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TMI Blog2006 (9) TMI 348X X X X Extracts X X X X X X X X Extracts X X X X ..... refer to the detailed facts, as recorded by the lower authorities in the case of Mr. Anant G. Shah. 4. VSPPL owned an immovable property somewhere near Churchgate, Mumbai. This property comprises of 28 flats which were leased to Defence Ministry at Rs. 1.08 lakhs per annum. These flats were allotted to the officers of Indian Navy. The shareholders of VSPPL decided to sell their total shares i.e., 7,500 equity shares of Rs. 100 each and consequently, entered into an agreement with VIL for sale of such shares at a price of Rs. 24,960 per share. The total consideration amounted to Rs. 18.72 crores. At the time of signing the agreement, the transferee paid a sum of Rs. 4,01,99,000 as advance. Subsequently, another sum of Rs. 9.36 crores was paid in the year under consideration and these amounts were shown by the respective shareholders as advance in their respective Balance Sheets. The amount shown by the assessee (Mr. Anant G. Shah) as advance was Rs. 2,15,13,200 pertaining to 1,000 shares held by him. As per the agreement, the assessee had signed the share transfer memos and deposited the same along with share certificates with a Solicitor in the name of Mr. Prakash Shah, who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the name of the transferee or any amount of consideration received. It was also stated by him that none of the parties had informed him about any payments made subsequent to the date of agreement. Subsequently, the assessee also furnished the copy of the legal opinion dated 15-3-2003 obtained from the Sr. Counsel Mr. S.E. Dastur. The contents of the legal opinion have been recorded by the Assessing Officer in his order. 6. However, the Assessing Officer was not satisfied with the submissions of the assessee. The Assessing Officer expressed his agreement with the opinion of the Sr. Counsel of assessee that the transaction was governed by the provisions of Sale of Goods Act inasmuch as the transaction involving the sale of shares and not the immovable property. But considering the facts of the case, he was of the view that transfer took place in the year under consideration. In coming to this conclusion, he took into consideration various factors namely ( i ) that, assessee had handed over the shares, ( ii ) that, the substantial amount had been received, and ( iii ) that, the conduct of the assessee in not putting the date for completion of the transaction was not bona fide. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h capital gain is to be taxed. He also considered the definition of the word "Transfer" provided in section 2( 47 ) of the Act and then observed that the case of assessee falls within the ambit of sub-clause ( i ) of section 2( 47 ) of the Act. Thereafter, he observed that the word "sale" has not been defined in the Income-tax Act, 1961 and, therefore, its meaning has to be understood as defined under the Sale of Goods Act, 1930 ( Act of 1930 ). After referring to the provisions of section 4 of the Act of 1930, he made a distinction between the contract of sale and agreement to sale. According to him, the contract can be either absolute or conditional. Therefore, where the property in goods is transferred from seller to the buyer, the contract is called "sale". An agreement to sell becomes a sale, when the condition is fulfilled subject to which the property in goods is to be transferred. He also referred to the provisions of sections 14 to 24 of the Act of 1930, which lay down the rules for ascertaining the intention of the parties. Considering such legal position, the Learned CIT(A) posed a question whether on the facts of the case, can it be said that transfer took place in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completed in the year under consideration irrespective of non-payment of full price. Reliance was placed by him on the judgments T.V. Sundaram Iyengar Sons Ltd. v. CIT [1959] 37 ITR 26 (Mad.), K.N. Narayanan v. I.T.O. [1984] 145 ITR 373 1 (Ker.), Mormasji Mancharji Vaid s case ( supra ) and Chaturbhuj Dwarkadas Kapadia v. CIT [2003] 260 ITR 491 (Bom.). On the other hand, the Learned Counsel for the assessee relied on the reasonings given by the learned CIT(A). Case law relied upon by him are given in the paper book, which are placed on record. 9. Rival submissions of the parties have been considered carefully. The question for consideration is whether, considering the facts of the case, can it be said that the transfer of shares took place in the year under consideration. At the outset, it may be mentioned that, it is a case of sale of shares as admitted by the Assessing Officer himself in Para-10 of his order and, therefore, shares being goods within the meaning of definition clause 7 of section 2 of the Act of 1930, the issue under consideration has to be adjudicated in accordance with provisions of the said Act. Even the Assessing Officer, in para 9 of his o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. Section 32 provides that it is the duty of seller to deliver the goods and of the buyer to accept and pay for them in accordance with the terms of contract of sale. Section 32 of the Act provides that unless otherwise agreed, delivery of the goods and payment of the price would be concurrent conditions for the performance of the contract. Section 33 provides that delivery of goods sold may be made by doing anything which the parties agree shall be treated as delivery or which has the effect of putting the goods in the possession of the buyers or of any other person authorised to hold them on his behalf. Section 35 provides that apart from any express contract, the seller of goods is not bound to deliver them until the buyer applies for delivery. The combined reading of these provisions clearly reveals that where the contact is for sale of specific goods, the transfer takes place immediately on the delivery of the goods. However, where contract is not absolute but conditional one then, the contract would become sale when the condition is fulfilled and the sale would complete when ultimately delivery of goods is affected. 11. Let us now apply the legal position, as mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The transferors and each of them agree and confirm that the transferee has agreed to purchase the said shares believing that the representation made by them and contained in this agreement are true and correct and in the event it being found that any of the representation made by the transferor to be false or incorrect, the transferee shall have option to avoid this agreement and seek refund of the price paid by the transferee to each of the transferors and the Transferors and each of them doth hereby agree to indemnify and keep always indemnified against all the loss suffered by the transferee by reason of any of the representation being found to be incorrect or false at any time hereafter." 12. The combined reading of the above clauses of the agreement clearly shows that intention of the parties was not to transfer the shares on the date of agreement but the intention in reality was to transfer the shares on the date when balance payment of the consideration was to be paid at a future date by the buyer to the sellers. Clause 9 specifically provides that till the payment is made, the shares would remain in custody of Mr. Prakash Shah, Solicitor, who was irrevocably authorise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been informed that the final payment has been made in April 2005 and the income would be offered in assessment year 2006-07. Therefore, it cannot be said that intention was to postpone the payment of tax indefinitely. 14. The contention of the revenue that delivery to the solicitor amounted to delivery to the transferee also cannot be accepted since the solicitor was acting merely as a trustee. In law, he could not deliver the shares to the transferee unless the full payment was made by the transferee. There is nothing on record to show that the solicitor was an agent of the transferee. Therefore, in our opinion, delivery of shares to the solicitor could not be considered as delivery to the transferee. 15. The case law relied upon by the Learned DR are distinguishable on facts. The judgment of the Hon ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia ( supra ), of Hon ble Gujarat High Court in the case of Mormasji Mancharji Vaid ( supra ), relate to the transfer of immovable properties and, therefore, cannot be applied to the present case since the event for transfer of shares is different from the event for transfer of immovable property. The judgment o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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