TaxTMI 
TaxTMI 
2016 (7) TMI 184
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....i Rajiv Kumar) 4. In this appeal, on ground No. 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 assessm....
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.... amount of cheque of Rs. 5 Crore was realized, what will be the 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 date....
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....garding possession, assessee has relied upon affidavit given by the buyer at the 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....
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.... 14.02.2014 submitted that return filed in original may be treated as filed in response to notice 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 considerati....
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.... Thus,the sale is complete even if price is intended to be paid. So sale has taken place during the year. 6.4 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....
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.... of sale is not well placed as these do not nullify the effect of what is stated in the revenue records and sale deed 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 titl....
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....xecuted agreement for transfer in respect of property and given possession to party and received consideration, doctrine of part performance as per 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 ....
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.... asset is covered by section 2(47)(i) of the Act and not by 2(47)(v) as contemplated by the appellant. In the judgment given by Hon'ble High Court 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 ....
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....ins under section 12B of the Indian Income-tax Act, 1922, it is sufficient if in the relevant accounting year profits have arisen out of the sale of capital assets, that is to say, if the assesses has a right to receive 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 d....
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....ssee further submitted that sale deed was executed with advance because the buyer company will have to get land use changed from the Revenue authorities with permission to develop by raising construction. In case no land use change permission has been granted 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 ....
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.... High Court and various civil and police authorities, assessee got the amount of undated cheque. Therefore, no capital gain arises in the years under consideration. 13. The ld. counsel for the assessee relied upon following decisions : i) Decision of Hon'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 ....
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....value. If it is held that the sale deed is final, in that case, the IT authorities will be debarred from looking into as to how much sale consideration passed under the transaction, which is not the law. The factum of sale and the proceeds are the real questions to be determined by the IT authorities. From what has been 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, sha....
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....vi Verma (124 ITD 467) wherein held that the assessee having executed the agreement, which only contemplated the sale property to the purchaser on a future date on certain terms without transferring any right of ownership, and no possession of property is given or right to use the property or right received income arising in the property 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 compan....
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....sarily pass as soon as the instrument is registered, for the true test is the intention of the parties. Registration is prima facie proof of an intention to transfer, but it is no proof of an operative transfer if there is a condition precedent as to the payment of consideration or delivery of the deed. Thus the seller may retain the deed pending 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.....
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....of CIT V Mrs. Hemal Raj Shete in IT Appeal No. 2348 of 2013 vide judgement dated 29.03.2016 held in para 7 to 12 as under: 7. Mr.Pinto, learned counsel for the Revenue urged that in terms of section 45(1) of the Act that transfer of capital asset would attract the capital gains tax. It is further submitted that the amount to be taxed under section 45(1) is not dependent upon the receipt 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 de....
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....eceived as deferred consideration is dependent/contingent upon certain uncertain events, therefore, it cannot be said to have accrued to the respondent-assessee. The Tribunal in the impugned order has correctly held that what has to be taxed is the amount received or accrued and not any notional or hypothetical income. As observed by the Apex Court in Commissioner of Income-Tax vs. M/s. Shoorji Vallabdas 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 rece....
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....erefore, essential condition of the sale deed is transfer of the property on full payment made by the purchaser. On the same day, the buyer M/s Link Infrastructure & Developer P. Ltd. through Shri Parveen Kumar executed an affidavit dated 20,.03.2007 duly attested by the Executive Magistrate, Jagadhari. In this affidavit, the buyer has mentioned/affirmed that though sale deed of the land has been registered but the spot possession 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 compan....
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....so directed to constitute Special Investigation Team to conduct fair investigations. These facts would also support the claim of the assessee that the buyer companies have no intention to pay any amount to the agriculturists who have executed sale deed in favour of the developers and the developers have not paid the substantial sale consideration to the agriculturists including the assessee. It is only when the investigation carried 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....
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....rative transfer if there is a condition precedent as to the payment of consideration or delivery of the deed or possession. The properties do not necessarily pass as soon as the instrument is registered, the true test is the intention of the parties. In the instant case, the sale of property depends upon full payment and the buyer company obtaining land use change permission and development permission etc. The authorities below only considered 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 ca....