TaxTMI 
TaxTMI 
2009 (10) TMI 621
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch, all these appeals are being decided by a common order. 2. The brief facts of the case are that the respondents, namely, S/Shri Rakesh Gupta, Ajay Gupta and Gunjan Gupta who are co-owners, entered into an agreement with one M/s. Pratap Sahkari Grih Nirman Samiti Ltd. on December 7, 1984, for the sale of land to the samiti and consequently the sale deed was also prepared. They had also received a meagre amount on the said date but subsequently, on December 8, 1984, proceedings were initiated under the Land Acquisition Act and a notification under section 4(1) of the Land Acquisition Act for compulsorily acquiring the land was issued by the State Government. The said proceedings of acquisition were challenged by the assessee, housing society and other persons but subsequently, this hon'ble court dismissed the writ petition vide judgment and order dated March 20, 1998, upholding the acquisition proceedings. In between, certain infirmities, which were reported during the acquisition proceedings, were removed by promulgation of the Ordinance dated December 27, 1990. It is also relevant to point out at this stage that in the agreement for sale, which was entered into between t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hether the assessee or the housing society had claimed the compensation under the land acquisition award and to whom the amount of compensation has been paid or is likely to be paid. 5. Pursuant to the order dated October 26, 1998, the Assessing Officer, after making enquiries and after giving opportunity to the assessees again assessed the income of the assessees as was computed in the order dated March 16, 1992, by the order dated March 22, 2001. Against the order dated March 22, 2001, the assessees filed appeals before Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals), vide order dated January 25, 2002, deleted the capital gains. While deleting the entire capital gains which has been added in the income of the assessee vide order dated March 22, 2001, a finding had been recorded that in the sale deed, it had been specifically provided that in case the entire sale consideration was not paid on or before December 31, 1987, the sale deed shall be null and void automatically. Admittedly, the sale consideration as per the terms and conditions of the sale deed was not paid on or before December 31, 1987. Thus, the sale deed has become automatically....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r : "45. Capital gains.-(1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 53, 54, 54B, 54D, 54E and 54F, be chargeable to income-tax under the head 'Capital gains', and shall be deemed to be the income of the previous year in which the transfer took place. (2) Notwithstanding anything contained in sub-section (1), the profits or gains arising from the transfer by way of conversion by the owner of a capital asset into, or its treatment by him as stock-in- trade of a business carried on by him shall be chargeable to income-tax as his income of the previous year in which such stock-in-trade is sold or otherwise transferred by him and, for the purposes of section 48, the fair market value of the asset on the date of such conversion or treatment shall be deemed to be the full value of the consideration received, or accruing as a result of the transfer of the capital asset." 8. In order to bring the capital assets within the four corners of the pro-visions of section 45, one has to determine whether in the relevant year, there was a transfer of a capital asset. In the i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment." 11. The aforesaid provisions were amended by the Finance Act, 1987, with effect from April 1, 1988. The amended provision of section 2(47) is repro-duced as under : "2. (47) 'transfer' in relation to a capital asset, includes,- (i) the sale, exchange or relinquishment of the asset ; or (ii) the extinguishment of any rights therein ; or (iii) the compulsory acquisition thereof under any law ; or (iv) in a case where the asset is converted by the owner thereof into or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment ; or (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 (4 of 1882) ; or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association or persons or by way of any agreement or any arrangemen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t year 1988-1989 and subsequent years. (Section 3(g) of the Finance Act, 1987)" 13. On a perusal of the provisions of section 2(47) of the Act existing in the assessment year 1985-86, the same requires registration of the sale deed under the Registration Act, 1908, for transfer of an immovable property for levying capital gains tax. If the instrument is not registered then, it is not treated as "transfer" and hence no capital gains could be charged on the alleged transfer of land. It is only after amendment by the Finance Act, 1987, that registration for completing the transfer was done away with. Capital gains could be charged merely on handing over of possession and on part performance as per agreement. 14. Section 53A of the Transfer of Property Act, 1882, which was added in the statute book by the Transfer of Property (Amendment) Act, 20 of 1929, was analysed by the apex court in the case of Nathulal v. Phoolchand, AIR 1970 SC 546, wherein the apex court has held that (page 548) : "The conditions necessary for making out the defence of part performance to an action in ejectment by owner are : (1) that the transferor has contracted to transfer for....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he property or he had part performed as per agreement by paying a part of contracted money or that he will make full payment as agreed upon and as scheduled, will not enough to hold that a "transfer" of immovable property took place for levying capital gains tax. Thus, under the Income-tax Act, section 53A of the Transfer of Property Act had no role to play in holding the creation of equitable interest in favour of the transferee a "transfer" in respect of conveyance of such interest through an agreement entered into prior to April 1, 1988, without conveyance of legal title. 16. Sri Pradeep Agarwal, with regard to the prospective application of the amendment by the Finance Act, 1987, has placed reliance upon the judgment of the hon'ble Delhi High Court in CIT v. Reliance International Corporation P. Ltd. [1995] 211 ITR 666 (Delhi) whereby the apex court has held that (page 670) : "the amendment made in section 2(47) of the Act subsequently with effect from April l, 1985, and April 1, 1988, was merely clarificatory in nature and the agreement to sell in the present case, though executed in the previous year relevant to the assessment year 1978-79, amounted to transfer within....