1 to 4. [These paras are not reproduced here as they involve minor issues.] 5. Capital gains. On 18-7-1979 the Urban Improvement Trust, Kota has allotted to the assessee plot No. 19, admeasuring 4683 sq. ft. at Jhalawar Road, Scheme, Kota. The assessee had deposited Rs. 52,074.96 P. towards sales consideration thereof. The deed of transfer of the plot was, however, got executed and registered on 25-6-1987. The said plot was transferred by the assessee on 8-7-1987/23-7-1987 for a consideration of Rs. 6,00,000. The assessee showed net sale consideration at Rs. 5,41,546 claiming Rs. 58,454 on account of expenses. The declared long term capital gains of Rs. 10,075 as the net sale consideration was stated to have been invested in the purchase of a residential plot at Jaipur and constructing a residential house at Kota. His case was that it was a case of long term capital gain and he was entitled to the benefit of Section 54F of the Act. The ITO, however, held that since the sale-deed was registered on 25-6-1987 and transfer of the property stood completed on that date, it was a case of short term capital gain. He, therefore, worked out the difference at Rs. 5,41,546 and taxed the same as short term capital gains. In appeal, the CIT (Appeals) confirmed his order for the same reasons.
6. Mr. B. Khosla, CA urged that by virtue of Section 47 of the Indian Registration Act, the transfer of the plot which admittedly took place in favour of the assessee on 18-7-1979 though the sale deed in respect of which was registered on 2-5-1987 would be deemed to be in operation w.e.f. 18-7-1979 and hence it would be a case of long term capital gain. This argument of Mr. Khosla was opposed by Mr. A.S. Chaudhary, D/R with the proposition laid down in the cases of Alapati Venkatararniah v. CIT [1965] 57 ITR 185 (SC), Nawab Sir Mir Osman Ali Khan v. CWT [1986] 162 ITR 888 (SC) and Alapati Venkataramiah's case (supra) where it was held that title to an immovable property exceeding Rs. 100 in value passes only on execution of a registered sale deed in respect thereto. It was submitted by Mr. Chaudhary that the assessee got ownership rights in the plot only on execution of the registered sale deed on 25-6-1987 and since the plotwas sold, thereafter, on 8-7-1987/23-7-1987, it was clearly acase of short-term capital gain.
We, however, find force in Mr. Khosla's argument.
7. It is no doubt true that the title in an immovable property exceeding Rs. 100 in value would stand transferred from one person to another only upon the registration, of the conveyance deed as required by Section 17 of the Indian Registration Act, 1877 (Act 3 of 1877). But Section 47 of the said Act clearly says that registered document shall operate from the time from which it would have commenced to operate if no registration thereof had been required or made and not from the time of its registration.
8. In view of the clear mandate contained in Section 47 of the said Act, the Conveyance Deed, registered in the instant case on 25-6-1987 shall operate from 18-7-1979 on which date the allotment letter in respect to the plot in question was issued by the UIT, Kota, to the assessee. It may be observed that but for the bar of Section 17 of the Indian Registration Act, 1877, the transfer of title in the instant case would have been operative w.e.f. 18-7-1979. Now by virtue of Section 47 of the said Act it would have that effect. Thus a joint reading of Sections 17 & 47 of the Indian Registration Act, 1877 leads us to hold that since the transfer of title in the plot from the UIT, Kota to the assessee is required to be operative from 18-7-1979 and the said plot was transferred by the assessee on 23-7-1987, it is a case of long term capital gain. Apart from the above, the definition of the term "transfer" as given in Section 2(47) was suitably modified w.e.f.
1-4-1988 with the insertion of Clause (v) by Finance Act, 1987. Section 2(47)(v) reads as under :- 2(47) transfer, in relation to a capital asset, includes-(i) * * *(ii) * * *(iii)* * *(iv) * * * (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...
It is the undisputed position that the possession of the plot was given to the assessee on the date of allotment thereof to him on 18-7-1979.
Now reading the amended definition of the term 'transfer' along with the mandate contained in Section 47 of the Indian Registration Act, one would have no difficulty in making the opinion that the registration of the document of transfer on 25-6-1987 in this case would operate from the date of allotment and transfer of possession of the plot to the assessee on 18-7-1979. Without dispute the assessment year involved in this case is 1988-89 to which the amended provisions of Section 2(47)(u) do apply.
9. The cases relied upon by the learned D/R lay down the proposition that the title in an immovable property exceeding Rs. 100 in value would pass from one person to another only through a registered document. There can be and is no dispute on this proposition. These cases, however, do not dispute the effect of Section 47 of the Indian Registration Act, 1877, as has been discussed above. That apart they were decided before insertion of Clause (v) in the definition of the term 'transfer' in Section 2(47). Thus the cases relied upon by the learned D/R do not afford any help to Revenue.
10. The ITO has referred to a.case of Abdullah v. Bhichuk [1934] 147 IC 767, purportedly laying down the proposition that the provisions of Section 47 would come into operation when there is a competition between two documents relating to the same property, both of which are registered and the question of priority between them is to be determined. This case could not be (made) available to us. Prima facie such a proposition is not borne out of the language of Section 47 of the Indian Registration Act, 1877 read with Section 2(47)(v) of the Act.
11. To sum up we hold that it was a case of long term capital gain. We, therefore, direct the ITO to treat it as such and give benefit of Section 54F of the Act to the assessee according to law at the time of giving effect to this order.