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TMI Blog2022 (12) TMI 689X X X X Extracts X X X X X X X X Extracts X X X X ..... e findings of Ld. CIT(A) in the appellate order. There is no prescribed provision of law or any procedure which has been brought to our notice in support of the argument that the subsequent deal has effectively cancelled the original registered sale deed after nine years from when it was entered. There is no legal capacity for two parties to a transaction entered by way of registered deed to cancel the same except with the permission of the Court as prescribed in section 31 of the Specific Relief Act. Another notable aspect is that on cancellation of the sale deed, the assessee has paid stamp duty. This also clearly indicates of the fact that the subsequent cancellation deed is only a fresh transfer by the daughter in favour of the assessee by way of a fresh transfer/sale deed upon the payment of full stamp duty. Accordingly, in our view, the subsequent cancellation deed has not annulled or cancelled revoked the original registered sale deed, but it is effectively a fresh transfer/sale deed by the daughter of the assessee in favour of the assessee. A perusal of the document indicates that they are an identical reproduction of schedule A of the conveyance deed dated to 05- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirming the addition of Rs. 2,26,85,000/- by considering it as a short term capital asset instead of long term capital asset. Your appellant, therefore, requests Honorable IT AT to consider the deed executed on 30-07-2015 as cancellation of the deed and not the purchase deed and thereby consider the transaction as long term as per the provisions of section 2(29 A) of the IT Act, 1961 as claimed by your appellant in the return of income and thereby allow the deduction claimed u/ s 54 of the IT Act, 1961. 2. On the facts and circumstances of the case the Ld. CIT (A) erred in law and facts by not accepting the fact that your appellant has occupied the property till the date of sale in 2015 and there were no transfer at all to the daughter in the year 2006 and hence the question of repurchase of the property was never arise. Your appellant, therefore, requests Honorable ITAT to consider the entire transaction as long term as per the provisions of section 2(29 A) of the IT Act, 1961 as claimed by your appellant in the return of income and thereby allow the deduction claimed u/s 54 of the IT Act, 1961. 3. On the facts and circumstances of the case the Ld. CIT (A) erred in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with Sub Registrar, Ahmedabad-3, Memnagar. Smt Ami Pritesh Patel took over possession of the said property after making payment of full sale consideration and also obtained Share Certificate in her name. Hence property was transferred to the daughter with all rights to use the property along with possession of the said property. 4. The assessee was of the view that when property was purchased by the appellant in 01.01.1979, total area of property was 302.86 sq. mtr. which included constructed area of 66.92 sq. mtr. and extra land of 235.94 sq. mtr. Subsequently, additional area of 133.72 sq. mtr. was constructed in the year 1982-83 and total constructed area came to be 200.64 sq. mtr. (133.72 + 66.92- refer page 151-154 of Paper-Book). Finally total area of property was 302.86 sq. mtrs. out of which constructed area was 200.64 sq. mtrs. and vacant land was 102.22 sq. mtr. Thereafter, when conveyance deed was registered by Gujarat State Housing Board on 05.08.1986, land area was erroneously mentioned as 66.92 sq. mtrs. only. Notably, even in sale deed executed with the daughter of the assessee, land area was mentioned as 66.92 sq. mtr instead of total land area of 302.86sq. mtr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s just 3 months from date of its acquisition being 30.07.2015, the gain earned was held to be short term capital gain since asset was held for less than 36 months. 4. In appeal, Ld. CIT(A) dismissed the assessee s appeal with the following observations: 5.4 On overall consideration of facts, it is observed that the issue under consideration is whether sale deed executed between the appellant and the daughter can be cancelled and in case of cancellation of such deed whether ownership of property will vest with the appellant as on the date of cancellation of sale deed (30.05.2015) or shall be revoked from the date of original purchase of such property (10.10.1986). It is observed that where sale deed is executed and registered, the owner completely loses his right over the property and the purchaser becomes the absolute owner. It is observed that any registered deed cannot be nullified by executing deed of cancellation since by execution and registration of sale deed, the properties are vested in the purchaser and cannot be divested by mere execution of a deed of cancellation. Hence once sale deed is registered and rights in a property are transferred along with possession, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) In case of Sri K. Rajuvs Bangalore Development Authority (ILR 2011 KAR 120), it has been held as under : It is thus clear that when the sale deed executed and registered, the owner completely loses his right over the property and the purchaser, becomes the absolute owner. It cannot be nullified by execution of a deed of cancellation because by execution and registration of a sale deed, the properties are being vested in the purchaser and the title cannot be divested by mere execution of a deed of cancellation. Therefore, even by consent or agreement between the purchaser and the vendor, the said sale deed cannot be annulled. If the purchaser wants to give back the property, it has to be by another deed of conveyance. If deed is vitiated by fraud or other grounds mentioned in the Contract Act, there is no possibility of parties agreeing by mutual consent to cancel the deed. It is only the Court which can cancel the deed duly executed, under the circumstances mentioned in Section 31 and other provisions of the Specified Relief Act, 1963. Therefore, the power to cancel the deed vests with a Court and it cannot be exercised by the vendor of a property. After execu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that where there is an instrument of transfer that the transfer has not been completed in the manner prescribed therefore by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract ; Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof. 5.6 Under Section 2(47) of the Act, transfer is an inclusive definition and therefore it extends to events and transactions which may not otherwise be 'transfer' according to its ordinary popular natural sense; the definition also mentions such transaction as sale, exchange etc to which the word transfer would properly apply on its popular and natural import. Thus a reading of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in case of Smt. KusumLata v. State of U.P. ors. In Writ - C No. - 2973 of 2016 dated 18.05.2018,Whether after a sale deed has been registered, the Registrar has any authority of law top cancel the registered sale deed under the provisions of the Registration Act, 1908. The Allahabad High Court held that Registering Authority cannot annul sale deed and made the following observations in the case: That unless and until there is an express provision in the Act or in the Rules, no Government Order could be issued giving power to a Registering Authority to annul a document on the administrative side. Such powers given would he. wholly arbitrary and against and against the provisions of the Act. That the State Government cannot, while taking recourse to the executive power of the State under Article 162, deprive a person of his property. Such power can be exercised only by authority of law and not by a mere executive fiat or order. That the language of Article 162 clearly indicates that the powers of the State executive do extend to matters upon which the State Legislature is competent to legislate and are not confined to matters over which legislation has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions under section 2(47) would squarely apply. That apart, the argument of the learned senior counsel for the assessee that contract was subsequently rescinded will not be of any help because the contract was rescinded only subsequent to the assessment year and what we are concerned for the purpose of the Act is the transactions which took place during the assessment year. The fact that the contract was subsequently terminated on mutual consent will not improve the case of the assessee to wriggle out of the purview of section 2(47) of the Act and the liability to pay tax on short-term capital gains under section 45 of the Act. 18. Here, to dispel any reasonable doubt which may arise, we extract below one of the conditions stated in Shrimant Shamrao Suryavanshi case (supra) (6) the transferee must have performed or be willing- to perform his part of the contract. Here the agreement was rescinded between the parties but long after the assessment year in which, the agreement was entered into and possession handed over. At least when the returns were filed there was a right conferred on the transferee as per section S3A of the Transfer of Property Act. The transferor t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee was not entitled to canvass for position that section 2(47)(v) was not applicable. Hence merely because possession in property was transferred and although sale deed was not registered, such transfer was considered as valid transfer within the meaning of section 2(47) of the Act. 5.13 In view of above facts and findings of various judicial authorities, it is held that property was transferred to the daughter of the appellant vide registered Sale Deed dated 16-01-2006 and cancellation of such sale deed subsequently shall not invalidate the transfer which took place in 2006. Hence the owner of the property from 16.01.2006 till 15.07.2015, being the date of cancellation of sale deed, was the daughter of the appellant. On the date of cancellation of original sale deed, the appellant became the rightful owner of the property once again from such date being 15.07.2015 and not from the original date of transfer of property by the Gujarat Housing Board in F.Y. 1986. In case of subsequent sale made on 09.10.2015, for computing period of holding, date of purchase shall be considered as 15.07.2015. It is on the date of cancellation of original sale deed that the appellant became the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd. The daughter of the appellant enjoyed right of the entire property and not part of the property as mentioned by the appellant. The appellant herself has stated that area of land was erroneously mentioned in the sale deeds executed on 05.08.1986 and 16.01.2006. When the appellant has herself accepted the fact that area has been erroneously mentioned, there is no force in the argument that only such part shall be considered as transferred to the daughter and not the balance area of 235.94 sq mtr more particularly when sale consideration offered was for entire area of 302.86 sq mtr. Hence such argument of the appellant is rejected 5.17 It is further observed that for cancellation of original sale deed, the appellant has paid stamp duty of Rs. l,35,300/-. The appellant has argued that stamp duty has been paid by mistake. Instead of buying a stamp paper of denomination of Rs. 100/-, the appellant mistakenly paid the stamp duty of Rs. 1,35,300. On knowing its mistake, the appellant applied for refund of such duty but since application was made after the expiry of specified time limit, no refund was granted to the appellant. I do not find force in the argument of appellant. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that cancellation deed 5572 of 2015 31.07.2015 is required to be treated as fresh purchase deed as per transfer of Property Act and appellant shall be considered as owner of property from such date. In the circumstances, the resultant income on sale of property is required to be taxed as Short Term Capital Gain in the hands of appellant. Since property is held for less than 36 months and such gain is short term gain, the appellant is not liable to claim deduction u/s 54 of the Act. Hence, addition made by Assessing Officer on account of short term capital gain of Rs.2,26,85,000/- is upheld and related ground of appeal is dismissed. 5. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(A) dismissing the assessee s appeal. In appeal before us, the counsel for the assessee argued that in the instant set of facts, since the sale deed between the assessee and her daughter dated 16-03-2006 was cancelled by way of a cancellation deed dated 30-07-2015, it has to be presumed that the sale of property by the assessee is a long-term gain, since property was in possession of the assessee since 05-08-1986. The counsel for the assessee drew our attenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Specific Relief Act, which states as below: When cancellation may be ordered 31. (1) Any person against whom a written instrument is void or voidable, and who has reasonable apprehension that such instrument, if left outstanding may cause him serious injury, may sue to have it adjudged void or voidable; and the court may, in its discretion, so adjudge it and order it to be delivered up and cancelled. (2) If the instrument has been registered under the Indian Registration Act, 1908 (16 of 1908), the court shall also send a copy of its decree to the officer in whose office the instrument has been so registered; and such officer shall note on the copy of the instrument contained in his books the fact of its cancellation. 7.1 A perusal of the above provisions shows that there is no legal capacity for two parties to a transaction entered by way of registered deed to cancel the same except with the permission of the Court as prescribed in section 31 of the Specific Relief Act. Another notable aspect is that on cancellation of the sale deed, the assessee has paid stamp duty of Rs. 1,35,300/-. This also clearly indicates of the fact that the subsequent cancell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the provisions does not seem to indicate that only a specific part relating only to the superstructure was sought to be transferred by the assessee to her daughter by the deed dated 16-03-2006, while the remaining land was to be retained by the assessee. Here, it would be pertinent to also analyse the submissions filed by the assessee before Ld. CIT(A) (page 152 of the paper book) wherein the assessee has mentioned that upon knowledge of this fact, your appellant has approached the Gujarat Housing Board to clarify the ownership of such open land area of 235.94 m in favour of my daughter . Accordingly, the above submission of the assessee clearly indicates that by way of sale deed dated 16-03-2006, all rights in the property was sought to be transferred including that of the open land area and the sale deed was verbatim reproduction of the original conveyance deed dated 05-08-1986 in favour of the assessee. Another notable aspect is that it was only when the Gujarat Housing Board clarified that the correction in respect of open land area can be made in the name of the assessee only and not in the name of the daughter, that the said property was transferred back to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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