Mere agreement to sell not result in transfer of asset

Godha Realtors Pvt. Ltd. Vs ACIT (ITAT Bangalore)

In the instant case, it is not the case of the AO that the provisions of sec. 53A of the Transfer of Property Act would apply to the impugned transaction. In fact, it is the submission of the assessee that the possession was never given to Shri Ramaiah Reddy. Hence, what was entered by the assessee with the above said person was mere ‘Agreement to sell’. In the Case Of Ushaben Jayantilal Sodhan vs. ITO (2018)(407 ITR 276)(Guj), the Hon’ble Gujarat High Court has held that the agreement to sell will not result in transfer of asset. In that case, there is no question of any extinguishment of right, as held by the AO and confirmed by Ld CIT(A). Hence the question of assessing any capital gain in AY 2008-09 does not arise. In that view of the matter, we are unable to approve the computation of capital gain made by the AO in AY 2011-12 also. Accordingly, the computation of capital gain made by the assessee in AY 2011-12 is upheld.

FULL TEXT OF THE ORDER OF ITAT BANGALORE

Both the appeals filed by the assessee are directed against the orders passed by Ld. CIT(A)-11, Bengaluru and they relate to the assessment years 2008-09 & 2011-12. The only issue urged in both the appeals relate to the year of transfer of property and accrual of capital gain. While the assessee claims that the property was transferred in the year relevant to the assessment year 2011­12, the case of the A.O. is that the property has been transferred in the year relevant to the assessment year 2008-09.

2. The facts relating to the case are stated in brief. The assessee is a private limited company and is engaged in the business of real estate development. During the financial year relevant to the assessment year 2008-09, the assessee won the bid for a property admeasuring 2 acres and 15 guntas in Hudi village in an auction conducted by Hon’ble High Court of Karnataka for a sum of Rs.9.00 crores. Accordingly, the Hon’ble High Court of Karnataka, vide its order dated 26.10.2007, directed the official liquidator to execute a registered sale deed in favour of the assessee. In compliance to the above directions, a registered sale deed was executed in the assessee’s name on 20.10.2010.

3. The above said deed amount of Rs.9 crores was arranged by the assessee company as under:-