2002 (1) TMI 283 - AT - Income Tax

Summary

Issues Involved:
1. Determination of the date of transfer of property.
2. Applicability of section 4(1)(a) of the Gift-tax Act.
3. Validity of the unilateral resolution by the trustees.
4. Assessment year for deemed gift.

Detailed Analysis:

1. Determination of the Date of Transfer of Property:
The primary issue revolves around determining whether the transfer of the plot of land occurred on 31-3-1984, when the assessee received consideration by book adjustment, or on 28-11-1989, when the sale deed was registered. The Assessing Officer and the learned Accountant Member concluded that the transfer occurred only upon the execution and registration of the sale deed on 28-11-1989, citing the necessity for a registered instrument to effectuate a valid transfer of immovable property under section 123 of the Transfer of Property Act. This view was supported by the jurisdictional High Court's decision in K. Madhavakrishnan v. CGT, which held that mere delivery of possession does not constitute a transfer without a registered deed.

2. Applicability of Section 4(1)(a) of the Gift-tax Act:
The Assessing Officer applied section 4(1)(a) of the Gift-tax Act, which deems the difference between the market value of the property at the date of transfer and the consideration received as a gift. The property was valued at Rs.2,80,000 by the Registrar, while the sale consideration was Rs.55,000. The learned Judicial Member, however, argued that the transfer was effective on 31-3-1984, when the consideration was received, thus suggesting that the deemed gift should be assessed for the year 1984-85. The learned Accountant Member, supported by the Third Member, maintained that the transfer was completed only with the registration of the sale deed in 1989, making the assessment year 1990-91 relevant.

3. Validity of the Unilateral Resolution by the Trustees:
The unilateral resolution by the trustees of Ayyappa Family Trust on 31-3-1984, which purported to adjust the sale consideration against the delivery of machinery and furniture, was scrutinized. The learned Judicial Member considered this resolution sufficient to effectuate the transfer, aligning with the provisions of section 53A of the Transfer of Property Act regarding part performance. However, the learned Accountant Member and the Third Member emphasized that the Gift-tax Act requires a registered instrument for a valid transfer, thereby invalidating the resolution as a means of transfer.

4. Assessment Year for Deemed Gift:
The core of the dispute was the appropriate assessment year for the deemed gift. The learned Judicial Member proposed the year 1984-85 based on the consideration received in 1984, while the learned Accountant Member and the Third Member concluded that the assessment year 1990-91 was appropriate, as the transfer was completed with the registration of the sale deed in 1989. The Third Member aligned with the view that a gift of immovable property necessitates a registered deed, thus supporting the assessment for the year 1990-91.

Conclusion:
The majority decision, supported by the Third Member, upheld that the transfer of the property was completed only upon the registration of the sale deed on 28-11-1989. Consequently, the deemed gift under section 4(1)(a) of the Gift-tax Act was correctly assessed for the assessment year 1990-91, and the appeal by the Revenue was allowed.