SURESHCHANDRA AGARWAL, MUMBAI V. ITO 20(3)3), MUMBAI

ITA 2376/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55153 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 09-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 26-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: ASHIT MEHTA
• Keywords: Capital asset; Depreciation; Share purchase agreement; Retraction
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F,MUMBAI BEFORE SHRI T.R. SOOD (AM) & SHRI V.DURGA RAO (JM) I.T.A.NO.2376/MUM/2010 (A.Y. 2005-06) ) SHRI SURESHCHANDRA AGARWAL, 405, VALENCIA, SUNDERVAN COMPLEX, OFF LOKHANDWALA COMPLEX, ANDHERI (W), MUMBAI-400 053. AAAPA5250A VS. INCOME-TAX OFFICER, WARD-20(3)(3), I.T.OFFICE, PIRAMAL CHAMBERS,MUMBAI. APPELLANT RESPONDENT I.T.A.NO.2377/MUM/2010 (A.Y. 2005-06) ) SMT. SUSHILA S. AGARWAL, 405, VALENCIA, SUNDERVAN COMPLEX, OFF LOKHANDWALA COMPLEX, ANDHERI (W), MUMBAI-400 053. AAAPA1534A VS. INCOME-TAX OFFICER, WARD-20(3)(3), I.T.OFFICE, PIRAMAL CHAMBERS,MUMBAI. APPELLANT RESPONDENT APPELLANTS BY S/SHRI VIJAY MEHTA & ASHIT MEHTA. RESPONDENT BY SHRI S .K. SINGH. DATE OF HEARING 09-08-2011 DATE OF PRONOUNCEMENT 14-9-2011 O R D E R PER T.R. SOOD, AM : IN BOTH THESE APPEALS, VARIOUS IDENTICAL GROUNDS H AVE BEEN RAISED BUT THE ONLY DISPUTE INVOLVED IS REGARDING DENIAL OF DE DUCTION U/S.54 OF THE I.T. ACT, 1961. THIS DISPUTE AROSE BECAUSE BOTH THE ASSE SSEES, WHO WERE 50% OWNER OF A FLAT IN A BUILDING KNOWN AS USHA KUNJ S ITUATED AT JUHU, MUMBAI- 49, WAS STATED TO HAVE BEEN SOLD ON 30-04-2004 FOR TOTAL CONSIDERATION OF RS.62,50,000/- AND SHARE OF EACH ASSESSEE WAS RS.31 ,25,000/-. ON THIS, ITA NOS.2376-2377/M/10 SURESHCHANDRA AGARWAL & SUSHILA S.AGARWAL 2 CAPITAL GAIN AROSE AMOUNTING TO RS.24,93,910/- EACH AROSE TO BOTH THE ASSESSEES. AGAINST THIS, BOTH THE ASSESSEES CLAIMED DEDUCTION U/S.54 AGAINST THE PURCHASE OF A NEW FLAT AT 403/404, VALENCIA, MU MBAI-53, WHICH WAS PURCHASED VIDE AGREEMENT DATED 25-06-2003 REGISTERE D ON 09-07-2003. THE CLAIM OF THE ASSESSEES WAS THAT THE NEW FLAT HAD BE EN PURCHASED WITHIN ONE YEAR FROM THE SALE OF OLD FLAT. IN SUPPORT OF THE S AME, THE ASSESSEE HAD FILED PHOTOCOPIES OF THE MAINTENANCE BILL FOR THE MONTH O F APRIL & MAY WHICH WERE IN THE NAMES OF MS. RANNA MODI & ORS. I.E. NEW OWNE RS. THE ASSESSEE HAD ALSO FILED COPY OF THE AGREEMENT DATED 23-04-2004. THE AO MADE ENQUIRIES WITH MS. RANNA MODI WHO SUBMITTED COPY OF THE DEED OF TRANSFER DATED 26-08-2004 WHICH WAS ALSO REGISTERED ON 26-08-2004. AS THERE WERE TWO AGREEMENTS, FURTHER ENQUIRIES WERE MADE. IT WAS ALS O STATED ON BEHALF OF MS. RANNA MODI THAT INITIAL AGREEMENT WAS MADE ON 23-04 -2004 FOR CONFIRMATION OF PURCHASE OF FLAT AND AN AMOUNT OF RS.17 LAKHS WA S PAID ON TWO DIFFERENT DATES. THEREAFTER, FULL PAYMENT WAS MADE ON 30-04-2 004. HOWEVER, STAMP DUTY WAS NOT PAID. POSSESSION WAS ALSO TAKEN ON 30- 04-2004 AND DEED OF TRANSFER WAS ALSO EXECUTED ON THAT DAY. THE PURCHAS ER HAD ALSO MADE APPLICATION TO THE SOCIETY FOR SUBMISSION OF NECESS ARY PAPERS. FINALLY, THE DEED OF TRANSFER WAS REGISTERED ON 26-08-2004. ENQU IRY LETTER WAS ALSO ISSUED TO USHA SUNDER PREMISES CHS AND IN RESPONSE THE SOC IETY FURNISHED THE SHARE CERTIFICATE SHOWING THE TRANSFER DATE OF 27-08-2004 . THEREAFTER, THE AO CONFRONTED THE SOCIETY REGARDING THE MAINTENANCE BI LL WHICH WAS ISSUED EARLIER IN THE NAME OF MS. RANNA MODI AND THE SOCIE TY STATED THAT BILL WAS ISSUED UNDER THE WRONG IMPRESSION AND HAD BEEN RECT IFIED LATER ON. SINCE NOBODY APPEARED ON SUMMONS ON BEHALF OF THE SOCIETY , ENQUIRIES WERE ITA NOS.2376-2377/M/10 SURESHCHANDRA AGARWAL & SUSHILA S.AGARWAL 3 FURTHER MADE THROUGH THE INSPECTOR FROM THE SOCIETY AND IT WAS CONFIRMED THAT THE MAINTENANCE BILLS ISSUED IN THE NAME OF MR S. RANNA MODI WERE WRONGLY ISSUED AND LATER ON CORRECT BILLS WERE ISSU ED IN THE NAMES OF THE ASSESSEES. THE ASSESSEES WERE CONFRONTED WITH THESE DETAILS AND THE ASSESSEE FILED DETAILED SUBMISSIONS AND PLACED RELI ANCE ON CERTAIN CASE LAWS ALSO. THE AO, AFTER EXAMINING THE SUBMISSIONS, REFE RRED TO THE DEFINITION OF TRANSFER IN SEC. 2(47). HE FURTHER OBSERVED THAT THOUGH AS PER CLAUSE (V), IF POSSESSION WAS GIVEN AND FULL CONSIDERATION WAS REC EIVED, THEN TRANSACTION NEEDS TO BE CONSIDERED AS TRANSFER BUT, AFTER THE AMENDMENT TO SEC. 53A OF THE TRANSFER OF PROPERTY ACT, EVEN SUCH AGREEMENT W AS REQUIRED TO BE REGISTERED MANDATORILY AND THEREFORE THE TRANSFER D EED DATED 30-04-2004 COULD NOT BE TREATED AS TRANSFER. HE ALSO DISCUSS ED VARIOUS CASE LAWS AND ULTIMATELY RELIED ON THE DECISION OF HONBLE SUPREM E COURT IN THE CASE OF MCDOWELL (1985) 154 ITR 148 AND OBSERVED THAT THE A SSESSEE HAS RESORTED TO DUBIOUS METHODS BY RESORTING TO A COLOURABLE DEVICE TO CLAIM DEDUCTION U/S.54. ULTIMATELY, HE HELD THAT THE FLAT WAS SOLD ON 27-08-2004 WHICH MEANS THE NEW FLAT WAS NOT ACQUIRED WITHIN ONE YEAR FROM THE DATE OF SUCH TRANSFER AND ACCORDINGLY THE ASSESSEE WERE HELD TO BE NOT EN TITLED TO DEDUCTION U/S.54. 2. BEFORE THE CIT(A), THE SUBMISSIONS MADE BEFORE T HE AO WERE REITERATED AND IT WAS EMPHASIZED THAT USHA KUNJ PRO PERTY WHICH WAS JOINTLY OWNED BY THE ASSESSEES, WAS SOLD ON 30-04-2004. SIN CE FULL CONSIDERATION WAS RECEIVED AND POSSESSION WAS ALSO GIVEN, THOUGH REGISTRATION WAS REQUIRED FOR THESE DOCUMENTS, BUT THE SAME WAS DELAYED BY PU RCHASER AND FOR REGISTRATION PURPOSE A FRESH TRANSFER DEED WAS EXEC UTED ON 26-08-2004. IT ITA NOS.2376-2377/M/10 SURESHCHANDRA AGARWAL & SUSHILA S.AGARWAL 4 WAS ALSO EMPHASIZED THAT ALL THE NECESSARY DOCUMENT S SUCH AS SHARE CERTIFICATE, APPLICATION TO THE SOCIETY FOR TRANSFE R OF SUCH SHARES IN FAVOUR OF TRANSFEREES, NOC AND ORIGINAL AGREEMENT DATED 22-05 -1980 WERE ALSO HANDED OVER TO THE TRANSFEREES ON 30-04-2004. THEREFORE, A LL THE FORMALITIES OF TRANSFER HAD BEEN COMPLETED AND ACCORDINGLY THE ASS ESSEES WERE ENTITLED FOR THE EXEMPTION. RELIANCE WAS ALSO PLACED ON THE DECI SION OF HONBLE SUPREME COURT IN THE CASE OF PODAR CEMENT (226 ITR 625) AND SOME OTHER HIGH COURT DECISIONS. THE LD. CIT(A), AFTER EXAMINATION OF THE SUBMISSIONS, DID NOT AGREE WITH THE SAME AND EMPHASIZED THAT SINCE SEC. 53A OF THE TRANSFER OF PROPERTY ACT ITSELF HAS BEEN AMENDED, THEREFORE, UNLESS AND UNTIL THE AGREEMENT WAS REGISTERED, THE SAME WOULD NOT AMOUNT TO TRANSFER. AFTER DETAILED DISCUSSION, HE CONFIRMED THE ACTION OF THE AO. 3. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE POINT ED OUT THAT AS FAR AS PURCHASE OF NEW FLAT IS CONCERNED, THERE IS NO DISP UTE REGARDING THE DATE OF PURCHASE WHICH HAS BEEN PURCHASED ON 25-06-2003 AND THAT AGREEMENT WAS REGISTERED ON 09-07-2003. THE DISPUTE IS REGARDING THE DATE OF SALE OF FLAT. THEN HE REFERRED TO THE AGREEMENT OF TRANSFER DATED 23-04-2004, COPY OF WHICH IS PLACED AT PAGES 1 TO 8 OF PAPER BOOK. THRO UGH THIS AGREEMENT, THE ASSESSEES AS PART OWNERS AGREED TO SELL THE FLAT BE ARING NO.402 IN USHA SUNDER PREMISES CHS ON 23-04-2004 TO MS. RANNA ASHO K MODI, MR. ASHOK BRIJLAL MODI AND MRS. KOKILA ASHOK MODI FOR A TOT AL CONSIDERATION OF RS.62,50,000/- (ASSESSEES HALF SHARE WOULD BE RS.3 1,25,000/-). IN THIS AGREEMENT, THE OWNERSHIP HAS BEEN DESCRIBED IN THE FORM OF BEING REGISTERED MEMBERS OF USHA SUNDER PREMISES CHS BY WAY OF HOLDI NG 5 SHARES OF THE SOCIETY OF RS.50/- EACH. HE POINTED THAT ON 23-04-2 004 THE ASSESSEE ALONG ITA NOS.2376-2377/M/10 SURESHCHANDRA AGARWAL & SUSHILA S.AGARWAL 5 WITH MRS.SUSHILA AGARWAL RECEIVED RS.8,50,000/- EAC H. IT WAS AGREED VIDE CLAUSE NO.2(B) THAT BALANCE AMOUNT OFRS.45,50,000/- OF THE TOTAL CONSIDERATION WOULD BE RECEIVED AT THE TIME OF POSS ESSION ON OR BEFORE 30-04- 2004. THROUGH CLAUSE 3, IT WAS AGREED THAT THE TRAN SFEROR, I.E., THE ASSESSEE ALONG WITH MRS. SUSHILA AGARWAL, WOULD EXECUTE THE DEED OF TRANSFER AFTER RECEIPT OF THE AMOUNT MENTIONED IN CLAUSE 2(B). THE REAFTER, ANOTHER DEED OF TRANSFER WAS EXECUTED ON 30-4-2004, COPY OF WHICH I S AVAILABLE AT PAGES 9 TO 13 OF THE PAPER BOOK. IN THIS DEED, THE ASSESSEE HA D ACKNOWLEDGED THE BALANCE PAYMENT OF RS.45,50,000/- WHICH WAS PAID BY CHEQUE NO.420536 DATED 29-04-2004 AMOUNTING TO RS.22,75,000/-TO THE ASSESSEE AND BALANCE OF RS.22,75,000/- TO MRS. SUSHILA AGARWAL VIDE CHEQUE NO.420535 DATED 29-04-2004. IN CLAUSE 3, IT WAS CLEARLY STATED THAT TRANSFERORS HAD HANDED OVER ALL THE PAPERS AND DOCUMENTS OF THE SAID FLAT AS WELL AS QUIET, VACANT AND PHYSICAL POSSESSION OF THE SAID FLAT TO THE TRANSFE REES. IN CLAUSE 5, SPECIFIC REFERENCE WAS MADE FOR HANDING OVER OF (1) SHARE CE RTIFICATE NO.7 REPRESENTING THE SHARES OF SOCIETY, (2) APPLICATION TO THE SOCIETY FOR TRANSFER OF SHARES IN FAVOUR OF THE TRANSFEREES, (3) APPLICA TION OF TRANSFER OF ELECTRIC METER IN THE NAME OF THE TRANSFEREES, (4) NOC RECEI VED FROM THE SOCIETY AND (5) ORIGINAL AGREEMENT DATED 22-05-1990 BY WHICH TH E TRANSFERORS HAD ACQUIRED THE SAID FLAT. HE SUBMITTED THAT RECEIPT O F FULL CONSIDERATION AND HANDING OVER PHYSICAL POSSESSION OF THE FLAT AS WEL L AS OF ORIGINAL DOCUMENTS INCLUDING THE SHARE CERTIFICATE CLEARLY SHOW THAT W HATEVER WAS REQUIRED TO BE DONE FOR THE TRANSFER OF THIS FLAT WAS DONE THROUGH AGREEMENT DATED 30-04-2004 AND THEREFORE THAT DATE SHOULD BE RECKON ED AS THE DATE OF TRANSFER. THEN HE REFERRED TO PAGE 14 OF THE PAPER BOOK, WHICH IS COPY OF THE ITA NOS.2376-2377/M/10 SURESHCHANDRA AGARWAL & SUSHILA S.AGARWAL 6 BILL ISSUED BY THE SOCIETY ON 01-05-2004 IN THE NAM E OF MRS. RANNA MODI FOR RS.1,915/- AGAINST WHICH MS. RANNA MODI HAD PAID TH E CHEQUE, COPY OF WHICH IS AVAILABLE AT PAGE 15 OF THE PAPER BOOK. THEN HE REFERRED TO PAGE 16, WHICH IS COPY OF THE LETTER WRITTEN BY MR. ASHOK MODI TO HE SECRETARY OF USHA SUNDER PREMISES CHS LTD. STATING THAT THEY HAVE TAKEN PEAC EFUL VACANT POSSESSION OF THE S;AID FLAT FROM MRS. & MR. SURESHCHANDRA AGARWA L, I.E., THE ASSESSEES. PAGE 17 IS COPY OF LETTER WRITTEN BY MS. RANNA MODI , MR. ASHOK B. MODI AND MRS. KOKILA A. MODI TO THE SECRETARY, USHA-SUNDER P REMISES CHS LTD., THROUGH WHICH A REQUEST FOR TRANSFER OF SHARE CERTIFICATE H AS BEEN MADE. THROUGH THIS LETTER (1) APPLICATION FORM FOR MEMBERSHIP IN FORM NO.23, (2) UNDERTAKINGS ON RS.50/- EACH STAMP PAPER IN FORM NOS.26 AND 4, (3) COPY OF FORM NO.20A AND 20B, (4) COPY OF NOC, (5) ORIGINAL SHARE CERTIFICAT E AND (6) COPY OF AGREEMENT FOR SALE. THREE CHEQUES WERE ALSO ENCLOSED WITH THE APPLICATION FOR RS.500/-, RS.100/- AND RS.25,000/- TOWARDS TRANSFER FEES UNDE R VARIOUS HEADS. AT SERIAL NO.10 OF THE SAID LETTER, IT WAS MENTIONED THAT STA MP DUTY PAID AND REGISTERED DEED OF TRANSFER WILL BE SUBMITTED SOON. ALL THESE FACTS CLEARLY SHOW THAT THE OTHER PARTY HAD TAKEN THE POSSESSION AND ALSO DID N ECESSARY FORMALITIES FOR TRANSFER OF SHARES. HE POINTED OUT THAT THE WHOLE P ROBLEM AROSE BECAUSE THE TRANSFEREES DID NOT PAY THE STAMP DUTY TILL AUGUST 2004, AND BY THAT TIME WHEN THEY APPROACHED THE SUB-REGISTRAR FOR PAYMENT OF STAMP DUTY, THEY FOUND THAT BECAUSE OF THE DELAY IN SUBMITTING THE T RANSFER AGREEMENT FOR REGISTRATION, SOME PENALTY WAS REQUIRED TO BE PAID. THEREFORE, THE TRANSFEREE REQUESTED THE TRANSFEROR VERBALLY TO EXECUTE ANOTHE R TRANSFER DEED DATED 26-08-2004, COPY OF WHICH IS AVAILABLE AT PAGES 21 TO 25 OF THE PAPER BOOK. THE ASSESSEES CO-OPERATED WITH THE TRANSFEREE AND S IGNED THIS TRANSFER DEED ITA NOS.2376-2377/M/10 SURESHCHANDRA AGARWAL & SUSHILA S.AGARWAL 7 ALSO AND STAMP DUTY WAS PAID AS PER THIS NEW DEED. HE SUBMITTED THAT WHEN ENQUIRIES WERE MADE BY THE AO WITH SHRI ASHOK B. MO DI, MS. RANNA MODI, THEN THESE TRANSFEREES REFERRED TO THE LATER TRANSF ER DEED WHICH WAS SIGNED ON 26-08-2004. BUT, AS IS CLEAR FROM ALL OTHER DOCU MENTS, AS FAR AS THE ASSESSEE IS CONCERNED, THE TRANSFER GOT COMPLETED O N 30-04-2004 ITSELF. 4. THE LD. COUNSEL OF THE ASSESSEE THEN INVITED OUR ATTENTION TO THE DEFINITION OF TRANSFER GIVEN U/S.2(47) AND EMPHAS IZED THAT THIS DEFINITION IS INCLUSIVE AND, THEREFORE, WHATEVER IS GIVEN IN THE SECTION IS ONLY WAY OF AN EXAMPLE AND SOME OTHER ACT WHICH IS SIMILAR TO THIS ACT MENTIONED IN THE PROVISION ALSO NEEDS TO BE CONSTRUED AS TRANSFER. H E SUBMITTED THAT THE FIRST TERM WHICH CAN BE APPLIED IN THE CASE OF THE ASSESS EE IS EXTINGUISHMENT OF ANY RIGHT GIVEN IN CLAUSE (II) BECAUSE AFTER RECEIV ING THE FULL CONSIDERATION ON 30-04-2004, WHEN THE ASSESSEE DELIVERED THE POSSESS ION OF FLAT AS WELL AS SHARE CERTIFICATE OF THE SOCIETY AND ALL OTHER RELE VANT DOCUMENTS PERTAINING TO THIS PROPERTY, NOTHING WAS LEFT WITH THE ASSESSEE A ND HIS RIGHTS GOT EXTINGUISHED IN THAT PROPERTY. SECONDLY, THE DEFINI TION GIVEN IN CLAUSE (V) SHOULD BE APPLIED BECAUSE THIS TRANSACTION IS SIMIL AR TO THE TRANSACTION REFERRED TO IN SEC. 53A OF THE TRANSFER OF PROPERTY ACT, 1882, BECAUSE THE ASSESSEE HAD ENTERED INTO AN AGREEMENT FOR TRANSFER FOR A CONSIDERATION IN WRITING AND HAD ALSO RECEIVED FULL CONSIDERATION AN D HAD ALSO GIVEN POSSESSION OF THE PROPERTY TO THE TRANSFEREES. THIS PROPOSITIO N WAS NOT AGREED TO BY THE AO BECAUSE OF THE AMENDMENT IN SEC. 53A W.E.F. 24-0 9-2001, BY WHICH THE WORDS THE CONTRACT, THOUGH REQUIRED TO BE REGISTER ED, OR, WERE OMITTED. HE ARGUED THAT THIS WILL NOT MAKE MUCH OF THE DIFFEREN CE. HE FILED A COPY OF THE PRE-AMENDED AND POST-AMENDED PROVISION OF SEC. 53A OF THE TRANSFER OF ITA NOS.2376-2377/M/10 SURESHCHANDRA AGARWAL & SUSHILA S.AGARWAL 8 PROPERTY ACT, 1882, AND POINTED OUT THAT FIRST THRE E PARTS REMAIN THE SAME AND THE LAST PART WAS AMENDED ONLY TO THE EXTENT TH AT EARLIER CONDITION OF DOCUMENT EVEN NOT BEING REGISTERED WAS REMOVED. HE ARGUED THAT THIS PROVISION WAS BASICALLY FOR THE BENEFIT OF A BUYER AND EARLIER EVEN IF THE AGREEMENT TO SELL WAS NOT REGISTERED, THE BUYER COU LD CLAIM A RIGHT ON THE PROPERTY IF PART OF THE CONSIDERATION WAS PAID AND POSSESSION HAS BEEN RECEIVED. HOWEVER, LATER ON, AFTER AMENDMENT, THE W ORDING OF THE 4 TH PART IS : THEN, NOTWITHSTANDING THAT THE CONTRACT, THOUGH RE QUIRED TO BE REGISTERED, HAS NOT BEEN REGISTERED, OR, WHER E THERE IS AN INSTRUMENT OF TRANSFER, THAT THE TRANSFER HAS NOT BEEN COMPLETED IN THE MANNER PRESCRIBED THREFOR BY THE L AW FOR THE TIME BEING IN FORCE, THE TRANSFEROR OR ANY PERS ON CLAIMING UNDER HIM SHALL BE DEBARRED FROM ENFORCING AGAINST THE TRANSFEREE AND PERSONS CLAIMING UNDER H IM ANY RIGHT IN RESPECT OF THE PROPERTY OF WHICH THE TRANS FEREE HAS TAKEN OR CONTINUED IN POSSESSION, OTHER THAN A RIGH T EXPRESSLY PROVIDED BY THE TERMS OF THE CONTRACT : THUS, THE ABOVE PARA DOES NOT PRESCRIBE THAT SUCH I NSTRUMENT OF TRANSFER IS NECESSARILY REQUIRED TO BE REGISTERED AND STILL MAI NTAINS THAT ONCE AN INSTRUMENT OF TRANSFER IS THERE, THEN EVEN IF THE T RANSFER HAS NOT BEEN COMPLETED, THAT WILL NOT DEBAR THE PERSON I.E. BUYE R FROM CLAIMING RIGHT TO SUCH PROPERTY. THUS, POST AMENDMENT ALSO, THE SITUA TION HAS NOT ALTERED SUBSTANTIALLY. IN ANY CASE, THE DEFINITION GIVEN IN SEC. 2(47) CLAUSE (V) ONLY MENTIONS A CONTRACT OF THE NATURE REFERRED TO IN S ECTION 53A. THIS MEANS THAT THE INCOME-TAX ACT RECOGNIZES A TRANSFER WHIC H HAS SIMILAR NATURE TO THE ONE MENTIONED IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT CLAUSE (V) HAS NOT PROVIDED THAT TRANSFER AS DEFINED IN SEC. 5 3A OF THE TRANSFER OF PROPERTY ACT, 1882. HE THEN CARRIED US TO COPY OF T HE CIRCULAR NO. 495 DATED 22-09-1987 EXPLANATORY NOTES ON THE PROVISION RELAT ING TO DIRECT TAXES REFERRED TO IN PARA 11.1. IT HAS BEEN CLARIFIED IN PARA 11.1 THAT THE WORD ITA NOS.2376-2377/M/10 SURESHCHANDRA AGARWAL & SUSHILA S.AGARWAL 9 TRANSFER GIVEN IN SEC. 2(47) DOES NOT INCLUDE TRA NSFER OF RIGHTS WHICH ARE ACQUIRED BY WAY OF ANY AGREEMENT BY A PERSON BY WHI CH SUCH PERSON ACQUIRED ANY RIGHT IN ANY BUILDING. SUCH ARRANGEMEN TS OR AGREEMENTS ALSO CONFER RIGHTS OF OWNERSHIP AND THEREFORE NEW CLAUSE S (V) AND (VI) WERE BEING ADDED TO THE DEFINITION OF TRANSFER IN SEC. 2(47) . THUS, THE WHOLE IDEA OF INSERTION OF CLAUSE (V) WAS WHEREVER A PERSON ACQUI RES RIGHTS TO PARTICULAR PROPERTY BY ANY AGREEMENT, SUCH CONFERRING OF RIGHT SHOULD ALSO BE CONSIDERED AS TRANSFER. 5. HE SUBMITTED THAT, IN ANY CASE, THE ASSESSEES C ASE SHOULD BE CONSIDERED TO BE COVERED BY CLAUSE (VI) OF SEC. 2(4 7) WHEREIN THROUGH ANY TRANSACTION IF A PERSON BY BECOMING MEMBER OF ANY C O-OP. SOCIETY, WHICH HAS THE EFFECT OF TRANSFERRING IMMOVEABLE PROPERTY, THE N SUCH TRANSACTION SHOULD BE CONSTRUED AS TRANSFER. SINCE THE ASSESSEE WAS HO LDING THIS PROPERTY BY BEING A MEMBER OF THE USHA SUNDER PREMISES CHS LTD. BY HOLDING 5 SHARES AND SUCH SHARES WERE HANDED OVER TO THE TRANSFEREES VIDE AGREEMENT DATED 30-04-2004 VIDE CLAUSE 6, AND THE TRANSFER OF SHARE S SHALL TAKE EFFECT ON THE DELIVERY. FURTHER, THESE SHARES WERE HANDED OVER BY THE TRANSFEREES TO THE SOCIETY VIDE THEIR APPLICATION DATED 05-05-2004 TO THE SOCIETY, COPY OF WHICH IS AVAILABLE AT PAGE 17 OF THE PAPER BOOK. THIS MEA NS ALL NECESSARY STEPS FOR TRANSFER OF THE SHARES WERE TAKEN BY THE TRANSFEROR S AND EVEN THE TRANSFEREES HAD LODGED THESE SHARES FOR TRANSFER WITH THE SOCIE TY AND, THEREFORE, TRANSFER SHALL BE TAKEN TO BE COMPLETE ON 30-04-2004. HE CON CLUDED THAT ALL THESE FACTORS CLEARLY SHOW THAT THE PROPERTY WAS TRANSFER RED ON 30-04-2004 AND SINCE THE NEW FLAT WAS ACQUIRED ON 25-06-2003 I.E. ONE YEAR FROM THE DATE OF SALE, THE ASSESSEE WAS ENTITLED TO DEDUCTION U/S.54 . ITA NOS.2376-2377/M/10 SURESHCHANDRA AGARWAL & SUSHILA S.AGARWAL 10 6. ON THE OTHER HAND, THE LD. D.R. CARRIED US TO THE ASSESSMENT ORDER AS WELL AS THE APPELLATE ORDER AND POINTED OUT THAT TH E AO AS WELL AS THE CIT(A) HAVE DEALT WITH ALL THE SUBMISSIONS OF THE ASSESSEE . IT HAS BEEN SPECIFICALLY POINTED OUT IN THE ORDERS HOW CLAUSE (V) IS NOT APP LICABLE BECAUSE CLAUSE (V) OF SEC. 2(47) CLEARLY MAKE REFERENCE TO SEC. 53A OF THE TRANSFER OF PROPERTY ACT AND THAT ACT ITSELF HAS BEEN AMENDED AND WOULD BE APPLICABLE ONLY IF SUCH AGREEMENT WAS REGISTERED INSTRUMENT. SINCE THE TRAN SFER DEED DATED 30-04- 2004 WAS NOT REGISTERED, THEREFORE, THIS WOULD NOT AMOUNT TO TRANSFER. THE OTHER ARGUMENTS HAVE ALREADY BEEN CONTROVERTED BY T HE AO BECAUSE ENQUIRY MADE BY HIM FROM SOCIETY CLEARLY SHOWS THAT BILL WA S ISSUED TO MRS. RANNA MODI UNDER WRONG IMPRESSION AND LATER ON WAS CANCEL LED. THE COUNSEL, WHO APPEARED ON BEHALF OF THE TRANSFEREE, I.E. MODI FAM ILY, BEFORE THE AO, HAD CLEARLY STATED THAT AGREEMENT WAS SIGNED ONLY ON 26 -08-2004. THEREFORE, THE DATE OF TRANSFER HAS TO BE RECKONED FROM THAT DATE ONLY. 7. WE HAVE CONSIDERED THE SUBMISSIONS CAREFULLY AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE DISPUTE IS REGARDING DENIAL OF DEDUCTION U/S.54 WHICH READS AS UNDER: 54. (1) SUBJECT TO THE PROVISIONS OF SUB-SECTION ( 2), WHERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET, BEING BUILDINGS OR LANDS APPURTENANT THERETO, AND BEING A RESIDENTIAL HOUSE, THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPER TY (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGI NAL ASST), AND THE ASSESSEE HAS WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLA CE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AF TER THAT DATE CONSTRUCTED, A RESIDENTIAL HOUSE, THEN, INSTEA D OF THE CAPITAL GAIN BEING CHARGED TO INCOME-TAX AS INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE, IT SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISI ONS OF THIS SECTION, THAT IS TO SAY, . ITA NOS.2376-2377/M/10 SURESHCHANDRA AGARWAL & SUSHILA S.AGARWAL 11 FROM THE ABOVE, IT IS CLEAR THAT WHERE A NEW PROPER TY HAS BEEN PURCHASED WITHIN ONE YEAR FROM THE DATE OF TRANSFER, THEM EXE MPTION IS ALLOWED. THE DISPUTE IS ONLY IN RESPECT OF TRANSFER OF THE OLD P ROPERTY AND THERE IS NO DISPUTE IN RESPECT OF OTHER CONDITIONS. ACCORDING T O THE ASSESSEE, THE OLD PROPERTY WAS TRANSFERRED ON 30-04-2004 AND THE NEW PROPERTY WAS PURCHASED ON 25-06-2003, WHEREAS, ACCORDING TO THE AO, THE NE W PROPERTY WAS PURCHASED ON 25-06-2003 BUT THE OLD PROPERTY STOOD TRANSFERRED ONLY ON 27- 08-2004 WHEN THE TRANSFER DEED GOT REGISTERED. SEC. 2(47), WHICH DEFINES THE TERM TRANSFER, READS AS UNDER: (47) TRANSFER, IN RELATION TO A CAPITAL ASSET, INCLUDES , ( I ) THE SALE , EXCHANGE OR RELINQUISHMENT OF THE AS SET ; OR ( II ) THE EXTINGUISHMENT OF ANY RIGHTS THEREIN ; OR ( III ) THE COMPULSORY ACQUISITION THEREOF UNDER ANY LAW ; OR ( IV ) IN A CASE WHERE THE ASSET IS CONVERTED BY THE OWN ER THEREOF INTO, OR IS TREATED BY HIM AS, STOCK-IN-TRADE OF A BUSINESS CAR RIED ON BY HIM, SUCH CONVERSION OR TREATMENT ;] [OR] [( IVA ) THE MATURITY OR REDEMPTION OF A ZERO COUPON BOND; OR] [( V ) ANY TRANSACTION INVOLVING THE ALLOWING OF THE POS SESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A O F THE TRANSFER OF PROPERTY ACT, 1882 (4 OF 1882) ; OR ( VI ) ANY TRANSACTION (WHETHER BY WAY OF BECOMING A MEM BER OF, OR ACQUIRING SHARES IN, A CO-OPERATIVE SOCIETY, COMPANY OR OTHER ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT OR ANY ARRANGEME NT OR IN ANY OTHER MANNER WHATSOEVER) WHICH HAS THE EFFECT OF TRANSFER RING, OR ENABLING THE ENJOYMENT OF, ANY IMMOVABLE PROPERTY. A PLAIN READING OF THE ABOVE SHOW THAT THIS IS AN I NCLUSIVE DEFINITION. FIRST, WE SHALL DEAL WITH CLAUSE (V), WHICH HAS BEEN CONSIDER ED BY THE AO AS WELL AS CIT(A). THE AO HAS REFUSED TO RECKON THE TRANSFER O N 30-04-2004 BECAUSE, ACCORDING TO HIM, THAT INSTRUMENT WAS NOT REGISTERE D AND AFTER THE AMENDMENT TO SEC. 53A W.E.F. 24-09-2001, IT IS MAND ATORY FOR APPLICATION OF SEC. 53A OF THE TRANSFER OF PROPERTY ACT, 1882, THA T SUCH INSTRUMENT OF ITA NOS.2376-2377/M/10 SURESHCHANDRA AGARWAL & SUSHILA S.AGARWAL 12 TRANSFER SHOULD BE REGISTERED. SEC. 53A OF TRANSFER OF PROPERTY ACT, 1882, BEFORE AMENDMENT AND AFTER AMENDMENT READS AS UNDER : BEFORE AMENDMENT : 53A. WHERE ANY PERSON CONTRACTS TO TRANSFER FOR CONSIDERATION ANY IMMOVABLE PROPERTY BY WRITING SIG NED BY HIM OR ON HIS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTITUTE THE TRANSFER CAN BE ASCERTAIN WITH REASO NABLE CERTAINTY, AND THE TRANSFEREE HAS, IN PART PERFORMANCE OF THE CONTRACT, TAKEN POSSESSION OF THE PROPERTY OR ANY PART THEREO F, OR THE TRANSFEREE, BEING ALREADY IN POSSESSION, CONTINUES IN POSSESSION IN PART PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT IN FURTHERANCE OF THE CONTRACT, AND THE TRANSFEREE HAS PERFORMED OR IS WILLING TO P ERFORM HIS PART OF THE CONTRACT, THEN, NOTWITHSTANDING THAT THE CONTRACT, THOUGH REQ UIRED TO BE REGISTERED, HAS NOT BEEN REGISTERED, OR, WHERE T HERE IS AN INSTRUMENT OF TRANSFER, THAT THE TRANSFER HAS NOT B EEN COMPLETED IN THE MANNER PRESCRIBED THEREFORE BY THE LAW FOR THE TIME BEING IN FORCE, THE TRANSFEROR OR ANY PERS ON CLAIMING UNDER HIM SHALL BE DEBARRED FROM ENFORCING AGAINST THE TRANSFEREE AND PERSONS CLAIMING UNDER HIM ANY R IGHT IN RESPECT OF THE PROPERTY OF WHICH THE TRANSFEREE HAS TAKEN OR CONTINUED IN POSSESSION, OTHER THAN A RIGHT EXPRESS LY PROVIDED BY THE TERMS OF THE CONTRACT : PROVIDED THAT NOTHING IN THIS SECTION SHALL AFFECT THE RIGH TS OF A TRANSFEREE FOR CONSIDERATION WHO HAS NO NOTICE OF THE CONTACT OR OF THE PART PERFORMANCE THEREOF. AFTER AMENDMENT : 53-A. PART PERFORMANCE. WHERE ANY PERSON CONTACTS TO TRANSFER FOR CONSIDERATION ANY IMMOVABL E PROPERTY BY WRITING SIGNED BY HIM OR ON HIS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTITUTE THE TRANSFE R CAN BE ASCERTAIN WITH REASONABLE CERTAINTY, AND THE TRANSFEREE HAS, IN PART PERFORMANCE OF TH E CONTRACT, TAKEN POSSESSION OF THE PROPERTY OR ANY P ART THEREOF, OR THE TRANSFEREE, BEING ALREADY IN POSSES SION, CONTINUES IN POSSESSION IN PART PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT IN FURTHERANCE OF THE CONTRAC T, AND THE TRANSFEREE HAS PERFORMED OR IS WILLING TO PERFORM HIS PART OF THE CONTRACT, ITA NOS.2376-2377/M/10 SURESHCHANDRA AGARWAL & SUSHILA S.AGARWAL 13 THEN, NOTWITHSTANDING THAT WHERE THERE IS AN INSTRUMENT OF TRANSFER, THAT THE TRANSFER HAS NOT B EEN COMPLETED IN THE MANNER PRESCRIBED THEREFORE BY THE LAW FOR THE TIME BEING IN FORCE, THE TRANSFEROR OR ANY PERS ON CLAIMING UNDER HIM SHALL BE DEBARRED FROM ENFORCING AGAINST THE TRANSFEREE AND PERSONS CLAIMING UNDER HIM ANY R IGHT IN RESPECT OF THE PROPERTY OF WHICH THE TRANSFEREE HAS TAKEN OR CONTINUED IN POSSESSION, OTHER THAN A RIGHT EXPRESS LY 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. THE ABOVE CLEARLY SHOWS THAT PARAS 1, 2 AND 3 REMAI N THE SAME AND THERE IS CHANGE ONLY IN THE 4 TH PARA BY WAY OF OMISSION OF THE WORDS THE CONTRACT , THOUGH REQUIRED TO BE REGISTERED, HAS NOT BEEN REGI STERED, OR, WHICH, ACCORDING TO THE AO, MEANS AFTER 24-09-2001 THE PRO VISIONS OF SEC. 53A WOULD NOT BE APPLIED IF THE DOCUMENT WAS REGISTERED BUT A READING OF THE WHOLE PROVISION CLEARLY SHOWS THAT THIS PROVISION I S BASICALLY FOR THE BENEFIT OF A BUYER AND IT HAS BEEN PROVIDED THAT WHERE AN INST RUMENT OF TRANSFER HAS BEEN EXECUTED IN WRITING AND IN PART PERFORMANCE SU CH TRANSFEREE HAS TAKEN POSSESSION AND PAID CONSIDERATION AND TRANSFEREE HA S PERFORMED OR WILLING TO PERFORM HIS PART OF THE CONTRACT, THEN THIS WOULD C ONSTITUTE PART PERFORMANCE. EVEN AFTER AMENDMENT, IT HAS NOT BEEN SPECIFICALLY PROVIDED THAT SUCH INSTRUMENT OF TRANSFER IS NECESSARILY TO BE REGISTE RED. WITHOUT GOING FURTHER ON THIS ASPECT, WE HAVE TO ASCERTAIN THE TRUE MEANING IN THE CONTEXT OF CLAUSE (V) OF SEC. 2(47). CLAUSE (V) HAS BEEN INSERTED BY THE FINANCE ACT, 1987, W.E.F. 01-04-1988 AND EXPLANATORY NOTES EXPLAINING THE PRO VISIONS OF THE ACT, WHICH HAS BEEN CIRCULATED BY CIRCULAR NO.495 DATED 22-09- 1987. PARA 11.1 READS AS UNDER: 11.1 THE EXISTING DEFINITION OF THE WORD TRANSFER IN SECTION 2(47) DOES SNOT INCLUDE TRANSFER OF CERTAIN RIGHTS ACCRUING TO A PURCHASER, BY WAY OF BECOMING A MEMBE R OF ITA NOS.2376-2377/M/10 SURESHCHANDRA AGARWAL & SUSHILA S.AGARWAL 14 OR ACQUIRING SHARES IN A CO-OPERATIVE SOCIETY, COMP ANY, OR ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT O R ANY ARRANGEMENT WHEREBY SUCH PERSON ACQUIRES ANY RIGHTS IN ANY BUILDING WHICH IS EITHER BEING CONSTRUCTED OR W HICH IS TO BE CONSTRUCTED. TRANSACTIONS OF THE NATURE REFERRED TO ABOVE ARE NOT REQUIRED TO BE REGISTERED UNDER THE REGISTR ATION ACT, 1908. SUCH ARRANGEMENTS CONFER THE PRIVILEGES OF OW NERSHIP WITHOUT TRANSFER OF TITLE IN THE BUILDING AND THERE ARE A COMMON MODE OF ACQUIRING FLATS PARTICULARLY IN MULT I- STOREYED CONSTRUCTIONS IN BIG CITIES. THE DEFINITIO N ALSO DOES SNOT COVER CASES WHERE POSSESSION IS ALLOWED TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT, OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPE RTY ACT, 1882. NEW SUB-CLAUSES (V) & (VI) HAVE BEEN INSERTED IN SECTION 2(47) TO PREVENT AVOIDANCE OF CAPITAL GAINS LIABILITY BY RECOURSE TO TRANSFER OF RIGHTS IN THE MANNER REF ERRED TO ABOVE. THE ABOVE CLEARLY SHOWS HAT THERE WAS CERTAIN SITUA TION WHERE PROPERTIES WERE BEING TRANSFERRED WITHOUT REGISTRATION OF TRAN SFER INSTRUMENTS AND PEOPLE WERE ESCAPING TAX LIABILITIES ON TRANSFER OF SUCH P ROPERTIES BECAUSE THE SAME COULD NOT BE BROUGHT IN THE DEFINITION OF TRANSFER PARTICULARLY IN MANY STATES OF THE COUNTRY PROPERTIES WERE BEING HELD BY VARIOU S PEOPLE AS LEASED PROPERTIES WHICH WERE ALLOTTED BY THE VARIOUS GOVT. DEPARTMENTS AND TRANSFERS OF SUCH LEASE WERE NOT PERMISSIBLE. PEOPLE WERE TRA NSFERRING SUCH PROPERTIES BY EXECUTING AGREEMENT TO SELL AND GENERAL POWER OF ATTORNEY AS WELL AS WILL AND RECEIVING FULL CONSIDERATION, BUT SINCE THE AGR EEMENT TO SELL WAS NOT REGISTERED AND THOUGH FULL CONSIDERATION WAS RECEIV ED AND EVEN POSSESSION WAS GIVEN, STILL THE SAME TRANSACTIONS COULD NOT BE SUBJECTED TO TAX BECAUSE THE SAME COULD NOT COVERED BY THE DEFINITION OF TR ANSFER. TO BRING SUCH TRANSACTIONS WITHIN THE TAX NET, THIS AMENDMENT WAS MADE. IT HAS TO BE APPRECIATED THAT CLAUSE (V) IN SEC. 2(47) DOES NOT LIFT THE DEFINITION OF PART PERFORMANCE FROM SEC. 53A OF THE TRANSFER OF PROPER TY ACT, 1882. RATHER, IT DEFINES ANY TRANSACTION INVOLVING ALLOWING OF POSS ESSION OF ANY IMMOVEABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANC E OF A CONTRACT OF THE ITA NOS.2376-2377/M/10 SURESHCHANDRA AGARWAL & SUSHILA S.AGARWAL 15 NATURE REFERRED TO IN SEC. 53A OF THE TRANSFER OF P ROPERTY ACT. THIS MEANS SUCH TRANSFER IS NOT REQUIRED TO BE EXACTLY SIMILAR TO THE ONE DEFINED U/S.53A OF THE TRANSFER OF PROPERTY ACT, OTHERWISE LEGISLAT URE WOULD HAVE SIMPLY STATED THAT TRANSFER WOULD INCLUDE TRANSACTIONS DE FINED IN SEC. 53A OF THE TRANSFER OF PROPERTY ACT. BUT THE LEGISLATURE IN IT S WISDOM HAS USED THE WORDS OF A CONTRACT, OF THE NATURE REFERRED IN SECTION 5 3A. THEREFORE, IT IS ONLY THE NATURE WHICH HAS TO BE SEEN. AS DISCUSSED ABOVE, TH E PURPOSE OF INSERTION OF CLAUSE (V) WAS TO TAX THOSE TRANSACTIONS WHERE PROP ERTIES WERE BEING TRANSFERRED BY WAY OF GIVING POSSESSION AND RECEIVI NG FULL CONSIDERATION. THEREFORE, IN OUR HUMBLE OPINION, IN THE CASE OF A TRANSFER WHERE POSSESSION HAS BEEN GIVEN AND FULL CONSIDERATION HAS BEEN RECE IVED, THEN SUCH TRANSACTION NEEDS TO BE CONSTRUED AS TRANSFER. TH EREFORE, THE AMENDMENT MADE IN SEC. 53A BY WHICH THE REQUIREMENT OF REGIST RATION HAS BEEN INDIRECTLY BROUGHT ON THE STATUTE NEED NOT APPLICABLE WHILE CO NSTRUING THE MEANING OF TRANSFER WITH REFERENCE TO THE INCOME-TAX ACT. 8. THE ABOVE SITUATION FURTHER BECOMES CLEAR IF WE REFER TO THE CELEBRATED DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T V. PODAR CEMENT P. LTD. & ORS. (226 ITR 625). IN THAT CASE, HE ASSESSEE WAS OWNER OF FOUR FLATS IN A BUILDING CALLED SILVER ARCH ON NEPEAN SEA ROAD, B OMBAY. OUT OF THESE FOUR FLATS, TWO WERE PURCHASED DIRECTLY FROM THE BUILDER S, MALABAR INDUSTRIES PVT. LTD., AND TWO WERE PURCHASED BY ITS SISTER CONCERNS WHICH WERE LATER PURCHASED BY THE ASSESSEE. THE POSSESSION OF THE FL ATS WAS TAKEN AFTER FULL PAYMENT OF CONSIDERATION. THE FLATS WERE LET OUT. T HE ASSESSEE CONTENDED THAT THE RENTAL INCOME FROM THESE FLATS WAS ASSESSA BLE AS INCOME FROM OTHER SOURCES BECAUSE THE ASSESSEE WAS NOT THE LEGAL OWN ER BECAUSE THE TITLE OF ITA NOS.2376-2377/M/10 SURESHCHANDRA AGARWAL & SUSHILA S.AGARWAL 16 THE PROPERTY HAD NOT BEEN CONVEYED TO THE CO-OPERAT IVE SOCIETY WHICH WAS FORMED BY THE PURCHASERS OF THE FLATS. THE HONBLE COURT NOTED THAT SEC. 27 HAD BEEN AMENDED VIDE CLAUSE 3(A) WHEREIN WHEN A PE RSON WAS ALLOWED TO TAKE POSSESSION OF THE BUILDING IN PART PERFORMANCE OF THE NATURE REFERRED TO IN SEC. 53A, SUCH PERSON SHALL BE DEEMED TO BE THE OWNER. IT WAS FURTHER OBSERVED THAT FOR ALL PRACTICABLE PURPOSES THE ASSE SSEE WAS THE OWNER AND POSSIBLY THERE CANNOT BE TWO OWNERS OF SAME PROPERT Y AT THE SAME TIME. IN FACT, THE AMENDMENTS TO SEC. 27 WERE MADE LATER ON BUT WERE TAKEN INTO COGNIZANCE ON THE BASIS OF ABOVE PRINCIPLE AND ULTI MATELY IT WAS HELD AS UNDER: HENCE, THOUGH UNDER THE COMMON LAW OWNER MEANS A PERSON WHO HAS GOT VALID TITLE LEGALLY CONVEYED TO HIM AFTER COMPLY WITH THE REQUIREMENTS OF LAW SUCH AS THE TRA NSFER OF PROPERTY ACT, THE REGISTRATION ACT, ETC., IN THE CO NTEXT OF SECTION 22 OF THE INCOME-TAX ACT, 1961, HAVING REGA RD TO THE GROUND REALITIES AND FURTHER HAVING REGARD TO THE O BJECT OF THE INCOME-TAX ACT, NAMELY, TO TAX THE INCOME, OWNER IS A PERSON WHO IS ENTITLED TO RECEIVE INCOME FROM THE P ROPERTY IN HIS OWN RIGHT. THE REQUIREMENT OF REGISTRATION OF T HE SALE DEED IN THE CONTEXT OF SECTION 22 IS NOT WARRANTED. THUS, FROM THE ABOVE, IT IS CLEAR THAT IT IS NOT NE CESSARY TO GET THE INSTRUMENT OF TRANSFER REGISTERED FOR THE PURPOSE OF INCOME-TA X ACT WHEN A PERSON HAS GOT A VALID TITLE LEGALLY CONVEYED AFTER COMPLYING WITH THE REQUIREMENTS OF THE LAW. 9. SIMILARLY, IN THE CASE OF MYSORE MINERALS LTD. V . CIT (239 ITR 775), THE ASSESSEE HAD PURCHASED FOR THE USE OF ITS STAFF SEV EN LOW INCOME GROUP HOUSES FROM A HOUSING BOARD. THE PAYMENT HAD BEEN M ADE AND IN TURN POSSESSION OF THE HOUSES WAS TAKEN OVER BY THE ASSE SSEE. THE ACTUAL CONVEYANCE DEED WAS NOT EXECUTED. THE ASSESSEE CLAI MED DEPRECIATION WHICH WAS DENIED BY THE DEPARTMENT. AFTER GREAT DISCUSSIO N, IT WAS OBSERVED THAT ITA NOS.2376-2377/M/10 SURESHCHANDRA AGARWAL & SUSHILA S.AGARWAL 17 FOR ALL PRACTICABLE PURPOSES AND FOR THE PURPOSE OF INCOME-TAX ACT, THE ASSESSEE SHALL BE CONSTRUED AS OWNER OF THE PROPERT Y. IN FACT, IT WAS HELD AS UNDER: HELD, REVERSING THE JUDGMENT OF THE HIGH COURT, TH AT THE FINDING OF FACT ARRIVED AT IN THE CASE AT HAND WAS THAT THOUGH A DOCUMENT OF TITLE WAS NOT EXECUTED BY THE HOUSING BOARD IN FAVO UR OF THE ASSESSEE, THE HOUSES WERE ALLOTTED TO THE ASSESSEE BY THE HOUSING BOARD, PART PAYMENT RECEIVED AND POSSESSION DELIVER ED SO AS TO CONFER DOMINION OVER THE PROPERTY ON THE ASSESSEE W HEREAFTER THE ASSESSEE HAD IN ITS OWN RIGHT ALLOTTED THE QUARTERS TO THE STAFF AND THEY WERE BEING ACTUALLY USED BY THE STAFF OF THE A SSESSEE. THE ASSESSEE WAS ENTITLED TO DEPRECIATION IN RESPECT OF THE SEVEN HOUSES IN RESPECT OF WHICH THE ASSESSEE HAD NOT OBTAINED A DEED OF CONVEYANCE FROM THE VENDOR ALTHOUGH IT HAD TAKEN PO SSESSION AND MADE PART PAYMENT OF THE CONSIDERATION. THUS, FROM THE ABOVE TWO DECISIONS, IT BECOMES ABSO LUTELY CLEAR THAT FOR THE PURPOSE OF THE INCOME-TAX ACT THE GROUND REALITY HA S TO BE RECOGNIZED AND IF ALL THE INGREDIENTS OF TRANSFER HAVE BEEN COMPLETED , THEN SUCH TRANSFER HAS TO BE RECOGNIZED. MERELY BECAUSE THE PARTICULAR INSTRU MENT OF TRANSFER HAS NOT BEEN REGISTERED WILL NOT ALTER THE SITUATION. THIS POSITION IS FURTHER STRENGTHENED BY THE FACT THAT LEGISLATURE ITSELF HA S INSERTED CLAUSE (V) TO SEC. 2(47) AND WHILE REFERRING TO THE PROVISIONS OF SEC. 53A, REFERENCE HAS BEEN MADE BY STATING THAT CONTRACTS IN THE NATURE OF SEC . 53A SHOULD ALSO BE COVERED BY THE DEFINITION OF TRANSFER. THEREFORE, IN OUR HUMBLE VIEW, THE AMENDMENT TO SEC. 53A OF THE TRANSFER OF PROPERTY A CT, WHEREBY THE REQUIREMENT OF THE DOCUMENTS NOT BEING REGISTERED H AS BEEN OMITTED, WILL NOT ALTER THE SITUATION FOR HOLDING THE TRANSACTION TO BE A TRANSFER U/S.2(47)(V) IF ALL OTHER INGREDIENTS HAVE BEEN SATISFIED. 10. NOW IN THIS CASE BEFORE US ASSESSEE INITIALLY E XECUTED AN AGREEMENT OF TRANSFER ON 23-4-2004 THROUGH WHICH ASSESSEE AGREED TO SELL FLAT NO.402, 4 TH FLOOR USHA KUNJ COMMISSIONER-OP. SOCIETY LTD., JUHU , MUMBAI TO (I) MISS RANNA ASHOK MODI, (II) SHRI ASHOK BRIJLAL MODI, AND (III) MRS. KOKILA ASHOK MODI ITA NOS.2376-2377/M/10 SURESHCHANDRA AGARWAL & SUSHILA S.AGARWAL 18 [HEREINAFTER CALLED TRANSFEREES]. THROUGH THIS AGRE EMENT ASSESSEE ALONG WITH SMT. SUSHILA AGARWAL RECEIVED A TOTAL SUM OF RS.17 LAKHS [RS.8,50,000/- EACH]. THROUGH CLAUSE 2(B) IT WAS AGREED THAT BALAN CE SUM OF RS.45,50,000/- WOULD BE RECEIVED ON OR BEFORE 30-4-04 AND ASSESSEE S WERE REQUIRED TO EXECUTE A TRANSFER DEED. FOLLOWING THIS A DEED OF T RANSFER WAS EXECUTED ON 30-4-04 THROUGH WHICH ASSESSEE TRANSFERRED THE RIGH TS IN NO.402, 4 TH FLOOR USHA KUNJ COMMISSIONER-OP. SOCIETY LTD., JUHU, MUMB AI, TO THE TRANSFEREES AND RECEIVED THE BALANCE CONSIDERATION OF RS.45,50, 000/-. THE POSSESSION OF THE FLAT WAS HANDED OVER TO THE TRANSFEREES AND THR OUGH CLAUSE NO.5 VARIOUS DOCUMENTS WERE ALSO HANDED OVER. CLAUSE NO.5 OF THE SAID AGREEMENT READS AS UNDER: 5. THE TRANSFEROR HAS HANDED OVER TO THE TRANSFER EES THE FOLLOWING: A) THE SAID SHARE CERTIFICATE NO.7, REPRESENTING THE S AID SHARES OF SOCIETY; B) APPLICATION TO THE SOCIETY FOR TRANSFER OF SHARES I N FAVOUR OF TRANSFEREES; C) APPLICATION FOR TRANSFER OF ELECTRIC METER TO THE N AME OF THE TRANSFEREES; D) THE NOC RECEIVED FROM THE SAID SOCIETY; E) THE ORIGINAL AGREEMENT DATED 22 ND MAY, 1980 BY WHICH THE TRANSFERORS ACQUIRED THE SAID FLAT AND SHARES AND A LL EARLIER AGREEMENTS. THUS, IT IS CLEAR THAT BOTH ASSESSEES BEFORE US NOT ONLY RECEIVED THE FULL CONSIDERATION AND HANDED OVER THE POSSESSION OF THE FLAT BUT ALSO HANDED OVER THE VARIOUS DOCUMENTS WHICH WERE NECESSARY FOR TRAN SFER. THE TRANSFEREES VIDE LETTER DATED 5-5-04 [COPY AT PAGE 17 OF THE PA PER BOOK] MADE AN APPLICATION TO THE SOCIETY FOR TRANSFER OF THE SAID FLAT IN THEIR NAMES. THROUGH THIS APPLICATION SHARE CERTIFICATE AS WELL AS COPY OF THE AGREEMENT FOR SALE ETC. WAS ALSO ENCLOSED. THUS, IT IS CLEAR THAT EVEN THE INTENTION OF THE TRANSFEREE ITA NOS.2376-2377/M/10 SURESHCHANDRA AGARWAL & SUSHILA S.AGARWAL 19 WAS TO GO AHEAD WITH THE TRANSFER. IT WAS POINTED O UT THAT SINCE THE TRANSFER DEED DATED 30-4-04 COULD NOT BE LODGED WITH THE SUB -REGISTRAR FOR STAMPING TILL 26-8-04 AND WHEN THE SAME WAS PRESENTED FOR ST AMPING, TRANSFEREES WERE INFORMED THAT SOME PENALTY WAS TO BE LEVIED FOR DEL AY IN PRESENTING THE SAME. AT THAT JUNCTURE THE TRANSFEREES REQUESTED THE ASSE SSEE I.E. THE TRANSFEROR TO EXECUTE ANOTHER TRANSFER DEED DATED 26-8-04 AND THA T REQUEST WAS ACCEPTED BY THE ASSESSEE WHO EXECUTED A FRESH TRANSFER DEED ON 26-8-2004. IT IS CLEAR THAT THIS NEW TRANSFER DEED IS NOT CONFERRING ANY F RESH RIGHTS ON THE TRANSFEREES AND THE FACT OF OLD TRANSFER DEED DATED 30-4-04 BECOMES CLEAR NOT ONLY FROM THE TRANSFER DEED BUT FROM THE LETTER DAT ED 5-5-04 WHICH IS PRIOR TO THE DATE OF NEW TRANSFER DEED I.E. 26-8-04. THE TRA NSFEREES HAD LODGED ALL THE DOCUMENTS FOR TRANSFER. WE FAIL TO UNDERSTAND WHAT COLOURABLE DEVICE HAS BEEN USED BY THE ASSESSEE FOR WHICH AO HAS APPLIED THE DECISION OF MCDOWELL. THE LEGAL POSITION AS DISCUSSED IN ABOVE PARAS CLEARLY SHOWS THAT THE TRANSFER DEED DATED 30-4-04 CLEARLY TRANSFERRED ALL THE RIGHTS OF THE ASSESSEE TO THE TRANSFEREES AND, THEREFORE, IN OUR OPINION, THAT TRANSFER DEED SHOULD BE CONSTRUED AS THE DEED OF TRANSFER. THE OT HER FACTS LIKE ISSUANCE OF THE BILL IN THE NAME OF THE NEW OWNERS AND LATER ON RETRACTION OF THE SOCIETY THAT THEY WERE ISSUED UNDER WRONG IMPRESSION, IN OU R VIEW, IS NOT IMPORTANT TO DECIDE THIS ISSUE AND, THEREFORE, WE ARE NOT DEA LING IN DETAIL WITH THOSE ASPECTS. AS OBSERVED BY US, THE DATE OF TRANSFER FO R THE OLD PROPERTY HAS TO BE RECKONED AS 30-4-04 WHICH IS WELL WITHIN ONE YEAR F ROM THE DATE OF ACQUISITION OF NEW DEED ON 25-6-03. THEREFORE, IN OUR OPINION, ASSESSEE IS ENTITLED TO EXEMPTION U/S.54. ACCORDINGLY, WE SET ASIDE THE ORD ER OF THE LD. CIT(A) AND DIRECT THE AO TO ALLOW EXEMPTION U/S.54. ITA NOS.2376-2377/M/10 SURESHCHANDRA AGARWAL & SUSHILA S.AGARWAL 20 11 IN THE RESULT APPEALS OF BOTH THE ASSESSEES ARE ALLOWED. ORDER PRONOUNCED ON THIS DAY OF 14/9/2011. SD/- SD/- (V.D.RAO ) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI:14/9/ 2010. P/-* COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-XXVII,,MUMBAI. 4 CIT,CITY-3,MUMBAI. 5.DR,B BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI.