ORDER
Ravish Sood, Judicial Member.- The present appeal filed by the revenue is directed against the order passed by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (for short, “CIT(A)”), which in turn arises from the assessment order passed by the Assessing Officer (“AO”) u/s 143(3) r.w.s. 147 of the Income-tax Act, 1961 (“the Act”) dated 30.10.2019 for A.Y. 2013-14. The revenue has assailed the impugned order on the following grounds if appeal before us:
“1. The Order of the Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi is erroneous in law and to the facts of the case.
2. The Ld. CIT(A) erred in law and on facts in deleting the addition of Rs. 11,26,01,500/ made by the Assessing Officer towards Long Term Capital Gains in the hands of the assessee for the Asst. Year 2013-14.
3. Whether on the facts and circumstances of the case, the Ld. CIT(A) is correct in deciding the issue of long term capital gains in favour of the assessee when the other co-owners have offered capital gains in their hands on the same transaction of transfer of subject immovable property during the financial year relevant to the Asst. Year 2013-14?
4. The Ld. CIT(A) erred in overlooking the fact that the assessee transferred the rights of
5 The appellant craves leave to add or delete or amend or substitute any ground of no.
6. For these and other grounds that may be urged at the time of appeal hearing.”
2. Succinctly stated, the assessee had filed his return of income for A.Y. 2013-14, belatedly on 21.01.2017, declaring an income of Rs. 1,73,79,050/- along with agriculture income of Rs. 1,22,290/-. Subsequently, the A.O., based on information that the assessee alongwith three other co-owners, had entered into a Joint Development Agreement (“JDA”) for a total consideration of Rs. 23.94 crores, but had failed to offer the “capital gains” for tax, initiated proceedings u/s 147 of the Act. Notice u/s 148 of the Act, dated 19.07.2018, was issued to the assessee. In compliance, the assessee submitted that his original return of income may be treated as the return filed in response to notice u/s 148 of the Act.
3. During the course of the assessment proceedings, the AO, observed that the assessee, along with three co-owners, owned land admeasuring Ac. 1.45 cents situated at Nolambur Village, Ambattur Taluk, Thiruvallur District, Tamil Nadu [Survey Nos. 318/3A1B, 3A1D & 3A1E (old S. No. 318/3A1)]. On 25.04.2012, i.e., period relevant to A.Y. 2013-14, the co-owners had entered into a “Joint Development Agreement”(“JDA”) with M/s. BBCL Vajra, a registered partnership firm having its office at No. 20, Mylai Rangnathan Street, T. Nagar, Chennai, that envisaged the development of a residential-cum-commercial project for a total consideration of Rs. 23.94 crores, which was to be shared between the parties in the manner set out in the agreement. The AO observed that, unlike the other three co-owners, the assessee had not offered any capital gain for A.Y. 2013-14 on the basis of the said JDA. The assesse on being confronted as to why the capital gain on transfer of the property was not offered for tax during the subject year, submitted, viz. (i) the JDA dated 25.04.2012 was unregistered; (ii) under the addendum, plan approval was to be obtained within stipulated time, failing which the arrangement could be cancelled; (iii) statutory approvals were actually obtained only on 17.10.2013, i.e., the period relevant to A.Y. 2014-15; and (iv) upon execution/regularization, the assessee had offered his share of capital gains for tax in A.Y. 2014-15. The assessee in support of his aforesaid claim that an unregistered JDA has no efficacy in law for purposes of Section 53A of the Transfer of Property Act, 1882, TPA, and, thus, cannot trigger Section 2(47)(v) of the Act, had relied upon the judgment of the Hon’ble Supreme Court in CIT v. Balbir Singh Maini ITR 531.
4. However, we find that the A.O. was not persuaded to subscribe to the claim of the assessee. The A.O. relied on Clause 17 of the JDA, which envisaged handing over of possession to the developer for commencing and completing construction, and invoked Section 2(47)(v) of the Act r.w. Section 53A of the Transfer of Property Act, 1882 (“TPA”), and computed long-term capital gain of Rs. 11,26,01,500/- in the hands of the assessee for A.Y. 2013-14. Accordingly, the A.O, vide his order passed under Section 143(3) r.w.s 147 of the Act, dated 30.10.2019, determined the income of the assessee at Rs. 13,10,30,550/- after making two additions, viz. (i). Long-term capital gains (on JDA): Rs. 11,26,01,500/-; and (ii) Unexplained cash deposits: Rs. 10,50,000/-.
5. Aggrieved, the assessee carried the matter in appeal before the CIT(A), who allowed the same. For the sake of clarity, the observations of the CIT(A) are culled out as under:
“5.1. The appellant is an individual and filed his return of income for the AY 2013- 14 declaring total income of Rs.1,73,79,050/-. The information in this case was received that the assessee entered into a Joint Development Agreement (Herein after referred to as “JDA” for short) for total consideration of Rs.23.94 Crores and did not declare any capital gain arising from such transaction. On the basis of this information available with the AO, the case of the appellant was reopened u/s 147 of the Act and notice was issued to the appellant u/s 148 of the Act. In response to notice u/s 148, the assessee submitted that he had already filed his return of income & requested to treat the same as return filed in response to notice issued u/s 148 of the Act.
5.2. During the year under consideration, the assessee along with three others entered into a joint development agreement with M/s BBCL Vajra, a registered partnership firm having its office at No.20, Mylai Rangnatahn Street, T. Nagar, Chennai on 25/04/2012 i.e. in the financial year 2012-13 relevant to the assessment year 2013-14, for the purpose of development of land admeasuring Ac. 1.45 cents situated at old survey No.318/3AI, new survey nos. 318/3AIB/3AID & 318/3AIE, Nolambur Village, Ambattur Taluk, Thiruvallur District of Tamilnadu, for a total consideration of Rs.23.94 Crores. As part of the agreement entered by the assessee along with other co-owners & the developer, the four co-owners of the land were entitled to a share of revenue from the sale of flats & commercial area which was to be developed by M/s BCCL Vajra. However on perusal of the return of income filed for the AY 201314, it was noted that the assessee did not declare any capital gain for taxation arising from the impugned joint development agreement. Therefore the AO issued notice u/s 142(1) of the Act asking the assessee to furnish computation of capital gain arisen. In response thereto, the assessee submitted that he along with 3 other co-owners entered into an unregistered JDA with the developer on 25/04/2012. As per addendum to the JDA, the developer was supposed to apply for plan approvals within 1.5 months of receipt of FMB or 90 days from the date of the JDA whichever is later & was supposed to obtain the approval of plans within 16.5 months from such date. But if the approval was likely to be delayed indefinitely, the JDA was to be cancelled. The assessee further submitted that since the approvals were obtained on 17/10/2013 i.e. during F.Y. 2013-14 relevant to the AY 2014-15, he offered the capital gains to taxation by filing return of income for the AY 2014-15. The assessee relied on the decision of the Hon’ble Supreme Court in the case of CIT v. Balbir Singh Maini wherein it is held that an unregistered JDA cannot be said to have resulted in transfer of title, irrespective of the fact whether possession of the property was handed over under the contract or not. However the AO reiterated that as per the terms of agreement dated 25/04/2012 at clause 17, the possession of the property was handed over to the developer for commencing & completing the construction activities and hence the AO concluded that the capital gain was earned by the assessee during the FY 2012-13 relevant to the AY 2013-14 as against during the FY 2013-14 relevant to the AY 2014-15 as claimed by the assessee. Accordingly, the AO made addition of Rs.11,26,01,500/- on account of long term capital gain. The computation of long term capital gain made by the AO is reproduced here as under:-
5.3. XX XXX XX
5.4. During the appellate proceedings, the appellant contended same as during the assessment proceedings that JDA came into effect only on 17/10/2013 & not on 25/04/2012 as is claimed by the AO. He further claimed that the JDA entered on 25/04/2012 was unregistered and hence handing over possession of the property on the basis of unregistered JDA did not constitute “transfer” of the property as per Transfer of Property Act. The assessee also submitted that after transfer of property on 17/10/2013, he had voluntarily offered capital gain arising from such JDA for taxation by filing return of income for the AY 2014-15. The appellant relied on the decision of the Hon’ble Supreme Court in the case of CIT v. Balbir Singh Maini wherein it is held that an unregistered JDA cannot be said to have resulted in transfer of title, irrespective of the fact whether possession of the property was handed over under the contract or not. The relevant portion of the Supreme Court Order is reproduced here as under:-
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 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 subsection (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, 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. I have perused the Supreme Court Order carefully wherein it is held that the property can be said to have been transferred u/s 2(47(v) of the Act only if there is a “contract” which can be enforced in law under Section 53A of the Transfer of Property Act. The facts of the case are identical and in this case, the AO treated the transfer of the property only on the basis of unregistered JDA. Since the unregistered JDA is not a contract enforceable in law under Section 53A of the Transfer of Property Act, only handing over possession of the property to the developer in order to get certain approvals for starting construction activities, cannot be treated as “Transfer” of the property as per section 2(47)(v) of the Act as was done by the AO during the assessment proceedings. Thus the AO erred in treating the transaction as “Transfer” of property. As such there was not any transfer of property, the question of capital gain & its taxation does not arise at all. Further the appellant submitted that he entered into registered JDA on 17/10/2013 i.e. during the F.Y. 2013-14 and offered long term capital gain from such JDA for taxation by filing return of income for the AY 2014-15. I have perused the return of income filed by the assessee for the AY 2014-15 and found the contention of the assessee to be correct. Also taxation of the same amount for the AY 2014-15 & 2013-14 would have resulted in double taxation of the same amount In view of the Hon’ble Supreme Court’s decision & facts discussed above, the contention of the assessee is accepted and hence, the AO is directed to delete the addition of Rs.11,26,01,500/- on account of long term capital gains. Accordingly, Ground No. 1 is allowed.”
6. Aggrieved, the revenue has carried the matter in appeal before us.
7. We have heard the Ld. Authorised Representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR.
8. Shri. Badicala Yadagiri, Ld. CIT-DR, at the threshold of hearing of the appeal, submitted that as per the terms of agreement dated 25/04/2012 at Clause 17, the possession of the property was handed over to the developer for commencing & completing the construction activities, hence the AO had rightly concluded that the capital gain was earned by the assessee during the FY 2012-13 relevant to the AY 2013-14 as against during the FY 2013-14 relevant to the AY 2014-15 as claimed by the assessee. The Ld. CIT-DR further submitted that, handing over of the possession of the subject property to the developer under Clause 17 was sufficient to attract Section 2(47)(v) of the Act. Also, it was submitted by him that as the assessee had received/secured consideration in kind by way of share in the built-up area/revenue, therefore, the transfer transaction was taxable in A.Y. 2013-14 itself. Further, the Ld. CIT-DR supported the assessment order and submitted that the AO had rightly made the addition of Rs. 11,26,01,500/- on account of long term capital gain in the hands of the assessee in AY 2013-14.
9. Per Contra, Shri. P. Murali, CA, Ld. Authorized Representative for the assessee supported the order of the CIT(A). The Ld. AR submitted that core issue involved in the present appeal, viz. the year of taxability of capital gains based on the unregistered Joint Development Agreement (JDA) dated 25.04.2012 vis-a-vis subsequent registered arrangement/approvals on 17.10.2013. The Ld. AR submitted that the assessee, along with three other co-owners, had entered into an unregistered JDA with the developer on 25/04/2012. As per the addendum to the JDA, the developer was supposed to apply for plan approvals within 1.5 months of receipt of FMB or 90 days from the date of the JDA, whichever was later, and was supposed to obtain the approval of plans within 16.5 months from such date. But if the approval was likely to be delayed indefinitely, the JDA was to be cancelled. The Ld. AR submitted that since the approvals were obtained on 17/10/2013, i.e., during F.Y. 2013-14 relevant to the AY 2014-15, therefore, the assessee had, as per the mandate of law, rightly offered the capital gains to tax in his return of income for the AY 2014-15. The Ld. AR in the support of his contention that the assessee had rightly offered the capital gains to tax in his return of income for AY 2014-15 had relied on the judgment of the Hon’ble Supreme Court in the case of Balbir Singh Maini (supra). The Ld. AR submitted that the Hon’ble Apex Court in its aforesaid order had held that an unregistered JDA cannot be said to have resulted in transfer of title, irrespective of the fact whether possession of the property was handed over under the contract or not.
10. We have given thoughtful consideration to the core issue involved in the present appeal, i.e., the year of taxability of the capital gains in the backdrop of the facts involved in the present case.
11. We find that Section 2(47)(v) treats as a transfer “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.” However, post the Registration and Other Related Laws (Amendment) Act, 2001, we find that Section 17(1A) of the Registration Act mandates registration of contracts for the transfer of immovable property for the purpose of Section 53A of the Transfer of Property Act, 1882. Section 49 of the Registration and Other Related Laws (Amendment) Act, 2001 further declares that an unregistered document required to be registered shall not affect the immovable property nor be received as evidence of any transaction affecting such property. As observed by the CIT(A) and rightly so, the Hon’ble Supreme Court in Balbir Singh Maini (supra), had considered an unregistered development agreement and held that, consequent to the Registration and Other Related Laws (Amendment) Act, 2001, unless the contract is registered, it has no effect in law for purposes of Section 53A of the Transfer of Property Act, 1882. The Hon’ble Supreme Court had further clarified that the expression “of the nature referred to in Section 53A” in Section 2(47)(v) imports all statutory preconditions of Section 53A, including the requirement of a registered contract, and in the absence thereof, there is no “transfer” in the eye of law.
12. Coming back to the facts of the present case, it is undisputed that the JDA dated 25.04.2012 was not registered. Insofar, the limited access given to the developer for site development/approvals was envisaged in the JDA, such permissive access, in our view, does not confer the kind of juridical possession contemplated by Section 53A of the Transfer of Property Act, 1882. We, thus, are of a firm conviction that the foundational prerequisite for invoking Section 2(47)(v) of the Act, not being as per the mandate of law, fails.
13. Also, we find that the record further evidences that the crucial statutory approvals were obtained by the developer only on 17.10.2013, i.e., during the period relevant to A.Y. 2014-15, and the assessee had based on the same offered the capital gains for tax in his return of income for the A.Y. 2014-15. We are of the view that taxing the same stream of gain again in the subject year, i.e., A.Y. 2013-14, would undeniably lead to double taxation of the same income, which is not permissible under law. Also, we may herein observe that the revenue has not brought on record any cogent material to show that any legally enforceable and registered transfer had occurred in F.Y. 2012-13. We, thus, in view of the binding judgment of The Hon’ble Apex Court in Balbir Singh Maini (supra), and the admitted factual position that the JDA dated 25.04.2012 was unregistered, herein observe that no “transfer” within the meaning of Section 2(47)(v) occurred in the period relevant to the subject year, i.e., AY 2013-14. Accordingly, the addition of Rs. 11,26,01,500/- made on account of LTCG in the hands of the assessee for A.Y. 2013-14 is, therefore, unsustainable and is directed to be deleted. The Grounds of appeal Nos. 2 to 4 raised by the revenue are dismissed.
14. The Grounds of appeal Nos. 1, 5 & 6, being general, are dismissed as not pressed.
15. Resultantly, the appeal filed by the revenue being devoid and bereft of any substance is dismissed.