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2005 (11) TMI 437 - AT - Income TaxCapital gain on sale of property - Transfer u/s 2(47)(v) - whether there was a transfer of property when the bank had a lien on the property? - mortgage of the property with the bank would in any way affect the rights of the transferee ? - HELD THAT:- There is an agreement of sale dated November 27, 1997, the transferee has paid sale consideration in March 1998, and is willing to fulfil other conditions and has taken over possession of the same on March 31, 1998 and subsequently undertaken renovation of the same. Therefore, the transferee gets the rights over the property and the transferor-assessee can only enforce the rights expressly provided by the terms of the contract. But that has nothing to do with the ownership of the proposed transferor who remains the full owner of the lands till they are legally conveyed by a sale deed to the proposed transferee. Any mortgage of the property would not invalidate the contract of agreement of sale or part performance thereof, but would only give the right of preference for the satisfaction of the debt. Section 2(47)(v) of the Income-tax Act or section 53A of the Transfer of Property Act, do not speak of transfer of title of ownership, but only speaks of transfer of possession of the property. Section 53A of the Transfer of Property Act, deals with part performance of a contract of transfer and not a final transfer. Final transfer of the property could be only with the execution of the registered sale deed as provided under the law and that can be done only after the bank issues the no-lien certificate. Section 2(47)(v) of the Income-tax Act, refers to transactions in the nature of contracts referred to in section 53A of the Transfer of Property Act. Therefore, in our opinion, the condition u/s 53A of the Transfer of Property Act is satisfied in this case and as per section 2(47)(v), there is a transfer of immovable property in the assessment year 1998-99 only. Hence, the capital gains arise in this year only and not in 1999-2000. Thus, it is clear that the Assessing Officer was enthusiastic to tax the capital gains in the assessment year 1999-2000 since it had taxable positive income and the assessee would not be able to set off the business loss from the capital gains. In our opinion this approach of the Assessing Officer is not correct. The Revenue authorities have to follow the provisions of law and should not be guided by revenue collection only. In this case, we find that the capital gains arise in 1998-99 only and therefore, the business loss in the year 1998-99 can be set off from the capital gains. In this view of the matter, the assessee’s appeal is allowed. In the result, the appeals filed by the assessee are allowed.
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