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2019 (9) TMI 458

..... ed all the conditions specified in the agreement but the seller failed to do so for the reasons best known to him. Accordingly, we conclude that the delay in non-registration of the sale deed and possession of the property has occurred for the reasons beyond the control of the assessee i.e. due to default of the seller of the property. The law of impossibility of performance does not necessarily require absolute impossibility, but also encompass the concept of severe impracticability. In our humble opinion, the doctrine of impossibility of performance applies in this case. Due to uncontrollable circumstances, the performance of the obligation as specified under the agreement became impossible to perform within the time for the assessee. ' The assessee cannot be penalized for the delay in the registration of the property in the given facts and circumstances. Hence the assessee is entitled to reckon the period of holding from the date of the registration of the agreement i.e. 15th February 2006. Execution of the sale deed in pursuance to the order of the court would relate back to the original agreement to sale as discussed above. Hence the assessee is entitled for the claim of i .....

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..... at ₹ 28464441/- in return of income. 3. The appellant craves to add, alter, amend or withdraw any of the grounds of appeal on or before of the final hearing of appeal. The assessee has also raised the additional ground of appeal vide letter dated NIL which is reproduced as under: 1. The Ld.CIT(A) has erred in law and on facts in not allowing cost of stamp duty and other expenses of ₹ 18,40,850/- incurred for purchasing the land as deduction from the sales consideration. 2. The issue raised by the assessee in ground no. 1 is that the Ld.CIT (A) erred in confirming the action of AO by treating the long term capital gain as short term capital gain. 3. Briefly stated facts are that the assessee is an Individual and engaged in the business of trading in grey, fabrics, and hosiery. The assessee in the year under consideration declared long term capital gain amounting to ₹ 2,86,64,441/- on sale of Land situated at Makarba vide survey no. 415/2, Ahmedabad. The property was sold vide sale deed dated 31-08-2012 at ₹ 3,11,00,000/- only. 3.1 The AO on verification of the purchase deed of Land dated 16-03-2012 found that the property was held by the assessee for a perio .....

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..... e got the possession of land on the date of Banakat itself. 3.5 The AO based on the above findings reached to a conclusion that the assessee held the land for a period of less than 3 years and accordingly computed short term capital gain of ₹ 3,05,63,800/-(3,11,00,000-5,36,200/-) instead of long term capital gain of ₹ 2,86,64,441/- which was claimed by the assessee. 4. Aggrieved assessee preferred an appeal before the Ld.CIT (A). The assessee before the Ld. CIT (A), besides the submissions made before the AO, tendered that he failed to get the land registered in his name due to non-performance on account of the seller. Therefore, he should not be penalized for the default of the seller. 4.1 However, the Ld.CIT (A) rejected the contention of the assessee and confirmed the order of the AO by observing that the transfer did not take place within the meaning of section 2(47) of the Act, read with section 53A of the transfer of property Act. Being Aggrieved by the order of the Ld.CIT (A) the assessee is in appeal before us. 5. The Ld. AR before us submitted that the impugned purchase of the property should relate back with the agreement to sell dated 15th February 2006. As s .....

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..... ther party. 7.4 It is well-settled that an obligation gets discharged due to impossibility of performance. The assessee in the instant case has fulfilled all the conditions specified in the agreement but the seller failed to do so for the reasons best known to him. Accordingly, we conclude that the delay in non-registration of the sale deed and possession of the property has occurred for the reasons beyond the control of the assessee i.e. due to default of the seller of the property. The law of impossibility of performance does not necessarily require absolute impossibility, but also encompass the concept of severe impracticability. In our humble opinion, the doctrine of impossibility of performance applies in this case. Due to uncontrollable circumstances, the performance of the obligation as specified under the agreement became impossible to perform within the time for the assessee. The impossibility of performance releases the assessee from its obligation for the delay of the registration of the property within the time. A default occurs only when an obligation is not performed. When the assessee is released from the obligation, it cannot be said that it is in default. Thus, whe .....

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..... ale. The petitioner was. thus, entitled to claim the benefit of cost indexation from the said date. The entire basis of the department in the reasons recorded in order to dispute the petitioner's computation of the capital gain, therefore, is rendered invalid. In the result, the impugned notice is set aside. In peculiar facts of this case, therefore, we have adopted the logic as was done by the Supreme Court in case of Sanjeev Lal (supra). The petition allowed and disposed of. 7.6 In view of the above we hold that the execution of the sale deed in pursuance to the order of the court would relate back to the original agreement to sale as discussed above. Hence the assessee is entitled for the claim of index cost of acquisition being the holding period more than 36 months. Therefore the ground of appeal of the assessee is allowed. The second issue raised by the assessee in additional ground of appeal is that the Ld.CIT (A) erred in confirming the action of the AO by denying the deduction of cost of improvement of ₹ 18,40,850/-. 8. The assessee while computing the capital gain claimed cost of improvement of ₹ 22,77,050/-. The AO on verification of details submitted by .....

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