9911796707
TMI Blog1976 (2) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... nd having regard to the fact that the assessee returned the sum of Rs. 50,785 to the vendor-company, any capital gains accrued to the assessee ? " The assessment year is 1963-64. The previous year ended on June 30, 1962. The assessee is a private limited company. It derives income from property and " other sources ". Messrs. Sur Estates (P.) Ltd., hereinafter stated as the " company ", was the owner of the house property involved in this reference. The company agreed to sell this property for Rs. 1,30,000 to one Mr. Gostho Behari Sircar. On February 2, 1946, Mr. Sircar filed a suit, being Suit No. 266 of 1946, on the original side of this court against the company for specific performance of the said agreement due to the failure of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso debited Rs. 79,204 being the price it paid to the company for purchasing this property. It has further debited Rs. 25,750.50 as the expenses for the said litigation financed by it to the company as agreed between them. The account kept by the assessee thus showed a profit of Rs. 25,045.50 on the sale of this property. It has also been found by the Tribunal that Rs. 50,795, being the surplus of the sale proceeds of Rs. 1,30,000 over the cost of Rs. 79,204.50, was returned by the assessee to the company and that the assessee had spent Rs. 79,204 and got back only that amount and nothing more from the company. The Income-tax Officer has brought Rs. 50,795 to tax, under section 12B of the Indian Income-tax Act, 1922, as capital gains accru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is settled law that a bona fide suit for specific performance of a contract to sell an immovable property falls squarely within the scope and ambit of section 52 of the Transfer of Property Act : (vide Gouri Dutt Maharaj v. Sheikh Sukur Mohammed AIR 1948 PC 147). It has also been held by the judicial Committee of the Privy Council in the case of Faiyaz Hussain Khan v. Pragnarain [1907] LR 34 IA 102, 105 ; [1907] ILR 29 All 339 (PC) that during the pendency of a litigation concerning an immovable property " neither party to it can alienate the property in dispute so as to affect his opponent ". In other words, transfer pendente lite, though not void as between the transferor and the transferee and it "operates to vest the title of the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount cannot alter or affect the nature, quality and character of any transaction and that for the purposes of taxation the substance of the transaction in question has to be looked at. The substance of the matter, in the instant case before us, must be viewed in the light of the said litigation including the decree and the said order passed therein. Further, the conveyance in this case should also be read and understood in the context of the said decree and the order including the facts and the circumstances of the case as found by the Tribunal. The charge is not on the entries in the books of any assessee but on the capital gains, if any, accrued to him under section 12B of the Act. The assessee keeps his accounts for his own purposes, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has suffered a loss of Rs. 25,750 being the amount spent by the assessee on the said litigation relating to this transaction. That apart, the rights of the assessee in relation to the property were subject to the result of the said litigation and the assessee was bound by the said decree for specific performance passed in the said suit against the company including the said order dated December 12, 1961, passed against the assessee. As already stated, the substance of the transaction has to be looked at in the light of the said litigation. The decree directed the company to sell this property for Rs. 1,30,000 to Mr. Sircar or to his nominee and the said order directed the assessee to release or transfer its rights in the said property as ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
