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2016 (4) TMI 863 - ITAT JAIPUR

2016 (4) TMI 863 - ITAT JAIPUR - TMI - Addition on account of capital gain - year of assessment - Held that:- There is merit in the propositions and contentions raised by the assessee. Transfer of the ownership of property based on a on a contract registered or otherwise is to be ascertained from the intention, documents and volition of the parties to the transaction. A different stand cannot be adopted by revenue authorities on one hand not to question about the genuineness of the documents and .....

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in CO filed by assessee become infructous. - ITA No. 51/JP/2015, C.O. No. 3/JP/2015 - Dated:- 29-2-2016 - SHRI R.P.TOLANI, JM & SHRI VIKRAM SINGH YADAV, AM For The Revenue : Shri Raj Mehra, JCIT -DR For The Assessee : Shri G.M. Mehta, CA ORDER PER R.P. TOLANI, JM:- The Revenue has filed an appeal against the order of the ld. CIT(A)-I, Jaipur dated 19-11-2014 for the assessment year 2011-12. The assessee has field the cross objection. 2.1 The ground raised by the Revenue in its appeal is as .....

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T(A) was legally correct in passing the order appealed against after considering the facts of the case incorporated in the registered sale deed and after applying the law laid down by Hon'ble Patna High Court (201 ITR 1032); 2. Alternatively ld. CIT(A) should considered and allowed following legal grounds of appeal : (a) Deductions of ₹ 50,00,000/- u/s 54EC of I.T. Act for investment in NHA Bonds and ₹ 85,59,386/- u/s 54B of I.T. Act for purchase of new agricultural land (b) Inde .....

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eed dated 17th January 2011 (registered with sub-Registrar on 19.01. 2011 to one M/s. Apex Land Mark Pvt. Ltd., through its Director Shri Gopal Lal Jat. Assessee s received share of sale proceeds of ₹ 2,93,55,828/- through post dated cheques of next financial year as the vendee had no ready cash. To eliminate the apprehension of post dated cheque(s), not getting dishonored after registration, the covenant of sale deed clearly stipulated that the sale was conditional and transfer ownership .....

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ut of all the five post-dated cheques issued by vendee, two cheques of ₹ 75,00,000/- issued to each joint owner (total ₹ 1,50,00,000/-) stood bounced as they could not be realized on given dates. Therefore as per the terms and condition embodied in registered sale deed the sale was claimed to be void abinitio. Thus in A.Y. 2011-12 there was no legal sale or transfer of property to be charged for Long Term Capital Gains. In these facts and circumstances assessee exercised the legal ri .....

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compensation cum undertaking agreement dated 11.07.2011 was entered in to with the Buyer effecting a proper sale and transfer of ownership rights. Since the impugned sale was factually and legally effected in A.Y. 2012-13, the appellant rightfully offered for taxation the long term capital gains in her return of income in A.Y. 2012-13. Ld. AO was of the view that the sale was completed in AY 2011-12 itself, therefore, proponed the year of taxability from AY 2012-13 to AY 2011-12. 4.2 Aggrieved, .....

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o avoid. Capital asset as defined u/s 2(14) of Income Tax Act, 1961 has to be interpreted w.r.t. Section 54 of the Transfer of Property Act, 1882. Properties do not necessarily pass as soon as the instrument is registered, for, the trust test is the intention of the parties. Registration is prima facie proof of an intention to transfer, but it is not proof of an operative transfer, if there is a condition precedent as to the payment of consideration of delivery of the deed. Thus the seller may r .....

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1-2012 instead of taxing it in A.Y. 2012-13. This shows lack of basic knowledge of taxation on the part of AO. AO s action of cherry picking for suitable words in the sale deed and completely ignoring the facts of conditional sale are quite surprising and also without any justification. Therefore, AO, is directed to delete addition on account of capital gain of ₹ 2,44,55,016/- 4.3 Being aggrieved against the order of the ld. CIT(A), the revenue is before us on limited issue of year of taxa .....

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nge the date of transfer of property. While ascertaining the date all the facts, evidence, covenant of registered documents are to be harmoniously considered. Authorities below by adopting a narrow and pedantic view have unjustifiably changed the year of taxation of LTCG. Reiterating the facts it is contended that total sale consideration of ₹ 2,93,55,828/- for sale of impugned agricultural land was initially paid by the Buyer through post dated cheques of April 2011 and May 2011 (A.Y. 201 .....

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l land was contemplated to be complete only when the entire sale consideration of ₹ 2,93,55,828/- paid through postdated cheques was realized. The same clause provided that if postdated cheque is dishonored on given date, the payment was to be made within 15 days without any further notice to buyer from the Seller(s). On receipt of payment against dishonoured cheque, the Buyer will obtain a receipt from the Sellers. In case of non-payment within said period of 15 days, the sale and transfe .....

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sale is accepted by both the parties as void ab initio by way of legal notices, there is no justification to charge long term capital gains on such conditional sale which is admittedly void ab-initio. The conditional sale was mandatorily dependent on agree precondition that all the postdated cheques are realized. Out of sale consideration of ₹ 2,93,55,828, cheque No. 0002292 dated 28.04.2011 for ₹ 75,00,000/- was dishonoured and the next cheque No. 0002294 dated 04.05.2011 for ₹ .....

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he Seller, the appellant Seller, in order to comply with legal formalities, had to serve a legal notice through an Advocate by registered post on the Buyer on 12.05.2011. As a precautionary measure, legal notice through an Advocate was also sent to Commissioner, Jaipur Development Authority (JDA) as the Buyer could have approached JDA to convert said land into urban by obtaining a certified copy of purchase deed dated 17.01.2011 from office of Sub-Registrar (annexure C). After adopting all these .....

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n of income for the A.Y. 2012-13 in accordance with law. It is contended that sale and transfer in impugned land being completed in FY 2011-12 relevant to AY 2012-13, ld. AO was not justified in unjustifiably pre-poning the year of taxability of LTCG in AY 2011-12 by distorting the facts, misinterpreting the legal provisions and on hypothetical considerations. Ld. CIT(A) rightly appreciated the relevant facts, circumstances, evidence on record and interpretation of law, there is no infirmity in .....

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the true test is the intention of the parties. Registration is prima-facie proof of an intention to transfer, but it is not proof of an operative transfer, if there is a condition precedent as to the payment of consideration of delivery of the deed. Thus the seller may retain the deed pending payment of price and in that case there is no transfer until the price is paid and the deed is delivered. The transfer under section 2 (47) must mean an effective conveyance of the capital asset to the tra .....

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ent enclosed marked annexure F) (ii) CIT Vs. Excel Industries Ltd. (2013) 358 ITR 295 (SC): It is well settled that income tax cannot be levied on hypothetical income. Income accrues when it becomes due but it must also be accompanied by corresponding liability of the other party to pay the amount. Only then can it be said that for the purpose of taxability that the income is not hypothetical and it has really accrued to the assessee. It is contended that while delivering this judgment Hon ble A .....

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(Central) (1971) 82 ITR 835 (SC) and Godhra Electricity Co. Ltd. Vs. CIT (1997) 225 ITR 746 (SC). Order of ld. CIT(A) is relied on that the LTCG are taxable in AY 2012-13 as returned by the assessee. 4.6 Apropos CO ld. Counsel contends that if assessee s taxability for LTCG is allowed in AY 2012-13 then the grounds raised in CO will become infructuous. 4.7 On merits of the alternate grounds raised in CO, it is submitted that the appellant had made to following investment in Bonds of National Hi .....

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.07.2011 and ₹ 85,59,386/- under section 54B of IT Act (purchase of new agricultural land within 2 years). These facts were already within knowledge of the ld. AO through copy of computation of total income for the A.Y. 2012-13, submitted during the course of hearing but ld. AO did not allow the deductions. The consideration and interest on loan for purchase of sold agricultural land was paid by the appellant as per following details for which investments are appearing in her regular books .....

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ppellant s books is also attached. * Cost inflation will be higher if sale treated as made in F.Y. 2011-12) As against inflated price of ₹ 1,01,26,926/-, ld. AO at page No. (8) of the order appealed against, has calculated ₹ 49,00,812/- as cost inflation price of the sold agricultural land by taking the purchase price and year of payment/purchase at his own presumption, estimation and calculations. The adoption of the lower indexed cost of acquisition of sold agricultural land by twi .....

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complete sale or alternatively a part performance of sale of property together with possession which is a transfer in terms of sec. 2(47). Therefore the LTCG on sale of impugned land is taxable in AY 2011-12. Per contra assessee has demonstrated that: i. There was no intention to part with ownership of the property. Such rights together with possession were provisionally transferred with a clear stipulation in deed itself that sale transaction and ownership in property will be complete only on .....

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nsequent to bouncing of cheques, vendee relented and made good the payment in subsequent assessment year. This is evidenced by the fresh deed termed as compensation cum undertaking agreement dated 11.07.2011. This fresh deed narrates all the facts and events as accepted by both the parties. Ld. AO cannot prefer one document favorable to revenue at the cost of other document which is subsequently executed by both parties and registered. Its genuineness has not been questioned. 4.9 In view of thes .....

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