Ita/270/2013 Of Punjabi Coop.house Building Soc v. Commr. Of Income Tax Chd.& Anr

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA No.270 of 2013 (O&M)Date of decision: July 31, 2015 Punjabi Cooperative House Building Society .....- Appe Vs, The Commissioner of Income Tax, Chandigarh and another ....mespondent CORAM: HON BLE MR. JUSTICK AJAY KUMAR MITTALHON BLE MR. JUSTICE FATEH DEEP SINGH Present: Ms.Radhika Suri, Advocate with Ms. Rinku Dahiya, Advocatefor the appellant. Ms. Urvashi Dhugga, Advocate for the revenue. Ajay Kumar Mittal,J, 1]This order shall dispose of ITA Nos.270 of 2013 and 50 of2014 as the issue involved in both the appeals 1s common. However, thefacts are being extracted from ITA No.270 of 2013. ? ITA No.270 of 2013 has been filed by the assessee-appellant under Section 260A of the Income Tax Act, 1961 (in short, “the Act’)against the order dated 29.7.2013, Annexure A.3 passed by the Income Tax ITA No.270 of 2013 (O&M) Appellate Tribunal, Chandigarh 'B'’ Bench Chandigarh (in short, “theTribunal) in ITA No.556/Chd/2012 for the assessment year 2007-08.3]Briefly, the facts as narrated in ITA No.270 of 2013 necessaryfor adjudication of the controversy involved may be noticed. The appellant-assessee 1S a society formed on 23.4.1998. It purchased land measuring 21.2acres in Village Kansal for an amount of=a6,16,07,029/-. The purchaseprice was contributed by the members of the society. The society allottedplots measuring 500 square yards to 65 members, 1000 square yards to 30members and four plots of 500 square yards were retained by the society. Itentered into a tripartite Joint Development Agreement dated 25.2.2007 (inshort, “JDA’”) with Hash Builders Private Limited, Chandigarh (for brevitHASH”) and Tata Housing Development Company Limited, Mumbai(THDC). Under the JDA, it was agreed that HASH and THDC ("thedevelopers’) shall undertake development of 21.2 acres of land owned andregistered in the name of the society in respect of which it would givedevelopment rights 1n lieu of consideration. The agreed consideration was tobe disbursed by THDC through Hash to each individual member of thesociety having plot size of 500 square yards partly in monetary terms (=82.50 lacs in cash) and balance in terms of built up property (one flatmeasuring 2250 square feet). Clause 4 of the JDA provided the followingschedule:- a) Payment ofTL3 lacs per plot holder of 500 square yards and}46 lacs per plot holder of 1000 square yards upon execution ofthe JDA as adjustable advance. b) Payment of <12 lacs per plot holder of 500 square yards and424 lacs per plot holder of 1000 square yards to be made uponexecution of the JDA against execution of a registered sale deed by the society in favour of THDC for land of equivalent valuebeing 3.08 acres having specific Khasra nos. as mentioned inthe JDA. c) Payment ofLT18 lacs per plot holder of 500 square yards and<a36 lacs per plot holder of 1000 square yards to be madewithin two months of execution of the JDA against execution ofanother registered sale deed by the society in favour of THDCfor land of equivalent value being 4.62 acres. d) Payment of|L24.75 lacs per plot holder of 500 square yardsand=a49.50 lacs per plot holder of 1000 square yards to bemade within six months from the date of execution of the JDAor within two months from the date of the approval of theplans/design and drawings and grant of final licence to developwhereupon construction can commence, whichever was later,against execution of another registered sale deed by the societyin favour of THDC for land of equivalent value being 6.36aCres. e) Balance payment of“a24.75 lacs per plot holder of 500square yards and|Ty49.50 lacs per plot holder of 1000 squareyards to be made within two months from the date of paymentas per clause (d) above, towards full and final settlement ofpayments after adjustment of the advance/earnest moneyagainst execution of another registered sale deed by the societyin favour of THDC for land of equivalent value being 7.14aCIics e) Balance payment of“a24.75 lacs per plot holder of 500square yards and|Ty49.50 lacs per plot holder of 1000 squareyards to be made within two months from the date of paymentas per clause (d) above, towards full and final settlement ofpayments after adjustment of the advance/earnest moneyagainst execution of another registered sale deed by the societyin favour of THDC for land of equivalent value being 7.14aCIics 1) Each member having plot of 500 square yards was entitled toreceive one built up apartment having super area of 2250 squarefeet and each member having plot of 1000 square yards wasentitled to two built up apartments having super area of 2250square feet after transfer of land in the name of THDC.Allotment letters were to be issued by THDC within twomonths from the date of obtaining approval to commenceconstruction at the site. Copies of the minutes of the ExecutiveCommittee of the society dated 4.1.2007 and JDA dated 25.2.2007 are attached as Annexures A.|l and A.2 respectivelwith the appeal. Clause 14 of the agreement further providedthat in case of termination of the JDA, lands registered in thename of THDC upto the date of termination shall remain withTHDC and the balance lands to be transferred shall not betransferred in favour of THDC. 4The developers made payments only upto clause (c) above 1.e,upto second installment and till date only part of the land measuring 7.7acres 1.e. 3.08 acres plus 4.62 acres having specific khasra nos. asmentioned in the JDA and plan attached thereto have actually beenregistered in the name of THDC. Subsequently, substantial disputes arosebetween the society on the one hand and the developers on the other withregard to further payments to be made in terms of the JDA 1.e. from clause(d) onwards. The appellant, who had been allotted 1000 square yards of plotin the society was, as per the JDA, entitled to receive monetaryconsideration of|v3,30,00,000/- and four furnished flats of 2250 square feeteach. The appellant actually received proportionate amount ofL66 lacs. 4 For the previous year relevant to the assessment year 2007-08,the appellant filed original return of income at nil after claiming deductionunder Section 80P of the Act. In the original return, the appellant did notoffer to tax any amount under the JDA on the ground that there was notransfer to THDC during the year under consideration and also becauseownership as well as possession of the land still vested 1n the society. 6.The Assessing Officer vide order dated 29.12.2010, AnnexureA.| passed under Section 143(3) of the Act held that since as per the JDA, there was grant and assignment of various rights in the property by the ITA No.270 of 2013 (O&M) 4 For the previous year relevant to the assessment year 2007-08,the appellant filed original return of income at nil after claiming deductionunder Section 80P of the Act. In the original return, the appellant did notoffer to tax any amount under the JDA on the ground that there was notransfer to THDC during the year under consideration and also becauseownership as well as possession of the land still vested 1n the society. 6.The Assessing Officer vide order dated 29.12.2010, AnnexureA.| passed under Section 143(3) of the Act held that since as per the JDA, there was grant and assignment of various rights in the property by the ITA No.270 of 2013 (O&M) possession, the same tantamount to “transfer”. The Assessing Officerframed a protective assessment holding that the appellant was liable tocapital gains on the entire consideration receivable ofv234 crores relatingto transfer of land and construction of 126 flats. The Assessing Officer alsotaxed the appellant on substantive basis on the amount receivable under theJoint development agreement on consideration of=a7,35,00,000/- relating tothe four plots of which 1t was owner. The Assessing Officer applied theprovisions of Section 2(47)(v) of the Act read with Section 53A of theTransfer of Property Act, 1882 (in short, “the 1882 Act’) which providesthat any transaction involving allowing the possession of any immovableproperty to be taken or retained in part performance of contract of the naturereferred to 1n Section 53A of the 1882 Act shall be treated as “‘transfer’’ fopurposes of the Act. Since the JDA was signed on 25.2.2007 1.e. during theprevious year relevant to assessment year 2007-08, the Assessing Officercomputed chargeable capital gains in that year. It was also held that therewas ‘transfer’ within the meaning of sub sections (11) and (v1) of Section 2(47) of the Act. The appellant challenged the order passed by the assessingOfficer before the Commissioner of Income Tax (Appeals) |CIT (A)]. Videorder dated 12.12.2011, Annexure A.2, the CIT(A) upheld the order passedby the Assessing Officer in framing substantive assessment on aconsideration of <a7,35,00,.000/- which was the amount receivable for thefour plots owned by the appellant under the JDA. The revenue and theappellant filed appeals before the Tribunal. The appellant on the basis ofthe terms of the JDA and subsequent material events contended before theTribunal that the action of the Assessing Officer 1n bringing to tax the entire ITA No.270 of 2013 (O&M) 6 consideration receivable under the JDA under the head ‘capital gains’ waslegally unsustainable. Vide order dated 29.7.2013, Annexure A.3, theTribunal upheld the order of the Assessing Officer bringing to tax the entireconsideration receivable under the JDA as hable for tax under the head‘capital gains’ following its order passed 1n the case of|C.§. Atwal vs. IThalrelation to the four plots owned by the Society. In nut shell, the Tribunalheld that technically there was transfer in terms of Section 2(47)(v) of theAct read with Section 53A of the 1882 Act. The entire considerationreceivable under the JDA was thus held to be taxable in the hands of theappellant. The Tribunal also affirmed the determination of notional value offlat by applying rate ofL4500 per square feet. The issue of allowability ofexemption under section 54F of the Act was rejected by the Tribunalfollowing tis order 1nCS. Atwal'Ss case and the exemption under Section 5of the Act was denied on the ground that the same was available only in thecase of residential house and as the asset transferred was a plot, theexemption under section 54 could not be granted. ToWe have heard learned counsel for the parties.§ In our recent judgment dated 22.7.2015 rendered in ITA No.200of 2013 (C.S.Attwal vs.The Commissioner ofIncome Tax, Ludhiana and another), the following issues emerged for consideration:- 1) scope and legislative intent of Section 2(47)(11), (v) and (v1)of the Act;of the Act; 11) the essential ingredients for applicability of Section 53A of1882 Act;1882 Act; ToWe have heard learned counsel for the parties.§ In our recent judgment dated 22.7.2015 rendered in ITA No.200of 2013 (C.S.Attwal vs.The Commissioner ofIncome Tax, Ludhiana and another), the following issues emerged for consideration:- 1) scope and legislative intent of Section 2(47)(11), (v) and (v1)of the Act;of the Act; 11) the essential ingredients for applicability of Section 53A of1882 Act;1882 Act; 111) meaning to be assigned to the term “possession’” iv) whether in the facts and circumstances, any taxable capitalgains arises from the transaction entered by the assessee?gains arises from the transaction entered by the assessee? After considering the relevant statutory provisions and the case law, thefollowing conclusions were drawn:- 1]. Perusal of the JDA dated 25.2.2007 read with sale deeds dat2.3.007 and 25.4.2007 in respect of 3.08 acres and 4.62 acresrespectively would reveal that the parties had agreed for pro-ratatransfer of land.2.3.007 and 25.4.2007 in respect of 3.08 acres and 4.62 acresrespectively would reveal that the parties had agreed for pro-ratatransfer of land. 2. No possession had been given by the transferor to the transfereeof the entire land 1n part performance of JDA dated 25.2.2007 soas to fall within the domain of Section 53A of 1882 Act.of the entire land 1n part performance of JDA dated 25.2.2007 soas to fall within the domain of Section 53A of 1882 Act. 3. The possession delivered, 1f at all, was as a licencee for thedevelopment of the property and not in the capacity of atransferee.development of the property and not in the capacity of atransferee. 4. Further Section 53A of 1882 Act, by incorporation, stoodembodied in section 2(47)(v) of the Act and all the essentialingredients of Section 53A of 1882 Act were required to befulfilled. In the absence of registration of JDA dated 25.2.2007having been executed after 24.9.2001, the agreement does notfall under Section 53A of 1882 Act and consequently Section 2(47)(v) of the Act does not apply,embodied in section 2(47)(v) of the Act and all the essentialingredients of Section 53A of 1882 Act were required to befulfilled. In the absence of registration of JDA dated 25.2.2007having been executed after 24.9.2001, the agreement does notfall under Section 53A of 1882 Act and consequently Section 2(47)(v) of the Act does not apply, 5. It was submitted by learned counsel for the assessee-appellantthat whatever amount was received from the developer, capitalgains tax has already been paid on that and sale deeds have alsobeen executed. In view of cancellation of JDA dated 25.2.2007,no turther amount has been received and no action thereon hasbeen taken. It was urged that as and when any amount 1sreceived, capital gains tax shall be discharged thereon inaccordance with law. In view of the aforesaid stand, whiledisposing of the appeals, we observe that the assessee appellantsShall remain bound by their said stand.that whatever amount was received from the developer, capitalgains tax has already been paid on that and sale deeds have alsobeen executed. In view of cancellation of JDA dated 25.2.2007,no turther amount has been received and no action thereon hasbeen taken. It was urged that as and when any amount 1sreceived, capital gains tax shall be discharged thereon inaccordance with law. In view of the aforesaid stand, whiledisposing of the appeals, we observe that the assessee appellantsShall remain bound by their said stand. 6. The issue of exigibility to capital gains tax having been decidedin favour of the assessee, the question of exemption underSection 54F of the Act would not survive any longer and hasbeen rendered academic.in favour of the assessee, the question of exemption underSection 54F of the Act would not survive any longer and hasbeen rendered academic. 6. The issue of exigibility to capital gains tax having been decidedin favour of the assessee, the question of exemption underSection 54F of the Act would not survive any longer and hasbeen rendered academic.in favour of the assessee, the question of exemption underSection 54F of the Act would not survive any longer and hasbeen rendered academic. 7. The Tribunal and the authorities below were not right in holdinthe assessee-appellant to be liable to capital gains tax in respectof remaining land measuring 13.5 acres for which noconsideration had been received and which stood cancelled andincapable of performance at present due to various orderspassed by the Supreme Court and the High Court in PILs.Therefore, the appeals are allowed.”the assessee-appellant to be liable to capital gains tax in respectof remaining land measuring 13.5 acres for which noconsideration had been received and which stood cancelled andincapable of performance at present due to various orderspassed by the Supreme Court and the High Court in PILs.Therefore, the appeals are allowed.” Q_In view of the above, it 1s considered appropriate that the matteris remanded to the Tribunal to pass fresh orders after hearing learnedcounsel for the parties and 1n view of the conclusions noticed herein above.Ordered accordingly. The appeals stand disposed of. (Ajay Kumar Mittal)Judge July 31, 2015<2%< (Fateh Deep Singh)Judge