2010 (2) TMI 153 - HC - Income Tax

Capital Gain- Transfer- The assessee the owner of the property entered into n agreement with a firm to sell the property for consideration of Rs. 25 lakhs. At the time of signing the agreement she received advances. She also obtained a no objection certificate from the authorities under Chapter XX-C of the Income Tax Act 1961. However she did not execute any sale deed in favour the agreement holder. But on their request she executed a power of attorney in favour of an individual authoriging him to do various acts with reference to the property including execution of deed or deeds of conveyance. The property was sold four different lots. The assessee purchased a residential property for a total consideration of Rs. 10, 70, 000 and filed a return for the assessment year 1994-95 and reported a capital gain from the sale of the property treating the transfer of possession to the proposed vendees as having resulted in a transfer for the purpose of section 2(47). Thereafter she filed a statement revising the net capital gain claiming that there was no transfer during the assessment years 1993-95 1994-95 and that the actual transfer was made in the assessment year 1995-96. The Assessing officer noticed that she had invested a sum of Rs. 4, 60, 000 in a site for the purpose of construction of residential house thereon and the unutilized capital gain had not been deposited in the capital gains scheme account and determined the long term capital gain and subjected it to tax. Held that- the subsequent act of the assessee in executing the power of attorney and the sale deed executed by power holder on the basis of such power of attorney would not in any way alter the status of the parties to the agreement for applicability of section 53A of the Transfer of property Act 1882. The single judge rightly held that the assessee could no longer assert possessory rights against the firm to which possession was already given pursuant to the agreement and that too after receiving the full sale consideration.

Summary

Issues:
1. Interpretation of section 53A of the Transfer of Property Act.
2. Application of section 53A to the facts of the case.
3. Determination of possession and consideration under the agreement.
4. Relevance of subsequent actions in relation to section 53A.

Interpretation of section 53A of the Transfer of Property Act:
The court analyzed the provisions of section 53A of the Transfer of Property Act to determine the requirements for invoking the doctrine of part performance. It was highlighted that the act or part performance must be referable to the contract in question and not to any other title. The court emphasized that possession handed over under the agreement is crucial for invoking section 53A.

Application of section 53A to the facts of the case:
The court examined the agreement dated March 29, 1993, between the appellant and M/s. Chettinad Investments, noting that it pertained to the entire property. Despite obtaining a no objection certificate, the appellant did not execute the necessary sale deeds. However, the appellant had received the full sale consideration even before the power of attorney was executed. The court held that subsequent actions, such as selling portions of the property to third parties using the power of attorney, did not affect the applicability of section 53A. The court concluded that the status of the parties to the original agreement remained unchanged for the purposes of section 53A.

Determination of possession and consideration under the agreement:
The court observed that the appellant had given possession to M/s. Chettinad Investments and received the entire sale consideration mentioned in the agreement before the sale deeds were executed by the power holder. This fact was considered significant in assessing the application of section 53A to the case.

Relevance of subsequent actions in relation to section 53A:
The court rejected the argument that the appellant's subsequent actions, including executing the power of attorney and sale deeds to third parties, altered the status of the original agreement parties for the purposes of section 53A. It was emphasized that the clauses in the original agreement and the performance in accordance with it were the key considerations for applying section 53A. The court affirmed that the appellant could not assert possessory rights against the firm after receiving the full sale consideration.

In conclusion, the court found no fault in the order of the learned single judge and dismissed the writ appeal without costs.