the respective owners could not be obtained till date and suits in this regard and pending before appropriate courts whereas the revenue’s stand is that the transaction is complete since the assessee has already parted with the effective control over the property and receipt of balance consideration or possession was not at all relevant factor to determine the taxability of the transaction. However, we have already observed that the assessee’s case fall under sub-clause-V to Section 2(47) and according to the same the parting with possession of the capital assets is the prime requirement so as to constitute transfer.

ITA Nos. 3171/M/2015 & 3692/M/2015 Shehab S.Bohra Assessment Year-2010-11 8. At this juncture, we find that the Apex Court, in recent judgment titled as CIT Vs. Balbir Singh Maini [2017 86 Taxmann.com 94 dated 04/10/2017] had occasion to deal with the identical situation. We find the same to very relevant and applicable to the facts of the issue in hand. Hence, we extract the operative portion of the said judgment as follows:- 16. A reading of the JDA shows that, it is essentially an agreement to facilitate development of 21.2 acres so that the developers build at their own cost, after obtaining necessary approvals, flats of a given size, some of which were then to be handed over to the members of the society. Payments were also to be made by the developer to each member in addition to giving each member a certain number of flats depending upon the size of the member’s plot that was handed over. What is important to bear in mind is that payments under the third installment were only to be made after the grant of approvals and not otherwise, and that it is an admitted position that this was never done because no approvals could be obtained as the High Court ultimately interdicted the project. Also, the termination clause is of great significance because it shows that in the event of the JDA being terminated, whatever parcels of land have already been conveyed, will stand conveyed, but that no other conveyances of the remaining land would take place. 17. The relevant sections that are necessary for us to decide the present matter are as under: Transfer of Property Act “53A. Part performance. - Where any person contracts to transfer for consideration any immoveable 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 where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefore by the law for the time being in force, the transferor 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

ITA Nos. 3171/M/2015 & 3692/M/2015 Shehab S.Bohra Assessment Year-2010-11 property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract:

Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof.]

Income Tax Act Section 2 - Definitions In this Act, unless the context otherwise requires, – (47) "transfer", in relation to a capital asset, includes, - (i) to (iv) xxx xxx xxx (v) any transaction involving the allowing of the 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) ; or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property.

ITA Nos. 3171/M/2015 & 3692/M/2015 Shehab S.Bohra Assessment Year-2010-11 “16. But there are certain conditions which are required to be fulfilled if a transferee wants to defend or protect his possession under Section 53- A of the Act. The necessary conditions are: (1) there must be a contract to transfer for consideration of any immovable property; (2) the contract must be in writing, signed by the transferor, or by someone on his behalf; (3) the writing must be in such words from which the terms necessary to construe the transfer can be ascertained; (4) the transferee must in part-performance of the contract take possession of the property, or of any part thereof; (5) the transferee must have done some act in furtherance of the contract; and (6) the transferee must have performed or be willing to perform his part of the contract.” 19. It is also well-settled by this Court that the protection provided under Section 53A is only a shield, and can only be resorted to as a right of defence. See Rambhau Namdeo Gajre v. Narayan Bapuji Dhgotra (Dead) through LRs. (2004) 8 SCC 614 at 619, para 10. An agreement of sale which fulfilled the ingredients of Section 53A was not required to be executed through a registered instrument. This position was changed by the Registration and Other Related Laws (Amendment) Act, 2001. Amendments were made simultaneously in Section 53A of the Transfer of Property Act and Sections 17 and 49 of the Indian Registration Act. By the aforesaid amendment, the words “the contract, though required to be registered, has not been registered, or” in Section 53A of the 1882 Act have been omitted. Simultaneously, Sections 17 and 49 of the 1908 Act have been amended, clarifying that unless the document containing the contract to transfer for consideration any immovable property (for the purpose of Section 53A of 1882 Act) is registered, it shall not have any effect in law, other than being received as evidence of a contract in a suit for specific performance or as evidence of any collateral transaction not required to be effected by a registered instrument. Section 17(1A) and Section 49 of the Registration Act, 1908 Act, as amended, read thus: “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 the 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.”

ITA Nos. 3171/M/2015 & 3692/M/2015 Shehab S.Bohra Assessment Year-2010-11 “49. Effect of non-registration of documents required to be registered. No document required by Section 17 or by any provision of the Transfer of Property Act, 1882 (4 of 1882), to be registered shall- (a) affect any immovable property comprised therein, or (b) confer any power to adopt, or (c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered:

Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1887 (1 of 1877) or as evidence of any collateral transaction not required to be effected by registered instrument.” 20. The effect of the aforesaid amendment is that, on and after the commencement of the Amendment Act of 2001, if an agreement, like the JDA in the present case, is not registered, then it shall have no effect in law for the purposes of Section 53A. In short, there is no agreement in the eyes of law which can be enforced under Section 53A of the Transfer of Property Act. This being the case, we are of the view that the High Court was right in stating that in order to qualify as a “transfer” of a capital asset under Section 2(47)(v) of the Act, there must be a “contract” which can be enforced in law under Section 53A of the Transfer of Property Act. A reading of Section 17(1A) and Section 49 of the Registration Act shows that in the eyes of law, there is no contract which can be taken cognizance of, for the purpose specified in Section 53A. The ITAT was not correct in referring to the expression “of the nature referred to in Section 53A” in Section 2(47)(v) in order to arrive at the opposite conclusion. This expression was used by the legislature ever since sub-section (v) was inserted by the Finance Act of 1987 w.e.f. 01.04.1988. All that is meant by this expression is to refer to the ingredients of applicability of Section 53A to the contracts mentioned therein. It is only where the contract contains all the six features mentioned in Shrimant Shamrao Suryavanshi (supra), that the Section applies, and this is what is meant by the expression “of the nature referred to in Section 53A”. This expression cannot be stretched to refer to an amendment that was made years later in 2001, so as to then say that though registration of a contract is required by the Amendment Act of 2001, yet the aforesaid expression “of the nature referred to in Section 53A” would somehow refer only to the nature of contract mentioned in Section 53A, which would then in turn not require registration. As has been stated above, there is no contract in the eye of law in force under Section 53A after 2001 unless the said contract is registered. This being the case, and it being clear that the said JDA was never registered, since the JDA has no efficacy in the eye of law, obviously no “transfer” can be said to have taken place under the aforesaid document.

ITA Nos. 3171/M/2015 & 3692/M/2015 Shehab S.Bohra Assessment Year-2010-11 Since we are deciding this case on this legal ground, it is unnecessary for us to go into the other questions decided by the High Court, namely, whether under the JDA possession was or was not taken; whether only a licence was granted to develop the property; and whether the developers were or were not ready and willing to carry out their part of the bargain. Since we are of the view that sub-clause (v) of Section 2(47) of the Act is not attracted on the facts of this case, we need not go into any other factual question. 21. However, the High Court has held that Section 2(47)(vi) will not apply for the reason that there was no change in membership of the society, as contemplated. We are afraid that we cannot agree with the High Court on this score. Under Section 2(47)(vi), any transaction which has the effect of transferring or enabling the enjoyment of any immovable property would come within its purview. The High Court has not adverted to the expression “or in any other manner whatsoever” in sub-clause (vi), which would show that it is not necessary that the transaction refers to the membership of a cooperative society. We have, therefore, to see whether the impugned transaction can fall within this provision. 22. The object of Section 2(47)(vi) appears to be to bring within the tax net a de facto transfer of any immovable property. The expression “enabling the enjoyment of” takes color from the earlier expression “transferring”, so that it is clear that any transaction which enables the enjoyment of immovable property must be enjoyment as a purported owner thereof.1 The idea is to bring within the tax net, transactions, where, though title may not be transferred in law, there is, in substance, a transfer of title in fact. 23. A reading of the JDA in the present case would show that the owner continues to be the owner throughout the agreement, and has at no stage purported to transfer rights akin to ownership to the developer. At the highest, possession alone is given under the agreement, and that too for a specific purpose -the purpose being to develop the property, as envisaged by all the parties. We are, therefore, of the view that this clause will also not rope in the present transaction. 24. The matter can also be viewed from a slightly different angle. Shri Vohra is right when he has referred to Sections 45 and 48 of the Income Tax Act and has then argued that some real income must “arise” on the assumption that there is transfer of a capital asset. This income must have been received or have “accrued” under Section 48 as a result of the transfer of the capital asset. 25. This Court in E.D. Sassoon & Co. Ltd. v. CIT, (1955) 1 SCR 313 at 343 held: “It is clear therefore that income may accrue to an assessee without the actual receipt of the same. If the assessee acquires a right to receive the income, the income can be said to have accrued to him though it may be received later on its being ascertained. The basic conception is that he must have acquired a right to receive the income. There must

ITA Nos. 3171/M/2015 & 3692/M/2015 Shehab S.Bohra Assessment Year-2010-11 be a debt owed to him by somebody. There must be as is otherwise expressed debitum in presenti, solvendum in futuro; See W.S. Try Ltd. v. Johnson (Inspector of Taxes) [(1946) 1 AER 532 at p. 539], and Webb v. Stenton, Garnishees [11 QBD 518 at p. 522 and 527]. Unless and until there is created in favour of the assessee a debt due by somebody it cannot be said that he has acquired a right to receive the income or that income has accrued to him.” 26. This Court, in Commissioner of Income Tax v. Excel Industries, (2014) 13 SCC 459 at 463-464 referred to various judgments on the expression “accrues”, and then held: “14. First of all, it is now well settled that income tax cannot be levied on hypothetical income. In CIT v. Shoorji Vallabhdas and Co. [CIT v. Shoorji Vallabhdas and Co., (1962) 46 ITR 144 (SC)] it was held as follows: (ITR p. 148) “… Income tax is a levy on income. No doubt, the Income Tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in bookkeeping, an entry is made about a ‘hypothetical income’, which does not materialise. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account.” 15. The above passage was cited with approval in Morvi Industries Ltd. v. CIT [Morvi Industries Ltd. v. CIT, (1972) 4 SCC 451 : 1974 SCC (Tax) 140 : (1971) 82 ITR 835] in which this Court also considered the dictionary meaning of the word “accrue” and held that income can be said to accrue when it becomes due. It was then observed that: (SCC p. 454, para 11) “11. … the date of payment … does not affect the accrual of income. The moment the income accrues, the assessee gets vested with the right to claim that amount even though it may not be immediately.” 16. This Court further held, and in our opinion more importantly, that income accrues when there “arises a corresponding liability of the other party from whom the income becomes due to pay that amount”. 17. It follow s from these decisions that income accrues when it becomes due but it must also be accompanied by a corresponding liability of the other party to pay the amount. Only then can it be said

ITA Nos. 3171/M/2015 & 3692/M/2015 Shehab S.Bohra Assessment Year-2010-11 that for the purposes of taxability that the income is not hypothetical and it has really accrued to the assessee. 18. Insofar as the present case is concerned, even if it is assumed that the assessee was entitled to the benefits under the advance licences as well as under the duty entitlement passbook, there was no corresponding liability on the Customs Authorities to pass on the benefit of duty-free imports to the assessee until the goods are actually imported and made available for clearance. The benefits represent, at best, a hypothetical income which may or may not materialise and its money value is, therefore, not the income of the assessee.” 27. In the facts of the present case, it is clear that the income from capital gain on a transaction which never materialized is, at best, a hypothetical income. It is admitted that, for want of permissions, the entire transaction of development envisaged in the JDA fell through. In point of fact, income did not result at all for the aforesaid reason. This being the case, it is clear that there is no profit or gain which arises from the transfer of a capital asset, which could be brought to tax under Section 45 read with Section 48 of the Income Tax Act. 28. In the present case, the assessee did not acquire any right to receive income, inasmuch as such alleged right was dependent upon the necessary permissions being obtained. This being the case, in the circumstances, there was no debt owed to the assessees by the developers and therefore, the assessees have not acquired any right to receive income under the JDA. This being so, no profits or gains “arose” from the transfer of a capital asset so as to attract Sections 45 and 48 of the Income Tax Act. 29. We are, therefore, of the view that the High Court was correct in its conclusion, but for the reasons stated by us hereinabove. The appeals are dismissed with no order as to costs.

ITA Nos. 3171/M/2015 & 3692/M/2015 Shehab S.Bohra Assessment Year-2010-11 (5) the transferee must have done some act in furtherance of the contract; and (6) the transferee must have performed or be willing to perform his part of the contract.”

Hence, transfer of possession is one of the primary condition so as to attract the provisions of Section 53A and consequently being covered u/s 2(47)(v). The assessee has all along contended that the possession of the properties was never handed over to the developer which has been reiterated before us also. The Ld. AR has placed certain additional evidences in the form of Letter from the Developer and copies of suits filed by the developer before appropriate court. We find that the fact that whether the assessee has handed over the possession to the developer or not has nowhere been examined by any of the lower authorities. Hence, on the fact of the case, we remit the matter back to the file of Ld. AO for adjudication de novo as per law and in terms of the cited order of the Hon’ble Supreme Court. If the transaction is found chargeable to tax, the computation thereof shall be computed in terms of Section 48 and other provisions, as applicable. Needless to say, adequate opportunity of being heard shall be granted to the assessee, who in turn, is directed to substantiate his stand in this regard. Resultantly, assessee’s appeal stands partly allowed for statistical purposes. Since, the revenue is aggrieved by the directions of Ld. CIT(A) qua direction to Ld. AO towards valuation of the property and we have already set aside the proceedings for fresh adjudication, the same becomes infructuous.

ITA Nos. 3171/M/2015 & 3692/M/2015 Shehab S.Bohra Assessment Year-2010-11 10. In nutshell, assessee’s appeal stands partly allowed for statistical purposes whereas revenue’s appeal is dismissed in terms of our above order. Order pronounced in the open court on 08th November, 2017.

Sd/- Sd/- (Saktijit Dey) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member मुंबई Mumbai; िदनांक Dated : 08.11. 2017 Sr.PS:- Thirumalesh आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��थ� / The Respondent 2. आयकर आयु�(अपील) / The CIT(A) 3. आयकर आयु� / CIT – concerned 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai 5. गाड� फाईल / Guard File 6. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai