SHRI AJAIB SINGH,BATHINDA vs. THE INCOME TAX OFFICER,, BATHINDA

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (SMC) BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER I.T.A. No. 78/Asr/2015 Assessment Year: 2007-08

Ajaib Singh, Vill.-Gill Patti, vs. Income Tax Officer, Goniana Road, Ward 2(1), Bathinda Vill.- Gill Patti [PAN: AFLPS 1861H] (Appellant) (Respondent)

Appellant by : Sh. P. N. Arora & P. K. Singla (Advs.) Respondent by: Sh. Charan Dass (D.R.) Date of Hearing: 03.04.2019 Date of Pronouncement: 01.07.2019

ORDER Per Sanjay Arora, AM: This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals), Bathinda ('CIT(A)' for short) dated 17.12.2014, dismissing the assessee’s appeal contesting his assessment u/s. 143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) dated 15.12.2009 for the Assessment Year (AY) 2007-08.

2 ITA No. 78/Asr/2015 (AY 2007-08) Ajaib Singh v. ITO his share (148 Marlas) in the said 232 Marlas. The subject land was itself a part of 75 Kanals of land being sold to PACL, the balance belonging to the assessee’s cousins. Sale deed in pursuance to the agreement dated 08/8/2006 was executed on 04.12.2006 in respect of 86 Marlas of land, adjusting the entire amount received in advance vide the said agreement. Another agreement to sell (ATS) was entered by the three co-owners, i.e., the assessee and his two brothers, with PACL on 04.12.2006 for the balance 146 (232 – 86) Marlas of land (at the same consideration of Rs.1 crore per acre), receiving advance for 50%. The assessee’s share therein was at Rs.19,37,500/-, i.e., relatable to his share of 62 Marlas in the unsold land, i.e., not subject to the sale deed. The reason for the same, as stated, is that the land was under dispute, i.e., between the assessee and his two brothers on one hand, and their cousins on the other. The assessee returned capital gain on 86 Marlas of land sold vide sale deed dated 04.12.2006 per his return for relevant year filed on 27/6/2007. It is the non-returning of the capital gain on the balance 62 Marlas, agreed to be sold on 04.12.2006, that is the subject matter of dispute between the assessee and the Revenue. While the assessee claims non-accrual of capital gain in-as-much as land was under ‘dispute’, the Revenue contends it to have arisen, i.e., irrespective of the fact that the assessee has not received the balance consideration, stated to be so even to date.

3 ITA No. 78/Asr/2015 (AY 2007-08) Ajaib Singh v. ITO rebutted this on the basis of the decision in CIT v. Balbir Singh Maini [2017] 398 ITR 531 (SC), wherein it stands clarified that section 53A of the Transfer of the Property Act, 1882 and, thus, section 2(47)(v) of the Act would not get attracted after the coming into effect of the Registration and Other Related Laws (Amendment) Act, 2001, where the relevant agreement is not registered under the Registration Act, 1908. The argument is no doubt valid. It would however not be of much assistance to the assessee as clause (v) of s. 2(47) provides one of the modes of transfer as defined u/s. 2(47). To effectively meet the charge of transfer, it, therefore, ought not to fall under any of the clauses of sec. 2(47), for which the attention of the ld. counsel for the assessee, Sh. Arora, was during hearing drawn to s. 2(47)(vi), which reads as under: ‘Definitions. 2. In this Act, unless the context otherwise requires, - (47) “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; (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.’

In Balbir Singh Maini (supra) the Apex Court also considered, though did not find clause (vi) attracted as the possession under the Joint Development Agreement (JDA) to the stated transferee was in his capacity as a developer, and not in his own right. In the present case, on the other hand, the delivery of possession to PACL, the transferee, is in its’ capacity as the buyer, the

4 ITA No. 78/Asr/2015 (AY 2007-08) Ajaib Singh v. ITO purchaser of the subject property. The agreement substantively transfers the property in the subject land to PACL.

4.2 The assessee’s next argument is that the sale is conditional, i.e., subject to the resolution of the dispute by the Court by 04.12.2007, failing which the date for registration would stand extended by the parties. The English translation of the ATS dated 04.12.2006 has been provided (PB pg. 13A), though the same is not, as provided per the Rules, certified by an authorized person as true copy of the vernacular. The same was perused during hearing. It notes of a court case in respect of the division of the subject land and, further, that the sale deed could be executed at any time up to 04.12.2007. The said date is thus the outer time limit by which the parties are to get the sale deed registered. If not, the purchaser has the right to get it so through the court. Further, the time limit could be extended only with the mutual consent of the parties. How could, then, the sale be regarded as conditional? The agreement nowhere makes the sale deed as conditional to the court’s decision. How could, rather, if the title was not clear, the assessee (and his brothers) enter into an ATS in the first place? The deferring of the sale deed by the parties, i.e., on their own violation, would not make the transfer conditional to the execution of the sale deed. Upon this being observed by the Bench during hearing, Sh. Arora would submit that the matter being sub judice, the sale deed could not in fact be executed. On the basis of the interim order of the Court (SDM) dated 25.11.2014, the Tehsildar made a detailed map of the area vide his order dated 24.12.2014 (PB pgs. 19-21). The certified copy of the order dated 25.11.2014 was obtained a few days after the passing of the impugned order, for which in fact the ld. CIT(A) was requested to, in anticipation, defer his order. In fact, the matter has since been resolved and the assessee is found to be the owner of only 20 Marlas of land out of the total 146 Marlas of land subject to the sale agreement, i.e., instead of 62 Marlas ostensibly sold by him (toward which Rs.19.375 lacs stand received by him).

5 ITA No. 78/Asr/2015 (AY 2007-08) Ajaib Singh v. ITO Toward this, he would refer to the relevant orders, which he pleaded being admitted as additional evidences. On being questioned as to how could it be that the assessee, who claimed his share at 62 Marlas, was actually found to be the owner of only 20 Marlas of land, Sh. Arora would explain that the assessee had in fact been allotted – not in exchange or in lieu of his share in the subject land, additional land at another place, which is not the subject matter of sale. This was in resolution of the dispute (between the assessee and his brothers with their cousins) with regard to the landholding of the family. On another query about the date of the transfer of the 20 Marlas, found to be the assessee’s property in-as-much as the court’s decision would operate retrospectively, the ld. counsel would agree that the land, to that extent, be regarded as transferred during the relevant year, i.e., on 04.12.2006, adjusting the advance to the extent of its’ sale consideration, i.e., Rs.12.50 lacs, so that the balance Rs.6,87,500 would stand to be refunded to PACL.

4.3 There is merit in the argument that the agreement to sell (ATS) could not be regarded as a transfer if the sale deed could not be, on its basis, executed – despite the absence of a recital to that effect therein, till the resolution of the dispute by the court. This is as the possession allowed by the assessee, assuming so, to the vendee (PACL), has to be not as a trustee but in his own right. In fact, Sh. Arora would submit that, though stated (in the ATS), actual, physical possession was not delivered, referring to an instance of a sale deed (out of the subject land) having been executed by one of the co-owners. Now, this is, again, surprising. While, where true, it does demonstrate that possession was not actually allowed (to PACL). At the same time, if sale deed could not be executed qua the land under reference, its’ ownership being disputed, till the resolution of the dispute, how could a sale deed qua a part of the said land be executed prior thereto? It may be further clarified that the time allowed under the Agreement for the parties to execute the sale deed (i.e., by 04/12/2007) does not

6 ITA No. 78/Asr/2015 (AY 2007-08) Ajaib Singh v. ITO make the sale conditional, being only a term of the contract, to facilitate the maturity of the sale. This is akin to a sale on credit, allowing the buyer (of goods or services) time to make the payment for the same, even as the delivery of possession of goods or of services is immediate.

4.4 The matter, accordingly, is restored back to the file of the assessing authority for factual determination. As explained by the Apex Court in CGT v. Abdul Karim Mohd. [1991] 191 ITR 317 (SC), speaking in the context of a gift deed, that the recitals in the deed of gift are not conclusive to determine the nature of the validity of the gift. It clarified that it is the conduct and the entirety of the circumstances that are to be taken into account. I make it abundantly clear that the transfer u/s. 2(47) in the instant case would, irrespective of actual date of the sale deed, or even the non-execution thereof, arise on the basis of the ATS dated 04/12/2006 if the sale deed could be executed by the assessee on that date upon the receipt of the balance consideration. If not, as where there is a subsisting dispute qua the ownership of the subject land, irrespective of the recital/s in the ATS, transfer u/s. 2(47) cannot be said to have taken place on that date, but only on the date on which this condition, even if pursuant to the said agreement, is satisfied. This is as, to that extent, the said agreement is conditional. It is for this reason that, admittedly, transfer of 20 Marlas (assessee’ s share) of land has taken place on 04/12/2006, so that the issue surviving is only qua the balance 42 Marlas of land. The ownership of the subject land being only to the extent of the 20 Marlas, where so, proves the assessee’s point. It may, however, be clarified that the land ‘allowed’ to the assessee, which is admittedly so (refer para 4.2), ought not to be, as indeed contended, in exchange or in lieu of the right of the assessee in the balance 42 Marlas (i.e., 62 – 20) of land. This is as, where so, the same is only against the release or relinquishment by the assessee of his right in the subject land to that extent (42 M), i.e., in favour of the person/s ‘allowing’ him the said land. That the transferee is, thus,

7 ITA No. 78/Asr/2015 (AY 2007-08) Ajaib Singh v. ITO this person/s, as against PACL, is of no moment. An exception to this being a transfer, though, would be where it is in pursuance of a family settlement; the release of the right in one capital asset in lieu of another being excepted u/s. 47(i). This is being stated as a matter of abundant caution and it does not appear, as contended, that the two transactions are related, only in which case the reference to the new ‘allowed’ land becomes relevant. I say so as the subject land is, to that extent, in dispute, with the matter being sub judice. The answer to the question posed at para 4.3 supra, it may be noted, would be relevant in deciding this issue and, in fact, would stand to be answered upon the adjudication by the AO. A confirmation from PACL, the transferee, in the matter may be also useful in deciding the matter, and it is in fact surprising that no such was called for by the Revenue, or indeed furnished by the assessee himself. It may though be again clarified that in case of any inconsistency, the AO shall allow primacy to the conduct of the parties, particularly considering that the dispute with regard to the ownership of land; the same being sub judice, cannot be doubted. The assessee is toward this entitled to rely on the court orders claiming the ownership of the land forming part of ATS dated 04/12/2006. The AO shall take the same on record, and cause such verification as he may deem fit and proper under the circumstances, or necessary, to arrive at his satisfaction qua the fulfillment of the condition of transfer as afore-stated. The assessee is bound to cooperate in the said, set aside proceedings, offering explanation/s qua the factual or legal aspects of the matter, if any, as may be raised by the assessing authority. The AO, needless to add, shall observe the time limit as prescribed u/s. 153, i.e., w.e.f. 01/6/2016.

4.5 I decide accordingly.

8 ITA No. 78/Asr/2015 (AY 2007-08) Ajaib Singh v. ITO 5. In the result, the assessee’s appeal is allowed for statistical purposes. Order pronounced in the open court on July 01, 2019 Sd/- (Sanjay Arora) Accountant Member Date: 01.07.2019 /GP/Sr. Ps. Copy of the order forwarded to: (1) The Appellant: Ajaib Singh, Vill.- Gill Patti, Goniana Road, Vill.- Gill Patti (2) The Respondent: Income Tax Officer, Ward 2(1), Bathinda (3) The CIT(Appeals), Bathinda (4) The CIT concerned (5) The Sr. DR, I.T.A.T