TaxTMI 
TaxTMI 
TaxTMI 
2016 (7) TMI 184
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....1 the assessee challenged the upholding of long term capital gain amounting to Rs. 5,23,23,470/- in the year under consideration i.e. 2007-08. On ground Nos. 2 to 7, the assessee challenged the order of the ld. CIT(Appeals) in denying exemption under section 54B and 54F of the Income Tax Act on different amounts. On ground No. 8, assessee challenged the order of ld. CIT(Appeals) in not allowing commission of Rs. 5,50,000/- paid by the assessee to the brokers from the sale proceeds of agriculture land. On ground No. 9, assessee challenged the order of ld. CIT(Appeals) in upholding the fair market value of land taken by Assessing Officer as on 01.04.1981. On ground No. 10, assessee challenged the order of ld. CIT(Appeals) in rejecting application of additional evidence filed under Rule 46A of the IT Rules. On ground No. 11, assessee challenged the re-opening of the assessment under section 147/148 of the Income Tax Act which is not pressed by the ld. counsel for the assessee. The same is, therefore, dismissed being not pressed. 5. The main issue have been raised on ground No. 1 above upholding the long term capital gain in assessment year under consideration i.e. 2007-08 amounting t....
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....effective date of transfer ? ii) If the amount of cheque of Rs. 5 Crores was not realized, what will be the fate of Rs. 50 lacs already paid by the buyer to the seller ? 6(ii) The Assessing Officer further observed that as per provisions of Section 54 of Transfer of Property Act, it is clear that when price is partly paid and partly promised, the immovable property is deemed to have been transferred on execution and Registration of the Sale Deed if the possession of property has been given to the buyer. The assessee deposed before the Registering Authority that possession of land was handed over to the vendee and nothing was due for payment. Entries of Mutation would be made by the purchaser company through its officers for which vendor will have no objection. The assessee's claim that the possession of the property remained with the seller till the encashment of undated cheque and cultivation of land was being done by the seller was not maintained in view of the information collected from the Revenue Authority. 6(iii) The Assessing Officer also observed that claim of assessee that one Sale Deed dated 20.03.2007 will have two different effective dates of transfer, were not ....
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....e time of registration. The assessee submitted that assessee received sum of Rs. 50 lacs only as proceeds of the land and due tax/treatment was meted out to the aforesaid receipt. 8(i) The assessee further submitted that though the definition of transfer of capital asset under section 2(47) is extended w.e.f. assessment year 1988-89 to include any transaction involving 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 T.P. Act. A combined reading of the two sections shall infer that unless the transferee is unconditionally willing and ready to do all the acts which he is obliged to do under the contract, Section 53A cannot come into play. Whenever there is a sale/transfer of immovable property, the consideration has to be paid by the transferee to the transferor. If the transferee fails to give any consideration or is not able to carry out his part of the contract, there cannot be a valid sale. In the case of the assessee, there was not an absolute and complete sale as defined hereinabove. At the most, the sale deed in true sense was only a contract for sale and as such no interest or ....
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....otice u/s 148 of the Act. 6.1 It is further noted that the appellant has sold agricultural land for a consideration of Rs. 5,50,00,000/- through a sale deed registered on 20.03.2007. As per the deed, the sale consideration comprised of Rs. 8,50,000/- in cash, Rs. 41,50,000/- through cheque dated 15.03.2007 and Rs. 5,00,00,000/- through undated cheque. The first two payments were received during the year under consideration on which the appellant through letter offered capital gain on pro rata basis. The appellant has not offered the capital gain on the entire sale proceed as the balance amount of Rs. 5,00,00,000/- was received by the appellant through undated cheque in subsequent year relevant to A.Y. 2009-10. The appellant has taken this view on the basis of clause in sale deed which says if the above cheque bounced then the sale deed itself is annulled. Thus, the appellant has taken the view that the complete transfer did not take place on the date of registration i.e. 20.03.2007 but in two parts, one during the year and second on the date of realization of entire sale consideration through undated cheque. 6.2 On the other hand, the AO rejected the appellant's stand by d....
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.... Further, there is a certainty in performance of contract and no right to revocation is stipulated in the sale deed or registration deed. The saving clause in the registration deed that in case of non realization of undated cheque, the agreement to sell shall stand cancelled is only a protection given to the seller for the purposes of filing his claim in the court of law in case of non realization of sale proceeds. It only states that the sale deed will stand cancelled but the registration having taken place and property having been transferred in the name of the buyers, the registration cannot be deemed to 'not have taken place'. As already stated this saving clause is only to protect the interest of seller and to facilitate the filing of claims etc. in court of law. It does not change the time of transfer of the capital asset. Further there is merit in observation that the saving clause was to take care of the eventuality which has not taken place, as, as on the date of the assessment, the payment has already been received. Therefore, even if the appellant's contention that there was a rider in the registration deed is accepted the time factors have eroded its effect.....
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....registered on 20.03.2007. 6.7 Regarding the claim of assessee that possession of property remained with the assessee' till the encashment of post dated cheque, there is contrary finding by the AO that the Tehsildar, Jagadhri informed that Intkal has been accepted before the year end on 31.03.2007 in the name of M/s Link Infrastructure & Developers Pvt. Ltd.Delhi This shows M/s Link Infrastructure & Developers Pvt. Ltd. Delhi. at Intkal of the registry was accepted before 31.03.2007 and possession of the land was also not with the appellant till the encashment of the post dated cheque. 6.8 The appellant has relied on the decision of Hon'ble High Court of Patna in the case of Smt. Raj Rani Devi Ramna Vs. CIT [1993] 201 ITR 1032. However, the fact of that case is distinguishable from the facts of instant case. In that case, the registered sale deed in respect of three sales clearly stipulated that only on payment of the entire consideration amount, the registration receipt and delivery of possession will be given evidencing the passing of title to the vendee. Whereas in the instant case, as per the registered sale deed the possession of land has already been handed over an....
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....r section 53 A of Transfer of Property Act was rightly invoked; subsequently act of assessee in executing power of attorney and sale deeds executed by PA holder on basis of such power of attorney would not in any way alter status of the parties to agreement. On perusal of these judgments, it is noticed that the appellant's reliance on these cases is misplaced as the facts are distinguishable from the facts of the instant case and the ratios given on the interpretation of section 2(47) is very well applicable in the appellant's case where the appellant has executed the sale deed on 20.03.2007 relevant to A.Y. 2007-08 and as per sale deed and revenue records the transfer of property has already happened and possession has also been granted. So, the appellant's .reliance in these cases does not support its contention for taxability of capital gains at two different points of time on receipts of part sale consideration in two financial years. Further, I make reference to the word 'transfer' of capital assets as in section 2(47) of the Act. The transfer in relation to a capital asset includes sale, exchange or relinquishment of the asset or the extinguishment of any ....
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....ourt of Bombay in the case of Chaturbhuj Dawarkadas Kapadia Vs. CIT 260 ITR 491, the Hon'ble Court observed that however/the mode of 'transfer' as per section 2(47)(v) read with section 53A of TP Act is in the cases of such agreements which are in the nature of development agreements where the possession has been transferred the agreement has been made but the title has not been transferred by way of registration. The Hon'ble High Court of Bombay in that case gave the findings as under :- "There is a difference between contract on one hand and performance on the other hand. In instant case, the Tribunal as well as the department had come to the conclusion that the transfer took place during the accounting year ending 31.03.1996 as substantial payments were effected during that year and substantial permissions were obtained. In such cases of Development Agreements, one could not go by substantial performance of a contract. In such cases, the year of chargeability is the year in which the contract is executed. This is in view of section 2(47)(v). So , the Hon'ble High Court while examining the provisions of section 2(47)(v) read with section 53A of TP Act rea....
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....eceive the profits. It is not necessary that the asses see should have received them. When once profits have arisen in the accounting year out of the sale of capital assets, what the parties did /subsequent to that year will not have any bearing on their liability to tax in respect of that year." The Supreme Court in Alapati Venkataramiah v. CIT [1965] 57 ITR 185 held (per head note) : "Before section 12B of the Indian Income-tax Act, 1922, could be attracted, title must pass by any of the modes mentioned in section 12B, i.e., sale, exchange or transfer. In the context 'transfer' meant effective conveyance of the capital asset to the transferee. Delivery of possession of immovable property could not by itself be treated as equivalent to conveyance of the immovable property." The Supreme Court also held that (ibid): "The entries in the account books of the appellant and of the company on March 20, 1948, were irrelevant for the purpose of determining the date when the sale or transfer took place. Title to the land and buildings and the plant and machinery and electrical fittings permanently embedded thereon could not pass to the company till the conveyance was execute....
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.... or construction is not allowed by the authorities, the buyer use to cancel the sale deed and advance many is refunded. He has, therefore, submitted that intention of the parties from the above facts shall have to be considered in the light of the material on record that no sale transaction has been done or completed in assessment year under appeal. The intention of the buyer was only to pay part amount and the substantial amount of Rs. 5 Cr would have been paid on completion of all the future transactions, i.e. permission to be obtained from the Revenue authorities. He has submitted that on the basis of the clause in the sale deed and affidavit of the buyer would clearly show that the transaction would take place only on encashment of the undated cheque i.e. on16.06.2008 when full consideration have been paid and possession of the land have been handed over to the buyer. The ld. counsel for the assessee further submitted that moreover the fraud has been committed by the buyer with the help of Revenue authorities on innocent villagers/sellers including the assessee who are illiterate and agriculturists by misrepresentation in the sale deed i.e. factum of post-dated cheque was not m....
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....;ble Punjab & Haryana High Court in the case of Hira Lal Ram Dayal V CIT 122 ITR 461. ii) Order of ITAT Chandigarh Bench in the case of CIT V Mrs. K.Atma Ram 6 CCH 202. iii) Order of ITAT Hyderabad Bench in the case of M/s Mali Florex Ltd. V DCIT in ITA 891/2011 dated 28.09.2012. iv) Order of ITAT Ahmedabad Bench in the case of Hansmukh Chottalal Patel Vs ITO in ITA 150/2012 dated 14.12.2012. v) Judgement of Hon'ble Patna High Court in the case of Smt. Raj Devi Ramna V CIT 201 ITR 1032. vi) Order of ITAT Kolkata Bench in the case of Chanchal Kumar Sirkar V ITO 50 SOT 289. 14. The ld. counsel for the assessee, therefore, submitted that no capital gain is leviable to tax in assessment year under appeal i.e. 2007-08 therefore, the whole addition is unjustified. 14(i) On the other hand, ld. DR relied upon orders of the authorities below and submitted that sale deed was executed on 20.03.2007 therefore, on the date of registered Sale Deed, there is a transfer of the title in favour of the buyer, therefore, sale is complete on 20.03.2007. As such, Capital gain is leviable in assessment year under appeal. He has submitted that merely because entire sale consideration....
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....een stated above, it is clear that the Tribunal fell into an error in refusing to examine the material put forth by the assessee to prove that the sale was a sham transaction." 15(i) ITAT Chandigarh Bench in the case of CIT V Mrs. K. Atma Ram (supra) held as under : " No doubt the question as to whether the registered deed is the last word for the transfer and whether oral evidence contrary to the terms of the registered deeds can be admitted for the purpose of nullifying the effects of registered documents is a question of law but the Tribunal had relied upon a decision of the Punjab & Haryana High Court in the case Hira Lal Ram Dayal vs.CIT (1980) 14 CTR (P&H) 88 : (1980) 122 ITR 461 (P&H), for the proposition that the registered sale deed is not the last word for transfer and, if there is evidence available on record that the two sale deed were bogus, sham or manipulated the assessee could not be subjected to capital gains tax on the transfer of the plots in question although this decision of the High Court relates, to a very important legal issue, the answer to which is highly controversial and ordinarily a reference over this question should have been made, no such referen....
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....perty also not given to the purchaser, in such circumstances, it is not a transfer in terms of section 2(47) of the IT Act, 1961. We also place reliance on the decision of CIT vs. Rasiklal Maneklal (HUF) (177 ITR 198)(SC) wherein the apex court held, affirming the decision of the High Court, that there was neither an "exchange" nor a "relinquishment" and no capital gains arose from the transaction. An "exchange" involves the transfer of property by one person to another and reciprocally the transfer of property by that other to the first person. There must be a mutual transfer of ownership of one thing for the ownership of another. A "relinquishment" takes place when the owner withdraws himself from the property and abandons his rights thereto. It presumes that the property continues to exist after the relinquishment. Where, upon amalgamation, the company in which the assessee holds shares stands dissolved, there is non "relinquishment" by the assessee. In view of the above discussion, there is no relinquishment of right over the property. Accordingly, the appeal of the Revenue is dismissed. 15(iv) ITAT Ahmedabad Bench in the case of Hansmukh Chottalal Patel V ITO (supra) held as....
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.... payment of price and in that case there is no transfer until the price is paid and the deed is delivered. 8.2. In the case of ITO vs Smt Satyawati Devi Verma (2010) 124 ITD 467, the Tribunal has concluded as under : "Assessee having executed an agreement on 19th Oct.,1995, which only contemplated sale of a property at a future date on stipulated terms and conditions without transferring any right of ownership, use or possession in the corpus or the income arising from such property to the purchases, and executed the registered sale deed on 20th Dec., 2,007, the transaction of sale of property was not completed in terms of provisions of s. 2(47)(v) of IT Act, 1961, r/w s. 53A of Transfer of Property Act, 1882, at the time of execution of agreement dt. 19th Oct., 1995, and therefore, capital gain was not chargeable in asst. yr. 1996- 97." 9. Considering the totality of facts and relying on the decisions of the H'ble HC in the case of Raj Rani Devi Ramna (supra) and of the Tribunal in the case of Satyawati Devi Verma (supra), we are of the view that the Assessee had given the possession of land in February-2009 to the purchaser and the purchaser could enjoy the fruits of p....
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....ceipt of the consideration. In support of the above he invites our attention to Section 45(1)(A) and section 45(5) of the Act which in contrast brings to tax capital gains on amount received. In the above view, it is his submission that the Assessing Officer was justified in bringing to tax entire amount of the respondent- assessee's share in Rs. 20 crores referred to in the agreement dated 25th January, 2006 as maximum amount that could be received on the sale of shares in M/s. Unisol by its co-owners from M/s. RKHS. 8. In the present case, from the reading of the above clauses of the agreement the deferred consideration is payable over a period of four years i.e. 2006-07, 2007-08, 2008-09 and 2009-10. Further the formula prescribed in the agreement itself makes it clear that the deferred consideration to be received by the respondent-assessee in the four years would be dependent upon the profits made by M/s. Unisol in each of the years. Thus in case M/s. Unisol does not make net profit in terms of the formula for the year under consideration for payment of deferred consideration then no amount would be payable to the respondent- assessee as deferred consideration. The consi....
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....llabdas and Co. (1962) 46 ITR 144 "Income-Tax is a levy on income. No doubt, the Income-Tax Act takes into account two points of time at which liability to tax is attracted, viz., the accrual of its income or its receipt; but the substance of the matter is income, if income does not result, there cannot be a tax,even though in book-keeping an entry is made about a hypothetical income, which does not materialize." In this case Rs. 20 crores cap in the agreement is not income in the subject assessment year. It has been observed by the Apex Court in the case of K.P. Varghese vs. Income-Tax Officer, Ernakulam & Anr. 181 ITR Page 597 that one has to read capital gain provision along with computation provision and the starting point of the computation is "the full value of the consideration received or accruing". In this case the amount of Rs. 20 crores is neither received nor it has accrued to the respondent-assessee during the subject assessment year. We are informed that for the subsequent assessment year (save Assessment Year 2007-08 for which there is no deferred consideration on application of formula), the Assessee has offered to tax the amounts which have been received on the app....
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....sion will be given at the time when total sale consideration of the PDC cheque is given to the owner. Uptil the amount of the cheque has not been paid, buyer company cannot make discharge of any kind to the remaining persons etc. The possession shall remain with the owner and in case of cancellation/delay, the buyer company shall be responsible for all the losses and expenses to the owner. Since the date of sale deed dated 20.03.2007 and affidavit of the buyer dated 20.03.2007 are related to the alleged transfer of property, therefore, contents of the affidavit would be relevant to consider the entire facts and circumstances of the case because it would support the contention of the assessee that the sale deed was executed only with intention that buyer company thereafter, can obtain land use change from the revenue authority with permission to raise the development in the agricultural land. 16(i) It would also strengthen the case of the assessee that in case of denial of land use change permission and development permission to the buyer, the sale deed would be cancelled between the parties. The assessee further explained that when the undated cheque was not paid by the buyer comp....
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....ed out by the State Police and Civil Authorities, as per directions of the Hon'ble Punjab & Haryana High Court, the substantial amount of sale consideration through undated cheque was cleared in favour of the assessee after several months. The provision of Negotiable Instrument Act provides that the negotiable instruments ( including cheque) would be valid for a period of six months but in the case of the assessee, with the intervention of Civil and Police authorities, as per directions of the Hon'ble Punjab & Haryana High Court, undated cheque of the assessee was cleared after about 15 months from the date of the sale deed because undated cheque is cleared on 16.06.2008 while sale deed was executed on 20.03.2007. The intention of the buyer company is, therefore, very clear from the beginning itself that the buyer company/builders never intended to pay substantial sale consideration to the assessee. The intention of the buyer company is also clear from the fact mentioned in the sale deed, affidavit and the attending circumstances. Though the sale deed is executed in the matter but the facts and circumstances above will clearly explain that the sale deed in-fact was a contra....
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....onsidered the sale deed was final but ignored the other material evidence on record. Accrual would be right to receive the amount but no right accrued as assessee was intentionally duped by the buyer. Since one of the assessee Shri Tejinder Kumar & others have made allegation against the developers/buyers conniving with the Revenue Authorities and directions have been issued to take action into the matter by forming a Special Investigation Team also, therefore, the mutation done by the Revenue authorities in favour of buyers as per registered Sale Deed would not be significant to declare any capital gain accrued or arise in the assessment year under appeal. The decisions relied upon by the assessee clearly apply to the facts and circumstances of the case. The decision in the case of Sanjeev Lal Vs CIT (supra) relied upon by ld. DR is distinguishable on facts of the case and would not support case of the revenue. 18. Considering the above discussion and material on record, we are of the view there is no transfer of capital asset in assessment year 2007-08. There is no accrual or receipt of any income in favour of the assessee on account of capital gains in assessment year 2007-08. ....