Asstt. Commissioner of Income Tax-1, Kanpur V. M/s Pt. Ranglal Trust, Kanpur

ITA 359/LKW/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92163 (ITAT-LUCKNOW)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-04-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 17-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PINKI MAHAVAR
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Additional evidence; Reasonable cause; Fair market value; Condonation of delay
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.359/LKW/2013 ASSESSMENT YEAR:2008-09 ASSTT. CIT-1 KANPUR V. M/S PT. RANGLAL TRUST 7/40, TILAK NAGAR KANPUR TAN/PAN:AABTP0284E (APPELLANT) (RESPONDENT) C.O. NO.06/LKW/2014 [ARISING OUT OF ITA NO.359/LKW/2013] ASSESSMENT YEAR:2008-09 M/S PT. RANGLAL TRUST 7/40, TILAK NAGAR KANPUR V. ASSTT. CIT-1 KANPUR TAN/PAN:AABTP0284E (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY: SMT. PINKI MAHAVAR, D.R. ASSESSEE BY: SHRI. RAKESH GARG, ADVOCATE DATE OF HEARING: 23 04 2015 DATE OF PRONOUNCEMENT: 05 06 2015 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), INTER ALIA, ON THE FOLLOWING GROUNDS:- 1. THAT THE LD. CIT(A)-II, KANPUR HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT NO LIABILITY FOR CAPITAL GAINS TAX ARISEN IN THE F.Y. 2007-08 AND IN DIRECTING THE ASSESSING OFFICER TO CONSIDER THE COMPUTATION OF CAPITAL GAINS IN THE A.Y. 2005-06 WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE ITSELF HAS CLAIMED LONG TERM CAPITAL LOSS AMOUNTING TO RS. 8,12,230/- IN THE RETURN OF :- 2 -: INCOME FOR A.Y. 2008-09 ON THE ACTUAL SALE CONSIDERATION OF RS. 51,00,000/-. 2. THAT THE LD. GIT (A)-II, KANPUR HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACTS THAT IN ITS REPLY DATED 14.04.2009 FILED BEFORE THE ASSESSING OFFICER, THE ASSESSEE ITSELF HAS ACCEPTED ABOUT HANDING OVER THE POSSESSION OF THE PROPERTY TO THE PURCHASER IN THE F.Y. 2007-08. 3. THAT THE LD. CIT(A)-II, KANPUR HAS ERRED IN LAW AND ON FACTS IN ACCEPTING THE ADDITIONAL EVIDENCE FROM THE ASSESSEE IN THE FORM OF SAID LETTER DATED 31.3.2005 WITHOUT OFFERING ANY OPPORTUNITY TO THE A.O. FOR CONFRONTING THE SAME THUS THE LD.CIT(A)-LL HAS VIOLATED THE PROVISION OF RULE 46(A) OF THE INCOME TAX RULES,1962. 4. THAT THE ORDER OF LD. CIT (A)-LL, KANPUR DATED 28.02.2013 NEEDS TO BE QUASHED AND THE, ORDER PASSED BY THE ASSESSING OFFICER DATED 16.12.2010 BE RESTORED. 2. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION ASSAILING THE ORDER OF THE LD. CIT(A), INTER ALIA, ON THE FOLLOWING GROUNDS:- 1. BECAUSE THE CIT(A) HAS FAILED .TO APPRECIATE THAT THE FMV OF THE SAID PROPERTY WAS DETERMINED BY THE DISTRICT JUDGE, KANPUR VIDE ORDER DATED 10.03.2004 WITHOUT WHOSE PERMISSION THE PROPERTY COULD NOT BE SOLD/TRANSFERRED. 2. BECAUSE THE CIT(A) HAS NOT ACCEPTED ANY ADDITIONAL EVIDENCE WITHIN THE MEANING OF THE PROVISIONS OF SECTION 46(A) IN AS MUCH AS WHATEVER PAPER/CONFIRMATION/LETTERS AS ALLEGED TO HAVE BEEN FILED ARE. ALL PURSUANT TO THE DIRECTIONS GIVEN BY THE CIT(A) IN TERMS OF SECTION 251(2) READ WITH RULE 46(A)(4) OF THE ACT, 1961. 3. WITHOUT PREJUDICE TO THE ABOVE, THE CIT(A) SHOULD OUGHT TO HAVE REFERRED THE MATTER TO THE DVO .IN TERMS OF SECTION :- 3 -: 50C(2) OF THE ACT, 1961, THE 'CLAIM' BEING IN THE MANNER OF COMPUTATION OF CAPITAL GAINS FILED ALONG WITH THE RETURN OF INCOME AND BY WAY OF SEPARATE SUBMISSIONS/LETTERS BEFORE THE CIT(A). 3. IT HAS BEEN POINTED OUT THAT THE CROSS OBJECTION IS FILED LATE BY 272 DAYS, FOR WHICH NO APPLICATION FOR CONDONATION OF DELAY HAS BEEN MOVED ON BEHALF OF THE ASSESSEE. IN THE ABSENCE OF PROPER APPLICATION FOR CONDONATION OF DELAY IN FILING OF THE CROSS OBJECTION, WE ARE OF THE VIEW THAT THE ASSESSEE HAS NO REASONABLE CAUSE FOR THE DELAY IN FILING OF THE CROSS OBJECTION. WE ACCORDINGLY HOLD THAT THE CROSS OBJECTION FILED BY THE ASSESSEE IS TIME BARRED AND DISMISS THE SAME BEING NOT ADMITTED. 4. NOW WE ARE LEFT WITH THE REVENUES APPEAL, IN WHICH THE ISSUE OF CAPITAL GAIN IN THE IMPUGNED ASSESSMENT YEAR HAS BEEN RAISED. IN THIS REGARD, THE FACTS CULLED OUT FROM THE ORDERS OF THE LOWER AUTHORITIES ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTICED THAT THE ASSESSEE HAS SOLD A PROPERTY BEARING NO.75/6, HALSEY ROAD, KANPUR. THE ASSESSEE WAS REQUIRED TO FURNISH COMPLETE DETAILS WHEREFROM THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS SOLD PROPERTY AT A SALE CONSIDERATION OF RS.51 LAKHS WHEREAS THE VALUE FOR THE PURPOSE OF STAMP DUTY WAS DETERMINED BY THE SUB-REGISTRAR, KANPUR AT RS.2,28,11,625/- ON WHICH STAMP DUTY WAS PAID. THE ASSESSEE WAS REQUIRED TO SHOW CAUSE AS TO WHY PROCEEDINGS UNDER SECTION 50C OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT') SHOULD NOT BE APPLIED. THE ASSESSING OFFICER ACCORDINGLY COMPUTED THE CAPITAL GAIN AT RS.1,69,01,323/-, AGAINST WHICH AN APPEAL WAS FILED BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT THE PROPERTY WAS NOT TRANSFERRED IN THE IMPUGNED ASSESSMENT YEAR. AS PER AGREEMENT TO SELL, THE PROPERTY WAS TRANSFERRED DURING THE FINANCIAL YEAR 2004-05 RELEVANT TO THE ASSESSMENT YEAR 2005-06. THEREFORE, WHATEVER CAPITAL GAIN IS TO BE COMPUTED, IT CAN BE COMPUTED IN THAT ASSESSMENT YEAR AND NOT IN THE IMPUGNED ASSESSMENT YEAR. IN :- 4 -: SUPPORT OF THIS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED THE COPY OF THE AGREEMENT TO SELL BEFORE THE LD. CIT(A), ON WHICH REMAND REPORT WAS CALLED FOR. THE REMAND REPORT WAS ACCORDINGLY SUBMITTED BY THE ASSESSING OFFICER. AS PER THE AGREEMENT TO SELL, THE TOTAL CONSIDERATION WAS FIXED AT RS.51 LAKHS OUT OF WHICH RS.21 LAKHS WAS RECEIVED BY THE ASSESSEE ON 10.1.2005 AND THE BALANCE AMOUNT OF RS.30 LAKHS WAS RECEIVED ON 31.3.2005. ON PAYMENT OF THE ENTIRE CONSIDERATION, THE POSSESSION WAS HANDED OVER TO THE BUYER. THEREFORE, NOTHING WAS LEFT OUT FOR FURTHER PAYMENT. IN THE LIGHT OF THE PROVISIONS OF SECTION 2(45)(VI) OF THE ACT, THE PROPERTY WAS TRANSFERRED IN THE IMPUGNED ASSESSMENT YEAR I.E. 2005-06. THEREFORE, CAPITAL GAIN CANNOT BE COMPUTED IN THE IMPUGNED ASSESSMENT YEAR BY INVOKING THE PROVISIONS OF SECTION 50C OF THE ACT. THE LD. CIT(A) EXAMINED THIS CONTENTION OF THE ASSESSEE AND BEING CONVINCED WITH IT, HE WAS OF THE VIEW THAT THE PROPERTY WAS IN FACT TRANSFERRED IN ASSESSMENT YEAR 2005-06, THEREFORE, CAPITAL GAIN SHOULD BE COMPUTED IN ASSESSMENT YEAR 2005-06. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE PAPER BOOK FILED BY THE ASSESSEE AND THE WRITTEN SUBMISSIONS PLACED BY LD. AR. THE ASSESSEE PT. RANGLAL TRUST, IS A PRIVATE TRUST, ESTABLISHED BY LATE PT. RANGLAL BY TRUST DEED DATED 27.01.1930. THE TRUST WAS CREATED BY SETTLING PROPERTY NO. 75/6, NAI SARAK, HALSEY ROAD, KANPUR WITH THE OBJECT OF PROVIDING SCHOLARSHIPS TO MERITORIOUS AND NEEDY STUDENTS OUT OF THE RENTAL INCOME FROM THE SAID PROPERTY. THE PROPERTY IS SITUATED ON 832.76 SQ.MTRS. AND IS DOUBLE STOREYED STRUCTURE WHICH CONSTRUCTION WAS COMPLETED PRIOR TO 1910. THE PROPERTY WAS LET OUT TO DIFFERENT TENANTS WHO WERE PAYING VERY MEAGER RENT. THE TOTAL RENT RECEIVED FROM THE SAID PROPERTY WAS RS.50/- PER MONTH ONLY. THE TRUST WAS ASSESSED TO INCOME-TAX. THE INCOME AND EXPENDITURE ACCOUNT OF THE TRUST HAS ALSO BEEN SEEN. THE ONLY SOURCE OF INCOME IS INCOME FROM INTEREST FROM BANK. THERE IS NO INCOME FROM PROPERTY. :- 5 -: THIS FURTHER SUBSTANTIATE THAT THE TRUST CEASED TO ENJOY INCOME FROM PROPERTY AFTER GIVING POSSESSION OF THE SAME. THE AUTHORIZED REPRESENTATIVE HAS PLACED THE ARGUMENTS THAT DUE TO MEAGER RENT THE TRUST WAS NOT IN A POSITION TO ACHIEVE ITS OBJECTS AND FULFILL THE PURPOSE FOR WHICH IT WAS CREATED. THE TENANTS WERE NEITHER PREPARED TO VACATE THE PREMISES NOR INCREASE THE RENT. KEEPING THIS IN MIND THE TRUSTEES MOVED A PETITION BEFORE THE DISTRICT JUDGE KANPUR NAGAR TO GRANT PERMISSION TO TRANSFER THE SAID PROPERTY TO THE HIGHEST BIDDER, SO THAT THE REALIZATION OF THE SALE PROCEEDS COULD BE UTILIZED TO ACHIEVE THE OBJECTS OF THE TRUST. THE DISTRICT JUDGE, KANPUR, GRANTED PERMISSION ON 10.03.2004 TO TRANSFER THE PROPERTY FOR AN AMOUNT NOT LESS THAN RS. 50 LAKHS. THE ASSESSEE TRUST ENTERED INTO A REGISTERED AGREEMENT ON 27.1.2005 WITH MAYUR INFRASTRUCTURE LIMITED TO SELL THE SAID PROPERTY FOR RS.51 LAKHS. THE ENTIRE SALE CONSIDERATION OF RS.51 LAKHS WAS RECEIVED AS UNDER: RS. 21,00,000/- VIDE CHEQUE NO.536834 ON STATE BANK OF INDORE, BIRHANA ROAD, KANPUR DATED 10.1.2005 RS.10,00,000/- VIDE CHEQUE NO. 536840 ON STATE BANK OF INDORE, BIRHANA ROAD, KANPUR DATED 31.3.2005 RS.20,00,000/- VIDE CHEQUE NO. 536839 ON STATE BANK OF INDORE, BIRHANA ROAD, KANPUR DATED 31.3.2005 ON RECEIVING THE ENTIRE CONSIDERATION THE POSSESSION OF PROPERTY WAS HANDED OVER TO THE VENDEE IN THE YEAR 2005 ITSELF VIDE HIS LETTER DATED 21-03-2005. THE SALE DEED WAS EXECUTED LATER ON 15.5.2007. IT HAS BEEN ARGUED BY THE A.R., BY WAY OF RAISING THE ADDITIONAL GROUND THAT THERE ARISES NO LIABILITY TO PAY CAPITAL GAINS TAX FOR THE YEAR UNDER CONSIDERATION. THIS SUBMISSION OF THE LD. A.R. IS :- 6 -: BASED ON THE PREMISE THAT AN AGREEMENT TO SELL WAS EXECUTED ON 27.1.2005 REGISTERED WITH SUB-REGISTRAR, KANPUR, BETWEEN THE ASSESSEE AND MAYUR INFRASTRUCTURE LTD., THE PURCHASER, FOR A TOTAL CONSIDERATION OF RS.51 LAKHS. THE SALE CONSIDERATION WAS TO BE PAID PARTLY AT THE TIME OF REGISTRATION OF THE AGREEMENT TO SELL AND PARTLY TO BE PAID BY MARCH 31, 2005. THE PURCHASER PAID RS. 21,00,000/- VIDE CHEQUE NO.536834 DRAWN ON STATE BANK OF INDORE, BIRHANA ROAD, KANPUR DATED 10.1.2005 AT THE TIME OF AGREEMENT TO SELL AND THEREAFTER THE REMAINING AMOUNT OF RS.31 LAKHS WAS PAID ON 31.3.2005 VIDE RS.10,00,000/- VIDE CHEQUE NO. 536840 ON STATE BANK OF INDORE, BIRHANA ROAD, KANPUR DATED 31.3.2005_RS.20,00,000/- VIDE CHEQUE NO. 536839 ON STATE BANK OF INDORE, BIRHANA ROAD, KANPUR DATED 31.3.2005. THE ENTIRE CONSIDERATION WAS PAID BY THE PURCHASER AND ACKNOWLEDGED BY THE ASSESSEE. THE ASSESSEE HANDED OVER THE POSSESSION OF THE SAID PROPERTY TO THE PURCHASER. THE PURCHASER ACKNOWLEDGED THE SAME VIDE LETTER DATED 31.3.2005 ITSELF. THE LD. A.R. HAS SUBMITTED THAT SINCE THE ENTIRE CONSIDERATION WAS PAID AND THE POSSESSION OF THE PROPERTY WAS HANDED OVER TO THE PURCHASER, THE ASSESSEE CEASED TO HAVE ANY RIGHT, TITLE OR INTEREST OR ANY LIEN OF ANY NATURE WHATSOEVER OVER THE SAID PROPERTY. THE OBLIGATION CAST ON THE ASSESSEE STOOD DISCHARGED. IN TERMS OF SECTION 2(47)(V) OF THE INCOME TAX ACT, 1961, 'WHEREIN ANY TRANSACTION INVOLVING THE ALLOWING OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SEC. 53A OF THE TRANSFER OF PROPERTY ACT, 1882 (4 OF 1882) OR AS PER SUB- CLAUSE '(VI)' ANY TRANSACTION( ........ BY WAY OF ANY AGREEMENT OR ANY ARRANGEMENT OR IN ANY OTHER MANNER WHATSOEVER), WHICH HAS THE EFFECT OF TRANSFERRING, OR ENABLING THE ENJOYMENT OF, ANY IMMOVABLE PROPERTY,' IN VIEW OF THE ABOVE, IT HAS BEEN ARGUED THAT SINCE THE ASSESSEE HAS RECEIVED THE ENTIRE CONSIDERATION AND HAS PARTED WITH THE PROPERTY, THE TRANSFER STOOD COMPLETED AND AS SUCH, THE LIABILITY TO PAY CAPITAL GAINS WOULD NOT ARISE IN THE YEAR UNDER APPEAL, WHEN THE SALE DEED WAS EXECUTED AND REGISTERED. :- 7 -: THESE FACTS ARE NOT IN DISPUTE. THE FACTS ARE DOCUMENTED, IN THE AGREEMENT TO SELL AS WELL AS THE SALE DEED, BOTH ARE REGISTERED AND ARE NOT DOUBTED UPON. THE CONSIDERATION HAS BEEN PAID IN FULL AND THE POSSESSION OF THE PROPERTY HAS BEEN DELIVERED. FOR THE PURPOSE OF INCOME TAX ACT, THE 'TRANSACTION OF TRANSFER' STANDS COMPLETE IN TERMS OF SECTION 2(47)(V)(VI) OF THE ACT. ACCORDINGLY, THERE HAS TAKEN NO TRANSFER OF ANY IMMOVABLE PROPERTY DURING THE YEAR UNDER CONSIDERATION. THERE WOULD BE NO LIABILITY FOR CAPITAL GAINS. MERELY BECAUSE THE SALE DEED HAS BEEN EXECUTED AND REGISTERED DURING THE YEAR UNDER CONSIDERATION ITSELF WOULD NOT MEAN THAT THE PROPERTY IN QUESTION HAS BEEN TRANSFERRED DURING THE YEAR UNDER CONSIDERATION. SECTION 2(47)(V) AND (VI) WAS BROUGHT IN THE STATUTE BY THE FINANCE ACT 1987 W.E.F. 01.04.1988. SUB-CLAUSE (V) WAS INSERTED IN SECTION 2(47) ALONGWITH OTHER CLAUSE (VI) WITH THE INTENTION TO NEUTRALIZE CERTAIN DEVICES AND TRANSACTIONS PURSUANT TO WHICH CAPITAL ASSET OR INTEREST THEREIN WERE TRANSFERRED IN SUCH A MANNER SO AS TO FALL BEYOND THE PARAMETERS OF THE DEFINITION OF THE TERM TRANSFER IN SECTION (2) SUB-SECTION (47). TAXABLE EVENT IN THE CASE OF POSSESSION IN PURSUANCE OF AGREEMENT TO SELL OCCURS IN THE YEAR OF POSSESSION AND NOT IN THE YEAR OF EXECUTION AND REGISTRATION OF THE SALE DEED, TO CURB THE PRACTICE, OF TRANSFERRING THE PROPERTIES BY GIVING POSSESSION AND NOT EXECUTING THE SALE DEED. IN ORDER TO OVERCOME THIS, THE STATUTE HAS PROVIDED IN TERMS OF CLAUSE (V) & (VI) OF SECTION 2(47) THAT TRANSFER WOULD STAND COMPLETE ON POSSESSION OF THE IMMOVABLE PROPERTY IRRESPECTIVE OF THE REGISTRATION OF THE SALE DEED. FOR THE PURPOSE OF SECTION 2(47)(V) POSSESSION ENABLING EXERCISE OF GENERAL CONTROL OF PROPERTY TO MAKE IT USE IS ENOUGH. THE ABOVE PROPOSITION IS CLEAR BY THE WORDINGS OF SECTION 53A AND ALSO BY THE BOARD'S CIRCULAR NO.495 DT. 22.09.1987 WHICH EXPLAINS THE INTENTION BEHIND THE INSERTION OF THESE SUB-SECTIONS TO SECTION 2(47) OF THE ACT, 1961. '53A. .PART PERFORMANCE - WHERE ANY PERSON CONTRACTS TO TRANSFER FOR CONSIDERATION ANY IMMOVABLE PROPERTY BY WRITING, :- 8 -: SIGNED BY HIM OR ON HIS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTITUTE THE TRANSFER CAN BE ASCERTAINED WITH REASONABLE CERTAINTY, AND THE TRANSFEREE HAS, IN PART PERFORMANCE OF THE CONTRACT, TAKEN POSSESSION OF THE PROPERTY OR ANY PART THEREOF, 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 PERFORM HIS PART OF THE CONTRACT, THEN, NOTWITHSTANDING THAT THE CONTRACT, THOUGH REQUIRED TO BE REGISTERED, HAS NOT BEEN REGISTERED, OR, WHERE THERE IS AN INSTRUMENT OF TRANSFER, THAT THE TRANSFER HAS NOT BEEN COMPLETED IN THE MANNER PRESCRIBED THEREFOR BY THE LAW FOR THE TIME BEING IN FORCE, THE TRANSFEROR OR ANY PERSON CLAIMING UNDER HIM SHALL BE DEBARRED FROM ENFORCING AGAINST THE TRANSFEREE AND PERSONS CLAIMING UNDER HIM ANY RIGHT IN RESPECT OF THE PROPERTY OF WHICH THE TRANSFEREE HAS TAKEN OR CONTINUED IN POSSESSION, OTHER THAN A RIGHT EXPRESSLY PROVIDED BY THE TERMS OF THE CONTRACT. PROVIDED THAT NOTHING IN THIS SECTION SHALL AFFECT THE RIGHTS OF A TRANSFEREE FOR CONSIDERATION WHO HAS NO NOTICE OF THE CONTRACT OR OF THE PART PERFORMANCE THEREOF.' FROM A REVIEW OF THE ABOVE, IT APPEARS THAT IF POSSESSION OF IMMOVABLE PROPERTY IS GIVEN PURSUANT TO AN AGREEMENT FOR SALE WHICH IS COVERED BY SECTION 53A, SUCH POSSESSION ITSELF WOULD FALL WITHIN THE DEFINITION OF 'TRANSFER' NOTWITHSTANDING THE FACT THAT THERE IS NO CONVEYANCE. THIS CHANGE NEUTRALIZES THE RATIO OF THE SUPREME COURT DECISIONS IN CIT VS BHURANGYA COAL CO. AND IN ALAPATI VENKATARAMIAH V. CIT. 'DEFINITION OF 'TRANSFER' WIDENED TO INCLUDE CERTAIN TRANSACTIONS - 11.1. THE EXISTING DEFINITION F THE WORD 'TRANSFER' IN SECTION 2(47) DOES NOT INCLUDE TRANSFER OF CERTAIN RIGHTS ACCRUING TO A PURCHASE, BY WAY OF BECOMING A MEMBER OF A ACQUIRING SHARES IN A CO-OPERATIVE SOCIETY, COMPANY, OR ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT OR ANY ARRANGEMENT WHEREBY SUCH PERSON ACQUIRES ANY :- 9 -: RIGHT IN ANY BUILDING WHICH IS EITHER BEING CONSTRUCTED OR WHICH IS TO BE CONSTRUCTED. TRANSACTIONS, OF THE NATURE REFERRED TO AND ARE NOT REQUIRED TO BE REGISTERED UNDER THE REGISTRATION ACT, 1908. SUCH ARRANGEMENTS CONFER THE PRIVILEGES OF OWNERSHIP WITHOUT TRANSFER OF TITLE IN THE BUILDING AND ARE A COMMON MODE OF ACQUIRING FLATS PARTICULARLY IN MULTI-STOREYED CONSTRUCTIONS IN BIG CITIES. THE DEFINITION ALSO DOES NOT 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 PROPERTY ACT, 1882. NOW SUB-CLAUSES (V) AND (VI) HAVE BEEN INSERTED IN SECTION 2(47) TO PREVENT AVOIDANCE OF CAPITAL GAINS LIABILITY BY RECOURSE TO TRANSFER OF RIGHTS IN THE MANNER REFERRED TO ABOVE. 11.2 THE NEWLY INSERTED SUB-CLAUSE (VI) OF SECTION 2(47) HAS BROUGHT INTO THE AMBIT OF 'TRANSFER', THE PRACTICE OF ENJOYMENT OF PROPERTY RIGHTS THROUGH WHAT IS COMMONLY KNOWN AS POWER OF ATTORNEY ARRANGEMENTS. THE PRACTICE IN SUCH CASES IS NORMALLY WHERE TRANSFER OF OWNERSHIP IS LEGALLY NOT PERMITTED. A PERSON HOLDING THE POWER OF ATTORNEY IS AUTHORIZED THE POWERS OF OWNER, INCLUDING THAT OF MAKING CONSTRUCTION. THE LEGAL OWNERSHIP IN SUCH CASES CONTINUES TO BE WITH THE TRANSFEROR.' THE SUBMISSIONS ALONG WITH ADDITIONAL GROUNDS OF APPEAL FILED ON 15.01.2013 BY THE AR ARE FORWARDED TO THE ACIT-I, KANPUR FOR HIS COMMENTS AND ALSO IF HE HAD ANYTHING IN CONTRARY. THE ACIT-I VIDE HIS REPORT DATED 19.2.2013, HAS SUBMITTED, THAT THE POSSESSION OF THE SAID PROPERTY WAS GIVEN TO THE PURCHASER AT THE TIME OF EXECUTION OF THE SALE DEED ON 15.05. 2007AND NOT WHEN THE ENTIRE SALE CONSIDERATION WAS PAID ON 31.03.2005. FOR THIS PURPOSE, THE ACIT-I ENCLOSED A COPY OF THE LETTER DATED 14.04.2009 ADDRESSED TO THE DCIT, RANGE-I, KANPUR (THE THEN AO) WHEREIN IT HAS BEEN MENTIONED BY THE ASSESSEE IN PARA 4, 'THAT THE SALE DEED AGAINST THE TRANSFER OF PROPERTY HAS BEEN EXECUTED ON 15.05.2007 AND POSSESSION WAS HANDED OVER TO THE PARTY DURING THIS YEAR'. COPY OF THE REMAND REPORT DATED 19.02.2013 WAS FORWARDED TO THE ASSESSEE FOR IS COMMENTS. :- 10 -: IN RESPONSE TO THE REMAND REPORT DATED 19-02-2013, THE AR HAS FILED DETAILED SUBMISSIONS DATED 21.02.2013 AS UNDER: WITH REFERENCE TO THE ABOVE, WE BEG TO SUBMIT THAT WE ARE IN RECEIPT OF THE REMAND REPORT DATED 19.02.2013 AND BEG TO SUBMIT AS UNDER: THAT THE LETTER DATED 14.04.2009, REFERRED TO BY THE ASSESSING OFFICER IN THE REMAND REPORT IS A REPLY FILED BY THE ASSESSEE, ADDRESSED TO THE DCIT-L, KANPUR AND IS IN PURSUANCE TO NOTICE ISSUED U/S 144/142(1) OF THE IT. ACT, 1961. IT MAY BE NOTED, THAT NO NOTICE U/S 143(2) WAS ISSUED PRIOR TO THE NOTICE U/S 144/142(1) OF THE ACT. IN PARA 4 OF THE SAID LETTER, IT HAS BEEN MENTIONED 'THAT THE SALE DEED AGAINST THE TRANSFER OF PROPERTY LIAS BEEN EXECUTED ON 15.05.2007 AND POSSESSION WAS HANDED OVER TO THE PARTY DURING THIS YEAR ' IT IS SIMPLY A SUBMISSION RECONFIRMING THEFACTUM OF POSSESSION GIVEN EARLIER. IN FACT, THE POSSESSION OF THE SAID PROPERTY WAS HANDED OVER TO THE BUYER ON 31.03.2005 ITSELF AS WOULD BE EVIDENT FROM THE COPY OF THE LETTER DT. 31.03.2005 ALREADY SUBJNITTED. THE SAID LETTER CONTAINS THE DETAILS OF THE BALANCE SALE CONSIDERATION PAID AND ITS ACKNOWLEDGMENT. IT ALSO CONTAINS THE FACTUM OF GIVING AND TAKING OF POSSESSION OF THE PROPERTY. FOR THE SAKE OF CONVENIENCE, THE LETTER IS REPRODUCED AS UNDER: :- 11 -: THUS, THE SUBMISSION OF THE AO THAT THE POSSESSION OF THE PROPERTY WAS NOT GIVEN IN THE FINANCIAL YEAR 2004-05 ITSELF, BUT WAS GIVEN ON 15.05.2007 IF READ IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES WOULD FOUND TO BE MISPLACED. THE POSSESSION OF PROPERTY DEPENDS UPON THE NATURE OF THE PROPERTY. THE NATURE OF THE PROPERTY REFERS TO THE PHYSICAL POSSESSION IN THE CASE OF TANGIBLE PROPERTY AND SYMBOLIC POSSESSION IN THE CASE OF INTANGIBLE PROPERTY. POSSESSION IS A FLEXIBLE TERM AND DOES NOT NECESSARILY IMPORT PERSONAL OCCUPATION. WHEN A BUYER HAD A NOTICE OF TENANCY AND THE FACT THAT THE PROPERTY IS TOTALLY LET OUT TO DIFFERENT TENANTS, HE WAS ONLY ENTITLED TO A SYMBOLIC POSSESSION. IT IS HEREBY ONCE AGAIN SUBMITTED THAT THE POSSESSION OF THE PROPERTY CAME TO BE GIVEN AND ACKNOWLEDGED BY THE BUYER ON 31.03.2005 ITSELF WHEN THE ENTIRE CONSIDERATION STOOD PAID, THE REASON BEING THAT SOON AFTER RECEIVING THE ENTIRE SALE CONSIDERATION, THE ASSESSEE CEASED TO HAVE ANY RIGHT, TITLE, INTEREST OR LIEU OF ANY NATURE WHATSOEVER OVER THE SAID PROPERTY. THE PROPERTY IN QUESTION STILL CONTINUES TO BE OCCUPIED BY DIFFERENT TENANTS AND THERE IS NO CHANGE IN THE STATUS. IF NEED BE, AND IF YOUR GOOD SELF DESIRES, DIRECT ENQUIRY MAY BE MADE FROM THE BUYER TO ASCERTAIN THE EXACT DATE OF POSSESSION. SUBMITTED, :- 12 -: DATE: 21.02.2013' EXPLAINING THAT THE POSSESSION WAS GIVEN ON 31.03.2005 ITSELF, AS WAS EVIDENT FROM THE LETTER DATED 31.03.2005 ITSELF, WHEREIN THE DETAILS OF THE BALANCE SALE CONSIDERATION HAVE BEEN ACKNOWLEDGED MENTIONING SPECIFICALLY ' : IN ORDER TO RESOLVE THE ISSUE OF DATE OF POSSESSION, THE A.R. IS ASKED TO FILE A CONFIRMATION FROM M/S MAYUR INFRASTRUCTURE LIMITED, THE BUYER OF THE PROPERTY. ACCORDINGLY, THE A.R. ON 26-02-2013 FILED A CONFIRMATION LETTER DATED 25-02-2013 REGARDING RECEIPT OF PAYMENTS AND TAKING OVER POSSESSION OF THE PROPERTY ON 31-03-2005. IN VIEW OF THE CONFIRMATORY LETTER OF M/S. MAYUR INFRASTRUCTURE LIMITED, DATED 25.02.2013 IT IS CLEAR, THAT THE POSSESSION OF THE PROPERTY WAS DELIVERED TO THE BUYER ON 31.03.2005 ITSELF. EVEN OTHERWISE AS SUBMITTED BY THE AR WHEN THE ENTIRE SALE CONSIDERATION WAS PAID, WHICH WAS DULY ACKNOWLEDGED BY THE SELLER, THE ASSESSEE CEASED TO HAVE ANY RIGHT, TITLE OR INTEREST IN THE PROPERTY. THE BUYER WAS FULLY AWARE THAT THE PROPERTY IN QUESTION IS FULLY TENANTED, AND IN CASE OF TENANTED PROPERTY, THE POSSESSION CAN ONLY BE SYMBOLIC. THE ASSESSEE TRUST, HAS FILED BALANCE SHEETS FOR THE PERIOD ENDING 31.03.2006, 31.3.2007 AND 31.03.2008 IN SUPPORT OF THE FACT THAT NO RENT HAD BEEN RECEIVED NOR HAS BEEN DECLARED IN THE INCOME & EXPENDITURE ACCOUNT. EVEN IN THE RETURN FOR THE YEAR UNDER CONSIDERATION I.E. A.Y. 2008-09, NO RENTAL INCOME FOR ONE AND A HALF MONTHS HAS BEEN DECLARED. THIS FURTHER SHOWS CLEARLY, THAT THE PROPERTY HAS NOT BEEN IN POSSESSION OF THE ASSESSEE AFTER 31.03.2005. IN VIEW OF THE ABOVE FACTUAL AND LEGAL POSITION, I AM OF THE CONSIDERED VIEW THAT SINCE THE PROPERTY IN QUESTION STOOD TRANSFERRED IN THE F.Y. 2004-05, AND NOT IN A.Y. 2008-09, THERE ARISES NO LIABILITY :- 13 -: FOR CAPITAL GAINS TAX DURING THE YEAR UNDER CONSIDERATION. HOWEVER, THE AO MAY CONSIDER THE COMPUTATION OF CAPITAL GAINS IN A.Y.2005- 06. THE RELIANCE IS ALSO PLACED ON THE LATEST DECISION DATED 17-01- 2013 OF HON'BLE DELHI HIGH COURT REACHED IN THE CASE OF M/S. SIMKA HOTELS & RESORTS VS. DCIT, 2013 - TIOL - 71 - HC - DEL -IT, WHEREIN THE RELINQUISHMENT OF VESTED RIGHTS IN AN IMMOVEABLE PROPERTY IS TREATED AS 'TRANSFER' U/S.2(47), EVEN IF SALE DEED IS NOT EXECUTED. THE OTHER GROUNDS OF APPEAL I.E. THE ADOPTION OF SALE CONSIDERATION, AS PER THE CONSIDERATION DETERMINED BY THE DISTRICT JUDGE, KANPUR, DEDUCTING FOR ENCUMBRANCES SUCH AS PROPERTY BEING COVERED BY THE RENT CONTROL ACT, AND THE PROPERTY SHOULD OUGHT TO HAVE BEEN REFERRED TO THE VALUATION CELL IN TERMS OF SEC. 50C(2) OF THE ACT ARE ALL VALID, THOUGH HAVE NOW IN THE PRESENT SCENARIO, BECOME ACADEMIC, AND HENCE ARE NOT BEEN ADJUDICATED UPON. 5. AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND PLACED HEAVY RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER; WHEREAS THE LD. COUNSEL FOR THE ASSESSEE, BESIDES PLACING RELIANCE UPON THE ORDER OF THE LD. CIT(A), HAS INVITED OUR ATTENTION TO THE ORDER OF THE DISTRICT JUDGE, KANPUR WITH REGARD TO THE PERMISSION OBTAINED FOR SALE OF PROPERTY AND SALE AGREEMENT DATED 27.1.2005 APPEARING AT PAGES 108 TO 129 OF COMPILATION OF THE ASSESSEE WHEREIN THE TOTAL CONSIDERATION WAS DETERMINED AND THE SAME WAS PAID DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2005-06. THE PAYMENT OF RS.51 LAKHS WAS MADE IN TWO INSTALMENTS THE FIRST INSTALMENT OF RS.21 LAKHS WAS PAID ON 10.1.2005 AND THE SECOND INSTALMENT OF RS.30 LAKHS WAS PAID ON 31.3.2005. THE POSSESSION WAS ALSO GIVEN TO THE BUYER DURING THE SAID FINANCIAL YEAR. THEREFORE, TRANSFER WAS COMPLETE DURING THE FINANCIAL YEAR 2004-05 AND NOT IN THE IMPUGNED ASSESSMENT YEAR. THEREFORE, NO CAPITAL GAIN WAS ACCRUED IN THE IMPUGNED ASSESSMENT YEAR. :- 14 -: 6. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT THE ASSESSEE HAS PLACED AMPLE EVIDENCE ON RECORD TO ESTABLISH THAT THE SALE AGREEMENT WAS EXECUTED ON 27.1.2005 AND THE SALE CONSIDERATION WAS PAID ON TWO OCCASIONS ONE IS ON 10.1.2005 AND THE OTHER IS ON 31.3.2005. THE POSSESSION WAS ALSO HANDED OVER TO THE BUYER. THE SALE AGREEMENT IS A REGISTERED DOCUMENT. THEREFORE, IN THE LD. CIT(A) OF THESE DOCUMENTS, THE TRANSFER IS COMPLETE AS PER PROVISIONS OF SECTION 2(47)(VI) OF THE ACT. THE LD. CIT(A) HAS EXAMINED THIS ISSUE IN THE LIGHT OF PROVISIONS OF SECTION 2(47)(V) AND 2(47)(VI) OF THE ACT AND 53A OF THE TRANSFER PROPERTY ACT. BEFORE TAKING A VIEW IN THIS REGARD, THE LD. CIT(A) HAS ALSO CALLED A REMAND REPORT WHICH WAS ALSO CONFRONTED TO THE ASSESSEE AND COMMENTS WERE ALSO OBTAINED FROM THE ASSESSEE. HAVING TAKEN INTO ACCOUNT ALL THESE FACTS, THE LD. CIT(A) HAS TAKEN A VIEW THAT THE CAPITAL GAIN DOES NOT ARISE IN THE IMPUGNED ASSESSMENT YEAR, AS IT ARISE IN FINANCIAL YEAR 2004-05 RELEVANT TO THE ASSESSMENT YEAR 2005-06 AND THE ASSESSING OFFICER MAY CONSIDER COMPUTATION OF CAPITAL GAIN IN THAT ASSESSMENT YEAR. SINCE IT HAS BEEN ESTABLISHED THAT THE TRANSFER TOOK PLACE AS PER PROVISIONS OF SECTION 2(47)(VI) OF THE ACT, NO CAPITAL GAIN CAN BE COMPUTED IN THE IMPUGNED ASSESSMENT YEAR. WE, THEREFORE, FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND WE CONFIRM THE SAME. 7. IN THE RESULT, APPEAL OF THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 5 TH JUNE, 2015 :- 15 -: JJ:3004 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR