Section 2(47)(v) defines transfer to include 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. In other words, the legal requirements of Section 53A of 1882 Act are required to be fulfilled so as to attract the provisions of Section 2(47)(v) of the Act.
Text of Section 2(47)(v)
(47) “transfer”, in relation
to a capital asset, includes,—
(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
In order to qualify as ‘transfer’ of capital asset under
section 2(47)(v), there must be a ‘contract’ which can be enforced in law under
section 53A of the Transfer of Property Act, 1882.
Thus, only where the contract contains all the following 6
features mentions in Shrimant Shamrao case, Section 2(47)(v) would apply and
this is what is meant by the expression 'of the nature referred to in Section 53A'.
Supreme Court stated that the object of Section 2(47)(vi) appeared to bring
within the tax net a defacto transfer of any immovable property.
The Supreme Court held that, in the case of
Shrimant Shamrao Suryavanshi and Another v. Pralhad Bhairoba Suryavanshi (2002) 3 SCC 676, the co-ordinate bench had held that certain
conditions have to be fulfilled if the transferee wants to defend or protect
his possession under Section 53A. The conditions are :
(i)
There must be a contract to transfer for
consideration of any immovable property;
(ii)
The contract must be in writing, signed by the
transferor or by someone on his behalf;
(iii)
The writing must be in such words from which the
terms necessary to construe the transfer can be ascertained;
(iv)
The transferee must in part performance of the
contract take possession of the property or any part thereof;
(v)
The transferee must have done some act in
furtherance of the contract; and
(vi)
The transferee must have performed or be willing to
perform his part of the contract.
Text
of section 53A of Transfer of property Act, 1882
53A.
Part performance
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 ascertained 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 [xxx] where there is an instrument of transfer, that the
transfer has not been completed in the manner prescribed therefor 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.
Rule laid down
by section 53A of Transfer of property Act, 1882
The rule laid down by section 53A of Transfer of property Act,
1882 is that when a party has taken possession under a contract or already
being in possession continues his possession and that party is willing to
perform his/her portion of the contract or that party has done some act in
furtherance of the contract, the other party can not remove him/her from
possession of the property. Section 53A of TPA, 1882 operates as a bar or
estoppel to the plaintiff claiming his title and gives the defendant a right to
protect his/her possession.
ILLUSTRATION:
‘A’ contracts
with ‘B’ to sell his plot for a
consideration of Rs. 10,00,000/-. ‘A’ executes an agreement for his plot. ‘A’
accepts the advance amount of Rs. 5,00,000/- from ‘B’ towards the sale of the
plot and hands over the possession of the said plot to ‘B’. After some time, ‘B’
is ready to pay the remaining sale amount but ‘A’ refuses to accept the same.
Further ‘A’ asks ‘B’ to hand over the plot back to him.
Here ‘B’ is ready to perform his part of the contract but A is not. In such a case, B can bring a case requiring specific performance from A. It does not matter that the sale was not registered.
Difference between English Law and Section 53A of Transfer
of Property Act, 1882 Regarding Doctrine of Part Performance
|
English
law of Part performance |
Indian
law of Part performance |
|
it is
not necessary that the contract must be in writing or signed by the
transferor. |
Section
53A of Transfer of Property
Act, 1882 deals
with the Doctrine and states that the contract must be in writing as well as
signed by the transferor. |
|
Right
under this doctrine is an equitable right. |
The
right under the doctrine is a statutory right for
safeguard of possession |
|
Right
under principle is an equitable right. |
It can
only be used to defend the possession of transferee. |
|
It
creates a title in the Transferee. |
It does
not create a title in the transferee. |
Thus, the equitable doctrine of part performance of England has been
partially incorporated in Section 53A of Transfer of Property Act, 1882.
Position after 2001
With the amendment introduced under the Registration Act,
1908 and Transfer of Property Act, 1882 with effect from 24.09.2001, there have
been sea changes in the interpretation to section 2(47)(v).
The provisions of section 53A of Transfer of Property Act,
1882 were amended with effect from 24.09.2001 whereby the requirement of
registration of agreement was made mandatory. While the provisions of section 53A
prior to the said amendment were applicable irrespective of whether the
contract between the parties had been registered or not, the said relaxation in
registration was done away with pursuant to the said amendment. This is evident
from the amended section 53A which is reproduced below:
“53 A. Part performance. - Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained 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, 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.”
Pursuant to amendment with effect from 24.09.2001, the phrase ‘contract, though required to be registered, has not been registered’ have been omitted.
Simultaneous with the aforesaid amendment, the provisions of the Registration Act, 1908 were also amended and sections (1A) was introduced in section 17 with effect from 24.09.2001. The said introduction of sections (1A) is reproduced below:
Text of Section 17(1A) of the Registration Act, 1908
“17(1A) The documents containing contracts to transfer
for consideration, any immovable property for the purpose of section 53A of the
Transfer of Property Act, 1882 (4 of 1882) shall be registered if they have
been executed on or after the commencement of the Registration and Other
Related laws (Amendment) Act, 2001 (48 of 2001) and if such documents are not
registered on or after such commencement, then, they shall have no effect for
the purposes of the said section 53A.”
The above provisions which were introduced with effect from 24.09.2001 by Registration and other related laws (Amendment) Act, 2001 shows that for all the agreement executed on or after 24.09.2001, they shall have no effect for the purpose of section 53A of Transfer of Property Act, 1882 and the said section 53A shall not be applicable if such agreement is not registered under the Registration Act.
Simultaneously, section 49 of the Registration Act, 1908 was also amended and proviso was introduced as follows:
Text of Proviso to section 49 of the Registration Act, 1908
“PROVIDED that an unregistered document affecting immovable
property and required by this Act or the Transfer of Property Act, 1882 (4 of
1882), to be registered may be received as evidence of a contract in a suit for
specific performance under Chapter II of the Specific Relief Act, 1877 (1 of
1877) or as evidence of any collateral transaction not required to be effected
by registered instrument.”
The effect of the said proviso to section 49 of the Registration Act, 1908 is that the non-registration of the agreement would not affect only those collateral transactions not required to be effected by registered instrument.
Thus, the combined reading of the amendment introduced in section 53A of Transfer of Property Act, 1882 and introduction of section 17(1A) and proviso to section 49 under the Registration Act clearly mandate that any transaction involving allowing of the possession of the immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A shall not result in transfer if the agreement is not registered. In other words, even if particular transaction is in pursuance of a contract of the nature referred to in section 53A, yet the same may not be taxable under section 45 of the Act as capital gains if the agreement between the parties has not been registered.
Capital gains are not taxed until the property is actually transferred in accordance with the agreement
Assessee entered into sale cum development agreement on 21.10.2010
with developer cum purchaser for transfer of his property. Assessing Officer
opined that possession of property had been handed over by assessee to
developer on execution of agreement dated 21.10.2010 and, therefore, transfer
of property had taken place in view of section 2(47)(v) read with section 53A
of Transfer of Property Act, 1882 as on 21.10.2010. He further computed
long-term capital gain in respect of aforesaid property and taxed in hands of
assessee in assessment year 2011-12. Commissioner (Appeals) confirmed order of
Assessing Officer. It was noted that as per terms of agreement dated 21.10.2010,
possession of property to transferee will be only after he obtained intimation
of disapproval (IOD) from Municipal Corporation of Greater Mumbai (MCGM) and
IOD was issued by MCGM only on 15.04.2013, i.e., in assessment year 2014-15 and
thereafter only assessee needed to hand over possession of property to developer.
It was further noted that there was no evidence/material before lower
authorities to suggest that assessee had given possession of property to
developer before IOD was issued by MCGM. Lower authorities erred in assuming
that assessee by virtue of sale cum development agreement dated 21.10.2020 had
handed over/allowed developer to take possession of property as on 21.10.2010
and thus erroneously held that section 2(47)(v) read with section 53A of
Transfer of Property Act stood attracted. There was no transfer of property as
on 21.10.2010 and so no capital gain could have been taxed in hands of assessee
in assessment year 2011-12 - [In favour of assessee] (Related Assessment year : 2011-12) – [Mahesh D. Saini
v. ITO (2022) 197 ITD 513 : 143 taxmann.com 433 (ITAT Mumbai)]
Explains law on ‘transfer’;
‘Possession’ under section 2(47)(v) denotes control, not mere physical
occupation - Under sale agreement entered into by assessee for transfer of land
to ‘V’, only permission or license had been granted to start advertising,
selling and construction on land, it would not result in transfer of immovable
property for purpose of capital gains taxation
Assessee entered into a sale
agreement for transfer of land to ‘V’. Under sale agreement, assessee granted
permission or license to start advertising, selling and construction on land. On
27.11.1998, assessee also executed a Power of Attorney under which a director
of ‘V’ was appointed to execute sale agreements in favour of third party after
construction on land. Both parties were entitled to specific performance of
this agreement. Subsequently, on 19.07.2003, a memo of compromise was executed
between assessee and V under which sale agreement and power of attorney granted
were confirmed, total amount payable and already paid by ‘V’ to assessee was
mentioned, further, manner of payment of remaining amount was specified for
which post-dated cheques were also handed over to assessee. Assessee claimed taxation of capital gains in
tax year 1998-99 based on sale agreement whereas all appellate authorities
including High Court held capital gains shall be taxed in year 2003-04 based on
memo of compromise. It was found that compromise deed provided for payment of
balance amounts by post-dated cheques and assessee’s rights in said immovable
property were extinguished on receipt of last cheque. Thus, compromise deed
could be stated to be a transaction which had effect of transferring immovable
property in question. Therefore, only permission or license granted to start
advertising, selling and construction of land would not result in transfer of
immovable property for purpose of capital gains taxation and it was to be held
that transfer of immovable property took place in tax year 2003-04 and not in
tax year 1998-99 as claimed. – [Seshasayee
Steels (P) Ltd. v. ACIT (2020) 421 ITR 46
: 275 Taxman 187 : 115 taxmann.com 5 : [TS-843-SC-2019] (SC)]
High Court upheld
Tribunal’s order holding that in absence of registration of Joint Development
Agreement (JDA) entered into by assessee with a builder, provisions of section
2(47)(v) would not apply; SLP filed against said decision was to be dismissed
Assessee was owner of a piece of
land - During relevant year, assessee entered into Joint Development Agreement
(JDA) of said land with a developer. In part performance of contract, assessee
handed over possession of immovable property to developer - Since JDA was
signed during assessment year in question, Assessing Officer opined that there
was transfer within meaning of section 2(47). Tribunal, however noted that
possession delivered, if at all, was as a licencee for development of property
and not in capacity of a transferee. Tribunal further opined that in absence of
registration of JDA, agreement did not fall under section 53A of Transfer of
Property Act, 1882 and, consequently, section 2(47)(v) did not apply. High
Court upheld order passed by Tribunal. On facts, SLP filed against decision of
High Court was to be dismissed. [In favour of assessee]
(Related Assessment year : 2007-08) - [PCIT, Jalandhar v. Chuni Lal
Bhagat (2019) 262 Taxman 209 : 103 taxmann.com 379 (SC)]
Unless document is
registered, it has no effect in law for purpose of section 53A of Transfer of
Property Act, 1882 and, therefore, where assessee received certain amount by
virtue of an unregistered agreement of assignment of leasehold rights, no case
of transfer of property was made out under section 2(47)(v)
During course of assessment
proceedings, Assessing Officer noted that assessee received certain amount by
virtue of an unregistered agreement of assignment of leasehold rights. Assessing
Officer held that since consideration was paid during relevant assessment year
and possession was also handed over during relevant year, there was deemed
transfer of ‘capital asset’ within meaning of section 2(47)(v) read with
section 53A of 1882 Act. In terms of Amendment Act, 2001, unless document is
registered, it has no effect in law for purpose of section 53A of 1882 Act. Since,
in instant case, agreement in question was not registered, impugned order
passed by Assessing Officer holding that it was a case of transfer of property
under section 2(47)(v), was to be set aside. [In favour of assessee]
(Related Assessment year : 2008-09) – [Mallika Investment Co. (P) Ltd. v. ITO (2019) 174 ITD 386 : 101 taxmann.com 48 (ITAT Kolkata)]
Pursuant to agreement to
sell, possession of land was handed over by assessee and sale consideration was
received, provisions of section 2(47) would apply and mere fact that contract
was subsequently terminated by mutual consent, would not improve case of assessee
to wriggle out of purview of section 2(47)
A search proceeding was carried out in case of assessee-company. In
course of said proceedings, Assessing Officer found that assessee had entered
into an agreement to sell a property to MAPL. Since capital gain arising from
said sale transaction was not disclosed, Assessing Officer made addition to
assessee's income. In appellate proceedings, assessee pointed out that dispute
arose between parties subsequently and, thus, sale agreement was terminated. It
was also pointed out that assessee had returned sale consideration received
from MAPL. Tribunal having accepted assessee’s explanation, deleted addition
made by Assessing Officer. Since it was not disputed that possession was handed
over in pursuance of agreement to sell, provisions of section 2(47) would
squarely apply. Therefore, mere fact that contract was subsequently terminated
by mutual consent, would not improve case of assessee to wriggle out of purview
of section 2(47). Therefore, impugned order of Tribunal was to be set aside and
addition made by Assessing Officer was to be restored. [In favour of revenue]
(Related Assessment year : 1999-2000) – [CIT v. Harbour View
(2018) 409 ITR 599 : (2019) 261 Taxman 330 : 102 taxmann.com 185 (Ker.)]
Pursuant to joint
development agreement entered into by assessee with a developer, it was agreed
that 60 per cent of constructed area would be retained by developer and a
General Power of Attorney (GPA) was also executed in terms of which developer
was conferred complete rights to deal with landed property in any manner, it
would amount to transfer of property within meaning of section 2(47)(v)
During relevant year, assessee
entered into an agreement with a builder developer for construction of
residential flats on land owned by it. As per terms of agreement, assessee was
to receive 40 per cent of total constructed area where as balance 60 per cent
of constructed area was to be retained by developer. Assessee’s case was that
since there was only an agreement to develop property, no transfer took place
within meaning of section 2(47)(v). Assessing Officer, however, opined that
there was a transfer under provisions of section 2(47)(v). Accordingly,
Assessing Officer computed capital gains on deemed sale of 60 per cent of total
area and added same to total income under head ‘long-term capital gains’. It
was noted from records that apart from joint development agreement, assessee
had also executed a registered General Power of Attorney (GPA) which conferred
on developer, complete transfer of rights of assessee over landed property. Once
registered GPA conferred entitlement to developer to sell, convey or deal in
any manner with 60 per cent undivided share it would very well be construed as
nothing but transfer of property within meaning of section 2(47)(v). Therefore,
impugned order passed by Assessing Officer did not require any interference. [In
favour of revenue] (Related Assessment
year : 2013-14) –[Tamilnadu Brick Industries v. ITO (2018) 97 taxmann.com 1 (ITAT Chennai)]
Allows LTCG claim, holds ‘agreement to sell’, not
agreement execution, relevant
ITAT treats capital gains on sale of
non-agricultural land as ‘long term’ for Assessment year 2011-12, holds that
the transfer of land in question would be regarded as on the date of agreement
to sale and not execution date; Due to prohibition of Sec. 42 of Rajasthan Tenancy
Act, 1955 to sale of agricultural land by a member of scheduled caste in favour
of non-member, assessee first converted his agricultural land (purchased in Assessment
year 2008-09) into non-agricultural land during Assessment
year 2010-11 and thereafter executed the sale deed in Assessment year 2011-12,
Revenue had treated the alleged gain as short term for relevant Assessment year;
Observes that assessee had already paid part consideration at the time of
agreement entered during Assessment year 2008-09, then after taking the
possession, assessee had carried out some development work thereon; Explains
that the term 'transfer' as per Section 2(47) r.w.s. 48 is wider than the term
sale and it includes all rights and privileges in the property either in
praesenti or accruing in future as vested in vendor; Opines that where transfer
deed has been executed though in violation of law prescribing for a previous
sanction or subsequent validation by a competent authority and though not
registered would still attract the application of doctrine of part
performance”; Concludes that execution of agreement to sale is a post facto
conversion and the transfer would effect from the date of agreement to sale
specifying all the conditions of Section 2(47) (v) r.w.s. 53A of the Transfer
of Property Act, follows Supreme Court ruling for Sanjay Lal v. CIT (2014) 365
ITR 389 (SC). [In favour of assessee] (Related Asessment years : 2011-12
& 2012-13) – [Lal Rajasthan Agencies (P) Ltd.
[TS-59-ITAT-2018(JPR)] 2018-01-25 (ITAT Jaipur)]
No ‘transfer’ under
section 2(47)(v) absent registration of JDA; Upholds capital gains tax deletion
- For want of permissions, entire transaction of development of land envisaged
in Joint Development Agreement (JDA) fell through, there would be no profit or
gain which arose from transfer of capital asset, which could be brought to tax
under section 45, read with section 48
It is well-settled that the
protection provided under section 53A is only a shield, and can only be
resorted to as a right of defence. An agreement of sale which fulfilled the
ingredients of section 53A was not required to be executed through a registered
instrument. This position was changed by the Registration and Other Related
Laws (Amendment) Act, 2001. Amendments were made simultaneously in section 53A
of the Transfer of Property Act and sections 17 and 49 of the Indian
Registration Act. By the aforesaid amendment, the words ‘the contract, though
required to be registered, has not been registered, or’ in section 53A of the
1882 Act have been omitted. Simultaneously, sections 17 and 49 of the 1908 Act
have been amended, clarifying that unless the document containing the contract
to transfer for consideration any immovable property (for the purpose of
section 53A of 1882 Act) is registered, it shall not have any effect in law,
other than being received as evidence of a contract in a suit for specific
performance or as evidence of any collateral transaction not required to be
effected by a registered instrument.
The effect of the aforesaid
amendment is that, on and after the commencement of the Amendment Act of 2001,
if an agreement, like the JDA in the present case, is not registered, then it
shall have no effect in law for the purposes of section 53A. In short, there is
no agreement in the eyes of law which can be enforced under section 53A of the
Transfer of Property Act. This being the case, that the High Court was right in
stating that in order to qualify as a ‘transfer’ of a capital asset under
section 2(47)(v), there must be a ‘contract’ which can be
enforced in law under section 53A of the Transfer of Property Act. A reading of
section 17(1A) and section 49 of the Registration Act shows that in the eyes of
law, there is no contract which can be taken cognizance of, for the purpose
specified in section 53A.
In the facts of the present case, it
is clear that the income from capital gain on a transaction which never
materialized is, at best, a hypothetical income. It is admitted that, where for
want of statutory permissions, the entire transaction of development of land
envisaged in the JDA fell through. At all that, there will be no profit or gain
which arises from the transfer of a capital asset, which could be brought to
tax under section 45 read with section 48.
In the present case, the assessee
did not acquire any right to receive income, inasmuch as such alleged right was
dependent upon the necessary permissions being obtained. This being the case,
in the circumstances, there was no debt owed to the assessee by the developers
and therefore, the assessee have not acquired any right to receive income under
the JDA. This being so, no profits or gains ‘arose’ from the transfer of a
capital asset so as to attract sections 45 and 48. Therefore, the High Court
was correct in its conclusion, but for the reasons stated hereinabove. The
appeals is dismissed. - [In favour of assessee] (Related Assessment year
: 2007-08) – [CIT v. Balbir Singh Maini (2017) 398 ITR 511 : 298 CTR 209 : 251 Taxman 202 : 86
taxmann.com 94 (SC)]
No capital gains on
unmaterialised development agreement with builder; Follows Supreme Court’s
Balbir Singh Maini
Pune ITAT dismisses
Revenue’s appeal, holds that no transfer of land, with disputed title, took
place under development agreements with the builder which were later cancelled;
Assessee-Individual for Assessment year 2008-09, was found to have entered into
two development agreements for certain land with a builder and no capital gain
therefrom was declared by the Assessee; Revenue assessed STCG of Rs. 3.12 Cr.
and LTCG of Rs. 2.63 Cr. as per Sec. 53A of the Transfer of Property Act, 1882
(TPA) r.w.s. 2(47)(v) and held that parting with the possession of the land in
favour of the builder and receiving a part of the agreed consideration amounted
to ‘transfer’; CIT(A) deleted additions made by AO upon production of copies of
cancellation agreements against the development agreements; On Revenue’s
appeal, ITAT observes that under development agreements, the builder was
allowed to enter into the property as a licensee (not owner) and further a part
of such piece of land was declared as excess land under the Urban Land (Ceiling
& Regulation) Act, 1976 at the material time which was later repealed and
led to reversion of land that was acquired by the State Government; ITAT takes
cognizance of the definition of “transfer” under section 2(47)(v) and Section
53A of TPA and remarks that since title to a part of such property itself was
disputed and vested with the State Government at the time of entering into the
development agreements there was no transfer of possession at the material
time; Relies on Supreme Court ruling in CIT v. Balbir Singh Maini (2017) 398
ITR 511 : 298 CTR 209 : 251 Taxman 202 : 86 taxmann.com 94 (SC) where it
was held that under a joint development agreement the owner of the land
continued being an owner throughout the agreement and no transfer of rights of
ownership was made to the developer and further, “income from capital gain on a
transaction which never materialized was, at best, hypothetical income”; ITAT
finds facts of the present case akin to those of Balbir Singh Maini case and
holds since no possession was given to the builder and part of the land vested with
the State Government at the material time and weighs in the fact that
transaction had fallen through since a part of land was eventually sold to
other parties in 2010 and 2013 and shall be charged to tax on substantive basis
for Assessment year : 2011-12 and 2014-15. [In favour of assessee] (Related Assessment
year : 2008-09) – [ITO v. Amit Murlidhar Kamthe [TS-395-ITAT-2021(PUN)] – Date of Judgement : 17.05.2021 (ITAT Pune)]
Transfer - In terms of
section 2(47) date of transfer would be date on which any transaction involving
allowing possession of any immovable property to be taken or retained in part
performance of a contract of nature referred to in section 53A of Transfer of
Property Act, 1882 takes place
Assessee entered into an
agreement for sale of office premises and parking space to a bank on 19.06.1984.
As per agreement sale would be completed only after expiration of five years
but before sixth year from 19.06.1984 and purchaser would have option to
complete transaction or rescind same. However, possession of property in
question was handed over to bank on 20.06.1984 in part performance of contract.
As per agreement purchaser-bank exercised its option to purchase said property
on 12.06.1990.
Assessing Officer held
that transaction of transfer within meaning of section 2(47)(v) read with
section 53A of the Transfer of Property Act took place on 12.06.1990 and
capital gain was chargeable to tax in relevant assessment year. On appeal, the
Commissioner (Appeals) upheld order of the Assessing Officer. On second appeal:
Held : A reading of the
provisions of section 53A of the Transfer of Property Act shows that the
following are the essential elements of transaction to be covered by the aforesaid
provisions:
(a) There
should be contract for consideration;
(b) It should be in writing;
(c) It should be signed by the transferor;
(d) It should pertain to the transfer of immovable
property;
(e) The transferee should have taken possession of
property;
(f) Lastly, transferee should be ready and willing
to perform the contract.
Thus, in the facts and
circumstances, part performance of the contract referred to in section 53A took
place in the instant case in the financial year 1984-85 vide agreement dated 19.06.1984.
Except deferment of execution of the registered deed for five years and payment
of balance consideration of 5 per cent, all the activities for sale of property
in question were completed.
A perusal of section 45,
which is a charging section for the purposes of capital gains, shows that the
capital gains can be charged to tax in the year, in which the transfer of the
capital asset takes place. Transfer as referred to in section 45(1) has been
defined in section 2(47).
A perusal of said
section shows that no transfer of the capital asset in question took place in
the previous year relevant to the assessment year under consideration, as
neither sale of immovable property as defined in Transfer of Property Act, 1882
took place during the assessment year 1990-91, nor it can be said that the
transaction of the nature referred to in section 53A of the Transfer of
Property Act, 1882 took place in the financial year 1990-91.
In fact, in the instant
case, it is not the case of any party that sale of immovable property in
question took place in the year under consideration. The contention of the
revenue is that in view of the provisions contained in sub-clause (v) of section
2(47), a transfer of the capital asset in question took place in the previous
year relevant to the assessment year 1991-92. The basis of the revenue for the
above claim is that the purchaser bank has exercised its option under clause 5
of the agreement dated 19.06.1984 on 12.06.1990 and, therefore, a transfer
within the meaning of section 2(47)(v) took place on that date. Section
2(47)(v) provides that the date of transfer would be the date on which 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 takes place.
In the instant case, the possession was taken by the bank from the assessee on 20.06.1984.
Further, no material has been brought on record to show that on 12-6-1990, the
assessee allowed the said bank to retain the possession in part performance of
a contract of the nature referred to in section 53A of the Transfer of Property
Act. In fact, contract of the nature referred to in section 53A was entered
into on 19.06.1984 and the possession was allowed to be taken over by the bank
on 20.06.1984 in part performance of that contract. Thus, transfer within the
meaning of section 2(47)(v) took place on 20.06.1984 and not on 12.06.1990.
In the above
circumstances, transfer within the meaning of section 2(47) of the capital
asset in question did not take place on 12.06.1990 or during the previous year
relevant to the assessment year 1991-92. Therefore, the Commissioner (Appeals)
was not justified in sustaining the action of the Assessing Officer in
including the capital gains in relation to capital asset in question during the
assessment year under consideration. [In favour of assessee] (Related Assessment year : 1991-92) –[Zuari
Estate Development & Investment Company (P) Ltd. v. JCIT (2016) 159 ITD 28
: 70 taxmann.com 118 (ITAT Panaji)]
Assessee handed over
possession of property to builder on first instalment of sale consideration,
transfer of property took place when said instalment was received
If a transaction
involves allowing of possession of any immovable property to be retained in
part performance of a contract of a nature referred to in section 53A of
Transfer of Property Act it amounts to transfer. Where assessee handed over
possession of property to builder on first instalment of sale consideration,
transfer of property took place when said instalment was received. [In favour
of revenue] (Related Assessment year :
2004-05) – [CIT, Cochin v. Cochin Stock Exchanges Ltd. (2014) 363 ITR 382 : 269
CTR 93 : 226 Taxman 161: 49 taxmann.com 263 (Ker.)]
As per provisions of
section 2(47) any transaction involving allowing of possession to be taken or
retained in part performance of a contract of nature referred to in section 53A
of Transfer of Property Act, 1882, would come within ambit of expression ‘transfer’
Assessee owned a piece
of land. He entered into a joint venture development agreement with ‘R’
Builders dated 12.07.2005 for development of said land. Pursuant to said
agreement, possession of land was handed over to builder. Thereupon,
development agreement was registered by way of confirmation deed on 23.01.2007.
Assessee claimed that capital gain arising from execution of said agreement was
taxable in assessment year 2007-08 because joint venture agreement was
registered on 23.01.2007 and only after which it was acted upon and implemented.
Assessing Officer opined that transfer had actually taken place on account of
development agreement dated 12.07.2005, i.e., in assessment year 2006-07 itself
and, thus, amount of capital gain was taxable in said assessment year. As per provisions of section 2(47) any
transaction involving allowing of possession to be taken or retained in part
performance of a contract of nature referred to in section 53A of Transfer of
Property Act, 1882, would come within ambit of expression ‘transfer’. Considering
in aforesaid legal background, development agreement entered on 12.07.2005,
which contemplated taking over of possession of property by ‘R’ Builders for
development fulfilled requirements of section 2(47)(v) and, therefore, impugned
order passed by Assessing Officer was to be upheld. [In favour of revenue] (Related Assessment year : 2006-07) – [Mahesh
Nemichandra Ganeshwade v. ITO (2012) 147 TTJ 488 : 51 SOT 155 : 21 taxmann.com
136 : 17 ITR(T) 116 (ITAT Pune)]
No transfer under section 2(47)(v), where
transferee unwilling to perform contractual obligations
Mumbai ITAT in this case, held that under section 53A of the
Transfer of Property Act, a contract can be termed to be 'of the nature referred
to in section 53A of the Transfer of Property Act’ if the transferee performs
or is willing to perform his part of the contract. Such willingness is more
than mere intent; it is unqualified and unconditional willingness. From the
facts, it was evident that the transferee never performed his obligations under
the agreement and was not even willing to perform his obligations. Therefore,
ITAT held that the impugned development agreement could not be said to be a ‘contract
of the nature referred to in section 53A of the Transfer of Property Act’ and,
accordingly, provisions of section 2(47) (v) could not be invoked. [In
favour of assessee] (Related Assessment year : 1996-97) – [General Glass
Co. v. DCIT [TS-6-ITAT-2006(Mum)] – Date of Judgement : 07.12.2006 (ITAT
Mumbai)]
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