Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH “A”: NEW DELHI
Before: SHRI SHAMIM YAHYA & SHRI ANUBHAV SHARMA
O R D E R PER ANUBHAV SHARMA, J. M.:
1. 1. The present appeal has been preferred by the Assessee against the order dated 30.11.2017 of Ld. CIT(A), Aligarh (hereinafter referred as Ld. First Appellate Authority) arising out of an appeal before it against the assessment order dated 25.11.2016 passed u/s 144/147 of the Income Tax Act, 1961 (hereinafter referred as „the Act‟) by the Assessing Officer, ITO, Ward-3(1), Bulandshahar (hereinafter referred as the Ld. AO).
2. Facts in brief are that the appellant was found to have sold immovable properties for sale consideration of Rs. 1,68,55,000/-. In this regard, proceedings were initiated by issuing notice u/s 148 on 21.03.2016. As no return was furnished in response to the said notice, various notices u/s 142(1) were issued seeking a necessary information. However, no compliance was made in respect of such notices. Thereafter, Page | 1 a show cause notice u/s 144 was issued 30.08.2016. Consequent to the said show cause notice, the appellant‟s AR filed return of income declaring total income of Rs. 40,200/- and agricultural income of Rs. 95,200/-. To scrutinize the return, notices u/s 143(2) and 142(1) were issued. The Ld. AO observed that the appellant had sold land and the same was in the nature of an industrial plot and hence, Long Term Capital Gain was chargeable. On the basis of the available facts, LTCG was assessed at Rs. 1,09,69,234/-. Thus, the total income was computed at Rs. 1,10,09,434/- and agricultural income of Rs. 95,200/-.
The ld CIT(A) upheld the addition while holding in para No. 5.4 as under:- “5.4 Decision This ground is against the assessment of capital gain of Rs. 1,09,69,234/-. In this regard, it has been explained that though in the sale deed the land has been declared to be an industrial plot, it was actually an agricultural land. It has also been explained that in the case of Shri Jitendra Kumar Singh, Ld. CIT (A) Ghaziabad had examined the facts and held that the sold land was agricultural in nature and agricultural activities were being carried out on the date of sale. Therefore, it has been argued that no capital gain can be assessed on the sale of the land. It has also been explained that the land in question is situated at a distance about 6.25 Kms to 6.75 Kms from the municipal limit of Khurja and hence it does not qualify to be declared a capital asset u/s 2(14) of the IT Act. I have considered all the facts as are available on the record. It is seen that the appellant had entered into an „Agreement to sale‟ with M/s Arshiya Northern Logistics Infrastructure Ltd. for sale of the land in question on 02.07.2008. Thereafter, the land-use was changed on 10.07.2008 and the land was declared to be a non agricultural land, subsequently, the sale deed was executed on 18.09.2008. It is important to note that the possession of the land was not handed
over when the aforesaid „Agreement to self was made. The possession was given only when the sale deed was executed on 18.09.2008. Thus, it can be concluded that the transfer of the land was completed only when the sale deed was executed and not on the date of signing of the „Agreement to sell‟. Therefore, it is reasonable to hold that by the time the land was transferred its land-use had been changed and it was declared t be a non agricultural land. Therefore, what was transferred by the appellant was indeed a non agricultural land which would qualify to be defined as capital asset u/s 2(14) of the IT Act. That being so, a capital gain would be chargeable on the said transfer of land O' w the moot question is what should be taken as the full value of consideration for the purpose of computing the capital gain?. It is seen that w.e.f. 01.04.2017, the following proviso has been inserted in section 50C:-
"Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer:
Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account, on or before the date of the agreement for transfer.
This proviso is essentially clarifactory in nature and hence would apply with retrospective effect. Therefore, it can be said that for the purpose of computing the full value of consideration, the value assessable by the stamp valuation authority on the date of „agreement to sell should be taken. Here, we must note that part of the consideration (Rs. 60,00,000/-) was paid by cheque on the date of agreement. Thus, the most necessary condition as prescribed for applying the aforesaid proviso has been fulfilled. Now, we have to see what would be the value assessable by the stamp valuation authority on the date of the agreement. It is noted that the land- use was changed after the agreement was signed. Therefore, on the date of agreement, land use was still agricultural only. This is also apparent from a perusal of the revenue records. Hence, the stamp value assessable on the agreement date, would be the circle rates applicable to agricultural lands for that year. It has been found that the circle rates for agricultural land prevailing during the F.Y. 2008-09 were Rs. 7,00,000/- per Bigha which converted Rs. 92,72,000/- per hectare. During the year under consideration 1.685 hectares of land was sold and the value of the said and as per circle rates as on date of agreement to sell comes to Rs. 1,56,23,320/- The actual sale consideration received for the land was of Rs. 91,83,850/- which is lower than the as per circle rates. The higher of the two figures would be taken as the full value of consideration with the provisions of section 50C . Therefore, the AO is being directed to re-compute the LTCG after taking full value of consideration.”
The assessee is now in appeal raising following grounds of appeal:- “(1) That the Ld. CIT(A) has erred in sustaining the addition of Rs. 1,09,69,234/- made towards the long term capital gain, since the land sold was an agricultural land and the same does not fall within the definition of capital asset u/s 2(14) of the I. T. Act, 1961, at the time of the agreement to sell dated 02.07.2008. The use of land sold was changed and treated as industrial land for the purpose of sale-deed executed on 18.09.2008 only on the intention of the purchaser, since the purchaser had purchased the agricultural land for the use of non-agricultural i.e. industrial purposes. (2) That the Ld. CIT(A) has erred in law and on facts that there is a extinguishment of some rights in the land sold by the appellant in favour of the purchaser vide the agreement to sell dated 02.07.2008. The extinguishment of any rights also amounts to the transfer as per the definition of „Transfer‟ vide section 2(47) of the I. T. Act, 1961. (3) That the Ld. CIT(A) has erred in ignoring the decision of Hon‟ble Supreme Court in case of Sh. Sanjeev Lai Etc. vs. CIT [ (2014) 365 ITR 389 ] in which it has been held that an agreement to sell creates some rights in favour of transferee and it is a transfer within section 2(47) of the I. T. Act, 1961. (4) That the Ld. CIT(A) has erred in adopting the valuation at Rs. 1,56,23,320/- to calculate the long term capital gain as per section 50C of the I. T. Act, 1961 as well as in applying the circle rate at Rs. 92,72,000/- per Hectare for the agriculture land sold, since there is a calculation mistake in conversion of the circle rate from Bigha to Hectare as 1 Bigha = 0.253 Hectare. (5) For these and other grounds, which may be urged at the time of the hearing, the appeal may be allowed and justice rendered.”
5. Heard. As the case was called for hearing none appeared on behalf of the assessee, however, a written submission on behalf of the assessee is placed on record with a request to adjudicate the appeal on the basis of written submission. On behalf of the assessee it has been submitted in written submission that plot has treated as industrial plot only for the purpose of sale deed as purchaser has purchased an agricultural land for industrial purpose. It has been submitted that the ld CIT(A) completely ignored the fact that land sold was an agricultural land at the time of execution of the agreement to sell duly signed and registered on 02.07.2008 and the use of land sold was changed subsequently on 10.07.2008 and treated it as industrial land for the purpose of sale deed executed on 18.09.2008. It was submitted that the Tax Authorities below should have considered the agreement to sale dated 02.07.2008 as the relevant date to consider the nature of land to be an agricultural land. In this context reliance is placed on the judgment of Allahabad High Court CIT Vs. Smt. Sanjeeda Begum and the coordinate bench decision in case of ITO Vs. Jitender Kumar, ITA No. 3909/Del/2015.
6. It has been submitted that the ld Tax Authorities below have fallen an error in not considering that for the purpose of section (2)47 of the Act, the extinguishment of any rights also amounts to transfer and the registered agreement to sale dated 02.07.2008 on transfer the interest in favour of purchaser and on that date the disputed land or agricultural in nature. In this context submissions have relied on the judgment of the Hon'ble Supreme Court in case of Sh. Sanjeev Lal Etc Vs. CIT (2014) 365 ITR 389 to submit that in this judgment it has been held that an agreement to sale creates some rights in favour of the transferee and it is a transfer within section 2(47) of the Act. It is also submitted that the ld CIT(A) erred in adopting valuation of the land at Rs. 1,56,23,320/- calculating the long term capital gain as per section 50C of the Act. It is submitted that in this regard calculation mistake has been committed in conversion of circle rate from bigha to hectare as 1 Bigha equal to 0.253 hectare. Correct calculation as per appellant has been submitted in para 4 as under:- “As per Order: Circle Rate - Rs.7,00,000/- per Bigha wrongly converted Rs. 92,72,000/-per Hectare. Right Conversion Calculation: Circle Rate - Rs. 7,00,000 XI/ 0.253 = Rs. 27,66,798/- per Hectare. As per Order: Value of 1.685 Hectare land sold on date of agreement to sell comes to Rs. 1,56,23,320/- considering the circle rate Rs. 92,72,000/- per Hectare wrongly. Correct Valuation: Value of 1.685 Hectare land sold on date of agreement to sell comes to Rs. 46,62,055/- considering the circle rate Rs. 27,66,798/- per Hectare correctly.”
7. On the other hand the ld DR submitted that there is no error in the findings of the ld Tax Authorities below. It is submitted that the relevant date to consider the nature of land is when the sale deed is executed. It was submitted even otherwise as for the purpose of section 50C of the Act, the addition has been rightly sustained.
8. Giving thoughtful consideration to the matter on record the bench is of considered opinion that controversy shrinks to the question what is the crucial date for determining transfer for the purpose of section 2(47) of the Act when the date of agreement for sale of property is different from the date of registration of sale deed. Specially in present case where on date of agreement admittedly the nature of land was agricultural for the purpose of Section 2(14) of the Act while it had converted to industrial land at the date of Sale deed. 9. In this context this bench takes note of clause (v) of section 2(47) of the Act which provides that if a „transfer‟ involves handing over of possession of any immovable property in part performance of a contract of the nature referred to in section 53A of the TP Act 82 that shall be Page | 7 included in the definition of transfer of capital asset. In the case in hand although fact of registration of agreement to sale is not disputed however, the possession was not handed over. Thus, strictly speaking provisions of section 53A of the TP Act are not applicable. There was no deemed transfer.
Further, when section 2(47) of the Act specifically deals with „sale‟ under clause (i) to section 2(47) and of the „agreement to sale‟ of property under clause (v) then the assessee cannot plead of being covered under clause (ii) of section 2(47) dealing with the extinguishment of any right.
Then reference needs to be made to the Hon‟ble Bombay High Court judgment in Pr. CIT Vs. Talwalkars Fitness Club in ITA 589/2016 dated 29.10.2018 wherein Hon‟ble High Court had upheld the order of Mumbai Bench that the relevant date for purpose of Section 45 read with 2(47) of the Act is the date of execution of sale deed and not the execution of agreement to sale even if registered.
It also need to be keep in mind that the settled proposition of law is that mere agreement to sell does not create any right, title or interest in a property. In case of Smt. Shail Moti Lal v. CIT, Chandigarh reported in [2013] 218 Taxman 298 (P&H), the Division Bench of Hon‟ble Punjab and Haryana High Court, in the context of transfer of capital asset, held that the transfer would take place only on the execution of the sale deed and the date of agreement to sell cannot be treated as the date of transfer of immovable property. In case of Ratna Trayi Reality Service (P) Ltd. v. Income tax Officer reported in 2013 (356) ITR 493, Hon‟ble Gujrat High Court observed that an agreement to sale, without there being anything more, cannot be equated with transfer of property. In Smt. Shoba jain Vs. CIT [2016] 75 taxmann.com 223 (Allahabad) Hon‟ble Allahabad High Court has also held that agreement to sell is not a transaction of immovable property.
Transfer of property can be done only through execution of registered sale deed.
In this context, we must refer to the judgment of the Hon‟ble Supreme Court in Sh.Sanjeev Lal Vs. CIT (supra), relied in submissions filed for Assessee. It was a case where to look into the question if assessee is entitled to benefits under Section 54 of the Act. The Hon‟ble ApexCourt, posed a question to itself whether the agreement to sale, which was executed can be considered as a date on which the property, i.e. the residential house, had been transferred. The Court observed that in normal circumstances, by executing an agreement to sale of an immovable property, a right in personem is created in favour of the transferrer. In such situation, the vendee is restrained from selling the property to anyone else. However, the question still remains whether the entire property can be said to have been sold at the time when the agreement to sale was entered into. The Hon‟ble Supreme Court was of the opinion that in normal circumstances, such question had to be answered in the negative. The Hon‟ble Supreme Court, thereafter, referred to the provisions of Section 2(47) of the Act giving expanded meaning to the term "transfer" and further observed in light of the said definition that one can come to the conclusion that some right in respect of the capital asset in question had been transferred and that such right with respect to the capital asset had been extinguished, after execution of the agreement to sale. The Hon‟ble Supreme Court also observed that, no doubt, such contractual right can be surrendered and neutralized by the parties by subsequent contract or conduct. But, such was not the case on hand. The Hon‟ble Supreme Court also noted that the sale deed could not be executed for the reason that the assessee had been prevented from dealing with the residential house by an order of the competent Court. The Hon‟ble Supreme Court, in view of such peculiar facts of the case and looking to the definition of "transfer" u/s.2(47) of the Act, was of the view that the assessee was entitled to relief u/s.54 of the Act.
This judgment, is contrary to what has been canvassed by this bench, earlier in para 11 and 12 above, but what is material is the fact that in this judgement, Hon‟ble Supreme Court does not lay down a blanket proposition that without there being anything else, upon execution of an agreement to sale of an immovable property, the asset, i.e. the property in question, itself stands transferred. Main thrust in the said case was that the assessee, after having executed an agreement to sale the property, was prevented from executing the sale deed by an injunction of the Court. In the meantime, he had already purchased the new property. These were the peculiar facts of that case. Also the question was with regard to extending benefit of beneficial section 54 to the assessee for allowing exemptions.
In case in hand the matter has to be considered for a charging section 45 read with Section 2(14) of the Act and the relevant is Section 47 of the Registration Act 1908, whereby it is provided that registered document shall operate from the date of its execution. It is the date of the execution of the registered deed and on that date alone, the title to property passes. Reliance can be placed on the judgement of Hon‟ble Supreme Court of India in Alapati Venkataramiah v. CIT [1965] 57 ITR 185 (SC) where Hon‟ble Apex court while dealing with the section 12B of Indian Income tax Act, 1922, was considering as to what constitutes passing of title for the purpose of Capital Gains and observed; “Before s. 12B can be attracted, title must pass to the company by any of the modes mentioned in s. 12B, i.e. sale, exchange or transfer. It is true that the word 'transfer' is used in addition to the word 'sale' but even so, in the context transfer must mean effective conveyance of the capital asset to the transferee. Delivery of possession of immovable property cannot by itself be treated as equivalent to conveyance of the immovable property.”