TMI Blog2004 (2) TMI 722X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the assessee declared income under the head long term capital gains on the sale of half share of inherited residential house at Prabhat Road, Karol Bagh, New Delhi. The assessee declared that the half share in the said property had been sold for ₹ 7,95,000 and net capital gain has been shown at ₹ 96,675. The assessee stated that the property at 51/1, Prabhat Road, Karol Bagh, New Delhi was in the joint ownership of late Shri Moolraj and Shri Gyan Chand. The property was purchased in auction in July, 1964 for a sum of ₹ 51,500 by late Shri Gyan Chand. According to the assessee. although the sale deed was executed in favour of Shri Gyan Chand but late Shri Moolraj, father of the assessee was 50 per cent owner as per the agreement entered into between Shri Gyan Chand and Shri Moolraj. Regarding the execution of the sale deed of the aforesaid property, the same was executed by the legal heirs of Shri Gyan Chand. The assessee thus claimed that even though the property has not been registered in the name of his father late Shri Moolraj yet because of the agreement as referred above he was 50 per cent owner and, therefore, received 50 per cent of the sale considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the ld. CIT(A) vide para No 6 7 of the appellate order which are reproduced hereunder: 6. I have considered the arguments of the ld. Counsel. It appears that the property in question was acquired in the year 1948. Since then both Sh. Gyan Chand and Moolraj their legal heirs were residing in the said property having half share each. This property was to be auctioned by Government. Both these persons entered into an agreement on 30-7-1964 to the effect that both these persons will continue to jointly own and enjoy the property even if the auction goes in favour of any of the two. The conveyance was to be done accordingly. When the auction took place the final bid was in the name of Sh.Gyan Chand. The earnest money on the fall of hammer was to be deposited. The appellant s father as well as Sh. Gyan Chand contributed 50 per cent each. The copy of the receipt issued by Sh. Gyan Chand to this effect is also on record. Subsequently, the appellant s father also paid 50 per cent of the auction money. The receipt of such payment is also on record. Since the property continued to be in possession of both having half share each even after the death of these two persons, the mal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntinued till the end. In case the appellant transfers such right the profit arising on the sale of such right has to be taxed under the head capital gains. In support of his conclusion, CIT(A) has placed reliance on the decision of CIT v. Shahney Steel Press Works (P.) Ltd. [1987] 165 ITR 399 (AP) wherein it has been held by the A.P. High Court that an assessee who pays consideration, obtains possession and enjoy the property and continues to hold the same must be regarded as owner of the property even though the property may not be registered in his name by a deed of conveyance. CIT(A) took the alternative ground that even if legal ownership of the property did not vest with the assessee, the assessee held the right of possession and enjoyment of the property and the assessee s father had contributed part of the consideration at the time of auction. According to the CIT(A), the right enjoyed and possessed by the assessee and inherited from his late father has the character of a capital asset for the purposes of section 45 and any consideration received for transfer of that asset is liable to be treated as long term capital gain. CIT(A) concluded by observing that In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se No. 51/1, Prahlad Market, Karol Bagh was to be auctioned and both the parties had agreed that they would bid for the same and shall pay the amount of bid money in equal shares to the Government authorities. Assessee has filed affidavits of the legal heirs of Shri Gyan Chand affirming and accepting the factual position that Shri Moolraj, father of the assessee was co-owner of the property. Ld. counsel submitted that mere absence of registration would not prove that the assessee had no interest or legal rights and title in the property. In support of his contentions, he placed reliance on the following decisions: (i) Addl. CIT v. UP State Agro Industrial Corpn. Ltd. [1981] 127 ITR 97 (All.) (ii) Shahney Steel Press Works (P.) Ltd. s case (supra) (iii) P. Joseph Swaminathan v. CIT [1984] 145 ITR 198 (Mad.) (iv) CIT v. Podar Cement (P.) Ltd. [1997] 226 ITR 625 (SC) Ld. Counsel further placed reliance on the decision of Supreme Court in the case of Podar Cement (P.) Ltd. s case (supra) which has upheld the decision rendered in the case of Shahney Steel Press Works (P.) Ltd. s case (supra ) and argued that the assessee had ownership of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the core and essence of ownership rights to the extent of one half share of the property vested with Shri Moolraj and his legal heir inasmuch as he has a right of possession and enjoyment of the property. Such rights were essentially of the nature of capital asset therefore, when the property was sold and the assessee as a legal heir gave up his right of enjoyment and possession of property, one half of the sale consideration received by him is obviously to be treated as consideration received by him in lien of transfer of his bundle of rights in the property. Such consideration received on transfer of capital assets would not fall within the purview of section 10(3) of the Income-tax Act 1961. In order to attract section 10(3), two conditions are required to be satisfied, viz., that the receipt should be casual and non-recurring and it should not arise by way of business income, salary income or capital gains chargeable under section 45. When the source of a receipt has a link with business income or salary income or capital gains chargeable under section 45 then section 10(3) would not apply. The proposition is unexceptional that capital receipts do not come within the amb ..... 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