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TMI Blog2014 (7) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... deceased son - late Shri Moti Lal and his widow. One of the above stated grand children and the daughter-in-law of Shri Amrit Lal are the appellants in these appeals. Upon death of Shri Amrit Lal, possession of the house was given to his widow. His widow, Smt. Shakuntla Devi expired on 29th August, 1993. Upon death of Smt. Shakuntla Devi, as per the Will, the ownership in respect of the house in question came to be vested in the present appellants and another grandchild of late Shri Amrit Lal. The appellants had decided to sell the house and with that intention they had entered into an agreement to sell the house with Shri Sandeep Talwar on 27th December, 2002 for a consideration of Rs. 1.32 crores. Out of the said amount, a sum of Rs.15 lakhs had been received by the appellants by way of earnest money. As the appellants had decided to sell the house in question, they had also decided to purchase another residential house bearing house No. 528 in Sector 8, Chandigarh so that the sale proceeds, including capital gain, can be used for purchase of the aforestated House No. 528. The said house was purchased on 30th April, 2003 i.e. well within one year from the date on which the agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad "Income from house property" (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say, - (i) If the amount of the capital gain is greater than the cost of the residential house so purchased or constructed (hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or (ii) If the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was well within the period prescribed under Section 54 of the Act. If one considers 27th December, 2002 as the date on which the property had been transferred or that a right in the property had been transferred, the appellants would become entitled to the benefit under Section 54 of the Act. 12. So as to substantiate his submissions, learned counsel for the appellants had submitted that the appellants wanted to transfer the property in question and therefore, they had entered into an agreement to sell on 27th December, 2002, but unfortunately they could not execute the sale deed on account of the litigation which was pending in respect of the property in question and due to an order restraining the appellants from dealing with the property. In view of the order passed by the civil court, the appellants could not execute the sale deed and the delay was only on account of a factor which was beyond the control of the appellants. 13. According to the learned counsel appearing for the appellants, the date on which the agreement to sell had been executed ought to have been treated as the date of transfer. He had referred to the provisions of Section 2(47) of the Act which defines the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by the appellants by way of earnest money when the agreement to sell had been executed and a new residential house/new asset had been purchased by the appellants on 30th April, 2003. It is also not in dispute that there was a litigation wherein the Will of late Shri Amrit Lal had been challenged by his son and the appellants had been restrained from dealing with the house in question by a judicial order and the said judicial order had been vacated only in the month of May, 2004 and therefore, the sale deed could not be executed before the said order was vacated though the agreement to sell had been executed on 27th September, 2002. 19. If one considers the date on which it was decided to sell the property, i.e. 27th December, 2002 as the date of transfer or sale, it cannot be disputed that the appellants would be entitled to the benefit under the provisions of Section 54 of the Act because long term capital gain earned by the appellants had been used for purchase of a new asset/residential house on 30th April, 2003 i.e. well within one year from the date of transfer of the house which resulted into long term capital gain. 20. The question to be considered by this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tue of an order passed in the suit filed by Shri Ranjeet Lal, the appellants were restrained from dealing with the said residential house and a law-abiding citizen cannot be expected to violate the direction of a court by executing a sale deed in favour of a third party while being restrained from doing so. In the circumstances, for a justifiable reason, which was not within the control of the appellants, they could not execute the sale deed and the sale deed had been registered only on 24th September, 2004, after the suit filed by Shri Ranjeet Lal, challenging the validity of the Will, had been dismissed. In the light of the aforestated facts and in view of the definition of the term "transfer", one can come to a conclusion that some right in respect of the capital asset in question had been transferred in favour of the vendee and therefore, some right which the appellants had, in respect of the capital asset in question, had been extinguished because after execution of the agreement to sell it was not open to the appellants to sell the property to someone else in accordance with law. A right in personam had been created in favour of the vendee, in whose favour the agreement to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would enable the appellants to get the benefit under Section 54 of the Act. 23. Consequences of execution of the agreement to sell are also very clear and they are to the effect that the appellants could not have sold the property to someone else. In practical life, there are events when a person, even after executing an agreement to sell an immoveable property in favour of one person, tries to sell the property to another. In our opinion, such an act would not be in accordance with law because once an agreement to sell is executed in favour of one person, the said person gets a right to get the property transferred in his favour by filing a suit for specific performance and therefore, without hesitation we can say that some right, in respect of the said property, belonging to the appellants had been extinguished and some right had been created in favour of the vendee/transferee, when the agreement to sell had been executed. 24. Thus, a right in respect of the capital asset, viz. the property in question had been transferred by the appellants in favour of the vendee/transferee on 27th December, 2002. The sale deed could not be executed for the reason that the appellants had been ..... 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