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TMI Blog1985 (6) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... eed will be executed by the assessee in favour of the purchasers after obtaining the income-tax clearance certificate and sale permission from the proper authorities. When both the certificates will be granted, then the sale deed will be effected within two weeks. The time will be taken from the date of last certificate out of two certificates. The assessee-seller was to apply for sale permission within two weeks from the date of execution of the agreement. Pursuant to the said agreement, the assessee-seller approached the Land and Development Officer who vide his letter dated29-11-1975intimated to the assessee that there was no objection to the transfer of his rights. It appears that prior to the receipt of the said permission, the assessee had handed over possession of the property in question (West Patel Nagar) to the aforesaid purchasers in September 1975. The assessee-seller had received the balance sale consideration of Rs. 50,000 from the purchasers prior to the execution and registration of the sale deed, on the dates detailed below : "Cheque No. Date Amount Rs. 83577420-9-197520,000 71031010-11-197510,000 46073620-1-197610,000 4607503-1-19765,000 3002519-2-19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort-term capital gain out of the sale of the capital asset, namely, West Patel Nagar property. 4. Being aggrieved with the order of the ITO, the assessee took up the matter in appeal. Before the learned AAC it was submitted that the West Patel Nagar property was sold on12-8-1975when agreement of sale was executed. The assessee had purchased within a period of one year from that date Paharganj property and as such the capital gain tax was exempt under section 54. The learned AAC held that transfer of immovable property of the value of Rs. 100 or more can be only made by a registered instrument. The agreement to sell West Patel Nagar property dated12-8-1975was merely a contract for sale. Although substantial part of the sale consideration was paid subsequently and possession was also handed over but ownership of the property was only transferred on8-2-1976when a sale deed was executed and registered. He found that permission to sell the property was given by the Land and Development Officer on15-11-1976while the competent authority under theUrbanLand(Ceiling and Regulations) Act has given the permission to sell it on6-8-1976. Thus, he was of the view that the vendor was not even co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , would be transfers but also 'relinquishment' or 'extinguishment of rights' which may ordinarily not be included in that concept. The word 'extinguishment' of any rights therein used in section 2(47) would cover the case of the assessee when he received the sale consideration and possession over the property before the sale deed was executed and registered. Reliance was placed on the ratio of decisions in CIT v. R.M. Amin [1977] 106 ITR 368 (SC), Addl. CIT v. M.A.J. Vasanaik [1979] 116 ITR 110 (Kar.), CIT v. T.N. Aravinda Reddy [1979] 120 ITR 46 (SC), Addl. CIT v. Mercury General Corpn. (P.) (Ltd.) [1982] 133 ITR 525 (Delhi) and CIT v.HindustanCold Storage Refrigeration (P.) Ltd. [1976] 103 ITR 455 (Delhi). 6. On behalf of the revenue it was vehemently contended that West Patel Nagar property was sold or transferred on10-2-1976, when the sale deed was executed and registered. By agreement to sell the said property on12-8-1975the seller never intended to transfer the property on that date. The agreement of sale clearly shows that the transfer of the property could be operative only after the sale deed was executed and registered and other formalities were completed. The Paharga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XV/3030 Multani Dhanda, Paharganj on7-5-1974for a consideration of Rs. 40,000. Rs. 20,000 was paid at the time of agreement and the balance amount of Rs. 20,000 was to be paid at the time of registration of the sale deed. Possession of the property was also given on the date of the agreement of sale but the sale deed was executed and registered on19-11-1974. The assessee agreed to sell West Patel Nagar property on12-8-1975for a consideration of Rs. 55,000. A sum of Rs. 5,000 was paid at the time of agreement of sale. Possession over the property was given in September 1975. Remaining sale consideration was paid in instalments as discussed above before the sale deed was executed and registered on10-2-1976. 8. On the facts it is to be seen whether the capital gain arising out of transfer of West Patel Nagar property is exempt under section 54. Section 54 enacts an exempting provision by way of exception to the general rule as to chargeability laid down in section 45 of the Act and is in these terms : "Profit on sale of property used for residence.--(1) Where a capital gain arises from the transfer of a capital asset to which the provisions of section 53 are not applicable, bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal for claiming exemption under section 54, the only dispute was whether the assessee had purchased Paharganj property within a period of one year before the transfer of West Patel Nagar property. The entire dispute in this case revolved round the date of transfer. The West Patel Nagar property was sold by registered deed on10-2-1976whereas the sale deed of Paharganj property was executed and registered on19-11-1974. If these two dates are taken for the purpose of deciding the present controversy, then the assessee will not be entitled to exemption under section 54 because the latter property (Paharganj property) was not purchased within a period of one year before the transfer of the West Patel Nagar property. West Patel Nagar property was sold on10-2-1976. For getting benefit under section 54, Paharganj property should have been purchased on or before10-2-1975. But it was only purchased in November 1974, i.e., beyond the period of one year. According to the assessee, although West Patel Nagar property was sold on10-2-1976, there was actually an agreement to sell which was entered into on12-8-1975and if this date was taken, then Paharganj property, which was purchased on19-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... include case of compulsory acquisition which involved a transfer by operation of law. Reference may be made to the ratio of decision in the case of Mangalore Electric Supply Co. Ltd. v. CIT [1978] 113 ITR 655 (SC). The word 'transfer' has been held to involve the transfer of the totality of interest in any property and not the transfer of mere interest in it, as for example, a mortgage. Reliance is placed on the ratio of the decision in the case of Ghanshyamrao Kishan Chander v. CIT [1979] 2 Taxman 244 (AP). In the decision in Alapati Venkataramiah v. CIT [1965] 57 ITR 185 at p.192 their Lordships of the Supreme Court observed that before section 12B of the Indian Income-tax Act, 1922 ('the 1922 Act') can be attracted, title must pass to the company by any of the modes mentioned in section 12B, i.e., sale, exchange or transfer. It is true that the word 'transfer' is used in addition to the word 'sale' but even so, in the context transfer must mean effective conveyance of capital asset to the transferee. Delivery or possession of immovable property of the value of Rs. 100 and above cannot by itself be treated as equivalent to conveyance of immovable property. On similar facts the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transferee was concerned, the section confers a right on him to the extent it imposes a bar to the transferor. But that is only a right to protect his possession against any challenge to it by the owner contrary to the terms of the contract. This section does not confer title on the defendant in possession and on the basis of such contract he cannot maintain a suit on title. In the present case the agreement to sell immovable property did not confer any right and interest in the property to the purchaser on the date of the said agreement. As discussed above, the possession was to be transferred at the time of execution, of the sale deed. Even the right in the property was to be transferred to the purchaser only on the date when the sale deed was executed and registered. Even if an assessee got possession over the property on the date of agreement of sale, in those cases also it was held in the cases of Meatles Ltd. and Hindustan Cold Storage Refrigeration (P.) Ltd. that it was not considered to be sufficient to vest the transferee with title. 11. The only question that survives is whether this case can be treated as one of relinquishment or extinguishment of rights of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent case. However, we would like to discuss them in brief. In the case of R.M. Amin the assessee held 192 shares in a private company incorporated inUganda. That company was not a company falling within the definition of a 'company' in section 2(17). The company went into voluntary liquidation and during 1961, the previous year for the assessment year 1962-63, the assessee received Rs. 1,84,326 in excess of the amount he had paid for those shares. The question was whether the excess of Rs. 1,84,326 was taxable as capital gains in the assessee's hands under section 45, read with section 2(47). It was held that there was no transfer of capital assets within the meaning of section 2(47). When a shareholder received money representing his shares on the distribution of the net assets of the company in liquidation, he received that money in satisfaction of the right which belonged to him by virtue of his holding the shares and not by any operation of any transaction which amounted to sale, exchange, relinquishment, transfer of a capital asset or extinguishment of any rights in capital assets. But for section 46(2) of the Act, it would not have been possible to charge tax under the hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest of the individual to the partnership and sections 34(3)(b) and 155(5) were attracted where development rebate had been allowed in respect of the partnership property. 14. In the decision in T.N. Aravinda Reddy the facts were that four brothers, members of an HUF, partitioned the joint family properties leaving undivided a common house. The assessee, the eldest of them, had sold his own house incurring capital gains tax. Each of his three brothers executed a release deed valuing his share in the common house in favour of the assessee towards the extra share agreed to be given. The question was whether this would amount to a purchase of the house by the assessee attracting section 54(1) and the assessee would be entitled to the relief thereunder on the ground that he had purchased the house property. It was held that the word 'purchase' in section 54(1) had to be given its common meaning, viz., buy for a price or equivalent of price by payment in kind or adjustment towards a debt or for other monetary consideration. Each release in this case was a transfer of the releasor's share for consideration to the release and the transferee, the assessee purchased the share of each o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 10(2)(vi). The interest which a person had in a property by virtue of section 53A of the Transfer of Property Act did not amount to ownership of the property. The flour mill constituted immovable property of more than Rs. 100 in value and title thereto would not pass to the assessee in the absence of the registered sale deed. As admittedly no sale deed was executed in favour of the assessee-company during the previous year relevant to the assessment year 1958-59, the title to the flour mill did not pass to the assessee-company. The flour mill was not the property of the company during the assessment year and, therefore, one of the conditions prescribed under section 10(2)(vi) was not satisfied and the assessee-company was not entitled to depreciation in respect thereof. 17. The abovesaid decisions are on different facts. Moreover, these decisions do not support the assessee. On the other hand, the decisions of the Delhi High Court, referred to above, are supporting the revenue. 18. On the facts discussed above and particularly on the basis of the agreement dated12-8-1975, it is difficult to hold that the assessee got any right of a capital asset on12-8-1975and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal gain ? We may point out that the word 'held' used in section 2(42A) is not defined in the Act. We have, therefore, to go by the dictionary meaning of the term. According to the Concise Oxford Dictionary, 'held' means--to possess ; to be the owner or holder or tenant, keep possession, occupy. Thus, 'held' connotes ownership as well as possession and in the context of the definition it is possible to interpret the term 'held' only in the sense of possession or a owner of the property. For example, if a land is held by a owner and also by a tenant or by a person in possession pursuant to a contract for sale, the holding will be taken to be the holding of all such persons. It obviously means that an owner who is not in actual possession will also be taken to be a holder of the land. If there was any doubt in this behalf, the same has been dispelled by Explanation (i) to section 2(42A). It reads as under : "Explanation (i) In determining the period for which any capital asset is held by the assessee-- (a) in the case of a share held in a company in liquidation, there shall be excluded the period subsequent to the date on which the company goes into liquidation ; (b) in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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