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2012 (11) TMI 850 - HC - Income TaxCapital Gain - Tripartite agreement for sale of land - purchase of land by the directors - person liable to tax against capital gains - reassessment proceedings - held that - if the power of attorney holder is already having any interest in the property as per the deed dated 2.9.1991, then the deed of power of attorney must carry some reference to the first of the agreements to accept the contention of the assessees that they had divested their rights over the property in favour of the power of attorney holder and that they had handed over the property in part performance of the agreement and hence the sale consideration could not be assesseed to capital gains at the hands of the respective assessees. One and only agreement on which the assessee had divested its interest to atleast to the extent of 83.96% in favour of M/s.Sundsun Housing Development (I) Ltd. for which consideration of Rs.90 lakhs/- was fixed is the agreement dated 29.10.1994 and that Emerald Promoters Private Limited acted only as a power of attorney holder on behalf of the vendors. Tribunal has committed serious error in not analysing the documents in proper perspective, particularly, in the face of the power of attorney and the tripartite agreement not making any reference at all to the first of the agreements dated 23.10.1991 entered into by the assessee with M/s.Emerald Promoters Pvt. Ltd. to accept the contention of the assessee that possession was handed over to Emerald Promoters Pvt. Ltd. in November 1991 itself. - Decided in favor of revenue.
Issues Involved:
1. Whether the Tribunal was right in holding that the assessee had transferred the entire land to M/s. Emerald under the agreement dated 23.10.1991 for a sale consideration of Rs. 4,50,000/-? 2. Whether the Tribunal was right in holding that the sale proceeds under the tripartite agreement dated 27.10.1994 executed by the assessee, M/s. Emerald, and M/s. Sudsun cannot be brought to tax at the hands of the assessee? Detailed Analysis: Issue 1: Transfer of Entire Land to M/s. Emerald The Revenue appealed against the Income Tax Appellate Tribunal's decision regarding the assessment years 1993-94 and 1995-96. The Tribunal held that the assessee had transferred the entire land to M/s. Emerald under an agreement dated 23.10.1991 for a sale consideration of Rs. 4,50,000/-. The assessees executed a general power of attorney in favor of M/s. Emerald Promoter Pvt. Ltd., authorizing them to sell the property, receive sale consideration, and administer the land. However, the Assessing Authority issued notices under Sections 143(2) and 142(1) to the assessees, questioning why the profit on the sale of land should not be taxed as income. The Tribunal concluded that the assessees were to be assessed only for the sale consideration received for 16.04% of the undivided share of the property, as M/s. Emerald Promoter Pvt. Ltd. had taken possession of the land in 1991, fulfilling the requirements of Section 53A of the Transfer of Property Act. Issue 2: Taxation of Sale Proceeds under Tripartite AgreementThe Tribunal also held that the sale proceeds under the tripartite agreement dated 27.10.1994, executed by the assessee, M/s. Emerald, and M/s. Sudsun, could not be taxed at the hands of the assessee. The agreement indicated that M/s. Emerald Promoter Pvt. Ltd. relinquished their role as contractors due to a lack of funds, and the vendors desired to develop the property through M/s. Sudsun Housing Development (I) Ltd. The agreement detailed a sale consideration of Rs. 90 lakhs, with specific payment terms. The Tribunal found that the entire sale consideration was received by M/s. Emerald Promoter Pvt. Ltd. and not by the assessees. The Tribunal relied on Section 2(47)(v) of the Income Tax Act and the decision in D.KASTURI VS. COMMISSIONER OF INCOME TAX AND ANOTHER, concluding that no capital gain arose in the hands of the assessees as possession had been handed over to M/s. Emerald Promoter Pvt. Ltd. in 1991. Revenue's Argument:The Revenue contended that the Tribunal erred in its judgment, arguing that the General Power of Attorney dated 5.11.1991 did not reference the agreement dated 23.10.1991, and the possession given did not contemplate any transfer of interest. They argued that the tripartite agreement dated 27.10.1994 indicated that the assessees were the owners and vendors of the property, and the sale consideration of Rs. 90 lakhs should be taxed in their hands. The Revenue also cited the decision in Commissioner of Income Tax Vs. Jeelani Basha, emphasizing the conditions for applying Section 53A of the Transfer of Property Act. Assessee's Argument:The assessee argued that the agreement dated 23.10.1991 and the subsequent possession handed over to M/s. Emerald Promoter Pvt. Ltd. fulfilled the requirements of Section 53A of the Transfer of Property Act. They contended that the sale consideration of Rs. 90 lakhs was received and retained by M/s. Emerald Promoter Pvt. Ltd., as evidenced by a letter from the company. The assessee maintained that they could not be held liable for any capital gains. Court's Conclusion:The court scrutinized the documents and found no reference to the agreement dated 23.10.1991 in the General Power of Attorney or the tripartite agreement. The court concluded that the assessees did not provide sufficient evidence to prove that possession was handed over to M/s. Emerald Promoter Pvt. Ltd. in 1991. The court accepted the Revenue's argument that the agreement dated 29.10.1994 was the only valid document for the sale of 83.96% undivided share in favor of M/s. Sudsun Housing Development (I) Ltd. for Rs. 90 lakhs. The court set aside the Tribunal's order and confirmed the assessment orders, holding the assessees liable for capital gains tax on the sale consideration.
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