TaxTMI 
TaxTMI 
2018 (5) TMI 1275
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....ch land. The assessee demolished the bunglow to construct 08 flats on the land, some of which would be occupied by her for her own residence. The rest she intended to sell. The assessee retained 04 flats for her own use. The remaining 04 were meant for sale. The details of the names of buyers of these flats, dates of agreements to sale, dates of sale deeds and details of payments received by the assessee under the agreements to sale are as under; Sr. No. Name of the Buyer Date of Sale Deed Date of Agreement to Sale Date of cheques & payment 1 Kankuben Mansingbhai Patel & Vipulbhai Mansingbhai Patel 10/09/08 19.01.2008 19.01.2008 - Rs. 11,00,000/- 11.02.2008 - Rs. 14,00,000/- 2 Naishadh Rajendra Diwanji & Toral Naishadh Rajendra Diwanji 15.12.2008 13.02.2007 11.12.2006 - Rs. 5,00,000/- 04.01.2007 - Rs. 5,00,000/- 3 Pavni Naishadh Diwanji 15.12.2008 13.02.2007 11.12.2006 - Rs. 1,00,000/- 23.12.2006 - Rs. 5,00,000/- 04.01.2007 - Rs. 4,00,000/- 4 Equipment & Space Engineering India Ltd. 09/01/09 17.01.2007 18.11.2006 ....
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....(SC) the Hon'ble Apex Court has held that there is no scope for importing into the statute words which are not there. Such importation would be, not to construe, but to amend the statute. Even if there be a casus omissus, the defect can be remedied only by legislation and not by judicial interpretation. The intention of the legislature is primarily to be gathered from the words used in the statute. Once it is shown that the case of the assessee comes within the letter of the law, he must be taxed, however, great the hardship may appear to the judicial mind to be. 14. In view of the aforesaid ratio, we are of the view that the contention of the ld. AR that the provisions of Section 54F being beneficial provision, cannot be accepted more so when the language of the section is very clear and since section 54F (1) states "has with a period of three years after that date constructed a residential house". In view of the aforesaid facts, we find no reason to interfere with the order of CIT(A) and thus dismiss this ground of assessee." 6. The Tribunal, thus, noted that the construction of the building was carried on between 01.02.2007 and 23.10.2008. Since the Building Use Perm....
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.... of such judgment, it was contended that upon execution of agreement to sale, a capital asset gets transferred. For the same purpose, reliance was also placed on the decision of the Division Bench of Delhi High Court in case of Commissioner of Incometax II v. Kuldeep Singh reported in [2014] 226 Taxman 133 (Delhi) and also of Allahabad High Court in case of Commissioner of IncometaxII, Agra v. Shimbhu Mehra reported in [2016] 236 Taxman 561 (Allahabad). (B) The decision of Supreme Court in case of R.B. Jodha Mal Kuthiala v. CIT, Punjab, J & K and Himachal Pradesh reported in [1971] 82 ITR 570 (SC) was also relied upon, in which it was observed that for the purpose of Section 9 of the Incometax Act, 1922, the owner must be the person who can exercise the rights of the owner, not on behalf of the owner but in his own right. (C) The Division Bench of Karnataka High Court in case of CIT; Dy. Director of Incometax (INTL TAXN) v. Shakuntala Devi since deceased by her LRS Anupama Banerji, Shakunthala Devi reported in 2016 (389) ITR 366 in which, it was observed that utilization of capital gains in construction of residential house would be sufficient to claim th....
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....nguishment of any rights therein" will have to be confined to extinguishment of rights on account of transfer and cannot be extended to mean any extinguishment of rights independent or otherwise than on account of transfer. (I) A decision of the Division Bench of this Court in case of Rustom Spinners Ltd. v. CIT reported in 1992 (198) ITR 351 was cited, in which, the assessee had acquired the right under a sale agreement for a consideration of Rs. 5 Lakhs and subsequently, received surplus of Rs. 9 Lakhs on assignment of the rights so acquired. The assessee disputed that such surplus could not be taxed as short term capital gain. The Court negatived such contention observing that it cannot be stated that no assignment was made by the assessee. Once it is held that there was no frustration of the contract and there was acquisition of rights, the assessee would be liable for tax on the capital gains. (J) Heavy reliance was placed on the decision of the Division Bench of Bombay High Court in case of CIT, Bombay City I v. Tata Services Ltd. reported in [1980] 122 ITR 594 in which it was held that the right to obtain conveyance in immovable property is a capital asset.....
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....vision No.2616 of 2011, it was observed that an agreement to sell a property itself does not create any right or title in the property and that it is the sale deed, which, when executed, will create right, title and interest in the property. These observations were made in the context of requirement of compulsory registration of agreement to sale and whether failure to do so would make the document inadmissible in evidence in a suit for specific performance. (C) In case of Smt. Shail Moti Lal v. CIT, Chandigarh reported in [2013] 218 Taxman 298 (P&H), the Division Bench of Punjab and Haryana High Court, in the context of transfer of capital asset, held that the transfer would take place only on the execution of the sale deed and the date of agreement to sell cannot be treated as the date of transfer of immovable property. (D) In case of Ratna Trayi Reality Service (P) Ltd. v. Income tax Officer reported in 2013 (356) ITR 493, this Court observed that an agreement to sale, without there being anything more, cannot be equated with transfer of property. (E) Reliance was placed on the decision of Supreme Court in case of Suraj Lamp & Industries Pvt. Ltd. v. S....
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.... shall be deemed to be the income of the previous year when the transfer took place. The terms "capital asset" and "transfer" have been defined under Sections 2(14) and 2(47) of the Act respectively. Clauses (a) and (b) of Section 2(14) of the Act define "capital asset" as (a) a property of any kind held by the assessee, whether or not connected with his business or profession and (b) any securities held by a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992. The remaining portion of this definition is in the nature of exclusion and excludes the stock in trade, personal assets, agricultural land, etc. 13. Section 54F of the Act carries the title "capital gain on transfer of certain capital assets not to be charged in case of investment in residential house". Subsection (1) of Section 54F of the Act provides for deduction in computation of capital gain arising out of transfer of long term capital asset if the assessee, within a period of 01 year or before 02 years after the date on which the transfer took place purchased or within a period of 03 years after such d....
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....s not convey a property from one person to another, either in present or even in future. An agreement to sale an immovable property is a bilateral contract under which the two parties, i.e. the buyer and the seller, agree to certain terms and conditions, subject to which the property in question would be transferred by the seller to the buyer for a decided sale consideration. The terms and conditions of the agreement to sale are bound to be different in each case. However, the common thread would be the commitment of the owner of the property to convey to the purchaser the right, title and interest in such property upon the purchaser paying the agreed consideration in agreed manner. It is only after such bilateral obligations are discharged that the execution of the sale deed would take place and it is this sale deed, which is compulsorily registrable under Section 17 of the Registration Act, 1908, upon being registered, would transfer the right, title and interest in the property in question into the purchaser. It is only upon the execution of the sale deed that the title in the property would vest in the purchaser. 16. We must, however, view these transactions in the context o....
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....tered sale deed, so as to transfer the title of property in question from the seller to the buyer. There may be multiple reasons why such eventuality may never arise and these reasons could be entirely different from the seller refusing to perform his part of the obligations arising out of the contract or for some such reason, the transaction running into legal controversies. Some of the imaginable reasons could be the inability of the seller to clear the title of the property due to which the contract may be frustrated or rescinded with mutual consent or the refusal or inability of the purchaser to pay the sale consideration. 18. An agreement to sale immovable property does not cast obligations only on the seller. It is based on reciprocal promises to be performed by both sides. If the purchaser fails to discharge his obligations arising out of the contract, then the agreement may as well not culminate into a final sale deed. Depending on the terms of agreement, the seller may either forfeit the earnest money, rescind the contract or in a given case, sue for specific performance or damages. These are but, a few illustrative examples to appreciate that there can be a wide gap be....
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....vant dates, if one considers the date on which the assessee had decided to sell the property as the date of transfer or sale, then the appellantassessee would be entitled to benefits under Section 54 of the Act. The Court, therefore, posed a question to itself whether the agreement to sale, which was executed on 27.12.2002, can be considered as a date on which the property, i.e. the residential house, had been transferred. The Court observed that in normal circumstances, by executing an agreement to sale of an immovable property, a right in personem is created in favour of the transferrer. In such situation, the vendee is restrained from selling the property to anyone else. However, the question still remains whether the entire property can be said to have been sold at the time when the agreement to sale was entered into. The Court was of the opinion that in normal circumstances, such question had to be answered in the negative. The Court, thereafter, referred to the provisions of Section 2(47) of the Act giving expanded meaning to the term "transfer" and further observed in light of the said definition that one can come to the conclusion that some right in respect of the capital a....
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....requirements of sections 54 and 55 of the TP Act and will not confer any title nor transfer any interest in an immovable property (except to the limited right granted u/s.53A of TP Act). According to TP Act, an agreement of sale, whether with possession or without possession, is not a conveyance. Section 54 of the TP Act enacts that sale of movable property can be made only by a registered instrument and an agreement of sale does not create any interest or charge no its subject matter." 22. The Delhi High Court in case of Kuldeep Singh (supra) relied on the observations of the Supreme Court in case of Sanjeev Lal (supra) in a situation where, the assessee, having sold his residential property, had entered into an agreement with a builder within the prescribed period of 02 years from such sale for purchase of flat, the payment of which was linked to the stage of construction. In this background, the Court held that the assessee had satisfied the requirements of Section 54 of the Act. 23. Likewise, the Allahabad High Court in case of Shimbhu Mehra (supra) applied the observations of the Supreme Court in case of Sanjeev Lal (supra) in a slightly different context. It was a case ....
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.... into was a development agreement, which would enable the builder to make profits by building and selling the flats at a profit. It was precisely for this reason that the Legislature had introduced clause( v) to Section 2(47) r/w. Section 45 of the Act, which indicates that capital gain is taxable in the year in which such transaction is entered into even if the transfer of immovable property is not effective or complete under the general law. The facts of the case and the question which arose before the Court were, thus, very different. 25. Interestingly, in case of Vania Silk Mills (supra), the brief facts were that the assessee Company was engaged in the business of manufature and sale of artsilk cloth. A fire broke out in the premises of the Company causing extensive damage to the machinery. By way of settlement of insurance claim, the assessee received a sum of Rs. 6.32 Lakhs (rounded off). The difference between the actual cost of machinery and written down value was Rs. 2.62 Lakhs. The AO treated the additional sum received by the assessee out of the insurance settlement claim as capital gain. In this background, the Supreme Court considered the question whether money rec....
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....ix months from the date of agreement. This transaction, however, ran into legal controversies. Eventually, it was agreed that the assessee would receive a sum of Rs. 5.90 Lakhs, which would include the earnest money of Rs. 90,000/paid by him from M/s. Advani and Batra, upon which the assessee would transfer and assign in favour of M/s. Advani and Batra, the assessee's right and title under the agreement entered with the owner for purchase of the property. The assessee passed on a receipt of having received such amount of Rs. 5 Lakhs, being the consideration for transfer and assignment of right, title and interest under the agreement. Relying on the words of the receipt, the Assessing Officer held that the assessee was liable to pay capital gain tax after adjusting the expenses incurred by the assessee. On a reference, the issue finally reached the High Court. The Court, under such background, observed that it is difficult to see how it is open for the assessee to contend that there was no transfer at all of any right in favour of M/s. Advani and Batra, as contemplated by the definition of the word "transfer" u/s.2(47) of the Act. In the opinion of the High Court, the rights that th....