KWALITY SPINNING MILLS LTD.,CHENNAI vs. DCIT, COIMBATORE

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) – 1, Coimbatore, dated 24.03.2016 and pertains to assessment year 2009-10.

The only issue arises for consideration is computation of capital gains.

Shri S. Sridhar, the Ld.counsel for the assessee, submitted that the assessee sold an agricultural land situated in Solapalayam village. According to the Ld. counsel, the assessee, in fact, received `4,18,20,000/- during the year under consideration.

The Ld.counsel for the assessee further submitted that the CIT(Appeals) has also failed to consider the cost of improvement incurred by the assessee to the extent of `20,00,000/-. Merely because the assessee could not produce the material evidence to support the claim of the cost of improvement that cannot be a reason to disallow the claim of the assessee totally.

On the contrary, Sh. Pathlavath Peerya, the Ld. Departmental Representative, submitted that the assessee claims that possession of property was not handed over during the year under consideration, therefore, there was no transfer. According to the Ld. D.R., the assessee has received entire sale consideration of `4,18,20,000/-. No purchaser would pay `4,18,20,000/- without taking physical possession of property. Therefore, the CIT(Appeals) has rightly found that it is only logic to assume that no buyer will part with `4,18,20,000/- without obtaining physical possession of the property. Hence, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the order of the Assessing Officer. Referring to the value, the Ld. D.R. submitted that determination of cost of acquisition as on 01.04.1981 as well as sale consideration by adopting Section 50C of the Act would become academic, therefore, it need not be adjudicated in the present. The assessee claims that it invested more than `20,00,000/- for the improvement of the property. However, the assessee could not produce any supporting material for the so called improvement said to be made. Therefore, the CIT(Appeals) has rightly confirmed the disallowance made by the Assessing Officer.

We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the sale deed was executed by the assessee for transfer of land on 28.04.2009, which falls in the assessment year 2010-11. The assessment year under consideration is 2009-10. There is no material to indicate that the assessee handed over the physical possession of the property during the year under consideration. No doubt, the assessee has received `4,18,20,000/- during the year under consideration for sale of the property. The CIT(Appeals) found that no person would hand over `4,18,20,000/- without receiving physical possession of the property. This Tribunal is of the considered opinion that there cannot be any presumption with regard to handing over of the property. When the assessee agreed to sell the property and the purchaser willingly accepted the same and paid `4,18,20,000/-, in the absence of any indication in the agreement for sale regarding handing over of physical possession, this Tribunal is of the considered opinion that there was no transfer of property during the year under consideration by virtue of provisions of Section 2(47) of the Act. The assessee has filed a copy of the registered sale deed dated 28.04.2009. Clause 8 of the sale deed reads as follows:-

In view of specific clause in the registered sale deed, this Tribunal is of the considered opinion that the physical possession was handed over by the assessee to the purchaser only on 28.04.2009 when the sale deed was executed. Therefore, there cannot be any presumption that the assessee handed over physical possession of the property on the date of receipt of sale consideration of `4,18,20,000/-.

It is common practice to receive part sale consideration or entire sale consideration and to execute the sale deed in a later stage. It is also common practice to hand over physical possession of the property at the time of execution of sale deed. In the absence of any material to indicate about handing over of physical possession to the purchaser whether by way of agreement or arrangement, this Tribunal is of the considered opinion that there is no transfer of property during the year under consideration, hence, there cannot be any levy of capital gain tax.

It is also not in dispute that the assessee has offered capital gains for the assessment year 2010-11. When the assessee executed the sale deed and handed over the physical possession of the property on 28.04.2009, this Tribunal is of the considered opinion that the capital gains accrued to the assessee only on 28.04.2009, therefore, the assessee rightly offered the same for taxation during the assessment year 2010-11. In view of the above, we are unable to uphold the order of the CIT(Appeals). Accordingly, the addition made by the Assessing Officer and confirmed by the CIT(Appeals) is deleted.

Now coming to application of Section 50C of the Act, as rightly submitted by the Ld. Departmental Representative, it becomes academic. Therefore, it need not be adjudicated during the year under consideration.

In the result, the appeal filed by the assessee is partly allowed.