REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 15619 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.35248 OF 2015)

Commissioner of Income Tax            … Appellant

Versus

Balbir Singh Maini           … Respondent

WITH

CIVIL APPEAL NO.  15622  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.35252 OF 2015)

CIVIL APPEAL NO.  15624  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.561 OF 2016)

CIVIL APPEAL NO. 15620 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.35250 OF 2015)

CIVIL APPEAL NO. 15639  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.585 OF 2016)

CIVIL APPEAL NO. 15637  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.583 OF 2016)

CIVIL APPEAL NO. 15621  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.35251 OF 2015)

CIVIL APPEAL NO. 15643 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.1450 OF 2016)

1

CIVIL APPEAL NO. 15623  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.499 OF 2016)

CIVIL APPEAL NO. 15657 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3170 OF 2016)

CIVIL APPEAL NO. 15650  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.1629 OF 2016)

CIVIL APPEAL NO. 15633  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.575 OF 2016)

CIVIL APPEAL NO. 15628  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.566 OF 2016)

CIVIL APPEAL NO. 15636  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.580 OF 2016)

CIVIL APPEAL NO. 15625  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.562 OF 2016)

CIVIL APPEAL NO. 15645  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.1565 OF 2016)

CIVIL APPEAL NO.  15630  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.568 OF 2016)

CIVIL APPEAL NO.  15634   OF 2017 (ARISING OUT OF SLP (CIVIL) NO.576 OF 2016)

CIVIL APPEAL NO.  15626  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.564 OF 2016)

CIVIL APPEAL NO. 15627 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.565 OF 2016)

CIVIL APPEAL NO. 15644  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.1562 OF 2016)

2

CIVIL APPEAL NO. 15641 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.587 OF 2016)

CIVIL APPEAL NO. 15631 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.572 OF 2016)

CIVIL APPEAL NO. 15635  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.577 OF 2016)

CIVIL APPEAL NO.  15649 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.1628 OF 2016)

CIVIL APPEAL NO.  15640  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.586 OF 2016)

CIVIL APPEAL NO.  15651  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.1630 OF 2016)

CIVIL APPEAL NO.  15638  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.584 OF 2016)

CIVIL APPEAL NO. 15629  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.567 OF 2016)

CIVIL APPEAL NO.  15632  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.574 OF 2016)

CIVIL APPEAL NO. 15642  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.588 OF 2016)

CIVIL APPEAL NO.  15646   OF 2017 (ARISING OUT OF SLP (CIVIL) NO.1567 OF 2016)

CIVIL APPEAL NO.  15648  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.1627 OF 2016)

CIVIL APPEAL NO. 15667  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3826 OF 2016)

3

CIVIL APPEAL NO. 15653  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3165 OF 2016)

CIVIL APPEAL NO.  15656  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3169 OF 2016)

CIVIL APPEAL NO. 15663  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3821 OF 2016)

CIVIL APPEAL NO.  15665  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3824 OF 2016)

CIVIL APPEAL NO. 15647  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.1622 OF 2016)

CIVIL APPEAL NO. 15666  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3825 OF 2016)

CIVIL APPEAL NO.  15662  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3176 OF 2016)

CIVIL APPEAL NO. 15655  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3168 OF 2016)

CIVIL APPEAL NO. 15658  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3172 OF 2016)

CIVIL APPEAL NO. 15669  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.5294 OF 2016)

CIVIL APPEAL NO.  15661  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3175 OF 2016)

CIVIL APPEAL NO.  15652  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3059 OF 2016)

CIVIL APPEAL NO. 15672 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.5441 OF 2016)

4

CIVIL APPEAL NO. 15664  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3822 OF 2016)

CIVIL APPEAL NO.  15654  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3167 OF 2016)

CIVIL APPEAL NO. 15660  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3174 OF 2016)

CIVIL APPEAL NO.  15659  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.3173 OF 2016)

CIVIL APPEAL NO. 15673 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.6147 OF 2016)

CIVIL APPEAL NO.  15676  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.12106 OF 2016)

CIVIL APPEAL NO. 15671  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.5440 OF 2016)

CIVIL APPEAL NO.  15674  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.7828 OF 2016)

CIVIL APPEAL NO. 15675  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.10574 OF 2016)

CIVIL APPEAL NO. 15677  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.31409 OF 2016)

CIVIL APPEAL NO.  15668  OF 2017 (ARISING OUT OF SLP (CIVIL) NO.4717 OF 2016)

CIVIL APPEAL NO. 15670 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.4722 OF 2016)

5

         J U D G M E N T  

R.F. Nariman, J.

1. Leave granted.

2. This judgment shall dispose of a batch of civil appeals, as

learned counsel appearing for both sides have submitted that

common substantial questions of law are involved in all these

appeals.   

3. The present appeals arise from a judgment of the Punjab

and Haryana High Court where a large number of appeals were

disposed of under Section 260A of the Income Tax Act, 1961.

The following substantial questions of law were raised before

the High Court:

“i) Whether the transactions in hand envisage a “transfer”  exigible  to  tax  by  reference  to Section 2(47)(v) of the Income Tax Act, 1961 read  with  Section  53-A  of  the  Transfer  of Property Act, 1882?

ii) Whether  the  Income Tax  Appellate  Tribunal, has ignored rights emanating from the JDA, legal  effect  of  non  registration  of  JDA,  its alleged repudiation etc.?

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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

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development of 21.2 acres of land in the village Kansal.  This

JDA  was  entered  into  between  the  owner  i.e.  Punjabi

Cooperative Housing Building Society Ltd., Hash Builders Pvt.

Ltd.,  Chandigarh  (HASH)  and  Tata  Housing  Development

Company Ltd.  (THDC).    Under the JDA, it  was agreed that

HASH and THDC viz., the developers, will undertake to develop

21.2 acres of land owned and registered in the name of  the

society.   The  agreed  consideration  was  to  be  disbursed  by

THDC through HASH to each individual member of the society,

and different amounts and flats were payable and allotable to

members having different plot sizes.  The developers were to

make payments in four instalments. A sum of Rs.3.87 crores

was paid on execution of the JDA.  Rs.15.48 crores was to be

paid against a registered sale deed for land of an equivalent

value  of  3.08  acres,  earmarked  on  the  demarcation  plan

annexed  to  the  JDA,  which  was  effected  by  a  registered

conveyance  dated  02.03.2007.   The  second  instalment

payment, being Rs. 23.22 crores, was for land of an equivalent

value of 4.62 acres, also earmarked on the demarcation plan,

which was effected by a registered deed of conveyance dated

8

25.04.2007.  The third instalment payment of Rs.31.9275 crores

was to be made within six months from the date of execution of

the agreement or within two months from the date of approval

of plans/design and drawings and grant of the final license to

develop,  whichever  was later.  This was to be for  land of  an

equivalent  value  of  6.36  acres,  also  earmarked  on  the

demarcation plan.  The balance payment of Rs.31.9275 crores

was to be made within two months from the date of the last

payment, towards full and final settlement of the entire payment

of Rs. 106.425 crores, for which a registered sale deed for land

of an equivalent value being 7.14 acres, also earmarked on the

demarcation plan, was to be conveyed.   

6. The  developers  made  payments  only  up  to  the  2nd

instalment payment,  and 7.7 acres of  land was conveyed as

mentioned, which we have been reliably informed, has since

suffered  payment  of  capital  gains  tax  for  assessment  years

2007-2008  &  2008-2009.   The  problem which  arose  for  the

subsequent  assessment  years  was  that,  due  to  pending

proceedings, first in the Punjab and Haryana High Court and

9

thereafter in the Delhi High Court, the necessary permissions

for development were not granted, as a result of which the JDA

did not take off the ground.  For the previous year relevant to

the assessment year 2007-08,  the assessee filed an original

return  of  income  on  07.12.2007,  declaring  an  income  of

Rs.2,50,171/-.   The return of  income tax for  the assessment

year was later revised, on 07.10.2009, declaring an income of

Rs.30,08,606/-, which included capital gains of Rs.27,58,436/-.

According  to  the  assessee,  Rs.36  lakhs  received  in  the

subsequent assessment year 2008-09 were also offered for tax

under the head “capital gains”.  

7. The Assessing Officer  vide an order  dated 30.12.2009,

passed under Section 143(3) of the Act, held that since physical

and vacant possession had been handed over under the JDA,

the same would tantamount to “transfer” within the meaning of

Sections 2(47)(ii), (v) and (vi) of the Income Tax Act.  He further

held that, in the case of an assessee owning a 1000 square

yards plot,  the full  value of  consideration would be Rs.3.675

10

crores less cost of acquisition of Rs.12,81,724/-.  The long term

capital gain was, therefore, stated to be Rs.3,54,68,276/-.

8. The  Commissioner  (Appeals)  dismissed  the  appeal

upholding the order passed by the Assessing Officer. Aggrieved

by the order, the assessee filed appeal before the Income Tax

Appellate  Tribunal  (ITAT),  which  was  also  dismissed  by  the

ITAT.   

9. In  the  impugned  judgment  by  the  High  Court  under

Section 260A of the Income Tax Act, the High Court allowed all

the appeals of the assessees and held:

“1. Perusal  of  the  JDA dated  25.02.2007  read with sale deeds dated 02.03.2007 and 25.04.2007 in respect of 3.08 acres and 4.62 acres respectively would reveal that the parties had agreed for pro-rata transfer of land.

2. No  possession  had  been  given  by  the transferor to the transferee of the entire land in part  performance of JDA dated 25.02.2007 so as to fall within the domain of Section 53A of 1882 Act.

3. The possession delivered, if at all, was as a licencee for the development of the property and not in the capacity of a transferee.

4. Further  Section  53A  of  1882  Act,  by incorporation,  stood embodied in Section 2(47)(v)

11

of  the  Act  and  all  the  essential  ingredients  of Section  53A  of  1882  Act  were  required  to  be fulfilled. In the absence of registration of JDA dated 25.02.2007 having been executed after 24.09.2001, the agreement does not fall  under Section 53A of 1882 Act and consequently Section 2(47)(v) of the Act does not apply.

5. It  was submitted by learned counsel  for  the assessee-appellant  that   whatever  amount  was received  from the developer, capital gains tax has already been paid on that and sale deeds have also been executed. In view of cancellation of JDA dated 25.02.2007, no further amount  has been received and no action thereon has been taken. It was urged that as and when any amount is received, capital gains tax shall be discharged thereon in accordance with  law.  In  view  of  the  aforesaid  stand,  while disposing  of  the  appeals,  we  observe  that   the assessee-appellants  shall  remain  bound  by  their said stand.

6.    The issue of exigibility to capital gains tax having been decided in favour of the assessee, the question of exemption under Section 54F of the Act would  not  survive  any  longer  and  has  been rendered academic.

7.  The Tribunal and the authorities below were not  right  in  holding  the  assessee-appellant  to  be liable  to  capital  gains tax  in  respect  of  remaining land  measuring  13.5  acres  for  which  no consideration had been received and which stood cancelled and incapable of performance at present due to various orders passed by the Supreme Court and the High Court in PILs. Therefore, the appeals are allowed.”  

12

10. Learned  counsel  for  the  revenue  has  argued  that  the

Assessing Officer and the CIT (Appeals), as well as the ITAT,

were all correct in bringing capital receipts under the JDA to tax

as ‘capital gains’.  According to the learned counsel, the present

case is squarely covered by Section 2(47)(v) as Section 53A of

the  Transfer  of  Property  Act,  1882  is  applicable  to  the

transaction under the JDA. According to the learned counsel,

the transferee in the present case has, as part performance of

the contract, taken possession of the entire property under the

JDA, and has done various acts in furtherance of the contract,

such as paying the EMD and the first two instalments, and that

the transferee was willing to perform his part  of  the contract

which unfortunately could not ultimately be performed because

of  the  orders  passed  by  the  High  Court,  because  of  which

necessary permissions for development of the property could

not  be  obtained.   He  further  argued that  the  fact  that,  after

2001,  registration  of  agreements  under  Section  53A  is

necessary in law would not stand in his way, as Section 2(47)(v)

only refers to a contract “of the nature” of Section 53A of the

Transfer of Property Act and that, therefore, the ITAT was right

13

in  stating that  since Section 53A had been incorporated into

Section 2(47)(v) of the Income Tax Act, it was unnecessary, for

the purpose of the Income Tax Act, to have such an agreement

registered.   He  further  argued  that  the  ITAT was  correct  in

finding that possession had in fact been handed over under the

JDA, as otherwise, THDC could not have been authorized to

amalgamate the project with any other project in an adjacent or

adjoining  area.  As  THDC  was  authorized  to  hand  over

possession of the property or portions thereof to the authority

only for this purpose, it is clear that possession of the land had

in  fact  been  handed  over.   Further,  all  other  ingredients  of

Section 53A of the Transfer of Property Act were met and the

ITAT was also correct in stating that the developers were ready

and willing to perform their part of the contract.  He, therefore,

urged us to uphold the ITAT order and set aside the High Court

judgment.

11. On the other hand, Shri  Vohra, learned counsel for the

Respondents, argued that the High Court was correct in holding

that  Section  2(47)(v)  would  not  apply  in  the  absence  of

14

registration  of  the  JDA,  which  admittedly  was  not  done.

According to him, no possession was ever handed over, as only

a license to develop the property was given by the JDA to the

developers.  According to the learned counsel, the High Court

was also correct in stating that the developers were not ready

and willing  to  perform their  part  of  the  agreement  and  that,

therefore, none of the ingredients of Section 53A of the Transfer

of Property Act were met on the facts of this case.  According to

the learned counsel, what was appreciated by the High Court

and missed by the ITAT was the fact that only two parcels of

land, admeasuring 7.7 acres, were conveyed, for which capital

gains tax has been paid.  Since the rest of the project could not

go through for want of various permissions, it is clear that no

capital  gain,  in  fact,  arose  or  accrued  to  the  assessees.

According to the learned counsel, under Section 45 read with

Section  48  of  the  Income Tax  Act,  profits  and  gains  should

“arise” from the transfer of a capital asset and income should

be  computed  after  full  value  of  the  consideration  has  been

received or accrued.  Since no income was received or had

accrued, as the project was finally terminated by the owners on

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13.06.2011,  it  was  clear  that  the  High  Court  judgment  was

correct.  Further, sub-clause (vi) of Section 2(47) also would not

apply for the reason stated by the High Court, which is that it

was not attracted because there was no change in membership

of the society.      

12. Having  heard  learned  counsel  for  the  parties,  it  is

important to first set out the important clauses of the JDA dated

25.02.2007.

13. The JDA, as has been stated above, was between the

housing society,  who was referred to as the owner,  and two

developers,  namely Hash Builders Pvt.  Ltd.,  Chandigarh and

Tata Housing Development Company Ltd.  Strewn throughout

the  agreement  is  the  fact  that  the  owner,  being  absolutely

seized  and  possessed  of  the  property,  was  desirous  of

assigning its development rights for developing the same.  This

is clear, inter alia, from sub-clause (E) of the agreement which

reads as under:

“E.     The  Owner  being  absolutely  seized  and possessed  of  and  otherwise  well  and  sufficiently entitled to the property and is desirous of assigning

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its  Development  Rights  in  the  Property  for developing the same including transferring the title in the property, by utilizing the available Floor Space Index (FSI) for group housing commercial and retail development  as  per  the  applicable  municipal building bye laws in force, but has no expertise or means to do so and had invited/  quotations from builders/  contractors/  developers  to  Develop  the property  vide  advertisements  published  in  The Tribune  dated  31-05-06  HASH  approached  the Owner and submitted the proposal to the owners for development  of the Property  and after prolonged negotiations  finalized  the  term  of  development. Since HASH did not  have the sufficient  means to develop  the  Property,  HASH  have  approached THDC for developing the property by constructing thereupon buildings and / or structures to be used for inter-alia residential public use, commercial use, institutional  use,  club  house,  parking  and  other amenities, utilities, services and any other kinds of structures/ and necessary amenities, infrastructure thereto  as may be decided by THDC (hereinafter referred as the ‘Premises’)  and all  work  including survey,  investigations,  studies,  design,  planning, financing,  constructing,  operating,   maintenance and marketing for sale/ lease/transfer to prospective purchasers/ lessees/transferees for residential and / or any other authorized user as may be determined by  the  THDC(hereinafter  referred  to  as  the ‘Project’).  It  is  expressly  agreed  to  between  the parties that the role of HASH as a developer shall be as specifically set out in this Agreement.   It is expressly  agreed  to  between  the  parties  that  the role  THDC  as  a  developer  shall  be  to  execute, implement, develop and complete the project on the Property.”

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Under cause 2, the project is stated to be:

“2.1 The  Owner  herby  irrevocably  and unequivocally grants and assigns in perpetuity all its rights to develop, construct, mortgage, lease, license, sell  and transfer the Property alongwith  any  and  all  the  construction, Premises,  hereditament,  easements,  trees thereon in favour of THDC for the purpose of development,  construction,  mortgage,  Sale, transfer, lease, license and /or exploitation for full  utilization of the Property (‘Right’) and to execute all the documents necessary to carry out,   facilitate  and  enforce  the  Right  in  the Property  including  to  execute  Lease Agreement,  License  Agreements, Construction  Contracts,  Supplier  Contracts, Agreement  for  Sale,  Conveyance,  Mortgage Deed, Finance document and all  documents and  Agreements  necessary  to  create  and register  the  mortgage,  conveyance,  lease deeds,  License  agreement,  Power  of Attorneys, affidavits, declarations, indemnities and all such other documents, letters as may be  necessary  to  carry  out,  facilitate  and enforce  the  Right  and  to  register  the  same with the revenue/ Competent authorities and to appear on our behalf before all authorities, statutory or otherwise, and before any court of law  (the  ‘Development  Rights’).  The  owner hereby hands over the original title deeds of the Property as mentioned in the list Annexed hereto  and  marked  as  Annexure  IV  and physical,  vacant  possession  of  the  Property has been handed over to THDC simultaneous to  the  execution  and  registration  of  this Agreement  to  develop  the  same as  set  out herein.

18

It is hereby agreed and confirmed that what is stated  in  the  recitals  hereinabove,  shall  be deemed  to  be  declarations  and representations on the part of the Owner as if the same were set out herein in verbatim and forming an integral part of this Agreement.

2.2  The  Project  shall  comprise  of  development/ construction of the Property into the Premises as  permissible  under  Punjab  Municipal Building Bye-laws/Punjab Urban Development Authority or any other Competent authority by the Developer at them own cost and expense. The  project  shall  be  developed  as  may  be sanctioned  by  the  concerned  local  authority i.e.  Department  of  Local  Bodies,  Punjab/ Punjab  Urban  Planning  and  Development Authority  (PUDA)  or  any  other  Competent Authority.

2.3  The  Owner  hereby  irrevocably  and unequivocally  grants  and  assigns  all  its Development Rights in the Property to THDC to  develop  the  Property  and  undertake  the Project at its own costs, efforts and expenses whereupon the Developers shall be entitled to apply  for  and  obtain  necessary  sanctions, licenses  and  permissions  from  all  the Concerned  Authorities  for  the commencement, development and completion of the Project on the Property.”

14. The consideration clause in the agreement is Clause 4,

by which a sum of Rs.106.425 crores, plus 129 flats consisting

of a super area of 2250 square feet, was to be made over to the

19

society  and  its  members.  As  stated  hereinabove,  Rs.3.87

crores  was  paid  as  earnest  money  on  execution  of  the

agreement, and Rs.15.48 crores was paid soon thereafter.  The

next  instalment  of  Rs.23.22  crores  was  also  paid  by

25.04.2007.   As  consideration  for  both  instalments,  land

admeasuring  7.7  acres  was  ultimately  conveyed.  The  third

instalment,  and  the  balance  payment,  were  payable  in  the

following terms.

“(iv)  Payment  being  Rs.  31,92,75,000/-  (Rupees Thirty one crores ninety two lacs seventy five thousand only)  calculated @ Rs 24,75,000/- (Rs.  Twenty four  lacs seventy five thousand only) per plot holder of 500 Sq. yard and Rs 49,50,000/-(  Rupees  Forty  nine  lacs  fifty thousand  only)  per  plot  holder  of  1000  Sq. yards, to be made to the Owner and / or the respective  members  of  the  Owner  (  as  the case may be), within six (6) months from the date of execution of this Agreement or within two (2) months from the date of approval of the plans/ Design and Drawings and grant of the  final  license  to  develop  whereupon  the construction  can  commence,  whichever  is later against which the Owner shall execute a registered sale  deed  for  land of  equivalent value being 6.36 Acres out of the Property as demarcated in green colour (also hatched in green  colour)  in  the  Demarcation  Plan annexed hereto as Annexure V and bearing Khasra  nos.  123/15,  123/6,  123/7  (balance

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part),  123/3  (part),   123//4//1/1,  123///4//1/2, 123//4/2, 123//5/1,  123//5/2, 123//5/3, 112/24 (part);

(v)  And  the  Balance  Payment  being  Rs. 31,92,75,000/-  (Rupees  Thirty  one  crore ninety  two  lacs  seventy  five  thousand  only) calculated @ Rs. 24,75,000/- (Rs. Twenty four lacs  seventy  five  thousand  only)  per  plot holder of 500 Sq. yards and Rs. 49,50,000/-, ( Rupees Forty nine lacs fifty thousand only) per plot holder of 1000 Sq yards, to be made to the Owner and /or the respective members of the Owner (as the case may be ), within two (2)  months  from  the  date  of  the  Payment made  as  per  Clause  4.1  (iv)  mentioned hereinabove, towards full and final settlement of payment, after adjustment of the above said Rs.  3,87,00,000/-  (Rupees  Three  Crores eighty  seven  lacs  only)  paid  as  adjustable Advance/  Earnest  Money  as  mentioned hereinabove,  against  which  the  Owner  shall execute  a  registered  sale  deed  for  land  of equivalent  value being 7.14 Acres being the balance out of the Property as demarcated in orange colour (also hatched in orange colour ) in  the Demarcation Plan annexed hereto as Annexure V and bearing Khasra nos.  123/3 (balance  part),  112/24  (balance  part), 112/25,113///21//1,  122//1/1,  122//1/2, 122//1/3,  122//10/1,  122//10/2,   122//11/1, 122//11/2,  122//12,   122/19,   122//22/1, 122//22/2,  122//23//2/1 (bal. part), 122//17/3/2 (balance part).”

Under  clause  9,  transfer  of  ownership/rights  of  property  are

stated as follows:

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“9.2 The owner shall execute in favor of THDC, the sale deeds in accordance with the provisions of  Clause  4.1(ii)  to  Clause  4.1  (v)  of  this Agreement  and  execute  all  other  necessary documents  and  papers  to  complete  the aforesaid transaction.

9.3   That  all  the original  title  deeds  pertaining  to property  as  mentioned  in  Annexure  IV  has been handed over to THDC by the Owner at the time of signing of this Agreement and in furtherance  of  the  Common  interest  of  the Parties for the development of the Project and except  the  Sale  Transaction  Made  by  the Owner in favour of THDC as set out in Clause 4.1  above.  THDC  hereby  undertake  and assure the Owner that they shall use the title deeds only for the purpose of furtherance of the  Project  in  the  manner  that  it  does  not adversely  effect  the  Owner/  Allottee  in  any manner whatsoever.”

Under  Clause  10,  financial  assistance  can  be  raised  by

mortgaging the property. Clause 10 reads as follows:

“10. LOANS/ FINANCIAL ASSISTANCE

The Owner hereby gives their  express consent to THDC  to  raise  finance  of  the  development  and completion of the Project on the Property by way of mortgaging  the  Property  and  the  proposed structures to the lending banks/ financial institutions by deposit of the title deeds with the lending bank and / or financial institution. The Owner shall, in no way, be liable for the repayment of the loan. THDC shall  have the right  to  negotiate,  create  and sign necessary  forms,  deeds  or  documents  for  the

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variation of  mortgage,  charge or  encumbrance on the Property by depositing the original title deeds of the Property with any financial institution/ bank etc. THDC undertakes that the finance raise by way of mortgage  of  the  Property  of  the  Owner,  with  the bank/financial  institutions shall  be utilized only  for the purpose of development of the project and shall keep  the  Owner  informed  in  writing  about  the charge created on the Property and keep the Owner indemnified against all claims, costs for the bank / financial  institutions  from when.  THDC may  have availed  loan  facility  in  respect  of  the  Project,  in case, the Project is not completed in terms of this Agreement.”

15. The  JDA could,  under  clause  14,  be  terminated  under

certain  circumstances  by  all  the  parties  thereto.   Since  the

owner alone terminated the aforesaid JDA, the relevant clause

is clause 14(iv), which reads as under:   

“14(iv).   The Owner shall have the right to terminate the Agreement only in the event of default  by the Developers for making the Payment in accordance with the terms of this Agreement and the allotment of Flats within the time period as mentioned in this Agreement  after  giving  Thirty  (30)  days  written notice for rectification of such breach or any further time as may be desired by the Owner. In the event the Agreement is terminated by Owner, all the lands registered in the name of THDC as per the terms of this  Agreement  up  to  the  date  of  the  termination shall remain with THDC and the balance lands to be transferred  to  THDC  as  per  the  terms  of  this agreement shall not to be transferred by the Owner

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as  per  the  terms  of  this  agreement.  Upon  the termination,  the Owner  shall  forfeit  the Adjustable Advance/ Earnest Money mentioned in clause 4(i).”

16. A reading  of  the  JDA shows  that,  it  is  essentially  an

agreement to facilitate development of 21.2 acres so that the

developers build  at  their  own cost,  after  obtaining necessary

approvals, flats of a given size, some of which were then to be

handed over to the members of the society.  Payments were

also to be made by the developer to each member in addition to

giving each member a certain number of flats depending upon

the size of the member’s plot that was handed over.  What is

important  to  bear  in  mind  is  that  payments  under  the  third

instalment were only to be made after the grant of approvals

and not otherwise, and that it is an admitted position that this

was never done because no approvals could be obtained as

the  High  Court  ultimately  interdicted  the  project.   Also,  the

termination clause is of great significance because it shows that

in the event of the JDA being terminated, whatever parcels of

land have already been conveyed, will stand conveyed, but that

no other conveyances of the remaining land would take place.   

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17. The relevant sections that are necessary for us to decide

the present matter are as under:

        Transfer of Property Act

“53A.  Part  performance.  -  Where  any  person contracts  to  transfer  for  consideration  any immoveable property by writing signed by him or on his  behalf  from  which  the  terms  necessary  to constitute  the  transfer  can  be  ascertained  with reasonable certainty,

and the transferee has, in part performance of the  contract,  taken  possession  of  the  property  or any part thereof, or the transferee, being already in possession,  continues  in  possession  in  part performance of the contract and has done some act in furtherance of the contract,

and the transferee has performed or is willing to perform his part of the contract,

then,  notwithstanding  that where  there  is  an instrument of transfer, that the transfer has not been completed  in  the  manner  prescribed  therefore  by the law for the time being in force, the transferor or any person claiming under  him shall  be debarred from enforcing against the transferee and persons claiming  under  him  any  right  in  respect  of  the property  of  which  the  transferee  has  taken  or continued  in  possession,  other  than  a  right expressly provided by the terms of the contract:

Provided  that  nothing  in  this  section  shall affect  the  rights  of  a  transferee  for  consideration who  has  no  notice  of  the  contract  or  of  the  part performance thereof.]

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Income Tax Act

Section 2 - Definitions

In this Act, unless the context otherwise requires, –

(47)  "transfer",  in  relation  to  a  capital  asset, includes, -

(i) to (iv) xxx xxx xxx

(v)  any  transaction  involving  the  allowing  of  the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or

(vi) any transaction (whether by way of becoming a member of,  or acquiring shares in,  a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of  transferring,  or  enabling the enjoyment  of,  any immovable property.

45.   Capital gains - (1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G and 54H,  be chargeable  to  income-tax under  the head “Capital gains”, and shall be deemed to be the income of  the previous year in which the transfer took place.

48.  Mode  of  computation  -   The  income chargeable under the head "Capital gains" shall be computed, by deducting from the full  value of  the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely:

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(i)  expenditure  incurred  wholly  and  exclusively  in connection with such transfer;

(ii) the cost of acquisition of the asset and the cost of any improvement thereto:”

18. Section  53A,  as  is  well  known,  was  inserted  by  the

Transfer of Property Amendment Act, 1929 to import into India

the equitable doctrine of part performance.  This Court has in

Shrimant Shamrao Suryavanshi & Anr. v. Pralhad Bhairoba

Suryavanshi (D) by LRs. & Ors.,  (2002) 3 SCC 676 at 682

stated as follows:

“16.   But  there  are  certain  conditions  which  are required  to  be  fulfilled  if  a  transferee  wants  to defend or protect his possession under Section 53- A of the Act. The necessary conditions are:

(1)  there  must  be  a  contract  to  transfer  for consideration of any immovable property;

(2)  the contract  must be in writing,  signed by the transferor, or by someone on his behalf;

(3) the writing must be in such words from which the terms  necessary  to  construe  the  transfer  can  be ascertained;

(4) the transferee must in part-performance of the contract take possession of the property, or of any part thereof;

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(5)  the  transferee  must  have  done  some  act  in furtherance of the contract; and

(6) the transferee must have performed or be willing to perform his part of the contract.”

19. It  is  also  well-settled  by  this  Court  that  the  protection

provided under Section 53A is only a shield, and can only be

resorted  to  as  a  right  of  defence.  See  Rambhau  Namdeo

Gajre  v.  Narayan  Bapuji  Dhgotra  (Dead)  through  LRs.

(2004) 8 SCC 614 at 619, para 10. An agreement of sale which

fulfilled the ingredients of Section 53A was not required to be

executed through a registered instrument.   This position was

changed  by  the  Registration  and  Other  Related  Laws

(Amendment)  Act,  2001.   Amendments  were  made

simultaneously in Section 53A of the Transfer of Property Act

and Sections 17 and 49 of the Indian Registration Act.  By the

aforesaid amendment, the words “the contract, though required

to be registered, has not been registered, or” in Section 53A of

the 1882 Act have been omitted.  Simultaneously, Sections 17

and 49  of  the  1908 Act  have  been amended,  clarifying  that

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unless  the  document  containing  the  contract  to  transfer  for

consideration  any  immovable  property  (for  the  purpose  of

Section 53A of  1882 Act)  is registered,  it  shall  not  have any

effect  in  law,  other  than  being  received  as  evidence  of  a

contract in a suit for specific performance or as evidence of any

collateral transaction not required to be effected by a registered

instrument.  Section 17(1A) and Section 49 of the Registration

Act, 1908 Act, as amended, read thus:   

“17(1A). The documents containing contracts to transfer for consideration, any immovable property for  the purpose of  Section 53A of  the Transfer of Property Act, 1882 (4 of 1882) shall be registered if they  have  been  executed  on  or  after  the commencement  of  the  Registration  and  Other Related Laws (Amendment) Act, 2001 and if  such documents  are  not  registered  on  or  after  such commencement, then they shall have no effect for the purposes of the said Section 53A.”

“49. Effect of non-registration of documents required to be registered. No document required by Section 17 or by any provision of the Transfer of Property Act, 1882 (4 of 1882), to be registered shall-

(a) affect  any  immovable  property  comprised therein, or  

(b)  confer any power to adopt, or

(c)  be received as evidence of any transaction affecting  such  property  or  conferring  such  power, unless it has been registered:  

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Provided  that  an  unregistered  document  affecting immovable property and required by this Act or the Transfer  of  Property  Act,  1882 (4 of  1882),  to  be registered  may  be  received  as  evidence  of  a contract  in  a  suit  for  specific  performance  under Chapter  II  of  the  Specific  Relief  Act,  1887  (1  of 1877) or as evidence of  any collateral transaction not  required  to  be  effected  by  registered instrument.”  

20. The effect  of  the aforesaid  amendment  is  that,  on and

after the commencement of the Amendment Act of 2001, if an

agreement, like the JDA in the present case, is not registered,

then it shall have no effect in law for the purposes of Section

53A.   In short, there is no agreement in the eyes of law which

can be enforced under Section 53A of the Transfer of Property

Act.    This being the case, we are of the view that the High

Court was right in stating that in order to qualify as a “transfer”

of a capital asset under Section 2(47)(v) of the Act, there must

be a “contract” which can be enforced in law under Section 53A

of the Transfer of Property Act.  A reading of Section 17(1A) and

Section 49 of the Registration Act shows that in the eyes of law,

there is no contract which can be taken cognizance of, for the

purpose specified in Section 53A.  The ITAT was not correct in

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referring to the expression “of the nature referred to in Section

53A”  in  Section  2(47)(v)  in  order  to  arrive  at  the  opposite

conclusion. This expression was used by the legislature ever

since sub-section (v) was inserted by the Finance Act of 1987

w.e.f. 01.04.1988.   All  that is meant by this expression is to

refer  to  the ingredients of  applicability  of  Section 53A to  the

contracts  mentioned  therein.    It  is  only  where  the  contract

contains all the six features mentioned in  Shrimant Shamrao

Suryavanshi (supra), that the Section applies, and this is what

is meant by the expression “of the nature referred to in Section

53A”.   This  expression  cannot  be  stretched  to  refer  to  an

amendment that was made years later in 2001, so as to then

say  that  though registration  of  a  contract  is  required  by  the

Amendment Act of 2001, yet the aforesaid expression “of the

nature referred to in Section 53A” would somehow refer only to

the nature of contract mentioned in Section 53A, which would

then in turn not require registration.  As has been stated above,

there is no contract in the eye of law in force under Section 53A

after 2001 unless the said contract is registered. This being the

case, and it being clear that the said JDA was never registered,

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since the JDA has no efficacy in the eye of law, obviously no

“transfer” can be said to have taken place under the aforesaid

document. Since we are deciding this case on this legal ground,

it is unnecessary for us to go into the other questions decided

by the High Court, namely, whether under the JDA possession

was or was not taken; whether only a licence was granted to

develop the property; and whether the developers were or were

not  ready  and  willing  to  carry  out  their  part  of  the  bargain.

Since we are of the view that sub-clause (v) of Section 2(47) of

the Act is not attracted on the facts of this case, we need not go

into any other factual question.

21. However, the High Court has held that Section 2(47)(vi)

will  not  apply  for  the  reason  that  there  was  no  change  in

membership of the society, as contemplated.  We are afraid that

we cannot  agree  with  the High  Court  on  this  score.   Under

Section  2(47)(vi),  any  transaction  which  has  the  effect  of

transferring  or  enabling  the  enjoyment  of  any  immovable

property would come within its purview.  The High Court has not

adverted to the expression “or in any other manner whatsoever”

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in sub-clause (vi),  which would show that it  is not necessary

that the transaction refers to the membership of a cooperative

society.   We  have,  therefore,  to  see  whether  the  impugned

transaction can fall within this provision.   

22. The  object  of  Section  2(47)(vi)  appears  to  be  to  bring

within the tax net a de facto transfer of any immovable property.

The expression “enabling the enjoyment  of”  takes color  from

the earlier expression “transferring”, so that it is clear that any

transaction which enables the enjoyment of immovable property

must be enjoyment as a purported owner thereof.1  The idea is

to bring within the tax net, transactions, where, though title may

not be transferred in law, there is, in substance, a transfer of

title in fact.  

23. A reading of the JDA in the present case would show that

the owner continues to be the owner throughout the agreement,

and  has  at  no  stage  purported  to  transfer  rights  akin  to

1 The maxim “noscitur a sociis” has been repeatedly applied by this Court.  A recent application of the maxim is contained in  Coastal Paper Limited v. Commissioner of Central Excise, Visakhapatnam, (2015) 10 SCC 664 at 677, para 25.   This maxim is best explained as birds of a feather flocking together.  The maxim only means that a word is to be judged by the company it keeps.  

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ownership to the developer.  At the highest, possession alone is

given under the agreement, and that too for a specific purpose

-the purpose being to develop the property, as envisaged by all

the parties.  We are, therefore, of the view that this clause will

also not rope in the present transaction.  

24. The matter can also be viewed from a slightly different

angle.  Shri Vohra is right when he has referred to Sections 45

and 48 of the Income Tax Act and has then argued that some

real  income  must  “arise”  on  the  assumption  that  there  is

transfer  of  a  capital  asset.  This  income  must  have  been

received or have “accrued” under Section 48 as a result of the

transfer of the capital asset.

25. This Court in  E.D. Sassoon & Co. Ltd.  v. CIT, (1955) 1

SCR 313 at 343 held:

“It is clear therefore that income may accrue to an assessee without the actual receipt of the same. If the assessee acquires a right to receive the income, the  income  can  be  said  to  have  accrued  to  him though  it  may  be  received  later  on  its  being ascertained. The basic conception is that he must have acquired a right to receive the income. There must be a debt owed to him by somebody. There must  be  as  is  otherwise  expressed debitum  in

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presenti,  solvendum in futuro;  See W.S.  Try Ltd. v. Johnson (Inspector of Taxes) [(1946) 1 AER 532  at  p.  539],  and Webb v. Stenton,  Garnishees [11 QBD 518 at p. 522 and 527]. Unless and until there is created in favour of  the assessee a debt due  by  somebody  it  cannot  be  said  that  he  has acquired  a  right  to  receive  the  income  or  that income has accrued to him.”

26. This Court,  in  Commissioner of Income Tax  v. Excel

Industries,  (2014) 13 SCC 459 at 463-464 referred to various

judgments on the expression “accrues”, and then held:

“14. First of all, it is now well settled that income tax cannot  be  levied  on  hypothetical  income. In CIT v. Shoorji Vallabhdas and Co. [CIT v. Shoorji Vallabhdas and Co., (1962) 46 ITR 144 (SC)] it was held as follows: (ITR p. 148)

“… Income tax is a levy on income. No doubt,  the  Income  Tax  Act  takes  into account two points of time at which the liability  to  tax  is  attracted,  viz.,  the accrual of the income or its receipt; but the  substance  of  the  matter  is  the income. If income does not result at all, there cannot be a tax,  even though in bookkeeping, an entry is made about a ‘hypothetical  income’,  which  does  not materialise. Where income has, in fact, been  received  and  is  subsequently given up in  such circumstances that  it remains  the  income  of  the  recipient, even though given up, the tax may be payable.  Where,  however,  the  income

35

can be said not to have resulted at all, there  is  obviously  neither  accrual  nor receipt of income, even though an entry to  that  effect  might,  in  certain circumstances, have been made in the books of account.”

15. The  above  passage  was  cited  with  approval in Morvi  Industries  Ltd. v. CIT  [Morvi  Industries Ltd. v. CIT, (1972) 4 SCC 451 : 1974 SCC (Tax) 140 :  (1971)  82  ITR  835]  in  which  this  Court  also considered  the  dictionary  meaning  of  the  word “accrue” and held that income can be said to accrue when it  becomes due.  It  was then observed that: (SCC p. 454, para 11)

“11. … the date of payment … does not affect  the  accrual  of  income.  The moment  the  income  accrues,  the assessee gets  vested with  the right  to claim that  amount  even though it  may not be immediately.”

16. This Court further held, and in our opinion more importantly, that income accrues when there “arises a  corresponding  liability  of  the  other  party  from whom  the  income  becomes  due  to  pay  that amount”.  

17. It  follows  from  these  decisions  that  income accrues when it becomes due but it  must also be accompanied  by  a  corresponding  liability  of  the other party to pay the amount. Only then can it be said  that  for  the  purposes  of  taxability  that  the income is not hypothetical and it has really accrued to the assessee.

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18. Insofar as the present case is concerned, even if it is assumed that the assessee was entitled to the benefits  under  the  advance  licences  as  well  as under the duty entitlement passbook, there was no corresponding liability on the Customs Authorities to pass  on  the  benefit  of  duty-free  imports  to  the assessee until the goods are actually imported and made  available  for  clearance.  The  benefits represent, at best, a hypothetical income which may or  may  not  materialise  and  its  money  value  is, therefore, not the income of the assessee.”

27. In the facts of the present case, it is clear that the income

from capital gain on a transaction which never materialized is,

at best, a hypothetical income.  It is admitted that, for want of

permissions, the entire transaction of development envisaged in

the JDA fell through.  In point of fact, income did not result at all

for the aforesaid reason.  This being the case, it is clear that

there is no profit  or  gain which arises from the transfer  of  a

capital asset, which could be brought to tax under Section 45

read with Section 48 of the Income Tax Act.   

28. In  the present  case,  the assessee did  not  acquire any

right  to  receive income, inasmuch as such alleged right  was

dependent  upon  the  necessary  permissions  being  obtained.

This being the case, in the circumstances, there was no debt

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owed to the assessees by the developers and therefore, the

assessees have not acquired any right to receive income under

the JDA.  This being so, no profits or gains “arose” from the

transfer of a capital asset so as to attract Sections 45 and 48 of

the Income Tax Act.

29. We are, therefore, of the view that the High Court was

correct  in  its  conclusion,  but  for  the  reasons  stated  by  us

hereinabove. The appeals are dismissed with no order as to

costs.

…………………………......J. (R.F. Nariman)

..……………………...........J. (Sanjay Kishan Kaul)

New Delhi; October 04, 2017.

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