Income Tax Appellate Tribunal - Mumbai
Sureshchandra Agarwal, Mumbai vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "F",MUMBAI
BEFORE SHRI T.R. SOOD (AM) & SHRI V.DURGA RAO (JM)
I.T.A.No.2376/Mum/2010
(A.Y. 2005-06) )
Shri Sureshchandra Agarwal, Income-tax Officer,
405, Valencia, Sundervan Complex, Ward-20(3)(3), I.T.Office,
Off Lokhandwala Complex, Andheri (W), Piramal Chambers,Mumbai.
Mumbai-400 053. Vs.
AAAPA5250A
Appellant Respondent
I.T.A.No.2377/Mum/2010
(A.Y. 2005-06) )
Smt. Sushila S. Agarwal, Income-tax Officer,
405, Valencia, Sundervan Complex, Ward-20(3)(3), I.T.Office,
Off Lokhandwala Complex, Andheri (W), Piramal Chambers,Mumbai.
Mumbai-400 053. Vs.
AAAPA1534A
Appellant Respondent
Appellants by S/Shri Vijay Mehta & Ashit Mehta.
Respondent by Shri S.K. Singh.
Date of hearing 09-08-2011
Date of pronouncement 14-9-2011
O R D E R
PER T.R. SOOD, AM :
In both these appeals, various identical grounds have been raised but the only dispute involved is regarding denial of deduction u/s.54 of the I.T. Act, 1961. This dispute arose because both the assessees, who were 50% owner of a flat in a building known as Usha Kunj situated at Juhu, Mumbai- 49, was stated to have been sold on 30-04-2004 for total consideration of Rs.62,50,000/- and share of each assessee was Rs.31,25,000/-. On this, 2 ITA Nos.2376-2377/M/10 Sureshchandra Agarwal & Sushila S.Agarwal capital gain arose amounting to Rs.24,93,910/- each arose to both the assessees. Against this, both the assessees claimed deduction u/s.54 against the purchase of a new flat at 403/404, Valencia, Mumbai-53, which was purchased vide agreement dated 25-06-2003 registered on 09-07-2003. The claim of the assessees was that the new flat had been purchased within one year from the sale of old flat. In support of the same, the assessee had filed photocopies of the maintenance bill for the month of April & May which were in the names of Ms. Ranna Modi & Ors. i.e. new owners. The assessee had also filed copy of the agreement dated 23-04-2004. The AO made enquiries with Ms. Ranna Modi who submitted copy of the deed of transfer dated 26-08-2004 which was also registered on 26-08-2004. As there were two agreements, further enquiries were made. It was also stated on behalf of Ms. Ranna Modi that initial agreement was made on 23-04-2004 for confirmation of purchase of flat and an amount of Rs.17 lakhs was paid on two different dates. Thereafter, full payment was made on 30-04-2004. However, stamp duty was not paid. Possession was also taken on 30-04-2004 and Deed of Transfer was also executed on that day. The purchaser had also made application to the Society for submission of necessary papers. Finally, the deed of transfer was registered on 26-08-2004. Enquiry letter was also issued to Usha Sunder Premises CHS and in response the Society furnished the share certificate showing the transfer date of 27-08-2004. Thereafter, the AO confronted the Society regarding the maintenance bill which was issued earlier in the name of Ms. Ranna Modi and the Society stated that bill was issued under the wrong impression and had been rectified later on. Since nobody appeared on summons on behalf of the Society, enquiries were 3 ITA Nos.2376-2377/M/10 Sureshchandra Agarwal & Sushila S.Agarwal further made through the Inspector from the Society and it was confirmed that the maintenance bills issued in the name of Mrs. Ranna Modi were wrongly issued and later on correct bills were issued in the names of the assessees. The assessees were confronted with these details and the assessee filed detailed submissions and placed reliance on certain case laws also. The AO, after examining the submissions, referred to the definition of "transfer" in sec. 2(47). He further observed that though as per clause (v), if possession was given and full consideration was received, then transaction needs to be considered as "transfer" but, after the amendment to sec. 53A of the Transfer of Property Act, even such agreement was required to be registered mandatorily and therefore the transfer deed dated 30-04-2004 could not be treated as "transfer". He also discussed various case laws and ultimately relied on the decision of Hon'ble Supreme Court in the case of McDowell (1985) 154 ITR 148 and observed that the assessee has resorted to dubious methods by resorting to a colourable device to claim deduction u/s.54. Ultimately, he held that the flat was sold on 27-08-2004 which means the new flat was not acquired within one year from the date of such transfer and accordingly the assessee were held to be not entitled to deduction u/s.54.
2. Before the CIT(A), the submissions made before the AO were reiterated and it was emphasized that Usha Kunj property which was jointly owned by the assessees, was sold on 30-04-2004. Since full consideration was received and possession was also given, though registration was required for these documents, but the same was delayed by purchaser and for registration purpose a fresh transfer deed was executed on 26-08-2004. It 4 ITA Nos.2376-2377/M/10 Sureshchandra Agarwal & Sushila S.Agarwal was also emphasized that all the necessary documents such as share certificate, application to the Society for transfer of such shares in favour of transferees, NOC and original agreement dated 22-05-1980 were also handed over to the transferees on 30-04-2004. Therefore, all the formalities of transfer had been completed and accordingly the assessees were entitled for the exemption. Reliance was also placed on the decision of Hon'ble Supreme Court in the case of Podar Cement (226 ITR 625) and some other High Court decisions. The ld. CIT(A), after examination of the submissions, did not agree with the same and emphasized that since sec. 53A of the Transfer of Property Act itself has been amended, therefore, unless and until the agreement was registered, the same would not amount to transfer. After detailed discussion, he confirmed the action of the AO.
3. Before us, the ld. counsel of the assessee pointed out that as far as purchase of new flat is concerned, there is no dispute regarding the date of purchase which has been purchased on 25-06-2003 and that agreement was registered on 09-07-2003. The dispute is regarding the date of sale of flat. Then he referred to the agreement of transfer dated 23-04-2004, copy of which is placed at pages 1 to 8 of paper book. Through this agreement, the assessees as part owners agreed to sell the flat bearing No.402 in Usha Sunder Premises CHS on 23-04-2004 to Ms. Ranna Ashok Modi, Mr. Ashok Brijlal Modi and Mrs. Kokila Ashok Modi for a total consideration of Rs.62,50,000/- (assessees' half share would be Rs.31,25,000/-). In this agreement, the ownership has been described in the form of being registered members of Usha Sunder Premises CHS by way of holding 5 shares of the Society of Rs.50/- each. He pointed that on 23-04-2004 the assessee along 5 ITA Nos.2376-2377/M/10 Sureshchandra Agarwal & Sushila S.Agarwal with Mrs.Sushila Agarwal received Rs.8,50,000/- each. It was agreed vide clause no.2(b) that balance amount ofRs.45,50,000/- of the total consideration would be received at the time of possession on or before 30-04- 2004. Through clause 3, it was agreed that the transferor, i.e., the assessee along with Mrs. Sushila Agarwal, would execute the deed of transfer after receipt of the amount mentioned in clause 2(b). Thereafter, another deed of transfer was executed on 30-4-2004, copy of which is available at pages 9 to 13 of the paper book. In this deed, the assessee had acknowledged the balance payment of Rs.45,50,000/- which was paid by cheque no.420536 dated 29-04-2004 amounting to Rs.22,75,000/-to the assessee and balance of Rs.22,75,000/- to Mrs. Sushila Agarwal vide cheque no.420535 dated 29-04-2004. In clause 3, it was clearly stated that transferors had handed over all the papers and documents of the said flat as well as quiet, vacant and physical possession of the said flat to the transferees. In clause 5, specific reference was made for handing over of (1) share certificate no.7 representing the shares of Society, (2) application to the Society for transfer of shares in favour of the transferees, (3) application of transfer of electric meter in the name of the transferees, (4) NOC received from the Society and (5) original agreement dated 22-05-1990 by which the transferors had acquired the said flat. He submitted that receipt of full consideration and handing over physical possession of the flat as well as of original documents including the share certificate clearly show that whatever was required to be done for the transfer of this flat was done through agreement dated 30-04-2004 and therefore that date should be reckoned as the date of transfer. Then he referred to page 14 of the paper book, which is copy of the 6 ITA Nos.2376-2377/M/10 Sureshchandra Agarwal & Sushila S.Agarwal bill issued by the Society on 01-05-2004 in the name of Mrs. Ranna Modi for Rs.1,915/- against which Ms. Ranna Modi had paid the cheque, copy of which is available at page 15 of the paper book. Then he referred to page 16, which is copy of the letter written by Mr. Ashok Modi to he Secretary of Usha Sunder Premises CHS Ltd. stating that they have taken peaceful vacant possession of the s;aid flat from Mrs. & Mr. Sureshchandra Agarwal, i.e., the assessees. Page 17 is copy of letter written by Ms. Ranna Modi , Mr. Ashok B. Modi and Mrs. Kokila A. Modi to the Secretary, Usha-Sunder Premises CHS Ltd., through which a request for transfer of share certificate has been made. Through this letter (1) application form for membership in form no.23, (2) undertakings on Rs.50/- each stamp paper in form nos.26 and 4, (3) copy of form no.20A and 20B, (4) copy of NOC, (5) original share certificate and (6) copy of agreement for sale. Three cheques were also enclosed with the application for Rs.500/-, Rs.100/- and Rs.25,000/- towards transfer fees under various heads. At serial no.10 of the said letter, it was mentioned that stamp duty paid and registered deed of transfer will be submitted soon. All these facts clearly show that the other party had taken the possession and also did necessary formalities for transfer of shares. He pointed out that the whole problem arose because the transferees did not pay the stamp duty till August 2004, and by that time when they approached the Sub-Registrar for payment of stamp duty, they found that because of the delay in submitting the transfer agreement for registration, some penalty was required to be paid. Therefore, the transferee requested the transferor verbally to execute another transfer deed dated 26-08-2004, copy of which is available at pages 21 to 25 of the paper book. The assessees co-operated with the transferee and signed this transfer deed 7 ITA Nos.2376-2377/M/10 Sureshchandra Agarwal & Sushila S.Agarwal also and stamp duty was paid as per this new deed. He submitted that when enquiries were made by the AO with Shri Ashok B. Modi, Ms. Ranna Modi, then these transferees referred to the later transfer deed which was signed on 26-08-2004. But, as is clear from all other documents, as far as the assessee is concerned, the transfer got completed on 30-04-2004 itself.
4. The ld. counsel of the assessee then invited our attention to the definition of "transfer" given u/s.2(47) and emphasized that this definition is inclusive and, therefore, whatever is given in the section is only way of an example and some other act which is similar to this act mentioned in the provision also needs to be construed as transfer. He submitted that the first term which can be applied in the case of the assessee is extinguishment of any right given in clause (ii) because after receiving the full consideration on 30-04-2004, when the assessee delivered the possession of flat as well as share certificate of the Society and all other relevant documents pertaining to this property, nothing was left with the assessee and his rights got extinguished in that property. Secondly, the definition given in clause (v) should be applied because this transaction is similar to the transaction referred to in sec. 53A of the Transfer of Property Act, 1882, because the assessee had entered into an agreement for transfer for a consideration in writing and had also received full consideration and had also given possession of the property to the transferees. This proposition was not agreed to by the AO because of the amendment in sec. 53A w.e.f. 24-09-2001, by which the words "the contract, though required to be registered, or," were omitted. He argued that this will not make much of the difference. He filed a copy of the pre-amended and post-amended provision of sec. 53A of the Transfer of 8 ITA Nos.2376-2377/M/10 Sureshchandra Agarwal & Sushila S.Agarwal Property Act, 1882, and pointed out that first three parts remain the same and the last part was amended only to the extent that earlier condition of document even not being registered was removed. He argued that this provision was basically for the benefit of a buyer and earlier even if the agreement to sell was not registered, the buyer could claim a right on the property if part of the consideration was paid and possession has been received. However, later on, after amendment, the wording of the 4th part is :
"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 threfor 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 :"
Thus, the above para does not prescribe that such instrument of transfer is necessarily required to be registered and still maintains that once an instrument of transfer is there, then even if the transfer has not been completed, that will not debar the person i.e. buyer from claiming right to such property. Thus, post amendment also, the situation has not altered substantially. In any case, the definition given in sec. 2(47) clause (v) only mentions "a contract of the nature referred to in section 53A". This means that the Income-tax Act recognizes a transfer which has similar nature to the one mentioned in section 53A of the Transfer of Property Act clause (v) has not provided that transfer as defined in sec. 53A of the Transfer of Property Act, 1882. He then carried us to copy of the circular no. 495 dated 22-09-1987 explanatory notes on the provision relating to Direct Taxes referred to in para 11.1. It has been clarified in para 11.1 that the word 9 ITA Nos.2376-2377/M/10 Sureshchandra Agarwal & Sushila S.Agarwal "transfer" given in sec. 2(47) does not include transfer of rights which are acquired by way of any agreement by a person by which such person acquired any right in any building. Such arrangements or agreements also confer rights of ownership and therefore new clauses (v) and (vi) were being added to the definition of "transfer" in sec. 2(47). Thus, the whole idea of insertion of clause (v) was wherever a person acquires rights to particular property by any agreement, such conferring of right should also be considered as "transfer".
5. He submitted that, in any case, the assessee's case should be considered to be covered by clause (vi) of sec. 2(47) wherein through any transaction if a person by becoming member of any Co-op. Society, which has the effect of transferring immoveable property, then such transaction should be construed as transfer. Since the assessee was holding this property by being a member of the Usha Sunder Premises CHS Ltd. by holding 5 shares and such shares were handed over to the transferees vide agreement dated 30-04-2004 vide clause 6, and the transfer of shares shall take effect on the delivery. Further, these shares were handed over by the transferees to the Society vide their application dated 05-05-2004 to the Society, copy of which is available at page 17 of the paper book. This means all necessary steps for transfer of the shares were taken by the transferors and even the transferees had lodged these shares for transfer with the Society and, therefore, transfer shall be taken to be complete on 30-04-2004. He concluded that all these factors clearly show that the property was transferred on 30-04-2004 and since the new flat was acquired on 25-06-2003 i.e. one year from the date of sale, the assessee was entitled to deduction u/s.54.
10 ITA Nos.2376-2377/M/10
Sureshchandra Agarwal & Sushila S.Agarwal
6. On the other hand, the ld. D.R. carried us to the assessment order as well as the appellate order and pointed out that the AO as well as the CIT(A) have dealt with all the submissions of the assessee. It has been specifically pointed out in the orders how clause (v) is not applicable because clause (v) of sec. 2(47) clearly make reference to sec. 53A of the Transfer of Property Act and that Act itself has been amended and would be applicable only if such agreement was registered instrument. Since the transfer deed dated 30-04- 2004 was not registered, therefore, this would not amount to transfer. The other arguments have already been controverted by the AO because enquiry made by him from Society clearly shows that bill was issued to Mrs. Ranna Modi under wrong impression and later on was cancelled. The counsel, who appeared on behalf of the transferee, i.e. Modi Family, before the AO, had clearly stated that agreement was signed only on 26-08-2004. Therefore, the date of transfer has to be reckoned from that date only.
7. We have considered the submissions carefully as well as the relevant material on record. The dispute is regarding denial of deduction u/s.54 which reads as under:
"54. (1) Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property"
(hereafter in this section referred to as the original asst), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say, ".
11 ITA Nos.2376-2377/M/10
Sureshchandra Agarwal & Sushila S.Agarwal From the above, it is clear that where a new property has been purchased within one year from the date of transfer, them exemption is allowed. The dispute is only in respect of transfer of the old property and there is no dispute in respect of other conditions. According to the assessee, the old property was transferred on 30-04-2004 and the new property was purchased on 25-06-2003, whereas, according to the AO, the new property was purchased on 25-06-2003 but the old property stood transferred only on 27- 08-2004 when the transfer deed got registered. Sec. 2(47), which defines the term "transfer", reads as under:
" (47) "transfer", in relation to a capital asset, includes,
(i) the sale , exchange or relinquishment of the asset ; or
(ii) the extinguishment of any rights therein ; or
(iii) the compulsory acquisition thereof under any law ; or
(iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment ;] [or] [(iva) the maturity or redemption of a zero coupon bond; or] [(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) ; or
(vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property.
A plain reading of the above show that this is an inclusive definition. First, we shall deal with clause (v), which has been considered by the AO as well as CIT(A). The AO has refused to reckon the transfer on 30-04-2004 because, according to him, that instrument was not registered and after the amendment to sec. 53A w.e.f. 24-09-2001, it is mandatory for application of sec. 53A of the Transfer of Property Act, 1882, that such instrument of 12 ITA Nos.2376-2377/M/10 Sureshchandra Agarwal & Sushila S.Agarwal transfer should be registered. Sec. 53A of Transfer of Property Act, 1882, before amendment and after amendment reads as under :
Before amendment :
"53A. 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 ascertain 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 therefore 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 contact or of the part performance thereof."
After amendment :
53-A. Part performance.--Where any person contacts 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 ascertain 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, 13 ITA Nos.2376-2377/M/10 Sureshchandra Agarwal & Sushila S.Agarwal then, notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefore 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."
The above clearly shows that paras 1, 2 and 3 remain the same and there is change only in the 4th para by way of omission of the words "the contract, though required to be registered, has not been registered, or, "which, according to the AO, means after 24-09-2001 the provisions of sec. 53A would not be applied if the document was registered but a reading of the whole provision clearly shows that this provision is basically for the benefit of a buyer and it has been provided that where an instrument of transfer has been executed in writing and in part performance such transferee has taken possession and paid consideration and transferee has performed or willing to perform his part of the contract, then this would constitute part performance.
Even after amendment, it has not been specifically provided that such instrument of transfer is necessarily to be registered. Without going further on this aspect, we have to ascertain the true meaning in the context of clause (v) of sec. 2(47). Clause (v) has been inserted by the Finance Act, 1987, w.e.f.
01-04-1988 and explanatory notes explaining the provisions of the Act, which has been circulated by circular no.495 dated 22-09-1987. Para 11.1 reads as under:
"11.1 The existing definition of the word "transfer" in section 2(47) does snot include transfer of certain rights accruing to a purchaser, by way of becoming a member of 14 ITA Nos.2376-2377/M/10 Sureshchandra Agarwal & Sushila S.Agarwal or acquiring shares in a co-operative society, company, or association of persons or by way of any agreement or any arrangement whereby such person acquires any rights in any building which is either being constructed or which is to be constructed. Transactions of the nature referred to above are not required to be registered under the Registration Act, 1908. Such arrangements confer the privileges of ownership without transfer of title in the building and there are a common mode of acquiring flats particularly in multi-
storeyed constructions in big cities. The definition also does snot cover cases where possession is allowed 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. New sub-clauses (v) & (vi) have been inserted in section 2(47) to prevent avoidance of capital gains liability by recourse to transfer of rights in the manner referred to above."
The above clearly shows hat there was certain situation where properties were being transferred without registration of transfer instruments and people were escaping tax liabilities on transfer of such properties because the same could not be brought in the definition of "transfer" particularly in many States of the country properties were being held by various people as leased properties which were allotted by the various Govt. Departments and transfers of such lease were not permissible. People were transferring such properties by executing agreement to sell and general power of attorney as well as Will and receiving full consideration, but since the agreement to sell was not registered and though full consideration was received and even possession was given, still the same transactions could not be subjected to tax because the same could not covered by the definition of "transfer". To bring such transactions within the tax net, this amendment was made. It has to be appreciated that clause (v) in sec. 2(47) does not lift the definition of part performance from sec. 53A of the Transfer of Property Act, 1882. Rather, it defines any transaction involving allowing of possession of any immoveable property to be taken or retained in part performance of a contract of the 15 ITA Nos.2376-2377/M/10 Sureshchandra Agarwal & Sushila S.Agarwal nature referred to in sec. 53A of the Transfer of Property Act. This means such transfer is not required to be exactly similar to the one defined u/s.53A of the Transfer of Property Act, otherwise legislature would have simply stated that transfer would include transactions defined in sec. 53A of the Transfer of Property Act. But the legislature in its wisdom has used the words "of a contract, of the nature referred in section 53A". Therefore, it is only the nature which has to be seen. As discussed above, the purpose of insertion of clause (v) was to tax those transactions where properties were being transferred by way of giving possession and receiving full consideration. Therefore, in our humble opinion, in the case of a transfer where possession has been given and full consideration has been received, then such transaction needs to be construed as "transfer". Therefore, the amendment made in sec. 53A by which the requirement of registration has been indirectly brought on the statute need not applicable while construing the meaning of "transfer" with reference to the Income-tax Act.
8. The above situation further becomes clear if we refer to the celebrated decision of Hon'ble Supreme Court in the case of CIT v. Podar Cement P. Ltd. & Ors. (226 ITR 625). In that case, he assessee was owner of four flats in a building called "Silver Arch" on Nepean Sea Road, Bombay. Out of these four flats, two were purchased directly from the Builders, Malabar industries Pvt. Ltd., and two were purchased by its sister concerns which were later purchased by the assessee. The possession of the flats was taken after full payment of consideration. The flats were let out. The assessee contended that the rental income from these flats was assessable as "income from other sources" because the assessee was not the legal owner because the title of 16 ITA Nos.2376-2377/M/10 Sureshchandra Agarwal & Sushila S.Agarwal the property had not been conveyed to the Co-operative Society which was formed by the purchasers of the flats. The Hon'ble Court noted that sec. 27 had been amended vide clause 3(a) wherein when a person was allowed to take possession of the building in part performance of the nature referred to in sec. 53A, such person shall be deemed to be the owner. It was further observed that for all practicable purposes the assessee was the owner and possibly there cannot be two owners of same property at the same time. In fact, the amendments to sec. 27 were made later on but were taken into cognizance on the basis of above principle and ultimately it was held as under:
"Hence, though under the common law "owner" means a person who has got valid title legally conveyed to him after comply with the requirements of law such as the Transfer of Property Act, the Registration Act, etc., in the context of section 22 of the Income-tax Act, 1961, having regard to the ground realities and further having regard to the object of the Income-tax Act, namely, to tax the income, "owner" is a person who is entitled to receive income from the property in his own right. The requirement of registration of the sale deed in the context of section 22 is not warranted."
Thus, from the above, it is clear that it is not necessary to get the instrument of transfer registered for the purpose of Income-tax Act when a person has got a valid title legally conveyed after complying with the requirements of the law.
9. Similarly, in the case of Mysore Minerals Ltd. v. CIT (239 ITR 775), the assessee had purchased for the use of its staff seven low income group houses from a Housing Board. The payment had been made and in turn possession of the houses was taken over by the assessee. The actual conveyance deed was not executed. The assessee claimed depreciation which was denied by the department. After great discussion, it was observed that 17 ITA Nos.2376-2377/M/10 Sureshchandra Agarwal & Sushila S.Agarwal for all practicable purposes and for the purpose of Income-tax Act, the assessee shall be construed as owner of the property. In fact, it was held as under:
"Held, reversing the judgment of the High Court, that the finding of fact arrived at in the case at hand was that though a document of title was not executed by the Housing Board in favour of the assessee, the houses were allotted to the assessee by the Housing Board, part payment received and possession delivered so as to confer dominion over the property on the assessee whereafter the assessee had in its own right allotted the quarters to the staff and they were being actually used by the staff of the assessee. The assessee was entitled to depreciation in respect of the seven houses in respect of which the assessee had not obtained a deed of conveyance from the vendor although it had taken possession and made part payment of the consideration".
Thus, from the above two decisions, it becomes absolutely clear that for the purpose of the Income-tax Act the ground reality has to be recognized and if all the ingredients of transfer have been completed, then such transfer has to be recognized. Merely because the particular instrument of transfer has not been registered will not alter the situation. This position is further strengthened by the fact that legislature itself has inserted clause (v) to sec. 2(47) and while referring to the provisions of sec. 53A, reference has been made by stating that contracts in the nature of sec. 53A should also be covered by the definition of "transfer". Therefore, in our humble view, the amendment to sec. 53A of the Transfer of Property Act, whereby the requirement of the documents not being registered has been omitted, will not alter the situation for holding the transaction to be a transfer u/s.2(47)(v) if all other ingredients have been satisfied.
10. Now in this case before us assessee initially executed an agreement of transfer on 23-4-2004 through which assessee agreed to sell flat No.402, 4th Floor Usha Kunj Commissioner-op. Society Ltd., Juhu, Mumbai to (i) Miss Ranna Ashok Modi, (ii) Shri Ashok Brijlal Modi, and (iii) Mrs. Kokila Ashok Modi 18 ITA Nos.2376-2377/M/10 Sureshchandra Agarwal & Sushila S.Agarwal [hereinafter called transferees]. Through this agreement assessee along with Smt. Sushila Agarwal received a total sum of Rs.17 lakhs [Rs.8,50,000/- each]. Through clause 2(b) it was agreed that balance sum of Rs.45,50,000/- would be received on or before 30-4-04 and assessees were required to execute a transfer deed. Following this a Deed of Transfer was executed on 30-4-04 through which assessee transferred the rights in No.402, 4th Floor Usha Kunj Commissioner-op. Society Ltd., Juhu, Mumbai, to the transferees and received the balance consideration of Rs.45,50,000/-. The possession of the flat was handed over to the transferees and through clause No.5 various documents were also handed over. Clause No.5 of the said agreement reads as under:
"5. The transferor has handed over to the Transferees the following:
a) The said Share Certificate No.7, representing the said shares of Society;
b) Application to the Society for transfer of shares in favour of Transferees;
c) Application for transfer of electric meter to the name of the Transferees;
d) The NOC received from the said Society;
e) The original agreement dated 22nd May, 1980 by which the Transferors acquired the said flat and shares and all earlier agreements.
Thus, it is clear that both assessees before us not only received the full consideration and handed over the possession of the flat but also handed over the various documents which were necessary for transfer. The transferees vide letter dated 5-5-04 [copy at page 17 of the paper book] made an application to the society for transfer of the said flat in their names. Through this application share certificate as well as copy of the agreement for sale etc. was also enclosed. Thus, it is clear that even the intention of the transferee 19 ITA Nos.2376-2377/M/10 Sureshchandra Agarwal & Sushila S.Agarwal was to go ahead with the transfer. It was pointed out that since the transfer deed dated 30-4-04 could not be lodged with the Sub-Registrar for stamping till 26-8-04 and when the same was presented for stamping, transferees were informed that some penalty was to be levied for delay in presenting the same. At that juncture the transferees requested the assessee i.e. the transferor to execute another transfer deed dated 26-8-04 and that request was accepted by the assessee who executed a fresh transfer deed on 26-8-2004. It is clear that this new transfer deed is not conferring any fresh rights on the transferees and the fact of old transfer deed dated 30-4-04 becomes clear not only from the transfer deed but from the letter dated 5-5-04 which is prior to the date of new transfer deed i.e. 26-8-04. The transferees had lodged all the documents for transfer. We fail to understand what colourable device has been used by the assessee for which AO has applied the decision of McDowell. The legal position as discussed in above paras clearly shows that the transfer deed dated 30-4-04 clearly transferred all the rights of the assessee to the transferees and, therefore, in our opinion, that transfer deed should be construed as the deed of transfer. The other facts like issuance of the bill in the name of the new owners and later on retraction of the society that they were issued under wrong impression, in our view, is not important to decide this issue and, therefore, we are not dealing in detail with those aspects. As observed by us, the date of transfer for the old property has to be reckoned as 30-4-04 which is well within one year from the date of acquisition of new deed on 25-6-03. Therefore, in our opinion, assessee is entitled to exemption u/s.54. Accordingly, we set aside the order of the ld. CIT(A) and direct the AO to allow exemption u/s.54.
20 ITA Nos.2376-2377/M/10
Sureshchandra Agarwal & Sushila S.Agarwal 11 In the result appeals of both the assessees are allowed.
Order pronounced on this day of 14/9/2011.
Sd/- Sd/-
(V.D.RAO ) (T.R.SOOD)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai:14/9/ 2010.
P/-*
Copy to :
1. Department.
2.Assessee.
3 CIT(A)-XXVII,,Mumbai.
4 CIT,City-3,Mumbai.
5.DR,"B" Bench,Mumbai.
6.Master file.
(TRUE COPY)
BY ORDER,
Asst.Registrar, ITAT, Mumbai.