Case Law Details
Owners have entered into an agreement for development of the property and certain rights were assigned to the developer who in turn had made the substantial payment and consequently entered into the property and thereafter the transferee has taken steps in relation to construction of the building including project plan approval on 11-4-2008, then it is to be considered as transfer under section 2(47)(v) of the Income Tax Act. The fact that the legal ownership continued with the owners to be transferred to the developer at a future distant date really does not affect the applicability of section 2(47)(v) as per the reasons assigned herein above. The transferee was undisputedly willing to perform its part of the contract, in this circumstance we have to hold that there is transfer under section 2(47)(v) of the Act. Thus, the possession and control of the property is already vested with the transferee and the impugned development agreement has not been duly cancelled and it is still in operation, it has to be decided that there is a transfer under section 2(47)(v) of the Act. We have to see the real intention of the parties. As per the well known cannon of construction of document, the intention generally prevails over the word used and that such a construction placed on the word in a deed as is most agreeable to the intention of the parties. There are grounds appearing from the face of the instrument affording proof of the real intention of the parties, then that intention would prevail against the obvious and ordinary meaning of the words used. Entering into the property and handing over of the possession was instantaneous thus entire conspectus of the case has attracted the provision of section 45 of the Act on fulfillment of conditions laid down in section 53A of the Transfer of Property Act. In our opinion, the real intention of the parties herein is to be seen.
Accordingly, we decide the above issue relating to transfer of property under section 2(47)(v) of the Income Tax Act in favour of the Assessee. We also hold that clause (47) of section 2 was amended by the Finance Act, 1987 with effect from 1-4-1988 by inserting new sub-clauses (v) and (vi) there under. These two new sub-clauses provide that “transfer” includes (i) any transaction which allows possession to be retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act ; and (ii) any transaction entered into in any manner which has the effect of transferring or enabling the enjoyment of any immovable property. Therefore, under these two sub-clauses, the capital gain 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. The assessee entered into an agreement with the builder/developer for development of the impugned land and construction of flats thereon. Also, the assessee signed a development agreement dated 27-6-2006 in favour of the builder/developer and gave ossession of the property to the builder/developer. Further, the assessee acted on the impugned agreement by accepting from the builder/developer payments by cheques on different dates in the financial year 2006-07 relevant assessment year 2007-08. In view of the facts and circumstances discussed above, all the conditions of sub- clause (v) of section 2(47) are satisfied in this case and therefore, it has to be inferred that a “transfer” did take place within the meaning of section 2(47)(v). The argument that the deeds in respect of the sale of flats were not registered/executed is not a relevant consideration so far as provisions of sub-clause (v) of section 2(47) are concerned. The completion of “transfer” of an immovable property as per the general law is not a requirement for the applicability of the provisions of sub-clause (v) of section 2(47). Thus, the taxability of long term capital gains only taxed in the financial year 2006-07 relevant to assessment year 2007-08 and ordered accordingly.
Full Text of the ITAT Order is as follows:-
These cross appeals by the Revenue and by the assessee are directed against the order of the Commissioner (Appeals)-4,Chenaai dated 8-2-2016.
2. The assessee has raised the following grounds :
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