TaxTMI 
TaxTMI 
2018 (2) TMI 1706
X X X X Extracts X X X X
X X X X Extracts X X X X
....sources without appreciating the fact that they are necessary expenditure to run a company. 2. That the Ld. CIT(A) erred in taxing the capital gain in the year under consideration ignoring the fact that transfer within the meaning of sec. 2(47) had already taken place in AY 1992-93 within the meaning of sec. 53A of Transfer of Property Act. 3. That the Ld. CIT(A) erred in not appreciating the fact that section 50C is not applicable in the case of appellant as the agreement to sell was entered into prior to introduction of section 50C in statute. 4. That the Ld. CIT(A) erred in not accepting the plea of the appellant that even if sec 50C is made applicable, stamp duty val9uation as on the date of agreement should be adopted and not of the date of registration. 5. The appellant craves leave to add to, alter, to delete from or substantiate the above ground of appeal" 3. First issue raised by assessee in ground No.1 is that Ld. CIT(A) erred in confirming the order of Assessing Officer by sustaining the disallowance of various administrative expenses on the ground that no business activity was carried on by assessee. 4. Briefly, the facts are that the assessee is a pri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ied on by assessee in the year under consideration. 5. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who has confirmed the order of AO. Aggrieved by this, the assessee has come up in appeal before us. 6. Ld. AR before us filed a paper book which is running from pages 1 to 85 and submitted that the expenses have been incurred towards day-to-day running of business. The assessee being a private limited company has incurred certain expenses which are imperative for its existence. Such as audit fees, directors meeting fees, filing fees etc. Similarly there are other indirect expenses which need to be incurred for its day-to-day working. Such as banking charges, telephone expenses, printing and stationary, & salary etc., Ld.AR in support of assessee's claim has relied on the judgment of Hon'ble jurisdictional High Court in the case of CIT vs. Ganga Properties Ltd. reported in 199 ITR 94 (Cal) wherein it was held as under:- "A limited company even if it does not carry on business, even if it derives income from other sources, has to maintain its establishment for complying with statutory obligation so long as it is in operation and its name is not struck off t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed by the assessee are essential to keep the status of the assessee-company as active. It is the duty of the assessee to establish that the expenses claimed by it were necessary for its company. We note that the assessee has claimed the expenses under total 8 heads as discussed above. Out of the total 8 heads of expenses the assessee has made the disallowance in respect of 4 heads of expenses which has already been discussed in the preceding paragraphs. In the instant case, the assessee has shown the major income under the head House Property and has claimed the statutory deduction u/s 24(a) of the Act towards the repairs and maintenance of the expenses. The relevant provision of section 24(a) reads as under : [Deductions from income from house property. 24. Income chargeable under the head "Income from house property" shall be computed after making the following deductions, namely:- (a) a sum equal to thirty per cent of the annual value; Once the assessee has claimed the above deduction then the same deduction cannot be allowed under any other head of income. The assessee before us has not brought any material on record suggesting that the expenses claimed under ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Transfer of Property Act. As per the AIR, it was revealed that assessee has transferred immovable property on 21.07.2011 which was valued for the purpose of stamp duty at Rs.1,90,83,227/- only by the District Registrar, Chaibas. The AO observed that the transaction for the sale of the property was not shown in its income tax return. Thus, an explanation was sought by AO from assessee. The assessee, accordingly, submitted that it has transferred the impugned property for Rs.1.90 lakh in the year 1991. It has also received an advance of Rs. 19,000/- which was duly reflected in the book of assessee. But the sale deed was not executed in the name of transferee due to some problem related to the title of the property. The assessee also submitted that the agreement was duly made with the transferee vide dated 22.03.1992 for the transfer of the impugned property. The relevant clause of the agreement reads as under:- "NOW THIS AGREEMENKT WITNESSETH as follows:- 1. That the company hereby declares that the Company is in absolute owner of all those Kayami Right plots of land bearing No.656 (a, b, c, d, e, f,g ,h, I ,j, k, l, and m) measuring 3 Acres 19.304 decimals in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....el this Agreement and the Transferer will not take any step for taking repossessions of the said properties from the Transferee. 9. In case the Transferee wants to resell the properties, he shall be at liberty to resell the same on such terms and conditions and at such price he may think fit and proper subject to observation and performance of all the provisions of law applicable to such transfer but in the event the transferee shall always remain liable to pay the balance of the agreed price under this agreement to the Transfer 10. That the balance agreed price which remains payable under this Agreement by the Transferee to the Transferer will form charge on the said properties. 11. In case of any acquisition or requisition of the said properties by any Government or Semi Government authority, the compensation to be received will belong to the Transsferee. The Transferer will give full co-operation to the Transferee to enable it to enjoy the properties in such manner as the Transferee may think fit and proper. 12. The Transferer hereby agrees to sign such papers, documents, pleadings etc. as may be required by the Transferee for protecting his o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....O disregarded the contention of assessee and observed the fact that the property was transferred in the financial year 2011-12 corresponding to Assessment Year 2012-13 and therefore capital gains on such transfer is liable to be taxed in the year under consideration. Accordingly, the AO treated the stamp value determined for the purpose of stamp duty of Rs.1,90,83,227/- as sale consideration u/s 50C of the Act and determine the capital gains income of Rs.1,89,1,170/- and added to that total income of assessee. 10. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that the impugned property was transferred vide agreement dated 22.03.1992, consequently there arose capital gains income which has to be taxed in the financial year 1991-92. The provision of Section 50C came into force with effect from 01.04.2003. Therefore, same cannot be applicable to the transfer of the impugned property which has taken place in the financial year 1991-92. However, Ld. CIT(A) disregarded the contention of assessee confirmed the order of AO by observing as under:- "6. I have perused the impugned order and the material placed on record. I have....
X X X X Extracts X X X X
X X X X Extracts X X X X
....was assessable in the assessment year 1992-93. The assessee has not been able to bring sufficient positive material on record to support its contention that the transfer of the property was made in the financial year 1991-92. I therefore find merit in the finding of the AO that the transfer of the property was made on 21-07-2011 when the deed was registered in the office of the Registrar and consequently the capital gain arising out of such transfer was assessable in the relevant assessment year 2012-13. I also find that the AO was justified in applying the provisions of section 50C for the purposes of computing the capital gain. I have perused the judicial decisions relied upon by the assessee as well as by the AO. I find that the issue in the present appeal is squ9arely covered by the judgment of the jurisdictional High Curt income of Bagri Impex (P Ld. vs. ACIT (supra). For better appreciation of the judicial decision, the order of the Hon'ble court is reproduced hereunder: 1. The undisputed facts of the case are as follows :- The assessee was owner of 2/5th share in a land situated at 14A, Burdwan Road, Kolkata. Naturally, there were co-owners owning the r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s a result of such transfer. 3. The case of the assessee is that the provision of section 50C has no manner of application because on the date when he received the money by way of sale proceeds neither the deed of conveyance had been executed and naturally it could have been registered on that date. We already have indicated that the sale proceeds were claimed to have been received in the financial 2005-06; the deed of conveyance was executed in the financial year 2006-07 and the registration of the deed of conveyance took place in the financial year 2007-08. 4. The submission of the assessee was accepted by the CIT(A). The Revenue preferred an appeal. The Ld Tribunal reversed the order of CIT(A). The assessee has once again come up before this Court. The following question of law has been advanced: "Whether, on the facts and circumstances of the case, the Ld Tribunal was justified in law in not considering that the words "or assessable" was introduced in section 50C (1) of the Income Tax Act, 1961 with effect from t» October, 2009 and thus erred in taking the value of the capital asset as assessed by the Stamp Valuation Authority on 27th November, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncial year 2005-06 when the consideration was received, the Deed of Conveyance had not even been executed has not found favour with us for the simple reason that the intention of the Parliament is that in a case where the land or building or both are sold or otherwise transferred, such transfer shall be deemed to have taken place only after the stamp duty has been assessed by State Government, because it is on the valuation made for the purpose of stamp duty that the tax is payable under the Income Tax Act. The amendment made in the year 2009 may have made the things simpler, but the intention of the legislature was very clear from the beginning that the value for the purpose of income tax shall be the same as the value for stamp duty. By adopting devices to defeat the provision, the assessee cannot be heard to contend that section 50C would not be applicable merely because the Deed of Conveyance had not at that time been executed or registered. The contention that the property stood transferred in the financial year 2005- 06 when the sale proceeds were received on the basis of the definition appearing from s.2(47)(v) of the IT Act is without any substance for reasons already discu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....012-13 and also that the AO has rightly invoked section 50C for the purposes of computing the capital gain. The impugned order of the AO is upheld. Ground no 2 to 5 is dismissed. Ground no 6 is general in nature." The assessee being aggrieved by this order of Ld. CIT(A) came in second appeal before us. 11. Ld. AR before us submitted that the impugned property has been transferred vide agreement dated 22.03.1992 as per the provision o Section 53A of the Transfer of Property Act. The ld. AR in support of assessee's claim drew our attention on pages 18 to 23 of the paper book where the copy of agreement dated 22.03.1992 was placed. The possession of the impugned property was also duly handed over to the transferee as per the agreement dated 22.03.1992 which has also been discussed in the preceding paragraph. Ld. AR in support of assessee's claim also drew our attention on pages 42 and 43 of the sale deed made on 20.07.2011 which reads as under:- "AND WHEREAS the Seller having earlier agreed to sell the Schedule Property to the purchasers on the basis of their mutual understanding which was reduced into writing vide an agreement dated 22.03.92 and the purchasers are in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o it in the year under consideration. As per assessee, the transfer of the property has taken place in the financial year 1991-92 as per the provision of Section 2(47) r.w.s. 53A of Transfer of Property Act Thus Simply, the impugned property was registered by way of sale deed in the year under consideration cannot be the basis charging the capital gains in the year under consideration. However, AO treated the said transactions of sale of the impugned property pertaining to the year under consideration and accordingly addition on account of capital gains was made to the total income of assessee. The view taken by AO was subsequently confirmed by Ld. CIT(A). Now the issue before us arise so as to whether the capital gain income has arisen in the hands of assessee in the year under consideration in the given facts & circumstances. It is undisputed fact that the impugned property was transferred to the transferee vide agreement dated 22.03.1992 and the possession was also duly handed over to the transferee. Against such transfer an amount of Rs.19,000/- was also received by assessee. Thus, we note that all the ingredients for the transfer of impugned property as specified u/s 53A of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof." 12.1 Therefore, we hold that the transfer of impugned property has taken place in the financial year 1991-92 and accordingly the tax liability arose under the head capital gains has to be subjected to tax in that financial year. In holding so we find support and guidance from the judgment of Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkads Kapadia Vs. CIT reported in 260 ITR 491 wherein it was held as under: "Under section 2(47)( v), any transaction involving allowing of possession to be taken over or retained in part-performance of a contract of the nature referred to in section 53A of the Transfer of Property Act would come within the ambit of section 2(47)(v ). In order to attract section 53A, the following conditions need to be fulfilled. There should be a contract for considerat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the nomenclature MOU will not change its character of sale agreement. Further, capital gains would be taxable in the year in which such transactions are entered into, even if the transfer of the immovable property is not effective or complete for want of registration under the general law. Under section 2(47)(v ) any transaction involving allowing of possession to be taken over or retained in part performance of a contract of the nature referred to in section 53A of the 1882 Act would come within the ambit of section 2(47)(v). In order to attract section 53A, therefore, there should be an agreement for consideration; it should be in writing; it should be signed by the transferor, it should pertain to transfer of immovable property; the transferee should have taken possession of the property and the transferee should be ready and willing to perform his part of contract. Therefore, capital gains would be taxable in the year in which such transactions were entered into, even if the transfer of the immovable property was not effective or complete for want of registration under the general law. Therefore, the conclusion of the Accountant Member that it was merely documents to identify ....