2002 (2) TMI 59 - HC - Income Tax

Issues Involved:
1. Whether the Tribunal was right in law and had valid materials in holding that no transfer took place as per the first sale deed dated June 11, 1981, read with the instrument of resale dated June 22, 1981, for the purpose of levying tax under the head 'Capital gains'.

Detailed Analysis:

Issue 1: Validity of Transfer for Capital Gains Tax

Factual Matrix:
The assessee sold a property for Rs. 2,00,000 by a sale deed dated June 11, 1981, to a vendee, but it was not presented for registration. Instead, another deed titled "Deed of resale agreement" was executed on June 22, 1981, specifying conditions for resale. Both documents were registered on June 22, 1981. The Revenue authorities treated this transaction as inviting capital gains under section 45 of the Income-tax Act.

Assessing Officer's View:
The Assessing Officer concluded that the assessee was liable to pay capital gains tax, rejecting the argument that the first document was a conditional sale and that no transfer occurred since both documents were registered together.

Commissioner of Income-tax (Appeals) View:
The Commissioner upheld the Assessing Officer's view, stating that the transaction dated June 11, 1981, was a transfer and thus subject to capital gains tax. The Commissioner distinguished this case from the Punjab and Haryana High Court decision in Hira Lal Ram Dayal v. CIT [1980] 122 ITR 461.

Income-tax Appellate Tribunal's View:
The Tribunal held in favor of the assessee, stating that there was no intention to transfer the asset as the sale deed and agreement of sale were registered on the same day, indicating no intention to transfer ownership.

Revenue's Argument:
The Revenue argued that the sale deed dated June 11, 1981, constituted a complete transfer of the immovable property, including the transfer of possession. They contended that the subsequent agreement dated June 22, 1981, did not negate the effect of the transfer.

Assessee's Argument:
The assessee argued that the transaction did not constitute a sale under section 45 of the Income-tax Act, relying on section 2(47) and section 54 of the Transfer of Property Act. The counsel emphasized that ownership was not transferred as the vendee agreed to sell back the property within three years.

Court's Analysis:
The court examined whether the transaction amounted to a transfer under section 45 of the Income-tax Act. It stated that once the registration of the sale deed took place, the transaction dated back to the date of execution. The court rejected the assessee's argument that the transaction was a "conditional sale" and not a transfer of ownership.

Legal Precedents:
The court considered various precedents, including:
- G. Srinivasalu Naidu v. Raju Naicker, AIR 1955 Mad 635
- Lalta Prashad v. Jagdish Narain, AIR 1927 All 137
- Sital Chandra Kolley v. Heirs of Mihilal Kolley, AIR 1955 Cal 21
- Bai Dosabai v. Mathurdas Govinddas, AIR 1980 SC 1334
- CIT v. Mrs. Grace Collis [2001] 248 ITR 323 (SC)

The court found that these decisions did not support the assessee's contention that the transaction was not a sale.

Conclusion:
The court concluded that the sale deed dated June 11, 1981, registered on June 22, 1981, constituted a transfer under section 45 of the Income-tax Act. The subsequent agreement did not negate the transfer, and the transaction was subject to capital gains tax. The reference was answered against the assessee and in favor of the Revenue.

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