TMI Blog1989 (12) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... document of the same date, the property was given on lease to the assessee. Subsequently, an agreement for reconveyance was renewed on three occasions, the last being on November 9, 1970, but for a consideration Rs. 45,000. In the year under consideration, the Guptas along with the assessee sold different portions of the property to six near relatives and to two educational institutions for amounts aggregating to Rs. 81,000. Out of this amount, Rs. 45,000 was received by the Guptas and the balance amount of Rs. 36,000 was paid to the assessee. The stamp duty for the eight sale deeds was paid on the total amount of Rs. 1,40,000. The assessee, in his income-tax return, declared a capital gain of Rs, 19,000 treating himself to be the owner of the property and the Guptas as mortgagees. The amount of gains was returned after adjusting from the total sale consideration, the amount received by the Guptas, the cost of acquisition of the property, statutory allowances and certain other amounts which were claimed as expenditure. The Income-tax Officer, however, computed the taxable gains at Rs. 54,848. In doing so, he disallowed the amount of Rs. 45,000 and certain other amounts claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 5,362 allowed by the Income-tax Officer and the Appellate Assistant Commissioner ?" Out of the above, which question or questions is at whose instance is not indicated in the statement of the case submitted by the Tribunal. Sri P. K. Jain, learned counsel, who had initially filed his appearance for the assessee stated that he has no instructions from his client despite several communications sent by him. We have heard Sri M. Katju, learned standing counsel appearing for the Revenue. He stated that questions Nos. 1, 2 and 4 are at the instance of Revenue and only question No. 3 is at the asking of the assessee. We feel that Sri Katju is right and we shall proceed accordingly. So far as question No. 3 is concerned, we return it unanswered for want of prosecution in view of the statement of Sri P. K. Jain. Now coming to the first question, learned standing counsel contended that the transaction represented by the sale deed dated February 12, 1963, in essence and substance, was a transaction of mortgage though apparently, it may have been given the appearance or form of an ostensible sale, because a contemporaneous agreement for reconveyance was contained in a separate docu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a mortgage. The subsequent renewal of the agreement does not change the original position and create a relationship of debtor and creditor between the parties. The assessee, therefore, was not the owner of the property at the time of sale." We may note that none of the three documents mentioned earlier has been filed in this reference nor have they been made a part of the statement of the case. Thus, we had no opportunity to look into those documents ourselves. The findings of fact recorded by the Tribunal were not questioned by learned standing counsel. It was admitted that the agreement for reconveyance was contained in a separate document and there was no such condition embodied in the document of sale which effected or purported to effect the sale. The contention urged was that both the documents, i.e., the sale deed and the document of reconveyance ought to have been read together in order to find out whether the transaction was mortgage by conditional sale or an outright sale. Now, section 58(a) of the Transfer of Property Act defines "mortgage" as the "transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter for construction which was meant. The Legislature has made a clear cut classification and excluded transactions embodied in more than one document from the category of mortgages, and therefore, it is reasonable to suppose that persons who, after the amendment choose not to use two documents, do not intend the transaction to be a sale, unless they displace that presumption by clear and express words ; and if the conditions of section 58(c) are fulfilled, then the deed should be construed as a mortgage." The argument that, in considering the question whether the transaction was one of sale or mortgage, the court should have regard to the intention and conduct of the parties is without any merit. Such an enquiry is shut out by the rule contained in the proviso which is rigid in its application and permits no scope for such an enquiry. This could have been possible, had the case of the Revenue been that the condition for reconveyance was contained in the sale deed itself. As stated earlier, the case put up by the Revenue before us was otherwise and for that matter that was not the case of the Revenue even before the tax authorities. In view of what has been stated above, the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the understatement, if any, was to avoid or reduce the income-tax liability of the assessee to tax on capital gains. A finding in this regard is a condition precedent and, where no such finding is recorded, the action of the authority concerned cannot be upheld. Sub-section (1) of section 52 has no application to bona fide transactions. In the absence of any finding or material on record that the understatement, if any, was to avoid tax liability, the Income-tax Appellate Tribunal, in our opinion, was perfectly justified in taking the view that sub-section (1) of section 52 had no application on the facts of the present case. As regards the other two sale deeds made in favour of the two educational institutions, the provisions of sub-section (2) of section 52 were invoked by the Income-tax Officer, on the same ground, namely, that the stamp duty was paid on a higher amount than the amount of sale consideration disclosed in the sale deeds. Sub-section (2) of section 52 provides that if, in the opinion of the Income-tax Officer, the fair market value of a capital asset transferred by an assessee as on the date of the transfer exceeds the full value of the consideration decla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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