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TMI Blog2015 (11) TMI 745X X X X Extracts X X X X X X X X Extracts X X X X ..... deration of Rs. 51,00,000. 2. That the learned Commissioner of Income-tax (Appeals)-II, Kanpur has erred in law and on facts in not appreciating the facts that in its reply dated April 14, 2009 filed before the Assessing Officer, the assesse itself has accepted about handing over the possession of the property to the purchaser in the financial year 2007-08. 3. That the learned Commissioner of Income-tax (Appeals)-II, Kanpur has erred in law and on facts in accepting the additional evidence from the assessee in the form of the said letter dated March 31, 2005 without offering any opportunity to the Assessing Officer for confronting the same thus the learned Commissioner of Income-tax (Appeals)-II has violated the provision of rule 46A of the Income-tax Rules, 1962. 4. That the order of the learned Commissioner of Income-tax (Appeals)-II, Kanpur dated February 28, 2013 needs to be quashed and the order passed by the Assessing Officer dated December 16, 2010 be restored. The assessee has also filed cross-objection assailing the order of the learned Commissioner of Income-tax (Appeals), inter alia, on the following grounds : 1. Because the Commissioner of Income-tax (Appeals) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst which an appeal was filed before the learned Commissioner of Income-tax (Appeals) with the submission that the property was not transferred in the impugned assessment year. As per agreement to sell, the property was transferred during the financial year 2004-05 relevant to the assessment year 2005-06. Therefore, whatever capital gain is to be computed, it can be computed in that assessment year and not in the impugned assessment year. In support of this contention, learned counsel for the assessee has placed the copy of the agreement to sell before the learned Commissioner of Income-tax (Appeals), on which remand report was called for. The remand report was accordingly submitted by the Assessing Officer. As per the agreement to sell, the total consideration was fixed at Rs. 51 lakhs out of which Rs. 21 lakhs was received by the assessee on January 10, 2005 and the balance amount of Rs. 30 lakhs was received on March 31, 2005. On payment of the entire consideration, the possession was handed over to the buyer. Therefore, nothing was left out for further payment. In the light of the provisions of section 2(45)(vi) of the Act, the property was transferred in the impugned assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rust entered into a registered agreement on January 27, 2005 with Mayur Infrastructure Ltd. to sell the said property for Rs. 51 lakhs. The entire sale consideration of Rs. 51 lakhs was received as under : Rs. 21,00,000 vide cheque No. 536834 on State Bank of Indore, Birhana Road, Kanpur dated January 10, 2005 Rs. 10,00,000 vide cheque No. 536840 on State Bank of Indore, Birhana Road, Kanpur dated March 31, 2005 Rs. 20,00,000 vide cheque No. 536839 on State Bank of Indore, Birhana Road, Kanpur dated March 31, 2005 On receiving the entire consideration the possession of property was handed over to the vendee in the year 2005 itself vide his letter dated March 21, 2005. The sale deed was executed later on May 15, 2007. It has been argued by the authorised representative, by way of rais ing the additional ground that there arises no liability to pay capital gains tax for the year under consideration. This submission of the learned authorised representative is based on the premise that an agreement to sell was executed on January 27, 2005 registered with Sub-Registrar, Kanpur, between the assessee and Mayur Infrastruc ture Ltd., the purchaser, for a total consideration of Rs. 51 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, there has taken no transfer of any immovable property during the year under consider ation. There would be no liability for capital gains. Merely because the sale deed has been executed and registered during the year under consideration itself would not mean that the property in question has been transferred during the year under consideration. Section 2(47)(v) and (vi) was brought in the statute by the Finance Act, 1987 with effect from April 1, 1988. Sub-clause (v) was inserted in section 2(47) along with other clause (vi) with the intention to neutralise certain devices and transactions pursuant to which capital asset or interest therein were transferred in such a manner so as to fall beyond the parameters of the definition of the term transfer in section (2) sub-section (47). Taxable event in the case of possession in pursuance of agreement to sell occurs in the year of possession and not in the year of execution and registration of the sale deed, to curb the practice, of transferring the properties by giving possession and not executing the sale deed. In order to overcome this, the statute has provided in terms of clauses (v) and (vi) of section 2(47) that transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The existing definition of the word "transfer" in section 2(47) does not include transfer of certain rights accruing to a purchase, by way of becoming a member of, or acquiring shares in a co-operative society, company, or association of persons or by way of any agreement or any arrangement whereby such person acquires any right in any building which is either being constructed or which is to be constructed. Transactions, of the nature referred to and are not required to be registered under the Registration Act, 1908. Such arrangements confer the privileges of ownership without transfer of title in the building and are a common mode of acquiring flats particularly in multi-storeyed constructions in big cities. The defini tion also does not cover cases where the possession is allowed to be taken or retained in part performance of a contract, of the nature referred to in section 53A of the Transfer of Property Act, 1882. Now sub-clauses (v) and (vi) have been inserted in section 2(47) to prevent avoidance of capital gains liability by recourse to transfer of rights in the manner referred to above. 11.2 The newly inserted sub-clause (vi) of section 2(47) has brought into the ambit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is simply a submission reconfirming the factum of possession given earlier. In fact, the possession of the said property was handed over to the buyer on March 31, 2005 itself as would be evident from the copy of the letter dated March 31, 2005 already submitted. The said letter contains the details of the balance sale consideration paid and its acknowledgment. It also contains the factum of giving and taking of possession of the property. For the sake of convenience, the letter is reproduced as under : Thus, the submission of the Assessing Officer that the possession of the property was not given in the financial year 2004-05 itself, but was given on May 15, 2007 if read in the totality of the facts and cir cumstances would found to be misplaced. The possession of property depends upon the nature of the property. The nature of the property refers to the physical possession in the case of tangible property and symbolic possession in the case of intangible property. Possession is a flexible term and does not necessarily import personal occupation. When a buyer had a notice of tenancy and the fact that the property is totally let out to different tenants, he was only entitled to a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the above factual and legal position, I am of the considered view that since the property in question stood transferred in the financial year 2004-05, and not in the assessment year 2008-09, there arises no liability for capital gains tax during the year under consideration. However, the Assessing Officer may consider the computation of capital gains in the assessment year 2005-06. The reliance is also placed on the latest decision dated January 17, 2013 of the hon'ble Delhi High Court reached in the case of Simka Hotels and Resorts v. Deputy CIT 2013-TIOL-71-HC-DEL-IT, wherein the relinquishment of vested rights in an immoveable property is treated as 'transfer' under section 2(47), even if sale deed is not executed. The other grounds of appeal, i.e., the adoption of sale considera tion, as per the consideration determined by the District Judge, Kanpur, deducting for encumbrances such as property being covered by the Rent Control Act, and the property should ought to have been referred to the Valuation Cell in terms of section 50C(2) of the Act are all valid, though have now in the present scenario, become academic, and hence are not been adjudicated upon." 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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