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Income Tax Appellate Tribunal, MUMBAI BENCHES “B”, MUMBAI
Before: Shri Joginder Singh, & Shri Rajesh Kumar
Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 31/10/2012 of the ld. First Appellate Authority, Mumbai. The only ground raised by the Revenue pertains to deleting the addition of long term capital gain of Rs.1,10,74,463/- holding that no capital gain arose to the assessee.
2 Mehrunnisa Jagirdar
During hearing, the ld. DR, Shri Randhir Gupta, advanced arguments, which are identical to the ground raised by contending that for A.Y. 2002-03, on this very transaction, the assessee herself declared long term capital gain, when the Assessing Officer founds flaws in her computation and the assessee herself claimed that the date of agreement was 25/11/2000, therefore, capital gains, if any, would be in A.Y. 2001-02 and the assessee had been changing stand as per her convenience.
2.1. On the other hand, ld. counsel for the assessee, Shri B.N. Rao, defended the conclusion arrived at in the impugned order by contending that long term capital gain was rightly granted to the assessee.
2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee declared loss of Rs.65,672/- in her return filed on 20/07/2001 by claiming long term capital gain on sale of immovable property. The assessee entered into a development agreement with M/s Pepeyon Developers Pvt. Ltd. dated 25/11/2000. Statement of Shri Mahesh Sadarangani, of K. Raheja Universal pvt. Ltd. was recorded. The contention of the assessee was that the development agreement was not honored by the developers and as such they did not pay the full amount of 5 crores to the assessee and only Rs.2,90,00,000/- was paid and further the developer did not carry out any work till date. The Assessing Officer held that capital gains to the extent of 3 Mehrunnisa Jagirdar Rs.1,10,74,463/- accrued to the assessee and thus addition was made to the income of the assessee.
2.3. The assessee preferred appeal before the ld. Commissioner of Income Tax (Appeals), wherein, it was held that no transfer involved within the meaning of section 2(47) r.w.s. 53(a) of the transfer of the property Act, as the assessee was in the possession of the property and the possession was to be given to the developer only upon the last payment and till then the assessee had a right to revoke the agreement, therefore, it was held that no capital gain arose to the assessee.
2.4. The Revenue is aggrieved and is in appeal before this Tribunal. Before coming to any conclusion, we are reproducing hereunder the relevant finding recorded in the impugned order:-
“ 3.9 I have given a careful consideration to the aforesaid arguments of the Ld. AR. Looking to the matrix of facts and the legal position, 1 am of the considered view that there is no 'transfer' involved within the meaning of section 2(47) r.w.s. 53(a) of the Transfer of ·Property Act, 1882. The appellant was always in possession of the property and never transferred the same to the developer either physically or in the records of the Municipal Corporation of Greater Mumbai. Further, the theory of 'part performance' as per the TP Act is also not applicable in the case of the appellant. Furthermore, the development agreement dated 25-11- 2000 has been terminated and the matter is under litigation before Hon'ble Mumbai High Court, the A.O. has presumed that the development agreement is still in-force and that is why he has started the computation of 4 Mehrunnisa Jagirdar Rs. 5 crores. However, the fact of the matter is that the said development agreement has been terminated by the appellant. As regards to the argument that the sum of Rs. 2,90,00,000/ - received by the appellant in pursuance of the development agreement and that this sum is still lying with the appellant, why the appellant should not be taxed on account of LTCG on this amount? To' this question, the Ld. AR has drawn my attention to the fact that even if for argument sake, this sum is taxed as LTCG there would not be any tax liability as the indexed cost is higher than (Rs. 3,85,70,000/ -) the consideration.
3.10 In addition to the above, the Id. AR has relied upon the decision of Mumbai Tribunal in the case of General Glass Co. (P) Ltd. Vs. DCIT reported in (2007) 108 TIJ (Mum) 854 and DCIT Vs. Asian Distributors Ltd. reported in (2001) 70 TIJ (Mum) 88. In the case of General Glass Co., it is held that" Where payment of balance consideration within stipulated time is essence of the agreement of sale and such payments are not made in time by the transferee, such a contract does not confer any right on the transferee as envisaged under s. 53A of the Transfer of Property Act) 1882) and provisions of s. 2(47)(v) cannot be applied in such a situation-When transferee demonstrates that he is unwilling to perform his obligations under the agreement) the date of agreement ceases to be relevant". In the case of Asian distribution Ltd., it is held that Capital gains-Transfer-Property development agreement- Assessee owner of land entered into contract with developers- Under the: agreement, possession of property to be given to developers only upon payment of last installment and till then, assessee had a right to revoke the agreement in certain eventualities - Last installment due in May, 1988-Transaction is not transfer either under s. 2(47)(v) of the IT Act or s. 53A of the Transfer of Property Act, 1882, but is a mere licence to the developers to enter upon the land within the meaning of s. 52 of the Easements Act, 1882-No transfer of land having taken 5 Mehrunnisa Jagirdar 31st March, 1988, no capital gains tax was chargeable in the asst. yr. 1988-89". On going through the facts of the case and the decision referred by the Id. AR, I am of the opinion that the case laws are quite relevant in the case of the appellant since, the possession of the property was to be given to the developer only upon last payment and till then the appellant had a right to revoke the agreement in certain eventualities such as in the instant case that of obtaining NOC from the flat owners and receipt of total consideration by the appellant. In view of this also, there is no transfer in terms of Section 2(47)(v) of the I.T. Act and hence, no capital gain arises to the appellant. Therefore, the A.O. is directed to recompute the income of the appellant accordingly. The ground of appeal is allowed.”
2.5. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition, and analyzed, following facts are emerging:-
The appellant entered into development agreement with the developer M/ s Papeyon Developers Put Ltd on or about 25.1- 1.2000. Copy of Development Agreement is already on your records as submitted in our paper book containing 78 pages. Clause 8 of-the Development Agreement specifies certain terms and conditions as to be complied by the appellant and Clause 9 specifies about the terms of payment to be made to the appellant by the Developer upon completion of certain terms and conditions.
2. The appellant was leqaloumer of the premises mentioned in Third Schedule to the Development Agreement admeasuring 595.13. Sq Mtrs. which is part of land mentioned in First Schedule.
6 Mehrunnisa Jagirdar
The appellant agreed to transfer the premises admeasuring 595.13 Sq Mtrs. as more specifically mentioned in Third Schedule to the said agreement and obtain the No Objection /Consent from the tenants of Jagir Apartments so that uninterrupted construction activity could take place.
The appellant expressed her inability to obtain the No Consent from the tenant of the property as more mentioned In Second Schedule to the Development Agreement. Thereafter by their letter dated 31.5.2004, the developer M/s Papeyon Developers Pvt Ltd., agreed to take the responsibility of getting NOC I consent letter from the tenants of Jagir Apartments.
By virtue of this, conditions specified in Clause 8 were relaxed and the developer was obliged to make payment as mentioned in Clause 9 since the other conditions were fulfilled and the condition of obtaining No Objection I Consent from the flat owners of Jagir Apartment was relaxed in so far as the responsibility was accepted by the developer absolving the appellant from that task I compliance. 6. However, even after a year has passed after this arrangement, the developer has not come forward with the balance payments and hence in May 2005, the appellant, through her advocate, issued a legal notice to the developers to comply with the terms and conditions of the agreement for which the developers through their advocates wrote a letter to withdraw and no other payment commitments were made by them. 7. In light of the fact that the developer had no bona fide intention of making payment to the appellant, appellant took a strong stand of canceling the agreement by issuing public notices in August, 2005 copies of which are already placed on your records. 8. The developer was summoned by the Assessing Officer during the reopened assessment proceedings wherein the developer's 7 Mehrunnisa Jagirdar representative admitted that the matter is not settled and is in litigation as on the date of hearing. 9. The public notice was issued and the physical possession of the premises was retained by the appellant and even today the physical possession is with the appellant through her sons to whom the property is gifted to them on or about 23.08.2005. No physical possession is enjoyed by the developer i.e., the Transferee. Copy of gift deed is enclosed for your reference. 10. The Developer filed a writ before the Hon'ble High Court after completion of more than three years and hence the application. suffers from the bar of limitation. 11. Since the appellant has received part payment of Rs. 290 lacs only as against the agreed value of Rs. 500 lacs and a constructed flat of 2400 Sq Ft. area with certain cost attached to it, the appellant will be certainly liable for making good the payment even alongwith interest if the Court directs or if the parties come to consent terms. But certainly, the land will not be parted and will be with the appellant both tri terms of legal ownership and constructive possession.
2.6. If the totality of facts are analyzed, undisputedly, the assessee entered into a development agreement with M/s Papeyon Developers Pvt. Ltd. to develop the plot of land for which the developer was to pay a consideration of Rs.5 crores and to handover the flat measuring 2400 sq. ft., built up area, in the proposed new building for a consideration of Rs.25 lakh. However, the assessee was paid Rs.2,90,00,000/- on various dates, pursuant to the development agreement but the remaining amount of Rs.2,10,00,000/- remained unpaid. The developer neither started the work nor paid the balance amount of Rs.2,10,00,000/-, therefore, the assessee issued a legal notice as well as notice in the newspapers and 8 Mehrunnisa Jagirdar 23/08/2005. The assessee showed long term capital gain in A.Y. 2002-03 as nil as the possession of the property in question always remained with the assessee. However, the Assessing Officer in view of the development agreement dated 25/11/2000 held that the capital gain to the extent of Rs.1,10,74,463/- accrued to the assessee during the year under consideration. On appeal, the ld. Commissioner of Income Tax (Appeals) decided in favour of the assessee, against which the Revenue is in appeal before this Tribunal. However, if the aforementioned facts, reproduced at pages 5 to 7 of this order are analyzed, it can be concluded that the property was not transferred within the meaning of section 2(47)(v) of the Act r.w.s 53A of the transfer of Property Act. Even, the condition of the development agreement could not reach to finality due to non-payment of specified amounts (clause-9 of the agreement) by the transferee, due to which, agreement was unilaterally canceled, therefore, we find merit in the claim of the assessee. Our view is fortified by the decision in the case of General Glass Company Pvt. Ltd. vs DCIT (14 SOT 32) (Mum.) and Asian Distributors Ltd. (2001) 70 TTJ (Mum) 88, wherein, it was held that where the payment of balance consideration within stipulated time is essence of the agreement of sale and such payments are not made within time by the transferee, such contract/agreement does not confer any righty on the transferee as envisaged u/s 53A of the transfer of the Property Act along with the provisions of section 2(47)(v) of the Act. Since the possession of the property was to be given to the developer only upon 9 Mehrunnisa Jagirdar fulfillment of the conditions of the agreement i.e. last payment, therefore, there is no transfer in terms of section 2(47)(v) of the Act, thus, we affirm the stand of the ld. Commissioner of Income Tax (Appeals). Finally, the appeal of the Revenue is dismissed. This Order was pronounced in the open court in the presence of ld. representatives from both sides at the conclusion of the hearing on 19/10/2015.