TMI Blog2011 (9) TMI 243X X X X Extracts X X X X X X X X Extracts X X X X ..... T.R. SOOD, V. DURGA RAO, JJ. For the Appellant: Vijay Mehta and Ashit Mehta For the Respondent: S.K. Singh ORDER T.R. Sood, Accountant Member. In both these appeals, various identical grounds have been raised but the only dispute involved is regarding denial of deduction u/s.54 of the I.T. Act, 1961. This dispute arose because both the assessees, who were 50% owner of a flat in a building known as Usha Kunj situated at Juhu, Mumbai-49, was stated to have been sold on 30-04-2004 for total consideration of ₹ 62,50,000/- and share of each assessee was ₹ 31,25,000/-. On this, capital gain arose amounting to ₹ 24,93,910/- each arose to both the assessees. Against this, both the assessees claimed deduction u/s.54 against the purchase of a new flat at 403/404, Valencia, Mumbai-53, which was purchased vide agreement dated 25-06-2003 registered on 09-07-2003. The claim of the assessees was that the new flat had been purchased within one year from the sale of old flat. In support of the same, the assessee had filed photocopies of the maintenance bill for the month of April May which were in the names of Ms. Ranna Modi Ors. i.e. new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely, he held that the flat was sold on 27-08-2004 which means the new flat was not acquired within one year from the date of such transfer and accordingly the assessee were held to be not entitled to deduction u/s.54. 2. Before the CIT(A), the submissions made before the AO were reiterated and it was emphasized that Usha Kunj property which was jointly owned by the assessees, was sold on 30-04-2004. Since full consideration was received and possession was also given, though registration was required for these documents, but the same was delayed by purchaser and for registration purpose a fresh transfer deed was executed on 26-08-2004. It was also emphasized that all the necessary documents such as share certificate, application to the Society for transfer of such shares in favour of transferees, NOC and original agreement dated 22-05-1980 were also handed over to the transferees on 30-04-2004. Therefore, all the formalities of transfer had been completed and accordingly the assessees were entitled for the exemption. Reliance was also placed on the decision of the Supreme Court in the case of CIT v. Podar Cement (P.) Ltd. [1997] 226 ITR 625/92 Taxman 541 and some other High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made for handing over of (1) share certificate No. 7 representing the shares of Society, (2) application to the Society for transfer of shares in favour of the transferees, (3) application of transfer of electric meter in the name of the transferees, (4) NOC received from the Society and (5) original agreement dated 22-05-1990 by which the transferors had acquired the said flat. He submitted that receipt of full consideration and handing over physical possession of the flat as well as of original documents including the share certificate clearly show that whatever was required to be done for the transfer of this flat was done through agreement dated 30-04-2004 and therefore that date should be reckoned as the date of transfer. Then he referred to page 14 of the paper book, which is copy of the bill issued by the Society on 01-05-2004 in the name of Mrs. Ranna Modi for ₹ 1,915/- against which Ms. Ranna Modi had paid the cheque, copy of which is available at page 15 of the paper book. Then he referred to page 16, which is copy of the letter written by Mr. Ashok Modi to he Secretary of Usha Sunder Premises CHS Ltd. stating that they have taken peaceful vacant possession of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e after receiving the full consideration on 30-04-2004, when the assessee delivered the possession of flat as well as share certificate of the Society and all other relevant documents pertaining to this property, nothing was left with the assessee and his rights got extinguished in that property. Secondly, the definition given in clause (v) should be applied because this transaction is similar to the transaction referred to in section 53A of the Transfer of Property Act, 1882, because the assessee had entered into an agreement for transfer for a consideration in writing and had also received full consideration and had also given possession of the property to the transferees. This proposition was not agreed to by the AO because of the amendment in section 53A w.e.f. 24-09-2001, by which the words the contract, though required to be registered, or, were omitted. He argued that this will not make much of the difference. He filed a copy of the pre-amended and post-amended provision of section 53A of the Transfer of Property Act, 1882, and pointed out that first three parts remain the same and the last part was amended only to the extent that earlier condition of document even not bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould also be considered as transfer . 5. He submitted that, in any case, the assessee's case should be considered to be covered by clause (vi) of sec. 2(47) wherein through any transaction if a person by becoming member of any Co-op. Society, which has the effect of transferring immovable property, then such transaction should be construed as transfer. Since the assessee was holding this property by being a member of the Usha Sunder Premises CHS Ltd. by holding 5 shares and such shares were handed over to the transferees vide agreement dated 30-04-2004 vide clause 6, and the transfer of shares shall take effect on the delivery. Further, these shares were handed over by the transferees to the Society vide their application dated 05-05-2004 to the Society, copy of which is available at page 17 of the paper book. This means all necessary steps for transfer of the shares were taken by the transferors and even the transferees had lodged these shares for transfer with the Society and, therefore, transfer shall be taken to be complete on 30-04-2004. He concluded that all these factors clearly show that the property was transferred on 30-04-2004 and since the new flat was acquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer of the old property and there is no dispute in respect of other conditions. According to the assessee, the old property was transferred on 30-04-2004 and the new property was purchased on 25-06-2003, whereas, according to the AO, the new property was purchased on 25-06-2003 but the old property stood transferred only on 27-08-2004 when the transfer deed got registered. Section 2(47), which defines the term transfer , reads as under: (47) transfer , in relation to a capital asset, includes, (i) the sale, exchange or relinquishment of the asset ; or (ii) the extinguishment of any rights therein; or (iii) the compulsory acquisition thereof under any law; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment ; or (iva) the maturity or redemption of a zero coupon bond; or (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertain with reasonable certainty, And the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefore by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee 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 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was certain situation where properties were being transferred without registration of transfer instruments and people were escaping tax liabilities on transfer of such properties because the same could not be brought in the definition of transfer particularly in many States of the country properties were being held by various people as leased properties which were allotted by the various Govt. Departments and transfers of such lease were not permissible. People were transferring such properties by executing agreement to sell and general power of attorney as well as Will and receiving full consideration, but since the agreement to sell was not registered and though full consideration was received and even possession was given, still the same transactions could not be subjected to tax because the same could not covered by the definition of transfer . To bring such transactions within the tax net, this amendment was made. It has to be appreciated that clause (v) in section 2(47) does not lift the definition of part performance from section 53A of the Transfer of Property Act, 1882. Rather, it defines any transaction involving allowing of possession of any immovable property to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owners of same property at the same time. In fact, the amendments to section 27 were made later on but were taken into cognizance on the basis of above principle and ultimately it was held as under: Hence, though under the common law owner means a person who has got valid title legally conveyed to him after comply with the requirements of law such as the Transfer of Property Act, the Registration Act, etc., in the context of section 22 of the Income-tax Act, 1961, having regard to the ground realities and further having regard to the object of the Income-tax Act, namely, to tax the income, owner is a person who is entitled to receive income from the property in his own right. The requirement of registration of the sale deed in the context of section 22 is not warranted. Thus, from the above, it is clear that it is not necessary to get the instrument of transfer registered for the purpose of Income-tax Act when a person has got a valid title legally conveyed after complying with the requirements of the law. 9. Similarly, in the case of Mysore Minerals Ltd. v. CIT [1999] 239 ITR 775/106 Taxman 166 (SC), the assessee had purchased for the use of its staff seven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uhu, Mumbai to (i) Miss Ranna Ashok Modi, (ii) Shri Ashok Brijlal Modi, and (iii) Mrs. Kokila Ashok Modi [hereinafter called transferees]. Through this agreement assessee along with Smt. Sushila Agarwal received a total sum of ₹ 17 lakhs [Rs. 8,50,000/-each]. Through clause 2(b) it was agreed that balance sum of ₹ 45,50,000/-would be received on or before 30-4-04 and assessees were required to execute a transfer deed. Following this a Deed of Transfer was executed on 30-4-04 through which assessee transferred the rights in No.402, 4th Floor Usha Kunj Commissioner-op. Society Ltd., Juhu, Mumbai, to the transferees and received the balance consideration of ₹ 45,50,000/-. The possession of the flat was handed over to the transferees and through clause No.5 various documents were also handed over. Clause No.5 of the said agreement reads as under: 5. The transferor has handed over to the Transferees the following: (a) The said Share Certificate No.7, representing the said shares of Society; (b) Application to the Society for transfer of shares in favour of Transferees; (c) Application for transfer of electric meter to the name of the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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