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TMI Blog2001 (10) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... that all the assessees had equal shares of 1/3rd each in respect of a jointly owned property at 143/10, Golf Link, New Delhi. It was submitted by the assessees that since the said property in question was under the occupation of tenants and it was not possible for them to manage the property from Calcutta, it was decided amongst themselves to dispose off the property. Accordingly, they had agreed to sale the property to one Real Estate Agent known as M/s. Premium Estate Pvt. Ltd. of F-44, Bhagat Singh Market, New Delhi by executing an agreement for sale of the said property on 31-8-1988 for a consideration of Rs. 67,10,000. An amount of Rs. 1,50,000 as earnest money was received by the assessee from the said purchaser M/s. Premium Estate (Pvt.) Ltd. by cheque No. 741193 dated 31-8-1988 drawn on Canara Bank, Gole Market Branch, New Delhi, and the said amount of Rs. 1,50,000 was deposited by the assessees in their joint S.B. Bank Account No. 15780 with Punjab National Bank, New Delhi. 5. The relevant clauses of the agreement for sale executed by the assessees on 31-8-1988 are summarised as follows: (1) Clause (i) stipulates about the total consideration fixed at Rs. 67,10,000. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he property known as No. 145, Golf Links, New Delhi more particularly described in the Schedule hereunder written for a total consideration of Rs. 140 lakhs payable in the following manner: (a) Rs. 15,00,000 paid at the time of execution of this agreement by way of earnest money, the receipt of which amount the vendors hereby admit and acknowledge. (b) Rs. 1,20,00,000 shall be paid by the purchaser within 30 days of receipt of Notice from the Vendors that the requisite permission or approval of the appropriate authority under section 269UC of the Income-tax Act and Rules framed in pursuance thereof as provided in para 3 hereof have been obtained within which period the Certificate in Form 34A of the Income-tax Rules will be obtained by the vendors simultaneously with the delivery by the vendors and Confirming Parties of the vacant possession of the entire property together with all the original documents of title as per list annexed hereto. (c) Rs. 5,00,000 shall be paid at the time of execution and registration of the Sale Deed by the Vendors before the Sub-Registrar of Assurances and FIRST CONFIRMING PARTY. (d) The aforesaid payments specified in sub-clauses (a), (b) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity has no objection to the transfer of the property in question by the said assessees (transferor) to the said transferee Premium Estate for apparent consideration of Rs. 67,10,000 in addition to unearned increase payable to L DO. 10. Again on 13-7-1989 the assessees as transferors together with Premium Estate as confirming party submitted a statement of transfer of immovable property in question to the appropriate authority under section 269UC of the Act showing therein the apparent consideration at Rs. 1.40 crores and BOT as transferee. The appropriate authority then issued certificate under section 269UL(3) on 28-8-1989 describing the assessees as well as Premium Estate as transferors and BOT as transferee and showing apparent consideration at Rs. 1.40 crores in addition to unearned increase payable to L DO. 11. The assessees also obtained a certificate dated 30-4-1992 under section 230A(1) of the Act from the assessing authority for the purpose of getting registration of Deed of Conveyance before the Registrar, New Delhi in favour of transferee, BOT. In his application for a certificate under section 230A(1) the total sale consideration receivable from BOT was shown a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 67,10,000 the transactions in question were evidenced by the order of the appropriate authority, who granted clearance under section 269UL of the Act and Premium Estate was assessed on the sum of Rs. 72,90,000 by the Assessing Officer, held that both the agreements for sale are genuine in character and there is no cause for suspicion. Aggrieved with the decision of the CIT(A), the department is in appeal before the Tribunal. 15. We have heard both the parties at length. We have gone through the relevant orders of the authorities below. We have also perused the papers placed in a Paper Book filed by the assessee. 16. The learned departmental representative supported the order of the Assessing Officer and strongly contended that the entire amount of Rs. 1.40 crores paid by the BOT be treated as full consideration in the hands of the assessees for determining the capital gains. The learned counsel for the assessees on the other hand, supported the order of the CIT(A) and reiterated the same contentions as made before the CIT(A). 17. The true and legal nature and character of the said agreement for sale can be ascertained from the surrounding circumstances, which are also at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any person(s) or company in favour of which the vendors shall execute the final conveyance and complete the sale transaction, and any such nomination shall be binding on the vendors. 19. It is also manifest that an amount of Rs. 1,50,000 was paid on 31-8-1988 by Premium Estate to the assessees by cheque at the time of execution of the agreement against the total consideration of Rs. 67,10,000. The assessee had, therefore, committed themselves to sell the property in question and made themselves liable to an action of specific performance by entering into commitments they made in the Agreement for sale dated 31-8-1988 and by receiving part consideration of Rs. 1,50,000 on the date of execution of the said agreement. 20. In terms of the clause 4-of the agreement for sale dated 31-8-1988 between the assessees and Premium Estate, the assessees as transferors and Premium Estate as transferee furnished a statement in Form No. 37-I in respect of the transfer of property in question at an apparent consideration of Rs. 67,10,000 in addition to un-earned increase payable to L DO, to the appropriate authority who did not make any order under section 269UD(1) for the purchase by the Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ropriate Authority, intending to transfer the property in question to BOT for the total apparent consideration of Rs. 1.40 crores speaks of Premium Estate having interest in the property to the extent of Rs. 72,90,000 out of the total consideration of Rs. 1,40,00,000 as well as of an agreement for sale dated 31-8-1988 with Premium Estate for consideration of Rs. 67,10,000. The Appropriate Authority accordingly granted certificate of having no objection to the transfer of the property in question describing Premium Estate as Confirming Party. The application in Form No. 34A for a certificate under section 230A(1) of the Act has also a mention of apportionment of total consideration of Rs. 1.40 crore in the manner that the sum of Rs. 72,90,000 is payable to Premium Estate and 1/3rd of the balance of Rs. 67,10,000 to each of the assessees. It, therefore, shows that the agreement for sale dated 31-8-1988 with Premium Estate had given due legal force and recognition by all the parties to the transaction of sale of property in question to the ultimate purchaser, the BOT. 24. It is also pertinent to note that in the registered Sale Deed executed on 18-5-1992 by the assessees in favour o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e excluded from his assessable income. In order that a payment should be treated as a diversion at source, it is necessary that it should have been made under some legal obligation. Such obligation must attach to the source of income. In other words, for such a payment there should be an overriding charge. 27. In the instant case, the assessees had entered into an agreement for sale of the property in question with Premium Estate on 31-8-1988 for a consideration of Rs. 67,10,000 out of which an amount of Rs. 1,50,000 was received by the assessee in advance on the date of execution of aforesaid agreement for sale implying prima facie thereby that the certain legal incidents were attached to the advance amount received by the assessees. The clause 7(b) of the agreement for sale dated 31-8-1988 stipulates, inter alia, that in case the assessees fail to fulfil the obligations under the said agreement and complete the sale transaction, the purchaser shall be entitled to have the said agreement specifically enforced through court at the cost of the assessees. Therefore, there was a legal obligation on the part of the assessees to complete the sale transaction as stated in the said agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property in question entitling it to enforce performance of the contract of sale of property either in its favour or in favour of its nominee. In case the assessees refuse or neglect to complete the transaction of sale of property in terms of agreement for sale dated 31-8-1988, Premium Estate was entitled to file a suit against the assessees for specific performance of the contract. It must be emphasised and it is significant to notice that the sale agreement dated 31-8-1988 created a legal right in Premium Estate to purchase the property for a consideration of the sum of Rs. 67,10,000 and further created an overriding right in Premium Estate to a consideration over and above the consideration amount payable to by it to the assessees under the agreement for sale dated 31-8-1988 and that the assessees were under a corresponding obligation not to receive any amount over and above the said consideration amount of Rs. 67,10,000. The case before us is a case of diversion under an overriding title/right/obligation and not a mere case of application. 30. For the above reasons, we hold that the capital gains had to be computed only by taking into account the sum of Rs. 67,10,000 act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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