ITO,WARD-11(2), KOLKATA, KOLKATA vs. M/S SUR ENAMEL & STAMPING WORKS PVT. LTD., KOLKATA

The Assessee is a company. It is engaged in the business of manufacturing of enamel ware, enamel frit incidental to enamel industry. The assessee’s manufacturing activities were suspended and the factory was closed as early as 23.10.1991. This was due to non payment of dues by the assessee to United Bank of India and other -M/s. Sur Enamel & Stamping Works Pvt.Ltd-A.Y.200708 creditors. A suit was filed by the bank and other creditors. The Hon’’ble Calcutta High Court directed the sale of the land belonging to the assessee. Order for sale of the land of the assessee was passed by the Hon’ble Calcutta High Court was passed on 07.10.2005. It is not in dispute that pursuant to the order of the sale, possession of the property was also handed over to the purchaser M/s. AGW Realtors Pvt. Ltd. The consideration realised on the sale was Rs.9.11 crores.

In the return of income filed for A.Y.2007-08 the assessee declared long term capital gain on sale of the land at Rs.2,11,09,250/- and claimed exemption u/s 54EC of the Act. Since no evidence for having made investments in specific assets referred to section 54EC of the Income Tax Act, 1961 (Act), the AO disallowed the claim of the assessee for deduction u/s 54EC of the Act and brought to tax long term capital gain of Rs.2,11,09,250/-.

Before CIT(A) the assessee contended that there was no transfer of any capital asset during the previous year relevant to A.Y.2007-08. The assessee pointed out that the sale of the land took place pursuant to an order by the Hon’ble Calcutta High Court dated 07.10.2005 and thereafter during the previous year relevant to A.Y.2006- 07 possession was handed over to the purchaser and transfer in terms of section 2(47)(v) of the Act had taken place during A.Y.2006-07. The assessee pointed out that it had erroneously declared long term capital gain in its return for A.Y.2006-07. The assessee pointed out that in terms of Circular No.14 of 1955 dated 11.04.1955 the officers of the department must not take advantages of ignorance of the assessee as to his rights and have to assist the tax payer in every reasonable way.

Taking the above submissions into consideration the CIT(A) held that transfer in terms of section 2(47)(v) of the Act had taken place only in A.Y.2006-07 and that was the appropriate year in which long term capital gain has to be brought to tax. CIT(A) gave liberty to the AO to take appropriate action for A.Y.2006-07 and held that action of AO in bringing to tax in respect of long term capital gain for A.Y.2007-08 was not proper.

Aggrieved by order of CIT(A) revenue has preferred the present appeal before the Tribunal.

Despite service of notice through the DR none appeared on behalf of the assessee. We have heard the submissions of the learned DR, who relied on the order of AO. He reiterated the stand of the revenue as reflected in ground no.1 raised by the revenue before the Tribunal. We have considered the submissions of the learned DR and are of the view that the same is without any merit. . Sec.2(47) of the Act defines “Transfer” for the purpose of the Act. It reads thus: “Sec.2 (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 ; 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;”

It can be seen from the provisions of clause (v) of Sec.2(47) of the Act that 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), would also be transfer and registered conveyance is not a condition precedent for considering a transaction as resulting in transfer. This is a departure under the Act as against the normal rule that unless there is a registered deed of conveyance there can be no passing of title by transfer. In the present case, the revenue does not dispute the fact that there was agreement for sale consequent to the order of Hon’ble Calcutta High Court with the purchaser of the property and -M/s. Sur Enamel & Stamping Works Pvt.Ltd-A.Y.200708 purchaser was put in possession of the property pursuant to the aforesaid agreement in part performance of the agreement for sale. The revenue does not dispute that such part performance was in the nature referred to u/s 53A of Transfer of Property Act 1982. The revenue also does not dispute that the agreement and handing over of possession took place during the previous year relevant to A.Y.2006-07. In such circumstances we are of the view that there was a transfer that took place during the previous yea relevant to A.Y.2006-07 within the meaning of section 2(47)(v) of the Act. Therefore the CIT(A) was justified in holding that there was no long term capital gain that could be brought to tax in A.Y.2007-08. We do not find any ground to interfere with the order of CIT(A). Ground no.2 is purely consequential and requires no specific adjudication.

In the result the appeal of the revenue is dismissed.