Section 2(47) – joint development agreement – mere signing of agreement without any other performance cannot be termed as transfer for the purpose of capital gains.
Facts :
The assessee had received certain land from his late father. He, alongwith other family members entered into joint development agreement (joint venture) on 28-02-2006 with L constructions which itself held land in the same area. As per the agreement the assessee was to receive developed plots (i.e. constructed properties) in lieu thereof. The assessing officer, relying on the decisions of Chaturbhuj Dwarkadas Kapadia [2003] 260 ITR 491 (Bom.) held that there was a transfer of land on 28-02-2006 itself.
Held:
The Hon’ble tribunal held as under: The joint venture project was in a nascent stage. In the concerned previous year, nothing happened other than the execution of the agreement. The transfer of an immovable property always contemplates transfer of an existing property, i.e., a property in praesenti. . As far as the assessee is concerned, there was only an agreement. The proposed project was still to be born as the offshoot of the assessee.
The assessee was not transferring any right or any property to ‘L’. The assessee assigned its landed property in favour of ‘L’ by the joint venture agreement between the assessee and ‘L’. There cannot be a sale to oneself. Nothing was exchanged in the previous year relevant to the assessment year under appeal. No rights are relinquished. It only proposes to redefine the rights.
The assessing officer has concluded that providing land for the purpose of development is a transfer. The consent given by the assessee to provide its land for developing the housing project is only one of the necessary stipulations of the whole scheme. It cannot be broken into an independent segment so as to conclude the same as transfer. The provision of land to facilitate the implementation of the joint venture is always to be read with other equally important stipulations.
Even though the agreement entered into is an enforceable one, that by itself does not take the character of an immovable property. The agreement speaks about the intentions of the parties. Once the project is completed and all the stipulations are satisfied, the parties may come to declare the final satisfaction of the agreements. Only at that point of time, the question really arises as to whether there was any transfer within the meaning of section 2(47). The housing project was a proposed project. As already stated, a transfer is contemplated only in the case of an existing property. In the present case the property was only in the nature of mutual rights. The project and development are yet to happen. Strictly, speaking, the projects and plans may happen or may not happen.
As far as applicability of section 53A of the Transfer of Property Act is concerned, it is one of the necessary preconditions that transferee should have or is willing to perform his part of the contract.
It is clear that willingness to perform for the purposes of section 53A is something more than a statement of intent; it is the unqualified and unconditional willingness on the part of the vendee to perform its obligations. It is only elementary that, unless provisions of section 53A of the Transfer of Property Act are satisfied on the facts of a case, the transaction in question cannot fall within the scope of deemed transfer u/s. 2(47)(v).
Both the developer and the assessee were having the landed property. They pooled together the landed property along with some other parties who were owners of some other landed property and all parties together gave licence to the builder to enter the premises and construct houses. No sale was effected on the date of agreement. No consideration has passed between the parties on signing theagreement. Further from the date of signing of development agreement dated 28-02-2006 to 31-03- 2006, no progress has taken place in the said landed property which is subject-matter of the development agreement. Further, there was no consideration in the form of money that passed between the parties. There was no construction, whatsoever, that took place during the period. Even otherwise, there was a General Power of Attorney given by the assessee to the developer. In such a situation, it is only the actual performance of transferee’s obligation which can give rise to the situation envisaged in section 53A of the TP Act. On these facts, it is not possible to hold that the developer performed its obligation during the period in which the capital is sought to be taxed by the Revenue authorities. Thus, the condition laid down u/s. 53A of TP Act was not satisfied during the period. Once it is concluded that the developer did not perform the stipulation as required by the development agreement during the period under consideration and within the meaning assigned to the expression in section 53A of TP Act it cannot be said that there was a transfer u/s. 2(47)(v) so as to levy capital gain tax.
