9911796707
TMI Blog2016 (1) TMI 861X X X X Extracts X X X X X X X X Extracts X X X X ..... claring loss of Rs. 9,19,804/-. Thereafter, the assessee filed revised return of income declaring loss of Rs. 8,66,270/- on 20-12-2003. A survey action u/s.133A was carried out at the premises of assessee on 19-01-2006. On investigation, it was found that the assessee had acquired a property situated at 1277, Bhamburda Town, Jangali Maharaj Road, Pune through WILL dated 25-09-1991 from her mother Smt. Madhumalti N. Suru. The said property was sub-divided in 4 equal parts between assessee and her 3 children. During survey 4 development agreements in the name of assessee and her children all dated 28-07-2001 with Kumar Group were found. Separate agreements for transfer of development rights were executed with the consideration of Rs. 17.50 lakhs each (total consideration of Rs. 70 lakhs). Admittedly, the bank statement of the assessee reflected receipt of Rs. 17.50 lakhs through cheques. The assessee had declared capital gain on transfer of development rights in respect of aforesaid property falling in her share in her revised return of income and had also claimed exemption u/s.54F of the Act for purchase of residential house in Twin Towers, Aundh. 4. The Assessing Officer in assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Bharat Jayantilal Patel Vs Union of India reported as 122 DTR 321 (Bombay). 7. The Ld. AR of the assessee assailing the finding of the authorities below on merits submitted, that the authorities below have erred in coming to the conclusion that the assessee was having absolute ownership rights of the bequeathed property. The Ld. AR referred to clause 8b of the WILL executed by Dr. Mrs. Madhumalti Narhar Suru dated 25-09-1991. The Ld. DR pointed out that a perusal of the said clause would show that the assessee was not the absolute owner of the property called Madhu Ranjan, 1277, Shivaji Nagar, Jangali Maharaj Road, Pune. The assessee was only having life time interest in the property, i.e. till her death. The assessee had no right to gift, donate, sale, lease out, alienate or dispose of the property in any manner. After her death, the property would have passed on to her 3 children, i.e. Gauri, Rohit and Radhika in equal proportion. Since there was dispute between the assessee and her children, a family settlement was drawn on 14-07-2000. According to the family settlement the assessee and her 3 children shared the property in equal proportion. Subsequently, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act from her act and conduct. During the reassessment proceedings the assessee cooperated throughout and had not raised any objection with regard to deciding of objections against invoking of section 147 proceedings separately. The Ld. DR also referred to provisions of section 292BB of the Act to buttress his submissions. The ld. DR contended that now at the appellate stage assessee cannot raise the issue that objections were not decided separately or there is any violation of principles of natural justice. 11. The Ld. DR further submitted that the assessee had disposed of the property in violation of the recitals in the WILL. According to the WILL the assessee had lifetime interest in the property but had no right to sell the same. Despite restrictive covenant the assessee could dispose of the property, this clearly shows that the assessee was absolute owner of the property. Separate development agreements in the name of assessee and her 3 children is merely a sham transaction to reduce tax liability. The actual ownership rights in the property vested with the assessee. 12. The Ld. DR further submitted that since there was no transfer of title as per the provisions of Trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to enjoy the property during her lifetime with restrictive conditions. Thereafter, in the year 2003, there was a family settlement between the assessee and her 3 children, i.e. Gauri, Rohit and Radhika. According to the family settlement, the property was divided in equal share between the assessee and her aforesaid 3 children. Subsequently, the assessee and the other coowners of the property executed separate development agreements on 28-07-2001 with Kumar Group. The assessee in view of transfer of her rights in the said property received a consideration of Rs. 17.50 lakhs. Undisputedly, the assessee only received Rs. 17.50 lakhs, i.e. to the extent of her 1/4th share in the said property. The assessee in her revised return of income disclosed the long term capital gain on the aforesaid amount. 14. We observe that the authorities below have erred in holding that the assessee was the absolute owner of the property acquired by her through WILL. As stated earlier the assessee had only lifetime interest in the property with no right of alienation. It was only through a family arrangement that the assessee got absolute right over 1/4th share in the property. The Ld. AR of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rights had taken place within the span of 1 year. The execution of confirmation deed at a later date would not make the assessee ineligible from the benefit of section 54F. A perusal of confirmation deed dated 13-12- 2002 would show that the same is in furtherance to the Development Agreement dated 28-07-2001 with assessee. Therefore, the assessee is eligible for claiming exemption u/s. 54F of the Act. 18. We observe that the CIT(A) in the impugned order has held that the assessee has sold one of the new flats i.e. Flat No. 802, Twin Towers, Aundh, Pune in the year 2004-05 therefore, the assessee is not eligible to claim exemption u/s. 54F of the Act. This finding of the CIT(A) has not been rebutted by the ld. AR of the assessee. In view of the fact that the assessee has subsequently i.e. within a period of three years has sold one of the flats purchased on which exemption u/s. 54F has been claimed, the assessee would not be eligible for claiming exemption on the said flat. The claim of exemption u/s. 54F in such circumstances is restricted to the amount of capital gain invested in one flat i.e. 801, Twin Towers, Aundh, Pune only. 19. One of the objections raised by the Revenue i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of Section 54 of the Act because long term capital gain earned by the appellants had been used for purchase of a new asset/residential house on 30th April, 2003 i.e. well within one year from the date of transfer of the house which resulted into long term capital gain. 20. The question to be considered by this Court is whether the agreement to sell which had been executed on 27th December, 2002 can be considered as a date on which the property i.e. the residential house had been transferred. In normal circumstances by executing an agreement to sell in respect of an immoveable property, a right in personam is created in favour of the transferee/vendee. When such a right is created in favour of the vendee, the vendor is restrained from selling the said property to someone else because the vendee, in whose favour the right in personam is created, has a legitimate right to enforce specific performance of the agreement, if the vendor, for some reason is not executing the sale deed. Thus, by virtue of the agreement to sell some right is given by the vendor to the vendee. The question is whether the entire property can be said to have been sold at the time when an agreement to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the appellants had, in respect of the capital asset in question, had been extinguished because after execution of the agreement to sell it was not open to the appellants to sell the property to someone else in accordance with law. A right in personam had been created in favour of the vendee, in whose favour the agreement to sell had been executed and who had also paid Rs. 15 lakhs by way of earnest money. No doubt, such contractual right can be surrendered or neutralized by the parties through subsequent contract or conduct leading to no transfer of the property to the proposed vendee but that is not the case at hand. 22. In addition to the fact that the term "transfer" has been defined under Section 2(47) of the Act, even if looked at the provisions of Section 54 of the Act which gives relief to a person who has transferred his one residential house and is purchasing another residential house either before one year of the transfer or even two years after the transfer, the intention of the Legislature is to give him relief in the matter of payment of tax on the long term capital gain. If a person, who gets some excess amount upon transfer of his old residential premises a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n favour of the vendee/transferee, when the agreement to sell had been executed.
24. Thus, a right in respect of the capital asset, viz. the property in question had been transferred by the appellants in favour of the vendee/transferee on 27th December, 2002. The sale deed could not be executed for the reason that the appellants had been prevented from dealing with the residential house by an order of a competent court, which they could not have violated."
From the perusal of the aforesaid decision it is explicitly clear that transfer of any rights in the capital asset would constitute transfer within the meaning of section 2(47) of the Act and the assessee is eligible to claim benefit u/s. 54 on such transfer. In view of our above findings, we hold that the assessee is eligible to claim exemption u/s.54F of the Act. This ground of appeal of the assessee is partly accepted in the aforesaid terms.
22. Since we have accepted the appeal of the assessee on merits, we are not deciding the issue of jurisdiction u/s.148 of the Act.
23. In the result, the appeal of the assessee is partly accepted.
Order pronounced on Friday, the 06th day of November, 2015. X X X X Extracts X X X X X X X X Extracts X X X X
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