Sec. 53A of Transfer of Property Act not attracted if JDA isn’t registered: HC

Case Details: Shelter Projects Ltd. v. PCIT - [2022] 137 taxmann.com 192 (Calcutta)

Judiciary and Counsel Details

• • T.S. Sivagnanam and Hiranmay Bhattacharyya, JJ.
  • S.N. Dutta and Soumen Bhattacharjee, Advs. for the Appellant. 
  • J.P. Khaitan, Sr. Adv. Sourav Chunder and Ms. Swapna Das, Advs. for the Respondent.

Facts of the Case

In pursuant to an unregistered agreement, the assessee handed over its property, being a land, to a company engaged in the development of housing projects. The Assessing Officer (AO) made an addition to assessee’s income treating it as a transfer of property under section 2(47) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act, 1882.

The assessee challenged the order of the AO before the Commissioner of Income-tax (Appeals) [CIT(A)]. However, the CIT(A) proceeded to hold that in the agreement, payment had been received by the assessee from the developer and the agreement also stipulated that the developer had a legally enforceable right to take possession of the said land from the assessee on payment of the balance amount. Therefore, the full amount payable under the agreement accrued to the assessee.

Aggrieved by the order of CIT(A), assessee challenged the said order before the Tribunal. The Tribunal reversed the order of CIT(A) by holding that Section 53A of the Transfer of Property Act was amended by the Amendment Act, 2001 which stipulates that if an agreement like the joint development agreement is not registered, then it shall have no effect in law. Thus, accordingly, the assessee’s appeal was allowed.

High Court Held

Aggrieved by the order of the Tribunal, the revenue filed the instant appeal before the High Court. The High Court relying upon the decision of the Hon’ble Supreme Court in the case of CIT v. Balbir Singh Maini [2017] 86 taxmann.com 94 (SC) held that if the development agreement is not registered, it shall have no effect in law for the purposes of section 53A of the Transfer of Property Act which bodily stood incorporated in section 2(47)(v) of the Income-tax Act, 1961. Thus, the Tribunal was right in allowing the assessee’s appeal.

Case Review

• • CIT v. Balbir Singh Maini [2017] 86 taxmann.com 94/251 Taxman 202/398 ITR 531 (SC) (para 5) followed.

List of Cases Referred to

• • CIT v. Balbir Singh Maini [2017] 86 taxmann.com 94/251 Taxman 202/398 ITR 531 (SC) (para 3).