{"id":11002,"date":"2015-07-28T17:17:11","date_gmt":"2015-07-28T11:47:11","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?p=11002"},"modified":"2015-07-28T17:17:11","modified_gmt":"2015-07-28T11:47:11","slug":"c-s-atwal-vs-cit-punjab-haryana-high-court-s-247vvi-entire-law-on-whether-the-entering-into-a-joint-development-agreement-with-an-irrevocable-power-of-attorney-in-favour-of-the-developer-resu","status":"publish","type":"post","link":"https:\/\/itatonline.org\/archives\/c-s-atwal-vs-cit-punjab-haryana-high-court-s-247vvi-entire-law-on-whether-the-entering-into-a-joint-development-agreement-with-an-irrevocable-power-of-attorney-in-favour-of-the-developer-resu\/","title":{"rendered":"C. S. Atwal vs. CIT (Punjab & Haryana High Court)"},"content":{"rendered":"

Against the judgement of the ITAT Chandigarh Bench in Charanjit Singh Atwal vs. Income-tax Officer<\/a> \/[2013] 144 ITD 528, the High Court had to consider the following issues relating to the taxability of capital gains pursuant to a Joint development assessment (JDA) with a developer coupled with an irrevocable general power of attorney: <\/p>\n

(i) The scope and legislative intent of Section 2(47)(ii), (v) and (vi) of the Act;<\/p>\n

(ii) The essential ingredients for applicability of Section 53A of 1882 Act;<\/p>\n

(iii) The meaning to be assigned to the term \u201cpossession\u201d?<\/p>\n

(iv) Whether in the facts and circumstances, any taxable capital gains arises from the transaction entered by the assessee?<\/p>\n

HELD by the High Court revering the Tribunal:<\/p>\n

(i) Clause (vi) of Section 2(47) of the Act, as explained by CBDT in its circular No.495 dated 23.9.1987, makes it clear that it was intended to cover those cases of transfer of ownership where the prospective buyer becomes owner of the property by becoming a member of a company, cooperative society etc. In the present case, JDA was executed between the society and the developers and there was no transaction involving the developer becoming member of a cooperative society\/company etc. in terms of Section 2(47) (vi) of the Act. The surrender of right to obtain plot by the members was for facilitating the society to enter into the JDA with the developers. There was no change in the membership of the society as contemplated under Section 2 (47)(vi) of the Act. Equally Clause (ii) of Section 2(47) of the Act has no applicability in as much as there was no extinguishment of any rights of the assessee in the capital asset at the time of execution of JDA in the absence of any registered conveyance deed in favour of the transferee in view of judgments in Alapati Venkataramiah vs. CIT, (1965) 57 ITR 185 (SC) and Additional CIT vs. Mercury General Corporation (P) Limited, (1982) 133 ITR 525 (Delhi);<\/p>\n

(ii) Section 53A of 1882 Act has been bodily transposed into Section 2(47)(v) of the Act and the effect of it would be that Section 53A of 1882 Act shall be taken to be an integral part of Section 2 (47)(v) of the Act. In other words, the legal requirements of Section 53A of 1882 Act are required to be fulfilled so as to attract the provisions of Section 2(47)(v) of the Act. Section 53-A of Act is clear to the effect that the person claiming benefit under it, must have “taken possession of the property”. This can happen, if the transferee was delivered physical possession of the property. It can also happen when a symbolical delivery of possession was effected, such as by attornment of the existing lease over such property. Where the contemplated transfer relates to an undivided share, Section 53-A takes a different colour. The reason is that, there cannot be delivery of possession of property by a co-owner, of an undivided property, or the corresponding taking possession of such property by the transferee; <\/p>\n

(iii) The concept of possession to be defined is an enormous task to be precisely elaborated. \u201cPossession\u201d 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;<\/p>\n

(iv) On facts, perusal of the JDA dated 25.2.2007 read with sale deeds dated 2.3.007 and 25.4.2007 in respect of 3.08 acres and 4.62 acres respectively would reveal that the parties had agreed for pro-rata transfer of land. No possession had been given by the transferor to the transferee of the entire land in part performance of JDA dated 25.2.2007 so as to fall within the domain of Section 53A of 1882 Act. The possession delivered, if at all, was as a licencee for the development of the property and not in the capacity of a transferee. Further Section 53A of 1882 Act, by incorporation, stood embodied in section 2(47)(v) of the Act and all the essential ingredients of Section 53A of 1882 Act were required to be fulfilled. In the absence of registration of JDA dated 25.2.2007 having been executed after 24.9.2001, the agreement does not fall under Section 53A of 1882 Act and consequently Section 2(47)(v) of the Act does not apply;<\/p>\n

(v) Viewed from another angle, it cannot be said that any income chargeable to capital gains tax in respect of remaining land had accrued or arisen to the assessee in the facts of the case. In Commissioner of Income Tax, Bombay City vs. Messrs Shoorji Vallabhdas & Co. (1962) 46 ITR 144 (SC) it was observed that income tax is a levy on income and where no income results either under accrual system or on the basis of receipt, no income tax is exigible. In CIT vs. Excel Industries Limited (2013) 358 ITR 295 (SC) held that income tax cannot be levied on hypothetical income. Income accrues when it becomes due but it must also be accompanied by a corresponding liability of the other party to pay the amount. Only then can it be said that for the purposes of taxability, the income is not hypothetical and it has really accrued to the assessee. (Chaturbhuj Dwarkadas Kapadia vs. Commissioner of Income Tax, (2003) 260 ITR 491 (Bom), CIT vs. K.Jeelani Basha, (2002) 256 ITR 282 (Mad), Commissioner of Income Tax vs. G.Saroja, (2008) 301 ITR 124 (Mad), Suraj Lamp & Industries (P) Ltd v. State of Haryana ( 2012) 340 ITR. 1(SC) referred)<\/p>\n","protected":false},"excerpt":{"rendered":"

The concept of possession to be defined is an enormous task to be precisely elaborated. \u201cPossession\u201d 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<\/p>\n

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