Income Tax - Capital Gains - sec. 2 (47) (i) & (v) -Agreement & Delivery of possession are enough - payment of total consideration not necessary to assess tax - liable to pay tax on capital gains on the date of delivery of possession - Tribunal upheld the same - their lordships of High court held that The element of factual possession and agreement are contemplated as transfer within the meaning of the aforesaid section. When the transfer is complete, automatically, consideration mentioned in the agreement for sale has to be taken into consideration for the purpose of assessment of income for the assessment year when the agreement was entered into and possession was given. Here, factually it was found that both the aforesaid aspects took place in the previous year relevant to the assessment year 2003-04. Hence, the learned Tribunal has rightly held that the appellant is liable to pay tax on the capital gain for the assessment year. =
In the instant case, on 07.03.2003 an agreement was entered into by the
assessee with M/s. Bhavya Constructions Pvt., Ltd., and the plan of the building
was approved on 31.03.2003. These dates fall in the previous year 2002-03,
relevant to assessment year 2003-04. Thus, in this case, the land being capital
asset was transferred by the assessee to the developer during the assessment
year under consideration, viz., 2003-04, for construction and it is enough if the
assessee has received the right to receive consideration on a later date, so as
to attract eligibility to tax on capital gains during the year under appeal.=
The definition of transfer under Section 2(47) of the Income Tax Act,
1961, reads as follows: transfer, in relation to a capital asset, includes,-
(i) the sale, exchange or relinquishment of the asset; or
....
....
....
....
we are of the view that the language of Section 53-A of the Transfer of Property
Act,1882, which has been engrafted in the aforesaid definition of Section 2(47) of
the Income Tax Act, 1961, does not contemplate any payment of consideration. We
set out Section 53-A, which reads as under:
Part performance Where any person contracts to transfer for
consideration any immovable property by writing 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 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.
Therefore, we are of the view, while upholding the learned Tribunals
application of law on this fact, that payment of consideration on the date of
agreement of sale is not required, it may be deferred for future date.
The element of factual possession and agreement are contemplated as
transfer within the meaning of the aforesaid section. When the transfer is
complete, automatically, consideration mentioned in the agreement for sale has
to be taken into consideration for the purpose of assessment of income for the
assessment year when the agreement was entered into and possession was given.
Here, factually it was found that both the aforesaid aspects took place in the
previous year relevant to the assessment year 2003-04. Hence, the learned
Tribunal has rightly held that the appellant is liable to pay tax on the capital
gain for the assessment year. Accordingly, we do not find any element of law to
admit this appeal.
The appeal is therefore dismissed. No order as to costs.
THE HONBLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HONBLE SRI JUSTICE SANJAY KUMAR
ITTA No.245 OF 2014
09-04-2014
Potla Nageswara Rao..Appellant
The Deputy Commissioner of Income Tax, Central Circle-4, Hyderabad.Respondent
Counsel for Petitioner: Sri K. Vasanth Kumar
Counsel for the respondent: None appeared
<GIST:
>HEAD NOTE:
?Cases referred
THE HONBLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA
AND
THE HONBLE SRI JUSTICE SANJAY KUMAR
I.T.T.A. No. 245 of 2014
Date: 09.04.2014
This Court made the following:
JUDGMENT: (Per the Honble The Chief Justice Sri Kalyan Jyoti Sengupta)
This appeal is directed against a portion of the judgment and order of the
learned Tribunal dated 22.03.2012 in relation to the assessment year 2003-04 on
the following suggested questions of law.
1. On the facts and in the circumstances of the case, whether the Income
Tax Tribunal is legally correct in relying on the decision of Bombay
High Court in the case of Chaturbhuj Dwarkadas Kapadia reported in
260 ITR 491 to hold that the capital gains arise in the year of entering
into development agreement, though the facts are distinguishable?
2. On the facts and in the circumstances of the case, whether the Income
Tax Tribunal is legally correct in relying on its own decision in the case
of Maya Chenoy reported in 124 TTJ (Hyd) 692 though such decision is
appealed against by the Department, to hold that the capital gains arise in
the year of entering into development agreement?
3. On the facts and in the circumstances of the case, whether the order of
the Income Tax Appellate Tribunal is perverse in not following its own
decision in the case of Smt. K. Radhika in ITA No.208/h/2011 wherein it
is held that capital gains arise in the year in which there is some
performance by the developer and stating in one sentence that it does not
support the case?
4. On the facts and in the circumstances of the case, whether the Income
Tax Appellate Tribunal is right in law in not considering the decision of
the Madras High Court in the case of R.Vijayalakshmi reported in 257
ITR 4?
5. On the facts and in the circumstances of the case, whether the Income
Tax Appellate Tribunal is correct in law in ignoring the fact that at best
capital gains could be assessed only to the extent of land that is
developed before the agreement is cancelled and holding that capital
gains arises on the whole of the land that is involved in the development
agreement?
Mr. Vasant Kumar, learned counsel appearing for the appellant, submits
that almost on identical issue this Court admitted an appeal, therefore, this
appeal should also be admitted.
We are of the view that each and every individual case stands on its own
footing. Before we admit this appeal we must examine the issue before us on its
own merit. Therefore, pendency of another matter cannot be a ground to proceed
with the matter.
Mr. Vasant Kumar further submits that in this case the learned Tribunal
went wrong while holding that the transfer has taken place the moment agreement
is entered into followed by possession for the purpose of computing capital
gain, as, admittedly, in this case there was no payment of consideration and there has
been only an agreement. He submits that the learned Tribunal has misread the
judgment relied on by it.
In the context of the above submission, we have to see whether in this
case any substantial question of law is involved or not. The learned Tribunal on
fact found as follows:
In the instant case, on 07.03.2003 an agreement was entered into by the
assessee with M/s. Bhavya Constructions Pvt., Ltd., and the plan of the building
was approved on 31.03.2003. These dates fall in the previous year 2002-03,
relevant to assessment year 2003-04. Thus, in this case, the land being capital
asset was transferred by the assessee to the developer during the assessment
year under consideration, viz., 2003-04, for construction and it is enough if the
assessee has received the right to receive consideration on a later date, so as
to attract eligibility to tax on capital gains during the year under appeal.
The definition of transfer under Section 2(47) of the Income Tax Act,
1961, reads as follows: transfer, in relation to a capital asset, includes,-
(i) the sale, exchange or relinquishment of the asset; or
(ii) the extinguishment of any rights therein; or
(iii) the compulsory acquisition thereof under any law; or
(iv) in a case where the asset is converted by the owner thereof into, or is
treated by him as, stock-in-trade of a business carried on by him, such
conversion or treatment; or
(iva) the maturity or redemption of a zero coupon bond; or
(v) 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 section 53A of the Transfer of
Property Act, 1882; or
(vi) any transaction (whether by way of becoming a member of, or acquiring
shares in, a cooperative society, company or other association of persons
or 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.
While dealing with the submission of Mr. Vasant Kumar transfer is deemed
to have taken place in the year when the consideration has been actually paid,
we are of the view that the language of Section 53-A of the Transfer of Property
Act,1882, which has been engrafted in the aforesaid definition of Section 2(47) of
the Income Tax Act, 1961, does not contemplate any payment of consideration. We
set out Section 53-A, which reads as under:
Part performance Where any person contracts to transfer for
consideration any immovable property by writing 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 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.
Therefore, we are of the view, while upholding the learned Tribunals
application of law on this fact, that payment of consideration on the date of
agreement of sale is not required, it may be deferred for future date.
The element of factual possession and agreement are contemplated as
transfer within the meaning of the aforesaid section. When the transfer is
complete, automatically, consideration mentioned in the agreement for sale has
to be taken into consideration for the purpose of assessment of income for the
assessment year when the agreement was entered into and possession was given.
Here, factually it was found that both the aforesaid aspects took place in the
previous year relevant to the assessment year 2003-04. Hence, the learned
Tribunal has rightly held that the appellant is liable to pay tax on the capital
gain for the assessment year. Accordingly, we do not find any element of law to
admit this appeal.
The appeal is therefore dismissed. No order as to costs.
_________________
K.J. SENGUPTA, CJ
__________________
SANJAY KUMAR, J
Date:09.04.2014
In the instant case, on 07.03.2003 an agreement was entered into by the
assessee with M/s. Bhavya Constructions Pvt., Ltd., and the plan of the building
was approved on 31.03.2003. These dates fall in the previous year 2002-03,
relevant to assessment year 2003-04. Thus, in this case, the land being capital
asset was transferred by the assessee to the developer during the assessment
year under consideration, viz., 2003-04, for construction and it is enough if the
assessee has received the right to receive consideration on a later date, so as
to attract eligibility to tax on capital gains during the year under appeal.=
The definition of transfer under Section 2(47) of the Income Tax Act,
1961, reads as follows: transfer, in relation to a capital asset, includes,-
(i) the sale, exchange or relinquishment of the asset; or
....
....
....
....
(v) 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 section 53A of the Transfer of
Property Act, 1882; or =
immovable property 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; or =
we are of the view that the language of Section 53-A of the Transfer of Property
Act,1882, which has been engrafted in the aforesaid definition of Section 2(47) of
the Income Tax Act, 1961, does not contemplate any payment of consideration. We
set out Section 53-A, which reads as under:
Part performance Where any person contracts to transfer for
consideration any immovable property by writing 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 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.
Therefore, we are of the view, while upholding the learned Tribunals
application of law on this fact, that payment of consideration on the date of
agreement of sale is not required, it may be deferred for future date.
The element of factual possession and agreement are contemplated as
transfer within the meaning of the aforesaid section. When the transfer is
complete, automatically, consideration mentioned in the agreement for sale has
to be taken into consideration for the purpose of assessment of income for the
assessment year when the agreement was entered into and possession was given.
Here, factually it was found that both the aforesaid aspects took place in the
previous year relevant to the assessment year 2003-04. Hence, the learned
Tribunal has rightly held that the appellant is liable to pay tax on the capital
gain for the assessment year. Accordingly, we do not find any element of law to
admit this appeal.
The appeal is therefore dismissed. No order as to costs.
THE HONBLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HONBLE SRI JUSTICE SANJAY KUMAR
ITTA No.245 OF 2014
09-04-2014
Potla Nageswara Rao..Appellant
The Deputy Commissioner of Income Tax, Central Circle-4, Hyderabad.Respondent
Counsel for Petitioner: Sri K. Vasanth Kumar
Counsel for the respondent: None appeared
<GIST:
>HEAD NOTE:
?Cases referred
THE HONBLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA
AND
THE HONBLE SRI JUSTICE SANJAY KUMAR
I.T.T.A. No. 245 of 2014
Date: 09.04.2014
This Court made the following:
JUDGMENT: (Per the Honble The Chief Justice Sri Kalyan Jyoti Sengupta)
This appeal is directed against a portion of the judgment and order of the
learned Tribunal dated 22.03.2012 in relation to the assessment year 2003-04 on
the following suggested questions of law.
1. On the facts and in the circumstances of the case, whether the Income
Tax Tribunal is legally correct in relying on the decision of Bombay
High Court in the case of Chaturbhuj Dwarkadas Kapadia reported in
260 ITR 491 to hold that the capital gains arise in the year of entering
into development agreement, though the facts are distinguishable?
2. On the facts and in the circumstances of the case, whether the Income
Tax Tribunal is legally correct in relying on its own decision in the case
of Maya Chenoy reported in 124 TTJ (Hyd) 692 though such decision is
appealed against by the Department, to hold that the capital gains arise in
the year of entering into development agreement?
3. On the facts and in the circumstances of the case, whether the order of
the Income Tax Appellate Tribunal is perverse in not following its own
decision in the case of Smt. K. Radhika in ITA No.208/h/2011 wherein it
is held that capital gains arise in the year in which there is some
performance by the developer and stating in one sentence that it does not
support the case?
4. On the facts and in the circumstances of the case, whether the Income
Tax Appellate Tribunal is right in law in not considering the decision of
the Madras High Court in the case of R.Vijayalakshmi reported in 257
ITR 4?
5. On the facts and in the circumstances of the case, whether the Income
Tax Appellate Tribunal is correct in law in ignoring the fact that at best
capital gains could be assessed only to the extent of land that is
developed before the agreement is cancelled and holding that capital
gains arises on the whole of the land that is involved in the development
agreement?
Mr. Vasant Kumar, learned counsel appearing for the appellant, submits
that almost on identical issue this Court admitted an appeal, therefore, this
appeal should also be admitted.
We are of the view that each and every individual case stands on its own
footing. Before we admit this appeal we must examine the issue before us on its
own merit. Therefore, pendency of another matter cannot be a ground to proceed
with the matter.
Mr. Vasant Kumar further submits that in this case the learned Tribunal
went wrong while holding that the transfer has taken place the moment agreement
is entered into followed by possession for the purpose of computing capital
gain, as, admittedly, in this case there was no payment of consideration and there has
been only an agreement. He submits that the learned Tribunal has misread the
judgment relied on by it.
In the context of the above submission, we have to see whether in this
case any substantial question of law is involved or not. The learned Tribunal on
fact found as follows:
In the instant case, on 07.03.2003 an agreement was entered into by the
assessee with M/s. Bhavya Constructions Pvt., Ltd., and the plan of the building
was approved on 31.03.2003. These dates fall in the previous year 2002-03,
relevant to assessment year 2003-04. Thus, in this case, the land being capital
asset was transferred by the assessee to the developer during the assessment
year under consideration, viz., 2003-04, for construction and it is enough if the
assessee has received the right to receive consideration on a later date, so as
to attract eligibility to tax on capital gains during the year under appeal.
The definition of transfer under Section 2(47) of the Income Tax Act,
1961, reads as follows: transfer, in relation to a capital asset, includes,-
(i) the sale, exchange or relinquishment of the asset; or
(ii) the extinguishment of any rights therein; or
(iii) the compulsory acquisition thereof under any law; or
(iv) in a case where the asset is converted by the owner thereof into, or is
treated by him as, stock-in-trade of a business carried on by him, such
conversion or treatment; or
(iva) the maturity or redemption of a zero coupon bond; or
(v) 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 section 53A of the Transfer of
Property Act, 1882; or
(vi) any transaction (whether by way of becoming a member of, or acquiring
shares in, a cooperative society, company or other association of persons
or 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.
While dealing with the submission of Mr. Vasant Kumar transfer is deemed
to have taken place in the year when the consideration has been actually paid,
we are of the view that the language of Section 53-A of the Transfer of Property
Act,1882, which has been engrafted in the aforesaid definition of Section 2(47) of
the Income Tax Act, 1961, does not contemplate any payment of consideration. We
set out Section 53-A, which reads as under:
Part performance Where any person contracts to transfer for
consideration any immovable property by writing 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 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.
Therefore, we are of the view, while upholding the learned Tribunals
application of law on this fact, that payment of consideration on the date of
agreement of sale is not required, it may be deferred for future date.
The element of factual possession and agreement are contemplated as
transfer within the meaning of the aforesaid section. When the transfer is
complete, automatically, consideration mentioned in the agreement for sale has
to be taken into consideration for the purpose of assessment of income for the
assessment year when the agreement was entered into and possession was given.
Here, factually it was found that both the aforesaid aspects took place in the
previous year relevant to the assessment year 2003-04. Hence, the learned
Tribunal has rightly held that the appellant is liable to pay tax on the capital
gain for the assessment year. Accordingly, we do not find any element of law to
admit this appeal.
The appeal is therefore dismissed. No order as to costs.
_________________
K.J. SENGUPTA, CJ
__________________
SANJAY KUMAR, J
Date:09.04.2014
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