REPORTABLE
IN THE 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
(ARISING OUT OF SLP (CIVIL) NO.35251 OF 2015)
CIVIL APPEAL NO. 15643 OF 2017
(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
J U D G M E N T
R.F. Nariman, J.
1. Leave granted.
2. This judgment shall dispose of a 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. The present appeals arise from a judgment of the Punjab
and Haryana High Court where a large number of appeals were
disposed of under Section 260A of the Income Tax Act, 1961.
The following substantial questions of law were raised before
the High Court:
“i) Whether the transactions in hand envisage a
“transfer” exigible to tax by reference to
Section 2(47)(v) of the Income Tax Act, 1961
read with Section 53-A of the Transfer of
Property Act, 1882?
ii) Whether the Income Tax Appellate Tribunal,
has ignored rights emanating from the 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 the
Transfer of Property Act, 1982 was delivered,
and if so, its nature and legal effect?
iv) Whether there was any default on the part of
the developers, and if so, its effect on the
transactions and on exigibility to tax?
v) Whether amount yet to be received can be
taxed on a hypothetical assumption arising
from the amount to be received?”
4. For the sake of convenience, we have referred to the
facts of Civil Appeal arising out of Special Leave Petition (Civil)
No.1565 of 2016 (Commissioner of Income Tax v. Charanjit
Singh Atwal).
5. The Respondents before us are members of the Punjabi
Cooperative Housing Building Society Ltd. The society
consisted of 95 members and was the owner of 21.2 acres, of
which 500 square yards plots were held by 65 members, 1000
square yards plots by 30 members and the remaining 4 plots of
500 square yards each were being retained by it. The bone of
contention in the present appeal is a tripartite Joint
Development Agreement (JDA) dated 25.02.2007 for
7
development of 21.2 acres of land in the village Kansal. This
JDA was entered into between the owner i.e. Punjabi
Cooperative Housing Building Society Ltd., Hash Builders Pvt.
Ltd., Chandigarh (HASH) and Tata Housing Development
Company Ltd. (THDC). Under the JDA, it was agreed that
HASH and THDC viz., the developers, will undertake to develop
21.2 acres of land owned and registered in the name of the
society. The agreed consideration was to be disbursed by
THDC through HASH to each individual member of the society,
and different amounts and flats were payable and allotable to
members having different plot sizes. The developers were to
make payments in four instalments. A sum of Rs.3.87 crores
was paid on execution of the JDA. Rs.15.48 crores was to be
paid against a registered sale deed for land of an equivalent
value of 3.08 acres, earmarked on the demarcation plan
annexed to the JDA, which was effected by a registered
conveyance dated 02.03.2007. The second instalment
payment, being Rs. 23.22 crores, was for land of an equivalent
value of 4.62 acres, also earmarked on the demarcation plan,
which was effected by a registered deed of conveyance dated
8
25.04.2007. The third instalment payment of Rs.31.9275 crores
was to be made within six months from the date of execution of
the agreement or within two months from the date of approval
of plans/design and drawings and grant of the final license to
develop, whichever was later. This was to be for land of an
equivalent value of 6.36 acres, also earmarked on the
demarcation plan. The balance payment of Rs.31.9275 crores
was to be made within two months from the date of the last
payment, towards full and final settlement of the entire payment
of Rs. 106.425 crores, for which a registered sale deed for land
of an equivalent value being 7.14 acres, also earmarked on the
demarcation plan, was to be conveyed.
6. The developers made payments only up to the 2nd
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. The problem which arose for the
subsequent assessment years was that, due to pending
proceedings, first in the Punjab and Haryana High Court and
9
thereafter in the Delhi High Court, the necessary permissions
for development were not granted, as a result of which the JDA
did not take off the ground. For the previous year relevant to
the assessment year 2007-08, the assessee filed an original
return of income on 07.12.2007, declaring an income of
Rs.2,50,171/-. The return of income tax for the assessment
year was later revised, on 07.10.2009, declaring an income of
Rs.30,08,606/-, which included capital gains of Rs.27,58,436/-.
According to the assessee, Rs.36 lakhs received in the
subsequent assessment year 2008-09 were also offered for tax
under the head “capital gains”.
7. The Assessing Officer vide an order dated 30.12.2009,
passed under Section 143(3) of the Act, held that since physical
and vacant possession had been handed over under the JDA,
the same would tantamount to “transfer” within the meaning of
Sections 2(47)(ii), (v) and (vi) of the Income Tax Act. He further
held that, in the case of an assessee owning a 1000 square
yards plot, the full value of consideration would be Rs.3.675
10
crores less cost of acquisition of Rs.12,81,724/-. The long term
capital gain was, therefore, stated to be Rs.3,54,68,276/-.
8. The Commissioner (Appeals) dismissed the appeal
upholding the order passed by the Assessing Officer. Aggrieved
by the order, the assessee filed appeal before the Income Tax
Appellate Tribunal (ITAT), which was also dismissed by the
ITAT.
9. In the impugned judgment by the High Court under
Section 260A of the Income Tax Act, the High Court allowed all
the appeals of the assessees and held:
“1. Perusal of the 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 the parties had agreed for pro-rata
transfer of land.
2. No possession had been given by the
transferor to the transferee of the entire land in part
performance of JDA dated 25.02.2007 so as to fall
within the domain of Section 53A of 1882 Act.
3. The possession delivered, if at all, was as a
licencee for the development of the property and not
in the capacity of a transferee.
4. Further Section 53A of 1882 Act, by
incorporation, stood embodied in Section 2(47)(v)
11
of the Act and all the essential ingredients of
Section 53A of 1882 Act were required to be
fulfilled. In the absence of registration of JDA dated
25.02.2007 having been executed after 24.09.2001,
the agreement does not fall under Section 53A of
1882 Act and consequently Section 2(47)(v) of the
Act does not apply.
5. It was submitted by learned counsel for the
assessee-appellant that whatever amount was
received from the 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 the aforesaid stand, while
disposing of the appeals, we observe that the
assessee-appellants shall remain bound by their
said stand.
6. The issue of exigibility to capital gains tax
having been decided in favour of the assessee, the
question of exemption under Section 54F of the Act
would not survive any longer and has been
rendered academic.
7. The Tribunal and the authorities below were
not right in holding the 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 the Supreme Court
and the High Court in PILs. Therefore, the appeals
are allowed.”
12
10. Learned counsel for the revenue has argued that the
Assessing Officer and the CIT (Appeals), as well as the ITAT,
were all correct in bringing capital receipts under the JDA to tax
as ‘capital gains’. According to the learned counsel, the present
case is squarely covered by Section 2(47)(v) as Section 53A of
the Transfer of Property Act, 1882 is applicable to the
transaction under the JDA. According to the learned counsel,
the transferee in the present case has, as part performance of
the contract, taken possession of the entire property under the
JDA, and has done various acts in furtherance of the contract,
such as paying the EMD and the first two instalments, and that
the transferee was willing to perform his part of the contract
which unfortunately could not ultimately be performed because
of the orders passed by the High Court, because of which
necessary permissions for development of the property could
not be obtained. He further argued that the 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 a contract “of the nature” of Section 53A of the
Transfer of Property Act and that, therefore, the ITAT was right
13
in stating that since Section 53A had been incorporated into
Section 2(47)(v) of the Income Tax Act, it was unnecessary, for
the purpose of the Income Tax Act, to have such an agreement
registered. He further argued that the ITAT was correct in
finding that possession had in fact been handed over under the
JDA, as otherwise, THDC could not have been authorized to
amalgamate the project with any other project in an adjacent or
adjoining area. As THDC was authorized to hand over
possession of the property or portions thereof to the authority
only for this purpose, it is clear that possession of the land had
in fact been handed over. Further, all other ingredients of
Section 53A of the Transfer of Property Act were met and the
ITAT was also correct in stating that the developers were ready
and willing to perform their part of the contract. He, therefore,
urged us to uphold the ITAT order and set aside the High Court
judgment.
11. On the other hand, Shri Vohra, learned counsel for the
Respondents, argued that the High Court was correct in holding
that Section 2(47)(v) would not apply in the absence of
14
registration of the JDA, which admittedly was not done.
According to him, no possession was ever handed over, as only
a license to develop the property was given by the JDA to the
developers. According to the learned counsel, the High Court
was also correct in stating that the developers were not ready
and willing to perform their part of the agreement and that,
therefore, none of the ingredients of Section 53A of the Transfer
of Property Act were met on the facts of this case. According to
the learned counsel, what was appreciated by the High Court
and missed by the ITAT was the fact that only two parcels of
land, admeasuring 7.7 acres, were conveyed, for which capital
gains tax has been paid. Since the rest of the project could not
go through for want of various permissions, it is clear that no
capital gain, in fact, arose or accrued to the assessees.
According to the learned counsel, under Section 45 read with
Section 48 of the Income Tax Act, profits and gains should
“arise” from the transfer of a capital asset and income should
be computed after full value of the consideration has been
received or accrued. Since no income was received or had
accrued, as the project was finally terminated by the owners on
15
13.06.2011, it was clear that the High Court judgment was
correct. Further, sub-clause (vi) of Section 2(47) also would not
apply for the reason stated by the High Court, which is that it
was not attracted because there was no change in membership
of the society.
12. Having heard learned counsel for the parties, it is
important to first set out the important clauses of the JDA dated
25.02.2007.
13. The JDA, as has been stated above, was between the
housing society, who was referred to as the owner, and two
developers, namely Hash Builders Pvt. Ltd., Chandigarh and
Tata Housing Development Company Ltd. Strewn throughout
the agreement is the fact that the owner, being absolutely
seized and possessed of the property, was desirous of
assigning its development rights for developing the same. This
is clear, inter alia, from sub-clause (E) of the agreement which
reads as under:
“E. The Owner being absolutely seized and
possessed of and otherwise well and sufficiently
entitled to the property and is desirous of assigning
16
its Development Rights in the Property for
developing the same including transferring the title
in the property, by utilizing the available Floor Space
Index (FSI) for group housing commercial and retail
development as per the 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 the
property vide advertisements published in The
Tribune dated 31-05-06 HASH approached the
Owner and submitted the proposal to the owners for
development of the Property and after prolonged
negotiations finalized the term of development.
Since HASH did not have the sufficient means to
develop the Property, HASH have approached
THDC for developing the 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 the ‘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 the THDC(hereinafter referred to as the
‘Project’). It is expressly agreed to between the
parties that the role of HASH as a developer shall
be as specifically set out in this Agreement. It is
expressly agreed to between the parties that the
role THDC as a developer shall be to execute,
implement, develop and complete the project on the
Property.”
17
Under cause 2, the project is stated to be:
“2.1 The Owner herby irrevocably and
unequivocally grants and assigns in perpetuity
all its rights to develop, construct, mortgage,
lease, license, sell and transfer the Property
alongwith any and all the construction,
Premises, hereditament, easements, trees
thereon in favour of THDC for the purpose of
development, construction, mortgage, Sale,
transfer, lease, license and /or exploitation for
full utilization of the Property (‘Right’) and to
execute all the documents necessary to carry
out, facilitate and enforce the Right in the
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 the 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 the Right and to register the same
with the revenue/ Competent authorities and
to appear on our behalf before all authorities,
statutory or otherwise, and before any court of
law (the ‘Development Rights’). The owner
hereby hands over the original title deeds of
the Property as mentioned in the list Annexed
hereto and marked as Annexure IV and
physical, vacant possession of the Property
has been handed over to THDC simultaneous
to the execution and registration of this
Agreement to develop the same as set out
herein.
18
It is hereby agreed and confirmed that what is
stated in the recitals hereinabove, shall be
deemed to be declarations and
representations on the part of the Owner as if
the same were set out herein in verbatim and
forming an integral part of this Agreement.
2.2 The Project shall comprise of development/
construction of the Property into the Premises
as permissible under Punjab Municipal
Building Bye-laws/Punjab Urban Development
Authority or any other Competent authority by
the Developer at them own cost and expense.
The project shall be developed as may be
sanctioned by the concerned local authority
i.e. Department of Local Bodies, Punjab/
Punjab Urban Planning and Development
Authority (PUDA) or any other Competent
Authority.
2.3 The Owner hereby irrevocably and
unequivocally grants and assigns all its
Development Rights in the Property to THDC
to develop the Property and undertake the
Project at its own costs, efforts and expenses
whereupon the Developers shall be entitled to
apply for and obtain necessary sanctions,
licenses and permissions from all the
Concerned Authorities for the
commencement, development and completion
of the Project on the Property.”
14. The consideration clause in the agreement is Clause 4,
by which a sum of Rs.106.425 crores, plus 129 flats consisting
of a super area of 2250 square feet, was to be made over to the
19
society and its members. As stated hereinabove, Rs.3.87
crores was paid as earnest money on execution of the
agreement, and Rs.15.48 crores was paid soon thereafter. The
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. The third
instalment, and the balance payment, were payable in the
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 the Owner and / or the
respective members of the Owner ( as the
case may be), within six (6) months from the
date of execution of this Agreement or within
two (2) months from the date of approval of
the plans/ Design and Drawings and grant of
the final license to develop whereupon the
construction can commence, whichever is
later against which the Owner shall execute a
registered sale deed for land of equivalent
value being 6.36 Acres out of the Property as
demarcated in green colour (also hatched in
green colour) in the 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 the 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 the Owner and /or the respective members
of the Owner (as the case may be ), within two
(2) months from the date of the Payment
made as per Clause 4.1 (iv) mentioned
hereinabove, towards full and final settlement
of payment, after adjustment of the 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 the Owner shall
execute a registered sale deed for land of
equivalent value being 7.14 Acres being the
balance out of the Property as demarcated in
orange colour (also hatched in orange colour )
in the 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 The owner shall execute in favor of THDC, the
sale deeds in accordance with the provisions
of Clause 4.1(ii) to Clause 4.1 (v) of this
Agreement and execute all other necessary
documents and papers to complete the
aforesaid transaction.
9.3 That all the original title deeds pertaining to
property as mentioned in Annexure IV has
been handed over to THDC by the Owner at
the time of signing of this Agreement and in
furtherance of the Common interest of the
Parties for the development of the Project and
except the Sale Transaction Made by the
Owner in favour of THDC as set out in Clause
4.1 above. THDC hereby undertake and
assure the Owner that they shall use the title
deeds only for the purpose of furtherance of
the Project in the manner that it does not
adversely effect the Owner/ Allottee in any
manner whatsoever.”
Under Clause 10, financial assistance can be raised by
mortgaging the property. Clause 10 reads as follows:
“10. LOANS/ FINANCIAL ASSISTANCE
The Owner hereby gives their express consent to
THDC to raise finance of the development and
completion of the Project on the Property by way of
mortgaging the Property and the proposed
structures to the lending banks/ financial institutions
by deposit of the title deeds with the lending bank
and / or financial institution. The Owner shall, in no
way, be liable for the repayment of the loan. THDC
shall have the right to negotiate, create and sign
necessary forms, deeds or documents for the
22
variation of mortgage, charge or encumbrance on
the Property by depositing the original title deeds of
the Property with any financial institution/ bank etc.
THDC undertakes that the finance raise by way of
mortgage of the Property of the Owner, with the
bank/financial institutions shall be utilized only for
the purpose of development of the project and shall
keep the Owner informed in writing about the
charge created on the Property and keep the Owner
indemnified against all claims, costs for the bank /
financial institutions from when. THDC may have
availed loan facility in respect of the Project, in
case, the Project is not completed in terms of this
Agreement.”
15. The JDA could, under clause 14, be terminated under
certain circumstances by all the parties thereto. Since the
owner alone terminated the aforesaid JDA, the relevant clause
is clause 14(iv), which reads as under:
“14(iv). The Owner shall have the right to terminate
the Agreement only in the event of default by the
Developers for making the Payment in accordance
with the terms of this Agreement and the allotment
of Flats within the 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 the Owner. In the event
the Agreement is terminated by Owner, all the lands
registered in the name of THDC as per the terms of
this Agreement up to the date of the termination
shall remain with THDC and the balance lands to be
transferred to THDC as per the terms of this
agreement shall not to be transferred by the Owner
23
as per the terms of this agreement. Upon the
termination, the Owner shall forfeit the Adjustable
Advance/ Earnest Money mentioned in clause 4(i).”
16. A reading of the JDA shows that, it is essentially an
agreement to facilitate development of 21.2 acres so that the
developers build at their own cost, after obtaining necessary
approvals, flats of a given size, some of which were then to be
handed over to the members of the society. Payments were
also to be made by the developer to each member in addition to
giving each member a certain number of flats depending upon
the size of the member’s plot that was handed over. What is
important to bear in mind is that payments under the third
instalment were only to be made after the grant of approvals
and not otherwise, and that it is an admitted position that this
was never done because no approvals could be obtained as
the High Court ultimately interdicted the project. Also, the
termination clause is of great significance because it shows that
in the event of the JDA being terminated, whatever parcels of
land have already been conveyed, will stand conveyed, but that
no other conveyances of the remaining land would take place.
24
17. The relevant sections that are necessary for us to decide
the 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 the terms necessary to
constitute the transfer can be ascertained with
reasonable certainty,
and the transferee has, in part performance of
the contract, taken possession of the property or
any part thereof, or the transferee, being already in
possession, continues in possession in part
performance of the contract and has done some act
in furtherance of the contract,
and the transferee has performed or is willing
to perform his part of the contract,
then, notwithstanding that where there is an
instrument of transfer, that the transfer has not been
completed in the manner prescribed therefore by
the law for the time being in force, the transferor or
any person claiming under him shall be debarred
from enforcing against the transferee and persons
claiming under him any right in respect of the
property of which the transferee has taken or
continued in possession, other than a right
expressly provided by the terms of the contract:
Provided that nothing in this section shall
affect the rights of a transferee for consideration
who has no notice of the contract or of the part
performance thereof.]
25
Income Tax Act
Section 2 - Definitions
In this Act, unless the context otherwise requires, –
(47) "transfer", in relation to a capital asset,
includes, -
(i) to (iv) xxx xxx xxx
(v) any transaction involving the allowing of the
possession of any immovable property to be taken
or retained in part performance of a contract of the
nature referred to in Section 53A of the Transfer of
Property Act, 1882 (4 of 1882) ; or
(vi) any transaction (whether by way of becoming a
member of, or acquiring shares in, a 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 the effect
of transferring, or enabling the enjoyment of, any
immovable property.
45. Capital gains - (1) Any profits or gains arising
from the transfer of a capital asset effected in the
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 the
head “Capital gains”, and shall be deemed to be the
income of the previous year in which the transfer
took place.
48. Mode of computation - The income
chargeable under the head "Capital gains" shall be
computed, by deducting from the full value of the
consideration received or accruing as a result of the
transfer of the capital asset the following amounts,
namely:
26
(i) expenditure incurred wholly and exclusively in
connection with such transfer;
(ii) the cost of acquisition of the asset and the cost
of any improvement thereto:”
18. Section 53A, as is well known, was inserted by the
Transfer of Property Amendment Act, 1929 to import into India
the 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 a transferee wants to
defend or protect his possession under Section 53-
A of the Act. The necessary conditions are:
(1) there must be a contract to transfer for
consideration of any immovable property;
(2) the contract must be in writing, signed by the
transferor, or by someone on his behalf;
(3) the writing must be in such words from which the
terms necessary to construe the transfer can be
ascertained;
(4) the transferee must in part-performance of the
contract take possession of the property, or of any
part thereof;
27
(5) the transferee must have done some act in
furtherance of the contract; and
(6) the transferee must have performed or be willing
to perform his part of the contract.”
19. It is also well-settled by this Court that the protection
provided under Section 53A is only a shield, and can only be
resorted to as a right of defence. See Rambhau Namdeo
Gajre v. Narayan Bapuji Dhgotra (Dead) through LRs.
(2004) 8 SCC 614 at 619, para 10. An agreement of sale which
fulfilled the ingredients of Section 53A was not required to be
executed through a registered instrument. This position was
changed by the Registration and Other Related Laws
(Amendment) Act, 2001. Amendments were made
simultaneously in Section 53A of the Transfer of Property Act
and Sections 17 and 49 of the Indian Registration Act. By the
aforesaid amendment, the words “the contract, though required
to be registered, has not been registered, or” in Section 53A of
the 1882 Act have been omitted. Simultaneously, Sections 17
and 49 of the 1908 Act have been amended, clarifying that
28
unless the document containing the contract to transfer for
consideration any immovable property (for the purpose of
Section 53A of 1882 Act) is registered, it shall not have any
effect in law, other than being received as evidence of a
contract in a suit for specific performance or as evidence of any
collateral transaction not required to be effected by a registered
instrument. Section 17(1A) and Section 49 of the Registration
Act, 1908 Act, as amended, read thus:
“17(1A). The documents containing contracts to
transfer for consideration, any immovable property
for the purpose of Section 53A of the Transfer of
Property Act, 1882 (4 of 1882) shall be registered if
they have been executed on or after the
commencement of the 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
the purposes of the 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 the 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 an unregistered document affecting
immovable property and required by this Act or the
Transfer of Property Act, 1882 (4 of 1882), to be
registered may be received as evidence of a
contract in a suit for specific performance under
Chapter II of the Specific Relief Act, 1887 (1 of
1877) or as evidence of any collateral transaction
not required to be effected by registered
instrument.”
20. The effect of the aforesaid amendment is that, on and
after the commencement of the Amendment Act of 2001, if an
agreement, like the JDA in the present case, is not registered,
then it shall have no effect in law for the purposes of Section
53A. In short, there is no agreement in the eyes of law which
can be enforced under Section 53A of the Transfer of Property
Act. This being the case, we are of the view that the High
Court was right in stating that in order to qualify as a “transfer”
of a capital asset under Section 2(47)(v) of the Act, there must
be a “contract” which can be enforced in law under Section 53A
of the Transfer of Property Act. A reading of Section 17(1A) and
Section 49 of the Registration Act shows that in the eyes of law,
there is no contract which can be taken cognizance of, for the
purpose specified in Section 53A. The ITAT was not correct in
30
referring to the expression “of the nature referred to in Section
53A” in Section 2(47)(v) in order to arrive at the opposite
conclusion. This expression was used by the legislature ever
since sub-section (v) was inserted by the Finance Act of 1987
w.e.f. 01.04.1988. All that is meant by this expression is to
refer to the ingredients of applicability of Section 53A to the
contracts mentioned therein. It is only where the contract
contains all the six features mentioned in Shrimant Shamrao
Suryavanshi (supra), that the Section applies, and this is what
is meant by the expression “of the nature referred to in Section
53A”. This expression cannot be stretched to refer to an
amendment that was made years later in 2001, so as to then
say that though registration of a contract is required by the
Amendment Act of 2001, yet the aforesaid expression “of the
nature referred to in Section 53A” would somehow refer only to
the 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 the eye of law in force under Section 53A
after 2001 unless the said contract is registered. This being the
case, and it being clear that the said JDA was never registered,
31
since the JDA has no efficacy in the eye of law, obviously no
“transfer” can be said to have taken place under the aforesaid
document. Since we are deciding this case on this legal ground,
it is unnecessary for us to go into the other questions decided
by the High Court, namely, whether under the JDA possession
was or was not taken; whether only a licence was granted to
develop the property; and whether the developers were or were
not ready and willing to carry out their part of the bargain.
Since we are of the view that sub-clause (v) of Section 2(47) of
the Act is not attracted on the facts of this case, we need not go
into any other factual question.
21. However, the High Court has held that Section 2(47)(vi)
will not apply for the reason that there was no change in
membership of the society, as contemplated. We are afraid that
we cannot agree with the High Court on this score. Under
Section 2(47)(vi), any transaction which has the effect of
transferring or enabling the enjoyment of any immovable
property would come within its purview. The High Court has not
adverted to the expression “or in any other manner whatsoever”
32
in sub-clause (vi), which would show that it is not necessary
that the transaction refers to the membership of a cooperative
society. We have, therefore, to see whether the impugned
transaction can fall within this provision.
22. The object of Section 2(47)(vi) appears to be to bring
within the tax net a de facto transfer of any immovable property.
The expression “enabling the enjoyment of” takes color from
the earlier expression “transferring”, so that it is clear that any
transaction which enables the enjoyment of immovable property
must be enjoyment as a purported owner thereof.1
The idea is
to bring within the tax net, transactions, where, though title may
not be transferred in law, there is, in substance, a transfer of
title in fact.
23. A reading of the JDA in the present case would show that
the owner continues to be the owner throughout the agreement,
and has at no stage purported to transfer rights akin to
1 The maxim “noscitur a sociis” has been repeatedly applied by this Court. A
recent application of the 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 a feather flocking
together. The maxim only means that a word is to be judged by the company
it keeps.
33
ownership to the developer. At the highest, possession alone is
given under the agreement, and that too for a specific purpose
-the purpose being to develop the property, as envisaged by all
the parties. We are, therefore, of the view that this clause will
also not rope in the present transaction.
24. The matter can also be viewed from a slightly different
angle. Shri Vohra is right when he has referred to Sections 45
and 48 of the Income Tax Act and has then argued that some
real income must “arise” on the assumption that there is
transfer of a capital asset. This income must have been
received or have “accrued” under Section 48 as a result of the
transfer of the 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 an
assessee without the actual receipt of the same. If
the assessee acquires a right to receive the income,
the income can be said to have accrued to him
though it may be received later on its being
ascertained. The basic conception is that he must
have acquired a right to receive the income. There
must be a 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 the assessee a debt
due by somebody it cannot be said that he has
acquired a right to receive the 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 the 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 a levy on income. No
doubt, the Income Tax Act takes into
account two points of time at which the
liability to tax is attracted, viz., the
accrual of the income or its receipt; but
the substance of the matter is the
income. If income does not result at all,
there cannot be a tax, even though in
bookkeeping, an entry is made about a
‘hypothetical income’, which does not
materialise. Where income has, in fact,
been received and is subsequently
given up in such circumstances that it
remains the income of the recipient,
even though given up, the tax may be
payable. Where, however, the income
35
can be said not to have resulted at all,
there is obviously neither accrual nor
receipt of income, even though an entry
to that effect might, in certain
circumstances, have been made in the
books of account.”
15. The 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 the dictionary meaning of the 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. … the date of payment … does not
affect the accrual of income. The
moment the income accrues, the
assessee gets vested with the 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
a corresponding liability of the other party from
whom the 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 a corresponding liability of the
other party to pay the amount. Only then can it be
said that for the purposes of taxability that the
income is not hypothetical and it has really accrued
to the assessee.
36
18. Insofar as the present case is concerned, even
if it is assumed that the assessee was entitled to the
benefits under the advance licences as well as
under the duty entitlement passbook, there was no
corresponding liability on the Customs Authorities to
pass on the benefit of duty-free imports to the
assessee until the goods are actually imported and
made available for clearance. The benefits
represent, at best, a hypothetical income which may
or may not materialise and its money value is,
therefore, not the income of the assessee.”
27. In the facts of the present case, it is clear that the income
from capital gain on a transaction which never materialized is,
at best, a hypothetical income. It is admitted that, for want of
permissions, the entire transaction of development envisaged in
the JDA fell through. In point of fact, income did not result at all
for the aforesaid reason. This being the case, it is clear that
there is no profit or gain which arises from the transfer of a
capital asset, which could be brought to tax under Section 45
read with Section 48 of the Income Tax Act.
28. In the present case, the assessee did not acquire any
right to receive income, inasmuch as such alleged right was
dependent upon the necessary permissions being obtained.
This being the case, in the circumstances, there was no debt
37
owed to the assessees by the developers and therefore, the
assessees have not acquired any right to receive income under
the JDA. This being so, no profits or gains “arose” from the
transfer of a capital asset so as to attract Sections 45 and 48 of
the Income Tax Act.
29. We are, therefore, of the view that the High Court was
correct in its conclusion, but for the reasons stated by us
hereinabove. The appeals are dismissed with no order as to
costs.
…………………………......J.
(R.F. Nariman)
..……………………...........J.
(Sanjay Kishan Kaul)
New Delhi;
October 04, 2017.
38
IN THE 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
(ARISING OUT OF SLP (CIVIL) NO.35251 OF 2015)
CIVIL APPEAL NO. 15643 OF 2017
(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
J U D G M E N T
R.F. Nariman, J.
1. Leave granted.
2. This judgment shall dispose of a 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. The present appeals arise from a judgment of the Punjab
and Haryana High Court where a large number of appeals were
disposed of under Section 260A of the Income Tax Act, 1961.
The following substantial questions of law were raised before
the High Court:
“i) Whether the transactions in hand envisage a
“transfer” exigible to tax by reference to
Section 2(47)(v) of the Income Tax Act, 1961
read with Section 53-A of the Transfer of
Property Act, 1882?
ii) Whether the Income Tax Appellate Tribunal,
has ignored rights emanating from the 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 the
Transfer of Property Act, 1982 was delivered,
and if so, its nature and legal effect?
iv) Whether there was any default on the part of
the developers, and if so, its effect on the
transactions and on exigibility to tax?
v) Whether amount yet to be received can be
taxed on a hypothetical assumption arising
from the amount to be received?”
4. For the sake of convenience, we have referred to the
facts of Civil Appeal arising out of Special Leave Petition (Civil)
No.1565 of 2016 (Commissioner of Income Tax v. Charanjit
Singh Atwal).
5. The Respondents before us are members of the Punjabi
Cooperative Housing Building Society Ltd. The society
consisted of 95 members and was the owner of 21.2 acres, of
which 500 square yards plots were held by 65 members, 1000
square yards plots by 30 members and the remaining 4 plots of
500 square yards each were being retained by it. The bone of
contention in the present appeal is a tripartite Joint
Development Agreement (JDA) dated 25.02.2007 for
7
development of 21.2 acres of land in the village Kansal. This
JDA was entered into between the owner i.e. Punjabi
Cooperative Housing Building Society Ltd., Hash Builders Pvt.
Ltd., Chandigarh (HASH) and Tata Housing Development
Company Ltd. (THDC). Under the JDA, it was agreed that
HASH and THDC viz., the developers, will undertake to develop
21.2 acres of land owned and registered in the name of the
society. The agreed consideration was to be disbursed by
THDC through HASH to each individual member of the society,
and different amounts and flats were payable and allotable to
members having different plot sizes. The developers were to
make payments in four instalments. A sum of Rs.3.87 crores
was paid on execution of the JDA. Rs.15.48 crores was to be
paid against a registered sale deed for land of an equivalent
value of 3.08 acres, earmarked on the demarcation plan
annexed to the JDA, which was effected by a registered
conveyance dated 02.03.2007. The second instalment
payment, being Rs. 23.22 crores, was for land of an equivalent
value of 4.62 acres, also earmarked on the demarcation plan,
which was effected by a registered deed of conveyance dated
8
25.04.2007. The third instalment payment of Rs.31.9275 crores
was to be made within six months from the date of execution of
the agreement or within two months from the date of approval
of plans/design and drawings and grant of the final license to
develop, whichever was later. This was to be for land of an
equivalent value of 6.36 acres, also earmarked on the
demarcation plan. The balance payment of Rs.31.9275 crores
was to be made within two months from the date of the last
payment, towards full and final settlement of the entire payment
of Rs. 106.425 crores, for which a registered sale deed for land
of an equivalent value being 7.14 acres, also earmarked on the
demarcation plan, was to be conveyed.
6. The developers made payments only up to the 2nd
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. The problem which arose for the
subsequent assessment years was that, due to pending
proceedings, first in the Punjab and Haryana High Court and
9
thereafter in the Delhi High Court, the necessary permissions
for development were not granted, as a result of which the JDA
did not take off the ground. For the previous year relevant to
the assessment year 2007-08, the assessee filed an original
return of income on 07.12.2007, declaring an income of
Rs.2,50,171/-. The return of income tax for the assessment
year was later revised, on 07.10.2009, declaring an income of
Rs.30,08,606/-, which included capital gains of Rs.27,58,436/-.
According to the assessee, Rs.36 lakhs received in the
subsequent assessment year 2008-09 were also offered for tax
under the head “capital gains”.
7. The Assessing Officer vide an order dated 30.12.2009,
passed under Section 143(3) of the Act, held that since physical
and vacant possession had been handed over under the JDA,
the same would tantamount to “transfer” within the meaning of
Sections 2(47)(ii), (v) and (vi) of the Income Tax Act. He further
held that, in the case of an assessee owning a 1000 square
yards plot, the full value of consideration would be Rs.3.675
10
crores less cost of acquisition of Rs.12,81,724/-. The long term
capital gain was, therefore, stated to be Rs.3,54,68,276/-.
8. The Commissioner (Appeals) dismissed the appeal
upholding the order passed by the Assessing Officer. Aggrieved
by the order, the assessee filed appeal before the Income Tax
Appellate Tribunal (ITAT), which was also dismissed by the
ITAT.
9. In the impugned judgment by the High Court under
Section 260A of the Income Tax Act, the High Court allowed all
the appeals of the assessees and held:
“1. Perusal of the 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 the parties had agreed for pro-rata
transfer of land.
2. No possession had been given by the
transferor to the transferee of the entire land in part
performance of JDA dated 25.02.2007 so as to fall
within the domain of Section 53A of 1882 Act.
3. The possession delivered, if at all, was as a
licencee for the development of the property and not
in the capacity of a transferee.
4. Further Section 53A of 1882 Act, by
incorporation, stood embodied in Section 2(47)(v)
11
of the Act and all the essential ingredients of
Section 53A of 1882 Act were required to be
fulfilled. In the absence of registration of JDA dated
25.02.2007 having been executed after 24.09.2001,
the agreement does not fall under Section 53A of
1882 Act and consequently Section 2(47)(v) of the
Act does not apply.
5. It was submitted by learned counsel for the
assessee-appellant that whatever amount was
received from the 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 the aforesaid stand, while
disposing of the appeals, we observe that the
assessee-appellants shall remain bound by their
said stand.
6. The issue of exigibility to capital gains tax
having been decided in favour of the assessee, the
question of exemption under Section 54F of the Act
would not survive any longer and has been
rendered academic.
7. The Tribunal and the authorities below were
not right in holding the 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 the Supreme Court
and the High Court in PILs. Therefore, the appeals
are allowed.”
12
10. Learned counsel for the revenue has argued that the
Assessing Officer and the CIT (Appeals), as well as the ITAT,
were all correct in bringing capital receipts under the JDA to tax
as ‘capital gains’. According to the learned counsel, the present
case is squarely covered by Section 2(47)(v) as Section 53A of
the Transfer of Property Act, 1882 is applicable to the
transaction under the JDA. According to the learned counsel,
the transferee in the present case has, as part performance of
the contract, taken possession of the entire property under the
JDA, and has done various acts in furtherance of the contract,
such as paying the EMD and the first two instalments, and that
the transferee was willing to perform his part of the contract
which unfortunately could not ultimately be performed because
of the orders passed by the High Court, because of which
necessary permissions for development of the property could
not be obtained. He further argued that the 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 a contract “of the nature” of Section 53A of the
Transfer of Property Act and that, therefore, the ITAT was right
13
in stating that since Section 53A had been incorporated into
Section 2(47)(v) of the Income Tax Act, it was unnecessary, for
the purpose of the Income Tax Act, to have such an agreement
registered. He further argued that the ITAT was correct in
finding that possession had in fact been handed over under the
JDA, as otherwise, THDC could not have been authorized to
amalgamate the project with any other project in an adjacent or
adjoining area. As THDC was authorized to hand over
possession of the property or portions thereof to the authority
only for this purpose, it is clear that possession of the land had
in fact been handed over. Further, all other ingredients of
Section 53A of the Transfer of Property Act were met and the
ITAT was also correct in stating that the developers were ready
and willing to perform their part of the contract. He, therefore,
urged us to uphold the ITAT order and set aside the High Court
judgment.
11. On the other hand, Shri Vohra, learned counsel for the
Respondents, argued that the High Court was correct in holding
that Section 2(47)(v) would not apply in the absence of
14
registration of the JDA, which admittedly was not done.
According to him, no possession was ever handed over, as only
a license to develop the property was given by the JDA to the
developers. According to the learned counsel, the High Court
was also correct in stating that the developers were not ready
and willing to perform their part of the agreement and that,
therefore, none of the ingredients of Section 53A of the Transfer
of Property Act were met on the facts of this case. According to
the learned counsel, what was appreciated by the High Court
and missed by the ITAT was the fact that only two parcels of
land, admeasuring 7.7 acres, were conveyed, for which capital
gains tax has been paid. Since the rest of the project could not
go through for want of various permissions, it is clear that no
capital gain, in fact, arose or accrued to the assessees.
According to the learned counsel, under Section 45 read with
Section 48 of the Income Tax Act, profits and gains should
“arise” from the transfer of a capital asset and income should
be computed after full value of the consideration has been
received or accrued. Since no income was received or had
accrued, as the project was finally terminated by the owners on
15
13.06.2011, it was clear that the High Court judgment was
correct. Further, sub-clause (vi) of Section 2(47) also would not
apply for the reason stated by the High Court, which is that it
was not attracted because there was no change in membership
of the society.
12. Having heard learned counsel for the parties, it is
important to first set out the important clauses of the JDA dated
25.02.2007.
13. The JDA, as has been stated above, was between the
housing society, who was referred to as the owner, and two
developers, namely Hash Builders Pvt. Ltd., Chandigarh and
Tata Housing Development Company Ltd. Strewn throughout
the agreement is the fact that the owner, being absolutely
seized and possessed of the property, was desirous of
assigning its development rights for developing the same. This
is clear, inter alia, from sub-clause (E) of the agreement which
reads as under:
“E. The Owner being absolutely seized and
possessed of and otherwise well and sufficiently
entitled to the property and is desirous of assigning
16
its Development Rights in the Property for
developing the same including transferring the title
in the property, by utilizing the available Floor Space
Index (FSI) for group housing commercial and retail
development as per the 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 the
property vide advertisements published in The
Tribune dated 31-05-06 HASH approached the
Owner and submitted the proposal to the owners for
development of the Property and after prolonged
negotiations finalized the term of development.
Since HASH did not have the sufficient means to
develop the Property, HASH have approached
THDC for developing the 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 the ‘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 the THDC(hereinafter referred to as the
‘Project’). It is expressly agreed to between the
parties that the role of HASH as a developer shall
be as specifically set out in this Agreement. It is
expressly agreed to between the parties that the
role THDC as a developer shall be to execute,
implement, develop and complete the project on the
Property.”
17
Under cause 2, the project is stated to be:
“2.1 The Owner herby irrevocably and
unequivocally grants and assigns in perpetuity
all its rights to develop, construct, mortgage,
lease, license, sell and transfer the Property
alongwith any and all the construction,
Premises, hereditament, easements, trees
thereon in favour of THDC for the purpose of
development, construction, mortgage, Sale,
transfer, lease, license and /or exploitation for
full utilization of the Property (‘Right’) and to
execute all the documents necessary to carry
out, facilitate and enforce the Right in the
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 the 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 the Right and to register the same
with the revenue/ Competent authorities and
to appear on our behalf before all authorities,
statutory or otherwise, and before any court of
law (the ‘Development Rights’). The owner
hereby hands over the original title deeds of
the Property as mentioned in the list Annexed
hereto and marked as Annexure IV and
physical, vacant possession of the Property
has been handed over to THDC simultaneous
to the execution and registration of this
Agreement to develop the same as set out
herein.
18
It is hereby agreed and confirmed that what is
stated in the recitals hereinabove, shall be
deemed to be declarations and
representations on the part of the Owner as if
the same were set out herein in verbatim and
forming an integral part of this Agreement.
2.2 The Project shall comprise of development/
construction of the Property into the Premises
as permissible under Punjab Municipal
Building Bye-laws/Punjab Urban Development
Authority or any other Competent authority by
the Developer at them own cost and expense.
The project shall be developed as may be
sanctioned by the concerned local authority
i.e. Department of Local Bodies, Punjab/
Punjab Urban Planning and Development
Authority (PUDA) or any other Competent
Authority.
2.3 The Owner hereby irrevocably and
unequivocally grants and assigns all its
Development Rights in the Property to THDC
to develop the Property and undertake the
Project at its own costs, efforts and expenses
whereupon the Developers shall be entitled to
apply for and obtain necessary sanctions,
licenses and permissions from all the
Concerned Authorities for the
commencement, development and completion
of the Project on the Property.”
14. The consideration clause in the agreement is Clause 4,
by which a sum of Rs.106.425 crores, plus 129 flats consisting
of a super area of 2250 square feet, was to be made over to the
19
society and its members. As stated hereinabove, Rs.3.87
crores was paid as earnest money on execution of the
agreement, and Rs.15.48 crores was paid soon thereafter. The
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. The third
instalment, and the balance payment, were payable in the
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 the Owner and / or the
respective members of the Owner ( as the
case may be), within six (6) months from the
date of execution of this Agreement or within
two (2) months from the date of approval of
the plans/ Design and Drawings and grant of
the final license to develop whereupon the
construction can commence, whichever is
later against which the Owner shall execute a
registered sale deed for land of equivalent
value being 6.36 Acres out of the Property as
demarcated in green colour (also hatched in
green colour) in the 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 the 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 the Owner and /or the respective members
of the Owner (as the case may be ), within two
(2) months from the date of the Payment
made as per Clause 4.1 (iv) mentioned
hereinabove, towards full and final settlement
of payment, after adjustment of the 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 the Owner shall
execute a registered sale deed for land of
equivalent value being 7.14 Acres being the
balance out of the Property as demarcated in
orange colour (also hatched in orange colour )
in the 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 The owner shall execute in favor of THDC, the
sale deeds in accordance with the provisions
of Clause 4.1(ii) to Clause 4.1 (v) of this
Agreement and execute all other necessary
documents and papers to complete the
aforesaid transaction.
9.3 That all the original title deeds pertaining to
property as mentioned in Annexure IV has
been handed over to THDC by the Owner at
the time of signing of this Agreement and in
furtherance of the Common interest of the
Parties for the development of the Project and
except the Sale Transaction Made by the
Owner in favour of THDC as set out in Clause
4.1 above. THDC hereby undertake and
assure the Owner that they shall use the title
deeds only for the purpose of furtherance of
the Project in the manner that it does not
adversely effect the Owner/ Allottee in any
manner whatsoever.”
Under Clause 10, financial assistance can be raised by
mortgaging the property. Clause 10 reads as follows:
“10. LOANS/ FINANCIAL ASSISTANCE
The Owner hereby gives their express consent to
THDC to raise finance of the development and
completion of the Project on the Property by way of
mortgaging the Property and the proposed
structures to the lending banks/ financial institutions
by deposit of the title deeds with the lending bank
and / or financial institution. The Owner shall, in no
way, be liable for the repayment of the loan. THDC
shall have the right to negotiate, create and sign
necessary forms, deeds or documents for the
22
variation of mortgage, charge or encumbrance on
the Property by depositing the original title deeds of
the Property with any financial institution/ bank etc.
THDC undertakes that the finance raise by way of
mortgage of the Property of the Owner, with the
bank/financial institutions shall be utilized only for
the purpose of development of the project and shall
keep the Owner informed in writing about the
charge created on the Property and keep the Owner
indemnified against all claims, costs for the bank /
financial institutions from when. THDC may have
availed loan facility in respect of the Project, in
case, the Project is not completed in terms of this
Agreement.”
15. The JDA could, under clause 14, be terminated under
certain circumstances by all the parties thereto. Since the
owner alone terminated the aforesaid JDA, the relevant clause
is clause 14(iv), which reads as under:
“14(iv). The Owner shall have the right to terminate
the Agreement only in the event of default by the
Developers for making the Payment in accordance
with the terms of this Agreement and the allotment
of Flats within the 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 the Owner. In the event
the Agreement is terminated by Owner, all the lands
registered in the name of THDC as per the terms of
this Agreement up to the date of the termination
shall remain with THDC and the balance lands to be
transferred to THDC as per the terms of this
agreement shall not to be transferred by the Owner
23
as per the terms of this agreement. Upon the
termination, the Owner shall forfeit the Adjustable
Advance/ Earnest Money mentioned in clause 4(i).”
16. A reading of the JDA shows that, it is essentially an
agreement to facilitate development of 21.2 acres so that the
developers build at their own cost, after obtaining necessary
approvals, flats of a given size, some of which were then to be
handed over to the members of the society. Payments were
also to be made by the developer to each member in addition to
giving each member a certain number of flats depending upon
the size of the member’s plot that was handed over. What is
important to bear in mind is that payments under the third
instalment were only to be made after the grant of approvals
and not otherwise, and that it is an admitted position that this
was never done because no approvals could be obtained as
the High Court ultimately interdicted the project. Also, the
termination clause is of great significance because it shows that
in the event of the JDA being terminated, whatever parcels of
land have already been conveyed, will stand conveyed, but that
no other conveyances of the remaining land would take place.
24
17. The relevant sections that are necessary for us to decide
the 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 the terms necessary to
constitute the transfer can be ascertained with
reasonable certainty,
and the transferee has, in part performance of
the contract, taken possession of the property or
any part thereof, or the transferee, being already in
possession, continues in possession in part
performance of the contract and has done some act
in furtherance of the contract,
and the transferee has performed or is willing
to perform his part of the contract,
then, notwithstanding that where there is an
instrument of transfer, that the transfer has not been
completed in the manner prescribed therefore by
the law for the time being in force, the transferor or
any person claiming under him shall be debarred
from enforcing against the transferee and persons
claiming under him any right in respect of the
property of which the transferee has taken or
continued in possession, other than a right
expressly provided by the terms of the contract:
Provided that nothing in this section shall
affect the rights of a transferee for consideration
who has no notice of the contract or of the part
performance thereof.]
25
Income Tax Act
Section 2 - Definitions
In this Act, unless the context otherwise requires, –
(47) "transfer", in relation to a capital asset,
includes, -
(i) to (iv) xxx xxx xxx
(v) any transaction involving the allowing of the
possession of any immovable property to be taken
or retained in part performance of a contract of the
nature referred to in Section 53A of the Transfer of
Property Act, 1882 (4 of 1882) ; or
(vi) any transaction (whether by way of becoming a
member of, or acquiring shares in, a 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 the effect
of transferring, or enabling the enjoyment of, any
immovable property.
45. Capital gains - (1) Any profits or gains arising
from the transfer of a capital asset effected in the
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 the
head “Capital gains”, and shall be deemed to be the
income of the previous year in which the transfer
took place.
48. Mode of computation - The income
chargeable under the head "Capital gains" shall be
computed, by deducting from the full value of the
consideration received or accruing as a result of the
transfer of the capital asset the following amounts,
namely:
26
(i) expenditure incurred wholly and exclusively in
connection with such transfer;
(ii) the cost of acquisition of the asset and the cost
of any improvement thereto:”
18. Section 53A, as is well known, was inserted by the
Transfer of Property Amendment Act, 1929 to import into India
the 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 a transferee wants to
defend or protect his possession under Section 53-
A of the Act. The necessary conditions are:
(1) there must be a contract to transfer for
consideration of any immovable property;
(2) the contract must be in writing, signed by the
transferor, or by someone on his behalf;
(3) the writing must be in such words from which the
terms necessary to construe the transfer can be
ascertained;
(4) the transferee must in part-performance of the
contract take possession of the property, or of any
part thereof;
27
(5) the transferee must have done some act in
furtherance of the contract; and
(6) the transferee must have performed or be willing
to perform his part of the contract.”
19. It is also well-settled by this Court that the protection
provided under Section 53A is only a shield, and can only be
resorted to as a right of defence. See Rambhau Namdeo
Gajre v. Narayan Bapuji Dhgotra (Dead) through LRs.
(2004) 8 SCC 614 at 619, para 10. An agreement of sale which
fulfilled the ingredients of Section 53A was not required to be
executed through a registered instrument. This position was
changed by the Registration and Other Related Laws
(Amendment) Act, 2001. Amendments were made
simultaneously in Section 53A of the Transfer of Property Act
and Sections 17 and 49 of the Indian Registration Act. By the
aforesaid amendment, the words “the contract, though required
to be registered, has not been registered, or” in Section 53A of
the 1882 Act have been omitted. Simultaneously, Sections 17
and 49 of the 1908 Act have been amended, clarifying that
28
unless the document containing the contract to transfer for
consideration any immovable property (for the purpose of
Section 53A of 1882 Act) is registered, it shall not have any
effect in law, other than being received as evidence of a
contract in a suit for specific performance or as evidence of any
collateral transaction not required to be effected by a registered
instrument. Section 17(1A) and Section 49 of the Registration
Act, 1908 Act, as amended, read thus:
“17(1A). The documents containing contracts to
transfer for consideration, any immovable property
for the purpose of Section 53A of the Transfer of
Property Act, 1882 (4 of 1882) shall be registered if
they have been executed on or after the
commencement of the 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
the purposes of the 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 the 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 an unregistered document affecting
immovable property and required by this Act or the
Transfer of Property Act, 1882 (4 of 1882), to be
registered may be received as evidence of a
contract in a suit for specific performance under
Chapter II of the Specific Relief Act, 1887 (1 of
1877) or as evidence of any collateral transaction
not required to be effected by registered
instrument.”
20. The effect of the aforesaid amendment is that, on and
after the commencement of the Amendment Act of 2001, if an
agreement, like the JDA in the present case, is not registered,
then it shall have no effect in law for the purposes of Section
53A. In short, there is no agreement in the eyes of law which
can be enforced under Section 53A of the Transfer of Property
Act. This being the case, we are of the view that the High
Court was right in stating that in order to qualify as a “transfer”
of a capital asset under Section 2(47)(v) of the Act, there must
be a “contract” which can be enforced in law under Section 53A
of the Transfer of Property Act. A reading of Section 17(1A) and
Section 49 of the Registration Act shows that in the eyes of law,
there is no contract which can be taken cognizance of, for the
purpose specified in Section 53A. The ITAT was not correct in
30
referring to the expression “of the nature referred to in Section
53A” in Section 2(47)(v) in order to arrive at the opposite
conclusion. This expression was used by the legislature ever
since sub-section (v) was inserted by the Finance Act of 1987
w.e.f. 01.04.1988. All that is meant by this expression is to
refer to the ingredients of applicability of Section 53A to the
contracts mentioned therein. It is only where the contract
contains all the six features mentioned in Shrimant Shamrao
Suryavanshi (supra), that the Section applies, and this is what
is meant by the expression “of the nature referred to in Section
53A”. This expression cannot be stretched to refer to an
amendment that was made years later in 2001, so as to then
say that though registration of a contract is required by the
Amendment Act of 2001, yet the aforesaid expression “of the
nature referred to in Section 53A” would somehow refer only to
the 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 the eye of law in force under Section 53A
after 2001 unless the said contract is registered. This being the
case, and it being clear that the said JDA was never registered,
31
since the JDA has no efficacy in the eye of law, obviously no
“transfer” can be said to have taken place under the aforesaid
document. Since we are deciding this case on this legal ground,
it is unnecessary for us to go into the other questions decided
by the High Court, namely, whether under the JDA possession
was or was not taken; whether only a licence was granted to
develop the property; and whether the developers were or were
not ready and willing to carry out their part of the bargain.
Since we are of the view that sub-clause (v) of Section 2(47) of
the Act is not attracted on the facts of this case, we need not go
into any other factual question.
21. However, the High Court has held that Section 2(47)(vi)
will not apply for the reason that there was no change in
membership of the society, as contemplated. We are afraid that
we cannot agree with the High Court on this score. Under
Section 2(47)(vi), any transaction which has the effect of
transferring or enabling the enjoyment of any immovable
property would come within its purview. The High Court has not
adverted to the expression “or in any other manner whatsoever”
32
in sub-clause (vi), which would show that it is not necessary
that the transaction refers to the membership of a cooperative
society. We have, therefore, to see whether the impugned
transaction can fall within this provision.
22. The object of Section 2(47)(vi) appears to be to bring
within the tax net a de facto transfer of any immovable property.
The expression “enabling the enjoyment of” takes color from
the earlier expression “transferring”, so that it is clear that any
transaction which enables the enjoyment of immovable property
must be enjoyment as a purported owner thereof.1
The idea is
to bring within the tax net, transactions, where, though title may
not be transferred in law, there is, in substance, a transfer of
title in fact.
23. A reading of the JDA in the present case would show that
the owner continues to be the owner throughout the agreement,
and has at no stage purported to transfer rights akin to
1 The maxim “noscitur a sociis” has been repeatedly applied by this Court. A
recent application of the 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 a feather flocking
together. The maxim only means that a word is to be judged by the company
it keeps.
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ownership to the developer. At the highest, possession alone is
given under the agreement, and that too for a specific purpose
-the purpose being to develop the property, as envisaged by all
the parties. We are, therefore, of the view that this clause will
also not rope in the present transaction.
24. The matter can also be viewed from a slightly different
angle. Shri Vohra is right when he has referred to Sections 45
and 48 of the Income Tax Act and has then argued that some
real income must “arise” on the assumption that there is
transfer of a capital asset. This income must have been
received or have “accrued” under Section 48 as a result of the
transfer of the 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 an
assessee without the actual receipt of the same. If
the assessee acquires a right to receive the income,
the income can be said to have accrued to him
though it may be received later on its being
ascertained. The basic conception is that he must
have acquired a right to receive the income. There
must be a 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 the assessee a debt
due by somebody it cannot be said that he has
acquired a right to receive the 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 the 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 a levy on income. No
doubt, the Income Tax Act takes into
account two points of time at which the
liability to tax is attracted, viz., the
accrual of the income or its receipt; but
the substance of the matter is the
income. If income does not result at all,
there cannot be a tax, even though in
bookkeeping, an entry is made about a
‘hypothetical income’, which does not
materialise. Where income has, in fact,
been received and is subsequently
given up in such circumstances that it
remains the income of the recipient,
even though given up, the tax may be
payable. Where, however, the income
35
can be said not to have resulted at all,
there is obviously neither accrual nor
receipt of income, even though an entry
to that effect might, in certain
circumstances, have been made in the
books of account.”
15. The 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 the dictionary meaning of the 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. … the date of payment … does not
affect the accrual of income. The
moment the income accrues, the
assessee gets vested with the 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
a corresponding liability of the other party from
whom the 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 a corresponding liability of the
other party to pay the amount. Only then can it be
said that for the purposes of taxability that the
income is not hypothetical and it has really accrued
to the assessee.
36
18. Insofar as the present case is concerned, even
if it is assumed that the assessee was entitled to the
benefits under the advance licences as well as
under the duty entitlement passbook, there was no
corresponding liability on the Customs Authorities to
pass on the benefit of duty-free imports to the
assessee until the goods are actually imported and
made available for clearance. The benefits
represent, at best, a hypothetical income which may
or may not materialise and its money value is,
therefore, not the income of the assessee.”
27. In the facts of the present case, it is clear that the income
from capital gain on a transaction which never materialized is,
at best, a hypothetical income. It is admitted that, for want of
permissions, the entire transaction of development envisaged in
the JDA fell through. In point of fact, income did not result at all
for the aforesaid reason. This being the case, it is clear that
there is no profit or gain which arises from the transfer of a
capital asset, which could be brought to tax under Section 45
read with Section 48 of the Income Tax Act.
28. In the present case, the assessee did not acquire any
right to receive income, inasmuch as such alleged right was
dependent upon the necessary permissions being obtained.
This being the case, in the circumstances, there was no debt
37
owed to the assessees by the developers and therefore, the
assessees have not acquired any right to receive income under
the JDA. This being so, no profits or gains “arose” from the
transfer of a capital asset so as to attract Sections 45 and 48 of
the Income Tax Act.
29. We are, therefore, of the view that the High Court was
correct in its conclusion, but for the reasons stated by us
hereinabove. The appeals are dismissed with no order as to
costs.
…………………………......J.
(R.F. Nariman)
..……………………...........J.
(Sanjay Kishan Kaul)
New Delhi;
October 04, 2017.
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