TMI Blog2018 (2) TMI 1706X X X X Extracts X X X X X X X X Extracts X X X X ..... y is not effective or complete by way of registration under the general law. Under section 2(47)(v ) any transaction involving allowing of possession to be taken over or retained in part performance of a contract of the nature referred to in section 53A of the 1882 Act would come within the ambit of section 2(47)(v). In order to attract section 53A, therefore, there should be an agreement for consideration; it should be in writing; it should be signed by the transferor, it should pertain to transfer of immovable property; the transferee should have taken possession of the property and the transferee should be ready and willing to perform his part of contract. Therefore, capital gains would be taxable in the year in which such transactions were entered into, even if the transfer of the immovable property was not effective or complete for want of registration under the general law. Therefore, the taxability of capital gains at the hands of the assessee did not fall in the assessment year 2012-2013. Thus the ground of appeal raised by the assessee is allowed. - ITA No.156/Kol/2015 - - - Dated:- 21-2-2018 - Shri Aby.T Varkey, Judicial Member And Shri Waseem Ahmed, Accountant Mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,071,600 Less: municipal taxes 2,903 1,068,697 Standard deduction @ 30% 320,609 748087.90 Income from business profession Income as per profit/loss account 447,924 Less: Income from other sources 79,667 Less: Rent received 1,071,600 Add: rates taxes 35,039 Add: repairs to building 113,059 Add: Depreciation 5,027 Add: Electricity 76,267 - 473950.91 Income from other sources Interest income 79,667 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer on the ground that no business activity was carried on by assessee in the year under consideration. 5. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who has confirmed the order of AO. Aggrieved by this, the assessee has come up in appeal before us. 6. Ld. AR before us filed a paper book which is running from pages 1 to 85 and submitted that the expenses have been incurred towards day-to-day running of business. The assessee being a private limited company has incurred certain expenses which are imperative for its existence. Such as audit fees, directors meeting fees, filing fees etc. Similarly there are other indirect expenses which need to be incurred for its day-to-day working. Such as banking charges, telephone expenses, printing and stationary, salary etc., Ld.AR in support of assessee s claim has relied on the judgment of Hon'ble jurisdictional High Court in the case of CIT vs. Ganga Properties Ltd. reported in 199 ITR 94 (Cal) wherein it was held as under:- A limited company even if it does not carry on business, even if it derives income from other sources, has to maintain its establishment for complying with statutory obli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 128689 6 Audit fees 8,000 - - 8,000 7 Repair maintenance 113059 113059 - - 8 Mis. Expenses 35006 - - 35006 It is well settled law that a private limited company being a body corporate has to incur certain expenses to keep its status active. In this regard, we find support and guidance from the judgment of Hon'ble jurisdictional High Court in the case of Ganga Properties Ltd. (supra) . However, the question arises whether the expense claimed by the assessee are essential to keep the status of the assessee-company as active. It is the duty of the assessee to establish that the expenses claimed by it were necessary for its company. We note that the assessee has claimed the expenses under total 8 heads as discussed above. Out of the total 8 heads of expenses the assessee has made the disallowance in respect of 4 heads of expenses which has already been discussed in the preceding paragraphs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount disallowed Further disallowance 1 Employee benefit 267949 -- 10 % 2 Depreciation 5027 5027 NIL 3 Rates and taxes 69745 35039 NIL 4 Electricity 76267 76267 NIL 5 Service charges of security 128689 - - 10 % 6 Audit fees 8,000 - - NIL 7 Repair maintenance 113059 113059 NIL 8 Mis. Expenses 35006 - - 10% In view of above we restrict the disallowance to the extent of 10% of the expenditure as discussed above. Thus the ground of appeal of assessee is part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties agreed to be sold to the Transferee which ever event takes place earlier. 5. The Transferer will put the transferee either in the vacant possession or by issuance of letter of Attornment on the existing occupier. 6. The sale will be completed within 15 days from the date of obtaining necessary permissions by the Transferer from the appropriate authority or authorities concerned and also obtaining income tax clearance certificate, if necessary for completion of sale and time of 15 days will be calculated from the date of Transferer s supply of copies of order after obtaining such permission and supply of Income Tax Clearance Certificate to the Transferer by the Transferee whichever period expires last. 7. That in case of delay in obtaining necessary permissions and income Tax clearance certificate etc. the tranferere will deliver the possessions of the said properties to the Transferee and the Transferee will be entitled to hold the said properties and to use the same for his own purpose and my also let out the same on such terms and conditions as he may think fit and proper and no further permission will be required to be taken in this respect from the Trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agreement. It was the duty of the transferor to make out a good marketable title free from all encumbrances whatsoever in favour of transferee. In fact, a suit was filed by Shri Sidram Soren before the lower court i.e. Upayukth, Paschim Singhbhum challenging the ownership of the assessee on the impugned land. However, the suit was decided vide Appeal No.19/2006-07 dated 18.03.2008 in favour of assessee. However, subsequently Shri Sidram Soren filed the revision petition before Upayukth Paschim Singhbhum which was again decided in favour of assessee vide revision petition No. 02/2009 dated 22.07.2013. However, the assessee in the meantime transferred the impugned property vide sale deed dated 02.07.2011 but no tax was offered by assessee in the year under consideration. Therefore, the AO called upon assessee to explain the reason for not disclosing the capital gains on the transfer of impugned property. The assessee in compliance thereto submitted that the property was transferred in the financial year 1991-92 vide agreement dated 22.03.1992. Against such transfer, an advance for a sum of ₹19,000/- was also received by the assessee. Thus, as per the provision of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of the definition of transfer contained in section 2(47), the transfer of the property had taken place in the financial year 1991-92 and consequently the capital gain arising out of such transfer was assessable in the assessment year 1992-93. The Ld AR has however admitted in course of the appellate proceedings that no capital gain on transfer of the property was declared by the assessee in its return for the assessment year 1992-93. I therefore find that though the assessee claimed to have transferred the property in the financial year 1991-92 but it has not declared any capital gain arising out of such transfer in its return for the assessment year relevant to the previous year 1991-92. In other words, the assessee though claimed that the property was transferred in the financial year 1991-92 but such transfer was not declared by the assessee in its return for the relevant assessment year 1992-93. In this factual background, I find that the assessee has claimed that the property was transferred in the financial year 1991-92 in view of section 2(47) but then the assessee has itself not followed the legal provisions of section 2(47) as it has not offered the transfer for ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... October, 2009, was as follows:- Special provision for full value of consideration in certain cases. 50C.(1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than' the value adopted or assessed by any authority of a State Government (hereafter in this section referred to as the stamp valuation authority) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purposes of section 48 be deemed to be the full value of the consideration received or accruing as a result of such transfer. 2. After the amendment with effect from 1st October, 2009 the provision of section 50C stood as follows :- Special provision for full value of consideration in certain cases. 50C.(1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed [or assessable] by any authority of a State Government (hereafter in this section referred to as the stamp valuation authority) For the purpose of payment of stamp duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( vii) Any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the employment of, any immovable property. 6. He submitted that going by the definition of word Transfer , appearing from s.2(47)(v) of the IT Act, the sale was completed when the consideration was received in the financial year 2005-06. Possession had already been given in the year 1996 pursuant to an agreement for sale, as indicated earlier. Section 50C had no manner of application because the valuation of the land for the purpose of stamp duty was J1.et to be assessed. In the circumstances, the Ld Tribunal erred in applying section 50C to the case of the assessee. 7. We have not been impressed by this submission. It is true that Transfer has been defined in Section 2(47) quoted above. But the aforesaid definition was made before Section 50C was introduced to the Income Tax Act. After section 50C was introduced in the year 2003, the value of land or building or both sold or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y was assessed by the stamp valuation authority because it was on such valuation that the tax was payable under the Income Tax Act. The Hon 'ble Court has held that no design or device to defeat the legal provisions with a view to evade tax could be permitted and the assessee could not be allowed to take refuge behind the argument that the deed of conveyance was registered at a later date. The Hon'ble Court has further held that the assessee could not be allowed to argue that transfer had already taken place on the basis of section 2(47) when the assessee itself did not follow section 2(47) by not offering in that year such transfer for taxation. I find that similar ingredients are present in the case of the assessee. For, the assessee claimed that transfer of the property had taken place in the financial year 1991-92 on the basis of section 2(47) but then the assessee itself did not follow section 2(47) as it did offer such transfer for taxation in the relevant assessment year 1992-93. Following the judgment of the jurisdictional High Court in the case of Bagri Impex (P) Ltd vs ACIT (supra), it is to be held that the AO was justified in holding that the transfer of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o ₹ 85,500/- (Eighty Five Thousand Five Hundred) only as full and final consideration amount, In view of the above, Ld. AR stated that the transfer of the impugned property has taken place in pursuance to the provision of Sec. 2(47) r.w.s. Sec. 53A of Transfer of Property Act. On the other hand, Ld. DR for the Revenue submitted that no capital gains income was offered by the assessee in Assessment Year 1992-93. It was also submitted by Ld. DR that the entire transactions was planned to escape from tax liability. Ld. DR in support of Revenue s case relied on the judgment of Hon'ble jurisdictional High Court in the case of Bagri Impex (P) Ltd. vs. ACIT reported (2013) 31 taxmann.com 39 (Cal). He vehemently relied on the order of Authorities Below. 12. We have heard the rival contentions of both the parties and perused the materials available on record including the cited case laws by both the parties. In the instant case, the impugned property was registered by assessee in favour of transferee vide sale deed dated 20.07.2011.The impugned property was valued at ₹1,90,83,227/- for the purpose of stamp duty. However, assessee did not disclose the impugned p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. Similarly, the provision of Sec. 53A of Transfer of Property Act is also reproduced below:- 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, Page 18 and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that the contract, though required to be registered, has not been registered, or, where there is an instrument of transfer, that the transfer has not been completed in the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support from the third member bench of the Bombay Tribunal in the case of Ms. Rubab M. Kazerani Vs. JCIT, reported in 91 ITD 429 wherein it was held as under: From the MOU it was clear that the assessee had entered into an agreement with SA to dispose of the said property for a total consideration of ₹ 5.5 crores. The possession of the property was handed over to the builder SA and original documents were also given to him on that day with an understanding that he will obtain all necessary clearance certificate under the Urban Land (Ceiling and Regulation) Act, 1976 and certificate under section 269UC. Therefore, the MOU was not for the purpose of simply identifying the prospective buyer or the consideration received by the assessee was only a security deposit. That was a transaction by which the assessee transferred the property in question in the manner prescribed in sub-clauses ( v ) and ( vi ), introduced in section 2(47) with effect from April, 1988. The events which had taken place constituted transfer which includes any transaction which allows possession to be taken/retained in part performance of a contract of the nature referred to in section 53A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstead of actual transfer price for the relevant assessment year 2006-07? Thus the question was raised in connection with the applicability of the provisions of section 50C(1) of the Act which is not the dispute in the case on hand. The dispute in question is for the transfer of the property in the manner prescribed in sub-clauses (v) introduced in section 2(47) with effect from April, 1988. In our considered view the events which had taken place constituted transfer which includes any transaction which allows possession to be taken/retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882. Thus any transaction entered into in any manner which has the effect of transferring or enabling the enjoyment of any immovable property amounts to transfer under section 2(47) of the Act. Accordingly capital gains would be taxable in the year in which such transactions are entered into, even if the transfer of the immovable property is not effective or complete by way of registration under the general law. Under section 2(47)(v ) any transaction involving allowing of possession to be taken over or retained in part performance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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