Mr. Vrajendra Karan Varma Rathod, Hyderabad V. Income Tax Officer, Ward-9(3), Hyderabad

ITA 1177/HYD/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74752 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 03-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ADAGIRI
• Keywords: Capital asset
• Section: 143(3); 54F; 234B; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1177/HYD/2012 ASSESSMENT YEAR 2008-09 MR. VRAJENDRA KARAN VARMA RATHOD, HYDERABAD PAN: ACBPR3858E VS. THE INCOME TAX OFFICER WARD-9(3) HYDERABAD [ASSESSEE] [RESPONDENT] ASSESSEE BY: SRI K.C. DEVDAS RESPONDENT BY: SRI B. YADAGIRI DATE OF HEARING: 19.02.2014 DATE OF PRONOUNCEMENT: 21.03.2014 ORDER PER CHANDRA POOJARI, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-VI, HYDERABAD DATED 15.05.2012 FOR ASSESSMENT YEAR 2008-09. 2. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED WITH THE DECISION OF THE CIT(A) IN NON-GRANTING OF DEDUCTION U/S. 54F OF THE INCOME-TAX ACT, 1961 AND THEREAFTER DIRECTIN G TO LEVY INTEREST U/S. 234A AND 234B OF INCOME-TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIM ED DEDUCTION U/S. 54F OF THE ACT IN THE ASSESSMENT YEA R UNDER CONSIDERATION WHILE COMPUTING CAPITAL GAINS. AS TH E ASSESSEE SOLD A PLOT OF LAND ADMEASURING 600 SQUARE YARDS (F OR SHORT ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 2 SQY) LOCATED AT MLA COLONY, ROAD NO. 12, BANJARA HI LLS, HYDERABAD. ACCORDING TO THE ASSESSEE, THE SAID PLO T WAS PURCHASED BY THE ASSESSEE FROM SMT. SAMYUKTA BULLAY YA IN THE YEAR 2004. HOWEVER, THE AO WAS OF THE OPINION THAT THE ASSESSEE HAS PURCHASED THE PROPERTY IN THE YEAR 200 7. THE ASSESSEE STATED BEFORE THE AO THAT HE ALONG WITH SR I D. HARI PRASAD ENTERED INTO SALE AGREEMENT ON 21.7.2004 WIT H SMT. SAMYUKTA BULLAYYA FOR PURCHASE OF PLOT BEARING NO. 259A/A, IN SY. NO. 120/403/1 OF SHAIKPET VILLAGE AND SY. NO. 102/1 OF HAKIMPET VILLAGE, HYDERABAD. LATER THE ASSESSEE AL ONG WITH SRI D. HARI PRASAD ENTERED INTO AN AGREEMENT OF SAL E-CUM-GPA WITH POSSESSION ON 1.9.2004 WITH SMT. SAMYUKTA BULL AYYA. 4. IN THE COURSE OF ASSESSMENT THE ASSESSING OFFICER OBTAINED FROM THE SUB REGISTRAR'S OFFICE A COPY OF A REGISTERED AGREEMENT OF SALE CUM IRREVOCABLE GENERA L POWER OF ATTORNEY DATED 24.07.2007, BETWEEN SMT. SAMYUKTA BULLAYYA (VENDOR) ON THE ONE HAND AND SRI R.V,K. VA RMA AND SRI D. HARI PRASAD (VENDEES) ON THE OTHER HAND. TH E AGREEMENT STATES AS FOLLOWS: 'WHEREAS THE PARTY OF THE FIRST PART/VENDOR IS A SO LE AND ABSOLUTE OWNER AND POSSESSOR OF THE HOUSE BEARING M CH NO. 8-2-293/82/L/28/A/2, PLOT NO. 28/A/2, ADMEASURING 6 00 SQ. YDS OR 501.66 SQUARE METERS, IN SY. NO. 403/1 OF SHAIKP ET VILLAGE, AND SY. NO. 102/1 OF HAKIMPET VILLAGE OF THE SRI VE NKATESWARA COOPERATIVE HOUSE BUILDING SOCIETY LTD. FOR AP LEG ISLATORS LTD., REGD. TAB NO. 185, AT ROAD NO. 12 BEHIND SHOP PING COMPLEX MLA COLONY, BANJARA HILLS, HYDERABAD, AP. I N T.S. ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 3 NO. 1, BLOCK J, WARD NO. 12 WITHIN THE LIMITS OF M CH IN WARD NO. 8, BLOCK NO. 2, HEREINAFTER REFERRED TO AS THE SCHEDULE PROPERTY MORE FULLY DESCRIBED AND DELINEATED IN THE PLAN ANNEXED HERETO UNDER A REGISTERED SALE DEED DATED 3 0.07.2007. VIDE DOCUMENT NO. 2820 OF 2007, BOOK-I, REGISTERED IN THE OFFICE OF THE SUB-REGISTRAR, BANJARA HILLS, HYDERAB AD, A P. WHEREAS SMT. SAMYUKTA BULLAYYA OF THE PARTY OF THE FIRST PART / VENDOR PURCHASED THE SAID PLOT FROM SR I. VENKATESWARA COOPERATIVE HOUSE BUILDING SOCIETY, WH ICH IS A REGISTERED SOCIETY WHICH WAS ASSIGNED AN EXTENT OF ABOUT AC. 100 OF LAND IN SY. NO. 403/1 OF SHAIKPET VILLAGE AN D SY. NO. 102/1 OF HAKIMPET VILLAGE, HYDERABAD DISTRICT BY TH E STATE OF ANDHRA PRADESH. WHEREAS THE SAID SOCIETY IN TURN DEVELOPED THE LAND INTO PLOTS THE LAYOUT POPULARLY KNOWN AS MLA'S COLONY, AND ALL OTTED THE SAID PLOTS TO ITS MEMBERS NO. 1 OF THE PARTY OF THE FIRST PART WAS ALLOTTED PLOT BEARING NUMBER 259/A/A ADMEASURIN G 600 SQ. YDS AS SHE ALSO A REGISTERED MEMBER OF THE SOCIETY VIDE MEMBERSHIP NUMBER 327. WHEREAS THE SAID PLOT OVERLAPPED WITH THE LAYOUT OF JUBILEE HILLS COOPERATIVE HOUSE BUILDING SOCIETY, SRI VENKA TESWARA COOPERATIVE HOUSE BUILDING SOCIETY THROUGH EXECUTED THE REGISTERED SALE DEED VIDE DOCUMENT NO. 976/85, DATE D 29.03.2005 COULD NOT DELIVER THE POSSESSION OF THE SAID LAND TO SMT. SAMYUKTA BULLAYYA. AND WHEREAS SMT. SAMYUKTA BULLAYYA THE PARTY OF THE FIRST PART / VENDOR APPROACHED THE JOINT REGIST RAR DISTRICT COOPERATIVE OFFICER, WHO ISSUED A LETTER VIDE RC. N O. 4710/2001-HSG DATED 21./03.2006 REQUESTING SRI VENK ATESWARA COOPERATIVE HOUSE BUILDING SOCIETY TO ALLOT ALTERNA TIVE LAND FROM THE AVAILABLE . LAND ALLOTTED BY THE GOVERNMEN T OF ANDHRA PRADESH. THE PRINCIPAL SECRETARY TO THE STATE OF A. P., AGRICULTURE AND CO. OP (C&M) DEPARTMENT, SECRETARIA T BUILDING, SAIFABAD, HYDERABAD VIDE LETTER NO. 7497/ CO. OP. VIII/2006-1 DATED 21.7.2006 DIRECTED THE CHAIRMAN O F SRI VENKATESWARA COOPERATIVE HOUSING BUILDING SOCIETY TO ALLOT AN ALTERNATIVE SITE TO PARTY OF THE FIRST PART (VEN DOR) THE PRINCIPAL SECRETARY ALSO ISSUED ANOTHER DIRECTION V IDE MEMO. NO. 7497/CO. OP VIII/2006-1 DATED 21.7.2006 TO IMPL EMENT THE EARLIER ORDERS. THE GOVERNMENT OF A.P. ALSO ISSUED A MEMO VIDE NO. 50892/ASSN. .III-1/2005-2 DATED 20.3.2006, REQUESTING PARTY TO THE FIRST PART (VENDOR) TO APPROACH SRI VE NKATESWARA COOPERATIVE HOUSE BUILDING SOCIETY FOR ALLOTMENT OF ALTERNATIVE PLOT FROM THE AVAILABLE LAND. THE COMM ISSIONER FOR ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 4 COOPERATION AND REGISTRAR OF CO. OP SOCIETIES, AP. HYDERABAD HAS REQUESTED SRI VENKATESWARA COOPERATIVE HOUSE BU ILDING SOCIETY TO INFORM THE ACTION TAKEN REPORT VIDE RC. NO. 35080/2006-H, DATED 8.5.2007, THE GOVERNMENT OF AND HRA PRADESH ( REGISTRATION AND STAMPS DEPARTMENT) VIDE GOS NO. 551 DT. 26.4.2007 ISSUED ORDERS EXEMPTING PARTY OF THE FIRST PART/VENDOR HAS ALREADY PAID STAMP DUTY AND REGISTR ATION CHARGES EARLIER, WHEREAS SRI VENKATESWARA COOPERATIVE HOUSE BUILDING SOCIETY APPROVING THE REQUEST OF PARTY OF THE FIRST PART/VENDOR FOR ALLOTMENT OF ALTERNATIVE LAND FROM THE AVAILABL E AREA ALLOTTED AN OPEN LAND, THE SCHEDULE PROPERTY. ...... 1. THE PARTY OF THE FIRST PART (VENDOR) AGR EED TO SELL THE SCHEDULE OF PROPERTY I.E. THE MCH NO. 8-2-293/82/L/ 28/A/2, PLOT NO. 28/A/2, ADMEASURING 600 SQ. YDS OR 501.66 SQUARE METERS, IN SY. NO. 403/1 OF SHAIKPET VII/AGE AND SY . NO. 102/1 OF HAKIMPET SOCIETY FOR AP LEGISLATORS LTD. REGD. T AB NO. 185, AT ROAD NO. 12, BEHIND SHOPPING COMPLEX MLA'S COLONY, BANJARA HILLS, HYDERABAD, AP IN TS NO. 1, BLOCK J, WARD NO. 12 WITHIN IN THE: LIMITED OF MCH IN WARD NO. 8, BLO CK NO. 2 TO THE PARTY OF THE SECOND PART FOR A TOTAL SALE CONSI DERATION OF RS. 5,00,000/- (RUPEES FIVE LAKHS ONLY) AND THE PAR TY OF THE SECOND PART/VENDEE AGREED TO PURCHASE THE SAME AT T HE AFORESAID SALE CONSIDERATION FROM THE PARTY OF THE FIRST PART (VENDOR). 2. THE PARTY OF THE SECOND PART/VENDEE PAID THE EN TIRE CONSIDERATION OF RS. 5,00,000/- (RUPEES FIVE LAKHS ONLY) TO THE PARTY OF THE FIRST PART (VENDOR) TOWARDS EARNEST MO NEY IN RESPECT OF' THE SCHEDULE PROPERTY THROUGH CHEQUE NO . 085479, DATED 23.07.2007, DRAWN ON ICICI BANK, DILSUKHNAGAR BRANCH, HYDERABAD AP, AND THE RECEIPT OF THE SAME IS ACKNOW LEDGE HEREUNDER. 3. THE PARTY OF THE FIRST PART/VENDOR HANDED OVER VACANT PEACEFUL PHYSICAL POSSESSION AND ENJOYMENT O F THE SCHEDULE PROPERTY TO THE PARTY OF THE SECOND PART/ VENDEE WITH ALL THE RIGHT UNDER THIS DEED. ' 5. THE ASSESSEE HAD CLAIMED THAT SINCE POSSESSION HAD BEEN HANDED OVER TO HIM BY SMT. SAMYUKTA BULLAYYA I N 2004 ITSELF, THE DATE OF TRANSFER IN HIS FAVOUR WAS TO B E RECKONED FROM 2004, MAKING THE TRANSFERRED ASSET A LONG TERM CAPITAL ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 5 ASSET. THE ASSESSING OFFICER OBSERVED THAT NEITHER THE AGREEMENT DATED 21.07,2004 NOR THE ONE DT. 01.09.2 004 WERE REGISTERED. THE ASSESSING OFFICER OBSERVED THAT HAD THE AGREEMENTS ENTERED INTO IN 2004 BEEN VALID AGREEMEN TS, THERE WOULD HAVE BEEN NO NEED FOR THE ASSESSEE TO ENTER I NTO ANOTHER AGREEMENT IN 2007 AND THAT THE AGREEMENT DA TED 24.7.2007 CLEARLY SHOWS THAT THE PAYMENT OF CONSIDE RATION AND HANDING OVER OF POSSESSION OF THE LAND HAD TAKE N PLACE ON THE DATE OF EXECUTION OF THE AGREEMENT IN 2007. THEREFORE, HE CONCLUDED THAT THE PURCHASE OF THE PROPERTY BY T HE ASSESSEE WAS TO BE HELD AS HAVING TAKEN PLACE IN 20 07 AND NOT IN 2004, THAT CONSEQUENTLY, THE ASSET HAD BEEN HELD BY THE ASSESSEE FOR A PERIOD OF LESS THAN 36 MONTHS AND TH E CAPITAL GAINS ON ITS SALE WAS NOT ELIGIBLE FOR DEDUCTION U/S . 54F. AGAINST THIS THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). 6. THE CIT(A) DID NOT AGREE WITH THE ARGUMENT OF THE A R. IN THE FIRST PLACE, MUTUAL ARRANGEMENTS AND UNDERST ANDINGS BETWEEN SMT. BULLAYYA AND THE ASSESSEE CANNOT BLUR THE DISTINCTION BETWEEN PLOT NO. 259A/A AND PLOT NO. 28A /2. WHILE IT MAY HAVE BEEN THE ORIGINAL INTENT OF BOTH PARTIES TO TRANSFER PLOT NO, 259A/A AND WHILE THEY MAY HAVE BEE N PREVENTED FROM DOING SO DUE TO FACTS BEYOND THEIR C ONTROL, THE FACT REMAINS THAT THE ASSET ACTUALLY TRANSFERRE D BY SMT. ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 6 BULLAYYA TO THE ASSESSEE AND BY THE ASSESSEE SUBSEQ UENTLY, WAS PLOT NO. 28A/2 AND NOT 259A/ A. 7. THE CIT(A) OBSERVED THAT THE RECITAL IN THE SALE DE ED DATED 29.30.1985 TO THE EFFECT THAT POSSESSION OF P LOT NO, 259A/A HAD BEEN HANDED OVER TO SMT. BULLAYYA ON THAT DAY NEEDS TO BE CONSIDERED IN THE LIGHT OF THE RECITAL OF THE SUBSEQUENT EVENTS IN THE AGREEMENT DATED 24.7.2007. THE AGREEMENT CATEGORICALLY RECORDS THAT THOUGH SALE DE ED HAD BEEN EXECUTED ON 29.3.1985, POSSESSION COULD NOT BE DELIVERED TO SMT. BULLAYYA. IT IS PERTINENT TO NOTE THAT THIS AGREEMENT HAS BEEN SIGNED BOTH BY SMT. BULLAYYA AND BY THE ASSESSEE SO THAT IT IS TO BE PRESUMED THAT THEY ACC EPT AND CONFIRM THE RECITALS THEREIN. WHEN BOTH THE PARTIES , SMT. BULLAYYA AND THE ASSESSEE, ACKNOWLEDGE IN A SUBSEQU ENT AGREEMENT DATED 24.7.2007 THAT SHE HAD NOT BEEN GIV EN POSSESSION, THE RECITAL IN THE SALE DEED DATED 29.3 .1985 (THAT POSSESSION HAD BEEN GIVEN) LOSES ITS SIGNIFICANCE A ND AUTHENTICITY. WHEN POSSESSION OF PLOT NO, 259A/A HAD NEVER BEEN HANDED OVER TO SMT. BULLAYYA HERSELF, NEITHER IN 1985 NOR SUBSEQUENTLY, THE QUESTION OF HER DELIVERING PO SSESSION TO THE ASSESSEE IN 2004 DOES NOT ARISE. THEREFORE, EVEN IF IT IS TO BE PRESUMED THAT THE EXCHANGE OF PLOT NO. 28A/2 F OR PLOT NO, 259A/A IN FAVOUR -OF SMT. BULLAYYA AND SUBSEQUEN T ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 7 TRANSFER OF PLOT NO. 28A/2 TO THE ASSESSEE IS TO BE CONSIDERED ONE SEAMLESS TRANSACTION, IT CANNOT BE SAID THAT TH E ASSESSEE ACQUIRED POSSESSION OF PLOT NO. 259A/A (AND BY IMPLI CATION, PLOT NO. 28A/2) IN 2004, 8. THE CIT(A) OBSERVED THAT THE REASON WHY TRANSFER OF PLOT NO. 259A/A COULD NOT BE EFFECTED WAS THAT THE ALLOTMENT OF THIS PLOT TO SMT. BULLAYYA HERSELF WAS WITHOUT A UTHORITY (BEING PART OF THE JUBILEE HILLS LAYOUT AND THEREFO RE, NOT AVAILABLE TO THE SRI VENKATESWARA SOCIETY FOR ALLOT MENT TO ITS MEMBERS). WHEN THE PLOT WAS NOT EVEN AVAILABLE TO T HE SRI VENKATESWARA SOCIETY FOR ALLOTMENT TO ITS MEMBERS, MERE POSSESSION, EVEN IF IT HAD ACTUALLY BEEN DELIVERED, WOULD NOT CONFER ANY LEGAL CLAIM OF OWNERSHIP ON SMT. BULLAYY A, 9. THE CIT(A), THEREFORE, HELD THAT TRANSFER OF POSSES SION OF THE TRANSFERRED ASSET IN FAVOUR OF THE ASSESSEE TOOK PLACE IN 2007 VIDE THE AGREEMENT DATED 24.7,2007. CONSEQU ENTLY, THE ASSET IS TO BE TREATED AS A SHORT TERM CAPITAL ASSET AND THE ASSESSEE IS NOT ENTITLED TO THE BENEFIT U/S. 54F OF THE ACT. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 10. THE LEARNED AR SUBMITTED THAT THE ASSESSEE IS AN INDIVIDUAL, DERIVES INCOME FROM BUSINESS. FOR THE A Y UNDER APPEAL HE FILED HIS RETURN OF INCOME ADMITTING AN I NCOME OF ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 8 RS 1,29,420/-. HE ALSO CLAIMED EXEMPTION FROM TAX U/S 54F OF THE IT ACT, LONG TERM CAPITAL GAINS, WHICH HE DE RIVED FROM SALE OF AN OPEN PLOT OF LAND WHICH HE PURCHASED IN THE YEAR 2004. THE SALE PROCEEDS WERE UTILIZED FOR THE CONS TRUCTION OF A NEW RESIDENTIAL HOUSE. DURING THE COURSE OF ASST PROCEEDINGS U/S 143(3) THE AO DISALLOWED THE CLAIM O F THE ASSESSEE ON THE GROUND THAT THE OLD PROPERTY WAS NO T HELD BY THE ASSESSEE FOR MORE THAN 36 MONTHS AS REQUIRED UN DER THE LAW FOR CLAIMING EXEMPTION U/S 54F. THE AO BROUGHT T O TAX THE ENTIRE SALE CONSIDERATION, TREATING THE SAME AS SHORT TERM CAPITAL GAINS. THE ASSESSEE'S CONTENTION IS THAT T HE AO IS NOT JUSTIFIED IN NOT ALLOWING THE BONA-FIDE CLAIM, BECA USE HE HELD THE OLD PROPERTY FOR MORE THAN 36 MONTHS AND, THERE FORE, THE ASSET WAS SOLD ON COMPLETION OF 3 YEARS AND HENCE I T IS A LONG TERM CAPITAL ASSET. 11. THE AR SUBMITTED THAT ON 18-09-2007 THE ASSESSEE SO LD 600 SQY OF OPEN PLOT BEARING NO 259/A/A, IN SY NOS. 120/403/1 AND 102/1 SITUATED AT MLA COLONY, ROAD NO. 12, BANJARA HILLS, HYDERABAD FOR A TOTAL CONSIDERATION OF RS. 2,10,56,000/- . THE ASSESSEE JOINTLY OWNED THIS PR OPERTY WITH ONE SRI D. HARI PRASAD. HIS SHARE OF SALE CONSIDER ATION WAS RS. 1,05,28,000/-. IT IS AN ADMITTED FACT THAT THE ASSESSEE DID NOT DECLARE ANY CAPITAL GAINS IN RETURN OF INCOME F ILED FOR THE ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 9 AY 2008-09, AS THE GAINS WERE UTILIZED FOR THE PURP OSE OF CONSTRUCTION OF A RESIDENTIAL HOUSE WITHIN THE TIME ALLOWED UNDER THE ACT AND, THEREFORE, THE SAME IS CLAIMED A S EXEMPT U/S 54F OF THE ACT. 12. THE AR SUBMITTED THAT THE AO, BASED ON THE SALE DEE D EXECUTED ON 18-09-2007 BY SMT. SAMYUKTA BULLAYYA, T HE ORIGINAL OWNER REPRESENTED BY HER AGREEMENT OF SALE -CUM IRREVOCABLE GENERAL POWER OF ATTORNEY HOLDERS, NAME LY SRI V.R.K.V RATHOD AND SRI DONTHU HARI PRASAD IN FAVOUR OF SRI G. MURALI, THE PURCHASER, OPINED THAT THE UNREGISTERED AGREEMENT OF SALE MADE BY SMT. SAMYUKTA BULLAYYA IN JULY 2004 IN FAVOUR OF THE ASSESSEE AND SRI D. HARI PRAS AD IS OF NO VALUE. IT IS ALSO AN ADMITTED FACT THAT, THOUGH, T HE AGREEMENT OF SALE EXECUTED BY SMT. SAMYUKTA BULLAYYA IN JULY 2004 IN FAVOUR OF THE ASSESSEE AND SRI D. HARI PRASAD WAS N OT A REGISTERED ONE, NEVERTHELESS THE FULL SALE CONSIDER ATION OF RS 5,00,000/- WAS PAID TO SMT. SAMYUKTA BULLAYYA AND T HE POSSESSION ALSO WAS TAKEN ON THE SAME DAY. PROPERT IES DO NOT NECESSARILY PASS AS SOON AS THAT INSTRUMENT IS REGISTERED FOR THE TRUE TEST IS THE INTENTION OF THE PARTIES. REGISTRATION IS PRIMA FACIE PROOF OF INTENTION TO TRANSFER. IF THERE IS A CONDITION PRECEDENT AS TO THE PAYMENT OF CONSIDERAT ION OR DELIVERY OF THE DEED, THEN SELLER MAY RETAIN THE DE ED PENDING ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 10 PAYMENT OF PRICE AND IN THAT CASE THERE IS NO TRANS FER UNTIL PRICE IS PAID AND THE DEED IS DELIVERED. TRANSFER U /S 2(47) MUST MEAN AN EFFECTIVE CONVEYANCE OF THE CAPITAL AS SET TO THE TRANSFEREE. 13. THE AR RELIED ON JUDGEMENT OF THE GUJARAT HIGH COUR T IN THE CASE OF CIT VS. MORMASJI MANCHJARJI VAID (25 0 ITR 542) (GUJ) WHEREIN THE FULL BENCH OF THE COURT HELD THAT A PROPERTY OF VALUE RS 100/- REQUIRES REGISTRATION AND THAT TH ERE IS COMPLETE TRANSFER ONLY ON REGISTRATION, AND NOT ON THE DATE OF PRESENTATION OF DOCUMENT FOR REGISTRATION, THOUGH, FOR TAXATION PURPOSE THE RIGHT OF ENJOYMENT OF INCOME M AY BE SUFFICIENT. TRANSACTIONS ALLOWING POSSESSION OF IM MOVABLE PROPERTY IN PART PERFORMANCE OF THE CONTRACT AS PER SUB CLAUSE (V) IS A TRANSFER: (A) SUB -CLASS (V) HAS BEEN INSERTED IN SEC -2(47) ALON G WITH SUB - CLASS (VI) BY FINANCE ACT 1987 W.E.F. 01-04-1998. T HE PURPOSE OF INSERTION WAS TO NEUTRALIZE CRETIN DEVICES AND T RANSACTIONS PURSUANT TO WHICH CAPITAL ASSETS OR INTEREST THERE ON WERE TRANSFERRED IN SUCH A MANNER SO AS TO FALL BEYOND T HE PARAMETERS OF THE DEFINITION OF THE TERM 'TRANSFER' IN SEC 2(4 7) . THE INTENTION OF THE LEGISLATURE WHICH HAS BEEN EXPRESS ED IN BOARD CIRCULAR NO 495 DT: SEPTEMBER 22 ND 1987 CONFIRMS THIS OBJECTIVE FROM PARA NO 11.1 AND 11.2 (B) NATURE AND SCOPE OF AMENDMENT BROUGHT IN BY INSERTI ON OF SUB CLASS (V) PROVIDES THAT ALLOWING POSSESSION OF ANY IMMOVABLE PROPERTY IN PART PERFORMANCE OF A CONTRACT OF THE N ATURE REFERRED TO IN SEC -53 A OF THE T.P. ACT 18882 WOULD AMOUNT TO THE TRANSFER. ON A PERUSAL OF SEC -53 A OF THE T.P. ACT IT APPEARS THAT IF POSSESSION OF IMMOVABLE PROPERTY IS GIVEN PURSUA NT TO AN AGREEMENT FOR SALE WHICH IS COVERED BY SEC-53A SUCH POSSESSION ITSELF WOULD FALL WITHIN THE DEFINITION OF 'TRANSFER', ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 11 NOTWITHSTANDING THE FACT THAT THERE IS NO CONVEYANC E. THIS CHANGE NEUTRALIZES THE RATIO OF THE SUPREME COURT D ECISIONS IN 14. THE AR RELIED ON THE JUDGEMENTS IN THE CASE OF CIT VS BHURANGYA COAL COMPANY (34 ITR 802) (SC) ALAPATI VENKATARAMAIAH VS CIT (57 ITR 185) (SC). IN TERMS O F THESE DECISIONS, TRANSFER OF IMMOVABLE PROPERTY WAS CONSI DERED TO HAVE TAKEN PLACE UP ON CONVEYANCE AND NOT ON THE DA TE OF AGREEMENT OF SALE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE SUBMITTED FULL DETAILS OF THE TRANSACTION TOGETHER WITH AGREEMENTS AND ALL OTHER RELEVANT INFORMATION NECESSARY. HE DREW OUR ATTENTION TO T HE FOLLOWING PROVISIONS OF THE ACT: SECTION 2 (47) OF THE IT ACT: AS PER THE DEFINITION N TRANSFER IN RELATION TO A CAPITAL ASSET INCLUDES (I) ------------ (I I) ------------ (I I I) ------------ (IV) ------------ (IV A) ------------ (V) ANY TRANSACTION INVOLVING THE ALLOWING OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED I N PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT 1882. SECTION 53A OF TRANSFER OF PROPERTY ACT 1882 IN ORDER TO ATTRACT 53 A OF T.P. ACT 1882 THE FOLLO WING CONDITIONS ARE TO BE FULFILLED (I) THERE SHOULD BE A CONTRACT FOR CONSIDERATION (II) IT SHOULD BE IN WRITING (III) THE CONTRACT SHOULD BE SIGNED BY THE TRANSFE ROR (IV) IT SHOULD PERTAIN TO TRANSFER OF IMMOVABLE PR OPERTY (V) THE TRANSFEREE SHOULD HAVE TAKEN POSSESSION OF THE PROPERTY (VI) THE TRANSFEREE SHOULD BE READY AND WILLING TO PERFORM HIS PART OF THE CONTRACT. ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 12 15. THE AR SUBMITTED THAT A COMBINED READING OF SEC 2(4 7) (V) OF THE IT ACT AND SEC 53 A OF THE T.P. ACT WOU LD CLARIFY THAT FOR ATTRACTING CAPITAL GAINS TAX THERE IS NO REQUIREMENT OF REGISTRATION WHICH IS OTHERWISE REQUIRED UNDER THE GENERAL LAW FOR EFFECTIVE TRANSFER OF THE TITLE IN FAVOUR OF THE PURCHASER. IN THIS CASE THE ASSESSEE PAID FULL C ONSIDERATION IN THE YEAR 2004 ITSELF AND FULFILLED HIS PART OF THE CONTRACT IN ALL RESPECTS AND ALSO TAKEN POSSESSION OF THE IMMOV ABLE PROPERTY IMMEDIATELY AFTER EXECUTION OF THE AGREEM ENT AND PAYMENT OF CONSIDERATION. THE TRANSFEROR CEASED TO BE THE OWNER OF THE PROPERTY BY VIRTUE OF THE AGREEMENT O F SALE. IT MAY ALSO BE MENTIONED HERE THAT THE ACT WAS AMENDED TO INCLUDE CASES SUCH AS AGREEMENT OF SALE ALSO WITHIN THE MEANING OF TRANSFER U/S 2(47) OF THE IT ACT AND IT I S PRECISELY FOR THIS REASON THE LEGISLATURE HAS INTRODUCED CLAU SE (V) SEC 2(47) READ WITH THE SEC 45 OF THE IT ACT WHICH INDI CATES THAT CAPITAL GAINS ARE TAXABLE IN THE YEAR IN WHICH SUCH TRANSACTION ARE ENTERED INTO, EVEN THOUGH THE TRANSFER OF THE I MMOVABLE PROPERTY IS NOT COMPLETE UNDER THE GENERAL LAW. THE RE IS NO REQUIREMENT OF REGISTRATION OF A DOCUMENT IN CASE OF TRANSFER OF A IMMOVABLE PROPERTY. THE VERY F ACT THAT THE BUYER HAS TAKEN POSSESSION UNDER A CONTRAC T IS ENOUGH TO CHARGE THE GAINS TO CAPITAL GAINS TAX. THEREFORE, AN AGREEMENT OF SALE AND PAYMENT OF FULL OR PARTIAL ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 13 CONSIDERATION AND HANDING OVER POSSESSION OF IMMOVA BLE PROPERTY IS ENOUGH TO SHOW THAT THE TRANSFER IS COM PLETE, THOUGH THE TRANSFER DEED IS NOT REGISTERED, FOR PUR POSE OF CAPITAL GAINS. 16. THE AR SUBMITTED THAT THE ASSESSEE PURCHASED THE PROPERTY WHICH WAS IN DISPUTE. THE OWNER, SMT. SAMY UKTA BULLAYYA EXECUTED AN AGREEMENT OF SALE CUM POSSESSI ON WHICH WAS A NOTARIZED DOCUMENT CONVEYING THE TITLE IN FAVOUR OF THE ASSESSEE. THE AGREEMENT OF SALE WAS NOT REGI STERED IMMEDIATELY AFTER THE FULL CONSIDERATION WAS PAID D UE TO THE FACT THAT THE PROPERTY WAS IN DISPUTE. IT MAY ALSO BE NECESSARY TO MENTION THAT THE PROPERTY WAS PURCHASE D FOR A MUCH LESS PRICE WHEN COMPARED TO EXISTING MARKET RA TE ON ACCOUNT OF THE DISPUTE THOUGH THE ASSESSEE HAS BECO ME THE OWNER OF THE PROPERTY WITH EFFECT FROM THE DATE OF AGREEMENT OF SALE CUM POSSESSION THAT IS JULY 2004. HE SOLD T HE PROPERTY IN THE YEAR 2007 AFTER HOLDING THE PROPERTY FOR THR EE COMPLETED YEARS AND SOLD THE PROPERTY AFTER RECEIVI NG FULL CONSIDERATION OF RS 2.10 CRORES WHICH RESULTED IN L ONG TERM CAPITAL GAINS AND THE SAME IS INVESTED IN THE CONST RUCTION OF NEW RESIDENTIAL HOUSE. HENCE CLAIMING EXEMPTION FRO M CAPITAL GAINS TAX U/S 54F IS WITHIN THE FRAME WORK O F LAW. IT MAY ALSO BE MENTIONED THAT SINCE THE ASSESSEE HAS B ECOME ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 14 THE LAWFUL OWNER WITH EFFECT FROM JULY 2004 HE ALSO FILED A SUIT IN THE COURT OF THE JUNIOR CIVIL JUDGE, CITY C IVIL COURT, HYDERABAD IN ORDER TO PROTECT THE TITLE AND ALSO FI LED A POLICE COMPLIANT IN THE YEAR 2004. 17. THE AR SUBMITTED THAT THE AO OBTAINED A COPY OF THE REGISTERED AGREEMENT OF SALE-CUM POWER OF ATTORNEY VIDE DOCUMENT NO 2832 OF 2007 DATE 24-07-2007 FROM SRO U /S 133(6) OF THE INCOME TAX ACT, WHICH SHOWS THAT THE ASSESSEE AND SRI D. HARI PRASAD HAVE PURCHASED THE PROPERTY ON 23-07- 2007 AND PAID THE CONSIDERATION THROUGH A CHEQUE DR AWN ON ICLCI BANK , DILSUKHNAGAR, HYDERABAD. THE SAME LAN D IS AGAIN SOLD ON 18-09-2007 FOR RS. 2,10,56,000/-., THEREFOR E, THE PERIOD OF HOLDING IS ONLY FOR FEW MONTHS AND NOT MO RE THAN 3 YEARS AS CLAIMED BY THE ASSESSEE. ACCORDING TO THE AO THE ASSESSEE IS NOT ELIGIBLE TO CLAIM DEDUCTION U/S 54F. 18. THE AR SUBMITTED THAT THE SALE CONSIDERATION OF 5 L AKHS WAS PAID TO SMT. SAMYUKTA BULLAYYA BY CASH IN THE Y EAR 2004 ITSELF SINCE THE PROPERTY WAS UNDER LITIGATION IT W AS NOT REGISTERED IN THE NAME OF THE ASSESSEE BUT AN AGREE MENT WAS ENTERED INTO (UNREGISTERED) AND POSSESSION WAS ALSO GIVEN ON THE SAME DATE. SINCE THE ASSESSEE BECAME THE LEGAL OWNER, IN ORDER TO PROTECT THE TITLE, FILED A SUIT. THE NEW B UYER OF THE PROPERTY IN SEPTEMBER 2007 AS A PRECAUTIONARY MEASU RE, ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 15 ABUNDANT CAUTION AND IN ORDER TO SAFEGUARD HIS INTE REST AND TO AVOID ANY FUTURE LITIGATION INSISTED ON A DULY R EGISTERED POWER OF ATTORNEY FROM THE PREVIOUS OWNER NAMELY, S MT. SAMYUKTA BULLAYYA IN FAVOUR OF THE ASSESSEE. IT IS ONLY AN INTERMEDIARY DOCUMENT FACILITATION TRANSFER OF THE PROPERTY IN FAVOUR OF THE NEW BUYER. IT IS ONLY A TECHNICAL RE QUIREMENT TO SATISFY THE NEW BUYER, NOTWITHSTANDING THE FACT THA T ASSESSEE IS THE OWNER OF THE PROPERTY FROM 2004 ONWARDS. SECTION 2(47) OF THE IT ACT R.W.S 53A OF THE TP ACT RECOGNI ZES THAT LEGAL OWNER SHIP PASSES ON TO THE PURCHASER, THE MO MENT HE PAID THE CONSIDERATION IN PERFORMANCE OF A CONTRACT AND TAKEN POSSESSION OF THE PROPERTY, AS OPPOSED TO GENERAL L AW, WHICH REQUIRES THAT THE SALE DEED MUST BE REGISTERED FOR EFFECTIVE TRANSFER OF TITLE OF AN IMMOVABLE PROPERTY. 19. THE AR SUBMITTED THAT HAD THE CHEQUE FOR 5 LAKHS BE EN ENCASHED BY SMT. SAMYUKTA BULLAYYA, IT WOULD HAVE R EFLECTED IN THE ICLCI BANK A/C OF THE ASSESSEE AS A DEBIT WITHIN 6 MONTHS FROM THE DATE OF ISSUE. NOWHERE, THERE IS A DEBIT OF THIS AMOUNT IN THE BANK ACCOUNT. IT DOES NOT STAND TO REASON, AND ALSO BEYOND ONES IMAGINATION THAT A PROPERTY PU RCHASED FOR 5 LAKHS WOULD FETCH RS 2.10 CRORES IN FEW MONTH S TIME, IF THE CONTENTION OF THE AO IS TO BE ACCEPTED. THE PR OPERTY WAS HELD FOR MORE THAN 3 YEARS BY THE ASSESSEE BEFORE I TS RESALE ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 16 DURING BIG BOOM IN THE VALUE OF IMMOVABLE PROPERTIE S IN HYDERABAD IN PARTICULAR. IT IS NOT DISPUTED BY THE AO THAT THE ASSESSEE DID NOT UTILIZE THE SALE PROCEEDS FOR THE CONSTRUCTION OF A NEW RESIDENTIAL HOUSE. THEREFORE, THE CAPITAL GAINS ARE EXEMPT FROM TAX U/S. 54F OF THE IT ACT, AS RIGHTLY C LAIMED BY THE ASSESSEE. 20. THE AR SUBMITTED THAT THE BASIC RULE IS THAT THE CA PITAL GAINS ARE DEEMED TO BE THE INCOME OF THE PREVIOUS Y EAR IN WHICH THE TRANSFER GIVING RISE TO THE GAIN STAKES P LACE. THUS THE YEAR OF THE CHARGE IS THE YEAR IN WHICH THE SAL E, EXCHANGE, RELINQUISHMENT ETC. TAKES PLACE. WHERE THE TRANSFER IS BY WAY OF ALLOWING POSSESSION OF AN IMMOVABLE PROPERTY IN PART PERFORMANCE OF A CONTRACT, IT IS THE YEAR IN WHICH SUCH POSSESSION IS HANDED OVER. IF THE HANDING OVER OF POSSESSION PRECEDES THE ENTERING INTO A CONTRACT AND THE TRANS FEREE IS ALLOWED THE POSSESSION IN PART PERFORMANCE OF THE P ROPOSED CONTRACT, THE YEAR OF TAXABILITY TO CAPITAL GAINS I S THE YEAR IN WHICH THE CONTRACT IS ENTERED INTO. ALL THE CONDITI ONS PRESCRIBED UNDER THE ACT ARE SATISFIED IN THIS CASE . 21. THE AR SUBMITTED THAT THE SOCIETY HAD ORIGINALLY ALLOTTED THE PLOT MUCH BEFORE 2007 AND THE ASSESSEE WAS IN POSSESSION FOR MORE THAN 3 YEARS. HOWEVER DUE TO A DISPUTE, THE SOCIETY ALLOTTED AN ALTERNATE PLOT IN EXCHANGE OF THE OLD ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 17 PLOT. THE HOLDING PERIOD OF THE PLOT SHOULD HAVE B EEN RECOGNIZED FROM THE PERIOD OF THAT HOLDING OF THE O LD PROPERTY AND NOT FROM THE NEW PROPERTY. THE FACT T HAT THE ASSESSEE/INDIVIDUAL HAD A RIGHT TO PROPERTY IS THE D ECIDING FACTOR THAT DETERMINES THE OWNERSHIP OF THE PROPERT Y AND NOT BY A TECHNICAL DEFINITION OF DETERMINING THE PERIOD ICITY OF HOLDING. THE RIGHT ITSELF IS AN UNDISPUTED TITLE T O HOLD THE PROPERTY. THE SOCIETY HAD GRANTED THE RIGHT AND IT CONFERRED THE RIGHT, WHICH ITSELF IS AN ASSET BECAUSE THE OWN ERSHIP IS GUARANTEED AND VESTED IN THE ASSESSEE'S HANDS IRRES PECTIVE OF THE CIRCUMSTANCES. THE RIGHT TO HOLD PROPERTY IS I TSELF AN ASSET. THE SOCIETY HAD VESTED ALL RIGHTS TO THE OW NER AND HE IS THE LEGAL OWNER OF THE PROPERTY FROM THE DATE OF THE ALLOTMENT OF THE ORIGINAL PROPERTY. OWNER IS OBVIO USLY THE OWNER OF THAT RIGHT AND LEGALLY BEING THE RIGHTFUL OWNER OF THE PROPERTY THROUGH THE RIGHT, IT CANNOT BE SAID THAT THE HOLDING PERIOD SHOULD BE COUNTED FROM THE ALLOTMENT OF THE NEW PLOT. THE SOCIETY ONCE GRANTS THE RIGHT AND HAVING RECEIV ED FULL CONSIDERATION, THE SOCIETY CANNOT CANCEL THE PLOT A FTER GRANTING THE RIGHTS AND PASSING THE TITLE TO THE OW NER. THE FACT THAT THE OWNER HELD THE PROPERTY SINCE THE DAT E OF ALLOTMENT AND THE PERIOD BEING FOR MORE THAN A DECA DE AND ONLY AFTER THE ORIGINAL PROPERTY OWNER TRANSFERRED THE PROPERTY TO THE ASSESSEE IN 2004 ITSELF INDICATES A ND PROVES ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 18 THAT THE RIGHT TO HOLD THE PROPERTY IS CONFERRED AN D IS UNDISPUTED. THE MERE FACT THAT THE SUBSEQUENT EVEN T WHICH THE ASSESSEE WAS UNAWARE OF THE DISPUTE WHICH HE TO OK IN GOOD FAITH FROM THE ORIGINAL OWNER CANNOT BE TREATE D AS THE OWNERSHIP BEING VESTED ONLY IN THE YEAR AFTER 2007 AS THE ORIGINAL OWNER HAD GIVEN FULL POSSESSION AND TRANSF ERRED THE OLD PROPERTY TO THE ASSESSEE, IN THE YEAR 2004 ITSE LF. THE ASSESSEE CANNOT BE HELD RESPONSIBLE FOR THE ACT OF THE SOCIETY. THE ASSESSEE HAD BEEN GIVEN AN ALTERNATE PLOT BY TH E SOCIETY TO SAFEGUARD THE INTEREST OF THE ASSESSEE AND THE A SSESSEE HAD ABSOLUTELY NO IDEA OF THIS SOLUTION. THE ALLOTMENT OF THE ALTERNATE PLOT IS IN CONTINUATION TO THE HOLDING OF THE OLD PLOT AND THE DATE FROM WHICH THE ALTERNATE PLOT SHOULD B E COUNTED SHOULD OBVIOUSLY BE FROM THE DATE OF THE POSSESSION AND THE OWNERSHIP OF THE OLD PLOT. THE ASSESSEE/INDIVIDUAL A GAINST THE UNJUSTIFIED AND UNWARRANTED ADDITION OF RS. 1,0 2,78,000/- BY DISALLOWING THE DEDUCTION U/S. 54F FILED AN APPEA L WITH THE CIT(A). THE FACT THAT THE POSSESSION OF THE OPEN L AND (PROPERTY) WAS WITH THE ASSESSEE FOR MORE THAN 3 YE ARS WAS IGNORED BY THE CIT(A) ON THE GROUND THAT THE RELEVA NT LAND (OPEN PLOT) WAS HELD FOR LESS THAN 3 YEARS AS IT WA S ACQUIRED IN THE YEAR OF 2007. THIS WAS SURMISED BASED ON TH E SITUATION THAT THE ALTERNATE PLOT THAT WAS GIVEN TO THE ASSESSEE IN LIEU OF THE OLD PLOT WAS HELD FOR LESS THAN 3 YE ARS, AS THE ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 19 SOCIETY HAD GIVEN THE OPEN PLOT IN 2007 IN LIEU OF THE OLD PLOT WHICH WAS CANCELLED. THAT THE ASSESSEE HAD NO CONT ROL ON THE OPERATIONS OF THE SOCIETY AND IT WAS THE SOCIETY WH ICH ALLOTTED THE NEW PLOT IN EXCHANGE OF THE OLD PLOT AND THE AS SESSEE HAD NOT SOUGHT FOR THE NEW PLOT AS HE WAS THE GENUINE A ND BONA FIDE OWNER OF THE OLD PLOT. THE SOCIETY IN ORDER T O SAFEGUARD THE INTERESTS OF THE ASSESSEE THRUST UPON THE ASSES SEE THE ALLOTMENT OF THE NEW PLOT AS THE ASSESSEE WAS AGGRI EVED WITH THE GOINGS ON THE SOCIETY'S MECHANISATION IN DEALIN G WITH VARIOUS LITIGANTS. THE ASSESSEE HAD NO CONTROL ON THE SOCIETY'S ISSUES AND IT WAS HENCE BEYOND THE CONTRO L OF THE ASSESSEE. THE ASSESSEE HAD UNDER A BONA FIDE BELIE F AND TRUST HELD THE PROPERTY FOR A CONTINUOUS PERIOD OF MORE T HAN 3 YEARS, AND WAS IN POSSESSION OF THE PROPERTY THEREO F. THEREFORE, THE PERIOD OF HOLDING SHOULD BE RECKONED FROM THE DATE OF THE ORIGINAL HOLDING AND NOT FROM THE DATE OF ALLOTMENT OF NEW PLOT. 22. HE RELIED ON THE JUDGEMENT OF JURISDICTIONAL HIGH C OURT IN THE CASE OF M. SYAMALA RAO VS. CIT (234 ITR 140) WHEREIN HELD THAT ' HELD, THAT A PERUSAL OF THE DOCUMENT MADE IT CLEAR THAT T HE AGREEMENT OF SALE WAS EXECUTED IN 1962 AND POSSESSI ON WAS DELIVERED TO THE ASSESSEE ON THE SAME DATE AND THE SALE CONSIDERATION WAS ALSO PAID BY THE ASSESSEE TO THE VENDOR, THOUGH THE DOCUMENT WAS REGISTERED ON JUNE 8, 1979. THE REGISTRATION OF THE DOCUMENT RELATED BACK TO THE DA TE ON WHICH THE AGREEMENT OF SALE WAS EXECUTED IN FAVOUR OF THE ASSESSEE BY ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 20 THE VENDOR. THEREFORE, THE ASSESSEE WAS DEEMED TO BE THE OWNER OF THE PROPERTY WITH EFFECT FROM MAY 1, 1962. THEREFORE, THE ASSESSEE HAD HELD THE PROPERTY FOR MORE THAN 36 MONTHS AND THE CAPITAL GAINS DERIVED BY THE ASSESSEE ON TH E SALE OF THE PLOTS COULD NOT BE ASSESSED AS SHORT-TERM CAPITAL G AINS.' 23. HE ALSO RELIED ON THE JUDGEMENT OF P & H HIGH COURT IN THE CASE OF VINOD KUMAR JAIN VS. CIT (344 ITR 501) (P & H) WHEREIN HELD THAT: ' HELD , ALLOWING THE APPEAL, THAT UNDER PARAGRAPH 2 OF TH E CIRCULAR ISSUED BY THE BOARD AS TO THE NATURE OF TH AT RIGHT THAT AN ALLOTTEE ACQUIRES ON ALLOTMENT OF FLAT UNDER THE SELF- FINANCING SCHEME, THE ALLOTTEE GETS TITLE TO THE PR OPERTY ON THE ISSUANCE OF AN ALLOTMENT LETTER AND THE PAYMENT OF INSTALMENTS WAS ONLY A CONSEQUENTIAL ACTION UPON WHICH THE DELI VERY OF POSSESSION FOLLOWS. THE ASSESSEE WAS ALLOTTED THE F LAT ON FEBRUARY 27, 1982. BY ISSUANCE OF AN ALLOTMENT LETT ER AND HE HAD BEEN MAKING PAYMENT IN TERMS THEREOF THE SPECIF IC NUMBER OF THE FLAT WAS ALLOCATED TO THE ASSESSEE AND POSSE SSION DELIVERED ON MAY 15, 1986. THE RIGHT OF THE ASSESSE E PRIOR TO MAY 15, 1986, WAS A RIGHT IN THE PROPERTY. IN SUCH A SITUATION, IT COULD NOT BE HELD THAT PRIOR TO THAT DATE THE AS SESSEE WAS NOT HOLDING THE FLAT. ' 24. THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A). 25. WE HAVE HEARD BOTH THE PARTIES AND PERUSED MATERIAL ON RECORD. IN THIS CASE, THE ASSESSEE ALONG WITH D. H ARI PRASAD ENTERED INTO THE FIRST SALE AGREEMENT WITH SMT. L. SAMYUKTA BULLAYYA ON 21 ST JULY, 2004 FOR PURCHASE OF A PLOT BEARING NO. 259A/A AT SY. NO. 102/1, HAKIMPET VILLAGE, HYDERABAD DISTRICT AND PAID A SUM OF RS. 5 LAKHS TOWARDS SALE CONSIDERATION. THE ASSESSEE ALSO ENTERED INTO AGRE EMENT OF SALE CUM GPA WITH POSSESSION WITH THE ABOVE VENDOR ON THE 21 ST DAY OF JULY, 2004 AND TAKEN POSSESSION OF THE PROP ERTY. ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 21 THIS PROPERTY WAS ORIGINALLY PLOTTED BY SRI VENKATE SWARA CO- OPERATIVE HOUSING BUILDING SOCIETY KNOWN AS 'MLA CO LONY' AND ALLOTTED THE PLOT TO SMT. L. SAMYUKTA BULLAYYA AS REGISTERED NUMBER OF THE SOCIETY VIDE MEMBERSHIP NO . 327. THE SAID PLOT OVERLAPPED WITH THE LAYOUT OF JUBILEE HILLS COOPERATIVE HOUSE BUILDING SOCIETY, SRI VENKATESWAR A COOPERATIVE HOUSE BUILDING SOCIETY THOUGH EXECUTED THE REGISTERED SALE DEED VIDE DOCUMENT NO. 976/85, DATED 29- 03.2005 COULD NOT DELIVER THE POSSESSION OF THE SAI D LAND TO SMT. SAMYUKTA BULLAYYA SHE HAD APPROACHED THE JOINT REGISTRAR DISTRICT CO-OPERATIVE OFFICER, WHO ISSUED A LETTER VIDE RC. NO. 4710/2001-HSG DATED 21-03-2006 REQUESTI NG SRI VENKATESWARA CO-OPERATIVE HOUSE BUILDING SOCIETY TO ALLOT ALTERNATIVE LAND FROM THE AVAILABLE LAND ALLOTTED B Y THE GOVERNMENT OF ANDHRA PRADESH, THE PRINCIPAL SECRETA RY TO THE STATE OF A.P., AGRICULTURE & CO-OP (C&M) DEPARTMENT , SECRETARIAT BUILDING, SAIFABAD, HYDERABAD VIDE LETT ER NO. 7497/CO-OP. VIII/2006-1 DATED: 21-7-2006 DIRECTED THE CHAIRMAN OF SRI VENKATESWARA CO-OPERATIVE HOUSING B UILDING SOCIETY TO ALLOT AN ALTERNATIVE SITE TO PARTY OF TH E FIRST PART (VENDOR) THE PRINCIPAL SECRETARY ALSO ISSUED ANOTHE R DIRECTION VIDE MEMO. NO. 7497/CO-OP VIII/2006-1 DATED 21-7-2006 TO IMPLEMENT THE EARLIER ORDERS. THE GOVERNMENT OF A.P . ALSO ISSUED A MEMO VIDE NO. 50892/ASSN. III-L/2005-2 DATE D 20-3- ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 22 2006, REQUESTING THE VENDOR TO APPROACH SRI VENKATE SWARA CO-OPERATIVE HOUSE BUILDING SOCIETY FOR ALLOTMENT O F ALTERNATIVE PLOT FROM THE AVAILABLE LAND. THE COMMI SSIONER FOR COOPERATION AND REGISTRAR OF CO-OP. SOCIETIES, A.P. HYDERABAD HAS REQUESTED SRI VENKATESWARA CO-OPERATI VE HOUSE BUILDING SOCIETY TO INFORM THE ACTION TAKEN R EPORT VIDE RC. NO. 35080/2006-H, DATED 8-5-2007, THE GOVERNMENT OF ANDHRA PRADESH (REGISTRATION AND STAMPS DEPARTMENT) VIDE G.O. MS. NO. 551 DATED 26-4-2007 ISSUED ORDERS EXEM PTING THE VENDOR HAS ALREADY PAID STAMP DUTY AND REGISTRA TION CHARGES EARLIER. SRI VENKATESWARA CO-OPERATIVE HOU SE BUILDING SOCIETY APPROVED THE REQUEST OF THE VENDOR FOR ALLOTMENT OF ALTERNATIVE LAND FROM THE AVAILABLE AR EA ALLOTTED AN OPEN LAND, THE SCHEDULE PROPERTY. UPON ACQUIRI NG THE ABOVE SAID PROPERTY, THE VENDOR HAS CONSTRUCTED A T WO SMALL DWELLING UNITS ON THE ABOVE SAID PROPERTY, AND GOT THE SAME ASSESSED TO MCH TAX, AND WAS ASSIGNED MUNICIPAL HOU SE NUMBERS, I.E., 8-2-293/82/L/28/A/2 BY THE MUNICIPAL AUTHORITIES. 26. IN VIEW OF THIS, THE ASSESSEE GOT PURCHASED THIS NE W PROPERTY VIDE AGREEMENT OF SALE CUM IRREVOCABLE GPA ON 24 TH JULY, 2007 IN RESPECT OF ALL THAT PROPERTY AT THE H OUSE BEARING MCH NO. 8-2-293/82/L/28/A/2, PLOT NO. 28/A/2, ADMEASURING ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 23 600 SQY OR 501.66 SQUARE METERS, IN SY. NO. 403/1 OF SHAIKPET VILLAGE, AND SY, NO. 102/ 1 OF HAKIMPET VILLAGE OF T HE SRI VENKATESWARA CO-OPERATIVE HOUSE BUILDING SOCIETY LT D., FOR A.P. LEGISLATORS LTD., REGD. TAB NO. 185, AT ROAD N O. 12 BEHIND SHOPPING COMPLEX MLA'S COLONY, BANJARA HILLS , HYDERABAD, A.P., IN T.S. NO. L, BLOCK J, WARD NO. 1 2 WITHIN THE LIMITS OF MCH IN WARD NO . B , BLOCK NO. 2, AND BOUNDED BY NORTH-PLOT NO. 28/A/1, SOUTH-OPEN LAND BELONGING TO T HE SOCIETY AND 60' WIDE ROAD, EAST-40'-0' WIDE ROAD AN D WEST- OPEN LAND BELONGING TO SOCIETY & SOCIETY SHOPPING C OMPLEX BUILDING. 27. WHILE SUBSTITUTING THE NEW PROPERTY BY THE VENDOR, THE ASSESSEE GOT EXEMPTION OF THE STAMP DUTY, REGISTRAT ION FEES BY THE STATE GOVERNMENT AS THIS IS AN ALTERNATIVE P LOT AND IN LIEU OF PLOT NO. 259A/A ADMEASURING 600 SQY IN TS NO . 1, BLOCK J, WARD-12, MLA COLONY, BANJARA HILLS, HYDERA BAD. SINCE SMT. SAMYUKTA BULLAYYA HAS ALREADY PAID STAMP DUTY FOR THE PLOT NO. 259A/A VIDE DOCUMENT NO. 976/85. THE GOVERN MENT NOTIFICATION DATED 26.4.2007 WAS ON RECORD AT PAGE NO. 40 OF PAPER BOOK. SRI VENKATESWARA CO-OPERATIVE HOUSE BU ILDING SOCIETY LTD. ALSO ISSUED NOC VIDE LETTER DATED 30.6 .2004 TO SMT. SAMYUKTA BULLAYYA AND GHMC TO ACCORD SANCTION OF HOUSING PLAN IN THE SAID LAND WHICH IS ALSO KEPT ON RECORD AT ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 24 PAGE 41 OF THE PAPER BOOK. THERE IS ALSO POLICE CO MPLIANT AND COPIES OF JUDGEMENT DECLARING OWNERSHIP OF THE PROP ERTY WHEN THE OWNERSHIP WAS BROUGHT TO DISPUTE AND THE AGREEMENT OF SALE CUM GPA EXECUTED IN THE YEAR 2004 BEARS THE TESTIMONY TO THE FACT THAT THE ASSESSEE WAS THE LAWFUL AND TRUE OWNER OF THE LAND SINCE 2004. THE ASSESSEE HA S BEEN FIGHTING FOR ABSOLUTE OWNERSHIP OF THE PROPERTY IN THE COURT OF LAW SINCE 2004. 28. NO PERSON WOULD BE SO NAIVE TO FIGHT CASES WHEN ONE IS NOT AN OWNER OF THE PROPERTY IF ONE TAKES INTO ACCO UNT THE FACTS OF THE CASE IN WHICH THE ASSESSEE WAS HOLDING PROPERTY SINCE 2004. THE CASE WAS FOUGHT IN THE YEAR 2004 AN D THAT ITSELF PROVES THE BONA FIDES OF THE CASE AS THE ASS ESSEE, BEING THE OWNER TOOK UPON HIMSELF IN LEGALLY PROVING THAT HE IS THE LAWFUL OWNER SINCE 2004 AFTER WINNING THE CASE FROM JUDICIAL AUTHORITIES. THE POWER OF ATTORNEY WAS REGISTERED I N 2007 WAS ONLY TO SATISFY THE NEW BUYER. LOOKING INTO THE SIT UATIONAL FACTS AND THE CONCRETE DOCUMENTARY EVIDENCES AVAILA BLE WITH THE ASSESSEE AND HAVING SUBMITTED TO THE DEPARTMENT AMPLY DEMONSTRATE THE TRUE FACT THAT THE ASSESSEE WAS THE LEGAL OWNER OF THE PROPERTY SINCE 2004. THE DEPARTMENT CA NNOT TAKE A NARROW VIEW THAT THE YEAR OF HOLDING THE PRO PERTY WAS IN THE YEAR 2007 AS THE FACTS ARE TOTALLY IN TANDEM WITH THE ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 25 DOCUMENTARY EVIDENCES HELD WITH THE ASSESSEE AS TO THE YEAR IN WHICH THE ASSESSEE HELD OWNERSHIP OF THE PROPERT Y SINCE 2004. ONE CANNOT BY ANY STRETCH OF IMAGINATION DRAW CONCLUSION THAT THE ASSESSEE BECAME THE OWNER SINCE 2007 IN VIEW OF THE ABOVE FACTS. THE NEW BUYER WHO PURCHAS ED THE PROPERTY FROM THE ASSESSEE IN THE YEAR 2007, AS A PRECAUTIONARY MEASURE AND UNDER ABUNDANT CAUTION, T O AVOID ANY FUTURE LITIGATION, INSISTED ON A DULY REGISTERE D POWER OF ATTORNEY WITH THE OLD OWNER IN FAVOUR OF THE ASSESS EE. THIS POWER OF ATTORNEY IS ONLY AN INTERMEDIARY DOCUMENT FACILITATING THE TRANSFER OF PROPERTY PROTECTING IN TERESTS OF THE NEW BUYER AND DOES NOT PER SE INDICATE THAT THE ASSESSEE PURCHASED THE PROPERTY IN THE YEAR 2007. REGISTRATI ON OF A POWER OF ATTORNEY DOCUMENT IS ONLY A TECHNICAL REQU IREMENT TO SATISFY THE NEW BUYER WITHOUT ABDICATING THE OWN ERSHIP OF THE ASSESSEE WHO WAS THE OWNER SINCE 2004. THIS MER E TECHNICALITY OF REGISTERING WAS TO COMPLY WITH THE BUYER'S INSISTENCE IN ENSURING A PROCESS AND THE SALE THERE OF FROM THE ASSESSEE TO THE NEW BUYER. THIS DOES NOT IN ANY WAY DEFLECT THE FACT THAT THE ASSESSEE OWNED PROPERTY IN THE YE AR 2004, WHICH IS THE CORRECT POSITION UNDER LAW AND THAT IS VERY CLEARLY COVERED WITHIN THE DEFINITION OF SECTION 2( 47) OF THE ACT. THERE CANNOT BE ANY KIND OF AVERMENT MADE THAT THE ASSESSEE OWNED PROPERTY ONLY IN THE YEAR 2007. THE ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 26 CIRCUMSTANCES OF THE CASE BEING PECULIAR BECAUSE OF THE LAND BEING UNDER DISPUTE, THE DEPARTMENT SHOULD NOT TAKE A NARROW VIEW OF THE INTERPRETATION THAT THE AGREEMEN T OF SALE SHOULD HAVE BEEN REGISTERED. THE FACT THAT THE ASSE SSEE FOUGHT THE CASE HAVING BEEN THE OWNER SINCE 2004 PR OVES THE BONA FIDES AND THE CONCLUSIVE EVIDENCE THAT HE IS A TRUE OWNER SINCE 2004. THERE IS NO INSISTENCE OR MANDATO RY REQUIREMENT THAT ASSESSEE IN HIS OWN JUDGMENT DELAY S THE NOTIFICATION OF CHANGE IN THE OWNERSHIP IN THE RECO RDS AS THE ASSESSEE WAS IN THE POSSESSION OF THE SAID PROPERTY . THERE BEING A DISPUTE, THE ASSESSEE UPON THE RESOLUTION O F THE CASE, SOLD THE PROPERTY AFTER HOLDING THE PROPERTY FOR TH REE COMPLETED YEARS. OUR VIEW IS ALSO SUPPORTED BY THE FOLLOWING JUDGEMENTS AS RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE: (A) CIT VS. RL SOOD, 108 TAXMAN 227 (DELHI) - THE ASSES SEE WAS ALLOTTED THE HOUSE BUT THE POSSESSION OF THE FL AT WAS HANDED OVER AFTER THE ALLOTMENT DATE. THEREFORE , DRAWING FROM THE SAME ANALOGY, ALLOTMENT OR TAKING OVER POSSESSION AND ACQUIRING SUBSTANTIAL DOMAIN OV ER THE OWNERSHIP OF THE PROPERTY IS THE MOST CRITICAL FACTOR IN DETERMINING THE DATE ON WHICH IT HAS BEEN ACQUIR ED AND NOT ON REGISTERING THE DOCUMENT PER SE. ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 27 (B) CIT VS. JINDAS PANCHAND GANDHI, 279 ITR 552 (GUJ) - IN THIS CASE IT WAS HELD THAT ONE HAS TO TAKE INTO VIE W THE SPIRIT OF THE SECTION CLAIMING EXEMPTION UNDER CAPI TAL GAINS RATHER THAN LOOK AT THE TECHNICALITIES OF DAT ES. THE CASE DEALT WITH AN INDIVIDUAL WHO WAS A MEMBER OF A N APARTMENT COMPLEX AND WAS ALLOTTED A FLAT AND THE OWNERSHIP VESTED TO THE INDIVIDUAL ON THE DATE OF ALLOTMENT AND NOT ON THE TECHNICAL GROUND THAT THE PROPERTY WAS COMPLETED LATER. DRAWING ON THE SAME ANALOGY IN THIS CASE THE ASSESSEE ON THE OTHER HAND TOOK COMPLETE POSSESSION OF THE PLOT VIDE A CONTRAC T DULY NOTARIZED WHICH IS THE CONCLUSIVE EVIDENCE IN DETERMINING THE OWNERSHIP OF THE PROPERTY. THEREFOR E IT CANNOT BE TAKEN AS OTHERWISE THAT THE ASSESSEE HELD THE PROPERTY FOR LESS THAN THREE YEARS SO AS TO BE DENI ED THE EXEMPTION UNDER LONG TERM CAPITAL GAINS TAX. THE CO URTS HAVE HELD IN THE ABOVE TWO CASES EVEN MORE LIBERALL Y THAN IS THE CASE WITH THE ASSESSEE WHO BECAME THE OWNER AND WAS IN POSSESSION OF THE PROPERTY FOR MOR E THAN THREE YEARS FROM THE FACTS AS MENTIONED ABOVE. VARIOUS CASE LAWS, AS MENTIONED ABOVE, SUPPORT THE ASSESSEE'S CONTENTION THAT HANDING OVER POSSESSION AFTER RECEIVING FULL CONSIDERATION IS THE DEFINITIV E ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 28 DECLARATION OF TRANSFER UNDER THE IT ACT AS PER THE DEFINITION U/S 2(47) AND REGISTRATION IS ONLY A PROC ESS THEREFORE, THE ASSESSEE IS RIGHTFULLY CLAIMING EXEM PTION U/S 54F AND REQUESTS THE ASSESSING OFFICER TO CONSID ER THE CASE FAVOURABLY LOOKING INTO THE TRUE FACTS AND NOT DRAW ANY LEGAL INFIRMITIES IN PROVING THAT THE TITL E OF THE OWNERSHIP IS NOT VESTED WITH THE ASSESSEE SINCE 200 4. 29. FURTHER THE ALLEGATION OF THE DEPARTMENT IS THAT AGREEMENT OF SALE CUM IRREVOCABLE GP DATED 24 TH JULY, 2007 AND AGREEMENT OF SALE DATED 21 ST JULY, 2004 ARE TWO DISTINCT TRANSACTIONS AND IT CANNOT BE SAID THAT THEY ARE TH E SAME AS PAYMENT CONSIDERATION ARE DIFFERENT. THE FIRST PAY MENT OF RS. 5 LAKHS IS WITH REFERENCE TO THE AGREEMENT OF S ALE DATED 21 ST JULY, 2004 WAS BY CASH. THE PAYMENT OF RS. 5 LAKH S WITH REFERENCE TO THE AGREEMENT OF SALE CUM GPA IS BY CH EQUE BEARING NO. 085479 DATED 23.7.2007 DRAWN ON ICICI B ANK, DILSUKHNAGAR BENCH, HYDERABAD BRANCH, HYDERABAD, AP . SINCE AS PER WHICH SALES CONSIDERATION HAS BEEN PAS SED FOR EACH AGREEMENT SEPARATELY BOTH THE AGREEMENTS CANN OT BE CONSIDERED AS ONE AND THE SAME SO AS TO RELATE BACK THE AGREEMENT OF SALE DATED 24 TH JULY, 2007 TO THE SALE AGREEMENT DATED 21 ST JULY, 2004. HOWEVER, THE MATERIAL ON RECORD SUGGEST THAT CHEQUE BEARING NO. 0785479 DATED 23.7. 2007 ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 29 ISSUED BY THE ASSESSEE FROM A/C. NO. 024301505741 IS NOT PRESENTED FOR CLEARANCE TILL 24.2.2014 AS PER CERTI FICATE GIVEN BY ICICI BANK WHICH READS AS FOLLOWS: 'ICICI BANK DT 25.02.2014 REF NO. ICBK/1314/2013-14 TO WHOMSOEVER CONCERNED THIS IS CONFIRM THAT CHEQUE NO. 085479 ISSUED BY MR . RATHOD VRAJENDRA KARAN VARMA FROM ACCOUNT NO. 024301505741 IS NOT PRESENTED FOR CLEARANCE AS ON 24.02.2014 AS PER THE STATEMENT ENCLOSED. ACCOUNT STATEMENT FROM 1.7.2007 TO TILL DATE ENCLOS ED FOR YOUR KIND REFERENCE. THIS CONFIRMATION IS ISSUED AS PER THE SPECIAL REQU EST OF THE CUSTOMER WITHOUT ANY RISK OR LIABILITY ON THE PART OF THE BANK OR THE OFFICIAL SIGNING THIS LETTER ON ITS BEHALF. FOR ICICI BANK LTD. SD/- AUTHORISED SIGNATORY' 30. AS SEEN FROM THE ABOVE FACTS OF THE CASE, SMT. SAMY UKTA BULLAYYA HAD ALREADY GIVEN POSSESSION OF PROPERTY T O THE ASSESSEE VIDE THE FIRST SALE AGREEMENT DATED 21 ST JULY, 2004. DUE TO THE REASONS BEYOND THE CONTROL OF THE PARTIE S, THE VENDOR LOST THAT PROPERTY AND GOT ALLOTTED ALTERNAT E PLOT IN EXCHANGE OF THE FIRST PLOT. BEING SO, THE PERUSAL OF THE FACTS SHOWS THAT THERE IS NO FAULT FROM THE SIDE OF THE A SSESSEE AND IT IS BEYOND ITS CONTROL AND THE PAYMENT FOR WHICH ORIGINAL PLOT MADE WAS ADJUSTED TOWARDS SALE CONSIDERATION O F THE SECOND PROPERTY AS THE CHEQUE ISSUED FOR PURCHASE O F SECOND ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 30 PROPERTY WAS NOT AT ALL ENCASHED AS CERTIFIED BY TH E BANK AS ABOVE, WE ARE OF THE OPINION THAT THE DATE OF THE SECOND SALE AGREEMENT RELATES BACK TO THE DATE ON WHICH THE AGR EEMENT OF SALE WAS ORIGINALLY EXECUTED IN FAVOUR OF SMT. SAMY UKTA BULLAYYA. THEREFORE, THE ASSESSEE IS DEEMED TO BE THE OWNER OF THE PROPERTY WITH EFFECT FROM THE DATE OF FIRST SALE AGREEMENT DT. 21.7.2004 AND PERIOD OF HOLDING THE A SSET IS TO BE COMPUTED FROM 21.07.2004 AND THE CAPITAL GAIN SO ARRIVED IS NOT SHORT TERM CAPITAL GAIN AND IT IS LONG TERM CAPITAL GAIN AS THE ASSESSEE HELD THE PROPERTY FOR MORE THAN 36 MONTHS. OUR ABOVE VIEW IS FORTIFIED BY THE JUDGEMENT OF JUR ISDICTIONAL HIGH COURT IN THE CASE OF SHYAMAL RAO VS. CIT (SUPR A). FURTHER WE ALSO TAKE SUPPORT FROM THE FOLLOWING JUD GEMENTS: (A) ACIT VS. P.R. CHOCKALINGAM [135 ITD 75 (CHENNAI) (TM)] WHEREIN HELD: 'WHEN THE ABOVE SEQUENCES OF EVENTS ARE CONSIDERED IN A WHOLESOME MANNER, IT IS EVIDENT THAT THE POSSESSION OF THE PROPERTY WAS HANDED OVER TO THE BUYERS AND THE CONS IDERATION WAS PAID BY THE BUYERS ON 28-11-1999 ITSELF. THIS G IVING AWAY OF THE POSSESSION OF THE PROPERTIES TO THE BUYERS A GAINST RECEIPT OF THE CONSIDERATION OF THE TRANSACTION, HAS SATISF IED THE REQUIREMENTS OF 'TRANSFER' WITHIN THE MEANING OF SE CTION 2(47) OF THE INCOME-TAX ACT, 1961 AND WITHIN THE MEANING OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT. THEREFORE, IT IS CLEAR THAT THE TRANSFER OF PROPERTY IN THIS CASE HAS TAKEN PLA CE ON 28-11- 1999 ITSELF. IF THAT DATE IS TAKEN AS THE DATE OF T RANSFER OF THE PROPERTY, IT IS TO BE SEEN THAT THE ASSESSEE HAD IN VESTED THE SALE PROCEEDS IN HIS BANGALORE PROPERTY WITHIN A PERIOD OF ONE YEAR PRIOR TO THE DATE OF TRANSFER. THE ASSESSEE HAS MAD E THE INVESTMENT IN HIS BANGALORE PROPERTY ON 9-12-1998. [PARA 9] NOW, THE QUESTION IS AS TO WHEN THE FINAL AND BINDI NG NOC WAS ISSUED BY THE APPROPRIATE AUTHORITY IN THE PRESENT CASE. THE ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 31 FINAL NOC WAS ISSUED ON 21-2-2000. THE REVENUE IS C LINCHING ON THIS DATE TO SHOW THAT THE NOC WAS ISSUED ON 21- 2-2000 AND, THEREFORE, THE TRANSFER COULD HAVE BEEN TAKEN PLACE ONLY AFTER THAT DATE AND NEVER BEFORE THAT DATE AND PART ICULARLY ON 28-11-1999. THIS ARGUMENT OF THE REVENUE IS HIGHLY TECHNICAL. THE REVENUE HAS OVERLOOKED THE SEQUENCE OF EVENTS P RECEDED THE ISSUE OF FINAL NOC BY THE APPROPRIATE AUTHORITY ON 21-2- 2000. TO REPEAT AGAIN, THE ORIGINAL AGREEMENT OF SA LE WAS EXECUTED ON 28-6-1996. THE APPROPRIATE AUTHORITY HA D ISSUED THE NOC ON THE BASIS OF THAT AGREEMENT ON 8-10-1996 ITSELF. THEREAFTER THE CIRCUMSTANCES WARRANTED TO REVISE TH E AGREEMENT TWICE, ONE FOR RESTATING THE ACTUAL EXTEN T OF THE PROPERTY AND THE OTHER FOR RESTATING THE NEGOTIATED CONSIDERATION OF SALE. THE ASSESSEE HAD FILED REVIS ED APPLICATIONS FOR NOC BEFORE THE APPROPRIATE AUTHORI TY ON BOTH OCCASIONS WHEN THE ORIGINAL AGREEMENT WAS RESTATED. MEANWHILE, THE POSSESSION WAS ALSO HANDED OVER TO T HE BUYERS AND THE CONSIDERATION WAS ALSO RECEIVED FROM THEM. THEREFORE, IT IS NECESSARY TO CONSIDER ALL THESE EVENTS AS INS EPARABLE SEGMENTS OF A SINGLE AND COMPOSITE TRANSACTION. THE ORIGINAL SALE AGREEMENT WAS EXECUTED BY THE PARTIES ON 28-6- 1996. THE SUBSEQUENT RESTATEMENTS OF THE AGREEMENT WERE ONLY TO INCORPORATE MODIFICATIONS AND NOT TO ALTER OR SUBST ITUTE THE ORIGINAL AGREEMENT. THE APPROPRIATE AUTHORITY HAD A LREADY GRANTED ITS NOC ON THE BASIS OF THE ORIGINAL AGREEM ENT ON 8- 10-1996 ITSELF. THIS FIRST NOC ISSUED BY THE APPROP RIATE AUTHORITY HOLDS GOOD FOR THE PROVISIONS OF CHAPTER XX-C OF THE INCOME-TAX ACT, 1961. THE LATEST NOC ISSUED BY THE APPROPRIATE AUTHORITY ON 21-2-2000 IS ONLY A REVISI ON OF THE FIRST NOC GRANTED ON 8-10-1996. THE LATEST NOC ISSU ED BY THE APPROPRIATE AUTHORITY ON 21-2-2000 CANNOT BE CONSID ERED IN ISOLATION OF THE EARLIER NOC ISSUED BY THE APPROPRI ATE AUTHORITY ON 8-10-1996. IT IS TO BE SEEN THAT THE L ATEST NOC ISSUED BY THE APPROPRIATE AUTHORITY ON 21-2-2000 RE LATES BACK TO THE FIRST NOC ISSUED BY THE APPROPRIATE AUTHORIT Y ON 8-10- 1996. THE RESTATEMENTS OF THE ORIGINAL AGREEMENT AN D THE RE- ISSUE OF NOC HAVE NOT DISTURBED THE FIRST NOC ISSUE D BY THE APPROPRIATE AUTHORITY. THEREFORE, IT IS TO BE SEEN THAT THE NOC ISSUED ON 21-2-2000 RELATES BACK TO 8-10-1996 AND A S SUCH REINFORCES THE FACT OF TRANSFER OF THE PROPERTY ON 28-11-1999, WHEN THE POSSESSION WAS HANDED OVER TO THE BUYERS. IN THESE CIRCUMSTANCES, AS FAR AS THIS CASE IS CONCERNED, TH EREFORE, THERE IS COMPLETE COMPATIBILITY BETWEEN THE APPLICATION O F SECTION 2(47) OF THE INCOME-TAX ACT, 1961 WITH SECTION 53A OF THE TRANSFER OF PROPERTY ACT AND CHAPTER XX-C. [PARA 1 0] IN VIEW OF THE ABOVE, THE ORDER OF THE ACCOUNTANT M EMBER, IS TO BE AGREED WITH. [PARA 11] ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 32 (B) SUNIL SIDDHARTHBHAI VS. CIT & ANR. (156 ITR 509) (SC) WHEREIN HELD THAT : 'IN ITS GENERAL SENSE, THE EXPRESSION 'TRANSFER OF PROPERTY' CONNOTES THE PASSING OF RIGHTS IN PROPERT Y FROM ONE PERSON TO ANOTHER. IN ONE CASE, THERE MAY BE A PASS ING OF THE ENTIRE BUNDLE OF RIGHTS FROM THE TRANSFEROR TO THE TRANSFEREE. IN ANOTHER CASE, THE TRANSFER MAY CONSIST OF ONE OF TH E ESTATES ONLY OUT OF ALL THE ESTATES COMPRISING THE TOTALITY OF R IGHTS IN THE PROPERTY. IN A THIRD CASE, THERE MAY BE A REDUCTION OF THE EXCLUSIVE INTEREST IN THE TOTALITY OF RIGHTS OF THE ORIGINAL OWNER INTO ET JOINT OR SHARED INTEREST WITH OTHER PERSONS . AN EXCLUSIVE INTEREST IN PROPERTY IS A LARGER INTEREST THAN A SH ARE IN THAT PROPERTY. TO THE EXTENT TO WHICH THE EXCLUSIVE INTE REST IS REDUCED TO A SHARED INTEREST, THERE IS A TRANSFER OF INTEREST.' 31. IN VIEW OF THIS, WE ARE INCLINED TO HOLD THAT THE A SSESSEE IS ENTITLED FOR DEDUCTION U/S. 54F OF THE ACT AS CLA IMED BY HIM AND THE SAME IS TO BE GRANTED TO THE ASSESSEE. THE OTHER GROUND RELATING TO LEVY OF INTEREST U/S. 234A AND 23 4B IS CONSEQUENTIAL IN NATURE AND DO NOT REQUIRE ANY ADJU DICATION. 32. IN THE RESULT, ASSESSEE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST MARCH, 2014. SD/- (SAKTIJIT DEY) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 21 ST MARCH, 2014 TPRAO COPY FORWARDED TO: 1. MR. VRAJENDRA KARAN VARMA RATHOD, PREM KUTIR, PL OT NO. 24, MADHURA NAGAR, SRIRAM NAGAR, MANSOORABAD, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-9(3), HYDERABAD. ITA NO. 1177/HYD/2012 MR. VRAJENDRA KARAN VARMA RATHOD ============================== 33 3. THE CIT(A)-VI, HYDERABAD. 4. THE CIT-VI, HYDERABAD 5. THE DR BENCH 'A', ITAT, HYDERABAD