Income Tax Appellate Tribunal - Mumbai
A.C. Kamdar & Co., Mumbai vs Asst Cit 11(2), Mumbai on 12 July, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL " A" BENCH, MUMBAI
BEFORE SRI MAHAVIR SINGH, JM AND SRI N.K PRADHAN, AM
ITA No.3561/Mum/2014
(A.Y:2007-08)
ITA No.8751/Mum/2011
(A.Y:2008-09
A.C. Kamdar & Co. Asst. Commissioner of
6/7 Pearl Mansion, 94 M.K. RD, Income Tax 11(2)
Marine Lines. Vs. R. No. 479 Aayakar Bhavan,
Mumbai-400 020 M.K. Rd
PAN No. AAAFA2793E Mumbai-400 020
Appellant .. Respondent
Assessee by .. s/shri K Shivaram & Sanjay
Parevik,ARs'
Revenue by .. Shri Purushottam Kashyap,
DR
Date of hearing .. 05-06-2017
Date of pronouncement .. 26-07-2017
ORDER
PER MAHAVIR SINGH, JM:
These two appeals by the assessee are arising out of the different orders of CIT(A)-3, Mumbai, in appeal No. CIT(A)-3/ACIT 11(2)/IT-211 & 171/11-12 & 10-11 dated 28-03-2014 & 21-11-2011. The assessments were framed by ACIT-11(2), Mumbai for the A.Ys. 2007-08 and 2008-09 vide order dated 28-12-2011 and 06-12-2010 u/s 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter 'the Act').
2. The only common and interconnected issue in these two appeals of assessee for AYs 2007-08 and 2008-09 is as regards to the assessment of capital gains on sale of property whether is to be assessed in AY 2007-08 or in AY 2008-09. For this assessee has raised following ground in AY 2007-08.
ITA No.3561/Mum/2014 & 8751/Mum/2011A.C. Kamdar & Co. AYs: 07-08,08-09 "B) Alleged capital gains with respect to unit No. 94- Rs.1,52,36,790/- cannot be assessed for the relevant assessment year.
2. The learned CIT(A) erred on facts and in law in upholding the order of the AO taxing the capital gains on sale of unit no. 94 of Rs. 1,52,36,790/- during the year under consideration holding that (a) there was part performance u/s. 53A of the Transfer of Property Act and (b) the property has been sold as one single unit and the resultant capital gains is not open to being taxed in two separate years, where no transfer has taken place during the year hence assessing the capital gain was bad in law."
Similarly, assessee also raised the ground for AY 2008-09 on the very issue as under: -
"1. The learned Commissioner of Income Tax (Appeals) has also erred in confirming assessment by the Assessing Officer on protective basis the full amount of Short Term Capital Gain in one year i.e. in Assessment year 2008-09, though the capital gain of Rs. 49,22,987/- is shown by the appellant in the Assessment Year 2007-08 on the basis of handing over the possession of the property thereby confirming the determination of deemed Short Term Capital Gain taxable under Section 50 of the Income Tax Act, 1961 to the extent of Rs. 2,01,59,687/- by the Assessing Officer against the amount of such gain of Rs. 1,02,36,790/- as per the Return of Income filed by the Appellant.."
3. Briefly stated facts are that the assessee is a firm of chartered accountants, purchased office premises through allotment letter dated 27-09-1979 from Prerana Premises P. Ltd. The assessee got the Page 2 of 21 ITA No.3561/Mum/2014 & 8751/Mum/2011 A.C. Kamdar & Co. AYs: 07-08,08-09 possession of the said premises in February 1983 and since then carrying on profession in the same place. The assessee claimed depreciation on the said premises from AY 1984-85 onwards. In the year 1995, the assessee intended to divide the said office into equal parts to give part of the premises on leave and license basis and accordingly, a request was made to the builder qua this i.e. Makers Chamber-III Premises Co-operative Hosing Society Ltd. A plan was submitted to the society by dividing the said office into to equal parts No. as 94 and 94A. The society vide their letter dated 21-08-1995 informed the assessee as regards to the approval of the division of office No.94 into 94 and 94A. This property was let out on the basis of leave and license to M/s First Union National Bank, a Foreign Co. of USA vide agreement dated 19-08- 1996 at a monthly rent of Rs. 1.05lakh. The said premises No.94A was registered separately by the Society and separate bills for maintenance was issued by the Society and separate electric meters for which bill for electric consumption was issued by BEST. Accordingly, from August 1996, assessee was carrying on professional activity of Chartered Accountancy from the bifurcated office premises No. 94 consisting of 582.5 sq. ft. area. Another bifurcated office premises No. 94A consisting of 582.5 sq. ft. was the given on leave and license basis on rent to various parties from time to time and receiving compensation for the same, which was declared as income from house property in the returns of income filed for respective assessment years. Subsequently, in September 2006, assessee entered into an agreement for sale of premises No. 94 and 94A for a total consideration of Rs. 3.15 crore and for this a cheque of 1,00,001/- as earnest money was received. In lieu of this, an agreement to sale was entered into dated 04-12-2006, wherein assessee agreed to sale the premises i.e. Nos 94 and 94A at a total consideration of Rs.3.15 crore and as per clause 1 of the said agreement to sale assessee given possession of premise No.94A, only on 04-12- 2006, on their paying a sum of Rs. 1,56,01,000/-. The sale deed was finally executed on 0-05-2007 with the purchaser M/s Satyanarayan Page 3 of 21 ITA No.3561/Mum/2014 & 8751/Mum/2011 A.C. Kamdar & Co. AYs: 07-08,08-09 Sekhsaria Pvt. Ltd. and balance payment of Rs. 1,58,99,000/- was also received and the possession was handed over along with car parking space. The assessee divided the sale proceeds in two parts i.e. for the consideration of Rs. 1,56,01,000/- in AY 2007-08 because it had handed over the actual possession of the office No. 94A to the party and received the entire consideration in lieu of the same. According to assessee, it is a case falling under 2(47) of the Act within the definition of transfer subject to clause 5 read with section 53A of the Transfer of Property Act, 1908. The assessee declared capital gains and claim deduction under section 54EC of the Act for investing the gain in Rural Electricity Bonds. Similarly, the assessee declared a sale consideration for Ay 2008-09 in respect to office No. 94A and disclosed sale consideration at Rs. 1,58,99,000/- as the possession of this office was handed over on the finalization of sale deed on 09-05-2007. The AO for the AY 2007-08 processed the return of income filed by the assessee under section 143(1) of the Act. For AY 2008-09, the assessment was completed under scrutiny assessment under section 143(3) of the Act. During the course of assessment proceedings for AY 2008-09 after considering the submissions of the assessee, the AO observed that the sale consideration of Rs. 3.15 crore cannot be bifurcated between the two units because sale deed is composite and agreement to sale is composite and property in question is treated as one for the purpose of computation of capital gains. Accordingly, the AO assessed the capital gain on protective basis of this year i.e. AY 2008-09 and assessment for AY 2007-08 was reopened by the AO for assessing capital gains on substantive basis. The AO observed in Para 7 of his assessment order which reads as under: -
"7. I have considered the submission of the asse4e and, found no force in them in as much as there is only one agreement one sale deed-in. respect. of both the parts No. 94 & 98 and the share certificates. It is also observed that the sale consideration of Rs.3,15,00,000/- is not bifurcated Page 4 of 21 ITA No.3561/Mum/2014 & 8751/Mum/2011 A.C. Kamdar & Co. AYs: 07-08,08-09 between two units and the share certificates. Unless, the share certificates are transferred in the name of the purchasers, the premises can be transferred in the name of the purchasers. Since the agreement as well as the sale deed, are composite, the entire proper tin question is treated as only one property for the purpose of computation of the capital gain. on protective basis in this year. However, the capital gain of Rs. 3,15,00,000/- will be taxed on substantial basis in the assessment year 2007-08 as part of the sale of the property as stated in the agreement to sale and sale deed was made in the assessment year 2007-08 and possession the same was given in A.Y. 2007-08 itself. Therefore, the short term capital gain of Rs. 3,15,00,00()/- is assessed in the assessment year 2008-09 on protective basis. After following the direction of the Ld. Jt. C.I.T., Range 11(2), Mumbai, the claim of the assessee u/s. 54EC is rejected. Since the assessee firm has furnished inaccurate particulars of its income, I am satisfied that this is a fit case for initiating penalty proceeding within the meaning of Section 271(1)(c) of the IT Act. Therefore, penalty proceedings u/s. 271(1)(c) have been initiated separately."
4. Similarly, the AO is in AY 2007-08 assessed the entire capital gains on substantive basis after going through the order of CIT(A) for AY 2008-09 and assessed the capital gains accordingly. The CIT(A) in AY 2008-09 held as under:-
"I have considered the facts and material on record and perused the assessment order as well as remand report. It is seen that the appellant had purchased the office premises Page 5 of 21 ITA No.3561/Mum/2014 & 8751/Mum/2011 A.C. Kamdar & Co. AYs: 07-08,08-09 vide allotment letter dated 27.9.1979 from Prerana Premises P. Ltd. which was thereafter substituted by the agreement dated 28.3.1981 and the appellant got the possession of the premises in February 1983. The appellant started carrying on the profession of Chartered Accountancy from the said premise since May 1983. The appellant has also claimed depreciation on the said office premise from A.Y. 84-85 and it was only in August 95, the appellant has divided the premises into equal parts premises No. 94 and 94A. The premises No. 94A was given on leave and license basis to MIs. First Union National Bank vide agreement dated 19.8.1996. The appellant has sold this entire office premises bearing No. 94 and 94A vide agreement to sale entered with MIs. Satyanarayan Sekhsaria P.Ltd. on 4.12.2006 for a total consideration of Rs. 3.15 crores. It is further noticed that the appellant has granted part possession of premise No. 94A to the buyer from 4.12.2006. It is noticed that the appellant has given the vacate office premise No. 94A to MIs. Satyanarayan Sekhsaria P.Ltd. against the payment of Rs.1.56 crores. It is seen that there is one single agreement for purchase of the said premises bearing No. 94 and 94A which was acquired by the appellant since May 1983 and being used as office premises. As per agreement, office premises were transferred and given possession to the buyer. Ongoing through Cl. (k) at Pages of the agreement dated Page 6 of 21 ITA No.3561/Mum/2014 & 8751/Mum/2011 A.C. Kamdar & Co. AYs: 07-08,08-09 4.12.2006 between the appellant and M/s. Satyanarayan Sekhsaria P.Ltd., it is seen that the purchaser vide their letter dated 29.9.2006 addressed to the appellant have agreed to purchase the said premises and said shares at/or for a total consideration of Rs. 3,15,00,000/- and also given a cheque for Rs. 1,01,000/- as and by way of earnest/or deposit on terms and conditions more particularly set out in the agreement. Thus, this clause of the agreement established the fact that the entire premises bearing No. 94 & 94A was agreed to be purchased by the purchaser for a total consideration of Rs. 3.15 crores and in lieu thereof they have also paid a cheque of Rs. 1.01 lakhs as earnest money. This clause also shows the fact that the premises purchased by the appellant was bearing only one shares issued by the Maker Chamber Ill Premises Co- Op. Housing Society who have allotted the appellant 5 fully paid up shares of Rs. 50/- each bearing distinctive No. 241 to 245 embodied in share certificate No. 47 in favour of the appellant. Thus, the appellant has transferred its share certificate in favour of the buyer. This share certificate No. 47 was pertaining to the entire premises bearing No 94 & 94A. Further clause (I) of the agreement dated 4.12.2006 also specifies that the appellant shall sell to the purchaser and the purchasers would purchase from the vendors office premises bearing No. 94 and 94A totally ad measuring 1165 sq.ft. of Page 7 of 21 ITA No.3561/Mum/2014 & 8751/Mum/2011 A.C. Kamdar & Co. AYs: 07-08,08-09 carpet area equivalent to 108.23 sq.mt. on the 9th floor in the building known as Maker Chamber - Ill situated at 223, Nariman Point, Mumbai - 21, along with car parking space No. 31 and 5 fully paid up shares of Rs. 50/- each bearing distinctive No. 241 to 245 and embodied in share certificate No. 47 for total price of Rs. 3.15 crores. Thus, it is seen that there is only one agreement to purchase the premise in 1983 and only 1 sale deed in respect of both the premises bearing No. 94 and 94A and the share certificates. It is also noticed that the sale consideration of Rs. • 3.15 crores which is also not bifurcated between two premises and to another share certificate. Since the share certificates is transferred in the name of the purchaser, the whole premises bearing No. 94 and 94A stands transferred in the name of the purchaser. Since the agreement as well as sale deed was one and composite one and part of the premise bearing No. 94 was parted with the possession during the A.Y. 07-08, therefore, the entire sale consideration would be deemed to be sale of entire property for the purpose of computation of capital gain, hence, same is assessable in A.Y. 07-08 only. Since, the assessee has shown capital gain during the year, therefore the entire capital gain would be assessable on protective basis in the year under consideration. The sub para (I) (iv) and (v) definition of 'transfer' as defined u/s 247 of the Act reads as under:-Page 8 of 21 ITA No.3561/Mum/2014 & 8751/Mum/2011
A.C. Kamdar & Co. AYs: 07-08,08-09 (I) Transfer in relation to a capital assets include the sale exchange or relinquishment of assets or;
(iv) any transaction involving the allotting of the possession of any immovable property to be taken or retaining part performance of a contact of the nature referred into section 53A of a TP Act 1882 and;
(vi) any transaction by way of becoming a member of or acquiring shares in a co-op.
society by way of an agreement or any arrangement or any other manner whatsoever which has effect of transferring or enabling the enjoyment of any immovable property. Thus, the sate effected by the appellant in respect of the premises No. 94 and 94A is covered by definition of transfer as discussed above, as the purchaser has taken the part possession of premises in compliance of part performance of the contract (i.e. purchase agreement), hence sale is complete in A.Y. 07-08 or to be considered as only one sale. In view of above facts and findings of the AG as discussed above, the AG is correct in holding that the entire capital gain from sate consideration of Rs. 3.15 crores will be taxed on substantial basis in the A.Y. 07-08, as per part performance of the sale of the immovable property as stated in the agreement dated 4.12.2006. It is further noticed that the appellant has filed some additional evidence under Rule 46A on the ground that Page 9 of 21 ITA No.3561/Mum/2014 & 8751/Mum/2011 A.C. Kamdar & Co. AYs: 07-08,08-09 sufficient opportunity of being heard was not allowed. However, the AO vide remand report dated 28.9.20 1 1 has objected to the admission of the same on the ground that adequate opportunity was given to the assessee which was replied by the appellant vide letter dated 6.1 2.2010 itself. I find that most of the evidence filed under Rule 46A were already with the possession of the appellant and in fact the appellant has referred these evidences in his letter dated 6.12.2010 to the AO. Therefore, these additional evidences are already on record, some of which have been referred by the AO. Therefore, these additional evidences are being allowed to be admitted. However, these evidence does not change in the material fact that the appellant has entered into one single agreement for sale of the entire premises for total consideration of Rs. 3.15 crores and in lieu of part performance, the appellant has accepted Rs. 1.01 lakhs as earnest money and also Rs. 1.59 crores at the time of handing over vacate possession of the part of office premises to the buyer. It may also be relevant to note that the seller is a single party for whole premises by single agreement of purchase. Similarly, the buyer is also a single party for whole of premises, and it is only on a convenience of the seller to find out alternative accommodation. The part of premises No. 94 was handed over later for which the buyer had agreed also.
Considering the above facts, I am inclined to Page 10 of 21 ITA No.3561/Mum/2014 & 8751/Mum/2011 A.C. Kamdar & Co. AYs: 07-08,08-09 agree with the findings of the AC that the entire capital gain for the sale of premises No. 94 and 94A is assessable in A.Y. 07-08, on substantive basis and on protective basis for A.Y. 08-09 under consideration. Therefore, Ground No, 1 and 2 of the appeal is treated as dismissed."
5. We have heard rival contentions and gone through the facts and circumstances of the case. We find from the facts of the case that the assessee firm is practicing as a firm of Chartered Accountants. We find that in respect to the above transaction the AO assessed the short term capital gains under section 50 of the Act at Rs. 3,15,00,000/- as against the sum of Rs. 1,52,36,790/- declared by the assessee. In this regard, the AO has made a protective addition in AY 2008-09 and assessed the entire capital gains for the year under consideration whereas the assessee had offered capital gains of Rs. 49,22,897/- in AY 2007-08. Before us assessee contented that it had purchased office premises vide allotment letter dated 27th September, 1979 from Prerna Premises Private Limited which was thereafter substituted by Agreement dated 28th March, 1981 and got possession of the said premises in February, 1983 and started carrying on the profession of Chartered Accountancy. The assessee thereafter realized that the premise was too big for its purpose and accordingly, a request was made to Maker Chamber III Premises Co-operative Society Ltd to allow them to divide the said office into two equal parts bearing nos. 94 and 94A as per plan submitted to the society. The Society vide letter dated 21st August, 1995 informed that the Managing Committee at its meeting held on 16th August, 1995 had approved the division of office number 94 according to the plan submitted. The assessee after carrying out necessary changes as per plan i.e. is by building and providing for a separate entrance, gave office premises bearing no. 94A on leave and licence basis to M/S First Union National Bank, a foreign company registered in the United States of Page 11 of 21 ITA No.3561/Mum/2014 & 8751/Mum/2011 A.C. Kamdar & Co. AYs: 07-08,08-09 America vide agreement dated 19th August, 1996. The assessee has been regularly showing the rental income of office bearing number 94A in their returns of income and the same has been accepted by the AO from year to year. The fact that the said office premises i.e. bearing no. 94A has been registered separately by the society and separate maintenance bills are received from the society for the premises bearing number 94A. Similarly, a separate meter for the premises bearing number 94A had been obtained and electricity charges of premises bearing number 94A were borne by the tenant from month to month. Finally, the assessee had entered into an Agreement to Sell with M/s Satyanarayan Sakseria Private Limited to transfer premises bearing number 94 and 94A to the said buyer's for a total consideration of Rs. 3,15,00,000/- and as premises bearing number 94 was being utilised by the them for its own profession, they had to make alternative arrangements for the same and accordingly, it was intimated to the buyers that it could give possession of the said premises bearing number 94 only on making alternative arrangements. However, as premises blearing number 94A was vacant, the assessee had given the possession of premises bearing number 94A against receipt of part consideration. It is a fact that the assessee not only granted the possession but had also received the consideration with respect to the premises bearing number 94A. Further, the society charges and electricity charges of the said premises bearing number 94A were paid by the buyers after taking possession of the premises. Accordingly, it had offered the capital gains with respect to the said premises in assessment year 2007-08 i.e. in the year in which the transfer of the said premises was completed. As the assessee had to make alternative arrangement to carry on its profession, it gave possession of premises bearing no. 94 to the buyers during the year under consideration against the receipt of the balance consideration. Accordingly, it offered the capital gains with respect to the said premises during the year under consideration.
Page 12 of 21 ITA No.3561/Mum/2014 & 8751/Mum/2011A.C. Kamdar & Co. AYs: 07-08,08-09
6. In view of the above facts of the case, we find that in the present case, the Sale Deed was executed on the 19th May, 2007. However, possession of part of the premises i.e. bearing no. 94A was already given to the buyers in lieu of their paying part consideration to the assessee. Accordingly, the assessee is liable to capital gains in two AYs i.e. that part relevant to premises bearing no. 94A in A.Y. 2007-08 i.e. in the year in which the possession was handed over and proportionate consideration received and the balance capital gains would be liable to tax during the year under consideration i.e. on receipt of balance consideration and giving possession of premises bearing no. 94. For this view of ours, we rely on the effect of the amendment in section 2(47) of the Act. Now we would like to reproduce the relevant clauses of the Agreement to Sell and the Sale Deed which clearly shows that the intention of the parties was only to part with that portion of the property for which payment would be received. Relevant Extracts from Agreement entered into with M/s. Satyanarayan Sekhsaria Pvt. Ltd. dated 04-12- 2006, which is enclosed at pages 178 to 189 of assessee's paper book and the relevant clauses are reproduced as under :-
"(g) For the sake of convenience the Vendors divided the said Office into two equal parts sanctioned by the Society being Nos. 4 and 94A. the Society has issued two separate bills in respect thereof. A copy of the bill for the period July September, 2006 for Office Premises 94 and 94A is hereto annexed and marked "ANNEXURE C"
respectively. Though there are two separate bills for the sake of convenience, the Share Certificate is one standing in the name of M/s A.C. Kamdar & Co. The area of the Office premises bearing No. 94 is 582.5 sq. ft. and the area of Office premises bearing No.94A is 582.5 sq. ft. A photocopy of the Plan showing the office premises Page 13 of 21 ITA No.3561/Mum/2014 & 8751/Mum/2011 A.C. Kamdar & Co. AYs: 07-08,08-09 bearing No.94 and 94A is hereto annexed and marked as "ANNEXURE D".
"(c) (i) Rs. 1,45,00,000/- (Rupees One Crore Forty Five Lacs only) paid on or before execution these presents and on handing over possession of full and vacant Office No. 94A (being 50% of the total premises) as per the record of the said Society (the payment and receipt whereof the Vendors do and each of them doth hereby admit and acknowledge);
(ii) The Vendors shall also deposit with M/s Shah Sanghvi pending the completion of sale: (i) original Agreement from Builder to Vendor ('ii) original Share Certificate in the name of the Vendors issued by the Society.
('iii) Pending the completion of Sale the Purchaser shall have an unobstructed entry to the said premises i.e. Office No. 94A possession whereof has been handed over by the Vendors to the Purchaser to allow the interior repair work to be carried out in said premises at the costs of the Purchaser."
"(d) The balance sum of Rs. 1,58,99,000/- (Rupees One Crore Fifty Eight Lacs Ninety Thousand only) to be paid at the time of handing over vacant possession of the entire premises i.e. Office No. 94 along with the car parking space on completion of the sale."
"5. On 50% payment of the purchase price as hereinabove set out the Vendors have put the Purchaser in possession of the said premises i.e. Office No. 94A and on the payment of the balance 50% of the purchase price the Vendors shall put the Page 14 of 21 ITA No.3561/Mum/2014 & 8751/Mum/2011 A.C. Kamdar & Co. AYs: 07-08,08-09 purchaser in complete vacant possession of the said premises i.e. Office No.: 94 along with the car parking space until such time the remaining 50% portion of the said premises i.e. Office no. 94 as per the record of the said Society the car parking space shall be used by the Vendors.
6. The said 50% of the said premises i.e. Office No. 94 in possession of the Vendors shall until completion of the sale and delivery of possession thereof to the Purchasers be at the risk of the Vendors as to fire or any other accident."
"9 (b) From the date hereof the Purchaser shall be liable to pay all outgoings including Society Charges as per the bills issued by the Society in respect of Office premises No. 94A.
9 (c) The Vendors shall till completion and handing over possession of Office premises 94 shall pay all outgoings including Society Charges as per the bills issued by the Society in respect of Office premises No. 94."
Sale Deed states so "NOW THIS INDENTURE WITNESSETH that in consideration of the said Agreement For Sale dated 4 I December, 2006 executed by an between the parties hereto and in consideration of balance payment of the sum of Rs. 1,58,99,000/- (Rupees One Crore Fifty Eight Lacs & Ninety Nine Thousand only) vide Pay Order dated 9" May, 2007 bearing No. 506243 drawn on HSBC Ltd. ..."
7. From the above clauses it is clear that premises bearing no. 94A were given possession to the buyers in A.Y. 2007 08 when the assessee Page 15 of 21 ITA No.3561/Mum/2014 & 8751/Mum/2011 A.C. Kamdar & Co. AYs: 07-08,08-09 received part of the consideration and possession of premises 94 was given to the buyers in May, 2007 when the assessee received the balance consideration. Further, the assessee was paying the electricity charges and society charges of premises bearing no. 94 upto April, 2007. Further, the assessee has informed various government authorities. In view of the above position, we are of the view that the assessee had correctly offered part of the capital gains in Assessment Year 2007 - 08 i.e. relating to premises bearing no. 94A and balance in Assessment Year 2008 - 09 i.e. relating to premises bearing no. 94. We also find that the provisions of section 53A of the Transfer of Property Act and its applicability with respect to Income-tax had been considered by various authorities. In the case of CIT v. K. Jeelani Basha (2002) 256 ITR 282 (Mad), the assessee had agreed to transfer the whole property. As the purchaser was unable to keep up schedule of payment, terms of agreement were modified and assessee parting with possession of one third of property on receiving part payment. It was held by the Hon'ble Madras High Court that capital gains to be computed on the basis of such part consideration received and not on total consideration. The Hon'ble High Court in this context held as under:
"In this case, possession was parted with whereas the assessee/vendor received the consideration therefore. Once possession, even of a part of the property was handed over to the transferee for the purpose of section 2(47)(v) read with section 45, the transfer was complete and therefore the tax authorities and more particularly, the Tribunal were justified to calculate the consideration received in that particular year for that part of the property which was parted with. In fact, a reference can be made to the judgment of the Supreme Court in Page 16 of 21 ITA No.3561/Mum/2014 & 8751/Mum/2011 A.C. Kamdar & Co. AYs: 07-08,08-09 Alapati Venkazaramiah v. CIT [1965] 57 ITR 185 which Mr. Rajan relied upon and pointed out that before the amendment, transfer was very strictly construed. In the said decision, the Supreme Court refused to accept the agreements to sell or the entries made in the account for the receipt of consideration by the transferor as a completed transfer for the purpose of then section 123. The Supreme Court observed that transfer means effective conveyance of a capital asset to the transferee and delivery of possession of immovable properly could not by itself be treated as equivalent to conveyance of the immovable property. Relying on this judgment, learned counsel pointed out that the amendment has effected a sea change in law, inasmuch as under section 2(47), delivery of possession provided it is in the nature as contemplated in section 53A of the Transfer of Property Act, would be enough to bring the transaction into the mischief of the word "transfer'. The argument is undoubtedly correct. Section 2(47)(v) has probably been introduced to meet the law laid down in this judgment, wherein there used to be a transfer for all the practical purposes, but the tax could be avoided only on the sole ground that the transaction was not completed by way of sale deed. Now, the law having undergone the change, it would be clear that where there would be a transfer of possession in the nature as contemplated under Page 17 of 21 ITA No.3561/Mum/2014 & 8751/Mum/2011 A.C. Kamdar & Co. AYs: 07-08,08-09 section 53A of the Transfer of Property Act, the transaction would be covered as a transfer. By necessary logic then, that transaction would be coverable in that particular assessment year as has been held by the Delhi High Court. The only question was as to whether a transaction could be considered for the purpose of calculation of capital gains in parts. The position in law has been indicated by the Delhi High Court that it can be so treated in parts. We respectfully agree with the Delhi High Court judgment. However, the only conditions would he that ("1,) such a delivery of possession should be in the nature of a doctrine of part performance under section 53A for which there should be an agreement between the parties, (2) such agreement should be in writing, (3) a completed contract has to be spelt out from that agreement, and the most important (4) the transfer of' possession of the property in pursuance of the said agreement. All these conditions undoubtedly and admittedly are completed here. If that is so, then there would be no question of interfering with the Tribunal's judgment. in our opinion, the Tribunal has correctly held that the assessee would have to be assessed on the basis of the transfer of the possession in proportionate to the consideration. Accordingly, the question is answered against the Revenue."Page 18 of 21 ITA No.3561/Mum/2014 & 8751/Mum/2011
A.C. Kamdar & Co. AYs: 07-08,08-09
8. Similar view was also taken by the Hon'ble Mumbai Tribunal in the case of Shivram Co-operative Housing Society Ltd. v. DCIT 70 lTD 8. The Hon'ble Tribunal in this case too held that capital gains would be taxed in stages i.e. to the extent of possession given and consideration received during the year under consideration. The relevant extracts from the said decision are reproduced hereunder:-
"Actually, the assessee had all along claimed that on/v a licence to enter and carry on construction was granted to the developer and the possession of the plot was not allowed. However, the question whether such granting of licence amounts to granting possession or even if it does not amount to granting possession, whether it, under specified circumstances, amounts to transfer in terms of section 2(47'v,) of the I. Act need not detain us here as the assessee himself had offered capital gains on the basis of the area in respect of which the developer was allowed the licence to enter and carry on construction and it appears to us that such an offer could have been made only on the implicit assumption that such licence was tantamount to granting of possession and that such licence coupled with the receipt of consideration was tantamount to ci transfer in terms of section 2('47)'v) of the I. T. Act. The revenue is entitled to accept the position conceded or stated implicitly or explicitly by an assessee. It cannot, however, go further than the conceded position and levy tax on the basis of a position that is not only not conceded but specifically denied by an assessee. In the present case, the assessee has denied that the possession of 1,672 sq. mtrs. was granted in the year of account relevant for the assessment year 1993-94 and there is no Page 19 of 21 ITA No.3561/Mum/2014 & 8751/Mum/2011 A.C. Kamdar & Co. AYs: 07-08,08-09 evidence with the revenue that such possession of 1,672 sq. mtrs. was allowed. It is also an undisputedfact that the total consideration of Rs. 1,13,25,900 was not received by the assessee either in the assessment year 1993-94 or even in the subsequent years. It is also not disputed that the conveyance of the land in question in favour of the proposed co-operative society to be formed by the developer subsequent to the construction as mentioned hereinbefore, was not even executed in the year of account relevant for the assessment year 1993-94. In these circumstances, we have to hold that there was no transfer of 1,672 sq. mtrs. and so the revenue was not justified in working out the capital gains on the basis of the said consideration of Rs. 1,13,25,000. A licence to enter upon the land or possession of the land was given only in stages and as some consideration has also been received in pursuance of the agreement dated 26-6-1992, we have to hold that the transfer has taken place in stages in terms of section 2(47)(v,) and accordingly, the capital gains has to be levied in the relevant years as returned by the appellant. In the circumstances, we have to set aside the orders of the revenue authorities on this issue. The capital gains for the assessment year 1993-94 may be worked out on the basis of the sale consideration actually received in respect of ESI of 1,060 sq. mtrs. which is Rs. 71, 79, 720. Subject to this remark, the main ground is allowed."
9. In the given facts of the case, proposition of law discussed above, we are of the view that the assessee had correctly offered part of the capital gains in Assessment Year 2007-08 i.e. relating to premises bearing no. 94A and balance in Assessment Year 2008 - 09 i.e. relating Page 20 of 21 ITA No.3561/Mum/2014 & 8751/Mum/2011 A.C. Kamdar & Co. AYs: 07-08,08-09 to premises bearing no. 94. Accordingly, we direct the AO to compute the capital gains accordingly. The appeals of assessee are allowed.
10. In the result, the appeals of assessee are allowed.
Order pronounced in the open court on 26-07-2017.
Sd/- Sd/-
(N.K PRADHAN) (MAHAVIR SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 26-07-2017
Sudip Sarkar /Sr.PS
Copy of the Order forwarded to:
1. The Appellant
2. The Respondent.
3. The CIT (A), Mumbai.
4. CIT
5. DR, ITAT, Mumbai
6. Guard file. //True Copy//
BY ORDER,
Assistant Registrar
ITAT, MUMBAI
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