TMI Blog1998 (1) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... greement. The assessee took possession of the Estate and started carrying out agricultural operations. The sale deed was not executed in favour of the assessee, but the assessee nominated another concern, Travancore Rubber Tea Company Ltd. for execution of the conveyance deed in their favour. The Travancore Rubber Tea Co. Ltd. paid a total sum of Rs. 1,04,55,417, inclusive of Rs. 5 lakhs disputed in this appeal. Before the AO the assessee claimed that the sum of Rs. 5 lakhs was a capital receipt not liable to tax under the IT Act. The AO did not accept the claim and for the reason that the assessee itself had admitted the amount as surplus on account of the transaction of purchase and transfer of Ambanad Estate it was brought to tax in their hands. In the assessee's appeal, the CIT(A) held that the assessee had received the amount as consideration for transfer of the right to enforce the deed of conveyance and as the transfer was within the definition of short-term capital gains in s. 2(42A), it had been correctly assessed by the AO. Aggrieved with the order of the CIT(A) confirming the assessment, the assessee has filed this appeal before the Tribunal. 3. Before us, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t itself had been subsequently set aside by the High Court, there was no right emanating under that agreement, which could have been transferred by the assessee to Travancore Rubber Tea Co. Ltd. It was argued that in view of the subsequent development of setting aside of the sale agreement, it could no longer be said that the sum of Rs. 5 lakhs received by the assessee was consideration for transferring any right of the assessee to bring it liable to tax as capital gains. Shri Ramachandran submitted that when there was no right over any property that could be transferred by the assessee in view of the High Court judgment there was no capital gains liable to tax as short-term capital gains. Arguing on the above lines, the learned counsel urged us to delete the amount brought to tax as short-term capital gains for the asst. yr. 1985-86. 4. On behalf of the Revenue, Shri Kuruvilla M. George, the Departmental Representative supported the order of the CIT(A) and submitted that the appellate authority was justified in confirming the addition of Rs. 5 lakhs in the light of the evidence showing receipt of the amount for nominating the Travancore Rubber Tea Co. Ltd. for purchasing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of settlement of the accounts, there was no stipulation that the amount passed on between the 4th and 3rd respondents. i.e. between Travancore Rubber Tea Co. Ltd. and the assessee to be taken into account. It was his contention that the Kerala High Court had not directed the assessee to return the sum of Rs. 5 lakhs to Travancore Rubber Tea Co. Ltd. and that there was also no claim by that concern for getting the amount back from the assessee. He added that the parties had taken up the matter in further appeal and that the matter had not assumed finality. Shri Kuruvilla submitted that as the assessee had already received the amount and there was also no demand by the other concern for returning the amount, the same was rightly brought to tax. The transaction took place within a period of 36 months from the date of acquisition of the right by the assessee and so it was rightly assessed as short-term capital gains, he submitted. 5. We have given due consideration to the rival submissions and also gone through the sale agreement dt. 31st March, 1984, and the judgment of the High Court in C.P. Nos. 11 and 20 of 1984 dt. 10th April, 1990. In terms of the agreement the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of immovable property is clearly property as contemplated by s. 2(14) of the IT Act. It can be seen that in terms of cl. 7 of the sale agreement the assessee acquired a right to obtain a conveyance of the property in their favour or in favour of their nominee. That right is a property as contemplated by s. 2(14). It was for the transfer of that right the assessee received Rs. 5 lakhs from Travancore Rubber Tea Co. Ltd. 6. The assessee's claim is that the entire transaction was in connection with the transfer of rubber and tea plantations and so it was an agricultural property. Sec. 2(14)(iii) exempts agricultural land in India from the definition of capital asset. The learned counsel for the assessee submitted that the sum of Rs. 5 lakhs formed part of the consideration for the transfer of agricultural property and so the receipt being on the transfer of an exempted amount, was not liable to capital gains tax. It is important to note that there was no valid transfer of the estate in favour of the assessee even though the sale agreement was entered on 31st March, 1984, and the assessee had taken possession on that date. Under the Transfer of Property Act the title to immovable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of the definition in s. 2(14) of the IT Act. 7. The CIT(A) has confirmed the assessment as short-term capital gains on the view that what the assessee transferred was the right to get the conveyance executed and that transfer was within a period of 36 months as provided in s. 2(42A). The assessee had acquired that right under the agreement dt. 31st March, 1984. Sec. 2(14)(iii) gives exemption on agricultural land in India. The right to get a conveyance executed is not 'agricultural land in India'. It makes no difference that it is the right to get a conveyance executed in respect of an agricultural land. Still that would not make it agricultural land. Further, the 'right' is not the interest in agricultural land but the right to get a conveyance only. In the circumstances of this case, the CIT(A) was right in holding that capital gains arising on the transfer of the right to get the conveyance executed was liable to tax in the hands of the assessee. As the assessee transferred that right to Travancore Rubber Tea Co. Ltd. within a period of 36 months after the assessee acquired the right on 31st March, 1984, the same was assessable as short-term capital gains. 8. We ..... X X X X Extracts X X X X X X X X Extracts X X X X
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