Important Excerpts from the Order
| 1 | 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.
[Para 19 on Page 28 of SC Order]
|
| 2 | There is no contract in the eye of law in force under Section 53A after 2001 unless the said contract is registered. (Para 20 on Page 31 of SC Order)
|
| 3 | On the basis of Arguments above SC concluded that “……….we are of the view that sub-clause (v) of Section 2(47) of the Act is not attracted…………..”
[Para 20 on Page 32 of SC Order]
|
| 4 | “…………..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………………..”
“……………The High Court has not adverted to the expression “or in any other manner whatsoever. 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……………….” [Para 21 of SC Order]
|
| 5 | 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 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 [S(47)(vi)]will also not rope in the present transaction. [Para 23]
|
| 6 | 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. [Para 27, Page 37 of SC Order]
|
| 7 | Supreme Court in Excel Industries has said that “……………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……………” [Para 26,Page35]
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 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. [Para 28]
|
| 8 | Hence Supreme Court has concurred with the Conclusion of Punjab and Haryana High Court in CS Atwal but not with the reasoning . |