Execution of unregistered Joint Development Agreement does not result in the ‘Transfer’ for capital gains
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Case Details: |
Namita Dutta vs. ITO |
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Appeal No.: |
ITA No. 1745/Del/2017 |
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Order pronounced by: |
ITAT Delhi |
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Date of Order: |
28-12-2020 |
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Assessment Year: |
2007-08 |
Brief Facts:
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The assessee is an individual who entered into a collaboration agreement with a developer in respect of 1/3rd share in her property situated at New Delhi. The collaboration agreement was entered into on 1st June 2006 and the relevant date of transfer of property was 19.08.2008 on which date the construction was completed and possession was handed over to the assessee discharging all obligations of the collaboration agreement. The assessee submitted that the transfer of the property is in the Assessment Year 2009-10 and not in Assessment Year 2007-08. |
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However, the ld. CIT (A) held that the collaboration agreement of 1st June 2006 is registered during the year 2006-07 and part payment has also been received in that financial year. Therefore, the property had been transferred during the year 2006-07 and capital gain is chargeable in A.Y. 2007-08 and not in A.Y. 2009-10 as claimed by the assessee. This is disputed by the assessee before the Tribunal. |
Submission by the assessee:
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The learned A/R submitted that the ld. CIT (A) has wrongly mentioned that the collaboration agreement was registered. He submitted that such an agreement was never registered. He relied upon the decision of the Hon’ble Supreme Court in the case of Balbir Singh Maini and submitted that the facts of this case are identical to the facts of the case before the Hon’ble Supreme Court. He reiterated that the collaboration agreement is unregistered and the date of handing over the possession of the property is 19.08.2008. Therefore, the transfer of capital assets took place in Assessment Year 2009-10 and not in Assessment Year 2007-08. |
Observations of Tribunal:
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With respect to the registration of the collaboration agreement, the Hon’ble Supreme Court in Balbir Singh Maini’s case has held that: “The effect of the aforesaid amendment is that, on or 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 the law that can be enforced under section 53A of the Transfer of Property Act. This being the case, and it is clear that the said JDA was never registered since the JDA has no efficacy in the eye of the law, obviously, no “transfer” can be said to have taken place under the aforesaid document.” |
Tribunal’s Ruling:
- In the case mentioned above, the Hon’ble Supreme Court held that the execution of an unregistered Joint Development Agreement with an irrevocable Power of Attorney in favor of the developer does not result in the “transfer” for capital gains liability. Thus, as the agreement in the present case is not registered one, it does not have any impact in the eye of law for the purpose of Section 53A of the Transfer of Property Act and similarly for defining transfer under the Income Tax Act.
- Therefore, in the present case, the collaboration agreement was never registered. Therefore, the presumption of delivery of possession to the collaborator cannot be assumed on signing the collaboration agreement i.e. in A.Y. 2007-08. Even otherwise, the assessee offered the above capital gain in the assessment year 2009-10, which is the property for the assessment of the transfer of capital asset and consequent capital gain in view of the decision of the Hon’ble Supreme Court.
Read Detailed Judgement: Namita Dutta Vs. ITO
Disclaimer: The article is based upon the judgment of the Hon’ble Tribunal and is meant for informative purposes only. Readers are requested to act diligently and under consultation with a professional before applying the information contained in this article.
