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TMI Blog2024 (6) TMI 646X X X X Extracts X X X X X X X X Extracts X X X X ..... ises out of the order of the Commissioner of Income Tax (Appeals)-18, New Delhi [hereinafter referred to as ld. CIT(A) , in short] in Appeal No. 267/14- 15 dated 11.09.2015 against the order of assessment passed u/s 143(3)/147 of the Income-tax Act, 1961 (hereinafter referred to as the Act ) dated 03.03.2014 by the Assessing Officer, ACIT, Circle-32(1), New Delhi (hereinafter referred to as ld. AO ). 2. The assessee has raised the following grounds of appeal before us:- 1. That on facts and in law, Ld. Commissioner of Income tax (Appeals) [Ld.CIT(A)] has erred in confirming the assessment of capital gain on transfer of booking rights in immovable property in AY 2008-09 as Short Term Capital Gain (STCG) (Rs. 52,80,000/-) as against the same being correctly assessable in AY 2009-10 as Long Term Capital Gain (LTCG) (Rs. 36,29,880/-) as returned by the assessee . In AY 2009-10, the LTCG has been assessed on protective basis and this issue is in appeal before the Hon'ble ITAT for AY 2009-10. 2. That the Ld. CIT(A) has erred in considering the date of agreement to sell 08.03.2008 as the date of transfer on mere receipt of 10% advance, whereas the transfer took place in the next year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the buyer and such charges were to be borne by buyer after transfer and not from date of agreement to sell. These clauses clearly indicate that transfer was to happen on future date on fulfillment of conditions under the said agreement. There was no transfer of booking rights on the date of agreement to sell. 5. Also, clause 16 of the allotment letter dated 09.04.2005 with Ansal Buildwell Limited lays down the restrictive condition for transfer that the buyer i.e. assessee is not entitled to transfer/encumber his rights under the said agreement till the sale of the house in his favour is completed except with prior written consent of the Builder. For the sake of convenience, the said clause 16 of allotment letter dated 9.4.2005 is reproduced below:- 16. The buyer is not entitled to transfer/encumber his rights under this allotment till the sale of the house in his favour is completed except with prior written consent of the builder on payment of outstandings and such administrative charges as may be specified by the builder in this behalf. The subsequent transferees shall be bound by the terms of this allotment in all respects 6. As seen from the terms of the said agreement to sell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in AY 2008-09 and as such capital gain thereon is taxable in AY 2009-10 as LTCG on protective basis and as Short Term Capital Gains (STCG) in AY 2008-09 on substantive basis. 9. Based on the said findings in AY 2009-10 assessment, Ld. AO computed LTCG in AY 2009-10 at Rs. 56,55,405/- on protective basis and issued notice u/s 148 of the Act in AY 2008-09. In the reassessment order in AY 2008-09, Ld. AO assessed the STCG at Rs. 52,80,000/-. The Ld. AO held that, since subject matter of transfer is booking rights and not immovable property, therefore provisions of section 2(47)(v) were not applicable requiring condition of handing over possession, but section 2(47)(ii) shall be applicable which require condition of relinquishment of asset. As per the Ld. AO there was relinquishment of rights and, therefore transfer took place in AY 2008- 09. 10. On appeal by assessee against order u/s 147/143(3) in AY 2008- 09, Ld. CIT(A) confirmed the assessment of the capital gain in AY 2008- 09 as STCG applying section 2(47)(vi) on the following grounds:- a. When there is intention to convey rights in the agreement to sell, it is safe to say that the rights to obtain title/ booking rights emanated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration was received on 25.04.2008 and original documents were handed over to the buyer; ii) the assessee wrote to the Builder to substitute its name by name of Shri Ardaman Singh, the buyer, in the records of the Builder vide letter dated 25.4.2008; iii) the Builder confirmed vide their letter dated 2.5.2008 that the property stood transferred in their records on 2.5.2008. 12. The agreement to sell was not a transfer and was subject to compliance of conditions by the buyer and by the Builder. The transfer was only to take place after compliance by buyer of buyer's obligations and after permission to transfer by Ansal Buildwell Limited. As borne out from clause-2 and 3 of the agreement to sell read with clause-16 of the allotment letter - a. The Agreement to sell specifically mentions that balance payment and transfer is to be done up to 30.4.2008 i.e. in FY 2008-09 relevant to AY 2009-10; b. On refusal of the transfer by the builder or delay beyond 30.04.2008, the seller (assessee herein) had the right to cancel the agreement to sell and to refund the advance of Rs. 15,75,000/- to the buyer; and c. even if permission is granted by the Builder, the seller has the right to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various conditions as stipulated in the beginning of his order ; c. The assessee was holding only booking rights in the building, which was sought to be transferred/ assigned in favour of the Shri Ardaman Singh for total consideration of ₹1,57,50,000/-; d. The final payment of the consideration was to be paid to the assessee on or before 30.04.2008 as per clause 2 of agreement to sell. The final payment of agreed consideration for booking rights was received by the assessee only on 25.04.2008; e. The assessee had no power to transfer the booking rights without prior written consent of by the builder M/s Ansal Buildwell Limited. Hence, it is very clear that the transfer of booking rights is subject to consent of the builder; f. The consent was given by the builder on 02.05.2008, wherein, the builder had transferred the booking rights in the name of Shri Ardaman Singh on 02.05.2008. The evidence to this effect is enclosed at page 25 of the Paper Book. 17. Hence, apparently, the transfer of capital asset (i.e. booking rights in the property) happened only on 02.05.2008, which fall in AY 2009-10 and the assessee would be justified to disclose long-term capital gai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, the assessees have not acquired any right to receive income under the JDA . This being so, no profits or gains arose from the transfer of a capital asset so as to attract Sections 45 and 48 of the Income Tax Act. (emphasis supplies by us) 21. Hence, the ratio of the aforesaid decision of the Hon'ble Supreme Court would be squarely applicable to the facts of the instant case inasmuch as the transfer of booking rights contemplated in the agreement to sell dated 08.03.2008 was dependent upon the permission to be granted by the builder, which happened only on 02.05.2008 and thereby the transfer of booking rights would be completed only in AY 2009- 10. 22. Further the Hon ble Gujarat High Court in the case of Ushaben Jayantilal Sodhan reported in 407 ITR 276 (Guj) had an occasion to deal with the similar issue under consideration. The relevant observations made thereon are reproduced herein below:- 16. We must, however, view these transactions in the context of the provisions contained in the Act instead of confining its effect to the Transfer of Property Act and the Registration Act. As noted, Section 2(14) of the Act defines capital asset inter alia as a property of any kind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refusing to perform his part of the obligations arising out of the contract or for some such reason, the transaction running into legal controversies. Some of the imaginable reasons could be the inability of the seller to clear the title of the property due to which the contract may be frustrated or rescinded with mutual consent or the refusal or inability of the purchaser to pay the sale consideration. 18. An agreement to sale immovable property does not cast obligations only on the seller. It is based on reciprocal promises to be performed by both sides. If the purchaser fails to discharge his obligations arising out of the contract, then the agreement may as well not culminate into a final sale deed. Depending on the terms of agreement, the seller may either forfeit the earnest money, rescind the contract or in a given case, sue for specific performance or damages. These are but, a few illustrative examples to appreciate that there can be a wide gap between an agreement to sale and an actual instance of sale being evidenced under a sale deed. To therefore hold that upon mere execution of an agreement to sale of the immovable property itself gets transferred into the purchaser, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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