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TMI Blog2018 (2) TMI 1706X X X X Extracts X X X X X X X X Extracts X X X X ..... hey are necessary expenditure to run a company. 2. That the Ld. CIT(A) erred in taxing the capital gain in the year under consideration ignoring the fact that transfer within the meaning of sec. 2(47) had already taken place in AY 1992-93 within the meaning of sec. 53A of Transfer of Property Act. 3. That the Ld. CIT(A) erred in not appreciating the fact that section 50C is not applicable in the case of appellant as the agreement to sell was entered into prior to introduction of section 50C in statute. 4. That the Ld. CIT(A) erred in not accepting the plea of the appellant that even if sec 50C is made applicable, stamp duty val9uation as on the date of agreement should be adopted and not of the date of registration. 5. The appellant craves leave to add to, alter, to delete from or substantiate the above ground of appeal" 3. First issue raised by assessee in ground No.1 is that Ld. CIT(A) erred in confirming the order of Assessing Officer by sustaining the disallowance of various administrative expenses on the ground that no business activity was carried on by assessee. 4. Briefly, the facts are that the assessee is a private limited company and engaged in business of let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 obligation so long as it is in operation and its name is not struck off the register or unless the company is dissolved. So long as the company is in operation, it has to maintain the status as a company and it has to discharge certain legal obligations and for that purpose it is necessary to appoint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f expenses the assessee has made the disallowance in respect of 4 heads of expenses which has already been discussed in the preceding paragraphs. In the instant case, the assessee has shown the major income under the head House Property and has claimed the statutory deduction u/s 24(a) of the Act towards the repairs and maintenance of the expenses. The relevant provision of section 24(a) reads as under : [Deductions from income from house property. 24. Income chargeable under the head "Income from house property" shall be computed after making the following deductions, namely:- (a) a sum equal to thirty per cent of the annual value; Once the assessee has claimed the above deduction then the same deduction cannot be allowed under any other head of income. The assessee before us has not brought any material on record suggesting that the expenses claimed under the head of business were incurred exclusively for the business purpose and no part of it was incurred in connection with the rental income declared by the assessee. In the absence of information we apprehend that the assessee should not avail the double deduction of the same expenses. Indeed, the assessee being a body ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly, submitted that it has transferred the impugned property for Rs.1.90 lakh in the year 1991. It has also received an advance of Rs. 19,000/- which was duly reflected in the book of assessee. But the sale deed was not executed in the name of transferee due to some problem related to the title of the property. The assessee also submitted that the agreement was duly made with the transferee vide dated 22.03.1992 for the transfer of the impugned property. The relevant clause of the agreement reads as under:- "NOW THIS AGREEMENKT WITNESSETH as follows:- 1. That the company hereby declares that the Company is in absolute owner of all those Kayami Right plots of land bearing No.656 (a, b, c, d, e, f,g ,h, I ,j, k, l, and m) measuring 3 Acres 19.304 decimals in Municipal Holding Nos. 157 of Ward No.1 Chaibasa Municipality, District Singhbhum (Bihar0 hereinafter referred to as the said properties) 2. The Transferer agreed to sell and the Transferee agreed to purchase all the said Plots of land hereinafter referred to as the said properties at and for the price of Rs. 1,90,000/- (Rupees one lac ninety thousand), only out of which the Transferee has paid a sum of Rs. 19,00/- (R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the balance of the agreed price under this agreement to the Transfer 10. That the balance agreed price which remains payable under this Agreement by the Transferee to the Transferer will form charge on the said properties. 11. In case of any acquisition or requisition of the said properties by any Government or Semi Government authority, the compensation to be received will belong to the Transsferee. The Transferer will give full co-operation to the Transferee to enable it to enjoy the properties in such manner as the Transferee may think fit and proper. 12. The Transferer hereby agrees to sign such papers, documents, pleadings etc. as may be required by the Transferee for protecting his own possession and occupation in the said plots of land and for that purpose the transferee can file suits and proceedings take legal steps, appoint Advocate, sign Vakalatnama for and/or on behalf of and in the name of the Transferer but all costs to be incurred in this connection will be borne and paid by the Transferee. 13. That this document is being executed in duplicate either party will retain a copy of the same. In fact, the delay in registration of said property was explaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of assessee. 10. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that the impugned property was transferred vide agreement dated 22.03.1992, consequently there arose capital gains income which has to be taxed in the financial year 1991-92. The provision of Section 50C came into force with effect from 01.04.2003. Therefore, same cannot be applicable to the transfer of the impugned property which has taken place in the financial year 1991-92. However, Ld. CIT(A) disregarded the contention of assessee confirmed the order of AO by observing as under:- "6. I have perused the impugned order and the material placed on record. I have also considered the submissions of the assessee. It is not in dispute that the sale deed was registered on 21.07.2011 in the office of the Registrar and the market value of the property for the purposes of stamp duty was determined by the stamp valuation authority at Rs. 1,90,83,227/-. It is also not in dispute that no capital gain on transfer of the said property was disclosed by the assessee in its return for the relevant assessment year 2012-13. The Ld. AR claimed that the possession of the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I also find that the AO was justified in applying the provisions of section 50C for the purposes of computing the capital gain. I have perused the judicial decisions relied upon by the assessee as well as by the AO. I find that the issue in the present appeal is squ9arely covered by the judgment of the jurisdictional High Curt income of Bagri Impex (P Ld. vs. ACIT (supra). For better appreciation of the judicial decision, the order of the Hon'ble court is reproduced hereunder: 1. The undisputed facts of the case are as follows :- The assessee was owner of 2/5th share in a land situated at 14A, Burdwan Road, Kolkata. Naturally, there were co-owners owning the residuary right in the land in question. The co-owner the group companies. The case of the assessee is that the land in question or the interest of the assessee was agreed to be sold on 15th October, 1996 to 15 several buyers. Deeds of conveyance in favour of five buyers were executed on 15.1.1998 The balance 10 deeds of conveyance were executed on 26th May, 2006 and registered on 27th November,2007. The stamp duty was assessed on 27th November, 2007. The assessee offered the sale proceeds for taxation during the fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial year 2007-08. 4. The submission of the assessee was accepted by the CIT(A). The Revenue preferred an appeal. The Ld Tribunal reversed the order of CIT(A). The assessee has once again come up before this Court. The following question of law has been advanced: "Whether, on the facts and circumstances of the case, the Ld Tribunal was justified in law in not considering that the words "or assessable" was introduced in section 50C (1) of the Income Tax Act, 1961 with effect from t» October, 2009 and thus erred in taking the value of the capital asset as assessed by the Stamp Valuation Authority on 27th November, 2007 instead of actual transfer price for the relevant assessment year 2006-07?' 5. Mr Bharatdwaj, Ld Advocate for the appellant submitted that the word "Transfer" in relation to capital asserts has been defined in section 2(47) of the Income Tax Act which provides as follows : Transfer, in relation to a capital asset, includes:- (i) The sale, exchange or relinquishment of the asset; or (ii) The extinguishment of any rights therein; or (iii) The compulsory acquisition thereof under any law; or (iv) In a case where the asset is converted by the own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar from the beginning that the value for the purpose of income tax shall be the same as the value for stamp duty. By adopting devices to defeat the provision, the assessee cannot be heard to contend that section 50C would not be applicable merely because the Deed of Conveyance had not at that time been executed or registered. The contention that the property stood transferred in the financial year 2005- 06 when the sale proceeds were received on the basis of the definition appearing from s.2(47)(v) of the IT Act is without any substance for reasons already discussed. The assessee itself did not follow s.2(47)(v) of the IT Act because it did not offer the transfer for taxation in the year 1996, when the possession is claimed to have been made over on the basis of the agreements for sale in accordance with s.2(47)(v) quoted above. Designs to evade tax cannot be permitted. The Assessing Officer on the date of assessment for the assessment year 2006-07 had before him the valuation made by the state for the purpose of stamp duty and rightly applied the same. 7. The Hon'ble High Court has noted in its order that transfer was defined in section 2(47) but then it was made before sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The possession of the impugned property was also duly handed over to the transferee as per the agreement dated 22.03.1992 which has also been discussed in the preceding paragraph. Ld. AR in support of assessee's claim also drew our attention on pages 42 and 43 of the sale deed made on 20.07.2011 which reads as under:- "AND WHEREAS the Seller having earlier agreed to sell the Schedule Property to the purchasers on the basis of their mutual understanding which was reduced into writing vide an agreement dated 22.03.92 and the purchasers are in the possession of the property since then, this Sale Deed is made on the terms and conditions settled and agreed by and between the parties and covenanted herein below:- Ld. AR also submitted that part payment was duly received by it in the financial year 1991-92 and he further submitted that the balance amount of Rs.1.71 lakh was duly received in the financial year 2011-12. Ld. AR in support of assessee's claim drew our attention on pages 45 to 49 of the paper book which reads as under:- "1. That the seller had already received a sum of Rs. 19,000 (Nineteen thousand only) by way of earnest money at the time execution of the agreement da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A). Now the issue before us arise so as to whether the capital gain income has arisen in the hands of assessee in the year under consideration in the given facts & circumstances. It is undisputed fact that the impugned property was transferred to the transferee vide agreement dated 22.03.1992 and the possession was also duly handed over to the transferee. Against such transfer an amount of Rs.19,000/- was also received by assessee. Thus, we note that all the ingredients for the transfer of impugned property as specified u/s 53A of Transfer of Property Act has been duly completed in the transactions of the impugned property. The relevant provision of Sec. 2(47) of the Act reads as under:- (47) 30["transfer"31, in relation to a capital asset, includes,- (i) the sale31, exchange31 or relinquishment31 of the asset ; or (ii) the extinguishment of any rights therein31 ; or (iii) the compulsory acquisition thereof under any law ; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment ;] 32[or] 33 [(iva) the maturity or redemption of a zero coupon bond; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Vs. CIT reported in 260 ITR 491 wherein it was held as under: "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 Transfer of Property Act would come within the ambit of section 2(47)(v ). In order to attract section 53A, the following conditions need to be fulfilled. There should be a contract 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; lastly the transferee should be ready and willing to perform his part of the contract. Even arrangements confirming privileges of ownership without transfer of title can fall under section 2(47)(v ). Section 2(47)( v) was introduced in the Act from assessment year 1988-89 because prior thereto, in most cases, it was argued on behalf of the assessee that no transfer took place till execution of the conveyance. Consequently, assessees used to enter into agreements for developing properties with the builders and under the arrangement with the builders, they used to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould 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 conclusion of the Accountant Member that it was merely documents to identify buyer and an assured security deposit was not correct in the eye of law. [Para 15] Therefore, taxability of capital gains at the hands of the assessee did not fall in the assessment year 2000-2001" On careful consideration of the principles laid down in the above judgments, we note that the transfer of the property in the instant case has taken place in the FY 1991-92 and it can be brought to tax in the assessment year 1992-93 only. 12.2 We further note that the facts of the case relied by Ld. DR are not applicable to the instant facts of the case. The relevant question raised before the Hon'ble court reads as under:- "Whether, on the facts and circumstances of the case, the learned Tribunal was justified in law in not considering that the words ..... X X X X Extracts X X X X X X X X Extracts X X X X
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