2008 (1) TMI 901 - SC - Income Tax

Computation of capital gains - transfer of 7,000 sq. land - such land divided in 24 plots and transfer to different 24 person - scope of section 2(47)(v) read with section 53A of the Transfer of Property Act - erroneous order of the Tribunal - HELD THAT - It may be noted that there is nothing on record to indicate the name of the applicant who had applied for sub-division. No revenue or municipal records have been produced which could have indicated as to whether the area admeasuring 7,000 sq. ms. or a part thereof stood conveyed and delivered to M/s. Kumaon Construction Ltd. at the relevant time. It is not clear as to how many plots stood conveyed and how many plots remained. In the absence of basic facts which are primary facts, we are of the view that the Tribunal could not have allowed the appeal in favour of the assessee. What is the indexed cost of each plot is not mentioned. Unfortunately, none of the aspects have been considered even by the High Court in its impugned judgment. Hence, we remit the matters to the Tribunal for fresh consideration in accordance with law. We make it clear that the assessee shall file all relevant documents including conveyance(s) in favour of the nominees of M/s. Kumaon Construction Ltd., the relevant plan indicating sub-division of plots, copy of the application made to the competent authority for sub-division of the plots and lastly, the Municipal and Revenue records in which the relevant entries made regarding possession. Basically, the question would be how many plots have been conveyed, how many are retained, whether possession of the entire land was ever handed over to Kumaon Construction Ltd. and how was cost calculated by the assessee. Thus, the appeals stand allowed and the impugned judgments of the High Court and the Tribunal are set aside. The matters are remitted to the Tribunal for fresh consideration in accordance with law.

Summary

Issues:
Scope of section 2(47)(v) read with section 53A of the Transfer of Property Act.

Analysis:
The case involves an agreement for the sale of vacant land by the assessee to a construction company, with a certain amount received as advance. The Assessing Officer assessed capital gains based on the total consideration fixed in the agreement, considering a major portion of the land already sold. The CIT(A) upheld this view, but the Tribunal disagreed, stating that the assessee had transferred 24 plots to different persons for a lower total consideration. The High Court also upheld the Tribunal's decision. However, the Supreme Court noted that crucial facts were missing, such as possession details, names of sub-division applicants, and lack of produced sale deeds. The possession is a crucial element in determining a transfer, which was not adequately addressed in the case. The Court emphasized the importance of primary facts like possession, number of conveyed plots, and indexed cost of each plot, which were not considered by the lower courts. Therefore, the Supreme Court remitted the matter to the Tribunal for fresh consideration, directing the assessee to provide relevant documents for a comprehensive review.

In conclusion, the Supreme Court allowed the appeals, setting aside the judgments of the High Court and Tribunal, and remitted the case to the Tribunal for a fresh examination in accordance with the law. The Court highlighted the importance of possession details, sub-division records, conveyance documents, and municipal and revenue records to determine the actual transfer and calculate the cost accurately. The case underscores the significance of primary facts and legal principles in assessing capital gains in property transactions under the Transfer of Property Act.