Tca/289/2019 Of C.shrinivasan v. The Deputy Commissioner Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 06.06.2019 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal No.289 of 2019and C.M.P.No.11113 of 2019 Shri C.Shrinivasan,Block -VI, Flat No.3C, Rani Meyyammai Towers,MRC Nagar, Chennai-600 032.PAN : .. Appellant/Respondent-vs- The Deputy Commissioner of Income Tax,Corporate Circle 3(2),Nungambakkam, Chennai-600 034. .. Respondent/Appellant Tax Case Appeal filed under Section 260A of the Income-tax Act, 1961 against the order dated 31.01.2019 inI.T.A.No.3083/Chny/2017 on the file of the Income-TaxAppellate Tribunal 'A' Bench, Chennai, for the assessmentyear 2010-11 against the order of the Commissioner ofIncome Tax (A)-12,Chennai 34,dated 11.10.2017 made in ITA .NO. 251/CIT(A)-12/2013-14, and against the Assessment orderpassed by the Joint Commissioner of Income Tax , BusinessRange XV Chennai dated 28.03.2013 made in GIRNO./PA.NO.BMGP50045E. For Appellant:Mr.Vijayaraghavan,For M/s.Subbaraya Aiyar,Padmanabhan & Ramamani For Respondent :Mr.M.Swaminathan,Senior Standing Counseland Mrs.V.Pushpa,Junior Standing Counsel ****** (Delivered by T.S.Sivagnanam, J.) This appeal, by the appellant/assessee filed underSection 260A of the Income-tax Act, 1961 (hereinafterreferred to as “the Act”), is directed against the orderdated 31.01.2019, passed by the Income Tax AppellateTribunal Madras “A” Bench, Chennai (“the Tribunal”), inI.T.A.No.3083/Chny/2017, for the assessment year 2010-11. 2.The above appeal has been filed raising the followingsubstantial questions of law:-“(i) Whether the Tribunal had right inlaw in holding that the capital gains aroseand is taxable in the Assessment Year 2010-11when the Assessee has offered capital gainstax on the same transaction in his return ofincome for Assessment Year 2009-10?(ii) Whether the Tribunal was right inlaw in holding that since the assessee hasnot registered the sale agreement as persection 17A of Transfer of Property Act, thesale/transfer took place only on the date ofsale deed executed on 27.4.2009 and hence thecapital gain is taxable in the assessmentyear 2010-11, without considering that on thefacts of the case transfer has taken place inthe year relevant to AY 2009-10, as perprovisions of sec 2(47)(vi) and the capitalgains offered has been assessed and hasreached finality?(iii) Whether the Tribunal erred inbasing their decision regarding transfer ofproperty u/s 2(47) considering only subsection (v) of sec 2(47) of the Act withoutconsidering the applicability of sub-clause(vi) of Section 2(47) to power of attorneyarrangements, in deciding whether transfer ofproperty took place under that sub-clause inthe AY 2009-10?(iv) Whether the Tribunal erred in law innot following the Judgment of theJurisdictional High Court in the case ofother co-owners Smt. P.T. Geetha Ramani &Shri P.N.Thiagarajan vide Tax Case AppealNos.675 & 676 of 2017 dated 14.12.2017 andhold that the year of accrual of capitalgains is the same as that of the co-owners in respect of transfer of the very same propertyon the very same documents and transaction?(v) The Tribunal erred in law indirecting the CIT(A) to consider only sec 2(47)(v) in the light of the decision of theApex Court, instead of directing the CIT(A)to decide the issue in accordance with theapplicable provisions of the Act.” 3.We have heard Mr.Vijayaraghavan, learned counsel forM/s.Subbaraya Aiyar, Padmanabhan & Ramamani, for theappellant/assessee; and Mr.M.Swaminathan, learned SeniorStanding Counsel and Mrs.V.Pushpa, learned Junior StandingCounsel for the respondent/Revenue. 4.With consent of the learned counsel on either side,this appeal is taken for final disposal at the admissionstage itself. respect of transfer of the very same propertyon the very same documents and transaction?(v) The Tribunal erred in law indirecting the CIT(A) to consider only sec 2(47)(v) in the light of the decision of theApex Court, instead of directing the CIT(A)to decide the issue in accordance with theapplicable provisions of the Act.” 3.We have heard Mr.Vijayaraghavan, learned counsel forM/s.Subbaraya Aiyar, Padmanabhan & Ramamani, for theappellant/assessee; and Mr.M.Swaminathan, learned SeniorStanding Counsel and Mrs.V.Pushpa, learned Junior StandingCounsel for the respondent/Revenue. 4.With consent of the learned counsel on either side,this appeal is taken for final disposal at the admissionstage itself. 5.We need not labour much to answer the substantialquestions of law raised for consideration, as in theconnected matter, that is, pertaining to the other co-owners, this Court had an occasion to test the correctnessof the order passed by the Tribunal dated 31.01.2017, inT.C.A.Nos.675 and 676 of 2017. In the said cases,identical substantial questions of law were raised at theinstance of the Revenue. 6.The sum and substance of the contention raised by theRevenue is that whether, the Tribunal was right in holdingthat the transfer of property has taken place in theassessment year 2009-10 relying on an unregistered saleagreement whereas the actual sale deed was registered inthe assessment year 2010-11. The other issue was whetherthe Tribunal was right in upholding that the transfer ofthe impugned property took place in the assessment year2009-10 without considering the provisions of Section 53Aread with Section 17(1A) of the Transfer of Property Act,1882 (hereinafter referred to as “the TP Act”) as amendedin 2001. 7.The Court considered the contentions raised by theRevenue, heard the assessee and dismissed the appeals bycommon judgment dated 14.12.2017. The operative portion ofthe judgment read as follows:-“6.Aggrieved by such orders, theassessees preferred appeals before theCommissioner of Income Tax (Appeals)reiterating the stand, which they had takenbefore the Assessing Officer. The 7.The Court considered the contentions raised by theRevenue, heard the assessee and dismissed the appeals bycommon judgment dated 14.12.2017. The operative portion ofthe judgment read as follows:-“6.Aggrieved by such orders, theassessees preferred appeals before theCommissioner of Income Tax (Appeals)reiterating the stand, which they had takenbefore the Assessing Officer. The Commissioner of Income Tax (Appeals)considered the sale agreement and also thetransaction, which took place in thefinancial year 2008-09 and held that theassesseesreceivedthefullsaleconsideration though the property wasregistered by the power of attorney holder in2009. After considering the provisions ofSection 2(47) of the Income Tax Act andSection 53A of the Transfer of Property Actand the decision of this Court in the case ofD.Kasthuri vs. CIT [reported in (2010) 323ITR 40], it was held that the capital gainsarose to the assessees on the basis of thesale agreement between the vendor and thevendee and applied the provisions of Section2(47)(v) of the Income Tax Act and thetransfer is complete in all aspects.7.The Tribunal noted the findingsrendered by the Commissioner of Income Tax(Appeals) in paragraph 32 of its order andheld that the observation of the Commissionerof Income Tax (Appeals) that the assessee hadcomplied with the provisions in the financialyear 2008-09 and paid capital gains and thatthere were no long term capital gains taxablein the assessment year 2010-11 to be just andproper. The above finding rendered by theTribunal is on re-appreciation of the factualposition as recorded by the Commissioner ofIncome Tax (Appeals). In respect of otherco-owners, similar orders were passed by theCommissioner of Income Tax (Appeals) and theyhad attained finality, as the Revenue did notprefer appeals against those orders. In thelight of the above factual position, we areof the considered view that the abovequestions framed by the Revenue stating to bethe substantial questions of law would notarise for consideration in these appeals, asthe entire matter is fully factual. There isno error of law committed by the Tribunalwarranting interference by this Court.8.Accordingly, the above tax case appealsare dismissed.” 8.In the aforementioned judgment, it had been notedthat in respect of other co-owners, similar orders werepassed by the CIT(A) and they had attained finality, as theRevenue did not prefer any appeals against those orders. Furthermore, the judgment in T.C.A.Nos.675 and 676 of 2017,dated 14.12.2017, has attained finality, as the Revenue hasnot preferred any appeals against the said judgment. Insuch circumstances, the Tribunal ought to have followed theearlier orders and allowed the appeals filed by theassessee. On the contrary, by the impugned order, theTribunal has dismissed the assessee's appeals. The reasonassigned by the Tribunal for doing so could be seen inparagraph 4.1 of the impugned order. In the saidparagraph, the Tribunal takes note of the judgment of thisCourt dated 14.12.2017 in T.C.A.Nos.675 and 676 of 2017.However, the Tribunal does not follow the said decision onthe ground that the Department had not placed reliance onthe judgment of the Hon’ble Supreme Court in the case ofCIT vs. Balbir Singh Maini reported in [2017] 86taxmann.com 94. In the said decision, the Hon’ble SupremeCourt pointed out that for the purpose of application ofSection 53A of the TP Act, the agreement should beregistered, if it is entered after 2001, when Section 17Aof the TP Act was amended. The Tribunal holds that theassessee has not registered the sale agreement in theinstant case and therefore, the sale/transfer took placeonly on the date of sale deed executed on 27.04.2009, thecapital gain is taxable in the assessment year 2010-11. 9.In our considered view, the Tribunal failed to takeinto consideration sub-Clauses (v) and (vi) of Section 2(47) of the Act read with Explanation 2 containedthereunder. At this juncture, it would be beneficial torefer to the said provisions:-“Section 2(47)(v):- any transactioninvolving the allowing of the possession ofany immovable property to be taken orretained in part performance of a contract ofthe nature referred to in Section 53A of theTransfer of Property Act, 1882 (4 of 1882); or Section 2(47)(vi):- any transaction (whether by way of becoming a member of, oracquiring shares in, a co-operative society,company or other association of persons or byway of any agreement or any arrangement or inany other manner whatsoever) which has theeffect of transferring, or enabling theenjoyment of, any immovable property.Explanation 1:- For the purpose of sub-clauses (v) and (vi), immovable propertyshall have the same meaning as in clause (d)of Section 269UA.Explanation 2:- For the removal of doubts, it is hereby clarified that“transfer” includes and shall be deemed tohave always included disposing of or partingwith an asset or any interest therein, orcreating any interest in any asset in anymanner whatsoever, directly or indirectly,absolutely or conditionally, voluntarily orinvoluntarily, by way of an agreement(whether entered into in India or outsideIndia) or otherwise, notwithstanding thatsuchtransferofrightshasbeencharacterised as being effected or dependentupon or flowing from the transfer of a shareor shares of a company registered orincorporated outside India;” 10.A conjoint reading of the above provisions willclearly show that any transaction involving the allowing ofthe possession of any immovable property to be taken orretained in part performance of a contract of the naturereferred to in Section 53A of the TP Act. Furthermore,Explanation 2 makes it abundantly clear that “transfer”includes and shall be deemed to have always includeddisposing of or parting with an asset or any interesttherein, or creating any interest in any asset in anymanner whatsoever, directly or indirectly, absolutely orconditionally, voluntarily or involuntarily, by way of anagreement (whether entered into in India or outside India)or otherwise, notwithstanding that such transfer of rightshas been characterised as being effected or dependent uponor flowing from the transfer of a share or shares of acompany registered or incorporated outside India. 11.The above Explanation comes to the aid andassistance of the assessee and in the instant case, theassessee has received consideration, handed over possessionof the property, executed registered Power of Attorney infavour of the holder empowering him to absolutely deal withthe property and the arrangement is covered by an agreementfor sale. Thus, the agreement for sale should not be readin isolation, but should be read in conjoint with the powerof attorney which in sum and substance is irrevocable. 12.Furthermore, we find from the circular issued by theCBDT in Circular No.495 dated 22.09.1987, which isExplanatory Notes on the provisions relating to directtaxes and in the said circular, the Board discusses aboutthe definition of “transfer” which had been widened toinclude paragraph 11.2. In terms of the above circular,the newly inserted sub-Clause (vi) of Section 2(47) of the https://hcservices.ecourts.gov.in/hcservices/ 12.Furthermore, we find from the circular issued by theCBDT in Circular No.495 dated 22.09.1987, which isExplanatory Notes on the provisions relating to directtaxes and in the said circular, the Board discusses aboutthe definition of “transfer” which had been widened toinclude paragraph 11.2. In terms of the above circular,the newly inserted sub-Clause (vi) of Section 2(47) of the https://hcservices.ecourts.gov.in/hcservices/ TP Act has brought into the ambit of “transfer”, practiceof enjoyment of property rights through what is commonlyknown as Power of Attorney arrangements. Thus, theTribunal committed an error in holding that the transfertook place only on the date of sale deed which was executedon 27.04.2009. As observed earlier, in respect of theother co-owners, they have succeeded either before the CIT(A) or before the Tribunal and those orders are attainedfinality. 13.In the light of the above, the order passed by theTribunal calls for interference. 14.Accordingly, the appeal filed by the assessee isallowed, the order passed by the Tribunal is set aside andthe substantial questions of law, raised for consideration,are answered in favour of the assessee. No costs.Consequently, connected miscellaneous petition is closed. Sd/- Assistant Registrar(CS) //True Copy// Sub Assistant Registrar abrTo 1.The Deputy Commissioner of Income Tax, Corporate Circle 3(2), Nungambakkam, Chennai-600 034. 2.The Joint Commissioner of Income tax, Business Range XV, Chennai. 3.The Commissioner of Income Tax (Appeals)-XII, 121, Mahatma Gandhi Road, Chennai-600 034. 4.The Income Tax Appellate Tribunal 'A' Bench, Chennai.+1cc to Mr.M.Swaminathan, Advocate SR.No. 45283+1cc to M/s.Subbaraya Aiyar , Advocate SR.No. 45227T.C.A.No.289 of 2019A.SK(19/07/2019)