Case Law Details

Case Name : Atlas Automotive Components Pvt. Ltd. Vs ITO (ITAT Mumbai)
Appeal Number : ITA No. 2291/Mum/2005
Date of Judgement/Order : 28/07/2008
Related Assessment Year : 2001- 2002
Courts : All ITAT (4421) ITAT Mumbai (1458)

RELEVANT PARAGRAPHS

21. In view of the above submissions of the assessee and in view of the fact that M/s.Sky Blue Trading & Investment Pvt. Ltd. is sister concern of the assessee, we find no merit in the contentions of the assessee that the transaction between the assessee and M/s.Sky Blue Trading & Investment Pvt. Ltd. fell through because of the non-compliance of the conditions stipulated in the Memorandum of Understanding dated 26.02.2001. Admittedly, the assessee had entered into the assignment agreement for the transfer of leasehold rights in piece of land measuring 8072 sq. meters to M/s.Sky Blue Trading & Investment Pvt. Ltd. on 26.02.2001 against which it had received earnest money of Rs.5.00 Lakhs The Memorandum of Understanding stipulates the seeking of permission from MIDC for the transfer of the said plot of land to M/s. Sky Blue Trading & Investment Pvt. Ltd. but no such permission was either sought by the assessee or M/s. Sky Blue Trading & Investment Pvt. Ltd. i e, its group company The covenants of Memorandum of Understanding dated 26 02 2001 does not stipulate the person who has to apply for the said sanction from MIDC though in the case of the transaction with M/s. Micromatic Machine Tools Pvt. Ltd. the said approval was received on 19.06.2001. The assessee fairly admits in its written submission filed before the CIT (A) that ‘its group company M/s. Sky Blue Trading & Investment Pvt. Ltd. was interested in carrying on the business of selling smaller plots out of this 8072 sq. meters and immediately thereafter it started scouting for buyers. The above said admission of the assessee establish the transaction between the assessee and M/s. Sky Blue Trading & Investment Pvt. Ltd. of having been acted upon and in view of the permission to be obtained under Chapter XXC of the I.T. Act where the sale consideration is more than Rs.20.00 Lakhs, the assessee routed the transaction by way of reassignment of the said rights in favour of 24 different parties in respect of the different sub-plots earmarked in the said plot of measuring 8072 sq. meters. The assessee further admits that the said transaction of reassignment were to be imprinted on the tax file in place of the transaction with M/s.Sky Blue Trading & Investment Pvt. Ltd. through the aggregate consideration was lesser than agreed transaction with M/s.Sky Blue Trading & Investment Pvt. Ltd.

22. The assessee had entered into a similar Memorandum of Understanding with M/s. Micromatic Machine Tools Pvt. Ltd. on 26.03.2001. Admittedly the approval was given by MIDC in respect of the transaction with M/s. Micromatic Machine Tools Pvt. Ltd. on 19.06.2001 and also M/s. Micromatic Machine Tools Pvt. Ltd. was not a sister-concern of the assessee having its Registered office at 271-272, Udyog Bhavan, Sonawala Road, Goregaon (East), Mumbai – 400 063. The transaction though not completed with M/s. Micromatic Machine Tools Pvt. Ltd. was treated as completed as on 31.03.2001 and the capital gains arising from the transaction was offered for taxation and accepted by the authorities. On the other hand, the assessee entered into a Memorandum of Understanding with its group company having its Registered Office at Udyog Mandir Compound, 7-C, Bhagoji Keer Marg, Mahim, Mumbai – 400 016, which is the Registered office of the assessee also. It disproves the contention of the assessee that M/s. Sky Blue Trading & Investment Pvt. Ltd. was not in possession of the said plot of land. Once the constructive possession is already with M/s. Sky Blue Trading & Investment Pvt. Ltd. and in view of the fact that the leasehold rights in the said flat of land agreed to be transferred to M/s. Sky Blue Trading & Investment Pvt. Ltd. were reassigned to 24 different parties in respect of 24 sub-plots in the full knowledge of M/s. Sky Blue Trading & Investment Pvt. Ltd., establishes the conclusion of agreement on the date when the Memorandum of Understanding was entered. The M3DC approval in respect of different plots has been obtained by the assessee and admittedly the assessee has not offered any capital gain in respect of those reassignment transactions for the sale of 24 sub-plots establishes the case of the Revenue that the transaction in question was completed in the year under appeal. The Long Term Capital Gains arising on the sale of the aforesaid piece of land which was sub-divided into 24 plots and was reassigned to 24 different persons does not require the permission under Chapter XXC of the I.T. Act as the transaction in each agreement was less than Rs.20.00 Lakhs.

23. The assessee by its own motion had included the Long Term Capital Gains on a similar transaction being entered into with M/s. Micromatic Machine Tools Pvt. Ltd. as income for the year under consideration and following the principles of consistency the similar Long Term Capital Gain arising on the transaction entered into with M/s. Sky Blue Trading & Investment Pvt. Ltd. vide Memorandum of Understanding dated 26.02.2001 is to be included in the hands of the assessee in the year under appeal. Mere reversal of the entries in the respective books of account of the assessee and its group company viz., M/s. Sky Blue Trading & Investment Pvt. Ltd. in view, of the facts and circumstances enumerated hereinabove in respect of the reassignment of the agreements entered into by the assessee in respect of the same piece of land has no relevance. The assessee on its own motion has not paid any capital gains in respect of the reassignment of plots of land carved within the same piece of land which was assigned to M/s. Sky Blue Trading & Investment Pvt. Ltd. as per the Memorandum of Understanding dated 26.02.2001. The CIT (A.) also noted that in respect of the transactions with M/s. Micromatic Machine Tools Pvt. Ltd. that the balance consideration was paid after 31.03.2001 and even the payment was made to MIDC after the approval on 19.06.2001. Similarly, in the case of transaction with M/s Sky Blue Trading & Investment Pvt Ltd wherein the group company was already in possession of the said property and had exercised the right of selling the sub-plots by way of reassignment agreements, though entered into by the assessee, establishes the completion of the agreement on the execution of the Memorandum of Understanding. The Memorandum of Understanding between the assessee and M/s Sky Blue Trading & Investment Pvt. Ltd was given effect to in the year itself, when the constructive possession of the property was with the purchaser and the rights in the property were assigned in the year itself, which is fortified by subsequent developments of reassignment sub-plots. The transaction is complete in the year itself in terms with the provisions of Section 2 (47) (v) read with Section 53 A of the Act. The income from Long Term Capital Gain on transfer of leasehold rights to M/s. Sky Blue Trading & Investment Pvt. Ltd. to be included in the hands of the assessee in the year itself.

24. We find support from the judgement of Hon’ble Bombay High Court in Chaturbhuj Dwarkadas Kapadia Vs. CIT (supra), wherein the provisions of Section 2 (47) after insertion of clauses (v) & (vi) with effect from 1.4.1998 had been considered and t has been held that ‘transfer’ includes (i) any transaction with allows possession to be taken/retained in part performance of a contract of the nature referred to in Section S3A of Transfer of Property Act, 1882, and (ii) any transaction entered into in any manner which has the effect of transferring or enabling the enjoyment of any immovable property. It has been further held “Therefore, in these two cases capital gains would be taxable in the year in which such transactions are entered into, even if the transfer of the immovable property is not effective or complete under the general nature’. The conditions to be fulfilled under Section 53 A of the Transfer of Property Act, 1882 are also provided and it was held as under:

“in order to attract section 53A, the following conditions need to be fulfilled. There should be a contract for consideration; it should be in writing; it should be signed by the transferor; it should pertain to transfer of immovable property; the transferee should have taken possession of the property; lastly the transferee should be ready and willing to perform his part of the contract”.

It was thus concluded by holding “Even arrangements confirming privileges of ownership without transfer of title could fall under Section 2 (47) (v) of the Act”. Applying the ratio laid down by the Hon’ble Bombay High Court in Chaturbhuj Dwarkadas Kapadia Vs. CIT (.supra) to the facts of the present case before us, we hold that the arrangement between the assessee and its sister concern M/s. Sky Blue Trading & Investment Pvt. Ltd. is governed by the provisions of Section 2 (47)(v) of the IT Act and as the transfer of the said piece of land has taken place during the year under consideration, the Long Term Capital Gains arising on the said transfer is to be included as income of the assessee in the year under consideration Accordingly the capital gain arising on the said transaction is chargeable in the year under consideration itself In view of the facts and circumstances of the case, we confirm the order of CIT (A) and dismiss the grounds of appeal raised by the assessee.

More Under Income Tax

Posted Under

Category : Income Tax (25488)
Type : Judiciary (10239)

0 responses to “Year of taxability on transfer of lease hold rights of immovable property”

  1. uday says:

    i like to know what is procedure of transfer the midc lease plot. example plot no.p 18 of midc purches the midc auction for two person

Leave a Reply

Your email address will not be published. Required fields are marked *