TaxTMI 
TaxTMI 
2014 (3) TMI 1017
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....om Smt. Samyukta Bullayya in the year 2004. However, the AO was of the opinion that the assessee has purchased the property in the year 2007. The assessee stated before the AO that he along with Sri D. Hari Prasad entered into sale agreement on 21.7.2004 with Smt. Samyukta Bullayya for purchase of plot bearing No. 259A/A, in Sy. No. 120/403/1 of Shaikpet village and Sy. No. 102/1 of Hakimpet village, Hyderabad. Later the assessee along with Sri D. Hari Prasad entered into an Agreement of Sale-cum-GPA with possession on 1.9.2004 with Smt. Samyukta Bullayya. 4. In the course of assessment the Assessing Officer obtained from the Sub Registrar's Office a copy of a registered Agreement of Sale cum Irrevocable General Power of Attorney dated 24.07.2007, between Smt. Samyukta Bullayya (vendor) on the one hand and Sri R.V,K. Varma and Sri D. Hari Prasad (vendees) on the other hand. The agreement states as follows: "Whereas the Party of the First Part/Vendor is a sole and absolute owner and possessor of the House bearing MCH No. 8-2-293/82/L/28/A/2, Plot No. 28/A/2, admeasuring 600 Sq. yds or 501.66 Square Meters, in Sy. No. 403/1 of Shaikpet Village, and Sy. No. 102/1 of Hakimp....
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.....7.2006 to implement the earlier orders. The Government of A.P. also issued a memo vide No. 50892/Assn. .III-1/2005-2 dated 20.3.2006, requesting party to the First Part (Vendor) to approach Sri Venkateswara Cooperative House Building Society for allotment of alternative Plot from the available land. The Commissioner for cooperation and Registrar of Co. op Societies, AP. Hyderabad has requested Sri Venkateswara Cooperative House Building Society to inform the action taken report vide Rc. No. 35080/2006-H, dated 8.5.2007, the Government of Andhra Pradesh ( Registration and Stamps Department) vide GOs No. 551 dt. 26.4.2007 issued orders exempting party of the First Part/Vendor has already paid stamp duty and registration charges earlier, Whereas Sri Venkateswara Cooperative House Building Society approving the request of party of the first Part/Vendor for allotment of alternative land from the available area allotted an open land, the schedule property. ...... 1. The party of the First Part (Vendor) agreed to sell the schedule of property i.e. the MCH No. 8-2-293/82/L/28/A/2, Plot No. 28/A/2, admeasuring 600 Sq. Yds or 501.66 square meters, in Sy. No. 403/1 of Shaik....
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....ion between plot no. 259A/A and plot no. 28A/2. While it may have been the original intent of both parties to transfer plot no, 259A/A and while they may have been prevented from doing so due to facts beyond their control, the fact remains that the asset actually transferred by Smt. Bullayya to the assessee and by the assessee subsequently, was plot no. 28A/2 and not 259A/ A. 7. The CIT(A) observed that the recital in the Sale Deed dated 29.30.1985 to the effect that possession of plot no, 259A/A had been handed over to Smt. Bullayya on that day needs to be considered in the light of the recital of the subsequent events in the Agreement dated 24.7.2007. The Agreement categorically records that though Sale Deed had been executed on 29.3.1985, possession could not be delivered to Smt. Bullayya. It is pertinent to note that this Agreement has been signed both by Smt. Bullayya and by the assessee so that it is to be presumed that they accept and confirm the recitals therein. When both the parties, Smt. Bullayya and the assessee, acknowledge in a subsequent Agreement dated 24.7.2007 that she had not been given possession, the recital in the Sale Deed dated 29.3.1985 (that possession ....
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....d property for more than 36 months and, therefore, the asset was sold on completion of 3 years and hence it is a long term capital asset. 11. The AR submitted that on 18-09-2007 the assessee sold 600 sqy of open plot bearing No 259/A/A, in Sy Nos. 120/403/1 and 102/1 situated at MLA Colony, Road No. 12, Banjara Hills, Hyderabad for a total consideration of Rs. 2,10,56,000/- . The assessee jointly owned this property with one Sri D. Hari Prasad. His share of sale consideration was Rs. 1,05,28,000/-. It is an admitted fact that the assessee did not declare any capital gains in return of income filed for the AY 2008-09, as the gains were utilized for the purpose of construction of a residential house within the time allowed under the act and, therefore, the same is claimed as exempt u/s 54F of the Act. 12. The AR submitted that the AO, based on the sale deed executed on 18-09-2007 by Smt. Samyukta Bullayya, the original owner represented by her agreement of sale-cum irrevocable general power of attorney holders, namely Sri V.R.K.V Rathod and Sri Donthu Hari Prasad in favour of Sri G. Murali, the purchaser, opined that the unregistered agreement of sale made by Smt. Samyukta Bull....
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....n pursuant to an agreement for sale which is covered by sec-53A such possession itself would fall within the definition of "transfer", notwithstanding the fact that there is no conveyance. This change neutralizes the ratio of the supreme court decisions in 14. The AR relied on the judgements in the case of CIT vs Bhurangya Coal Company (34 ITR 802) (SC) Alapati Venkataramaiah vs CIT (57 ITR 185) (SC). In terms of these decisions, transfer of immovable property was considered to have taken place up on conveyance and not on the date of agreement of sale. During the course of assessment proceedings the assessee submitted full details of the transaction together with agreements and all other relevant information necessary. He drew our attention to the following provisions of the Act: Section 2 (47) of the IT Act: As per the definition n transfer in relation to a capital asset includes (i) ------------ (ii) ------------ (iii) ------------ (iv) ------------ (iv a) ------------ (v) Any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a con....
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.... was a notarized document conveying the title in favour of the assessee. The agreement of sale was not registered immediately after the full consideration was paid due to the fact that the property was in dispute. it may also be necessary to mention that the property was purchased for a much less price when compared to existing market rate on account of the dispute though the assessee has become the owner of the property with effect from the date of agreement of sale cum possession that is July 2004. He sold the property in the year 2007 after holding the property for three completed years and sold the property after receiving full consideration of Rs. 2.10 Crores which resulted in Long term Capital Gains and the same is invested in the construction of new residential house. Hence claiming exemption from Capital gains Tax U/S 54F is within the frame work of law. It may also be mentioned that since the assessee has become the lawful owner with effect from July 2004 he also filed a suit in the court of the junior civil judge, city civil court, Hyderabad in order to protect the title and also filed a police compliant in the year 2004. 17. The AR submitted that the AO obtained a cop....
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....years by the assessee before its resale during big boom in the value of immovable properties in Hyderabad in particular. It is not disputed by the AO that the assessee did not utilize the sale proceeds for the construction of a new residential house. Therefore, the capital gains are exempt from tax u/s. 54F of the IT Act, as rightly claimed by the assessee. 20. The AR submitted that the basic rule is that the capital gains are deemed to be the income of the previous year in which the transfer giving rise to the gain stakes place. Thus the year of the charge is the year in which the sale, exchange, relinquishment etc. takes place. Where the transfer is by way of allowing possession of an immovable property in part performance of a contract, it is the year in which such possession is handed over. If the handing over of possession precedes the entering into a contract and the transferee is allowed the possession in part performance of the proposed contract, the year of taxability to capital gains is the year in which the contract is entered into. All the conditions prescribed under the act are satisfied in this case. 21. The AR submitted that the society had originally allotted ....
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....e date of the possession and the ownership of the old plot. The assessee/individual against the unjustified and unwarranted addition of Rs. 1,02,78,000/-by disallowing the deduction u/s. 54F filed an appeal with the CIT(A). The fact that the possession of the open land (property) was with the assessee for more than 3 years was ignored by the CIT(A) on the ground that the relevant land (open plot) was held for less than 3 years as it was acquired in the year of 2007. This was surmised based on the situation that the alternate plot that was given to the assessee in lieu of the old plot was held for less than 3 years, as the society had given the open plot in 2007 in lieu of the old plot which was cancelled. That the assessee had no control on the operations of the society and it was the society which allotted the new plot in exchange of the old plot and the assessee had not sought for the new plot as he was the genuine and bona fide owner of the old plot. The society in order to safeguard the interests of the assessee thrust upon the assessee the allotment of the new plot as the assessee was aggrieved with the goings on the society's mechanisation in dealing with various litigants. T....
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....i Prasad entered into the first sale agreement with Smt. L. Samyukta Bullayya on 21st July, 2004 for purchase of a plot bearing No. 259A/A at Sy. No. 102/1, Hakimpet village, Hyderabad district and paid a sum of Rs. 5 lakhs towards sale consideration. The assessee also entered into agreement of sale cum GPA with possession with the above vendor on the 21st day of July, 2004 and taken possession of the property. This property was originally plotted by Sri Venkateswara Cooperative Housing Building Society known as "MLA Colony" and allotted the plot to Smt. L. Samyukta Bullayya as registered number of the society vide Membership No. 327. The said plot overlapped with the layout of Jubilee Hills Cooperative House Building Society, Sri Venkateswara Cooperative House Building Society though executed the registered sale deed vide Document No. 976/85, dated 29-03.2005 could not deliver the possession of the said land to Smt. Samyukta Bullayya she had approached the Joint Registrar District Co-operative officer, who issued a letter vide Rc. No. 4710/2001-Hsg dated 21-03-2006 requesting Sri Venkateswara Co-operative House Building Society to allot alternative land from the available land all....
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....open land belonging to Society & Society Shopping Complex Building. 27. While substituting the new property by the vendor, the assessee got exemption of the stamp duty, registration fees by the State Government as this is an alternative plot and in lieu of Plot No. 259A/A admeasuring 600 sqy in TS No. 1, Block J, Ward-12, MLA Colony, Banjara Hills, Hyderabad. Since Smt. Samyukta Bullayya has already paid stamp duty for the plot No. 259A/A vide document No. 976/85. The Government notification dated 26.4.2007 was on record at page No. 40 of Paper Book. Sri Venkateswara Co-operative House Building Society Ltd. also issued NOC vide letter dated 30.6.2004 to Smt. Samyukta Bullayya and GHMC to accord sanction of housing plan in the said land which is also kept on record at page 41 of the Paper Book. There is also Police compliant and copies of judgement declaring ownership of the property when the ownership was brought to dispute and the agreement of sale cum GPA executed in the year 2004 bears the testimony to the fact that the assessee was the lawful and true owner of the land since 2004. The assessee has been fighting for absolute ownership of the property in the court of law since....
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....should not take a narrow view of the interpretation that the agreement of sale should have been registered. The fact that the assessee fought the case having been the owner since 2004 proves the bona fides and the conclusive evidence that he is a true owner since 2004. There is no insistence or mandatory requirement that assessee in his own judgment delays the notification of change in the ownership in the records as the assessee was in the possession of the said property. There being a dispute, the assessee upon the resolution of the case, sold the property after holding the property for three completed years. Our view is also supported by the following judgements as relied on by the learned counsel for the assessee: (a) CIT vs. RL Sood, 108 Taxman 227 (Delhi) - The assessee was allotted the house but the possession of the flat was handed over after the allotment date. Therefore, drawing from the same analogy, allotment or taking over possession and acquiring substantial domain over the ownership of the property is the most critical factor in determining the date on which it has been acquired and not on registering the document per se. (b) CIT vs. Jindas Panchand....
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....eement dated 21st July, 2004. However, the material on record suggest that cheque bearing No. 0785479 dated 23.7.2007 issued by the assessee from A/c. No. 024301505741 is not presented for clearance till 24.2.2014 as per certificate given by ICICI Bank which reads as follows: "ICICI Bank Dt 25.02.2014 Ref no. ICBK/1314/2013-14 TO WHOMSOEVER CONCERNED This is confirm that Cheque No. 085479 issued by Mr. Rathod Vrajendra Karan Varma from account no. 024301505741 is not presented for clearance as on 24.02.2014 as per the statement enclosed. Account statement from 1.7.2007 to till date enclosed for your kind reference. This confirmation is issued as per the special request of the Customer without any risk or liability on the part of the Bank or the Official signing this letter on its behalf. For ICICI Bank Ltd. Sd/- Authorised Signatory" 30. As seen from the above facts of the case, Smt. Samyukta Bullayya had already given possession of property to the assessee vide the first sale agreement dated 21st July, 2004. Due to the reasons beyond the control of the parties, the vendor lost that property and got allot....
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....nsfer could have been taken place only after that date and never before that date and particularly on 28-11-1999. This argument of the Revenue is highly technical. The Revenue has overlooked the sequence of events preceded the issue of final NOC by the Appropriate Authority on 21-2-2000. To repeat again, the original agreement of sale was executed on 28-6-1996. The Appropriate Authority had issued the NOC on the basis of that agreement on 8-10-1996 itself. Thereafter the circumstances warranted to revise the agreement twice, one for restating the actual extent of the property and the other for restating the negotiated consideration of sale. The assessee had filed revised applications for NOC before the Appropriate Authority on both occasions when the original agreement was restated. Meanwhile, the possession was also handed over to the buyers and the consideration was also received from them. Therefore, it is necessary to consider all these events as inseparable segments of a single and composite transaction. The original sale agreement was executed by the parties on 28-6-1996. The subsequent restatements of the agreement were only to incorporate modifications and not to alter or s....