TMI Blog2016 (8) TMI 1225X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the orders of authorities below are set aside and matter in issue is restored to the file of Assessing Officer with direction to consider issue of long term capital gain in assessment year 2009-10 alongwith claim of deduction under section 54B of the Income Tax Act alongwith issue of agriculture income of ₹ 2,67,022/-. The Assessing Officer shall give reasonable sufficient opportunity of being heard to the assessee. - ITA Nos. 968 And 969/CHD/2014, ITA Nos. 1185/CHD/2012, And ITA Nos. 970 & 971/CHD/2014 - - - Dated:- 17-8-2016 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER, AND SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER For The Appellant : Shri Tej Mohan For The Respondent : Shri Sushil Kumar,DR ORDER PER BHAVNESH SAINI, JM This order shall dispose off all the above appeals filed by three different assessees because the issues are common in all the appeals. 2. We have heard ld. Representatives of both the parties, perused the findings of authorities below and considered the material available on record. The appeals are decided as under. ITA 968/2014 ( Shri Purshotam Kumar : A.Y. 2007-08) 3. This appeal by assessee has been directed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Sale Deed if the possession of property has been given to the buyer. Regarding the affidavit of the vendee in favour of vendor, Assessing Officer observed that it was a sham arrangement. The assessee s claim that the possession of the property remained with the seller till the encashment of cheque on 15.06.2008 and cultivation of land was being done by the seller, is not maintained in view of the information collected from revenue authorities. The Assessing Officer did not accept claim of the assessee that possession of the property remained with him till encashment of the cheque because Tehsildar, Jagadhri has intimated that intakal has been accepted before 31.03.2007 in the name of M/s Zodiac Housing Infrastructure Pvt. Ltd. and physical possession had already been handed over to the buyer. Therefore, whole of the sale consideration was held to be taxable in assessment year 2007-08 in appeal. The Assessing Officer distinguished the case law relied upon by assessee and concluded that entire sale consideration of ₹ 2.95 Cr is taxable in assessment year under appeal and computed long term capital gain of ₹ 2,68,43,750/-. 7. The assessee challenged the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital gain in assessment year under consideration i.e. 2007-08 amounting to ₹ 5,23,23,470/-. 6. The facts of the case are that the assessee filed return of income on 03.03.2008 declaring income of ₹ 99,990/- + agriculture income of ₹ 1,75,000/-. The Assessing Officer issued notice under section 148 of the Income Tax Act and also issued statutory notices. The assessee in reply thereto submitted that return filed in original may be treated as filed in response to notice under section 148 of the Act. The Assessing Officer noted that assessee had sold the land for a consideration of ₹ 5.50 Cr through a Registered Sale Deed dated 20.03.2007. The sale consideration comprise of ₹ 8,50,000/- in cash, ₹ 41,50,000/- vide cheque dated 15.03.2007 and ₹ 5 Crore vide cheque No. 009643 undated from M/s Link Infrastructure Developers Pvt. Ltd., Delhi. The proceeds of the aforesaid cheques were realized by assessee in March, 2007 and 16.06.2008 respectively. The assessee in reply to the notices offered sale consideration of ₹ 50 lacs for tax during the year under consideration and balance amount of ₹ 5 Crore for assessment year 2009-10 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. 6(iii) The Assessing Officer also observed that claim of assessee that one Sale Deed dated 20.03.2007 will have two different effective dates of transfer, were not according to law. The post-dated cheque, as promised, has since been encashed by the assessee on 16.06.2008, therefore, effective date of transfer in this case would be 20.03.2007 as per Registered Sale Deed. The submission of the assessee that there would be two different dates for the effective transfer, was held to be not tenable. Moreover, this claim of assessee that possession of the property in question remained with the assessee till encashment of the post-dated cheque was found false. The Tehsildar, Jagadhri has informed that Intakal had been accepted before the year end on 31.03.2007 in the name of M/s Link Infrastructure Developers Pvt. Ltd., Delhi and physical possession had been handed over to the buyer. Accordingly, whole of the sale consideration of ₹ 5.50 Cr was held to be taxable in financial year 2006-07 relevant to assessment year 2007-08 under appeal. The assessee was taking shelter of the intention of the parties while transferring an asset to buyer. The assessee was trying to prove t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be a valid sale. In the case of the assessee, there was not an absolute and complete sale as defined hereinabove. At the most, the sale deed in true sense was only a contract for sale and as such no interest or charge is created on the property. Since balance amount of ₹ 5 Crores was received during the assessment year 2009-10, hence, the taxability of the same is to be considered in that year only and not in assessment year under appeal i.e. 2007-08. 9. The assessee also referred to affidavit of the buyer to emphasize about transfer of possession at the time of payment as per post-dated cheque. The assessee submitted that sale in respect of amount of ₹ 50 lacs was completed during the year under appeal and the one covered under the cheque of ₹ 5 Crores (undated) was completed when the cheque got encashed on 16.06.2008 which falls in assessment year 2009-10. This position has been explained in the affidavit dated 20.03.2007 executed by the buyer. The assessee also submitted that tax liability has to be ascertained strictly in accordance with the terms of sale deed and not on the basis of assumption. As per terms of the sale deed, sale took place in two p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer did not take place on the date of registration i.e. 20.03.2007 but in two parts, one during the year and second on the date of realization of entire sale consideration through undated cheque. 6.2 On the other hand, the AO rejected the appellant's stand by deciphering the meaning of sale as per section 54 of TP Act. The AO has observed that as per section 54 of TP Act, sale means transfer of the ownership in exchange for a price paid or promised or part paid or part promised. In sale, the seller absolutely transfer all rights in the property sold and no right is retained by him. This aspect of sale makes it distinguishable from other modes of transfer of immovable property. The AO has also observed that components of effective sales include the parties i.e. seller and buyer, the subject to sale, the transfer deed of conveyance and the consideration. All these components have been effected through sale deed dated 20.03.2007. The AO has also referred to the provisions of Registration Act and reached to the conclusion that in case of transfer of immovable property and registration thereof, the effected date of transfer is the date of registration. Thus, the AO rejected t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... care of the eventuality which has not taken place, as, as on the date of the assessment, the payment has already been received. Therefore, even if the appellant's contention that there was a rider in the registration deed is accepted the time factors have eroded its effect. The AO is right in observing that such like clause does not state as to what will be the effective date of transfer if the cheque is realized and what will be fate of ₹ 41,50,000/-, the advance which has been paid by the buyer to the seller and which has already been offered for taxation, if the balance amount is not realized. 6.5 Further, regarding the possession, the registration deed clearly state that the possession has been handed over to the buyer on the date of registry i.e. 20.03.2007. It is to be noted that the document evidencing the transfer of property has been duly registered by the competent authority i.e. Registering Authority and the necessary mutation entry has also been done and accepted on 31.03.2007. In such circumstances one has to go by the entries in the land revenue records. Therefore, the appellant's contention, if any, that the crops were grown by the appellant is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learly stipulated that only on payment of the entire consideration amount, the registration receipt and delivery of possession will be given evidencing the passing of title to the vendee. Whereas in the instant case, as per the registered sale deed the possession of land has already been handed over and the condition intended in case of dishonor of cheque, the sale deed in question shall automatically be stand cancelled. The registered deed, in the instant case, does not stipulate that the registration receipt and delivery of possession will be given after receipt of entire consideration amount. So, the decision of Hon'ble Patna High Court is not applicable in the instant case being on different facts. 6.9 The appellant in its submission has placed reliance in the cases of ITO Vs. Roop Singh [2010] 127 TTJ 377 (Del.); CIT Vs. Smt. Burfi [2010] 8 Taxman.com 248 (P H); Vemanna Reddy (HUF) Vs. ITO [2009] 30 SOT 11 (Bang.); CIT Vs. Geetadevi Pasari [2009] 17 DTR 280 (Bom); ACIT Vs. A.R. Dahiya [2004] 89 ITD 377 (Chd.); CIT Vs. Vimal Kumar Surana [2004] 269 ITR 288 (Raj.) and Anusandhan Investment Ltd. Vs. ITO [2010] 40 SOT 205 (Mum.). On perusal of these judgments, it is noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of time on receipts of part sale consideration in two financial years. Further, I make reference to the word 'transfer' of capital assets as in section 2(47) of the Act. The transfer in relation to a capital asset includes sale, exchange or relinquishment of the asset or the extinguishment of any rights therein. The definition of transfer u/s 2(47) is merely inclusive and does not exhaust other kinds of transfer (Sunil Sidharathbhai Vs. CIT 156 ITR 509 (SC)]. If a particular situation has not been contemplated specifically in section but is otherwise understood as transfer in common parlance, it clearly stands covered within the definition of term 'transfer' [CIT Vs. Singla Rice General Mills 82 ITD 778 (Del.)]. Section 2(47) deals with various situations of 'transfer' and sub clause (v) deals with specific situation for considering 'transfer', if a transaction which involves allowing the possession of any immovable property. Any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53 A of TP Act amounts to transfer. Generall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eements, one could not go by substantial performance of a contract. In such cases, the year of chargeability is the year in which the contract is executed. This is in view of section 2(47)(v). So, the Hon'ble High Court while examining the provisions of section 2(47)(v) read with section 53A of TP Act reached to the conclusion that the year of chargeability of capital gains is the year in which the contract is executed. 6.12 Further, a reference is made to the observations of Hon'ble Calcutta High Court in the case of CIT vs. Ganga Properties Ltd. 77ITR 637 which is reproduced as under :- Now, section 17(l)(b) of the Indian Registration Act, 1908, makes compulsorily registrable non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value ofRs.100 or upwards, to or in immovable property. And section 47 of the Registration Act says : a registered document shall, operate from the time from which it would have commenced to operate if no registration therefore had been required or made, and not from the time of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The entries in the account books of the appellant and of the company on March 20, 1948, were irrelevant for the purpose of determining the date when the sale or transfer took place. Title to the land and buildings and the plant and machinery and electrical fittings permanently embedded thereon could not pass to the company till the conveyance was executed and registered; and as -the sale deed was executed and registered only on November 22, 1948, no sale or transfer of these assets took place before April 1, 1948, and no capital gains arose in the relevant previous year. Therefore, the transfer is effective only from the date when the title passes to the other party. For determining the year of chargeability it is the date of effective transfer of title that is relevant and capital gains are assessable as income of the year in which the transfer took place, even though they may be realized later. 6.13 In view of aforesaid discussion, facts of the case and judicial pronouncements, it is held that the transfer of the property took place during the year under consideration, i.e., A.Y. 2007-08, and the AO has rightly taxed the capital gain arising from transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been paid and possession of the land have been handed over to the buyer. The ld. counsel for the assessee further submitted that moreover the fraud has been committed by the buyer with the help of Revenue authorities on innocent villagers/sellers including the assessee who are illiterate and agriculturists by misrepresentation in the sale deed i.e. factum of post-dated cheque was not mentioned, the address of the buyer was fake. He has submitted that one of the assessee Tejinder Kumar has moved criminal Miscellaneous Petition 36372-M of 2007 against the State of Haryana and Others for direction to the Police Authorities of District Yamuna Nagar for registration of the case against functionaries including the Managing Director of Zodiac Housing Infrastructure Pvt. Ltd. Hon'ble High Court gave a direction to the Superintendent of Police, Yamuna Nagar to enquire into the complaints of petitioners vide order dated 31.05.2007, copy is placed on record. 11(2) The ld. counsel for the assessee submitted that only after intervention of the High Court and District authorities, the assessee is able to get en-cashed the undated cheque on 16.06.2008 whereby ₹ 5 Crore was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is unjustified. 14(i) On the other hand, ld. DR relied upon orders of the authorities below and submitted that sale deed was executed on 20.03.2007 therefore, on the date of registered Sale Deed, there is a transfer of the title in favour of the buyer, therefore, sale is complete on 20.03.2007. As such, Capital gain is leviable in assessment year under appeal. He has submitted that merely because entire sale consideration was not received in assessment year under appeal, is no ground to allow relief to the assessee. He has relied upon decision of the Supreme Court in the case of Sanjiv Lal V CIT 365 ITR 389. 15. We have considered the rival submissions and perused the material on record. Hon'ble Hon'ble Punjab Haryana High Court in the case of Hira Lal Ram Dayal V CIT (supra) held as under : It is no doubt true that evidentiary value has to be attached to a registered document but the said document cannot be a final word in the matter. It has to be remembered that capital gains accrue only if there is sale or any other transfer of the capital asset and if the assessee is able to prove that in fact no sale took place in that case no capital gains ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le deed is not the last word for transfer and, if there is evidence available on record that the two sale deed were bogus, sham or manipulated the assessee could not be subjected to capital gains tax on the transfer of the plots in question although this decision of the High Court relates, to a very important legal issue, the answer to which is highly controversial and ordinarily a reference over this question should have been made, no such reference can be made as the matter stands concluded by a decision of the jurisdictional High Court. 15(iii) ITAT Hyderabad Bench in the case of M/s Mali Florex Ltd. DCIT (supra) held as under : 7. We have heard both the parties and perused the material on record. The assessee entered into sale agreement on 25/2/2007 for sale of land admeasuring 15 acres 39 guntas. The assessee received ₹ 8 lakhs out of total consideration of ₹ 2.24 crores. According to the Assessing Officer there is a relinquishment of right over the property to the purchaser which amounts to transfer u/s. (47) of the Income-tax Act, 1961. In our opinion the conclusion of the Assessing Officer is farfetched. The assessee received only a meagre considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andons his rights thereto. It presumes that the property continues to exist after the relinquishment. Where, upon amalgamation, the company in which the assessee holds shares stands dissolved, there is non relinquishment by the assessee. In view of the above discussion, there is no relinquishment of right over the property. Accordingly, the appeal of the Revenue is dismissed. 15(iv) ITAT Ahmedabad Bench in the case of Hansmukh Chottalal Patel V ITO (supra) held as under : 8. We have heard the rival submissions and perused the material on record. The factual matrix of the case is that Assessee had sold agricultural land admeasuring about 6534 sq. yd at Vadaj, Ahmedabad for a total consideration of ₹ 1,69,88,400/- and for which banakhat was executed and registered on 18.12.2006 and banakhat money of ₹ 8.50 lacs was received by the Assessee. The conveyance deed in respect of the aforesaid land was executed and registered on 19.3.2008. As per the copy of the sales deed, the Assessee received the sales consideration in installments by way of forward dated cheques. The first installment was by way of 2 cheques dated 16.12.2006 of ₹ 4.25 lacs each and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer of Property Act, 1882, at the time of execution of agreement dt. 19th Oct., 1995, and therefore, capital gain was not chargeable in asst. yr. 199697. 9. Considering the totality of facts and relying on the decisions of the H'ble HC in the case of Raj Rani Devi Ramna (supra) and of the Tribunal in the case of Satyawati Devi Verma (supra), we are of the view that the Assessee had given the possession of land in February-2009 to the purchaser and the purchaser could enjoy the fruits of property only after that date. In view of these facts we are of the view that the assessee has rightly treated the transfer of land in AY 2009-10 and therefore the AO was not right in taxing the income on sale of land in AY 2008-09. Thus this ground of the Assessee is allowed. We thus allow the appeal of the Assessee . 15(v) Hon'ble Patna High Court in the case of Smt. Raj Devi Ramna V CIT (supra) held as under : The properties do not necessarily pass as soon as the instrument is registered, for the true test is the intention of the parties. Registration is prima facie proof of an intention to transfer, but it is no proof of an operative transfer if there is a conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... four years i.e. 2006-07, 2007-08, 2008-09 and 2009-10. Further the formula prescribed in the agreement itself makes it clear that the deferred consideration to be received by the respondent-assessee in the four years would be dependent upon the profits made by M/s. Unisol in each of the years. Thus in case M/s. Unisol does not make net profit in terms of the formula for the year under consideration for payment of deferred consideration then no amount would be payable to the respondent assessee as deferred consideration. The consideration of ₹ 20 crores is not an assured consideration to be received by the Shete family. It is only the maximum that could be received. Therefore it is not a case where any consideration out of ₹ 20 crores or part thereof (after reducing ₹ 2.70 crores) has been received or has accrued to the respondent-assessee. As observed by the Apex Court in Morvi Industries Ltd. vs. CIT (1971) 82 ITR 835. The income can be said to accrue when it becomes due.... The moment the income accrues, the assessee gets vested right to claim that amount, even though not immediately. In fact the application of formula in the agreement dated 25th January, 2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has to read capital gain provision along with computation provision and the starting point of the computation is the full value of the consideration received or accruing . In this case the amount of ₹ 20 crores is neither received nor it has accrued to the respondent-assessee during the subject assessment year. We are informed that for the subsequent assessment year (save Assessment Year 2007-08 for which there is no deferred consideration on application of formula), the Assessee has offered to tax the amounts which have been received on the application of formula provided in the agreement dated 25th January, 2006 pertaining to the transfer of shares. 9. The contention of the Revenue that the impugned order is seeking to tax the amount on receipt basis by not having brought it to tax in the subject assessment year, is not correct. This for the reason, that the amounts to be received as deferred consideration under the agreement could not be subjected to tax in the assessment year 2006-07 as the same has not accrued during the year. As pointed out above, accrual would be a right to receive the amount and the respondent-assessee alongwith its co owners have not under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire facts and circumstances of the case because it would support the contention of the assessee that the sale deed was executed only with intention that buyer company thereafter, can obtain land use change from the revenue authority with permission to raise the development in the agricultural land. 16(i) It would also strengthen the case of the assessee that in case of denial of land use change permission and development permission to the buyer, the sale deed would be cancelled between the parties. The assessee further explained that when the undated cheque was not paid by the buyer company, one of the assessee Shri Tejinder Kumar filed a criminal Misc. No. 36372-M of 2007 which is decided by Hon'ble Punjab Haryana High Court on 31.05.2007 (copy of which is placed on record) in which the petitioner prayed for direction to police authorities of District Yamuna Nagar to register a case against functionaries including the Managing Director of Zodiac Housing Infrastructure Pvt. Ltd. for duping various agriculturists including the petitioner for committing fraud to grab their valuable agricultural land. Hon'ble High Court directed the Superintendent of Police, Yamun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about 15 months from the date of the sale deed because undated cheque is cleared on 16.06.2008 while sale deed was executed on 20.03.2007. The intention of the buyer company is, therefore, very clear from the beginning itself that the buyer company/builders never intended to pay substantial sale consideration to the assessee. The intention of the buyer company is also clear from the fact mentioned in the sale deed, affidavit and the attending circumstances. Though the sale deed is executed in the matter but the facts and circumstances above will clearly explain that the sale deed in-fact was a contract of sale of property only and it would not create any interest or charge in the property. The sale transaction shall take place on terms settled between the parties i.e. the contents of the sale deed and the affidavit executed by the buyer. 16(iii) The facts of the case also clearly reveal that full payment on account of sale consideration was essence of the contract not satisfied by the buyer company at the time of execution of the sale deed. There is no transfer of capital asset in assessment year 2007-08. Thus, no income/amount accrued or received by the assessee on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ificant to declare any capital gain accrued or arise in the assessment year under appeal. The decisions relied upon by the assessee clearly apply to the facts and circumstances of the case. The decision in the case of Sanjeev Lal Vs CIT (supra) relied upon by ld. DR is distinguishable on facts of the case and would not support case of the revenue. 18. Considering the above discussion and material on record, we are of the view there is no transfer of capital asset in assessment year 2007-08. There is no accrual or receipt of any income in favour of the assessee on account of capital gains in assessment year 2007-08. Therefore, whole of the addition in assessment year under appeal i.e. 2007-08 is unjustified. We, accordingly, set aside the orders of the authorities below and delete the entire addition on account of capital gains in assessment year under appeal, however, revenue authorities are at liberty to consider the issue of accrual or receipt of capital gain in assessment year 2009-10 in accordance with law, if so advised. 19. In the result, ground No. 1 of appeal of the assessee is allowed. 20. In view of the above findings, there is no need to decide the rema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins in assessment year under appeal. The Revenue is at liberty to consider the issue of capital gain in assessment year 2009-10 in accordance with law. The appeal of the assessee is, thus, allowed. 12. In view of the above, there is no need to decide remaining grounds of appeal claiming exemption under section 54B of the Act because the same has become infructuous and accordingly disposed off. 13. In the result, appeal of the assessee is partly allowed. ITA 969/2014 : (Shri Parshotam Kumar A.Y. 2009-10) 14. The assessee challenged the order of ld. CIT(Appeals), Panchkula dated 02.09.2014 for assessment year 2009-10. The Assessing Officer made addition of ₹ 2,68,43,750/- on protective basis because similar addition was made in assessment year 2007-08. The ld. CIT(Appeals) considering that similar addition have been confirmed in assessment year 2007 08, deleted the protective addition. 15. The assessee in the present appeal, challenged the order of ld. CIT(Appeals) as well as in not allowing deduction under section 54B of the Act and upholding the addition of ₹ 2,67,022/-. The Assessing Officer made addition of ₹ 2,67,022/- because assessee has g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09-10) 20. This appeal by assessee has been directed against the order of ld. CIT(Appeals) Panchkula dated 10.09.2012 for assessment year 2009-10. The ld. CIT(Appeals) noted that similar addition was made in assessment year 2007-08. The assessee did not make deposit of the amount in capital gain account as per Section 139(1) of the Act therefore, same was disallowed. It was also noted that assessee moved application under section 154 which have been allowed by the Assessing Officer and addition of capital gain deleted as it was assessed in assessment year 2007-08. Therefore, in assessment year 2009-10, issue was considered as infructuous. The assessee in the present appeal raised the same issue. 20(i) Since in assessment year 2007-08, we have directed that issue may be considered in assessment year 2009-10 as is directed in the case of Shri Purushottam Kumar (supra), therefore, the issue of long term capital gain and deduction, if any under section 54EC/54B etc. of the Act shall be considered by Assessing Officer in assessment year 2009-10 in accordance with law by giving reasonable sufficient opportunity of being heard to the assessee. 21. In the result, appeal of the ..... 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