2020 (10) TMI 1115 - AT - Income Tax

Taxable event u/s. 56(2)(vii)(b) - transfer recognized u/s. 2(47)(vi) - year of assessment - property under reference stands received by the assessee during fy 2012-13 OR fy 2013-14, i.e., the previous years relevant to AYs. 2013-14 and 2014-15 respectively - HELD THAT - The de facto ownership, recognized in Podar Cement Pvt. Ltd. 1997 (5) TMI 2 - SUPREME COURT is for the purpose of section 22 of the Act. The reason/s therefor is not far to seek, i.e., the object of the Act, being to tax the person who is in the effective control of the asset (property), and who has a better title thereto than anyone else, receiving income therefrom in his own right. No doubt, the word employed in section 56(2)(vii) is receives . The same, again, could only mean receipt in his own right, assuming effective control over and right on the usufruct of the property, implying a de facto ownership. It is only a de facto transfer, which stands recognized u/s. 2(47)(vi) of the Act, that would result in a de facto ownership, fulfilling the requirement of a receipt u/s. 56(2)(vii) inasmuch as it enables one to exercise, for all practical purposes, rights in and over the property received . While the sale, resulting in a de jure ownership, is complete only on 24/4/2013, the de facto transfer, leading to a de facto ownership, gets completed earlier on 30/3/2013 on the execution of the instrument of sale, with each party having fulfilled his part of the contract to transfer. There is thus receipt of the subject land by the assessee on 30/3/2013, i.e., during the previous year relevant to AY 2013-14, the immediately preceding year. The taxable event u/s. 56(2)(vii)(b) thus takes place during the said year, and not the current year. That, for that year, the law did not bring the short consideration to tax, but only where the subject property is received without consideration, is a different matter altogether, with which we are not concerned and, in fact, is, to that extent, an irrelevant consideration. The Revenue s action in invoking s. 56(2)(vii)(b)(ii) for the current year is thus not sustainable in law. - Decided in favour of assessee.

Issues Involved:
1. Determination of the date of transfer for the purpose of taxation under section 56(2)(vii)(b)(ii) of the Income Tax Act, 1961.
2. Applicability of section 2(47) of the Income Tax Act, 1961, in defining 'transfer' in relation to the sale of immovable property.
3. Relevance of the Registration Act, 1908, and the Transfer of Property Act, 1882, in determining the effective date of transfer.
4. The impact of judicial precedents on the interpretation of 'transfer' and 'receipt' under the Income Tax Act, 1961.

Detailed Analysis:

1. Determination of the Date of Transfer for the Purpose of Taxation:
The primary issue is whether the property was 'received' by the assessee during the financial year 2012-13 or 2013-14. The Assessing Officer (AO) considered the date of registration (24.4.2013) as the date of transfer, thereby attracting tax under section 56(2)(vii)(b)(ii) for AY 2014-15. The assessee argued that the transfer occurred on the date of execution of the sale deed (30.3.2013), which falls in the previous year relevant to AY 2013-14. The Tribunal concluded that the taxable event under section 56(2)(vii)(b) took place during the financial year 2012-13, as the de facto transfer was completed on 30.3.2013, even though the legal ownership was established on 24.4.2013.

2. Applicability of Section 2(47) in Defining 'Transfer':
Section 2(47) of the Income Tax Act, 1961, defines 'transfer' in relation to a capital asset. The Tribunal examined whether the transfer was complete on the date of execution or registration of the sale deed. The assessee relied on judicial precedents, arguing that the transfer should relate back to the date of execution. The Tribunal noted that the term 'transfer' under section 2(47) should be given a simple meaning, considering the object of the Act. The Tribunal upheld that the de facto transfer occurred on 30.3.2013, aligning with the definition under section 2(47).

3. Relevance of the Registration Act, 1908, and the Transfer of Property Act, 1882:
The Tribunal discussed the provisions of the Registration Act, 1908, particularly section 47, which states that a registered document operates from the date of execution. The Tribunal referred to judicial precedents, including Thakur Kishan Singh v. Arvind Kumar and Hamda Ammal v. Avadiapppa Pathar, which clarified that the sale deed operates from the date of execution upon registration. The Tribunal also considered the amendments made by the Registration & Other Related Laws (Amendment) Act, 2001, which necessitated the registration of contracts to transfer immovable property.

4. Impact of Judicial Precedents:
The Tribunal examined several judicial precedents, including Podar Cement (P.) Ltd. and Mormasji Mancharji Vaid, which supported the assessee's contention that the transfer date should be the date of execution. The Tribunal also considered the decision in Balbir Singh Maini, which emphasized the requirement of registration for recognizing a transfer under law. The Tribunal concluded that while the sale resulting in de jure ownership was complete on 24.4.2013, the de facto transfer occurred on 30.3.2013, leading to de facto ownership and fulfilling the requirement of 'receipt' under section 56(2)(vii).

Conclusion:
The Tribunal upheld the order of the Commissioner of Income Tax (Appeals), concluding that the taxable event under section 56(2)(vii)(b) occurred during the financial year 2012-13, and not the current year. Consequently, the Revenue's appeal was dismissed. The Tribunal emphasized that the de facto transfer and receipt of the property by the assessee occurred on 30.3.2013, aligning with the judicial precedents and the provisions of the Registration Act, 1908.

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