SHRI KAILASHCHAND AGRAWAL HUF, Nagpur V. PRINCIPOAL C.I.T.-3, Nagpur

ITA 336/NAG/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1290 (ITAT-NAGPUR)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 13-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Keywords: Capital asset; Rectification of order; Cost of acquisition; Reassessment proceedings
• Section: 143(3); 54F; 148; 54; 263; 154

Judgement Text

1 ITA NO. 336/NAG/2016. IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER.. I.T.A. NO. 336/NAG/2016 ASSESSMENT YEAR : 2011 - 12. SHRI KAILASHCHAND AGRAWAL, HUF, PR. COMMISSIONER OF INCOME TAX - 3, NAGPUR. VS. NAGPUR. PAN AADHK2663N. APPELLANT. RESPONDENT. APPELLANT BY : SHRI K APIL HIRANI. RESPONDENT BY : SHRI A.R. NINAWE. DATE OF HEARING : 2 4 - 11 - 2016 DATE OF PRONOUNCEMENT : 28 TH DEC., 2016 O R D E R. PER SHAMIM YAHYA, A.M. : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED PR. COMMISSIONER OF INCOME TAX - 3, NAGPUR PASSED U/S 263 OF THE I.T. ACT DATED 22 - 03 - 2016. THE GROUNDS OF APPEAL READ AS UNDER : 1. THE NOTICE ISSUED U/S 263 AND THE ORDER PASSED U/S 263 ARE ILLEGAL AS THE SAME ARE NOT IN CONFORMITY TO THE BASIC REQ UIREMENT OF SECTION 263. 2. WITHOUT PREJUDICE TO ABOVE, THE NOTICE AND PROCEEDINGS ARE INVALID AS THE ORDER PASSED BY AO U/S 143(3) WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. 3. IN ANY CASE WHETHER A TRANSACTION IS A LONG TERM CAPITAL GAIN OR A SHORT TERM CAPITAL GAINS IS PURELY A QUESTION DEPENDING ON THE PECULIAR FACTS OF THE CASE. THE AO WHILE PASSING HIS ORDER U/S 143(3) ADOPTED ONE OF THE POSSIBLE TWO VIEWS AND THEREFORE HIS ORDER CANNOT BE TERMED AS ERRONEOUS AND IS NOT AMENABLE TO BE REVISED U/S 263. 4. THE COMMISSIONER OF INCOME TAX ERRED IN HOLDING THAT THE GAIN ON SALE OF PROPERTY IS SHORT TERM CAPITAL GAINS IGNORING THE FACTS OF THE CASE THAT THE APPELLANT WAS ALLOTTED THE SHARE IN SAID LAND VIDE DEED OF ALLOTMENT D.16.12.2005 AND AS THE PROPERTY WAS SOLD ON 22.4.2010, 2 ITA NO. 336/NAG/2016. THE PROPERTY IS LONG TERM CAPITAL ASSET AND CONSEQUENTLY THE GAIN ON THE SAME IS LONG TERM CAPITAL GAIN. 2. BRIEF FACTS OF THE CASE AS NOTED BY LEARNED CIT IN THE ORDER U/S 263 OF THE I.T. ACT READ AS UNDER : THE ASSESSEE HAD FILED THE ORIGINAL RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011 - 12 ON 28/10/2012 DECLARING TOTAL INCOME OF RS.18,10,610/ - . IN THE COMPUTATION OF INCOME, THE ASSESSEE HAD SHOWN SALE OF AN IMMOVABLE PROPERTY BEING LAND HELD JOINTLY WITH 32 OTHER PERSONS. THE SHARE O N THE SAME WAS SHOWN AT RS.1,23,21,982/ - AND CAPITAL GAINS WERE CALCULATED AT NIL. THE COMPUTATION OF CAPITAL GAIN AS PER RETURN IS REPRODUCED HEREWITH - LONG TERM CAPITAL GAINS SHARE IN LAND 22/04/2010 (SALE CONSIDERATION) - RS. 1,23,21,982 L ESS : TRANSFER EXPENSES. RS. 1,15,830 RS. 1,22,06,152 LESS : INDEXED COST OF ACQUISITION 1. F.Y. 2005 - 06 - RS. 19, 67,052 2. F.Y. 2007 - 08 - RS. 3,22,595 3. F.Y. 2008 - 09 - RS. 26,876 4. F.Y. 2009 - 10 - RS. 3,50,250 5. F.Y. 2010 - 11 - RS. 15,400 RS. 26,82,173 RS. 95,23,979 DEDUCTED U/S 54F. RS. 95,23,979 000 INVESTMENT IN HOUSE PROPERTY U/S 54F RS.1,23,56,640 0.2 DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD WORKED OUT THE CAPITAL GAIN AT RS. 1,02,39,100/ - ON SALE OF THIS PROPERTY AFTER RESTRICTING INDEXED COST OF ACQUISITION OF RS.19,67,052/ - AS AGAINST ASSESSEES CLAIM OF RS.26,82,173/ - . HOWEVER, THE TAXABLE CAPITAL GAINS WAS COMPUTED AT RS. NIL, SINCE THE ASSESSEE HAD INVESTED AN AMOUNT OF RS.1.23 CRORES AND CLAIMED EXEMPTION U/S 54F OF THE ACT. 3 ITA NO. 336/NAG/2016. 3. ON THE ABOVE FACTS, LEARNED CIT MADE FOLLOWING OBSERVATIONS : 3 . ON VER I F I CAT I ON OF CASE RECORDS, IT I S NOTICED THAT THE SAID PROPERTY WAS IN THE POSSESSION OF SHREE MAHARA J A AGRASEN CO - OPERATIVE HOUSI N G SOC I ETY TIL L 01/09/2009 . T H E OWNERSH I P WAS T R ANSFERRED F R OM SHREE MAHARAJA AGRASEN CO - OPERAT I VE HO U S IN G SOC I ETY L . T D . I N THE ASSESSEE ' S FAVOUR ON 01/09/2009 BY A REG I S T ERED SA L E DEED , WHICH I S APPARENT F R OM THE P R OPE R TY CARD . THUS , THE CORRECT DATE OF ACQU I S I T I ON OF THE ABOVE PROPE RT Y IS 01/09/2009 AND NOT 16/12/2005, AS ADOPTED BY THE ASSESSEE . IT IS AMP L Y C L EAR THAT THE OWNERSHIP IN THE PROPERTY DEVOLVES ON THE ASSESSEE W . E . F . 01/09/2009 . I) IT I S ALSO SEEN FROM THE RECO R DS THAT THE INSTANT PROPERTY HAS BEEN SOLD BY THE ASSESSEE VIDE DEED OF CONVEYANCE DATED 22/04/2010 TO M/S . TRIF REAL ESTATE AND DEVELOPMENT PRIVATE LIMITED , MUMBAI, AND THE POSSESSION THEREOF HAS ALSO BEEN HANDED OVER BY THE ASSESSEE ON THAT DATE AFTER THE EXECUTION OF DEED . FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSEE HAD PURCHASED THE PROPERTY ON 01/0912009 AND SOLD THE SAME ON 22/04/2010 . THE PROPERTY HAS BEEN HELD BY THE ASSESSEE FOR . LESS THAN 36 MONTHS AND, THEREFORE , THE GAIN ACCRUED TO THE ASSES SEE IS SHORT TERM CAPITAL GAIN AND NOT LONG TERM CAPITAL GAIN AS CLAIMED BY THE ASSESSEE I N HIS RETURN OF INCOME. AS SUCH , THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION U / S 54F OF THE I . T . ACT, 1961 AMOUNTING TO RS . 1 , 02 , 39 , 1001 - . I I; . IN VIEW OF THE - FACTS AS NARRATED ABO VE; DEDUCTIO N AL L OWE D U/ S 54F OF THE ACT IN THE ASSESSMENT ORDER U/S 143(3) OF THE ACT, NEEDS TO BE W I THDRA W H . 04 IN VIEW OF THE FACTS AS NARRATED ABOVE , THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME - TAX, CHANDRAPUR RANGE , CHANDRAPUR , ON 23/03/2014 U/S 143(3) OF THE I . T.ACT, 1961 WAS ERRONEOUS IN - SO - FAR - AS IT WAS PREJUDICIAL TO THE I NTEREST OF REVENUE AND , THEREFORE, THE SAME DESERVES TO BE REV I SED U/ ~ . 263 OF THE I . T . ACT, 1961 . AS SUCH, A SHOW CAUSE NOTICE U/S. 263 OF THE ACT DATED 09/0212016 WAS ISSUED CONVEYING THE FACTS (SUPRA) TO THE ASSESSEE, THAT THE ASSESSMENT FRAMED BY THE ASSESSING OFFICER WAS CONSIDERED ERRONEOUS AND PREJUDICIAL LTO T H E INTERES TOF REVENUE . THE SHOW CAUSE NOTICE WAS DULY SERVED UPON THE AS S ESSEE ON 1 9I02L2016 F I X I NG THE CASE FOR HEARING ON 25/02/2016 . 4. THE ASSESSEE RESPONDED AS UNDER : , I) THE ASSESSEE IS A HUF ASSESSED TO TAX VIDE THE ABOVE MENTIONED PAN. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE A. Y. 2011 - 12 ON 2810112012 DECLARING TOTAL INCOME OF RS. 18,10,6101 - COMPRISING OF INCOME FROM BUSINESS AND PROFESSION AND INCOME FROM OTHER SOURCES. THAT APART FROM THE ABOVE, THE ASSESSEE ALSO HAD INCOME FROM LONG TERM CAPITAL GAINS ON ACCOUNT OF SALE OF 1 . 1583% UNDIVI DED SHARE IN LAND BEARING CITY SURVEY NO. 36211, SHEET NO. 6412 OR MOUZA JAT - TARODI, BEARING MUNICIPAL HOUSE NO. 2, CORPORATION WARD NO. 11, SITUATED AT NEAR MEDICAL SQUARE, HAMBAGH, NAGPUR WHICH WAS CLAIMED ' EXEMPT ULS. 54F OF THE INCOME TAXAC, 1961. ORDER ULS. 143(3) OF THE ACT WAS PASSED ON 2310312014 ACCEPTING THE RETURNED INCOME. THE ASSESSEE HAS RECEIVED NOTICE U/S. 263, PROPOSING REVISION U/S. 263 OF THE ACT BY 4 ITA NO. 336/NAG/2016. DISALLOWING THE CLAIM OF DEDUCTION U/S. 54F BY TREATING THE CAPITAL GAINS ON SALE OF PROPERLY AS SHORT TERM CAPITAL GAINS INSTEAD OF LONG TERM CAPITAL GAINS DECLARED BY THE ASSESSEE AND ACCEPTED BY THE A.O. IN THE ORIG I NAL ASSESSMENT YEAR. , I II) THE ASSESSEE AT THE OUTSET SUBMITTED THAT THE CAPITAL GAINS AS COMPUTED AND ' DISCLOSED BY THE ASSESSEE , IN ITS RETURN OF INCOME IS IN ACCORDANCE WITH THE LAW AND THE SAME HAS FURTHER BEEN CORRECTLY ASS ESSED AS I LONG TERM CAPITAL GAINS U/S. 143(3) OF THE ACT, 1961 AND THUS THE ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE WARRANTING REVISION US!. 263 OF THE INCOME TAX ACT, 1961. THE ASSESSEE ALSO ENCLOSED COPY OF PUR C HASE AND THE SALE DEED OF THE PROPERLY. THE ASSESSEE FURNISHED THE HISTORY OF THE OWNERSHIP OF THE PROPERLY SOLD. III) AS PER POINT (D), PAGE NO. 3, BY AND UNDER A DEED OF ALLOTMENT DATED , . DECEMBER 16, 200~ AND EXECUTED BETWEEN THE SAID SOCIETY AND ITS ORIG I NAL MEMBERS THEREIN REFERRED TO AS THE ALLOTTEES OF THE SECOND PA R T AND CERTAIN MEMBERS THEREIN REFERRED TO AS THE CONSENTOR MEMBER OF THE THIRD PART, THE SAID ORIGINAL MEMBERS WERE ALLOTTED AN UNDIVIDED SHARE AND INTEREST IN THE SAID LAND AS PER THEIR INTEREST AND SHARE AND CONTRIBUTION FOR THE PURCHASE OF THE SAID LAND; IV) THE DEED OF ALLOTMENT DATED 1611212B05 REFERRED TO IN THE SALE DEED MAKES IT VERY CLEAR THAT THE ASSESSEE ALONGWITH THE OTHER MEMBERS OF THE SOCIETY BECAME OWNERS OF UNDIVIDED SHARE IN THE SAID LAND ON THE DATE OF THE DEED OF ALLOTMENT I.E. 1611212005 PERTAINING TO F. Y. 2005 - 06 WHICH HAS BEEN ACCORDINGLY CORRECTLY TAKEN AS THE YEAR OF ACQUISITION BY THE ASSESS E E IN ITS RETURN OF INCOME. V) THE ASSESSEE FURTHER ENCLOSED COPY OF DEED OF ALLOTMENT DATED 16/12/2005 AND DRAWN TH E ATTENTION OF THIS OFFICE TO THE PARA 1 TO 3 OF PAGE 6 OF THE DEED OF ALLOTMENT AND SUBMITTED THAT FROM THE ABOVE PARAS IT IS AMPLY CLEAR THAT THE ALLOTTEES INCLUDING THE ASSESSEE BECAME THE LEGAL OWNER OF THE UNDIVIDED SHARE IN THE LAND VIDE THE DEED OF THE ALLOTMENT DATED 16/12/2005. 5. HOWEVER, LEARNED CIT WAS NOT CONVINCED. HE OBSERVED AS UNDER : I) DEED OF ALLOTMENT DATED , 16/1212005 IS A DEED DRAFTED ON RS. 100 STAMP PAPER BETWEEN SHREE MAHARAJA AG R A S EN CO - OPERATIVE HOUSING SOCIETY LIMITED , A CO - OPERATIVE HOUSING SOCIETY, HAVING ITS OFFICE AT BHAVSAR CHOWK , OPP. HOTEL INDIA SON, C.A . ROAD, NAGPUR ACTING THROUQH PRESIDENT SHRI SHIVKISHAN S/O . MOOLCHAND AGRAWAL, NAGPUR ARID 33 MEMBERS JOINTLY KNOWN AND REFERRED AS THE PURCHASER, OR THE ALLOT TEES. I - II) TH E ABOVE DEED OF ALLOTMENT IS NOT A REGISTERED DOCUMENT . NO STAMP DUTY AND REGISTRATION CHARGES HAVE BEEN PAID BY THE SOCIETY . . . ~ . . .. III) IT IS MENTIONED IN PARA - 7 OF THE DEED OF ALLOTMENT , THAT THE SOCIETY WILL 5 ITA NO. 336/NAG/2016. EXECUTE THE SALE DEED IN FAVOUR OF THE MEMBERS AFTER GETTING THE NECESSARY PERMISSIONS / APPROVAL / CLEARANCES FROM ALL THE CONCERNED DEPARTMENTS. AS PER THE DEED OF ALLOTME N T, THE SOCIETY HAS MENTIONED THE UNDIVIDED SHARE AND INTEREST IN THE ! . I - LAND TO ALLOTTEE MEMBERS AS PER THEIR CONTRIBUTION FOR THE PURCHASE OF THE SAID LAND. IV) THE CONTRIBUTION OF THE INDIVIDUAL MEMBER IS NO WHERE MENTIONED IN THE DEED OF ALLOTMENT AND NO EVIDENCE HAS BEEN FURNISHED FOR THE PAYMENT OF SAID PROPERTY. NO S PECIFIC DESCRIPTION I DEMARCATION OF THE - PART OF LAND ALLOTTED TO I NDIVIDUAL MEMBER ARE GIVEN IN THE SAID DEED OF ALLOTMENT . V) IN VIEW OF THE ABOVE , THE QUESTION REGARDING HANDING OVER OF POSSESSION OF THE UNDIVIDED SHARE AND INTEREST IN THE LAND TO THE ALLOTTEE MEMBERS AS PER THEIR CONTRIBUTION FOR THE PURCHASE OF THE SAID LAND AS PER DEED OF ALLOTMENT IS I NCONCLUSIVE. VI) IN THIS CONTEXT, FURTHER RELIANCE IS MADE ON THE DECISION OF HON ' BLE SUPREME C OURT OF INDIA IN THE CASE OF SURAJ LAMP AND INDUSTRIES PVT . LLD VS. STATE OF HARYANA . 6. THEREAFTER LEARNED CIT FURTHER REFERRED TO ABOVE SAID CASE LAW FROM THE HONBLE APEX COURT. HE OBSERVED AS UNDER : IN VIEW OF THE ABOVE, IT IS AMPLY CLEAR THAT THE ASSESSEE HAS PURCHASED THE PROPERTY VIDE REGISTERED SALE DEED DATED 01/09/2009 AND MUTATED THE SAME IN HIS NAME ON THE BASIS OF THIS SALE DEED IN PROPERTY EXTRACT I,.E. 7/12 AND SOLD THE SAME ON 22/04/2010. AS THE PROPERTY HAS BEEN HELD FOR LESS THAN 36 MONTHS, THE GAIN CLAIMED BY THE ASSESSEE IN HIS RETURN OF INCOME. THEREFORE, THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION U/S 54F OF THE ACT AMOUNTING TO RS.1,02,39,100/ - FOR THE YEAR UNDER CONSIDERATION. 7. AGAINST THE ABOVE ORDER, ASSESSEE IS IN A PPEAL BEFORE US. 8. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE AO HAD DURING THE ORIGINAL ASSESSMENT PROCEEDINGS EXAMINED THE DETAILS OF CAPITAL GAINS AND HAD ACCEPTED THE SAME AFTER DISCUSSI NG IT IN DETAIL IN PARA 4 OF THE ASSESSMENT ORDER. LEARNED COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE HAS RECEIVED NOTICE U/S 154/155 OF THE I.T. ACT DATED 10 - 08 - 2015 PROPOSING RECTIFICATION OF ORDER PASSED U/S 143(3) OF THE I.T. ACT AS UNDER : 6 ITA NO. 336/NAG/2016. ON PERU SAL OF RECORDS, IT IS SEEN THAT THE PROPERTY WHICH WAS SOLD AT RS.1,23,21,982/ - WAS IN THE POSSESSION OF SHREE MAHARAJA AGRASEN CO - OPERATIVE HOUSING SOCIETY LTD.. TILL 01/09/2009 AND IT WAS TRANSFERRED IN YOUR NAME ON 01/09/2009 BY THE AID SOCIETY. HENCE, FOR CALCULATING THE INDEXED COST OF ACQUISITION OF THE SAID PROPERTY, F.Y. 2009 - 10 OUGHT TO HAVE BEEN CONSIDERED INSTEAD OF F.Y. 2005 - 06. ACCORDINGLY, THE ORDER U/S 143(3) IS PROPOSED TO BE RECTIFIED. 9. THEREAFTER UPON ASSESSEES RESPONSE THE AO PASSED A N ORDER U/S 154 DATED 02 - 12 - 2015 DROPPING THE PROCEEDINGS U/S 154 OF THE I.T. ACT. LEARNED COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE RECEIVED SHOW CAUSE NOTICE DATED 03 - 09 - 2015 ON THE SAME ISSUE TO SHOW CAUSE AS TO WHY THE CASE SHOULD NOT BE REOPENED FOR SCRUTINY U/S 148 OF THE I.T. ACT. UPON ASSESSEES RESPONSE AND JUSTIFICATION OF HIS CALCULATION THE AO DROPPED THE PROPOSED REASSESSMENT PROCEEDINGS. LEARNED COUNSEL SUBMITTED THAT TILL DATE NO NOTICE U/S 148 HAS BEEN RECEIVED. HOWEVER, THE ASSESSEE HAS R ECEIVED NOTICE U/S 263 AND ORDER THEREAFTER. LEARNED COUNSEL FURTHER SUBMITTED THAT ALL DETAILS PERTAINING TO THE TRANSACTION OF SALE AND PURCHASE ARE ON RECORD. THE DEED OF ALLOTMENT DATED 16 - 12 - 200 5 MAKES IT CLEAR THAT THE ASSESSEE ALONG WITH OTHER MEMBE RS OF THE SOCIETY BECAME OWNER OF UNDIVIDED SHARE OF THE SAID LAND ON THE DATE OF DEED OF ALLOTMENT I.E. 16 - 12 - 2005 WHICH HAS HENCE RIGHTLY BEEN TAKEN AS YEAR OF ACQUISITION FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS. REFERRING TO THE DEED OF ALLOTMEN T, LEARNED COUNSEL SUBMITTED THAT THE DEED NOWHERE MENTIONED THAT THE POSSESSION OF THE LAND WAS WITH THE SOCIETY. HE REFERRED TO PARA 8 OF THE SALE DEED EXECUTED ON 01 - 09 - 2009 AS UNDER : THAT THE SELLER HAS ALREADY DELIVERED THE ACTUAL PHYSICAL POSSESSIO N OF THE PROPERTY HEREBY SOLD/TRANSFERRED TO THE PURCHASER/S IN VACANT CONDITION AT THE TIME OF EXECUTION OF ALLOTMENT DEED DT. 16.12.2005 AND THE PURCHASER/S AARE IN POSSESSION SINCE THEN. 10. PER CONTRA LEARNED D.R. RELIED UPON THE ORDER OF LEARNED CIT. 11. W E HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT ON 7 ITA NO. 336/NAG/2016. THE SAME ISSUE ON WHICH REVISIONARY ORDER U/S 263 HAS BEEN PASSED, REVENUE HAS INITIATED PROCEEDINGS U/S 154 AND THEREAFTER DROPPED THE SAME AFTER RECEIVING THE ASSESSEES REPLY. THEREAFTER ON THE SAME ISSUE, SHOW CAUSE NOTICE FOR REOPENING U/S 148 WAS ISSUED. UPON ASSESSEES EXPLANATION THE AO WAS SATISFIED AND SO FAR NO REOPENING U/S 148 HAS BEEN DONE. THE ABOVE FACTS MAKE IT CLEAR THAT THE EXPLANATION BY THE ASSESSEE IS PLAUSIB LE. THE AO HAD APPLIED HIS MIND IN THE ASSESSMENT ORDER ALSO. IT IS SETTLED LAW THAT THE ISSUE ON WHICH TWO VIEWS ARE POSSIBLE AND THE AO HAS ADOPTED ONE OF THE VIEWS, ASSUMPTION OF JURISDICTION U/S 263 OF TH E I.T. ACT BY THE LEARNED CIT IS INVALID. IN THI S REGARD WE FIND SUPPORT FROM THE HONBLE APEX COURT DECISION IN THE CASE OF MAX INDIA LTD. 213 CTR 266. IN THIS CASE IT WAS HELD THAT WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTAINABLE IN LAW. 12. FURTHER MORE AS REGARDS THE MERITS OF THE FACTS OF THE CASE IS CONCERNED, WE FIND THAT THE ISSUE IN DISPUTE IS WHETHER AGREEMENT/DEED OF ALLOTMENT GRANTING OF POSSESSION AFTER COMPLETING ALL THE PAYMENT FORMALITIES SHOULD BE TAKEN AS DATE OF TRANSFER FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS OR THE DATE OF REGISTRATION OF SALE DEED. WE FIND THAT THIS ISSUE IS NO MORE RES - INTEGRA. HONBLE APEX COURT IN THE CASE OF SHRI SA NJEEV LAL ETC. VS. CIT IN CIVIL APPEAL NO. 5899 - 5900 OF 201 4 DATED 01 - 07 - 2014 HELD AS UNDER : IN NORMAL CIRCUMSTANCES, THE AFORESTATED QUESTION HAS TO BE ANSWERED IN THE NEGATIVE. HOWEVER, LOOKING AT THE PROVISIONS OF SECTION 2(47) OF THE ACT, WHICH DEFINES THE WORD TRANSFER IN RELATION TO A CAPITAL ASSET, ONE CAN SAY THAT IF A RIGHT IN THE PROPERTY IS EXTINGUISHED BY EXECUTION OF AN AGREEMENT TO SELL, THE CAPITAL ASSET CAN BE DEEMED TO HAVE BEEN TRANSFE RRED. RELEVANT PORTION OF SECTION 2(47), DEFINING THE WORD TRANSFER IS AS UNDER: 2(47) TRANSFER, IN RELATION TO A CAPITAL ASSET, INCLUDES, - (I)................ (II) THE EXTINGUISHMENT OF ANY RIGHTS THEREIN; OR . . . . . . . . 21. NOW IN THE LIGHT OF DEFINITION OF TRANSFER AS DEFINED UNDER SECTION 2(47) OF THE ACT, IT IS CLEAR THAT WHEN ANY RIGHT IN RESPECT OF ANY CAPITAL ASSET IS EXTINGUISHED AND THAT RIGHT IS TRANSFERRED TO SOMEONE, IT WOULD AMOUNT TO TRANSFER OF A CAPITAL ASSET. IN THE LIGHT OF THE AFORESTATED 8 ITA NO. 336/NAG/2016. DEFINITION, LET US LOOK AT THE FACTS OF THE PRESENT CASE WHERE AN AGREEMENT TO SELL IN RESPECT OF A CAPITAL ASSET HAD BEEN EXECUTED ON 27 TH DECEMBER, 2002 FOR TRANSFERRING THE RESIDENTIAL HOUSE/ORIGINAL ASSET IN QUESTION AND A SUM OF RS. 15 LAKHS HAD BEEN RECEIVED BY WAY OF EARNEST MONEY. IT IS ALSO NOT IN DISPUTE THAT THE SALE DEED COULD NOT BE EXECUTED BECAUSE OF PENDENCY OF THE LITIGATION BETWEEN SHRI RANJEET LAL ON ONE HAND AND THE APPELLANTS ON THE OTHER AS SHRI RANJEET LAL HAD CHALLE NGED THE VALIDITY OF THE WILL UNDER WHICH THE PROPERTY HAD DEVOLVED UPON THE APPELLANTS. BY VIRTUE OF AN ORDER PASSED IN THE SUIT FILED BY SHRI RANJEET LAL, THE APPELLANTS WERE RESTRAINED FROM DEALING WITH THE SAID RESIDENTIAL HOUSE AND A LAW - ABIDING CITIZ EN CANNOT BE EXPECTED TO VIOLATE THE DIRECTION OF A COURT BY EXECUTING A SALE DEED IN FAVOUR OF A THIRD PARTY WHILE BEING RESTRAINED FROM DOING SO. IN THE CIRCUMSTANCES, FOR A JUSTIFIABLE REASON, WHICH WAS NOT WITHIN THE CONTROL OF THE APPELLANTS, THEY COU LD NOT EXECUTE THE SALE DEED AND THE SALE DEED HAD BEEN REGISTERED ONLY ON 24 TH SEPTEMBER, 2004, AFTER THE SUIT FILED BY SHRI RANJEET LAL, CHALLENGING THE VALIDITY OF THE WILL, HAD BEEN DISMISSED. IN THE LIGHT OF THE AFORESTATED FACTS AND IN VIEW OF THE D EFINITION OF THE TERM TRANSFER, ONE CAN COME TO A CONCLUSION THAT SOME RIGHT IN RESPECT OF THE CAPITAL ASSET IN QUESTION HAD BEEN TRANSFERRED IN FAVOUR OF THE VENDEE AND THEREFORE, SOME RIGHT WHICH THE APPELLANTS HAD, IN RESPECT OF THE CAPITAL ASSET IN Q UESTION, HAD BEEN EXTINGUISHED BECAUSE AFTER EXECUTION OF THE AGREEMENT TO SELL IT WAS NOT OPEN TO THE APPELLANTS TO SELL THE PROPERTY TO SOMEONE ELSE IN ACCORDANCE WITH LAW. A RIGHT IN PERSONAM HAD BEEN CREATED IN FAVOUR OF THE VENDEE, IN WHOSE FAVOUR THE AGREEMENT TO SELL HAD BEEN EXECUTED AND WHO HAD ALSO PAID RS.15 LAKHS BY WAY OF EARNEST MONEY. NO DOUBT, SUCH CONTRACTUAL RIGHT CAN BE SURRENDERED OR NEUTRALIZED BY THE PARTIES THROUGH SUBSEQUENT CONTRACT OR CONDUCT LEADING TO NO TRANSFER OF THE PROPERTY TO THE PROPOSED VENDEE BUT THAT IS NOT THE CASE AT HAND. 22. IN ADDITION TO THE FACT THAT THE TERM TRANSFER HAS BEEN DEFINED UNDER SECTION 2(47) OF THE ACT, EVEN IF LOOKED AT THE PROVISIONS OF SECTION 54 OF THE ACT WHICH GIVES RELIEF TO A PERSON WHO HAS TRANSFERRED HIS ONE RESIDENTIAL HOUSE AND IS PURCHASING ANOTHER RESIDENTIAL HOUSE EITHER BEFORE ONE YEAR OF THE TRANSFER OR EVEN TWO YEARS AFTER THE TRANSFER, THE INTENTION OF THE LEGISLATURE IS TO GIVE HIM RELIEF IN THE MATTER OF PAYMENT OF TAX ON THE LO NG TERM CAPITAL GAIN. IF A PERSON, WHO GETS SOME EXCESS AMOUNT UPON TRANSFER OF HIS OLD RESIDENTIAL PREMISES AND THEREAFTER PURCHASES OR CONSTRUCTS A NEW PREMISES WITHIN THE TIME STIPULATED UNDER SECTION 54 OF THE ACT, THE LEGISLATURE DOES NOT WANT HIM TO BE BURDENED WITH TAX ON THE LONG TERM CAPITAL GAIN AND THEREFORE, RELIEF HAS BEEN GIVEN TO HIM IN RESPECT OF PAYING INCOME TAX ON THE LONG TERM CAPITAL GAIN. THE INTENTION OF THE LEGISLATURE OR THE PURPOSE WITH WHICH THE SAID PROVISION HAS BEEN INCORPORATE D IN THE ACT, IS ALSO VERY CLEAR THAT THE ASSESSEE SHOULD BE GIVEN SOME RELIEF. THOUGH IT HAS BEEN VERY OFTEN SAID THAT COMMON SENSE IS A STRANGER AND AN INCOMPATIBLE PARTNER TO THE INCOME TAX ACT AND IT IS ALSO SAID THAT EQUITY AND TAX ARE STRANGERS TO EA CH OTHER, STILL THIS COURT HAS OFTEN OBSERVED THAT PURPOSIVE INTERPRETATION SHOULD BE GIVEN TO THE 9 ITA NO. 336/NAG/2016. PROVISIONS OF THE ACT. IN THE CASE OF OXFORD UNIVERSITY PRESS V. COMMISSIONER OF INCOME TAX [(2001) 3 SCC 359] THIS COURT HAS OBSERVED THAT A PURPOSIVE INTER PRETATION OF THE PROVISIONS OF THE ACT SHOULD BE GIVEN WHILE CONSIDERING A CLAIM FOR EXEMPTION FROM TAX. IT HAS ALSO BEEN SAID THAT HARMONIOUS CONSTRUCTION OF THE PROVISIONS WHICH SUBSERVE THE OBJECT AND PURPOSE SHOULD ALSO BE MADE WHILE CONSTRUING ANY OF THE PROVISIONS OF THE ACT AND MORE PARTICULARLY WHEN ONE IS CONCERNED WITH EXEMPTION FROM PAYMENT OF TAX. CONSIDERING THE AFORESTATED OBSERVATIONS AND THE PRINCIPLES WITH REGARD TO THE INTERPRETATION OF STATUTE PERTAINING TO THE TAX LAWS, ONE CAN VERY WELL INTERPRET THE PROVISIONS OF SECTION 54 READ WITH SECTION 2(47) OF THE ACT, I.E. DEFINITION OF TRANSFER, WHICH WOULD ENABLE THE APPELLANTS TO GET THE BENEFIT UNDER SECTION 54 OF THE ACT. 23. CONSEQUENCES OF EXECUTION OF THE AGREEMENT TO SELL ARE ALSO VERY CLEAR AND THEY ARE TO THE EFFECT THAT THE APPELLANTS COULD NOT HAVE SOLD THE PROPERTY TO SOMEONE ELSE. IN PRACTICAL LIFE, THERE ARE EVENTS WHEN A PERSON, EVEN AFTER EXECUTING AN AGREEMENT TO SELL AN IMMOVEABLE PROPERTY IN FAVOUR OF ONE PERSON, TRIES T O SELL THE PROPERTY TO ANOTHER. IN OUR OPINION, SUCH AN ACT WOULD NOT BE IN ACCORDANCE WITH LAW BECAUSE ONCE AN AGREEMENT TO SELL IS EXECUTED IN FAVOUR OF ONE PERSON, THE SAID PERSON GETS A RIGHT TO GET THE PROPERTY TRANSFERRED IN HIS FAVOUR BY FILING A SU IT FOR SPECIFIC PERFORMANCE AND THEREFORE, WITHOUT HESITATION WE CAN SAY THAT SOME RIGHT, IN RESPECT OF THE SAID PROPERTY, BELONGING TO THE APPELLANTS HAD BEEN EXTINGUISHED AND SOME RIGHT HAD BEEN CREATED IN FAVOUR OF THE V ENDEE/TRANSFEREE, WHEN THE AGREEM ENT TO SELL HAD BEEN EXECUTED. 24. THUS, A RIGHT IN RESPECT OF THE CAPITAL ASSET, VIZ. THE PROPERTY IN QUESTION HAD BEEN TRANSFERRED BY THE APPELLANTS IN FAVOUR OF THE VENDEE/TRANSFEREE ON 27 TH DECEMBER, 2002. THE SALE DEED COULD NOT BE EXECUTED FOR THE R EASON THAT THE APPELLANTS HAD BEEN PREVENTED FROM DEALING WITH THE RESIDENTIAL HOUSE BY AN ORDER OF A COMPETENT COURT, WHICH THEY COULD NOT HAVE VIOLATED. 13. THUS WE FIND THAT IN THIS CASE THE ASSESSEE HAS OBTAINED THE POSSESSION OF THE LAND VIDE DEED OF ALLOTMENT ON 16 - 12 - 2005. UPON THIS DATE ALL THE PAYMENTS HAD BEEN DONE. NO CA S E HAS BEEN MADE BY THE REVENUE THAT ANY OF THE PAYMENT WAS DUE AFTER THIS DATE. IN SUCH CIRCUMSTANCES ON THE ANVIL OF AFORESAID CASE LAW OF THE ABOVE SAID APEX COURT DECISION THE DATE OF TRANSFER QUA THE PURCHASE FOR COMPUTATION OF CAPITAL GAINS IS 16 - 12 - 2005 AND NOT THE DATE ON WHICH THE SALE DEED WAS REGISTERED I.E. ON 01 - 09 - 2009. 14. THE ABOVE MAKES IT VERY CLEAR THAT THE AO HAVING BEEN CONSCIOUS OF THE 10 ITA NO. 336/NAG/2016. FACTS OF THE CASE HA S APPLIED A VIEW WHICH HAS THE MANDATE OF HONBLE APEX COURT. IN SUCH VIEW OF THE MATTER, TREATMENT OF THE ASSESSMENT ORDER AS PREJUDICIAL AND ERRONEOUS TO REVENUE BY THE LEARNED CIT IS NOT AT ALL SUSTAINABLE. HERE AGAIN THE ABOVE DECISION OF HONBLE APEX COURT IN MAX INDIA LTD. SUPPORT THIS VIEW. HENCE WE HAVE NO HESITATION IN QUASHING THE 263 ORDER PASSED BY THE LEARNED CIT. 15. IN THE RESULT, THIS APPEAL BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF DEC., 2016. SD/ - SD/ - (RAM LAL NEGI) ( SHAMIM YAHYA) JUDICIAL MEMBER. ACOUNTANT MEMBER. NAGPUR, DATED: 28 TH DEC. , 2016. COPY FORWARDED TO : 1. SHRI KAILASHCHAND AGRAWAL, C/O KAPIL HIRANI & CO., C.AS., 8, WARDHA ROAD, NEAR LOKMAT SQUARE, NAGPUR - 440012. 2. A .C.I.T., C HANDRAPUR CIRCLE, CHANDRAPUR. 3. PR. C.I.T. - 3 , NAGPUR. 4. D.R., ITAT, NAGPUR. 5. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE.