Holding

Because the JDA was not registered, it could not be treated as a contract enforceable under Section 53A, so no "transfer" under Section 2(47)(v) occurred and no capital gains tax is payable on the unreceived consideration.

Summary

The respondents, members of a cooperative housing society, entered into a Joint Development Agreement (JDA) with developers to develop 21.2 acres of land. Only two instalments were paid and 7.7 acres were conveyed, for which capital gains tax was paid. The Assessing Officer and the ITAT treated the unreceived consideration for the remaining 13.5 acres as a taxable transfer under s.2(47)(v) and (vi) of the Income Tax Act, relying on s.53A of the Transfer of Property Act. The High Court held that the JDA, being unregistered, could not be enforced under s.53A and thus no "transfer" occurred, also noting that no income accrued. The Supreme Court affirmed this view, stating that an unregistered JDA cannot satisfy the requirements of s.53A, so no transfer under s.2(47)(v) took place and consequently no capital gains tax is exigible. The Court dismissed the appeals.

Issues considered

Whether the JDA constitutes a "transfer" of a capital asset within the meaning of s.2(47)(v) of the Income Tax Act read with s.53A of the Transfer of Property Act.
Whether the non‑registration of the JDA defeats its enforceability under s.53A and thus affects tax liability.
Whether possession of the land was delivered in part performance as contemplated by s.53A.
Whether the developers were in default and the effect of such default on taxability.
Whether hypothetical or accrued income from the unreceived consideration can be taxed.
Whether s.2(47)(vi) of the Income Tax Act applies to the transaction.

Legislation cited

Income Tax Act, 1961s. 2(47)(v), s. 2(47)(vi), s. 45, s. 48
Registration Act, 1908s. 17(1A), s. 49
Registration and Other Related Laws (Amendment) Act, 2001
Transfer of Property Act, 1882s. 53A

Subjects

capital gains taxtransfer of propertySection 53Aregistrationjoint development agreementhypothetical incomepart performancecooperative housing societyIncome Tax Act

Judgment

[2017] 10 S.C.R. 1073

COMMISSIONER OF INCOME TAX A
v.
BALBIR SINGH MAIN!
(Civil Appeal No. 15619 of2017)
OCTOBER 04, 2017 B

[R. F. NARIMAN AND SANJAY KISHAN KAUL, JJ.]
Income Tax Act, I961:
ss.2(47)(v) and (vi), 45 and 48 - Capital gains tax - Exigibility
to - Assessees were members of a Co-op_erative Housing Society - C
Societies entered into Joint Development Agreement (JDA) with
Developers - Developers were required to make payment in four
instalments - Developers made payments to the assessees only upto
second instalment and 7. 7 acres of land out of the total 21.2 acres
of land was conveyed - The said paid amount suffered capital gains
tax for assessment years 2007-2008 and 2008-2009 - Further D
instalments were never paid as the project got interdicted by judicial
orders and no other conveyance of the remaining land took place
as per the JDA - Assessing Officer held that the assessees were
li<ible to capital gains tax also in respect of the remaining 13.5
acres of land for which no consideration had been received because E
physical and vacant possession of the land had been handed over
.and ihe same would tantamount to "transfer" within the meaning
of ss.2(47)(ii), (v) and (vi) of Income Tax Act - Appellate Authority
as well as Appellate Tribunal of Assessing Officer upheld the order
of Assessing Officer - High Court decided in favour of the assessees
holding that no possession had been given of the land in part F
performance of JDA so as to fall within the domain of s. 53A of
Transfer of Property Act, 1882 and that in absence of registration
of JDA, having been executed after 24.9.2001, the agreement did
not fall u/s. 53A and consequently uls. 2(47)(v) - On appeal, held:
In order to qualify as a "transfer" of a capital asset uls. 2(47)(v) of G
· I961 Act, there must be a "contract" enforceable in law uls. 53A of
I882 Act - Under ss. 17(/A) and 49 of Registration Act, 1908, the
contract (JDA) which was executed after 24.9.2001, since
unregistered, cannot be taken cognizance of. for the purpose
specified in s. 53A of 1882 Act - Therefore, no "transfer" can be
said to have taken place under JDA - .The assessees did not acquire H
1073
1074 SUPREME COURT REPORTS [2017) 10 S.C.R.

A any right to receive income and hence there was no profit or gain
arising from the transfer of a capital asset to be brought to tax u/s.
45 r/w. s. 48 - Transfer of Property Act, 1882- s. 53A - Registration
Act, 1908 - ss. 17(1A) and 49.
Transfer of Property Act, 1882:
B s.53A - Nature of - Held: Protection provided u/s. 53A is
only a shield, to be resorted to as a right of defence.
s. 53A [as amended by Registration and Other Related Laws
(Amendment) Act, 2001] - Applicability of - Held: After the
amendment, if any agreement/contract is not registered, it shall have
C no effect in law enforceable under 53A - Registration Act, 1908 -
ss.17(/A) and 49.
Dismissing the appeals, the Court
HELD: 1. A reading of the Joint Development Agreement
(JDA) shows that, it is essentially an agreement to facilitate
D 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
E that was handed over. 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 shows that
F 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.
[Para 16) [1089-A-C]
2. Section 53A was inserted by the Transfer of Property
G (Amendment) Act, 1929 to import into India the equitable doctrine
of part performance. The protection provided under Section 53A
is only a shield, and can only be resorted to as a right of defence.
[Paras 18, 19) [1091-A, E-F]
Shrimant Shamrao Suryavanshi & Anr. v. Pralliad
Bhairoba Suryavanshi (D) by LRs. & Ors. (2002) 3 SCC
H
. COMMISSIONER OF INCOME TAX v. BALBIR SINGH MAINI 1075

676 at 682 : [2002] 1 SCR 393; Rambhau Namdeo A
Gajre v. Narayan Bapuji Dhgotra (Dead) through LRs.
(2004) 8 SCC 614 : [2004] 3 Suppl. SCR 817 - referred
to.
3. Initially an agreement of sale which fulfilled the
ingredients of Section 53A was not required to be executed · B
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, 1882 and Sections 17 and 49 of the
Registration Act, 1908. By the aforesaid amendment, the words
"the contract, though required to be registered, has not been C
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 unless the docu-ment containing the
contract to transfer for consideration any immovable property
(for the purpose of Section 53A of 1882 Act) is registered, it shall D
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. [Para 19] r1091-F-H; 1092-AJ -
4. The effect of the amendment is that, on and after the E
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, the High Court was right in stating thal in order to F
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
uniter Section 53A of the Transfer of Property Act. A reading of
Section 17(1A) and Section 49 of the Registration Act, 1908 shows
that in the eyes of law, there is no contract which can be taken G
cognizance of, for the purpose specified in Section 53A of Transfer
of Property Act, 1882. [Para 20] [1092-F-H; 1093-A]
5, Sub-clause (v) of Section 2(47) of the Income Tax Act is
not attracted on the facts of the present case. The ITAT was not
correct iii~ referring to the expression "of the nature referred fo _H
1076 SUPREME COURT REPORTS [2017] IO S.C.R.

A 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
B
all the six features mentioned in *Shrimant Shamrao Suryavanshi
case 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
c 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. Since there is no contract in the eye of law in force
under Section 53A after 2001, unless the said contract is
D
registered, and since the JOA was never registered and therefore
has no efficacy in the eye of law, obviously no "transfer" can be
said to have taken place under the aforesaid document. [Para 20)
[1093-A-D]
*Shrimant Shamrao SuryaFanshi & A111: v. Pralhad
E Bhairoba Suryavanshi (D) by LRs. & Ors. (2002) 3 SCC
676 at 682 : [2002) 1 SCR 393 - referred to.
6. However, the High Court was not correct in holding that
Section 2(47)(vi) will not apply for the reason that there was no
change in membership of the society. Under Section 2(47)(vi),
F 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" in sub-clause (vi), which would
show that it is not necessary that the transaction refers to the
G membership of a co-operative society. [Para 21) [1093-F-H]
7. The object of Section 2(47)(vi) appears to be to bring
within the tax net a defacto transfer of any immovable property.
The expression "enabling the enjoyment or• takes color from
the earlier expression "transferring", so that it is clear that any
H transaction which enables the enjoyment of immovable property

..
COMMISSIONER OF INCOME TAX v. BALBIR SINGH MAINI I 077

must be enjoyment as a purported owner thereof. The idea is to A
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. [Para 22] [1094-A-B]
Coastal Paper Limited v. Commissioner of Central
Excise, Visakhapatnam (2015) 10 SCC 664 : [2015] 8. B
SCR 486 - referred to.
8. 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 c
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. Therefore, this clause will also not rope in the .present
transaction. [Para 23] [1094'-C]
9. It is correct that some some real income must "arise" D
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. In the present
case, 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 E
envisaged in the JDA fell through. The assessee did not acquire
any right to receive income, inasmuch as such alleged right was
dependent upon the necessary permissions being obtained. 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 F
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. Thus, 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 G
Sections 45 and 48 of the Income Tax Act. [Paras 24, 27] [1094-
D-E; 1096-D-E, F-G]
E.D. Sassoon & Co. Ltd. v. ClT [1955] 1 SCR 313;
Commissioner of Income Tax v. Excel Industries, (2014)
13 SCC 459 : [2013] 10 SCR 490 - relied on. H
1078 SUPREME .COURT REPORTS [2017] 10 S.C.R.

A Case Law Reference
--
[2002] 1 SCR 393 referred to Para 18
[2004] 3 Suppl. SCR 817 referred to Para 19
[2015] 8 SCR 486 referred to Para 22
[1955] 1 SCR 313 relied on Para 25
B
[2013] 10 SCR 490 relied on Para 26
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 15619
of2017.
From the Judgment and Order dated 22.07.2015 of the High Court
C of Punjab and Haryana at Chandigarh in Income Tax Appeal No. 293 of
2013( O&~).
WITH
C. A. Nos. 15622, 15624, 15620, 15639, 15637, 15621, 15643,
15623, 15657, 15650, 15633, 15628, 15636, 15625, 15645, 15630, 15634,
D 15626, 15627, 15644, 15641, 15631, 15635, 15649, 15640, 15651, 15638,
15629, 15632, 15642, 15646, 15648, 15667, 15653, 15656, 15663,
15665, 15647, 15666, 15662, 15655, 15658, 15669, 15661, 15652,
15672, 15664, 15654, 15660, 15659, 15673, 15676, 15671, 15674,
15675, 15677, 15668and 15670of2017
E· Rupesh Kumar, D. L. Chidanand, Manish Pushkarna, Ms. Rachna
Shrivastava, Ms. Anil Katiyar, Ad vs. for the Appellant.
Ms. Ajay Vohra, Narender Hooda, Pankaj Jain, Ms. Kavita Jha,
Rohit Jain, Vaibhav Kulkarni, Udit Naresh, Rajat Rathee, Aviral Dhirendra,
Dr. Surender Singh Hooda, Divya Suri, Sachin Bhardwaj, Deepanshu
F Jain, Gaurav Mittal, Ms. Manju Jaitley, Deepak Chopra, Harpreet Singh
Ajmani, Sheel Vardhan, Kishore Kunal, A. N. Arora, Advs., for the
Respondents.
The Judgment of the Court was delivered by
R. F. NARIMAN, J. 1. Leave granted.
G
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
H Haryana High Court where a large number of appeals were disposed of
COMMISSIONER OF INCOME TAX v. BALBIR SINGH MAINI I 079
[R. F. NARIMAN, J.]

under Section 260A of the Income Tax Act, 1961. The following A
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? B
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.?
iii) Whether "possession" as envisaged by Section 2(47)(v) and
Section 53-A of the Transfer of Property Act, 1982 was C
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?
D
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 E
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 of95
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 F
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 development of
21.2 acres of land in the village Kansai. 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 G
Development Company Ltd. (THDC). Under the JDA, it was agreed
that HASH and THDCviz., 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
.H
1080 SUPREME COURT REPORTS [2017] I 0 S.C.R.

A were payable and allotable to members having different plot sizes. The
developers were to make payments in four instalments. A sum ofRs.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,
B 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 ofconveyance dated 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
C two months from the date of approval of plans/design and drawings and
gi'!mt 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 fa~t payment, towards
full and final settlement of the entire payment of Rs. 106.425 crores, for
D 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 2•d 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
E 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 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
F 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 ofRs.27,58,436/-. According
to the assessee, Rs.36 lakhs received in the subsequent assessment year
G 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)
H
COMMISSIONER OF iNCOME TAX v. BALBIR SINGH MAIN! 1081
[R. F. NARIMAN, J.]

and (vi) of the Income Tax Act. He further held that~ in the case of an A
assessee owniilg a 1000 square yards plot, the full value of consideration
would be Rs.3.675 crores less cost of acquisition ofRs.12,81, 724/-.. The
·long term capital gain was, th,erefore, _stated to be Rs.3,54,68,276/-. :
· 8. TheCommissioner (Appeals) dismissed the appeal upholding
the order passed by the Assessing Officer. Aggrieved by the order, the B
assessee filed appeal before the Income Tax Appellate Tribunal (!TAT),
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: C
"1. Perusal of the JDA dated 25.02.2007 read with sale deeds
dated 02.03.200?° and 25.04.2007 in respect of 3.08 acres and
4.62 acres respectively would r~veal that the parties had agreed
for pro-rata transfer of land.
2. No possession had ·been given by the transferor to the · D
transfhee of the entire land in part performance of JDA dated
25.02;2007 so as to fall within the. domail). of,Sectiqn. 531\.of
1882A.ci. . . · ·. . . . ... . .... ···· ·. , . . .

3. The possession delivered, if at all, was as a licencee for the
development of the property and not in the capacity of a E
transferee.
4. Further Section 53A.of 1882 Act, by incorporation, stood
embodied in Section 2(47)(v) of the Act and all the essential
ingredients of Section 53A of 1882 Act were required to be
fulfilled. In the absence ofregistration ofJDA dated 25.02.2007 F -
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 G
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 H
1082 SUPREME COURT REPORTS [2017] 10 S.C.R.

A 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
B l 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
c 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." ·
10. Learned counsel for the revenue has argued that the Assessing
D 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
E 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·
F 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 Jaw 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 in stating that
G 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
H to amalgamate the project with any other project in an adjacent or adjoining
COMMISSIONER OF INCOME TAX v. BALBIR SINGH MAINI I 083
[R. F. NARIMAN, J.]

are·a. As THDC was authorized to hand over possession of the property A
or portions thereofto 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 B
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 correc.t in holding that
Section 2(47)(v) would not apply in the absence of 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 D
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
#Je rest of the project could not go through for want of various permissions, ·
it is clear th.at no capital gain, in fact, arose or accrued to the assessees. . E
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 13.06.2011, it was clear that the High Court judgment was F
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. G
13. The JDA, ~s 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 H
1084 SUPREME COURT REPORTS (2017) 10 S.C.R.

A desirous of assigning its development rights for developing the same.
This i.s 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 entitfod to the property and is
B desirous of assigning 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/
c 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
D sufficient means to develop the Property, HASH have
approached THDC for developing the property by constructing
thereupon buildings and I 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
E
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 I or any other authorized
F 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."
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
H
COMMISSIONER OF INCOME TAX v. BALBIR SINGH MAIN! I085
[R. F. NARIMAN, J.]

alongwith any and all the construction, Premis~s, A
hereditament, easements, trees thereon in favour of THDC
for the purpose of development, Construction, mortgage,
Sale, transfer, lease, license and /or exploitation for foll
utilization of the Propei:J:y ('Right') ilrl\l to execute all the
documents necessary to carry out, faciiitate and enforce
B
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 C
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 D
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 E
the same as set out herein.
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 ifthe same
were set out herein in verbatim and forming an integral F
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 G
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.
H
1086 SUPREME COURT REPORTS [2017] 10 S.C.R.

A 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
B
ConcemedAuthorities 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 ofRs.106.4~.5 crores, plus 129 flats consisting of a super
area of 2250 square feet, was to be made over to the society and its
C 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
D 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 holderof 500 Sq. yard andRs49,50,000/-( Rupees Forty
E nine lacs fifty thousand only) per plot holder of I000 Sq. yards,
to be made to the Owner and I 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
F 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
G Khasra nos. 123115, 123/6, 123/7 (balance part), 123/3 (part),
123//4//1/1, 1237//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)
H calculated@Rs. 24,75,000/- (Rs. Twenty four lacs seventy five
COMMISSIONER OF INCOME TAX v. BALBIR SINGH MAINI I 087
[R. F. NARIMAN, J.]

thousand only) per plot holder of 500 Sq. yards and Rs. A
49,50,000/-,( Rupees Forty nine lac.s 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
B
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 C
or~nge colour ) in the Demarcation Plan annexed hereto. as
Annexure V artd bearing Khasra nos. 123/3 (balance part), 112/
24 (balance part), 112/25,113/1/21//l, 122//1/1, 122//1/2, 122//1/3,
122//10/1, 122//10/2, 122//11/1, 122//11/2, 1221112, .122/19, '.
122//22/1, 122//22/2, 122//23//2/1(bal.part),122//17/3/2(balance D ''
part)." ·
Under clause 9, transfer of ownership/rights of property are stated as
follows: - · . . ·
· "9:2 The owner shall.execute in favor of THDC, the ~ale deeds
in accordance with the provisions of Clause 4.1 (ii) to Clause .. E'
4J (v} of this /\greement 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 F
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. ofTHDC 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 G
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 I 0 reads as follows:
.H
1088 SUPREME COURT REPORTS [2017] 10 S,,C.R
.,

A "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
B of the title deeds with the lending bank and I 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 variation of
mortgage, charge or encumbrance on the Property by depositing
the original title deeds of the Property with any financial institution/
c 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
D indemnified against all claims, costs for the bank I 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
E 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
F 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
n·otice 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
G 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 as per the terms of this
agreement. Upon the termination, the Owner shall forfeit the
H Adjustable Advance/ Earnest Money mentioned in clause 4(i)."
COMMISSIONER OF INCOME TAX v. BALBIR SINGH MAINI 1089
[R. F. NARIMAN, J.]

16. Areading of the IDA shows that, it is essentially an agreement A
to facilitate development of 2 i.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 B
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 C
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.
17. The relevant sections that are necessary for us to decide the
present matter are as under: , . _ •. D
Transfer of Property Act
"53A. Part performance: • Where any· person contracts to
transfer for consideration any immoveable property by wrjting
signed by him or on his behalf from which the terms necessary
to constitute the transfer can be ascertained with reasonable E
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 F
of the contract,
··:
and the transferee has performed or is willi!lg to perform his
part of the coritract, ·
then; notwithstanding that where there is an instrument of transfer, G
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·
H
1090 SUPREME COURT REPORTS [2017] 10 S.C.R.

A 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.]
B Income Tax Act
Section 2 - Definitions
In this Act, unless the context otherwise requires, -
(47) "transfer", in relation to a capital asset, includes, -
c (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 (4of1882); or
D
(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
, ,·,E effect of transferring, or enabling the enjoyment of, any
immovable pro'perty. '
45. Capital gains • (I) 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
F 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
G the transfer of the capital asset the following amounts, namely:
(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:"
H
COMMISSIONER OF INCOME TAX v. BALBIR SINGH MAIN! 1091
[R. F. NARIMAN, J.]

18. Section 53A, as is well known, was inserted by the Transfer A
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 B
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 C
by someone on his behalf;
(J) 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 D
possession of the property, or of any part thereof;
(5) the transferee must have done some act in furtherance of
. '
the contract; and. 1

(6) the transferee must have performed or be willing to perform-
his part of the contract." E
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 F
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 G
Act have been omitted. Simultaneously, Sections 17 and 49 of the 1908
Act have been amended, clarifying that 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 H
1092 SUPREME COURT REPORTS [2017] 10 S.C.R.

;A 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:
"l 7(1A). The documents Containing contracts to transfer for
consideration, any immovable property for the purpose of Section
B 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 riot registered ···
on or after such commencement, then they shall have no effect
for the purposes of the said Section 53A."
c "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 l 8S2), to
be registered shall-
(a) affect any immovable property comprised therein, or
D (b) confer any power to adopt, or
(c) be received as evidence Many transaction affecting such
. '· property '
or conferring such power, unless it has been registered:
. ,._ '' '· .
~
Provided that an unregistered document affecting. immovable
property and required by this Act or the Transfer of Property
E 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."
F 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 oflaw which can be enforced under Section 53A
G 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 Transferof Property Act. A reading of Section 17(1 A) and Section
49 of the Registration Act shows that in the eyes of law, there is no
H contract which can be taken cognizance of, for the purpose specified in
COMMISSIONER OF INCOME TAX v. BALBIR SINGH MAINI 1093
[R. F. NARIMAN, J.]

Section 53A. The ITAT was not correct in referring to the expression A
"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 B
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 laterin 2001, so as to then say that
though registration of a contract is required by the Amendment Act of C
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 tum 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, D
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.
int~ the other questions decided by the High Court, namely; whether
under the JDA possession was or was not taken; whether only a licence E
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.
F
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 G
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.
H
1094 SUPREME COURT REPORTS [2017] 10 S.C.R.

A 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,
B
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 ownership to the developer.
c 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.
D 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.
E 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
F 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 presenti, solvendum in futuro; See W.S. Try Ltd. v. Johnson
(Inspector of Taxes) [(1946) 1 AER 532 at p. 539),
G
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, Visakhapatuam, (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.
H
COMMISSIONER OF INCOME TAX v. BALBIR SINGH MAIN! I 095
[R. F. NARIMAN, J.]

and Webb v. ~tenton, Garnishees [11 QBD 518 at p. 522 and A
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 B
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. Slzoorji Vallabhdas and Co., (1962) 46 ITR 144
(SC)] it was held as follows: (ITR p. 148) C
" ... 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 im,:ome does
not result at all, there cannot be a tax, even though in D
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 can
be said not to have resulted at all, there is obviously neither E
accrual nor receipt of income, even though an entry to that
effect might, ii) 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, (l 972) 4 F
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)
"I I . ... the date of payment ... does not affect the accrual of G
income. The moment the income accrues, the assessee gets
vested with the right to claim that amount even though it may
not be immediately."
I 6. This Comt further held, and in our opinion more importantly,
that income accrues when there "arises a corresponding liability H
1096 SUPREME COURT REPORTS [2017] I0 S.C.R.

A 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
B said that for the purposes of taxability that the income is not
hypothetical and it has really accrued to the assessee.
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 u,nder the duty entitlement passbook, there
c 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."
D
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 JOA fell through. In
point of fact, income did not result at all for the aforesaid reason. This
E 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 asses see did not acquire any right to
receive income, inasmuch as such alleged right was dependent upon the
F 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 JOA. This being so, no profits or gains "arose"
from the transfer of a capital asset so as to attract Sections 45 and 48 of
G 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.

H Kalpana K. Tripathy Appeals dismissed.