TMI Blog2022 (2) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... tered by the assessee with the above said person was mere Agreement to sell . In the above said decision, the Hon ble Gujarat High Court has held that the agreement to sell will not result in transfer of asset. In that case, there is no question of any extinguishment of right, as held by the AO and confirmed by Ld CIT(A). Hence the question of assessing any capital gain in AY 2008-09 does not arise. In that view of the matter, we are unable to approve the computation of capital gain made by the AO in AY 2011-12 also. Accordingly, the computation of capital gain made by the assessee in AY 2011-12 is upheld. - Decided in favour of assessee. - ITA Nos. 1115 And 1116/Bang/2018 - - - Dated:- 2-2-2022 - Shri N.V. Vasudevan, Vice President And Shri B.R. Baskaran, Accountant Member For the Appellant : Shri V. Srinivasan, A.R. For the Respondent : Shri Sumer Singh Meena, D.R. ORDER PER B.R. BASKARAN, ACCOUNTANT MEMBER: Both the appeals filed by the assessee are directed against the orders passed by Ld. CIT(A)-11, Bengaluru and they relate to the assessment years 2008-09 2011-12. The only issue urged in both the appeals relate to the year of transfer of prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e mean time, it appears that the assessee and Shri Ramaiah Reddy had also purchased adjacent lands in the same survey number. The entire parcel of the land i.e. above said land of 2 acres 15 guntas and other adjacent land was sold for a consideration of ₹ 113 crores on 18.1.2021 to M/s. Total Environment Habitat Pvt. Ltd jointly by the assessee and Shri Ramaiah Reddy. The sale consideration pertaining to 2 acres and 15 guntas of land was ₹ 18.05 crores, which was divided between the assessee and Shri Ramaiah Reddy, i.e., 20% sale consideration amounting to ₹ 3.61 crores was taken by the assessee and remaining 80% sale consideration amounting to ₹ 14.44 crores was given to Ramaiah Reddy. The assessee computed long term capital loss as under in assessment year 2011- 12:- CAPITAL GAINS Gross sale consideration on sale of property Sy.No.170-2A-15G - received from Ramaiah Reddy towards Sale of 80% of UDI - received from M/s. Total Environment Habitat Pvt. Ltd. towards Sale of 80% of UDI 72,000,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansfer of 80% of land is assessable in AY 2008-09. Accordingly, the AO computed long term capital gain for the remaining portion of 20% of land only in assessment year 2011-12. In A.Y. 2008-09, the AO computed short term capital gain on sale of land to Shri Ramaiah Reddy. The amount of STCG computed by AO was ₹ 32/-. 6. The assessee challenged assessment order passed for both AY 2008-09 2011-12 by filing appeals before Ld. CIT(A) in respect of the above said issue. The Ld. CIT(A) upheld the view of AO that transfer of land to Shri Ramaiah Reddy has taken place in the year relevant to AY 2008-09 and accordingly confirmed the computation of capital gain made by the A.O. in A.Y. 2011-12. With regard to computation of STCG made in AY 2008-09, the Ld. CIT(A) deleted the same citing clerical error. Aggrieved, the assessee has filed the appeals for both the years before us. 7. The Ld A.R submitted that the AO was not correct in law in stating that the 80% of Undivided share in the land has been sold to Shri Ramaiah Reddy in the year relevant to the AY 2008-09. He submitted that the assessee had entered into only Agreement to Sell with Shri Ramaiah Reddy and it will not tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere entering of Agreement to Sell will not result in transfer of asset, while the case of the AO is that there was transfer of asset. 10. We notice that issue whether the Agreement to sell would result in transfer of asset or not was examined by Hon ble Gujarat High Court in the case of Ushaben Jayantilal Sodhan (supra). For the sake of convenience, we extract below the relevant observations made by Hon ble Gujarat High Court in the above said case:- 15. It is, in this context, that both the sides had strenuously argued the case. Learned counsel for the assessee obviously contended that the capital asset, i.e. in the present case, the land of the assessee, should be treated to have been transferred on the date on which the agreement to sale took place. Counsel for the Revenue, for obvious reasons, opposed this proposition. Section 5 of the Transfer of Property Act, 1882 defines the term transfer of property as to mean an act by which a living person conveys property in present or in future to one or more other living persons or to himself or to himself and one or more other living persons. Section 54 of the Transfer of Property Act defines sale as a transfer of owne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he title of the property be transferred if he performs his part of the obligation arising out of the agreement. If the seller is unwilling to do so, the intending purchaser may also successfully bring a suit for specific performance by demonstrating that he was and had always been ready and willing to perform his part of the obligations arising out of the agreement. Under an agreement to sale, thus, the seller binds himself to do or not to do certain things in reciprocation of the purchaser performing his part of the obligations. Correspondingly, it may be stated that the sellers right to freely deal in the property in question gets curtailed. It may, therefore, also be possible to argue that upon execution of such an agreement, there was extinguishment of certain rights of the owner and to that extent, there was a transfer of capital asset. The crucial question, however, still begs the answer is can it be stated that the agreement to sale transfers the property in question within the meaning of Section 2(47) of the Act? 17. In our opinion, the answer has to be in the negative. As discussed earlier, the agreement to sale an immovable property is in the nature of bilateral cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... another house property in Chandigarh out of the sale proceeds. The house was purchased on 30.04.2003, which was within 01 year from the date of execution of the agreement to sale. Before the sale deed could be executed, the validity of the Will under which the assessee had received the property was called in question by another son of the deceased testator by filing a Civil Suit. The trial Court granted interim injunction restraining the assessee from dealing with the property. However, during the pendency of the suit, the plaintiff died leaving behind no heirs and the suit was dismissed in May 2004. It was due to the interim injunction that the assessee could not execute the sale deed. Upon dismissal of the suit, the sale deed was executed on 24.09.2004. 19.1 In this context, the assessees claim for deduction of capital gain arose. The Revenue argued that the assessee was not entitled to benefit of Section 54 of the Act since the transfer of the capital asset took place on 24.09.2004 whereas, the assessee had purchased another residential house on 30.04.2003, i.e. more than 01 year prior to the sale of the asset. The Supreme Court noted that Section 54 of the Act clearly pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re being anything else, upon execution of an agreement to sale of an immovable property, the asset, i.e. the property in question, itself stands transferred. Main thrust in the said case was that the assessee, after having executed an agreement to sale the property, was prevented from executing the sale deed by an injunction of the Court. In the meantime, he had already purchased the new property. These were the peculiar facts of that case. 21. We may recall, the Supreme Court in case of Suraj Lamp Industries (P) Ltd. (supra) had occasion to extensively deal with the nature of agreement to sale of immovable properties and the requirement of compulsory registration of sale deeds in order to transfer right, title and interest in immovable properties. In this judgment, of course, the Supreme Court was not concerned with the provisions of the Act. Nevertheless, some of the observations of the Supreme Court in the said judgment would be apposite. The Court, after referring to the provisions of the Transfer of Property Act and Registration Act, noted with approval the observations of the judgment in case of Narandas Karsondas v. S.A. Kamtam and another reported in 1977 (3) SCC 247 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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