TaxTMI 
TaxTMI 
2018 (5) TMI 1275
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....onstruct 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 - Rs. 10,50,000 3. The assessee considered the proportionate land apportioned to the 04 flat purchasers as sale of land belonging to her and disclosed long term capital gain of R....
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....ere 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 Permission was granted on 23.10.2008, it could safely be held that no construction activity took place after such date. According to the Tribunal, for grant of deduction u/s.54F of the Income Tax Act, 1961 ("t....
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.... 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 the benefit u/s.54 of the Act. (D) The decision of the Full Bench of Kerala High Court in case of CIT, Cochin v. Grace Collis reported in 2001 (248) ITR 323 was cited in the context of Section 2(47) of the Act, in which, it was observed th....
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....rt 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. (K) Counsel for the assessee relied on the Circular No.359 dated 10.05.1983 issued by the C.B.D.T. clarifying, in the context of deduction u/s.54E of the Act, that strict interpretation may go against the purpose of the Section and that if the assessee invests the earnest money or the....
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....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. State of Haryana and another reported in 2012(1) SCC 656, in which, the Court made certain important observations with respect to transfer of immovable properties under agreement to sale and under Wills. The Court frowned upon the practice of virtual transfer of immovable properties under agreement to sale with delivery of possession o....
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....h 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 date constructed one residential house. If the cost of new asset is not less than the net consideration in respect of the original asset, the whole of the capital gain would not be charged. Otherwise, the deduction would be proportionate. 14. In the context of these provisions, the assessee's case and the rival contentions have to be examined. We may ....
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....d 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 of the provisions contained in the Act instead of confining its effect to the Transfer of Property Act and the Registration Act. As noted, Section 2(14) of the Act defines "capital asset" inter alia as a property of any kind held by an assessee. Section 2(47) of the Act defines "transfer" in relation to a capital asset to include sale, exchange or relinquish....
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....al 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 between an agreement to sale and an actual instance of sale being evidenced under a sale deed. To therefore hold that upon mere execution of an agreement to sale of the immovable property itself gets transferred into the purchaser, even within the extended definition of Section 2(47) of the Act, would be incorrect. 19. In this context, we must first refer to the....
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....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 asset in question had been transferred and that such right with respect to the capital asset had been extinguished, after execution of the agreement to sale. The Court also observed that, no doubt, such contractual right can be surrendered and neutralized by the parties by subsequent contract or conduct. But, such was not the case on hand. The Court also noted that ....
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....y 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 in which the assessee had entered into an agreement to sale his land on 04.07.2001 with a prospective buyer and had received part consideration with the aid of which the assesee discharged the liabilities of a lending bank, which had a charge over the property. The mortgage was released on 21.11.2001 and the sale was executed in April 2003. The Assessing Officer was of the opini....
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....ble 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 received towards accident claim on account of destruction of capital asset can be said to have been received on account of transfer of asset within the meaning of Section 45 of the Act. In this context, the Supreme Court observed as under; "6. It is true that the definition of "transfer" in S2( 47) of the Act is inclusive and therefore, extends to events and transactions which may no....
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....e 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 the assessee had were assigned in favour of M/s. Advani and Batra. The Court was of the opinion that Rs. 90,000/paid by the assessee as earnest money was cost for acquisition of such right and Rs. 5 Lakhs which was over and above the sum of Rs. 90,000/originally paid by the assessee by way of earnest money would be the capital gain in the hands of the assessee. In the said case, the Court was c....