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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 ..... ower of attorney was also executed on behalf of the co-owners for taking further steps and although this power of attorney was cancelled subsequently, the agreement was not cancelled or revoked. Thus, between the parties to this agreement, it remained a valid document. It may be pointed out that on the basis of this agreement, M/s. Agarwal s Associates even sold some shops in subsequent years and this act of M/s. Agarwal s Associates was not challenged by the assessees, which indicates that the assessee treated M/s. Agarwal s Associates as owners of the property by virtue of this agreement. The owners had already made arrangements for delivery of the possession and for all other necessary acts under the agreement. Thus, the transfer of rights of ownership by the owners stood concluded by this agreement. From the above, it is clear that the transferors i.e., the co-owners had done everything on their part to convey the title to the transferor. The intention of the parties to the agreement has also to be seen while construing the document. In the present case, clear intention of parties was to change hands over the property. So far as the present matter is concerned in view of clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing common grounds: "1. Ld. CIT(A) has erred in law and on facts in holding that capital gain is not taxable in respect of sale agreement dated 7-9-1991 in pursuance of which possession over property was transferred 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing modes of payment and responsibility of the purchasers for getting ceiling permission to sale etc. (v) A search was conducted in November, 1994 in the premises of the assessees and certain documents relating to sale of Bungalow No. 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 respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 is Rs. 18,00,000. Long Term Capital Gain is, therefore, to be charged in assessment year 1992-93 on 84 minus 18 = 66 lakh rupees. The name is to be divided in the hands of Smt. Pushpa Devi Jain, Shri C.P. Jain and Shri V.P. Jain in the ratio discussed above. (Charge 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 submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Agarwal's Associates. M/s. Agarwal's Associates also entered into an agreement, as mentioned earlier, with them to take possession of the property on 2-9-1991 for a consideration of Rs. 10,00,000 and paid Rs. 10,000 at the time of agreement. However, this agreement 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 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their interest in the property to the purchases and on the basis of this agreement, the purchasers made payments also to the owners. According to him, the property was sold or transferred on the basis of "as is where is" basis and, therefore, it cannot be said that in absence of delivery 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 itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Agarwal's Associates in assessment year 1995-96, he submitted that firstly such transfer was illegal and secondly this transfer took place in assessment year 1995-96 and not in assessment year 1992-93. 5. In the setting of above background, facts and circumstances of this matter and 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Transfer of Property Act, 1882 (4 of 1882); or (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. 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asset. In such arrangement, there may not be requirement of any registered sale deed to convey the title to the property as envisaged under section 54 of Transfer of Property Act. Otherwise also in view of section 47 of the Registration Act, a registered document operates from the time from which it would have commenced to operate if no registration thereof had been required 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act, owner is a person, who is entitled to receive income in his own right. According to Hon'ble Supreme Court, section 22 does not require registration of sale deed. While considering the provisions of sections 22 to 27 of Income-tax Act, the Hon'ble Supreme Court has held that the owner must be that person who can exercise the rights of the owner, not on behalf of owner but in his 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" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of immovable property can be completed even without delivery of possession of the property. What is to be transferred by the owners is the title in the property and their interests in such property? On scrutiny of the agreement, it is found that the owners agreed to sell the property and to transfer their rights to the purchasers under this agreement. The owners have accepted this agreement to be a final deal for the transaction of transfer as they never cancelled this 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time of execution of the agreement. In para 2 of the agreement, it was mentioned that first party has received post-dated cheques and nothing is in balance. In para 4 of the agreement, it is stated that the first party will not return any amount to any type to the second party for the above property and in future second party shall be responsible to pay to all the persons, whatsoever amount payable or whatsoever compromise will be and second party shall be responsible 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 everyth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticular for the transfer of capital assets, the definition of terms given in section 2(47) and clause (d) of section 269UA has to be applied and not the definition of 'sale' or 'transfer' as given in the Transfer of Property Act or in other statutes. The other arguments raised by the ld. Counsel for the assessee was that the possession was not delivered at the time of the agreement also does not carry force because as provided in clause (d) of section 269UA 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "He can, and he must, tax the right person and the right person alone. But "right person", we mean the person who is liable to be taxed, according to law, with respect to a particular income. The expression "wrong person" is obviously used as the opposite of the expression "right person". Merely because a wrong person is taxed with regard to a particular income, the Assessing Officer is not precluded from taxing the right person with respect to that income. This is so irrespective 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shortage and as the assessee was giving friendly advances from cash balance in hand for every year, due to such shortage he was compelled to take loans when there was shortage of cash. According to him, not much cash was found with the assessee on the date of search. On the basis of statement of Mohd. Sadiq, he therefore concluded that Shri C.P. Jain and others used to give loan to persons on interest and in time of sudden emergency, they took loan from others. On the basis of this conclusion, he estimated the amount of 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. 865/97, 863/97, 864/97, 866/97, 4508/99, 4505/99, 867/97, 4509/99, 4506/99, 868/97, 4510/99 & 4507/99 14. The assessees have taken ground No. 1 to challenge the charging of interest income from Shri Sharad Jain (i) The facts concerning this ground are that at the time of search, one Ajanta Quality slip pad was found and on this pad, there was following entries : "1 to Sharad for Espee Exports on 11.9.1991 at the rate of 24% interest per month." In reply, it was submitted that Sharad Jain was real brother of Shri C.P. Jain and Shri 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be upheld. Hence, on the basis of the above, the addition made by the Assessing Officer and so sustained by the CIT (A) in the hands of the assessees in various assessment years is to be deleted. Consequently Ground No. 2 taken in all the appeals is allowed. GROUND NO. 2 IN ITA NOS. 865/97, 863/97, 864/97, 866/97, 4508/99, 4505/99, 867/97, 4509/99, 4506/99, 868/97, 4510/99 & 4507/99 15. Ground No. 2 has been taken by the assessees in their appeals to challenge the charging of interest on the basis of alleged loan from Devband party. (i) 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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