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SUPREME COURT OF INDIA
R.F. Nariman, Sanjay Kishan Kaul, JJ.
Commissioner of Income Tax – Appellant
Versus
Balbir Singh Maini – Respondents
Civil Appeal No. 15619 of 2017 (Arising Out of SLP (Civil) No.35248 of 2015) 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) , 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), 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), 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), 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)
Decided On : 04-10-2017
(2002) 3 SCC 676; (2004) 8 SCC 614 – Referred
(b) Income Tax Act, 1961 – Section 2(47)(vi) – Covers de facto transfer of any immovable property – Expression "enabling the enjoyment of" taking color from earlier expression "transferring" – "noscitur a sociis" – Instantly JDA not transferring any ownership rights – Only transferring possession to developers for developing the site – Section 2(47)(vi) does not apply. (Para 22, 23)
(2015) 10 SCC 664 – Relied upon
(c) Income Tax act, 1961 – Sections 45 and 48 – Tax on income, real or accrued, from transferred capital asset – Instantly, no asset transferred – No question of even accrued income on transferred assets – No question of capital gains – Sections 45 and 48 do noyt apply. (Para 28)
(1955) 1 SCR 313; (2014) 13 SCC 459 – Relied upon
Facts of the case:
Interpretation of Section 2(47)(v) of the Income Tax Act, 1961 read with Section 53-A of the Transfer of Property Act, 1882 is called for in these appeals.
The bone of contention is a tripartite Joint Development Agreement (JDA) dated 25.02.2007 for development of 21.2 acres of land in the village Kansal 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).
The developers made payments only up to the 2nd instalment payment, and 7.7 acres of land was conveyed which 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 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".
The Assessing Officer passed order under Section 143(3) of the Act holding that since physical and vacant possession had been handed over under the JDA, the same would tantamount to "transfer". 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 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/-.
The Commissioner (Appeals) dismissed the appeal upholding the order passed by the Assessing Officer. The appeal before the Income Tax Appellate Tribunal (ITAT) was also dismissed.
The High Court allowed all the appeals of the assesses.
Finding of the Court:
Neither section 53A of TP Act nor sections 2(47)(v), 2(47)(vi), 45 and 48 of IT Act apply in the present case.
Result: Appeals dismissed.
Certainly. Here are the key points derived from the provided legal document:
Section 53A of the Transfer of Property Act functions solely as a shield and can only be invoked as a right of defense, not as a basis for establishing transfer unless the agreement is registered and in force under applicable law (!) (!) (!) (!) .
For Section 2(47)(v) of the Income Tax Act to apply, there must be a de facto transfer of assets, which requires actual transfer of ownership rights. Mere possession or rights to develop do not constitute a transfer (!) (!) (!) (!) .
The transaction must involve a transfer of ownership or rights akin to ownership for it to be considered a transfer under the relevant provisions. Possession alone, without transfer of ownership rights, does not qualify as a transfer (!) (!) (!) (!) .
The transfer of property must be supported by a registered agreement for it to be recognized legally. Unregistered agreements lack legal efficacy under the law, and thus, no transfer can be deemed to have occurred based solely on unregistered contracts or agreements (!) (!) (!) (!) .
The concept of "enabling the enjoyment of" property, as per the law, refers to actual transfer or rights that give the transferee ownership-like rights. Transactions that only provide possession or license do not fall within this scope (!) (!) .
The transfer of rights or property must result in actual income or profit. Hypothetical or non-materialized transactions, where permissions or development do not materialize, do not generate taxable capital gains or income (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) .
The right to receive income or profits must be actual, enforceable, and not merely hypothetical. Income accrues when it becomes due and enforceable, not merely when a right is anticipated or dependent on future permissions or approvals (!) (!) (!) (!) (!) .
In cases where the transaction has not resulted in actual transfer, possession, or income, and where development has been halted or permissions have not been obtained, there is no taxable transfer or capital gain (!) (!) (!) (!) (!) (!) (!) (!) .
The legal requirements for a valid transfer include the existence of a written, signed agreement, registration where applicable, and actual transfer of rights or possession. Without these, the transaction cannot be recognized as a transfer under the law (!) (!) (!) .
The legal effect of non-registration and lack of actual transfer or possession is that the agreement remains unenforceable as a transfer, and no capital gains or income tax liability arises from such unmaterialized or non-registered transactions (!) (!) (!) (!) .
These points collectively emphasize that for a transfer to be recognized legally and for associated tax liabilities to arise, there must be actual, enforceable transfer of ownership rights supported by proper registration, and the transaction must result in tangible income or profit. Mere possession, rights to develop, or unmaterialized agreements do not constitute a taxable transfer under the applicable laws.
JUDGMENT
R.F. Nariman, J.
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.?
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 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 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 gain
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