IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH ‘A’, CHANDIGARH

BEFORE SHRI T.R. SOOD, A.M AND Ms. SUSHMA CHOWLA, JM

ITA No. 738/Chd/2012 Assessment Year : 2008-09

Smt . B inde r Khokhe r V A .C . I .T . 2514 -B C i rc le 5 (1 ) , Sec to r 47-C Chand iga rh Chand iga rh AVFPK 2984 B (Appe l lan t ) (Respondent )

Appe l lan t by None Respondent by : Sh r i N.K . Sa in i

Da te o f hear ing 11 .6 .2013

Da te o f Pronouncement 31 .7 .2013

O R D E R PER T.R.SOOD, A.M

Th is appea l i s d i rec ted aga ins t the o rde r da ted 4 .6 .2012

o f the ld . CIT (A) , Chand iga rh .

2 Since the issues raised in this appeal were covered by other

group of cases and particularly the lead case in case of Shri

Charanjit Singh Atwal in ITA No. 448/Chd/2011 and therefore, we

proceeded to hear this appeal on ex-parte basis because the issues

raised are covered by the case of Shri Charanjit Singh Atwal, ITA

No. 448/Chd/2011 which has already been adjudicated by us.

3 In th i s appea l the assessee has ra i sed the fo l lowing

g rounds:

“1 That the Learned CIT(A) has erred in law and on facts in upholding reopening of proceedings U/s 147(3)/148 which were not valid as no copy of the reasons recorded were furnished to the appellant.

2 That the learned CIT(A) has taxability of capital gain on notation consideration not received by the appellant is erroneous in law. Handing over of possession of property was conditional in order to enable the builder to obtain necessary permission from the Govt. Agencies. There is no transfer of

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property as envisaged u/s 2 (47) (vi) of the Income Tax Act 1961.

3 That the learned CIT(A) has fallen in error in including the cost of f lats on estimation basis which could not be ascertained as no construct ion or other activity has been commenced by the Developer and hence no capital gains could be levied on the cost of f lats on the date of the agreement i.e. 27.04.2007. That, the Assessing Officer has fallen in error and has misconstrued the terms of the agreement dated 27.04.2007.

4 That the learned CIT(A) has also not allowed deduction u/s 54 F which was eligible to the applicant since, he has included the cost of proposed f lat in the sale consideration. “

4 The ld . DR fo r the revenue subm i t ted tha t s ince the i ssue

invo lved is same as in the case o f l ead case o f Sh r i Cha ran j i t

S ingh A twa l and there fo re same arguments may be adopted in

th i s case .

5 Ground No. 1 – A f te r cons ide r ing the submiss ions o f ld .

DR fo r the revenue and re levan t mate r ia l on reco rd , we f ind

tha t t he fac t s o f the case a re tha t o r ig ina l re tu rn o f i ncome was

p rocessed u /s 143 (1 ) o f the Ac t and la te r on no t i ce u / s 148 was

i ssued . The i ssue rega rd ing reopen ing the assessment has

been ad jud ica ted by the ld . CIT (A ) v ide pa ra 4 .2 to 4 .2 .2 . wh ich

i s as unde r :

“4 .2 I have cons ide red the fac ts o f the case . The ld . counse l o f the assessee has h imse l f ment ioned f rom the ‘ reasons reco rded ’ i n h i s submiss ions and so he is no t co r rec t in say ing tha t t he appe l lan t was no t g iven the copy o f reasons reco rded .

4 .2 .1 The a rgument o f the ld . counse l o f the assessee tha t no t i ce u /s 148 had been issued to the Soc ie ty a l so doesa no t ho ld wate r s ince the appe l lan t had been i ssued no t i ce u / s 148 a f te r reco rd ing p rope r reasons and i t i s none o f the appe l lan t ’s bus iness to po in t ou t as to wh ich o ther pe rsons had been i ssued no t ice u / s 148 .

“4.2.2 There was information available with the Assessing Officer that the appellant, being a member of M/s Defense Services Cooperat ive House Building Society Ltd., Mohali (who had 27.3 acres of land in vi l lage Kansal and had entered into an agreement with TATA and HASH for sale of land), had received Rs. 32 Lacs as considerat ion and was liable to pay

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capital gain tax on sale of land. The appellant had declared Rs. 32 Lacs only as the sale consideration for the purposes of calculation of capital gain on sale of land in the return of income originally f i led and the correct value of capital gain had not been declared. As the full value of consideration was at least Rs. 1,92,50,000.00/- (Rs. 80,00,000/- monetary consideration and Rs. 1,12,50,000/- as cost of furnished flat of 2250 sq.feet), the Assessing Off icer formed his reasons to believe that some income had escaped assessment and so issued notice u/s 147 of the Act. It has been held by Hon’ble Supreme Court in the case of ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (291 ITR 500 ) that at the stage of issue of notice u/s 148, the only question to be seen is whether there was relevant material, on the basis of which a reasonable person could have formed the requisite belief. Whether material would conclusively prove escapement of income is not the concern at the stage of issue of notice u/s 148. It is so because the formation of belief is within the realm of the subject ive sat isfact ion of the Assessing Officer. In view of this judgment of Hon’ble Supreme Court and by respectful ly following the same, the action of the Assessing Officer of reopening the assessment is upheld. Ground of appeal No. 1 is dismissed.”

S ince o r ig ina l re tu rn was p rocessed u /s 143(1 ) and the

Revenue go t in fo rmat ion la te r on tha t De fence Se rv i ces Coop

House Bu i ld ing Soc ie t y L td . has t rans fe r red the land to

deve lope rs to Ta ta Hous ing Deve lopment Company L td . and

Hash Bu i lders Pv t . L td . the re fo re , the ld . CIT (A ) has co r rec t l y

ad jud ica ted the i ssue in v iew o f the dec is ion o f Hon 'b le

Sup reme Cour t i n case o f ACIT V . Ra jesh Jhave r i S tock Broke r

Pv t . L td . 291 ITR 500 .

6 Grounds No. 2 & 3 – W e have cons ide red the submiss ions

o f the ld . DR fo r the revenue and ca re fu l l y gone th rough the

mate r ia l ava i lab le on reco rd . The ma in i ssue i s whethe r

assessee is l iab le to cap i ta l ga in tax in the yea r unde r

cons ide ra t ion i .e assessmen t yea r 2007 -08 in v iew o f t he Jo in t

Deve lopmen t Agreemen t . The assessee i s a member o f

De fence Se rv ices Coop House Bu i ld ing Soc ie t y L td . The

Soc ie t y has t rans fe r red 27 .3 ac res o f land to the Deve lope r i .e .

M/s Ta ta Hous ing Deve lopment Company L td and M/s Hash

Bu i lde rs Pvt L td . A Member hav ing p lo t o f 500 sqyd was

en t i t led to moneta ry cons ide ra t ion o f Rs . 80 lakhs and

fu rn i shed f la t measur ing 2250 sqf t wh ich has been es t imated by

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the Revenue a t Rs . 5000 per sqf t . W e fu r ther f ind tha t

i den t i ca l i ssue came up fo r cons ide ra t ion in the case o f Shr i

Cha ran j i t S ingh A twa l ( sup ra ) in ITA No . 448 /Chd/2011 and

o thers and i t was he ld v ide pa ra 27 to 110 as unde r :

“ 2 7 W e h a v e c o n s i d e r e d t h e r i v a l s u b m i s s i o n s a n d c a r e f u l l y g o n e

t h r o u g h t h e w r i t t e n s u b m i s s i o n s f i l e d b y b o t h t h e p a r t i e s i n t h e l i g h t

o f m a t e r i a l o n r e c o r d , p a p e r b o o k s a n d v a r i o u s j u d g m e n t s c i t e d b y t h e

p a r t i e s . T h e m a i n i s s u e i s w h e t h e r a s s e s s e e i s l i a b l e t o c a p i t a l g a i n

t a x i n t h e ye a r u n d e r c o n s i d e r a t i o n i . e a s s e s sm e n t ye a r 2 0 0 7 - 0 8 i n

v i e w o f t h e J D A . F o r c h a r g i n g c a p i t a l g a i n s , t h e c h a r g i n g s e c t i o n i s

4 5 a n d t h e r e l e v a n t p o r t i o n i s a s u n d e r : -

Sect ion 45. [ (1) ] Any prof i ts or gains ar is ing from the transfer of a capi ta l asset effected in the prev ious year shal l , save as otherwise prov ided in sect ions [54, 54B, [ [54D, [54E, [54EA, 54EB,] 54F [ 54G and 54H], be chargeable to income-tax under the head “Capi ta l gains”, and shal l be deemed to be the income of the prev ious year in which the transfer took p lace.

2 8 T h e p l a i n r e a d i n g o f t h e a b o v e p r o v i s i o n w o u l d s h o w t h a t c h a r g i n g

a n i t e m o f i n c om e u n d e r t h e h e a d ‘ C a p i t a l g a i n s ” r e q u i r e t h r e e

i n g r e d i e n t s i . e . ( i ) t h e r e s h o u l d b e s o m e p r o f i t . ( i i ) S u c h p r o f i t m u s t

b e a r i s i n g o n a c c o u n t o f t r a n s f e r a n d ( i i i ) t h e r e s h o u l d b e c a p i t a l

a s s e t w h i c h h a s b e e n t r a n s f e r r e d . T h e r e i s n o d i s p u t e t h a t a c a p i t a l

a s s e t w a s i n v o l v e d a n d t h e r e w a s s o m e p r o f i t a l s o i . e . w h y a s s e s s e e

h a s h i m s e l f r e t u r n e d i n c o m e u n d e r t h e h e a d ‘ c a p i t a l g a i n s ; . T h e

d i s p u t e i s m a i n l y o n a c c o u n t o f t r a n s f e r a n d t h a t t o o w h e t h e r t h e

t r a n s f e r c o u l d b e c o v e r e d u n d e r c l a u s e s ( i i ) , ( v ) & ( v i ) o f s e c t i o n

2 ( 4 7 ) s o a s t o b r i n g i n t o p i c t u r e t h e w h o l e o f c o n s i d e r a t i o n a r i s i n g o n

t r a n s f e r o f s u c h a s s e t s . W e s h a l l d e a l w i t h e a c h o f t h e a s p e c t i n

d e t a i l a t a p p r o p r i a t e t i m e .

2 9 . A p a r t f r o m c h a r g i n g p r o v i s i o n s u / s 4 5 a n o t h e r i m p o r t a n t

p r o v i s i o n i s s e c t i o n 4 8 w h i c h d e a l s w i t h t h e m o d e o f c o m p u t a t i o n a n d

r e l e v a n t p o r t i o n r e a d s a s u n d e r : -

48. The income chargeable under the head “Capita l gains” shal l

be computed, by deduct ing from the ful l value of the cons iderat ion

received or accru ing as a result of the transfer of the capi ta l asset

the fol lowing amounts , namely :—

( i ) expendi ture incurred whol ly and exc lusively in connect ion

wi th such transfer ;

( i i ) the cost of acquis it ion of the asset and the cost of any

improvement thereto :

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3 0 A g a i n p l a i n r e a d i n g w o u l d s h o w t h a t c a p i t a l g a i n w o u l d b e

c o m p u t e d b y c o n s i d e r i n g t h e f u l l v a l u e o f c o n s i d e r a t i o n w h e t h e r

r e c e i v e d o r a c c r u i n g a s a r e s u l t o f t h e t r a n s f e r . T h e r e f o r e , i t i s n o t

o n l y t h e c o n s i d e r a t i o n r e c e i v e d w h i c h i s r e l e v a n t b u t t h e

c o n s i d e r a t i o n w h i c h h a s a c c r u e d i s a l s o r e l e v a n t .

3 1 . T h e e x p r e s s i o n ‘ t r a n s f e r ’ h a s b e e n d e f i n e d u / s 2 ( 4 7 ) o f t h e

A c t w h i c h r e a d s a s u n d e r : -

2 (47) [“ t ransfer ”, in relat ion to a capi ta l asset , inc ludes,—

( i) the sale , exchange or re l inquishment of the asset ; or

( i i ) the ext inguishment of any r ights there in ; or

( i i i ) the compulsory acquis it ion thereof under any law ; or

( iv) in a case where the asset is converted by the owner thereof in to, or

is treated by h im as, s tock- in- trade of a business carr ied on by h im,

such convers ion or t reatment ; ] [or ]

[ ( iva) the matur i ty or redemption of a zero coupon bond; or ]

[ (v) any transact ion involv ing the a l lowing of the possess ion of any

immovable proper ty to be taken or reta ined in part per formance of

a contrac t of the nature referred to in sect ion 53A of the Transfer

of Property Act , 1882 (4 of 1882) ; or

(v i) any transact ion (whether by way of becoming a member of , or

acquir ing shares in, a co-operat ive soc iety , company or other

assoc iat ion of persons or by way of any agreement or any

arrangement or in any other manner whatsoever) which has the

ef fec t of t ransferr ing, or enabl ing the enjoyment of , any immovable

property .

Explanat ion.—For the purposes of sub-c lauses (v) and (v i) ,

“ immovable property” shal l have the same meaning as in c lause (d) of

sect ion 269UA;]

C l a u s e s ( v ) & ( v i ) t o s e c t i o n 2 ( 4 7 ) o f t h e A c t h a v e b e e n i n s e r t e d

b y F i n a n c e A c t , 1 9 8 7 w . e . f . 1 . 4 . 1 9 8 8 . T h e p u r p o s e o f t h i s

i n s e r t i o n h a s b e e n e x p l a i n e d b y C B D T i n C i r c u l a r N o . 4 9 5 d a t e d

2 2 . 9 . 1 9 8 7 . T h e r e l e v a n t p a r t 1 1 . 1 a n d 1 1 . 2 o f t h e c i r c u l a r r e a d s

a s u n d e r : -

“11.1 The ex ist ing def ini t ion of the word " t ransfer " in sect ion 2(47) does not inc lude transfer of cer ta in r ights accru ing to a purchaser, by way of becoming a member or acquir ing shares in a co-operat ive soc iety, company, or as way of any agreement or any arrangement whereby such any bui ld ing which is e ither being constructed or which is to be constructed. Transact ions of the

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nature referred to above are not required to be regis tered under the Registrat ion Act , 1908. Such arrangements confer the pr iv i leges of ownership without transfer of t i t le in the bui lding and are a common mode of acquir ing f la ts part icular ly in mul t i-storeyed construc t ions in b ig c i tes . The def in i t ion a lso does not cover cases where possess ion is a l lowed to be taken or reta ined in part performance of a contrac t, o f the nature referred to in sect ion 53A of Transfer of Proper ty Act, 1882. New sub-c lauses (v) & (v i) have been inser ted in sect ion2(47) to prevent avoidance of capi ta l gains l iabi l i ty by recourse to transfer of r ights in the manner referred to above.

11.2 The newly inserted sub-c lause (v i) of sect ion 2(47) has brought in to the ambit of t ransfer ”, the pract ice of enjoyment of property r ights through what is commonly known as Power of At torney arrangements. The pract ice in such cases is adopted normal ly where transfer of ownership is legal ly not permit ted. A person hold ing the power of at torney is author ized the powers of owner, inc luding that of mak ing construc t ion. The legal ownership in such cases cont inues to be wi th the transferor . ”

3 2 B e f o r e i n s e r t i o n o f t h e c l a u s e ( v ) & ( v i ) t o s e c t i o n 2 ( 4 7 ) o f

t h e A c t , t h e p o s i t i o n o f l a w w a s t h a t u n l e s s a n d u n t i l a s a l e d e e d

w a s e x e c u t e d f o r t r a n s f e r o f i m m o va b l e p r o p e r t y , t h e s a m e c o u l d

n o t b e c o n s t r u e d a s t r a n s f e r f o r t h e p u r p o s e o f c h a r g i n g c a p i t a l

g a i n t a x . T h i s w a s p a r t i c u l a r l y s o i n t h e l i g h t o f v a r i o u s j u d g m e n t s

p a r t i c u l a r l y t h e j u d g m e n t o f H o n ' b l e A p e x C o u r t i n t h e c a s e o f

A l a p a t i V e n k a t r a m i a n v C I T ( 5 7 I T R 1 8 5 ) ( S C ) . I n t h i s c a s e i t w a s

h e l d t h a t i n t h e c o n t e x t o f t r a n s f e r f o r t h e p u r p o s e o f c a p i t a l g a i n

t a x , w h a t i s m e a n t b y t r a n s f e r i s t h e e f f e c t i v e c o n v e ya n c e o f t h e

c a p i t a l a s s e t b y a t r a n s f e r o r t o t h e t r a n s f e r e e . D e l i ve r y o f

p o s s e s s i o n a n d a g r e e m e n t t o s e l l b y i t s e l f c o u l d n o t c o n s t i t u t e

c o n v e ya n c e o f t h e i m m o v a b l e p r o p e r t y . I n t h e m e a n t i m e a p a r t

f r o m t h i s d e c i s i o n a p r a c t i c e c a m e i n t o v o g u e b y w h i c h c e r t a i n

p r o p e r t i e s w e r e b e i n g t r a n s f e r r e d w i t h o u t e x e c u t i n g t h e p r o p e r

s a l e d e e d s . T h i s w a s b e i n g d o n e b e c a u s e t h e r e w a s r e s t r i c t i o n o n

s a l e o f p r o p e r t i e s i n v a r i o u s t o w n s e . g . i n c a s e o f l e a s e h o l d p l o t s

a n d f l a t s i n D e l h i i f t h e s am e w e r e t o b e t r a n s f e r r e d , p e r m i s s i o n

w a s r e q u i r e d t o b e t a k e n f r o m t h e G o v e r n m e n t / D D A a n d

t r a n s f e r o r w a s r e q u i r e d t o p a y 5 0 % o f t h e m a r k e t v a l u e – c o s t ( i . e .

u n e a r n e d i n c r e a s e ) t o t h e G o v e r n m e n t . T o a v o i d s u c h p a ym e n t s

a n d / o r a l s o t o a v o i d t h e p a ym e n t o f s t a m p d u t y o r c u m b e r s o m e

p r o c e d u r e o f o b t a i n i n g p e r m i s s i o n , s o m e p r o p e r t i e s w e r e b e i n g

s o l d b y w a y o f s a l e a g r e e m e n t a n d a l s o e x e c u t i o n o f G e n e r a l

P o w e r O f A t t o r n e y a n d p o s s e s s i o n w a s g i v e n o n r e c e i p t o f f u l l

c o n s i d e r a t i o n w i t h o u t e x e c u t i n g t h e p r o p e r s a l e d e e d s e t c . w h i c h

a s m e n t i o n e d e a r l i e r w a s n o t e v e n p e r m i s s i b l e i n s o m e c a s e s .

T h e s e t r a n s a c t i o n s a r e p o p u l a r l y c a l l e d “ p o w e r o f a t t o r n e y ”

t r a n s a c t i o n s . T o a vo i d t h e s e a n d t o s t o p t h e l e a k a g e o f R e v e n u e ,

t h e P a r l i a m e n t h a s i n s e r t e d c l a u s e s ( v ) & ( v i ) t o s e c t i o n 2 ( 4 7 ) s o

a s s u c h t yp e o f t r a n s a c t i o n s a r e a l s o b e b r o u g h t i n t o t a x a t i o n n e t .

H o w e v e r , i n t e r p r e t a t i o n s o f t h e s e c l a u s e s h a s l e d t o l o t o f

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l i t i g a t i o n a n d t h e m a i n p o i n t o f l i t i g a t i o n w a s t h a t a t w h a t p o i n t o f

t i m e t h e p o s s e s s i o n c a n b e s a i d t o h a v e b e e n g i v e n . I n t h e p r e s e n t

c a s e , t h e R e v e n u e h a s m a i n l y r e l i e d o n t w o d e c i s i o n s n am e l y ( i )

C h a t u r b h u j D w a r k a d a s K a p a d i a v C I T 2 6 0 I T R 4 9 1 ( B o m . ) a n d ; ( i i )

A u t h o r i t y f o r A d v a n c e R u l i n g ( A A R ) N e w D e l h i i n t h e c a s e o f J a s b i r

S i n g h S a r k a r i a 2 9 4 I T R 1 9 6 .

3 3 . I n t h e c a s e o f C h a t u r b h u j D w a r k a d a s K a p a d i a v C I T ( s u p r a ) ,

t h e f a c t s b e f o r e t h e H o n ' b l e B o m b a y H i g h C o u r t w e r e t h a t

a s s e s s e e w h o w a s a n i n d i v i d u a l h a d 4 4 / 1 9 2 u n d i v i d e d s h a r e i n

a n i m m o v a b l e p r o p e r t y i n G r e a t e r B o m b a y w h i c h c o n s i s t e d o f

v a r i o u s l a n d s a n d b u i l d i n g s . B y A g r e e m e n t d a t e d A u g u s t 1 8 ,

1 9 9 4 , t h e a s s e s s e e a g r e e d t o s e l l t o F l o r e a t I n v e s t m e n t L t d ,

( h e r e i n r e f e r r e d t o ‘ F l o r e a t ’ ) h i s s h a r e o f i m m o v a b l e p r o p e r t y f o r a

t o t a l c o n s i d e r a t i o n o f R s . 1 , 8 5 , 6 3 , 2 2 0 / - w i t h r i g h t t o s a i d F l o r e a t

t o d e v e l o p t h e p r o p e r t y i n a c c o r d a n c e w i t h t h e r u l e s / r e g u l a t i o n s

f r a m e d b y l o c a l a u t h o r i t i e s . F o r t h i s p u r p o s e , t h e a s s e s s e e a l s o

a g r e e d t o e x e c u t e a l i m i t e d p o w e r o f a t t o r n e y a u t h o r i z i n g F l o r e a t

t o d e a l w i t h t h e p r o p e r t y a n d a l s o o b t a i n p e r m i s s i o n s a n d

a p p r o v a l s f r o m v a r i o u s a u t h o r i t i e s . U n d e r c l a u s e 1 1 o f t h e

a g r e e m e n t , i t w a s p r o v i d e d t h a t a f t e r F l o r e a t w a s g i v e n a n

i r r e v o c a b l e l i c e n s e t o e n t e r u p o n t h e a s s e s s e e ’ s s h a r e o f p r o p e r t y

a n d a f t e r F l o r e t i n v e s t m e n t h a v e o b t a i n e d a l l n e c e s s a r y a p p r o v a l s ,

t h e F l o r e t w a s e n t i t l e d t o d e m o l i s h v a r i o u s b u i l d i n g s f o r s e t t l i n g

t h e c l a i m s o f t h e t e n a n t s . U n d e r c l a u s e 1 4 o f t h e a g r e e m e n t , t h e

a s s e s s e e w a s e n t i t l e d t o r e c e i v e p r o p o r t i o n a t e r e n t t i l l t h e

p a ym e n t o f l a s t i n s t a l l m e n t s a n d t i l l t h a t t i m e a s s e s s e e w a s b o u n d

t o p a y a l l o u t g o i n g s . U n d e r c l a u s e 2 0 o f t h e A g r e e m e n t , i t w a s

a g r e e d t h a t s a l e s h a l l b e c o m p l e t e d b y e x e c u t i o n o f c o n v e ya n c e ,

h o w e v e r , t i l l t h e m a t t e r w a s a d j u d i c a t e d b y t h e H o n ' b l e H i g h C o u r t ,

n o c o n v e ya n c e w a s e x e c u t e d . P u r s u a n t t o t h i s a g r e e m e n t , F l o r e a t

o b t a i n e d v a r i o u s p e r m i s s i o n s n a m e l y ( i ) c l e a r a n c e f r o m C R Z

A u t h o r i t y d a t e d F e b r u a r y 7 , 1 9 9 6 ; ( i i ) l e t t e r f r o m U L C f o r

r e d e v e l o pm e n t o f p r o p e r t y d a t e d A p r i l 2 6 , 1 9 9 5 . O t h e r

p e r m i s s i o n s w e r e a l s o o b t a i n e d d u r i n g t h e f i n a n c i a l ye a r e n d i n g

M a r c h 3 1 , 1 9 9 6 r e l e v a n t t o a s s e s s m e n t ye a r 1 9 9 6 - 9 7 . B y M a r c h ,

3 1 , 1 9 9 6 , F l o r e a t h a d p a i d a l m o s t t h e e n t i r e c o n s i d e r a t i o n e x p e c t

f o r a s m a l l s u m o f R s . 9 , 9 8 , 0 0 0 / - . H o w e v e r , t h e c om m e n c e m e n t

c e r t i f i c a t e p e r m i t t i n g c o n s t r u c t i o n o f t h e b u i l d i n g w a s i s s u e d o n

N o v e m b e r 1 5 , 1 9 9 6 . T h e p o w e r o f a t t o r n e y w a s e x e c u t e d o n

M a r c h 1 2 , 1 9 9 9 . T h e q u e s t i o n a r o s e w h e t h e r l i a b i l i t y o f t h e

a s s e s s e e f o r c a p i t a l g a i n a r o s e i n t h e a s s e s sm e n t ye a r 1 9 9 6 - 9 7 o r

1 9 9 9 - 2 0 0 0 . T h e o b s e r v a t i o n o f t h e C o u r t h a s b e e n s u m m a r i ze d i n

h e a d n o t e a s u n d e r : -

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“ C l a u s e s ( v ) a n d ( v i ) w e r e i n t r o d u c e d i n s e c t i o n 2 ( 4 7 ) o f t h e I n c o m e - t a x A c t , 1 9 6 1 , w i t h e f f e c t f r o m A p r i l 1 , 1 9 8 8 . T h e y p r o v i d e t h a t “ t r a n s f e r ” i n c l u d e s ( i ) a n y t r a n s a c t i o n w h i c h a l l o w s p o s s e s s i o n t o b e t a k e n / r e t a i n e d i n p a r t p e r f o r m a n c e o f a c o n t r a c t o f t h e n a t u r e r e f e r r e d t o i n s e c t i o n 5 3 A o f t h e T r a n s f e r o f P r o p e r t y A c t , 1 8 8 2 , a n d ( i i ) a n y t r a n s a c t i o n e n t e r e d i n t o i n a n y m a n n e r w h i c h h a s t h e e f f e c t o f t r a n s f e r r i n g o r e n a b l i n g t h e e n j o y m e n t o f a n y i m m o v a b l e p r o p e r t y . T h e r e f o r e , i n t h e s e t w o c a s e s c a p i t a l g a i n s w o u l d b e t a x a b l e i n t h e y e a r i n w h i c h s u c h t r a n s a c t i o n s a r e e n t e r e d i n t o , e v e n i f t h e t r a n s f e r o f t h e i m m o v a b l e p r o p e r t y i s n o t e f f e c t i v e o r c o m p l e t e u n d e r t h e g e n e r a l l a w . U n d e r s e c t i o n 2 ( 4 7 ) ( v ) a n y t r a n s a c t i o n i n v o l v i n g a l l o w i n g o f p o s s e s s i o n t o b e t a k e n o v e r o r r e t a i n e d i n p a r t p e r f o r m a n c e o f a c o n t r a c t o f t h e n a t u r e r e f e r r e d t o i n s e c t i o n 5 3 A o f t h e T r a n s f e r o f P r o p e r t y A c t w o u l d c o m e w i t h i n t h e a m b i t o f s e c t i o n 2 ( 4 7 ) ( v ) . I n o r d e r t o a t t r a c t s e c t i o n 5 3 A , t h e f o l l o w i n g c o n d i t i o n s n e e d t o b e f u l f i l l e d . T h e r e s h o u l d b e a c o n t r a c t f o r c o n s i d e r a t i o n ; i t s h o u l d b e i n w r i t i n g ; i t s h o u l d b e s i g n e d b y t h e t r a n s f e r o r ; i t s h o u l d p e r t a i n t o t r a n s f e r o f i m m o v a b l e p r o p e r t y ; t h e t r a n s f e r e e s h o u l d h a v e t a k e n p o s s e s s i o n o f t h e p r o p e r t y ; l a s t l y , t h e t r a n s f e r e e s h o u l d b e r e a d y a n d w i l l i n g t o p e r f o r m h i s p a r t o f t h e c o n t r a c t . E v e n a r r a n g e m e n t s c o n f i r m i n g p r i v i l e g e s o f o w n e r s h i p w i t h o u t t r a n s f e r o f t i t l e c o u l d f a l l u n d e r s e c t i o n 2 ( 4 7 ) ( v ) . S e c t i o n 2 ( 4 7 ) ( v ) w a s i n t r o d u c e d i n t h e A c t f r o m t h e a s s e s s m e n t y e a r 1 9 8 8 - 8 9 b e c a u s e p r i o r t h e r e t o , i n m o s t c a s e s , i t w a s a r g u e d o n b e h a l f o f t h e a s s e s s e e t h a t n o t r a n s f e r t o o k p l a c e t i l l e x e c u t i o n o f t h e c o n v e y a n c e . A s s e s s e e s u s e d t o e n t e r i n t o a g r e e m e n t s f o r d e v e l o p i n g p r o p e r t i e s w i t h b u i l d e r s a n d u n d e r t h e a r r a n g e m e n t w i t h t h e b u i l d e r s , t h e y u s e d t o c o n f e r p r i v i l e g e s o f o w n e r s h i p w i t h o u t e x e c u t i n g c o n v e y a n c e a n d t o p l u g t h a t l o o p h o l e , s e c t i o n 2 ( 4 7 ) ( v ) c a m e t o b e i n t r o d u c e d i n t h e A c t .

… … … … … .

H e l d , t h a t s e c t i o n 2 ( 4 7 ) ( v ) r e a d w i t h s e c t i o n 4 5 i n d i c a t e s t h a t c a p i t a l g a i n s w a s t a x a b l e i n t h e y e a r i n w h i c h s u c h t r a n s a c t i o n s w e r e e n t e r e d i n t o e v e n i f t h e t r a n s f e r o f i m m o v a b l e p r o p e r t y i s n o t e f f e c t i v e o r c o m p l e t e u n d e r t h e g e n e r a l l a w . I n t h i s c a s e , t h e t e s t h a d n o t b e e n a p p l i e d b y t h e D e p a r t m e n t . N o r e a s o n h a d b e e n g i v e n w h y t h a t t e s t h a d n o t b e e n a p p l i e d , p a r t i c u l a r l y w h e n t h e a g r e e m e n t i n q u e s t i o n , r e a d a s a w h o l e , s h o w e d t h a t i t w a s a d e v e l o p m e n t a g r e e m e n t . O n c e u n d e r c l a u s e 8 o f t h e a g r e e m e n t a l i m i t e d p o w e r o f a t t o r n e y w a s i n t e n d e d t o b e g i v e n t o t h e d e v e l o p e r t o d e a l w i t h t h e p r o p e r t y , t h e n t h e d a t e o f t h e c o n t r a c t , v i z . , A u g u s t 1 8 , 1 9 9 4 , w o u l d b e t h e r e l e v a n t d a t e t o d e c i d e t h e d a t e o f t r a n s f e r u n d e r s e c t i o n 2 ( 4 7 ) ( v ) a n d , i n w h i c h e v e n t , t h e q u e s t i o n o f s u b s t a n t i a l p e r f o r m a n c e o f t h e c o n t r a c t t h e r e a f t e r w o u l d n o t a r i s e … … ”

3 4 . T h e H o n ' b l e C o u r t r e f e r r e d t o c l a u s e s ( v ) & ( v i ) o f s e c t i o n

2 ( 4 7 ) a n d m a d e t h e f o l l o w i n g o b s e r v a t i o n s a t p a g e 4 9 9 o f t h e

r e p o r t :

“…….. T h e a b o v e t w o c l a u s e s w e r e i n t r o d u c e d w i t h e f f e c t f r o m A p r i l 1 , 1 9 8 8 . T h e y p r o v i d e t h a t “ t r a n s f e r ” i n c l u d e s ( i ) a n y t r a n s a c t i o n w h i c h a l l o w s p o s s e s s i o n t o b e t a k e n / r e t a i n e d i n p a r t p e r f o r m a n c e o f a c o n t r a c t o f t h e n a t u r e r e f e r r e d t o i n s e c t i o n 5 3 A o f t h e T r a n s f e r o f P r o p e r t y A c t , a n d ( i i ) a n y t r a n s a c t i o n e n t e r e d i n t o i n a n y m a n n e r w h i c h h a s t h e e f f e c t o f t r a n s f e r r i n g o r e n a b l i n g t h e e n j o y m e n t o f a n y i m m o v a b l e p r o p e r t y ( s e e s e c t i o n 2 6 9 U A ( d ) ) . T h e r e f o r e , i n t h e s e t w o

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c a s e s c a p i t a l g a i n s w o u l d b e t a x a b l e i n t h e y e a r i n w h i c h s u c h t r a n s a c t i o n s a r e e n t e r e d i n t o , e v e n i f t h e t r a n s f e r o f t h e i m m o v a b l e p r o p e r t y i s n o t e f f e c t i v e o r c o m p l e t e u n d e r t h e g e n e r a l l a w ( s e e K a n g a a n d P a l k h i v a l a ’ s L a w a n d P r a c t i c e o f I n c o m e - t a x - V I I I e d i t i o n , p a g e 7 6 6 ) . T h i s t e s t i s i m p o r t a n t t o d e c i d e t h e y e a r o f c h a r g e a b i l i t y o f t h e c a p i t a l g a i n s . ”

35 The above observat ions were made on the bas is of opin ion

expressed by Ld. author in the commentary – “The Law and Pract ice of

Income Tax by Kanga and Palkhivala Eighth Edit ion at page 766.

Relevant observat ions read as under :

“Cls . (v ) and (v i) of s . 2(47) , inser ted by the Finance Act 1987 with effect from 1

s t Apr i l 1988, prov ide that “ transfer ” inc ludes (a) any transact ion

which involves the a l lowing of the possess ion of an immovable proper ty (s. 269UA(d)) to be taken or reta ined in part per formance of a contract of the nature referred to in s.53A of the transfer of Proper ty Act 1882, and (b) any transact ion entered into in any manner which has the ef fec t of t ransferr ing, or enabl ing the enjoyment of , any immovable property (s. 269UA(d)) . Therefore in these two cases capita l gains would be taxable in the year in which such transact ions are entered into, even i f the transfer of the immovable property is not ef fec t ive or complete under general law.” 3 6 F r om t h e a b o v e , i t i s c l e a r t h a t C o u r t w a s o f t h e v i e w t h a t i n

c a s e a n y t r a n s a c t i o n c o v e r e d b y c l a u s e ( v ) a n d ( v i ) t o s e c t i o n

2 ( 4 7 ) t h e l i a b i l i t y f o r c a p i t o l g a i n w o u l d a r i s e o n t h e d a t e w h e n

s u c h t r a n s a c t i o n s a r e e n t e r e d i n t o . I n t h e j u d g m e n t a t s o m e o t h e r

p l a c e s , t h e s i m i l a r o b s e r v a t i o n s h a v e b e e n m a d e . H o w e v e r ,

d e s p i t e t h i s o b s e r va t i o n t h e c a s e w a s d e c i d e d i n f a v o u r o f t h e

a s s e s s e e . The reason for the same have been g iven in the judgment

i tse lf . Firs t ly i t is observed that provis ion of sect ion 2(47)(v) of the Act

were not invoked by the Revenue i tself . This becomes clear f rom the

fol lowing para:

“ I t was argued on behal f of the assessee that there was no ef fect ive transfer t i l l grant of i r revocable l icence. In th is connect ion, the judgment of the Hon'b le Supreme Court were c i ted on behalf of the assessee, but a l l those judgment were pr ior to introduct ion of the concept of deemed transfer u/s 2(47)(v) . In this mat ter, the agreement in quest ion is a development agreement . Such development agreements do not const i tu te transfer in general law. They are spread over a per iod of t ime. They contemplate var ious stages. The Bombay High Court in var ious judgments has taken the v iew in several matters that the object of enter ing into a development agreement is to enable a professional bui lder / contractor to make prof i ts by complet ing the bui ld ing and sel l ing the f la ts at a prof i t . That the aim of these professional contractors was only to make prof i ts by complet ing the bui ld ing and, therefore, no interest in the land stands created in their favour under such agreements . That such agreements are only a mode of remunerat ing the bui lder for his serv ices of construct ing the bui ld ing (see Gurudev Developers v . Kur la Konkan Niwas Co-operat ive Hous ing Soc iety [2003] 3 Mah LJ 131). I t is prec isely for th is reason that the Legis lature has introduced sect ion 2(47)(v) read with sect ion 45 which indicates that capi ta l gains is taxable in the year in which such transact ions are entered into even i f the transfer of immovable property is not effec t ive or complete under the general law. In this case that test has not been applied by the Department. No reason has been given why that test has not been appl ied, particularly when the agreement in quest ion, read as a whole, shows that it is a development agreement. There is a dif ference between the contract on the one hand and the performance on the other hand. In th is case, the Tr ibunal as wel l as

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the Depar tment have come to the conc lus ion that the transfer took place dur ing the account ing year ending March 31,1996, as substant ia l payments were effec ted dur ing that year and substant ia l permissions were obta ined. In such cases of development agreements, one cannot go by substant ia l performance of a contract . In such cases, the year of chargeabil ity is the year in which the contract is executed. This is in view of sect ion 2 (47)(v) of the Act. ” Secondly i t is ment ioned in the order of the Court that law was not ver y

c lear on th is point and s ince the assessee has admitted and paid capi ta l

gain in the Assessment year 1999-2000, therefore, tax was held to be

chargeable in Assessment year 1999-2000.

Thirdly cer tain shortcomings were a lso noted i n t h e o r d e r o f t h e

T r i b u n a l w h e r e c e r t a i n d o c u m e n t s w e r e m e n t i o n e d t o h a v e b e e n

e x e c u t e d b e f o r e M a r c h 3 1 , 1 9 9 6 e . g . t h e f o l l o w i n g o b s e r v a t i o n o f

t h e T r i b u n a l w a s n o t f o u n d c o r r e c t a s s o m e t h i n g i s d o n e o n I s t

A p r i l , 1 9 9 7 t h e n t h e s a m e c a n n o t f a l l i n t h e ye a r e n d i n g 3 1 . 3 . 1 9 9 6 .

“ F r o m t h e d a t e s i t i s e v i d e n t t h a t f r o m t h e v e r y n e x t d a y , i . e . , A p r i l 1 , 1 9 9 7 , f r o m t h e e n d o f t h e f i n a n c i a l y e a r e n d i n g o n M a r c h 3 1 , 1 9 9 6 , t h e b u i l d e r w a s u s i n g t h e w e l l w a t e r a g a i n s t p a y m e n t o f r e l e v a n t c h a r g e s t o t h e a s s e s s e e . ”

3 7 T h u s i t i s v e r y c l e a r t h a t i n c a s e s w h e r e a n a r r a n g e m e n t h a d

b e e n e n t e r e d i n t o b y a n a s s e s s e e i n t e r m s o f c l a u s e ( v ) o f S e c t i o n

2 ( 4 7 ) w h i c h h a s e f f e c t o f h a n d i n g o v e r t h e p o s s e s s i o n t h e n t h e

t r a n s f e r i s s a i d t o h a v e b e e n t a k e n p l a c e o n t h e d a t e o f e n t e r i n g

i n t o s u c h a r r a n g e m e n t .

3 8 . W e d o n o t f i n d a n y f o r c e i n t h e c o n t e n t i o n o f t h e L d .

C o u n s e l f o r t h e a s s e s s e e t h a t j u d g m e n t h a s t o b e r e a d i n t h e

c o n t e x t o f t h e d e c i s i o n m a d e i n s u c h j u d g m e n t . I n f a c t , i t i s w e l l

s e t t l e d t h a t d o c t r i n e o f p r e c e d e n t w h i c h m e a n s w h a t n e e d s t o b e

f o l l o w e d l a t e r o n p a r t i c u l a r l y b y s u b o r d i n a t e T r i b u n a l s a n d C o u r t s

i s t h e r a t i o o f a p a r t i c u l a r j u d g m e n t g i ve n b y t h e h i g h e r C o u r t o r

F o r u m . F u r t h e r , t h e r e i s n o f o r c e i n t h e c o n t e n t i o n t h a t d e c i s i o n

o f t h e H o n ' b l e B o m b a y H i g h C o u r t i n t h e c a s e o f C h a t u r b h u j

D w a r k a d a s K a p a d i a v C I T ( s u p r a ) d o e s n o t s h o w t h a t t h e d a t e o f

a g r e e m e n t i t s e l f c o n s t i t u t e t h e t r a n s f e r . A g a i n t h e r e i s n o f o r c e

e v e n i n t h e c o n t e n t i o n t h a t i n t h a t c a s e i t w a s u l t i m a t e l y d e c i d e d

t h a t c a p i t a l g a i n t a x e s i s c h a r g e a b l e i n A s s e s s m e n t ye a r 1 9 9 9 -

2 0 0 0 b e c a u s e o f t h e r e a s o n s g i v e n i n a b o v e n o t e d p a r a s

p a r t i c u l a r l y b e c a u s e t h e R e v e n u e i t s e l f n e v e r i n v o k e d t h e

p r o v i s i o n s o f s e c t i o n 2 ( 4 7 ) ( v ) o f t h e A c t a n d h e l d i t t o b e t a x a b l e

i n A s s e s s m e n t ye a r 1 9 9 6 - 9 7 . N o d o u b t i n t h a t c a s e u l t i m a t e l y i t

w a s h e l d t h a t c a p i t a l g a i n w a s i n a s s e s s m e n t ye a r 1 9 9 9 - 2 0 0 0 b u t

C o u r t h a d m a d e i t ve r y c l e a r t h a t t h i s i s f i r s t t i m e t h a t l a w i s b e i n g

l a i d d o w n a n d g u i d e l i n e s a r e b e i n g i s s u e d w h i c h m e a n s t h a t t h e r e

w a s a c o n f u s i o n e a r l i e r . C l a u s e s ( v ) & ( v i ) t o s e c t i o n 2 ( 4 7 ) w e r e

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i n t r o d u c e d i n t h e ye a r o n l y i n 1 9 9 8 . P e r h a p s C o u r t t o o k a l e n i e n t

v i e w b e c a u s e o f t h e s e r e a s o n s a n d h e l d t h a t c a p i t a l g a i n w a s

t a x a b l e i n A s s e s s m e n t ye a r 1 9 9 9 - 2 0 0 0 . I t i s q u i t e c l e a r t h a t

r a t i o o f t h e a b o v e d e c i s i o n i s t h a t i n c a s e o f a n y a r r a n g e m e n t s

o r t r a n s a c t i o n s w h e r e b y t h e o t h e r p a r t y b e c o m e s e n t i t l e d to

e n j o y t h e p r o p e r t y t h e n t h a t d a t e o f s u c h t r a n s a c t i o n i t s e l f

n e e d s t o b e c o n s t r u e d a s t h e d a t e o f t r a n s f e r .

3 9 . T h e s e c o n d r e l e v a n t d e c i s i o n c i t e d b y t h e R e v e n u e i s b y

A u t h o r i t y f o r A d v a n c e R u l i n g ( A A R ) N e w D e l h i i n t h e c a s e o f J a s b i r

S i n g h S a r k a r i a ( s u p r a ) . I n t h a t c a s e t h e a s s e s s e e w a s c o - o w n e r

o f a g r i c u l t u r a l l a n d m e a s u r i n g a b o u t 2 7 . 7 a c r e s a n d h i s s h a r e w a s

4 / 9 . T h e c o - o w n e r d e c i d e d t o d e v e l o p t h e l a n d b y c o n s t r u c t i n g

r e s i d e n t i a l c o m p l e x t h r o u g h d e v e l o p e r a n d e n t e r e d i n t o a

C o l l a b o r a t i o n a g r e e m e n t o n 8 . 6 . 2 0 0 5 w i t h M / s S a n t u r D e v e l o p e r

P v t L t d , N e w D e l h i ( h e r e i n a f t e r c a l l e d ‘ D e v e l o p e r ’ ) . A c c o r d i n g t o

t h e t e r m s o f a g r e e m e n t , t h e D e v e l o p e r s h o u l d o b t a i n a l e t t e r o f

i n t e n t f r o m t h e c o n c e r n e d g o v e r n m e n t d e p a r t m e n t a n d o b t a i n o t h e r

p e r m i s s i o n s a n d s a n c t i o n s f o r d e v e l o p i n g t h e l a n d a t i t s o w n r i s k

a n d c o s t . T h e D e v e l o p e r w a s t o t a k e 8 4 % o f t h e b u i l t u p a r e a a n d

b a l a n c e 1 6 % w o u l d b e l o n g t o a s s e s s e e a n d o t h e r c o - o w n e r . T h e

c o n s i d e r a t i o n f o r t h e a g r e e m e n t w a s t a k e n a s t h e b u i l t u p a r e a t o

b e h a n d e d o v e r t o t h e o w n e r s f r e e o f c o s t . T h e o w n e r s w e r e

e n t i t l e d t o v i s i t t h e s i t e i n o r d e r t o r e v i e w t h e p r o g r e s s o f t h e

p r o j e c t . I t w a s c l a r i f i e d b y c l a u s e 1 8 t h a t o w n e r s h i p w o u l d r e m a i n

e x c l u s i v e l y w i t h t h e o w n e r s t i l l i t v e s t s w i t h b o t h t h e p a r t i e s a s p e r

t h e i r r e s p e c t i v e s h a r e s o n t h e c o m p l e t i o n o f t h e p r o j e c t . T h e o t h e r

c l a u s e s a n d t h e s t e p s i n t h e a g r e e m e n t w e r e t h a t a s u m o f R s . 1

c r o r e t o w a r d s p a ym e n t o f e a r n e s t m o n e y a t t h e t i m e o f e n t e r i n g

i n t o a g r e e m e n t ; a s p e c i a l p o w e r o f a t t o r n e y w a s t o b e e x e c u t e d i n

f a v o u r o f t h e D e v e l o p e r t o e n a b l e t o d e a l w i t h t h e S t a t u t o r y

a u t h o r i t i e s e t c . f o r o b t a i n i n g n e c e s s a r y a p p r o v a l s / s a n c t i o n s ;

l e t t e r o f i n t e n t w a s t o b e o b t a i n e d n o t l a t e r t h a n M a r c h 8 , 2 0 0 6

a n d i n c a s e o f a f a i l u r e t o d o s o , t h e a g r e e m e n t s h a l l s t a n d

t e r m i n a t e d . L e t t e r o f i n t e n t i s b a s i c a l l y a l i c e n s e g r a n t e d b y t h e

D i r e c t o r o f T o w n P l a n t i n g t o D e v e l o p e r o f l a n d f o r t h e p u r p o s e o f

c o n s t r u c t i n g r e s i d e n t i a l f l a t s s u b j e c t t o p a ym e n t o f c e r t a i n c h a r g e s

a n d c o m p l i a n c e o f o t h e r c o n d i t i o n s . I t w a s f u r t h e r s t a t e d i n t h e

a g r e e m e n t t h a t o n f u l f i l lm e n t o f t h e r e q u i r e m e n t i n t h e l e t t e r o f

i n t e n t , o w n e r s w i l l h a v e t o e x e c u t e i r r e v o c a b l e g e n e r a l p o w e r o f

a t t o r n e y i n f a v o u r o f t h e D e v e l o p e r a u t h o r i z i n g t h e D e v e l o p e r t o

t o o k a n d s e l l t h e d w e l l i n g u n i t s o u t o f d e v e l o p e r ’ s s h a r e a n d

c o l l e c t t h e m o n e y f o r t h e s a m e . H o w e v e r , f i n a l l y s a l e d e e d s c o u l d

b e e x e c u t e d o n l y a f t e r t h e o w n e r r e c e i v e d t h e i r s h a r e o f

c o n s t r u c t e d a r e a . T h r e e m o n t h s l a t e r , a s u p p l em e n t a r y a g r e e m e n t

w a s e n t e r e d o n S e p t e m b e r 1 5 , 2 0 0 5 b e t w e e n t h e a s s e s s e e a n d

o t h e r c o - o w n e r s a n d D e v e l o p e r s t h r o u g h w h i c h i t w a s a g r e e d t h a t

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o w n e r s w i l l s e l l t h e i r 1 6 % s h a r e i n t h e b u i l t u p a r e a t o t h e

D e v e l o p e r o r i t s n o m i n e e f o r c o n s i d e r a t i o n o f R s . 4 2 c r o r e s . A s u m

o f R s . 2 c r o r e s w a s r e c e i v e d . T h i s c o l l a b o r a t i o n a g r e em e n t a n d

b a l a n c e o f R s . 4 0 c r o r e s w a s p a ya b l e b y t h e D e v e l o p e r t o t h e

o w n e r s i n s i x i n s t a l l m e n t s f r o m M a r c h 0 6 , 2 0 0 8 . T h e i n s t a l l m e n t s

c o u l d b e e x t e n d e d s u b j e c t t o p a ym e n t o f i n t e r e s t a n d f u r t h e r

s u b j e c t t o m a x i m u m e x t e n s i o n o f t h r e e m o n t h s . T h e r e w e r e

v a r i o u s o t h e r c l a u s e s w h i c h a r e n o t r e l e v a n t f o r o u r p u r p o s e s .

T h e q u e s t i o n a r o s e w h e t h e r c a p i t a l g a i n a c c r u e / a r i s e t o t h e

a s s e s s e e d u r i n g t h e f i n a n c i a l ye a r 2 0 0 6 - 0 7 r e l e v a n t t o a s s e s s m e n t

ye a r 2 0 0 7 - 0 8 o r d u r i n g f i n a n c i a l ye a r 2 0 0 7 - 0 8 r e l e va n t t o

a s s e s s m e n t ye a r 2 0 0 8 - 0 9 .

4 0 . O n t h e a b o v e , t h e H o n ' b l e A u t h o r i t y a f t e r r e f e r r i n g t o t h e

p r o v i s i o n s o f s e c t i o n 4 5 a n d o b s e r v e d a s u n d e r : -

“ … … … . The sect ion can be analysed thus :

(a) transfer of a capi ta l asset effec ted in the prev ious year,

(b) resultant prof i ts or gains from such transfer , (c) those prof i ts or gains would const i tu te the income of the

assessee/ transferor

(d) such income shal l be deemed to be the income of the same prev ious year in which the transfer had taken p lace.

Two aspects may be noted at th is juncture. Firs t ly , the express ion used is “ar is ing” which is not to be equated with the express ion “received”. Both these express ions and in addit ion thereto, the express ion “accrue” are used in the Income-tax Act e ither col lec t ive ly or separate ly according to the context and nature of the charging provis ion. The second point which deserves not ice is that by a deeming prov is ion, the prof i ts or gains that have ar isen would be treated as the income of the prev ious year in which the transfer took p lace. That means, the income on account of ar isa l of capita l gain should be charged to tax in the same prev ious year in which the transfer was ef fec ted or deemed to have taken p lace.

The effect and ambit of the deeming prov is ion conta ined in sect ion 45 has been cons idered in dec ided cases and leading text books. The fo l lowing statement of law in Sampath Iyengar ’s Commentary (10th Edit ion— Revised by Shr i S. Rajaratnam) br ings out the correct legal pos i t ion :

“Sect ion 45 enacts that the capita l gains shal l by f ic t ion ‘be deemed to be the income of the prev ious year in which the transfer took place’. Since th is is a statutory f ic t ion, the actual year in which the sale pr ice was received, whether i t was one year , two years , three years , four years etc. prev ious to the prev ious year of t ransfer , is bes ide the point . The ent irety of the sum or sums received in any ear l ier year or years would be

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regarded as the capi ta l gains ar is ing in the prev ious year of t ransfer .

. . . . In the words of sect ion 45, the capita l gains ar is ing from the transfer 'shal l be the income of the prev ious year in which the transfer took place' . So, the payments of cons iderat ion st ipulated to be paid in fu ture would have to be at tr ibuted, by s tatutory mandate, to the year of t ransfer, even as payments made pr ior to the year of t ransfer . ”

4 1 . T h e r e a f t e r , t h e A u t h o r i t y r e f e r r e d t o s e c t i o n 2 ( 4 7 ) a n d

o b j e c t s o f t h e i n t r o d u c t i o n o f c l a u s e s ( v ) & ( v i ) a n d a l s o r e f e r r e d

t o p a r a s 1 1 . 1 & 1 1 . 2 o f t h e B o a r d C i r c u l a r N o . 4 9 5 ( w h i c h we h a v e

a l r e a d y d i s c u s s e d e a r l i e r ) . T h e H o n ' b l e A u t h o r i t y h a s d i s c u s s e d

v a r i o u s i m p l i c a t i o n s o f c l a u s e ( v ) o f s e c t i o n 2 ( 4 7 ) a n d a l s o

i m p l i c a t i o n o f s e c t i o n 5 3 A o f t h e T r a n s f e r o f P r o p e r t y A c t a s w e l l

a s o b s e r v a t i o n s o f H o n ' b l e B om b a y H i g h C o u r t i n t h e c a s e o f

C h a t u r b h u j D w a r k a d a s K a p a d i a v C I T ( s u p r a ) . T h e A u t h o r i t y

o b s e r v e d t h a t t o u n d e r s t a n d t h i s p r o v i s i o n p r o p e r l y m e a n i n g o f

‘ p o s s e s s i o n ’ h a s t o b e u n d e r s t o o d p r o p e r l y a n d w e n t o n t o d i s c u s s

t h e m e a n i n g o f t e r m ‘ p o s s e s s i o n , a n d h o w t h e s a m e i s t o b e

u n d e r s t o o d i n t h e c o n t e x t o f c l a u s e ( v ) . T h e s e a r e v e r y i m p o r t a n t

o b s e r v a t i o n s a n d h a v e b e e n d i s c u s s e d i n m o s t e l u c i d a t e d f a s h i o n .

T h e s e o b s e r v a t i o n s w i l l a n s w e r m a n y o f t h e q u e s t i o n s r a i s e d

b e f o r e u s a n d , t h e r e f o r e , w e a r e e x t r a c t i n g t h e s e o b s e r v a t i o n s a s

u n d e r : -

“Meaning of “possession” and how should it be understood in the context of clause (v)

The next quest ion is , in what sense we have to unders tand the term “possess ion” in the context of c lause (v) of sect ion 2(47) . Should i t only mean the r ight to exc lus ive possess ion—which the transferee can mainta in in h is own r ight to the exc lus ion of everyone inc luding the transferor from whom he der ived the possess ion ? Such a cr i ter ion wi l l be sat is f ied only af ter the ent i re sale cons iderat ion is paid and the transferor has for fe ited h is r ight to exerc ise acts of possess ion over the land or to resume possess ion. In our v iew, there is no warrant to place such a restr ic ted interpretat ion on the word “possess ion” occurr ing in c lause (v) of sect ion 2(47) . Possess ion is an abstract concept . I t has d if ferent shades of meaning. I t is var ious ly descr ibed as “a polymorphous term having d if ferent meanings in d if ferent contexts” (per R. S. Sarkar ia J. in Super intendent and Remembrance of Legal Af fai rs, W. B. v . Ani l Kumar Bhunja [1979] 4 SCC 274 and as a word of “open tex ture” (see Salmond on Jur isprudence, paragraph 51, Twel f th Edit ion, Indian repr int) . Salmond observed : “ to look for a def in i t ion that wi l l summar ize the meanings of the term “possess ion” in ord inary language, in a l l areas of law and in a l l legal systems, is to ask for the imposs ib le”. In the above case of Ani l Kumar Bhunja [1979] 4 SCC 274, Sarkar ia J . speaking for a three- judge Bench a lso referred to the comments of Dias and Hughes in their book on Jur isprudence that “ i f a topic ever suf fered too much theor izing i t is that of ‘possess ion ’” . Much of the d i f f icu lty is caused by the fact that possess ion is not a pure legal concept , as pointed out by Salmond. The learned judge then expla ined the connotat ion of the express ion “possess ion” by referr ing to the well known treat ises on jur isprudence (page 278) :

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“ ‘Possess ion ’, impl ies a r ight and a fact : the r ight to enjoy annexed to the r ight to proper ty and the fac t of the real intent ion. I t involves power of control and intent to contro l, (see Dias and Hughes)

14 . . . .

15. Whi le recognizing that ‘possess ion ’ is not a purely legal concept but a lso a mat ter of fact , Salmond (12th Ed., 52) descr ibes possess ion, in fact , as a re lat ionship between a person and a thing. According to the learned author, the tes t for determining ‘whether a person is in possess ion of anything is whether he is in general contro l of i t ’ . “

In Salmond ’s Jur isprudence, at paragraph 54, we f ind an i l luminat ing discuss ion on “ immediate” and “mediate possess ion”. The learned author states “ in law one person may possess a thing for and on account of some one e lse. In such a case the lat ter is in possess ion by the agency of h im who so holds the th ing on h is behalf . The possess ion thus held by one man through another may be termed mediate, whi le that which is acquired or reta ined d irect ly or personal ly may be dis t inguished as ‘ immediate or di rec t ’ . ” Salmond makes reference to three types of mediate possess ion. In a l l cases of “mediate possess ion”, two persons are in possess ion of the same th ing at the same t ime. An a l l ied concept of concurrent possess ion has a lso been expla ined in paragraph 55 of Salmond’s Jur isprudence in the fo l lowing words :

“ I t was a maxim of the c iv i l law that two persons could not be in possess ion of the same thing at the same t ime. As a general propos it ion th is is true : for exc lusiveness is of the essence of possess ion. Two adverse c la ims of exc lus ive use cannot both be effec tual ly real ized at the same t ime. Cla ims, however , which are not adverse, and which are not, therefore, mutual ly destruc t ive, admit of concurrent real izat ion. Hence, there are several possible cases of dupl icate possess ion.

1. Mediate and immediate possess ion co-ex is t in respect of the same th ing as a lready explained.

2. Two or more persons may possess the same th ing in common, jus t as they may owe i t in common ….”

On a fa ir and reasonable interpretat ion and on adopt ing the pr inc ip le of purpos ive construct ion, i t must be held that possess ion contemplated by c lause (v) need not necessar i ly be sole and exc lus ive possess ion. So long as the transferee is, by v ir tue of the possess ion g iven, enabled to exerc ise general contro l over the property and to make use of i t for the in tended purpose, the mere fac t that the owner has a lso the r ight to enter the property to oversee the development work or to ensure per formance of the terms of agreement does not in troduce any incompat ibi l i ty . The concurrent possess ion of the owner who can exerc ise possessory r ights to a l imited extent and for a l imited purpose and that of the buyer /developer who has a general contro l and custody of the land can very wel l be reconci led. Clause (v) of sect ion 2(47) wi l l have i ts fu l l p lay even in such a s i tuat ion. There is no warrant to postpone the operat ion of c lause (v) and the resul tant accrual of capita l gain to a point of t ime when the concurrent possess ion wi l l become exc lus ive possess ion of developer / transferee af ter he pays fu l l cons iderat ion.

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Fur ther, i f “possess ion” referred to in c lause (v) is to be understood as exclus ive possess ion of the transferee/developer, then, the very purpose of the amendment expanding the def in i t ion of t ransfer for the purpose of capita l gains may be defeated. The reason is this : the owner of the proper ty can very wel l contend, as is being contended in the present case, that the developer wi l l have such exc lusive possession in h is own r ight only after the ent ire amount is paid to the owner to the las t p ie. There is then a poss ib i l i ty of s tagger ing the last insta lment of a smal l amount to a d istant date, may be, when the ent ire bui ld ing complex gets ready. Even i f some amount , say 10 per cent . , remains to be paid and the developer / transferee fa i ls to pay, leading to a d ispute between the par t ies , the r ight to exclusive and indefeasible possess ion may be in jeopardy. In th is state of af fa irs , the transact ion wi th in the meaning of c lause (v) cannot be said to have been ef fected and the l iab i l i ty to pay capita l gains may be indef ini te ly postponed. True, i t may not be prof i table for the developer to al low this s i tuat ion to l inger for long as the process of transfer of f la ts to the prospect ive purchasers wi l l get delayed. At the same t ime, the other s ide of the p icture cannot be over- looked. There is a poss ib i l i ty of the owner wi th the connivance of the transferee postponing the payment of capi ta l gains tax on the ostens ib le ground that the ent ire cons iderat ion has not been received and some balance is lef t . The mischief sought to be remedied, wi l l then perpetuate. We are, therefore of the v iew that possess ion given to the developers need not r ipen i tse lf in to exclusive possess ion on payment of a l l the insta lments in ent irety for the purpose of determining the date of t ransfer .

While on the point of possess ion, we would l ike to c lar i fy one more aspect . What is spoken to in c lause (v) of sect ion 2(47) is the “ transact ion” which involves a l lowing the possess ion to be taken. By means of such t ransact ion, a transferee l ike a developer is a l lowed to under take development work on the land by assuming general control over the property in par t per formance of the contrac t. The date of that transact ion determines the date of t ransfer. The actual date of taking phys ical possess ion or the instances of possessory acts exerc ised is not very re levant . The ascerta inment of such date, i f ca l led for , leads to compl icated inquir ies , which may frus trate the object ive of the legis lat ive prov is ion. I t is enough i f the transferee has, by v ir tue of that t ransact ion, a r ight to enter upon and exerc ise acts of possession effect ive ly pursuant to the covenants in the contract . That tantamounts to legal possess ion. We are referr ing to th is aspect because the author ized representat ive has submitted when he appeared before us in the last week of May, 2007, that even by that date the development work could not be commenced for want of cer ta in approvals, and therefore, the developer was “not wi l l ing to take possession of the land”. Such an unsubstant iated statement which is not found in the or ig inal appl icat ion or even writ ten submiss ions f i led ear l ier need not be probed into especia l ly when i t is not h is case that the developer was not a l lowed to take possess ion in terms of the agreement. ”

4 2 . A f t e r t h e a b o v e d i s c u s s i o n , t h e A u t h o r i t y d i s c u s s e d t h e f a c t s

o f t h e c a s e b e f o r e i t . I t w a s o b s e r v e d t h a t p a r a g r a p h 1 8 o f t h e

C o l l a b o r a t i o n A g r e e m e n t p r o v i d e s t h a t o n i s s u a n c e o f l e t t e r o f

i n t e n t , t h e o w n e r s w i l l a l l o w a n d p e r m i t t h e D e v e l o p e r t o e n t e r

u p o n a n d s u r v e y t h e l a n d , e r e c t s i t e / s a l e s o f f i c e , c a r r y o u t t h e

s i t e d e v e l o pm e n t w o r k a n d d o a c t i v i t i e s f o r a d v a n c i n g & s a l e

p r o m o t i o n , c o n s t r u c t i o n e t c . T h e A u t h o r i t y f u r t h e r o b s e r v e d t h a t i f

t h i s c l a u s e i s r e a d i n i s o l a t i o n t h i s w o u l d s u g g e s t o n p a s s i n g o f

p o s s e s s i o n b u t a c c o r d i n g t o A u t h o r i t y t h e o t h e r f a c t o r s a r e t o b e

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c o n s i d e r e d . C l a u s e 1 5 p r o v i d e d t h a t o n f u l f i l l m e n t o f t h e

r e q u i r e m e n t s l a i d d o w n i n t h e l e t t e r o f i n t e n t w h i c h i s p r o v i s i o n a l

l i c e n s e , t h e o w n e r s s h o u l d e x e c u t e a n i r r e v o c a b l e g e n e r a l p o w e r

o f a t t o r n e y i n f a v o u r o f t h e d e v e l o p e r a l l o w i n g i n t e r a l i a t o b o o k

a n d s e l l t h e d w e l l i n g u n i t f a i l i n g u n d e r t h e i r s h a r e . T h i s w a s

p o s s i b l e o n l y a f t e r d e p o s i t o f r e q u i s i t e c h a r g e s e t c . a n d p e r h a p s

t h e r e w a s l i t i g a t i o n r e g a r d i n g o w n e r s h i p o f l a n d w h i c h h a s a l s o t o

b e w i t h d r a w n . T h e A u t h o r i t y h a s d i s c u s s e d t h e s i g n i f i c a n c e o f

g e n e r a l p o w e r o f a t t o r n e y a n d t h e t e r m s o f t h e g e n e r a l p o w e r o f

a t t o r n e y a t p a r a 3 3 a n d t h e r e l e v a n t p o r t i o n o f t h e s a m e i s a s

u n d e r : -

“A copy of the ir revocable GPA executed in terms of paragraph 15 of the agreement has been furn ished by the appl icant. I t author izes the developer : ( i ) to enter upon and survey the land, prepare the layout plan, apply for renewal /ex tens ion of l icence, submit the bui ld ing p lans for sanct ion of the appropr iate author i ty and to carry out the work of development of a mul t i-s tor ied res ident ia l complex, ( i i ) to manage and contro l, look after and superv ise the proper ty in any manner as the at torney deems f i t and proper , ( i i i ) to obta in water , sewage disposal and e lectr ic i ty connect ions. The developer is a lso author ized to borrow money for meet ing the cost of construct ion on the secur i ty and mortgage of land fal l ing to the developer ’s share. The other c lauses in the GPA are not re levant for our purpose. The GPA unequivocal ly grants to the developer a bundle of possessory r ights . The acts of management, contro l and superv is ion of proper ty are expl ic i t ly ment ioned. I t is fa ir ly c lear that the GPA is not a mere l icence to enter the land for doing some prel iminary ac ts in re lat ion to the development work. The power of contro l of the land which is an incidence of possess ion as expla ined supra has been conferred on the developer under th is GPA. The developer armed wi th the GPA cannot be regarded merely as a l icensee or an agent subjec t to the contro l of the owners. His possess ion cannot be character ized as precar ious or tentat ive in nature. The fact that the agreement descr ibes the GPA as ir revocable and an express dec larat ion to that effec t is found in the GPA itse l f is not without s ignif icance. Having regard to the second and supplemental agreement by v ir tue of which the ent ire developed proper ty inc luding the owners ’ share has been agreed to be sold to the developer or h is nominees for valuable money cons iderat ion, the developer has a v ita l s take in the ent ire property . As far as the qual i ty of possess ion is concerned, he is on a higher pedesta l than a developer who apport ions bui l t up area with the owner. Even i f he is an agent in one sense in the course of developing the land, that agency is coupled with interest. For these reasons, the pref ix “ i r revocable” is del iberate ly chosen. As d iscussed ear l ier , the owner 's l imited r ight to enter the land and oversee the development work is not incompat ib le wi th the developer ’s r ight of control over the land which he der ives from the GPA. Exc lus ive possess ion, as a lready pointed out, is not necessary for the purpose of sat is fy ing the ingredients of c lause (v) of sect ion 2(47) . We are therefore, of the v iew that the ir revocable GPA executed by the owners in favour of the developer must be regarded as a transact ion in the eye of law which a l lows possess ion to be taken in part performance of the contract for transfer of the property in quest ion……..”

4 3 T h u s , t h e a b o v e c l e a r l y s h o w s t h a t i r r e v o c a b l e g e n e r a l

p o w e r o f a t t o r n e y w h i c h l e a d s t o o v e r a l l c o n t r o l o f t h e p r o p e r t y i n

t h e h a n d s o f t h e D e v e l o p e r , e v e n i f t h a t m e a n s n o e x c l u s i v e

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p o s s e s s i o n b y t h e D e v e l o p e r w o u l d c o n s t i t u t e t r a n s f e r . I t c a n b e

s a i d t h a t i t h a s t o b e c o n s t r u e d a s ‘ p o s s e s s i o n ’ i n t e rm s o f c l a u s e

( v ) o f s e c t i o n 2 ( 4 7 ) o f t h e A c t .

44 A quest ion may ar ise that why the t ransfer was not held to be

taken p lace in Assessment year 2006-07 when f irst agreement was

entered into on June 8, 2005. The supplementary agreement was also

entered into on Sept 15, 2005 both of which fa l l in F inanc ia l Year 2005-

06 re levant to Assessment year 2006-07. Then why transfer was not

construed in Assessment year 2006-07 i t was because the f irs t

agreement i tself conta ined a condi t ion that “ le t ter of intent” should be

procured not la ter than March 8, 2006. In case of fa i lure to do so the

agreement shal l s tand terminated. Therefore, obtain ing the “ let ter of

intent” was the crucia l factor . I t has been expla ined in the dec is ion that

the “ let ter of in tent” bas ical ly is a l icense issued by the Direc tor of Town

and Country Planning, Haryana which g ives permiss ion for construct ion

of the f lats . The other cruc ia l point was execut ion of ir revocable of GPA

which was executed on May 8, 2006 which according to the ld. author i ty

depicts the intent ion of the handing over of the possess ion. Therefore,

i t becomes very c lear that i t is not necessary that t ransfer would take

p lace on the s igning of development agreement but the same has to be

inferred only when the possess ion has been handed over by the

transferor to the developer which can be inferred f rom the documents

e.g. Power of Attorney. Af ter above d iscuss ion Hon'b le author i ty has

summarized the dec is ion in para 41 which is as under :

“The fo l lowing is the summary of conc lus ions:

1. Where the agreement for transfer of immovable property by i tse lf does not prov ide for immediate transfer of possess ion, the date of enter ing into the agreement cannot be considered to be the date of t ransfer with in the meaning of c lause (v) of sect ion 2 (47) of the Income-Tax Act .

2. To at trac t c lause (v) of sect ion 2(47), i t is not necessary that the ent ire sale cons iderat ion up to the las t ins ta l lment should be received by the owner .

3. In the instant case, having regard to the terms of the two agreements and the ir revocable GPA executed pursuant to the agreement , the execut ion of the GPA shal l be regarded as the “ transact ion involv ing the a l lowing of the possess ion” of land to be taken in par t per formance of the contract and therefore, the t ransfer wi thin the meaning of sect ion 2(47)(v) must be deemed to have taken p lace on the date of execut ion of such GPA. The ir revocable GPA was executed on May 8, 2006, i .e . , dur ing the prev ious year re levant to the assessment year 2007-08 and the capi ta l gains must be held to have ar isen dur ing that year. Inc identa l ly , i t may be ment ioned that dur ing the said year, i .e . , f inanc ia l year 2006-07, a f inal l icense was granted and the appl icant /owners received near ly 2/3rds of the cons iderat ion. “

45. L e g a l p o s i t i o n h a s b e e n d i s c u s s e d i n a b o v e n o t e d p a r a s a n d

n o w l e t u s d i s c u s s t h e f a c t s o f t h e c a s e i n t h e l i g h t o f a b o v e n o t e d

l e g a l p o s i t i o n .

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4 6 U n d i s p u t e d f a c t s o f t h e c a s e a r e t h a t t h e a s s e s s e e i s a

M e m b e r o f P u n j a b i C o o p H o u s e B u i l d i n g S o c i e t y L t d . w h i c h h a d 9 6

m e m b e r s ( N u m b e r o f m e m b e r s w e r e s t a t e d a s 9 5 d u r i n g a r g u m e n t s

b u t c l a u s e 1 3 o f t h e J D A r e f e r s t o n u m b e r o f m e m b e r s a s 9 6 ) . T h e

S o c i e t y w a s o w n i n g 2 1 . 2 a c r e s o f l a n d i n v i l l a g e K a n s a l D i s t t .

M o h a l i a d j a c e n t t o C h a n d i g a r h . T h e r e w e r e t w o t yp e s o f m e m b e rs

f i r s t l y t h e m e m b e r s w h o w e r e o w n i n g p l o t o f 5 0 0 s q yd a n d

s e c o n d l y t h e m e m b e r s w h o a r e h o l d i n g p l o t o f 1 0 0 0 s q yd .

S o m e w h e r e i n 2 0 0 6 i t w a s d e c i d e d t o d e v e l o p a G r o u p H o u s i n g

c o m m e r c i a l p r o j e c t a n d d o d e v e l o p m e n t a s p e r t h e a p p l i c a b l e

m u n i c i p a l b u i l d i n g b ye - l a w s i n f o r c e a n d a c c o r d i n g l y a b i d w a s

i n v i t e d t h r o u g h a d ve r t i s e m e n t i n t h e T r i b u n e d a t e d 3 1 . 5 . 2 0 0 6 .

H A S H a d e v e l o p e r , a p p r o a c h e d t h e S o c i e t y w i t h p r o p o s a l f o r

d e v e l o p m e n t o f t h e p r o p e r t y . S i n c e H a s h d i d n o t h a v e s u f f i c i e n t

m e a n s t o d e v e l o p t h e p r o p e r t y , H a s h h a d a p p r o a c h e d T H D C f o r

d e v e l o p m e n t o f t h e p r o p e r t y b y c o n s t r u c t i n g t h e b u i l d i n g a n d / o r

s t r u c t u r e s t o b e u s e d f o r i n t e r a l i a r e s i d e n t i a l , p u b l i c u s e a n d

c o m m e r c i a l p u r p o s e s . T h i s p r o p o s a l w a s d i s c u s s e d b y t h e S o c i e t y

i n i t s E x e c u t i v e C o m m i t t e e m e e t i n g o n 4 . 1 . 2 0 0 7 . M i n u t e s o f t h e

m e e t i n g a r e p l a c e d a t p a g e 5 8 t o 6 5 o f t h e p a p e r b o o k . I n t h e

E x e c u t i v e c o m m i t t e e i t w a s d e c i d e d t o a p p o i n t H a s h w h o w a s

a c t i n g a l o n g w i t h t h e j o i n t d e v e l o p e r T H D C a s j o i n t d e v e l o p e r o n

t h e t e r m s a n d c o n d i t i o n s t o b e m e n t i o n e d i n t h e J D A . I t w a s

f u r t h e r r e s o l v e d t h a t m e m b e r o w i n g p l o t o f 5 0 0 s q yd w o u l d r e c e i v e

a c o n s i d e r a t i o n o f R s . 8 2 , 5 0 , 0 0 0 / - e a c h t o b e p a i d i n f o u r

i n s t a l l m e n t s b y H a s h d i r e c t l y i n f a v o u r o f t h e m em b e r s a n d o n e

f l a t w i t h s u p e r a r e a o f 2 2 5 0 s q f t o b e c o n s t r u c t e d b y T H D C . T h e

m e m b e r s w h o h e l d t h e p l o t o f 1 0 0 0 s q yd w e r e t o r e c e i v e a

c o n s i d e r a t i o n o f R s . 1 , 6 5 , 0 0 , 0 0 0 / - a n d t w o f l a t s c o n s i s t i n g o f

2 2 5 0 s q f t t o b e c o n s t r u c t e d b y t h e T H D C . I t w a s f u r t h e r r e s o l v e d

t o e n t e r i n t o a J D A w i t h T H D C / H A S H . I t w a s a l s o r e s o l ve d t o

e x e c u t e i r r e v o c a b l e P o w e r o f a t t o r n e y b y t h e S o c i e t y i n f a v o u r o f

T H D C f o r t h i s p u r p o s e . T h i s r e s o l u t i o n w a s u l t i m a t e l y r a t i f i e d i n

t h e G e n e r a l B o d y m e e t i n g h e l d b y t h e S o c i e t y o n 2 5 . 2 . 2 0 0 7 .

P u r s u a n t t o t h e a b o v e r e s o l u t i o n , t r i p a r t i t e J D A w a s e x e c u t e d

( c o p y o f t h e s a m e i s a v a i l a b l e a t p a g e 1 5 t o 5 4 o f f i r s t p a p e r

b o o k ) . T h r o u g h r e c i t a t i o n c l a u s e i t h a s b e e n m e n t i o n e d t h a t o w n e r

i s i n p o s s e s s i o n o f l a n d m e a s u r i n g a b o u t 2 1 . 2 a c r e s o f l a n d w h i c h

h a s c o m e i n t h e p u r v i e w o f N a g a r P a n c h a ya t , N a ya G a o n v i d e

N o t i f i c a t i o n i s s u e d o n 1 8 . 1 0 . 2 0 0 6 d u l y s u b s t i t u t e d b y a n o t h e r

n o t i f i c a t i o n d a t e d 2 1 . 1 1 . 2 0 0 6 a n d t h a t n o p a r t o f l a n d o f t h e

p r o p e r t y f a l l s u n d e r F o r e s t A r e a u n d e r t h e P u n j a b L a n d

P r e s e r v a t i o n A c t . I t h a s b e e n f u r t h e r r e c i t e d t h a t t h e S o c i e t y h a s

a g r e e d t o a c c e p t t h e p r o p o s a l s o f H a s h a n d f u r t h e r e x e c u t e d t h i s

a g r e e m e n t w i t h T H D C / H A S H . H a s h w a s r e s p o n s i b l e t o m a k e

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p a ym e n t t o t h e o w n e r a s d e s c r i b e d e a r l i e r a n d t h e f l a t s w e r e t o b e

p r o v i d e d b y T H D C . I n c a s e o f H a s h f a i l s t o m a k e t h e p a ym e n t ,

T H D C a g r e e d t o m a k e t h e p a ym e n t s . C o p y o f t h e r e s o l u t i o n o f t h e

E x e c u t i v e C o m m i t t e e o f t h e S o c i e t y d a t e d 4 . 1 . 2 0 0 7 a s w e l l a s

r e s o l u t i o n o f t h e G e n e r a l B o d y M e e t i n g o f t h e S o c i e t y d a t e d

2 5 . 2 . 2 0 0 7 w e r e m a d e p a r t o f J D A b y w a y o f a n n e x u r e . T h e

S o c i e t y a g r e e d t o e x e c u t e a n i r r e vo c a b l e S p e c i a l P o w e r o f

A t t o r n e y i n f a v o u r o f T H D C a n d a l l o t h e r n e c e s s a r y d o c u m e n t s , a t

t h e r e q u e s t o f t h e d e v e l o p e r s .

4 7 I n c l a u s e 1 o f J D A v a r i o u s e x p r e s s i o n s h a v e b e e n d e f i n e d .

C l a u s e 2 d e s c r i b e s t h e p r o j e c t a s u n d e r :

“ 2 . 1 T h e o w n e r h e r e b y i r r e v o c a b l y a n d u n e q u i v o c a l l y g r a n t s a n d a s s i g n s i n p e r p e t u i t y a l l i t s r i g h t s t o d e v e l o p , c o n s t r u c t , m o r t g a g e , l e a s e , l i c e n s e , s e l l a n d t r a n s f e r t h e p r o p e r t y a l o n g w i t h a n y a n d a l l t h e c o n s t r u c t i o n , p r e m i s e s , h e r e d i t a m e n t s , e a s e m e n t s , t r e e s t h e r e o n i n f a v o u r o f T H D C f o r t h e p u r p o s e o f d e v e l o p m e n t , c o n s t r u c t i o n , m o r t g a g e , s a l e , t r a n s f e r , l e a s e , l i c e n s e a n d o r e x p l o i t a t i o n f o r f u l l u t i l i z a t i o n o f t h e P r o p e r t y ( R i g h t s ) a n d t o e x e c u t e a l l t h e d o c u m e n t s n e c e s s a r y t o c a r r y o u t , f a c i l i t a t e a n d e n f o r c e t h e R i g h t s i n t h e P r o p e r t y i n c l u d i n g t o e x e c u t e L e a s e A g r e e m e n t , L i c e n s e A g r e e m e n t s , C o n s t r u c t i o n C o n t r a c t s , S u p p l i e r C o n t r a c t s , A g r e e m e n t f o r s a l e , C o n v e y a n c e , M o r t g a g e D e e d s , f i n a n c e d o c u m e n t s a n d a l l d o c u m e n t s a n d a g r e e m e n t s n e c e s s a r y t o c r e a t e a n d r e g i s t e r t h e m o r t g a g e , c o n v e y a n c e , l e a s e d e e d s , l i c e n s e a g r e e m e n t , P o w e r o f A t t o r n e y , a f f i d a v i t s , d e c l a r a t i o n , i n d e m n i t i e s a n d a l l s u c h o t h e r d o c u m e n t s , l e t t e r s a s m a y b e n e c e s s a r y t o c a r r y o u t , f a c i l i t a t e a n d e n f o r c e t h e R i g h t s a n d t o r e g i s t e r t h e s a m e w i t h t h e r e v e n u e / C o m p e t e n t a u t h o r i t y a n d t o a p p e a r o n o u r b e h a l f b e f o r e a l l a u t h o r i t i e s , s t a t u t o r y o r o t h e r w i s e , a n d b e f o r e a n y c o u r t o f l a w ( t h e ‘ D e v e l o p m e n t R i g h t s ’ ) . T h e o w n e r h e r e b y h a n d s o v e r t h e o r i g i n a l t i t l e d e e d s o f t h e P r o p e r t y a s m e n t i o n e d i n t h e l i s t A n n e x e d h e r e t o a n d m a r k e d a s A n n e x u r e I V a n d p h y s i c a l , v a c a n t p o s s e s s i o n o f t h e p r o p e r t y h a s b e e n h a n d e d o v e r t o T H D C s i m u l t a n e o u s t o t h e e x e c u t i o n a n d r e g i s t r a t i o n o f t h i s a g r e e m e n t t o d e v e l o p t h e s a m e a s s e t o u t h e r e i n .

I t i s h e r e b y a g r e e d a n d c o n f i r m e d t h a t w h a t i s s t a t e d i n t h e r e c i t a l s h e r e i n a b o v e , s h a l l b e d e e m e d t o b e d e c l a r a t i o n s a n d r e p r e s e n t a t i o n s o n t h e p a r t o f t h e O w n e r a s i f t h e s a m e w e r e s e t o u t h e r e i n v e r b a t i m a n d f o r m i n g a n i n t e g r a l p a r t o f t h e a g r e e m e n t .

2 . 2 T h e P r o j e c t s h a l l c o m p r i s e o f d e v e l o p m e n t / c o n s t r u c t i o n o f t h e P r o p e r t y i n t o t h e p r e m i s e s a s p e r m i s s i b l e u n d e r P u n j a b M u n i c i p a l B u i l d i n g B y e - l a w s / P u n j a b U r b a n D e v e l o p m e n t A u t h o r i t y o r a n y o t h e r C o m p e t e n t A u t h o r i t y b y t h e D e v e l o p e r a t t h e i r o w n c o s t a n d e x p e n s e . T h e P r o j e c t s h a l l b e d e v e l o p e d a s m a y b e s a n c t i o n e d b y t h e c o n c e r n e d l o c a l a u t h o r i t y i . e . D e p a r t m e n t o f L o c a l B o d i e s , P u n j a b / P u n j a b U r b a n P l a n n i n g a n d D e v e l o p m e n t A u t h o r i t y ( P U D A ) o r a n y o t h e r C o m p e t e n t A u t h o r i t y .

2 . 3 T h e o w n e r h e r e b y i r r e v o c a b l y a n d u n e q u i v o c a l l y g r a n t s a n d a s s i g n s a l l i t s D e v e l o p m e n t R i g h t s i n t h e p r o p e r t y t o T H D C t o d e v e l o p t h e p r o p e r t y a n d u n d e r t a k e t h e p r o j e c t a t i t s o w n c o s t s , e f f o r t s a n d e x p e n s e s w h e r e u p o n t h e D e v e l o p e r s h a l l b e e n t i t l e d t o a p p l y f o r a n d o b t a i n n e c e s s a r y s a n c t i o n s , l i c e n s e s a n d p e r m i s s i o n s f r o m a l l t h e c o n c e r n e d a u t h o r i t i e s f o r t h e

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c o m m e n c e m e n t , d e v e l o p m e n t a n d c o m p l e t i o n o f t h e p r o j e c t o n t h e p r o p e r t y . ”

4 8 C l a u s e 3 d e s c r i b e s t h e o b l i g a t i o n s o f t h e d e v e l o p e r s &

S o c i e t y f o r g e t t i n g t h e p l a n s , e t c . s a n c t i o n e d f r o m c o m p e t e n t

a u t h o r i t y / a p p l i c a t i o n s t o b e s i g n e d b y o w n e r f o r p l a n s , d r a w i n g s

e t c . , c o n s t r u c t i o n . C l a u s e 4 d e a l s w i t h c o n s i d e r a t i o n c l a u s e s 5 t o

8 d e a l s v a r i o u s a s p e c t s o f p r o j e c t a n d o b l i g a t i o n s o f S o c i e t y a n d

D e v e l o p e r . C l a u s e 9 t a l k s a b o u t o w n e r s h i p a n d r i g h t s a n d r e a d a s

u n d e r :

“ 9 T r a n s f e r o f o w n e r s h i p / R i g h t s

9 . 1 T h e o w n e r s h a l l s i m u l t a n e o u s l y o n r e c e i p t o f P a y m e n t a s s e t o u t i n C l a u s e 4 . 1 a b o v e , e x e c u t e a n i r r e v o c a b l e S p e c i a l P o w e r o f A t t o r n e y t o T H D C f o r d e v e l o p m e n t o f t h e p r o p e r t y a u t h o r i z i n g T H D C t o d o a l l l a w f u l a c t s , d e e d s , m a t t e r s a n d t h i n g s p e r t a i n i n g t o t h e d e v e l o p m e n t o f t h e p r o p e r t y f o r t h e p r o j e c t a l o n g w i t h i n t e r a l i a r i g h t t o m o r t g a g e t h e p r o p e r t y a n d / o r p r e m i s e s , s e l l , l e a s e , l i c e n s e t h e p r e m i s e s a n d r e c e i v e / c o l l e c t m o n i e s i n i t ’ s n a m e i n r e s p e c t o f t h e s a m e a n d a p p r o a c h i n t e r a c t , c o m m u n i c a t e w i t h t h e C o m p e t e n t a u t h o r i t i e s a n d f o r d o i n g a l l a c t s , d e e d s , m a t t e r s a n d t h i n g s t o b e d o n e o r i n c u r r e d b y T H D C i n t h a t b e h a l f a s a l s o t o s i g n a l l l e t t e r s , a p p l i c a t i o n s , a g r e e m e n t s a n d r e g i s t e r t h e s a m e i f n e c e s s a r y , d o c u m e n t s , c o u r t p r o c e e d i n g s , a f f i d a v i t s a n d s u c h o t h e r p a p e r s c o n t a i n i n g t r u e f a c t s a n d c o r r e c t p a r t i c u l a r s a s m a d e f r o m t i m e t o t i m e b e r e q u i r e d i n t h i s b e h a l f .

9 . 2 T h e o w n e r s h a l l e x e c u t e i n f a v o u r o f T H D C t h e s a l e d e e d i s i n a c c o r d a n c e w i t h t h e p r o v i s i o n s o f c l a u s e 4 . 1 ( i i ) t o C l a u s e 4 . 1 ( i v ) o f t h i s A g r e e m e n t a n d e x e c u t e a l l o t h e r n e c e s s a r y d o c u m e n t s a n d p a p e r s t o c o m p l e t e t h e a f o r e s a i d t r a n s a c t i o n .

9 . 3 T h a t a l l t h e o r i g i n a l t i t l e d e e d s p e r t a i n i n g t o p r o p e r t y a s m e n t i o n e d i n A n n e x u r e I V h a s b e e n h a n d e d o v e r t o T H D C b y t h e o w n e r a t t h e t i m e o f s i g n i n g o f t h i s A g r e e m e n t a n d i n f u r t h e r a n c e o f t h e c o m m o n i n t e r e s t o f t h e P a r t i e s f o r t h e d e v e l o p m e n t o f t h e P r o j e c t a n d e x c e p t t h e S a l e T r a n s a c t i o n m a d e b y t h e O w n e r i n f a v o u r o f T H D C a s e t o u t i n C l a u s e 4 . 1 a b o v e . T H D C h e r e b y u n d e r t a k e a n d a s s u r e t h e o w n e r t h a t t h e y s h a l l u s e t h e t i t l e d e e d s o n l y f o r t h e p u r p o s e o f f u r t h e r a n c e o f t h e P r o j e c t i n t h e m a n n e r t h a t i t d o e s n o t a d v e r s e l y e f f e c t t h e O w n e r / A l l o t t e e i n a n y m a n n e r w h a t s o e v e r . ”

4 9 C l a u s e 1 0 d e s c r i b e s t h e c o n s e n t g i v e n b y t h e S o c i e t y t o

T H D C f o r r a i s i n g f i n a n c e f o r d e v e l o p m e n t a n d c o m p l e t i o n o f

p r o j e c t . C l a u s e 1 1 t a l k s a b o u t f o r m a t i o n o f m a i n t e n a n c e S o c i e t y

f o r t h e p r o j e c t a f t e r i t s c o m p l e t i o n . C l a u s e 1 3 t a l k s a b o u t t r a n s f e r

o f r i g h t s w h i c h r e a d s a s u n d e r :

“ 1 3 T r a n s f e r o f R i g h t s

T h e o w n e r h e r e i n i . e . T h e P u n j a b i C o o p H o u s e B u i l d i n g S o c i e t y L t d . a l o n g w i t h a l l i t s n i n e t y s i x ( 9 6 ) m e m b e r s h a v e g i v e n t h e i r e x p r e s s , f r e e a n d c l e a r c o n s e n t i n w r i t i n g i n t h e f o r m o f a n

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A f f i d a v i t / N o O b j e c t i o n C e r t i f i c a t e / C o n s e n t L e t t e r w h e r e b y t h e D e v e l o p e r s h a v e b e e n a l l o w e d t o d e v e l o p t h e p r o p e r t y i n a c c o r d a n c e w i t h t h e P r o j e c t a n d t h a t T H D C s h a l l b e e n t i t l e d t o t r a n s f e r t h e r i g h t s o b t a i n e d u n d e r t h i s a g r e e m e n t t o a n y t h i r d p a r t y a n d t o g e t t h e d e v e l o p m e n t / c o n s t r u c t i o n w o r k c o m p l e t e d o n s u c h t e r m s a n d c o n d i t i o n s a s T H D C m a y d e e m f i t s o l o n g a s i t d o e s n o t a d v e r s e l y e f f e c t t h e O w n e r i n t e r m s o f t h e i r r i g h t t o r e c e i v e E n t i r e c o n s i d e r a t i o n a s m e n t i o n e d i n t h i s a g r e e m e n t s u b j e c t t o a l l o t h e r c o n d i t i o n s m e n t i o n e d t h e r e i n a s w e l l . T h e o w n e r s h a l l a t a l l t i m e s p r o v i d e f u l l s u p p o r t t o t h e D e v e l o p e r s h e r e i n . ”

5 0 O t h e r c l a u s e s p r o v i d e f o r t e r m i n a t i o n , G e n e r a l p r o v i s i o n s ,

D i s c l a i m e r , P a r t i a l I n v a l i d i t y , A r b i t r a t i o n , N o t i c e s a n d F o r c e

M a j e u r e & J u r i s d i c t i o n .

5 1 I n a d d i t i o n t o a b o v e a n i r r e v o c a b l e S p e c i a l P o w e r o f

A t t o r n e y h a s a l s o b e e n e x e c u t e d b y t h e S o c i e t y i n f a v o u r o f t h e

d e v e l o p e r s i . e . T H D C . ( C o p y o f w h i c h i s a v a i l a b l e a t p a g e s 4 0 t o

5 2 o f t h e p a p e r b o o k i n c a s e o f S o c i e t y i n I T A N o . 5 5 6 o f 2 0 1 2 a s

d i s c u s s e d e a r l i e r i n p a r a 2 5 ( c om p l e t e c o p y o f S u p p l e m e n t a r y

P o w e r o f A t t o r n e y w a s n o t a v a i l a b l e i n t h e p a p e r b o o k o f t h e

a s s e s s e e , t h e r e f o r e , r e f e r e n c e w a s m a d e t o t h e p a p e r b o o k i n

c a s e o f t h e S o c i e t y ) .

5 2 T h e f i r s t m a j o r c o n t e n t i o n o f t h e l d . c o u n s e l o f t h e a s s e s s e e

i s t h a t t h e p o s s e s s i o n w a s n o t g i v e n b y t h e S o c i e t y b e c a u s e

a c c o r d i n g t o h i m a s p e r c l a u s e 2 . 1 o f t h e J D A t h e p o s s e s s i o n o f

t h e p r o p e r t y w a s t o b e h a n d e d o v e r s i m u l t a n e o u s l y t o t h e

e x e c u t i o n a n d r e g i s t r a t i o n o f J D A a n d s i n c e t h e J D A w a s n o t

r e g i s t e r e d , t h e r e f o r e , t h e p o s s e s s i o n wa s n o t g i v e n . W e c a n n o t

a c c e p t t h i s c o n t e n t i o n b e c a u s e i n “ P o w e r o f A t t o r n e y ”

t r a n s a c t i o n s , i t i s n o t n e c e s s a r y t o r e g i s t e r t h e J D A i f a s p e c i a l

P o w e r o f A t t o r n e y h a s b e e n g i v e n a n d s a m e i s r e g i s t e r e d .

S e c o n d l y c l a u s e 9 . 3 o f t h e J D A a s r e p r o d u c e d a b o v e c l e a r l y s h o w

t h a t o r i g i n a l t i t l e d e e d w h i c h h a v e b e e n m e n t i o n e d a l o n g w i t h t h e

p o s s e s s i o n i n p a r a 2 . 1 w h i c h a c c o r d i n g t o t h e l d . c o u n s e l o f t h e

a s s e s s e e w e r e t o b e h a n d e d o v e r s i m u l t a n e o u s l y t o e x e c u t i o n a n d

r e g i s t r a t i o n o f t h e J D A , i s n o t c o r r e c t b e c a u s e c l a u s e 9 . 3 c l e a r l y

m e n t i o n t h a t o r i g i n a l t i t l e d e e d o f t h e p r o p e r t y h a v e b e e n h a n d e d

o v e r t o t h e T H D C a t t h e t i m e o f s i g n i n g o f t h i s a g r e e m e n t b e c a u s e

c l a u s e 9 . 3 t h e r e i s n o m e n t i o n a b o u t r e g i s t r a t i o n o f J D A .

5 3 S p e c i a l P o w e r o f A t t o r n e y w h i c h h a s b e e n e x e c u t e d o n

2 6 . 2 . 2 0 0 7 a n d h a s b e e n r e g i s t e r e d a l s o . T h e i r r e v o c a b l e s p e c i a l

P o w e r o f A t t o r n e y h a s b e e n e x e c u t e d a s p r o v i d e d i n c l a u s e 6 . 7 o f

t h e J D A w h i c h r e a d s a s u n d e r :

“ 6 . 7 T h e O w n e r s h a l l e x e c u t e a n i r r e v o c a b l e s p e c i a l P o w e r o f A t t o r n e y g r a n t i n g i t s c o m p l e t e D e v e l o p m e n t R i g h t s i n t h e P r o p e r t y i n f a v o u r o f T H D C i n t e r a l i a i n c l u d i n g t h e r i g h t t o r a i s e f i n a n c e b y

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m o r t g a g i n g t h e p r o p e r t y a n d r e g i s t e r t h e c h a r g e w i t h t h e C o m p e t e n t A u t h o r i t y a n d e x e c u t e r e g i s t e r e d s a l e d e e d s ) a s s e t o u t i n C l a u s e 4 . 1 ( i i ) , ( i i i ) , ( i v ) a n d ( v ) a n d t h e O w n e r c o n f i r m s , u n d e r t a k e s , d e c l a r e s a n d b i n d s i t s e l f n o t t o r e v o k e t h e s a m e f o r a n y r e a s o n w h a t s o e v e r o u t o f i t s o w n w i l l a n d d i s c r e t i o n w i t h o u t o b t a i n i n g a s p e c i f i c p r i o r w r i t t e n c o n s e n t o f T H D C o r a n y o f i t s d u l y c o n s t i t u t e d a t t o r n e y s . ”

T h r o u g h t h i s P o w e r o f A t t o r n e y v a r i o u s p o w e r s h a v e b e e n g i v e n

l i k e t o a s s i g n , f i l e , a m e n d e t c . v a r i o u s p l a n s , d e s i g n s t o r e p r e s e n t

b e f o r e v a r i o u s a u t h o r i t i e s , t o a p p o i n t a r c h i t e c t , L a w ye r s . S o m e o f

t h e s p e c i f i c c l a u s e s r e l e v a n t , a r e e x t r a c t e d b e l o w :

( j ) T o n e g o t i a t e a n d a g r e e t o a n y / o r t o e n t e r i n t o a g r e e m e n t ( s ) t o c o n s t r u c t / s e l l a n d t o u n d e r t a k e c o n s t r u c t i o n / s a l e o f t h e P r e m i s e s o n t h e P r o p e r t y o r a n y p o r t i o n t h e r e o f w i t h / t o s u c h p e r s o n s ( s ) o r b o d y a n d f o r s u c h c o n s i d e r a t i o n a n d u p o n s u c h t e r m s a n d c o n d i t i o n s a s t h e A t t o r n e y d e e m f i t .

( n ) T o e n t e r u p o n t h e P r o p e r t y e i t h e r a l o n e o r w i t h o t h e r s f o r t h e p u r p o s e o f d e v e l o p m e n t , C o o r d i n a t i o n , e x e c u t i o n , i m p l e m e n t a t i o n o f t h e P r o j e c t a n d c o m m e r c i a l i za t i o n o f t h e P r o p e r t y / P r e m i s e s .

( t ) T o a m a l g a m a t e t h e P r o p e r t y w i t h a n y o t h e r c o n t i g u o u s , a d j a c e n t a n d a d j o i n i n g l a n d s a n d p r o p e r t i e s w h e r e i n d e v e l o p m e n t a n d / o r o t h e r r i g h t , b e n e f i t s a n d i n t e r e s t s a r e a c q u i r e d a n d / o r p r o p o s e d t o b e a c q u i r e d a n d d e v e l o p e d o r p r o p o s e d t o b e d e v e l o p e d b y T H D C a n d / o r t h e i r a s s o c i a t e a n d / o r g r o u p c o n c e r n s /s a n d / o r u t i l i ze t h e F S I , F A R , D R a n d T D R o f t h e c o n t i g u o u s , a d j a c e n t a n d a d j o i n i n g l a n d s f o r t h e p u r p o s e o f c o n s t r u c t i n g b u i l d i n g s a n d / o r s t r u c t u r e s t h e r e o n a n d / o r o n t h e P r o p e r t y o r u t i l i ze s u c h l a n d s a n d p r o p e r t i e s f o r m a k i n g p r o v i s i o n o f p a r k i n g s p a c e s t h e r e o n , a n d / o r m a y u t i l i ze t h e s a m e f o r a n y o t h e r l a w f u l p u r p o s e , a s T H D C a n d / o r t h e i r a s s o c i a t e a n d / o r g r o u p c o n c e r n s m a y i n t h e i r s o l d , a b s o l u t e a n d u n f e t t e r e d d i s c r e t i o n t h i n k f i t .

( w ) T o h a n d o v e r t h e p o s s e s s i o n o f t h e P r o p e r t y o r a n y p a r t o r p o r t i o n t h e r e o f t o t h e a u t h o r i t i e s t o w h o m t h e s a m e i s r e q u i r e d t o b e h a n d e d o v e r o r o t h e r w i s e a n d t o e x e c u t e a n d d e l i ve r a n y u n d e r t a k i n g s , d e c l a r a t i o n s , a f f i d a v i t s , b o n d s , d e e d s , d o c u m e n t s , e t c . a s m a y b e r e q u i r e d b y t h e a u t h o r i t i e s c o n c e r n e d f o r ve s t i n g s u c h a p a r t o r p o r t i o n i n s u c h a u t h o r i t y a n d t o a d m i t e x e c u t i o n t h e r e o f b e f o r e t h e c o n c e r n e d C o m p e t e n t A u t h o r i t y a n d g e t t h e s a m e r e g i s t e r e d w i t h t h e c o n c e r n e d s u b - r e g i s t r a r .

( y ) R e a s o n a b l e o p p o r t u n i t y o f h e a r i n g s h a l l b e g i v e n t o m o r t g a g e , e n c um b e r o r c r e a t e a c h a r g e o n t h e P r o p e r t y o r a n y p a r t o r p o r t i o n t h e r e o f a n d e x e c u t e t h e n e c e s s a r y s e c u r i t y d o c u m e n t s i n f a v o u r o f a n y b a n k / f i n a n c i a l i n s t i t u t i o n t o r a i s e f u n d s f o r t h e c o n s t r u c t i o n / d e v e l o p m e n t o f t h e P r o p e r t y a n d f o r t h e s a i d p u r p o s e t o d e p o s i t t i t l e d e e d s ( i f r e q u i r e d ) i n r e s p e c t o f t h e P r o p e r t y i n f a v o u r o f s u c h b a n k / f i n a n c i a l i n s t i t u t i o n , e x e c u t e t h e n e c e s s a r y d o c u m e n t s a n d r e g i s t e r t h e c h a r g e c r e a t e d o n t h e P r o p e r t y i f s o r e q u i r e d i n t h e r e v e n u e r e c o r d s a n d / o r d e s i r e d b y t h e A t t o r n e y .

( a a ) T o s e l l , t r a n s f e r , l e a s e , l i c e n s e t h e P r e m i s e s t h a t m a y b e c o n s t r u c t e d o n t h e P r o p e r t y o n o w n e r s h i p b a s i s , l e a s e , l i c e n s e a n d / o r i n a n y o t h e r m a n n e r f o r s u c h p r i c e a s t h e A t t o r n e ys m a y d e e m f i t a n d p r o p e r . T o c o l l e c t a n d r e c e i v e f r om t h e p u r c h a s e d , t r a n s f e r e e s , l e s s e e s , l i c e n s e e s o f t h e P r e m i s e s , m o n i e s / p r i c e

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a n d / o r c o n s i d e r a t i o n a n d / o r m a i n t e n a n c e c h a r g e s a n d t o s i g n a n d e x e c u t e a n d / o r g i v e p r o p e r a n d l a w f u l d i s c h a r g e f o r t h e r e c e i p t s .

( b b ) T o e x e c u t e f r o m t i m e t o t im e a l l t h e w r i t i n g , a g r e e m e n t , d e e d s e t c . i n r e s p e c t o f t h e p r e m i s e s w h i c h m a yb e c o n s t r u c t e d o n t h e P r o p e r t y a n d a l s o t o e x e c u t e a n d s i g n c o n v e ya n c e , t r a n s f e r o r s u r r e n d e r i n r e s p e c t o f t h e P r o p e r t y o r a n y p a r t t h e r e o f .

( c c ) T o s i g n , e x e c u t e a n d r e g i s t e r t h e c o n v e ya n c e s o r a s s i g n m e n t s a n d / o r P o w e r o f A t t o r n e y ’ s a n d / o r o t h e r d o c u m e n t s a n d / o r a g r e e m e n t s a n d / o r a n y o t h e r w r i t i n g s i n r e s p e c t o f t h e P r o p e r t y i n p a r t o r f u l l a n d / o r t h e P r e m i s e s c o n s t r u c t e d t h e r e o n o r a n y p a r t t h e r e o f i n f a v o u r o f a n y p e r s o n a s t h e A t t o r n e ys m a y d e t e r m i n e i n c l u d i n g i n f a v o u r o f a n y i n d i v i d u a l a n d / o r l e g a l e n t i t l e s a n d / o r C o - o p e r a t i v e S o c i e t y a n d / o r L i m i t e d C o m p a n y a n d / o r a n y o t h e r e n t i t y t h a t m a y b e f o r m e d f o r s u c h p u r p o s e .

( d d ) T o i s s u e l e t t e r o f l i e n / N O C ’ s a n d t o s i g n d o c u m e n t s o n b e h a l f o f t h e O w n e r a s r e q u i r e d b y t h e p r o s p e c t i v e b u ye r s / l e n d i n g i n s t r u c t i o n s t o c r e a t e a c h a r g e o n t h e a l l o t t e d p r e m i s e s .

( g g ) T o l o o k a f t e r a n d m a i n t a i n t h e P r o p e r t y a n d t h e P r e m i s e s c o n s t r u c t e d t h e r e o n t i l l i t s t r a n s f e r i n f a v o u r o f t h e C o - o p e r a t i v e S o c i e t y o r L i m i t e d C o m p a n y o r a n y o t h e r O r g a n i s a t i o n .

5 4 I t is pert inent to note that power /author izat ion which have been

g iven by the Soc iety to the developer , were in fac t were required to be

g iven in terms of var ious c lauses of the JDA. Clause 6.7 reproduced

above i tself shows that the Soc iety was required to give powers to ra ise

f inance to mortgage the proper ty and even the registrat ion of charge was

a lso required to be g iven. Fur ther through c lause 6.15 i t was agreed

that documents of or ig inal t i t le deeds of the property would be handed

over to the developer i .e . THDC/HASH so that same can be used in

fur therance of development of the Project as wel l as secur i ty for the

money paid by the owner. Through c lause 6.24 i t was agreed that

developer THDC/HASH was a lways permit ted by owner to amalgamate

the proper ty wi th any other cont iguous, adjacent and adjo in ing land and

the propert ies wherein developmental and or other r ights , benef i ts and

interest were acquired by the developer or would be acquired in future.

This c lear ly shows that the Soc iety was under obl igat ion in terms of

agreement i tse lf to a l low the developer to amalgamate the projec t.

Towards the end of c lause 6.24 i t has been c lear ly stated that in the

event of terminat ion of JDA, provis ion of c lause 6 would be surviv ing

which c lear ly shows that developer cont inues to be in possess ion for the

purpose of development , mortgage etc. even af ter terminat ion. Clause 8

which descr ibes the obl igat ion and undertak ing of the THDC/HASH and

provides spec if ica l ly that a l l environmental c learance shal l be obta ined

by THDC/HASH out of i ts own sources. Thus i t was c lear ly understood

by the part ies that requis i te environmental c learances had to be obta ined

before start of the pro ject . Clause 10 again casts spec if ic obl igat ion on

the owner Soc iety to g ive consent to THDC/HASH to ra ise f inance for the

development and complet ion of the project on the Secur ity of the

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24

property by way of mortgaging the property. Thus whatever

power/author izat ion have been g iven through ir revocable spec ia l Power

of At torney are emanat ing f rom the terms and condit ions agreed to

among the part ies f rom the JDA.

5 5 T h e c o m b i n e d r e a d i n g o f t h e a b o ve c l a u s e s o f t h e

I r r e v o c a b l e S p e c i a l P o w e r o f A t t o r n e y a n d J D A c l e a r l y s h o w t h a t

t h e d e v e l o p e r w a s a u t h o r i ze d t o e n t e r u p o n t h e p r o p e r t y f o r n o t

o n l y f o r t h e p u r p o s e o f d e v e l o p m e n t b u t o t h e r p u r p o s e s a l s o .

T H D C w a s a u t h o r i ze d t o a m a l g a m a t e t h e p r o j e c t w i t h a n y o t h e r

p r o j e c t i n t h e a d j a c e n t a r e a o r a d j o i n i n g a r e a a s p e r c l a u s e ( t ) o f

t h e s p e c i a l P o w e r o f A t t o r n e y . I f t h e p o s s e s s i o n w a s n e v e r g i v e n

t o t h e d e v e l o p e r b y t h e S o c i e t y t h e n h o w t h e d e v e l o p e r c o u l d

a m a l g a m a t e t h e p r o j e c t w i t h a n o t h e r p r o j e c t w h i c h m a y b e

a c q u i r e d l a t t e r i n t h e a d j o i n i n g a r e a . T h r o u g h c l a u s e ( w ) T H D C

w a s a u t h o r i ze d t o h a n d o v e r t h e p o s s e s s i o n o f p r o p e r t y o r p o r t i o n

t h e r e o f t o t h e a u t h o r i t y t o w h o m t h e s a m e i s r e q u i r e d . I n l a r g e

H o u s i n g S o c i e t y P r o j e c t s s o m e t i m e s M u n i c i p a l a u t h o r i t i e s t a k e s

s o m e p o r t i o n o f l a n d f o r t h e p u r p o s e o f r o a d s , p a r k s o r o t h e r

g e n e r a l u t i l i t y p u r p o s e s l i k e i n s t a l l a t i o n o f e l e c t r i c i t y t r a n s f o r m e r s

a n d b e f o r e s a n c t i o n i n g t h e p l a n s t h e d e v e l o p e r i s r e q u i r e d t o

u n d e r t a k e t h a t s u c h p o r t i o n s o f l a n d wo u l d b e g i v e n f o r s u c h a

c o m m o n p u r p o s e . I f p o s s e s s i o n w a s n o t g i v e n t h e n h o w T H D C w a s

a u t h o r i ze d t o h a n d o v e r s u c h l a n d o r p o r t i o n s t h e r e o f w h i c h h a v e

n o t b e e n i d e n t i f i e d i n t h e J D A o u t o f t h e t o t a l l a n d . S i m i l a r l y

t h r o u g h c l a u s e ( y ) T H D C h a s b e e n a u t h o r i ze d t o m o r t g a g e ,

e n c u m b r a n c e o r c r e a t e c h a r g e o n t h e p r o p e r t y i n f a v o u r o f a n y

b a n k o r f i n a n c i a l i n s t i t u t i o n f o r r a i s i n g t h e f u n d s f o r t h e p r o j e c t .

I n t h e a b s e n c e o f p o s s e s s i o n s u c h p o w e r s c a n n o t b e g i v e n .

C l a u s e ( a a ) c l e a r l y a u t h o r i ze d t h e T H D C t o s e l l , t r a n s f e r , l e a s e ,

l i c e n s e t h e p r e m i s e s w h i c h w e r e t o b e c o n s t r u c t e d o n o w n e r s h i p

b a s i s a n d f u r t h e r t o r e c e i v e m o n e ys a g a i n s t s u c h s a l e e t c . a n d t o

i s s u e f i n a l r e c e i p t . N o w h e r e i t i s m e n t i o n e d i n t h i s c l a u s e t h a t

s u c h s a l e d e e d s w e r e t o b e s i n g e d b y t h e S o c i e t y a s c o n f i r m i n g

p a r t y . I n t h e a b s e n c e o f p o s s e s s i o n i t i s j u s t n o t p o s s i b l e f o r t h e

d e v e l o p e r t o s e l l a n d t r a n s f e r t h e p r e m i s e s w h i c h w e r e t o b e

c o n s t r u c t e d . T h i s i s f u r t h e r c l a r i f i e d b y c l a u s e ( b b ) a n d ( c c ) w h i c h

g i v e s t h e p o w e r o f e x e c u t i o n o f c o n v e ya n c e a n d o t h e r d o c u m e n t s

i n v o l v i n g i n r e s p e c t o f t h e p r e m i s e s t o b e c o n s t r u c t e d w i t h o u t a n y

i n t e r f e r e n c e o f t h e S o c i e t y b e i n g m a d e c o n f i r m i n g p a r t y . A l l t h e s e

c l a u s e s c l e a r l y s h o w t h a t t h e p o s s e s s i o n w a s g i v e n b y t h e S o c i e t y

a n d / o r i t s m e m b e r s t o T H D C / H A S H o n t h e e x e c u t i o n o f i r r e vo c a b l e

P o w e r o f A t t o r n e y . T h r o u g h t h e s e c l a u s e s o f J D A a n d i r r e vo c a b l e

P o w e r o f A t t o r n e y t h e d e v e l o p e r w a s a b l e t o c o m p l e t e l y c o n t r o l

t h e p r o p e r t y a n d m a k e u s e o f i t n o t o n l y f o r t h e p u r p o s e o f

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d e v e l o p m e n t b u t a l s o f o r t h e p u r p o s e o f a m a l g a m a t i o n , s a l e ,

m o r t g a g e e t c . W h e n t h e a b o v e c l a u s e s a r e c o m p a r e d o n t o u c h

s t o n e o f t h e d i s c u s s i o n o n p o s s e s s i o n i n p a r a 2 6 t o 2 8 i n t h e c a s e

o f J a s b i r S i n g h S a r k a r i a ( s u p r a ) w h i c h w e h a v e r e p r o d u c e d a b o v e ,

i t b e c o m e s c l e a r t h a t t h e p o s s e s s i o n h a s b e e n g i v e n .

5 6 I n t h a t d i s c u s s i o n , i t h a s b e e n c l e a r l y m e n t i o n e d t h a t t h e

p o s i t i o n c o n t e m p l a t e d b y c l a u s e ( v ) o f s e c t i o n 2 ( 4 7 ) o f t h e A c t

n e e d n o t t o b e e x c l u s i v e p o s s e s s i o n . W h a t i s r e q u i r e d i s t h a t t h e

t r a n s f e r e e b y v i r t u e o f p o s s e s s i o n s h o u l d b e a b l e t o e x e r c i s e

c o n t r o l f r o m o v e r a l l i n t e n d e d p u r p o s e s . W e d o n o t t h i n k i n t h e

p r e s e n t c a s e t h e a s s e s s e e h a s g i v e n o n l y a l i c e n s e a s c l a i m e d b y

l d . c o u n s e l o f t h e a s s e s s e e b e c a u s e o f t h e p o w e r s o f s e l l i n g ,

a m a l g a m a t i n g e t c . m e n t i o n e d i n t h e J D A a n d i r r e v o c a b l e S p e c i a l

P o w e r o f A t t o r n e y . T h e i s s u e h a s b e e n d i s c u s s e d i n h e j u d g m e n t

o f J a s b i r S i n g h S a r k a r i a ( s u p r a ) i n f u r t h e r d i s c u s s i o n w h i c h h a s

b e e n m a d e i n p a r a 3 3 r e g a r d i n g P o w e r o f A t t o r n e y ( w h i c h h a s

b e e n r e p r o d u c e d e a r l i e r ) . I n t h a t c a s e t h e p o w e r s w e r e g i v e n t o

e n t e r u p o n a n d s u r v e y t h e l a n d , p r e p a r e l a y o u t p l a n s , s u b m i t

b u i l d i n g p l a n f o r s a n c t i o n w i t h t h e a p p r o p r i a t e a u t h o r i t i e s t o

c o n t r o l , m a n a g e a n d l o o k a f t e r a n d s u p e r v i s e t h e p r o p e r t y , t o

o b t a i n w a t e r a n d s e w e r a g e , d i s p o s a l a n d e l e c t r i c i t y c o n n e c t i o n . I n

t h a t c a s e t h e d e v e l o p e r w a s a u t h o r i ze d t o m o r t g a g e t h e p r o p e r t y

t o o b t a i n m o n e y f o r m e e t i n g t h e c o s t o f c o n s t r u c t i o n o n s e c u r i t y

a n d m o r t g a g e o f l a n d f a l l i n g o n l y t o t h e d e v e l o p e r ’ s s h a r e . I n t h a t

c a s e i t w a s h e l d t h a t G P A w a s n o t a l i c e n s e t o e n t e r u p o n f o r

d o i n g s o m e p r e l i m i n a r y a c t s i n r e l a t i o n t o d e v e l o p m e n t o f w o r k b u t

t h e p o w e r t o c o n t r o l t h e l a n d h a s a l s o b e e n c o n f i r m e d . I t h a s a l s o

b e e n n o t e d t h a t t h e a g r e e m e n t d e s c r i b e d t h e P o w e r o f A t t o r n e y a s

i r r e v o c a b l e a n d e x t r a d e c l a r a t i o n t o t h a t e f f e c t i n t h e P o w e r o f

A t t o r n e y i s n o t w i t h o u t s i g n i f i c a n c e . I n c a s e b e f o r e u s , m a n y m o r e

p o w e r s h a v e b e e n g i v e n t o T H D C i n a d d i t i o n t o p o w e r s w h i c h h a v e

b e e n d e s c r i b e d i n t h a t j u d g m e n t a n d P o w e r o f A t t o r n e y h a s b e e n

d e s c r i b e d a s i r r e v o c a b l e i n c l a u s e 6 . 7 o f J D A . T h e r e f o r e , i t i s

c l e a r t h a t t h e a s s e s s e e ’ s p l e a t h a t t h e p o s s e s s i o n w a s t o b e g i v e n

o n l y a t t h e t i m e o f r e g i s t r a t i o n o f t h e J D A , i s n o t c o r r e c t . O n c e

i r r e v o c a b l e p o w e r w a s g i v e n t h e n i t c a n n o t b e s a i d t h a t t h e

p o s s e s s i o n w a s n o t g i v e n . T h e i s s u e r e g a r d i n g r e v o c a t i o n o f

i r r e v o c a b l e P o w e r o f A t t o r n e y a n d c a n c e l l a t i o n o f t h e J D A w o u l d

b e d i s c u s s e d l a t e r o n w h i l e d e a l i n g w i t h t h a t c o n t e n t i o n .

5 7 W e f i n d f o r c e i n t h e s u b m i s s i o n s o f t h e l d . D R f o r t h e

r e v e n u e t h a t i n t e r p r e t a t i o n o f c l a u s e ( v ) t o s e c t i o n 2 ( 4 7 ) s h o u l d b e

m a d e i n t h e l i g h t o f H e yd o n ’ s R u l e . T h e r e i s n o f o r c e i n t h e

o b j e c t i o n o f t h e l d . c o u n s e l o f t h e a s s e s s e e t h a t t h i s c l a u s e s h o u l d

b e i n t e r p r e t e d o n g e n e r a l r u l e s o f i n t e r p r e t a t i o n p a r t i c u l a r l y i n t h e

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l i g h t o f t h e f a c t t h a t n o r e a s o n h a s b e e n g i v e n f o r t h e s a m e .

H e yd o n ’ s R u l e h a s b e e n a p p l i e d b y t h e I n d i a n C o u r t s m a n y t i m e s .

T h e R u l e w a s a p p l i e d a n d i n i t i a t e d i n H e yd o n ’ s c a s e ( 1 5 8 4 ) 3 C o .

R e p 7 a . T h i s R u l e w a s u p h e l d b y t h e C o n s t i t u t i o n B e n c h o f

H o n ' b l e A p e x C o u r t i n c a s e o f B e n g a l I m m u n i t y C o . L t d . V S t a t e o f

B i h a r ( 1 9 5 5 ) 2 S C R 6 0 3 f o r c o n s i d e r a t i o n o f A r t i c l e 2 8 6 o f t h e

C o n s t i t u t i o n . I t h a s b e e n h e l d i n c a s e o f D r . B a l i r a m W am a n H i r a y

V . M r . J u s t i c e B . L e n t i n a n d a n o t h e r , 1 7 6 I T R 1 t h a t f o r

u n d e r s t a n d i n g a m e n d m e n t i n t h e A c t , p e r h a p s H e yd o n ’ s R u l e i s

b e s t r u l e f o r i n t e r p r e t a t i o n o f s u c h a m e n d m e n t . W e f i n d t h a t

w i t h o u t m e n t i o n i n g t h i s r u l e L d . A u t h o r i t y F o r A d v a n c e R u l i n g h a s

d i s c u s s e d t h i s i s s u e i n p a r a 2 7 o f t h e j u d g m e n t w h i c h w e h a v e

e x t r a c t e d a b o v e . I t h a s b e e n h e l d t h a t i f ‘ p o s s e s s i o n ’ r e f e r r e d t o

i n c l a u s e ( v ) i s t o b e u n d e r s t o o d a s e x c l u s i v e b a s i s o f t h e

t r a n s f e r e e t h e n v e r y p u r p o s e o f t h e a m e n d m e n t o r e n l a r g e m e n t o f

t h e d e f i n i t i o n o f t r a n s f e r w o u l d g e t d e f e a t e d . W e a r e r e p r o d u c i n g

f o l l o w i n g h e a d n o t e o f t h e H o n ' b l e A p e x C o u r t i n c a s e o f D r .

B a l i r a m W am a n H i r a y V . M r . J u s t i c e B . L e n t i n a n d a n o t h e r

( s u p r a ) :

“ T h e f o l l o w i n g p r i n c i p l e s e n u n c i a t e d i n H e y d o n ”s c a a s e ( 1 5 8 4 ) 3 C o . R e p 7 a a n d f i r m l y e s t a b l i s h e d , a r e s t i l l i n f u l l f o r c e a n d e f f e c t : “ t h a t f o r t h e s u r e a n d t r u e i n t e r p r e t a t i o n o f a l l s t a t u t e s i n g e n e r a ls ( b e t h e y p e n a l o r b e n e f i c i a l , r e s t r i c t i v e o r e n l a r g i n g o f t h e c o m m o n l a w ) , f o u r t h i n g s a r e t o b e d i s c e r n e d a n d c o n s i d e r e d : ( 1 ) w h a t w a s t h e c o m m o n l a w b e f o r e t h e m a k i n g o f t h e A c t ; ( 2 ) w h a t w a s t h e m i s c h i e f a n d d e f e c t f o r w h i c h t h e c o m m o n l a w d i d n o t p r o v i d e ; ( 3 ) w h a t r e m e d y P a r l i a m e n t h a s r e s o l v e d a n d a p p o i n t e d t o c u r e t h e d i s e a s e o f t h e c o m m o n w e a l t h a n d ( 4 ) t h e t r u e r e a s o n o f t h e r e m e d y . A n d t h e n , t h e o f f i c e o f a l l t h e j u d g e s i s a l w a y s t o m a k e s u c h c o n s t r u c t i o n a s s h a l l s u p p r e s s t h e e v a s i o n s f o r t h e c o n t i n u a n c e o f t h e m i s c h i e f a n d p r o p r i v a t e c o m m a n d o a n d t o a d d f o r c e a n d l i f e t o t h e c u r e a n d r e m e d y a c c o r d i n g t o t h e t r u e i n t e n t o f t h e m a k e r s o f t h e A c t p r o b o n o p u b l i c . ” T h e r e i s n o w t h e f u r t h e r a d d i t i o n t h a t r e g a r d m u s t b e h a d n o t o n l y t o t h e e x i s t i n g l a w b u t a l s o t o p r i o r l e g i s l a t i o n a n d t o t h e j u d i c i a l i n t e r p r e t a t i o n t h e r e o f . ”

5 8 G o i n g b y t h e H e yd o n ’ s R u l e o f i n t e r p r e t a t i o n i f w e a n a l yze

t h e p u r p o s e o f c l a u s e ( v ) o f S e c t i o n 2 ( 4 7 ) t h e n i t w o u l d e m e r g e

t h a t l a w b e f o r e m a k i n g t h e a m e n d m e n t w a s t h a t c a p i t a l g a i n c o u l d

b e c h a r g e d o n l y i f a t r a n s f e r h a s b e e n e f f e c t e d a n d t r a n s f e r w a s

i n t e r p r e t e d b y v a r i o u s C o u r t s i n c l u d i n g t h e d e c i s i o n o f H o n ' b l e

S u p r e m e C o u r t i n c a s e o f A l a p a t i V e n k a t r a m i a n V C I T , 5 7 I T R 1 8 5

( S C ) t h a t p r o p e r c o n v e ya n c e o f t h e p r o p e r t y h a s b e e n m a d e u n d e r

t h e c o m m o n l a w . T h e m i s c h i e f w a s w i t h r e g a r d t o t r a n s f e r i n t h e

s e n s e t h a t t h e r e w a s c o m m o n p r a c t i c e t h a t p r o p e r t i e s w e r e b e i n g

t r a n s f e r r e d i n s u c h a m a n n e r t h a t t r a n s f e r e e c o u l d e n j o y t h e

b e n e f i t o f t h e p r o p e r t y w i t h o u t e x e c u t i o n o f t h e c o n v e ya n c e d e e d .

T h i r d l y w e n e e d t o e x a m i n e t h e r e m e d y w h i c h w a s i n s e r t i o n o f

c l a u s e ( v ) a n d ( v i ) s o t h a t c a s e s o f g i v i n g p o s s e s s i o n o f t h e

p r o p e r t y , w e r e a l s o c o v e r e d b y t h e d e f i n i t i o n o f t r a n s f e r . F o u r t h l y ,

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t r u e r e a s o n f o r t h i s a m e n d m e n t w a s t o p l u g a l o o p h o l e i n t h e l a w .

T h e r e f o r e , c o n s i d e r i n g t h e p u r p o s e o f i n s e r t i o n o f c l a u s e ( v ) a n d

( v i ) o f s e c t i o n 2 ( 4 7 ) a n d v a r i o u s c l a u s e s o f P o w e r o f A t t o r n e y a n d

J D A i t b e c o m e s a b s o l u t e l y c l e a r t h a t t h e S o c i e t y h a s h a n d e d o v e r

t h e p o s s e s s i o n o f t h e p r o p e r t y t o T H D C / H A S H .

5 9 S e c o n d i m p o r t a n t c o n t e n t i o n o n b e h a l f o f t h e a s s e s s e e i s

t h a t J D A w a s e x e c u t e d o n 2 5 . 2 . 2 0 0 7 a n d i f p o s s e s s i o n w a s g i v e n

t h e n h o w t h e a s s e s s e e w a s h a v i n g p o s s e s s i o n i n t e rm s o f l a t e r

s a l e d e e d s e x e c u t e d o n 2 . 3 . 2 0 0 7 a n d 2 5 . 4 . 2 0 0 7 . T h e S o c i e t y h a s

e x e c u t e d t w o s a l e d e e d s f o r c o n v e ya n c e o f p a r t s o f t h e t o t a l l a n d .

F i r s t s a l e d e e d h a s b e e n e x e c u t e d o n 2 . 3 . 2 0 0 7 f o r 3 . 0 8 a c r e s a n d

r e c i t a t i o n c l a u s e ( A ) r e a d s a s u n d e r :

C l a u s e ( A ) - T h e v e n d o r i s t h e a b s o l u t e o w n e r a n d i n p o s s e s s i o n o f l a n d t o t a l m e a s u r i n g 1 6 9 k a n a l 7 m a r l a s e q u i v a l e n t t o a p p r o x . 2 1 . 2 a c r e s i n V i l l a g e K a n s a l , T e h s i l M o h a l i a n d m o r e p a r t i c u l a r l y d e s c r i b e d i n S c h e d u l e A h e r e u n d e r w r i t t e n a n d d e l i n e a t e d i n g r e e n c o l o u r b o u n d a r y l i n e i n t h e S h i z r a P l a n i s s u e d b y t h e P a t w a r i d a t e d 2 3 . 2 . 2 0 0 7 . ”

6 0 A c c o r d i n g t o t h e l d . c o u n s e l o f t h e a s s e s s e e i f S o c i e t y h a d

a l r e a d y g i v e n t h e p o s s e s s i o n t h e n t h e S o c i e t y w o u l d n o t h a v e /

h a d p o s s e s s i o n o n 2 . 3 . 2 0 0 7 o f t h e l a n d . A t f a c e v a l u e t h i s

a r g u m e n t l o o k s a t t r a c t i v e b u t w h e n e x a m i n e d i n t e r m s o f

p o s s e s s i o n w h i c h h a s b e e n e x p l a i n e d i n c a s e o f J a s b i r S i n g h

S a r k a r i a ( s u p r a ) , a c t u a l r e a l i t y w i l l c o m e f o r w a r d . I n t h i s j u d g m e n t

c o n c e p t o f c o n c u r r e n t p o s s e s s i o n h a s a l s o b e e n d i s c u s s e d a n d

f o l l o w i n g e x t r a c t o f p a r a g r a p h 5 5 o f S a l m o n d ’ s J u r i s p r u d e n c e h a s

b e e n e x t r a c t e d w h i c h r e a d s a s u n d e r :

“ I t w a s a m a x i m o f t h e c i v i l l a w t h a t t w o p e r s o n s c o u l d n o t b e i n p o s s e s s i o n o f t h e s a m e t h i n g a t t h e s a m e t i m e . A s a g e n e r a l p r o p o s i t i o n t h i s i s t r u e : f o r e x c l u s i v e n e s s i s o f t h e e s s e n c e o f p o s s e s s i o n . T w o a d v e r s e c l a i m s o f e x c l u s i v e u s e c a n n o t b o t h b e e f f e c t u a l l y r e a l i ze d a t t h e s a m e t i m e . C l a i m s , h o w e v e r , w h i c h a r e n o t a d v e r s e , a n d w h i c h a r e n o t , t h e r e f o r e , m u t u a l l y d e s t r u c t i v e , a d m i t o f c o n c u r r e n t r e a l i za t i o n . H e n c e t h e r e a r e s e v e r a l p o s s i b l e c a s e s o f d u p l i c a t e p o s s e s s i o n .

1 M e d i a t e a n d i m m e d i a t e p o s s e s s i o n C r o s s - o b j e c t i o n s -e x i s t i n r e s p e c t o f t h e s a m e t h i n g a s a l r e a d y e x p l a i n e d .

2 T w o o r m o r e p e r s o n s m a y p o s s e s s t h e s a m e t h i n g i n c o m m o n ; j u s t a s t h e y m a y o w e i t i n c o m m o n .

T h e c o n c u r r e n t p o s s e s s i o n o f t h e o w n e r w h o c a n e x e r c i s e p o s s e s s i o n r i g h t t o a l i m i t e d e x t e n t a n d f o r a l i m i t e d p u r p o s e a n d t h a t o f t h e b u y e r / d e v e l o p e r w h o h a s a g e n e r a l c o n t r o l a n d c u s t o d y o f t h e l a n d c a n v e r y w e l l b e r e c o n c i l e d . ”

6 1 I n f u r t h e r d i s c u s s i o n i n p a r a 2 6 t o 2 8 o f t h e a b o v e d e c i s i o n

i t h a s b e e n h e l d t h a t i t i s n o t n e c e s s a r y i n t e r m s o f c l a u s e ( v ) t h a t

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t h e d e v e l o p e r s h o u l d h a v e e x c l u s i v e p o s s e s s i o n . T h e c o n c u r r e n t

p o s s e s s i o n o f t h e o w n e r i s p o s s i b l e w h i c h g i v e s r i g h t s t o a l i m i t e d

e x t e n t f o r a l i m i t e d p u r p o s e . T h u s i t i s v e r y m u c h p o s s i b l e t o h o l d

c o n c u r r e n t p o s s e s s i o n . M e r e r e c i t a t i o n i n t h e s a l e d e e d t o t h e

e f f e c t t h a t t h e S o c i e t y w a s o w n e r o f a n d i n p o s s e s s i o n o f l a n d

m e a s u r i n g 2 1 . 2 a c r e s , d o e s n o t s h o w t h a t t h e S o c i e t y w a s h a v i n g

a c t u a l p o s s e s s i o n . W h a t t h e S o c i e t y w a s h a v i n g i s o n l y o w n e r s h i p

r i g h t a n d t h e p o s s e s s i o n w a s o n l y c o n c u r r e n t a s t h e p o s s e s s a r y

r i g h t . F u r t h e r i t i s a s t a n d a r d c l a u s e i n t h e c o n v e ya n c e d e e d a n d

i t d o e s n o t p r o v e o r i n d i c a t e a n y t h i n g e x c e p t t h a t a p o r t i o n o f l a n d

m e a s u r i n g 3 . 0 8 a c r e s , h a s b e e n s o l d / c o n v e ye d t o t h e d e v e l o p e r .

I n t h e l i g h t o f t h i s p o s i t i o n , t h i s c o n t e n t i o n i s r e j e c t e d .

6 2 W e f i n d n o f o r c e i n t h e n e x t c o n t e n t i o n o f t h e l d . c o u n s e l o f

t h e a s s e s s e e t h a t p o s s e s s i o n i f a t a l l w a s g i v e n s h o u l d b e h e l d t o

b e o n l y a l i c e n s e a s d e f i n e d i n S e c t i o n 5 2 o f I n d i a n E a s em e n t A c t

b e c a u s e c l e a r l y a s p e r S e c t i o n 5 2 o f t h i s A c t , w h e r e o n e p e r s o n

g r a n t s t o a n o t h e r o r m a n y o t h e r p e r s o n s t o d o s o m e t h i n g u p o n

i m m o v e a b l e p r o p e r t y w h i c h i n t h e a b s e n c e o f s u c h r i g h t w o u l d b e

u n l a w f u l .

6 3 H e r e i n c a s e b e f o r e u s , t h e r i g h t h a s n o t b e e n g i v e n f o r t h e

p u r p o s e o f d o i n g s o m e t h i n g b u t a l l t h e p o s s i b l e r i g h t s i n p r o p e r t y

i n c l u d i n g r i g h t t o s e l l , r i g h t t o a m a l g a m a t e t h e p r o j e c t w i t h a n o t h e r

p r o j e c t i n t h e a d j o i n i n g a r e a w h i c h m a y b e a c q u i r e d l a t e r , r i g h t t o

m o r t g a g e e t c . c l e a r l y s h o w t h a t r i g h t s g i v e n b y t h e S o c i e t y a r e

m u c h m o r e l a r g e r t h a n w h a t i s c o v e r e d i n t h e t e r m “ l i c e n s e ” .

6 4 Fourth content ion is that the money received at the t ime of

execut ion of JDA can be termed as advance and whatever money has

been received has a lready been shown as capi ta l gain. W e f ind no force

in th is submiss ion because Sect ion 45 which has been extracted above

c lear ly provide for tax ing of prof i ts and gains ar is ing f rom the transfer.

W e have al ready d iscussed the impl icat ion of Sect ion 45 r .w.s. 48 whi le

d iscuss ing the legal pos it ion. W e had a lso discussed th is issue in the

l ight of the dec is ion in case of Jasbir Singh Sarkar ia (supra) and pointed

out that when Sect ion 45 is read a long wi th Sect ion 48 i t becomes clear

that whole of the considerat ion which is received or accrued is to be

taxed once capita l asset is t ransferred in a part icu lar year .

65 W e would l ike to d iscuss th is aspect of the issue in l i t t le more

detai l and try to unders tand why the whole of the cons iderat ion is

required to be taxed. At the cost of repet i t ion let us again reproduce the

observat ions of the Ld. author i ty in case of Jasbir Singh Sarkar ia (supra)

which we have ear l ier extracted at para 40 and the re levant port ion is as

under:

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“4 0 . O n t h e a b o v e , t h e H o n ' b l e A u t h o r i t y a f t e r r e f e r r i n g t o t h e p r o v i s i o n s o f s e c t i o n 4 5 a n d o b s e r v e d a s u n d e r : -

“ … … … . The sect ion can be analysed thus :

(a) transfer of a capi ta l asset effec ted in the prev ious year, (b) resultant prof i ts or gains from such transfer , (c) those prof i ts or gains would const i tu te the income of the assessee/ transferor (d) such income shal l be deemed to be the income of the same prev ious year in which the transfer had taken p lace.

Two aspects may be noted at th is juncture. Firs t ly , the express ion used is “ar is ing” which is not to be equated with the express ion “received”. Both these express ions and in addit ion thereto, the express ion “accrue” are used in the Income-tax Act e ither col lec t ive ly or separate ly according to the context and nature of the charging provis ion. The second point which deserves not ice is that by a deeming prov is ion, the prof i ts or gains that have ar isen would be treated as the income of the prev ious year in which the transfer took p lace. That means, the income on account of ar isa l of capita l gain should be charged to tax in the same prev ious year in which the transfer was ef fec ted or deemed to have taken p lace.

The effect and ambit of the deeming prov is ion conta ined in sect ion 45 has been cons idered in dec ided cases and leading text books. The fo l lowing statement of law in Sampath Iyengar ’s Commentary (10th Edit ion— Revised by Shr i S. Rajaratnam) br ings out the correct legal pos i t ion :

“Sect ion 45 enacts that the capita l gains shal l by f ic t ion ‘be deemed to be the income of the prev ious year in which the transfer took place’. Since th is is a statutory f ic t ion, the actual year in which the sale pr ice was received, whether i t was one year , two years , three years , four years etc. prev ious to the prev ious year of t ransfer , is bes ide the point . The ent irety of the sum or sums received in any ear l ier year or years would be regarded as the capi ta l gains ar is ing in the prev ious year of t ransfer .

. . . . In the words of sect ion 45, the capita l gains ar is ing from the transfer 'shal l be the income of the prev ious year in which the transfer took place' . So, the payments of cons iderat ion st ipulated to be paid in fu ture would have to be at tr ibuted, by s tatutory mandate, to the year of t ransfer, even as payments made pr ior to the year of t ransfer . ”

66 The above c lear ly shows that i t is because of express ion used in

Sect ion 45 that is “ar is ing” which cannot be equated wi th “receipt” . In

th is respect the ld. author i ty has quoted a very o ld dec is ion of Hon'b le

Madras High Court in case of T.V. Sundaram Iyengaar and Sons Ltd. V.

CIT, 37 ITR 26 (Mad) . At para 13 of the said dec is ion is extracted in the

fol lowing manner :

“13. In T.V. Sundaram Iyengar and Sons Ltd. V. CIT [1959] 37 ITR 26, a Div is ion Bench of the Madras High Court whi le constru ing sect ion 12 B of the Indian Income-tax Act , 1922 c lar i f ied the import of the express ion “ar ise” as fo l lows

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“ Sect ion 12B does not require that prof i ts should have been actual ly received. I t is suf f ic ient i f they have ar isen. Throughout the Income-tax Act the words ”accrue ’ and “ar ise” are used in contradist inct ion to the word “receive” and indicate a r ight to receive. This was expla ined by Fry L.J . , in Colquhoun v . Brooks. The learned judge observed: ‘ I think , therefore, that the words “ar ise or accru ing” are general words descr ipt ive of a r ight to receive prof i ts . ’

See a lso CIT v. Anamalla is T imber Trust Ltd. To at trac t the operat ion of sect ion 12B i t is therefore suff ic ient i f the prof i ts arose. They need not have been actual ly received.”

14. Thus the cr i ter ion of r ight to receive the prof i ts / gains was appl ied in

that case. 15. The legal pos i t ion does not therefore admit of any doubt that the

actual receipt of the ent ire sale cons iderat ion dur ing the year of “ transfer ” is not necessary for the purpose of comput ing capita l gains. ”

Fur ther the express ion ar is ing has been def ined in the Advanced Law

Lex icon by P. Ramanatha Aiyer edited by Y.V. Chandrachud, Former Chief

Just ice of India:

“The words “Ar is ing or accruing” descr ibe a r ight to receive prof i ts , and that there must be a debt owed by somebody. Ld. Commiss ioner of Income Tax, West Bengal- I I , Calcut ta V. Hindustan Hous ing and Land Development Trust Ltd. AIR 1986 S.C 1805, 1807.”

The express ion “accrual of income” has been def ined in the same

Lex icon as under :

“Accrual of income. E.D Jassoon & C. Ltd. V Ld. Commiss ioner of Income Tax, AIR 1954 S.C 470 quoted – Income may accrue to an assessee wi thout the actual receipt of the same. I f the assessee acquires a r ight to receive the income, the income can be said to have accrued to h im though i t may be received later on i ts being ascer ta ined. The basic concept ion is that he must have acquired a r ight to receive the income. Bhogi lal V Income Tax Ld. Commissioner, AIR 1956 Bom 411, 414 ( Income Tax Act (11 of 1992) Ss. 16(1) and (3) } ”

67 The combined reading of these two def in i t ions show that i t ( i .e.

accrual) is not equal to the receipt of income. In fac t i t is a s tage before

the point of t ime when the income becomes receivable. In other words,

once the vested r ights come to a person then i t can be said that such

r ight or income has accrued to such person. The concept of accrual or

arousal of income has a lso been d iscussed by the ld . author S.

Rajaratnam in the commentary of Law of Income Tax by Sampath

Iyengar XIth Edit ion by d iscuss ing the meaning of “accrued and ar ise” at

page 1300 i t has been observe as under:

“ (1) Impor tant pr incip les.- (a) Meaning – ‘Accrue ’ means ‘to ar ise or spr ing as a natura l growth or resul t ’, to come by way of increase ’. ‘Ar is ing ’ means ‘coming into ex istence or not ice or present ing i tse lf ’. ‘Accrue ’ connotes growth or accumulat ion with a tangib le shape so as to be receivable. In a secondary sense, the two words together mean ‘to become a present and enforceable r ight ’ and ‘to become a present r ight of demand’. In the Act , the two words are used synonymously wi th each other to denote the same idea or ideas very s imi lar , and the d i f ference l ies only in this that one is more appropr iate than the other , when

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appl ied, to a par t icu lar case. I t wi l l indeed be d if f icu l t to d ist inguish between the two words, but i t is c lear that both the words are used in contradis t inc t ion to the word ‘receive ’ and indicate a r ight to receive. They represent a s tage anter ior to the point of t ime when the income becomes receivable and connote a character of the income, which is more or less inchoate and which is something less than a receipt . An unenforceable c la im to receive an undetermined or undef ined sum does not g ive r ise to accrual. ”

68 Therefore, i t is not only the money which has been received by

the assessee which is required to be taxed but the cons iderat ion which

has accrued to the assessee is also required to be taxed. In v iew of

th is , th is content ion is rejected.

6 9 T h e f i f t h c o n t e n t i o n m a d e b y t h e L d . C o u n s e l f o r t h e

a s s e s s e e w a s t h a t s i n c e s e c t i o n 5 3 A o f t h e T r a n s f e r o f P r o p e r t y

A c t i t s e l f h a s u n d e r g o n e a m e n d m e n t w . e . f . 2 4 . 9 . 2 0 0 1 b y w h i c h t h e

a g r e e m e n t r e f e r r e d t o i n t h a t s e c t i o n i s r e q u i r e d t o b e r e g i s t e r e d

a n d t h e r e f o r e , n o w i n s e c t i o n 2 ( 4 7 ) ( v ) o n l y t h e a m e n d e d p r o v i s i o n s

c a n b e r e a d . W e f i n d n o f o r c e i n t h i s c o n t e n t i o n . I t i s w e l l k n o w n

t h a t s e c t i o n 5 3 A o f t h e T r a n s f e r o f P r o p e r t y A c t w a s p a s s e d o n

e q u i t a b l e d o c t r i n e s o a s t o p r o t e c t t h e t a k i n g o v e r o r r e t e n t i o n o f

t h e p o s s e s s i o n b y t h e t r a n s f e r e e . I t w a s n o t a s o u r c e b y w h i c h

t i t l e o f i m m o v a b l e p r o p e r t y c o u l d b e a c q u i r e d . S e c t i o n 5 3 A o f T P

A c t r e a d a s u n d e r : -

53A. Par t performance.- Where any person contrac ts to transfer for cons iderat ion any immoveable property by wr i t ing s igned by h im or on h is behalf f rom which the terms necessary to const i tute the transfer can be ascerta ined with reasonable cer ta inty,

and the transferee has, in part performance of the contract , taken possess ion of the proper ty or any par t thereof, or the transferee, being a lready in possess ion, cont inues in possess ion in part per formance of the contract and has done some act in fur therance of the contract ,

and the t ransferee has performed or is wi l l ing to per form his par t of the contrac t, then, notwi ths tanding that the contract , [ *** ]where there is an ins trument of t ransfer , that the t ransfer has not been completed in the manner prescr ibed therefor by the law for the t ime being in force, the transferor or any person c la iming under h im shal l be debarred from enforc ing against the transferee and persons c la iming under h im any r ight in respect of the proper ty of which the transferee has taken or cont inued in possess ion, other than a r ight expressly prov ided by the terms of the contract ”

7 0 A p l a i n r e a d i n g o f t h e a b o v e p r o v i s i o n s h o w s t h a t i t p r o v i d e s

a s a f e t y m e a s u r e o r a s h i e l d i n t h e h a n d s o f t h e t r a n s f e r e e t o

p r o t e c t t h e p o s s e s s i o n o f a n y p r o p e r t y w h i c h h a s b e e n g i v e n b y

t h e t r a n s f e r o r a s l a w f u l p o s s e s s i o n u n d e r a p a r t i c u l a r a g r e e m e n t

o f s a l e . T h i s p o s i t i o n o f l a w w a s i n c o r p o r a t e d i n t h e d e f i n i t i o n o f

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‘ t r a n s f e r ’ b y i n s e r t i o n o f c l a u s e s ( v ) & ( v i ) i n s e c t i o n 2 ( 4 7 ) o f t h e

A c t . I t i s i m p o r t a n t t o n o t e t h a t c l a u s e ( v ) u s e s t h e e x p r e s s i o n

“ c o n t r a c t o f t h e n a t u r e r e f e r r e d t o i n s e c t i o n 5 3 A o f T . P . A c t ,

t h e r e f o r e , c l e a r l y t h e i d e a i s t h a t a n a g r e e m e n t w h i c h p r o v i d e s

s o m e d e f e n s e i n t h e h a n d s o f t r a n s f e r e e w a s i n c o r p o r a t e d u n d e r

t h e d e f i n i t i o n o f ‘ t r a n s f e r ’ i n t h e I n c o m e T a x A c t . N o w o r i g i n a l l y

s e c t i o n 5 3 A o f T . P . A c t p r o v i d e d t h a t e ve n i f “ t h e c o n t r a c t t h o u g h

r e q u i r e d t o b e r e g i s t e r e d h a s n o t b e e n r e g i s t e r e d ” , w h i c h m e a n s

t h e r i g h t o f d e f e n d i n g t h e p o s s e s s i o n w a s a v a i l a b l e e v e n i f t h e

c o n t r a c t w a s n o t r e g i s t e r e d b u t b y A m e n d m e n t A c t 4 8 o f 2 0 0 1 , t h e

e x p r e s s i o n “ t h o u g h r e q u i r e d t o b e r e g i s t e r e d h a s n o t b e e n

r e g i s t e r e d ” , h a s b e e n o m i t t e d w h i c h m e a n s f o r t h e p u r p o s e o f

p o s s e s s i o n u / s 5 3 A o f T . P . A c t , a p e r s o n h a s t o p r o v e t h a t

p o s s e s s i o n h a s b e e n g i v e n u n d e r a r e g i s t e r e d a g r e e m e n t . I n o t h e r

w o r d s , n o w u / s 5 3 A o f T . P . A c t , t h e a g r e e m e n t r e f e r r e d i s r e q u i r e d

t o b e r e g i s t e r e d . T h i s r e q u i r e m e n t c a n n o t b e r e a d i n c l a u s e ( v ) o f

s e c t i o n 2 ( 4 7 ) b e c a u s e t h a t r e f e r s o n l y t o t h e c o n t r a c t o f t h e

n a t u r e o f s e c t i o n 5 3 A o f T . P . A c t w i t h o u t g o i n g i n t o t h e

c o n t r o v e r s y w h e t h e r s u c h a g r e e m e n t i s r e q u i r e d t o b e r e g i s t e r e d

o r n o t . T h e L d . C o u n s e l f o r t h e a s s e s s e e h a d r e f e r r e d t o t h e

d e c i s i o n o f H o n ' b l e S u p r e m e C o u r t i n t h e c a s e o f S u r a n a S t e e l s v

D C I T 2 3 7 I T R 7 7 7 ( S C ) f o r t h e p r o p o s i t i o n t h a t w h e n a s e c t i o n o f a

p a r t i c u l a r s t a t u t e i s i n t r o d u c e d i n t o a n o t h e r A c t i t m u s t b e r e a d i n

t h e s a m e s e n s e a s i t b o r e i n t h e o r i g i n a l A c t . T h e c a r e f u l p e r u s a l

o f t h a t j u d g m e n t w o u l d s h o w t h a t s i t u a t i o n i s a p p l i c a b l e o n l y w h e n

a p a r t i c u l a r p r o v i s i o n o f a n A c t h a s b e e n i n c o r p o r a t e d i n t h e l a t e r

A c t . I n t h a t c a s e a q u e s t i o n a r o s e t h a t f o r t h e p u r p o s e o f M A T

p r o v i s i o n w h a t i s t h e m e a n i n g o f p a s t l o s s e s o r u n a b s o r b e d

d e p r e c i a t i o n . I t w a s f o u n d t h a t i n e x p l a n a t i o n t o s e c t i o n 1 1 5 J

c l a u s e ( i v ) , t h e f o l l o w i n g e x p r e s s i o n w a s u s e d : -

“ ( i v ) t h e a m o u n t o f t h e l o s s o r t h e a m o u n t o f d e p r e c i a t i o n w h i c h w o u l d b e r e q u i r e d t o b e s e t o f f a g a i n s t t h e p r o f i t o f t h e r e l e v a n t p r e v i o u s y e a r a s i f t h e p r o v i s i o n s o f c l a u s e ( b ) o f t h e f i r s t p r o v i s o t o s u b s e c t i o n ( i ) o f s e c t i o n 2 0 5 o f t h e C o m p a n i e s A c t , 1 9 5 6 ( 1 o f 1 9 5 6 ) a r e a p p l i c a b l e .

7 1 T h e H o n ' b l e A p e x C o u r t r e f e r r e d t o t h e P r i n c i p l e s o f

S t a t u t o r y I n t e r p r e t a t i o n b y S h r i G . P . S i n g h a n d e x t r a c t e d f o l l o w i n g

p i e c e :

“ S e c t i o n 1 1 5 J , E x p l a n a t i o n c l a u s e ( i v ) , i s a p i e c e o f l e g i s l a t i o n b y i n c o r p o r a t i o n . D e a l i n g w i t h t h e s u b j e c t , J u s t i c e G . P . S i n g h s t a t e s i n P r i n c i p l e s o f S t a t u t o r y I n t e r p r e t a t i o n ( 7 t h e d i t i o n , 1 9 9 9 ) .

I n c o r p o r a t i o n o f a n e a r l i e r A c t i n t o a l a t e r A c t i s a l e g i s l a t i v e d e v i c e a d o p t e d f o r t h e s a k e o f c o n v e n i e n c e i n o r d e r t o a v o i d v e r b a t i m r e p r o d u c t i o n o f t h e p r o v i s i o n s o f t h e e a r l i e r A c t i n t o t h e l a t e r . W h e n a n e a r l i e r A c t o r c e r t a i n o f

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i t s p r o v i s i o n s a r e i n c o r p o r a t e d b y r e f e r e n c e i n t o a l a t e r A c t , t h e p r o v i s i o n s s o i n c o r p o r a t e d b e c om e p a r t a n d p a r c e l o f t h e l a t e r A c t a s i f t h e y h a d b e e n " b o d i l y t r a n s p o s e d i n t o i t " . T h e e f f e c t o f i n c o r p o r a t i o n i s a d m i r a b l y s t a t e d b y L O R D E S H E R , M . R . : " I f a s u b s e q u e n t A c t b r i n g s i n t o i t s e l f b y r e f e r e n c e s o m e o f t h e c l a u s e s o f a f o r m e r A c t , t h e l e g a l e f f e c t o f t h a t , a s h a s o f t e n b e e n h e l d , i s t o w r i t e t h o s e S e c t i o n s i n t o t h e n e w A c t a s i f t h e y h a d b e e n a c t u a l l y w r i t t e n i n i t w i t h t h e p e n , o r p r i n t e d i n i t . ( p . 2 3 3 )

E v e n t h o u g h o n l y p a r t i c u l a r S e c t i o n s o f a n e a r l i e r A c t a r e i n c o r p o r a t e d i n t o l a t e r , i n c o n s t r u i n g t h e i n c o r p o r a t e d S e c t i o n s i t m a y b e a t t i m e s n e c e s s a r y a n d p e r m i s s i b l e t o r e f e r t o o t h e r p a r t s o f t h e e a r l i e r s t a t u t e w h i c h a r e n o t i n c o r p o r a t e d . A s w a s s t a t e d b y L O R D B L A C K B U R N : "W h e n a s i n g l e S e c t i o n o f a n A c t o f P a r l i a m e n t i s i n t r o d u c e d i n t o a n o t h e r A c t , I t h i n k i t m u s t b e r e a d i n t h e s e n s e i t b o r e i n t h e o r i g i n a l A c t f r o m w h i c h i t w a s t a k e n , a n d t h a t c o n s e q u e n t l y i t i s p e r f e c t l y l e g i t i m a t e t o r e f e r t o a l l t h e r e s t o f t h a t A c t i n o r d e r t o a s c e r t a i n w h a t t h e S e c t i o n s m e a n t , t h o u g h t h o s e o t h e r S e c t i o n s a r e n o t i n c o r p o r a t e d i n t h e n e w A c t . ( p . 2 4 4 )

7 2 O n t h e b a s i s o f a b o v e o b s e r v a t i o n , i t wa s h e l d t h a t m e a n i n g

o f p a s t l o s s e s o r u n a b s o r b e d d e p r e c i a t i o n h a s t o b e t a k e n s a m e a s

w a s d e f i n e d i n t h e C o m p a n i e s A c t . I n t h i s c a s e i t i s c l e a r t h a t

p r o v i s i o n i t s e l f r e f e r s t o c l a u s e ( b ) o f s u b s e c t i o n ( 1 ) o f s e c t i o n

2 0 5 o f C o m p a n y ’ s A c t 1 9 5 6 a n d t h e r e f o r e , s a m e m e a n i n g w a s

g i v e n t o p a s t l o s s e s o r u n a b s o r b e d d e p r e c i a t i o n a s i s g i v e n u n d e r

t h e C om p a n i e s A c t , 1 9 5 6 .

7 3 I n c a s e o f c l a u s e ( v ) t o s e c t i o n 2 ( 4 7 ) , c l e a r l y t h e e x p r e s s i o n

u s e d i s “ c o n t r a c t o f t h e n a t u r e r e f e r r e d t o i n s e c t i o n 5 3 A o f T . P .

A c t ” , w h i c h m e a n s i t i s n o t a c a s e o f i n c o r p o r a t i o n o f o n e p i e c e o f

l e g i s l a t i o n i n t o a n o t h e r p i e c e o f l e g i s l a t i o n . I f t h a t w a s t h e

i n t e n t i o n o f t h e P a r l i a m e n t , o b v i o u s l y c l a u s e ( v ) w o u l d c o n t a i n t h e

e x p r e s s i o n “ c o n t r a c t a s d e f i n e d u n d e r s e c t i o n 5 3 A o f T r a n s f e r o f

P r o p e r t y A c t , 1 8 8 2 ” . F u r t h e r , i t i s s e t t l e d p o s i t i o n o f l a w t h a t a n y

i n t e r p r e t a t i o n w h i c h c o u l d r e n d e r a p a r t i c u l a r p r o v i s i o n r e d u n d a n t

s h o u l d b e a v o i d e d . I f t h e c o n t e n t i o n o f t h e L d . c o u n s e l w a s t o b e

a c c e p t e d , o b v i o u s l y t h e p r o v i s i o n s o f c l a u s e ( v ) o f s e c t i o n 2 ( 4 7 ) o f

t h e A c t w o u l d b e c o m e r e d u n d a n t i n t h e s e n s e t h a t r e g i s t r a t i o n o f

a g r e e m e n t w o u l d a g a i n b e m a d e c o m p u l s o r y b u t s i n c e p r o p e r t i e s

w e r e b e i n g s o l d i n t h e m a r k e t o n “ p o w e r o f a t t o r n e y ” b a s i s t h r o u g h

u n r e g i s t e r e d a g r e e m e n t s w h i c h w o u l d m a k e t h i s p r o v i s i o n

r e d u n d a n t . T h i s p o s i t i o n w e h a v e a l r e a d y d i s c u s s e d e a r l i e r w h i l e

d i s c u s s i n g t h e H e yd o n ’ s R u l e i n t h e i n t e r p r e t a t i o n s o f t h i s c l a u s e .

F u r t h e r t h e i s s u e o f i n t e r p r e t a t i o n o f c l a u s e ( v ) a n d a m e n d m e n t t o

s e c t i o n 5 3 A o f t h e T r a n s f e r o f P r o p e r t y A c t c a m e f o r c o n s i d e r a t i o n

b e f o r e t h e M u m b a i B e n c h o f t h e T r i b u n a l i n t h e c a s e o f S u r e s h

C h a n d e r A g g a r w a l v s I T O 4 8 S O T 2 0 1 0 . T h e T r i b u n a l d i s c u s s e d

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t h i s i s s u e a t p a g e 7 a n d a f t e r q u o t i n g t h e p r o v i s i o n s o f s e c t i o n

2 ( 4 7 ) a n d a l s o s e c t i o n 5 3 A b e f o r e a n d a f t e r a m e n d m e n t a s w a l l a s

p a r a N o s . 1 1 . 1 t o 1 1 . 2 o f t h e B o a r d ’ s C i r c u l a r N o . 4 9 5 d a t e d

2 2 . 9 . 1 9 8 7 o b s e r v e d a s u n d e r : -

“The above c lear ly shows that there was certa in s i tuat ion where propert ies were being transferred wi thout regis trat ion of transfer instruments and people were escaping tax l iab i l i t ies on transfer of such propert ies because the same could not be brought in the def in i t ion of "transfer" part icu lar ly in many States of the country propert ies were being held by var ious people as leased propert ies which were a l lo t ted by the var ious Govt. Depar tments and t ransfers of such lease were not permiss ible. People were transferr ing such propert ies by execut ing agreement to sel l and general power of at torney as wel l as Wi l l and receiv ing fu l l cons iderat ion, but s ince the agreement to sel l was not registered and though fu l l cons iderat ion was received and even possession was g iven, s t i l l the same transact ions could not be subjected to tax because the same could not covered by the def in i t ion of " transfer". To br ing such transact ions wi th in the tax net , th is amendment was made. I t has to be apprec iated that c lause (v) in sect ion 2(47) does not l i f t the def in i t ion of part per formance from sect ion 53A of the Transfer of Proper ty Act , 1882. Rather , i t def ines any transact ion involv ing a l lowing of possess ion of any immovable property to be taken or reta ined in part per formance of a contract of the nature referred to in sect ion 53A of the Transfer of Proper ty Act . This means such transfer is hot required to be exact ly s imi lar to the one def ined u/s .53A of the Transfer of Proper ty Act, otherwise legis lature would have s imply stated that transfer would inc lude transact ions def ined in sec. 53A of the Transfer of Property Act . But the legis lature in i ts wisdom has used the words "of a contract , of the nature referred in sect ion 53A". Therefore, i t is only the nature which has to be seen. As d iscussed above, the purpose of inser t ion of c lause (v) was to tax those transact ions where proper t ies were being t ransferred by way of g iv ing possess ion and receiv ing ful l considerat ion. Therefore, in our humble opin ion, in the case of a transfer where possess ion has been g iven and fu l l cons iderat ion has been received, then such transact ion needs to be construed as "transfer". Therefore, the amendment made in sect ion 53A by which the requirement of regist rat ion has been indirect ly brought on the statute need not be appl ied whi le constru ing the meaning of "transfer" with reference to the Income-tax Act.

8. The above s i tuat ion fur ther becomes c lear i f we refer to the celebrated dec is ion of Hon'b le Supreme Court in the case of Podar Cement (P.) Ltd. (supra}. In that case, the assessee was owner of four f lats in a bui ld ing cal led "Si lver Arch"/on Nepean Sea Road, Bombay. Out of these four f la ts, two were purchased d irect ly f rom the Bui lders, Malabar Industr ies Pvt . Ltd. , and two were purchased by i ts s is ter concerns which were later purchased by the assessee. The possess ion of the f lats was taken after fu l l payment of cons iderat ion. The f la ts were let out . The assessee contended that the renta l income from these f lats was assessable as " income from other sources" because the assessee was not the legal owner because the t i t le of the property had not been conveyed to the Co-operat ive Soc iety which was formed by the purchasers of the f la ts. The Hon'b le Court noted that sect ion 27 had been amended v ide c lause 3(a) wherein when a person was a l lowed to take possess ion of the bui lding in part performance of the nature referred to in sect ion 53A, such person shal l be deemed to be the owner. I t was fur ther observed that for a l l pract icable purposes the assessee was the owner and poss ib ly there cannot be two owners of same property at the same t ime. In fact , the amendments to sect ion 27 were made later on but were taken into cognizance on the bas is of above pr incip le and u l t imate ly i t was held as under :

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"Hence, though under the common law "owner" means a person who has got val id t i t le legal ly conveyed to h im af ter comply wi th the requirements of law such as the Transfer of Proper ty Act, the Regis trat ion Act , etc. , in the context sect ion 22 of the Income-tax Act , 1961, hav ing regard to the ground real i t ies and fur ther hav ing regard to the objec t of the Income-tax Act , namely, to tax the income, "owner" is a person who is ent i t led to receive income from the proper ty in h is own r ight . The requirement of regist rat ion of the sale deed in the context of sect ion 22 is not warranted."

Thus, from the above, i t is c lear that i t is not necessary to get the instrument of t ransfer registered for the purpose of Income-tax Act when a person has got a val id legal ly conveyed after comply ing with the requirements of the law.

9. Simi lar ly , in the case of Mysore Minerals Ltd. v . CIT [1999] 239 ITR 775/106 Taxman 166 (SC), the assessee had purchased for the use of i ts staff seven low income group houses from a Hous ing Board. The payment had been made and in turn possess ion of the houses was taken over by the assessee. The actual conveyance deed was not executed. The assessee c la imed deprec iat ion which was denied by the depar tment . Af ter great d iscuss ion, i t was observed that for a l l pract icable purposes and for the purpose of Income-tax Act , the assessee shal l be construed as owner of the proper ty. In fac t, i t was held as under : -

"Held, revers ing the judgment of the High Court , that the f inding of fac t arr ived at in the case at hand was that though a document of t i t le was not executed by the Hous ing Board in favour of the assessee, the houses were a l lot ted to the assessee by the Housing Board, par t payment received and possess ion del ivered so as to confer dominion over the property on the assessee whereaf ter the assessee had in i ts own r ight a l lot ted the quar ters to the s taf f and they were being actual ly used by the staf f of the assessee. The assessee was ent i t led to deprec iat ion in respect of the seven houses in respect of which the assessee had not obta ined a deed of conveyance f rom the vendor a l though i t had taken possess ion and made par t payment of the cons iderat ion".

Thus, from the above two dec is ions, i t becomes absolute ly c lear that for the purpose of the Income-tax Act the ground real i ty has to be recognized and i f a l l the ingredients of t ransfer have been completed, then such transfer has to be recognized. Merely because the part icu lar instrument of t ransfer has not been regis tered wi l l not a lter the s i tuat ion. This pos it ion is fur ther strengthened by the fact that legis lature i tse lf has inserted c lause (v) to sect ion 2(47) and whi le referr ing to the prov is ions of sect ion 53A, reference has been made by s tat ing that contrac ts in the nature of sect ion 53A should a lso be covered by the def in i t ion of "transfer" . Therefore, in our humble v iew, the amendment to sec. 53A of the Transfer of Proper ty Act , whereby the requirement of the documents not being regis tered has been omit ted, wi l l not a lter the s ituat ion for hold ing the t ransact ion to be a transfer u/s .2(47)(v) i f a l l other ingredients have been sat is f ied.”

7 4 T h u s , i t i s c l e a r t h a t n o n r e g i s t r a t i o n o f a g r e e m e n t c a n n o t

l e a d t o t h e c o n c l u s i o n t h a t p r o v i s i o n o f s e c t i o n 2 ( 4 7 ) ( v ) i s n o t

a p p l i c a b l e . S i m i l a r v i e w h a s b e e n t a k e n b y I T A T C o c h i n B e n c h o f

t h e T r i b u n a l i n c a s e o f G . S r e e n i v a s a n V s D C I T 2 8 T x m a n n . c o m

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2 0 0 ( C o c h . ) a n d I T A T P u n e B e n c h i n t h e c a s e o f M a h e s h

N e m i c h a n d r a G a n e s h w a d e v I T O 2 1 T a x m a n n . c o m 1 3 6 ( P u n e ) . I n

v i e w o f t h i s l e g a l p o s i t i o n , t h i s c o n t e n t i o n i s r e j e c t e d .

75 The next content ion was that the dec is ion of Hon'b le Bombay High

Court in case of Chaturbhuj Dwarkadas Kapadia (supra) is not appl icable

par t icu lar ly because u lt imate ly in that case i t was held that capi ta l gain

tax should be charged in Assessment year 1999-2000 whereas

agreement was executed in August , 1994.

76 W e have a lready d iscussed the impl icat ions of the dec is ion in

case of Chaturbhuj Dwarkadas Kapadia (supra) in para 33 to 38. We had

a lso examined why in that case capi ta l gain was not held to be

chargeable in Assessment year 1995-96.There is no need to repeat the

same and in v iew of the said observat ions, we rejec t this content ion.

7 7 T h e n e x t c o n t e n t i o n i s t h a t i t i s n e c e s s a r y f o r i n v o k i n g o f

s e c t i o n 2 ( 4 7 ) ( v ) o f t h e A c t t o c o m p l y w i t h t h e p r o v i s i o n s o f s e c t i o n

5 3 A o f t h e T r a n s f e r o f P r o p e r t y A c t t o t h e e x t e n t t h a t t h e r e s h o u l d

b e w i l l i n g n e s s o n t h e p a r t o f t h e t r a n s f e r e e t o p e r f o r m h i s p a r t o f

t h e c o n t r a c t .

7 8 I n t h i s a s p e c t w e h a v e n o q u a r r e l w i t h t h e p r o p o s i t i o n t h a t

f o r i n v o k i n g s e c t i o n 5 3 A p f T . P . A c t r e a d w i t h c l a u s e ( v ) o f s e c t i o n

2 ( 4 7 ) , t h e t r a n s f e r e e h a s t o p e r f o r m o r i s w i l l i n g t o p e r f o r m h i s

p a r t o f t h e c o n t r a c t . I n t h i s r e s p e c t a s r e f e r r e d t o b y L d . C o u n s e l

f o r t h e a s s e s s e e , t h e c o m m e n t s o f t h e L d . A u t h o r i n t h e

c o m m e n t a r y b y M u l l a – D i n s h a n F r e d e r i c k M u l l a v i d e p a r a 1 6 a r e

c l e a r a n d s h o ws t h a t t h i s r e q u i r e m e n t h a s t o b e a b s o l u t e a n d

u n c o n d i t i o n a l . S o m e o b s e r v a t i o n s h a v e b e e n m a d e i n t h e c a s e o f

G e n e r a l G l a s s C o m p a n y P v t L t d V s D C I T ( s u p r a ) . I n t h a t c a s e i t

w a s h e l d t h a t w i l l i n g n e s s t o p e r f o r m f o r t h e p u r p o s e o f s e c t i o n 5 3 A

i s s o m e t h i n g m o r e t h a n a s t a t e m e n t o f i n t e n t a n d i t i s u n q u a l i f i e d

a n d u n c o n d i t i o n a l w i l l i n g n e s s o n t h e p a r t o f t h e t r a n s f e r e e t o

p e r f o r m h i s o b l i g a t i o n . I n t h a t c a s e t h e t r a n s f e r e e h a s a g r e e d t o

m a k e c e r t a i n p a ym e n t s i n i n s t a l l m e n t s i n c o n s i d e r a t i o n o f t h e

d e v e l o p m e n t a g r e e m e n t b u t s u c h p a ym e n t s w e r e n o t m a d e . L a t e r

o n , t h e a g r e e m e n t w a s m o d i f i e d a n d m o r e t i m e w a s g i v e n t o t h e

t r a n s f e r e e f o r p a ym e n t o f s u c h i n s t a l l m e n t s . H o w e v e r , t h e

i n s t a l l m e n t s w e r e n o t p a i d e v e n u n d e r t h e m o d i f i e d t e rm s a n d t h a t

i s w h y i t w a s u l t i m a t e l y h e l d t h a t s u c h a g r e e m e n t c a n n o t b e

c o n s t r u e d a s t r a n s f e r .

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7 9 T h e s e c o n d d e c i s i o n r e f e r r e d t o b y L d . C o u n s e l f o r t h e

a s s e s s e e i s K . R a d i k a v D C I T ( s u p r a ) . I n t h i s c a s e , s i m i l a r

o b s e r v a t i o n s w e r e m a d e , t h o u g h i t i s n o t p o i n t e d o u t i n w h a t

r e s p e c t t h e t r a n s f e r e e h a s f a i l e d t o p e r f o r m h i s p a r t b u t i t h a s

b e e n o b s e r v e d t h a t t h e f a c t s o f t h e c a s e s h o w s t h a t t r a n s f e r e e h a s

n o t p e r f o r m e d h i s p a r t o f t h e c o n t r a c t .

8 0 T h e t h i r d j u d gm e n t r e l i e d u p o n b y t h e L d . C o u n s e l f o r t h e

a s s e s s e e i s i n t h e c a s e o f D C I T v T e j S i n g h ( s u p r a ) . I n t h a t c a s e

l a n d w a s a c q u i r e d b y t h e g o v e r n m e n t a n d t h e m a t t e r w e n t f o r

l i t i g a t i o n . D u r i n g t h e p e n d e n c y o f l i t i g a t i o n , t h e a s s e s s e e e n t e r e d

i n t o a D e v e l o p m e n t a g r e e m e n t w i t h a D e v e l o p e r f o r t h e p u r p o s e o f

d e v e l o p m e n t o f t h e p r o p e r t y , h o w e v e r , i t w a s c l a r i f i e d i n t h e

a g r e e m e n t t h a t t h e r e i s l i t i g a t i o n i n r e s p e c t o f a c q u i s i t i o n o f

p r o p e r t y a n d t h e d e v e l o p e r h a s t o t a k e c l e a r a n c e f r o m t h e

g o v e r n m e n t i n t h e m a t t e r o f d e n o t i f i c a t i o n o f t h e l a n d . I t w a s h e l d

t h a t s i n c e t h e l a n d w a s u n d e r c o m pu l s o r y a c q u i s i t i o n a n d n o

c o m p e n s a t i o n h a s b e e n r e c e i v e d , t h e r e f o r e , t h e r e c o u l d n o t b e

a n y c a p i t a l g a i n t a x u / s 2 ( 4 7 ) ( i i i ) w h i c h d e a l s w i t h t h e c o m p u l s o r y

a c q u i s i t i o n . I t w a s f u r t h e r o b s e r v e d t h a t a s s e s s e e c o u l d n o t h a v e

g i v e n p o s s e s s i o n u n l e s s a n d u n t i l t h e l a n d w a s d e n o t i f i e d . S i n c e

f a c t s o f t h e c a s e a r e d i f f e r e n t t h a n t h e c a s e i n h a n d a n d t h e r e f o r e ,

s a m e a r e n o t r e l e v a n t f o r o u r p u r p o s e .

8 1 N o w c o m i n g t o t h e f a c t s , f i r s t l y i t w a s c o n t e n d e d t h a t D e ve l o p e r

i . e t r a n s f e r e e h a s n o t o b t a i n e d v a r i o u s p e r m i s s i o n s w h i c h w e r e

r e q u i r e d t o b e t a k e n b y t h e D e v e l o p e r a s p e r c l a u s e s 3 . 1 , 7 . 9 , 8 . 4

a n d 8 . 6 o f t h e J D A . T h i s i s n o t c o r r e c t a s p o i n t e d o u t b y t h e L d . C IT

D R t h a t a s s e s s e e h a d a l r e a d y g o t t h e m u n i c i p a l p l a n s a n c t i o n e d b u t

i n t h e m e a n t i m e P I L w a s f i l e d b e f o r e t h e H o n ' b l e P u n j a b & H a r ya n a

H i g h C o u r t a g a i n s t t h e i m p l em e n t a t i o n o f t h e p r o j e c t . I n i t i a l l y , t h e

c o n s t r u c t i o n w a s b a n n e d b y t h e H o n ' b l e H i g h C o u r t . H o w e v e r , l a t e r

o n i t w a s o b s e r v e d i n t h e CW P N o . 2 0 4 2 5 o f 2 0 1 0 a n d a s c l a r i f i e d b y

t h e o r d e r o f t h e H o n ' b l e S u p r e m e C o u r t t h a t r e f u s a l o f s a n c t i o n u n d e r

t h e E n v i r o n m e n t ( P r o t e c t i o n ) A c t , t h e s o c i e t y h a v e s o u g h t a r e v i e w o f

t h e o r d e r b e c a u s e t h e f i n d i n g s a r r i v e d w e r e e x . p a r t e . N o o r d e r i n

t h e m a t t e r h a s b e e n p a s s e d b y t h e c o m p e t e n t a u t h o r i t y p e r h a p s

b e c a u s e o f t h e o r d e r o f H i g h C o u r t . I n t h e i n t e r i m o r d e r p a s s e d i n

t h e P I L i t h a s b e e n c l a r i f i e d b y t h e H o n ' b l e S u p r e m e C o u r t v i d e o r d e r

d a t e d 3 1 . 1 . 2 0 1 2 p e r m i t t i n g t h e c o n c e r n e d a u t h o r i t y u n d e r t h e

d i f f e r e n t s t a t u t e s g o v e r n i n g t h e m a t t e r t o t h e i r r e s p e c t i v e j u r i s d i c t i o n

t o b e d e c i d e d i n a c c o r d a n c e w i t h l a w . T h u s , i t b e c o m e s c l e a r t h a t

d e v e l o p e r i . e . T H D C h a s a p p l i e d f o r v a r i o u s p e r m i s s i o n s b e f o r e t h e

r e l e v a n t a u t h o r i t i e s a n d i n s o m e c a s e s p e r m i s s i o n w e r e d e c l i n e d o n

e x . p a r t e b a s i s a n d i n s o m e c a s e s t h e s a m e w e r e d e c l i n e d i n v i e w o f

t h e H i g h C o u r t o r d e r b a n n i n g t h e c o n s t r u c t i o n . A f t e r t h e c l a r i f i c a t i o n

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o f t h e o r d e r o f t h e H i g h C o u r t b y H o n ' b l e S u p r e m e C o u r t b y o r d e r

d a t e d 3 1 . 1 . 2 0 1 2 , t h e a u t h o r i t i e s h a v e a l r e a d y b e e n p e r m i t t e d t o

e x a m i n e t h e i s s u e o n m e r i t s u n d e r v a r i o u s l a w s . F u r t h e r i n t h e J D A

t h e r e i s a c l a u s e 2 6 w h i c h d e a l s w i t h t h e F o r c e M a j e u r e c l a u s e s . T h e

c l a u s e 2 6 ( i ) t o ( v ) r e a d s a s u n d e r : -

F O R C E M A J E U R E

i ) N o n e o f t h e p a r t i e s s h a l l b e l i a b l e t o t h e o t h e r P a r t y o r b e d e e m e d t o b e i n b r e a c h o f t h i s A g r e e m e n t b y r e a s o n s o f a n y d e l a y i n p e r f o r m i n g o r a n y f a i l u r e t o p e r f o r m , a n y o f i t s o w n o b l i g a t i o n s i n r e l a t i o n t o t h e A g r e e m e n t , i f t h e d e l a y o r f a i l u r e i s d u e t o a n y E v e n t o f F o r c e M e j e u r e . E v e n t o f F o r c e M a j e u r e i s a n y e v e n t c a u s e d b e yo n d t h e p a r t i e s r e a s o n a b l e c o n t r o l . T h e f o l l o w i n g s h a l l b e r e g a r d e d a s i s s u e s b e yo n d t h e P a r t i e s r e a s o n a b l e c o n t r o l .

i i ) F o r t h e p u r p o s e s o f t h i s C l a u s e , a n E v e n t o f F o r c e M a j e u r e s h a l l m e a n e v e n t s o f w a r , w a r l i k e c o n d i t i o n s , b l o c k a d e s , e m b a r g o e s , i n s u r r e c t i o n , G o v e r n m e n t a l d i r e c t i o n s , r i o t s , s t r i k e s , a c t s o f t e r r o r i s m , c i v i l c o m m o t i o n , l o c k - o u t s , s a b o t a g e , p l a g u e s o r o t h e r e p i d e m i c s , a c t s o f G o d i n c l u d i n g f i r e , f l o o d s , v o l c a n i c e r u p t i o n s , t yp h o o n s , h u r r i c a n e s , s t o r m s , t i d a l w a v e s , e a r t h q u a k e , l a n d s l i d e s , l i g h t n i n g , e x p l o s i o n s a n d o t h e r n a t u r a l c a l a m i t i e s , p r o l o n g e d f a i l u r e o f e n e r g y , c o u r t o r d e r s / i n j u n c t i o n s , c h a r g e o f l a w s , a c t i o n a n d / o r o r d e r b y s t a t u t o r y a n d / o r g o v e r n m e n t a u t h o r i t y , t h i r d p a r t y a c t i o n s a f f e c t i n g t h e d e v e l o p m e n t o f t h e P r o j e c t , a c q u i s i t i o n / r e q u i s i t i o n o f t h e P r o p e r t y o r a n y p a r t t h e r e o f b y t h e g o v e r n m e n t o r a n y o t h e r s t a t u t o r y a u t h o r i t y a n d s u c h c i r c u m s t a n c e s a f f e c t i n g t h e d e v e l o p m e n t o f t h e p r o j e c t ( E v e n t o f F o r c e M a j e u r e ) .

i i i ) A n y P a r t y c l a i m i n g r e s t r i c t i o n o n t h e p e r f o r m a n c e o f a n y o f i t s o b l i g a t i o n s u n d e r t h i s a g r e em e n t d u e t o t h e h a p p e n i n g o r a r i s i n g o f a n E v e n t o f F o r c e M a j e u r e h e r e o f s h a l l n o t i f y t h e o t h e r P a r t y o f t h e h a p p e n i n g o r a r i s i n g a n d t h e e n d i n g o f c e a s i n g o f s u c h e ve n t o r c i r c um s t a n c e w i t h t h r e e ( 3 ) d a ys o f d e t e r m i n i n g t h a t a n E v e n t o f F o r c e M a j e u r e h a s o c c u r r e d . I n t h e e v e n t a n y P a r t y a n t i c i p a t e s t h e h a p p e n i n g o f a n E v e n t o f F o r c e M a j e u r e , s u c h P a r t y s h a l l p r o m p t l y n o t i f y t h e o t h e r p a r t y .

i v ) T h e P a r t y c l a i m i n g E v e n t o f F o r c e M a j e u r e c o n d i t i o n s s h a l l , i n a l l i n s t a n c e s a n d t o t h e e x t e n t i t i s c a p a b l e o f d o i n g s o , u s e i t s b e s t e f f o r t s t o r e m o v e o r r e m e d y t h e c a u s e t h e r e o f a n d m i n i m i ze t h e e c o n o m i c d a m a g e a r i s i n g t h e r e o f .

v ) E i t h e r P a r t y m a y t e r m i n a t e t h i s A g r e e m e n t a f t e r g i v i n g t h e o t h e r P a r t y a p r i o r n o t i c e o f f i f t e e n ( 1 5 ) d a ys i n w r i t i n g o f t h e E v e n t o f F o r c e M a j e u r e c o n t i n u e s f o r p e r i o d o f n i n e t y ( 9 0 ) d a ys . I n t h e e v e n t o f t e r m i n a t i o n o f t h i s A g r e e m e n t a l l o b l i g a t i o n s o f t h e P a r t i e s u n t i l s u c h d a t e s h a l l b e f u l f i l l e d .

8 2 T h e c o m b i n e d r e a d i n g o f t h e s e c l a u s e s s h o w t h a t i f a n y o f t h e

p a r t y c o u l d n o t p e r f o r m i t s p a r t o f t h e o b l i g a t i o n b e c a u s e o f t h e

u n f o r e s e e n c i r c u m s t a n c e s w h i c h i n c l u d e d g o v e r n m e n t d i r e c t i o n s ,

c o u r t o r d e r s , i n j u n c t i o n s e t c . s u c h p a r t y w o u l d n o t b e l i a b l e t o o t h e r

p a r t y . I n v i e w o f F o r c e M a j e u r e c l a u s e w h i c h i n c l u d e d C o u r t

I n j u n c t i o n i t c a n n o t b e s a i d t h a t T H D C i s n o t w i l l i n g t o p e r f o r m i t s

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o b l i g a t i o n . I n f a c t D e v e l p e r s i . e . T H D C / H A S H w e r e p e r u s i n g t h e

i s s u e o f p e r m i s s i o n s / s a n c t i o n s v i g o r o u s l y . T h e s e a s p e c t s b e c o m e

f u r t h e r c l e a r i f t h e j u d g m e n t o f t h e H o n ' b l e P u n j a b & H a r ya n a H i g h

C o u r t i n CW P N o . 2 0 4 2 5 o f 2 0 1 0 v i d e o r d e r d a t e d M a r c h 2 6 , 2 0 1 2 i s

p e r u s e d . P a r a s 3 , 4 , 2 2 , 2 5 & 2 6 o f t h e j u d g m e n t r e a d a s u n d e r : -

3 . T h e b r o a d c o n t o u r s o f t h e p r e s e n t p r o c e e d i n g h a v i n g b e e n o u t l i n e d , w e m a y n o w p r o c e e d t o t a k e n o t e o f t h e s p e c i f i c c o n t e n t i o n s o f t h e c o n t e s t i n g p a r t i e s a s m a d e b e f o r e u s . H o w e v e r , b e f o r e w e d o s o , i t m a y b e a p p r o p r i a t e t o m e n t i o n t h e s o m e wh a t c o n f l i c t i n g s t a n d o f t h e p a r t i e s w i t h r e g a r d t o t h e p r e s e n t s t a g e o f t h e a p p l i c a t i o n s f i l e d u n d e r t h e p r o v i s i o n s o f t h e E n v i r o n m e n t ( P r o t e c t i o n ) A c t a s w e l l a s t h e W i l d L i f e ( P r o t e c t i o n ) A c t . W h i l e t h e p e t i t i o n e r , w h o i s s u p p o r t e d b y t h e r e s p o n d e n t N o . 6 - C h a n d i g a r h A d m i n i s t r a t i o n , a s s e r t s t h a t n e c e s s a r y s a n c t i o n / p e rm i s s i o n u n d e r b o t h t h e A c t s h a v e b e e n r e f u s e d b y o r d e r s p a s s e d b y t h e c om p e t e n t a u t h o r i t i e s , t h e p r o m o t e r s o f t h e p r o j e c t c o n t e n d t o t h e c o n t r a r y . T h e f a c t s , a s u n f o l d e d b e f o r e u s , i n d i c a t e t h a t a g a i n s t t h e r e f u s a l o f s a n c t i o n u n d e r t h e E n v i r o n m e n t ( P r o t e c t i o n ) A c t , t h e r e s p o n d e n t s h a v e s o u g h t a r e v i e w o f t h e o r d e r o n t h e g r o u n d t h a t t h e f i n d i n g s a r r i v e d a t , w h i c h h a v e f o r m e d t h e b a s i s o f t h e r e f u s a l , a r e e x - p a r t e . N o o r d e r i n t h e r e v i e w m a t t e r h a s b e e n p a s s e d b y t h e c o m p e t e n t a u t h o r i t y , p e r h a p s , b e c a u s e o f t h e i n t e r i m o r d e r p a s s e d i n t h e P I L w h i c h h a s b e e n c l a r i f i e d b y t h e H o n ' b l e S u p r e m e C o u r t b y o r d e r d a t e d 3 1 . 1 . 2 0 1 2 p e r m i t t i n g t h e c o n c e r n e d a u t h o r i t y u n d e r t h e d i f f e r e n t s t a t u t e s g o v e r n i n g t h e m a t t e r t o e x e r c i s e t h e i r r e s p e c t i v e j u r i s d i c t i o n s i n a c c o r d a n c e w i t h l a w . I n s o f a r a s t h e W i l d L i f e ( P r o t e c t i o n ) A c t i s c o n c e r n e d , i t a p p e a r s t h a t t h e r e j e c t i o n h a s b e e n m a d e b y t h e C h i e f W i l d L i f e W a r d e n w h o , t h e r e s p o n d e n t s c l a i m , i s m e r e l y a r e c o m m e n d i n g a u t h o r i t y a n d i s r e q u i r e d t o f o r w a r d h i s r e c o m m e n d a t i o n t o t h e C e n t r a l G o v e r n m e n t . A s t h e r e j e c t i o n u n d e r t h e W i l d L i f e ( P r o t e c t i o n ) A c t h a s b e e n m a d e b y a n a u t h o r i t y n o t c o m p e t e n t t o d o , t h e p r o m o t e r s o f t h e p r o j e c t h a v e s o u g h t a r e v i e w o f t h e o r d e r w h i c h i s s t i l l p e n d i n g f o r t h e s a m e r e a s o n ( s ) a s n o t i c e d a b o v e .

4 . O n t h e s e f a c t s w e a r e o f t h e v i e w t h a t i t w o u l d b e p r u d e n t o n o u r p a r t t o t a k e t h e v i e w t h a t t h e i s s u e w i t h r e g a r d t o c l e a r a n c e / s a n c t i o n u n d e r t h e t w o e n a c t m e n t s i . e . E n v i r o n m e n t ( P r o t e c t i o n ) A c t a n d W i l d L i f e ( P r o t e c t i o n ) A c t i s p r e s e n t l y p e n d i n g a n d a s t h e p r o m o t e r s o f t h e p r o j e c t h a v e s u b m i t t e d t h e m s e l v e s t o t h e j u r i s d i c t i o n o f t h e a u t h o r i t i e s u n d e r t h e s a i d e n a c t m e n t s w e s h o u l d r e f r a i n f r om a d d r e s s i n g o u r s e l v e s o n a n y o f t h e i s s u e s c o n n e c t e d w i t h e i t h e r o f t h e t w o s t a t u t o r y e n a c t m e n t s a s a n y s u c h e x e r c i s e , e v e n t h o u g h m a y b e u n i n t e n d e d , m a y h a v e t h e e f f e c t o f f e t t e r i n g t h e j u r i s d i c t i o n o f s t a t u t o r y a u t h o r i t i e s f u n c t i o n i n g u n d e r t h e t w o r e l e v a n t s t a t u t e s .

2 2 . I n s o f a r a s t h e p r o v i s i o n s o f t h e E n v i r o n m e n t ( P r o t e c t i o n ) A c t a n d t h e W i l d L i f e ( P r o t e c t i o n ) A c t a r e c o n c e r n e d , i t n e e d n o t b e em p h a s i s e d t h a t e v e r y p r o j e c t a t t r a c t i n g t h e p r o v i s i o n s o f t h e P e r i p h e r y C o n t r o l A c t a n d / o r t h e p r o v i s i o n s o f t h e 1 9 9 5 A c t m u s t s a t i s f y t h e e c o l o g i c a l c o n c e r n s o f t h e a r e a i n t h e l i g h t o f t h e p r o v i s i o n s o f t h e t w o s t a t u e s i n q u e s t i o n . A s a l r e a d y h e l d b y u s , a p u b l i c t r u s t h a s b e e n b e s t o w e d o n t h e a u t h o r i t i e s b y p r o v i s i o n s o f t h e s a i d A c t s w h i c h c a s t o n s u c h a u t h o r i t i e s a d u t y t o i n t e r d i c t a n y p r o j e c t o r a c t i v i t y w h i c h e v e n r e m o t e l y s e e m s t o c r e a t e a n i m b a l a n c e i n t h e p r i s t i n e e c o l o g y a n d e n v i r o n m e n t o f t h e a r e a o n w h i c h t h e c i t y o f C h a n d i g a r h i s s i t u a t e d o r f o r t h a t m a t t e r i n t h e i m m e d i a t e v i c i n i t y t h e r e o f . A s a l r e a d y

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o b s e r v e d , n e c e s s a r y c l e a r a n c e s u n d e r t h e a f o r e s a i d t w o e n a c t m e n t s , i n s o f a r a s t h e r e s p o n d e n t s a r e c o n c e r n e d , a r e p r e s e n t l y p e n d i n g b e f o r e t h e c o n c e r n e d a u t h o r i t i e s a n d , t h e r e f o r e , i t w o u l d b e h i g h l y i n c o r r e c t o n o u r p a r t t o e n t e r i n t o a n y f u r t h e r d i s c u s s i o n o n t h e a f o r e s a i d a s p e c t o f t h e c a s e .

2 5 . W e a l s o h a s t e n t o e m p h a s i s e t h a t a m o r e r i g o r o u s r e g u l a t e d d e v e l o p m e n t i n w h a t a r e n o w t h e r e m n a n t s o f t h e p e r i p h e r y a n d t h e a r e a s a d j o i n i n g t o i t i s t h e n e e d o f t h e h o u r f o r w h i c h t h e s t a k e h o l d e r s i . e . t h e A d m i n i s t r a t i o n o f C h a n d i g a r h , t h e S t a t e s o f P u n j a b a n d H a r ya n a a s a l s o t h e a u t h o r i t i e s u n d e r t h e E n v i r o nm e n t ( P r o t e c t i o n ) A c t a n d t h e W i l d L i f e P r o t e c t i o n A c t h a v e t o d e m o n s t r a t e t h e n e e d t o e n g a g e t h e m s e l v e s i n t e n s i v e l y a n d n o t a c q u i r e a p l a c i d a p p r o a c h i n d i c a t i n g a n e l o q u e n t a c q u i e s c e n c e t o t h e v i o l a t i o n o f t h e 1 9 9 5 A c t , P e r i p h e r y C o n t r o l A c t a n d t h e P e r i p h e r y P o l i c y .

2 6 . W e t h u s c o n c l u d e o n t h e a f o r e s a i d n o t e b y h o l d i n g a n d o b s e r v i n g t h a t t h e p r o v i s i o n s o f t h e P e r i p h e r y C o n t r o l A c t a n d t h e 1 9 9 5 A c t a r e c o m p l e m e n t a r y t o e a c h o t h e r a n d t h e p r o v i s i o n s o f t h e t w o s t a t u t e s w o u l d a p p l y t o t h e h o u s i n g p r o j e c t i n q u e s t i o n . T h e r e s p o n d e n t s , t h e r e f o r e , w i l l h a v e t o c o m p l y w i t h a l l t h e r e q u i r em e n t s s p e l t o u t b y b o t h t h e a f o r e s a i d s t a t u t e s . A s t h e r e q u i r e m e n t o f c l e a r a n c e s u n d e r t h e W i l d L i f e ( P r o t e c t i o n ) A c t a n d E n v i r o n m e n t ( P r o t e c t i o n ) A c t i s n o t a c o n t e n t i o u s i s s u e , a n d a s w e h a v e a l r e a d y h e l d t h a t t h e p r o c e s s o f g r a n t o f s u c h c l e a r a n c e s i s p e n d i n g b e f o r e t h e a p p r o p r i a t e a u t h o r i t i e s u n d e r t h e r e s p e c t i v e A c t s , t h e s a m e w i l l n o w h a v e t o b e b r o u g h t t o i t s l o g i c a l c o n c l u s i o n k e e p i n g i n m i n d o u r o b s e r v a t i o n s a n d d i r e c t i o n s c o n t a i n e d h e r e i n a b o v e .

8 3 T h e c o m b i n e d r e a d i n g o f t h e a b o v e p a r a s i n t h e o r d e r o f

H o n ' b l e H i g h C o u r t c l e a r l y s h o w s t h a t D e v e l o p e r T H D C / H A S H i . e .

t r a n s f e r e e h a v e m a d e t h e i r s i n c e r e e f f o r t s f o r o b t a i n i n g t h e

n e c e s s a r y p e r m i s s i o n s / s a n c t i o n s w h i c h w e r e r e q u i r e d u n d e r t h e

J D A . H o w e v e r , s o m e o f t h e s a n c t i o n s c o u l d n o t b e t a k e n i n t i m e

b e c a u s e o f t h e l i t i g a t i o n b y w a y o f P I L b u t s i n c e n o n e o f t h e p a r t y

w a s l i a b l e t o t h e o t h e r p a r t y i n v i e w o f t h e c l a u s e 2 6 d e a l i n g w i t h

F O R C E M A J E U R E i t c a n n o t b e s a i d t h a t D e v e l o p e r w a s n o t w i l l i n g

t o p e r f o r m h i s p a r t o f c o n t r a c t . I n a n y c a s e n o s p e c i f i c e v i d e n c e

h a s b e e n s h o w n u s t o p r o v e t h a t T H D C / H A S H w e r e d e c l i n i n g t o

p e r f o r m p a r t i c u l a r o b l i g a t i o n p r o v i d e d i n J D A . I n v i e w o f t h i s

d i s c u s s i o n , i t c a n n o t b e s a i d t h a t t r a n s f e r e e i . e . D e ve l o p e r

T H D C / H A S H i s n o t w i l l i n g t o p e r f o r m h i s p a r t o f c o n t r a c t .

8 4 S e c o n d l y , i t w a s c o n t e n d e d t h a t p a ym e n t s h a v e n o t b e e n

m a d e a s p e r t h e J D A . H o w e v e r , a g a i n t h i s i s n o t c o r r e c t . A s p e r

c l a u s e 4 ( i v ) o f t h e J D A , t h e i n s t a l l m e n t f o r R s . 3 1 , 9 2 , 7 5 , 0 0 0 / - w a s

r e q u i r e d t o b e p a i d . T h e c l a u s e 4 ( i v ) r e a d a s u n d e r : -

“ i v ) P a y m e n t b e i n g R s . 3 1 , 9 2 , 7 5 , 0 0 0 / - ( R u p e e s O n e C r o r e n i n e t y t w o l a c s s e v e n t y f i v e t h o u s a n d o n l y ) c a l c u l a t e d @ R s . 2 4 , 7 5 , 0 0 0 / - ( R s . T w e n t y F o u r l a c s s e v e n t y f i v e t h o u s a n d o n l y ) p e r p l o t h o l d e r o f 5 0 0 S q . y a r d s a n d ( R s . 4 9 , 5 0 , 0 0 0 / -

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( R s . F o r t y n i n e l a c s f i f t y t h o u s a n d o n l y ) a s p e r p l o t h o l d e r o f 1 0 0 0 s q u a r e y a r d s t o b e m a d e t o t h e O w n e r a n d / o r t h e r e s p e c t i v e m e m b e r s o f t h e O w n e r ( a s t h e c a s e m a y b e ) w i t h i n s i x ( 6 ) m o n t h s f r o m t h e d a t e o f e x e c u t i o n o f t h i s a g r e e m e n t o r w i t h i n t w o ( 2 ) m o n t h s f r o m t h e d a t e o f a p p r o v a l o f t h e p l a n s / D e s i g n a n d D r a w i n g s a n d g r a n t o f t h e f i n a l l i c e n c e t o d e v e l o p w h e r e u p o n t h e c o n s t r u c t i o n c a n c o m m e n c e , w h i c h e v e r i s l a t e r , a g a i n s t w h i c h t h e O w n e r s h a l l e x e c u t e a r e g i s t e r e d s a l e d e e d f o r l a n d o f e q u i v a l e n t v a l u e b e i n g 6 . 3 6 a c r e s o u t o f t h e P r o p e r t y a s d e m a r c a t e d i n g r e e n c o l o u r ( a l s o h a t c h e d i n g r e e n c o l o u r ) i n t h e D e m a r c a t i o n P l a n a n n e x e d h e r e t o a s A n n e x u r e V a n d b e a r i n g K h a s r a n o s . 1 2 3 / 1 5 , 1 2 3 / 6 , 1 2 3 / 7 ( b a l a n c e p a r t ) , 1 2 3 / 3 ( p a r t ) , 1 2 3 / / 4 / / 1 , 1 2 3 / / / 4 / / 1 / 2 , 1 2 3 / / 4 / 2 , 1 2 3 / 5 / 1 , 1 2 3 / / 5 / 2 , 1 2 3 / / 5 / 3 , 1 1 2 / 2 4 / 2 4 ( p a r t ) ”

8 5 T h e c a r e f u l r e a d i n g o f t h e s a i d c l a u s e o f t h e J D A w o u l d

s h o w t h i s p a ym e n t w a s r e q u i r e d t o b e m a d e w i t h i n a p e r i o d o f s i x

m o n t h s f r o m t h e d a t e o f e x e c u t i o n o f t h i s a g r e e m e n t o r w i t h i n t w o

m o n t h s f r o m t h e d a t e o f a p p r o v a l o f p l a n / s a n c t i o n a n d d r a w i n g

g r a n t o f f i n a l l i c e n s e t o d e v e l o p w h e r e u p o n t h e c o n s t r u c t i o n c a n

c o m m e n c e , w h i c h e v e r i s l a t e r . T h u s , t h i s i n s t a l l m e n t w a s

d e p e n d e n t o n t w o c o n t i n g e n c i e s f i r s t t h e e x p i r a t i o n o f a p e r i o d o f

s i x m o n t h s f r o m t h e d a t e o f a g r e e m e n t o r a l t e r n a t i v e l y o n t h e

e x p i r a t i o n o f a p e r i o d o f t w o m o n t h s f r o m t h e d a t e o f a p p r o v a l o f

p l a n s / d e s i g n s d r a w i n g e t c . l e a d i n g t o g r a n t o f f i n a l l i c e n s e s

w h i c h c a n l e a d t o c o m m e n c e m e n t o f c o n s t r u c t i o n , w h i c h e v e r i s

l a t e r . T h e m a t t e r w a s t a k e n u p b y w a y o f P I L b y c e r t a i n c i t i ze n s

a n d A d m i n i s t r a t i o n o f t h e U n i o n T e r r i t o r y b e f o r e t h e H o n ' b l e H i g h

C o u r t w h i c h i n i t i a l l y s t a ye d t h e s a n c t i o n o f s u c h p l a n e t c . T h i s l e d

t o s i t u a t i o n w h e r e c o n s t r u c t i o n c o u l d n o t b e c o m m e n c e d a n d h e n c e

p a ym e n t w a s n o t r e q u i r e d t o b e m a d e i n v i e w o f t h e p e n d i n g

l i t i g a t i o n . T h e c l a u s e s o f f o r c e m a j e u r e c am e i n t o o p e r a t i o n a n d

t h e r e f o r e , i t c a n n o t b e s a i d t h a t t h e d e v e l o p e r i s n o t w i l l i n g t o

p e r f o r m i t s p a r t o f t h e c o n t r a c t . I n a n y c a s e t h e r e i s n o d e f a u l t o n

t h e p a r t o f t h e d e v e l o p e r a s p a ym e n t w a s n o t ye t d u e a s p e r

c l a u s e 4 ( i ) ( i v ) o f J D A .

8 6 T h i s p o s i t i o n w a s i n f o r m e d t o t h e S o c i e t y b y l e t t e r d a t e d

4 . 2 . 2 0 1 1 b y H A S H B u i l d e r , c o p y o f w h i c h h a s b e e n f i l e d a t p a g e s

2 3 & 2 4 o f t h e p a p e r b o o k d e a l i n g w i t h t h e a d d i t i o n a l e v i d e n c e .

T h r o u g h t h i s l e t t e r i t h a s b e e n c l e a r l y s t a t e d t h a t s i n c e p e r m i s s i o n

i s p e n d i n g f r o m t h e M i n i s t r y o f E n v i r o n m e n t a n d F o r e s t D e p a r t m e n t

a n d t h e r e f o r e c o n s t r u c t i o n s c o u l d n o t c o m m e n c e . T h e s e

p e r m i s s i o n s w e r e p e n d i n g b e c a u s e o f t h e P I L f i l e d b y S h r i A a l o k

J a g g a b e f o r e t h e H o n ' b l e P u n j a b & H a r ya n a H i g h C o u r t . A l l t h e s e

f a c t s c l e a r l y s h o w s t h a t i n v i e w o f c l a u s e 4 . 1 ( i v ) r e a d w i t h c l a u s e

2 6 ( v ) o f t h e J D A , H A S H B u i l d e r w e r e n o t r e q u i r e d t o m a k e t h e

p a ym e n t a n d i t c a n n o t b e s a i d t h a t t h e y w e r e n o t w i l l i n g t o p e r f o r m

t h e i r p a r t o f t h e c o n t r a c t o n t h i s a s p e c t . T h e r e f o r e , t h i s

c o n t e n t i o n i s r e j e c t e d .

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87 Seventh content ion is that revenue wrongly held that even c lause (v i) of

Sect ion 2(47) is appl icable. W e f ind no force in th is content ion. Clause (vi)

to Sect ion 2(47) reads as under :

“any transact ion (whether by way of becoming a member of , or accru ing shares in, a cooperat ive soc iety , company or other assoc iat ion of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the ef fec t of t ransferr ing, or enabl ing the enjoyment of , any immovable property”.

88 The p la in reading of the provis ion shows that any transact ion by way of

becoming a Member or acquir ing shares in the Cooperat ive Society or

shares in the company which has the ef fec t of t ransferr ing or enabl ing the

enjoyment of any immoveable property would be covered by the def in i t ion of

t ransfer . In the case before us, in i t ial ly the Members of the Society were

hold ing shares in the Soc iety for ownership of p lot of 500 sqyd or 1000

sqyd. This membership was surrendered to the Society v ide resolut ion of

the Soc iety passed in the Execut ive Committee on 4.1.2007 which was later

rat i f ied in the General Body Meet ing of the Soc iety on 25.1.2007, so that the

soc iety could enter in to JDA. In the JDA the Soc iety has agreed to transfer

the land. Therefore, technical ly i t can be said that the developer i .e.

THDC/HASH has purchased the membership of the Members in the soc iety

which would lead to enjoyment of the property and in that technical sense,

c lause (v i) of Sect ion 2(47) is appl icable.

89 Eighth content ion is that s ince the Soc iety has transferred the land

through JDA on a pro-rata bas is, therefore, only whatever money is

received against which sale deeds have a lso been executed, can be taxed

and not ional income i .e. the money to be received later, can not be taxed.

In th is regard re l iance was p laced on certa in Supreme Court dec is ions and

other cases for the propos it ion that not ional income cannot be taxed. There

is no need to d iscuss the cases re l ied on by the ld . counsel of the assessee

because i t is set t led pos i t ion of law that no not ional income can be taxed.

Though there is no quarrel that i t is a sett led pr inc ip le of law that not ional

income can not be taxed but in case of capita l gain, Sect ion 45 which is

charging Sect ion and Sect ion 48 which is computat ion sect ion, makes i t

absolute ly c lear that r igor of tax in case of capi ta l gain would come into p lay

on the transfer of capita l asset and tota l cons iderat ion which is ar is ing on

such transfer, has to be taxed. Sect ion 48 c lear ly ta lks about fu l l

cons iderat ion received or accru ing as result of t ransfer. This aspect we

have a lready d iscussed in deta i l at paras 64 to 68.

9 0 S e c o n d a s p e c t o f t h i s c o n t e n t i o n w a s t h a t i f c o n s i d e r a t i o n

w h i c h h a s n o t b e e n r e c e i v e d w a s t o b e t a x e d t h e n t h e a s s e s s e e w o u l d

b e d e p r i v e d f o r c l a i m i n g e x e m p t i o n u / s 5 4 a n d 5 4 E C . A s o b s e r v e d

a b o v e a s p e r S e c t i o n 4 5 r . w . s 4 8 w h o l e o f t h e c o n s i d e r a t i o n , r e c e i v e d

o r a c c r u e d h a s t o b e t a x e d . E v e r y p e r s o n i s s u p p o s e d t o k n o w t h e

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l a w a n d i f t h e t r a n s a c t i o n i s s t r u c t u r e d i n s u c h a w a y f o r t h e t r a n s f e r

o f c a p i t a l a s s e t t h a t s o m e o f t h e c o n s i d e r a t i o n w o u l d b e r e c e i v e d

l a t e r t h e n s u c h p e r s o n i s s u p p o s e d t o k n o w t h e c o n s e q u e n c e s o f t h e

d e n i a l o f s u c h b e n e f i t s . H o w e v e r , i f t h e s e c t i o n i s i n t e r p r e t e d i n t h e

m a n n e r s u g g e s t e d b y t h e l d . c o u n s e l o f t h e a s s e s s e e t h e n n o p e r s o n

w o u l d p a y c a p i t a l g a i n t a x o n t r a n s f e r o f a p r o p e r t y . T h i s w i l l b e

c l e a r f r o m a s i m p l e e x a m p l e . L e t u s a s s u m e i f “ A ” s e l l s t h e p r o p e r t y

t o “ B ” f o r a c o n s i d e r a t i o n o f R s . 1 0 0 c r o r e s a n d r e c e i v e o n l y a

c o n s i d e r a t i o n o f 1 . 0 0 c r o r e a n d i t i s m e n t i o n e d i n t h e t r a n s f e r

i n s t r u m e n t t h a t b a l a n c e o f c o n s i d e r a t i o n w o u l d b e p a i d a f t e r 2 0 ye a r s

t h e n n o t a x c a n b e l e v i e d o n s u c h b a l a n c e c o n s i d e r a t i o n o f R s . 9 9 . 0 0

c r o r e s w h i c h h a s n o t b e e n r e c e i v e d a s p e r t h e c o n t e n t i o n o f t h e l d .

c o u n s e l o f t h e a s s e s s e e . B u t i n t h a t c a s e n o t a x e s c a n b e l e v i e d

e v e n a f t e r 2 0 ye a r s b e c a u s e n o t r a n s f e r c a n b e s a i d t o h a v e t a k e n

p l a c e a f t e r 2 0 ye a r s a n d R e v e n u e c a n n o t d o a n y t h i n g b e c a u s e

c a p i t a l g a i n c a n b e c h a r g e d u / s 4 5 o n l y o n t r a n s f e r o f c a p i t a l a s s e t .

W e d o n o t t h i n k t h a t t h i s k i n d o f i n t e r p r e t a t i o n c a n b e m a d e w h i l e

i n t e r p r e t i n g S e c t i o n 4 5 r . w . s . 4 8 b y i n v o k i n g t h e r u l e t h a t t h e r e c a n

n o t b e a n y t a x o n n o t i o n a l r e c e i p t . General ly speak ing i t is only the real

income which can be taxed but th is has to be unders tood subject to

l im itat ions. Commenting on these l im itat ions, the Ld. Author Shr i S.

Rajaratnam in the Commentary of Law of Income Tax by Sampat Iyengar ’s

Volume 1, (11t h

Edit ion) has observed at page 343 as under :-

“5. Reservat ions on real income theory. - Whether accrua l o f inco me has

taken place or no t , mus t be judged on the pr inciple o f the real income

theory. After accrual , non-charging of tax on the same because o f cer tain

conduct based on the ipse d ixi t o f a par t icular assessee cannot be

accep ted. In de termining the quest ion whether i t is hypothet ica l income

or whether rea l income has mater ia l ized or no t , var ious fac tors wi l l have

to be taken into account . It would be diff icult and improper to extend

the concept of rea l inco me to a l l cases depending upon the se lf-

serv ing statement of the assessee. What has rea lly accrued to the

assessee has to be found out and what has accrued must be considered

from the po int of v iew or real inco me taking the probabil ity or

improbabi l ity of rea lizat ion in a real ist ic manner, but once accrual

takes place, on the conduct o f the parties subsequent to the year of

closing, an inco me which has been accrued cannot be made “no

income’.”

9 1 T h e a b o v e p o s i t i o n c a n b e u n d e r s t o o d b y e x a m i n i n g s o m e o f

t h e p r o v i s i o n s o f t h e A c t w h i c h w o u l d s h o w t h a t c o n c e p t o f

n o t i o n a l i n c o m e c a n n o t b e e x t e n d e d i f s p e c i f i c p r o v i s i o n i s

a v a i l a b l e i n t h e A c t . F o r e x a m p l e i n c a s e o f i n c o m e f r o m h o u s e

p r o p e r t y , t h e i n c o m e h a s t o b e d e t e r m i n e d a s p e r s e c t i o n 2 3 .

S e c t i o n 2 2 o f t h e I n c o m e T a x A c t p r o v i d e s t h a t i t i s t h e a n n u a l

v a l u e o f t h e p r o p e r t y w h i c h c a n b e t a x e d u n d e r t h e h e a d “ i n c o m e

f r o m h o u s e p r o p e r t y ” . S e c t o r 2 3 p r e s c r i b e s t h e m e t h o d f o r

d e t e r m i n i n g t h e a n n u a l v a l u e . S e c t i o n 2 3 ( 1 ) ( a ) r e a d s a s u n d e r : -

23. (1) For the purposes of sect ion 22, the annual va lue of any property shal l be deemed to be —

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(a) the sum for which the property might reasonably be expected to let f rom year to year ; or

( b ) w h e r e t h e p r o p e r t y o r a n y p a r t o f t h e p r o p e r t y i s l e t a n d t h e a c t u a l r e n t r e c e i v e d o r r e c e i v a b l e b y t h e o w n e r i n r e s p e c t t h e r e o f i s i n e x c e s s o f t h e s u m r e f e r r e d t o i n c l a u s e ( a ) , t h e a m o u n t s o r e c e i v e d o r r e c e i v a b l e ; o r … … … .

92 On th is aspect the sett led pos i t ion of the law is that the annual

va lue has to be determined even i f the proper ty is not let out. This

pos i t ion has been d iscussed by the Ld. author Chaturvedi & Pith isar ia ’s

in Commentary of Income Tax Law ( f i f th edi t ion) Volume 1 in th is respect

at pages 1275 & 1276 observed as under:

“Annual value- determinat ion of – Sect ion 23(1)(a) provides that for the purposes of sect ion 22, the annual va lue of any property shal l be deemed to be the sum for which the proper ty might reasonably be expected to let f rom year to year . The word used is ‘might ’ and not ‘can ’ or ‘ is ’. I t is thus a not ional income to be gathered from what a hypothet ica l tenant would pay which is to be object ive ly ascer ta ined on a reasonable bas is ir respect ive of the fact whether the property is let out or not [Sultan Bros. Pr. Ltd. v. CIT, (1964) 51 ITR 353 (SC); Jamnadas Prabhudas v. CIT, (1951)20 ITR 160(Bom); D.M. Vak i l v . CIT, (1946) 14 ITR 298, 302(Bom); CIT v . Biman Behar i Shaw, Shebai t , (1968) 68 ITR 815 (Cal) ; Sr i Sr i Radha Gov inda Jew v. CIT, (1972) 84 ITR 150, 156 (Cal) ; CIT v. Ganga Proper t ies Ltd. , (1970) 77 ITR 637, 647 (Cal) ; L iquidator , Mahmudabad Propert ies Ltd. v . CIT, (1972) 83 ITR 470 (Cal) , af f i rmed, (1980) 124 ITR 31 (SC); CIT v. Zorostr ian Bui ld ing Soc iety Ltd. , (1976) 102 ITR 499 (Bom); C.J. George V. CIT, (1973) 92 ITR 137 (Ker) ; D.C. Anand & Sons v . CIT, (1981) 131 ITR 77 (Del) . Also see, CIT v. Parbutty Churn Law, (1965) 57 ITR 609, 619 (Cal) ; In the mat ter of Kr ishna Lal Seal, AIR 1932 Cal 836; Lal la Mal Samgham Lal v. CIT, (1936) 4 ITR 250 (Lah); New Delh i Munic ipal Commit tee v . Nand Kumar Bussi , (1977) Tax LR 2130 (Del) ] ”

93 Similar v iew has been expressed by Shr i N.A. Palkhivala in h is

commentary on the Law land Pract ice of Income Tax, Volume 2 (Eighth

edi t ion) by Kanga and Palkhivala ’s observat ion at pages 22 & 23. Again

even Shr i S. Rajaratnam in the Commentary of Law of Income Tax by

Sampat Iyengar ’s Volume 2, (11t h

edi t ion) expressed ident ica l v iews in

h is commentary at page 2738.

9 4 I n a l l t h e l e a d i n g c o m m e n t a r i e s c i t e d a b o v e , i t h a s b e e n

o b s e r v e d t h a t a n n u a l v a l u e i s t o b e c o m p u t e d w h e t h e r p r o p e r t y

h a s b e e n l e t o u t o r n o t . T h i s m e a n s t h a t n o t i o n a l v a l u e o f t h e

p r o p e r t y h a s t o b e c h a r g e d t o t h e I n c o m e T a x u n d e r t h e h e a d

“ i n c o m e f r o m h o u s e p r o p e r t y ” . F r o m t h e a b o v e , i t b e c o m e s c l e a r

t h a t t h o u g h t h e r e i s n o r e a l i n c o m e f r o m l e t t i n g o u t o f t h e

p r o p e r t y , s t i l l t h e n o t i o n a l a n n u a l v a l u e i s s u b j e c t e d t o t a x u n d e r

t h e h e a d “ i n c o m e f r o m h o u s e p r o p e r t y ” . H o w e v e r , w e m a y m e n t i o n

t h a t u / s 2 3 ( 1 ) ( c ) o f t h e A c t i f t h e p r o p e r t y i s l e t o u t a n d t h e n

r e m a i n e d v a c a n t f o r s o m e p a r t o f t h e ye a r o r f o r w h o l e o f t h e ye a r

t h e n v a c a n c y a l l o w a n c e c a n b e c l a im e d . H e r e , i t i s i m p o r t a n t t o

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n o t e t h a t i f p r o p e r t y i s n o t l e t o u t , t h e n n o t i o n a l i n c o m e b e c o m e s

c h a r g e a b l e t o t h e t a x b e c a u s e o f p r o v i s i o n s o f s e c t i o n s 2 2 a n d 2 3

( 1 ) ( a ) o f t h e A c t . S i m i l a r l y , u n d e r t h e M a t p r o v i s i o n s , i t i s

b a s i c a l l y t h e n o t i o n a l i n c o m e w h i c h i s b e i n g s u b j e c t e d t o c h a r g e

u n d e r t h e h e a d “ i n c o m e f r o m b u s i n e s s a n d p r o f e s s i o n ” . A

b u s i n e s s m a n m a y h a v e i n c o m e o f R s . 1 0 0 / - b u t b e c a u s e o f h i g h e r

d e p r e c i a t i o n a l l o w a b l e u n d e r t h e I n c o m e - t a x A c t o r s o m e o t h e r

w e i g h t e d d e d u c t i o n s s a y f o r e x a m p l e i n c a s e o f e x p e n d i t u r e o n

s c i e n t i f i c r e s e a r c h , t h e t a x a b l e i n c o m e a s p e r t h e p r o v i s i o n s o f t h e

A c t m a y b e ze r o b u t s t i l l b e c a u s e o f t h e M a t p r o v i s i o n s , t a x h a s t o

b e c h a r g e d o n b o o k p r o f i t s . S i m i l a r l y i n t h e c a s e o f p r e s u m p t i v e

t a x p r o v i s i o n s e . g . u / s 4 4 A D i f a p e r s o n i s c i v i l c o n t r a c t o r a n d

d o e s n o t m a i n t a i n b o o k s o f a c c o u n t a n d h i s t u r n o v e r i s l e s s t h a n

R s . 6 0 l a k h s t h e n t h e p r o f i t w o u l d b e p r e s u m e d t o b e 8 % o f

t u r n o v e r e v e n i f h e h a s s u f f e r e d a l o s s . A n o t h e r e x a m p l e o f

S e c t i o n 2 ( 2 2 ) ( e ) c a n b e t a k e n . U n d e r t h i s p r o v i s i o n a l o a n o r

a d v a n c e g i v e n b y c e r t a i n c o m p a n i e s t o a s u b s t a n t i a l s h a r e h o l d e r

i s t o b e t r e a t e d a s d e e m e d d i v i d e n d . S u c h l o a n u n d e r t h e n o r m a l

a c c o u n t i n g p r i n c i p l e o r o n c o m m e r c i a l p r i n c i p l e s c a n n o t b e

r e g a r d e d a s i n c o m e b u t b e c a u s e o f t h i s s p e c i f i c p r o v i s i o n

r e g a r d i n g d e e m e d d i v i d e n d s u c h a m o u n t h a s t o b e t r e a t e d a s

i n c o m e o f t h e p e r s o n r e c e i v i n g s u c h l o a n s .

9 5 T h e a b o v e p o s i t i o n o f l a w m a k e s i t a b s o l u t e l y c l e a r t h a t

t h e o r y o f r e a l i n c o m e i s s u b j e c t t o t h e p r o v i s i o n s o f t h e A c t a n d

w h e n e v e r a n y s p e c i f i c p r o v i s i o n s o f t h e A c t i s t h e r e f o r c h a r g i n g o f

a p a r t i c u l a r i t e m o f i n c om e , t h e n t h e s a m e h a s t o b e c h a r g e d

a c c o r d i n g l y . I t m a y b e s o m e t im e s h a r d t o t h e a s s e s s e e ’ s b u t

a g a i n i t h a s b e e n h e l d i n n u m e r o u s d e c i s i o n s t h a t F i s c a l s t a t u e s

h a v e t o b e i n t e r p r e t e d o n t h e b a s i s o f l a n g u a g e u s e d a n d t h e r e i s

n o s c o p e f o r e q u i t y o r i n t e n t . L d . A u t h o r S h r i S . R a j a r a t n a m i n t h e

C o m m e n t a r y o f L a w o f I n c o m e T a x b y S a m p a t I ye n g a r ’ s V o l u m e 1 ,

p a g e 2 3 6 i n t h i s r e g a r d h a s o b s e r v e d a s u n d e r : -

“Once i t is shown that the case of the assessee comes wi th in the let ter of the law, he must be taxed, however , great the hardship may appear to the judic ia l mind. Considerat ions of hardship, injus t ice or anomal ies do not p lay any usefu l ro le in constru ing tax ing statutes unless there be some real ambiguity. Thus, any benevolent construct ion in favour of the assessee has been held to be uncal led for .

9 6 T h e r e f o r e , i t c a n b e s a i d t h a t g e n e r a l l y s p e a k i n g n o t i o n a l

i n c o m e c o u l d n o t b e s u b j e c t e d t o t a x b u t w h e n e v e r t h e r e i s a

s p e c i f i c p r o v i s i o n , t h e s a m e h a s t o b e t a x e d . N o w , i n c a s e o f

c a p i t a l g a i n , s e c t i o n 4 5 r e a d w i t h s e c t i o n 4 8 v e r y c l e a r l y p r o v i d e s

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t h a t i t i s t h e p r o f i t “ a r i s i n g ” f r o m t h e t r a n s f e r o f a c a p i t a l a s s e t

w h i c h w o u l d b e s u b j e c t e d t o c h a r g e o f c a p i t a l g a i n t a x a n d s e c t i o n

4 8 c l e a r l y p r o v i d e s f o r t a k i n g t h e t o t a l c o n s i d e r a t i o n i n t o a c c o u n t

w h i l e c o m p u t i n g t h e c a p i t a l g a i n s . T h i s a s p e c t w e h a v e a l r e a d y

d i s c u s s e d i n d e t a i l a t p a r a N o . 6 4 t o 6 8 f r o m w h i c h i t b e c o m e s

c l e a r t h a t i t i s t h e w h o l e c o n s i d e r a t i o n w h e t h e r r e c e i ve d o r

a c c r u e d , w h i c h h a s t o b e t a x e d u n d e r t h e c a p i t a l g a i n o n c e

t r a n s f e r o f t h e c a p i t a l a s s e t t a k e s p l a c e . A c c o r d i n g l y , t h e r e i s n o

f o r c e i n t h i s p a r t o f t h e c o n t e n t i o n .

9 7 N o w l e t u s e x a m i n e t h e i s s u e o f t a x a b i l i t y o f f l a t o n t h e

b a s i s o f a b o v e p r i n c i p l e s . R e l e v a n t p o r t i o n o f c l a u s e 4 o f t h e

J D A w h i c h d e a l s w i t h c o n s i d e r a t i o n a r e a s u n d e r :

“ 4 . C O N S I D E R A T I O N

4.1 I t is spec i f ica l ly understood and agreed amongst the Par t ies that THDC shal l use i ts exper t ise and i ts Brand name and / or any other brand name at i ts d iscret ion to develop the Proper ty in to the Premises as per appl icable bui ld ing bye- laws of the Competent Author i ty and the Owner shal l have no objec t ion to the same in whatsoever manner . In cons iderat ion of the Owner grant ing and ass igning, i ts Development Rights in the Property , i r revocably and in perpetui ty, to THDC to develop the Property and for transfer of the Proper ty upon the surrender of a l lo tment r ights of 500 sq. yards and/or 1000 sq. yards (as the case may be) by i ts members to the Owner, v ide resolut ion dated 04.01.2007 and 25.02.2007 (copy attached as per Annexure I & I I) , HASH is committed to pay to the Owner and / or the respect ive members of the Owner (as the case may be) a tota l amount of Rs. 106,42,50,000/- (Rupees One Hundred Six Crores Forty Two Lacs F if ty Thousands Only) calculated @ Rs. 82,50,000/- (Rupees Eighty Two Lacs F i f ty Thousands Only) payable to 65 members having p lot of 500 sq. yards each, Rs. 1,65,00,000/- (Rupees One Crore Sixty F ive Lacs Only) payable to 30 members hav ing p lot of 1000 sq. yards each and Rs. 3,30,00,000/- (Rupees Three Crores Thir ty Lacs Only) payable to the Owner for the 4 p lots of 500 sq. yards each, which shal l tantamount to the fu l l and f inal payment to the Owner and / or the respect ive members of the Owner (as the case may be) in a manner set out herein below ( ‘Payment ’) . Further, the t ransfer , sa le and conveyance of 21.2 acres of land of the Proper ty shal l be made by the Owner in favour of THDC pro rata to the Payment received by the Owner and/or the respect ive members of the Owner (as the case may be) from HASH by execut ing sale deeds and register ing the same. I t is express ly prov ided that as resolved by the Owner, the tota l amount payable by HASH to the Owner and / or the respect ive members of the Owner (as the case may be) for ass ignment of the Development Rights and for transfer and sale of 21.2 acres of land of the Property shal l be Rs. 106,42,50,000/- (Rupees One Hundred Six Crores Forty Two Lacs Fif ty Thousand only) and one hundred and twenty nine (129) f la ts consist ing of Super Area of 2250 Sq. feet ( ‘F lats ’) ; one f la t each for s ixty f ive members hav ing a plot of 500 sq. yards, two f lats for the ( thir ty) 30 members hav ing a plot of 1000 sq. yards and 4 f lats to the Owner for the 4 p lots of 500 sq. yards each as per l is t annexed with th is Agreement as Schedule B ( ‘Sale Transact ion ’)

I t is express ly agreed between the Developers that HASH shal l be respons ib le for mak ing a l l payments to the Owner and/or the respect ive members of the Owner (as the case may be) as per the negot iated and

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agreed terms between the Owner and HASH, HASH express ly undertakes to make t imely payments of the Payment to the Owner and / or the respect ive members of the Owner (as the case may be) as under :

4.2 As resolved by the Owner, THDC ei ther by i tse lf or a long with HASH shal l a l lot the Flats in the name of members of the Owner as per l is t annexed wi th th is Agreement as Schedule B attached herein (hereinafter referred to as the ‘Al lo t tees ’) . The spec if icat ions of the f lats would be prov ided by the Developers to the Owner and more par t icu lar ly descr ibed in the Schedule C attached herein (hereinaf ter referred to as the ‘Spec if icat ions ’) . The Al lo tment let ters shal l be issued to the Al lo t tees (members of the Owner) with in for ty- f ive (45) days from the date of sanct ion of the bui lding p lans / Des ign and Drawing and on obtain ing f inal l icense/permiss ion for the development of the Projec t from the Competent Author i ty . Thereaf ter , the possess ion of the f lats shal l be handed over to the Al lot tees wi thin th ir ty(30) months form the date of issuance of the Al lo tment Letter .

I t i s e x p r e s s l y p r o v i d e d t h a t t h e P a y m e n t t o b e m a d e b y H A S H t o t h e O w n e r a n d / o r t o t h e r e s p e c t i v e m e m b e r s o f t h e O w n e r ( a s t h e c a s e m a y b e ) a n d t h e F l a t s t o b e a l l o t t e d t o t h e A l l o t t e e s a s s e t o u t i n t h i s C l a u s e 4 . 2 s h a l l h e r e i n a f t e r b e c o l l e c t i v e l y r e f e r r e d t o a s t h e ‘E n t i r e C o n s i d e r a t i o n ’

9 8 F r om t h i s c l a u s e i t b e c o m e s a b s o l u t e l y c l e a r t h a t e a c h

M e m b e r h a v i n g 5 0 0 s q yd o f p l o t w a s e n t i t l e d t o r e c e i v e o n e

f u r n i s h e d f l a t m e a s u r i n g 2 2 5 0 s q f t a n d M e m b e r s h a v i n g 1 0 0 0 s q yd

f l a t w e r e e n t i t l e d t o r e c e i v e t w o f u r n i s h e d f l a t s . T h u s u p o n

e x e c u t i o n o f t h e J D A v e s t e d r i g h t c a m e t o s u c h M e m b e r s t o

r e c e i v e s u c h f l a t s . O n c e t h i s v e s t e d r i g h t a r i s e s o u t o f t h e a b o v e

c o n t r a c t i t c a n e a s i l y b e s a i d t h a t t h i s r i g h t h a s a l s o a c c r u e d t o

t h e a s s e s s e e . C l a u s e 4 . 2 m a k e s i t a b s o l u t e l y c l e a r t h a t d e v e l o p e r

i . e . T H D C / H A S H w a s t o a l l o t t h e l e t t e r s o f a l l o t m e n t w i t h i n 4 5 d a ys

f r o m f i n a l s a n c t i o n f r o m t h e c o m p e t e n t a u t h o r i t y a n d s u c h f l a t s

w e r e p a r t o f e n t i r e c o n s i d e r a t i o n . M e r e l y b e c a u s e s u c h a l l o t m e n t

l e t t e r h a s n o t b e e n g i v e n b e c a u s e o f s a n c t i o n s / p e r m i s s i o n s c o u l d

n o t b e o b t a i n e d b e c a u s e o f P u b l i c I n t e r e s t L i t i g a t i o n b e f o r e t h e

H o n ' b l e P u n j a b & H a r ya n a H i g h C o u r t , i t c a n n o t b e s a i d t h a t s u c h

r i g h t h a s n o t a c c r u e d . T h o u g h i t m a y b e h a r d o n t h e a s s e s s e e b u t

i t i s w e l l s e t t l e d t h a t t a x a t i o n a n d e q u i t y a r e s t r a n g e r s . F u r t h e r

c o m m e n t i n g o n t h i s a s p e c t S h r i R a j a r a t h n a m i n h i s c o m m e n t a r y

h a s o b s e r v e d a t p a g e 5 1 6 4 a s u n d e r :

“ I t i s h a r d o n t h e o w n e r s w h e n r e q u i r e d t o p a y t a x , w h e n h a n d i n g o v e r t h e p o s s e s s i o n f o r p u r p o s e s o f c o n s t r u c t i o n w i t h o u t b e i n g a b l e t o e n j o y t h e c o n s t r u c t i o n , w h i c h i s y e t t o c o m m e r c e o r i n t h e p r o c e s s o f c o n s t r u c t i o n b e i n g p u t u p b y t h e d e v e l o p e r , b u t t h e s o l u t i o n l i e s i n s t a t u t o r y c l a r i f i c a t i o n i n s u c h c a s e s . I n v i e w o f t h e

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i n c r e a s i n g s c a l e o f s u c h d e v e l o p m e n t a g r e e m e n t s t o s o l v e t h e h o u s i n g p r o b l e m i n t h e c i t i e s , a s t a t u t o r y c l a r i f i c a t i o n o r c i r c u l a r i s o v e r d u e . ”

9 9 T h e s e c o m m e n t s a n d t h e o t h e r d e t a i l e d d i s c u s s i o n o n t h i s

a s p e c t c l e a r l y s h o w t h a t c a p i t a l g a i n t a x h a s t o b e p a i d o n t h e

t o t a l c o n s i d e r a t i o n a r i s i n g o n t r a n s f e r w h i c h w o u l d i n c l u d e t h e

c o n s i d e r a t i o n w h i c h h a s b e e n r e c e i v e d a s w e l l a s t h e

c o n s i d e r a t i o n w h i c h h a s a r o s e n a n d b e c o m e d u e a n d m a y b e

r e c e i v e d l a t e r o n . I n v i e w o f t h i s d i s c u s s i o n t h i s c o n t e n t i o n i s

r e j e c t e d .

100 Ninth content ion is that the assessee has a lready terminated the

agreement and has revoked the Power of Attorney. W e f ind no force in

th is submissions.

101 In th is regard ld . counsel of the assessee has re l ied on the

dec is ion of Mumbai Bench of the Tr ibunal in case of Chemosyn Ltd. V

ACIT (supra). In that case the assessee-Company was owner of two

p lots bear ing 256 & 257 in Gundabali Andher i Mumbai. The assessee-

company entered into a development agreement wi th Dip it i Bui lders for

the development r ights for a cons iderat ion of Rs. 16.11 crores. Dip i t i

Bui lders had a lso agreed to construct 18000 sqf t carpet area for the

benef i t of assessee on plot No. 256. In the return of income total

cons iderat ion was shown only at Rs. 16.11 crores. I t was explained that

before Dip it i Bui lders could start the development /construc t ion work ,

ent ire property compris ing of plot no. 256 & 257 was sold to a th ird par ty

M/s F inanc ia l Technology Ltd. by a tr ipart i te conveyance deed executed

on 5.7.2007 for Rs. 29.11 crores and therefore, addit ional cons iderat ion

of Rs. 13 crores has been of fered to tax in Assessment year 2008-09.

This explanat ion was rejected by the Assessing Of f icer because

according to h im i t was a case of t ransfer u/s 2(47)(v) and tota l

cons iderat ion has to be charged in the year of t ransfer. The Tr ibunal

af ter cons ider ing the provis ions of sect ion 45 & 48 posed a quest ion to

i tse lf that what should be the cons iderat ion in the case before the Bench.

The case law rel ied on by the Department was rejected because same

was relevant to accrual of in terest. The Bench fo l lowed the dec is ion of

Kalptaru Construc t ion Oversees Pvt Ltd. 13 SOT 194. In that case the

assessee had agreed to sel l to i ts subs id iary equity shares for a

cons iderat ion of Rs. 1.25 crores which was f inal ly set t led at Rs. 1.00

crore and the Tr ibunal held that the considerat ion of Rs. 1.00 crore has

to be accepted.

102. From the above dec is ion i t is not c lear whether in case of

Kalaptaru Construc t ion Oversees Pvt Ltd. (supra) which has been

fol lowed in above case, was concerning capita l gain or not? Secondly i t

is not c lear that whether the amended considerat ion i .e . sett lement for

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Rs. 1.00 crore was made in the same year or not? As observed ear l ier

whi le d iscuss ing the issue of not ional income that provis ions of sect ion

45 r .w.s. 48, are absolute ly c lear and there is no ambigui ty that once a

capi ta l asset is t ransferred then whole of the cons iderat ion received or

accru ing has to be cons idered for the purpose of taxat ion in the year in

which the transfer has taken p lace. W e further f ind that in the JDA there

is a c lause for terminat ion of the agreement. Relevant c lause 14 reads

as under:

“Terminat ion

“14( i) Save and except the provis ion of c lause 26, THDC shal l at al l t imes have the r ight to terminate th is Agreement in the event there is any mater ia l breach of the representat ions, warrant ies, undertak ings, dec larat ions, covenants and/or obl igat ions g iven by the Owner under th is Agreement af ter g iv ing th ir ty (30) days wr it ten not ice for rect i f icat ion of such breach. In the event the Agreement is terminat ion by THDC, a l l the lands regis tered in the name of THDC as per the terms of this Agreement upto the date of the terminat ion shal l remain wi th THDC and the balance lands to be transferred to THDC as per the terms of th is Agreement shal l not be transferred by the Owner in favour of THDC. Upon the terminat ion, the Owner shal l refund to THDC the Adjustable Advance/Earnest Money ment ioned in c lause 4.1( i) above wi th in one month of such terminat ion. In the event of fa i lure of the Owner to refund the said amount, the Owner hereby agrees to execute a registered sale deed for land of equivalent value in favour of THDC.

( i i ) In the event a l l the requis i te government and statutory approvals, author izat ions, consents , l icenses, approvals of a l l the p lans/des igns and Drawings as may be required for the development of th is Property in re lat ion to the Project and to under take the Project are not granted wi thin n ine (9) months of the submission of the f inal p lans/Designs and Drawings to the Competent Author i ty for approval then THDC may as i ts sole d iscret ion e ither dec ide that i t does not des ire to undertake and complete the Projec t and hence terminate th is Agreement af ter g iving th ir ty (30) days wr it ten not ice in th is regard or dec ide to wait for any fur ther t imes deemed f i t by THDC for the grant of the aforesaid approvals and l icenses. In the event the Agreement is terminated by THDC, a l l the lands regis tered in the name of THDC as per the terms of th is Agreement upto the date of the terminat ion shal l remain wi th THDC and the balance lands to be transferred to THDC as per the terms of th is Agreement shal l not be transfer red by the Owner in favour of THDC. Upon the terminat ion, the Owner shal l refund to THDC the Adjustable Advance/Earnest Money ment ioned in c lause 4.1( i) above wi th in one month of such terminat ion. In the event of fa i lure of the Owner to refund the said amount, the Owner hereby agrees to execute a registered sale deed for land of equivalent value in favour of THDC.

( i i i ) In the event THDC is unable to develop the Proper ty due to refusal /non grant of approvals , consents, permission, l icenses or revocat ion of the same by the appropr iate s tatutory author i ty, then THDC may at i ts sale discret ion terminate th is Agreement. In the event the Agreement is terminated by THDC, a l l the lands registered in the name of THDC as per the terms of th is Agreement upto the date of the terminat ion shal l remain wi th THDC and the balance lands to be transferred to THDC as per the terms of th is Agreement shal l not be

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t ransferred by the Owner in favour of THDC. Upon the terminat ion, the Owner shal l refund to THDC the Adjustable Advance/Earnest Money mentioned in c lause 4.1( i) above wi th in one month of such terminat ion. In the event of fai lure of the Owner to refund the said amount, the Owner hereby agrees to execute a registered sale deed for land of equivalent value in favour of THDC.

( iv) The owner shal l have the r ight to terminate the Agreement only in the event of default by the Developers for mak ing the Payment in accordance with the terms of this Agreement and the a l lo tment of F lats wi thin the t ime per iod as ment ioned in th is Agreement af ter g iv ing Thir t y (30) days wr it ten not ice for rec t i f icat ion of such breach or any fur ther t ime as may be des ired by the Owner . In the event the Agreement is terminated by Owner , al l the lands regis tered in the name of THDC as per the terms of th is Agreement upto the date of the terminat ion shal l remain wi th THDC and the balance lands to be transferred to THDC as per the terms of th is Agreement shal l not be transferred by the Owner in favour of THDC. Upon the terminat ion, the Owner shal l for fei t the Adjustable Advance/Earnest Money ment ioned in c lause 4( i) . ”

103 The reading of the above c lause would show that power of

terminat ion has been g iven in many c ircumstances to THDC vide c lause

14( i) , ( i i ) and ( i i i ) . The power for terminat ion by the owner has been

mentioned in c lause 14( iv) only. Reading of th is c lause would show that

r ight to terminate wi th the owner i .e. the Society was avai lable only in

case of defaul t in mak ing the payment. The issue regarding defaul t for

mak ing payment has a lready been d iscussed by us in Paras 84 to 86

above whi le d iscussing the issue of wi l l ingness on the part of the

transferee to perform its par t of the contrac t W e have a lready held that

there was no default on the part of developer i .e. THDC/HASH in making

the payment, therefore, the assessee had no r ight to terminate the

contract . In any case we fur ther f ind that c lause 20 of the JDA refers to

Arbitrat ion and i t is c lear ly provided that a l l the d isputes under i t should

be referred to the arb itrat ion. Therefore, i f the Society had some

gr ievance i t was duty bound to g ive a not ice for appointment of an

Arbitrator to the developer. In the absence of such not ice the

terminat ion wi l l not stand scrut iny of law. Here i t is a lso per t inent to note

that though i t was stated that ir revocable Power of Attorney has been

revoked and some documents have been f i led before us for revocat ion

but c lause 6.7 of the JDA which we have reproduced ear l ier c lear ly

provides that such Power of At torney cannot be revoked. W e reproduce

c lause 6.7 again which is as under:

“ 6 . 7 T h e O w n e r s h a l l e x e c u t e a n i r r e v o c a b l e s p e c i a l P o w e r o f A t t o r n e y g r a n t i n g i t s c o m p l e t e D e v e l o p m e n t R i g h t s i n t h e P r o p e r t y i n f a v o u r o f T H D C i n t e r a l i a i n c l u d i n g t h e r i g h t t o r a i s e f i n a n c e b y m o r t g a g i n g t h e p r o p e r t y a n d r e g i s t e r t h e c h a r g e w i t h t h e C o m p e t e n t A u t h o r i t y a n d e x e c u t e r e g i s t e r e d s a l e d e e d s ) a s s e t o u t i n C l a u s e 4 . 1 ( i i ) , ( i i i ) , ( i v ) a n d ( v ) a n d t h e O w n e r c o n f i r m s , u n d e r t a k e s , d e c l a r e s a n d b i n d s i t s e l f n o t t o r e v o k e t h e s a m e f o r a n y r e a s o n w h a t s o e v e r o u t o f i t s o w n w i l l a n d d i s c r e t i o n

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w i t h o u t o b t a i n i n g a s p e c i f i c p r i o r w r i t t e n c o n s e n t o f T H D C o r a n y o f i t s d u l y c o n s t i t u t e d a t t o r n e y s . ”

1 0 4 T h e a b o v e c l e a r l y s h o w s t h a t t h i s P o w e r o f A t t o r n e y c o u l d

n o t b e r e v o k e d f o r a n y r e a s o n w i t h o u t o b t a i n i n g s p e c i f i c p r i o r

w r i t t e n c o n s e n t o f T H D C / H A S H . N o d o c u m e n t s h o w i n g t h e c o n s e n t

o f T H D C f o r r e v o c a t i o n o f t h i s i r r e v o c a b l e P o w e r o f A t t o r n e y h a s

b e e n p r o d u c e d b e f o r e u s . W e f a i l t o u n d e r s t a n d t h a t i n t h e

a b s e n c e o f s u c h d o c u m e n t h o w t h e a s s e s s e e c a n c l a i m t h a t t h i s

P o w e r o f A t t o r n e y h a s b e e n r e v o k e d . A s d i s c u s s e d e a r l i e r w h i l e

c o n s i d e r i n g t h e l e g a l p o s i t i o n , w e w o u l d a g a i n r e c a l l t h e w o r d s o f

H o n ' b l e A u t h o r i t y f o r A d v a n c e R u l i n g i n c a s e o f J a s b i r S i n g h

S a r k a r i a ( s u p r a ) w h e r e i n a t p a r a 3 3 o f t h e d e c i s i o n w h i l e

d i s c u s s i n g t h e i s s u e i n r e s p e c t o f P o w e r o f A t t o r n e y , i t w a s

h i g h l i g h t e d t h a t e x e c u t i o n o f i r r e v o c a b l e P o w e r o f A t t o r n e y i s o f

s i g n i f i c a n t n a t u r e a n d t h e w o r d s “ i r r e v o c a b l e ” a r e v e r y i m p o r t a n t .

T h e e x p r e s s i o n “ i r r e v o c a b l e ” i t s e l f s h o w s t h a t n o r m a l l y s u c h

a t t o r n e y c a n n o t b e r e v o k e d . T h e r e f o r e , n o c o g n i za n c e c a n b e

t a k e n i n r e s p e c t o f r e v o c a t i o n o f t h e i r r e v o c a b l e P o w e r o f

A t t o r n e y . I n t h e a b s e n c e o f s p e c i f i c c o n s e n t a s p r o v i d e d i n c l a u s e

6 . 7 o f t h e J D A f r om T H D C .

105 W e may also note that CIT D.R has pointed out that tota l

cons iderat ion was to be determined as under:

( i ) C o n s i d e r a t i o n i n c a s h ( R s . 8 2 , 5 0 , 0 0 0 x 1 2 9 p l o t s )

R s . 1 0 6 , 4 2 , 5 0 , 0 0 0 / -

( i i ) C o n s i d e r a t i o n i n k i n d ( R s . 1 0 1 , 2 5 , 0 0 0 / - x 1 2 9 p l o t s )

R s . 1 3 0 , 6 1 , 2 5 , 0 0 0 / -

T o t a l R s . 2 3 7 , 0 3 , 7 5 , 0 0 0 / -

Average cost of consideration Rs. 11.18 crores per acre

(Tota l cons iderat ion of Rs. 237.03 crores d iv ided by 21.2 acres of

land)

I t is c la imed on behalf of the assessee that JDA has been cancel led and

the developer has been a l lowed to reta in the proper ty which has a lso

been conveyed to developer through two sale deeds. I f that is so then

what would happen to the balance cons iderat ion because in such

s ituat ion the assessee has received cons iderat ion of only about Rs. 5

croress per acre because the assessee has regis tered land measur ing

3.08 acres for Rs. 15.48 crores through f irs t conveyance deed, whereas

cons iderat ion as per or ig inal agreement was Rs. 11.18 crores per acre

as shown above. The d if ference is because of non receipt of

cons iderat ion in k ind and the assessee has not shown any evidence that

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i t has made the c la im for receipt of balance cons iderat ion. This leads to

the conc lus ion that there was no cancel lat ion of the JDA.

106 Some arguments were made by both the part ies that i f the

contract is f ina l ly stand abandoned then what would happen. The

content ion on behalf of the assessee is that i f the contract is abandoned

then the assessee would have paid tax in the year of t ransfer and would

be lef t wi th no recourse for re l ief . The content ion on behalf of the

Department was that the assessee could a lways f i le revised return or

make a pet i t ion u/s 264 and some re l ief was poss ib le in case of the

assessee. However , i f revenue fa i ls to tax the tota l cons iderat ion in the

year of t ransfer then same cannot be subjected to tax in any other year.

W e f ind that th is quest ion was ser ious ly considered by the Ld. Author i ty

for Advance Rul ing in case of Jasbir Singh Katar ia (supra) which has

been rel ied on by both the par t ies for var ious aspects. In that case i t

was observed at para 39 as under:

“W e have to adver t to one aspect which has caused some concern to us . W hat wi l l happen i f dur ing the year fol lowing the one in which the deemed transfer took p lace, the proposed venture col lapses for reasons such as refusal of permissions, the developer fac ing f inanc ia l crunch etc. By that t ime, the owner would have received only a par t of the agreed cons iderat ion, but he is obl iged to f i le the return showing the ent ire capi ta l gain based on the fu l l sa le pr ice whether or not received dur ing the year of deemed transfer. In such an eventual i t y, hardship may be caused to the owner who would have paid ful l tax . No doubt , such a s ituat ion could be avoided i f the content ion of the appl icant is accepted. On deep considerat ion, however, we f ind that the construc t ion of the re levant provis ion should not be contro l led by g iv ing undue importance to such hypothet ica l s i tuat ions. Normal ly, the owner executes a Power of At torney or does s imilar ac t to lef t the transferee take possess ion only af ter the bas ic permissions are granted and he is sat is f ied about the abi l i t y of t ransferee/developer to fulf i l the contract . In spi te of that , i f such rate s i tuat ions take p lace, the owner / transferor wi l l not be wi thout remedy. He can f i le a revised return and make out a case for exclusion or reduct ion of income. However, i f the t ime- l im it for f i l ing a revised return expires, the d if f icul ty wi l l ar ise. I t is for Par l iament or the Central Government to provide a remedy to the assessee in such cases. Moreover, the other s ide of the p icture as depicted in paragraph 27 (supra) should also be kept in v iew.”

Here the comments of Shr i Rajaratnam quoted at para 5164 above are

a lso re levant again:

“ “ I t i s h a r d o n t h e o w n e r s w h e n r e q u i r e d t o p a y t a x , w h e n h a n d i n g o v e r t h e p o s s e s s i o n f o r p u r p o s e s o f c o n s t r u c t i o n w i t h o u t b e i n g a b l e t o e n j o y t h e c o n s t r u c t i o n , w h i c h i s y e t t o c o m m e r c e o r i n t h e p r o c e s s o f c o n s t r u c t i o n b e i n g p u t u p b y t h e d e v e l o p e r , b u t t h e s o l u t i o n l i e s i n s t a t u t o r y c l a r i f i c a t i o n i n s u c h c a s e s . I n v i e w o f t h e i n c r e a s i n g s c a l e o f s u c h d e v e l o p m e n t a g r e e m e n t s t o s o l v e t h e h o u s i n g p r o b l e m i n t h e c i t i e s , a s t a t u t o r y c l a r i f i c a t i o n o r c i r c u l a r i s o v e r d u e . ”

W e may ment ion here that no doubt somet imes an assessee may be put

in a d if f icu l t s i tuat ion and as mentioned by Hon'b le Author i ty in case of

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Jasbir Singh Sarkar ia (supra) as wel l as Ld. Author Shr i Rajaratnam it is

for the legis lature to take correct ive s teps. However , i t may not be out

of place that i f cons ider ing the d if f icu lty the in terpretat ion g iven by the

ld. counsel of the assessee is accepted then the Revenue may not be

able to tax such assessees when these d if f icu l t ies are removed. For

example in the present case i f tomorrow when al l permissions are

obtained and construct ion is completed and i f no taxes are held to be

payable then later on a lso the assessee may not be subjected to any tax

under the head “capi ta l gain” because then i t can be eas i ly contended on

behalf of the assessee that the transfer has already taken p lace on the

date when ir revocable Power of Attorney was executed. In that s i tuat ion

the Revenue wi l l have no remedy.

107 The above c lear ly shows that such hypothet ica l cons iderat ion

cannot be cons idered for g iv ing true meaning to a par t icu lar provis ion. I t

has a lso been observed that in some genuine cases the d if f icu l t ies may

ar ise but i t was for the Par l iament or the Government to provide remedy

in such cases and judic ia l forums cannot do anyth ing. Therefore, in

v iew of the provis ions of Sect ion 45 r .w.s. 48 we are of the opin ion that

subsequent events, i f at al l any wi l l not make any d if ference because

tota l cons iderat ion received or accrued has to be assessed in the year of

t ransfer . W e may a lso note that i t was stated that ir revocable Power of

At torney has been revoked but the word “ ir revocable” i tse lf shows that in

the eyes of law spec ia l Power of Attorney could not have been revoked.

In v iew of th is analysis, we are of the opin ion that e ither the JDA has not

been cancel led or in any case the same cannot be cons idered for

determining the taxat ion of capita l gain. Accordingly th is content ion is

rejec ted.

1 0 8 T h e n e x t c o n t e n t i o n o f t h e a s s e s s e e i s t h a t e v e n i f t h e w h o l e

c o n s i d e r a t i o n h a s t o b e t a x e d t h e n v a l u e o f t h e f l a t s c a n n o t b e

t a k e n a t R s . 4 , 5 0 0 / - p e r s q . f e e t . I t i s a l s o p o i n t e d o u t t h a t i n v i e w

o f t h e a g r e e m e n t b e t w e e n t h e H A S H & T H D C c o n s i d e r a t i o n h a s

b e e n s h o w n a t R s . 2 , 0 0 0 / - p e r s q . f e e t f o r 1 2 6 f l a t s w h e r e a s i t i s

R s . 4 , 5 0 0 / - p e r s q . f e e t f o r t h r e e f l a t s . W e f i n d n o f o r c e i n t h e s e

s u b m i s s i o n s . T h e a s s e s s e e h a s f i l e d a l o n g w i t h t h e w r i t t e n

s u b m i s s i o n s c o p y o f t h e a d d e n d u m o f a g r e e m e n t b e t w e e n T H D C

a n d H A S H b y J o i n t D e v e l o p e r ( a t p a g e 2 6 5 & 2 6 6 ) a n d t h i s i s s u e

i s d i s c u s s e d i n c l a u s e 5 w h i c h i s a s u n d e r : -

“ 5 . C l a u s e s 4 . 1 , 4 . 2 , 4 . 3 a n d 4 . 4 o n t h e p a g e n o s . 1 8 a n d 1 9 o f t h e A g r e e m e n t s h a l l s t a n d a m e n d e d , m o d i f i e d a n d s u b s t i t u t e d b y t h e f o l l o w i n g : -

4 . 1 I t i s e x p r e s s l y a g r e e d a n d u n d e r s t o o d b y a n d b e t w e e n t h e P a r t i e s h e r e t o

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( a ) i n t h e r a t i o o f 7 2 , 2 8 b e t w e e n T H D C a n d H A S H i n c a s e G r o s s S a l e s P r o c e e d s d o e s n o t e x c e e d R s . 1 2 7 2 c r o r e s ;

( b ) i n t h e r a t i o o f 7 0 : 3 0 b e t w e e n T H D C a n d H A S H i n c a s e G r o s s S a l e s P r o c e e d s i s e q u a l t o R s . 1 2 7 2 c r o r e s ;

( c ) i n a d d i t i o n ( b ) , i n t h e r a t i o o f 6 0 : 4 0 b e t w e e n T H D C a n d H A S H i n r e s p e c t o f g r o s s s a l e s P r o c e e d s i n e x c e s s o f R s . 1 2 7 2 c r o r e s .

“ I t i s a g r e e d t h a t t h e m i n i m u m g u a r a n t e e d a m o u n t f r o m t h e G r o s s S a l e s P r o c e e d s f o r T H D C a n d H A S H i s R s . 8 9 0 . 4 0 c r o r e s a n d R s . 2 2 5 . 7 6 c r o r e s r e s p e c t i v e l y . T h e m i n i m u m g u a r a n t e e d a m o u n t o f R s . 2 2 5 . 7 6 c r o r e s t o H A S H i n c l u d e s R s . 5 8 . 8 8 c r o r e s t h a t s h a l l b e e x p e n d e d b y T H D C t o w a r d s c o n s t r u c t i o n o f 1 2 6 f l a t s e q u i v a l e n t t o 2 , 8 3 , 5 0 0 s q . f t , , w h i c h f l a t s a r e t o b e a l l o t t e d i n t h e n a m e s o f t h e m e m b e r s o f t h e S o c i e t y o r o t h e r w i s e , a s t h e c a s e m a y b e , c a l c u l a t e d a s R s . 2 0 0 0 p e r s q . f t . f o r t h e a r e a 2 , 8 3 , 5 0 0 s q . f t . a n d t h e 7 2 % s h a r e o f 3 f l a t s o f 2 2 5 0 S q . f t . t o b e p u r c h a s e d b y H A S H @ R s , 4 5 0 0 / - p e r s q . f t . S h o u l d t h e a p p l i c a t i o n o f t h e r a t i o s t i p u l a t e d i n ( a ) a b o v e r e s u l t i n H A S H b e i n g e n t i t l e d t o a s u m g r e a t e r t h a n t h e m i n i m u m g u a r a n t e e d a m o u n t a n d T H D C b e i n g e n t i t l e d t o a s u m l e s s t h a n t h e m i n i m u m g u a r a n t e e d a m o u n t , T H D C s h a l l - b e e n t i t l e d t o t h e e n t i t l e m e n t o f H A S H w h i c h i s i n e x c e s s o f i t s m i n i m u m , g u a r a n t e e d a m o u n t u n t i l T H D C a c h i e v e s i t s m i n i m u m g u a r a n t e e d a m o u n t . - T h e s a m e i s i l l u s t r a t e d i n A n n e x u r e I h e r e t o .”

1 0 9 T h e a b o v e c l e a r l y s h o w s t h a t H A S H w a s e n t i t l e d t o t o t a l

p r o c e e d s o f R s . 2 2 5 . 7 6 c r o r e s o u t o f t o t a l p r o c e e d s o f t h e p r o j e c t

w h i c h w e r e a g r e e d t o b e s h a r e d b y T H D C a n d H A S H b u t t h e

p o r t i o n o f H A S H i n c l u d e s a s u m o f R s . 5 8 . 8 8 c r o r e s w h i c h w a s

r e q u i r e d t o b e s p e n t t o w a r d s c o n s t r u c t i o n o f 1 2 6 f l a t s e q u i v a l e n t

t o 2 8 3 5 0 0 s q u a r e f e e t a r e a w h i c h we r e t o b e a l l o t t e d t o t h e

m e m b e r s o f t h e s o c i e t y . T h u s , i t i s c l e a r t h a t f i g u r e o f R s . 2 , 0 0 0 / -

p e r s q . f e e t r e p r e s e n t s o n l y t h e c o s t o f c o n s t r u c t i o n s t o b e

i n c u r r e d b y T H D C w h i c h w a s d e b i t e d t o t h e a c c o u n t o f H A S H .

F u r t h e r , H A S H h a s a g r e e d t o p u r c h a s e t h r e e F l a t s @ 4 , 5 0 0 / - p e r

s q u a r e f e e t . S o m e n e w s r e p o r t s w e r e q u o t e d b e f o r e u s i n o n e o f

t h e c a s e s t o s h o w t h a t v a r i o u s b r o k e r s h a d i s s u e d v a r i o u s

a d v e r t i s e m e n t s f o r s a l e o f t h e s e f l a t s a n d t h e s e f l a t s w e r e

u l t i m a t e l y t o b e s o l d a t R s . 7 , 0 0 0 / - t o R s . 1 0 , 0 0 0 / - p e r s q u a r e f e e t .

T h i s a l s o b e c o m e s c l e a r f r o m t h e a d d e n d u m o f a g r e e m e n t i n

t e r m s o f t o t a l p r o c e e d s o f 1 2 7 2 c r o r e s . I n a n y c a s e i f t h e c o s t o f

c o n s t r u c t i o n i s R s . 2 , 0 0 0 / - , t h e n c o s t o f l a n d w h i c h h a s b e e n p a i d

t o t h e s o c i e t y i s a l s o t o b e a d d e d t o t h e c o s t o f t h e f l a t b e c a u s e

t h i s p o r t i o n o f c o n s i d e r a t i o n i n a n y c a s e w a s r e c e i v e d o r t o b e

r e c e i v e d l a t e r b y t h e s o c i e t y i n c a s h . C o n s i d e r i n g t h e p r e s e n t

m a r k e t v a l u e o f t h e f l a t s i n a n d a r o u n d C h a n d i g a r h a r e a w h i c h i s

R s . 4 , 0 0 0 / - t o 1 2 , 0 0 0 / - p e r s q u a r e f e e t w e a r e o f t h e o p i n i o n t h a t

v a l u e o f t h e f l a t a t R s . 4 , 5 0 0 / - p e r s q u a r e f e e t i s a b s o l u t e l y f a i r .

I n a n y c a s e M / s H A S H h a s a g r e e d t o p u r c h a s e t h e f l a t s a t t h i s r a t e

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f r o m M / s T H D C . I t m a y b e n o t e d a s p o i n t e d o u t b y t h e l d . D R f o r

t h e r e v e n u e s o m e o f t h e N e w s r e p o r t c l i p p i n g s f i l e d b y v a r i o u s

a s s e s s e e s c l e a r l y s h o w s t h a t f l a t s w e r e b o o k e d i n t h e “ T a t a

C a m l e o t ” ( t h i s w a s t h e n a m e w h i c h w a s g i v e n t o t h e P r o j e c t w h i c h

w a s t o b e d e v e l o p e d o n t h e l a n d o f t w o s o c i e t i e s ) i n t h e P r e

L a u n c h o f f e r i n t h e r a n g e o f R s . 7 5 0 0 t o 8 0 0 0 p e r s q f t . I t i s a

c o m m o n k n o w l e d g e t h a t r a t e s i n P r e L a u n c h o f f e r a r e l o w e r t h a n

t h e r a t e s w h e n b o o k i n g s o p e n f o r t h e P u b l i c . C o n s i d e r i n g t h e s e

f a c t s w e a r e o f t h e o p i n i o n t h a t A s s e s s i n g O f f i c e r h a s e s t i m a t e d

t h e v a l u e o f t h e f l a t s o n m o s t r e a s o n a b l e b a s i s . I n v i e w o f t h e s e

o b s e r v a t i o n s t h i s c o n t e n t i o n i s r e j e c t e d .

110 The Ld. Counsel for the assessee had made some submissions on the

issue o f deduct ion u/s 54F. He has pointed out that this i ssue has been

rejected wrongly by CIT(A). Ho wever , careful ly perusa l o f the grounds o f

appeal sho w that no ground in respect o f deduction u/s 54F has been raised

before us and , therefore, we decline to adjudica te th is issue and al l the

arguments made in th is behal f are rejected . Though re ference was made to

ground No. 2 .3 in this regard. The perusal o f grounds No. 2 .3 would sho w

that re ference has been made only to Sect ion 54 and Sect ion 54EC. Sect ion 54

deals wi th deduction in case the assessee be ing an individua l or HUF, transfers

the resident ial house and in case before us, the assessee has transferred the

plot . Therefore, i t cannot be said that deduction u/s 54F and 54 i s same.

Since no ground has been raised for deduction u/s 54F, we reject th is

contention.”

Fo l lowing the above , we dec ide th i s i ssue aga ins t the

assessee . Howeve r , a t the same t ime we f i nd tha t i n case o f

Sh r i Cha ran j i t S ingh A twa l (sup ra) as we l l as o the r p lo t ho lde rs

i n Pun jab i Coop Hous ing Bu i ld ing Soc ie t y L td . the f la t has been

va lued a t Rs . 4500 per sqf t and s ince na tu re and spec i f i ca t ion

o f the f la t rema ins same, we do no t f ind any jus t i f i ca t ion in

va lu ing the f la t Rs . 5000 per sqf t . Acco rd ing ly we dec ide the

p r inc ip le issue o f tax on cap i ta l ga in aga ins t the assessee .

howeve r , the Assess ing Of f ice r i s d i rec ted to va lue the f la t Rs .

4500 pe r sqf t .

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7 Ground No. 4 - After hearing the ld. DR for the revenue and

relevant material we f ind this issue has been adjudicated by Ld. CIT

(Appeals) vide para 6.13 to 6.14, which are as under:-

“6.13 The Ld. Counsel for the appellant has also argued that the appellant is entit led to deduction u/s 54F to the extent of investment in the new asset, as reinvestment in f lat. For the sake of convenience, provisions of section 54 F of the Act are reproduced below:

“ 54F. Capital gain on transfer of certain capital

assets not to be charged in case of investment in

residential house.

(1) Subject to the provisions of sub-section (4), where, in the case of an appellant being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this sect ion referred to as the original asset), and the appellant has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this sect ion referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this sect ion, that is to say,-

(a) if the cost of the asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under sect ion 45;

(b) if the cost of the new asset is less than the net

consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proport ion as the cost of the new asset bears to the net consideration, shall not be charged under section 45;

Provided that nothing contained in this sub-section shall apply where- a) the appellant-

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i ) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or

ii ) purchase any residential house, other than

the new asset, within a period of one year after the date of transfer of the original asset; or

iii )constructs any residential house, other than

the new asset, within a period of three years after the date of transfer of the original asset; and

b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head “Income from house property”.

Explanation – For the purposes of this sect ion,

“net consideration”, in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.

6.14 Sub section (1) of section 54 F al lows exemption of long term capital gains from tax, if the net consideration on transfer of long term capital asset is invested in the purchase of a new residential house within a period of one year before or two years after or in construction of a new residential house within a period of 3 years from the date of the transfer of the long term capital asset. In the instant case, the construction of the flat, which the appellant is to be given, has not yet started and so it cannot be said that the amount has been invested in a new residential house for al lowing benefit u/s 54 F of the Act. Hence, the appellant is not eligible for deduction u/s 54 F “

8 After considering the submissions of ld. DR for the revenue

and relevant material on record, we f ind Ld. CIT(A) has adjudicated

the issue correct ly and has given the reason for rejection of

deduction under section 54 / 54 F. Therefore, we f ind nothing wrong

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with the order of Ld. CIT(A) and confirm the same. Hence this

ground is rejected.

9 In the resu l t , appea l o f the assessee i s pa r t l y a l l owed .

Orde r p ronounced in the open cou r t on 31 .7 .2013 Sd/- Sd/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 31.7.2013 SURESH Copy to: The Appellant/The Respondent/The CIT/The CIT(A)/The DR

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