HEMA DALJIT SINGH CHADHA,MUMBAI vs. ITO 23(1)(5), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “H”, MUMBAI BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER ITA No. 887/Mum/2016 (A.Y. 2011-12) Smt. Hema Daljit Singh Chadha, Flat No. 204, Grant Canyon, Opp. HDFC Bank, Pali Hill, Bandra West, Mumbai-400050. PAN: ACXPC0971B ...... Appellant Vs. ITO-23(1)(5), Room No. 114, Matru Mandir, 1st Floor, Tardeo Road, Mumbai-400007 ..... Respondent Appellant by : None Respondent by : Sh. Tejinder Pal Singh, Sr. DR Date of hearing : 14/07/2022 Date of pronouncement : 10/10/2022 ORDER PER GAGAN GOYAL, A.M:

This appeal by the assessee is directed against the orders of Commissioner of Income Tax (Appeals)-32, Mumbai [hereinafter referred to as (‘CIT(A))] dated 16.12.2015 for the Assessment Year (AY) 2011-12. The assessee has raised the following grounds of appeal:

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“1. Whether on the facts and in the circumstances of the case, the Ld. CII-4A) erred in holding that provisions of section 2(47)(1) are applicable in my case ignoring the fact that the period of holding the asset was 37 months as the final payment of the flat was made on 26.05.2011 and handed over possession of the flat on 06.06.2011, and the exemption claimed by the appellant u/s 54 cannot be denied." 2. "Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in treating the profit on sale of flat being flat No. 702B, 7 Floor, Acquarius Towers, Banra. Mumbai-400050 as Short Term Capital Gains instead of Long Term Capital Gains" The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the AO be restored. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.” 2. Brief facts of the case are that the assessee filed her return of income at Rs 5,18,570/- u/s 139(4) on 18th february2013. The case was selected for scrutiny under CASS. Assessee is deriving income from business, house property and other sources. During the year under consideration as per AIR information the assessee has sold an immovable property by agreement dated 28-02-2011 for a consideration of Rs 83,00,000/-. But capital gains arose against the said transaction is not reflected in her return of income. 3. During the assessment proceedings assessee was asked to file the details of purchase agreement of the property sold on 28-02-2011. Copy of purchase agreement AO obtained from ITO-16(2)(1) where the assessee was assessable earlier. 4. On perusal of the purchase agreement as per registration document annexed to the said agreement assessee purchased the flat on 05-07-2008and the said flat was sold as per AIR information on 28-02-2011. Hence in view of AO the capital asset was held by the assessee only for a period of 31 months i.e., to be

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treated as short term capital gain. The assessee was asked as to why short-term capital gain arose from the said transaction shouldn’t be taxed in AY 2011-12. Assessee submitted his reply, but AO was not convinced and treating the transaction as short-term capital gain amounting to Rs 55,70,880/- added to the income of the assessee. 5. Being aggrieved with the order of AO assessee preferred an appeal before the Ld.CIT(A)-32 (Mumbai). Ld.CIT(A) also confirmed the view of AO by holding his decision as under: “5. DECISION: I have carefully considered the matter. I find that the facts are not in dispute. The appellant is not denying that the flat was sold vide registered sale deed dated 28th Feb 2011 for a consideration of Rs. 83,00,000. She is also not denying that the flat was purchased vide registered agreement dated 5th July 2008 for a sum of Rs. 27,29,120 inclusive of stamp duty and registration charges. However, the appellant seeks to import the provisions of part performance of the Transfer of Property Act into this transaction by virtue of it being mentioned in the definition of transfer in sec 2(47). While doing so, the appellant is ignoring cl (i) of sec 2(47). This clause specifically states that transfer in relation to a capital asset includes "sale". The appellant is also overlooking the fact that there are instruments of purchase and sale of the flat and that these deeds have been registered and stamp duty and registration charges paid towards them on 5th July 2008 and 28th Feb 2011. Now admittedly there has been an instrument of sale on both sides of the transaction. The intervening period between the instrument of purchase and the instrument of sale is admittedly less than 36 months. "Sale" is recognized when a sale deed is signed and registered. By this act, the transferor ceases to have any rights whatsoever in the property. In fact the Transfer of Property Act itself recognizes that the title would pass to the transferee only when the sale deed or instrument is registered. Admittedly this is so in the instant case. By registering a purchase deed on 5 July 2008, the appellant came to be the legal owner of the property holding all rights therein. Once again by registering the sale deed on 28th Feb 2011, the appellant ceased to be the legal owner of the flat. To my mind the provisions of sec 2(47)(i) clearly apply to the facts of the case. "sale" as legally understood takes place when an instrument is signed and registered. In which situation, the period of holding is less than 36 months. The appellant is also overlooking the wordings of see

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2(47). After each clause the word "or" is used. This clearly means that all the clauses of sec 2(47) have to be read separately and independently. To my mind the appellant is stretching it too far by importing part performance into this transaction. In effect it is the case of the appellant that part performance as defined in TOPA should override the provisions of sec 2(47) of the IT Act. I am therefore of the opinion that the appellant has purchased the flat on 5 July 2008 when the purchase deed was registered and sold the same on 28th Feb 2011 when the sale deed was registered. Be that as it may, let me consider the argument of the appellant on part performance. 6. The appellant claims that sec 2(47)(v) would apply to her because she has taken possession of the flat in May 2008 and parted possession in June 2011. At this stage, I find that the appellant has been able to produce before me a possession letter for the same. The appellant has paid a sum of Rs 51,000 only out of the total agreed consideration of Rs 25,00,000 in May 2008. On the strength of this, she has taken possession of the flat. However, no evidence of handing over possession in June 2011 as claimed by her is produced before me. Even so, it is important to examine the contents of the sale deed dated 28th Feb 2011. On page 3 of the deed the reason for the payment being delayed beyond Feb 2011 is clearly mentioned. The purchaser has paid Rs 1,00,000 to the appellant on 7th Feb 2011. Now going by the logic of the appellant, if she has part performed her part of the contract at the time of purchase by paying Rs 51,000 out of Rs 25,00,000 in May 2008, then she has also part performed her part of the contract on 7th Feb 2011 on receipt of Rs 1,00,000 out of Rs 83,00,000. The appellant would have me ignore this part of both the agreements. With respect, she cannot have it both ways. If part performance is to be argued then we have to compare similars i.e. to say dates of payments. This is because part performance implies that if any act is done in furtherance of a contract including payment, then the contract is part performed. In this case, admittedly, the payment is partly made in May 2008 and partly received in Feb 2011. Thus, the purchase transaction is part performed in May 2008 while the sale transaction is part performed in Feb 2011. Therefore, even by the appellants own argument, the purchase deed is part performed in May 2008 while the sale deed is part performed in Feb 2001. The period of holding remains below 36 months. To my mind, this puts paid the argument of the appellant on part performance. Going further it is interesting to note the reasons stated in page 3 of the sale deed dated 28 Feb 2011. The appellant has an outstanding loan against the property sold, while the transferee has got a loan sanction in Feb 2011. The transferee's loan sanctioning bank has to pay the appellant's bank directly the sum of loan outstanding. In any

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case, even if for a moment the appellant's argument about part performance is accepted, I have demonstrated that even then the period of holding is below 36 months. I have gone through the case laws cited by the appellant, and find that they are on different facts as the facts of the instant case are peculiar. 7. The appellant would have me disregard the dates of the registered purchase and sale deeds, she would also have me disregard the dates of part performance by virtue of having paid and received part consideration. This to my mind is stretching things too far. I am afraid I cannot agree with the appellant here. I therefore hold that the case of the appellant is covered by sec 2(47)(1) and therefore the period of holding is below 36 months. The AO has rightly assessed the capital gains as STCG. The AO has also rightly assessed the capital gains in AY 2011-12 as the transfer has taken place in PY 2010-11 relevant to AY 2011-12. In any case, the appellant's own argument of part performance goes against her, as I have discussed in para 6 above. In the circumstances, both grounds of appeal are dismissed.” 6. We have gone through the order of AO, Ld.CIT(A) and considered the submissions of the assessee in the light of law applicable and facts of the case. The following facts relevant to the issue under consideration has emerged : I. Assessee was agreed to purchase the flat at Rs 25,00,000/- vide MOU dated 15-05-2008. On the same day assessee paid Rs 51,000/- and possession taken on the same day. The appellant filed a copy of the possession letter before the authorities below. II. The appellant sold the flat vide agreement dated 20-02-2011 for a consideration of Rs 83,00,000/-. This agreement was registered and as per this agreement the purchaser has paid Rs 1,00,000/- to the assessee on 07-02-2011 and balance amount of Rs 82,00,000/- was made to the assessee on 26-05-2011 and in turn assessee handed over the possession of the flat on 06-06-2011.

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["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 ii. 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 (4 of 1882) ; or vi. any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative 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. Explanation 1].—For the purposes of sub-clauses (v) and (vi), "immovable property" shall 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 to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India;] [53A. Part performance.—Where any person contracts to transfer for consideration any immoveable 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

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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 2[***] 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.” 8. We have analysed the provisions of section 2(47) of the act and sec 53A of transfer of property Act, 1882. The basic crux of our analysis lies with word possession. The specific provision relevant to transaction of transfer of immovable property is provided in sec 2(47)(v). Authorities below focused on the term part performance of contract entered into by the assessee at the time of purchase and sales. Whereas part performance is one of the ingredients whereas possession is an ultimate ingredient to be achieved for the purposes of transfer as defined in sec 2(47)(v) and sec 53A of transfer of property Act, 1882. 9. Ld.CIT(A) relied on sec 2(47)(i) and given overriding effect to the provisions of sec 53A of Transfer of Property Act, 1882. Whereas the transaction of the assessee falls in a specific section 2(47)(v), which is in nowhere contradicts sec 2(47)(v) rather both the sections are in harmony to each other. We have gone through the judicial pronouncement as relied upon the assessee as under: “f) The appellant drew my attention to sec 2(47)(v) which states that transfer in this case would be defined as per the part performance mentioned in sec 2(47)(v), i.e to say that the date of both purchase and sale should be reckoned from the date

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of part performance. The appellant relied on the following case laws which she claims to be in her favour. Bombay High Court in the case of Chaturbhuj Das Kapadia (2003) 180 CTR 107 (Bom) ITAT Ahmedabad D Bench in Hasmukhbhai M Patel (2011) 46 SOT 419 (Ahd) ITAT Chennai B Bench in R Kalanidhi (2009) 122 TTJ 405 (Chennai) ITAT Kolkatta A Bench in Chanchal Kumar Sircar (2012) 50 SOT 289 (Kol) ITAT Mumbai A Bench in Gripwell Industries Ltd (2006) 102 TTJ 441 (Mum) ITAT Pune Bench in Dyaneshwar Mulik (2005) 98 TTJ 179 (Pune). 10. In view of the above we are of categorical view that assessee transaction of purchase for the purposes of sec 2(47)(v) i.e., transfer in her favour completed on 05-07-2008. On the other hand, transaction of sale i.e. transfer for the purposes of sec 2(47)(v), transfer in favour of said buyer completed on 06-06-2011, the date on which assessee handed over the possession of the flat. 11. In the light of above discussion, we found that this transaction of transfer of property is eligible under the category of long term and liability of capital gain towards assessee arises in AY 2012-13 subject to any exemption available to assessee. We hereby direct the AO to treat the transaction as long term in AY 2012-13 and also provide consequential relief to the assessee, if due to her. 12. In the result, appeal filed by the assessee is fully allowed. Order pronounced in the open court on 10th day of October, 2022.

Sd/- Sd/- (KULDIP SINGH) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, िदनांक/Dated: 10/10/2022 SK, Sr.PS

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Copy of the Order forwarded to: 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent. 3. आयकर आयु�(अ)/ The CIT(A)- 4. आयकर आयु� CIT 5. िवभागीय �ितिनिध, आय.अपी.अिध., मुबंई/DR, ITAT, Mumbai 6. गाड� फाइल/Guard file. BY ORDER, //True Copy// (Dy. /Asstt. Registrar) ITAT, Mumbai