|CORAM:||R. C. Sharma (AM), Vivek Varma (JM)|
|SECTION(S):||2(47)(v), 2(47)(vi), 45, 48|
|CATCH WORDS:||capital gains, Development agreement, transfer|
|DATE:||February 25, 2015 (Date of pronouncement)|
|DATE:||March 9, 2015 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 2(47)(v)/(vi): Land ceases to be a capital asset on date of application for conversion into N. A. land. Pursuant to amendment to s. 53A of TOP Act , non-registered development agreement does not result in transfer u/s 2(47)(v). Law in Chaturbhuj Dwarkadas Kapadia 260 ITR 491 (Bom) does not apply after amendment to s. 53A|
(i) The land ceased to be a capital asset from the date when assessee filed application before the Bangalore Development Authority for conversion of land from ‘agriculture’ to non-agriculture. The intent of the assessee to hold the land as ‘stock in trade’ is further established by the fact that in the records of Revenue Department land was registered as ‘N.A. Land’ without which no residential project could be carried thereon. The approval of plans to construct residential villas by BDA further proves the intention of the appellants to treat the land as commercial asset. Thus various steps taken by the assessee are very much part of business activities involved in real estate development.
(ii) Amendment made in section 53A in 2001 is also relevant wherein an additional condition for registration of the written agreement was introduced as a result of which if the agreement between transferor and transferee is not registered, the transferor can dispossess the transferee from the property. Simultaneously, a consequential amendment was also been made in The Registration Act, 1908 to provide that unless the documents containing contracts to transfer any immoveable property for the purpose of section 53A of the TOPA is registered, it shall not have effect for the purposes of section 53A of the TOPA. A perusal of the Section reveals that registration of document is a sine qua non for applicability of section 53A of TOPA which entitles the transferee to remain in possession of the property.
(iii) In the instant case, Development Agreement was executed on stamp paper of Rs. 100/- and the same was not registered, hence, provisions of section 2(47)(v) of the Act are not applicable since the conditions stipulated in section 53A of TOPA are fulfilled.
(iv) With respect to the decision of the Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia 260 ITR 491, we found that the said decision is not applicable because the said decision was in the context of transfer of capital asset. Although the said decision was rendered in February 2003 the assessment year under its consideration was A.Y.1996-97. Further for the purpose of assessment of capital gains in the said case, all the conditions specified in Section 53A of the TOPA were satisfied. Hence, the judgment was delivered qua the law prevailing in the year of the transaction. Accordingly, the Hon’ble Bombay High Court has discussed all the conditions required to be complied under Section 53A of the TOPA, other than the condition of registration, since the law provided only five conditions at the time. Thus the case of Chaturbhuj Dwarkadas Kapadia (supra) is of no help to Revenue to bring the transaction within the purview of section 53A of TOPA. As provisions of section 53A was amended in 2001 by which additional condition of registration of the written agreement was introduced and since in the instant case the agreement was not registered, the decision rendered by Hon’ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia 260 ITR 491 with respect to relevant provisions of section 53A applicable in A.Y. 1996-97 will not be applicable to the facts of instant case. We can therefore safely conclude that the conditions stipulated in section 53A of TOPA are not satisfied n the case of assessee as discussed above, there is no transfer as per the provisions of section 2(47) of the Act.