LAXMIDHAR PANDA,BHUBANESWAR vs. ADDL.CIT, RANGE-2, BHUBANESWAR, BHUBANESWAR

per which assessee was entitled to 50% built up area, is ‘transfer’ as per

section 2(47) and is taxable in the year in which agreement giving vacant

and peaceful possession to developer, was entered into by the assessee.

authorities and materials available on record. The undisputed facts giving

9 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 rise to this appeal is that the assessee entered into a Joint Development

Agreement on 9th September, 2008 with Shri Jitendra Hans,. The

assessee received Rs.20 lakhs from the said Shri Jitendra Hands on the

date of signing of the Joint Development Agreement. Article 3 Point No.2

of the said Joint Development Agreement provided that a sum of Rs.20

lakhs paid to the assessee as an advance consideration money from the

developer and if any problem arises with Bhubaneswar Development

Authority approval of plan, the advance amount will be refunded. The

builder obtained the approval of BDA in 26.12.2009. The Assessing

Officer was of the view that in the year in which the development

agreement was signed together with irrevocable power of attorney given

by the assessee in favour of the builder, there was transfer as the

assessee handed over the possession of the land. Hence, he held that

such transfer of possession and other rights of development amounted to

a valid transfer u/s.53A of the Transfer of Property and, therefore, the

assessee is liable to capital gains tax u/s.2(47) r.w.s 45 of the Act and,

accordingly brought to tax the market value of 14 flats less the value of

proportionate value of the land and made addition of Rs.4,05,87,159/- to

the income of the assessee.

Officer.

and pointed out that the said agreement is an unregistered agreement.

10 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 He claimed that the agreement was not registered. The contention of the

ld A.R. of the assessee is that the registration and other related laws

(Amendment) Act 2001) has brought about a radical change in rights

flowing on the basis of agreements executed in part performance of the

contract u/s.53A of 1882 Act. The amendments have been made in

section 53A of the 1882 Act and Sections 17 & 49 of the 1908 Act. The

amendment, vide 2001 Act, which stood enforced w.e.f. September 24,

2001, the words ‘the contract’ though required to be registered has not

been registered.

(supra), has held as under:

“9.. The following issues emerge for consideration and adjudication :

(i) scope and legislative intent of section 2(47)(ii), (v) and (vi) of the Act ;

(ii) the essential ingredients for applicability of section 53A of the 1882 Act ;

(iii) meaning to be assigned to the term "possession" ? (iv) whether, in the facts and in the circumstances, any taxable capital gains arises from the transaction entered by the assessee ? 10. Taking up the first issue, it may be noticed that section 2(14) of the Act defines "capital asset" whereas section 45 of the Act is the charging section in regard to capital gains. Section 48 of the Act provides for mode of computation of capital gains. Before delving into the controversy involved in the present case, it would be advantageous to refer to the relevant portion of section 2(47) of the Act defining "transfer", which reads thus : Section 2(47) of Income-tax Act, 1961—Definition of transfer in this Act, unless the context otherwise requires—

"'transfer', in relation to a capital asset, includes,— . . .

(ii) the extinguishment of any rights therein ; or . . .

(v) any transaction involving the allowing of the possession of any immovable

11 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 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 asso ciation 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.

Explanation 1.—For the purposes of sub-clauses (v) and (vi), 'immovable property' shall have the same meaning as in clause (d) of section 269UA.

Explanation 2.—For the removal of doubts, it is hereby clarified that 'transfer' includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India."

Clause (d) of section 269UA of the Act which defines "immovable property" for the purposes of sub-clauses (v) and (vi) of section 2(47) of the Act is in the following terms :

"269UA. Definitions.—In this Chapter, unless the context other wise requires,— . . .

(d) 'immovable property' means—

(i) any land or any building or part of a building, and includes, where any land or any building or part of a building is to be transferred together with any machinery, plant, furniture, fittings or other things, such machinery, plant, furniture, fittings or other things also.

Explanation.—For the purposes of this sub-clause, land, building, part of a building, machinery, plant, furniture, fittings and other things include any rights therein ;

(ii) any rights in or with respect to any land or any building or a part of a building (whether or not including any machinery, plant, furniture, fittings or other things, therein) which has been constructed or which is to be constructed, accruing or arising from 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 of whatever nature), not being a transaction by way of sale, exchange or lease of such land, building or part of a building ; (e) and (f) . . ."

12 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 transaction entered into in any manner which has the effect of transferring or enabling the enjoyment of any immovable property. Therefore, in these two eventualities, profits on account of capital gains would be taxable in the year in which such transactions are entered into, even if the transfer of the immovable property is not effective or complete under the general law. Under section 2(47)(v) of the Act, any transaction involving allowing of possession referred to in section 53A of the 1882 Act would come within the ambit of "transfer". Even arrangements confirming privileges of ownership without transfer of title could fall under section 2(47)(v) of the Act. Section 2(47)(v) read with section 45 of the Act indicates that capital gains is taxable in the year in which such transactions are entered into even if the transfer of immovable property is not effective or complete under the general law. The purpose of introducing clause (v) in conjunction with clause (vi) in section 2(47) of the Act, defining "transfer" is to widen the net of taxation of capital gains so as to include transactions that closely resembles transfers but are not treated as such under the general law. Avoidance or postponement of tax on capital gains by adopting devices such as the enjoyment of property in pursuance of irrevocable power of attorney or part performance of a contract of sale is also sought to be arrested by introducing the two clauses, clause (v) and clause (vi) in section 2(47) of the Act. According to the Explanation to section 2(47) of the Act, operative from April 1, 1988 (numbered as Explanation 1 by the Finance Act, 2012) for the purposes of sub- clauses (v) and (vi), the expression "immovable property" shall have the same meaning as in section 269UA(d) of the Act.

` 12. The Central Board of Direct Taxes (CBDT) Circular No. 495, dated September 22, 1987—[1987] 168 ITR (St.) 87 at page 92, provides an insight into the background and objectives of the said clauses. The relevant portion is reproduced as under :

"Definition of 'transfer' widened to include certain transactions—

11.1 The existing definition of the word 'transfer' in section 2(47) does not include transfer of certain rights accruing to a purchaser, by way of becoming a member of or acquiring shares in a co-operative society, company or association of persons or by way of any agreement or any arrangement whereby such person acquires any right in any building which is either being constructed or which is to be con structed. Transactions of the nature referred to above are not required to be registered under the Registration Act, 1908. Such arrangements confer the privileges of ownership without transfer of title in the building and are a common mode of acquiring flats particularly in multistoried constructions in big cities. The definition also does not cover cases where possession is allowed 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. New sub-clauses (v) and

(vi) have been inserted in section 2(47) to prevent avoidance of capital gains liability by recourse to transfer of rights in the manner referred to above.

11.2 The newly inserted sub-clause (vi) of section 2(47) has brought into the ambit of 'transfer', the practice of enjoyment of property rights through what is commonly known as power of attorney arrangements. The practice in such cases is adopted normally where transfer of ownership is legally not permitted. A person holding the power of attorney is authorised the powers of owner, including that of making construction. The legal ownership in such cases continues to be with the transferor.

13 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 11.3 These amendments shall come into force with effect from April 1, 1988, and will, accordingly, apply to the assessment year 1988-89 and subsequent years (section 3(g) of the Finance Act, 1987)."

"In this case, possession was parted with whereas the assessee/ vendor received the consideration therefor. Once possession, even of a part of the property was handed over to the transferee for the purpose of section 2(47)(v) read with section 45, the transfer was complete and, therefore, the tax authorities and more particularly, the Tribunal were justified to calculate the consideration received in that particular year for that part of the property which was parted with. In fact, a reference can be made to the judgment of the Supreme Court in Alapati Venkataramiah v. CIT [1965] 57 ITR 185, which Mr.Rajan relied upon and pointed out that before the amendment, transfer was very strictly construed. In the said decision, the Supreme Court refused to accept the agreement to sell or the entries made in the account for the receipt of consideration by the transferor as a completed transfer for the purpose of then section 12B. The Supreme Court observed that transfer means effective conveyance of a capital asset to the transferee and delivery of possession of immovable property could not by itself be treated as equivalent to conveyance of the immovable property. Relying on this judgment, learned counsel pointed out that the amendment has effected a sea change in law, inasmuch as under section 2(47), delivery of possession provided it is in the nature as contemplated in section 53A of the Transfer of Property Act, would be enough to bring the transaction into the mischief of the word 'transfer'. The argument is undoubtedly correct.

Section 2(47)(v) has probably been introduced to meet the law laid down in this judgment, wherein there used to be a transfer for all the practical purposes, but the tax could be avoided only on the sole ground that the transaction was not completed by way of a sale deed. Now, the law having undergone the change, it would be clear that where there would be a transfer of possession in the nature as con templated under section 53A of the Transfer of Property Act, the transaction would be covered as a transfer. By necessary logic then, that transaction would be coverable in that particular assessment year as has been held by the Delhi High Court. The only question was as to whether a transaction could be considered for the purpose of calculation of capital gains in parts. The position in law has been indicated by the Delhi High Court that it can be so treated in parts.

14 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 We respectfully agree with the Delhi High Court judgment. However, the only conditions would be that (1) such a delivery of possession should be in the nature of a doctrine of part performance under section 53A for which there should be an agreement between the parties, (2) such agreement should be in writing, (3) a completed contract has to be spelt out from that agreement, and the most important (4) the transfer of possession of the property in pursuance of the said agreement. All these conditions undoubtedly and admittedly are completed here. If that is so, then there would be no question of interfering with the Tribunal's judgment. In our opinion, the Tribunal has correctly held that the assessee would have to be assessed on the basis of the trans fer of the possession in proportionate to the consideration."

"Under section 2(47)(v), any transaction involving allowing of possession to be taken over or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act would come within the ambit of section 2(47)(v). That, in order to attract section 53A, the following conditions need to be fulfilled. There should be a contract for consideration ; it should be in writing ; it should be signed by the transferor ; it should pertain to transfer of immovable property ; the transferee should have taken possession of the property ; lastly, the transferee should be ready and willing to per form his part of the contract. That even arrangements confirming privileges of ownership without transfer of title could fall under section 2(47)(v). Section 2(47)(v) was introduced in the Act from the assessment year 1988-89 because prior thereto, in most cases, it was argued on behalf of the assessee that no transfer took place till execution of the conveyance. Consequently, the assessees used to enter into agreements for developing properties with the builders and under the arrangement with the builders, they used to confer privileges of ownership without executing conveyance and to plug that loophole, section 2(47)(v) came to be introduced in the Act.

It was argued on behalf of the assessee that there was no effective transfer till grant of irrevocable licence. In this connection, the judgments of the Supreme Court were cited on behalf of the assessee, but all those judgments were prior to introduction of the concept of deemed transfer under section 2(47)(v). In this matter, the agreement in question is a development agreement. Such development agreements do not constitute transfer in general law. They are spread over a perio of time. They contemplate various stages. The Bombay High Court in various judgments has taken the view in several matters that the object of entering into a development agreement is to enable a professional builder/contractor to make profits by completing the building and selling the flats at a profit. That the aim of these professional contractors was only to make profits by completing the building and, therefore, no interest in the land stands created in their favour under such agreements. That such agreements are only a mode of remunerating the builder for his services of constructing the building (see Gurudev Developers v. Kurla Konkan Niwas Co-operative Housing Society [2000] 3 Mah LJ 131). It is precisely for this reason that the Legislature has introduced section 2(47)(v) read with section 45 which indicates that capital gains is taxable in the year in which such transactions are entered into even if the transfer of immovable property is not effective or complete under the general law. In this

15 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 case that test has not been applied by the Department. No reason has been given why that test has not been applied, particularly when the agreement in question, read as a whole, shows that it is a development agreement. There is a difference between the contract on the one hand and the performance on the other hand. In this case, the Tribunal as well as the Department have come to the conclusion that the transfer took place during the accounting year ending March 31, 1996, as substantial payments were effected during that year and substantial permissions were obtained. In such cases of development agreements, one cannot go by substantial performance of a contract. In such cases, the year of chargeability is the year in which the con tract is executed. This is in view of section 2(47)(v) of the Act."

"Section 2(47)(v) of the Income-tax Act comes into the aid of the Department only if the conditions of section 53A of the Transfer of Property Act are satisfied. From a reading of the above provisions, it is clear that unless there is a written agreement, section 53A of the Transfer of Property Act will not come into operation. In the present case, there is no written agreement and no sale consideration was received during the relevant period. The Revenue is also unable to prove that the assessee had put the developer in possession of the property by receiving the consideration partly or in full. The fact remains that there is no sale agreement between the assessee and the builder and also the assessee had not received the sale consideration. Hence, the Tribunal is right in holding that there is no transfer of property, as contemplated under section 2(47(v) of the Act. The rea sons given by the Tribunal are based on valid materials and evidence and we do not find any error or legal infirmity in the order of the Tribunal so as to warrant interference."

"Section 53A of the Transfer of Property Act, 1882

16 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 53A. Part performance.—Where any person contracts to transfer for consideration any immovable 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 therefor 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 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."

"(1) there must be a contract to transfer for consideration 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 neces sary 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."

"Protection provided under section 53A of the Act to the proposed transferee is a shield only against the transferor. It disentitles the transferor from disturbing the

17 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 possession of the proposed transferee who is put in possession in pursuance to such an agreement. It has nothing to do with the ownership of the proposed transferor who remains full owner of the property till it is legally conveyed by executing a registered sale deed in favour of the transferee. Such a right to protect possession against the proposed vendor cannot be pressed in service against a third party."

An agreement of sale which fulfilled the ingredients of section 53A of the 1882 Act was not required to be executed through a registered instrument either under the 1882 Act or the Indian Registration Act, 1908 (in short, "the 1908 Act") as originally enacted.

"17. (1A) The documents containing contracts to transfer for con sideration, 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 Regis tration 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."

"49. Effect of non-registration of documents required to be regis tered.—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 pro perty 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, 1877 (1 of 1877) or as evidence of any collateral transaction not required to be effected by registered instrument."

18 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 The words "or as evidence of part performance of a contract for the pur poses of section 53A of the Transfer of Property Act, 1882" have been omitted from the proviso to section 49.

"7. A contract/agreement that satisfies the ingredients of section 53A of 1882 Act was not compulsory registrable whether under the Transfer of Property Act or the Indian Registration Act, 1908.

'Section 17(1A) of the Indian Registration Act, 1908. 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.

19 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 "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, 1877 (1 of 1877), or as evidence of part performance of a contract for the purposes of section 53A of the Transfer of Property Act, 1882 (4 of 1882) or as evidence of any collateral trans action not required to be effected by registered instrument.'

(a) a suit for specific performance, based upon an unregistered contract/agreement to sell that contains a clause recording part performance of the contract by delivery of possession or has been executed with a person, who is already in possession shall not be dis missed for want of registration of the contract/agreement ;

20 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0

(b) the proviso to section 49 of the Registration Act, legitimises such a contract to the extent that, even though unregistered, it can form the basis of a suit for specific performance and be led into evidence as proof of the agreement or part performance of a contract."

In Sukhwinder Kaur v. Amarjit Singh [2012] ILR 2 P&H 718, a single Bench of this court observed as follows :

"8. Section 53A of the Transfer of Property Act before amendment prescribed that where in pursuance to part performance of the con tract, the transferee has taken possession of the property and has done some act in furtherance of the contract, and the transferor has performed or is will to perform his part of the contact then despite the fact that the contract was required to be registered and has not been registered, the transferrer shall be debarred from enforcing against the transferee any right other than a right expressly provided by the contract. Meaning thereby, section 53A of the Transfer of Property Act recognised part performance of the contract even though the con tract used to be unregistered and the transferee's rights to remain in possession was protected. By the amendment Act No. 48 of 2001 (with effect from September 24, 2001), the words "the contract, though required to be registered, has not been registered, or" have been omitted from the provision. The effect of the amendment is that now if any person takes possession in pursuance to a contract which is required to be registered but has not been registered, the transferee has no right to remain in possession of the property. To give effect to this principle, section 17(1A) has accordingly been inserted in the Act which mandates that such contract is now required to be registered. If such a contract entered into after the amendment is not registered then per section 49 of the Act, the same can neither affect any immovable property comprised therein nor will it be received as evidence of any transaction affecting such property or conferring such power."

Similarly, the Delhi High Court in MAC Associates v. S. P. Singh Chandel RFA No. 518 of 2011, decided on February 7, 2013, dealing with the essential requirements of registration in an agreement under section 53A of the 1882 Act after September 24, 2001, noticed as under :

"13. If the matter is viewed from another angle then also suit for possession on the basis of collaboration agreement, which at best can be taken at par with the agreement to sell, is not maintainable even if, for the sake of arguments, it is accepted that the respondent was agent of appellant. Agreement to sell does not vest any right in favour of a person to the possession of property. Even if a person is put in possession of property through an agreement to sell, he cannot protect his possession on the pretext of part performance under section 53A of the Transfer of Property Act, 1882, unless such an agreement is a registered document. Section 17(1A) of the Registration Act, 1908, which has come into force with effect from September 24, 2001, reads as under :

'Documents containing contracts to transfer for consideration, any immovable property for 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.'

21 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 Once a person cannot even protect the possession, which he is holding, in absence of an unregistered agreement to sell, then how such a person can seek possession on the basis of such a document. In Sunil Kapoor v. Himmat Singh [2010] 167 Delhi Law Times 806, a single judge of this court has held thus 'a mere agreement to sell of immovable property does not create any right in the property save the right to enforce the said agreement. Thus, even if the respondents/ plaintiffs are found to have agreed to sell the property, the petitioner/ defendant would not get any right to occupy that property as an agreement purchaser. This court in Jiwan Das v. Narain Das, AIR 1981 Delhi 291 has held that in fact no right inure to the agreement purchaser, not even after the passing of a decree for specific performance and till conveyance in accordance with law and in pursuance thereto is executed."

"Section 115J, Explanation clause (iv), is a piece of legislation by incorporation. Dealing with the subject, Justice G. P. Singh states in Principles of Statutory Interpretation (7th edition, 1999) :

'Incorporation of an earlier Act into a later Act is a legislative device adopted for the sake of convenience in order to avoid verbatim reproduction of the provisions of the earlier Act into the later. When an earlier Act or certain of its provisions are incorporated by reference into a later Act, the provisions so incorporated become part and parcel of the later Act as if they had been "bodily transposed into it". The effect of incorporation is admirably stated by Lord Esher M. R. "If a subsequent Act brings into itself by reference some of the clauses of a former Act, the legal effect of that, as has often been held, is to write those sections into the new Act as if they had been actually written in it with the pen, or printed in it.' (page 233)

22 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 'Even though only particular sections of an earlier Act are inco porated into later, in construing the incorporated sections it may be at times necessary and permissible to refer to other parts of the earlier statute which are not incorporated. As was stated by Lord Blackburn : "When a single section of an Act of Parliament is introduced into another Act. I think it must be read in the sense it bore in the original Act from which it was taken, and that consequently it is perfectly legitimate to refer to all the rest of that Act in order to ascertain what the sections meant, though those other sections are not incorporated in the new Act".' "

Thus, it would mean that section 53A of the 1882 Act has been bodily transposed into section 2(47)(v) of the Act and the effect of it would be that section 53A of the 1882 Act shall be taken to be an integral part of section 2(47)(v) of the Act. In other words, the legal requirements of section 53A of 1882 Act are required to be fulfilled so as to attract the provisions of section 2(47)(v) of the Act.

23 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 Act. On the other hand, learned counsel for the Revenue, drawing support from the judgment delivered by the Authority for Advance Rulings (AAR) in Jasbir Singh Sarkaria, In re [2007] 294 ITR 196 (AAR) submitted that there can be concurrent possession of the transferor as well as of the transferee and it would be enough if the transferee has, by virtue of the transaction, a right to enter upon and exercise acts of possession effectively pursuant to the covenants in the contract. Reliance was placed upon the following observations for meaning of possession and how should it be understood in the context of sub-clause (v) of section 2(47) of the Act (page 210) :

"The next question is, in what sense we have to understand the term 'possession' in the context of clause (v) of section 2(47). Should it only mean the right to exclusive possession—which the transferee can maintain in his own right to the exclusion of everyone including the transferor from whom he derived the possession ? Such a criterion will be satisfied only after the entire sale consideration is paid and the transferor has forfeited his right to exercise acts of possession over the land or to resume possession. In our view, there is no war rant to place such a restricted interpretation on the word 'possession' occurring in sub-clause (v) of section 2(47). Possession is an abstract concept. It has different shades of meaning. It is variously described as 'a polymorphous term having different meanings in different con texts' (per R. S. Sarkaria J. in Superintendent and Remembrancer of Legal Affairs, W. B. v. Anil Kumar Bhunja [1979] 4 SCC 274 and as a word of 'open texture' (see Salmond on Jurisprudence, paragraph 51, Twelfth Edition, Indian reprint). Salmond observed : 'to look for a definition that will summarize the meanings of the term "possession" in ordinary language, in all areas of law and in all legal systems, is to ask for the impossible'. In the above case of Anil Kumar Bhunja [1979] 4 SCC 274, Sarkaria J. speaking for a three-judge Bench also referred to the comments of Dias and Hughes in their book on Juris prudence that 'if a topic ever suffered too much theorizing it is that of "possession".'. Much of the difficulty is caused by the fact that possession is not a pure legal concept, as pointed out by Salmond. The learned judge then explained the connotation of the expression 'possession' by referring to the well known treatises on Jurisprudence (page 278) :

'"Possession", implies a right and a fact : the right to enjoy annexed to the right to property and the fact of the real intention. It involves power of control and intent to control (see Dias and Hughes) . . .

In Salmond's Jurisprudence, at paragraph 54, we find an illuminating discussion on 'immediate' and 'mediate possession'. The learned author states "in law one person may possess a thing for and on account of some one else. In such a case the latter is in possession by the agency of him who so holds the thing on his behalf. The possession thus held by one man through another may be termed mediate, while that which is acquired or retained directly or person ally may be distinguished as 'immediate or direct'." Salmond makes reference to three types of mediate possession. In all cases of "mediate possession", two persons are in possession of the same thing at the same time. An allied concept of concurrent

24 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 possession has also been explained in paragraph 55 of Salmond's Jurisprudence in the following words :

'It was a maxim of the civil law that two persons could not be in possession of the same thing at the same time. As a general proposition this is true : for exclusiveness is of the essence of possession. Two adverse claims of exclusive use cannot both be effectually realized at the same time. Claims, however, which are not adverse, and which are not, therefore, mutually destructive, admit of concur rent realisation. Hence, there are several possible cases of duplicate possession.

On a fair and reasonable interpretation and on adopting the principle of purposive construction, it must be held that possession contemplated by sub-clause (v) need not necessarily be sole and exclusive possession. So long as the transferee is, by virtue of the possession given, enabled to exercise general control over the property and to make use of it for the intended purpose, the mere fact that the owner has also the right to enter the property to oversee the development work or to ensure performance of the terms of agreement does not introduce any incompatibility. The concurrent possession of the owner who can exercise possessory rights to a limited extent and for a limited purpose and that of the buyer/developer who has a general control and custody of the land can very well be reconciled. Sub-clause (v) of section 2(47) will have its full play even in such a situation. There is no warrant to postpone the operation of sub-clause (v) and the resultant accrual of capital gain to a point of time when the concurrent possession will become exclusive possession of developer/transferee after he pays full consideration.

Further, if 'possession' referred to in sub-clause (v) is to be under stood as exclusive possession of the transferee/developer, then, the very purpose of the amendment expanding the definition of transfer for the purpose of capital gains may be defeated. The reason is this : the owner of the property can very well contend, as is being con tended in the present case, that the developer will have such exclusive possession in his own right only after the entire amount is paid to the owner to the last pie. There is then a possibility of staggering the last instalment of a small amount to a distant date, may be, when the entire building complex gets ready. Even if some amount, say 10 per cent., remains to be paid and the developer/transferee fails to pay, leading to a dispute between the parties, the right to exclusive and indefeasible possession may be in jeopardy. In this state of affairs, the transaction within the meaning of sub-clause (v) cannot be said to have been effected and the liability to pay capital gains may be indefinitely postponed. True, it may not be profitable for the developer to allow this situation to linger for long as the process of transfer of flats to the prospective purchasers will get delayed. At the same time, the other side of the picture cannot be over looked. There is a possibility of the owner with the connivance of the transferee postponing the payment of capital gains tax on the ostensible ground that the entire consideration has not been received and some balance is left. The mischief sought to be remedied, will then perpetuate. We are, there fore, of the view that possession given to the developers need not ripen itself into exclusive possession on payment of all the instalments in entirety for the purpose of determining the date of transfer.

25 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 While on the point of possession, we would like to clarify one more aspect. What is spoken to in sub-clause (v) of section 2(47) is the 'transaction' which involves allowing the possession to be taken. By means of such transaction, a transferee like a developer is allowed to undertake development work on the land by assuming general control over the property in part performance of the contract. The date of that transaction determines the date of transfer. The actual date of taking physical possession or the instances of possessory acts exercised is not very relevant. The ascertainment of such date, if called for, leads to complicated inquiries, which may frustrate the objective of the legislative provision. It is enough if the transferee has, by virtue of that transaction, a right to enter upon and exercise acts of possession effectively pursuant to the covenants in the contract. That tanta mounts to legal possession. We are referring to this aspect because the authorised representative has submitted when he appeared before us in the last week of May, 2007, that even by that date the development work could not be commenced for want of certain approvals, and, therefore, the developer was 'not willing to take possession of the land'. Such an unsubstantiated statement which is not found in the original application or even written submissions filed earlier need not be probed into especially when it is not his case that the developer was not allowed to take possession in terms of the agreement."

"31. While text book writers and English decisions may shed some light to illuminate the blurred areas as to whether part payment of purchase money or even the whole of the consideration would not be sufficient act of part performance, it is necessary that this aspect may be examined in the background of statutory requirement as enacted in section 53A. To qualify for the protection of the doctrine of part performance it must be shown that there is a contract to transfer for consideration immovable property and the contract is evidenced by a writing signed by the person sought to be bound by it and from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty. These are pre-requisites to invoke the equitable doctrine of part performance. After establishing the aforementioned circumstances it must be further shown that a transferee had in part performance of the contract either taken possession of the property or any part thereof or the transferee being already in possession continues in possession in part performance of the con tract and has done some act in furtherance of the contract. The acts claimed to be in part performance must be unequivocally referable to the pre-existing contract and the acts of part performance must unequivocally point in the direction of the existence of contract and evidencing implementation or performance of contract. There must be a real nexus between the contract and the acts done in pursuance of the contract or in furtherance of the contract and must be unequivocally referable to the contract. When series of acts are done in part performance, one such may be payment of consideration. Any one act by itself may or may not be of such a conclusive nature as to conclude the point one way or the other but when taken with many others payment of part of the consideration or the whole of the consideration may as well be shown to be in furtherance of contract. The correct approach would be, what Lord Reid said in Steadman's case [1974] 2 All ER 977 (HL) that one must not first took at the oral contract and then see whether the alleged acts of part performance are consistent with it. One must first look at the alleged acts of part performance and see whether they prove that there must have been a contract and it is only if they do so prove that one can bring in the oral contract. This view may not be wholly applicable to the situation in India because an oral contract is not envisaged by section 53A. Even for invoking the equitable doctrine of part performance there has to be a contract in writing from which the

26 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 terms necessary to constitute the transfer can be ascertained with reasonable certainty. Therefore, the correct view in India would be, look at that writing that is offered as a contract for transfer for consideration of any immovable property and then examine the acts said to have been done in furtherance of the contract and find out whether there is a real nexus between the contract and the acts pleaded as in part performance so that to refuse relief would be perpetuating the fraud of the party who after having taken advantage or benefit of the contract backs out and pleads non registration as defence, a defence analogous to section 4 of the Statute of Frauds.

"9. Secondly, the appellant has failed to allege and prove that he was delivered possession in part performance of the contract or he, being already in possession as lessee, continued in possession in part performance of the agreement to purchase, i.e., by mutual agreement between the parties his possession as lessee ceased and commenced as that of a transferee under the contract. On the contrary, there is a finding recorded in the earlier suit that in spite of his having entered into a contract to purchase the property he had not disowned his character as lessee and he was treated as such by the parties. The judgment dated September 1, 1999, in the civil suit notes the conduct of the plaintiff inconsistent with his conduct as vendee in possession. When a person already in possession of the property in some other capacity enters into a contract to purchase the property, to confer the benefit of protecting possession under the plea of part performance, his act effective from that day must be consistent with the contract alleged and also such as cannot be referred to the preceding title. The High Court of Madhya Pradesh had an occasion to deal with the facts very near to the facts before us in Bhagwandas Parsadilal v. Surajmal, AIR 1961 MP 237. A tenant in possession entered into an agreement to purchase the house forming subject matter of tenancy. However, he failed to show his nature of possession having altered from that of a tenant into that of a transferee. In a suit of ejectment based on land lord-tenant relationship, the tenant sought to protect his possession by raising the plea of part performance as against subsequent pur chaser of the property. Referring to section 91 of the Indian Trusts Act, the High Court held that a subsequent purchaser of the property with notice of an existing contract affecting that property must hold the property for the benefit of the person in whose favour the prior agreement to sell has been executed to the extent it is necessary to give effect to that contract. But that does not mean that till a final decision has been reached the contract creates a right in the person in possession, i.e., the tenant, to refuse to surrender possession of the premises even if such possession was obtained by him not in part performance of the contract but in his capacity as a tenant. Having entered into possession as a tenant and having continued to remain in possession in that capacity he cannot be heard to say that by rea son of the agreement to sell his possession was no longer that of a tenant (also see Dakshinamurthi Mudaliar v. Dhanakoti Ammal, AIR 1925 Mad 965 and A. M. A. Sultan v. Seydu Zohra Beevi, AIR 1990 Ker 186). In our opinion, the law has been correctly stated by the High Court of Madhya Pradesh in the abovesaid decision."

27 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 28. In Thota Rambabu alias Ramu v. Cherukuri Venkateswara Rao alias Pedababu, AIR 2006 AP 114, the Andhra Pradesh High Court, while considering the question of requirement of delivery of possession for claiming benefits of section 53A of the 1882 Act in a suit for relief of specific performance of an agreement of sale, observed as under :

"30. Now, the third point : The plaintiff raised a plea, as to his enti tlement for the benefit under section 53A of the Act. Specific issue was framed and extensive discussion was undertaken by the trial court on this. It is true that section 53A of the Act is basically a legal weapon to be used in defence to protect the possession, under an agreement of transfer, if the person in possession is ready and willing to perform his part of contract. In the recent past, courts have recognized that this provision can be treated as a source of independent right, and that it can be enforced by filing a suit.

'I want to make the point that there are many meanings of the word "possession" ; that possession can only be usefully defined with reference to the purpose in hand ; and that possession may have one meaning in one connection and another meaning in another.'

'I gain possession, then, a man must stand in a certain physical relation to the object and to the rest of the world, and must have a certain intent. These relations and this intent are the facts of which we are in search.'

'Possession has three aspects : firstly, the relation between a per son and a thing is a fact. Secondly, the advantages attached by law to that relation is a matter of law. Thirdly, these advantages are also attributed to a person when certain other facts exist. What they are in any given type of case is a matter of law.'

28 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 yield an answer to this. In the instant case, the plaintiff pleaded that symbolical delivery of possession was affected to him. Admittedly, the first defendant is owner of only one- fourth share of the rice mill and that the mill, as a whole, was under lease to a third party.

'44. Transfer by one co-owner.—Where one of two or more co- owners of immovable property legally competent in that behalf trans fers his share of such property or any interest therein, the transferee acquires, as to such share or interest, and so far as is necessary to give effect to the transfer, the transferor's right to joint possession or other common or part enjoyment of the property, and to enforce a partition of the same, but subject to the conditions and liabilities affecting, at the date of the transfer, the share or interest so transferred.

Where the transferee of a share of a dwelling-house belonging to an undivided family is not a member of the family, nothing in this section shall be deemed to entitle him to joint possession or other common or part enjoyment of the house.'

It mandates that, what a transferee, from a co-owner of an undi vided property, gets, is a right, to enforce a partition, that too, subject to conditions and liabilities, in relation to the property, by the date of transfer.

29 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 section 53A, since he does not gain or take possession of the subject-matter of transfer.

"14. From the aforesaid statements made in both the Articles it is manifest that the legal position enunciated in Hounslow London Borough's case (supra), is no more a good law. Possession of the suit land delivered to defendants 1 and 2 at the time of the execution of the agreements dated March 1/11, 1985, was only by way of temporary measure for undertaking the construction work by them and the exclusive possession thereof in legal sense remained with the executants of the said agreements. Thus, defendants 1 and 2 prima facie are not entitled to protect their possession over the suit land under said section 53A of the Transfer of Property Act."

30 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 Rulings was the year of chargeability of the income to capital gain tax. Integrally connected to it was the identification of the previous year in which the deemed transfer within the meaning of sub-clause (v) of section 2(47) of the Act had taken place. It was observed that once it was held that the transaction of the nature referred to in sub-clause (v) of section 2(47) of the Act had taken place on a particular date, the actual date of taking physical possession need not be probed into. It is enough if the transferee has by virtue of that transaction a right to enter upon and exercise the acts of possession effectively. It was further held in that case that the capital gains which arose during the financial year 2006-07 shall be subjected to tax for the assessment year 2007-08. The aforesaid observations were recorded in that context on the facts involved therein. It would have to be ascertained in each case independently whether a transferee has been delivered possession in furtherance of the contract in order to fall under section 53A of the 1882 Act and, thus, amenable to tax by virtue of section 2(47)(v) read with section 45 of the Act.

"52. 'Licence' defined.—Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a licence."

It was contended that possession was handed over to the transferee as a licensee to carry out development of the property. No possession was ever given by the transferor to the transferee in part performance of the JDA dated February 25, 2007. JDA had not conferred any right to own the pro perty on the transferee but only to develop it. Even registered irrevocable special power of attorney nowhere specified granting possession in part performance of JDA dated February 25, 2007, as required under section 53A of the 1882 Act.

(I) Clauses of the JDA dated February 25, 2007

2.1. The owner hereby irrevocably and unequivocally grants and assigns in perpetuity all its rights to develop, construct, mortgage, lease, licence, sell and transfer the property along with any and all the construction, premises, hereditaments, easements, trees thereon in favour of THDC for the purpose of development, construction, mort gage, sale, transfer, lease, licence and/or exploitation for full utilisation of the property ("rights") and to execute all the documents necessary to carry out, facilitates and enforce the rights in the property including to execute lease agreement, licence agreements, Construction contracts, supplier contracts, agreement for sale, conveyance, mortgage deeds,

31 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 finance documents and all documents and agreements necessary to create and register the mortgage, conveyance, lease deeds, licence agreement, Power of Attorneys, affidavits, declarations, indemnities and all such other documents, letters as may be necessary to carry out, facilitate and enforce the rights and to register the same with the revenue/competent authorities and to appear on our behalf before all authorities, statutory or otherwise, and before any court of law (the Development Rights). The owner hereby hands over the original title deeds of the property as mentioned in the list annexed hereto and marked as annexure IV and physical, vacant possession of the property has been handed over to THDC simultaneous to the execution and registration of this agreement to develop the same as set out herein. It is hereby agreed and confirmed that what is stated in the recitals hereinabove, shall be deemed to be declarations and representations on the part of the owner as if the same were set out herein in verbatim and forming an integral part of this agreement.

4.1. It is specifically understood and agreed amongst the parties that THDC shall use its expertise and its brand name and/or any other brand name at its discretion to develop the property into the premises as per applicable building bye-laws of the competent authority and the owner shall have no objection to the same in whatsoever manner. In consideration of the owner granting and signing, its development rights in the property, irrevocably and in perpetuity to THDC to develop the property and for transfer of the property upon the surrender of allotment rights of 500 sq. yards and/or 1,000 sq. yards (as the case may be) by its members to the owner, vide resolution dated January 4, 2007, and February 25, 2007 (copy attached as per annexures I and II), HASH is committed to pay to the owner and/ or the respective members of the owner (as the case may be) a total amount of Rs. 106,42,50,000 (rupees one hundred six crores forty-two lakhs fifty thousand only) calculated at Rs. 82,50,000 (Rupees eighty two lakhs fifty thousand only) payable to 65 members having plot of 500 square yards each, Rs. 1,65,00,000 (rupees one crore sixty-five lakhs only) payable to 30 members having plot of 1000 square yards each and Rs. 3,30,00,000 (rupees three crores thirty lakhs only) pay able to the owner for the 4 plots of 500 square yards each which shall tantamount to the full and final payment to the owner and/or the respective members of the owner (as the case may be) in a manner set out herein below (payment). Further, the transfer, sale and convey ance of 21.2 acres of land of the property shall be made by the owner in favour of THDC pro rata to the payment received by the owner and/or the respective members of the owner (as the case may be) from HASH by executing sale deeds and registering the same. It is expressly provided that as resolved by the owner, the total amount payable by HASH to the owner and/or the respective members of the owner (as the cas may be) for assignment of the development rights and for transfer and sale of 21.2 acres of land of the property shall be Rs. 106,42,50,000 (rupees one hundred six crores forty-two lakhs fifty thousand only) and one hundred and twenty nine (129) flats consisting of super area of 2250 square feet (flats) one flat each for sixty five (65) members having a plot of 500 square yards, two flats for the (thirty) 30 members having a plot of 1000 square yards and 4 flats to the owner for the 4 plots of 500 square yards each as per list annexed with this agreement as schedule B (sale transaction).

4.2. It is expressly agreed between the developers that HASH shall be responsible for making all payments to the owner and/or the respective members of the owner (as the case may be) as per the negotiated and agreed terms between the owner and HASH. HASH expressly undertakes to make timely payments of the

32 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 payment to the owner and/or the respective members of the owner (as the case may be) as under :"

(The schedule of payment referred in clause 4.1 herein has already been reproduced in the earlier part of the judgment).

9.1. The owner shall simultaneously on receipt of payment as set out in clause 4.1 above, execute an irrevocable special power of attorney in favour of THDC for development of the property, authorizing THDC to do all lawful acts, deeds, matters and things pertaining to the development of the property for the project along with inter alia right to mortgage the property and/or premises, sell, lease, licence the premises and receive/collect monies in its name in respect of the same and approach, interact, communicate with the competent authorities and for doing all acts, deeds, matters and things to be done or incurred by THDC in that behalf as also to sign all letters, applications, agreements and register the same if necessary, documents, court proceedings, affidavits and such other papers containing true facts and correct particulars as may from time to time be required in this behalf.

9.2 The owner shall execute in favour of THDC, the sale deeds in accordance with the provisions of clause 4.1(ii) to clause 4.1(v) of this agreement and execute all other necessary documents and papers to complete the aforesaid transaction.

9.3 That all the original title deeds pertaining to property as mentioned in annexure IV have been handed over to THDC by the owner at the time of signing of this agreement and in furtherance of the common interest of the parties for the development of the project and except the sale transaction made by the owner in favour of THDC as set out in clause 4.1 above. THDC hereby undertake and assure the owner that they shall use the title deeds only for the purpose of furtherance of the project in the manner that it does not adversely affect the owner/allottee in any manner whatsoever.

(i) Save and except the provisions of clause 26, THDC shall at all times have the right to terminate this agreement in the event there is any material breach of the representations, warranties, undertakings, declarations, covenants and/or obligations given by the owner under this agreement after giving thirty(30) days written notice for rectification of such breach. In the event the agreement is terminated by THDC, all the lands registered in the name of THDC as per the terms of this agreement up to the date of the termination shall remain with THDC and the balance lands to be transferred to THDC as per the terms of this agreement shall not be transferred by the owner in favour of THDC. Upon the termination, the owner shall refund to THDC the adjustable advance/earnest money mentioned in clause 4.1(i) above within one month of such termination. In the event of failure of the owner to refund the said amount, the owner hereby agrees to execute a registered sale deed for land of equivalent value in favour of THDC.

(ii) In the event all the requisite governmental and statutory approvals, authorizations, consents, licences, approvals of all the plans/design and drawings as may be required for the development of this property in relation to the project and to undertake the project are not granted within nine (9) months of the submission of the final plans/design and drawings to the competent authority for approval, then THDC may at its sole discretion either decide that it does not

33 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 desire to undertake and complete the project and hence terminate this agreement after giving thirty (30) days written notice in this regard or decide to wait for any further time as deemed fit by THDC for the grant of the aforesaid approvals and licences. In the event the agreement is terminated by THDC, all the lands registered in the name of THDC as per the terms of this agreement up to the date of the termination shall remain with THDC and the balance lands to be transferred to THDC as per the terms of this agreement shall not be transferred by the owner in favour of THDC. Upon the termination, the owner shall refund to THDC the adjustable advance/earnest money mentioned in clause 4.1(i) above within one month of such termination. In the event of failure of the owner to refund the said amount, the owner hereby agrees to execute a registered sale deed for land of equivalent value in favour of THDC.

(iii) In the event THDC is unable to develop the property due to refusal/non grant of approvals, consents, permissions, licenses or revocation of the same by the appropriate statutory authority, then THDC may at its sole discretion terminate this agreement. In the event the agreement is terminated by THDC, all the lands registered in the name of THDC as per the terms of this agreement up to the date of the termination shall remain with THDC and the balance lands to be transferred to THDC as per the terms of this agreement shall not be transferred by the owner in favour of THDC. Upon the termination, the owner shall refund to THDC the adjustable advance/ earnest money mentioned in clause 4.1(i) above within one month of such termination. In he event of failure of the owner to refund the said amount, the owner hereby agrees to execute a registered sale deed for land of equivalent value in favour of THDC.

(iv) The owner shall have the right to terminate the agreement only in the event of default by the developers for making the payment in accordance with the terms of this agreement and the allotment of flats within the time period as mentioned in this agreement after giving thirty (30) days written notice for rectification of such breach or any further time as may be desired by the owner. In the event the agreement is terminated by owner, all the lands registered in the name of THDC as per the terms of this agreement up to the date of the termination shall remain with THDC and the balance lands to be transferred to THDC as per the terms of this agreement shall not be transferred by the owner in favour of THDC. Upon the termination, the owner shall forfeit the adjustable advance/earnest money mentioned in clause 4(i).

(i) None of the parties shall be liable to the other party or be deemed to be in breach of this agreement by reason of any delay in performing, or any failure to perform, any of its own obligations in relation to the agreement, if the delay or failure is due to any event of force majeure. Event of force majeure is any event caused beyond the parties' reasonable control. The following shall be regarded as causes beyond the parties reasonable control.

(ii) For the purposes of this clause, an event of force majeure shall mean events of war, war like conditions, blockades, embargoes, insurrection, governmental direction, riots, strikes, acts of terrorism, civil commotion, lock outs, sabotage, plagues or other epidemics, acts of God including fire, floods, volcanic eruptions, typhoons, hurri canes, storms, tidal waves, earthquake, landslides, lightning, explo sions, and other natural calamities, prolonged failure of energy, court orders/injunctions, change of laws, action and/or order by statutory and/or government authority, third party actions affecting the deve lopment of the project, acquisition/requisition of the property or any part thereof by the

34 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 government or any other statutory authority and such other circumstances affecting the development of the project (Event of force majeure).

(iii) Any party claiming restriction on the performance of any of its obligations under this agreement due to the happening or arising of an event of force majeure hereof shall notify the other party of the happening or arising and the ending or ceasing of such event or circumstance within three (3) days of determining that an event of force majeure has occurred. In the event any party anticipates the happening of an event of force majeure, such party shall promptly notify the other party.

(iv) The party claiming event of force majeure conditions shall, in all instances and to the extent it is capable of doing so, use its best efforts to remove or remedy the cause thereof and minimise the economic damage arising thereof.

(v) Either party may terminate this agreement after giving the other party a prior notice of fifteen (15) days in writing if the event of force majeure continues for a period of ninety (90) days. In the event of termination of this agreement all obligations of the parties until such date shall be fulfilled.

(II) Clauses of special power of attorney dated February 26, 2007

(A). The owner is absolutely seized and possessed of 169 kanals 7 marlas equivalent to 21.2 acres (approx.) of free hold land situated in village Kansal, Tehsil Kharar, District Mohali, registered in this name vide various sale deeds duly registered with Sub-Registrar Majri, Dis trict Rupnagar (now within District Mohali) and more particularly described in the schedule A hereunder written and delineated in green colour boundary line in the plan attached hereto, annexed as annexure I (hereinafter referred to as the "property").

(B). The owner is the absolute and undisputed owner of the pro perty and has assigned and transferred all its rights to plan, develop, construct, sell, lease, mortgage the property as more particularly set out in the joint development agreement dated February 25, 2007, (joint development agreement) entered into by the owner with Hash Builders P. Ltd. having its registered office at SCO No. 311-12, 2nd Floor, Sector 40-D, Chandigarh, hereinafter referred to as "Hash" and THDC Limited having their registered office at Eruchshaw Building, Fourth Floor, 249, Dr. D. N. Road, Mumbai 400 001, hereinafter referred to as "THDC" wherein the owner assigned its development rights (as defined in the joint development agreement in favour of THDC, who possesses the relevant and required skills and other expertise for developing the property by constructing thereupon buildings and/or structure to be used for, inter alia, residential, public use, commercial use, institutional use, club use, parking and any other kind of structures, and necessary amenities, utilities, infrastruc ture thereto as may be decided by THDC and all work including investigations, studies, design, planning, financing, constructing, operations, maintenance and marketing for sale/lease/transfer to pur chasers/lessees/transferees for residential and/or any other authorized user to be determined by THDC (hereinafter referred to as the "project"). Further the S . . . to execute an irrevocable special power of attorney in favour of THDC authorised nominee . . .

(D). Under the terms and conditions of the joint development agreement, the owner is required to execute and register an irrevo cable special power of attorney (Irrevocable special power of attorney) in favour of THDC and/or its authorised nominee to facilitate THDC to carry out its duties and obligations for the execution, co-ordination and implementation of the project under the joint development agreement. In pursuance thereof, the owner hereby nominates and

35 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 appoints THDC and/or its authorized nominee to act for and in the name of and on the behalf of the owner and to do all acts and things relating to the property.

Now, know all and these presents witness that the owner hereby nominates, constitutes and appoints THDC Limited and/or its authorised nominees (the attorneys) to be the owner's true and lawful attorneys and to do the following acts, deeds, matters and things on behalf of and in the name of the owner in relation to the property that is to say.

(m) To apply to the competent authority and/or any other body (ies) and/or any other relevant statutory and/or Government authority (ies) for the time being concerned therewith for the permanent or temporary connection of power, light, water, sewerage, gas and/or other facilities to the property for the construction of the premises or any party thereof and in connection therewith to make all deposits as shall or may be necessary and to do all other acts, deeds, matters and things which the owner can do.

(n) to enter upon the property either alone or with others for the purpose of development, coordination, execution, implementation of the project and commercialisation of the property/premises . . .

(t) To amalgamate the property with any other contiguous, adjacent and adjoining lands and properties wherein developmental and/ or other rights, benefits and interests are acquired and/or proposed to be acquired and developed or proposed to be developed by THDC and/or their associate and/or group concern/s and/or utilise the FSI, FAR, DR and TDR of the contiguous, adjacent and adjoining lands for the purpose of constructing buildings and/or structures thereon and/ or on the property or utilise such lands and properties for making provision of parking spaces thereon, and/or may utilise the same for any other lawful purpose, as THDC and/or their associate and/or group concern/s may in their sale, absolute and unfettered discretion think fit.

(aa) To sell, transfer, lease, licence the premises that may be con structed on the property on ownership basis, lease, licence and/or in any other manner for such price as the attorneys may deem fit and proper. To collect and receive from the purchasers, transferees, lessees, licensees of the premises, monies/price and/or consideration and/or maintenance charges and to sign and execute and/or give proper and lawful discharge for the receipts.

(bb) to (hh) . . ."

36 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 document. To garner support, reliance was placed on the following observations in the judgment of the Supreme Court in S. Chattanatha Karayalar v. Central Bank of India Limited, AIR 1965 SC 1856 :

"The first question presented for determination in this case is whether the status of the third defendant in regard to the transaction of overdraft account is that of a surety or of a co-obligant. It was argued by Mr. Desai on behalf of the appellant that the High Court has misconstrued the contents of exhibits A and B in holding that the 3rd defendant has undertaken the liability as a co-obligant. It was submitted that there was an integrated transaction constituted by the various documents—exhibits A, B and G executed between the par ties on the same day and the legal effect of the documents was to confer on the third defendant the status of a surety and not of a co- obligant. In our opinion, the argument put forward on behalf of the appellant is well-rounded and must be accepted as correct. It is true that in the promissory note—exhibit B all the three defendants have 'jointly and severally promised to pay the Central Bank of India Ltd. or order a sum of Rs. 4 lakhs only together with interest on such sum from this date', but the transaction between the parties is contained not merely in the promissory note—exhibit B—but also in the letter of continuity dated November 26, 1946— exhibit A which was sent by the defendants to the plaintiff-bank along with promissory note— exhibit B on the same date. There is another document executed by defendant No. 1 on November 26, 1946—exhibit G-Hypothecation agreement. The principle is well-established that if the transaction is contained in more than one document between the same parties they must be read and interpreted together and they have the same legal effect for all purposes as if they are one document. In Manks v. Whiteley [1912] 1 CH 735, at page 754, (1) Moulton L. J. stated :

'Where several deeds form part of one transaction and are con temporaneously executed they have the same effect for all purposes such as are relevant to this case as if they were one deed. Each is exe cuted on the faith of all the others being executed also and is intended to speak only as part of the one transaction, and if one is seeking to make equities apply to the parties they must be equities arising out of the transaction as a whole.' "

"202. Termination of agency, where agent has an interest in sub ject-matter.— Where the agent has himself an interest in the property which forms the subject- matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest.

Illustrations

(a) A gives authority to B to sell A's land, and to pay himself, out of the proceeds, the debts due to him from A. A cannot revoke this authority, nor can it be terminated by his insanity or death.

(b) A consigns 1,000 bales of cotton to B, who has made advances to him on such cotton, and desires B to sell the cotton, and to repay himself, out of the

37 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 price the amount of his own advances. A cannot revoke this authority, nor is it terminated by his insanity or death."

To buttress her submissions, support was gathered from following observations in the judgment rendered by Delhi High Court in Harbas Singh v. Shanti Devi [1977] 13 DLT 369 :

"(7) For the purposes of the Law of Contract, therefore, it would not be useful to restrict the meaning of the word 'interest' by the nar row compass in which this world is used at times in relation to immovable property. For instance, the last sentence of section 54 of the Transfer of Property Act states that a contract for sale of itself does not create any interest in or charge on immovable property. Similarly, section 17(1)(b) of the Registration Act makes only those documents compulsorily registrable which create, declare, assign, limit or extin guish any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards to or in immovable pro perty. Since an agreement for sale does not create such a right, title or interest, it may not be compulsorily registrable. But in the context of the Contract Act, it cannot be said that a person who is the benefi ciary of an agreement of sale has no right or interest in the subject matter of the sale. He has a legally enforceable right and interest in enforcing the contract of sale by the execution of a sale deed and in getting possession of the property agreed to be sold under the pro visions of the Specific Relief Act. In the English Common Law, the specific performance of contracts was a part of the law of contract. This is why Chapter IV of the Contract Act deals with the perform ance of contracts which includes the performance of contracts relating to immovable property also. In fact, section 4 of the Transfer of Pro perty Act says that the chapters and sections of that Act which relate to contracts shall be taken as part of the Indian Contract Act, 1872. Therefore, the respondent in whose favour the appellant had exe cuted an agreement for the sale of an immovable property had an interest in the subject-matter of the contract, namely, the shop, turn the purposes of section 202 of the Contract Act if not for the purposes of the Transfer of Property and the Registration Acts."

"It is a sound rule of construction of a statute firmly established in England as far back as 1584 when—Heydon's case [1584] 3 Co. Rep 7a (V) was decided that—

'. . . for the sure and true interpretation of all Statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered :

1st. What was the common law before the making of the Act.

38 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 2nd. What was the mischief and defect for which the common law did not provide.

3rd. What remedy the Parliament hath resolved and appointed to cure the disease of the Commonwealth, and

4th. The true reason of the remedy ; and then the office of all the judges is always to make such construction as shall suppress the mis chief, and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief, and "pro privato com modo", and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, "pro bono publico".'

In In re Mayfair Property Co. [1896] 2 Ch 28, at page 35 (W) Lind ley, M. R. in 1898 found the rule 'as necessary now as it was when Lord Coke reported Heydon's case'. In (v) Eastman Photographic Material Company v. Comptroller General of Patents, Designs and Trade Marks [1898] AC 571 at page 576 Earl of Halsbury re-affirmed the rule as follows : 'My Lords, it appears to me that to construe the statute in question, it is not only legitimate but highly convenient to refer both to the former Act and to the ascertained evils to which the former Act had given rise, and to the later Act which provided the remedy. These three being compared I cannot doubt the conclusion'."

"No rule is more firmly established than the principles enunciated in Heydon's case. which have been continually cited with approval not only by the English Courts but also by the Privy Council as well as this court. The principles laid down in Heydon's case have been enunciated in Craies on Statute Law, 6th edition. at page 96 as follows :

'That for the sure and true interpretation of all statutes in general (be they penal or beneficial restrictive or enlarging of the common law), four things are to be discerned and considered : (1) what was the common law before the making of the Act, (2) What was the mis chief and defect for which the common law did not provide, (3) What remedy Parliament hath resolved and appointed to cure the disease of the commonwealth and (4) The true reason of the remedy. And then the office of all the judges is always to make such construction as shall suppress the mischief and advance the remedy, and to suppress sub tle inventions and evasions for the continuance of the mischief and pro privato commodo, and to add force and life to the cure and remedy according to the true intent of the makers of the Act pro bono publico.'

These rules are still in full force and effect, with the addition that regard must now be had not only to the existing law but also to prior legislation and to the judicial interpretation thereof. The court applied the rule enunciated in Heydon's case and in Bengal Immunity Company Ltd. v. State of Bihar [1955] 2 SCR 603 in the construction of article 286 of the Constitution."

39 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 deed of conveyance (sale deed). In the absence of a deed of conveyance duly stamped and registered as required by law, no right, title or interest in an immovable property can be transferred. Any contract of sale which is not a registered deed of conveyance would fall short of the requirements of sections 54 and 55 of the 1882 Act and will not confer any title nor transfer any interest in an immovable property except to the limited right granted under section 53A of the 1882 Act. The following observations were referred to (page 12) :

"24. We therefore, reiterate that immovable property can be legally and lawfully transferred/conveyed only by a registered deed of conveyance. Transactions of the nature of 'GPA sales' or 'SA/GPA/WILL transfers' do not convey title and do not amount to transfer, nor can they be recognized or valid mode of transfer of immovable property. The courts will not treat such transactions as completed or concluded transfers or as conveyances as they neither convey title nor create any interest in an immovable property. They cannot be recognized as deeds of title, except to the limited extent of section 53A of the Transfer of Property Act. Such transactions cannot be relied upon or made the basis for mutations in Municipal or Revenue Records. What is stated above will apply not only to deeds of conveyance in regard to free hold property but also to transfer of leasehold property. A lease can be validly transferred only under a registered Assignment of Lease. It is time that an end is put to the pernicious practice of SA/GPA/WILL transactions known as GPA sales . . .

40 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 39. It would be apt to notice undisputed facts as discernible from the record of the case. The assessee is a member of Punjabi Co-operative House Building Society Ltd. who owned 21.2 acres of land in Village Kansal, District Mohali. Certain members were owning plots measuring 500 square yards whereas others were holding plots of 1,000 square yards. On advertisement having been floated by the society to develop a group housing commercial project and do development as per the municipal building bye- laws, HASH – a developer approached them with proposal for the development of the property. HASH in turn due to paucity of funds with it for constructing the building and/or structures entered into an agreement with THDC for the said purpose. The executive committee of the society decided to appoint HASH along with the joint developer THDC in terms of JDA. It was resolved that the members of the society owning plots measuring 500 square yards would receive Rs. 82,50,000 each to be paid by HASH in four instalments and one flat with super area of 2,250 square feet to be constructed by THDC. The members owning plots of 1,000 square yards were to receive double the amount of settlement of plot holders of 500 square yards. For this purpose, irrevocable power of attorney was also agreed to be executed for this purpose. The resolution of the executive committee was ratified in the general body meeting held on February 25, 2007, pursuant to which tripartite JDA was executed on the same day. The possession of the owners on land measuring 21.2 acres was recognised, vide this JDA. HASH was responsible to make the payment failing which it was the responsibility of THDC. A copy of the JDA dated February 25, 2007, has been annexed as annexure A.2 with I. T. A. No. 200 of 2013. It may be advantageous to broadly refer to various clauses of the JDA dated February 25, 2007, and irrevocable special power of attorney dated February 26, 2007. A plain reading of the JDA dated February 25, 2007, spells out that clause 1 thereof has defined various expressions. Clause 2 enumerates the description of the project. Clause 3 describes the obligations of the developers for getting building plans, designs, drawings, etc., sanctioned from the competent authority. Clause 4 deals with consideration whereas clauses 5 to 8 are relating to various aspects of project and obligations of the society and developers. Under clause 9 of the JDA, the method of transfer of ownership and rights have been prescribed. Clause 10 speaks about consent given by the society to THDC for raising finance for development and completion of project. Other clauses provide for general provisions, disclaimer partial invalidity, formation of maintenance society for the project after its completion, transfer of rights, notices and jurisdiction whereas termination under clause 14 and force majeure under clause 26 are also material clauses which had been strenuously referred by the appellants. In addition to the JDA dated February 25, 2007, irrevocable registered special power of attorney dated February 26, 2007, had also been executed by the society in favour of THDC. Various relevant clauses A, B, D and other conditions relied upon by the parties have already been reproduced in the earlier part of the judgment.

41 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 land. A combined reading of the various clauses of the JDA dated February 25, 2007, and irrevocable registered special power of attorney dated February 26, 2007, clearly shows that the developer was entitled to enter upon the property for the purposes of development, etc. For invoking section 53A of the 1882 Act, it was mandatory to establish that possession in part performance of an agreement was delivered by the transferor to the transferee. Section 53A of the 1882 Act does not define any contract but relates to a particular nature of contract where the transferee is entitled to protect his possession when he has been delivered the same in part performance of a contract. In other words, the society or its members had never parted possession of the property though under the JDA and the special power of attorney, the developer was given power to raise finance by mortgaging the property and for the purpose of registration of the charge thereon. If at all, it is to be held that possession was delivered to the developers then it would be as a licensee only. The developer was authorised to amalgamate the project and in the event of termination of the JDA, the provisions of clause 6 thereof were agreed to be surviving. The environmental clearance was the responsibility of the developer THDC/HASH out of its own sources. The Tribunal had sought to raise the presumption of delivery of possession which on the basis of the preceding analysis of factual matrix involved herein was legally not permissible. The JDA dated February 25, 2007, to be covered under section 53A of the 1882 Act was required to be a registered instrument even for purposes of enforcing civil law rights. Once it was embodied in section 2(47)(v) of the Act by incorporation, all the legal requirements of section 53A of the 1882 Act had to be complied with. In the absence of registration of such an agreement, the same was not enforceable under general law keeping in view the provisions of sections 17(1A) and 49 of the 1908 Act and at the same time, the transaction would not fall under section 2(47)(v) of the Act.

42 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 Sukhna lake as per the survey of India record including the project under consideration. Demolition of the existing structure after March 11, 2011, was also ordered. However, the apex court, vide order dated May 22, 2012, granted status quo and directed that no construction should be undertaken in the area and stayed demolition of the existing structure. The developers who were not party in CWP No. 18253 of 2009 were also impleaded therein. The society in the meantime issued letter dated January 28, 2011, to HASH for payment of the third instalment as per clause 4.1(iv) of the JDA. Vide letter dated February 4, 2011, HASH stated that the third instalment would become due only after obtaining permission to commence construction which was still pending with the Ministry of Environment and Forests. The High Court, vide order dated January 28, 2011, had already restrained the developers to start construction. The society not satisfied with the stand taken by the developers sent legal notice dated May 11, 2011, to them stating therein that time was the essence of the JDA and there was delay on their part to obtain necessary approval from the competent authority. The society gave 30 days time to the developers to make payment of the third instalment failing which the JDA was liable to be terminated. On failure of the developers to pay the instalment, the society decided to terminate the JDA, vide resolution dated June 13, 2011, and cancelled the special power of attorney on October 31, 2011, which was earlier executed in favour of the developers. Thus, willingness to perform their part of the contract was absent on the part of the developers or it could not be performed by them which was one of the condition precedents for applying section 53A of the 1882 Act. Under clause 26 of the JDA dated February 25, 2007, the principle of force majeure had been provided for, which would be applicable with full vigour in the circumstances noticed earlier. However, the Heydon's rule, in the facts as narrated hereinbefore, would not be attracted.

"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 sub stance of the matter is the income, if income does not result at all, there cannot be a tax, even tough 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,

43 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 even though an entry to that, effect might, in certain circumstances, have been made in the books of account."

This pronouncement was applied by the Supreme Court in Godhra Elec tricity Co. Ltd. v. CIT [1997] 225 ITR 746 (SC) and followed by the Cal cutta High Court in CIT v. Balarampur Commercial Enterprises Ltd. [2003] 262 ITR 439 (Cal).

First of all, it is now well-settled that Income-tax cannot be levied on hypothetical income. In CIT v. Shoorji Vallabhdas and Co. [1962] 46 ITR 144 (SC), it was held as follows (page 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 sub stance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, 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.'

The above passage was cited with approval in Morvi Industries Ltd. v. CIT [1971] 82 ITR 835 (SC) 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 (page 840) : '. . . 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'.

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'.

It follows 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 that for the purposes of taxability that the income is not hypothetical and it has really accrued to the assessee.

13, Thereafter, the Hon’ble High Court in para 46 has held under:

44 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 46. We summarise our conclusions as under : 1. Perusal of the JDA dated February 25, 2007, read with sale deeds dated March 2, 2007, and April 25, 2007, in respect of 3.08 acres and 4.62 acres, respectively, would reveal that the parties had agreed for pro rata transfer of land. 2. No possession had been given by the transferor to the transferee of the entire land in part performance of the JDA dated February 25, 2007, so as to fall within the domain of section 53A of the 1882 Act. 3. The possession delivered, if at all, was as a licensee for the deve lopment of the property and not in the capacity of a transferee.

development agreement dated 9.9.2008 entered by the assessee with

Shri Jitendra Hans is not registered. In view of the above decision of

Hon’ble P&H High Court, in absence of registered joint development

agreement, the agreement does not fall under section 53A of the 1882

Act and consequently, section 2(47)(v) does not apply. Hence, there is

no transfer of land by the assessee during the year under consideration

and consequently, the assessee is not liable to capital gains tax. Hence,

we set aside the orders of lower authorities an delete the addition of

Rs.4,05,87,159/- under the head “ long term capital gains ” and allow the

appeal of the assessee.

45 ITA No . 501/CT K/ 2014 Asse ssment Year : 20 09- 201 0 16. In the result, appeal filed by the assessee is allowed.

Order pronounced in the open court on 22 /09/2017.

Sd/- sd/-

(Pavan Kumar Gadale) (N.S Saini) JUDICIALMEMBER ACCOUNTANT MEMBER Cuttack; Dated 22 /09/2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Sri Laxmidhar Panda, Plot No.560, Patia, Bhubaneswar 2. The Respondent. ACIT, Range-2, Bhubaneswar. 3. The CIT(A)- Bhubaneswar 4. Pr.CIT- Bhubaneswar 5. DR, ITAT, Cuttack 6. Guard file. //True Copy// BY ORDER,

SR.PRIVATE SECRETARY ITAT, Cuttack