Income Tax Appellate Tribunal - Chennai
Bakvathavatsalam Gowtham, Chennai vs Department Of Income Tax on 25 April, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH : CHENNAI
[BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER
AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER]
I.T.A.No. 1614/Mds/2010
Assessment year : 2007-08
The Income Tax Officer vs Shri Bakthavatsalam Gowtham
Business Ward VI(2) No.137, Wallajah Road
Chennai Mount Road
Chennai 2
[PAN AAIPG7746F]
(Appellant) (Respondent)
C.O.No. 121/Mds/2010
Assessment year : 2007-08
Shri Bakthavatsalam vs The Income Tax Officer
Gowtham Business Ward VI(2)
No.137, Wallajah Road Chennai
Mount Road
Chennai 2
(Cross objector) (Respondent)
Department by : Shri Shaji P. Jacob, Addl. CIT
Assessee by : Shri S. Sridhar, Advocate
Date of Hearing : 25-4-2012
Date of Pronouncement : 04-5-2012
ORDER
PER N.S. SAINI, ACCOUNTANT MEMBER
The appeal by the Revenue and the cross objection by the assessee are against the order of the CIT(A)-IX, Chennai, dated 16.6.2010.
:- 2 -: I.T.A.No.1614/10& CO 121/10
2. The sole grievance of the Revenue, as projected in the ground of appeal raised in this appeal, is that the CIT(A) has erred in holding that the capital gains was not taxable in assessment year 2007-08.
3. The brief facts of the case are the assessee had inherited a property at Teynampet, Chennai, alongwith his brother Shri Vijay. The assessee and his brother sold a portion of the above said property to M/s Ceebros Hotels Pvt. Ltd. Chennai, by executing irrevocable Power of Attorney registered with Sub-Registrar as document No.637 of 2003 dated 20.11.2003 and also executed an agreement for joint development and sale dated 20.11.2003 in favour of M/s Ceebros Hotels Pvt. Ltd. alongwith his brother. The assessee's share of deemed sale consideration arising out of the above joint development worked out to ` 4,22,50,000/-. The assessee had shown the capital gains arising out of the said sale in assessment year 2004-05 after indexation and cost of transfer which was admitted by the Assessing Officer in an assessment completed u/s 143(3) of the Act on 26.12.2006. The assessee, at the request of M/s Ceebros Hotels Pvt. Ltd signed a sale deed dated 29.3.2007 alongwith his brother since it was pleaded by M/s Ceebros Hotels Pvt. Ltd that they have dropped :- 3 -: I.T.A.No.1614/10 & CO 121/10 their original intention of developing the said property into different units and sell it to different parties and decided to retain the same for their own use and when they approached the Registrar to register the sale deed using the Power of Attorney given, they could not do so since they could not use the Power of Attorney already given in their favour to register the sale deed in their own name and requested the assessee to sign the sale deed to comply with the technical formalities for which the assessee obliged. The assessee had not received any further consideration for signing the sale deed which was registered on 29.3.2007. The Assessing Officer, on the basis of information received through AIR, proposed to assess the capital gains on the basis of sale deed signed by the assessee on 29.3.2007. The assessee explained to the Assessing Officer that the sale of the property had already been completed in the previous year relevant to assessment year 2004-05 and the Assessing Officer's proposal to tax the capital gains on the basis of sale deed registered on 29.3.2007 in assessment year 2007-08 was illegal. The assessee also filed confirmation certificate from M/s Ceebros Hotels Pvt. Ltd to the effect that the sale of the said property was completed in the previous year relevant to assessment year 2004- 05 when they had paid the entire consideration and taken the :- 4 -: I.T.A.No.1614/10 & CO 121/10 possession of the property and signing of the sale deed was just to comply with the technical formalities and they have also not paid any further consideration at the time of registering the above said sale deed. It was also submitted that all the conditions for effective transfer of the property stipulated u/s 2(47) of the Income-tax Act, r.w.s 53A of the Transfer of Property Act was satisfied and as such, the sale of the said property was concluded in the previous year relevant to assessment year 2004-05 and the capital gains arising out of the above sale should be taxable only in assessment year 2004-05. However, the Assessing Officer did not accept the contention of the assessee and brought to tax the balance between the sale value attributable to the assessee as per sale deed registered on 27.3.2007 and actual capital gain assessed in assessment year 2004-05.
4. On appeal before the CIT(A), the assessee has submitted as under:
"1. The appellant had inherited property at Teynampet, Chennai along with his brother Mr. Vijay. The appellant along with his brother sold a portion of the above said property to M/s Ceebros Hotels Pvt Lt d., Chennai by executing irrevocable Power of Attorney registered with Sub registrar as document No.637 of 2003 dated 20.11.2003 and also executed an agreement for joint development and sale dated 20.11.2003 in favour of M/s. Ceebros Hotels Pvt Ltd along with his brother. The entire consideration was received and the entire property had been handed :- 5 -: I.T.A.No.1614/10 & CO 121/10 over and taken possession by M/s.Ceebros Hotels Pvt. Ltd. The appellant's share of deemed sale consideration arising out of the above joint development worked out to Rs.4,22,50,000/-. The Capital gains arising from the above sale was admitted in Asst. Year 2004-05 for which assessment was completed u/s 143(3) by the then Joint Commissioner, Range VI vide his scrutiny assessment order dated 26.12.2006.
2. Subsequently, in Asst Year 2007-08, the appellant had signed a sale deed dated 29.03.2007 along with his brother since it was pleaded by M/s Ceebros Hotels Pvt Ltd that they have dropped their original intention of developing the above said property into different units and sell it to different parties and decided to retain the same for own use and when they approached the Registrar to register the sale deed using the Power of attorney already given by the appellant and his brother, they could not do so since they cannot use the Power of Attorney already given in their favour to register the sale deed in their own name and requested your appellant to sign the sale deed to comply with the technical formalities for which your appellant obliged. The appellant had not received any further consideration for signing the sale deed, which was registered on 29.3.2007.
3. the appellant had also filed a confirmation certificate from M/s Ceebros Hotels Pvt. Ltd to the effect that the sale of above said property was completed in the previous year relevant to ay 2004-05 when they have paid the entire consideration and taken over possession of the property and signing of the sale deed was just to comply with the technical formalities and they have also not paid any further consideration at the time of registering the above said sale deed.
4. Further it was submitted that all the conditions for effective transfer of the property stipulated u/s 2(47) of the Income Tax Act read with sec 53A of the Transfer of Property Act was satisfied and as such the sale of the above said property is concluded in the previous year relevant to Asst. Year 2004-05 and the capital gains arising out of the above said sale should be taxable only in Asst. year 2004-05, accordingly your appellant had rightly admitted the capital gains in the Asst. Year 04-05.:- 6 -: I.T.A.No.1614/10 & CO 121/10
The Learned Authorised representative relied on the following two case laws in support of his arguments:
• D Kasturi vs CIT and another delivered (Mad HC 251 ITR 532) • Chaturbhuj Dwarakadas Kapadia vs CIT (Bom HC 260 ITR 491)"
5. The CIT(A), after considering the submissions of the assessee, deleted the addition by observing as under:
" 5.4 From the above discussion, the following inferences are drawn:
(a) The appellant and his co-owner(brother) Shri B.Vijay' entered into the Memorandum of Agreement for the joint development of the said land with one M/s. Ceebros Hotels Pvt. Ltd. on 0.11.2003 and also given irrevocable Power of Attorney in favour of M/s. Ceebros Hotels Pvt. Ltd. and handed over possession of the property.
(b) The appellant Shri B. Gautham had already filed his return of income for the Asst. year 2004-05 by admitting the capital gains of Rs.2,45,35,429/- from the sale of the land under question and remitted the taxes of Rs. 54,06,741/- thereon by which the learned AO has passed order on 26.12.2006.
(c) In the year 2007-08, it is seen that the said land was registered in the name of M/s. Ceebros Hote s Pvt. Ltd. and the registered value as per the guide line is Rs.23,50,85,500/- and accordingly the AO has assessed the difference in value of guideline value adopted for the Memorandum of Agreement and the guide line value adopted for Registration purposes.
Total sale value as reported in AIR Rs. 23,50,85,500 Appellant's share 50% of the above 23,50,85,500 Rs.11,75,42,750 2 Less: Capital Gain already offered and assessed In Asst. Year 2004-05 Rs. 2,45,36,429 Balance capital gains now assessed by AO Rs. 9,30,06,321
(d) The appellant has now rely on the section 2(47)(v) of the Income Tax Act for the purpose of offering capital gains even though the :- 7 -: I.T.A.No.1614/10 & CO 121/10 transfer of immovable property of the said land is not effective or complete under the general law.
(e) The appellant is also relying on the jurisdictional case laws
1) D.Kasturi vs CIT and another delivered (Mad High Court 251 ITR 532)
2) Chaturbhuj Dwarakadas Kapadia vs CIT (Bom High Court 260 ITR 491) Wherein it is held that the ingredients of section 53A of the Property Act is satisfied, after the assessee parted with the possession of the property, such possession having been given after payment of agreed consideration for sale and same will result in transfer forhte purpose of Section 2(47)(v) of the Income-tax Act.
It was also held in Chaturbhuj Dwarakadas Kapadia Vs CIT (Bom HC 260 T'R 491) case that capital gains is taxable in the year in which such transactions were entered into e' 'en if the transfer of immovable property is not effective or complete under the general law. Once the agreement of irrevocable power of attorney was intended to be given to the developer to deal with the property. then the date of contract would be the relevant date to decide the date of transfer u/s 2(47)(v).
6. After considering the above facts, and following the jurisdictional High Court's decision in the case of D,Kasturi Vs CIT (Mad HC 251 ITR
532) and also the ratio followed in Smt. Vijay Laxmi Dhaddha vs Income Tax Officer (2009: 20 DTR (Jp) (Trib) .365, I hold the view that for the purpose of Capital gains, the appellant had already discharged his obligation by filing of return and paid tax in the Asst.Year 2004-05 itself when possession has been handed over and full consideration received by way of a joint development with irrevocable power of attorney, and further in the Asst.Year 2007-08 adopting the registered value of Rs.23,50,85,500/- for the purpose of capital gain is not justified and accordingly the AO is directed to delete the addition of Rs.9,30,06,321/-. The appeal on this ground is allowed."
6. The DR argued and submitted as under:
"The only dispute in this appeal is the year of taxability of Capital gains. As per sec. 45 C.G. is chargeable to tax in the year of transfer and thus the moot question is the year of transfer. The impugned asset transferred is an immovable property and hence A.O. held that the date of registration of sale deed ie. 29.03.2007 is the date of transfer and hence Capital gains arose in A.Y. 2007-08.:- 8 -: I.T.A.No.1614/10 & CO 121/10
2. According to the assessee Joint Development agreement was entered into On 20-11-2003 and hence capital gains arose in A.Y. 2004-05 in view of sec. 2(47) of IT. Act r.w.s. 53A of the Transfer of Property Act. Claim of the assessee is not correct since the conditions set out in sec. 53A of the Transfer of Property Act are not complied with. The essential conditions are :
•There should be a sale agreement in writing signed by the transferor •Transferee has taken possession of the property •Transferee is willing to perform his part of the contract
3. The words "the contract, though required to be registered, has not been registered, or" appearing in sec. 53A was omitted w.e.f 24-09-2001. Hence registration of sale agreement is mandatory after 24-09-2001 to enforce sec. 53A. Correspondingly, by an amendment of 2001, sub-section (lA) has been introduced in sec. 17 of the Registration Act to the effect that every agreement to sell has to be registered with the Registration authorities under the Registration Act, 1908, if the benefits of part performance and possession under sec. 53A of the transfer of Property are to be availed of. The binding nature of these conditions so as to apply the provisions of sec. 53A of the T.P. Act is reiterated by jurisdictional High court in K. Mani Vs M.D. Jayavel & Ors. (Mad) (2011) 7 MU 264 [copy enclosed]
4. In the present appeal, assessee has not registered the sale agreement though it was executed subsequent to 24-09-2001.
5. There is no evidence to show that transferee has taken possession of the property as an owner and not for construction purposes alone (in fact no construction was carried out at all). As evident from page 8 of paper Book, assessee only applied to CMDA for Planning Permit for construction of multi-storeyed building. Even the copy of power of attorney filed by assessee proves that the land was still in the possession of assessee. In this regard I rely on the decision of the Apex court in Nanjegowda Vs Gangamma (SC) 2011 STPL(Web) 722 SC 1 [copy enclosed].
6. As per Memorandum of Agreement dated 20-] ] -2003, transferee had to construct a multi-storeyed building with 64350 sft. with given specifications. Further Cl. 10 of the said agreement [page 27 of Paper Book] makes it clear that the transferee "should not part with possession of the property earmarked for the Developer either as a whole or in parts without handing over possession of the completed :- 9 -: I.T.A.No.1614/10 & CO 121/10 multi-storeyed commercial complex building to the owners in the land which is more fully described in the Schedule "E" hereunder".
In fact, no construction was made on this property till 29-03-2007 as evident from page 13 of Paper Book and no constructed area was handed over to asessee as consideration, which is contrary to the terms in the Memorandum of Agreement dated 20-11-2003. Thus there is no evidence to indicate that the transferee was willing to perform his part of the contract.
7. Balance sheet of the transferee viz. Ceebros Hotels Pvt. Ltd. for year ending 31-03-2004 shows that the property was not acquired by it in F.Y. 2003-04. [copy enclosed]
8. Value of the property for the purpose of registration is Rs. 23,50,85,500 [page 13 of Paper Book] and 50% of this was adopted as sale consideration by the A.O. in the assessment. As per the sale deed, both brothers ie. assessee and Sri B. Vijay are equal owners of the property [page 7 of Paper Book] and the claim that 6.5 grounds was transferred separately by Sri Vijay is against facts on record. "
7. He also relied on the decision of the Hon'ble Supreme Court in the case of Nangegowda & Anr vs Gangamma & Ors, in Civil Appeal No.2006 of 2006, where it was held as under:
" 8. We have bestowed our consideration to the rival submissions. Section 53A of the Act which is relevant for the purpose reads as follows:
'53A. Part performance- Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the :- 10 -: I.T.A.No.1614/10 & CO 121/10 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."
8.1. From a plain reading of the aforesaid provision, it is evident that a party can take shelter behind this provision only when the following conditions are fulfilled. They are:
(i) The contract should have been in writing signed by or on behalf of the transferor;
(ii) The transferee should have got possession of the immoveable property covered by the contract;
(iii) The transferee should have done some act in furtherance of the contract; and
(iv) The transferee has either performed his part of the contract or is willing to perform his part of the contract.
9. Bearing in mind the aforesaid principle, we, now, proceed to consider as to whether defendants have satisfied all the requirements. Had they got possession of the immoveable property covered by the contract necessary for invocation of Section 53A of the Act? Agreement to sale dated 27th November, 1982 recites that Honnanna had delivered the possess] of property to defendant no.3 Jayamma. According to the defendants, there had been ban on registration of documents, hence Honnanna executed an irrevocable power of attorney on 14th July, 1985. The contents of the general power of attorney show that the property at that particular time was in possession of Honnanna, the transferor. This would be evident from the following recital in the power of attorney:
:- 11 -: I.T.A.No.1614/10& CO 121/10
'The vacant site as mentioned in the schedule below which is in my possession acquired through the registered Sale Dee dated 05.05.1980 registered in the Office of the Sub-Registrar, Bangalore North Taluk, in Book No. I, Volume 3236 page 210- 230 No. 1363, I have hereby given the power in favour of you to look after and manage completely on my behalf as am unable to manage for inevitable reasons.' (underlining ours)
10. Had defendant no.3 Jayamma got possession of the property in pursuance of the agreement to sale dated 27th November, 1982, there was no occasion for Honnanna to recite in clear terms that he was in possession of the property. view of the aforesaid, we are of the opinion that the finding recorded by the Trial Court as affirmed by the High Court tl defendants did not get possession of the property after execution of the sale deed is on correct appreciation of facts, which do not call for interference in this appeal. In view of this finding, in our opinion, the provision of Section 53A of the Transfer of Property Act is not attracted and defendants cannot take advantage of that.
11. In the result, we do not find any merit in this appeal which is dismissed accordingly but without any order as to the costs. "
8. We have heard the rival submissions and perused the orders of the lower authorities and materials available on record. The facts relevant to the issue under consideration are that the assessee was owner of land measuring 27.38 grounds alongwith his brother namely, Shri Vijay, both having equal share. The assessee entered into an agreement with M/s Ceebros Hotels Pvt. Ltd alongwith his brother whereby land measuring 6.5 grounds was outrightly sold to the said purchaser for ` 4,22,50,000/- and 9.75 grounds of land was valued at :- 12 -: I.T.A.No.1614/10 & CO 121/10 ` 6,33,75,000/-. The consideration of ` 4,22,50,000/- was paid by cheque during the financial year 2003-04 by the purchaser to the assessee and his brother and in lieu of consideration of `6,33,75,000/-, the purchaser agreed to construct about 64,350 sq ft of complex on the land left with assessee and his brother. Thus, the total consideration amounting to ` 10,56,25,000/- out of which assessee's share being 50% was ` 5,28,12,500/-. The sale deed in respect of above transaction was registered in financial year 2006-07 relevant to the year under consideration and on which stamp duty was charged on the value of ` 23,50,85,500/-. The assessee offered capital gains in respect of the above transaction in assessment year 2004-05 which was duly assessed by the Assessing Officer u/s 143(3) in the assessment of the assessment year 2004-05. However, the Assessing Officer observed that the stamp duty paid was on the value of ` 23,50,85,500/- . He brought the difference between the stamp duty value and capital gains assessed in assessment year 2004-05 to tax in assessment year 2007-08. Thereby the Assessing Officer assessed the capital gains of ` 9,30,06,321/- during the year under appeal.:- 13 -: I.T.A.No.1614/10 & CO 121/10
9. On appeal, the CIT(A) deleted the above addition for the reasons quoted in detail above in this order.
10. The DR submitted before us that the agreement to sell entered into in financial year 2003-04 was not registered as required by law even u/s 53A of the Transfer of Property Act and therefore, the said transfer in financial year 2003-04 was not correct and transfer of the property only took place in financial year 2006-07 when sale deed was registered. The DR also argued that possession of the property was not handed over to the transferee in financial year 2003-04 and for this submission, he relied upon clause 10 of the Memorandum of Understanding (MoU) dated 20.11.2003. He, therefore, contended that the CIT(A) was not justified in deleting the entire capital gains assessed by the Assessing Officer in assessment year 2007-08.
11. On the other hand, the A.R supported the order of the CIT(A). The A.R contended that the Department has accepted the property as transfer in assessment year 2004-05 and also levied tax thereon and after this it was not open to the Department to again tax the very said property as transfer by the assessee in assessment year 2007-08. He also argued that merely because agreement to sale was :- 14 -: I.T.A.No.1614/10 & CO 121/10 not registered, it cannot be held that on handing over of the possession of the property in assessment year 2004-05, no transfer took place. He also pointed out that a registered power of attorney was executed in favour of the purchaser in assessment year 2004-05 and simply because of a technical requirement of Registrar, at the request of the purchaser, the assessee again signed the sale deed and at that time no consideration whatsoever was received by the assessee. We find that in respect of the property in question, the Assessing Officer has taken assessee's share of sale consideration at ` 11,75,42,750/- on the basis of stamp duty value and brought to tax the entire sale consideration as capital gains being ` 2,45,36,429/- in assessment year 2004-05 and balance ` 9,30,06,321/- in assessment year 2007-08. Thus, the Assessing Officer has not allowed any deduction for the indexed cost of the property in question which cannot be justified.
12. Be that as it may. We find that it is not in dispute that the property in question was treated as transfer u/s 2(47)(v) of the Act in the assessment year 2004-05 in the hands of the assessee and consequently, capital gains was also assessed in that assessment year.:- 15 -: I.T.A.No.1614/10 & CO 121/10
In our considered opinion, after this, treating of transfer of the property in the hands of the assessee in assessment year 2004-05 it was not open to the Revenue to again treat the same property as transfer by the very same assessee in assessment year 2007-08 also.
It is not the case of the Revenue that the assessment made in assessment year 2004-05 was rectified or revised subsequently.
Further, we find that section 2(47) (v) of the Act reads as under:
"2. In this Act, unless the context otherwise requires .......................................................... (47) transfer , in relation to a capital asset, includes,--
............................................. [(v) any transaction involving the allowing of the possession of any immovable property 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 (4 of 1882) ; or
13. A reading of the above provision shows that the main ingredient to attract the provisions of this section is that there should be parting of possession of an immovable property in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, which reads as under after amendment made in 2001:
"Part performance.
53A. Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in :- 16 -: I.T.A.No.1614/10 & CO 121/10 part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract 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 thereof or by the law for the time being in force, the transferer 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. "
14. Thus, in our considered opinion, merely because an agreement to sale has not been registered, which otherwise is in the nature of agreement referred to in section 53A cannot be taken out of ambit of section 2(47)(v) of the Act when parting of the possession of immovable property has taken place. The provisions of clause 10 of the MoU dated 20.11.2003 entered into between the assessee alongwith his brother with the purchaser reads as under:
"10. As far as the area of land earmarked for the Developer is concerned, the Developer is at perfect liberty to plan for development/sale of the said area and accordingly develop or sell and the owners will not interfere with the same. But, it is made clear to the Developer that the Developer should not part with :- 17 -: I.T.A.No.1614/10 & CO 121/10 possession of the property earmarked for the Developer either as a whole or in parts without handing over possession of the completed multi- storeyed commercial complex building to the owners in the land which is more fully described in the Schedule "E" hereunder:
Alternatively, it is open to the Developer to give necessary and required security to the owners to protect their interest in respect of the construction to be put up by the Developer in the land retained by the owners, which is more fully described in the Schedule "E" hereunder."
15. On the reading of the above, we do not find any force in the contention of the DR that the above clause evidences that the assessee has not parted with the possession of the property in question. Thus, we do not find any merit in this appeal of the Revenue and find no error in the order of the CIT(A) wherein it was held that the property in question has already been treated as transfer by the assessee in assessment year 2004-05 and therefore, in respect of that transfer, capital gains cannot be assessed in the assessment of assessment year 2007-08. We, therefore, dismiss the grounds of appeal of the Revenue.
16. In the cross objection filed by the assessee, the assessee has merely supported the order of the CIT(A). In view of our finding :- 18 -: I.T.A.No.1614/10 & CO 121/10 in the appeal of the Revenue, the cross objection filed by the assessee has become only academic in nature and hence, infructuous. We, therefore, dismiss the cross objection filed by the assessee.
17. In the result, both, the appeal of the Revenue and the cross objection of the assessee, are dismissed.
Order pronounced on Friday, the 4th of May, 2012, at Chennai Sd/- Sd/-
(VIKAS AWASTHY) (N.S.SAINI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 4th May, 2012
RD
Copy to: Appellant/Respondent/CIT(A)/CIT/DR