TMI Blog2015 (7) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... neither the legal owner of the property nor was having any document showing any right/title in his favour and uncontrovertedly the land was meant for a primary school and the assessee illegally encroached upon such land. Before us, the only argument of the assessee is that ownership of the property is not a pre-condition for the claim of capital gains. We are not agreeing with this proposition because how a gain can be claimed on a illegally occupied property which was a meant for a school and the assessee is not having any title/right over the land. Section 2(14) defines capital asset. The assessee right from assessment stage and till before this Tribunal has not produced any document regarding transfer/purchase of the impugned property in his favour as is evident from para 4.1 of the assessment order also. The assessee did not produce any document in support of the cost of acquisition or investment made for the property/capital asset. The Fatnani family is consisting of three brothers and encroached upon the adjacent plot meant for a primary school. Even in para-2 at page -3 of the impugned order, it has been admitted by the assessee itself that he occupied the school land un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DCIT (2008) 301 ITR 345 (Mad.) 2.3. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee returned income of ₹ 9,99,290/- on 30/09/2008, which was processed u/s 143(1) of the Income Tax, Act, 1961 (hereinafter the Act). The case was selected for scrutiny, therefore, notices u/s 142(1) and 143(2) were issued and served upon the assessee to which the assessee attended the proceedings. It was found by the Assessing Officer that, during financial year 2007-08, the assessee declared business income by way of remuneration received from partnership firm i.e. poly wines, also declared income from capital gains and other sources by way of interest received from bank deposits. The issue in hand before us is with respect to long term capital gains shown in its books from unauthorizedly encroached school land for which he has no title/right. The ld. Assessing Officer vide notice dated 18/08/2010 asked the assessee to furnish copy of purchase/sale agreement of the immovable property wherein long term capital gains was claimed. Again notice dated 13/12/2010 u/s 142(1) of the Act was issued to the assessee to fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required details. This is to prevent the assessee from taking undue advantage due to delay in assessment, by his not furnishing the required details. 4.2. This clearly shows the non cooperation attitude of the assessee. The intention of the assessee is not to produce the copies of the documents in support of the cost or acquisition. Also, the claim that the investment by the assessee is duly reflected in his balance sheet for last several years does not support his claim with regard to the ownership until the same has been substantiated by documentary evidence. Further, the mere facts that certain entries were made in the balance sheet would not substantiate or justify the same to be adopted as the cost of acquisition unless such claim is substantiated as and when called upon the assessment proceedings. The assessee has failed to produce the same in the present proceedings despite repeated opportunities on various occasions. As the assessee has shown the sale of the immovable property during the year under consideration, the onus is on the assessee to prove that he is the owner of the property that has been sold. The proof can be substantiated only through the purchase agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... croached upon such land. Before us, the only argument of the assessee is that ownership of the property is not a pre-condition for the claim of capital gains. We are not agreeing with this proposition because how a gain can be claimed on a illegally occupied property which was a meant for a school and the assessee is not having any title/right over the land. Section 2(14) defines capital asset, which is reproduced hereunder for ready reference:- capital asset means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include- (i) any stock-in-trade], consumable stores or raw materials held for the purposes of his business or profession ; [(ii) personal effects, that is to say, movable property (including wearing apparel and furniture) held for personal use by the assessee or any member of his family dependent on him, but excludes- (a) jewellery; (b) archaeological collections; (c) drawings; (d) paintings; (e) sculptures; or (f) any work of art. [Explanation.]-For the purposes of this sub-clause, jewellery includes- (a) ornaments made of gold, silver, platinum or any other precious metal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Government.] [Explanation.-For the removal of doubts, it is hereby clarified that property includes and shall be deemed to have always included any rights in or in relation to an Indian company, including rights of management or control or any other rights whatsoever;] 2.5. From the aforesaid definition of capital asset, the ld. Counsel for the assessee canvassed that the word used is property of any kind and it is not necessary that it should be lawfully acquired property. We are not in agreement with this proposition because the legislature in its wisdom has used this word for lawful property only. Otherwise, the natural intention of the legislature will be defeated and anybody will claim by a forged documents that he/she is the owner of Gateway of India in Mumbai or Red Fort in Delhi by showing these properties in their accounts/balance-sheet and will claim capital gains. It is not permissible. It is a case, where, legal action was required to be taken against the assessee for illegally encroaching upon the land meant for a primary school however that was not done by the concerned authorities due to the reason best known to them only. In sub-clause (iii), agricul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. The assessee was in lawful possession of a document/agreement to sale. In that situation, the assessment was held to be made treating the gain as long term capital gains arising out of sale of immovable property. However, the facts are absolutely different in the present appeal as the assessee illegally encroached upon a land, which was meant for a school without having any title/ownership right. Thus, the benefit of the aforesaid decision/observation from Hon ble High Court cannot be extended to the assessee being on different facts. 2.8. Another decision relied upon by the assessee is from Hon ble Delhi High Court in CIT vs Smt. Nilofer I. Singh (309 ITR 233) (Del.), wherein, the issue before the Hon ble High Court was for computation of capital gains, it was held that it does not refer to market value but only to consideration specified in sale deed. It was further held that there was no necessity to compute fair market value. Obviously, the facts are all together different, therefore, the assessee cannot be benefited from this order also. Because, the facts were when a sale of a property took place, the capital gains, arising out of such transfer, has to be compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due vs CIT -31 ITR 711- Mad.), an undertaking (Indian Bank Ltd. vs CIT 153 ITR 282- Mad.), running business (CIT vs F.X. Periera Sons (T.) (P.) Ltd. 184 ITR 461-Ker.), route permits (Addl. CIT vs Ganpati Raju Jegi, Sanyasi Raju-119 ITR 715-AP/S.Vaidyanatha Swamy vs CIT -119 ITR 369-Mad.), fixed deposits (CIT vs East India Charitable Trust-206 ITR 152-Cal.), etc. and not as has been canvassed by the ld. counsel for the assessee. To elaborate it further, it can be said that section 6 of the transfer of property Act, which uses the same expression property of any kind in the context of transferability makes an exception in the case of mere right to use. The decisions thereunder makes it abundantly clear that right to sue for damages is not actionable claim. It cannot be assigned. Transfer of such a right is as much opposed to public policy as is gambling in litigation. As such, it will not be quite correct to say that such a right constitute a capital asset which in turn has to be an interest of property of any kind . This proposition is supported by the decision from the Hon ble jurisdictional High Court in CIT vs Abhas Bhoy A. Beghgamwalla (1992) 195 ITR 28 (Bom.). 2.11. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of a sale deed/transfer document only then conclusion can be drawn that any gains has accrued. However, in the present case, neither any sale or transfer of the property/asset took place, therefore, there is no question of capital gain. The ratio laid down in Hira lal Ramdayal vs CIT (122 ITR 461)(P H) supports our view. Capital gains is to be included only at the time, it is ascertained, the question of capital gain is interrelated with the quantification of the amounts which only can happen in the case of sale/transfer of capital asset. However, in the present appeal, there was no question of any sale/transfer of asset, therefore, there is no question of any capital gains. In order to attract section 45 of the Act, it should be established that by the transfer/sale, the title of the property passed to the purchaser. If any immovable property is sold or transferred, it should be established by a conveyance/ registered deed or any other legal document. The Hon ble Apex Court in Alapati Venkatramiah vs CIT 57 ITR 185 (SC) held that entries in accounts book are not relevant, rather the date of sale or the transfer date when the sale or transfer takes place is relevant. The ratio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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