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ASSISTANT COMMISSIONER OF INCOME-TAX Versus PT. RANGLAL TRUST (and vice versa)

2015 (11) TMI 745 - ITAT LUCKNOW

Computation of capital gain - whether transfer was complete during the financial year 2004-05 and not in the impugned assessment year, therefore, no capital gain was accrued in the impugned assessment year? - CIT(A) deleted the addition - Held that:- Assessee has placed ample evidence on record to establish that the sale agreement was executed on January 27, 2005 and the sale consideration was paid on two occasions - one is on January 10, 2005 and the other is on March 31, 2005. The possession w .....

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t all these facts, the learned Commissioner of Income-tax (Appeals) has taken a view that the capital gain does not arise in the impugned assessment year, as it arise in the financial year 2004-05 relevant to the assessment year 2005-06 and the Assessing Officer may consider computation of capital gains in that assessment year. Since it has been established that the transfer took place as per the provisions of section 2(47)(vi) of the Act, no capital gain can be computed in the impugned assessme .....

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is preferred by the Revenue against the order of the learned Commissioner of Income-tax (Appeals), inter alia, on the following grounds : 1. That the learned Commissioner of Income-tax (Appeals)-II, Kanpur has erred in law and on facts in holding that no liability for capital gains tax had arisen in the financial year 2007-08 and in directing the Assessing Officer to consider the computation of capital gains in the assessment year 2005-06 without appreciating the facts that the assessee itself h .....

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007-08. 3. That the learned Commissioner of Income-tax (Appeals)-II, Kanpur has erred in law and on facts in accepting the additional evidence from the assessee in the form of the said letter dated March 31, 2005 without offering any opportunity to the Assessing Officer for confronting the same thus the learned Commissioner of Income-tax (Appeals)-II has violated the provision of rule 46A of the Income-tax Rules, 1962. 4. That the order of the learned Commissioner of Income-tax (Appeals)-II, Kan .....

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se permission the property could not be sold/transferred. 2. Because the Commissioner of Income-tax (Appeals) has not accepted any additional evidence within the meaning of the provisions of rule 46A inasmuch as whatever paper/confirmation/letters as alleged to have been filed are all pursuant to the directions given by the Commis sioner of Income-tax (Appeals) in terms of section 251(2) read with rule 46A(4) of the Act, 1961. 3. Without prejudice to the above, the Commissioner of Income-tax (Ap .....

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lication for condonation of delay in filing of the cross-objection, we are of the view that the assessee has no reasonable cause for the delay in filing of the cross-objection. We accordingly hold that the cross-objection filed by the assessee is time barred and dismiss the same being not admitted. 4. Now we are left with the Revenue's appeal, in which the issue of capital gain in the impugned assessment year has been raised. In this regard, the facts culled out from the orders of the lower .....

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aid. The assessee was required to show cause as to why proceedings under section 50C of the Income-tax Act, 1961 (hereinafter called in short "the Act") should not be applied. The Assessing Officer accordingly computed the capital gain at ₹ 1,69,01,323, against which an appeal was filed before the learned Commissioner of Income-tax (Appeals) with the submission that the property was not transferred in the impugned assessment year. As per agreement to sell, the property was transf .....

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he agreement to sell, the total consideration was fixed at ₹ 51 lakhs out of which ₹ 21 lakhs was received by the assessee on January 10, 2005 and the balance amount of ₹ 30 lakhs was received on March 31, 2005. On payment of the entire consideration, the possession was handed over to the buyer. Therefore, nothing was left out for further payment. In the light of the provisions of section 2(45)(vi) of the Act, the property was transferred in the impugned assessment year, i.e., .....

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ppeals) are extracted hereunder for the sake of reference : "I have considered the facts and circumstances of the case, gone through the assessment order as well as the paper book filed by the assessee and the written submissions placed by the learned author ised representative. The assessee Pt. Ranglal Trust, is a private trust, established by Late Pt. Ranglal by trust deed dated January 27, 1930. The trust was created by settling property No. 75/6, Nai Sarak, Halsey Road, Kanpur with the .....

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seen. The only source of income is income from interest from bank. There is no income from property. This further substantiate that the trust ceased to enjoy income from property after giving possession of the same. The authorised representative has placed the arguments that due to meager rent the trust was not in a position to achieve its objects and fulfil the purpose for which it was created. The tenants were nei ther prepared to vacate the premises nor increase the rent. Keeping this in mind .....

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d property for ₹ 51 lakhs. The entire sale consideration of ₹ 51 lakhs was received as under : ₹ 21,00,000 vide cheque No. 536834 on State Bank of Indore, Birhana Road, Kanpur dated January 10, 2005 ₹ 10,00,000 vide cheque No. 536840 on State Bank of Indore, Birhana Road, Kanpur dated March 31, 2005 ₹ 20,00,000 vide cheque No. 536839 on State Bank of Indore, Birhana Road, Kanpur dated March 31, 2005 On receiving the entire consideration the possession of property wa .....

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r, between the assessee and Mayur Infrastruc ture Ltd., the purchaser, for a total consideration of ₹ 51 lakhs. The sale consideration was to be paid partly at the time of registration of the agreement to sell and partly to be paid by March 31, 2005. The purchaser paid ₹ 21,00,000 vide cheque No. 536834 drawn on State Bank of Indore, Birhana Road, Kanpur dated January 10, 2005 at the time of agreement to sell and thereafter the remaining amount of ₹ 31 lakhs was paid on March 3 .....

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resentative has submitted that since the entire consideration was paid and the possession of the property was handed over to the purchaser, the assessee ceased to have any right, title or interest or any lien of any nature whatsoever over the said property. The obligation cast on the assessee stood discharged. In terms of section 2(47)(v) of the Income- tax Act, 1961, wherein any transaction involving the allowing of the possession of any immovable property to be taken or retained in part perfor .....

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completed and as such, the liability to pay capital gains would not arise in the year under appeal, when the sale deed was executed and registered. These facts are not in dispute. The facts are documented, in the agreement to sell as well as the sale deed, both are registered and are not doubted upon. The consideration has been paid in full and the possession of the property has been delivered. For the purpose of the Income-tax Act, the 'transaction of transfer' stands complete in terms .....

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1988. Sub-clause (v) was inserted in section 2(47) along with other clause (vi) with the intention to neutralise certain devices and transactions pursuant to which capital asset or interest therein were transferred in such a manner so as to fall beyond the parameters of the definition of the term transfer in section (2) sub-section (47). Taxable event in the case of possession in pursuance of agreement to sell occurs in the year of possession and not in the year of execution and registration of .....

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lear by the wordings of section 53A and also by the Board's Circular No. 495 dated September 22, 1987 ([1987] 168 ITR (St.) 87 ) which explains the intention behind the insertion of these sub-sections to section 2(47) of the Act, 1961. '53A. Part performance.-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 to constitute the transfer can be ascertained with reasonable certainty, and t .....

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r, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract : Provided that nothing in this section shall affect the rights of a transferee f .....

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d in Alapati Venkataramiah v. CIT [1965] 57 ITR 185 (SC). 'Definition of "transfer" widened to include certain transac tions-11.1. The existing definition of the word "transfer" in section 2(47) does not include transfer of certain rights accruing to a purchase, by way of becoming a member of, or acquiring shares in a co-operative society, company, or association of persons or by way of any agreement or any arrangement whereby such person acquires any right in any buildin .....

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ntract, of the nature referred to in section 53A of the Transfer of Property Act, 1882. Now sub-clauses (v) and (vi) have been inserted in section 2(47) to prevent avoidance of capital gains liability by recourse to transfer of rights in the manner referred to above. 11.2 The newly inserted sub-clause (vi) of section 2(47) has brought into the ambit of 'transfer', the practice of enjoyment of property rights through what is commonly known as power of attor ney arrangements. The practice .....

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contrary. The Assistant Commissioner of Income-tax-I vide his report dated February 19, 2013, has submitted, that the possession of the said property was given to the purchaser at the time of execution of the sale deed on May 15, 2007 and not when the entire sale consideration was paid on March 31, 2005. For this purpose, the Assistant Commissioner of Income-tax-I enclosed a copy of the letter dated April 14, 2009 addressed to the Deputy Commissioner of Income-tax, Range-I, Kanpur (the then Asse .....

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e to the above, we beg to submit that we are in receipt of the remand report dated February 19, 2013 and beg to submit as under : That the letter dated April 14, 2009, referred to by the Assessing Officer in the remand report is a reply filed by the assessee, addressed to the Deputy Commissioner of Income-tax-I, Kanpur and is in pursuance to notice issued under section 144/142(1) of the Income- tax Act, 1961. It may be noted, that no notice under section 143(2) was issued prior to the notice und .....

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ubmitted. The said letter contains the details of the balance sale consideration paid and its acknowledgment. It also contains the factum of giving and taking of possession of the property. For the sake of convenience, the letter is reproduced as under : Thus, the submission of the Assessing Officer that the possession of the property was not given in the financial year 2004-05 itself, but was given on May 15, 2007 if read in the totality of the facts and cir cumstances would found to be misplac .....

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hat the possession of the prop erty came to be given and acknowledged by the buyer on March 31, 2005 itself when the entire consideration stood paid, the reason being that soon after receiving the entire sale consideration, the assessee ceased to have any right, title, interest or lieu of any nature whatso ever over the said property. The property in question still continues to be occupied by different tenants and there is no change in the status. If need be, and if your good self-desires, direc .....

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rmation from M/s. Mayur Infra structure Ltd., the buyer of the property. Accordingly, the authorised representative on February 26, 2013 filed a confirmation letter dated February 25, 2013 regarding receipt of payments and taking over possession of the property on March 31, 2005. In view of the confirmatory letter of M/s. Mayur Infrastructure Ltd., dated February 25, 2013 it is clear, that the possession of the property was delivered to the buyer on March 31, 2005 itself. Even otherwise as submi .....

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nt had been received nor has been declared in the income and expenditure account. Even in the return for the year under consideration, i.e., assessment year 2008-09, no rental income for one and a half months has been declared. This further shows clearly, that the property has not been in possession of the assessee after March 31, 2005. In view of the above factual and legal position, I am of the considered view that since the property in question stood transferred in the financial year 2004-05, .....

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is treated as 'transfer' under section 2(47), even if sale deed is not executed. The other grounds of appeal, i.e., the adoption of sale considera tion, as per the consideration determined by the District Judge, Kanpur, deducting for encumbrances such as property being covered by the Rent Control Act, and the property should ought to have been referred to the Valuation Cell in terms of section 50C(2) of the Act are all valid, though have now in the present scenario, become academic, and .....

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pages 108 to 129 of compilation of the assessee wherein the total consideration was determined and the same was paid during the financial year relevant to the assessment year 2005-06. The payment of ₹ 51 lakhs was made in two instalments-the first instalment of ₹ 21 lakhs was paid on January 10, 2005 and the second instalment of ₹ 30 lakhs was paid on March 31, 2005. The possession was also given to the buyer during the said financial year. Therefore, transfer was complete dur .....

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