TaxTMI 
TaxTMI 
2009 (4) TMI 804
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.... the issue raised in the appeal before us. For the sake of convenience, therefore, the name of the assessee is mentioned as "Harbour View". 3. The assessee, M/s. Harbour View is the owner of 30.7 cents of land facing M.G. Road on its southern end. There are two access roads towards the property, one directly from M.G. Road and the other through Allappat Cross Road. The land originally belonged to the partners of the erstwhile firm, who commenced the construction of the building on the property. The construction of the said property was continued by the firm/company. 4. In the meanwhile, the assessee had entered into an agreement on 12-4-1996 for the sale of 4300 sq.ft. of built-up area of the building in the ground floor. The agreement was entered into with M/s. Sai Sales and Services. The consideration for the transaction stated in the agreement was Rs. 2.58 crores. In continuation of the said agreement, the assessee received a sum of Rs. 1.25 crores from M/s. Sai Sales and Services upto 30-8-1996. M/s. Sai Sales and Services agreed to purchase the said property for opening a showroom for Indica Car. As they were already having the agency of Maruti Car, they found it difficu....
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....sessee to file the return. The assessee filed the return declaring nil income, which was not acceptable to the assessing officer. The assessing officer proceeded to complete the assessment on a total income of Rs. 1,87,00,000 being short-term capital gains. 9. In the course of assessment proceedings, the assessing officer laid his 9 hands on the agreement entered into between the assessee and MAPL for the sale of 4300 sq.ft. of built-up area in the ground floor of the hotel building of M/s. Harbour View. The subject-matter of the present appeal is the computation of short-term capital gains made by the assessing authority in the light of that agreement to sell. 10. In the light of the fact that there was an agreement for the sale of 430010 sq.ft. of built-up area in the ground floor of the hotel building of Harbour View and in the light of the accompanying facts that the assessee has already received a sum of Rs. 2.30 crores against the agreed consideration of Rs. 2,42,92,649, the assessing officer came to a conclusion that the possession of the property was taken over by MAPL. In addition to the payment of the major portion of the consideration for the sale, the assessing of....
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....see and MAPL should be construed as culminated into a transfer for the purpose of Section 2(47) of the Income Tax Act, 1961 read with Section 53A of the Transfer of Property Act, 1882. Accordingly, the assessing officer held that the assessee is assessable for short-term capital gains arising out of the above transaction. The total amount received by the assessee from MAPL during the previous year relevant to the impugned assessment year was Rs. 2.30 crores. This was proposed by the assessing officer as the consideration attributable for computing the short-term capital gains of the assessee. The cost of construction estimated by the assessing officer was at Rs. 1,000 per sq.ft. and accordingly the total cost was estimated at Rs. 43 lakhs for 4300 sq.ft. area of the showroom. The differential amount of Rs. 1,87,00,000 was proposed to be assessed in the hands of the assessee as short-term capital gains. 13. When the proposal was sent to the assessee, the assessee filed a detailed reply for the consideration of the assessing officer. The assessee explained that an agreement was entered into for the sale of the property on 4-12-1998, but the agreement was not matured to its logical....
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....mplated under Section 2(47) of the Income Tax Act and Section 53A of the Transfer of Property Act never applied to the case for the reason that the property was never in the possession of MAPL. 17. The assessing officer did not accept the objections raised by the asses - Section According to the assessing officer, the possession of the property was taken over by MAPL on 4-12-1998, and the property was in their possession till the end of the previous year as evident from the letter of MAPL addressed to the Assistant Director of Income-tax, Investigation. Thereafter the agreement was terminated and part of the payment was returned to MAPL and the balance amount was offered by the assessee for income-tax, for the assessment year 2004-05. All these developments have taken place subsequently and do not affect the transfer, which has already taken place in the previous year relevant to the impugned assessment year. The assessing officer held that the subsequent developments in respect of the agreement and the property are not to be considered for determining whether there was a transfer of property in the previous year relevant to the impugned assessment year. 18. Accordingly, the ....
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....ommissioner (Appeals) further observed that on termination of the agreement, the assessee has earned an income of Rs. 1.5 crores which was offered as income under the head "Income from other sources". 21. He held that, considering the totality of the circumstances, there cannot be any case of transfer of property and no case of levy of capital gains. He accordingly allowed the appeal of the assessee and deleted the income determined by the assessing officer by way of short-term capital gains. 22. The revenue is aggrieved and therefore the second appeal before us. The question of capital gains is the solitary issue raised in this appeal. 23. The ground raised by the revenue reads as follows: The learned Commissioner (Appeals) erred in deleting the addition of Rs. 1,87,00,000 assessed as the short-term capital gain, on the ground that there was no transfer within the meaning of Section 2(47) of the Income Tax Act and Section 53A of the Transfer of Property Act. The Commissioner (Appeals) has failed to note that the agreement dated 4-12-1998 for the purchase of the property was in force and the possession of the property was with M/s. Malabar Automobiles Pvt. Ltd. as....
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....ment to sell to its full logical conclusion by executing a deed of registration or they would have rescinded the agreement as has been done in the present case. As far as the relevant previous year is concerned, all such subsequent events are only possibilities based on which no finding can be arrived at for the assessment year 1999-2000. Therefore, in the light of the subsequent events, it is not permissible for the assessee to argue that there was no transfer of property at all. 27. The learned Additional Commissioner further argued that the property sought to be purchased by MAPL was a commercial property for the purpose of running a car showroom. The construction of that much portion of the building was completed. MAPL was given exclusive right of access to the said premises from the side of MG Road. The assessee had obtained number of telephone lines in the said premises. The assessee had applied for electric connection in its own name in the said premises. MAPL has proceeded too far in opening its showroom and it is incredible to argue that all these efforts were done by MAPL before getting the possession of the property. All these developments could happen only if the pos....
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....ransaction. By applying for electric connection or telephone connections in the address of the proposed property to be purchased through a deed of sale, it is not possible in law to come to a conclusion that the possession of the property was handed over to the vendee. 32. The learned chartered accountant further argued that certain conditions are required to be fulfilled if a transferee wants to defend his possession of property under Section 53A of the Transfer of Property Act, 1882. First of all there is no agreement to handover the possession before execution of the sale deed. This is a crucial point missed out by the assessing officer. The assessee had received Rs. 2.30 crores as on 4-12-1999. As on 4-12-1998, the assessee had received only Rs. 1.75 crores against the total consideration of Rs. 2,42,92,649. Here we are concerned with the assessment year 1999-2000. The relevant previous year ends on 31-3-1999. The consideration has not been received in full as on that date. One of the conditions in the agreement is that the vendor and vendee should apply to the appropriate authority under Section 269 for obtaining NOC for the purpose of the proposed sale. The permission of t....
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....perty was terminated by mutual agreement. In such circumstances, it is highly arbitrary on the part of the assessing officer to come to a conclusion that there was a transfer of capital asset and thereby the assessee is liable for capital gains tax. 36. The learned chartered accountant further explained that the assessee had returned a sum of Rs. 1.25 crores to MAPL in pursuance of the termination of the agreement and retained the balance of Rs. 1.05 crores as nonrefundable money. The said amount has been credited in the profit and loss account of the assessee and the same has been offered for income-tax in the assessment year 2004-05 under the head "Income from other sources". 37. The learned chartered accountant has relied on the following judicial pronouncements in support of his arguments: CWT v. H.H Maharaja F.P. Gaekwad (1983) 144 ITR 304 (Guj)- The court has held that the doctrine of part performance is of limited application. CIT v. Ashaland Corporation (1982) 133 ITR 55 (Guj)- The court held that agreement to sell land does not create any interest in favour of the purchaser. The receipt of part payment of price coupled with parting....
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....urt has held that- To qualify for the protection of the doctrine of part performance it must be shown that there is a contract to transfer for consideration of immovable property and the contract is evidenced by a writing signed by the person sought to be bound by it and from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty. 41. In the present case, there is no such terms in writing which prevents reasonable inference that the possession of the property should be transferred before the execution of the conveyance deed. 42. We heard both sides in detail and considered the rival submissions. We have gone through the detailed orders of the lower authorities as well. Regarding the chronology of the facts leading to the present case, there is no dispute. Earlier there was an agreement to sell the subject property of 4300 sq.ft. ground floor area to M/s. Sai Sales Services. The said agreement was substituted by another agreement entered into between the assessee and MAPL. The first agreement with M/s. Sai Sales Services was executed on 12-4-1996. At that point of time, the assessee has received an amount of Rs. 1.25 crores f....
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....f search on 6-8-2003. By the time of search, it is clear that the agreement to sell had not reached its logical conclusion and the agreement was rescinded and part of the money received from the vendee was returned and the subject property was let out to another third party and the whole transaction was aborted. When the whole chain of events are available in the course of search and all the agreements were very well before the authorities, how it is possible for the assessing officer to read the events in a piece meal manner instead of reading them in a logical and a continuous manner from the beginning to the end. The assessing officer has stopped on 31-3-1999 to make out a case that there is a transfer of asset within the meaning of Section 2(47) of the Income Tax Act, 1961 read with Section 53A of the Transfer of Property Act for the impugned assessment year 1999-2000. In order to make out such a case, the assessing officer has refused to look into the events, which followed after 31-3-1999. If the assessing officer read the entire episode as a whole, the assessing officer would know that there was no actual transfer of any capital asset from the assessee to MAPL. That is the n....
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....on of the said property from the assessee to the MAPL. The title of the property always remained with the assessee, so also the possession. Since there is no separate stipulation in writing in the agreement, in the present case, transfer of possession of the property cannot be disassociated from the transfer of title in the property. In the light of the terms of the agreement entered into between the parties in the present case, the transfer of title in the property and the transfer of possession of the property go simultaneously hand-in-hand on the execution and registration of conveyance deed. Therefore, in law, we find that there is no basis for the finding of the assessing officer that there was any part performance of the contract within the meaning of Section 53A of the Transfer of Property Act, 1882 and thereby a transfer of asset within the meaning of Section 2(47) of the Income Tax Act. 48. Apart from this legal position, the facts of the case make it simple and clear that the agreement entered into between the assessee and MAPL was disrupted. The instances like MAPL had applied for electric connection, had obtained telephone connections, etc., are peripheral things. Th....