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Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI
Before: SHRI ASHWANI TANEJA & SHRI SANJAY GARG
Per Sanjay Garg, Judicial Member:
The above titled appeals have been preferred by the Revenue against two separate orders both dated 02.12.2010 of the Commissioner of Income Tax
2 & ITA No.1109/M/2011 Shri Imtiaz Mohd. Mansuri & Legal Heirs of late Shri Akhtar Mohd. Mansuri (Appeals) [hereinafter referred to as the CIT(A)] relating to two different but related (brothers) assessees. The common issue taken in both the appeals is regarding the year of taxability of the capital gains earned by the assessees on the sale of their land by way of common agreement dated 17.05.06.
The brief facts of the case are that both the assessees were having ownership of immovable property as detailed in the assessment order. Some part of the property was occupied by a tenant also. Adjoining to the property of the above named assessees, a property belonging to one Mr. Mario Miranda was also situated. Both the above named assessees and Mr. Mario Miranda entered into a Memorandum of Understanding (MOU) dated 01.12.05 with the purchasers. The total consideration settled for the sale of property was at Rs.3,12,00,000/- out of which the above named assessees were entitled to Rs.2,52,00,000/- and Mr. Mario Miranda to Rs.60,00,000/-. The above named assessees were also the power of attorney holders of Mr. Mario Miranda and thus were authorized to enter into transaction with the purchasers on behalf of Mr. Mario Miranda also. Out of the total consideration of Rs.2,52,00,000/- payable to the above named assessees, the purchaser made the total payment amounting to Rs.1,32,00,000/- spread between the dates 01.12.05 to 15.05.06. A deed of conveyance/agreement was executed and registered on 17.05.06 wherein it has been agreed that the purchasers would pay the balance amount of Rs.1,20,00,000/- to the assessees on or before 30.06.06 and on such payment of Rs.1,20,00,000/- they would have right to enter into the possession of the property in question. However, before the payment of the said balance amount of Rs.1,20,00,000/-, the vendors would have first charge on the property and that charge would stand vacated only on the payment of balance amount of Rs.1,20,00,000/-. According to the Assessing Officer (hereinafter referred to as the AO), the transfer/transaction had taken place on the registration of the agreement on 17.05.06, hence the entire capital gains accrued/earned by the assessees were taxable in the A.Y. 2007-08. However,
3 & ITA No.1109/M/2011 Shri Imtiaz Mohd. Mansuri & Legal Heirs of late Shri Akhtar Mohd. Mansuri the case of the assessees is that even though the sale deed for immovable property was dated 17.05.06, however the possession was given after getting the balance payment as narrated above. It has also been explained that due to non fulfillment of certain conditions by the assessees, the purchaser had filed a suit against the assessees in the High Court. Ultimately a compromise was arrived at between the parties and as per the consent terms, the balance payment was received by the assessees and the peaceful possession of the property in question was handed over to the purchasers in the month of March 2008 only. Therefore, the whole capital gains earned by the assessees were accounted for in the A.Y. 2008-09 after claiming certain deductions under section 54 of the Act. The AO, however, held that the capital gains were taxable in the A.Y. 2007-08 only.
On appeal, the Ld. CIT(A), after going through the facts and evidences on the file, observed that in the instant case, apart from the sale agreement in question, the assessees had simultaneously executed a Memorandum of Understanding (MOU) in which they had agreed to handover the peaceful possession of the property after getting the part of the property vacated from the tenant and completing certain other obligations as detailed and agreed vide the said separate MOU. Since the assessees had failed to fulfill the conditions of the said MOU, the purchasers had filed a suit in the Hon’ble Bombay High Court and as narrated above, subsequently a settlement was reached out on 07.03.08. As per the said settlement, the balance amount was paid by the purchasers, the charge of the assessees on the property in question was vacated and the peaceful possession of the property was handed over to the purchasers in the month of March, 2008 only and the resultant capital gains were offered in A.Y. 2008-09 accordingly. The Ld. CIT(A), after appreciating the facts and evidences on the file, held that the transactions in question was completed in A.Y. 2008-09 only and accordingly held that the capital gains were taxable in the A.Y. 2008-09. He also directed the AO to consider the claim of the 4 & ITA No.1109/M/2011 Shri Imtiaz Mohd. Mansuri & Legal Heirs of late Shri Akhtar Mohd. Mansuri assessee for allowance of deduction under section 54 of the Act in the A.Y. 2008-09 only. Being aggrieved by the order of the Ld. CIT(A), the Revenue has filed the above appeals before us.
We have heard the rival contentions and have also gone through the sale agreement in question, the MOU and the other evidences relied upon by both the parties. We find from the documents on the file that as per the registration agreement/sale deed, the possession was not handed over to the purchasers. It was agreed to be handed over on the payment of balance consideration of Rs.1,20,00,000/-. Apart from the said agreement another MOU was also entered into between the parties. As per the said MOU, the assessees, who were also the power of attorney holders of Mr. Mario Miranda, had to complete certain formalities for clearances of title of the property belong to Mr. Mario Miranda and thereafter the same was to be conveyed/sold/handed over to the purchasers in question. Apart from that, the assessees had also agreed to get the property vacated from the tenant and handover the possession of the same to the purchasers. Since the assessees could not fulfill their part of obligations as per MOU, the dispute had arisen between the parties resulting into a civil suit/litigation which was settled by the parties by way of consent terms and ultimately the vacant possession of the property was offered by the assessees to the purchasers in the month of March 2008. The Ld. A.R. of the assessees has brought our attention to the MOU in question as well as an agreement with the tenant vide which he had agreed to vacate the possession of the property in question after receiving compensation from the assessees. The Ld. CIT(A) after fully appreciating the facts on the file has held that it is not the date of agreement but virtually the actual date of transaction which matters and in fact, the transaction was completed and possession was handed over to the purchaser by the assessees in the month of March 2008 only. We do not find any infirmity in the order of the Ld. CIT(A) in this respect.
5 & ITA No.1109/M/2011 Shri Imtiaz Mohd. Mansuri & Legal Heirs of late Shri Akhtar Mohd. Mansuri 5. So far as the case laws relied upon by the Ld. D.R. are concerned, we find that the same are not strictly applicable to the cases of the assessees before us. So far as the decision of the Authority of Advance Rulings, New Delhi [(2007) 164 Taxman 108 (AAR) – New Delhi] in the case of “Jasbir Singh Sarkaria” strongly relied upon by the Ld. D.R. and also referred to in the grounds of appeal is concerned, we find that in the said decision, the Authority for Advance Rulings has held that the date of entering into the agreement cannot be the determining factor rather it is the distinct transaction, that gives rise to the event of allowing the contractee to enter into possession, that matters. It is not the date of agreement but the terms of the agreement that matters and the transaction which has direct and immediate bearing on the allowing of possession that amounts to transfer. From the facts of the case, we find that even if, we apply the above stated case law strongly relied upon by the Revenue, the fact remains that the transfer in question did not take place on the date of execution of the agreement, rather subsequently in the month of March 2008 and hence the above named assessees rightly offered the capital gains in the A.Y. 2008-09. We, therefore, do not find any infirmity in the impugned orders of the Ld. CIT(A) and the same are accordingly upheld.
In the result, both the above titled appeals of the Revenue are hereby dismissed. Order pronounced in the open court on 05.02.2016.