Charanjit Singh Atwal & Ors. v. ITO & Ors.

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The Tax Publishers2014 TaxPub(DT) 3762 (Chd-Trib) : (2014) 164 TTJ 0592 : (2014) 108 DTR 0067 Charanjit Singh Atwal & Ors. v. ITO & Ors. INCOME TAX ACT, 1961 --Capital gains--Transfer under section 2(47)(v)Land transferred to developer under property development agreement--While making discreet enquiries in the cases of housing societies, it was gathered that housing society consisting of 95 present and Ex-MLAs of Punjab Legislative Assembly were owner of the 21.2 acres of land. The housing society of MLAs entered into a tripartite Joint Development Agreement 'JDA') with developers HASH and M/s . ('THDC'). By virtue of this tripartite agreement it was agreed upon among these parties that the society which is owner of 21.2 acres of land, shall transfer its land to THDC/HASH in lieu of monetary consideration and consideration in kind. As per the agreement each member of the society having a plot of 500 sq. yd. in the society was to receive monetary consideration of Rs. 82,50,000 and the member holding plot of 1,000 sq. yd. was to receive a sum of Rs. 1.65 crores. In addition to this member holding a plot of 500 sq. yd. was to receive fully furnished flat measuring 2,250 sq. ft. to be constructed by THDC/HASH and members having 1,000 sq. yd. were to get two such flats. According to the AO total consideration to be received by all the members was Rs. 1,06,42,35,000 and furnished flats as mentioned above. The assessee was also a member and president of the society and was owner of a plot measuring 1,000 sq. yd. Therefore, as per JDA, he was to receive Rs. 1.65 crore as monetary consideration and two furnished flats as consideration in kind and the cost of the same as per AO was Rs. 2,02,50,000 and total consideration would be Rs. 3,67,50,000. According to the AO since the society has assigned all rights in 21.2 acres of land belonging to the society in terms of JDA to THDC/HASH and also handed over the physical vacant possession of the property to THDC/HASH, therefore, the assessee became liable to capital gain tax on his share of consideration. Capital gain was to be charged in the hands of the assessee in assessment year 2007-08 by taking full value of the construction at Rs. 3,67,50,000. *Held:* The plain reading of the provision of section 2(47)(vi) shows that any transaction by way of becoming a member or acquiring shares in the co-operative society or shares in the company which has the effect of transferring or enabling the enjoyment of any immoveable property would be covered by the definition of transfer. In the present case initially the members of the society were holding shares in the society for ownership of plot of 500 sq. yd. or 1,000 sq. yd. In the JDA the society has agreed to transfer the land. Therefore, technically it can be said that the developer, i.e., THDC/HASH has purchased the membership of the members in the society which would lead to enjoyment of the property and in that technical sense, clause (vi) of section 2(47) is applicable. Section 45 which is charging section and section 48 which is computation section, makes it absolutely clear that rigor of tax in case of capital gain would come into play on the transfer of capital asset and total consideration which is arising on such transfer, has to be taxed. Section 48 clearly talks about full consideration received or accruing as result of transfer. Once this vested right arises out of the above contract it can easily be said that this right has also accrued to the assessee. Clause 4.2 makes it absolutely clear that developer i.e. Once this vested right arises out of the above contract it can easily be said that this right has also accrued to the assessee. Clause 4.2 makes it absolutely clear that developer, i.e., THDC/HASH was to allot the letters of allotment within 45 days from final sanction from the competent authority and such flats were part of entire consideration. Merely because such allotment letter has not been given because of sanctions/permissions could not be obtained because of PIL before the Hon'ble Punjab & Haryana High Court, it cannot be said that such right has not accrued. Though it may be hard on the assessee but it is well settled that taxation and equity are strangers. It is very clear that in cases where an arrangement had been entered into by an assessee in terms of clause (v) of section 2(47) which has effect of handing over the possession then the transfer is said to have been taken place on the date of entering into such arrangement. [Para 37] In case of any arrangements or transactions whereby the other party becomes entitled to enjoy the property then that date of such transaction itself needs to be construed as the date of transfer. [Para 38] Irrevocable general power of attorney which leads to overall control of the property in the hands of the developer, even if that means no exclusive possession by the developer would constitute transfer. It can be said that it has to be construed as 'possession' in terms of clause (v) of section 2(47). [Para 43] The first major contention of the counsel of the assessee is that the possession was not given by the society because according to him as per clause 2.1 of the JDA the possession of the property was to be handed over simultaneously to the execution and registration of JDA and since the JDA was not registered, therefore, the possession was not given. Tribunal could not accept this contention because in 'power of attorney' transactions, it is not necessary to register the JDA if a special power of attorney has been given and same is registered. Secondly clause 9.3 of the JDA as reproduced above clearly shows that original title deeds which have been mentioned along with the possession in para 2.1 which according to the counsel of the assessee were to be handed over simultaneously to execution and registration of the JDA, is not correct because in clause 9.3 clearly mentions that original title deeds of the property have been handed over to the THDC at the time of signing of this agreement because in clause 9.3 there is no mention about registration of JDA. [Para 52] Special power of attorney which has been executed on 26-2-2007 has been registered also. The irrevocable special power of attorney has been executed as provided in clause 6.7 of the JDA. [Para 53] It is pertinent to note that power/authorization which have been given by the society to the developer, were in fact required to be given in terms of various clauses of the JDA. Clause 6.7 reproduced above itself shows that the society was required to give powers to raise finance to mortgage the property and even the registration of charge was also required to be given. Further through clause 6.15 it was agreed that documents of original title deeds of the property would be handed over to the developer i.e. THDC/HASH so that same can be used in furtherance of development of the project as well as security for the money paid by the owner. Through clause 6.24 it was agreed that developer THDC/HASH was always permitted by owner to amalgamate the property with any other contiguous, adjacent and adjoining land and the properties wherein developmental and or other rights, benefits and interest were acquired by the developer or would be acquired in future. This clearly shows that the society was under obligation in terms of agreement itself to allow the developer to amalgamate the project. Towards the end of clause 6.24 it has been clearly stated that in the event of termination of JDA, provision of clause 6 would be surviving which clearly shows that developer continues to be in possession for the purpose of development, mortgage etc. even after termination. Clause 8 which describes the obligation and undertaking of the THDC/HASH and provides specifically that all environmental clearance shall be obtained by THDC/HASH out of its own sources. Thus it was clearly understood by the parties that requisite environmental clearances had to be obtained before start of the project. Clause 10 again casts specific obligation on the owner society to give consent to THDC/HASH to raise finance for the development and completion of the project on the security of the property by way of mortgaging the property. Thus, whatever power/authorization have been given through irrevocable special power of attorney are emanating from the terms and conditions agreed to among the parties from the JDA. [Para 54] The combined reading of the above clauses of the irrevocable special power of attorney and JDA clearly shows that the developer was authorized to enter upon the property for not only for the purpose of development but other purposes also. THDC was authorized to amalgamate the project with any other project in the adjacent area or adjoining area as per clause (t) of the special power of attorney. If the possession was never given to the developer by the society then how the developer could amalgamate the project with another project which may be acquired latter in the adjoining area. Through clause (w) THDC was authorized to hand over the possession of property or portion thereof to the authority to whom the same is required. In large housing society projects sometimes municipal authorities take some portion of land for the purpose of roads, parks or other general utility purposes like installation of electricity transformers and before sanctioning the plans the developer is required to undertake that such portions of land would be given for such a common purpose. If possession was not given then how THDC was authorized to hand over such land or portions thereof which have not been identified in the JDA out of the total land. Similarly, through clause (y) THDC has been authorized to mortgage, encumbrance or create charge on the property in favour of any bank or financial institution for raising the funds for the project. In the absence of possession such powers cannot be given. Clause (aa) clearly authorized the THDC to sell, transfer, lease, license the premises which were to be constructed on ownership basis and further to 'receive moneys against such sale etc. and to issue final receipt. Nowhere it is mentioned in this clause that such sale deeds were to be signed by the society as confirming party. In the absence of possession it is just not possible for the developer to sell and transfer the premises which were to be constructed. This is further clarified by clauses (bb) and (cc) which gives the power of execution of conveyance and other documents involving in respect of the premises to be constructed without any interference of the society being made confirming party. All these clauses clearly show that the possession was given by the society and/or its members to THDC/HASH on the execution of irrevocable power of attorney. Through these clauses of JDA and irrevocable power of attorney the developer was able to completely control the property and make use of it not only for the purpose of development but also for the purpose of amalgamation, sale, mortgage, etc. [Para 55] Tribunal does not think in the present case the assessee has given only a license as claimed by learned counsel of the assessee because of the powers of selling, amalgamating, etc., mentioned in the JDA and irrevocable special power of attorney. In the present case many more powers have been given to THDC in addition to powers which have been described in that judgment and power of attorney has been described as irrevocable in clause 6.7 of JDA. Therefore, it is clear that the assessee's plea that the possession was to be given only at the time of registration of the JDA, is not correct. Once irrevocable power was given then it cannot be said that the possession was not given. [Para 56] Interpretation of clause (v) of section 2(47) should be made in the light of Heydon's rule. There is no force in the objection of the counsel of the assessee that this clause should be interpreted on general rules of interpretation particularly in the light of the fact that no reason has been given for the same. Heydon's rule has been applied by the Indian Courts many times. [Para 57] Going by the Heydon's rule of interpretation if one analyze the purpose of clause (v) of section 2(47) then it would emerge that law before making the amendment was that capital gain could be charged only if a transfer has been effected and transfer was interpreted by various Courts including the decision of Hon'ble Supreme Court in case of Alapati Venkatramian v. CIT (supra) that proper conveyance of the property has been made under the common law. The mischief was with regard to transfer in the sense that there was common practice that properties were being transferred in such a manner that transferee could enjoy the benefit of the property without execution of the conveyance deed. Thirdly one need to examine the remedy which was insertion of clauses (v) and (vi) so that cases of giving possession of the property, were also covered by the definition of transfer. Fourthly, true reason for this amendment was to plug a loophole in the law. Therefore, considering the purpose of insertion of clauses (v) and (vi) of section 2(47) and various clauses of power of attorney and JDA it becomes absolutely clear that the society has handed over the possession of the property to THDC/HASH. [Para 58] Second important contention on behalf of the assessee is that JDA was executed on 25-2-2007 and if possession was given then how the assessee was having possession in terms of later sale deeds executed on 2-3-2007 and 25-4-2007. The society has executed two sale deeds for conveyance of parts of the total land. First sale deed has been executed on 2-3-2007 for 3.08 acres. [Para 59] According to the counsel of the assessee if society had already given the possession then the society would not have/had possession on 2-3-2007 of the land. At face value this argument looks attractive but when examined in terms of possession which has been explained in case of Jasbir Singh Sarkaria (supra), actual reality will come forward. [Para 60] Mere recitation in the sale deed to the effect that the society was owner of and in possession of land measuring 21.2 acres, does not show that the society was having actual possession. What the society was having is only ownership right and the possession was only concurrent as the possessory right. Further, it is a standard clause in the conveyance deed and it does not prove or indicate anything except that a portion of land measuring 3.08 acres, has been sold/conveyed to the developer. In the light of this position, this contention is rejected. [Para 61] There is no force in the next contention of the counsel of the assessee that possession if at all was given should be held to be only a license as defined in section 52 of Indian Easement Act because clearly as per section 52 of this Act, where one person grants to another or many other persons to do something upon immovable property which in the absence of such right would be unlawful. [Para 62] Here in the present case the right has not been given for the purpose of doing something but all the possible rights in property including right to sell, right to amalgamate the project with another project in the adjoining area which may be acquired later, right to mortgage etc. clearly show that rights given by the society are much more larger than what is covered in the term 'license'. [Para 63] Fourth contention is that the money received at the time of execution of JDA can be termed as advance and whatever money has been received has already been shown as capital gain. There is no force in this submission because section 45 clearly provide for taxing of profits and gains arising from the transfer. When section 45 is read along with section 48 it becomes clear that whole of the consideration which is received or accrued is to be taxed once capital asset is transferred in a particular year. [Para 64] The fifth contention made by the counsel for the assessee was that since section 53A of the TP Act itself has undergone amendment with effect from 24-9-2001 by which the agreement referred to in that section is required to be registered and therefore, now in section 2(47)(v) only the amended provisions can be read. There is no force in this contention. It is well known that section 53A of the TP Act was passed on equitable doctrine so as to protect the taking over or retention of the possession by the transferee. It was not a source by which title of immovable property could be acquired. [Para 69] A plain reading of the provision of section 53 of Transfer of property Act, shows that it provides a safety measure or a shield in the hands of the transferee to protect the possession of any property which has been given by the transferor as lawful possession under a particular agreement of sale. This position of law was incorporated in the definition of 'transfer' by insertion of clauses (v) and (vi) in section 2(47). It is important to note that clause (v) uses the expression 'contract of the nature referred to in section 53A of TP Act, therefore, clearly the idea is that an agreement which provides some defense in the hands of transferee was incorporated under the definition of transfer' in the Income Tax Act. Now originally section 53A of TP Act provided that even if 'the contract though required to be registered has not been registered', which means the right of defending the possession was available even if the contract was not registered but by Amendment Act 48 of 2001, the expression 'though required to be registered has not been registered', has been omitted which means for the purpose of possession under section 53A of TP Act, a person has to prove that possession has been given under a registered agreement. In other words, now under section 53A of to Act, the agreement referred is required to be registered. This requirement cannot be read in clause (v) of section 2(47) because that refers only to the contract of the nature of section 53A of TP Act without going into the controversy whether such agreement is required to be registered or not. [Para 70] In case of clause (v) of section 2(47), clearly the expression used is 'contract of the nature referred to in section 53A of TP Act', which means it is not a case of incorporation of one piece of legislation into another piece of legislation. If that was the intention of the Parliament, obviously clause (v) would contain the expression 'contract as defined under section 53A of TP Act, 1882'. Further, it is settled position of law that any interpretation which could render a particular provision redundant should be avoided. If the contention of the counsel was to be accepted, obviously the provisions of clause (v) of section 2(47) would become redundant in the sense that registration of agreement would again be made compulsory but since properties were being sold in the market on 'power of attorney' basis through unregistered agreements which would make this provision redundant. This position Tribunal has already discussed earlier while discussing the Heydoris rule in the interpretations of this clause. [Para 73] Thus, it is clear that non-registration of agreement cannot lead to the conclusion that provision of section 2(47)(v) is not applicable. [Para 74] In view of this legal position, this contention is rejected. [Para 74] There is no quarrel with the proposition that for invoking section 53A of TP Act read with clause (v) of section 2(47), the transferee has to perform or is willing to perform his part of the contract. [Para 78] Now coming to the facts, firstly it was contended that developer i.e. transferee has not obtained various permissions which were required to be taken by the developer as per clauses 3.1, 7.9, 8.4 and 8.6 of the JDA. This is not correct as pointed out by the CIT-Departmental Representative that assessee had already got the municipal plan sanctioned but in the meantime PIL was filed before the Hon'ble Punjab & Haryana High Court against the implementation of the project. Initially, the construction was banned by the Hon'ble High Court. However, later on it was observed in the CWP No. 20425 of 2010 and as clarified by the order of the Hon'ble Supreme Court that refusal of sanction under the Environment (Protection) Act, the society has sought a review of the order because the findings arrived were ex parte. No order in the matter has been passed by the competent authority perhaps because of the order of High Court. In the interim order passed in the PIL it has been clarified by the Hon'ble Supreme Court vide order dt. 31-1-2012 permitting the concerned authorities under the different statutes governing the matter to their respective jurisdiction to be decided in accordance with law. Thus, it becomes clear that developer i.e. THDC has applied for various permissions before the relevant authorities and in some cases permission were declined on ex parte basis and in some cases the same were declined in view of the High Court order banning the construction. After the clarification of the order of the High Court by Hon'ble Supreme Court by order dt. 31-1-2012, the authorities have already been permitted to examine the issue on merits under various laws. Further, in the JDA there is a clause 26 which deals with the force majeure clauses. [Para 81] The combined reading of these clauses shows that if any of the party could not perform its part of the obligation because of the unforeseen circumstances which included Government directions, Court orders, injunctions etc., such party would not be liable to other party. In view of force majeure clause which included Court injunction it cannot be said that THDC is not willing to perform its obligation. In fact developers i.e. THDC and HASH were perusing the issue of permissions/sanctions vigorously. These aspects become further clear if the judgment of the Hon'ble Punjab & Haryana High Court in CWP No. 20425 of 2010 vide order dt. 26-3-2012. [Para 82] The combined reading of the paras of the order of Hon'ble High Court clearly shows that developers THDC and HASH i.e. transferee have made their sincere efforts for obtaining the necessary permissions/ sanctions which were required under the JDA. However, some of the sanctions could not be taken in time because of the litigation by way of PIL but since none of the parties was liable to the other party in view of the clause 26 dealing with force majeure it cannot be said that developer was not willing to perform his part of contract. In any case no specific evidence has been shown us to prove that THDC/HASH were declining to perform particular obligation provided in JDA. In view of this discussion, it cannot be said that transferee i.e. developer THDC/HASH is not willing to perform his part of contract. [Para 83] Secondly, it was contended that payments have not been made as per the JDA. However, again this is not correct. As per clause 4(iv) of the JDA, the instalment for Rs. 31,92,.75,000 was required to be paid. [Para 84] The careful reading of the said clause of the JDA would show this payment was required to be made within a period of six months from the date of execution of this agreement or within two months from the date of approval of plan/sanction and drawing grant of final license to develop whereupon the construction can commence, whichever is later. Thus, this instalment was dependent on two contingenciesâ€”first the expiration of a period of six months from the date of agreement or alternatively on the expiration of a period of two months from the date of approval of plans/designs drawing, etc., leading to grant of final licenses which can lead to commencement of construction, whichever is later. The matter was taken up by way of PIL by certain citizens and administration of the Union Territory before the Hon'ble High Court which initially stayed the sanction of such plan, etc. This led to situation where construction could not be commenced and hence payment was not required to be made in view of the pending litigation. The clauses of force majeure came into operation and therefore, it cannot be said that the developer is not willing to perform its part of the contract. In any case there is no default on the part of the developer as payment was not yet due as per el. 4(i)/(iv) of JDA. [Para 85] This position was informed to the society by letter dt. 4-2-2011 by HASH Builders, dealing with the additional evidence. Through this letter it has been clearly stated that since permission is pending from the Ministry of Environment and Forest Department and therefore, constructions could not commence. These permissions were pending because of the PIL filed before the Hon'ble Punjab & Haryana High Court. All these facts clearly show that in view of clause 4.1(iv) read with clause 26(v) of the JDA, HASH Builders were not required to make the payment and it cannot be said that they were not willing to perform their part of the contract on this aspect. Therefore, this contention is rejected. [Para 86] The plain reading of the provision of section 2(47)(vi) shows that any transaction by way of becoming a member or acquiring shares in the co-operative society or shares in the company which has the effect of transferring or enabling the enjoyment of any immoveable property would be covered by the definition of transfer. In the present case initially the members of the society were holding shares in the society for ownership of plot of 500 sq. yd. or 1,000 sq. yd. This membership was surrendered to the society vide resolution of the society passed in the executive committee (meeting) on 4-1-2007 which was later ratified in the general body meeting of the society on 25-1-2007, so that the society could enter into JDA. In the JDA the society has agreed to transfer the land. Therefore, technically it can be said that the developer, i.e. THDC/HASH has purchased the membership of the members in the society which would lead to enjoyment of the property and in that technical sense, clause (vi) of section 2(47) is applicable. [Para 88] Eighth contention is that since the society has transferred the land through JDA on a pro rata basis, therefore, only whatever money is received against which sale deeds have also been executed, can be taxed and notional income i.e. the money to be received later, cannot be taxed. In this regard reliance was placed on certain Supreme Court decisions and other cases for the proposition that notional income cannot be taxed. There is no need to discuss the cases relied on by the counsel of the assessee because it is settled position of law that no notional income can be taxed. Though there is no quarrel that it is a settled principle of law that notional income cannot be taxed but in case of capital gain, section 45 which is charging section and section 48 which is computation section, makes it absolutely clear that rigor of tax in case of capital gain would come into play on the transfer of capital asset and total consideration which is arising on such transfer, has to be taxed. Section 48 clearly talks about full consideration received or accruing as result of transfer. [Para 89] Second aspect of this contention was that if consideration which has not been received was to be taxed then the assessee would be deprived for claiming exemption under section 54 and section 54EC. As observed above as per section 45 read with section 48 whole of the consideration, received or accrued has to be taxed. Every person is supposed to know the law and if the transaction is structured in such a way for the transfer of capital asset that some of the consideration would be received later then such person is supposed to know the consequences of the denial of such benefits. However, if the section is interpreted in the manner suggested by the counsel of the assessee then no person would pay capital gain tax on transfer of a property. [Para 90] This kind of interpretation cannot be made while interpreting section 45 read with section 48 by invoking the rule that there cannot be any tax on notional receipt. Generally speaking it is only the real income which can be taxed. [Para 90] The position of law makes it absolutely clear that theory of real income is subject to the provisions of the Act and whenever any specific provision of the Act is there for charging of a particular item of income, then the same has to be charged accordingly. It may be sometimes hard to the assessees but again it has been held in numerous decisions that fiscal statutes have to be interpreted on the basis of language used and there is no scope for equity or intent. [Para 95] From clause 4 it becomes absolutely clear that each member having 500 sq. yd. of plot was entitled to receive one furnished flat measuring 2,250 sq. ft. and members having 1,000 sq. yd. flat were entitled to receive two furnished flats. Thus upon execution of the JDA vested right came to such members to receive such flats. Once this vested right arises out of the above contract it can easily be said that this right has also accrued to the assessee. Clause 4.2 makes it absolutely clear that developer i.e. THDC/HASH was to allot the letters of allotment within 45 days from final sanction from the competent authority and such flats were part of entire consideration. Merely because such allotment letter has not been given because of sanctions/permissions could not be obtained because of PIL before the Hon'ble Punjab & Haryana High Court, it cannot be said that such right has not accrued. Though it may be hard on the assessee but it is well settled that taxation and equity are strangers. [Para 98] Ninth contention is that the assessee has already terminated the agreement and has revoked the power of attorney has no force in this submissions. [Para 100] The reading of the clause 14 would show that power of termination has been given in many circumstances to THDC vide clause 14(f), (ii) and (iii). The power for termination by the owner has been mentioned in cl. 14(iv) only. Reading of this clause would show that right to terminate with the owner, i.e., the society, was available only in case of default in making the payment. There was no default on the part of developer i.e. THDC/HASH in making the payment, therefore, the assessee had no right to terminate the contract. In any case one further find that clause 20 of the JDA refers to arbitration and it is clearly provided that all the disputes under it should be referred to the arbitration. Therefore, if the society had some grievance it was duty bound to give a notice for appointment of an arbitrator to the developer. In the absence of such notice the termination will not stand scrutiny of law. Here, it is also pertinent to note that though it was stated that irrevocable power of attorney has been revoked and some documents have been filed before this Tribunal for revocation but clause 6.7 of the JDA clearly provides that such power of attorney cannot be revoked. [Para 103] The next contention of the assessee is that even if the whole consideration has to be taxed then value of the flats cannot be taken at Rs. 4,500 per sq. ft. It is also pointed out that in view of the agreement between the HASH and THDC consideration has been shown at Rs. 2,000 per sq. ft. for 126 flats whereas it is Rs. 4,500 per sq. ft. for three flats. There is no force in these submissions. The assessee has filed along with the written submissions copy of the addendum of agreement between THDC and HASH by joint developer (at pp. 265 and 266) and this issue is discussed in clause 5. [Para 108] The clause 5 clearly shows that HASH was entitled to total proceeds of Rs. 225.76 crores out of total proceeds of the project which were agreed to be shared by THDC and HASH but the portion of HASH includes a sum of Rs. 58.88 crores which was required to be spent towards construction of 126 flats equivalent to 2,83,500 sq. ft. area which were to be allotted to the members of the society. Thus, it is clear that figure of Rs. 2,000 per sq. ft. represents only the cost of constructions to be incurred by THDC which was debited to the account of HASH. Further, HASH has agreed to purchase three flats @ 4,500 per sq. ft. Some news reports were quoted in one of the cases to show that various brokers had issued various advertisements for sale of these flats and these flats were ultimately to be sold at Rs. 7,000 to Rs. 10,000 per sq. ft. This also becomes clear from the addendum to agreement in terms of total proceeds of 1,272 crores. In any case if the cost of construction is Rs. 2,000, then cost of land which has been paid to the society is also to be added to the cost of the flat because this portion of consideration in any case was received or to be received later by the society in cash. [Para 109] Considering the present market value of the flats in and around Chandigarh area which is Rs. 4,000 to 12,000 per sq. ft. value of the flat at Rs. 4,500 per sq. ft. is absolutely fair. In any case M/s HASH has agreed to purchase the flats at this rate from M/s THDC. It may be noted as pointed out by the Departmental Representative for the Revenue some of the news report clippings filed by various assessees clearly show that flats were booked in the 'Tata Camleot' (this was the name which was given to the project which was to be developed on the land of two societies) in the pre-launch offer in the range of Rs. 7,500 to 8,000 per sq. ft. It is a common knowledge that rates in pre-launch offer are lower than the rates when bookings open for the public. Considering these facts AO has estimated the value of the flats on most reasonable basis. In view of these observations this contention is rejected. [Para 109] The society was formed by various members for the purpose of purchase of land and to develop the same and they allotted the plots to the members. The society purchased 21.2 acres of land and ultimately plots in the sizes of 500 sq. yd. and 1,000 sq. yd. were allotted to various members. When the proposal for development of property came it was resolved in the general body meeting of the society that the members would surrender their rights in favour of the society so that the society can enter into the JDA. Thus it is clear that the society has entered into JDA on behalf of the members. It is the members who are owning the plots and the society was only a facilitator. It becomes clear from the JDA that payment for consideration was to be made to an individual plot holder and in fact consideration was mentioned in terms of per member. Each member holding 500 sq. yd. plot was to receive a sum of Rs. 82,50,000 and one fully furnished flat measuring 2,250 sq. ft. and the members holding 1,000 sq. yd. plot were to receive monetary consideration of Rs. 1.65 crore plus two flats measuring 2,250 sq. ft. In fact the payment of cheques is made by HASH by issuing cheques in the name of individual member and not the society. This fact stands admitted because assessee has filed a return declaring capital gain against part money received against his plot. Thus, it becomes clear that it is the individual member who is liable to tax in respect of transfer to plots and the society being only a facilitator or post office. [Para 113] SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2014 TaxPub(DT) 3762 (Chd-Trib) : (2014) 164 TTJ 0592 : (2014) 108 DTR 0067

Charanjit Singh Atwal & Ors. v. ITO & Ors.

INCOME TAX ACT, 1961

--Capital gains--Transfer under section 2(47)(v)Land transferred to developer under property development agreement--While making discreet enquiries in the cases of housing societies, it was gathered that housing society consisting of 95 present and Ex-MLAs of Punjab Legislative Assembly were owner of the 21.2 acres of land. The housing society of MLAs entered into a tripartite Joint Development Agreement 'JDA') with developers HASH and M/s . ('THDC'). By virtue of this tripartite agreement it was agreed upon among these parties that the society which is owner of 21.2 acres of land, shall transfer its land to THDC/HASH in lieu of monetary consideration and consideration in kind. As per the agreement each member of the society having a plot of 500 sq. yd. in the society was to receive monetary consideration of Rs. 82,50,000 and the member holding plot of 1,000 sq. yd. was to receive a sum of Rs. 1.65 crores. In addition to this member holding a plot of 500 sq. yd. was to receive fully furnished flat measuring 2,250 sq. ft. to be constructed by THDC/HASH and members having 1,000 sq. yd. were to get two such flats. According to the AO total consideration to be received by all the members was Rs. 1,06,42,35,000 and furnished flats as mentioned above. The assessee was also a member and president of the society and was owner of a plot measuring 1,000 sq. yd. Therefore, as per JDA, he was to receive Rs. 1.65 crore as monetary consideration and two furnished flats as consideration in kind and the cost of the same as per AO was Rs. 2,02,50,000 and total consideration would be Rs. 3,67,50,000. According to the AO since the society has assigned all rights in 21.2 acres of land belonging to the society in terms of JDA to THDC/HASH and also handed over the physical vacant possession of the property to THDC/HASH, therefore, the assessee became liable to capital gain tax on his share of consideration. Capital gain was to be charged in the hands of the assessee in assessment year 2007-08 by taking full value of the construction at Rs. 3,67,50,000. Held: The plain reading of the provision of section 2(47)(vi) shows that any transaction by way of becoming a member or acquiring shares in the co-operative society or shares in the company which has the effect of transferring or enabling the enjoyment of any immoveable property would be covered by the definition of transfer. In the present case initially the members of the society were holding shares in the society for ownership of plot of 500 sq. yd. or 1,000 sq. yd. In the JDA the society has agreed to transfer the land. Therefore, technically it can be said that the developer, i.e., THDC/HASH has purchased the membership of the members in the society which would lead to enjoyment of the property and in that technical sense, clause (vi) of section 2(47) is applicable. Section 45 which is charging section and section 48 which is computation section, makes it absolutely clear that rigor of tax in case of capital gain would come into play on the transfer of capital asset and total consideration which is arising on such transfer, has to be taxed. Section 48 clearly talks about full consideration received or accruing as result of transfer. Once this vested right arises out of the above contract it can easily be said that this right has also accrued to the assessee. Clause 4.2 makes it absolutely clear that developer i.e. Once this vested right arises out of the above contract it can easily be said that this right has also accrued to the assessee. Clause 4.2 makes it absolutely clear that developer, i.e., THDC/HASH was to allot the letters of allotment within 45 days from final sanction from the competent authority and such flats were part of entire consideration. Merely because such allotment letter has not been given because of sanctions/permissions could not be obtained because of PIL before the Hon'ble Punjab & Haryana High Court, it cannot be said that such right has not accrued. Though it may be hard on the assessee but it is well settled that taxation and equity are strangers.

It is very clear that in cases where an arrangement had been entered into by an assessee in terms of clause (v) of section 2(47) which has effect of handing over the possession then the transfer is said to have been taken place on the date of entering into such arrangement. [Para 37] In case of any arrangements or transactions whereby the other party becomes entitled to enjoy the property then that date of such transaction itself needs to be construed as the date of transfer. [Para 38] Irrevocable general power of attorney which leads to overall control of the property in the hands of the developer, even if that means no exclusive possession by the developer would constitute transfer. It can be said that it has to be construed as 'possession' in terms of clause (v) of section 2(47). [Para 43] The first major contention of the counsel of the assessee is that the possession was not given by the society because according to him as per clause 2.1 of the JDA the possession of the property was to be handed over simultaneously to the execution and registration of JDA and since the JDA was not registered, therefore, the possession was not given. Tribunal could not accept this contention because in 'power of attorney' transactions, it is not necessary to register the JDA if a special power of attorney has been given and same is registered. Secondly clause 9.3 of the JDA as reproduced above clearly shows that original title deeds which have been mentioned along with the possession in para 2.1 which according to the counsel of the assessee were to be handed over simultaneously to execution and registration of the JDA, is not correct because in clause 9.3 clearly mentions that original title deeds of the property have been handed over to the THDC at the time of signing of this agreement because in clause 9.3 there is no mention about registration of JDA. [Para 52] Special power of attorney which has been executed on 26-2-2007 has been registered also. The irrevocable special power of attorney has been executed as provided in clause 6.7 of the JDA. [Para 53] It is pertinent to note that power/authorization which have been given by the society to the developer, were in fact required to be given in terms of various clauses of the JDA. Clause 6.7 reproduced above itself shows that the society was required to give powers to raise finance to mortgage the property and even the registration of charge was also required to be given. Further through clause 6.15 it was agreed that documents of original title deeds of the property would be handed over to the developer i.e. THDC/HASH so that same can be used in furtherance of development of the project as well as security for the money paid by the owner. Through clause 6.24 it was agreed that developer THDC/HASH was always permitted by owner to amalgamate the property with any other contiguous, adjacent and adjoining land and the properties wherein developmental and or other rights, benefits and interest were acquired by the developer or would be acquired in future. This clearly shows that the society was under obligation in terms of agreement itself to allow the developer to amalgamate the project. Towards the end of clause 6.24 it has been clearly stated that in the event of termination of JDA, provision of clause 6 would be surviving which clearly shows that developer continues to be in possession for the purpose of development, mortgage etc. even after termination. Clause 8 which describes the obligation and undertaking of the THDC/HASH and provides specifically that all environmental clearance shall be obtained by THDC/HASH out of its own sources. Thus it was clearly understood by the parties that requisite environmental clearances had to be obtained before start of the project. Clause 10 again casts specific obligation on the owner society to give consent to THDC/HASH to raise finance for the development and completion of the project on the security of the property by way of mortgaging the property. Thus, whatever power/authorization have been given through irrevocable special power of attorney are emanating from the terms and conditions agreed to among the parties from the JDA. [Para 54] The combined reading of the above clauses of the irrevocable special power of attorney and JDA clearly shows that the developer was authorized to enter upon the property for not only for the purpose of development but other purposes also. THDC was authorized to amalgamate the project with any other project in the adjacent area or adjoining area as per clause (t) of the special power of attorney. If the possession was never given to the developer by the society then how the developer could amalgamate the project with another project which may be acquired latter in the adjoining area. Through clause (w) THDC was authorized to hand over the possession of property or portion thereof to the authority to whom the same is required. In large housing society projects sometimes municipal authorities take some portion of land for the purpose of roads, parks or other general utility purposes like installation of electricity transformers and before sanctioning the plans the developer is required to undertake that such portions of land would be given for such a common purpose. If possession was not given then how THDC was authorized to hand over such land or portions thereof which have not been identified in the JDA out of the total land. Similarly, through clause (y) THDC has been authorized to mortgage, encumbrance or create charge on the property in favour of any bank or financial institution for raising the funds for the project. In the absence of possession such powers cannot be given. Clause (aa) clearly authorized the THDC to sell, transfer, lease, license the premises which were to be constructed on ownership basis and further to 'receive moneys against such sale etc. and to issue final receipt. Nowhere it is mentioned in this clause that such sale deeds were to be signed by the society as confirming party. In the absence of possession it is just not possible for the developer to sell and transfer the premises which were to be constructed. This is further clarified by clauses (bb) and (cc) which gives the power of execution of conveyance and other documents involving in respect of the premises to be constructed without any interference of the society being made confirming party. All these clauses clearly show that the possession was given by the society and/or its members to THDC/HASH on the execution of irrevocable power of attorney. Through these clauses of JDA and irrevocable power of attorney the developer was able to completely control the property and make use of it not only for the purpose of development but also for the purpose of amalgamation, sale, mortgage, etc. [Para 55] Tribunal does not think in the present case the assessee has given only a license as claimed by learned counsel of the assessee because of the powers of selling, amalgamating, etc., mentioned in the JDA and irrevocable special power of attorney. In the present case many more powers have been given to THDC in addition to powers which have been described in that judgment and power of attorney has been described as irrevocable in clause 6.7 of JDA. Therefore, it is clear that the assessee's plea that the possession was to be given only at the time of registration of the JDA, is not correct. Once irrevocable power was given then it cannot be said that the possession was not given. [Para 56] Interpretation of clause (v) of section 2(47) should be made in the light of Heydon's rule. There is no force in the objection of the counsel of the assessee that this clause should be interpreted on general rules of interpretation particularly in the light of the fact that no reason has been given for the same. Heydon's rule has been applied by the Indian Courts many times. [Para 57] Going by the Heydon's rule of interpretation if one analyze the purpose of clause (v) of section 2(47) then it would emerge that law before making the amendment was that capital gain could be charged only if a transfer has been effected and transfer was interpreted by various Courts including the decision of Hon'ble Supreme Court in case of Alapati Venkatramian v. CIT (supra) that proper conveyance of the property has been made under the common law. The mischief was with regard to transfer in the sense that there was common practice that properties were being transferred in such a manner that transferee could enjoy the benefit of the property without execution of the conveyance deed. Thirdly one need to examine the remedy which was insertion of clauses (v) and (vi) so that cases of giving possession of the property, were also covered by the definition of transfer. Fourthly, true reason for this amendment was to plug a loophole in the law. Therefore, considering the purpose of insertion of clauses (v) and (vi) of section 2(47) and various clauses of power of attorney and JDA it becomes absolutely clear that the society has handed over the possession of the property to THDC/HASH. [Para 58] Second important contention on behalf of the assessee is that JDA was executed on 25-2-2007 and if possession was given then how the assessee was having possession in terms of later sale deeds executed on 2-3-2007 and 25-4-2007. The society has executed two sale deeds for conveyance of parts of the total land. First sale deed has been executed on 2-3-2007 for 3.08 acres. [Para 59] According to the counsel of the assessee if society had already given the possession then the society would not have/had possession on 2-3-2007 of the land. At face value this argument looks attractive but when examined in terms of possession which has been explained in case of Jasbir Singh Sarkaria (supra), actual reality will come forward. [Para 60] Mere recitation in the sale deed to the effect that the society was owner of and in possession of land measuring 21.2 acres, does not show that the society was having actual possession. What the society was having is only ownership right and the possession was only concurrent as the possessory right. Further, it is a standard clause in the conveyance deed and it does not prove or indicate anything except that a portion of land measuring 3.08 acres, has been sold/conveyed to the developer. In the light of this position, this contention is rejected. [Para 61] There is no force in the next contention of the counsel of the assessee that possession if at all was given should be held to be only a license as defined in section 52 of Indian Easement Act because clearly as per section 52 of this Act, where one person grants to another or many other persons to do something upon immovable property which in the absence of such right would be unlawful. [Para 62] Here in the present case the right has not been given for the purpose of doing something but all the possible rights in property including right to sell, right to amalgamate the project with another project in the adjoining area which may be acquired later, right to mortgage etc. clearly show that rights given by the society are much more larger than what is covered in the term 'license'. [Para 63] Fourth contention is that the money received at the time of execution of JDA can be termed as advance and whatever money has been received has already been shown as capital gain. There is no force in this submission because section 45 clearly provide for taxing of profits and gains arising from the transfer. When section 45 is read along with section 48 it becomes clear that whole of the consideration which is received or accrued is to be taxed once capital asset is transferred in a particular year. [Para 64] The fifth contention made by the counsel for the assessee was that since section 53A of the TP Act itself has undergone amendment with effect from 24-9-2001 by which the agreement referred to in that section is required to be registered and therefore, now in section 2(47)(v) only the amended provisions can be read. There is no force in this contention. It is well known that section 53A of the TP Act was passed on equitable doctrine so as to protect the taking over or retention of the possession by the transferee. It was not a source by which title of immovable property could be acquired. [Para 69] A plain reading of the provision of section 53 of Transfer of property Act, shows that it provides a safety measure or a shield in the hands of the transferee to protect the possession of any property which has been given by the transferor as lawful possession under a particular agreement of sale. This position of law was incorporated in the definition of 'transfer' by insertion of clauses (v) and (vi) in section 2(47). It is important to note that clause (v) uses the expression 'contract of the nature referred to in section 53A of TP Act, therefore, clearly the idea is that an agreement which provides some defense in the hands of transferee was incorporated under the definition of transfer' in the Income Tax Act. Now originally section 53A of TP Act provided that even if 'the contract though required to be registered has not been registered', which means the right of defending the possession was available even if the contract was not registered but by Amendment Act 48 of 2001, the expression 'though required to be registered has not been registered', has been omitted which means for the purpose of possession under section 53A of TP Act, a person has to prove that possession has been given under a registered agreement. In other words, now under section 53A of to Act, the agreement referred is required to be registered. This requirement cannot be read in clause (v) of section 2(47) because that refers only to the contract of the nature of section 53A of TP Act without going into the controversy whether such agreement is required to be registered or not. [Para 70] In case of clause (v) of section 2(47), clearly the expression used is 'contract of the nature referred to in section 53A of TP Act', which means it is not a case of incorporation of one piece of legislation into another piece of legislation. If that was the intention of the Parliament, obviously clause (v) would contain the expression 'contract as defined under section 53A of TP Act, 1882'. Further, it is settled position of law that any interpretation which could render a particular provision redundant should be avoided. If the contention of the counsel was to be accepted, obviously the provisions of clause (v) of section 2(47) would become redundant in the sense that registration of agreement would again be made compulsory but since properties were being sold in the market on 'power of attorney' basis through unregistered agreements which would make this provision redundant. This position Tribunal has already discussed earlier while discussing the Heydoris rule in the interpretations of this clause. [Para 73] Thus, it is clear that non-registration of agreement cannot lead to the conclusion that provision of section 2(47)(v) is not applicable. [Para 74] In view of this legal position, this contention is rejected. [Para 74] There is no quarrel with the proposition that for invoking section 53A of TP Act read with clause (v) of section 2(47), the transferee has to perform or is willing to perform his part of the contract. [Para 78] Now coming to the facts, firstly it was contended that developer i.e. transferee has not obtained various permissions which were required to be taken by the developer as per clauses 3.1, 7.9, 8.4 and 8.6 of the JDA. This is not correct as pointed out by the CIT-Departmental Representative that assessee had already got the municipal plan sanctioned but in the meantime PIL was filed before the Hon'ble Punjab & Haryana High Court against the implementation of the project. Initially, the construction was banned by the Hon'ble High Court. However, later on it was observed in the CWP No. 20425 of 2010 and as clarified by the order of the Hon'ble Supreme Court that refusal of sanction under the Environment (Protection) Act, the society has sought a review of the order because the findings arrived were ex parte. No order in the matter has been passed by the competent authority perhaps because of the order of High Court. In the interim order passed in the PIL it has been clarified by the Hon'ble Supreme Court vide order dt. 31-1-2012 permitting the concerned authorities under the different statutes governing the matter to their respective jurisdiction to be decided in accordance with law. Thus, it becomes clear that developer i.e. THDC has applied for various permissions before the relevant authorities and in some cases permission were declined on ex parte basis and in some cases the same were declined in view of the High Court order banning the construction. After the clarification of the order of the High Court by Hon'ble Supreme Court by order dt. 31-1-2012, the authorities have already been permitted to examine the issue on merits under various laws. Further, in the JDA there is a clause 26 which deals with the force majeure clauses. [Para 81] The combined reading of these clauses shows that if any of the party could not perform its part of the obligation because of the unforeseen circumstances which included Government directions, Court orders, injunctions etc., such party would not be liable to other party. In view of force majeure clause which included Court injunction it cannot be said that THDC is not willing to perform its obligation. In fact developers i.e. THDC and HASH were perusing the issue of permissions/sanctions vigorously. These aspects become further clear if the judgment of the Hon'ble Punjab & Haryana High Court in CWP No. 20425 of 2010 vide order dt. 26-3-2012. [Para 82] The combined reading of the paras of the order of Hon'ble High Court clearly shows that developers THDC and HASH i.e. transferee have made their sincere efforts for obtaining the necessary permissions/ sanctions which were required under the JDA. However, some of the sanctions could not be taken in time because of the litigation by way of PIL but since none of the parties was liable to the other party in view of the clause 26 dealing with force majeure it cannot be said that developer was not willing to perform his part of contract. In any case no specific evidence has been shown us to prove that THDC/HASH were declining to perform particular obligation provided in JDA. In view of this discussion, it cannot be said that transferee i.e. developer THDC/HASH is not willing to perform his part of contract. [Para 83] Secondly, it was contended that payments have not been made as per the JDA. However, again this is not correct. As per clause 4(iv) of the JDA, the instalment for Rs. 31,92,.75,000 was required to be paid. [Para 84] The careful reading of the said clause of the JDA would show this payment was required to be made within a period of six months from the date of execution of this agreement or within two months from the date of approval of plan/sanction and drawing grant of final license to develop whereupon the construction can commence, whichever is later. Thus, this instalment was dependent on two contingenciesâ€”first the expiration of a period of six months from the date of agreement or alternatively on the expiration of a period of two months from the date of approval of plans/designs drawing, etc., leading to grant of final licenses which can lead to commencement of construction, whichever is later. The matter was taken up by way of PIL by certain citizens and administration of the Union Territory before the Hon'ble High Court which initially stayed the sanction of such plan, etc. This led to situation where construction could not be commenced and hence payment was not required to be made in view of the pending litigation. The clauses of force majeure came into operation and therefore, it cannot be said that the developer is not willing to perform its part of the contract. In any case there is no default on the part of the developer as payment was not yet due as per el. 4(i)/(iv) of JDA. [Para 85] This position was informed to the society by letter dt. 4-2-2011 by HASH Builders, dealing with the additional evidence. Through this letter it has been clearly stated that since permission is pending from the Ministry of Environment and Forest Department and therefore, constructions could not commence. These permissions were pending because of the PIL filed before the Hon'ble Punjab & Haryana High Court. All these facts clearly show that in view of clause 4.1(iv) read with clause 26(v) of the JDA, HASH Builders were not required to make the payment and it cannot be said that they were not willing to perform their part of the contract on this aspect. Therefore, this contention is rejected. [Para 86] The plain reading of the provision of section 2(47)(vi) shows that any transaction by way of becoming a member or acquiring shares in the co-operative society or shares in the company which has the effect of transferring or enabling the enjoyment of any immoveable property would be covered by the definition of transfer. In the present case initially the members of the society were holding shares in the society for ownership of plot of 500 sq. yd. or 1,000 sq. yd. This membership was surrendered to the society vide resolution of the society passed in the executive committee (meeting) on 4-1-2007 which was later ratified in the general body meeting of the society on 25-1-2007, so that the society could enter into JDA. In the JDA the society has agreed to transfer the land. Therefore, technically it can be said that the developer, i.e. THDC/HASH has purchased the membership of the members in the society which would lead to enjoyment of the property and in that technical sense, clause (vi) of section 2(47) is applicable. [Para 88] Eighth contention is that since the society has transferred the land through JDA on a pro rata basis, therefore, only whatever money is received against which sale deeds have also been executed, can be taxed and notional income i.e. the money to be received later, cannot be taxed. In this regard reliance was placed on certain Supreme Court decisions and other cases for the proposition that notional income cannot be taxed. There is no need to discuss the cases relied on by the counsel of the assessee because it is settled position of law that no notional income can be taxed. Though there is no quarrel that it is a settled principle of law that notional income cannot be taxed but in case of capital gain, section 45 which is charging section and section 48 which is computation section, makes it absolutely clear that rigor of tax in case of capital gain would come into play on the transfer of capital asset and total consideration which is arising on such transfer, has to be taxed. Section 48 clearly talks about full consideration received or accruing as result of transfer. [Para 89] Second aspect of this contention was that if consideration which has not been received was to be taxed then the assessee would be deprived for claiming exemption under section 54 and section 54EC. As observed above as per section 45 read with section 48 whole of the consideration, received or accrued has to be taxed. Every person is supposed to know the law and if the transaction is structured in such a way for the transfer of capital asset that some of the consideration would be received later then such person is supposed to know the consequences of the denial of such benefits. However, if the section is interpreted in the manner suggested by the counsel of the assessee then no person would pay capital gain tax on transfer of a property. [Para 90] This kind of interpretation cannot be made while interpreting section 45 read with section 48 by invoking the rule that there cannot be any tax on notional receipt. Generally speaking it is only the real income which can be taxed. [Para 90] The position of law makes it absolutely clear that theory of real income is subject to the provisions of the Act and whenever any specific provision of the Act is there for charging of a particular item of income, then the same has to be charged accordingly. It may be sometimes hard to the assessees but again it has been held in numerous decisions that fiscal statutes have to be interpreted on the basis of language used and there is no scope for equity or intent. [Para 95] From clause 4 it becomes absolutely clear that each member having 500 sq. yd. of plot was entitled to receive one furnished flat measuring 2,250 sq. ft. and members having 1,000 sq. yd. flat were entitled to receive two furnished flats. Thus upon execution of the JDA vested right came to such members to receive such flats. Once this vested right arises out of the above contract it can easily be said that this right has also accrued to the assessee. Clause 4.2 makes it absolutely clear that developer i.e. THDC/HASH was to allot the letters of allotment within 45 days from final sanction from the competent authority and such flats were part of entire consideration. Merely because such allotment letter has not been given because of sanctions/permissions could not be obtained because of PIL before the Hon'ble Punjab & Haryana High Court, it cannot be said that such right has not accrued. Though it may be hard on the assessee but it is well settled that taxation and equity are strangers. [Para 98] Ninth contention is that the assessee has already terminated the agreement and has revoked the power of attorney has no force in this submissions. [Para 100] The reading of the clause 14 would show that power of termination has been given in many circumstances to THDC vide clause 14(f), (ii) and (iii). The power for termination by the owner has been mentioned in cl. 14(iv) only. Reading of this clause would show that right to terminate with the owner, i.e., the society, was available only in case of default in making the payment. There was no default on the part of developer i.e. THDC/HASH in making the payment, therefore, the assessee had no right to terminate the contract. In any case one further find that clause 20 of the JDA refers to arbitration and it is clearly provided that all the disputes under it should be referred to the arbitration. Therefore, if the society had some grievance it was duty bound to give a notice for appointment of an arbitrator to the developer. In the absence of such notice the termination will not stand scrutiny of law. Here, it is also pertinent to note that though it was stated that irrevocable power of attorney has been revoked and some documents have been filed before this Tribunal for revocation but clause 6.7 of the JDA clearly provides that such power of attorney cannot be revoked. [Para 103] The next contention of the assessee is that even if the whole consideration has to be taxed then value of the flats cannot be taken at Rs. 4,500 per sq. ft. It is also pointed out that in view of the agreement between the HASH and THDC consideration has been shown at Rs. 2,000 per sq. ft. for 126 flats whereas it is Rs. 4,500 per sq. ft. for three flats. There is no force in these submissions. The assessee has filed along with the written submissions copy of the addendum of agreement between THDC and HASH by joint developer (at pp. 265 and 266) and this issue is discussed in clause 5. [Para 108] The clause 5 clearly shows that HASH was entitled to total proceeds of Rs. 225.76 crores out of total proceeds of the project which were agreed to be shared by THDC and HASH but the portion of HASH includes a sum of Rs. 58.88 crores which was required to be spent towards construction of 126 flats equivalent to 2,83,500 sq. ft. area which were to be allotted to the members of the society. Thus, it is clear that figure of Rs. 2,000 per sq. ft. represents only the cost of constructions to be incurred by THDC which was debited to the account of HASH. Further, HASH has agreed to purchase three flats @ 4,500 per sq. ft. Some news reports were quoted in one of the cases to show that various brokers had issued various advertisements for sale of these flats and these flats were ultimately to be sold at Rs. 7,000 to Rs. 10,000 per sq. ft. This also becomes clear from the addendum to agreement in terms of total proceeds of 1,272 crores. In any case if the cost of construction is Rs. 2,000, then cost of land which has been paid to the society is also to be added to the cost of the flat because this portion of consideration in any case was received or to be received later by the society in cash. [Para 109] Considering the present market value of the flats in and around Chandigarh area which is Rs. 4,000 to 12,000 per sq. ft. value of the flat at Rs. 4,500 per sq. ft. is absolutely fair. In any case M/s HASH has agreed to purchase the flats at this rate from M/s THDC. It may be noted as pointed out by the Departmental Representative for the Revenue some of the news report clippings filed by various assessees clearly show that flats were booked in the 'Tata Camleot' (this was the name which was given to the project which was to be developed on the land of two societies) in the pre-launch offer in the range of Rs. 7,500 to 8,000 per sq. ft. It is a common knowledge that rates in pre-launch offer are lower than the rates when bookings open for the public. Considering these facts AO has estimated the value of the flats on most reasonable basis. In view of these observations this contention is rejected. [Para 109] The society was formed by various members for the purpose of purchase of land and to develop the same and they allotted the plots to the members. The society purchased 21.2 acres of land and ultimately plots in the sizes of 500 sq. yd. and 1,000 sq. yd. were allotted to various members. When the proposal for development of property came it was resolved in the general body meeting of the society that the members would surrender their rights in favour of the society so that the society can enter into the JDA. Thus it is clear that the society has entered into JDA on behalf of the members. It is the members who are owning the plots and the society was only a facilitator. It becomes clear from the JDA that payment for consideration was to be made to an individual plot holder and in fact consideration was mentioned in terms of per member. Each member holding 500 sq. yd. plot was to receive a sum of Rs. 82,50,000 and one fully furnished flat measuring 2,250 sq. ft. and the members holding 1,000 sq. yd. plot were to receive monetary consideration of Rs. 1.65 crore plus two flats measuring 2,250 sq. ft. In fact the payment of cheques is made by HASH by issuing cheques in the name of individual member and not the society. This fact stands admitted because assessee has filed a return declaring capital gain against part money received against his plot. Thus, it becomes clear that it is the individual member who is liable to tax in respect of transfer to plots and the society being only a facilitator or post office. [Para 113]