Commissioner Of Income Tax vs Balbir Singh Maini

5. The Respondents before us are members of the Punjabi Cooperative Housing Building Society Ltd. The society consisted of 95 members and was the owner of 21.2 acres, of which 500 square yards plots were held by 65 members, 1000 square yards plots by 30 members and the remaining 4 plots of 500 square yards each were being retained by it. The bone of contention in the present appeal is a tripartite Joint Development Agreement (JDA) dated 25.02.2007 for 7 development of 21.2 acres of land in the village Kansal. This JDA was entered into between the owner i.e. Punjabi Cooperative Housing Building Society Ltd., Hash Builders Pvt. Ltd., Chandigarh (HASH) and Tata Housing Development Company Ltd. (THDC). Under the JDA, it was agreed that HASH and THDC viz., the developers, will undertake to develop 21.2 acres of land owned and registered in the name of the society. The agreed consideration was to be disbursed by THDC through HASH to each individual member of the society, and different amounts and flats were payable and allotable to members having different plot sizes. The developers were to make payments in four instalments. A sum of Rs.3.87 crores was paid on execution of the JDA. Rs.15.48 crores was to be paid against a registered sale deed for land of an equivalent value of 3.08 acres, earmarked on the demarcation plan annexed to the JDA, which was effected by a registered conveyance dated 02.03.2007. The second instalment payment, being Rs. 23.22 crores, was for land of an equivalent value of 4.62 acres, also earmarked on the demarcation plan, which was effected by a registered deed of conveyance dated 8 25.04.2007. The third instalment payment of Rs.31.9275 crores was to be made within six months from the date of execution of the agreement or within two months from the date of approval of plans/design and drawings and grant of the final license to develop, whichever was later. This was to be for land of an equivalent value of 6.36 acres, also earmarked on the demarcation plan. The balance payment of Rs.31.9275 crores was to be made within two months from the date of the last payment, towards full and final settlement of the entire payment of Rs. 106.425 crores, for which a registered sale deed for land of an equivalent value being 7.14 acres, also earmarked on the demarcation plan, was to be conveyed.

6. The developers made payments only up to the 2 nd instalment payment, and 7.7 acres of land was conveyed as mentioned, which we have been reliably informed, has since suffered payment of capital gains tax for assessment years 2007-2008 & 2008-2009. The problem which arose for the subsequent assessment years was that, due to pending proceedings, first in the Punjab and Haryana High Court and 9 thereafter in the Delhi High Court, the necessary permissions for development were not granted, as a result of which the JDA did not take off the ground. For the previous year relevant to the assessment year 2007-08, the assessee filed an original return of income on 07.12.2007, declaring an income of Rs.2,50,171/-. The return of income tax for the assessment year was later revised, on 07.10.2009, declaring an income of Rs.30,08,606/-, which included capital gains of Rs.27,58,436/-. According to the assessee, Rs.36 lakhs received in the subsequent assessment year 2008-09 were also offered for tax under the head “capital gains”.

7. The Assessing Officer vide an order dated 30.12.2009, passed under Section 143(3) of the Act, held that since physical and vacant possession had been handed over under the JDA, the same would tantamount to “transfer” within the meaning of Sections 2(47)(ii), (v) and (vi) of the Income Tax Act. He further held that, in the case of an assessee owning a 1000 square yards plot, the full value of consideration would be Rs.3.675 10 crores less cost of acquisition of Rs.12,81,724/-. The long term capital gain was, therefore, stated to be Rs.3,54,68,276/-.

8. The Commissioner (Appeals) dismissed the appeal upholding the order passed by the Assessing Officer. Aggrieved by the order, the assessee filed appeal before the Income Tax Appellate Tribunal (ITAT), which was also dismissed by the ITAT.

“(iv) Payment being Rs. 31,92,75,000/- (Rupees Thirty one crores ninety two lacs seventy five thousand only) calculated @ Rs 24,75,000/- (Rs. Twenty four lacs seventy five thousand only) per plot holder of 500 Sq. yard and Rs 49,50,000/-( Rupees Forty nine lacs fifty thousand only) per plot holder of 1000 Sq.

yards, to be made to the Owner and / or the respective members of the Owner ( as the case may be), within six (6) months from the date of execution of this Agreement or within two (2) months from the date of approval of the plans/ Design and Drawings and grant of the final license to develop whereupon the construction can commence, whichever is later against which the Owner shall execute a registered sale deed for land of equivalent value being 6.36 Acres out of the Property as demarcated in green colour (also hatched in green colour) in the Demarcation Plan annexed hereto as Annexure V and bearing Khasra nos. 123/15, 123/6, 123/7 (balance 20 part), 123/3 (part), 123//4//1/1, 123///4//1/2, 123//4/2, 123//5/1, 123//5/2, 123//5/3, 112/24 (part);

31,92,75,000/- (Rupees Thirty one crore ninety two lacs seventy five thousand only) calculated @ Rs. 24,75,000/- (Rs. Twenty four lacs seventy five thousand only) per plot holder of 500 Sq. yards and Rs. 49,50,000/-, ( Rupees Forty nine lacs fifty thousand only) per plot holder of 1000 Sq yards, to be made to the Owner and /or the respective members of the Owner (as the case may be ), within two (2) months from the date of the Payment made as per Clause 4.1 (iv) mentioned hereinabove, towards full and final settlement of payment, after adjustment of the above said Rs. 3,87,00,000/- (Rupees Three Crores eighty seven lacs only) paid as adjustable Advance/ Earnest Money as mentioned hereinabove, against which the Owner shall execute a registered sale deed for land of equivalent value being 7.14 Acres being the balance out of the Property as demarcated in orange colour (also hatched in orange colour ) in the Demarcation Plan annexed hereto as Annexure V and bearing Khasra nos. 123/3 (balance part), 112/24 (balance part), 112/25,113///21//1, 122//1/1, 122//1/2, 122//1/3, 122//10/1, 122//10/2, 122//11/1, 122//11/2, 122//12, 122/19, 122//22/1, 122//22/2, 122//23//2/1 (bal. part), 122//17/3/2 (balance part).” Under clause 9, transfer of ownership/rights of property are stated as follows:

2.3 The Owner hereby irrevocably and unequivocally grants and assigns all its Development Rights in the Property to THDC to develop the Property and undertake the Project at its own costs, efforts and expenses whereupon the Developers shall be entitled to apply for and obtain necessary sanctions, licenses and permissions from all the Concerned Authorities for the commencement, development and completion of the Project on the Property.”

(v) And the Balance Payment being Rs.

45. Capital gains - (1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G and 54H, be chargeable to income-tax under the head “Capital gains”, and shall be deemed to be the income of the previous year in which the transfer took place.

33 ownership to the developer. At the highest, possession alone is given under the agreement, and that too for a specific purpose

-the purpose being to develop the property, as envisaged by all the parties. We are, therefore, of the view that this clause will also not rope in the present transaction.

29. We are, therefore, of the view that the High Court was correct in its conclusion, but for the reasons stated by us hereinabove. The appeals are dismissed with no order as to costs.

October 04, 2017.