Case Law Details

Case Name : Potla Nageswara Rao. Vs The Deputy Commissioner of Income Tax (Punjab and Haryana High Court)
Appeal Number : ITTA No. 245 of 2014
Date of Judgement/Order : 09/04/2014
Related Assessment Year :
Courts : All High Courts (3706) Punjab and Haryana HC (201)

The element of factual possession and agreement are contemplated as transfer within the meaning of the aforesaid section. When the transfer is complete, automatically, consideration mentioned in the agreement for sale has to be taken into consideration for the purpose of assessment of income for the assessment year when the agreement was entered into and possession was given. Here, factually it was found that both the aforesaid aspects took place in the previous year relevant to the assessment year 2003-04. Hence, the learned Tribunal has rightly held that the appellant is liable to pay tax on the capital gain for the assessment year. Accordingly, we do not find any element of law to admit this appeal.

HIGH COURT OF ANDHRA PRADESH

ITTA No. 245 OF 2014

Dated 09-04-2014

                        Potla Nageswara Rao.                         

Vs.

The Deputy Commissioner of Income Tax

JUDGMENT: (Per the Hon’ble The Chief Justice Sri Kalyan Jyoti Sengupta)

This appeal is directed against a portion of the judgment and order of the learned Tribunal dated 22.03.20 12 in relation to the assessment year 2003-04 on the following suggested questions of law.

“1. On the facts and in the circumstances of the case, whether the Income Tax Tribunal is legally correct in relying on the decision of Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia reported in 260 ITR 491 to hold that the capital gains arise in the year of entering into development agreement, though the facts are distinguishable?

2. On the facts and in the circumstances of the case, whether the Income Tax Tribunal is legally correct in relying on its own decision in the case of Maya Chenoy reported in 124 TTJ (Hyd) 692 though such decision is appealed against by the Department, to hold that the capital gains arise in the year of entering into development agreement?

3. On the facts and in the circumstances of the case, whether the order of the Income Tax Appellate Tribunal is perverse in not following its own decision in the case of Smt. K. Radhika in ITA No.208/h/201 1 wherein it is held that capital gains arise in the year in which there is some performance by the developer and stating in one sentence that it does not support the case?

4. On the facts and in the circumstances of the case, whether the Income Tax Appellate Tribunal is right in law in not considering the decision of the Madras High Court in the case of R. Vijayalakshmi reported in 257 ITR 4?

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5. On the facts and in the circumstances of the case, whether the Income Tax Appellate Tribunal is correct in law in ignoring the fact that at best capital gains could be assessed only to the extent of land that is developed before the agreement is cancelled and holding that capital gains arises on the whole of the land that is involved in the development agreement?

Mr. Vasant Kumar, learned counsel appearing for the appellant, submits that almost on identical issue this Court admitted an appeal, therefore, this appeal should also be admitted.

We are of the view that each and every individual case stands on its own footing. Before we admit this appeal we must examine the issue before us on its own merit. Therefore, pendency of another matter cannot be a ground to proceed with the matter.

Mr. Vasant Kumar further submits that in this case the learned Tribunal went wrong while holding that the transfer has taken place the moment agreement is entered into followed by possession for the purpose of computing capital gain, as, admittedly, in this case there was no payment of consideration and there has been only an agreement. He submits that the learned Tribunal has misread the judgment relied on by it.

In the context of the above submission, we have to see whether in this case any substantial question of law is involved or not. The learned Tribunal on fact found as follows:

“In the instant case, on 07.03.2003 an agreement was entered into by the assessee with M/s. Bhavya Constructions Pvt., Ltd., and the plan of the building was approved on 3 1.03.2003. These dates fall in the previous year 2002-03, relevant to assessment year 2003-04. Thus, in this case, the land being capital asset was transferred by the assessee to the developer during the assessment year under consideration, viz., 2003-04, for construction and it is enough if the assessee has received the right to receive consideration on a later date, so as to attract eligibility to tax on capital gains during the year under appeal.”

The definition of ‘transfer’ under Section 2(47) of the Income Tax Act, 1961, reads as follows: “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; or

(vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a cooperative 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.”

While dealing with the submission of Mr. Vasant Kumar transfer is deemed to have taken place in the year when the consideration has been actually paid, we are of the view that the language of Section 53-A of the Transfer of Property Act, 1882, which has been engrafted in the aforesaid definition of Section 2(47) of the Income Tax Act, 1961, does not contemplate any payment of consideration. We set out Section 53-A, which reads as under:

Part performance – Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract:

Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof.”

Therefore, we are of the view, while upholding the learned Tribunal’s application of law on this fact, that payment of consideration on the date of agreement of sale is not required, it may be deferred for future date.

The element of factual possession and agreement are contemplated as transfer within the meaning of the aforesaid section. When the transfer is complete, automatically, consideration mentioned in the agreement for sale has to be taken into consideration for the purpose of assessment of income for the assessment year when the agreement was entered into and possession was given. Here, factually it was found that both the aforesaid aspects took place in the previous year relevant to the assessment year 2003-04. Hence, the learned Tribunal has rightly held that the appellant is liable to pay tax on the capital gain for the assessment year. Accordingly, we do not find any element of law to admit this appeal.

The appeal is therefore dismissed. No order as to costs.

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