2022 (11) TMI 1261 - HC - Income Tax

Capital gain - 'Transfer' within the meaning of Section 2(47)(v) - recital to the effect that possession of the property in question was delivered in part performance of the contract - HELD THAT - As in order to attract Section 2(47)(v) of the IT Act, it is absolutely essential that possession of the property in question should be delivered in terms of Section 53-A of the T.P. Act. In the instant case, a perusal of the Sale Agreement, Agency Agreement and GPA, will clearly indicate that possession of the said property covered under the said documents has not been delivered as mandatorily required under Section 53-A of the T.P. Act. In fact, the contents of the said documents will clearly indicate that there is no recital with regard to the petitioner handing over possession or putting the party in possession in part performance as required under Section 53- A of the T.P. Act. Sale Agreement under which, the petitioner is said to have agreed to sell the said land in favour of the third party is also not a registered document as required under Section 17(1-A) of the Registration Act and on this ground also, it cannot be said that the petitioner had delivered or put the other party in possession in part performance for the purpose of Section 53- A of the T.P. Act. Thus in the absence of any recital in the aforesaid three documents, much less any recital to the effect that possession of the property in question was delivered in part performance of the contract, the three documents executed by the petitioner cannot be construed or treated as constituting a 'Transfer' within the meaning of Section 2(47)(v) of the IT Act. Thus so long as the documents do not constitute a 'Transfer' within the meaning of Section 2(47)(v) of the IT Act, the petitioner cannot be made liable to pay capital gains tax on the amount received by him. Thus the impugned Assessment order deserves to be quashed and the matter remitted back to respondent 1- Assessing Officer for reconsideration afresh in accordance with law.

Issues:
1. Quashing of the assessment order passed by the Commissioner of Income Tax (Appeals)
2. Directing the production of government notification and information for valuation of stock
3. Declaration on liability to capital gains tax based on project completion
4. Mandamus for material relied on by authorities for computation of capital gains
5. Any other writ or direction as deemed fit by the Court

Issue 1: Quashing of Assessment Order:
The petitioner sought the quashing of the assessment order passed by the Commissioner of Income Tax (Appeals) and the first respondent for A.Y. 2013-14. The petitioner argued that the documents executed did not constitute a 'Transfer' within the meaning of Section 2(47)(v) of the Income Tax Act, 1961. The petitioner contended that possession was not delivered as required under Section 53-A of the Transfer of Property Act, and therefore, there was no liability to pay capital gains tax. The High Court agreed with the petitioner's arguments, stating that the documents did not constitute a 'Transfer' under the IT Act. The Court quashed the assessment order and remitted the matter back to the Assessing Officer for reconsideration.

Issue 2: Production of Government Notification and Information:
The petitioner also requested the production of the government notification dated 17.04.2007 and information obtained from the office of the Sub Registrar for the valuation of stock. However, the Court did not specifically address this request in its judgment.

Issue 3: Declaration on Liability to Capital Gains Tax:
The petitioner sought a declaration that the liability to capital gains tax arises only after the project is completed and consideration is received, not during the execution of agreements. The Court did not provide a specific declaration on this issue but focused on the lack of 'Transfer' as per the IT Act.

Issue 4: Mandamus for Material Relied On:
The petitioner requested a writ of Mandamus directing the respondents to provide the material relied on for the computation of capital gains before passing the assessment order. The Court did not address this request specifically in its judgment.

Issue 5: Any Other Writ or Direction:
The petitioner requested any other writ or direction as deemed fit by the Court. The Court allowed the petition, set aside the assessment order, and remitted the matter back to the Assessing Officer for reconsideration in accordance with the law. The petitioner was granted liberty to submit additional pleadings and documents for further consideration.

Overall, the High Court granted the relief sought by the petitioner, quashing the assessment order and remitting the matter back for reconsideration, emphasizing the absence of a 'Transfer' as defined under the Income Tax Act.

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