SANJAY NARAYAN KOPKAR, MUMBAI V. ACIT 2(1), MUMBAI

ITA 7499/MUM/2012

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4256 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 18-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Capital asset; Gift; Salary income; Principle of natural justice; Competent authority; Set aside; Capital Gains
• Section: 143(3); 142(1); 201; 143(2); 54EC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , AM AND SHRI AMARJIT SINGH , JM I.T.A. NO . 7499 / M/ 20 1 2 ( ASSESSMENT YEAR : 2009 - 10 ) SANJAY NARAYAN KHOPKAR B/103, GAGAN DEEP, GULMOHAR MARG, JVPD SCHEME, VILE PARLE (E), MUMBAI - 400049 . VS. ACIT - 2 (1 ) ROOM NO.561, 5 TH FLOOR, AAYAKAR BHAVAN, MUMBAI - 400020 MUMBAI. ./ ./ PAN/GIR NO. : ADTPK2059F ( APPELLANT ) .. ( RESPONDENT ) DATE OF HEARING : 19 . 0 2 .201 9 DATE OF PRONOUNCEMENT : 13.0 3 . 201 9 O R D E R PER AMARJIT SINGH, JM: THE PRESENT APPEA L HA S BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 10 . 10 .201 2 PASSED BY THE COMMIS S IONER OF INCOME TAX (APPEALS) - 4 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE ASSESSMENT YEAR 2009 - 10 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED U/S 250(6) OF THE I.T. ACT, 1961 IS ERRONEOUS AND AGAINST PRINCIPALS OF FAIR PLAY, EQUITY AND NATURAL JUSTICE AS THE SAME IS CONTRARY TO THE FACTS. ASSESSEE BY: SHRI M. SUBRAANIYAM DEPARTMENT BY: SHRI CHAUDHARY ARUN KUMAR SINGH (DR) ITA. NO. 7499 /M/201 2 A.Y. 20 09 - 10 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN PASSING AN O RDER U/S 250(6) OF THE I.T. ACT. 1961 AND CONFIRMING THE TREATMENT OF LTCG AS THAT OF STCG AND THERE B Y DENYING THE CLAIM U/S 54EC OF THE APPELLANT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN PASSING AN ORDER U/S 25 0(6) OF THE I.T. ACT, 1961 AND THAT TOO WITHOUT APPRECIATING FULLY AND PROPERLY THE FACTS OF THE CASE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN HOLDING THAT THE ORDER PASSING BY THE ACIT 2(1) IS JUSTIFIED AND THA T THE SAME IS NOT PREJUDICIAL TO THE INTEREST OF THE APPELLANT. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN CONFIRMING THE DETERMINATION OF LONG TERM CAPITAL GAIN FOR THE YEAR 2009 - 10 ON THE ISSUE OF ASSESSING THE RECEIPTS I.E. TOTAL RECEIPTS OF RS.40,00,000/ - FROM THE SALE OF LAND IN PUNE AS THAT SHORT TERM CAPITAL GAIN AND INTERALIA DISALLOWING CLAIM U/S 54EC OF THE IT ACT. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN CONFIR MING THE ORDER PASSED U/S 143(3) OF THE I.T. ACT ON 26.12.2011 FOR A.Y. 2009 - 10 ON THE ISSUE OF ASSESSING THE RECEIPTS I.E. TOTAL RECEIPT OF RS.40,00,000/ - AFTER TREATING THE SAID INCOME AS INCOME OTHER THAN SHORT CAPITAL GAIN AND DISALLOWING THE EXEMPTION U/S 54EC OF THE I.T. ACT. 3. THE ASSESSEE HAS RAISED THE ADDITIONAL GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW, THE LEARNED C.I.T. (A) ERRED IN DISMISSING THE APPEAL AND THAT TOO IN VIOLATION OF RULES OF NATURAL JUSTICE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT. (A) FAILED TO APPRECIATE THAT THE ASSET WAS PURCHASED VIDE AGREEMENT DATED 23 - 07 - 1996 AND THE SAID AGREEMENT WAS REGISTERED AS WELL ON 30 - 07 - 1996. 3. ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE AND IN LAW, THE C.I .T. (A) ERRED IN CONFIRMING THAT THE ASSET WAS PURCHASED ON 03 - ITA. NO. 7499 /M/201 2 A.Y. 20 09 - 10 3 05 - 2008, ALTHOUGH THERE HAS BEEN NEITHER ANY PURCHASE NOR TRANSFER OF ANY CAPITAL ASSET ON 03 - 05 - 2008. 4. WITHOUT PREJUDICE TO THE ABOVE, AND ON THE F ACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, IF THE CAPITAL ASSET IS ASSUMED TO HAVE BEEN PURCHASED ON 3 - 5 - 2008 THEN FOR COMPUTING THE CAPITAL GAINS INCOME, THE COST SHOULD BE THE VALUE OF THE ASSET AS ON 03 - 05 - 2008 AND NOT R.4,51,277/ - AS ADOPTED BY THE LEARNED A.O. THE APPELLANT CRAVES LEAVE TO ADD, AL TER, AMEND OR DELETE ANY OR ALL OF T HE GROUNDS OF APPEAL AT ANY TIME. 4 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME ON 07 . 0 7 .20 09 FOR THE A.Y. 2009 - 10 DECLARING TOTAL I N COME TO THE TUNE OF RS.51,77,179 / - . THE CASE WAS SELECTED FOR SCRUTINY, THEREFORE, NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE IS AN INDIVIDUAL AND DERIVED INCOME FROM SALARY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES. THE ASSESSEE SOLD A PLOT OF LAND ON 21.07.2008 AND CLAIMED EXEMPTION U/S 54EC OF THE ACT FOR RS.30 LAKHS . THE AO OBSERVED THAT THE LAND WAS PURCHASED BY ASSESSEE ON 03.05.2008, THEREFORE, THE CAPITAL GAIN TREATED AS A S HORT TERM CAPITAL GAIN, THEREFORE, REJECTED THE CLAIM U/S 54EC OF THE ACT. THE ASSESSEE CLAIMED THAT HE ACQUIRED THE PLOT BY VIRTUE OF AN AGREEMENT ON 23.07.1996 REGISTERED ON 30.07.1996 IN SUM OF RS.4,51,277/ - . A FTER DECLINING THE CLAIM OF THE ASSESSEE, T HE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE SAID ADDITION, THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ITA. NO. 7499 /M/201 2 A.Y. 20 09 - 10 4 5 . ALL THE ISSUES ARE INTER - CONNECTED, THEREFORE, ARE BEING TAKEN UP TOGETHER FOR ADJUDICATION. THE CLAIM OF THE ASSESSEE IS THAT THE ASSESSEE ACQUIRED THE PLOT BY VIRTUE OF AN AGREEMENT DATED 23.07.1996 REGISTERED ON 30.07.1996 IN SUM OF RS.4,51,277/ - . SUBSEQUENTLY, THE ASSESSEE ALSO ENTERED INTO AN AGREEMENT TO SALE DATED 03.05.2008 AND ACCORDINGLY AO TREATED THE S UBSEQUENT AGREEMENT OF SALE FOR ACQUISITION OF PLOT IN QUESTION WHICH WAS SUBSEQUENTLY SOLD ON 21.07.2008, THEREFORE, THE CLAIM OF U/S 54EC OF THE ACT IN SUM OF RS.30,00,000/ - WAS DENIED AND THE INCOME OF THE ASSESSEE WAS TREATED AS SHORT TERM CAPITAL GAIN . IN BRIEF, THE CONTROVERSY SURROUNDS UPON THE EXECUTION OF THE FIRST AGREEMENT DATED 23.07.1996 AND THE SUBSEQUENT AGREEMENT TO SALE DATED 03.05.2008 . THE ONLY DISPUTE IS THIS WHICH AGREEMENT IS REQUIRED TO BE TREATED FOR THE ACQUISITION OF PLOT IN QUESTI ON. THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE ASSESSEE HAS PURCHASED THE PLOT IN QUESTION IN SUM OF RS.4,51,277/ - BY VIRTUE OF AGREEMENT DATED 23.07.1996 REGISTERED ON 30.07.1996, THEREFORE, ACCORDINGLY, THE LONG TERM CAPITAL GAIN IS LIABL E TO BE ASSESSED AND THE CLAIM OF THE ASSESSEE U/S 54EC OF THE ACT IS LIABLE TO BE ALLOWED. IT IS ALSO ARGUED THAT THE ASSESSEE PAID THE SOCIETY CHARGES ON 10.05.2001 IN SUM OF RS.780/ - , IN SUM OF RS.3009/ - ON 04.03.2003. IT IS ARGUED THAT THE SUBSEQUENT A GREEMENT DATED 03.05.2008 NOWHERE FALSIFY THE CLAIM OF THE ASSESSEE IN CONNECTION WITH THE PURCHASE OF PLOT ON 23.07.1996 BUT THE AO HAS WRONGLY RELIED UPON THE SUBSEQUENT AGREEMENT AND DECLINED THE CLAIM OF THE ASSESSEE, ITA. NO. 7499 /M/201 2 A.Y. 20 09 - 10 5 THE REFORE, THE FINDING OF THE CIT( A ) IS WRONG AGAINST LAW AND FACT IS LIABLE TO BE SET ASIDE. THE COPY OF AGREEMENT DATED 23.07.1996 IS ON THE FILE IN WHICH THE ASSESSEE AGREED TO PURCHASE THE PLOT IN SUM OF RS.4,51,277/ - . THE SAID AGREEMENT WAS REGISTERED ON 23.07.1996. THE COPY OF WHICH IS ON THE FILE LIES AT PAGE NO.4 TO 35 OF THE PAPER BOOK. SUBSEQUENTLY, THE ASSESSE E PAID THE SOCIETY CHARGES ON DIFFERENT DATES WHICH HAS BEEN MENTIONED ABOVE. THEREAFTER, AN ANOTHER AGREEMENT WAS EXECUTED FOR THE PURCHASE OF LAND IN QUESTION BY ASSESSEE ON 03.05.2008 WHICH WAS ALSO REGISTERED ON THE SAME DATE. THE AGREEMENT IS ON THE FILE WHICH LIES AT PAGE NO. 54 OF THE PAPER BOOK. THE CONTENTS OF THE SUBSEQUENT AGREEMENT IS THE SAME WHICH HAS BEEN MENTIONED WHILE EXECUTING THE AGREEMENT BETWEEN THE PART IES ON 27.07.1996. THE TERMS AND CONDITION ARE ALSO SAME . MOREOVER, THE CONSIDERATION PAYABLE HAS ALSO BEEN DESCRIBED IN SUM OF RS.4,51,277/ - . THE ASSESSEE PURCHASED THE PROPERTY BY EXECUTING TWO AGREEMENTS . N O DOUBT THE SUBSEQUENT AGREEMENT DATED 03.05.2008 WAS EXECUTED DUE TO SOME TECHNICAL REASONS BUT HAVING THE SAME TERMS AND CONDITIONS AND CONSIDERATION WHICH HAS BEEN MENTIONED IN EARLIER AGREEMENT DATED 03.07.1996. THE ASSESSEE ACQUIRED THE RIGHT IN THE P LOT BY VIRTUE OF AGREEMENT DATED 27.07.1996, REGISTERED ON 03.071996. HOWEVER, IN PURSUANCE OF THE SAID AGREEMENT THE FURTHER AGREEMENT DATED 03.05.2008 EXECUTED. UNDOUBTEDLY, THE ASSESSEE GOT THE RIGHT IN HIS FAVOUR BY VIRTUE OF AGREEMENT DATED 23.07.1996 . NO DOUBT, THE ASSESSEE ACQUIRED THE PROPERTY BY VIRTUE OF AGREEMENT DATED ITA. NO. 7499 /M/201 2 A.Y. 20 09 - 10 6 23.07.1996, THEREFORE, THE ACQUISITION OF THE LAND IS LIABLE TO BE CONSIDERED ON THE EARLIER DATE OF EXECUTION OF AGREEMENT I.E.23.07.1996. TO ARRIVE AT THIS CONCLUSION, W E ALSO FI ND THE SUPPORT OF LAW SETTLED IN ITA. NO. 680 & 681/JP/2017 DATED 25.01.2018 JAIPUR BENCH . THE RELEVANT PARA IS HEREBY REPRODUCED AS UNDER .: - 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE CLAIMED TO HAVE PURCHASED THE AGRICULTURAL LAND MEASURING 2.74 HECTARE AT NEWATA, TEHSIL SANGANER, JAIPUR VIDE AGREEMENT DATED 11.04.2007 FOR A CONSIDERATION OF RS. 50 LACS. AS PER CLAUSE - 2 OF THE AGREEMENT THE ASSESSEE PAID RS. 40,00,000/ - VIDE THREE PAY ORDERS DATED 10. 04.2007 AND ONE CHEQUE DATED 11.04.2007 OF RS. 10 LACS EACH. THE DETAILS OF THE PAYMENTS GIVEN IN CLAUSE 2 ARE AS UNDER: - THUS, IT IS CLEAR THAT OUT OF THE TOTAL CONSIDERATION OF RS. 50 LACS THE ASSESSEE PAID RS. 40 LACS AT THE TIME OF AGREEMENT. THE VENDO RS HAVE ALSO ACKNOWLEDGED RECEIPT OF THE CONSIDERATION OF RS. 40 LACS. AS PER CLAUSE 5 OF THE AGREEMENT THE POSSESSION OF THE LAND WAS HANDED OVER TO THE ASSESSEE AS UNDER: - THE BALANCE CONSIDERATION OF RS. 10 LACS WAS PAID ON 29.09.2008 THUS, IT WAS NOT D ISPUTED THAT THAT PART CONSIDERATION WAS PAID BY THE ASSESSEE AT THE TIME OF AGREEMENT DATED 11.04.2007. THE POSSESSION OF THE LAND WAS ALSO HANDED OVER TO THE ASSESSEE IN PART PERFORMANCE AND CONSEQUENTLY THE LAND WAS AVAILABLE TO THE ASSESSEE FOR ENJOYME NT. IT IS ALSO NOT DISPUTED THAT AFTER THE POSSESSION HANDED OVER TO THE ASSESSEE THE ASSESSEE CARRIED OUT SOME DEVELOPMENT WORK AND THE SAID EXPENDITURE WAS DISALLOWED BY THE AO ON THE GROUND THAT IT IS PRIOR TO THE EXECUTION OF SALE DEED DATED 13.04.2010 . THERE IS NO QUARREL THAT SECTION 42 OF RAJASTHAN TENANCY ACT, 1955 PROHIBITS SALE, GIFT OR BEQUEATH OF AGRICULTURAL LAND BY A MEMBER OF SCHEDULED CASTE IN FAVOUR OF A PERSON WHO IS A NOT A MEMBER OF SCHEDULED CASTE HOWEVER, WHEN FOR THE PURPOSE OF TRANSF ER OF THE PROPERTY THE LAND WAS CONVERTED FROM AGRICULTURAL TO NON AGRICULTURAL USE THEN, THE PROVISIONS OF SECTION 42 OF RAJASTHAN TENANCY ACT ARE UNDISPUTED NOT APPLICABLE ONCE, THE LAND WAS CONVERTED TO NON AGRICULTURAL USE. 6. EVEN OTHERWISE THE TERM TRANSFER AS PER SECTION 2(47) R.W.S. 48 OF THE OF THE INCOME TAX ACT IS WIDER THAN THE TERM SALE AND IT INCLUDES ALL RIGHTS AND PRIVILEGES IN THE PROPERTY EITHER IN PRESENT OR ACCRUING IN FUTURE AS VESTED IN VENDOR. ONCE THESE RIGHTS VESTED IN THE VENDOR W ERE SUBJECT MATTER OF THE TRANSFER, THE VENDOR RETAINS NO RIGHT IN THE PROPERTY TO BE RE - CONVEYED IN THE SUBSEQUENT SALE DEED EXCEPT THE OBLIGATION TO GET THE PROPERTY CONVERTED FOR NON AGRICULTURAL USE AND EXECUTION OF THE SALE DEED. THE INTENTIONS OF THE PARTIES ITA. NO. 7499 /M/201 2 A.Y. 20 09 - 10 7 ARE RELEVANT AND MUST BE ASCERTAINED FROM A DOCUMENT AS A WHOLE. WHERE THE DEED OF TRANSFER HAS BEEN EXECUTED THOUGH IN VIOLATION OF LAW PRESCRIBING FOR A PREVIOUS SANCTION OR SUBSEQUENT VALIDATION BY A COMPETENT AUTHORITY AND THOUGH NOT REGISTERE D WOULD STILL ATTRACT THE APPLICATION OF DOCTRINE OF PART PERFORMANCE. IN THE CASE IN HAND SINCE, THE AGRICULTURAL LAND COULD NOT BE SOLD IN VIEW OF SECTION 42 OF THE RAJASTHAN TENANCY ACT, THEREFORE, THE PARTIES ENTERED INTO AN AGREEMENT TO SALE DATED 11 11.04.2007 AND THEREAFTER THE LANDS WERE CONVERTED INTO NON AGRICULTURAL LAND AND MORE SPECIFIC FARM HOUSE LAND ON 03.02.2010 AND 05.02.2010 AND THEREAFTER THE SALE DEED WAS EXECUTED BY THE VENDORS ON 13.04.2010. AS IT IS CLEAR FROM THESE ACT AND EVENTS TH AT IT IS CONTINUOUS PROCESS OF TRANSFER WHICH BEGINS WITH THE AGREEMENT TO SALE DATED 11.04.2007, CONVERSION OF THE LAND USE ON 03/05.02.2010 AND ULTIMATELY EXECUTION ON SALE DEED ON 13.04.2010. THE SALE DEED DATED 13.04.2010 IS A PERFORMANCE OF OBLIGATION UNDER THE AGREEMENT TO SALE DATED 11.04.2007, THEREFORE, THE CONVERSION OF THE LAND AFTER THE EXECUTION OF AGREEMENT TO SALE IS A POST FACTO CONVERSION AND THE TRANSFER WOULD EFFECTS FROM THE DATE OF AGREEMENT TO SALE SPECIFYING ALL THE CONDITIONS AS STIP ULATED U/S 2(47) (V) OF THE ACT R.W.S. 53A OF THE TRANSFER OF PROPERTY ACT. ONCE, THE SALE DEED IS EXECUTED IN PURSUANT TO AGREEMENT TO SALE AND ALL THE CONDITIONS STIPULATED U/S 2(47) OF THE ACT ARE SATISFIED IT WOULD CONSTITUTE TRANSFER AND WOULD BE EFFE CTIVE FROM THE DATE OF AGREEMENT TO SALE ITSELF. 7. THOUGH AS PER THE AMENDMENT BROUGHT TO THE REGISTRATION ACT 1908 VIDE AMENDMENT ACT 2001 AN AGREEMENT FOR SALE OF ANY IMMOVABLE PROPERTY WITHOUT REGISTRATION SHALL HAVE NO EFFECT OF TRANSFER HOWEVER, THE AGREEMENT IN QUESTION HAS TO BE SEEN ALONG WITH THE SALE DEED EXECUTED SUBSEQUENTLY. IT IS NOT A CASE OF TRANSFER BASED ONLY ON UNREGISTERED DOCUMENTS BUT IN THIS CASE THE PARTIES TO THE AGREEMENT HAVE EXECUTED SALE DEED IN PERFORMANCE OF THE AGREEMENT. T HEREFORE, THE TRANSFER OF IMMOVABLE PROPERTY WOULD BE CONSIDERED AS A COMBINED ACT OF AGREEMENT TO SALE AND SALE DEED AS A SINGLE TRANSACTION OF TRANSFER WITH EFFECT FROM THE DATE ON WHICH SUCH TRANSACTION WAS INTENDED AND CONCEIVED BY THE PARTIES TO THE T RANSACTION. HENCE, AGREEMENT TO SALE DATED 11.04.2007, CONVERSION OF LAND USE BY JDA ON 03.02.2010 AND 05.02.2010 AND EXECUTION SALE DEED DATED 13.04.2010 ARE INTERLINKED AND INSEPARABLE CHAIN OF EVENTS NECESSARY FOR TRANSACTION OF TRANSFER. THE CONTENTS O F THE SALE DEED DATED 13.04.2010 CLEARLY SHOW THAT IT IS IN FURTHERANCE OF AGREEMENT DATED 11.04.2007. THE SALE DEED CLEARLY STATES THAT MADE OF PAYMENT OF CONSIDERATION AS PER THE DETAILS GIVEN IN THE AGREEMENT DATED 11.04.2007. THEREFORE, THE POSSESSION WAS HANDED OVER AND CONSIDERATION WAS RECEIVED PRIOR TO THE DATE OF SALE DEED. THE SALE DEED IN FACT RATIFY THE TRANSACTION OF TRANSFER VIDE AGREEMENT DATED 11.04.2007. THE PARTIES WERE VERY MUCH AWARE ABOUT THE NEED OF CONVERSION OF LAND USE AND ACCORDING LY APPLIED TO JDA FOR CONVERSION WHICH WAS GRANTED IN THE MONTH OF FEBRUARY, 2010 AND THEREAFTER THE SALE DEED WAS EXECUTED. HENCE, THE ITA. NO. 7499 /M/201 2 A.Y. 20 09 - 10 8 TRANSFER AS PER PROVISIONS OF SECTION 2(47) OF THE ACT IS TO BE CONSIDERED AT THE TIME OF AGREEMENT DATED 11.04.2007. TH E INTENTION OF THE PARTIES CAN BE GATHERED FROM THE TERMS OF THE AGREEMENT, SUBSEQUENT PERFORMANCE BY THE PARTIES IN TERMS OF AGREEMENT GETTING THE LAND CONVERTED TO NON AGRICULTURAL USE AND EXECUTION ON SALE WHICH HAS REAFFIRMED THE STATUS OF THE PARTIES TO THE AGREEMENT AND THE TRANSFER UNDER THE AGREEMENT INSTEAD OF ALTERING THE SAME. THE HONBLE SUPREME COURT IN CASE OF SANJAY LAL VS. CIT 365 ITR 389 WHILE CONSIDERING THE QUESTION AS TO WHETHER THE DATE ON WHICH AGREEMENT FOR SALE WAS EXECUTED COULD BE CONSIDERED THE DATE ON WHICH THE PROPERTY WAS TRANSFER HAS HELD IN PARA 20 TO 25 AS UNDER: - 20. THE QUESTION TO BE CONSIDERED BY THIS COURT IS WHETHER THE AGREEMENT TO SELL WHICH HAD BEEN EXECUTED ON 27TH DECEMBER, 2002 CAN BE CONSIDERED AS A DATE ON WHIC H THE PROPERTY I.E. THE RESIDENTIAL HOUSE HAD BEEN TRANSFERRED. IN NORMAL CIRCUMSTANCES BY EXECUTING AN AGREEMENT TO SELL IN RESPECT OF AN IMMOVAB LE PROPERTY, A RIGHT IN PERSONAL IS CREATED IN FAVOUR OF THE TRANSFEREE/VENDEE. WHEN SUCH A RIGHT IS CREATED I N FAVOUR OF THE VENDEE, THE VENDOR IS RESTRAINED FROM SELLING THE SAID PROPERTY TO SOMEONE ELSE BECAUSE THE VENDEE, IN WHOSE FAVOU R THE RIGHT IN PERSONAL IS CREATED, HAS A LEGITIMATE RIGHT TO ENFORCE SPECIFIC PERFORMANCE OF THE AGREEMENT, IF THE VENDOR, FO R SOME REASON IS NOT EXECUTING THE SALE DEED. THUS, BY VIRTUE OF THE AGREEMENT TO SELL SOME RIGHT IS GIVEN BY THE VENDOR TO THE VENDEE. THE QUESTION IS WHETHER THE ENTIRE PROPERTY CAN BE SAID TO HAVE BEEN SOLD AT THE TIME WHEN AN AGREEMENT TO SELL IS ENTER ED INTO. 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 TRANSFERRED. RELEVANT PORTION OF SECTION 2(47), DEFINING THE WORD 'TRANSFER' IS AS UNDER: '2(47) 'TRANSFER', IN RELATION TO A CAPITAL ASSET, INC LUDES, - (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 E XTINGUISHED AND THAT RIGHT IS TRANSFERRED TO SOMEONE, IT WOULD AMOUNT TO TRANSFER OF A CAPITAL ASSET. IN THE LIGHT OF THE AFORESTATED 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 27TH 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 O F THE LITIGATION BETWEEN SHRI RANJEET LAL ON ONE HAND AND THE APPELLANTS ON THE OTHER AS SHRI RANJEET LAL HAD CHALLENGED 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 S HRI RANJEET LAL, THE APPELLANTS WERE RESTRAINED FROM DEALING WITH THE SAID RESIDENTIAL HOUSE AND A LAW - ABIDING ITA. NO. 7499 /M/201 2 A.Y. 20 09 - 10 9 CITIZEN 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 DO ING SO. IN THE CIRCUMSTANCES, FOR A JUSTIFIABLE REASON, WHICH WAS NOT WITHIN THE CONTROL OF THE APPELLANTS, THEY COULD NOT EXECUTE THE SALE DEED AND THE SALE DEED HAD BEEN REGISTERED ONLY ON 24TH SEPTEMBER, 2004, AFTER THE SUIT FILED BY SHRI RANJEET LAL, C HALLENGING THE VALIDITY OF THE WILL, HAD BEEN DISMISSED. IN THE LIGHT OF THE AFORESTATED FACTS AND VIEW OF THE DEFINITION 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 QUESTION, HAD BEEN EXTINGUISHED BECAUSE AFTER EXECUTION OF THE AGREEMENT TO SELL IT WAS NOT OPEN TO THE APPELLANTS TO SELL THE PROPERTY TO SOMEON E ELSE IN ACCORDAN CE WITH LAW. A RIGHT IN PERSONAL 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 SURRENDE RED 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(4 7) 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 LONG TERM CAPITAL GAIN. IF A PERSON, WHO GETS SOME EXCESS AMOUNT UPON TRANSFER OF HIS OLD RESIDENTIAL PREMISES AND THEREAFTER PURCHASES OR CONSTRUC TS 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 C APITAL GAIN. THE INTENTION OF THE LEGISLATURE OR THE PURPOSE WITH WHICH THE SAID PROVISION HAS BEEN INCORPORATED 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 STRANGE R AND AN INCOMPATIBLE PARTNER TO THE INCOME TAX ACT AND IT IS ALSO SAID THAT EQUITY AND TAX ARE STRANGERS TO EACH OTHER, STILL THIS COURT HAS OFTEN OBSERVED THAT PURPOSIVE INTERPRETATION SHOULD BE GIVEN TO THE PROVISIONS OF THE ACT . IN THE CASE OF OXFORD U NIVERSITY PRESS V. CIT [2001] 247 ITR 658/115 TAXMAN 69 THIS COURT HAS OBSERVED THAT A PURPOSIVE INTERPRETATION OF THE PROVISIONS OF THE ACT SHOULD BE GIVEN WHILE CONSIDERING A CLAIM FOR EXEMPTION FROM TAX. IT HAS ALSO BEEN SAID THAT HARMONIOUS CONSTRUCTIO N 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 ITA. NO. 7499 /M/201 2 A.Y. 20 09 - 10 10 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 BE NEFIT 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 IMMOVABLE PROPERTY IN FAVOUR OF ONE PERSON, TRIES TO 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 SUIT FOR SPECIFIC PERFORMANCE AND THEREFORE, WITHOUT HESITATION WE CAN SAY THAT SOME RIGHT, IN RESPECT OF THE SAID PROPERTY, BELONGING TO THE APPELLANTS HAD BEE N EXTINGUISHED AND SOME RIGHT HAD BEEN CREATED IN FAVOUR OF THE VENDEE/TRANSFEREE, WHEN THE AGREEMENT 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 FAVO UR OF THE VENDEE/TRANSFEREE ON 27TH DECEMBER, 2002. THE SALE DEED COULD NOT BE EXECUTED FOR THE REASON 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 IN VI EW OF THE AFORESTATED PECULIAR FACTS OF THE CASE AND LOOKING AT THE DEFINITION OF THE TERM 'TRANSFER' AS DEFINED UNDER SECTION 2(47) OF THE ACT, WE ARE OF THE VIEW THAT THE APPELLANTS WERE ENTITLED TO RELIEF UNDER SECTION 54 OF THE ACT IN RESPECT OF THE LO NG TERM CAPITAL GAIN WHICH THEY HAD EARNED IN PURSUANCE OF TRANSFER OF THEIR RESIDENTIAL PROPERTY BEING HOUSE NO. 267, SECTOR 9 - C, SITUATED IN CHANDIGARH AND USED FOR PURCHASE OF A NEW ASSET/RESIDENTIAL HOUSE. THUS, IT WAS HELD BY THE HONBLE SUPREME COUR T THAT WHEN AGREEMENT TO SALE IN RESPECT OF IMMOVEABLE PROPERTY IS EXECUTED A RIGHT IN PERSONAE IS CREATED IN FAVOUR OF THE VENDEE AND THEREBY THE VENDOR IS RESTRAIN FROM SELLING THE PROPERTY TO SOMEONE ELSE BECAUSE THE VENDEE GETS THE LEGITIMATE RIGHT TO ENFORCE SPECIFIC PERFORMANCE OF THE AGREEMENT. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE DECISION OF HONBLE SUPREME COURT WE HOLD THAT THE TRANSFER OF THE LAND IN QUESTION WOULD BE REGARDED AS ON THE DATE OF AGREEMENT TO SALE DATED 11.04.2007. THE ORDER OF THE AUTHORITIES BELOW QUA THIS ISSUE ARE SET ASIDE. 6. IN VIEW OF THE ABOVE MENTIONED LAW AND IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF THE VIEW THAT THE ASSESSEE ACQUIRED THE PROPERTY IN QUESTION BY VIRTUE OF AGREEMENT DATED 23.07.1996 AND THEREAFTER, SOLD THE SAME ON 23.07.2008 AN D SUBSEQUENTLY INVESTED IN THE BONDS IN SUM OF RS.30,00,000/ - . THE ITA. NO. 7499 /M/201 2 A.Y. 20 09 - 10 11 CONSIDERATION RECEIVED BY THE ASSESSEE IS LIABLE TO BE ASSESSED AS LONG TERM CAPITAL GAIN AND ACCORDINGLY THE CLAIM OF THE ASSESSEE IS ALSO LIABLE T O BE CONSIDERED IN VIEW OF THE PROVISION U/S 54EC OF THE ACT IN CONNECTION WITH THE INVESTMENT IN BONDS IN SUM OF RS.30,00,000/ - . ACCORDINGLY, WE SET ASIDE THE FINDING OF THE CIT(A) ON THIS ISSUE AND AL LOWED THE CLAIM OF THE ASSESSEE. 7 . IN RESULT, APPEAL FILED BY THE ASSESSEE IS HEREBY ORDERED TO BE ALLOWED . ORDER P RONOUNCED IN THE OPEN COURT ON 1 3 . 0 3 . 2019 . S D / - S D / - ( SHAMIM YAHYA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 1 3 . 03 . 201 9 VIJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI