Patna High Court
Smt. Raj Rani Devi Ramna vs Commissioner Of Income-Tax on 21 May, 1992
Equivalent citations: 1992(40)BLJR1207, [1993]201ITR1032(PATNA)
JUDGMENT G.C. Bharuka, J.
1. This reference made under Section 256(1) of the Income-tax Act, 1961 (hereinafter to be referred to as "the Act" only), involves the following questions of law :
"(1) Whether, on the facts and in the circumstances of the case, the learned Income-tax Officer was justified in including the sum of Rs. 42,000 pertaining to three deeds of sale in the gross receipts for the purposes of computation of capital gains ?
(2) Whether, on the facts and in the circumstances of the case, the learned Income-tax Officer was legally correct in coming to a finding that once the sale deed was registered, the transfer was complete and any stipulation in the deed of sale to the contrary was irrelevant ?
(3) Whether by mere execution of a deed of sale and registration thereof, there could be transfer of an immovable property without effective conveyance of the same to the transferee ?
(4) Whether, 'transfer' according to Section 2(47) of the Income-tax Act, 1961, must mean effective conveyance of the capital asset to the transferee ?"
2. The relevant facts and circumstances of the case lie in a short corn-pass. The assessee is an individual. During the previous year relating to the assessment year 1977-78, he sold 49 kathas and 91/2 dhoors of land through different registered sale deeds for a total consideration of Rs. 1,93,050. Out of these sales, three sales were of Rs. 14,000 each. The registered sale deeds in respect of these sales clearly stipulated that only on payment of the entire consideration amount, the registration receipt and delivery of possession will be given evidencing the passing of title to the vendee. It is not in dispute that, during the period under consideration, the entire consideration amount was not paid. Still the Income-tax Officer included Rs. 42,000 representing the consideration amount of the said three sale deeds for the purpose of computing capital gains on the ground that, since the sale deeds have been registered, therefore, there is an implied transfer. On appeal to the Appellate Assistant Commissioner, the contention of the assessee was accepted in respect of only two sale deeds since in respect of the third sale deed, the Appellate Assistant Commissioner found some ambiguity in its recitals. Against the said appellate order, both the Department as well as the assessee filed appeals before the Tribunal. The Tribunal took the view that since the transaction is evidenced by registered sale deeds, therefore, irrespective of any stipulation for payment and delivery of possession at a future date or the intention of the parties in respect of passing of title, for the purpose of the Income-tax Act, it will be deemed to be a transfer.
3. After hearing learned counsel for the parties, I have no hesitation in holding that the properties do not necessarily pass as soon as the instrument is registered, for the true test is the intention of the parties. Registration is prima facie proof of an intention to transfer, but it is no proof of an operative transfer if there is a condition precedent as to the payment of consideration or delivery of the deed. Thus the seller may retain the deed pending payment of price and, in that case, there is no transfer until the price is paid and the deed is delivered.
4. To substantiate my above view, I may first refer to a Bench decision of the Calcutta High Court in the case of Nitai Chandra Naskar v. Smt. Champahlnta Debi reported in [1919] 29 CLJ 250, wherein while referring to Section 54 of the Transfer of Property Act, it has been held that, "sale is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. The true test is, what is the intention of the parties to the transaction. If the intention is that title should pass immediately, even though the consideration has not been paid, title passes, that is, failure to pay the consideration for a conveyance does not defeat the conveyance except where there is an agreement that it should take effect only if the consideration is first paid." In the case of Panchoo Sahu v. Janki Mandar, reported in AIR 1952 Patna 2(53, it has been held that title does not pass on the mere execution and registration of the sale deed and the answer to the question regarding passing of the title lies in the intention of the parties, which is to be gathered from the sale deed itself. A similar view has been taken in the case of Shiva Narayan Sah v. Baidya Nath Prasad Tiwary, reported in AIR 1973 Patna 386. There is a catena of decisions of this court as well as of other High Courts taking a similar view.
5. The relevant provisions under the Act for the present purpose are Sections 45 and 2(47). Section 45, inter alia, provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall, subject to certain exceptions, be chargeable to income-tax under the head "Capital gains" and shall be deemed to be the income of the previous year in which the transfer took place. The word "transfer" has been defined under Section 2(47) of the Act which provides that, in relation to a capital asset, transfer includes the sale, exchange or rclinquishmcnt of the asset or the extinguishment of any rights therein or the compulsory acquisition thereof under any law.
6. In the present case, we are concerned with the transfer of an immovable property by way of sale. In the absence of any provision to the contrary, the concept of sale of an immovable property which is included in the expression "capital asset" as defined under Section 2(14) of the Act, has to be gathered from Section 54 of the Transfer of Property Act, 1882. In the present case, from the statement of case itself as drawn up and sent to this court by the Tribunal, it is apparent that the parties had clearly intended that despite the execution and registration of sale deeds, transfer by way of sale will become effective only on payment of the entire consideration amount and in this background of facts, it has to be held that there was no transfer of land covered by the three sale deeds in question during the period under consideration making the assessee liable for capital gains tax under Section 45 of the Act.
7. Keeping in view the discussions made above, question No. 4 is answered in the affirmative, that is to say, the transfer under Section 2(47) of the Act must mean an effective conveyance of the capital assets to the transferee. Questions Nos. 1, 2 and 3 are answered in the negative and in favour of the assessee. In the facts and circumstances of this case, there shall be no order as to costs.
8. Let a copy of this judgment be transmitted to the Income-tax Appellate Tribunal, Patna Bench, Patna, in terms of Section 260 of the Act.
S. K. Chattopadhyaya, J.
9. I agree.