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DATE: November 20, 2017 (Date of pronouncement)
DATE: December 23, 2017 (Date of publication)
AY: 2008-09
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CITATION:
S. 2(47)(v): Immovable property can be regarded to have been transferred on the date of execution of the Development Agreement and irrevocable General Power of Attorney only if the terms indicate that complete control is given to the developer. If the entire consideration is not received by the assessee and physical possession of the property is not parted with, there is no transfer u/s 2(47)(v)

What binds this Court is that the judgment of the Division Bench in the case of Chaturbhuj Dwarkadas Kapadia v/s. Commissioner of Income Tax (2003) 260 ITR 491 (Bom). The Division Bench held that the date of contract is relevant provided the terms of the contract indicate passing off or transferring of complete control over the property in favour of the developer. The Division Bench laid down the test for determining the date which should be taken into account for determining the relevant accounting year in which the liability accrues. Admittedly, on the date of execution of the development agreement, the entire consideration was not received by the respondent assessee. The physical possession of the property subject matter of development agreement was parted with by the respondent assessee on 1st March, 2008. It was held that on that day, complete control over the property was passed on to the developer

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DATE: September 28, 2016 (Date of pronouncement)
DATE: October 15, 2016 (Date of publication)
AY: 2008-09
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CITATION:
S. 2(47)(v): Entire law on whether entering into a "joint development agreement" with the builder and handing over possession/ power of attorney amounts to a "transfer" and gives rise to capital gains explained. Chaturbuj Dwarkadas Kapadia 260 ITR 491(Bom) explained/ distinguished

It is generally seen that there may be several stages or events arising in a joint development arrangement made between owner of the land and the developer. For the purpose of determining the actual date of transfer of the land by the land owner, all these stages / events needs to be collectively analsysed and after evaluating overall effect of the same we can determine the actual date of transfer. These stages / events may be described as date of entering into JDA, date of executing power of attorney authorising the developer for taking various approvals / permissions etc., handing over the possession of the land to the developer for various purposes, receipt of part / full sale consideration from the developer, date of execution of power of attorney in favour of developer authorising him for the sale of developed units to the customers at his absolute discretion; and transfer of developed units to the customers etc. There may be few more stages / events to complete the transaction. Though, one single event may trigger the process of transfer but may not necessarily complete it also. Whether the transfer has, in substance, taken place, can be determined by analysing the inter-play and effect of all these stages / events combined and put together. For example, possession may be given for various purposes, viz. possession given to a contractor, or to a tenant also, but such an event in itself cannot be regarded as “transfer” of land. Possession of land may also be handed over as licensee only for the purpose of development of real estate on land. Here again, it shall not give rise to “transfer”. Thus, when the possession is given along with other legal rights to the developer resulting into entitlement of the developer for full use and enjoyment of the property as well as its further sale after converting it into developed units at its full, own and sole discretion, then it may result into ‘transfer’ provided other conditions also suggest so. Thus, handing over of the possession has to be necessarily coupled with the intention of transferring the rights of ownership and enjoyment of the property to the developer. Handing over of the possession for the limited purpose of developing the land while still retaining the ownership and control of various legal rights upon the property by the land owner would not fall in clause (v) of section 2(47)

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DATE: July 22, 2015 (Date of pronouncement)
DATE: July 28, 2015 (Date of publication)
AY: 2007-08
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CITATION:
S. 2(47)(v)/(vi): Entire law on whether the entering into a joint development agreement with an irrevocable power of attorney in favour of the developer results in a "transfer" for purposes of capital gains explained

The concept of possession to be defined is an enormous task to be precisely elaborated. “Possession” is a word of open texture. It is an abstract notion. It implies a right to enjoy which is attached to the right to property. It is not purely a legal concept but is a matter of fact. The issue of ownership depends on rule of law whereas possession is a question dependent upon fact without reference to law. To put it differently, ownership is strictly a legal concept and possession is both a legal and a non-legal or pre-legal concept. The test for determining whether any person is in possession of anything is to see whether it is under his general control. He should be actually holding, using and enjoying it, without interference on the part of others. It would have to be ascertained in each case independently whether a transferee has been delivered possession in furtherance of the contract in order to fall under Section 53A of the 1882 Act and thus amenable to tax by virtue of Section 2(47)(v) read with Section 45 of the Act

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DATE: June 30, 2015 (Date of pronouncement)
DATE: July 10, 2015 (Date of publication)
AY: 2010-11
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CITATION:
Development Agreement: Tax implications of entering into a development agreement in respect of land held as stock-in-trade explained

What the assessee has got today is only a right to sell the 1,28,940.26 fts of constructed area in the Alexandria project and the profits, howsoever certain they may appear to be, will only fructify and be realized, and can even be quantified, only when this right is exercised- in part or in full. That stage has not yet come, and until that stage comes, such profit cannot be taxed

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DATE: June 23, 2015 (Date of pronouncement)
DATE: July 8, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 2(47)(v): Even if possession is handed over to the developer, there is no "transfer" if the developer has only paid an interest-free advance to the assessee to meet expenses

The provisions of section 2(47)(v) of the Act can only be invoked where absolute possession of capital asset was given to the buyer against certain consideration, but in the instant case no consideration was ever fixed for handing over the possession to the developer and whatever amount was received it was received as interest free advance to meet the expenses to be incurred in discharging certain responsibilities agreed upon in this agreement. Therefore, from any angle there is no transfer of asset as per provisions of section 2(47) of the Act and capital gain would only be chargeable in the years in which stock-in-trade would be sold

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DATE: February 25, 2015 (Date of pronouncement)
DATE: March 9, 2015 (Date of publication)
AY: 2008-09
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CITATION:
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

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

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DATE: November 14, 2014 (Date of pronouncement)
DATE: November 17, 2014 (Date of publication)
AY: 2001-02
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CITATION:
S. 2(47((v)/(vi): Mere execution of a development agreement does not result in a "transfer" if the approval of the municality is delayed and the developer has not started work

The assessee had received advance amounts much earlier to the execution of development agreement, probably on the strength of the MOU. The property was encumbered with tenancy rights of many persons and the release of tenancy right was completed only …

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