Tax Case (Appeal) v. G.saroja

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 18.06.2007 Coram : THE HONOURABLE MR.JUSTICE P.D.DINAKARAN AND THE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Appeal) No.217 of 2004Commissioner of Income-tax-IX,Chennai. ..Appellant/Respondent.VsG.Saroja ..Respondent/Appellant. Appeal under Section 260A of the Income-tax Act, 1961 against theorder of the Income Tax Appellate Tribunal, Chennai Bench 'C', Chennai inI.T.(SS)A.No.169/Mds/2000 dated 05.11.2003 for the block assessment period01.04.1988 to 20.08.1998 against the order of the Commissioner of IncomeTax [Appeals] X Chennai 34 dated 20.9.2000 in ITA.No.142/2002-03 againstthe order of the Asst. Commissioner of Income Tax Circle XII Chennai 600006 dated 31.7.2002 in S 47508-S for the Block period and Assessment Ydear1989-90 to the date of search i.e. 20.8.1998.For Appellant :Mr.T.Ravi Kumar,Standing Counsel forIncome-tax DepartmentFor Respondent :Mr.Ashok Pathy JUDGMENT(Judgment of the Court was delivered byP.P.S.Janarthana Raja, J.)This appeal is filed under Section 260A of the Income Tax Act, 1961 bythe Revenue, against the order of the Income Tax Appellate Tribunal,Chennai Bench 'C', Chennai in I.T.(SS)A.No.169/Mds/2000 dated 05.11.2003for the block assessment period 01.04.1988 to 20.08.1998. On 22.07.2004,this Court admitted the appeal and formulated the following substantialquestion of law:- "Whether on the facts and in the circumstances of thecase, the Income Tax Appellate Tribunal was right inholding that there was no transfer of property by theassessee to M/s.Kalpaga Builders on 10.02.1995, i.e., https://hcservices.ecourts.gov.in/hcservices/ within the block period ending 20.08.1998 within themeaning of Section 2(47)(v) of the Income-tax Act andno capital gains were assessable for the block period?" 2.The facts leading to the above substantial question of law are asunder: The assessee is an individual. There was a raid in the premises ofM/s.Kalpaga Builders and its partners on 20.08.1998. The assessee is themother-in-law of the partners of the said partnership firm. During theraid, it was noticed that the assessee was the owner of the premises. Thesaid firm had promoted a housing project which came up on the landbelonging to the assessee. There was no written agreement between theKalpaga Builders and the assessee for this developmental work as thebuilder was a family concern. The property situated at No.5, MounasamyMutt Street was acquired by the assessee in March, 1992. M/s.KalpagaBuilders started construction of the residential flats on this property on10.2.1995. For effecting the sale of flats and registration of documents,sale deeds and other documents were executed by the assessee in favour ofvarious purchasers from November onwards. The assessee had received a sumof Rs.5,80,346/- out of the transfer of the total property and sixresidential flats towards consideration which were found to besubsequently let out to six tenants. The total consideration received bythe assessee was Rs.32,32,383/-. The assessee filed her block Return forthe period from 01.04.1988 to 31.03.1999 on 19.11.1999 before theinitiation of proceedings under Section 158BD of the Income-tax Act ("Act"in short), by the Revenue. On 13.08.2001, the assessee was asked as towhy she had filed the Return in Form 2B voluntarily before the proceedingsin that behalf initiated by the Department. By letter dated 17.08.2001,the assessee requested the Assessing Officer to consider the Block Returnalready filed as the one filed in response to the notice under Section158BD issued by the Revenue. The Assessing Officer completed the BlockAssessment for the said block period under Section 158BA of the Act r/wSection 158BD. The computation under the Block Assessment are as follows:-Asst year 1995-96: Rs.22,02,723Asst year 1996-97:Rs. 27,718Asst year 1997-98:Rs. 79,768 ----------------- TOTAL INCOME:Rs.23,10,209 ----------------- ----------------- The Assessing Officer computed the short term capital and long termcapital gains in the block period for the assessment year 1995-96 atRs.7,73,413/- and Rs.14,29,310/-, thus totalling to Rs.22,02,723/- and thesame was added in the Block Assessment. Aggrieved by the order, theassessee filed an appeal to the Commissioner of Income-tax (Appeals). TheC.I.T.(A) dismissed the appeal and confirmed the order of assessment.Aggrieved, the assessee filed an appeal to the Income-tax AppellateTribunal ("Tribunal" in short). The Tribunal allowed the appeal and setaside the orders of the lower authorities. Hence the present appeal bythe Revenue. https://hcservices.ecourts.gov.in/hcservices/ 3.Learned Standing Counsel appearing for the Revenue submittedthat, as per the sale deed between the assessee and an ultimate purchaserof the flat, one of the clauses in the said sale deed stipulates that theassessee was selling the undivided share to the purchaser subject to thecondition that the purchaser should construct and own the flat allotted inhis favour only through M/s.Kalpaga Builders and would enjoy the flat interms of covenants agreed with the said promoter. M/s.Kalpaga Buildersstarted construction on the impugned land with effect from 10.02.1995 andalso the said builder had taken over possession and full control over theimpugned land by 10.02.1995. Hence the transfer of land should bereckoned for the assessment year 1995-96 within the meaning of Section 2(47)(v) of the Act. Hence the profit of sale of the land wouldautomatically become short term capital gains assessable in the blockperiod and more specifically pertaining to assessment year 1995-96. Hencethe Assessing Officer is right in assessing it for the assessment year1995-96 for the block period. 4.Learned counsel appearing for the assessee submitted that oncethe ingredients of Section 53A of the Transfer of Property Act is notsatisfied, Section 2(47)(v) of the Income-tax Act cannot be invoked. Itis further submitted that there is no written agreement between theassessee and the builder, which is the basic requirement for invoking theprovision of Section 53A of the Transfer of Property Act. It is alsofurther submitted that the assessee is yet to receive the amount and theassessee had shown the amount only as receivables and there is no actualreceipt of the amount. Therefore, the question of transfer followed bycapital gain will not arise for this block assessment period. Hence, theorder passed by the Tribunal is in confirmity with law. 5.Heard the counsel. The dispute in this case is regarding theassessment year in which the transfer of land has to be assessed. It isnot in dispute that there is no written agreement between the assessee andthe builder. A written agreement is a basic requirement for invoking theprovision of Section 53A of the Transfer of Property Act. Section 53A ofthe Transfer of Property Act, reads as under:- "53A. Part performance.-Where any person contracts totransfer for consideration any immovable property bywriting signed by him or on his behalf from which theterms necessary to constitute the transfer can beascertained with reasonable certainty,and the transferee has, in part performance of thecontract, taken possession of the property or any partthereof, or the transferee, being already inpossession, continues in possession in partperformance of the contract and has done some act infurtherance of the contract, and the transferee has performed or is willing toperform his part of the contract,then, notwithstanding that where there is aninstrument of transfer, that the transfer has not been https://hcservices.ecourts.gov.in/hcservices/ "53A. Part performance.-Where any person contracts totransfer for consideration any immovable property bywriting signed by him or on his behalf from which theterms necessary to constitute the transfer can beascertained with reasonable certainty,and the transferee has, in part performance of thecontract, taken possession of the property or any partthereof, or the transferee, being already inpossession, continues in possession in partperformance of the contract and has done some act infurtherance of the contract, and the transferee has performed or is willing toperform his part of the contract,then, notwithstanding that where there is aninstrument of transfer, that the transfer has not been https://hcservices.ecourts.gov.in/hcservices/ completed in the manner prescribed therefor by the lawfor the time being in force, the transferor or anyperson claiming under him shall be debarred fromenforcing against the transferee and persons claimingunder him any right in respect of the property ofwhich the transferee has taken or continued inpossession, other than a right expressly provided bythe terms of the contract: Provided that nothing in this section shall affectthe rights of a transferee for consideration who hasno notice of the contract or of the part performancethereof."In the case of Nathulal Vs. Phoolchand, AIR 1970 SC 546, the Apex Courtconsidered the scope of Section 53A of the Transfer of Property Act andheld as follows:- "(1) that the transferor has contracted to transfer forconsideration any immovable property by writing signedby him or on his behalf from which the terms necessaryto constitute the transfer can be ascertained withreasonable certainty; (2) that the transferee has, inpart performance of the contract, taken possession ofthe property or any part thereof, or the transferee,being already in possession continues in possession inpart performance of the contract; (3) that thetransferee has done some act in furtherance of thecontract; and (4) that the transferee hadperformed or is willing to perform his part of thecontract."Section 2(47)(v) of the Income-tax Act reads as follows:-""transfer", in relation to a capital asset, includes,- (i) ...(ii) ...(iii)...(iv) ... (iva)... (v) any transaction involving the allowing of thepossession of any immovable property to be taken orretained in part performance of a contract of thenature referred to in section 53A of the Transfer ofProperty Act, 1882 (4 of 1882); or" Section 2(47)(v) of the Income-tax Act comes into the aid of theDepartment only if the conditions of Section 53A of the Transfer ofProperty Act are satisfied. From a reading of the above provisions, it isclear that unless there is a written agreement, Section 53A of theTransfer of Property Act will not come into operation. In the presentcase, there is no written agreement and no sale consideration was receivedduring the relevant period. The Revenue is also unable to prove that theassessee had put the developer in possession of the property by receivingthe consideration partly or in full. The fact remains that there is no https://hcservices.ecourts.gov.in/hcservices/ sale agreement between the assessee and the builder and also the assesseehad not received the sale consideration. Hence, the Tribunal is right inholding that there is no transfer of property, as contemplated underSection 2(47(v) of the Act. The reasons given by the Tribunal are basedon valid materials and evidence and we do not find any error or legalinfirmity in the order of the Tribunal so as to warrant interference. 6.In view of the foregoing reasons, we answer the question infavour of the assessee and against the Revenue. Accordingly, the tax caseis dismissed. No costs. https://hcservices.ecourts.gov.in/hcservices/ sale agreement between the assessee and the builder and also the assesseehad not received the sale consideration. Hence, the Tribunal is right inholding that there is no transfer of property, as contemplated underSection 2(47(v) of the Act. The reasons given by the Tribunal are basedon valid materials and evidence and we do not find any error or legalinfirmity in the order of the Tribunal so as to warrant interference. 6.In view of the foregoing reasons, we answer the question infavour of the assessee and against the Revenue. Accordingly, the tax caseis dismissed. No costs. Sd/-Asst. Registrar./true copy/Sub Asst. Registrar.kmTo1. The Assistant Registrar, Income-tax Appellate Tribunal, Chennai Bench 'C', Chennai 90.2. The Commissioner of Income-tax (Appeals) X, Chennai.3. The Assistant Commissioner of Income-tax, Circle XII, Chennai-600 006.4. The Commissioner of Income Tax, IX, Chennai.+ 1 CC To Mr. N. Muralikumaran Advocate SR NO.35732 T.C.(A) No.217 of 2004tej[co]gp/6.7.