TaxTMI 
TaxTMI 
2022 (11) TMI 1289
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....ances of the case, and also in law, the Ld. CIT(A) erred in confirming the addition of Rs.4,52,40,600/- made by the Ld. AO by invoking provisions of Section 43CA of the Act in regard to certain registered Cancellation Deeds executed by the appellant for cancelling the earlier purchase transactions of the plots of agricultural land. 1.2 The Ld. CITIA) thus failed to appreciate, and ought to have held, that these Cancellation Deeds did not involve any transfer as envisaged under section 43CA of the Act since the earlier purchase transactions themselves were ab initio void, and illegal as per the provisions of Section 6h) of the Transfer of Property Act, 1882 read with Section 23 of the Indian Contract Act, 1872 and Section 63(1) of the Maharashtra Tenancy and Agricultural Lands Act, 1948. Your appellant, therefore, prays that the addition of Rs.4,52,40,600/- be deleted." 2. Brief facts of the case are that the assessee-company is engaged in the business as Builder/promoter of residential and commercial complexes at Neral efiled its return of income on 28.11.2014 declaring total income at Rs. 29,72,720/-. 3. During the assessment proceedings it is seen that ass....
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....o, in the year, relevant to the assessment year 2011-12. Therefore, in principle, the transactions which are appearing in AIR, are cancellations deeds. There is no actual sale of said plots. The agreements entered in the year 2011-12, were nullified /cancelled by the agreements entered into in the year relevant to assessment year 2014-15. Additionally, both Mr. Yogesh Joshi, in the year relevant to the assessment year 2011-12, & assessee-company, in the year, relevant to assessment year 2014-15 paid heavily towards stamp duty & registration charges for these transactions, which were entered in to through registered agreements. We enclose herewith copies of these agreements for your perusal. We hope the above explanation clarifies the situation. If you require any further explanation, we would be glad to submit the same" 5. AO was not convinced with the factual submissions and still relied over the provisions of sec 43CA in isolation without considering the facts of the case. Being aggrieved with the order of AO assessee preferred an appeal before the Ld. CIT(A)-2 (Thane). Version of order Ld. CIT(A)is reproduced as under: "6. I have c....
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....sideration that paid by it to the sellers, as a result of cancellation of earlier transaction that was not aw. Hence, it is submitted that the vital ingredients are missing in the appellant's case, and consequently, provisions of section 43CA of the Act do not apply. 6.3 Likewise after quoting relevant provisions of Section 63(1) of the Maharashtra Tenancy and Agricultural Land Act, stated that the aforesaid provision prohibits any sale, gift, exchange or lease of any agricultural land to a non-agriculturist. Accordingly it was contended that the appellant being a company, and not an agriculturist, purchase of agricultural land by it was in violation of the statutory provisions of Section 63(1), and hence, the purchase transaction itself was illegal and void in law. Therefore, even though the appellant purchased these agricultural lands by registered sale deeds, no title could legally vest in the appellant. It was further contended that since the appellant never got any legal title in the lands under reference, the appellant cannot "transfer the title to any other person, that which does not vest in it as per the law. 6.4 Now, let us see the facts as per the d....
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....harashtra Stamp Duty has been paid in both the cases. In the Cancellation Deed, nowhere has it been mentioned that the Deed is cancelled because the appellant was not eligible to buy the agricultural land in the first place. However, as quoted above, the reason for cancellation has been stated as there is discrepancy in the property. Moreover, it has been clearly stated in the Cancellation of Sale Deed that "second party has put the proposal before the first party to return the said property with all rights". Hence, the argument of the AR that the appellant was never an owner of land and hence the transfer is invalid, is not logical, therefore, cannot be accepted. As per the legal documents placed during the course of assessment proceedings and also placed before me, it is seen that transfer back of land has taken place from the appellant to the original seller of the land, after more than 2 years of being held at a consideration of Rs. 7,00,000/-. Hence, as per the Section 43CA of the I.T. Act, 1961 there has been both, a consideration and a transfer, in the transaction of this land. Therefore, the provisions of Section 43CA of the I.T. Act, 1961 are attracted in case of the appel....
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....upon are given vide pg no-12-21, 33- 47,60-72,86-96, 109-125, 138-153, 166-176, 189-204, 217-227, 242-257 and 269- 279 of the paper-book. 9. Sec. 43CA is applicable in the case of transfer of property in addition to other ingredients of the section. In this case what we observed assessee-company inadvertently entered into a transaction of purchase of agricultural land, which was void ab-initio. It means assessee was never a lawful owner of the said agricultural land as mentioned supra. When assessee is not an owner of any asset, there can't be any question of transferring the same to someone else whether provisions of sec43CA is complied with or not will be a secondary issue. In this case assessee-company simply rectified its earlier mistake to safe-guard the financial interest of the company and to come out an unlawful transaction entered earlier. For ready reference we are reproducing herein below the relevant provisions of Maharashtra Tenancy and Agricultural Lands Act 1948 along with relevant provision of contract Act and Transfer of Property Act. "All the above three ingredients are to co-exist for the provisions of Section 43CA of the Act to be attracted. In the p....
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....of the statute, no title could legally vest in the appellant. It is well settled law that when a contract is contrary to a statutory provision, it is non-est in law; it does not exist in the eyes of law. In this context, it is useful to refer to the relevant provisions of the Indian Contract Act, 1872 (Contract Act") and the Transfer of Property Act, 1882 (TPA), which are reproduced below: Section 23 of the Contract Act: "23. What considerations and objects are lawful, and what not. - The consideration or object of an agreement is lawful, unlessit is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy." [Emphasis supplied) Section 6 of the TPA: "Section 6. What may be transferred Property of any kind may be transferred, except as otherwise provided by this Act or by any other law for the time being in force. ..................................... (h) No transfer can be made ....
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.... inception. In view of above legal position, the appellant never got any legal title in the lands - under reference, and if that is the correct legal position, the appellant cannot 'transfer the title to any other person, that which does not vest in it as per the law. A person cannot pass a title better than what he possesses, and where he has no legal title, obviously, he cannot pass on to other what he does not possess. The entire chain of transactions right from the inception, i.e. purchase to the cancellation should, therefore, be viewed in the above legal background. Therefore, by executing the Cancellation Deeds, what the appellant did was not an act of transfer of any land, but to wipe out the earlier void transaction, and receiving back the purchase consideration previously paid by it to the sellers, which was refundable to the appellant under the principle of equity. Therefore, it is submitted that the appellant neither transferred' any land, nor did it receive any 'consideration' as a result of any transfer', when the appellant executed Cancellation Deeds, and received back the purchase consideration paid by it to the vendors. Therefo....
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.... cannot be said that the assessee ever acquired any interest in the property. No doubt extinguishment is also covered in the definition of transfer under section 2(47)(ii). However, extinguishment would normally connote a situation where an asset goes out of existence. However, when the asset never comes into existence then such asset cannot be extinguished. Therefore, there is no extinguishment in the present case because the said property purchased through auction by assessee-company never came into existence because of the order of the Supreme Court through which sale itself was set aside. In view of above, it was held that surplus arising on account of compensation received by the assessee cannot be assessed under the head 'capital gain' because no asset came into existence with the assessee. Though this decision is rendered in the context of capital gains, the ratio of the - decision is applicable to Section 43CA as well because what is held is that where the assessee does not acquire any interest in property in the first place due to cancellation of transaction previously executed, he simply cannot transfer that interest in the property. In the case before th....