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TMI Blog2022 (12) TMI 689X X X X Extracts X X X X X X X X Extracts X X X X ..... AT to consider the deed executed on 30-07-2015 as cancellation of the deed and not the purchase deed and thereby consider the transaction as long term as per the provisions of section 2(29 A) of the IT Act, 1961 as claimed by your appellant in the return of income and thereby allow the deduction claimed u/ s 54 of the IT Act, 1961. 2. On the facts and circumstances of the case the Ld. CIT (A) erred in law and facts by not accepting the fact that your appellant has occupied the property till the date of sale in 2015 and there were no transfer at all to the daughter in the year 2006 and hence the question of repurchase of the property was never arise. Your appellant, therefore, requests Honorable ITAT to consider the entire transaction as long term as per the provisions of section 2(29 A) of the IT Act, 1961 as claimed by your appellant in the return of income and thereby allow the deduction claimed u/s 54 of the IT Act, 1961. 3. On the facts and circumstances of the case the Ld. CIT (A) erred in law and facts in upholding that your appellant had entered into a sale agreement with her daughter for the entire property vide the Sale agreement dated 16th March 2006 even though appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n her name. Hence property was transferred to the daughter with all rights to use the property along with possession of the said property. 4. The assessee was of the view that when property was purchased by the appellant in 01.01.1979, total area of property was 302.86 sq. mtr. which included constructed area of 66.92 sq. mtr. and extra land of 235.94 sq. mtr. Subsequently, additional area of 133.72 sq. mtr. was constructed in the year 1982-83 and total constructed area came to be 200.64 sq. mtr. (133.72 + 66.92- refer page 151-154 of Paper-Book). Finally total area of property was 302.86 sq. mtrs. out of which constructed area was 200.64 sq. mtrs. and vacant land was 102.22 sq. mtr. Thereafter, when conveyance deed was registered by Gujarat State Housing Board on 05.08.1986, land area was erroneously mentioned as 66.92 sq. mtrs. only. Notably, even in sale deed executed with the daughter of the assessee, land area was mentioned as 66.92 sq. mtr instead of total land area of 302.86sq. mtr. Due to this error, the appellant stated that there was no clear title in the hands of the daughter of the assessee since out of total land area of 302.86 sq. mtr., land area mentioned in the dee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancelled and in case of cancellation of such deed whether ownership of property will vest with the appellant as on the date of cancellation of sale deed (30.05.2015) or shall be revoked from the date of original purchase of such property (10.10.1986). It is observed that where sale deed is executed and registered, the owner completely loses his right over the property and the purchaser becomes the absolute owner. It is observed that any registered deed cannot be nullified by executing deed of cancellation since by execution and registration of sale deed, the properties are vested in the purchaser and cannot be divested by mere execution of a deed of cancellation. Hence once sale deed is registered and rights in a property are transferred along with possession, such transaction cannot be cancelled in any circumstances. The following decisions relied by the Assessing Officer are duly applicable to the facts of the present case: (i) Binny Mill Labour Welfare House Building Co-operative Society Ltd. vs. D.R. MruthyunjaAradhya - (ILR 2008 KAR 2245), it has been held as under: "Unilaterally he cannot execute what is styled as a deed of cancellation, because on the date of execution a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchaser and the title cannot be divested by mere execution of a deed of cancellation. Therefore, even by consent or agreement between the purchaser and the vendor, the said sale deed cannot be annulled. If the purchaser wants to give back the property, it has to be by another deed of conveyance. If deed is vitiated by fraud or other grounds mentioned in the Contract Act, there is no possibility of parties agreeing by mutual consent to cancel the deed. It is only the Court which can cancel the deed duly executed, under the circumstances mentioned in Section 31 and other provisions of the Specified Relief Act, 1963. Therefore, the power to cancel the deed vests with a Court and it cannot be exercised by the vendor of a property. After execution and registration of the sale deed, the BDS cannot determine the validity of the sale deed. It can neither execute a cancellation deed unilaterally. It the BDS is of the view that the sale deed executed by it is contrary to law, it has to approach the Civil Court for its cancellation as perovided under Section 31 of the Specific Relief Act." 5.5 Reference is invited towards the provision of section 2(47) of the Income Tax Act, 1961 which defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract ; Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof. " 5.6 Under Section 2(47) of the Act, "transfer" is an inclusive definition and therefore it extends to events and transactions which may not otherwise be 'transfer' according to its ordinary popular natural sense; the definition also mentions such transaction as sale, exchange etc to which the word "transfer" would properly apply on its popular and natural import. Thus a reading of Sections 5 and 53-A of the Transfer of Property Act, 1882, shows that part performance is assumed where any person contracts to transfer for consideration, any immovable property and in pursuance of which possession is handed over to the other party towards part performance of the contract. 5.7 Reading Section 53A of the Transfer of Property Act, 1882 with Section 2(47) of the Income Tax Act, 1961 on facts, we find that the entrustment of the possession of the property to the daughter via reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be issued giving power to a Registering Authority to annul a document on the administrative side. Such powers given would he. wholly arbitrary and against and against the provisions of the Act. That the State Government cannot, while taking recourse to the executive power of the State under Article 162, deprive a person of his property. Such power can be exercised only by authority of law and not by a mere executive fiat or order. That the language of Article 162 clearly indicates that the powers of the State executive do extend to matters upon which the State Legislature is competent to legislate and are not confined to matters over which legislation has been passed already. Where a particular subject is regulated by a legislative enactment, the field is said to be covered by such statute. In such matters and on such subjects the executive powers is circumscribed. That the executive exercising powers under Article 162 cannot issue orders which contravene provisions of a statute or are inconsistent with the same. The State in exercise of its executive power is charged with the duty and the responsibility of carrying on the general administration of the State. So long as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the liability to pay tax on short-term capital gains under section 45 of the Act. 18. Here, to dispel any reasonable doubt which may arise, we extract below one of the conditions stated in Shrimant Shamrao Suryavanshi case (supra) "(6) the transferee must have performed or be willing- to perform his part of the contract." Here the agreement was rescinded between the parties but long after the assessment year in which, the agreement was entered into and possession handed over. At least when the returns were filed there was a right conferred on the transferee as per section S3A of the Transfer of Property Act. The transferor though subsequently was absolved from the rigour of section 53A ; in the close of assessment year was obliged to return the capital gains as per section 2(47)(v) of the Income-tax Act. The Income-tax Act by the definition clause includes a transaction in accordance with section 53A as a transfer in relation to a capital asset. The consequence flowing from the inclusive definition has to be given effect to as on the subject assessment year and the transferor being absolved subsequently from the rigour of section 53A as against the transferee is of no conseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 2006. Hence the owner of the property from 16.01.2006 till 15.07.2015, being the date of cancellation of sale deed, was the daughter of the appellant. On the date of cancellation of original sale deed, the appellant became the rightful owner of the property once again from such date being 15.07.2015 and not from the original date of transfer of property by the Gujarat Housing Board in F.Y. 1986. In case of subsequent sale made on 09.10.2015, for computing period of holding, date of purchase shall be considered as 15.07.2015. It is on the date of cancellation of original sale deed that the appellant became the owner of the property. Before such cancellation, all the rights, title, interest, possession etc was enjoyed by the daughter of the appellant. The fact that property was owned by the daughter from 2006 till 2015 cannot be ignored since during such time the appellant had no right over the property. By cancellation of sale deed, such right enjoyed by the daughter shall not be effected or altered. 5.14 With respect to argument of Appellant that appellant did not transfer possession in said property to her daughter, on perusal of copy of Sale Deed executed on 16.01.2006, it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence such argument of the appellant is rejected 5.17 It is further observed that for cancellation of original sale deed, the appellant has paid stamp duty of Rs. l,35,300/-. The appellant has argued that stamp duty has been paid by mistake. Instead of buying a stamp paper of denomination of Rs. 100/-, the appellant mistakenly paid the stamp duty of Rs. 1,35,300. On knowing its mistake, the appellant applied for refund of such duty but since application was made after the expiry of specified time limit, no refund was granted to the appellant. I do not find force in the argument of appellant. It is difficult to accept that huge amount of stamp duty of Rs. 1,35,300/- would be paid on a mistaken belief. I find merit in the argument of the Assessing Officer that payment under the "Stamp Act" is required to be made as and when new documents are registered under "Transfer of Property Act. Since the appellant has made payment towards registered deed No. 5572 to the tune of Rs. 1,35,300/- as per information provided by Sub-Registrar, Ahmedabad, the transaction with respect to immovable property shall be considered as a fresh transaction. Payment of stamp duty itself suggests that a new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld and related ground of appeal is dismissed." 5. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(A) dismissing the assessee's appeal. In appeal before us, the counsel for the assessee argued that in the instant set of facts, since the sale deed between the assessee and her daughter dated 16-03-2006 was cancelled by way of a cancellation deed dated 30-07-2015, it has to be presumed that the sale of property by the assessee is a long-term gain, since property was in possession of the assessee since 05-08-1986. The counsel for the assessee drew our attention to copy of "cancellation deed " at pages 173-182 of the paper book and submitted that since the deed was cancelled, therefore, the sale of property by the assessee was to be treated as long-term capital gains since the property has been held by the assessee since 1986. Alternatively, the counsel for the assessee argued that what was transferred by way of sale deed between the assessee and her daughter was only the superstructure admeasuring 66.92 m² and the balance adjacent land measuring 235-94 sq. metres was never transferred to the daughter, and hence, short-term capital gains, if at al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strument has been so registered; and such officer shall note on the copy of the instrument contained in his books the fact of its cancellation." 7.1 A perusal of the above provisions shows that there is no legal capacity for two parties to a transaction entered by way of registered deed to cancel the same except with the permission of the Court as prescribed in section 31 of the Specific Relief Act. Another notable aspect is that on cancellation of the sale deed, the assessee has paid stamp duty of Rs. 1,35,300/-. This also clearly indicates of the fact that the subsequent "cancellation" deed is only a fresh transfer by the daughter in favour of the assessee by way of a fresh transfer/sale deed upon the payment of full stamp duty. Accordingly, in our view, the subsequent "cancellation deed" has not annulled or cancelled revoked the original registered sale deed, but it is effectively a fresh transfer/sale deed by the daughter of the assessee in favour of the assessee. 8. The alternative argument of the assessee is that what the assessee is transferred was only the superstructure measuring 66.92 m² and accordingly, even if the subsequent cancellation deed were to be treated a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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