Case Law Details

Case Name : Smt. Shashi Gupta Vs I.T.O (ITAT Delhi)
Appeal Number : ITA No.6109/Del./2012
Date of Judgement/Order : 24/11/2015
Related Assessment Year : 2007-08
Courts : All ITAT (1730) ITAT Delhi (428)

Brief of the case

In the case of Shashi Gupta vs. ITO, the Delhi Tribunal while considering the effective date of transfer of immovable property for the purpose of taking benefit of time limit specified u/s 54 of the Act considered the date of ‘agreement to sell’ of an immovable property as effective date of transfer of property taking the view expressed by Hon’ble Apex Court on the word ‘transfer’ in the case of Sanjeev lal & Anr. Vs. CIT & Anr, wherein the Apex court held that ‘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.’

Fact of the case

The Assessee own 1/4th share in the residential house at B-30, Geetanjali Enclave, New Delhi – 110 030 along-with the other three co-owners, which was sold for a consideration of Rs.49,50,000/- under a sale deed dated 05-09-2006. The assessee declared long term capital gain of Rs.43,27,615/-. In respect of this gain, the assessee claimed exemption of Rs.20,40,600/- under section 54 of the Act on the ground that she has purchased a new house property at Ramprastha, Ghaziabad vide registered deed dated 04-08-2005. The A.O. observing that the purchase of property was one year before the date of sale of her share in the residential property i.e, 05-09-2006 sought to disallow the exemption claimed. The assessee in respect of the above observation of the AO contended that she had entered into an agreement to sell dated 16.04.2006 and, therefore, the claim was in accordance with section 54 of the Act. However, the AO disagreed with the said contention of the assessee and rejected her said claim. On appeal by the assessee, the CIT (A), however, turned down the appeal and upheld the disallowance on the ground that there are many glaring contradictions as well as inconsistencies in the argument and documents presented by the assessee, to the extent that document i.e. agreement to sell i.e. 16.04.2006 appears to be concocted just for the purpose to meet the valid objections raised by the AO. The assessee filed the appeal before the Tribunal against the disallowance of exemption claimed u/s 54 of the Act.

Contention of Assessee

The Ld. AR filed a synopsis of the events related to the ownership associated with the property. He submitted that all the four Co-owner having equal share agreed to sell the said property to Shri Ramesh Chandra Kalra s/o Shri K. L. Kalra, B-49, Shivalik Colony, New Delhi and Shri Ashish Rajpal s/o Shri G. D. Rajpal, B-1/53, Malviya Nagar, New Delhi-17 for a sum of Rs.1.98 Crores as per the terms and conditions mentioned in agreement dated 16.04.2006 and received the advance payment. As per the agreement the sale transaction was to be concluded on/or before 01.10.2006, by that time, the second party shall pay the remaining consideration amount. The assessee has already received a sum of Rs.20,00,000/- vide cheque no.759207 on 16.01.2005 as part consideration for her 1/4th share in the property. The sale deed could not be registered because of family dispute and the balance consideration could not be received. The assessee had purchased a new residential house property B-195, Ramprastha Surya Nagar, Ghaziabad for Rs.20,00,000/-+40,600/- vide registered deed dated 04.08.2005. Therefore the money received from Sh. Ramesh Chandra Kalra as part sale consideration was invested in purchase of new house. He further submitted that Mr. Kalra had taken the possession from the assessee on the terms and conditions as specified in agreement dated 16.04.2006 and committed to the assessee that the balance amount of Rs.29,50,000/-will be paid on or before 6 months from 16.04.2006 and/or on registered deed in favour of the Sh. Ramesh Chander Kalra and Sh Ashish Rajpal or their nominee(s) whichever is earlier. On 04.09.2006 the assessee had received the balance amount of Rs.29,50,000/- and signed the registered deed on 04.09.2006 which is registered in the name of Sh. Ashok Seth and Smt. Poonam Seth who are the nominee(s) of Sh. Ramesh Chander Kalra and Sh. Ashish RajpaL Therefore, the transaction of sale was completed in the following manner:-

  1. Firstly, the assessee has received an advance of Rs.20,00,000/- on 16.01.2005 from Mr. Ramesh Chandra Kalra which was invested in purchase of new house property at Ghazibad on 04.08.2005.
  2. Secondly, on 16.04.2006 an agreement was signed between the assessee along with other joint holders of the property. In this agreement, Mr. Ramesh Chandra Kalra assured the assessee to pay balance amount for her share in the property i.e the effective date of sale of share in the property of the assessee.
  3. Thirdly, the registered sale deed was signed on 04.09.2006 and the assessee has received the balance sale consideration amount of Rs.29,50,000/-

Contention of Revenue

The Ld. DR supported the order of the Ld. CIT(A).

Held by Tribunal

The Tribunal held that it is not disputed that assessee sold her share in the property for a consideration of Rs.49,50,000/- which was received in the following manner :-

(i)  Received cheque no.759207 dt. 16.01.2006 Rs.20,00,000/-

(ii) Received DD no.039172 dt. 04.09.2006 Rs.19,50,000/-

(iii) Received cheque no.394334dt. 04.09.2006 Rs.10,00,000/-

From the aforesaid facts, it is apparent that substantial consideration was received by the assessee even 15 months prior to the agreement of sale dated 16.04.2006. Moreover, the agreement dated 16.04.2006 is signed by all the four co-owners and the Vendee, Shri Ramesh Kalra and also is duly witnessed. The agreement further specifically states as under:-

“And whereas the balance sale consideration has been agreed to be paid by the second party to the first party. Time to time or at the time of sale transaction within six month of this date and whereas Smt. Shashi Gupta one of the ownered the said property (first party) handed over the vacant possession of her ¼ share of the property to the second party today / on this date. NOW this agreement witnesses as under :

  1. That the second party shall pay the balance sale consideration of Rs.1 Crore 67 Lacs 50 thousands to the first party as follows:
    1. Shri Mahendra Prakash Gupta Rs.46 Lacs
    2. Shri Shiv Prakash Gupta Rs.46 Lacs
    3. Shri Ram Prakash Gupta Rs.46 Lacs
    4. Smt. Shashi Gupta Rs.29.5 Lacs
  2. That the sale transaction shall be concluded on or before 01.10.06. By that time, second party shall pay the remaining consideration amount of Rs. l Crores 67 Lacs 50 thousands to the first party and the first party shall simultaneously execute the sale deed with respect to the property in favour of the second party or his nominee(s) and shall also handover the vacant and peaceful ¾ balance possession of the said property to the second party or their nominee(s).”

From the above, it is vivid that the possession to the extent of 1/4th share of the assessee’s house in that house stood transferred on 16.04.2006 itself. The Tribunal also noted that in the affidavit, the vendee has specifically affirmed as under:-

“I. R.C. Kalra S/o K.L. Kalra R/o B-49, Shivalik Colony, Malviya Nagar, New Delhi do hereby confirm as under :-

  1. That vide agreement to sale dated 16.4.2006 between me and Smt. Shashi Gupta and others for purchase of ¼ share of her portion in the house located at B-30, Geetanjali Enclave, New Delhi.
  2. I have taken possession of ¼ share of the house as on 16.4.2006 against consideration as agreed upon detailed in the sale agreement dt.16.4.2006.
  3. That I have option to get the sale deed executed in my name or in the name of my nominee as per cl.2 of the referred agreement.”

The observation of CIT (A) that in the sale deed, the possession of the property was taken on 05.09.2006 cannot be seen in isolation because in the agreement to sale on 16.04.2006 suggested by the affidavit of the Vendee clearly buttress the claim of the assessee, that she has handed over her share of the property to Vendee. Having regard to the above factual position, tribunal was of the opinion that possession of the property stood handed over on 16.04.2006. Furthermore on facts of the case, the tribunal held that the Hon’ble Apex court in the case of Sanjeev lal & Anr. Vs. CIT & Anr. (2014) 365 ITR 389(SC), held as under:-

“In normal circumstances by executing an agreement to sell in respect of an immoveable 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,-….

(ii) the extinguishment of any rights therein; or………”

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.”

Having regard to the above binding precedent, the Tribunal rejected the conclusion of the ld. CIT (A) that agreement to sell is a mere start of the sale and cannot become the act of sale for section 54 of the Act. Moreover, the tribunal further observed that it needs to be appreciated here that a hyper technical approach cannot be adopted to an incentive granting provision. Here is a case, where the assessee is a widow who has received advance in June 2005 against sale of her share and thereafter, purchased a residential property in August 2005, but yet exemption is not held eligible on the ground that the sale is in September 2006. According to the Revenue, had the sale deed be executed in August 2006, everything will be in order. We do not subscribe to such a pedantic application of the incentive provision. It was on account of such an approach, the Hon‘ble Apex Court in Sanjeev lal & Anr. Vs. CIT & Anr. has held as above. Thus, in view of the aforesaid, the Tribunal allowed the ground raised by the assessee.

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Category : Income Tax (20866)
Type : Judiciary (8910)
Tags : CA Girish Gupta (87) ITAT Judgments (3704) section 54 (90)

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