TMI Blog2008 (10) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... as only an agreement to sell and not a sale deed transferring the capital asset in favour of the buyer. Applying the ratio of decision in the case of Smt. Maniben Hirji Jadavji Bhatt Smt. Saraswati Jayantilal Hirjibhai Bhatt, Smarak Shri Copal Krishna Trust vs. ITO [ 1997 (1) TMI 116 - ITAT AHMEDABAD-B] , it is held that the agreement dt. 19th Oct., 1995 does not establish that the transaction of sale of property was completed in terms of provisions of s. 2(47)(v), 1961 r/w s. 53A of the Transfer of Property Act and so the capital gain worked out by the AO and added to the income of the assessee in AY 1996-97 was not justified. Therefore, the CIT(A) has rightly deleted the impugned addition by reversing the order of AO. Accordingly the order of CIT(A) is upheld and the grounds of appeal taken by the Revenue are rejected. Hence, AO is at liberty to take appropriate action on the basis of the registered sale deed dt. 31st Dec., 2007 in case, on verification, he finds that the assessee has not declared the capital gain in the return in relevant assessment year he may take action for working out the capital gain, if any, as permitted under law. In the result, the appeal file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts relating to the issue involved in the appeal of the Revenue are that the original return in this case was filed by the appellant on 3rd July, 1996 declaring therein total income of Rs. 90,680 and the same was processed under s. 143(1) of the Act, on 31st March, 1997. The AO initiated reassessment proceedings by issue of notice under s. 148 of the IT Act on 18th July, 2000. 6. According to the AO the assessee had not disclosed the income from capital gains on the sale of plot of land at Mumbai. The AO, therefore, computed long-term capital gain of Rs. 32,54.326 while framing the reassessment under s. 147 by treating the transaction as sale within the meaning of s. 2(47)(v) of the Act and added the same to the income of the assessee. 7. The learned Authorised Representative for the assessee Smt. Satyawati Verma, thereafter submitted that she inherited the plot of the land bearing No. 62, Ville Parle, TPS-II, Mumbai, admeasuring about 1,307 sq. yds. under a registered will left by the real sister of her father late Shri Babu Ram Verma. This plot had been continuously under the possession of a public charitable trust. Smt. Satyawati Verma initiated Court proceedings against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment he was supposed to make has not been made till date and, therefore, both the essential requirements, as contained in s. 53A of the Transfer of Property Act, 1882 have been not complied with in the instant case. It is submitted that, in a latest communication from the buyer, in response to the notice issued by the AO, the buyer has specifically stressed and refused the balance payment., on the ground of being unable to take possession of the property under question. In view of the facts stated above, the deeming provisions contained in s. 2(47)(v) of the IT Act, 1961 do not apply and therefore, the question of levy of any capital gain would not arise. 10. On considering the submissions of the assessee and going through the provisions of s. 2 (47)(v) of the IT Act and s. 53A of Transfer of Properly Act, as well as the relevant evidence on record, the contents of articles of agreement dt. 19th Oct., 1995 and the letters dt. 7th July, 2002 and 15th Nov., 2002 received from the buyer, the CIT(A) came to the conclusion that the articles of agreement executed on 19th Oct., 1995 by and between the buyer and the appellant, do not constitute transfer as defined in s. 2(47)(v) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the meaning of s. 2 (47)(v) r/w s. 53A of the IT Act, 1961 and capital gain tax was leviable on the assessee in asst. yr. 1996-97. 14. Before deciding these issues we would like to refer to the relevant provisions of law. 14.1 In s. 45 of the IT Act, 1961 the income under the head capital gain is chargeable to tax on transfer of capital asset effected in the previous year and such profit or gain shall be deemed to be income of the previous year. 14.2 Sec. 53A of the Transfer of Property Act, 1882 reads as under: "Where any person contracts to transfer, for consideration, any immovable property by writing signed by him or on his behalf from which the terms necessary, so to constitute the transfer of property can be ascertained 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 the contract, though required to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of Rs. 54,00,000 (rupees fifty-four lakhs only) to be paid to the vendor as hereinafter provided. (b) The balance purchase price namely Rs. 54,00,000 (rupees fifty-four lakhs only) shall be paid by the purchaser to the vendor as follows (time being of the essence): - Rs. 25 lacs on or before 30th Nov., 1995 (time being of the essence). - Rs. 25 lacs on or before 31st Dec., 1995 (time being of the essence). - Rs. 4 lakhs upon the vendor furnishing to the purchasers the necessary certificate under s. 230A of the IT Act, 1961 before the completion of the sale herein. (c) In the event of the purchasers not paying the balance amounts on the due date as mentioned hereinabove, the vendor shall give to the purchasers a written notice of such default whereupon the purchasers shall within 60 days from the receipt of the said notice be liable to pay the said outstanding amounts with interest thereon at 18 per cent per annum. In the event of the purchasers not making the said payment together with the interest thereon at 18 per cent per annum within a period of 60 days as mentioned above, the vendor will be entitled to cancel this agreement in which event the amounts paid to the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e any right of ownership, use or possession in the corpus or the income arising from such property since there was no transfer or relinquishment of rights by the owner in favour of 2nd party of the deed of agreement dt. 19th Oct., 1995. 21. Clause No. 6 reproduced hereinbefore proves that sale was to made or effected at a future date and the agreement dt. 19th Oct., 1995 thus could be termed as a document of sale whereby there was transfer of property by the vendor in favour of the vendee. The property to be sold was subject to NOC under s. 22 of the ULC Act, 1976. At the time of acquisition of this document, NOC has not been obtained and was to be obtained at a future date before the sale is effective. 22. It would therefore be seen that s. 2(47)(v) would apply only in those cases where the transferee has no part to perform, in respect of the contract and has taken possession of the property or any part thereof. Further the transferor has performed or is willing to perform his part of the contract, and then only the s. 2(47)(v) would have application. 23. In the case of Smt. Raj Rani Devi Ramna vs. CIT (1993) 201 ITR 1032 (Pat), the Hon'ble Patna High Court held as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso given exemption to the trust under ss. 11 and 12. As regards the contention of the AO that as per the definition of 'transfer' in relation to capital assets under s. 2(47) which has become more wide w.e.f. 1st April, 1988 for the purpose of capital gains, there is no merit in it. The Departmental Circular No. 495, dt. 22nd Sept., 1987 explains the legislative amendment and amply clarifies the legal position in relation to the extended meaning of the term 'transfer'. If along with the acceptance of same consideration under an agreement for sale, the vendor allows the possession of the property to be taken or retained by the purchaser; the transfer would be complete at that point of time but in a case, as in the present case, where mere advance under the agreement for sale was received, but no possession had been parted with during the year under appeal, there would be no liability to capital gains. Since there would be no transfer within the meaning of s. 2(47). In the case of the assessee, the transfer effectively took place at the time of final execution of the sale deed when the physical possession of the respective plots were handed over to the final purchasers, after obtain ..... X X X X Extracts X X X X X X X X Extracts X X X X
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