Gauhati High Court
Assam Vegetables And Oil Products Ltd. vs Commissioner Of Income-Tax And Anr. on 28 July, 2003
Equivalent citations: (2003)185CTR(GAU)647, (2004)1GLR12, [2003]264ITR47(GAUHATI)
Author: P.P. Naolekar
Bench: P.P. Naolekar, I.A. Ansari
JUDGMENT P.P. Naolekar, C.J.
1. In the financial year 1991-92, the appellant-asses-see entered into an agreement on January 2, 1992, to purchase a plot of land measuring 1B, OK, 5L (27.42 centiares) situated in Dag Nos. 711, 712 of KP Patta No. 126 in village Japorigog under Mouza Beltola of Dispur Circle in the district of Kamrup along with the multi-storeyed RCC building standing thereon and having a built-up area of 7790 sq. ft. The aforesaid agreement was entered into between Srimati Bimla Devi Agarwalla, Sri Praveen Kumar Agarwalla, and the appellant-assessee for the consideration of Rs. 27,51,000. It is the assessee's case that the entire amount of consideration has been paid and in pursuance of the sale agreement the property was taken possession of on a subsequent date. Later on, the vendor of the assessee has executed a power of attorney on February 21, 1992, authorising one of the directors of the assessee, namely, Sri Ashok Kumar Deorah, to transfer the property in favour of the assessee or its nominee and, accordingly, the property was transferred to the Government of Mizoram for the consideration of Rs. 64,50,000. From the transaction, the assessee has earned a profit of an amount of Rs. 24,65,204 and has claimed the said profit as short-term capital gain whereas the Revenue has contended that the income earned by the assessee is from other sources and not from the sale of capital asset.
2. The Assessing Officer was of the view that no registered sale deed has been executed by the transferor in favour of the assessee of the property valued more than Rs. 100 and, therefore, the assessee does not acquire any right, title or interest under the transfer to further transfer it in favour of other persons and thus the income of Rs. 24,65,204 earned from the transfer shall be taken to be the income earned by the assessee from other sources and is taxable as such. Aggrieved by the order passed by the Assessing Officer, the company-assessee has preferred an appeal before the Commissioner of Income-tax (Appeals), Guwahati. The appellate authority has held that by virtue of the extended definition of transfer under Section 2(47) of the Income-tax Act, 1961, the agreement to sell a property being of the nature as provided under Section 53A of the Transfer of Property Act, 1882, the same would be held to be a transfer. The appellate authority has recorded a finding that in pursuance of the agreement to sell, the assessee has paid the entire amount mentioned therein and has been placed in possession and was enjoying the benefit of full possession. The appellate authority has held that the property in question was transferred in favour of the assessee and the income earned out of the transfer of the property to the Government of Mizoram would be in the nature of short-term capital gain and not income from other sources and passed the order accordingly. The Department, being aggrieved by the order of the appellate authority, has preferred further appeal to the Tribunal. The Tribunal took the view that the agreement to sell does not confer any right, title and interest in the assessee as it was not a transfer. Any transfer of immovable property valued at more than Rs. 100 has to be effected by registered sale deed and in the absence of any registered sale deed, the property cannot be held to be transferred in favour of the assessee. The Tribunal has in fact held that the property has been sold in favour of the Government of Mizoram exercising the power under the power of attorney executed by the vendor of the assessee and thus the transfer effected by one of the directors of the assessee would be in the capacity of an agent and would be transfer by the vendor of the assessee and, therefore, the assessee cannot claim the income earned out of the transaction to be income earned from the transfer of a capital asset and the same cannot be termed as income from short-term capital gain. The decision of the Tribunal proceeded on the premises that there was no transfer of the interest in the property in favour of the assessee by virtue of the agreement to sell. The Tribunal has not arrived at a finding nor a decision that the transaction of sale of the property by agreement to transfer does not satisfy the essential ingredients of Section 53A of the Transfer of Property Act. There is no finding recorded by the Tribunal that the amount mentioned in the agreement to sell has not been paid by the assessee to its vendor nor is there a finding that the possession has not been delivered in pursuance of the agreement to sell. The Tribunal, however, on the basis of interpretation of the power of attorney and for the reasons recorded by it, has reached the conclusion that the profit earned is not of capital nature and would be an income from other sources. This has given rise to the present appeal by the assessee in the High Court.
3. The appeal is admitted on the following substantial question of law :
"Whether in view of the facts and circumstances of the case and in view of the fact that the ownership of the appellant over the said property having been accepted by the learned Tribunal, the learned Tribunal was legally justified and correct in holding that the income derived from the sale of the said property by the appellant should be treated as income from other sources solely on the ground that the title deed to the said property was not registered ?"
4. To appreciate the rival contentions, it would be beneficial to quote the relevant provisions of Section 2(47) of the Income-tax Act.
"2. (47) 'transfer', in relation to a capital asset, includes,--. . .
(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act, 1882 (4 of 1882) . . ."
5. It is apparent from this definition that a transfer in relation to a capital asset includes any transaction entered into between the parties which is in the nature of part performance of the contract as referred to in Section 53A of the Transfer of Property Act, 1882. Thus, if the transaction falls within the definition of transfer being in the nature as provided under Section 53A of the Transfer of Property Act, it shall be a transfer in relation to a capital asset and fall within the purview of transfer under the Income-tax Act, 1961. For application of Section 53A of the Transfer of Property Act, the necessary ingredients, so far it relates to the case in hand, would be that (i) there is a contract for transfer of immovable property in writing ; (ii) the contract of transfer is for the consideration mentioned in the written contract ; (iii) the written contract is signed by the transferor or by some other person on his behalf; (iv) the terms under the contract to transfer the property can be ascertained with reasonable certainty ; (v) the transferee in part performance of the contract has taken possession of the property or any part thereof; and (vi) if the transferee is already in possession, he continues to be in possession in part performance of the contract and has done some act in furtherance of the contract.
6. In the present case, the agreement dated January 2, 1992, is admittedly a contract in writing executed by the transferor of the assessee signed by them for the consideration and in pursuance of such agreement, the assessee has been placed in possession of the property. The ingredients requisite for application of Section 53A of the Transfer of Property Act are fully satisfied in the present case and, therefore, the property has been deemed to have been transferred to the assessee within the meaning of Section 2(47) of the Income-tax Act. Once the interest in the property is transferred to the assessee under the agreement, a further transfer of its interest in the property in favour of the Government of Mizoram would be transfer of the capital asset and the profit earned on such transfer would be a short-term capital gain of the assessee.
7. It may also been seen that the power of attorney executed by the transferor in favour of one of the directors, namely, Sri A. K. Deorah, authorises the said director to transfer the property in favour of the assessee or in favour of its nominee. The power of attorney, therefore, authorised the attorney holder to transfer the property to the assessee itself or the person nominated by the assessee. It can, therefore, be safely assumed that the transfer effected in favour of the Government of Mizoram is as per the direction issued by the assessee to the power of attorney holder. The transfer being effected of the property of the assessee on its direction to the Government of Mizoram, it shall be a transfer of the interest in the property by the assessee in favour of the Government of Mizoram. The income accrued from the said transaction would be an income of the assessee from the property transferred.
8. For the aforesaid reasons, we are of the view that the income accrued on account of transfer of the property would be the short-term capital gain.
9. The question is answered accordingly.