MRS MRS. ASHA KANODIA,NEW DELHI vs. ITO, NEW DELHI

O R D E R. PER I. C. SUDHIR, J. M. : The assessee has impugned first appellate order on the following grounds :-

“ That on the facts and in the circumstances of the case and in law the Ld. CIT (Appeals) erred in confirming the order of Assessing Officer by holding :

2 I. T. Appeal No. 34/Del/2016 Assessment Year : 2012–2013 i) the transfer of 50% share in property situated at E-102, East of Kailash, New Delhi by the Appellant for a consideration of Rs.3 crores was not assessable as long term capital gain under the head ‘capital gain’; ii) the claim by the Appellant of investment of the long term capital gain arising out of the sale of above property in the purchase of 1 /3rd share of property situated at 212, Kailash Hills, New Delhi for Rs.2,90,00,000/- u/s. 54 of the Act was not allowable. iii) rejecting the Appellant's claim of assessment under the head ‘capital gain’ in respect of transfer of immovable property within the meaning of Sec. 2(47) of the Act of the long term capital assets on the basis of superfluous enquiry carried out behind the back of the Appellant, relying on irrelevant considerations and ignoring crucial pieces of evidence on record in support of income; iv) the amount of Rs.3 crores received as consideration on transfer of property situated at E-102, East of Kailash, New Delhi by the Appellant was assessable u/s. 56 of the Act. ”

3 I. T. Appeal No. 34/Del/2016 Assessment Year : 2012–2013

3.1 At the outset of hearing the ld. AR pointed out that the issue raised is fully covered in favour of the assessee in the case of the co-owner, Rajendra Kanodia & Sons (HUF) assessment year

4 I. T. Appeal No. 34/Del/2016 Assessment Year : 2012–2013 2012-13, who had sold 50% of their share in the same property i.e. E-102, East of Kailash, New Delhi, wherein the Assessing Officer in the assessment framed under section 143(3) of the Act has accepted the claimed exemption under section 54 of the Act under similar facts. He drew our attention to page No. 55 of the paper book where a copy of the said assessment order has been made available. He submitted that the assessee had entered into an agreement to sell dated 25.03.2011 with Pushpanjali Investrade Pvt. Ltd. to sell her 50% share in the property situated at E-102, East of Kailash, New Delhi, for a consideration of Rs.3 crores, subject to execution of sale deed on receiving full and final payment from them. Out of the above sale consideration of Rs.3 crores, Rs.2,50,00,000/- was received on 8.03.2011 through RTGS from ICICI Bank, having UTR No. ICICH 11067047050. The remaining payment of Rs.50,00,000/- was received on 22.02.2012 as full and final payment for the above property. On the same date physical possession of the property was delivered to Pushpanjali Investrade Pvt. Ltd. by the assessee. On 10.03.2011, 1/3rd share of the property 212, Kailash Hills, New Delhi, was purchased by the assessee through sale deed for a consideration of Rs.2,90,00,000/-. The assessee claimed exemption under section 54.

5 I. T. Appeal No. 34/Del/2016 Assessment Year : 2012–2013 The calculation of long term capital gain and exemption under section 54 is being reproduced hereunder :-

“ Calculation of Long Term Capital Gain and Exemption U/s. 54 :

Sale Consideration of one floor of property E-102, East of Kailash, New Delhi. 3,00,00,000/- Less: Cost of Acquisition in 1994-1995 Rs.4,12,190.50 Indexed cost of Acquisition Rs. 4,12,190* 785/259 12,49,302/- Long Term Capital gain. 2,87,50,6989/- Less: Exemption U/s. 54 for Purchase of Residential house Property at 212, Kailash Hills, New Delhi. Cost of Purchase Rs.2,90,00,000/- 2,87,50,6989/- Taxable capital gain ‘N I L’. ”

3.2 The ld. AR submitted that the Assessing Officer was not justified in treating the sale of the property to Pushpanjali Investrade Pvt. Ltd. on the basis that possession of the property was not handed over since the assessee failed to provide original possession letter and receipt of advance. The ld. CIT (Appeals) has held the same

6 I. T. Appeal No. 34/Del/2016 Assessment Year : 2012–2013 that possession letter was not signed by the buyer i.e. Pushpanjali Investrade Pvt. Ltd. or on its behalf by any other person. The ld. AR submitted that on receipt of total consideration the assessee had handed over possession of the property to the buyer, Pushpanjali Investrade Pvt. Ltd. and thus, “transfer” was complete under section 2(47) of the I. T. Act. In support he referred page Nos. 5, 8 and 46 of the paper book i.e. copies of possession letter, terms of agreement and financial statements of Pushpanjali Investrade Pvt. Ltd. The ld. AR also submitted that the decision in the cased of Suraj Land & Industries Pvt. Ltd. Vs. State of Haryana, 340 ITR 1 (SC) relied upon by the Assessing Officer having distinguishable facts are not applicable in the case of the assessee as it is based on general provisions of law.

3.3 The ld. Sr. DR, on the other hand, placed reliance on the orders of the authorities below. He submitted that the possession letter has not been signed by the purchaser Pushpanjali Investrade Pvt. Ltd., hence the same cannot be relied upon to establish that possession of the property was handed over by the assessee to them well before execution of sale deed. He submitted that the assessee had deputed

7 I. T. Appeal No. 34/Del/2016 Assessment Year : 2012–2013 Inspector to enquire about the property status of E-102, East of Kailash, New Delhi, from House Tax Department and Electricity Department. Both the Departments reported that the property was vested with the assessee and Mr. Rajendra Kanodia.

3.4 The ld. AR rejoined with the submission that the company’s balance sheet made available at page No. 46 as well as terms of the agreement to sell made available at page No. 8 as well as possession letter issued by the assessee and witnessed by two persons are best proof of possession handed over by the assessee to the purchaser. He submitted that the ownership is transferred on the record of the House Tax authorities and Electricity Department only on execution of sale deed of the property. He submitted that copy of the report of the Inspector was, however, not supplied to the assessee, hence that report cannot be relied upon.

3.5 Considering the above submission even if we ignore the possession letter under the signature of the assessee stating that the possession was handed over to the buyer Pushpanjali Investrade Pvt. Ltd., there are other evidences to support the handing over of 8 I. T. Appeal No. 34/Del/2016 Assessment Year : 2012–2013 the possession of the property (50% thereof) to the buyer i.e. as per the clause 2 of the Agreement to Sell dated 25.03.2011, whereby it was agreed upon that “the vacant physical possession of the property shall be delivered to the second party by the first party immediately after receiving the balance consideration amount at the time of Registry and / or final possession,” as well as the financial statement of the buyer, Pushpanjali Investrade Pvt. Ltd., wherein it has been made clear by the noting as “Pending completion of registration and formalities, advance of Rs.600 lacs (previous year Rs.700 lacs) against purchase of properties has been shown as capital advances after full payment as per sale agreement. The property will be capitalized in the year of completion of registration and formalities.” There is no dispute that payment of Rs.2,50,00,000/- out of the sale consideration of Rs.3 crores was made by the buyer to the assessee on 8.03.2011 and the balance amount of Rs.50,00,000/- was paid to the assessee by them on 22.02.2012 both through banking channel through RTGS. In such transaction, it is in general practice to make entire payment of amount in consideration pending the execution of Sale deed, only when possession of the property is handed over to the buyer. Hence, there was no reason to doubt about the handing over of the possession of 9 I. T. Appeal No. 34/Del/2016 Assessment Year : 2012–2013 the property as per the Terms of the Agreement and as per the financial statements of the buyer company on full payment of the amount in consideration. It is undisputed position of law that for the purpose of section 2(47) of the Income Tax Act, “transfer” of immovable property is complete on handing over of the possession of the property on payment of sale consideration in performance of a contract of the nature referred to in section 53-Aof the Transfer of the Property Act. It is also undisputed fact that name of the owner on the record of House Tax and Electricity Departments is transferred on the basis of Registered Sale Deed only. Thus the report of the Income Tax Officer has no relevance. And above all, in the case of co-owner i.e. Rajendra Kanodia & Sons (HUF) who was owner of the 50% of the same property, the Assessing Officer in the assessment under section 143(3) for the same assessment year has allowed the claimed exemption under section 54 of the I. T. Act on the sale of their 50% of the property. Under these facts and circumstances, we hold that the Assessing Officer was not justified in denying the claimed exemption under section 54 of the Act to the assessee on the basis that possession of the property was not handed over to the buyer and thus, sale was not complete in absence of execution of Sale Deed. We

10 I. T. Appeal No. 34/Del/2016 Assessment Year : 2012–2013 thus, while setting aside orders of the authorities below in this regard, direct the Assessing Officer to allow the claimed exemption. The grounds are accordingly allowed.