TaxTMI 
TaxTMI 
2006 (3) TMI 290
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....A) erred in upholding capital gain of Rs. 48,59,900 as short-term capital gain as against Rs. 44,44,725 assessed by the learned Assessing Officer as long-term capital gain and Rs. 43,36,235 shown by the assessee as long-term capital gain, thereby enhancing the assessment. It is submitted that long-term capital gain as shown by the assessee may kindly be upheld as correct. 2. Without prejudice to ground No.1 above, the learned CIT(A) erred in not allowing deduction of Rs. 69,010 being stamp duty paid by the assessee on agreement dated 16-11-1990 paid by the assessee on demand by the registering authorities. It is requested that the said amount be allowed to be deducted in computing the capital gain. 3. Without prejudice to ground Nos. 1 and 2 and alternately, without admitting the correctness of the order of the learned CIT(A), if his finding that the transfer took place on 12-5-1998 is to be upheld, then, the entire capital gain would be assessable in assessment year 1999-2000 in which case the capital gain even as declared by the assessee may kindly be directed to be deleted from the income of the assessment year 1997-98. 4. Further without prejudice to ground Nos. 1 and 2, if ....
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....n the owner and the said Saraswathi. The aggregate amount of Rs. 6,83,100, which included registration charges of Rs. 7,000, was paid in four financial years, starting from financial year 1990-91 to financial year 1995-96, the details of which have been furnished on page 3 of the assessment order. On the basis of the aforesaid facts, it was contended that on payment of the first instalment of Rs. 1,19,465 on 1-11-1990, the assessee acquired the right to conveyance etc. in respect of the three shops. It was further explained that the assessee entered into agreement with the IDBI on 15-12-1995 by way of an agreement titled "assignment deed" for a consideration of Rs. 55,50,000 by which the rights in shops were assigned to IDBI. As per the provisions of section 269A of the Act, the assessee applied to the Appropriate Authority for No Objection Certificate (NOC) by filing Form No. 37-I. In this form, the assessee and the IDBI were shown as assignor and assignee. Acting on the application, the Appropriate Authority granted the NOC. Thereafter, the assessee transferred and handed over the rights in the shops to the IDBI. On the basis of the aforesaid arguments and certain case laws quote....
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.... at Rs. 61,19,325. The computation is reproduced below for the sake of ready reference: -------------------------------------------------- "Sales consideration received Rs. 55,50,000 Less: Cost of acquisition of right of assignment 10% of agreed price (Rs. 68,310) Indexed cost of acquisition Rs.1,14,475 Add: Payments made later on Rs.6,14,790 Add: Stamp duty charges as claimed by the assessee Rs. 69,010 Rs. 5,69.325 ------------ ------------- Rs.61,19,325" -------------------------------------------------- 2.2 Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the learned CIT(A). The arguments of the assessee before the learned CIT(A) were more or less the same as the arguments made before the Assessing Officer. The learned CIT(A) considered various agreements of the assessee including the cases cited before him. He pointed out that the assessee had not directly received the possession of the property, which was handed over by the owners to the IDBI. However, such handing over of the possession from the owner to the IDBI at the instance of the assessee amounted to constructive possession by the asses....
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....------------- The learned counsel also referred to various dates on which the sale consideration was received. These dates may also be reproduced here: ---------------------------------------------- Sl.No. Date Sale Remarks consideration received ---------------------------------------------- 1 16-12-1995 27,75,000 - 2 28-5-1996 16,65,000 On receipt of NOC 3 12-5-1998 11,10,000 Sale deed Total 55,50,000 ---------------------------------------------- 3.2 The learned counsel referred to pages 13 to 31 of the paper book, which is an agreement for purchase of Shop No. 14, executed on 1-11-1990. Agreements in respect of other shops were stated to be identical to this agreement. As per para 2 on page 5, the assessee agreed to purchase the shop in the proposed building for a sum of Rs. 2,32,000, calculated @ Rs. 900 per sq. ft. As per paragraph 3 on page 6, 10 per cent of the estimated price was to be paid at the time of execution of the agreement and the balance amount was to be paid in four instalments, as mentioned therein. It may be pointed that 35 per cent of the purchase consideration was to be paid on taking possession of the shop and 15 per cent on execution of a ....
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....ecuted between the assessee, owner and the IDBI. According to this agreement, the assessee and the owners were required to execute a deed of conveyance in favour of the IDBI for conveying, transferring and assigning the shops to it on ownership basis and, therefore, they joined in execution of this deed. References were made to the purchase agreement and the earlier payments made to the assessee. The remaining amount of Rs. 11,10,000 was paid to the assessee on execution of this deed, bringing the full payment to Rs. 55,50,000, the consideration for purchase of the property. It may be noted that this agreement was one of assignment and sale. 3.7 The case of the learned counsel was that what the assessee transferred was the right of assignment in the property, which was acquired from the owners on 1-11-1990. In this connection, he relied on the decision of Hon'ble Bombay High Court in the case of CIT v. Tata Services Ltd [1980] 122 ITR 594. In that case, the assessee entered into an agreement with Seth Anandji Haridas for purchase of 5000 sq. yards of land situated at Bombay, @ Rs. 175 per sq. yard and paid earnest money of Rs. 90,000. The vendor was to obtain requisite permission ....
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....assignable. Therefore, such right to obtain conveyance was 'property' as contemplated by section 2(14). This right was assigned in favour of M/s. Advani and Batra and, therefore, it amounted to transfer of right by way of extinguishment of any right therein. 3.8 The learned counsel also relied on the decision of Hon'ble Bombay High Court in the case of CIT v. Sterling Investment Corpn. Ltd. [1980] 123 ITR 441, a case arising under section 12B of the Income-tax Act, 1922. In that case, the assessee entered into an agreement for purchase of certain properties in 1946. Earnest money of Rs. 1,50,000 was paid in October, 1946. A further sum of Rs. 1,50,000 was paid by way of earnest money. The agreement for sale stipulated a period of four months for completing the sale after verifying the vendor's title in the properties. The assessee was not satisfied about such title. Therefore, protracted correspondence ensued between the solicitors of the vender and the assessee. In 1958, an agreement was reached, under which a sum of Rs. 10,000 was returned to the assessee, leading to a loss of Rs. 2,90,000, which was claimed as a capital loss. The loss was disallowed. The Hon'ble Court pointed o....
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....onveyance, however, was executed in her favour or in favour of the co-operative society of the said building. She entered into agreement on 28-4-1983 with Chanraj Uttamchand, transferring her right, title and interest in the flat. Thus, all rights acquired under the agreement dated 8-11-1977 and 4-12-1978 were transferred on 28-4-1983 to the said Chanraj Uttamchand. The Hon'ble Court came to the conclusion that the assessee held rights under the said two agreements for more than three years and, therefore, upheld the decision of the Tribunal that the capital gains amounted to longterm capital gains. 3.10 The learned counsel also relied on the decision of Hon'ble Punjab and Haryana High Court in the case of CIT v. Ved Parkash & Sons (HUF) [1994] 207 ITR 148. The facts of the case are that the assessee entered into agreement for purchase of a flat in New Delhi on 29-5-1970. Pursuant to the agreement he was put in possession of the flat on the same day. According to the stipulation, the assessee was to pay the amount in instalments and the last instalment was paid on 10-2-1973. The assessee sold the property on 10-2-1973 and claimed that gains were long-term capital gains. The Hon'bl....
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....as signed. The possession was given after completion certificate had been obtained from PMC on 24-12-1996. The case of the learned DR was that the handing over the possession of the completed shop to the IDBI, for which the agreement was initially entered into with the owner and subsequently with the IDBI, was taken and given simultaneously. In other words, his case was that direct handing over of the possession to the IDBI by the owner amounted to giving possession to the assessee and thereafter giving possession by the assessee to the IDBI on the same day. He referred to the provisions of section 2(47)(vi) of the Income-tax Act, which provide that any transaction of acquiring shares in a co-operative society etc., which has the effect of transferring of a capital asset or enabling the enjoyment of any immovable property shall be deemed to be the transfer. We may also refer to the provisions of section 2(47)(v) by which any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of the contract of the nature referred to in section 53A of the Transfer of Property Act, 1882, is also deemed to be the transfer of the c....
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....hat the assessee transferred the right of conveyance, then, benefit of indexation cannot be given for the subsequent payments. 3.14 In the rejoinder, the learned counsel of the assessee referred to page 57 of the paper book, which is a part of application in form 37-I wherein it is mentioned that what was transferred was right to get possession of the shops and right to get the conveyance deed executed. 4.1 We have considered the facts of the case and rival submissions. We find that the facts of the case of Tata Services Ltd and Sterling Investment Corpn. Ltd. are totally different from the facts of the instant case. Those cases dealt with ready properties, which could be transferred to the assessee after going through the required formalities. Since the agreement did not come through, it was held that subsequent transfer was merely the transfer of right to conveyance, acquired on payment of earnest money. However, no subsequent payments were made by the buyers in those cases. The ratio of the decision of Ved Parkash & Sons (HUF)'s case is also distinguishable from the facts of this case. In that case, the buyer was put in possession of the property and this act amounted to trans....
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....l Corporation on 24-12-1996. Before that the assessee could neither have taken possession of the shops nor handed over the possession of the shops. Sale deed with the IDBI was executed on 12-5-1998, whereby the possession was directly given to the IDBI. This was done by way of an agreement made by the assessee with the IDBI in which the owner also acted as a consenting party. Thus, giving possession to IDBI on 12-5-1998 also involved giving possession to the assessee by the owner on the same day. In terms of provisions of section 2(47)(v), the dates of transfer in respect of purchase and sale were, thus, the same, i.e., 12-5-1998. Therefore, we are of the view that it is a case of a short-term capital gain resulting as a consequence of sale and assignment deed dated 12-5-1998. 4.3 The learned counsel of the assessee had also pointed out that the assessee paid stamp duty of Rs. 69,010 at the time of making agreement of purchase with the owner on 16-11-1990. We are of the view that such payments, if actually made, leads to betterment of the title of the assessee and, therefore, it represents cost of improvement of the asset. 4.4 We have already pointed out that the instant transact....