IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 25.2.2019 CORAM HON'BLE DR.JUSTICE VINEET KOTHARI AND HON'BLE MR.JUSTICE C.V.KARTHIKEYAN Tax Case Appeal No.130 of 2019 Principal Commissioner of Income Tax 6 No.121, Nungambakkam High Road Chennai 600 034. Appellant Vs. Shri.R.J.V.Kaiwar PAN: ALDPK 9112 H Respondent Tax Case Appeal filed under Section 260A of Income Tax Act, 1961 against order of Income Tax Appellate Tribunal, Madras 'B' Bench, Chennai, dated 31.5.2017 made in ITA No.1673/Mds/2016. For Appellant : Mr.T.R.Senthilkumar Senior Standing Counsel JUDGMENT (Delivered by DR.VINEET KOTHARI,J) Revenue has filed this Tax Case (Appeal) under Section 260-A of Income Tax Act by raising following purported substantial questions of law against order passed by Income Tax Appellate Tribunal on 31.3.2017 for Assessment Year 2011- 2012 by which learned Tribunal dismissed Appeal filed by http://www.judis.nic.in 2 Revenue and held that capital gains to be taxed with in hands of respondent/Assessee could arise only in Assessment Year 2013-2014 and not in year in question viz. Assessment Year 2011- 2012:- "i) Whether Appellate Tribunal was right in holding that Assessee is entitled for exemption under Section 54 of Income Tax Act? ii) Whether Tribunal was correct in holding that Assessee is eligible for exemption under Section 54 of Income Tax Act in respect of building under construction despite same having not constructed within stipulated period of three years for availing benefit as per Section 54(1) of Income Tax Act?" 2. findings of learned Tribunal in this regard are quoted below for ready reference:- "6. We have considered rival submissions on either side and perused relevant material available on record. Admittedly, agreement was entered into for joint development of property on 26.8.2010. As per agreement, licence was given to developer for measuring http://www.judis.nic.in 3 land for preparing plan, etc. before starting actual construction. It is not in dispute that due to coastal zone regulation, joint developer was not able to get approval for intended area of construction. Floor Space Index was considerably reduced in coast zone regulation and after getting necessary approval from coastal zone regulation authority, Chennai Metropolitan Development Authority ultimately granted approval only on 31.3.2012. physical possession of property thereafter handed over to developer for purpose of construction. Therefore, mere licence to enter into property for preparing plan and to carry on necessary formalities for purpose of constructing building cannot be construed as handing over of physical possession of property. 7. If joint developer could not get plan approved from Chennai Metropolitan Development Authority, assessee would continue to be in http://www.judis.nic.in 4 physical possession of property. In other words, no part of property was handed over to joint developer as per agreement which would enable him to continue in possession. As per agreement, assessee would continue physical possession of property till developer get approval from Chennai Metropolitan Development Authority. After approval, physical possession of property was handed over, which ultimately falls in assessment year 2013-14. Therefore, assessee filed revised return to claim exemption under Section 54 of Act. This Tribunal is of considered opinion that when assessee handed over entire land on basis of arrangement that developer could retain 30% of land in proportionate to constructed area, there was transfer of property in assessment year 2013-14. 8. cost of 30% of undivided share of land would be cost of 70% constructed area at rate of Rs.9500/- per sq.ft. Since assessee http://www.judis.nic.in 5 has not received any money from developer, entire fund has to be treated as investment in construction by developer. This Tribunal is of considered opinion that it has to be construed that assessee invested cost of 30% of undivided share of land for construction. In other words, cost of 30% of undivided share of land would be deemed to be invested and deposited with developer on transfer of 30% of undivided share of land to developer, for assessment year 2013-14. Since cost of 30% share of undivided land was deemed to be invested with developer for construction, this Tribunal is of considered opinion that assessee is eligible for exemption under Section 54 of Act. Therefore, this Tribunal do no find any reason to interfere with order of lower authority and accordingly same is confirmed. 7. In result, appeal filed by Revenue is dismissed." 3. Learned Senior Standing Counsel appearing for Revenue, http://www.judis.nic.in 6 relying upon decision of Bombay High Court in Chaturbhuj Dwarkadas Kapadia of Bombay v. Commissioner of Income Tax (260 ITR 491(Bom.), submitted that in present case since joint development agreement was executed by respondent/Assessee on 23.8.2010 coupled with General Power of Attorney executed in favour of Developer in succession on 12.8.2010 which was registered only on 26.8.2010 and Joint Development Agreement was executed on 23.8.2010, therefore even though final approval from Chennai Metropolitan Development Authority was obtained only on 31.12.2012, tax liability on capital gains should be assessed in hands of respondent/Assessee in Assessment Year 2011-2012 and not 2013-2014 as held by Tribunal. 4. Having heard learned Senior Standing Counsel for Revenue, Mr.T.R.Senthilkumar, we are satisfied that no substantial question of law arises in this Appeal by Revenue and finding of facts arrived at by Tribunal, which are binding on High Court under Section 260A of Act, cannot be said to be perverse in any manner in present case. fact of execution of Joint Developer Agreement on 23.8.2010 and execution of General Power of Attorney preceding that on 12.8.2010 which was registered on 26.8.2010 does not amount to 'transfer', as defined under Section 2(47) of Act, which is quoted below for ready reference:- http://www.judis.nic.in 7 "(47) -"transfer", in relation to capital asset, includes, (i) sale, "exchange or relinquishment" of asset; or (ii) extinguishment of any rights therein; or (iii) compulsory acquisition thereof under any law; or (iv) in case where asset is converted by owner thereof into, or is treated by him as, stock-in-trade of business carried on by him, such conversion or treatment; or (iva) maturity or redemption of zero coupon bond; or (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 ..." 5. contention of learned counsel for Revenue is that possession of property in question was handed over to Developer is not borne out from any evidence on record. Tribunal, in our opinion, has rightly held that mere licence to enter into property for measuring land and preparing plan for http://www.judis.nic.in 8 construction of building cannot be construed as handing over physical possession of property. Section 53A of Transfer of Property Act also does not get attracted in such circumstances, as, admittedly, not even part of consideration had passed on from Developer to Assessee in Assessment Year 2011-2012. mere execution of Joint Development Agreement and execution of Power of Attorney in favour of Developer does not amount to 'transfer' within meaning of Section 2(47) of Act. 6. facts of case in decision of Bombay High Court relied upon by learned counsel for Revenue are not only distinguishable from facts of present case, but, also conclusion arrived at by Bombay High Court supports view which we have taken above. In that case, Agreement was entered on 18.8.1994 and entire payment by Developer to land owner was made by 31.3.1996 and Developer had been requested to complete formalities and obtain permission, but, since Bombay Municipal Corporation issued commencement certificate permitting construction of building upto plinth level only, building plan came to be amended and ultimately Power of Attorney was executed on 12.3.1999 and therefore, Assessee claimed that capital gains liability would arise only in Assessment Year 1999-2000 which contention was finally upheld by Bombay High Court. only http://www.judis.nic.in 9 arithmetical error found in that case by Bombay High Court was that in order of Tribunal, date of possession of property by Developer was shown as 1.4.1996 and it was corrected by High Court order as 1.4.1997, as payments were made by Developer to Land Owner only upto 31.3.1996. 7. Therefore, we are of considered opinion that findings recorded by Tribunal in present case are findings of facts and they do not give rise to any perversity giving rise to Substantial Question of Law so as to call for interference by this court under Section 260A of Act. 8. appeal filed by Revenue is devoid of merit and it is liable to be dismissed. Accordingly, it is dismissed. No costs. copy of this judgment may be forwarded to Assessee forthwith. (V.K.,J.) (C.V.K.,J.) 25.2.2019 Index : Yes Internet : Yes ssk. 1. Principal Commissioner of Income Tax 6 No.121, Nungambakkam High Road Chennai 600 034. 2. Income Tax Appellate Tribunal, Madras 'B' Bench, Chennai. 3. Income Tax Officer, Non Corporate Ward 15(2), Chennai 600 034. http://www.judis.nic.in 10 DR.VINEET KOTHARI, J. and C.V.KARTHIKEYAN, J. ssk. TCA No.130 of 2019 25.2.2019. http://www.judis.nic.in Principal Commissioner of Income-tax-6, Chennai v. R.J.V. Kaiwar