Income Tax Appellate Tribunal - Madras
Gift Tax Officer vs Dr. V. Srinivasan on 29 January, 2002
Equivalent citations: [2002]81ITD182(MAD)
ORDER
P.S. Kalsian, AM.
1. The appeal is directed by the Revenue against the order of the CIT(A), dt. 16th July, 1993.
2. The assessee is an owner of a plot of land measuring 4,012 sq. feet in Trichy. The assessee transferred his land to Ayyappa Family Trust in which the assessee's two children alone are beneficiaries. The assessee executed an agreement dt. 13th April, 1981, for sale of the said plot for Rs. 55,000. The agreement dt. 13th April, 1981, was not registered. By a resolution dt. 31st March, 1984, Ayyappa Family Trust resolved that the machinery and furniture belonging to the trust shall be delivered by the trust at book value to the assessee and is to be adjusted against the sale consideration being the value of the plot. It was claimed by the assessee before the AO that the sale consideration has been received on 31st March, 1984, itself by book adjustment. No gift was involved in the transaction dt. 22nd Nov., 1989, when the actual sale deed was registered in the trust. For the reasons mentioned by the AO in the assessment order, he did not agree with the claim of the assessee.
According to the AO, the ownership title in the land passes to Ayyappa Family Trust when the actual transfer of property took place. According to him, the sale deed was executed on 22nd Nov., 1989, and registered on 28th Nov., 1989, as document No. 3644 of 1989. Therefore, title in the land passed to the trust only on 22nd Nov., 1989 and not before that. The AO, therefore, considered that since the plot of land has been transferred to the transferor for inadequate consideration, the provisions of Section 4(1)(a) are applicable. The assessee himself valued the property in question at Rs. 1,68,000 in the document No. 3644 of 1989. The registrar has valued the property at Rs. 2,80,000 and registered the said document on 28th Nov., 1989, after receiving the necessary additional charges from the assessee. The difference between the market value of the property at Rs. 2,80,000 as well as the sale consideration of Rs. 55,000 received by the assessee was assessed to gift-tax under Section 4(1)(a) of the GT Act. In first appeal, the CIT{A) held that since the assessee had given possession of the land in 1978, there was a valid gift on that date. The CIT(A), therefore, held that the assessment of gift in asst. yr. 1990-91 was unwarranted and allowed the appeal of the assessee. Aggrieved by the order of the CIT(A), the Department came in appeal before us.
3. It is argued by the learned Departmental Representative that the assessee has executed an agreement of sale on 13th April, 1981, under which the assessee has agreed to sell the land measuring about 1-1/2 grounds to the Ayyappa Family Trust for Rs. 55,000. It was be mentioned here that this agreement dt. 13th April 1981, has been signed by the assessee, Dr. V. Srinivasa and his wife, Mrs. Usha Srinivasan representing the Ayyappa Family Trust. It seems that Dr. Srinivasan and Mrs. Usha Srinivasan are trustees of Ayyappa Family Trust for the benefit of their children. It is mentioned in the agreement dt. 13th April, 1981, that the possession of the land was given to Sri Ayyappa Family Trust for the construction of the building. According to the learned Departmental Representative, there was no transfer of the land on the date of agreement because neither the sale agreement nor the sale deed was registered on 13th April, 1981. The sale deed was executed on 22nd Nov., 1989, and registered on 28th Nov., 1989, as Document No. 3644 of 1989. Therefore, the actual transfer has taken place only on 28th Nov., 1989, when the said sale deed was registered and not before that. He relied on the decision of the Supreme Court in the case of Alapati Venkataramiah v. CIT (1965) 57 ITR 185 (SC) and argued that transfer means that effective conveyance of the capital asset to the transferee. Delivery of possession of immovable property could not by itself be treated as equivalent to conveyance of the immovable property, and the title to the land could not pass on till the conveyance was executed and registered. The learned Departmental Representative, therefore, supported the order of the AO. He also referred to the decision of the Madras High Court in the case of CIT v. Bharani Pictures (1981) 129 ITR 244 (Mad) and the decision of the Supreme Court in the case of Mir Osman Alikhan v. CWT (1986) 162 ITR 888 (SC).
4. The learned counsel for the assessee, on the other hand, referred to the definition of gift given in Section 2(xii) of the GT Act and also the definition of expression 'transfer of property' means any disposition, conveyance, assignment, settlement, delivery, payment or other alienation of property and also include certain other transfers. The learned counsel for the assessee, therefore, stated that since delivery of property has taken place on 13th April, 1981, there is no gift in 1989. He also referred to amendment to Section 2(47)(v) of the IT Act and Section 27 of the IT Act as well as the Explanation inserted by the Finance Act, 1987, w.e.f. 1st April, 1988.
5. We have considered the rival submissions, facts of the case and material on record. For the sake of convenience, the relevant provisions of Section 4(1)(a), 2(xii) and 2(xxiv) of the GT. Act are reproduced hereunder:
"4(1)(a) : Where property is transferred otherwise than for adequate consideration, the amount by which the market value of the property at the date of the transfer exceeds the value of the consideration shall be deemed to be a gift made by the transferor;
2(xii) : "gift" means the transfer by one person to another of any existing movable or immovable property "made voluntarily and without consideration in money or money's worth and includes the transfer or conversion of any property referred to in Section 4, deemed to be a gift under that Section; 2(xxiv) : "transfer of property" means any disposition, conveyance, assignment, settlement, delivery, payment or other alienation of property and, without limiting the generality of the foregoing, includes :
6. The assessee has executed the agreement dt. 13th April, 1981, to sell the land measuring about 1-1/2 grounds to the said Sri Ayyappa Family Trust for a consideration of Rs. 55,000 only provided the said transaction is concluded within three years from the date of agreement. This agreement was further extended for a period of three years. As mentioned in the sale deed dt. 22nd Nov., 1989, the amount of Rs. 55,000 was satisfied by delivery of laboratory equipments, furniture and typewriter to the assessee by the trust. The real sale deed was executed on 22nd Nov., 1989, and registered on 28th Nov., 1989. The only issue to be decided is whether the transfer took place on 13th April, 1981, because the land was in possession of the vendee, viz., Ayyappa Family Trust from 1981 as mentioned in the sale deed or the transfer took place when the sale deed was registered in November, 1989. In fact, as mentioned by the AO the possession of the land in question had already been taken over by the trust in 1978 itself and the circumstances under which the possession of the land has taken over are not clear from the record. For the first time, the assessee has executed the agreement on 13th April, 1981, for sale of land to Ayyappa Family Trust. The AO treated the difference between the market value of the property and consideration received by the assessee as a deemed gift under Section 4(1)(a) of the GT Act, where property is transferred otherwise than for adequate consideration, the amount by which the market value of the property at the date of the transfer exceeds the value of the consideration shall be deemed to be a gift made by the transferor. The expression "transfer of property" has been defined in Section 2(xxiv) (mentioned above) which means any disposition, conveyance, assignment, settlement, delivery payment or other alienation of property. The immovable property valuing Rs. 100 or more can be validly transfer by a registered deed only. It has been held by the various High Courts in the following cases :
(i) Smt. Satyabati Goswami and Ors. v. CGT (1978) 113 ITR 228 (Gau);
(ii) Smt. Padma Lalchand Mirchandani v. CIT (1981) 128 ITR 174 (Del);
(iii) Darbar Shivrajkumar v. CGT (1981) 131 ITR 647 (Guj);
(iv) CGT v. Matilda Ferreira (1978) 112 ITR 934 (Bom); and
(v) K. Madhavakrishnan v. CGT (1980) 124 ITR 233 (Mad).
That in case of a gift of an immovable property, the effective and crucial date is the date on which the gift dead is executed and registered. The mere delivery of an immovable property is not sufficient for effecting a valid gift. Section 123 of the Transfer of Property Act, 1882, provides that, for the purpose of making a gift of immovable property, the transfer must be effected by a registered instrument signed by or on behalf of the donor and attested by at least two witnesses. The GT Act does not enact any exception to the general law as contained in Section 123 of the Transfer of Property Act. Therefore, in order to effectuate a valid gift, the requirements of Section 123 of the Transfer of Property Act must be complied with.
7. In the case of Alapati Venkataramiah v. CIT (supra), the facts were that the assessee owned certain lands and the buildings, plant and machinery, thereon and carried on the manufacture of tiles and bricks. The assessee entered into an agreement on 17th March, 1948, to sell those assets including the stocks and the goodwill of the business for a sum of Rs. 2 lakhs to a company. The question was whether capital gains arose from the sale in the previous year ending 31st March, 1948, relevant to the asst. yr. 1948-49. The Hon'ble Supreme Court held as under:
"that before Section 12B of the Indian IT Act, 1922, could be attracted, title must pass by way of modes mentioned in Section 12B i.e., sale, exchange or transfer. In the context 'transfer' meant effective conveyance of the capital asset to the transferee. Delivery of possession of immovable property could not by itself be treated as equivalent to conveyance of the immovable property. The Hon'ble Supreme Court further held that title to the land and buildings and the plant and machinery and electrical fittings permanently embedded thereon could not pass to the company till the conveyance was executed and registered and as the sale deed was executed and registered only on 22nd Nov., 1948, no sale or transfer of these assets took place before 1st April, 1948, and no capital gains arose in the relevant previous year."
8. Similarly, in the case of (Late) Nawab Sir Mir Osman Ali Khan v. CWT (supra), the assessee, the Nizam of Hyderabad, had received full consideration for certain immovable properties from the purchasers but he had not executed any registered sale deeds in favour of the vendees. The issue was whether the value of the property has to be included in the assessee's net wealth for the purpose of assessment as they were belonging to him within the meaning of Section 2(m) of the WT Act. The Hon'ble Supreme Court held that for all the purposes the property has to be treated as belonging to the assessee.
9. In the case of the assessee before us, the first agreement was executed to the assessee on 13th April, 1981, and the assessee transferred the land measuring 1-1/2 grounds to the Ayyappa Family Trust for a consideration of Rs. 55,000 within three years from his date of agreement. No transaction was concluded within three years of the agreement and, therefore, the assessee remained the owner of the land in question. Since the property was not transferred on 1.3th April, 1981, another agreement was made on 10th April, 1984, between the assessee, Dr. V. Srinivasan and his wife, Mrs. Usha Srinivasan, in her capacity as trustee of Sree Ayyappa Family Trust. Vide this agreement, the assessee agreed to transfer the property before 31st March, 1989, to bath the beneficiaries jointly. Mere agreement does not transfer the property. Subsequently the sale deed was executed by the assessee on 22nd Nov., 1989, under which the land in question was transferred in favour of Sree Ayyappa Family Trust consisting of two beneficiaries who are children of the beneficiaries. Since the sale deed was executed in the month of November, 1989, actual transfer has taken place only in November, 1989, because before that there was no transfer of property. The transfer of immovable property doesnot take place by mere delivery.
10. In the case of K. Madhavakrishnan v. CGT (supra), the facts are that one Srimathi Lakshmi Ammal gave agricultural land to her daughter. She died on 4th April, 1971. It was claimed before the AO by the assessee that he is not liable to gift-tax in asst. yr. 1967-68. The AO had before him a compromise decree passed in O.S. No. 42 of 1966, dt. 18th April, 1966. It was contended for the assessee that the compromise decree did not create any interest in any immovable property and that it merely declared the pre-existing rights of the donee. The GTO rejected the contentions of the donee and came to the conclusion that she became entitled to the property only by virtue of the decree of the Court, dt. 18th April, 1966. The issue before the High Court was that whether there was a gift as contemplated by law during the relevant previous year under consideration i.e.. 1967-68. After considering the provisions of Section 2(xii) and 2(xxiv) of the GT Act and other case laws on the subject, the Hon'ble High Court held as under:
"Section 123 of the Transfer of Property Act provides that for the purpose of making a gift of immovable property, the transfer must be effected by a registered instrument signed by or on behalf of the donor, and attested by at least two witnesses. The GT Act does not enact any exception to the general law as found in Section 123 of the Transfer of Property Act. Therefore, in order to effectuate a valid gift, the requirements of Section 123 of the Transfer of Property Act should have been complied with. Section 123 of the Transfer of Property Act requires a registered instrument. There was no instrument in May, 1956, and mere delivery of possession would not satisfy the requirements of Section 123 of the Transfer of Property Act. It would, therefore, follow that there was no gift in the year 1956."
Therefore, in this case, it was held by the Hon'ble Madras High Court that mere delivery of possession would not satisfy the requirements of Section 123 of the Transfer of Property Act. In the case of the assessee also mere agreement to sell the property on 13th April, 1981, and mere delivery of property at that time did not constitute any gift. The ratio of the decision of the Madras High Court reported in (1980) 124 ITR 233 (Mad) (supra) is squarely applicable to the facts of the case. If the formalities required by the law are not complied with, the gift would not be complete. Therefore, gift of immovable property is not complete till the properties transferred by registered deed. Since the assessee has transferred the property by registration in November, 1989, the AO was justified in assessing the value of the deemed gift under Section 4(l}(a). We, therefore, allow the appeal of the Revenue.
11. In the result, the appeal of the Revenue is allowed.
P. Mohanarajan, J.M.
12. I have gone through the order of my learned Brother. With great respect, I am unable to persuade myself to concur with his point of view for the following reasons. ;
13. This is a case where there was an agreement between the assessee and Shri Ayyappa Family Trust in the year 1981 to sell the property to the trust on a consideration of Rs. 55,000. The time to execute and register the deed of conveyance was extended in the year 1984. However, on 31st March, 1984, the assessee had satisfied the consideration fixed at Rs. 55,000 from the trust. In the year 1989, the deed of conveyance was registered in the office of the sub-registrar, Tiruchirappilly, in document No. 3644 of 1989. At the time of registration, the value of the property was fixed at Rs. 1,68,000 for the purpose of registration, by the assessee. But, the Registrar had valued the property at Rs. 2,80,000 for the purpose of registration on the basis of the guideline value and collected the deficit stamp duty. The AO treated the difference between the value arrived at Rs. 2,80,000 and the actual consideration passed on 31st March, 1984, at Rs. 55,000 as gift.
14. My learned Brother following certain decisions referred to by him in the proposed order has held that the gift has taken place in the asst. yr. 1990-91 and before the date, according to him, the agreement to sell the property entered into in the year 1981 and the date of receipt of consideration from the trust and the extention of time for registration of the document are not relevant in determining the issue. In his view, the transfer of the property has taken place only in the asst. yr. 1990-91, when the title of the property has passed on to the trust.
15. From the facts narrated as above, it is clear that the entire transaction relates to the sale of immovable property. The transaction commenced in the year 1981 by an agreement to sell the property on a consideration of Rs. 55,000 and on 31st March, 1984, the consideration was passed on to the assessee by book adjustments. The AO assessed only the difference of sale consideration and the guideline value as on the date of registration of the conveyance deed, as gift, and brought to tax under the GT Act.
16. Section 2(xii) of the GT Act reads as follows :
"gift" means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth, and [includes the transfer or conversion of any property referred to in Section 4, deemed to be a gift under that section."
There are two limbs in this provision. The first one relates to direct gift made without any consideration in money or money's worth. The second one relates to deemed gift under Section 4 which fall under the definition of Section 2(xxiv) of the Act. Here, in this case a consideration had been admittedly passed on to the assessee from the vendee. In this context it is necessary to refer the definition of the term 'transfer of property' as contemplated under Section 2(xxiv) of the GT Act, which reads as follows :
"transfer of property" means any disposition, conveyance, assignment, settlement, delivery, payment or other alienation of property and, without limiting the generality of the foregoing, includes :
(a) the creation of a trust in property;
(b) the grant or creation of any lease, mortgage, charge, easement, licence, power, partnership or interest in property;
(c) the exercise of a power of appointment [(whether general, special or subject to any restrictions as to the persons in whose favour the appointment may be made)] of property vested in any person, not the owner of the property, to determine its disposition in favour of any person other than the donee of the power, and
(d) any transaction entered into by any person with intent thereby to diminish directly or indirectly the value of his own property and to increase the value of the property of any other person."
This provision has to be read along with Section 4(1)(a) of the GT Act, which reads as follows :
"4(1) For the purposes of this Act,
(a) where property is transferred otherwise than for adequate consideration, the amount by which the [value of the property as on the date of the transfer and determined in the manner laid down in Schedule III exceeds the value of the consideration shall be deemed to be a gift made by the transferor."
As per the provisions of Section 2(xxiv) apart from executing the conveyance, the acts of disposition, assignment, settlement, delivery, payment, or other alienation of property also are considered as the act of transfer of property. Therefore, considering together with Section 4(1)(a), it is abundantly clear that in the given facts of the case, the transaction namely transfer of property as defined under Section 2(xxiv) of GT Act, had been effected as early as in 1984. The consideration had been passed on to the assessee on 31st March, 1984. It is also to be seen in this case that the possession of the land in question was handed over to the said trust as early as in 1978. The trust was allowed not only to retain the possession but also to interfere with it by putting up a superstructure out of its own funds. The consideration was admittedly passed in the year 1984. Therefore, this transaction amounts to a transfer of property as defined under Section 2(xxiv) of the GT Act and within its extended definition of gift, if any, under Section 4(1)(a) of the Act and the valuation date of such gift, if any, shall be as on the date of such transfer, i.e., 31st March. 1984. 17. In this context it is also pertinent to refer the relevant provisions of Section 53A of the Transfer of Property Act, which reads as follows : "53-A. Part-performance.--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 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 the contract, though required to be registered, has not been registered, or, where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the manner prescribed therefor 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."
18. A reading of this provision makes it clear that there should be certain conditions so as to attract the provisions of Section 53-A, which are as follows :
(i) There should be a contract of sale for consideration;
(ii) The contract should be in writing;
(iii) The contract should be signed by the transferor or on his behalf;
(iv) The contract should be in respect of immovable property;
(v) The transferee should have been taken the possession of the property; and
(vi) The transferee should have performed or should be willing to perform his part of contract.
If all the aforesaid conditions are satisfied, the transferor is debarred from enforcing against the transferee any right in respect of the property by which the transferee has taken the possession even if the instrument of transfer is not registered, and such transfer is valid in law.
In the present case, all the aforesaid conditions are prevailing. Therefore, it can be safely said that the assessee was having only a husk of title remained with him after 31st March, 1984.
19. From the above, it is clear that the legislature not only adopted the definition of transaction from the 'Transfer of Property Act' as has been done in other Acts, but also adopted certain other transactions for the concept of 'gift' under GT Act.
20. From the reading of Section 2(xxiv), it is apparent that the gift under Section 2(xii) includes certain transfers, detailed in Section 4(1) and 4(2) of the GT Act. The transactions amounts under the GT Act in view of the definition for the term 'Transfer of property' as contemplated under Section 2(xxiv) of the GT Act. The concept of gift under the GT Act is much wider. Therefore, from the reading of the above provisions quoted above and from the facts discussed as above, it is clear that in this case, the issue is only a transaction of sale for which only Section 4 of the GT Act is applicable, as the AO himself assessed the gift on the basis of the difference between the actual consideration and the value of the property prevailed as per guideline issued by the Registrar of Assurance. As discussed above, the transfer has taken place in the year 1984, It is well within the definition as contemplated under Section 2(xxiv) of the Act. If, at all there is any gift, it shall be deemed gift and it is not a case of direct gift for which a deed of registration is required. Then only Section 123 of Transfer of Property Act will come into play and not otherwise.
21. In the case of Sirehmal Nawalkha v. CIT (1985) 156 ITR 714 (Raj), the Hon'ble Rajasthan High Court held that it is not necessary that "one can become an owner of property only by a registered instrument". In that case, on a declaration in writing the assessee had gifted certain property to his wife. The declaration was duly signed by the assessee as well as his wife but was not registered. The assessee delivered actual and physical possession to his wife and she was exercising her right as owner without any interruption or objection. She let out the house on rent, made repairs, etc. Under such circumstances, the Hon'ble Rajasthan High Court held that there was a valid gift of the property by the assessee to his wife, by applying the extended definition of 'Transfer' as contemplated under Section 2(xxiv) of the GT Act, even if the donee was not the registered owner of the property. 22. In the case before us, the possession of the land was delivered in 1978. The trust constructed the buildings on the said land and let out for rent and earned income. All these were possible on account of delivery of the possession of the land, which commenced by an agreement in 1981 and receipt of consideration in 1984. Thus, only the husk of title to the land remained with the assessee. The admitted facts are narrated in p. 4 of the assessment order, which is as follows :
"In the assessee's case, he is the transferor and the trust created by him is the transferee. According to the terms of unregistered agreements dt. 13th April, 1981 and 10th April, 1984, the execution of documents transferring the land in question is to be made by assessee at any rate before 31st March, 1989. Moreover, 'Clause 6' at p. 3 of the so-called unregistered agreement dt. 13th April, 1981, expressly provides for charging of rent at the market rate, from the date of the transaction is concluded, for the space occupied by the assessee for his consulting room. From the above, it is clear that even though the trust was allowed to put up superstructure in the land belonging to the assessee as early as 1978, the title to the land has not passed till the date of first agreement. That is why Clause '6' has been included in the so-called agreement. Thereafter by another unregistered agreement the time for execution of the document transferring the title to the land was extended upon 31st March, 1989, by mutual agreement among the parties. It was finally executed on 22nd Nov., 1989, only."
Therefore, it cannot be said that the relevant date assessing the gift, if any, arises only in the asst. yr. 1990-91. The registration of the deed is not relevant. On the facts and circumstances of this case as already discussed, the transactions fall under the purview of the extended definition of Section 2(xxiv) of the GT Act. Therefore, if at all, there can be only a deemed gift for which the relevant assessment year shall be 1984-85 for the accounting year ended on 31st March, 1984, because on 31st March, 1984, consideration was passed on to the assessee. Therefore, the issue has to go back to the AO to verify whether there was any difference between the consideration passed on 31st March, 1984, and the guideline value that was prevailing as on 31st March, 1984, and it is ordered accordingly.
23. With this direction, the appeal of the Revenue is deemed to be allowed for statistical purposes only.
REFERENCE UNDER SECTION 23(11) OK THE GT ACT, 1958 5th March, 1999 As we differ in opinion after due deliberation on the point in adjudication in this appeal, we refer to the Hon'ble President of the Income-tax Appellate Tribunal for hearing by one or more of the other Members of the Tribunal to be constituted by him as TM, the point of difference stated below :
1. "Whether, on the facts and in the circumstances of the case, the plot of land at Trichy was transferred by the assessee :
(a) by the actual sale deed dt. 28th Nov., 1989, in view of the definition of "transfer of property" in Section 2(xxiv) of the GT Act, as per the decision of the Hon'ble Madras High Court in the case of K. Madhavaknshnan v. CGT 124 ITR 233 (Mad), or
(b) on 31st March, 1984, when a unilateral resolution was passed by the trustee of the Ayyappa Family Trust that the machinery and furniture belonging to the trust shall be delivered by the trust at book value to the assessee and is to be adjusted against sale consideration being the value of plot ?
2. Whether, such unilateral resolution of the trustees is legally sufficient to transfer the property of the assessee on 31st March, 1984, to the trust under the law, even when no such claim was made by the assessee before the AO or CIT(A) or Tribunal ?
3. Whether, the deemed gift took place :
(a) on 22nd Jan., 1989, when the sale deed was executed which was registered on 28th Nov., 1939 ? or
(b) took place on 31st March, 1984, as per aforesaid unilateral resolution, dt. 31st March, 1984, of the trustees of Ayyappa Family Trust, even when no such claim was made by the assessee before the AO or CIT(A) or before the Tribunal?"
C.E. Veera Bhadrappa, AM.
1. On a difference of opinion between the two Members constituting the Division Bench, the following points of difference are referred to me for my opinion as TM by the Hon'ble President acting under Section 255(4) of the IT Act, 1961 :
1. "Whether, on the facts and in the circumstances of the case, the plot of land at Trichy was transferred by the assessee :
(a) by the actual sale deed dt. 28th Nov., 1989, in view of the definition of the 'transfer of property' in Section 2(xxiv) of the GT Act, as per the decision of the Hon'ble Madras High Court in the case of K. Madhavakrishnan v. CGT (1980) 124 ITR 233 (Mad); or
(b) On 31st March, 1984, when a unilateral resolution was passed by the trustee of the Ayyappa Family Trust that the machinery and furniture belonging to the trust shall be delivered by the trust at book value to the assessee and is to be adjusted against sale consideration being the value of plot.
2. Whether, such unilateral resolution of the trustees is legally sufficient to transfer the property of the assessee on 31st March, 1984, to the trust under the law, even when no such claim was made by the assessee before the AO or CIT(A) or Tribunal.
3. Whether, the deemed gift took place :
(a) on 22nd Jan., 1989, when the sale, deed was executed which was registered on 28th Nov., 1989; or
(b) took place on 31st Marcy, 1984, as per aforesaid unilateral resolution dt. 31st March, 1984, of the trustees of Ayyappa Family Trust, even when no such claim was made by the assessee before the AO or CIT{A) or before the Tribunal?"
2. The relevant facts are that the assessee is an individual and owns a plot of land measuring 4,012 sq. ft. situated in a prime locality in Thillainagar. Tiruchy town, where elite citizens of the town are residing. The aboveside property was transferred to Sri Ayyappa Family Trust, a private trust in which the assessee's two children are beneficiaries. The sale consideration as agreed to between the parties is Rs. 55,000 according to an unregistered agreement dt. 13th April, 1981. By a resolution dt. 31st March, 1984, the trust has resolved that the machinery and furniture belonging to the trust shall be delivered by the trust at book value to the assessee and is to be adjusted against the sale consideration being the value of the plot. It was claimed by the assessee before the AO that the sale consideration has been received on 31st March, 1984, itself by way of book adjustment. Due to some reasons or the other the transfer document could not be executed till 22nd Nov., 1989. When the deed was executed on 22nd Nov., 1989, the value of the plot was enumerated at Rs. 1,68,000 according to the assessee but the Registrar under the Registration Act has valued the same property at Rs. 2,80,000 on the basis of the guideline value prevalent in that area. The difference between the guideline value and the consideration stated to have been received by the assessee was treated as taxable gift by invoking the provisions of Section 4(1)(a) of the GT Act for the asst. yr. 1990-91. Notwithstanding the following claims made by the assessee before the AO :
(1) The possession of the land in question had already been taken over by the trust in 1978 itself.
(2) Full consideration had already been received by the assessee in the form of equipments by book adjustments on 31st March, 1984.
(3) The recent amendment of Section 2{47)(v) of the IT Act, contemplates any transaction involving the allowing of 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, and it would deem to be transfer. In the assessee's case, the possession was already given in 1978 itself and, therefore, no gift arises in the present transaction that took place on 22nd Nov., 1989.
The AO was of the opinion that the ownership title in the land passes to Ayyappa Family Trust when the actual transfer of property took place. According to him, the sale deed was executed on 22nd Nov., 1989, and registered on 28th Nov., 1989, as document No. 3644 of 1989. Therefore, title in the land passed to the trust only on 22nd Nov., 1989, and not before that. According to the AO since the plot of land has been transferred for inadequate consideration, the provisions of Section 4(1)(a) are applicable. The assessee himself valued the property in question at Rs. 1,68,000 but the Registrar took the value of the property at Rs. 2,80,000. According to the AO the value adopted by the Registrar is on the lower side since the prevalent market rate in that area was more than Rs. 150 per sq. ft. However, since he had no material to support his cost, he adopted the value taken by the sub-registrar as the market value for the purpose of registration and assessed the difference under Section 4{l)(a) as deemed gift for the asst. yr. 1990-91. In first appeal the CIT(A) held that since the assessee had given possession of the land in 1978, there was a valid gift on that date. The CIT(A), therefore, held that the assessment of gift in the asst. yrs. 1990-91 was unwarranted and the Revenue came up in appeal.
3. The learned AM after considering the provisions of Section 4(1)(a) and 2(xxiv) of the GT Act and also the decisions in Smt. Satyabati Goswami v. CGT (1978) 113 ITR 229 (Gau), Smt. Padma Lalchand Mirchandani v. CIT (1981) 128 ITR 174 (Del),Darbar Shivrajkumar v. CGT (1981) 131 ITR 647 (Guj), CGT v. Matilda Feneira (1978) 112 ITR 934 (Bom) and K. Madhavakrishnan v. CGT (1981) 124 ITR 233 (Mad), was of the view that in a case of gift of immovable property, the effective and crucial date is the date on which the deed is executed and registered. The learned AM felt that the mere delivery of an immovable property is not sufficient for effecting a valid gift. Section 123 of the Transfer of Property Act, according to him, provided that for the purpose of making a gift of immovable property, the transfer must be effected by a registered instrument signed by or on behalf of the donor and attested by at least two witnesses. The GT Act does not enact any exception to the general law as contained in Section 123 of the Transfer of Property Act. Therefore, according to him, in order to effectuate a valid gift, the requirements of Section 123 of the Transfer of Property Act must be complied with. He went on to rely on the decision of the Supreme Court in Alapati Venkataramiah v. CIT (1965) 57 ITR 185 (SC) for the view that transfer in the context of capital gains under Section 12B of the Indian IT Act, 1922, meant effective conveyance of the capital asset to the transferee. Delivery of possession of immovable property could not by itself be treated as equivalent to conveyance of the immovable property. He further considered the effect of the decision in Late Nawab Sir Mir Osman Ali Khan v. CWT (1986) 162 ITR 888 (SC) which related to the interpretation of Section 2(m) of the WT Act, where the assessee had received full consideration for sale of certain -immovable properties but had not executed any registered sale deed in favour of the vendees. The assets in question was to be included in the assessee's net wealth for the purpose of assessment as they are belonging to him within the meaning of Section 2(m) of the WT Act. The learned AM further considered the fact that the first agreement executed by the assessee on 13th April, 1981, was to be acted within three years from the date of such agreement. No transaction was concluded within three years of the agreement and, therefore, the assessee remained the owner of the land in question. Since the property was not transferred on 13th April, 1981, another agreement was made on 10th April, 1984, between the assessee and his wife Mrs. Usha Srinivasan in her capacity as trustee of Sree Ayyappa Family Trust whereby it was agreed to transfer the property before 31st March, 1989, to both the beneficiaries jointly. According to the AM mere agreement does not transfer the property. Subsequently the sale deed was executed on 22nd Nov., 1989, under which the land in question was transferred in favour of Sree Ayyappa Family Trust consisting of two beneficiaries who are children of the transferor. Since the sale deed was executed in the month of November, 1989, actual transfer, according to him, took place only in November, 1989. He heavily relied upon the decision in the case of K. Madhavakrishnan v. CGT (supra), wherein, the Hon'ble High Court held that Section 123 of the Transfer of Property Act provides that for the purpose of making a gift of immovable property, the transfer must be effected by a registered instrument signed by or on behalf of the donor and attested by at least two witnesses. The GT Act does not enact any exception to the general law as found in s, 123 of the Transfer of Property Act. Therefore, in order to effectuate a valid gift, the requirements of Section 123 of the Transfer of Property Act should have been complied with. Section 123 of the Transfer of Property Act requires a registered instrument. There was no instrument in May, 1956, and mere delivery of possession would not satisfy the requirements of Section 123 of the Transfer of Property Act. Following the same principles of the jurisdictional High Court the learned AM came to the conclusion that the property in question was transferred by registered deed in November, 1989, and, therefore, any deemed gift under Section 4(1)(a) has to be done in the asst. yr. 1990-91.
4. The learned JM, however, was of different view. The consideration for the transfer has been passed on to the assessee on 31st March, 1984. The possession of the land in question was handed over to the said trust as early as in 1978, and the trust was allowed not only to retain the possession but also to interfere with it by putting up a superstructure out of its own funds. Therefore, the transaction amounts to transfer of property as referred to under Section 2(xxiv) of the GT Act and within its extended definition of gift, if any, under Section 4(1)(a) of the Act and the valuation date of such gift, if any, shall be as on the date of such transfer i.e., 31st March, 1984. He relied upon the provisions of Section 53A of the Transfer of Property Act to come to a conclusion that where there is a contract of sale for consideration and such contract is in writing, the contract was executed by the transferor and the transferee has taken possession of the property by performing his part of the terms of contract. If all the aforesaid conditions are satisfied, the transferor is debarred from enforcing against the transferee any right in respect of the property by which the transferee has taken the possession even if the instrument of transfer is not registered. In the present case, all the aforesaid conditions are satisfied and, therefore, it can be safely said that the assessee was having only a husk of title remained with him after 31st March, 1984. According to him the principle laid down by the Rajasthan High Court is Sirehmal Navalkha vs, CIT (1985) 156 ITR 714 (Raj) clearly supports the stand of the assessee. He came to the view that the relevant date for assessing the gift, if any, arises only in the asst. yr. 1990-91, According to him the registration of the deed is not relevant. If at all, there can be only a deemed gift and that can be only for asst. yr. 1984-85 when the consideration passed on to the assessee. In the light of this decision the learned JM felt that the issue is has to go back to the AO to verify whether there was any difference between the consideration passed on 31st March, 1984, and the guideline value that was prevailing as on 31st March, 1984. With this direction, the matter, according to him, was required to be restored to the AO. It is thus the matter stands referred to me for answering the questions as set out in the paragraph supra.
5. I have heard the learned counsel for the assessee who strongly supported the view taken by the learned JM. He relied upon the decisions in Mysore Minerals Ltd. v. CIT (1999) 239 ITR 775 (SC), Gowersons Publishers (P) Ltd. CIT (1999) 240 ITR 191 (Del) and Sirehmeal Nawalkha v. CTT (supra). The learned Departmental Representative, on the other hand, supported each of the finding of the AM in the light of the decisions in K. Madhavakrishnan v. CGT (supra), Late Nawab Sir Mir Osman Ali Khan v. CWT (supra) and Alapati Venkataramiah v. CIT (supra).
6. I have carefully considered the rival submissions and gone through the records. At the outset it may be stated that the area of difference between the two Members is in a narrow compass. Whether the gift was completed on the date when the consideration was received by the assessee on 31st March, 1984, which view is expressed by the JM and whether the transfer is said to be completed on 28th Nov., 1989, when the deed of transfer was executed between the parties. There seems to be no dispute as to the fact that there is a gift in the transaction entered into by the parties. A reading of the orders of the Members clearly show that there is no dispute as to the liability of the assessee towards gift-tax. The only question in which assessment year the liability arises. The learned counsel who appeared before me made a feeble attempt to canvass that the guideline value prescribed by the registration authorities should not be taken into consideration for concluding that there is a gift within the meaning of the provisions of Section 4(1)(a) of the GT Act as if the property is transferred for inadequate consideration. But I did not entertain that ground of the assessee for the simple reason that that seems to be not the area for consideration by the Members who first heard the appeal. The only question which came up for consideration is in which assessment year the gift transaction is liable to be taxed. Therefore, I do not go into the question whether at all there is a gift in the transaction because that issue is beyond the scope of my area for enquiry for giving answers to the questions referred to me. Therefore, I confine myself to the issue and decide in which assessment year the gift is liable to be taxed based on the facts and material available on record. The learned JM seems to have heavily relied upon the provisions of Section 53 of the Transfer of Property Act, which has been extracted in para. 17 of his order. It shows that where there is a part-performance of the contract and only what remains to be done is registration of transfer, it is provided that 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. The concept of transfer under Section 2(47) which includes transaction of the type referred to in Section 53A of the Transfer of Property Act is different from the expression of transfer of property used in Section 2(xxiv) of the GT Act for the reason that the amendment made in the IT Act have not been carried out in the GT Act so as to include the transactions of the type described in Section 53A of the Transfer of Property Act. I, therefore, do not agree that such provisions will be relevant for considering the effective date of gift under the GT Act. In my view the aforesaid provision does not in anyway affect the provisions of the GT Act. Under the provisions of Section 4(1)(a) where property is transferred otherwise than for adequate consideration, the amount by which the market value of the property at the date of the transfer exceeds the value of the consideration shall be deemed to be a gift made by the transferor. What is the date of transfer will, therefore, be relevant and under Section 2(xii) 'gift' means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth. Therefore, the receipt of consideration and part of consideration will be irrelevant for the purpose of determining the completion of the gift. "Transfer of property' for the purpose of gift-tax means any disposition, conveyance, assignment, settlement, delivery, payment or other alienation of property. The provisions of the GT Act were considered by the jurisdictional High Court in K. Madhavakrishnan (supra) the facts of which are extracted in para 10 of the order of the learned AM. The Hon'ble High Court has held that in order to effectuate a valid gift the requirements of Section 123 of the Transfer of Property Act should have been complied with. There is no dispute as to the fact that provisions of Section 123 of the Transfer of Property Act require registration of the instrument of transfer. Mere delivery of possession would not satisfy the requirement of Section 123 of the Transfer of Property Act. It has been so held by the Gauhati High Court in Smt. Satyabati Goswami v. CGT (supra), Smt. Padma Lalchand Mirchandani v. CIT (supra), Darbar Shivrajkumar v. CGT (supra), CGT v. Matilda Ferreira (supra). In all these cases it was held that a gift of an immovable property valuing Rs. 100 or more can validly be effected by a registered deed only. In other words, in case of a gift of immovable property, the effective and crucial date is the date on which the gift deed is executed and registered. A contrary view has been expressed in G.V. Krishna Rao v. GTO (1968) 70 ITR 81 (AP) and Sirehmal Nowalkha v. CIT (supra). But sitting within the jurisdiction of the Madras High Court, I am of the view that the view expressed by the learned AM has to be followed which is squarely in accordance with the ratio laid down by the Madras High Court in K. Madhavakrishnan v. CGT cited supra. Before parting with I may add that to bring any transaction under the purview of GT Act, the gift must be complete in all respects. It is no doubt true that gift-tax is not necessarily restricted to gift effected by written documents. If it is possible to effect a gift without an instrument in writing, gift-tax is payable on the same. But the subject-matter of a gift may be such that a written instrument is necessary to perfect a gift. Completed gifts alone attract liability to gift-tax. These were found expression in Sharadkumar Shrikrishna v. CGT (1986) 160 ITR 332 (MP). The principle laid down by the Madras High Court in K. Madhavakiishnan cited supra has been reaffirmed by the same High Court in Dr. Raja Sir M.A. Muthiah Chettiar v. CIT (1985) 148 ITR 532 (Mad). Some of the decisions relied upon by the assessee like those in (1999) 239 ITR 775 (supra) and 240 ITR 191 (supra) are not relevant for deciding the issue before me. They are in connection with the concept of ownership for the purpose of declaration under Section 32 of the IT Act. The conditions and considerations which are relevant for granting depreciation are entirely different from the provisions of the GT Act which specifically provided for completed valid gift for the purpose of bringing any transaction within the ambit of the GT Act. Therefore, I agree with the learned AM and dispose of the matter. The matter will now go before the Division Bench for giving effect to the majority view.
K.S.S. Prasada Rao, J.M. This appeal by the Revenue arises out of the order dt. 16th July, 1993, of the CGT{A) for the asst. yr. 1990-91. The main issue in this appeal related to the addition of Rs. 2,25,000 made in computing the taxable gift for the asst. yr. 1990-91. Since there was difference of opinion in deciding the issue, between the Members who originally heard the appeal, the following questions were referred to the Hon'ble President of the Tribunal for decision by a Third Member under Section 23(11) of the GT Act, 1958 :
1. Whether, on the facts and in the circumstances of the case, the plot of land at Trichy was transferred by the assessee :
(a) by the actual sale deed dt. 28th Nov., 1989, in view of the definition of the 'transfer of property' in Section 2(xxiv) of the GT Act, as per the decision of the Hon'ble Madras High Court in the case of K. Madhavakrishnan v. CGT (1980) 124 ITR 233 (Mad) ? or,
(b) on 31st March, 1984, when a unilateral resolution was passed by the trustee of the Ayyappa Family Trust, that the machinery and furniture belonging to the trust shall be delivered by the trust at book value to the assessee and is to be adjusted against sale consideration being the value of plot ?
2. Whether, such unilateral resolution of the trustees is legally sufficient to transfer the property of the assessee on 31st March, 1984, to the trust under the law, even when no such claim was made by the assessee before the AO, or CIT(A) or Tribunal ?
3. Whether, the deemed gift took place :
(a) on 22nd Jan., 1989, when the sale deed was executed which was registered on 28th Nov., 1989 ? or
(b) took place on 31st March, 1984, as per aforesaid unilateral resolution dt. 31st March, 1984, of the trustees of Ayyappa Family Trust, even when no such claim was made by the assessee before the AO or CIT(A) or before the Tribunal?
The learned Third Member vide his order dt. 28th March, 2001, has decided the issue in favour of the Revenue, agreeing with the view taken by the learned Accountant Member. In view of the majority decision, the appeal filed by the Department is hereby allowed.