Execution of irrevocable power of attorney of a property in favour of land developers deemed as ‘transfer’

Where an irrevocable power of attorney was executed and registered by a housing society, leading to overall control of property in hands of developer, it constituted transfer under section 2(47)

In the instant case the assessee was a member of a housing society, which transferred certain land to developers under a Joint Development Agreement (‘JDA’), whereby each member was entitled to monetary consideration and a furnished flat. An irrevocable Special Power of Attorney (‘ISPOA’) was executed in favour of the developers which was deemed as a transfer under section 2(47) by the revenue. But assessee contended that handing over of possession of property was conditional in order to enable the builder to obtain necessary permission from the Governmental agencies, and there was no transfer as per section 2(47).

The Tribunal held in favour of revenue as under:

1) Clauses of the ISPOA and JDA clearly showed that the developers were authorized to enter upon the property not only for the purpose of development but for other purposes also;

2) Developers were authorized to amalgamate the project with any other project in the adjacent area or adjoining area as per the special Power of Attorney. The position contemplated by clause (v) of section 2(47) need not be exclusive possession. What is required is that the transferee by virtue of possession should be able to exercise control for intended purposes;

3) In the instant case, the assessee had not given only a license as claimed by the ld. Counsel of assessee, but also the powers of selling, amalgamating, etc, mentioned in the JDA and ISPOA. Section 2(47)(vi) clearly shows that any transaction which has the effect of transferring or enabling enjoyment of any immovable property would be covered by the definition of transfer;

4) Where developers were vigorously pursuing issue of permission/sanction for executing agreement, requirement under section 53A of Transfer of Property Act, regarding willingness of transferee to perform contract, was also fulfilled;

5) Though it is a settled principle of law that notional income can’t be taxed yet in case of capital gain, rigour of tax in case of capital gain would come into play on the transfer of capital asset and total consideration arising on such transfer has to be taxed;

6) Therefore, capital gains tax had to be paid on the total consideration arising on transfer which would include the consideration which had been received as well as the consideration which had arisen and become due and might be received later on - SMT. BINDER KHOKHER V. ACIT (2013) 36 taxman 503 (Chandigarh - Trib.)