Andhra HC (Pre-Telangana)
M. Syamala Rao vs Commissioner Of Income-Tax on 29 April, 1998
Equivalent citations: [1998]234ITR140(AP)
Author: T.N.C. Rangarajan
Bench: T.N.C. Rangarajan
JUDGMENT S.V. Maruthi, J.
1. At the instance of the assessee, the following question is referred for the opinion of this court :
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the capital gains liable to be taxed in this case should be of short-term capital gains ?"
2. The brief facts of the case are as follows :
The assessee entered into an agreement of sale dated May 1, 1962, with Sri B. Vardha Reddy and paid him a sum of Rs. 3,800 for the purchase of land admeasuring 3 acres 37 gts. in Sy. Nos. 37 and 38 situated at Malkajgiri village, Ranga Reddy district. The sale deed was executed on June 8, 1979. The assessee contended that the land was purchased by him in 1962 itself and he was in possession of the land and on payment of sale consideration he is the legal owner of the land. After he became full-fledged owner by registering the document on June 8, 1979, he sold the land by making it into plots. The Income-tax Officer held that the land was registered in the name of the assessee individually on June 8, 1979. Therefore, the capital gain on the sale of the plots should be considered as a short-term capital gain. On appeal, the Appellate Assistant Commissioner of Income-tax confirmed the said finding. On further appeal to the Tribunal, the Tribunal held that it is a short-term capital gain. Hence, the assessee is before us in this reference case.
3. The question for consideration is whether the Tribunal is right in holding that the capital gains that arise are short-term capital gains. To consider whether the capital gain is a short-term capital gain or a long-term capital gain, it is necessary to refer to the document which is registered on June 8, 1979. The document which is produced before us reads as follows :
"Whereas the vendor is the absolute owner of agricultural land in Survey Nos. 38 and 38 admeasuring 3 acres 37 guntas situated at Malkajgiri village by virtue of inheritance from his father.
Whereas the vendor had agreed with the said vendee by an agreement of sale in the year 1962 to sell absolutely to the vendee agricultural lands admeasuring 3 acres 37 guntas in Sy. Nos. 37 and 38 described in the schedule for a price of Rs. 3,800 (rupees three thousand and eight hundred only) and the vendee had agreed to purchase the said agricultural property for the aforesaid price free from all encumbrances, charges and demands whatsoever.
Now, this deed witnessed that in pursuance of the aforesaid agreement of sale and in consideration of Rs. 3,800 (rupees three thousand and eight hundred only) having been fully and truly paid by the vendee to the vendor at the time of agreement of sale by way of cash the vendor does hereby admit, accept and acknowledge the receipt of full payment.
The vendor had already given possession of the agricultural land in Sy. Nos. 37 and 38 admeasuring 3 acres 37 guntas at the time of agreement of sale in the year 1962 to the vendee but no formal transfer of title was made by the vendor in favour of the vendee due to some unavoidable circumstances."
4. A perusal of the document makes it clear that the agreement of sale was executed in 1962 and possession was delivered to the assessee on the said date and the sale consideration was also paid by the assessee to the owner of the property. However, the document was registered on June 8, 1979. The registration of the document relates back to the date on which the agreement of sale was executed in favour of the assessee by the owner. Therefore, the assessee is deemed to be the owner of the property with effect from May 1, 1962. If the assessee is the owner of the property with effect from May 1, 1962, the capital gains cannot be said to be short-term capital gains as the assessee has already held the property for more than thirty-six (36) months. In our view, therefore, the view expressed by the Tribunal that the capital gains are short-term capital gains is not correct.
5. In the light of the above, we answer the question in the negative and in favour of the assessee. The referred case is accordingly answered. No costs.