J.K.Kashyap
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[ITA No.391/2007] Page 1 of 16 HIGH COURT OF DELHI : NEW DELHI %
Judgment reserved on: 25th February, 2008
Judgment delivered on: 11th March, 2008
J.K.Kashyap
.... Appellant Through: Mr.Krishan Mahajan with Mr.K.Sampath, Advocates.
Versus. A.C.I.T.
….Respondent Through: Mr.Sanjiv Sabharwal, Advocate.
Coram: HON'BLE MR. JUSTICE V.B. GUPTA HON'BLE MR. JUSTICE MADAN B. LOKUR
Whether the Reporters of local papers may be allowed to see the judgment?
Yes
To be referred to Reporter or not?
Yes
Whether the judgment should be reported in the Digest?
Yes
V.B. GUPTA, J.
The present appeal has been filed under Section 260-A of the Income Tax Act, 1961 (for short as „Act‟) 2008:DHC:907-DB
[ITA No.391/2007] Page 2 of 16 challenging the impugned order dated 21st July, 2006, passed by the Income Tax Appellate Tribunal (for short as „Tribunal‟), Delhi Bench (B) in ITA No.4970/DEL/1999 for the Assessment Year 1996-1997 vide which the Tribunal had reversed the order of Commissioner of Income Tax (Appeal) {for short as CIT(A)} in Appeal No.75/1999-2000 and upheld order dated 26th March, 1999, passed by the Assessing Officer holding the Asseessee is liable to pay capital gain tax under Section 45 of the Act read with Section 2(47) of the Act.
The Assessee, who is engaged in real estate business filed his return of income on 24th December, 1996 declaring an income of Rs.3,24,930 (rupees three lakh twenty four thousand nine hundred and thirty). During the course of assessment proceedings it was noted by the Assessing Officer that apart from the 2008:DHC:907-DB
[ITA No.391/2007] Page 3 of 16 profit declared by the Assessee in the real estate business for the previous year relevant to the assessment year under consideration the Assessee received a sum of Rs.2.34 crores in pursuance of an agreement signed by him at London on 26th September, 1995 for extinguishing his rights in the property – 13, Golf Links, New Delhi.
The sequence of events which are relevant for appreciating the facts of the present case have been mentioned in the assessment order as follows:- “The property under reference located at 13-Golf Links, New Delhi measuring 171 sq.yds was originally obtained by Dr.BC Guha since deceased vide deed of Perpetual lease dated 8.8.1995 from the President of India acting through the Land Development Office of the Govt. of India, thereafter a double storied structure was built upon this land after getting sanction from the Municipal authorities.
The said Dr.BC Guha transferred his rights in the said property in favour 2008:DHC:907-DB
[ITA No.391/2007] Page 4 of 16 of his wife Smt.Leela Guha, son Dr.PK Guha and daughter Smt.Santona Guha by way of gift deed dated 26.1.1958. The shares of Smt.Leela and Smt.Santona Guha were subsequently inherited by Smt.Ina Guha and Shri JK Guha on 8.2.1984 and 8.1.69 on the death of these two parties as per their separately executed wills, thus Dr.PK Guha, Smt. Ina Guha and Shri JK Guha became 1/3rd owner of the undivided 1/3rd undivided share in the said property. Subsequently the claim was amended to ½ share instead of 1/3rd Share.
During the pendency of these proceedings the assessee Shri JK Kashyap, moved an application under order 1 Rule 10 CPC seeking to be made party to the proceedings on the averments that Shri JK Guha had entered into an agreement with him to sell his 1/3rd share in the said property, the assessee also filed a suit for specific performance against Shri JK Guha being Civil Suit No.2312 of 1990, 2008:DHC:907-DB
[ITA No.391/2007] Page 5 of 16 Rs.25,00,000/- out of which an amount of Rs.3.7 lakhs had been already paid as part payment.
However, this claim of the assessee was denied by Shri JK Guha and subsequently he entered into an agreement with one Shri Singh Chauhan S/o Shri Shanker Singh Chauhan to sell his rights in the said property for a sum of Rs.One Crore. Shri Ram Singh Chauhan made some advances and payments and obtained some documents including General Power of Attorney, will and affidavit by virtue of which Shri JK Guha created rights and interest in the property in favour of Shri Ram Singh Chauhan.
During the pendency of these proceedings, the assessee along with one Mr.Parveen Nayyar entered into an agreement on 9.11.1993 to purchase the undivided 2/3rd share of Dr.PK Guha & his wife Mrs.Ina Guha for a total sale consideration of Rs.2 crores and an amount of Rs.20 lakhs was paid as earnest money. Necessary permission from the Appropriate Authority in form 2008:DHC:907-DB
[ITA No.391/2007] Page 6 of 16 37-I was duly obtained for purchase the said 2/3rd share for Rs.2 crores.
Thus it became evident that the three co-owners Dr.PK Guha, Smt.Ina Guha and Shri JK Guha had subsequently created rights and interest in the property in favour of the assessee Shri JK Kashyap and Shri Praveen Nayyar and Shri Ram Singh Chauhan.
The above six parties mutually agreed that in view of the litigation, engagement claims and counter claims between themselves it was not possible to give effect to their said agreement executed previously and therefore, subsequently on 26.9.95 an agreement
as mentioned earlier, between the following parties was signed (1) the vendors, Dr.PK Guha, Ina Guha & JK Guha and (ii) the assignors Shri JK Kashyap, Sh.Praveen Nauuar and Sh.Ram Singh Chauhan and (iii) the vendee FMI Investment Pvt.Ltd. It was signed in London, U.K. wherein the vendee M/s FMI Investment Pvt.Ltd, was to purchase the property at 13-Golf Links, New Delhi.
As per this agreement it was mutually decided that the 1st, 2nd and 3rd parties (vendors) shall sell their ownership and priprietory rights in the property and the 4th, 5th & 6th parties 2008:DHC:907-DB
[ITA No.391/2007] Page 7 of 16 (assignors) shall assign all and whatever rights they claim. All the previous agreements claims and counter claims in respect of the said property were to come to an end and resolved.
In consideration of this offer, representations & assurances, the 7th party (vendee) was to pay a sum of Rs. 10 crores, which was to be divided between 1st to 6th parties. Out of this amount, Rs.9 crores 45 lacs, was to be paid as part payment, on application for compromise/withdrawal being moved in the High Court and orders being passed thereon and all other necessary documents being executed. Out of this amount, the assessee, Shri J.K.Kashyap, was to receive a sum of Rs.2.24 crores. The Balance Rs.55 lakhs, which inlcuded the assessee's share of Rs.10 lacs, was to be paid on execution of the sale deed before the Sub-
