IN HIGH COURT OF JUDICATURE AT MADRAS DATED 03.03.2020 CORAM HONOURABLE MR. JUSTICE M. SATHYANARAYANAN AND HONOURABLE MR. JUSTICE ABDUL QUDDHOSE TCA.Nos.42 & 45 of 2019 M/s.Sumeru Soft P.Ltd No.50, Capital Place South Boag Road T.Nagar, Chennai 600017. Appellant in both appeals Versus Income Tax Officer Corporate Ward 6[4] Chennai. Respondent in both appeals COMMON PRAYER:- Tax Case Appeals filed under Section 260-A of Income Tax Act, 1961, to set aside orders of Income Tax Appellate Tribunal 'A' Bench in ITA.Nos.2101/Mds/2016 and 2484/Mds/2016 dated 08.05.2017 and allow present appeals. For Appellant in both Appeals Mr.V.S.Jayakumar For Respondent in both Appeals Mr.J.Narayanasamy COMMON JUDGMENT [Judgment of Court was delivered by M.SATHYANARAYANAN,J.,] (1)By consent, both Tax Case Appeals are taken up together for final hearing and are disposed of by this common judgment. (2)The facts narrated in brief, for purpose of disposal of these appeals, are as follows:- 1. appellant/assessee Company filed return of income on 30.10.2007 for Assessment Year 2007-08 admitting total income of Rs.37,91,560/-. Since there was reason to believe that income has escaped assessment, assessment was reopened under Section 147 of Income Tax Act, 1961, [in short ''the IT Act''] and notice under Section 148 of said Act was issued. said notice was followed by notices under Sections 143[2]/142[21] of IT Act. 2. Subsequently, assessment was completed under Section 143[3] read with Section 147 of IT Act on 31.03.2005, assessing total income at Rs.40,28,24,591/-. appellant/assessee Company, aggrieved by said Order of Assessment dated 31.03.2005, filed Appeal before Commissioner of Income Tax [Appeals]-15, [in short CIT [Appeals]], by invoking Section 246A[1] of IT Act. 3. appellant/assessee Company before Appellate Authority, contended among other things that action on part of Assessing Officer in bringing to tax, Long Term Capital Gains, aggregating to sum of Rs.39,77,60,547/- by applying Section 2[47][v] read with Section 45 of Act, is per se unsustainable for reason that appellant/assessee Company had entered into unregistered Joint Venture Agreement with M/s.Parsvanath Developers Limited, for developing multi-facility complex consisting of IT/ITES parks, commercial, service and residential apartments and pursuant to said Agreement dated 10.09.2006, Refundable Security Deposit of Rs.7,02,54,000/- was received during Previous Year relating to Assessment Year 2007-08. It was further contended that status of said property till date, remains vacant with no developments took place and Developer has not carried out any activity relating to construction for reason that project may not be successful and therefore, appellant/assessee Company may be called upon to return Refundable Security Deposit. 4. Appellate Authority, had also taken into consideration Order of Assessment, especially, with regard to fact that owners had allowed Developer to enter upon project of land for purpose of construction and also allowed Developer to open site office and also granted some rights to Developer to raise any loan for development and construction of project from any Financial Institutions and further taken note of fact that in light of fact that Assessing Officer has reached conclusion that transfer in terms of Section 2[47][v] of Act took place on date of execution of Joint Venture Agreement dated 10.09.2006, followed by General Power of Attorney dated 12.09.2006, executed by appellant/assessee Company in favour of Developer unequivocally granted bundle of possessory rights including right to mortgage 77.5% of property and raise loan etc. 5. Appellate Authority, upon considering grounds urged by appellant/assessee Company and contents of Assessment Order, found that in pursuant to Agreement of such nature, possession is given in part performance of contract, liability of Capital Gains tax will arise upon handing over possession and citing among other reasons, had partly allowed appeal vide order dated 30.05.2016. 6. appellant/assessee Company, aggrieved by said order, filed ITA.No.2101/Mds/2016 and Revenue, aggrieved by order, in partly allowing appeal, filed ITA.No.2484/Mds/2016 before Income Tax Appellate Tribunal, ''A'' Bench, at Chennai [in short ''the ITAT'']. 7. ITAT, took up both appeals and given disposal vide common order dated 08.05.2017, which is impugned in present Tax Case Appeals. 8. ITAT, in paragraph No.5.3 of order, had given finding that as per explanation under Section 147 of IT Act, it is very clear that due to non-disclosure of Capital Gain by appellant/assessee Company, income chargeable to tax, had escaped assessment and appellant/assessee Company did not produce anything before CIT [Appeals] to show as to how there is no transfer of impugned property in Assessment Year and how provisions of Section 247[5] of IT Act is applicable and consequently, held that entire re-assessment proceeding is valid and thereby, upheld action of Assessing Officer. 9. ITAT also recorded positive finding that there is transfer under Section 2[47][v] of IT Act in Assessment Year 2007-08 for reason that possession and control of property is already vested with transfer and that apart, Joint Development Agreement has also not been cancelled and is still in operation. ITAT also dealt with issue with regard to quantification of Capital Gains and after discussing same in paragraph No.10, had remanded both appeals to Assessing Officer, for fresh consideration as to computation of Capital Gain. 10.The appellant/assessee Company, challenging legality of order in respect of rejection of other grounds, filed present Tax Case Appeals. (3)The Tax Case Appeals were admitted on 18.01.2019 on following substantial questions of law :- TCA.No.42 of 2019:- 1. Whether on facts and circumstances of case, Appellate Tribunal was right in law in reopening assessment u/s.147 of Income Tax Act, for assessment year 2007-08 without any tangible materials on record? 2. Whether on facts and circumstances of case, Tribunal was right in law in holding that 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? 3. Whether on facts and circumstances of case, decision of Hon'ble Supreme Court in case of CIT V. Balhir Singh Maini in Civil Appeal No.15619 of 2017 arising out of SLP [Civil] No.35248 of 2015 would squarely apply to case of appellant for impugned Assessment Year 2007-08? 4. Whether on facts and circumstances of case, Tribunal was right in law in holding that ''possession'' as envisaged by Section 2[47][v] and Section 53-A of Transfer of Property Act, 1882 was actually delivered by appellant during impugned Assessment Year 2007-08? 5. Whether on facts and circumstances of case, Tribunal was right in law in disallowing expenditure amounting to Rs.7,95,000/- towards brand promotion and advertisement incurred by appellant for impugned Assessment Year 2007-08? TCA.No.45 of 2019:- 1. Whether on facts and circumstances of case, Tribunal was right in law in holding that 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? 2. Whether on facts and circumstances of case, Tribunal was right in law in remitting matter to files of respondent for limited purpose of determining sale consideration and to compute capital gains at 27% share of constructed area? (4)The learned counsel for appellant/assessee Company has invited attention of this Court to judgment rendered by Hon'ble Supreme Court of India reported in [2017] 398 IT 531 [SC] : [2017] 251 TAXMAN 0202 [SC] [2 Judges Bench] [Commissioner of Income Tax V. Balbir Singh Maini] and would submit that in almost similar facts and circumstances, Hon'ble Apex Court of India held that income from Capital Gain of transaction which never materialised can be termed as hypothetical income at best and that being case, there is no profit or gain which arises from transfer of Capital Asset which could be brought to tax under Section 45 read with 48 of Income Tax Act. It is also submitted that in latest decision reported in [2020] 421 ITR 46 [SC] [3 Judges Bench] [Seshasayee Steels P.Ltd V. Assistant Commissioner of Income Tax], Hon'ble Supreme Court of India also affirmed above cited decision in Balbir Singh Maini's case. (5)The learned counsel for appellant/assessee Company would submit that in light of ratio laid down in Balbir Singh Maini's case that income from Capital Gain on transaction which never materialised, at best, can be termed only as hypothetical income and that assessee did not acquire any right to receive income. (6) Per contra, Mr.J.Narayanasamy, learned Standing counsel appearing for respondent/Revenue would submit that in light of concurrent findings recorded by authorities below and that judgment of Hon'ble Apex Court in Balbir Singh Naini's case [cited supra], also came into being subsequently, prays for dismissal of these appeals. (7)This Court has carefully considered rival submissions and also perused materials placed before it. (8)It is relevant to extract paragraph Nos.23, 27 and 28 of decision reported in [2017] 398 IT 531 [SC] : [2017] 251 TAXMAN 0202 [SC] [2 Judges Bench] [Commissioner of Income Tax V. Balbir Singh Maini] which reads thus:- ''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 ownership to developer. At highest, possession alone is given under agreement, and that too for specific purpose 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. .. 27. In facts and circumstances 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, 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 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.'' (9)It is submission of learned counsel for appellant/assessee Company that he is not pressing substantial question of Law No.5 in TCA.No.42/2019. Insofar as Substantial Question of Law No.1 in TCA.No.42/2019 is concerned, viz., in reopening assessment under Section 147 of IT Act, same depends upon facts and circumstances of each case and therefore, it cannot be construed as Substantial Question of Law. Insofar as Question No.2 in TCA.No.45/2019 is concerned, perusal and reading of impugned order would disclose that it is case of conditional remand with some observations. (10)In light of ratio laid down in Balbir Singh Maini's case [cited supra], as affirmed in Judgment reported in 2020 [421] ITR 46 [SC] [3 Judges Bench] Seshasayee Steels' case, questions as to transfer exigible to tax with reference to Section 2[47][v] of Income Tax Act, 1961 read with Section 53-A of Transfer of Property Act, 1882, is remanded to Assessing Officer for fresh consideration and adjudication and Assessing Officer shall complete said exercise in accordance with law as expeditiously as possible. (11)The Tax Case Appeals are disposed of accordingly. No costs. [M.S.N.,J] [A.Q., J] 03.03.2020 AP Internet : Yes To 1.The Income Tax Appellate Tribunal ''A' Bench, Chennai. 2.The Income Tax Officer Corporate Ward 6[4] Chennai. M.SATHYANARAYANAN, J., AND ABDUL QUDDHOSE, J., AP Sumeru Soft P. Ltd. v. Income-tax Officer, Corporate Ward 6[4], Chennai