REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 15619 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.35248 OF 2015) Commissioner of Income Tax Appellant Versus Balbir Singh Maini Respondent WITH CIVIL APPEAL NO. 15622 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.35252 OF 2015) CIVIL APPEAL NO. 15624 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.561 OF 2016) CIVIL APPEAL NO. 15620 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.35250 OF 2015) CIVIL APPEAL NO. 15639 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.585 OF 2016) CIVIL APPEAL NO. 15637 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.583 OF 2016) CIVIL APPEAL NO. 15621 OF 2017 Signature Not Verified (ARISING OUT OF SLP (CIVIL) NO.35251 OF 2015) Digitally signed by R.NATARAJAN CIVIL APPEAL NO. 15643 OF 2017 Date: 2017.10.05 16:42:14 IST Reason: (ARISING OUT OF SLP (CIVIL) NO.1450 OF 2016) 1 CIVIL APPEAL NO. 15623 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.499 OF 2016) CIVIL APPEAL NO. 15657 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3170 OF 2016) CIVIL APPEAL NO. 15650 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.1629 OF 2016) CIVIL APPEAL NO. 15633 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.575 OF 2016) CIVIL APPEAL NO. 15628 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.566 OF 2016) CIVIL APPEAL NO. 15636 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.580 OF 2016) CIVIL APPEAL NO. 15625 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.562 OF 2016) CIVIL APPEAL NO. 15645 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.1565 OF 2016) CIVIL APPEAL NO. 15630 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.568 OF 2016) CIVIL APPEAL NO. 15634 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.576 OF 2016) CIVIL APPEAL NO. 15626 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.564 OF 2016) CIVIL APPEAL NO. 15627 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.565 OF 2016) CIVIL APPEAL NO. 15644 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.1562 OF 2016) 2 CIVIL APPEAL NO. 15641 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.587 OF 2016) CIVIL APPEAL NO. 15631 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.572 OF 2016) CIVIL APPEAL NO. 15635 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.577 OF 2016) CIVIL APPEAL NO. 15649 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.1628 OF 2016) CIVIL APPEAL NO. 15640 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.586 OF 2016) CIVIL APPEAL NO. 15651 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.1630 OF 2016) CIVIL APPEAL NO. 15638 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.584 OF 2016) CIVIL APPEAL NO. 15629 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.567 OF 2016) CIVIL APPEAL NO. 15632 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.574 OF 2016) CIVIL APPEAL NO. 15642 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.588 OF 2016) CIVIL APPEAL NO. 15646 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.1567 OF 2016) CIVIL APPEAL NO. 15648 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.1627 OF 2016) CIVIL APPEAL NO. 15667 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3826 OF 2016) 3 CIVIL APPEAL NO. 15653 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3165 OF 2016) CIVIL APPEAL NO. 15656 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3169 OF 2016) CIVIL APPEAL NO. 15663 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3821 OF 2016) CIVIL APPEAL NO. 15665 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3824 OF 2016) CIVIL APPEAL NO. 15647 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.1622 OF 2016) CIVIL APPEAL NO. 15666 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3825 OF 2016) CIVIL APPEAL NO. 15662 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3176 OF 2016) CIVIL APPEAL NO. 15655 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3168 OF 2016) CIVIL APPEAL NO. 15658 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3172 OF 2016) CIVIL APPEAL NO. 15669 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.5294 OF 2016) CIVIL APPEAL NO. 15661 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3175 OF 2016) CIVIL APPEAL NO. 15652 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3059 OF 2016) CIVIL APPEAL NO. 15672 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.5441 OF 2016) 4 CIVIL APPEAL NO. 15664 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3822 OF 2016) CIVIL APPEAL NO. 15654 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3167 OF 2016) CIVIL APPEAL NO. 15660 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3174 OF 2016) CIVIL APPEAL NO. 15659 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3173 OF 2016) CIVIL APPEAL NO. 15673 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.6147 OF 2016) CIVIL APPEAL NO. 15676 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.12106 OF 2016) CIVIL APPEAL NO. 15671 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.5440 OF 2016) CIVIL APPEAL NO. 15674 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.7828 OF 2016) CIVIL APPEAL NO. 15675 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.10574 OF 2016) CIVIL APPEAL NO. 15677 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.31409 OF 2016) CIVIL APPEAL NO. 15668 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.4717 OF 2016) CIVIL APPEAL NO. 15670 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.4722 OF 2016) 5 JUDGMENT R.F. Nariman, J. 1. Leave granted. 2. This judgment shall dispose of batch of civil appeals, as learned counsel appearing for both sides have submitted that common substantial questions of law are involved in all these appeals. 3. present appeals arise from judgment of Punjab and Haryana High Court where large number of appeals were disposed of under Section 260A of Income Tax Act, 1961. following substantial questions of law were raised before High Court: i) Whether transactions in hand envisage transfer exigible to tax by reference to Section 2(47)(v) of Income Tax Act, 1961 read with Section 53-A of Transfer of Property Act, 1882? ii) Whether Income Tax Appellate Tribunal, has ignored rights emanating from JDA, legal effect of non registration of JDA, its alleged repudiation etc.? 6 iii) Whether possession as envisaged by Section 2(47)(v) and Section 53-A of Transfer of Property Act, 1982 was delivered, and if so, its nature and legal effect? iv) Whether there was any default on part of developers, and if so, its effect on transactions and on exigibility to tax? v) Whether amount yet to be received can be taxed on hypothetical assumption arising from amount to be received? 4. For sake of convenience, we have referred to facts of Civil Appeal arising out of Special Leave Petition (Civil) No.1565 of 2016 (Commissioner of Income Tax v. Charanjit Singh Atwal). 5. Respondents before us are members of Punjabi Cooperative Housing Building Society Ltd. society consisted of 95 members and was owner of 21.2 acres, of which 500 square yards plots were held by 65 members, 1000 square yards plots by 30 members and remaining 4 plots of 500 square yards each were being retained by it. bone of contention in present appeal is tripartite Joint Development Agreement (JDA) dated 25.02.2007 for 7 development of 21.2 acres of land in village Kansal. This JDA was entered into between owner i.e. Punjabi Cooperative Housing Building Society Ltd., Hash Builders Pvt. Ltd., Chandigarh (HASH) and Tata Housing Development Company Ltd. (THDC). Under JDA, it was agreed that HASH and THDC viz., developers, will undertake to develop 21.2 acres of land owned and registered in name of society. agreed consideration was to be disbursed by THDC through HASH to each individual member of society, and different amounts and flats were payable and allotable to members having different plot sizes. developers were to make payments in four instalments. sum of Rs.3.87 crores was paid on execution of JDA. Rs.15.48 crores was to be paid against registered sale deed for land of equivalent value of 3.08 acres, earmarked on demarcation plan annexed to JDA, which was effected by registered conveyance dated 02.03.2007. second instalment payment, being Rs. 23.22 crores, was for land of equivalent value of 4.62 acres, also earmarked on demarcation plan, which was effected by registered deed of conveyance dated 8 25.04.2007. third instalment payment of Rs.31.9275 crores was to be made within six months from date of execution of agreement or within two months from date of approval of plans/design and drawings and grant of final license to develop, whichever was later. This was to be for land of equivalent value of 6.36 acres, also earmarked on demarcation plan. balance payment of Rs.31.9275 crores was to be made within two months from date of last payment, towards full and final settlement of entire payment of Rs. 106.425 crores, for which registered sale deed for land of equivalent value being 7.14 acres, also earmarked on demarcation plan, was to be conveyed. 6. developers made payments only up to 2 nd instalment payment, and 7.7 acres of land was conveyed as mentioned, which we have been reliably informed, has since suffered payment of capital gains tax for assessment years 2007-2008 & 2008-2009. problem which arose for subsequent assessment years was that, due to pending proceedings, first in Punjab and Haryana High Court and 9 thereafter in Delhi High Court, necessary permissions for development were not granted, as result of which JDA did not take off ground. For previous year relevant to assessment year 2007-08, assessee filed original return of income on 07.12.2007, declaring income of Rs.2,50,171/-. return of income tax for assessment year was later revised, on 07.10.2009, declaring income of Rs.30,08,606/-, which included capital gains of Rs.27,58,436/-. According to assessee, Rs.36 lakhs received in subsequent assessment year 2008-09 were also offered for tax under head capital gains . 7. Assessing Officer vide order dated 30.12.2009, passed under Section 143(3) of Act, held that since physical and vacant possession had been handed over under JDA, same would tantamount to transfer within meaning of Sections 2(47)(ii), (v) and (vi) of Income Tax Act. He further held that, in case of assessee owning 1000 square yards plot, full value of consideration would be Rs.3.675 10 crores less cost of acquisition of Rs.12,81,724/-. long term capital gain was, therefore, stated to be Rs.3,54,68,276/-. 8. Commissioner (Appeals) dismissed appeal upholding order passed by Assessing Officer. Aggrieved by order, assessee filed appeal before Income Tax Appellate Tribunal (ITAT), which was also dismissed by ITAT. 9. In impugned judgment by High Court under Section 260A of Income Tax Act, High Court allowed all appeals of assessees and held: 1. Perusal of JDA dated 25.02.2007 read with sale deeds dated 02.03.2007 and 25.04.2007 in respect of 3.08 acres and 4.62 acres respectively would reveal that parties had agreed for pro-rata transfer of land. 2. No possession had been given by transferor to transferee of entire land in part performance of JDA dated 25.02.2007 so as to fall within domain of Section 53A of 1882 Act. 3. possession delivered, if at all, was as licencee for development of property and not in capacity of transferee. 4. Further Section 53A of 1882 Act, by incorporation, stood embodied in Section 2(47)(v) 11 of Act and all essential ingredients of Section 53A of 1882 Act were required to be fulfilled. In absence of registration of JDA dated 25.02.2007 having been executed after 24.09.2001, agreement does not fall under Section 53A of 1882 Act and consequently Section 2(47)(v) of Act does not apply. 5. It was submitted by learned counsel for assessee-appellant that whatever amount was received from developer, capital gains tax has already been paid on that and sale deeds have also been executed. In view of cancellation of JDA dated 25.02.2007, no further amount has been received and no action thereon has been taken. It was urged that as and when any amount is received, capital gains tax shall be discharged thereon in accordance with law. In view of aforesaid stand, while disposing of appeals, we observe that assessee-appellants shall remain bound by their said stand. 6. issue of exigibility to capital gains tax having been decided in favour of assessee, question of exemption under Section 54F of Act would not survive any longer and has been rendered academic. 7. Tribunal and authorities below were not right in holding assessee-appellant to be liable to capital gains tax in respect of remaining land measuring 13.5 acres for which no consideration had been received and which stood cancelled and incapable of performance at present due to various orders passed by Supreme Court and High Court in PILs. Therefore, appeals are allowed. 12 10. Learned counsel for revenue has argued that Assessing Officer and CIT (Appeals), as well as ITAT, were all correct in bringing capital receipts under JDA to tax as capital gains . According to learned counsel, present case is squarely covered by Section 2(47)(v) as Section 53A of Transfer of Property Act, 1882 is applicable to transaction under JDA. According to learned counsel, transferee in present case has, as part performance of contract, taken possession of entire property under JDA, and has done various acts in furtherance of contract, such as paying EMD and first two instalments, and that transferee was willing to perform his part of contract which unfortunately could not ultimately be performed because of orders passed by High Court, because of which necessary permissions for development of property could not be obtained. He further argued that fact that, after 2001, registration of agreements under Section 53A is necessary in law would not stand in his way, as Section 2(47)(v) only refers to contract of nature of Section 53A of Transfer of Property Act and that, therefore, ITAT was right 13 in stating that since Section 53A had been incorporated into Section 2(47)(v) of Income Tax Act, it was unnecessary, for purpose of Income Tax Act, to have such agreement registered. He further argued that ITAT was correct in finding that possession had in fact been handed over under JDA, as otherwise, THDC could not have been authorized to amalgamate project with any other project in adjacent or adjoining area. As THDC was authorized to hand over possession of property or portions thereof to authority only for this purpose, it is clear that possession of land had in fact been handed over. Further, all other ingredients of Section 53A of Transfer of Property Act were met and ITAT was also correct in stating that developers were ready and willing to perform their part of contract. He, therefore, urged us to uphold ITAT order and set aside High Court judgment. 11. On other hand, Shri Vohra, learned counsel for Respondents, argued that High Court was correct in holding that Section 2(47)(v) would not apply in absence of 14 registration of JDA, which admittedly was not done. According to him, no possession was ever handed over, as only license to develop property was given by JDA to developers. According to learned counsel, High Court was also correct in stating that developers were not ready and willing to perform their part of agreement and that, therefore, none of ingredients of Section 53A of Transfer of Property Act were met on facts of this case. According to learned counsel, what was appreciated by High Court and missed by ITAT was fact that only two parcels of land, admeasuring 7.7 acres, were conveyed, for which capital gains tax has been paid. Since rest of project could not go through for want of various permissions, it is clear that no capital gain, in fact, arose or accrued to assessees. According to learned counsel, under Section 45 read with Section 48 of Income Tax Act, profits and gains should arise from transfer of capital asset and income should be computed after full value of consideration has been received or accrued. Since no income was received or had accrued, as project was finally terminated by owners on 15 13.06.2011, it was clear that High Court judgment was correct. Further, sub-clause (vi) of Section 2(47) also would not apply for reason stated by High Court, which is that it was not attracted because there was no change in membership of society. 12. Having heard learned counsel for parties, it is important to first set out important clauses of JDA dated 25.02.2007. 13. JDA, as has been stated above, was between housing society, who was referred to as owner, and two developers, namely Hash Builders Pvt. Ltd., Chandigarh and Tata Housing Development Company Ltd. Strewn throughout agreement is fact that owner, being absolutely seized and possessed of property, was desirous of assigning its development rights for developing same. This is clear, inter alia, from sub-clause (E) of agreement which reads as under: E. Owner being absolutely seized and possessed of and otherwise well and sufficiently entitled to property and is desirous of assigning 16 its Development Rights in Property for developing same including transferring title in property, by utilizing available Floor Space Index (FSI) for group housing commercial and retail development as per applicable municipal building bye laws in force, but has no expertise or means to do so and had invited/ quotations from builders/ contractors/ developers to Develop property vide advertisements published in Tribune dated 31-05-06 HASH approached Owner and submitted proposal to owners for development of Property and after prolonged negotiations finalized term of development. Since HASH did not have sufficient means to develop Property, HASH have approached THDC for developing property by constructing thereupon buildings and / or structures to be used for inter-alia residential public use, commercial use, institutional use, club house, parking and other amenities, utilities, services and any other kinds of structures/ and necessary amenities, infrastructure thereto as may be decided by THDC (hereinafter referred as Premises ) and all work including survey, investigations, studies, design, planning, financing, constructing, operating, maintenance and marketing for sale/ lease/transfer to prospective purchasers/ lessees/transferees for residential and / or any other authorized user as may be determined by THDC(hereinafter referred to as Project ). It is expressly agreed to between parties that role of HASH as developer shall be as specifically set out in this Agreement. It is expressly agreed to between parties that role THDC as developer shall be to execute, implement, develop and complete project on Property. 17 Under cause 2, project is stated to be: 2.1 Owner herby irrevocably and unequivocally grants and assigns in perpetuity all its rights to develop, construct, mortgage, lease, license, sell and transfer Property alongwith any and all construction, Premises, hereditament, easements, trees thereon in favour of THDC for purpose of development, construction, mortgage, Sale, transfer, lease, license and /or exploitation for full utilization of Property ( Right ) and to execute all documents necessary to carry out, facilitate and enforce Right in Property including to execute Lease Agreement, License Agreements, Construction Contracts, Supplier Contracts, Agreement for Sale, Conveyance, Mortgage Deed, Finance document and all documents and Agreements necessary to create and register mortgage, conveyance, lease deeds, License agreement, Power of Attorneys, affidavits, declarations, indemnities and all such other documents, letters as may be necessary to carry out, facilitate and enforce Right and to register same with revenue/ Competent authorities and to appear on our behalf before all authorities, statutory or otherwise, and before any court of law (the Development Rights ). owner hereby hands over original title deeds of Property as mentioned in list Annexed hereto and marked as Annexure IV and physical, vacant possession of Property has been handed over to THDC simultaneous to execution and registration of this Agreement to develop same as set out herein. 18 It is hereby agreed and confirmed that what is stated in recitals hereinabove, shall be deemed to be declarations and representations on part of Owner as if same were set out herein in verbatim and forming integral part of this Agreement. 2.2 Project shall comprise of development/ construction of Property into Premises as permissible under Punjab Municipal Building Bye-laws/Punjab Urban Development Authority or any other Competent authority by Developer at them own cost and expense. project shall be developed as may be sanctioned by concerned local authority i.e. Department of Local Bodies, Punjab/ Punjab Urban Planning and Development Authority (PUDA) or any other Competent Authority. 2.3 Owner hereby irrevocably and unequivocally grants and assigns all its Development Rights in Property to THDC to develop Property and undertake Project at its own costs, efforts and expenses whereupon Developers shall be entitled to apply for and obtain necessary sanctions, licenses and permissions from all Concerned Authorities for commencement, development and completion of Project on Property. 14. consideration clause in agreement is Clause 4, by which sum of Rs.106.425 crores, plus 129 flats consisting of super area of 2250 square feet, was to be made over to 19 society and its members. As stated hereinabove, Rs.3.87 crores was paid as earnest money on execution of agreement, and Rs.15.48 crores was paid soon thereafter. next instalment of Rs.23.22 crores was also paid by 25.04.2007. As consideration for both instalments, land admeasuring 7.7 acres was ultimately conveyed. third instalment, and balance payment, were payable in following terms. (iv) Payment being Rs. 31,92,75,000/- (Rupees Thirty one crores ninety two lacs seventy five thousand only) calculated @ Rs 24,75,000/- (Rs. Twenty four lacs seventy five thousand only) per plot holder of 500 Sq. yard and Rs 49,50,000/-( Rupees Forty nine lacs fifty thousand only) per plot holder of 1000 Sq. yards, to be made to Owner and / or respective members of Owner ( as case may be), within six (6) months from date of execution of this Agreement or within two (2) months from date of approval of plans/ Design and Drawings and grant of final license to develop whereupon construction can commence, whichever is later against which Owner shall execute registered sale deed for land of equivalent value being 6.36 Acres out of Property as demarcated in green colour (also hatched in green colour) in Demarcation Plan annexed hereto as Annexure V and bearing Khasra nos. 123/15, 123/6, 123/7 (balance 20 part), 123/3 (part), 123//4//1/1, 123///4//1/2, 123//4/2, 123//5/1, 123//5/2, 123//5/3, 112/24 (part); (v) And Balance Payment being Rs. 31,92,75,000/- (Rupees Thirty one crore ninety two lacs seventy five thousand only) calculated @ Rs. 24,75,000/- (Rs. Twenty four lacs seventy five thousand only) per plot holder of 500 Sq. yards and Rs. 49,50,000/-, ( Rupees Forty nine lacs fifty thousand only) per plot holder of 1000 Sq yards, to be made to Owner and /or respective members of Owner (as case may be ), within two (2) months from date of Payment made as per Clause 4.1 (iv) mentioned hereinabove, towards full and final settlement of payment, after adjustment of above said Rs. 3,87,00,000/- (Rupees Three Crores eighty seven lacs only) paid as adjustable Advance/ Earnest Money as mentioned hereinabove, against which Owner shall execute registered sale deed for land of equivalent value being 7.14 Acres being balance out of Property as demarcated in orange colour (also hatched in orange colour ) in Demarcation Plan annexed hereto as Annexure V and bearing Khasra nos. 123/3 (balance part), 112/24 (balance part), 112/25,113///21//1, 122//1/1, 122//1/2, 122//1/3, 122//10/1, 122//10/2, 122//11/1, 122//11/2, 122//12, 122/19, 122//22/1, 122//22/2, 122//23//2/1 (bal. part), 122//17/3/2 (balance part). Under clause 9, transfer of ownership/rights of property are stated as follows: 21 9.2 owner shall execute in favor of THDC, sale deeds in accordance with provisions of Clause 4.1(ii) to Clause 4.1 (v) of this Agreement and execute all other necessary documents and papers to complete aforesaid transaction. 9.3 That all original title deeds pertaining to property as mentioned in Annexure IV has been handed over to THDC by Owner at time of signing of this Agreement and in furtherance of Common interest of Parties for development of Project and except Sale Transaction Made by Owner in favour of THDC as set out in Clause 4.1 above. THDC hereby undertake and assure Owner that they shall use title deeds only for purpose of furtherance of Project in manner that it does not adversely effect Owner/ Allottee in any manner whatsoever. Under Clause 10, financial assistance can be raised by mortgaging property. Clause 10 reads as follows: 10. LOANS/ FINANCIAL ASSISTANCE Owner hereby gives their express consent to THDC to raise finance of development and completion of Project on Property by way of mortgaging Property and proposed structures to lending banks/ financial institutions by deposit of title deeds with lending bank and / or financial institution. Owner shall, in no way, be liable for repayment of loan. THDC shall have right to negotiate, create and sign necessary forms, deeds or documents for 22 variation of mortgage, charge or encumbrance on Property by depositing original title deeds of Property with any financial institution/ bank etc. THDC undertakes that finance raise by way of mortgage of Property of Owner, with bank/financial institutions shall be utilized only for purpose of development of project and shall keep Owner informed in writing about charge created on Property and keep Owner indemnified against all claims, costs for bank / financial institutions from when. THDC may have availed loan facility in respect of Project, in case, Project is not completed in terms of this Agreement. 15. JDA could, under clause 14, be terminated under certain circumstances by all parties thereto. Since owner alone terminated aforesaid JDA, relevant clause is clause 14(iv), which reads as under: 14(iv). Owner shall have right to terminate Agreement only in event of default by Developers for making Payment in accordance with terms of this Agreement and allotment of Flats within time period as mentioned in this Agreement after giving Thirty (30) days written notice for rectification of such breach or any further time as may be desired by Owner. In event Agreement is terminated by Owner, all lands registered in name of THDC as per terms of this Agreement up to date of termination shall remain with THDC and balance lands to be transferred to THDC as per terms of this agreement shall not to be transferred by Owner 23 as per terms of this agreement. Upon termination, Owner shall forfeit Adjustable Advance/ Earnest Money mentioned in clause 4(i). 16. reading of JDA shows that, it is essentially agreement to facilitate development of 21.2 acres so that developers build at their own cost, after obtaining necessary approvals, flats of given size, some of which were then to be handed over to members of society. Payments were also to be made by developer to each member in addition to giving each member certain number of flats depending upon size of member s plot that was handed over. What is important to bear in mind is that payments under third instalment were only to be made after grant of approvals and not otherwise, and that it is admitted position that this was never done because no approvals could be obtained as High Court ultimately interdicted project. Also, termination clause is of great significance because it shows that in event of JDA being terminated, whatever parcels of land have already been conveyed, will stand conveyed, but that no other conveyances of remaining land would take place. 24 17. relevant sections that are necessary for us to decide present matter are as under: Transfer of Property Act 53A. Part performance. - Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which terms necessary to constitute transfer can be ascertained with reasonable certainty, and transferee has, in part performance of contract, taken possession of property or any part thereof, or transferee, being already in possession, continues in possession in part performance of contract and has done some act in furtherance of contract, and transferee has performed or is willing to perform his part of contract, then, notwithstanding that where there is instrument of transfer, that transfer has not been completed in manner prescribed therefore by law for time being in force, transferor or any person claiming under him shall be debarred from enforcing against transferee and persons claiming under him any right in respect of property of which transferee has taken or continued in possession, other than right expressly provided by terms of contract: Provided that nothing in this section shall affect rights of transferee for consideration who has no notice of contract or of part performance thereof.] 25 Income Tax Act Section 2 - Definitions In this Act, unless context otherwise requires, (47) "transfer", in relation to capital asset, includes, - (i) to (iv) xxx xxx xxx (v) any transaction involving allowing of possession of any immovable property to be taken or retained in part performance of contract of nature referred to in Section 53A of Transfer of Property Act, 1882 (4 of 1882) ; or (vi) any transaction (whether by way of becoming member of, or acquiring shares in, co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has effect of transferring, or enabling enjoyment of, any immovable property. 45. Capital gains - (1) Any profits or gains arising from transfer of capital asset effected in previous year shall, save as otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G and 54H, be chargeable to income-tax under head Capital gains , and shall be deemed to be income of previous year in which transfer took place. 48. Mode of computation - income chargeable under head "Capital gains" shall be computed, by deducting from full value of consideration received or accruing as result of transfer of capital asset following amounts, namely: 26 (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) cost of acquisition of asset and cost of any improvement thereto: 18. Section 53A, as is well known, was inserted by Transfer of Property Amendment Act, 1929 to import into India equitable doctrine of part performance. This Court has in Shrimant Shamrao Suryavanshi & Anr. v. Pralhad Bhairoba Suryavanshi (D) by LRs. & Ors., (2002) 3 SCC 676 at 682 stated as follows: 16. But there are certain conditions which are required to be fulfilled if transferee wants to defend or protect his possession under Section 53- of Act. necessary conditions are: (1) there must be contract to transfer for consideration of any immovable property; (2) contract must be in writing, signed by transferor, or by someone on his behalf; (3) writing must be in such words from which terms necessary to construe transfer can be ascertained; (4) transferee must in part-performance of contract take possession of property, or of any part thereof; 27 (5) transferee must have done some act in furtherance of contract; and (6) transferee must have performed or be willing to perform his part of contract. 19. It is also well-settled by this Court that protection provided under Section 53A is only shield, and can only be resorted to as right of defence. See Rambhau Namdeo Gajre v. Narayan Bapuji Dhgotra (Dead) through LRs. (2004) 8 SCC 614 at 619, para 10. agreement of sale which fulfilled ingredients of Section 53A was not required to be executed through registered instrument. This position was changed by Registration and Other Related Laws (Amendment) Act, 2001. Amendments were made simultaneously in Section 53A of Transfer of Property Act and Sections 17 and 49 of Indian Registration Act. By aforesaid amendment, words contract, though required to be registered, has not been registered, or in Section 53A of 1882 Act have been omitted. Simultaneously, Sections 17 and 49 of 1908 Act have been amended, clarifying that 28 unless document containing contract to transfer for consideration any immovable property (for purpose of Section 53A of 1882 Act) is registered, it shall not have any effect in law, other than being received as evidence of contract in suit for specific performance or as evidence of any collateral transaction not required to be effected by registered instrument. Section 17(1A) and Section 49 of Registration Act, 1908 Act, as amended, read thus: 17(1A). documents containing contracts to transfer for consideration, any immovable property for purpose of Section 53A of Transfer of Property Act, 1882 (4 of 1882) shall be registered if they have been executed on or after commencement of Registration and Other Related Laws (Amendment) Act, 2001 and if such documents are not registered on or after such commencement, then they shall have no effect for purposes of said Section 53A. 49. Effect of non-registration of documents required to be registered. No document required by Section 17 or by any provision of Transfer of Property Act, 1882 (4 of 1882), to be registered shall- (a) affect any immovable property comprised therein, or (b) confer any power to adopt, or (c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered: 29 Provided that unregistered document affecting immovable property and required by this Act or Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of contract in suit for specific performance under Chapter II of Specific Relief Act, 1887 (1 of 1877) or as evidence of any collateral transaction not required to be effected by registered instrument. 20. effect of aforesaid amendment is that, on and after commencement of Amendment Act of 2001, if agreement, like JDA in present case, is not registered, then it shall have no effect in law for purposes of Section 53A. In short, there is no agreement in eyes of law which can be enforced under Section 53A of Transfer of Property Act. This being case, we are of view that High Court was right in stating that in order to qualify as transfer of capital asset under Section 2(47)(v) of Act, there must be contract which can be enforced in law under Section 53A of Transfer of Property Act. reading of Section 17(1A) and Section 49 of Registration Act shows that in eyes of law, there is no contract which can be taken cognizance of, for purpose specified in Section 53A. ITAT was not correct in 30 referring to expression of nature referred to in Section 53A in Section 2(47)(v) in order to arrive at opposite conclusion. This expression was used by legislature ever since sub-section (v) was inserted by Finance Act of 1987 w.e.f. 01.04.1988. All that is meant by this expression is to refer to ingredients of applicability of Section 53A to contracts mentioned therein. It is only where contract contains all six features mentioned in Shrimant Shamrao Suryavanshi (supra), that Section applies, and this is what is meant by expression of nature referred to in Section 53A . This expression cannot be stretched to refer to amendment that was made years later in 2001, so as to then say that though registration of contract is required by Amendment Act of 2001, yet aforesaid expression of nature referred to in Section 53A would somehow refer only to nature of contract mentioned in Section 53A, which would then in turn not require registration. As has been stated above, there is no contract in eye of law in force under Section 53A after 2001 unless said contract is registered. This being case, and it being clear that said JDA was never registered, 31 since JDA has no efficacy in eye of law, obviously no transfer can be said to have taken place under aforesaid document. Since we are deciding this case on this legal ground, it is unnecessary for us to go into other questions decided by High Court, namely, whether under JDA possession was or was not taken; whether only licence was granted to develop property; and whether developers were or were not ready and willing to carry out their part of bargain. Since we are of view that sub-clause (v) of Section 2(47) of Act is not attracted on facts of this case, we need not go into any other factual question. 21. However, High Court has held that Section 2(47)(vi) will not apply for reason that there was no change in membership of society, as contemplated. We are afraid that we cannot agree with High Court on this score. Under Section 2(47)(vi), any transaction which has effect of transferring or enabling enjoyment of any immovable property would come within its purview. High Court has not adverted to expression or in any other manner whatsoever 32 in sub-clause (vi), which would show that it is not necessary that transaction refers to membership of cooperative society. We have, therefore, to see whether impugned transaction can fall within this provision. 22. object of Section 2(47)(vi) appears to be to bring within tax net de facto transfer of any immovable property. expression enabling enjoyment of takes color from earlier expression transferring , so that it is clear that any transaction which enables enjoyment of immovable property must be enjoyment as purported owner thereof. 1 idea is to bring within tax net, transactions, where, though title may not be transferred in law, there is, in substance, transfer of title in fact. 23. reading of JDA in present case would show that owner continues to be owner throughout agreement, and has at no stage purported to transfer rights akin to 1 maxim noscitur sociis has been repeatedly applied by this Court. recent application of maxim is contained in Coastal Paper Limited v. Commissioner of Central Excise, Visakhapatnam, (2015) 10 SCC 664 at 677, para 25. This maxim is best explained as birds of feather flocking together. maxim only means that word is to be judged by company it keeps. 33 ownership to developer. At highest, possession alone is given under agreement, and that too for specific purpose -the purpose being to develop property, as envisaged by all parties. We are, therefore, of view that this clause will also not rope in present transaction. 24. matter can also be viewed from slightly different angle. Shri Vohra is right when he has referred to Sections 45 and 48 of Income Tax Act and has then argued that some real income must arise on assumption that there is transfer of capital asset. This income must have been received or have accrued under Section 48 as result of transfer of capital asset. 25. This Court in E.D. Sassoon & Co. Ltd. v. CIT, (1955) 1 SCR 313 at 343 held: It is clear therefore that income may accrue to assessee without actual receipt of same. If assessee acquires right to receive income, income can be said to have accrued to him though it may be received later on its being ascertained. basic conception is that he must have acquired right to receive income. There must be debt owed to him by somebody. There must be as is otherwise expressed debitum in 34 presenti, solvendum in futuro; See W.S. Try Ltd. v. Johnson (Inspector of Taxes) [(1946) 1 AER 532 at p. 539], and Webb v. Stenton, Garnishees [11 QBD 518 at p. 522 and 527]. Unless and until there is created in favour of assessee debt due by somebody it cannot be said that he has acquired right to receive income or that income has accrued to him. 26. This Court, in Commissioner of Income Tax v. Excel Industries, (2014) 13 SCC 459 at 463-464 referred to various judgments on expression accrues , and then held: 14. First of all, it is now well settled that income tax cannot be levied on hypothetical income. In CIT v. Shoorji Vallabhdas and Co. [CIT v. Shoorji Vallabhdas and Co., (1962) 46 ITR 144 (SC)] it was held as follows: (ITR p. 148) Income tax is levy on income. No doubt, Income Tax Act takes into account two points of time at which liability to tax is attracted, viz., accrual of income or its receipt; but substance of matter is income. If income does not result at all, there cannot be tax, even though in bookkeeping, entry is made about hypothetical income , which does not materialise. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains income of recipient, even though given up, tax may be payable. Where, however, income 35 can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though entry to that effect might, in certain circumstances, have been made in books of account. 15. above passage was cited with approval in Morvi Industries Ltd. v. CIT [Morvi Industries Ltd. v. CIT, (1972) 4 SCC 451 : 1974 SCC (Tax) 140 : (1971) 82 ITR 835] in which this Court also considered dictionary meaning of word accrue and held that income can be said to accrue when it becomes due. It was then observed that: (SCC p. 454, para 11) 11. date of payment does not affect accrual of income. moment income accrues, assessee gets vested with right to claim that amount even though it may not be immediately. 16. This Court further held, and in our opinion more importantly, that income accrues when there arises corresponding liability of other party from whom income becomes due to pay that amount . 17. It follows from these decisions that income accrues when it becomes due but it must also be accompanied by corresponding liability of other party to pay amount. Only then can it be said that for purposes of taxability that income is not hypothetical and it has really accrued to assessee. 36 18. Insofar as present case is concerned, even if it is assumed that assessee was entitled to benefits under advance licences as well as under duty entitlement passbook, there was no corresponding liability on Customs Authorities to pass on benefit of duty-free imports to assessee until goods are actually imported and made available for clearance. benefits represent, at best, hypothetical income which may or may not materialise and its money value is, therefore, not income of assessee. 27. In facts of present case, it is clear that income from capital gain on transaction which never materialized is, at best, hypothetical income. It is admitted that, for want of permissions, entire transaction of development envisaged in JDA fell through. In point of fact, income did not result at all for aforesaid reason. This being case, it is clear that there is no profit or gain which arises from transfer of capital asset, which could be brought to tax under Section 45 read with Section 48 of Income Tax Act. 28. In present case, assessee did not acquire any right to receive income, inasmuch as such alleged right was dependent upon necessary permissions being obtained. This being case, in circumstances, there was no debt 37 owed to assessees by developers and therefore, assessees have not acquired any right to receive income under JDA. This being so, no profits or gains arose from transfer of capital asset so as to attract Sections 45 and 48 of Income Tax Act. 29. We are, therefore, of view that High Court was correct in its conclusion, but for reasons stated by us hereinabove. appeals are dismissed with no order as to costs. J. (R.F. Nariman) J. (Sanjay Kishan Kaul) New Delhi; October 04, 2017. 38 Commissioner of Income-tax v. Balbir Singh Maini