TMI Blog2019 (4) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... jit Singh, JM For the Assessee : Shri M. Subraaniyam For the Department : Shri Chaudhary Arun Kumar Singh (DR) ORDER PER AMARJIT SINGH, JM: The present appeal has been filed by the assessee against the order dated 10.10.2012 passed by the Commissioner of Income Tax (Appeals)-4, Mumbai [hereinafter referred to as the CIT(A) ] relevant to the assessment year 2009-10. 2. The assessee has raised the following grounds: - 1. On the facts and in the circumstances of the case and in law, the order passed u/s 250(6) of the I.T. Act, 1961 is erroneous and against principals of fair play, equity and natural justice as the same is contrary to the facts. 2. On the facts and in the circumstances of the case and in law, Ld. CIT(A) has erred in passing an order u/s 250(6) of the I.T. Act. 1961 and confirming the treatment of LTCG as that of STCG and thereby denying the claim u/s 54EC of the appellant. 3. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in passing an order u/s 250(6) of the I.T. Act, 1961 and that too without appreciating fully and properly the facts of the case. 4. On the facts and in the circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is an individual and derived income from Salary, Capital Gains and Income from other Sources. The assessee sold a plot of land on 21.07.2008 and claimed exemption u/s 54EC of the Act for ₹ 30 lakhs. The AO observed that the land was purchased by assessee on 03.05.2008, therefore, the capital gain treated as a short term capital gain, therefore, rejected the claim u/s 54EC of the Act. The assessee claimed that he acquired the plot by virtue of an agreement on 23.07.1996 registered on 30.07.1996 in sum of ₹ 4,51,277/-. After declining the claim of the assessee, the assessee filed an appeal before the CIT(A) who confirmed the said addition, therefore, the assessee has filed the present appeal before us. 5. All the issues are inter-connected, therefore, are being taken up together for adjudication. The claim of the assessee is that the assessee acquired the plot by virtue of an agreement dated 23.07.1996 registered on 30.07.1996 in sum of ₹ 4,51,277/-. Subsequently, the assessee also entered into an agreement to sale dated 03.05.2008 and accordingly AO treated the subsequent agreement of sale for acquisition of plot in question which was subsequently sold on 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 03.07.1996. The assessee acquired the right in the plot by virtue of agreement dated 27.07.1996, registered on 03.071996. However, in pursuance of the said agreement the further agreement dated 03.05.2008 executed. Undoubtedly, the assessee got the right in his favour by virtue of agreement dated 23.07.1996. No doubt, the assessee acquired the property by virtue of agreement dated 23.07.1996, therefore, the acquisition of the land is liable to be considered on the earlier date of execution of agreement i.e.23.07.1996. To arrive at this conclusion, we also find the support of law settled in ITA. No.680 681/JP/2017 dated 25.01.2018 Jaipur Bench. The relevant para is hereby reproduced as under.: - 5. We have considered the rival submissions as well as relevant material on record. The assessee claimed to have purchased the agricultural land measuring 2.74 hectare at Newata, Tehsil Sanganer, Jaipur vide agreement dated 11.04.2007 for a consideration of ₹ 50 lacs. As per clause-2 of the agreement the assessee paid ₹ 40,00,000/- vide three pay orders dated 10.04.2007 and one cheque dated 11.04.2007 of ₹ 10 lacs each. The details of the payments given in clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han Tenancy Act, therefore, the parties entered into an agreement to sale dated 11 11.04.2007 and thereafter the lands were converted into non agricultural land and more specific Farm House Land on 03.02.2010 and 05.02.2010 and thereafter the sale deed was executed by the vendors on 13.04.2010. As it is clear from these act and events that it is continuous process of transfer which begins with the agreement to sale dated 11.04.2007, conversion of the land use on 03/05.02.2010 and ultimately execution on sale deed on 13.04.2010. The sale deed dated 13.04.2010 is a performance of obligation under the agreement to sale dated 11.04.2007, therefore, the conversion of the land after the execution of agreement to sale is a post facto conversion and the transfer would effects from the date of agreement to sale specifying all the conditions as stipulated u/s 2(47) (v) of the Act r.w.s. 53A of the Transfer of Property Act. Once, the sale deed is executed in pursuant to agreement to sale and all the conditions stipulated u/s 2(47) of the Act are satisfied it would constitute transfer and would be effective from the date of agreement to sale itself. 7. Though as per the amendment brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell 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 immovable property, a right in personal 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 personal 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 sell is entered into. In normal circumstances, the aforestated question has to be answered in the negative. However, looking at the provisions of Section 2(47) of the Act, which defines the word transfer in relation to a capital asset, one can say that if a right in the property is extinguished by execution of an agreement to sell, the capital asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o paid ₹ 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 and thereafter purchases or constructs a new premises within the time stipulated under Section 54 of the Act, the Legislature does not want him to be burdened with tax on the long term capital gain and therefore, relief has been given to him in respect of paying income tax on the long term capital gain. The intention of the Legislature or the purpose with which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial house by an order of a competent court, which they could not have violated In view of the aforestated peculiar facts of the case and looking at the definition of the term 'transfer as defined under Section 2(47) of the Act, we are of the view that the appellants were entitled to relief under Section 54 of the Act in respect of the long term capital gain which they had earned in pursuance of transfer of their residential property being House No. 267, Sector 9-C, situated in Chandigarh and used for purchase of a new asset/residential house. Thus, it was held by the Hon ble Supreme Court that when agreement to sale in respect of immoveable property is executed a right in personae is created in favour of the vendee and thereby the vendor is restrain from selling the property to someone else because the vendee gets the legitimate right to enforce specific performance of the agreement. In view of the above facts and circumstances of the case as well as the decision of Hon ble Supreme Court we hold that the transfer of the land in question would be regarded as on the date of agreement to sale dated 11.04.2007. The order of the authorities below qua this issue are set aside. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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