2018 (11) TMI 137 - HC - Income Tax

Capital Gains - Transfer u/s 2(47) - Tribunal held that the transaction or sale was not complete in the year under consideration - Held that - The sale or transfer was not complete on the date of the execution of the agreement as is now urged and erroneously understood by the Assessing Officer and the Commissioner. The Tribunal was right in its conclusion that on facts, the agreement executed on 14th February, 2011 is but an agreement for sale of immovable property. The law then prevailing required such an agreement to be registered. In any event merely because it is registered, that does not partake the character of a conveyance or a sale deed automatically. Thus, the possession also was not handed over but was to be handed over on compliance with certain obligations by the Vendor. It is in these circumstances that the total consideration was received on 16th June, 2011. It is evident that the Vendor was in possession of the premises from February to June 2011. It was carrying on its business from these premises up to April 2011. This would indicate as to how the Tribunal applied the correct legal principles and construed the clauses in the agreement, otherwise than as understood by the Assessing Officer and the Commissioner

Summary

Issues:
Challenge to order passed by Income Tax Tribunal for Assessment Year 2011-2012.

Analysis:
The Revenue challenged the Income Tax Tribunal's order allowing the Assessee's Appeal for the Assessment Year 2011-2012. The Appellant argued that the Tribunal erred in holding the transaction was not complete in the relevant year, emphasizing that the agreement was duly stamped and registered, resulting in the disposal and creation of title in favor of the transferee. The Tribunal's decision led to gains being offered in a subsequent assessment year, causing a loss of revenue. However, upon reviewing the agreement and relevant clauses, the Court disagreed with the Appellant. The agreement clearly outlined the transfer of property upon the payment of consideration, with specific conditions to be met by both parties. The Court noted that possession was not handed over immediately, and the total consideration was received later. The Tribunal's interpretation aligned with legal principles, and the findings were based on the evidence presented. Consequently, the Court found no substantial legal questions in the appeal and dismissed it.

This case involved the interpretation of an agreement for the sale of immovable property and whether the transaction was complete in the relevant year for tax assessment purposes. The Court analyzed the clauses of the agreement, emphasizing the conditions for transfer and possession outlined within it. The Court highlighted that the agreement required the payment of consideration for the transfer to take effect, with specific obligations to be fulfilled by both parties. The Court noted that possession was to be handed over upon compliance with certain conditions, and the total consideration was received at a later date. The Court affirmed the Tribunal's decision, stating that it correctly applied legal principles in interpreting the agreement and assessing the transaction's completion. The Court found the Tribunal's findings to be based on the evidence and not legally erroneous, leading to the dismissal of the appeal.

In conclusion, the Court's analysis focused on the agreement's provisions, the timing of possession transfer, and the receipt of consideration to determine the completion of the transaction. The Court upheld the Tribunal's decision, emphasizing the correct application of legal principles in interpreting the agreement and assessing the transaction. The Court found no substantial legal questions in the appeal and dismissed it, affirming the Tribunal's findings based on the evidence presented.