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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER VIKAS AWASTHY, JM :
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-3, Pune dated 30-09-2015 for the assessment year 2011-12.
The brief facts of the case as emanating from records are : The assessee filed his return of income for the impugned assessment year on
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08-12-2011 declaring total income of Rs.3,69,780/-. The case of the assessee was selected for scrutiny under CASS, accordingly statutory notice u/s. 143(2) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) was issued to the assessee on 11-09-2012. In scrutiny assessment proceedings, the Assessing Officer observed that the assessee has sold property admeasuring 1H 61R comprising in S. No. 22/1+3/3 at Pimple Nilakh to M/s. Bhoomi Enterprises for a consideration of Rs.20,12,500/-. Ostensibly, the aforesaid property was held jointly by 15 persons and the assessee was having 6.67% share in the said property. The above mentioned land was transferred in the name of M/s. Bhoomi Enterprises vide registered Sale deed dated 08-03-2011. The Assessing Officer invoked the provisions of section 50C and determined the value of property at Rs.2,71,57,500/- based on Government valuation for stamp purposes. The Assessing Officer computed assessee‟s share at Rs.82,11.000/-. After allowing the benefit of indexed cost of acquisition, the Assessing Officer determined Long Term Capital Gain of Rs.74,44,044/- as taxable in the hands of assessee.
Aggrieved by the assessment order dated 25-03-2014, the assessee filed appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) rejected the contentions of assessee and upheld the findings of Assessing Officer. Hence, the present appeal by the assessee.
Shri Nilesh Khandelwal appearing on behalf of the assessee submitted at the outset that the assessee has raised 5 grounds of appeal. On instruction from the assessee, he is not pressing ground Nos. 2, 3 and 4 of the appeal. The ground No. 5 is general in nature. Thus, the solitary ground for adjudication is with respect to addition of Rs.74,44,044/- on
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account of Long Term Capital Gain determined after invoking the provisions of section 50C of the Act.
3.1 The ld. AR submitted that the assessee is a joint owner of land comprising in S. No. 22/1+3/3 at Pimple Nilakh admeasuring 1H 61R entered into agreement to sale with M/s. Bhoomi Enterprises on 02-10- 1989 for a consideration of Rs.12,50,000/-. At the time of execution of sale agreement (Sathekhat) on 02-10-1989 Rs.10,000/- was paid by the purchaser by way of cheque drawn on Bank of India, Pashan in the name of assessee. A Visar Pavti dated 02-10-1989 was executed. An irrevocable Power of Attorney was also executed by the assessee along with other 8 co- owners in favour of Shri Vinayak Mahadev Nimhan, Proprietor of M/s. Bhoomi Enterprises. The Power of Attorney is at pages 26 to 38 of the paper book. The balance payment of Rs.12,40,000/- was made by way of cheque/cash spread over the period from 1989 to 1995. The registered sale deed was executed in favour of purchaser of land on 08-03-2011.
3.2 The ld. AR contended that by the time final sale deed was executed the price of land skyrocketed. As additional consideration, M/s. Bhoomi Enterprises sold part of land back to the assessee. M/s. Bhoomi Enterprises sold back 45R land from the total share of assessee 60R without any monetary consideration to the assessee. The ld. AR submitted that the payment schedule and the fact that 45R land was sold back to the assessee has been recorded in the registered sale deed dated 08-03-2011. The assessee offered Capital Gain on the basis of date of execution of agreement to sale i.e. 02-10-1989. The ld. AR pointed that in para 6 of the registered sale deed there is specific mention of Visar Pavti/Agreement executed on 02-10-1989 and the total value of consideration agreed between the parties. The authorities below have erred in computing Long
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Term Capital Gain on the date of execution of registered sale deed. It is an undisputed fact that entire transaction was completed in 1995. However, there was delay in execution of sale deed. The possession of land was handed over to M/s. Bhoomi Enterprises at the time of execution of Visar Pavti/Sale Agreement and irrevocable power of attorney in the year 1989 itself. The ld. AR submitted that Allahabad Bench of the Tribunal in the case of Hari Mohan Das Tandon (HUF) Vs. Principal Commissioner of Income Tax reported as 91 taxmann.com 199 has held that where the agreement to sell has been executed and the registered sale deed is executed at later date, the date of agreement to sell has to be considered for computing Long Term Capital Gain.
On the other hand Shri Sanjeev Ghei representing the Department vehemently defended the order of Commissioner of Income Tax (Appeals). The ld. DR submitted that the assessee has failed to place on record agreement dated 02-10-1989. The ld. DR further submitted that even if the said agreement is admitted, the terms and conditions of agreement were modified and a fresh sale deed dated 08-03-2011 was executed. According to sale deed part of land sold by the vendors are purchased back by them. Therefore, the registered sale deed dated 08-03-2011 is the actual date of sale and not the agreement to sell dated 02-10-1989.
We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The assessee in appeal has raised 5 grounds. The ld. AR stated at the Bar that he is not pressing ground Nos. 2, 3 and 4 of the appeal. Accordingly, the same are dismissed as not pressed.
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The solitary ground of appeal before us for adjudication is ground No. 1, which relates to addition of Rs.74,44,044/- on account of Long Term Capital Gain arising from sale of land. A perusal of documents on record show that the assessee and other co-owners purportedly entered into agreement to sell land comprising in S. No. 22/1+3/3 at Pimple Nilakh admeasuring 1H 61R. At the time of execution of said sale agreement, irrevocable power of attorney was also executed in favour of Vinayak Mahadev Nimhan. However, a registered sale deed in respect of aforesaid land was executed in favour of M/s. Bhoomi Enterprises a proprietary concern of Shri Vinayak Mahadev Nimhan on 08-03-2011. A perusal of registered sale deed shows that there is mention of Visar Pavti/Agreement dated 02-10-1989 and the sale consideration agreed between the vendors and the purchaser at Rs.12,50,000/-. The sale deed also mention the payment schedule of consideration. The sale consideration was paid by M/s. Bhoomi Enterprises to the vendors over the period of 6 years starting from 1989 i.e. the date of execution of Visar Pavti/Agreement to sell in 1995. The ld. AR has placed on record irrevocable power of attorney dated 02-10-1989 by 9 persons including the assessee in favour of Vinayak Mahadev Nimhan. Though, the copy of Visar Pavti/Agreement dated 02- 10-1989 has not been furnished by the assessee, however, the reference of payment schedule of consideration and the execution of Visar Pavti on 02- 10-1989 in registered sale deed executed in 2011 and the irrevocable power of attorney indicates that in 1989 there was agreement between the assessee and other co-owners of land on one side and Vinayak Mahadev Nimhan, Prop. M/s. Bhoomi Enterprises on the other with respect to the land comprising in S. No. 22/1+3/3 at Pimple Nilakh admeasuring 1H 61R.
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In the present case the assessee in his return of income filed on 08-12-2011 for the impugned assessment year declared total income of Rs.3,69,780/-. The assessee in return of income had not declared any income under the head „Capital Gains‟. The case of assessee was selected under CASS as the assessee had executed sale deed along with other co- owners in respect of aforementioned land on 09-03-2011 i.e. in the period relevant to assessment year under appeal. The Assessing Officer involved the provisions of section 50C and brought to tax capital gain on sale of land in current assessment year on the basis of execution of Registered Sale Deed. The short contention of the assessee is that for determining Long Term Capital Gain the sale price of land should be considered as per sale agreement executed in 1989 and not the fair market value on the date of execution of Registered Sale Deed.
In the present case we observe that the execution of agreement to sale in 1989 has been established. The entire consideration was also received by the assessee and other co-owners in 1995. It was mere execution and registration of sale deed in 2011. Execution of sale deed of part of land purchased by vendee back to assessee (vendor) is a separate transaction and thus cannot be clubbed with the sale of agreement executed in 1989.
The Hon‟ble Supreme Court of India in the case of Sanjeev Lal Vs. Commissioner of Income Tax reported as 365 ITR 389 while deciding the issue of assessee‟s eligibility for claiming benefit of exemption u/s. 54 had occasion to consider the issue of date of transfer of capital asset i.e. whether it is date of Agreement to sell or the date of execution of registered Sale Deed. The Hon‟ble Apex Court held as under : “20. The question to be considered by this Court is whether the agreement to sell which had been executed on 27th December, 2002 can be considered as a date on
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which the property i.e. the residential house had been transferred. In normal circumstances by executing an agreement to sell in respect of an immovable property, a right in personam is created in favour of the transferee/vendee. When such a right is created in favour of the vendee, the vendor is restrained from selling the said property to someone else because the vendee, in whose favour the right in personam is created, has a legitimate right to enforce specific performance of the agreement, if the vendor, for some reason is not executing the sale deed. Thus, by virtue of the agreement to sell some right is given by the vendor to the vendee. The question is whether the entire property can be said to have been sold at the time when an agreement to sell is entered into. In normal circumstances, the aforestated question has to be answered in the negative. However, looking at the provisions of Section 2(47) of the Act, which defines the word "transfer" in relation to a capital asset, one can say that if a right in the property is extinguished by execution of an agreement to sell, the capital asset can be deemed to have been transferred. Relevant portion of Section 2(47), defining the word "transfer" is as under: '2(47) "transfer", in relation to a capital asset, includes,- (i)** ** ** (ii) the extinguishment of any rights therein; or. . . . . . . . . . . . .' 21. Now in the light of definition of "transfer" as defined under Section 2(47) of the Act, it is clear that when any right in respect of any capital asset is extinguished and that right is transferred to someone, it would amount to transfer of a capital asset. In the light of the aforestated definition, let us look at the facts of the present case where an agreement to sell in respect of a capital asset had been executed on 27th December, 2002 for transferring the residential house/original asset in question and a sum of Rs. 15 lakhs had been received by way of earnest money. It is also not in dispute that the sale deed could not be executed because of pendency of the litigation between Shri Ranjeet Lal on one hand and the appellants on the other as Shri Ranjeet Lal had challenged the validity of the Will under which the property had devolved upon the appellants. By virtue of an order passed in the suit filed by Shri Ranjeet Lal, the appellants were restrained from dealing with the said residential house and a law-abiding citizen cannot be expected to violate the direction of a court by executing a sale deed in favour of a third party while being restrained from doing so. In the circumstances, for a justifiable reason, which was not within the control of the appellants, they could not execute the sale deed and the sale deed had been registered only on 24th September, 2004, after the suit filed by Shri Ranjeet Lal, challenging the validity of the Will, had been dismissed. In the light of the aforestated facts and in view of the definition of the term "transfer", one can come to a conclusion that some right in respect of the capital asset in question had been transferred in favour of the vendee and therefore, some right which the appellants had, in respect of the capital asset in question, had been extinguished because after execution of the agreement to sell it was not open to the appellants to sell the property to someone else in accordance with law. A right in personam had been created in favour of the vendee, in whose favour the agreement to sell had been executed and who had also paid Rs.15 lakhs by way of earnest money. No doubt, such contractual right can be surrendered or neutralized by the parties through subsequent contract or conduct leading to no transfer of the property to the proposed vendee but that is not the case at hand.”
The Hon‟ble Court thus held that the date of transfer of asset should be reckoned from the date of execution of Agreement to sell.
The Allahabad Bench of the Tribunal in the case of Hari Mohan Das Tandon (HUF) Vs. Principal Commissioner of Income Tax (supra) in a case where the agreement to sale was executed in September, 1966, earnest
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money was received through cheque, execution of agreement to sale was established but due to litigation registered Sale Deed was executed in 2010 held that in peculiar facts of the case, for calculating Long Term Capital Gain sale deed would be considered to have been executed in September, 1966 i.e. the date of execution of Agreement to sell.
Thus, taking into consideration the facts of the case and decisions discussed above, we hold that in the instant case for determining Long Term Capital Gain the date of execution of Sale agreement would be relevant and not the date of execution of registered sale deed. Resultantly, the ground No. 1 of the appeal is allowed.
In the result, appeal of assessee is partly allowed.
Order pronounced on Friday, the 09th day of November, 2018.
Sd/- Sd/- (डी. करुणाकरा राव/D. Karunakara Rao) (ववकास अवस्थी / Vikas Awasthy) ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 09th November, 2018 RK आदेश की प्रयिलऱवऩ अग्रेवषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. आयकर आयुक्त (अऩीऱ) / The CIT(A)-3, Pune 3. 4. The Pr. C.I.T. – 2, Pune ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, “ए” बेंच, 5. ऩुणे / DR, ITAT, “A” Bench, Pune. गाडड फ़ाइऱ / Guard File. 6. //सत्यावऩत प्रयत // True Copy// आदेशानुसार / BY ORDER,
यनजी सधचव / Private Secretary, आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune