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TMI Blog2009 (10) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Act, 1961 (hereinafter referred to as "the Act" for the sake of brevity) against the judgment and order dated July 27, 2007, passed by the Income-tax Appellate Tribunal, Lucknow Bench, Lucknow in Appeal No. I.T. A. Nos. 285/Luc/2002, 143/Luc/2002 and 300/Luc/2002, respectively, for the assessment year 1985-86, raising the following common question of law : "Whether on the facts and circumstances of the case, the Income-tax Appellate Tribunal was justified in law in holding that there was no 'transfer' of land from the assessee to the society and no capital gain would arise on the alleged transfer of land to the society on December 7, 1984 ?" and as such, all these appeals are being decided by a common order. 2. The brief facts of the case are that the respondents, namely, S/Shri Rakesh Gupta, Ajay Gupta and Gunjan Gupta who are co-owners, entered into an agreement with one M/s. Pratap Sahkari Grih Nirman Samiti Ltd. on December 7, 1984, for the sale of land to the samiti and consequently the sale deed was also prepared. They had also received a meagre amount on the said date but subsequently, on December 8, 1984, proceedings were initiated under the Land Acquisit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal, vide order dated October 26, 1998, remitted the matter to the Assessing Officer for adjudicating it afresh in the light of the observations contained therein. It was also provided by the Tribunal that while framing the assessment order, the Assessing Officer shall record his findings specifically on the points, i.e., (1) whether the sale deed has been registered or not and whether the sale consideration has been paid to the transferors ; (2) whether the name of the housing society has been mutated in the Revenue records as owner of the land on the basis of the sale deed ; (3) when the relevant notification for acquiring the land was made ; (4) whether the assessee or the housing society had claimed the compensation under the land acquisition award and to whom the amount of compensation has been paid or is likely to be paid. 5. Pursuant to the order dated October 26, 1998, the Assessing Officer, after making enquiries and after giving opportunity to the assessees again assessed the income of the assessees as was computed in the order dated March 16, 1992, by the order dated March 22, 2001. Against the order dated March 22, 2001, the assessees filed appeals before Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction between the asses-see and the housing society and that the order of the learned Commissioner of Income-tax (Appeals)-III, Lucknow being erroneous in law as well as on the facts deserves to be vacated and that of the Assessing Officer restored. The Tribunal, vide order dated July 27, 2007, dismissed the appeal of the Revenue. Hence, the instant appeal. 7. In order to decide the question, as to whether there was a valid transfer of land from the assessee to the society on December 7, 1984, or not, it would be apt to refer the provisions of section 45 of the Act as existing for the relevant assessment year, which are reproduced as under : "45. Capital gains.-(1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 53, 54, 54B, 54D, 54E and 54F, be chargeable to income-tax under the head 'Capital gains', and shall be deemed to be the income of the previous year in which the transfer took place. (2) Notwithstanding anything contained in sub-section (1), the profits or gains arising from the transfer by way of conversion by the owner of a capital asset into, or its treatment by him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the Government on the acquisition of land. Thus, to resolve the issue one has to look into both the definitions of transfer under section 2(47) of the Income-tax Act, 1961, prior to the amendment and further after the amendment by the Finance Act, 1987. The definition prior to the amendment is as under : "2. (47) 'transfer' in relation to a capital asset, includes,- (i) the sale, exchange or relinquishment of the asset ; or (ii) the extinguishment of any rights therein ; or (iii) the compulsory acquisition thereof under any law ; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment." 11. The aforesaid provisions were amended by the Finance Act, 1987, with effect from April 1, 1988. The amended provision of section 2(47) is repro-duced as under : "2. (47) 'transfer' in relation to a capital asset, includes,- (i) the sale, exchange or relinquishment of the asset ; or (ii) the extinguishment of any rights therein ; or (iii) the compulsory acquisition thereof under any law ; or (iv) in a case where the asset is converte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght into the ambit of 'transfer', the practice of enjoyment of property rights through what is commonly known as power of attorney arrangements. The practice in such cases is adopted normally where transfer of ownership is legally not permitted. A person hold-ing the power of attorney is authorized the powers of owner, including that of making construction. The legal ownership in such cases continues to be with the transferor. 11.3 These amendments shall come into force with effect from April 1, 1988, and will accordingly apply to the assessment year 1988-1989 and subsequent years. (Section 3(g) of the Finance Act, 1987)" 13. On a perusal of the provisions of section 2(47) of the Act existing in the assessment year 1985-86, the same requires registration of the sale deed under the Registration Act, 1908, for transfer of an immovable property for levying capital gains tax. If the instrument is not registered then, it is not treated as "transfer" and hence no capital gains could be charged on the alleged transfer of land. It is only after amendment by the Finance Act, 1987, that registration for completing the transfer was done away with. Capital gains could be charged merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue to the transferee in the property on the fulfilment of the conditions mentioned therein. Under the Income-tax Act, the recognition of conveyance of de facto ownership by way of handing over of possession of the property as per contract and part performance by the transferee without actual conveyance of title was first time made by the Finance Act of 1987, by amending the definition of section 2(47)(v) as discussed hereinabove. Thus, prior to April 1, 1988, the fact that the transferee had taken possession of the property or he had part performed as per agreement by paying a part of contracted money or that he will make full payment as agreed upon and as scheduled, will not enough to hold that a "transfer" of immovable property took place for levying capital gains tax. Thus, under the Income-tax Act, section 53A of the Transfer of Property Act had no role to play in holding the creation of equitable interest in favour of the transferee a "transfer" in respect of conveyance of such interest through an agreement entered into prior to April 1, 1988, without conveyance of legal title. 16. Sri Pradeep Agarwal, with regard to the prospective application of the amendment by the Fina ..... X X X X Extracts X X X X X X X X Extracts X X X X
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