TMI Blog1997 (9) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest in Flat No. 102 of the same property. 3.3. The Assessing Officer required the assessee to explain as to why the exemption claimed under section 54F be not denied as the profit on sale of residential property is not eligible for grant of such exemption. In reply to the said notice, it was contended on behalf of the assessee that the interest in flat transferred by the assessee cannot be treated as sale of residential house, as actual possession of the flat in Punjabi Bagh property was never taken by the assessee. The assessee had simply transferred the interest in the property. It was also stated that the properties were given back to the original builder and the letter of allotment given by the builder has been returned back to the builder. The assessee, is, therefore, eligible for grant of exemption under section 54F. 3.4. The Assessing Officer also required the assessee to explain as to why the profit on sale of interest in the aforesaid two flats be not treated as income from business, as such, interest in flats were held by the assessee as stock in trade. It was submitted on behalf of the assessee that he is not a dealer of the properties nor he has shown any profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of disposal of the said appeal. It was also stated in the said M.A. that after hearing the appeal for only about 10 minutes, the then ld. President openly announced that the matter is squarely covered in favour of the assessee by the judgment of Hon'ble Bombay High Court in the case of CIT v. Vijaya Flexible Containers [1990] 48 Taxman 86. Therefore, the matter was neither heard not argued at great length. The assessee has also mentioned that the judgment of the Hon'bleDelhiHigh Court relied upon by the Tribunal in the aforesaid decision is squarely distinguishable from the facts of the present case. 3.7. The Tribunal vide its order dated30th March, 1995in M.A. No. 150/Del/94 recalled the said order and the case--was directed to be fixed for hearing. 3.8. In these circumstances, the matter has come up before us for a fresh hearing. 3.9. The ld. Counsel for the assessee submitted that the CIT(Appeals) has given a finding of fact that the income from transfer of interest in flats cannot be treated as business income. The interest in flats which the assessee acquired by obtaining letters of allotment, constitutes "Capital Assets" within the meaning of section 2(14) of Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eposited towards instalment for flat No. 102 at 22 /75, Punjabi Bagh,New Delhi. He also drew our attention towards copy of a receipt dated15-1-1988showing that a sum of Rs. 25,000 was paid by cheque dated12-5-1984for booking of a flat in the said property. He also invited our attention to the copy of the minutes of the meeting held on 10-6-1987 regarding delay in construction of flats plot No. 22, Road No. 75, Punjabi Bagh, New Delhi. The various persons who had booked flats in the aforesaid property had unanimously passed a resolution with a view to peruse the matter with the builders, so as to get possession of the flats as early as possible. 3.11A. The ld. Counsel submitted that ultimately the booking of the said flat was cancelled. The assessee received at sum of Rs. 2,95,000 against the booking a amount for the flat on First Floor on 22/75, Punjabi Bagh,New Delhiagainst his payment of Rs. 1,80,000 made during the year 1983-88. The builder, M/s. Lion Builders Pvt. Ltd. paid an aggregate to Rs. 2,95,000 by three different cheques in the month of March, 1989. The assessee, thus, received a surplus amount of Rs. 1,15,000 for cancellation of the booking of the said flat. The cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Madan Lal Wahi v. ITO [1983] 5 ITD 533 in which it was held that the word 'held' in section 2(42A) should not be taken to mean "held" as a registered owner. The Tribunal relied upon the judgment of Hon'ble Gujarat High Court in the case of CIT v. Chunilal Khushal Das [1974] 93 ITR 369. 3.15. The ld. Counsel also relied upon the judgment of the Hon'ble Delhi High Court in the case of R. Dalmia v. CIT [1982] 133 ITR 169/9 Taxman 171 but did not indicate the relevant paras of the said judgment on which he wanted to place specific reliance. This appears to have been cited by the ld. Counsel to corroborate his contention that the facts of the judgment delivered by Hon'ble Delhi High Court in the case of R. Dalmia (Decd.), which was passed by following the judgment in the case of J Dalmia are clearly distinguishable. The judgment of Hon'ble Delhi High Court reported in R. Dalmia case has been referred in the judgment of CIT v. R. Dalmia (Decd.) [1987] 163 ITR 519 (App.). 3.16. The ld. Counsel also submitted that the assessee acquired the right to have conveyance of the title in the said flats immediately when he booked the said flats and, therefore, the capital gain derived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asset. Consequently, receipts attributable to such a right is not assessable to capital gain. This judgment relates to the rights acquired by the assessee under the agreement to sell dated21st May, 1955and31st August, 1959. The Hon'ble High Court has taken their aforesaid views by following judgment in the case of J. Dalmia. In that case, the Hon'ble Delhi High Court has held as under :-- From 149 ITR 215 : "Held, that in order that a receipt or accrual of income may attract tax on capital gains the sine qua non is that the receipt or accrual must have originated in a "transfer". The right to receive damages was a mere right to sue and, whether it was property or not, it could not be transferred in view of section 6(e) of the Transfer of Property Act, 1882. Though the word "transfer" in relation to capital assets had been denied in section 2(47) of the IT Act, 1961, no exception was made therein to the applicability of section 6(e) of the Transfer of Property Act. Since there could not be any transfer of the right to receive damages, the amount of Rs. 1,02,500 received by the assessee as damages was not assessable to tax as capital gains. The damages which were received by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings also. Explanation.--For the purposes of this sub-clause, "land, building, part of a building, machinery, plant, furniture, fittings and other things" include any rights therein ; (ii) any right in or with respect to any land or any building or a part of a building (whether or not including any machinery, plant, furniture, fittings or other things therein) which has been constructed or which is to be constructed, accruing or arising from any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement of whatever nature), not being a transaction by way of sale, exchange or lease of such land, building or part of a building ; " A plain reading of the aforesaid provisions dealing with the definition of transfer in relation to a capital asset clearly indicates that if any rights in or with respect to any building or a part of the building which has been constructed or which is to be constructed, accruing or arising from any transactions by way of any agreement or any arrangement of whatever nature will also be treated as a transfer of a capital asset. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the settled position that under the common law, owner" means a person who has got valid title legally conveyed to him after complying with the requirements of law such as the Transfer of Property Act, Registration Act, etc. But, in the context of section 22 of the Income-tax Act, having regard to the ground realities and further having regard to the object of the Income-tax Act, namely, "to tax the income", we are of the view, "owner' is a person who is entitled to receive income from the property in his own right." 6.2. In view of the aforesaid amendment made in section 2(47), and the judgment of Hon'ble Supreme Court in the case of Podar Cement (P.) Ltd. it will have to be concluded that the judgment of the Hon'ble Delhi High Court relied upon by the ld. D.R. will not be applicable to the facts of the present case relating to assessment year 1989-90. The assessee by acquiring these two flats in the property at Punjabi Bagh, in the years 1983 and 1984, acquired a capital asset, namely, the right to have these two flats transferred in his favour. 6.3. The Hon'bleBombayHigh Court in the case of Vijay Flexible Containers has held as under : " The right to obtain a conveyance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng or a part of the building constructed or yet to be constructed comes within the definition of "immovable property" as defined in section 269UA(d) which has been incorporated in the definition of 'transfer" given in section 2(47)(v) and (vi) but that by itself would not mean that such an interest, which is deemed to be an immovable property will assume the character of a residential house. The expression used in section 54F which deals with the Capital Gain arising from the transfer of any long-term capital asset, not being a residential house clearly indicates that the Capital Gain arising from the transfer of any long-term capital asset, will be eligible for grant of exemption under section 54F, if the amount of such capital gain is invested for purchase or construction of a residential house within the prescribed period. The exemption under section 54F will not apply in relation to capital gain arising from the transfer of a residential house. What was transferred by the assessee, was his interest in the two flats, which had not yet been constructed. The assessee did not acquire possession of' those flats. The flats in question were not fit for human habitation. Therefore, suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of CIT v. Vimal Lalchand Mutha [1991] 187 ITR 613. The head note of the said judgment is reproduced hereunder :-- "Held, that the assessee had entered into an agreement for the purchase of a flat in November, 1977, and had executed a formal agreement in December, 1978. She transferred her right, title and interest in the flat by an agreement to C in April, 1983. The Tribunal was, therefore, right in holding that the rights under the said two agreements of November, 1977/December, 1978, had been held for more than 36 months and that the gains arising from the transfer of her rights under the agreement in April, 1983, constituted long-term capital gains. No question of law arose from the order of the Tribunal." 7.3. In view of the aforesaid judgment and the facts, we are of the view that the capital gain derived by the assessee relates to a capital asset held by him for a period of more than 36 months and, therefore, the gains arising from the transfer of his rights in the said flats constituted long-term capital gains. We have already held that the assessee would be entitled to grant of exemption under section 54F in respect of such long-term capital gain. The ground No. 1 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is said to be in conformity with the past history of the assessee's case. It our view, the Revenue's appeal has no merit in relation to this ground. Hence Ground No. 1 is rejected. 9.4. The Assessing Officer has disallowed a sum of Rs. 12,000 claimed by the assessee as collection charges. The Assessing Officer has given elaborate reasons in para 3.2 of the assessment order. The disallowance was made by the Assessing Officer mainly on the ground that the two persons, namely, Shri Rajesh and Shri Vikram to whom such collection charges @ Rs. 6,000 were paid were not produced before the Assessing Officer. The CIT (Appeals) observed that the assessee had produced proof regarding payment of salary to those two persons and had also submitted copies of appointment letters issued to them. It was practically impossible for the assessee to produce those employees who had left the service with the assessee long ago. The CIT (Appeals), therefore, directed the Assessing Officer to allow deduction of Rs. 12,000 claimed by way of collection charges. 9.5. On a careful consideration of the relevant facts and circumstances as elaborately discussed in the order of the CIT(Appeals), we are o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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