TaxTMI 
TaxTMI 
2015 (12) TMI 1421
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....s an Original Suit No.3950/95-96 had been filed relating to the said land, the sale deed could not be executed. The litigation between the parties relating to the land in question went up to the High Court and ultimately, a compromise was entered into between the parties, and in terms of the said compromise, instead of 3 acres 39 guntas of land which was to be sold in favour of the appellant for approximately Rs. 4.80 crores, only 27 guntas of land was agreed to be sold to the assessee. 3. In terms of the said compromise, two sale deeds were executed in favour of the assessee for a sum of Rs. 41.00 lakhs, and after adjusting the advance of Rs. 40.00 lakhs already paid to the seller in terms of the agreement dated 01.04.1995, the balance amount of Rs. 1 lakh was paid by the assessee at the time of execution of sale deed. The assessee thereafter sold the aforesaid 27 guntas land to a third party on 20.05.2005 for a sum of Rs. 1,02,50,000/- and paid tax on the same after claiming benefit of long term capital gains as defined in Section 2(42A) read with Section 2(29A) of the Income Tax Act (hereinafter referred to as 'the Act'). The returns filed by the assessee was processed un....
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....ary that the land was to be owned by the assessee, as long as it was held by the assessee. In support of his submission, learned counsel has relied on a decision of the Apex Court rendered in the case of SANJEEV LAL vs COMMISSIONER OF INCOME-TAX AND ANOTHER ((2014) 365 ITR 389) , which shall be dealt with at the time of considering the arguments of the parties. 7. Per contra, Sri Jeevan J Neeralgi, learned counsel for the respondent-revenue has supported the order of the Tribunal, as well as the Appellate Commissioner and the Assessing Officer. He submitted that the sale deed was executed in favour of the assessee on 05.12.2002, which property he sold on 20.05.2005, which was within 36 months from the date of its purchase, hence the assessee would not be entitled to the benefit of long term capital gains and the authorities have thus rightly given the benefit of short term capital gains, which is perfectly justified in law. It is further contended that the agreement entered into on 01.04.1995, on the basis of which advance of Rs. 40.00 lakhs had been given by the assessee, did not refer to the assessee being given possession of the land in question and as such, the authorities h....
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....d been executed on December 27,2002, can be considered as a date on which the property, i.e., the residential house had been transferred. In normal circumstances by executing an agreement to sell in respect of an immovable property, a right in personam is created in favour of the transferee/vendee. When such a right is created in favour of the vendee, the vendor is restrained from selling the said property to someone else because the vendee, in whose favour the right in personam is created, has a legitimate right to enforce specific performance of the agreement, if the vendor, for some reason is not executing the sale deed. Thus, by virtue of the agreement to sell some right is given by the vendor to the vendee. The question is whether the entire property can be said to have been sold at the time when an agreement to sell is entered into. In normal circumstances, the aforestated question has to be answered in the negative. However, looking at the provisions of section 2(47) of the Act, which defines the word "transfer" in relation to a capital asset, one can say that if a right in the property is extinguished by execution of an agreement to sell, the capital asset can be deemed to ....
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....r neutralized by the parties through subsequent contract or conduct leading to no transfer of the property to the proposed vendee but that is not the case at hand. 22....... 23. Consequences of execution of the agreement to sell are also very clear and they are to the effect that the appellants could not have sold the property to someone else. In practical life, there are events when a person, even after executing an agreement to sell an immovable property in favour of one person, tries to sell the property to another. In our opinion, such an act would not be in accordance with law because once an agreement to sell is executed in favour of one person, the said person gets a right to get the property transferred in his favour by filing a suit for specific performance and, therefore, without hesitation we can say that some right, in respect of the said property, belonging to the appellants had been extinguished and some right had been created in favour of the vendee/transferee, when the agreement to sell had been executed. In the aforesaid facts, the Apex Court in paragraph 25, held as under: 25. In view of the aforestated peculiar facts of the case and ....