TaxTMI 
TaxTMI 
2001 (10) TMI 255
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.... are that all the assessees had equal shares of 1/3rd each in respect of a jointly owned property at 143/10, Golf Link, New Delhi. It was submitted by the assessees that since the said property in question was under the occupation of tenants and it was not possible for them to manage the property from Calcutta, it was decided amongst themselves to dispose off the property. Accordingly, they had agreed to sale the property to one Real Estate Agent known as M/s. Premium Estate Pvt. Ltd. of F-44, Bhagat Singh Market, New Delhi by executing an agreement for sale of the said property on 31-8-1988 for a consideration of Rs. 67,10,000. An amount of Rs. 1,50,000 as earnest money was received by the assessee from the said purchaser M/s. Premium Estate (Pvt.) Ltd. by cheque No. 741193 dated 31-8-1988 drawn on Canara Bank, Gole Market Branch, New Delhi, and the said amount of Rs. 1,50,000 was deposited by the assessees in their joint S.B. Bank Account No. 15780 with Punjab National Bank, New Delhi. 5. The relevant clauses of the agreement for sale executed by the assessees on 31-8-1988 are summarised as follows: (1) Clause (i) stipulates about the total consideration fixed at Rs. 67,10,000.....
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....roperty known as No. 145, Golf Links, New Delhi more particularly described in the Schedule hereunder written for a total consideration of Rs. 140 lakhs payable in the following manner: (a) Rs. 15,00,000 paid at the time of execution of this agreement by way of earnest money, the receipt of which amount the vendors hereby admit and acknowledge. (b) Rs. 1,20,00,000 shall be paid by the purchaser within 30 days of receipt of Notice from the Vendors that the requisite permission or approval of the appropriate authority under section 269UC of the Income-tax Act and Rules framed in pursuance thereof as provided in para 3 hereof have been obtained within which period the Certificate in Form 34A of the Income-tax Rules will be obtained by the vendors simultaneously with the delivery by the vendors and Confirming Parties of the vacant possession of the entire property together with all the original documents of title as per list annexed hereto. (c) Rs. 5,00,000 shall be paid at the time of execution and registration of the Sale Deed by the Vendors before the Sub-Registrar of Assurances and FIRST CONFIRMING PARTY. (d) The aforesaid payments specified in sub-clauses (a), (b) and (c) here....
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....bsp; 5,00,000 ------------------ Rs. 1,40,00,000 ---------------------------------------------------------------------------------------- The entire consideration amount of Rs. 1,40,00,000 was paid by BOT to Premium Estate who confirmed to have received the same and deposited the same in its own Bank account. 9. A certificate under section 269UL(3) of the Act was issued on 10-10-1988 by the Appropriate Authority in pursuance of a statement in....
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....n of Deed of Conveyance was made in terms of the agreement for sale dated 31-8-1988, no sale could be considered to have been made to Premium Estate by the asses sees. (iii) The sale was actually executed by the assessees to the BOT at a consideration of Rs. 1.40 crores. (iv) The payment of consideration to Premium Estate would be considered as. ex-gratia payment without consideration for any real service. (v) There was no mention of the extent of consideration payable to Premium Estate in the agreement for sale dated 7-7-1989 entered into with BOT. (vi) In the Deed of Conveyance registered on 19-5-1992 there was no mention of Premium Estate as confirming party nor the interest or Premium Estate to the extent of Rs. 72,90,000. (vii) Neither the assessees could justify as to how Premium Estate developed an interest to the extent of Rs. 72,90,000 in the property in question merely by virtue of an agreement dated 31-8-1988, which was also not registered nor the Sale Deed in terms of agreement was registered. 14. On appeal, the CIT(A) having considered the entirety of the circumstances, directed the Assessing Officer to revise the assessment by adopting the sale price received by....
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.... entire consideration of Rs. 1.40 crores payable by the BOT were paid to Premium Estate at the direction of the assessees by Bank charges drawn in favour of Premium Estate. On perusal of the said agreement for sale dated 31-8-1988, it is found that the said agreement was executed by both the parties whereby it was agreed and decided that the assessees would sell to the purchaser Premium Estate. The property in question for a total consideration of Rs. 67,10,000 on the terms and condition as contained therein, some of them being material and relevant to the case have already stated hereinbefore by us in para 5 of this order. The Assessing Officer has raised suspicions and doubts on this agreement dated 31-8-1988 on the ground that the agreement dated 31-8-1988 was neither registered nor any registered Sale Deed was made in favour of Premium Estate in pursuance of the said agreement. But in our considered view, the reasons cited by the Assessing Officer are not tenable in the eyes of law inasmuch as the agreement for sale of property in question does not require compulsory registration under the provisions of Indian Registration Act nor it was obligatory on the part of Premium Estate....
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.... therefore, implied that the fact of entering into agreement for sale dated 31-8-1988 with Premium Estate was duly disclosed to and brought to the knowledge of BOT at the time of entering into an agreement for sale dated 7-7-1989 of the property in question and accordingly, all the consideration money were paid by BOT to Premium Estate at the instruction of the assessees. It is evident that the agreement for sale dated 31-8-1988 with Premium Estate has found its place in the Second Agreement for sale dated 7-7-1989 implying thereby the parties to the agreement had in fact and in reality given due recognition and legal character to the agreement for sale dated 31-8-1988. 22. Further, it is an admitted position that none of the assessees is anyway interested in the Premium Estate, which is separately assessed to income-tax vide GIR No. P-17 by Asstt. CIT, Comp. Circle 3(5), New Delhi. It is also found that the transaction for purchase and re-sale of the property in question were duly reflected in the Profit & Loss Account of the relevant year of Premium Estate which confirmed to have entered into the transaction for purchase and re-sale of the property in question vide its letter da....
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....fairs. The said two agreements have in reality and substance given legal effect to and have been acted upon. 26. Now, the question arises as to whether the payment of Rs. 72,90,000 to Premium Estate out of total consideration of Rs. 1.40 crores paid by the ultimate purchaser, the BOT is to be treated as application of income or diversion of income at source. In order to decide whether a particular disbursement amounts to diversion or application of income, the true test is to probe into, and decide, whether the amount sought to be deducted, in truth, did not or did reach the assessee or as his own income. Obligations there are in every case, but it is the nature of the obligation which is the decisive, fact. There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of his income. Where by the obligation income is diverted before it reaches the assessee, it is deductible; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. It is only when income or a portion of ....
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....ole consideration amount of Rs. 1.40 crores paid by the ultimate buyer, the BOT cannot be deemed to have accrued or arisen to the assessees. The excess amount over and above the sum of Rs. 67,10,000 can be said to have been diverted by overriding title in view of the fact that the assessees had, out of their free Will and desire, entered into an agreement for sale of the property in question to Premium Estate for a consideration of Rs. 67,10,000 and the assessees were thus, under a legal obligation to complete the sale transaction in accordance with the terms and conditions embodied in the said agreement for sale dated 31-8-1988. And it was only later that Premium Estate decided to transfer his right to purchase the property in question to the BOT by executing an agreement for sale on 7-7-1989 as Confirming Party. 29. Once the agreement for sale dated 31-8-1988 is found bona fide one and also enforceable, it must be held that Premium Estate acquired a legal right to purchase the property in question for a consideration of Rs. 67,10,000 either in its own income or in the name of its nominee or representative. The said right is a legal right and a right which overrides the assessees....