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TMI Blog2004 (12) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... sferred to the buyer who constructed shops and payments of Rs. 55,00,000 was received through cheques. 2. Ld. CIT(A) has erred in law and on facts in holding that there was no transfer of property whereas Assessing Officer had sufficient material on record to substantiate that there was transfer of property within the provisions of sections 2(47) and 53A of the Income-tax Act, 1961. 3. Ld. CIT(A) has erred in law and on facts in deleting capital gain without appreciating material available on record." 4. Before dealing with the issues involved in these appeals, we consider it proper to narrate the relevant facts concerning these grounds, which are as under: (i) Smt. Pushpa Devi Jain, Shri C.P. Jain and Shri V.P. Jain were co-owners of the property bearing Bungalow No. 210-B, West End Road, Meerut measuring about 45,000 sq. yds. (equivalent to about 9 acres). Whereas the share of Smt. Pushpa Devi Jain in the above-referred property was one-half, the other two co-owners had the share of one-fourth each. On this property, besides the bungalow there were some hutments etc. and some portion was rented out. (ii) Vide agreement dated 4-7-1974, all the co-owners agreed to transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 210-B, West End Road, Meerut were found and seized. Besides certain notings about the payments received by the owners etc., a copy of agreement dated7-9-1991referred to above, was also found. (vi) The Assessing Officer has noted the details from the documents seized. The relevant extract of the assessment order in this regard is being reproduced as under: "Rs. 11,111 By cheque Rs. 25,000 By cheque Rs. 50,000 By five cheques Rs. 2,00,000 By four cheques Rs. 52,00,000 By two cheques Rs. 13,889 By cash." (vii) On enquiry, the assessee admitted that the deal was for Rs. 84 lakhs and out of this amount, a sum of Rs. 21 lakhs was left with the purchasers for settling old disputes about the land and for obtaining necessary permission from the concerned authorities. It was also stated that deal was for "as is where is basis". Thus, a total sum of Rs. 63 lakhs was to be received by the co-owners as per ratio of their respective shares. (viii) The Assessing Officer proposed to levy capital gain tax on the basis of the agreement dated7-9-1991in the assessment year 1992-93. The contention of the assessee was that since possession remained with the purchasers of 1974, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long-term capital gain on Rs. 66,00,000 in assessment year 1992-93)" (xi) The assessee challenged the findings of the Assessing Officer before the ld. CIT(A). It was submitted on behalf of the assessee in appeal that as the possession remained with the buyers of 1974 agreement, there was no question of co-owners handing over the possession to the subsequent purchasers, namely, M/s. Agarwal's Associates. It was pointed out that the appellants were still legal owners of the property as the balance amount has not been paid by M/s. Agarwal's Associates and as possession could not be delivered to M/s. Agarwal's Associates, it could not be said that there was any transfer of the property within the meaning of section 2(47) of the Income-tax Act for the levy of capital gain. In this regard, reference was also made to the provisions contained under section 2(47)(v) of the Income-tax Act and it was submitted that agreement dated 7-9-1991 which was only on a stamp paper of Rs. 6 cannot be treated to be a valid document for transferring the property. Another submission made on behalf of the assessee was that as possession was not transferred to the purchasers at the time of agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not materialise as subsequently M/s. Agarwal's Associates did not pay the balance of the amount to them. Though the appellant has received substantial amount from Shri Mahavir Prasad Jain & Others as well as from certain other persons for sale of plot/lands (referred earlier) yet they did not execute any sale deed with any of the parties. We are not, in the year under consideration, concerned with the taxability of the amount realised by the appellant from the said parties, the precise question in the year under consideration is as to whether it could be said that the appellant had by virtue of agreement to sell with M/s. Agarwal's Associates transferred the possession of the property to them. It is clear from the agreement to sell that the appellant had agreed to sell the property in question on 'as is where is' basis. It was also agreed between the parties that a sum of Rs. 21 lakhs will not be given to the sellers and will be kept apart for settling the matters with Mahavir Prasad Jain & Others and for clearing other legal hindrance and claims of other parties. There is nothing in the agreement as such which could indicate that the appellant had given the po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivery of possession, no transfer took place. According to the ld. DR, by virtue of this deed, all the rights of the co-owners stood transferred to the transferees. He further submitted that the ld. CIT(A) has not properly considered the contents and nature of this agreement and, therefore, the view taken by him is not justified. (xiv) On the other hand, the ld. Counsel for the assessee, Shri Salil Agarwal supported the order of the ld. CIT(A) and submitted that since, during financial year 1991-92 relevant to assessment year 1992-93, the possession of the property remained with the purchaser of agreement dated 4-7-1974, the question of transferring the possession of the property on the basis of the agreement to M/s. Agarwal's Associates did not arise. He pointed out that the power of attorney given to Shri A.P. Agarwal was also cancelled. According to him, the power of attorney was itself invalid on law on account of following reasons: (a) A power of attorney holder cannot execute a power of attorney in favour of three persons; (b) the property could not be transferred since the property had been attached by the Income-tax Department in respect of demand outstanding again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on considering the entire relevant material on record as well as the submissions of the ld. Senior DR and that of the ld. Counsel for the assessee, we proceed to adjudicate the issues involved. On the basis of the material placed before us, the following are undisputed facts: (i) Smt. Pushpa Devi Jain, Shri C.P. Jain and Shri V.P. Jain were absolute owners of the property, namely, Bungalow No. 210-B, West End Road, Meerut. (ii) Although vide agreement dated 4-7-1974, the co-owners agreed to sell the above property to Shri Mahavir Prasad Jain and Others and received a total amount of Rs. 8 lakhs from them and also transferred possession vide agreement dated 15-6-1975, rights of ownership were not transferred to them as nothing further was done by the parties in compliance of the said agreement. Thus, the co-owners retained title on this property. (iii) Vide agreement dated 7-9-1991, the co-owners agreed to sell the property on the basis of "as is where is" basis. The sale consideration as well as the modes of payment were set out in this deed. (iv) After the agreement dated 7-9-1991, neither any further agreement nor any further sale deed was executed by the co-owners. (v) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling the enjoyment of, any immovable property. Explanation.- For the purposes of sub-clauses (v) and (vi), "immovable property" shall have the same meaning as in clause (d) of section 269UA." (i) It may be pointed out that the definition of transfer as contained under section 2(47) is for a particular purpose and it relates to the transfer of a capital asset. This definition is inclusive definition as it includes several modes of transfer, besides the mode of sale, exchange and relinquishment of the asset, there are other modes also. In clause (vi) of section 2(47), a very wide definition of transfer has been given. We repeat this clause for proper analysis and appreciation of the nature of transaction before us: (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring or enabling the enjoyment of, any immovable property. (ii) By virtue of Explanation attached to clauses (v) and (vi) of section 2(47), the definition of immovable property as given in clause (d) of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired or made and not from the time of its registration. In the case of Arundhati Balkrishna v. CIT [1982] 138 ITR 245, the Hon'ble Gujarat High Court, taking this view, held that the transfer of capital asset becomes effective under section 45 of the Income-tax Act from the date on which the document was executed, in case its registration was subsequently admitted before the Registrar. Thus, the court came to the conclusion that the transfer was effected in the previous year in which the document was executed but was presented for registration and was registered in a subsequent year. A similar view was expressed by the Hon'ble Supreme Court of India in the case of Ravi Saran Lall v. Mst. Domini Kuer AIR 1961 SC 1747. The Hon'ble Supreme Court explained the meaning of 'owner' for the purposes of section 22 of the Income-tax Act in the case of CIT v. Poddar Cement (P.) Ltd. [1997] 226 ITR 625 and observed as under:- "Considering the provisions of the Act, English decisions, Jodha Mal Kuthiala's case [1971] 82 ITR 570 (SC) and passages from the G.W. Paton on Jurisprudence, Dias on Jurisprudence, Stroud's Judicial Dictionary and Pallock on Jurisprudence, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s own right. Thus, the liability of taxation is fixed on the person who receives and is entitled to receive the income from the property in his own right. Clarifying the concept of ownership for the purpose of Income-tax Act, the Hon'ble Supreme Court has held as under: "From the memorandum explanation the Finance Bill, 1987, it is clear that the amendment to section 27 of the 1961 Act was intended to supply an obvious omission or to clear up doubts as to the meaning of the word "owner" in section 22. The amendment introduced by the Finance Bill, 1987, was declaratory/clarificatory in nature so far as it related to section 27(iii), (iiia) and (iiib). Consequently, these provisions are retrospective in operation. Hence, though under the common law "owner" means a person who has got valid title legally conveyed to him after complying with the requirements of law such as the Transfer of Property Act, the Registration Act etc., in the context of section 22 of the Income-tax Act, 1961, having regard to the ground realities and further having regard to the object of the Income-tax Act, namely, to tax the income, "owner" is a person who is entitled to receive income from the prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement. Hence, this agreement is the sole basis of transferring the rights of ownership in the property. The owners received payment and continued to receive the balance payment only under this agreement. By virtue of this agreement, the transferee took further steps for the recovery of the possession. This was done on the basis of authority given under this agreement by the co-owners. Even in the arbitration proceedings though the co-owners were made party but they did not raise any objection. Had they still treated themselves to be the owners of the property, they would have certainly objected to the delivery of the possession by the 1974 purchases to the purchasers under the agreement of 1991. (x) At the time of hearing of this appeal, the Bench enquired from the parties and in particular from the assessee, regarding any subsequent deal or document for the transfer of the disputed property. No such deal or transaction regarding sale or transfer of this property could be pointed out. It could also not be pointed out that M/s. Agarwal's Associates were not owners of the property on the basis of this agreement. Thus, this agreement is the only document on the basis of which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to pay all the amounts received by the signatures of the first party. In paras 6 and 7 of the agreement the second party is made responsible for obtaining the requisite permissions for sale. In para 11, it is clearly mentioned that, 'if the first party object to execute and register the sale deed or agreement etc. as per direction of the second party then the second party have a right to sue for specific performance and get the registration through court, in this condition all the expenses of court will be the liability of the first party.' (xii) In view of the various conditions and stipulations, in the above agreement and on reading the agreement as a whole, it is found that the owners had done everything on their part to transfer the rights in the property. It may be pointed out again that this agreement has been treated to be binding by the parties and both the parties have acted upon the same. The owners do not deny that the property was not transferred to M/s. Agarwal's Associates. In fact, the version of the assessee is that the transfer took place in the year 1999 when delivery of possession was given to the purchaser, this contention is not acceptable beca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9UA immovable property includes any rights with respect to any land or building etc. In the present case the owners did not have physical possession but they had the rights of ownership in the property and by transferring such rights to the purchasers by virtue of 1991 agreement, they transferred immovable property within the meaning of the above provision. (xv) The ld. CIT(A) has considered the provisions of section 2(47)(v) for holding that as at the time of execution of agreement dated 7-9-1991 the possession was not handed over, no transfer took place under the said agreement or by virtue of the said agreement. He has also considered section 53A of the Transfer of Property Act, which relates to part performance of the contract and possession taken under such contract. In our considered opinion, the ld. CIT(A) has mis-directed himself in invoking the provisions of section 2(47)(v) of the Income-tax Act because in the present case the possession was not delivered in pursuance of the agreement. (xvi) The ld. Counsel for the assessee pointed out that in assessment year 1999-2000, the assessee filed return disclosing the capital gain on transfer of the said Bungalow and the Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrespective of the fact which course is more beneficial to the Revenue. In our opinion, the language of the relevant provisions of the present Act is quite clear and unambiguous. Section 183 shows that where Parliament intended to provide an option, it provided so expressly. Where a person is taxed wrongfully, he is no doubt entitled to be relieved of it in accordance with law, but that is a different matter altogether. The person lawfully liable to be taxed can claim no immunity because the Assessing Officer [Income-tax Officer] has taxed the said income in the hands of another person contrary to law." 8. On the basis of the above, we are unable to accept the arguments of the ld. Counsel for the assessee and rejecting the same, we uphold the view taken by the Assessing Officer. 9. In view of the above, we are unable to uphold the findings of the ld. CIT(A) and after setting aside the same, we hold that the transfer of the capital asset i.e., Bungalow No. 210-B, West End Road, Meerut, took place by virtue and under the agreement dated 7-9-1991 in the financial year 1991-92 (assessment year 1992-93) and as such, the Assessing Officer was fully justified in levying the capital gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f loan given on interest in the relevant assessment years. He also took the interest @ 24% p.a. and worked out the notional interest in the following various assessment years as under : Assessment Year Amount of Loan Intt. Earned 1991-92 3,97,111/- 95,306/- 1992-93 11,05,489 2,65,370/- 1993-94 10,07,906/- 2,41,897/- 1994-95 7,16,828/- 1,72,039/- 1995-96 2,37,575/- 81,018/- (iii) On appeal, it was submitted before the ld. CIT (A) that the Assessing Officer was not justified in working out the notional interest on the basis of presumptions. In this regard, before the CIT (A), following submissions were made : "7.2 The learned counsel for the appellant submitted that there was no material with the A.O. to come to the conclusion that the appellant, Shri C.P. Jain and Shri V.P. Jain had advanced cash in hand on interest to various parties and had earned the interest. This is a pure presumption on the part of the A.O. and the addition cannot be made on whims and without any material on record. The A.O. has also not rebutted the appellant's stand that the cash was kept with Shri C.P. Jain. Irrespective of this fact, he mentioned that the A.O. had himself mentione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri C.P. Jain might have given some amount to his brother Shri Sharad Jain out of family fund to keep with him and there was no interest charged nor Shri Sharad Jain has paid any interest. It was further contended that the rate of 24% interest per month is not correct and the market rate for lending money could at best be 15% p.a. It was explained that this annexure is memorandum of copy as written over in the diary. In this regard, confirmation from Shri Sharad Jain was also filed regarding non-receipt of any interest. (ii) The Assessing Officer did not accept the explanation of the assessee in view of the fact that at page 231 of the seized Book B-11, the receipt of interest from Shri Sharad Jain at Rs. 2,000/- from 14.4 to 13.5 and similarly on page 226, the receipt of Rs. 2,000/0- from 13.5.92 to 12.6.92 was mentioned. The Assessing Officer thus correlated Annexure B-l with Annexure B-11 and held that money was definitely advanced to Shri Sharad Jain by the assessees who received interest @ Rs. 2,000/- p.m. for the loan of Rs. 1 lac. On this basis, he applied the rate of 24% p.a. on the loan advanced and worked out the receipt as under : A.Y. 1992-93 14,000/- 1993-94 24,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) During the course of search on annexure B-1 page 1 of the book, there was following entry : 2 ½ to Babuji on 13.9.91 @ 24% interest p.a. 1 1/2 to Babuji on 28.11.1991 @ 24% interest p.m. In order to explain the above entries, it was submitted on behalf of the assessee that a sum of Rs. 4 lacs was given by Shri C.P. Jain to his relation to invest the same @ 24% p.a. but the relation could not do so and returned the money back later. In support, affidavit of father-in-law of Shri C.P. Jain was also filed. It was further submitted that this money was later on invested in the purchase of a piece of land at Saket, Meerut. To substantiate this version, the purchase deed was also furnished. The Assessing Officer did not accept this version and rejected the same. In doing so, he also made reference to certain alterations on page 231 and 227 of B-11 which related to the charging of interest. On the basis of these entries, he held that the interest was received from Devband party. He thus worked out the interest in various assessment years in the following manner: A.Y. 1992-93 Rs. 32,500/- plus 13,500/- = 46,000/- 1993-94 Rs. 96,000/- Rs. 96,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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