TMI Blog2012 (4) TMI 417X X X X Extracts X X X X X X X X Extracts X X X X ..... ments of "transfer" within the meaning of section 2(47) of the Income-tax Act, 1961 and within the meaning of section 53A of the Transfer of Property Act. It is to be seen that the NOC issued on 21-2-2000 relates back to 8-10-1996 and as such reinforces the fact of transfer of the property on 28-11-1999, when the possession was handed over to the buyers. In these circumstances, as far as this case is concerned, therefore, there is complete compatibility between the application of section 2(47) of the Income-tax Act, 1961 with section 53A of the Transfer of Property Act and Chapter XX-C of the Income-tax Act, 1961. Investment made by the assessee on 9.12.1998 in the residential property was well within the time period mentioned for availing deduction under Section 54 / 54F of the Act. - Decided in favor of assessee. - IT APPEAL NO. 1830 (MDS.) OF 2009 - - - Dated:- 10-1-2012 - DR. O.K. NARAYANAN, U.B.S. BEDI, AND GEORGE MATHAN, ABRAHAM P. GEORGE, JJ. Shaji P. Jacob for the Appellant. S. Sridhar for the Respondent. ORDER U.B.S. Bedi, Judicial Member This appeal of the Department is directed against the order passed by the ld. CIT(A), Tiruchirappalli da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Aut1lority. The C.I.T. (Appeals) failed to note that last payment was received by the assessee only on 21.12.1999 and therefore, it is wrong and untruthful statement that entire consideration was received on 28.11.1999. 7. The C.I.T. (Appeals) ought not to have given relief on the basis of Section 2(47)(v) as the possession was not handed over pursuant to an agreement of sale. The C.I.T. (Appeals) failed to note that in the sale agreement (right from sale agreement dated 28.06.1996 duly modified by way of various supplementary agreements), it was clearly mentioned that possession would be handed over after obtaining last installment of the balance consideration subsequent to receipt of No Objection Certificate (NOC) from the Appropriate Authority. In the instant case, the handing over of possession was before receipt of last installment of the balance consideration and before receipt of NOC and Was therefore not pursuant to the sale agreement as required u/s 53A of Transfer of Property Act r.w.s. 2(47)(v) of the Act. 8. The C.I.T. (Appeals) also erred in not following the ratio of decision of R.B. Falcon (A) Pvt. Ltd. v. C.I.T. 301 ITR 309 (SC), Shri Krishna Engg Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consequently, the sale consideration was reduced to Rs. 5,42,64,458/- Subsequently, this agreement was restated on 18.12.1996 once after verification in the actual extent of the property to be conveyed and again on 25.11.1999 for a steep fall in prices and in respect of this final restated agreement, the assessee has approached the appropriate authority on 11.02.2000 for clearance and obtained the same. The total sale consideration for the properly was Rs. 5,42,74,658/- and the assessee's share was Rs. 1,35,66,114/- the possession of the property was delivered by the assessee on 28.11.1999 and the vender had in writing acknowledged the taking of possession. During the course of the original assessment completed u/s. 143(3) r.w.s. 147 the assessee has disclosed all these facts and had also produced the letter handing over possession and had claimed exemption u/s. 54F of the IT Act, 1961, for having invested in the proceeds in the purchase and construction of the property at Bangalore. The deduction was considered and allowed only for the purchase at the stage of assessment. The assessee took the matter in appeal before the CIT(A), who after going through the facts and observing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer when the first reassessment was done on 20.03.2005. No fresh materials had come into the possession of the Assessing Officer after date of completion of the assessment after the said reassessment. The ld. AR of the assessee stated to have cited several case law before the first appellate authority, where reopening of the assessment after lapse of four years had been held to be invalid in the absence of having made out any case by the Assessing Officer that under assessment was due to failure on the part of the assessee. The ld. AR of the assessee further submitted that in this case, there had been no such failure as the assessee had fully and truly disclosed all materials relevant to completion of the original assessment. The assessee's AR has further submitted in first appeal that the reassessment to be held to be invalid and the original assessment to be restored. He further contended that capital gain is taxable with the capital asset transferred by the assessee and word transfer had been defined in section 2(47)(vi) as "any transactions involving the allowing of the possession of any immovable property to be taken or retained in part performance of the contract of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad been filed against such pleadings and relying upon such written submission and the ratio of the decision cited therein, it was pleaded for setting aside the order of the ld. CIT(A) and restoring that of the Assessing Officer as not only reassessment is valid in law, the deduction claimed under section 54 and 54F is also not available to the assessee as transfer could take place only after final NOC by the appropriate authority under XXC, which had been issued on 21.02.2000 and transfer of original asset could only take place thereafter of transfer as even date is available on record. Neither the assessee has been able to give such date and even after this 21.02.2000 is to be taken as date of transfer then investment made on purchase of new asset is before one year's period as stipulated under section 54 and otherwise, the amount spent for further improvement is not covered by relevant provisions. Therefore, the Assessing Officer's action for not allowing the relief as claimed by the assessee under section 54/54F is justified and the ld. CIT(A) is not legally or factually correct to reverse the order of the Assessing Officer in this regard. Therefore, order passed by the ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and application of mind. In such an event the allegation that the respondent had not furnished the details is not maintainable. 5. The entire exercise of re-opening the assessment flows from the surmise that the respondent had obtained the NOC from the Appropriate Authority 21st February 2000 and therefore the transfer could have taken place only thereafter. The Respondent had handed over possession of the property on 28.11.99 and had also produced a document to this effect. This had been described as a self-serving letter without any effort to prove that it's a dumb document especially in the light of the observations of the Assessing Officer cited earlier. 6. The Appellant had overlooked the fact the outstanding sale consideration as on the date of delivery of possession is less than 2% of the total consideration and the delivery of possession prior to the receipt of this measly sum cannot be faulted with. 7. The Appellant had overlooked the fact that the application for No Objection had been filed on 30th November 1999 itself. 8. The Respondent submits that he had already furnished a Power of Attorney on 6.2.98 itself in favour of the buyers Sanmar Properti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngh v. Asstt. CIT [2010] 127 ITD 303 (Delhi). The assessee's counsel further pleaded that the reasons recorded are looked into, it would transpire that these are not valid reason and moreover 2nd NOC has no relevance because at the time of executing restated agreement dated 25.11.1999 and handing over of possession on 28.11.1999. So, 2nd NOC is not fatal to the transfer already taken place and if at all any offence against Chapter XXC has been committed that is challengeable in the Civil Court. Since Appropriate Authority is not from Department of Income Tax, therefore any information received from such Appropriate Authority cannot be made basis for reopening of the assessment and moreover, second reassessment is not valid. Further reliance was made on CIT v. Cholamandalam Investment Finance Co. Ltd. [2009] 309 ITR 110 (Mad.), 305 ITR 333 (Mad.) ( sic ), CIT v. TVS Motor Co. Ltd. [2009] 319 ITR 192 (Mad.) and CIT v. Elgi Ultra Industries Ltd. [2008] 296 ITR 573 (Mad.). 7. The ld. DR. in order to counter the submissions of the ld. Counsel for the assessee has pleaded that the transfer of the property in view of special provisions under Chapter XXC could not take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,71,410/-. 8.1 The assessee has sold the property at Kilpauk Garden Road to M/s. Sanmar Properties and Investments Limited for Rs. 1,35,66,114/-. A deduction under section 54/54F of Income Tax Act was claimed. However, it was found by the Assessing Officer that the assessee has obtained 'No Objection Certificate from appropriate authority for the sale of property only on 21.02.2000 and the sale can take place only after this date. Since the investment at the property was made prior to one year of the sale, the deduction under section 54/54F is not correct and since the assessee has claimed 54/54F deduction, the assessment was reopened under section 147 by issuing notice on 28.03.2007, which came be served on 28.03.2007 itself. The Assessing Officer recorded following reasons for reopening of the assessment: "In the course of assessment proceedings for the Asst. Year 2000-01, assessee stated that he sold a residential property at Kilpauk, Chennai for consideration of Rs. 1,35,66,114/- on 28.11.99. In the Capital Gains working, based on the details furnished by the assessee, a deduction of Rs. 74,78,800/- was allowed u/s 54/54F for a prior investment in a residential house at B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction Certificate from appropriate authority was issued on the basis of subsequent documents, which had various variations on 21.02.2000. From the relevant provisions as contained in Chapter XXC, it becomes clear that there is restriction on revocation or alteration of certain agreements for the transfer of immovable property or on transfer of certain immovable property and otherwise, there is clear restriction on transfer of immovable property without obtaining 'No Objection Certificate' from the competent authority. Here, in this case, the assessee executed an agreement on 28.07.1996 on the basis of which he obtained 'no objection certificate on 08.10.1996 and thereafter the assessee is found to have executed further agreements to sell and final agreement in this regard was executed on 25.11.1999. 8.5 Considering the arguments of both the sides in the light of documents placed before us and the precedents relied upon, it is found that the immovable property at 275 Kilpauk Garden Road was agreed to be sold as per agreements dated 28.07.1996, 12.08.1996 and 06.02.1998 and 25.11.1999. All these agreements are only "agreements to sell" and the registered sale deed was not produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have been recorded, in our view, is valid and in view of 'no objection certificate' issued on 21.02.2000, no valid transfer/deemed transfer could take place so, the assessee could not be eligible for deduction u/s. 54/54F in respect of the investment and improvements made to the property purchased on 09.12.1998 at Bangalore being not within one year before the date of sale. Therefore, the order of the ld. CIT(A) is not proper and justified either in holding reopening to be justified or accepting the assessee's claim for deduction under section 54/54F in view of the facts and circumstances of the case. As such, the order of the ld. CIT(A) is set aside and that of the Assessing Officer is restored. 9. In the result, the appeal of the Revenue is allowed. Abraham P. George, Accountant Member - I have carefully gone through the order of ld. Judicial Member. Despite discussion and deep study of the order, I am unable to persuade myself to agree with his views, on one of the issues raised in the appeal filed by the Department. Grounds of the Department intrinsically raise two issues. First is on the validity of reopening and second is on allowability of deduction claimed under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y their letter dated 29.5.98 had lodged the said application. Nevertheless, the parties filed Form No. 37-I once again on 30.11.99 for getting approval of the restated supplementary agreement and appropriate authority by their order dated 21.2.2000 issued No Objection for transfer of the property for a consideration of Rs. 5,42,64,458/- mentioned in the restated agreement dated 25th November, 1999. Finding of the A.O. was that assessee had never executed a power of attorney in favour of the property developer and since assessee could not produce a power of attorney, the transfer could never be treated as complete. Related observations of the A.O. is reproduced hereunder:- "The objection is not acceptable. The immovable property at 275 Kilpauk Garden Road was agreed to be sold as per agreements dated 28/6/96, 12/8/96, 6/2/98 and 25/11/99. All these agreements are only agreements to sale and the registered sale deed was not produced by the assessee. The assessee has sold a property to Sanmar Property Development Ltd. which is a company that constructs flats to be sold to various flat buyers. The commo practice in this line of business is to give a power of Attorney by the seller in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween us on 28.6.96. (3) Supplementary Agreements dated 18.12.1996 and 06.02.1998 I confirm having received the entire Sale Consideration fully and finally payable to me under the above said Agreement dated 28.06.1996 and the Supplementary Agreements Dated 18.12.1996 and 06.02.1998 for sale of the Property referred to above. Consequent upon receipt of the entire Sale Consideration as stated above I am herewith delivering freehold vacant possession of the Property bearing Door No: 275, Kilpauk Garden Road, Chennai - 600010. I have instructed Mr. M. Subramania Rao, Advocate, to hand over the Original Developments of title pertaining to the above property to your duly authorized representative. Kindly acknowledge in detail on receipt of the Original Documents of title pertaining to the above property from Mr. M. Subramania Rao. Yours faithfully, sd/- (PR. Chockalingam)" Nothing has been brought on record by the Assessing Officer as to why the above letter could not be considered. No statement has been taken from M/s Sanmar Properties and Investments Limited in this regard. So, the nutshell of entire gamut of facts are that there was a principal sale agreement for sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riate authority had been obtained by the parties. Thus, the conditions prescribed under Section 53A of T.P. Act stood satisfied. This would automatically call for application of Section 2(47) of the Act which defines "transfer" since the above transaction falls within the purview of clause (v) thereunder. 6. This brings us to the vital second question. The question is, even if the transaction falls within the definition of "transfer" under Section 2(47) of the Act, can it be considered so, in view of Chapter XXC of the Act wherein Section 269UC and Section 269UL place restriction for transfer and registration of documents in respect of transfer of certain specified categories of immovable property. There is absolutely no doubt that for the final restated agreement dated 25.11.2009, No Objection order passed by the appropriate authority under Section 269UL of the Act was dated 21.2.2000. If date of such No Objection is treated as date of transfer, then without doubt the investment made by the assessee on 9.12.1998 for claiming deduction under Section 54/54F of the Act was out of time since it was done more than one year earlier to the former date. The argument of the learned D.R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under Section 53A of T.P. Act, 1882 stood satisfied. Thus, even though the certificate of No Objection has been issued finally by the appropriate authority on 21.2.2000, it would operate back to the date on which possession was given, which, here, was admittedly 28.11.99. In taking the view that "transfer" under clause (v) of Section 2(47) of the Act could be considered as complete, even if the approval of appropriate authority has not been obtained, I am fortified by the decision of Hon'ble Rajasthan High Court in the case of Rajasthan Patrika Ltd. v. Union of India [1995] 213 ITR 443/[1994] 75 Taxman 464. In that case, possession of the property was given over part performance and their Lordship was of the opinion that there was a lot of difference between "actual transfer" and "intended transfer". Their Lordship after analyzing Form No. 37-I in great detail, held that the transfer stood effected by way of part performance under Section 53A of T.P. Act, 1882 even before filing of Form No. 37-I. It was held that if the transfer was effected before submitting Form No. 37-I, nothing remained but prosecution of the violator. The above decision of Hon'ble Rajasthan High Court wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... putes with reference to certain incidental matters and that appeal was also disposed off. Later on, notice under section 263 of the act was issued to revise the assessment order on the ground that the assessing authority had committed an error in reckoning the actual date of the sale of the property, whereby the benefit of deduction under section 54/54F was erroneously granted to the assessee. After considering the detailed submissions filed by the assessee, the proposed revision under section 263 was dropped by the Commissioner of Income-tax. But, anyhow, a notice under section 148 was issued thereafter and the reassessment was completed, wherein the deduction already granted to the assessee under section 54/54F was withdrawn by the assessing authority. According to the assessing authority, the No Objection Certificate (NOC) from the Appropriate Authority, constituted under the Income-tax Act, 1961, was obtained only on 21-2-2000 and, therefore, the transfer of the property could have been made only after that date, whereas the assessee has made the investment in Bangalore property on 9-12-1998, whereby there is a gap of more than one year between the purchase of the new property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961 was complete on that date and accordingly the period between the investment in the Bangalore property and the transfer of the old property was less than one year and the assessee was entitled for the deduction under section 54/54F of the Act. He held that the investment made by the assessee on 9-12-1998 in the residential property at Bangalore was well within the period mentioned for availing the deduction under section 54/54F of the Act. He accordingly confirmed the order of the Commissioner of Income-tax (Appeals) on that point and granted relief to the assessee on the merit of the issue. 5. In the light of the difference of opinion between the Members who heard the appeal, the following question was referred to the Hon'ble President, Income-tax Appellate Tribunal under section 255(4) of the Act for referring the same to a Third Member for adjudication:- "Whether, in view of facts and circumstances of the case, prior to applying and obtaining "No Objection Certificate" under Chapter XXC for proposed transfer exceeding amount and asset situated in area prescribed, deemed transfer u/s 2(47) of Income Tax Act could be held to be valid when there is specific restriction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty on 6-2-1998 itself. As the sale price of the property was revised on the basis of the revised extent of land, a fresh application was placed before the Appropriate Authority for a fresh NOC. The Appropriate Authority lodged the second application for clearing the supplementary agreement on 29-5-1998. Meanwhile, the agreement was again restated to revise the sale consideration consequent to the fall in price of real estate. There was renegotiation of price and the consideration was again revised and fixed. The restated agreement was executed on 25-11-1999. Immediately thereafter, on 28-11-1999, the possession of the property was granted to and taken over by the buyers on receipt of the consideration, except 2% thereof. Again, an application was filed before the Appropriate Authority on 30-11-1999 for a fresh NOC. The remaining 2% consideration was also paid by the buyers on 21-12-1999. Finally, the NOC was issued by the Appropriate Authority on 21-2-2000. As the property was sold to developers and builders, the ultimate conveyances were executed by the sellers to the ultimate buyers of the apartments, on the basis of an irrevocable Power of Attorney already granted on 6-2-19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substitute the original agreement. The Appropriate Authority had already granted its NOC on the basis of the original agreement on 8-10-1996 itself. This first NOC issued by the Appropriate Authority holds good for the provisions of Chapter XX-C of the Income-tax Act, 1961. The latest NOC issued by the Appropriate Authority on 21-2-2000 is only a revision of the first NOC granted on 8-10-1996. The latest NOC issued by the Appropriate Authority on 21-2-2000 cannot be considered in isolation of the earlier NOC issued by the Appropriate Authority on 8-10-1996. It is to be seen that the latest NOC issued by the Appropriate Authority on 21-2-2000 relates back to the first NOC issued by the Appropriate Authority on 8-10-1996. The restatements of the original agreement and the re-issue of NOC have not disturbed the first NOC issued by the Appropriate Authority. Therefore, it is to be seen that the NOC issued on 21-2-2000 relates back to 8-10-1996 and as such reinforces the fact of transfer of the property on 28-11-1999, when the possession was handed over to the buyers. In these circumstances, as far as this case is concerned, therefore, there is complete compatibility between the applic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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