ITO,, NANI DAMAN vs. SHRI NARESHBHAI RANCHHODBHAI TANDEL,, NANI DAMAN

This appeal by the Revenue is directed against the order of Ld.Commissioner of Income Tax(Appeals)-Valsad, Valsad dated 22.09.2014.

Grounds raised

The appellant craves to add, modify or alter any grounds during the course of appeal proceedings.”

Brief facts of the case are that the assessee along with his brother Shri Sureshbhai Ranchhodbhai Tandel had received Rs.6,08,55,000/- on sale of land bearing Survey No.370/2 and measuring about 68,700 sq.mtrs. The sale deed for the aforesaid land was executed on 04.10.2008 by the assessee and Shri Sureshbhai Ranchhodbhai Tandel. During the course of assessment proceedings, in the case of the brother of the assessee for A.Y. 2009- 10 it was seen that the brother of the assessee Shri Sureshbhai Ranchhodbhai Tandel has shown cost of acquisition of said land @80 rupees per sq.metre in the year 1981 and accordingly he calculated capital gain. The said calculation of actual fair market value was verified by the ld.Assessing Officer(AO) and was determined @Rs5.5 per sq. metre, consequently a demand on account of long term capital gain was raised in the case of Shri Sureshbhai Ranchhodbhai Tandel. Keeping in view of the above facts, the case of the assessee reopened and after providing opportunity of the hearing to the assessee, assessment order u/s.143(3) r.w.s 147 was passed on 13.03.2013 thereby treating a sum of Rs.2,93,27,956/- as long term capital gain in the case of assessee for the year under consideration.

Being aggrieved by the order of the ld.CIT(A), the Revenue has filed the present appeal before us on the grounds mentioned hereinabove.

Both the grounds raised by the Revenue are inter-related and inter-connected and relates to challenging the order of the ld.CIT(A) in holding that the long term capital gain had arisen in A.Y. 2008-09 instead of A.Y. 2009-10. The ld.Departmental Representative(DR) appearing on behalf of the Revenue submitted before us that the ld.CIT(A) had no appreciated the facts of the case, that on verification of the registered sale deed, it indicates that not only substantial parts of the payment had been received by the seller during F.Y.2008-09 but the legal possession over the land was also handed over by them during the F.Y. 2008-09 and not F.Y. 2007-08. The ld.DR further submitted that on perusal of records, the land owners i.e. Shri ITO, Daman Ward, Daman Vs. Nareshbhai Ranchhodbhai Tandel / Page 4 of 8 Nareshbhai R.Tandel and Shri Sureshbhai Ranchhodbhai Tandel have submitted as under : “(i) The land owners i.e. Shri Nareshbhai R. Tandel and Shri Sureshbhai R. Tandel have submitted before the AO a photocopy of a agreement for sale dated 24.07.2007 of land at Sr.No. 370/2 admg. 79500 sq.mtrs at-Village Kachhigam, U.T. Daman & Die for a total consideration of Rs.6,08,55,000/- to M/s. Polycab Wires Pvt.Ltd. From the copy of the said document, it is seen that till 24.07.2007, an amount of Rs. 1.50 crores (F.Yr. 2007-08) has been paid by the purchaser to the sellers and there is also a copy of a possession letter dated 24.07.2007 as per which agri.land bearing S.No. 370/2 at Village Kachhigam has been handed over to the Chairman of Polycab Wires Pvt.Ltd. (ii) On records, there is registered sale deed of the above transaction dated 04.10.2008 between the above parties as per the said registered sale deed, the balance payment of Rs. 4,58,55,000/- has been paid by the purchaser to the seller between 23.05.2008 and 06.09.2008 (F.Yr. 2008- 09). On going through the documents as above, the following aspects has come to notice :- (i) Substantial part of the payment i.e. 75% of the total consideration has been received by the sellers during the F.Yr. 2008-09 relevant to A.Yr. 2009- 10. (ii) The possession letter of 24.07.2007 mentioned in Para-3(i) above is loosely worded i.e. specifics of the property and the total area handed over are not at all mentioned. Only Sr.No. and the Village is mentioned in the possession letter. (iii) The registered sale deed executed on 04.10.2008 ( F.Yr. 2008-09 - A.Yr. 2009-10) contains an important clause on page No. 120, which is reproduced as under :- 3. That the Vendor have handed over to the purchaser the physical, vacant and peaceful possession of the said property on receipt of full and final consideration of Rs. 6,08,55,000/-. It is further agrred that on and from date of receiving peaceful, vacant and physical possession of the said property from the Venders, the purchasers will be the absolute owner of the said property and it shall be lawful for the purchaser from time to time and at all time hereafter peacefully and quietly to hold, enter upon, have, occupy, possess and enjoy the said property, hereditaments and premises hereby granted with its appurtenances and shall further have full power and absolute authority and shall be fully entitled to enjoy and use and manage the said property in the manner it likes and further receive the rents, issues and profits thereof and of every part thereof to and for its own use and benefit and without any let, hindrance, denial, demand, interference, claim or eviction whatsoever from or by Venders and/ or their respective heirs, executors, administrators ITO, Daman Ward, Daman Vs. Nareshbhai Ranchhodbhai Tandel / Page 5 of 8 and assigns or any other person or persons lawfully or equitably claiming through, under or in trust for them' 5. The above aspects clearly indicate that not only the substantial part of the payment of sale consideration has been received by the sellers during the financial year 2008-09, but the legal possession over the land sold also has been handed over by them during financial year 2008-09 and not in financial year 2007-08, as held by the Ld. CIT(A).”

On the other hand, the ld.Authorised Representative(AR) appearing on behalf of the assessee reiterated the same arguments as was raised by him before the ld.CIT(A). It was further submitted that the capital gains did not arise in this cases in A.Y. 2008-09 or in A.Y. 2009-10 as the capital gain assets was not transferred. However, it was also submitted that as the agreement for sale in respect of the land was executed on 26.02.2007 and an amount of Rs.1,50,00,000/- was received from the purchaser of the land i.e. M/s.Polycab Wires Pvt. Ltd., and possession was also handed over to the purchaser on 24.02.2007, thus, the question of taxability regarding the sale of land during A.Y. 2009-10 do not arise.

We have heard the Counsels of both the parties and we have also perused the material placed on record, judgments cited by the parties and the orders passed by the Revenue Authorities. From the facts of the present case, we noticed that the land in question was transferred on 24.07.2007 in performance to the agreement to the sale between the assessee [vendors assessee, and his brother] and M/s.Polycab Wires Pvt Ltd.[Purchaser]. According to the ld.Assessing Officer(AO), since the sale deed was registered before ITO, Daman Ward, Daman Vs. Nareshbhai Ranchhodbhai Tandel / Page 6 of 8 the Sub-Registrar, Daman 07.10.2008, consequent to conversion of agricultural land the non-agricultural on 01.04.2008 and therefore the transfer took place in A.Y. 2009-10. However, section 45(1) speaks about capital gain arising out of “Transfer of Capital”. Transfer presumes both the existence of the asset and of the transferee to whom it is transferred. According to section 2(47)(v) of the Act which deals with the transfer of capital assets states that: "transfer", in relation to a capital asset, includes, (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 537Tofthe Transfer of Property Act, 1882 (4 of 1882); or Hence, as per s. 2(47)(v) of the Act, the transfer of a capital asset, which is immoveable property, is complete on granting of possession pursuant to a written agreement and subject to the transferee being willing to fulfill its obligations. It is (w.e.f. 1-4-1988) by amending section 2(47) of the Act introducing sub-clause (v) that a transaction falling within the provisions of that section 53A has been treated as transfer in relation to capital asset. The Provision of sub - clause (v) of section 2(47) are substantive in nature and same are operative for and from assessment year 1988 -89 [ CIT v. Reliance International Corporation P. Ltd., (1995) 211 ITR 666,670 ( Del)]. " Transfer " is a word of the widest import and includes every means by which the property may be passed from one person to another. It include transfer by operation of law in invitem.

We are also of the view that section 53A of the Transfer of Property Act deals with the doctrine of part performance. It is an equitable doctrine of part performance in vogue in England and was partially imported into India by enacting section 53A. This section does not confer any title on the transferee in possession but merely imposes a statutory bar on the transferor. The doctrine of part ITO, Daman Ward, Daman Vs. Nareshbhai Ranchhodbhai Tandel / Page 7 of 8 performance is a defence. It is a shield not a sword. It is right to protect the transferee's possession any challenge to it by the transferor contrary to the terms of the contract. It is (w.e.f. 1-4-1988) by amending section 2(47) of the Act introducing sub-clause (v) that a transaction falling within the provisions of that section 53A has been treated as transfer in relation to capital asset.

It is worthwhile to mention here that these issues were already dealt with while deciding the appeal of assessee’s brother i.e. Shri Sureshbhai R. Tandel for A.Y. 2009-2010. While considering the entire facts and circumstances, we also hold that the agricultural land in question was a 'capital asset' within the meaning of provisions u/s.2(i4)(iii) of the Act and chargeable to tax u/s. 45 of the Act. ii. The transfer of agricultural land i.e. 'capital asset' was during the F.Y. 2007-08 relevant to A.Y. 2008-09 as envisaged in the provisions of sec. 2(47) r.w.s. 53A of Transfer of Property Act.

Considering the totality of the facts and circumstances and discussion made by us as above, we are of the view that the ld.CIT(A) has rightly came to the conclusion that capital gain has arisen in the year 2008-09 as the same is not taxable in this year, accordingly ld.AO was directed.

No new facts or circumstances have been brought before us to controvert or rebut the findings recorded by the ld.CIT(A), therefore, ITO, Daman Ward, Daman Vs. Nareshbhai Ranchhodbhai Tandel / Page 8 of 8 we find no reason to interfere with the order passed by the ld.CIT(A), accordingly grounds of appeal raised by the Revenue is dismissed.

In the result, appeal of the Revenue is dismissed.

Order pronounced in the open court on 11-02-2020.