TMI Blog1981 (8) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... 75,213 and Rs. 16,95,615, respectively ? and 3. Whether, on the facts and in the circumstances of the case, the applicant's claim that having agreed to sell the Jay Mahal Palace and Makarpura Palace and having put the purchasers in possession thereof, the only asset belonging to the applicant was the right to receive the unpaid price on the valuation dates and such unpaid price was non-urban immovable asset was rightly rejected by the Tribunal ?" The first question which pertains to the property known as Kunj Bungalow at Baroda is directly covered by our judgment in CIT v. Kartikey V. Sarabhai (I.T.R. No. 34 of 1980, decided on May 4, 1981 [1981] 131 ITR 42 (Guj)). The assessee who was a partner in the firm of M/s. Gaekwad Co., which came into existence on January 1, 1963, introduced his said immovable property known as Kunj Bungalow owned by him by way of his capital contribution to the said firm. His account with the firm was credited with a sum of Rs. 1,50,000 in consideration of the introduction of the aforesaid immovable property in the books of account of the said firm and this property was shown in the balance-sheet of the firm as an asset belonging to the firm. The fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mahal Palace " situate at Napean Sea Road, Bombay, and more particularly described in the schedule hereunder written with their appurtenance free from all incumbrances at or for the price or sum of Rs. 1,10,11,111(Rupees one crore ten lakhs eleven thousand one hundred and eleven) subject to variation as hereinafter provided in clause 3 to be paid as follows, that is to say, the sum of Rs. 8,00,000 (rupees eight lakhs) as earnest money immediately on the execution of this agreement (the payment and receipt whereof the vendor doth hereby admit and acknowledge and the balance of Rs. 1,02,11,111 (one crore two lakhs eleven thousand one hundred and eleven), to be paid to the vendor as provided hereinafter in clause. (2) The balance of the consideration money of Rs. 1,02,11,111 (rupees one crore two lakhs eleven thousand one hundred and eleven), shall be paid as follows, that is to say: (a) Rs. 32,11,111 (Rupees thirty-two lakhs eleven thousand one hundred and eleven), shall be paid on or before 30th November, 1963, without interest (subject to variation, if any, as mentioned in clause (3) (here). (b)Rs. 17,50,000 (Rupees seventeen lakhs fifty thousand) shall be paid on or befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lla Mulla Craigie Blunt Caroe, attorneys for the vendor. The vendor declares he is in possession of the whole property and there are no tenants ...... (11) The vendor shall before the completion of sale furnish to the purchaser's attorneys the certificate under section 34 of the Wealth-tax Act. If after the date of these presents and before 30th November, 1963, any notice of acquisition or requisition of any substantial part of the land is received from the Government of India or the State of Maharashtra or the Bombay Municipality or any other public authority, and only if a substantial part thereof is not available to the purchasers, the purchasers will be entitled to rescind this agreement and the vendor will return the earnest money without interest. If the vendor receives any such notice after 30th day of November, 1963, the purchasers shall complete the sale according to these presents and the purchasers alone will be entitled to any compensation or any other moneys that may be payable by reason of the acquisition or requisition of the property or any part thereof by Government or any other public authority ...... (13) Upon payment of the purchase money at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agreement. Thereafter four instalments of Rs. 17,50,000 each were paid towards the sale price between January 18, 1963, and March 27, 1968. The purchasers thus paid a total consideration of Rs. 1,07,75,213 by March 27, 1968. Property was conveyed to the purchasers by four deeds of conveyance dated November 20, 1970, November 27, 1971, January 26, 1971, and May 2, 1972. An analysis of the transactions reveals the following situation: On valuation date 31-3-1964: (1) Only agreement to sell for Rs. 1,10,11,111 was in existence. (2) Payment of Rs. 8 lakhs as earnest money and Rs. 29.75 lakhs paid towards sale price (about Rs. 72.36 lakhs of consideration remained outstanding). Possession was handed over to the purchaser. (3) Sale deed was not executed. On valuation date 31-3-1965: (1) (2) as in the previous year. (3) instalment of Rs. 17.50 lakhs paid. (4) About Rs. 54.86 lakhs of consideration remained outstanding. (5) Sale deed was not executed. On valuation date 31-3-1966 : (1), (2) (3) as in the previous year. (4) Further instalment of Rs. 17.50 lakhs paid. (5) About Rs. 37.36 lakhs of consideration remained outstanding. 6) Sale deed was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fair manner. The only right which the assessee had after the purchasers were put in possession was to receive the unpaid purchase price. The following factors need to be emphasised: (1) The title of the owner is not extinguished till he executes conveyance merely because a part of the purchase price is paid and he parts with possession in favour of the person who has agreed to purchase the property ; (2) A person who has agreed to purchase the property does not become its legal owner on mere payment of a part of purchase price merely on entering into possession of the property, more so before obtaining registered deed of sale in his favour ; (3) What would happen if the parties did not honour the rest of the conditions ? Suppose the owner does not accept the rest of the sale price and refused to execute sale deed ? or Purchaser refused to pay the rest of the price ? Would the owner have lost his title ? And the person who has agreed to purchase become the owner of the property without payment of price and without securing sale deed ? (4) How would the title of the owner be extinguished and the person who agreed to purchase created without a registered instrumen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw. Dealing with the argument based on the provisions of s. 53 A of the Transfer of Property Act, that in any case, Rs. 2,13,772 assumed the character of income when possession of some of the plots was handed over to the purchaser, it was observed that the doctrine of part-performance embodied in s. 53A of the Transfer of Property Act has limited application and it affords only good defence to the person put in possession under an agreement in writing to protect his possession to the extent provided in the said s. 53A of the said Act. However, the agreement in writing to sell, coupled with parting of possession, would not confer any legal title on the purchaser. This court rejected the assessee's contention that Rs. 2,13,772 received by it in pursuance of agreement to sell represented its income. In our opinion, the reasons given by us in reaching this conclusion would govern the facts of the present case also. So far as the relevant valuation date s are concerned, the transaction of sale in respect of Jay Mahal Palace, the property which the assessee had agreed to sell under the agreement dated June 13, 1963, was not complete. As pointed out above, the deeds of conveyance were e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement which completely destroys the assessee's case that it was in part performance of the agreement that the purchasers were put in possession of the property. Relevant portion of cl. (4) reads thus : " the vendors shall put the purchasers in vacant possession of the entire property with all the structures thereon by way of leave and licence only ........" These terms make it clear that possession of the purchasers on and from January 30, 1964, was as licensee and in no other capacity. Licence of the purchasers could have been terminated at any time and the assessee could have entered into possession of the property. Clause (11) of the agreement amongst other things provides for rescission of the contract by the purchasers and says that in case the purchasers receive any notice of acquisition or requisition, the purchasers would be entitled to rescind the agreement and the vendor (the assessee) would return the earnest money without interest. Clause (11) read with cl. (5) of the agreement makes it clear that title was to pass on to the purchasers only on payment of full consideration and completion of sale. And sale could not have been completed without execution of a reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed by the learned counsel for the assessee, were rendered in a different context and, therefore, we do not consider it necessary to deal with them. In the instant case, having regard to the clear legal and factual position, no other view is possible. The Tribunal was, therefore, right in holding to the effect that value of the property named Jay Mahal Palace was liable to be included in the net wealth of the assessee for the years under reference. This takes us to the property known as Makarpura Palace, situate at Baroda. By an order dated April 2, 1964, Makarpura Palace was requisitioned under s. 29(1) of the Defence of India Act, 1962, read with r. 3 of the Defence of India (Requisitioning and Acquisition of Immovable Property) Rules, 1962. It was stated before us that possession of part of this property was handed over to the Union Government on December 7, 1963, even before the order requisitioning the property was passed. Possession of the rest of the property was handed over to the Union Government on April 7, 1964. Proceedings for acquisition of the property were initiated but before they were completed, an agreement dated August 24, 1964, was reached between the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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