Mankad, J.
1. The Income-tax Appellate Tribunal, Ahmedabad (hereinafter referred to as the 'Tribunal'), has referred to us for our opinion the following three questions under s. 27(1) of the W. T. Act, 1957 (hereinafter referred to as the 'Act') :
'1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the immovable property known as Kunj Bungalow was not the property of the assessee and he held the some on behalf of the firm of M/s. Gaekwad & Co. Baroda, at the relevant valuation date?
2. Whether the Tribunal was right in law in holding that the assessee continued to be the legal owner of the immovable properties known as lay Mahal Place and Makapura palace on the releveant valuation dates and rightly assessed to welath-tad in respect of their market values which were admittedly Rs. 1,07,75,213 and Rs. 16,95,615, respectively? and
3. Whether, on the facts and in the circumstances of the case, the applicant's claim that having agreed to sell the Jay Mahal Palace and Makarpura Palace and having put the purchasers in possession thereof the only asset belonging to the applicant was the right to receive the unpaid price on the valuation dates and such such paid price was non-urban immovable asset was rightly rejected by the Tribunal?'
2. The first question which pertain to the property known as Kunj Bungalow at Baroda is directly covered by our judgment in CIT v. Kartikey V. Sarabhai (I. T. R. No. 34 of 1980, decided on May 4, 1981 : [1981]131ITR42(Guj) ]. The assessee who was a partner in the firm of M/s. Gaekwad & Co., which came into existence on January 1, 1963, introduced his said immovable property known as Kunj Bungalow owned by him by way of his capital contribution to the said firm, His account with the firm was credited with a sum of Rs. 1,50,000 in consideration of the interdiction of the aforesaid immovable property in the books of account of the said firm and this property was shown in the balance sheet of the firm as an asset belonging to the firm. The facts which are not in dispute clearly establish that Kunj Bungalow was capital contribution made by the assessee to the firm and, therefore, as held by us in the judgment referred to above, the bungalow ceased to be the property of the assessee and became the property of the firm inasmuch as it stood transferred to the firm. The assessee was not under an obligation to include the said asset in his net welath. We, therefore, upheld the view taken by the Tribunal and answer question No. 1, referred at the instance of the Revenue, in the affirmative and against the Revenue. We may mention that the assessee would be liable to include the valuation o his interest in the firm in his net welath and the same would have to be valued as per the relevant rules of valuation.
3. Remaining two questions which are referred to us at the instance of the assessee relate to two immovable properties, one known as Jay Mahal Palace situated at Bombay and another known as Makarpura Palace situated at Baroda. The main question which we are called upon to answer with reference to these properties is whether the assessee was owner of these two properties on the relevant valuation dates, and whether he wa liable to include the value of these two properties in his welath=tax returns for the assessment years 1964-65, 1965-66 and 1966-67. The 31st March, 1064, 31st March, 1964, 31st March, 1965 and 31st March, 1966, are the relevant valuation dates for the assessment years 1964-65, 1965-66 and 1966-67, respectively. It will be convenient to deal with the assessee, s claim in respect of each of the properties separately; y.
4. Jay Mahal Palace is a property situate on Napean Sea Road in Bombay. The assessee who was the owner of this property entered into an agreement dated June 14, 1963, with the partners of a firm running in the name and style of M/s. Goodluck Construction to sell this property for a consideration of Rs. one crore ten lakhs odd. An amount of Rs. 8 lakhs was paid to the assessee by way of earnest money on the date of the agreement, i.e., on June 14, 1963. In order to appreciate the arguments advanced before us it is necessary to read cls. (1), (2), (4), (5), (11), (13), and (16) of the agreement, which are in the following terms :
' (1) The vendor shall sell to the purchasers and the purchasers shall purchase from the vendor all and singular the land, hereditaments and premises known as 'Jay Mahal Palace' situate at Napean Sea Road, Bombay, and more particularly described in the schedule hereunder written with their appurtenance free from all incumbrances at or for the price so sum of Rs. 1,10,11,111 (Rupees open crore ten lakhs eleven thousand one hundred and eleven) _as earnest money immediately on the exaction of this agreement (the payment and receipt whereof the vendor both hereby admit and acknowledge and the balance of Rs. 1,02,11,111 (one crore two lakhs eleven thousand one hundred and eleven), to be paid to the vendor as provided hereinafter in clause.
(2) The balance of the consideration money of Rs. 1,02,11,111 (Rupees one crore two lakhs eleven thousand one hundred and eleven), shall be paid as follows, that is to say :
(a) Rs. 32,11,111 (Rupees thirty-two lakhs eleven thousand one hundred and eleven) m, shall be paid on or before 309th November, 1963, without interest (subject to variation, if any, as mentioned in clause (3) (here).
(b) Rs. 17,50,000 (Rupees seventeens lakhs fifty thousand) shall be paid on or before 15th December, 1964, without interest.
(c) Rs. 17,50,000 (Rupees Seventeen lakhs fifty thousand) shall be paid on or before 15th December, 1965, without interest.
(d) Rs. 17,50,000 (Rupees seventeen lakhs fifty thousand) shall be paid on or before 15th December, 1966, without interest.
(e) and the balance of Rs. 17,50,000 (rupees seventeen lakhs fifty thousand) shall be paid on or before 15th December, 1967, without interest.
time being the essence in each case. If the purchasers shall fail to pay any amount or amounts on or before the respective due dates, fixed for the payment of the same, the vendor shall be at liberty to terminate the contract and to forfeit all moneys paid until then without giving any other precious intimation....
(4) On payment of the sum of Rs. 32,11,111 (rupees thirty-two lakhs eleven thousand one hundred and eleven), (subject to variation as mentioned in clause (3) hereof), on or before the 30th day of November, 1963, and on the purchasers accepting the title of the vendor to the property, time being of the essence in this respect, the vendor shall put the preachers in vacant possession of the entire property with all the structures thereon by way of leave and license only, in order to enable the purchase or their nominee or nominees to enter upon the premises and to pull down or dispose of any structure or structures thereon and/or the sanitary fitting and/or wiring and/or lift or construct any structure or structures thereon or carry out any other necessary works thereon. The purchasers, the vendor shall joint in making such application as may be reasonably required by the purchasers or their nominee or nominees but on the distinct understanding that the vendor shall not be liable or accountable for any delay in. the matter of joining in such application and further that the purchasers shall in carrying out any new work or in pulling down the existing structure or structures fully comply with all the requirements of the Municipality or any other public body and indemnify or keep indemnified the vendor in respect thereof.
(5) The purchase shall be competed on the payment of the full consideration money as provided in clause (2) thereof at the office of Messrs. Mulla & Craigie Blunt & Caroe, attorneys for the vendor. The vendor declares he is in possession of the whole property and there are no tenants......
(11) the Vendor shall before the completion of sale furnish to the preacher, s attorneys the certificate under section 34 of the Welath-tax Act. If after the date of these presents and before 30th November, 1963, any notice of acquisition or requisition of any substantial part of the land is received from the Government of India or the State of Maharashtra or the Bombay Municiplality or any other public authority and only if a substantial part thereof is not available to the purchasers, the purchasers will be entitled to rescind this agreement and the vendor will return the earnest money without interest. If the vendor receive any such notice after 30th day of November, 1963, the purchases shall complete the sale according to these present and the purchasers alone will be entitled to any compensation or any other moneys that may be payable by reason of the acquisition or requisition of the property or any part thereof by Government or any other public authority......
(13) Upon payment of the purchase money at the time and in manner aforesaid the vendor shall make and execute to the purchasers or to such other person or person a they may direct a proper conveyance to be prepared by the purchasers shall require more than one conveyance all costs of and incidental to such additional conveyances which shall be incurred by the vendor including the vendor's solicitors charge shall be borne and paid by the purchaser's attorneys and to be approved by the vendor's attorneys. If the purchasers shall require more than one convenience all costs of and incidental to such additional conveyances which shall be incurred by the vendor including the vendor solicitors charge shall be borne and paid by the purchasers alone. If any time before the 30th of November, 1967, the purchasers desire any portion of protons of the property to be conveyed to any party of parties and agrees to pay full consideration money in respect of such portion or portions at the rate of Rs. 333.66 per square yard without taking into consideration any payments already made, then and in that event the vendor shall execute a convenience of any plot or plots in favour of the purchasers or their nominees and put such purchaser or purchasers in possession of the plot or plots purchased by him or them provided that the purchasers shall produce the necessary certificates from the Collector, costs....... except amount further any receiving without him to tendered conveyances all execute shall vendor the date which after agreement this under payable moneys consideration full receives as only time such till operation in remain clause out set arrangement The property. purchase entitled party proper a is purchaser that effect certificate give certifying body public other or
(16) The said property shall until 30th November, 1963, remain at the risk of the vendor as to fire or any other accident and in the event of the property being damaged by such fire or other accident as aforesaid before the completion of the sale the purchasers shall have the option to cancel this agreement in which event the earnest money will be returned to the purchasers without interest and each party will be returned to the purchasers without interest and each party will be and pay his own costs incurred till then, from and after 1st December, 1963, the property shall remain at the risk of purchaser in all respect.'
5. The purchasers paid Rs. 29,75,213 on January 30, 1964, and they were put in possession of the property agreed to be sold on that day, under clause (4) of the agreement. Thereafter four installments of Rs. 17,50,000 each were paid towards the sale price between Janunary 18, 1963, and March 27, 1968. The purchasers thus paid a total consideration of Rs. 1,07,75,213 by March 27, 1968. Property was conveyed to the purchasers by four deeds of conveyance dated November 20, 1970, November 27, 1971, Janunary 26, 1971, and May 2, 1972. An analysis of the transactions reveals the following situation :
on valuation date 31-3-1964 :
(1) Only agreement to sell for Rs. 1,10,11,111 was in existence.
(2) payment of Rs. 8 lakhs as earnest money and Rs. 29.75 lakhs paid toward sal price (about Rs. 72.36 lakhs of consideration remained outstanding). Possession was handed over to the purchaser.
(3) Sale deed was not executed.
On valuation date 31-3-1965 :
(1) & (2) as in the previous year.
(2) installment of Rs. 17.50 lakhs paid.
(4) About Rs. 54.86 lakhs of consideration remained outstanding.
On valuation date 31-3-1966 :
(1), (2) & (3) as in the previous year.
(4) Further installment of Rs. 17.50 lakhs paid.
(5) About Rs. 37.36 lakhs of consideration remained outstanding.
(6) Sale deed was not executed.
Subsequently : Rest of the amount was paid buy two installments between 1-3-=1967 and 27-3-1968.
6. Sale deeds were executed on 20-11-1970, 27-11-1970, 26-1-1971 2-5-1972, more than four years after the valuation date.
7. It was in the context of the above facts that the question arose before the WTO whether the property named Jay Mahal belonged to the assessee on the relevant valuation dates, i.e., on March 31, 1964, March 31,1965, and March 31, 1966, and whether its value was liable to be included in his net welath.
8. The WTO rejected the assessee, s claim that though a large part of the sale price of more than Rs. 110 lakhs has remained unpaid and no sale deed has been executed in favour of the purchaser who has agreed to purchase the property, Jay Mahal, he has ceased to be the owner of the property on the relevant valuation dates and consequently the WTO included Rs. 1,10,11,111, being the value of the property, in the net wealth of the assessee in each of the assessment years under reference. Th AAC and the Tribunal having confirmed the view taken by the WTO, the questions as set out above are referred to use for out opinion.
9. The learned counsel for the assessee argued that the purchasers having been put in possession of the property under the terms of the agreement to sell, the assessee ceased to be the owner of the property on and form January 30, 1964, the date on which possession of the property was handed over to the purchases meaning thereby the the party who has agreed to purchase and who has yet to pay a large amount of about 72.36 lakhs and has not obtained any sale deed conveying the property to him has become the owner of the property on the said date. It was argued that the right or interest over of the assessee as owner came an end on the date he handed over possession of the property to the conferred on him under the contract, that is the agreement of sale. It was contended that the assessee ceased to be the owner by virtue of the agreement read with s. 53A of the Transfer of Property ACt. It was argued that is the person in possession and enjoyment who holds or owns the assets. The assessee was not in possession and enjoyment of the property and, therefore, he could not be said to be the owner of the property if the term 'owner' was interpreted in a fair manner. The only right which the assessee has after the purchasers were put in possession was to receive the unpaid purchase price.
10. The following factors need to be emphasized :
(1) The title of the owner is not extinguished till he executes a conveyance merely because a part of the purchase price is paid and he parts with possession in favour of th person who has agreed to purchase the property;
(2) A person who has agreed to purchase the property does not become its legal ower on more payment of a part of purchase price merely on entering into possession of the property, more so before obtaining a registered deed of sale in his favour;
(3) What would happen if the parties did not honour the rest of the conditions? Suppose the owner does not accept the rest of the sale price and refused top execute sale deed?
or
purchaser refused to pay the rest of the price? Would the owner have lost his title? And the person who has agreed to purchase become the owner of the property without payment of price and without securing sale deed?
(4) How would the title of the owner be extinguished and the person who agreed to purchase created without a registered instrument of sale transferring title?
(5) Would the person who has merely agreed to purchase a property and paid a part of the purchase price be liable to include the value of the property in his net welath in his welath-tax returns merely because he has secured possession? Can it be said that he is the owner? And how will the property be valued?
(6) Would the property be liable to be included in the welath-tax returns of both? or none
11. We are unable to accept the arguments advanced on behalf of the assessee. The question which is canvassed before us is directly covered by our decision in CIT v. Ashaland Corporation (I. T. R. No. 377 of 1977, decided on July 21/22, 1981-[Since reported in : [1982]133ITR55(Guj) . That was a case in which the assessee,. a partnership firm, dealing in land has agreed to sell land which was part of its stock-in-trade to a co-operative housing society under an agreement dated March 15, 1970. The assessee received Rs. 2,13,772 towards the sale price which included Rs. 5,000 by way of earnest money and put the purchasers in possession of some of the plots of land agreed to be sold. The assessee claimed that Rs. 2,13,772, which it received in the previous year relevant to the assessment year 1971-72, represented its income earned in that year. It was held in the context of the above facts that in order to partake of the character of income, a receipt, must be part of the profits earned by the assessee. In other words, a receipt, must assume, e the character of income before it becomes exigible to income-tax. It was observed that the business of the assessee was to purchase and sell land, and unless the title of the assessee was extinguished, the title of the purchasers did not arise. An agreement to sell did not create any interest in favour of co-operative society (Purchaser). it wa held that is is no completion of the transaction of purchase and sale culminating in the extinguishment of the title in the vendor and simultaneous creation of the title in the vendor that the assessee earns profit or suffers loss. It was further held that the transaction which may or may not ultimately result in a completed sale by executing a registered convenience, is no transaction at all for the purpose of working out profit. Receipt of Rs. 2,13,772, would assume the character of income law. Dealing with the argument based on the provision of s. 53A of the Transfer of Property Act, that in any case, Rs. 2,13,772 assumed the character of income when possession of some of the plots was handed over to the purchaser, it was observed that the doctrine of part-performance embodied in s. 53A of the Transfer of Property Act has limited application and it affords only good defence to the person put in possession under an agreement, in writing to protect his possession to the extent provided in the said s. 53A of the Act. However, the agreement in writing to sell, coupled with parting of possession, would not confer any legal title on the purchaser. This court rejected the assessee, s contention that Rs. 2,13,772 received by it in pursuance of agreement to sell represented its income. In out opinion, the reasons given by us in reaching this conclusion would govern the facts of th present case also. So far as the relevant valuation dates are concerned, the transaction of sale in respect of Jay Mahal Palce, the property which the assessee has agreed to sell under the agreement dated June 13, 1963, was not complete. As pointed out above, the deeds of conveyance were executed in 1970-71 and 1972. It is true that after the assessee entered into the agreement for sale, he has received various amounts towards sale price before March, 31, 1966, the last of th relevant valuation dates, and put the purchasers in possession of the property on January 30, 1964., But these facts taken together do not confer any title on the purchasers. The assessee in spite of the fact that he had received part of consideration and has parted with possession of property contained to be the legal owner of Jay Mahal Palce; nor had the vendee become the owner of th property before the payment of the full price and before securing a conveyance in his favour. In other words, he wa not divest of his title over the property on the relevant valuation dates. Doctrine of part performance embodied in s. 53A of the Transfer of property Act on which reliance was placed by the assessee, as pointed out by us in our judgment in the case of Ashaland Corporation : [1982]133ITR55(Guj) , has limited application and it affords only good defence to the person put in possession to the extent provided in that section. REceipt of part of th price and parting of possession does to divest the assessee of his title nor do the purchasers acquire any title over the property., We, therefore, do not see any substance in the contention of the assessee that on receipt of part of the sale price and pirouetting with possession of the property assessee ceased to be the owner of the property.
12. We also do not see any force in the argument that after parting with possession of the property, the only right which the assessee has was to claim and receive unpaid sale price. Clause(2) of the agreement of sale amongst other things provides :
'If the preachers shall fail to pay any amount or amounts on or before the respective due date, fixed for the payment of the same, the vendor shall be at liberty to terminate the contract and to forfeit all moneys paid until then without giving any other previous intimation.'
13. It is, therefore, obvious that if purchasers has failed to make payment as provided in the agreement, the assessee could have put an end to the contract of sale and forfeited moneys which he had received. Now, what was the nature and character of the possession of the property which was handed over to the purchasers on January 30, 1964, is made clear by clause (4) of the agreement which completely destroys the assessee, s case that it was in part performance of the agreement that the purchasers were put in possession of the property. Relevant portion of Clause (4) reads thus :
'the vendors shall put the purchasers in vacant possession of the entire property with all the structures thereon by way of leave and licence only.....'
14. These terms make it clear that possession of the purchasers on and from Janunary 30, 1964, was as licensee and in no there capacity. Licence of the purchasers could have been terminated at any time and the assessee could have entered into possession of the property. Clause (11) of the agreement amongst other things provides for rescission of the contract by the purchasers and says that in case the purchasers receive any notice of acquisition or requisition, the purchasers would be entitled to rescind the agreement and the vendor (the assessee) would return the earnest money without interest. Clause (11) read with clause (5) of the agreement makes it clear that title was to pass onto the purchase only on pay have been completed without exaction of a registered 'sal deed' or 'sale deeds'. Clause (16) of the agreement provides that in the event of the property being damaged by fire or other accident before the completion of the sale, the purchasers would be at liberty to cancel the agreement and, in that event, the earnest money would be returned to the purchasers without interest. These terms also leave no room for doubt that the assessee continued to be the owner of the property in question. We, therefore, find ourselves unable to agree with the argument that the only right which the assessee has on the relevant valuation dates was to receive the unpaid sale price. The relevant provisions of law and the relevant clauses of the agreement for sale cannot but lead to only one conclusion that the assessee was the owner of the property named Jay Mahal Palace on the relevant valuation dates and he was, therefore, liable to include its value in his net welath returned for each of the assessment years under reference.
15. It is significant to note that the assessee has shown capital gains arising out of the aforesaid sale transaction in Part IV of his returns of income for the assessment years 1971-72 and 1973-74. Capital gains arising out of the three transactions already referred to above were shown in the assessment year 1971-72 and the capital gains arising from the fourth claimed that the capital gains were not taxable and, therefore, showed them in Part IV of his return as stated above. However, what is material to note is that even according to the assessee capital gains, if taxable, were taxable in the assessment years 1971-72 and 1973-74. Capital gains could have arisen only on transfer of the property. Therefore, even according to the assessee, no transfer took place prior to the assessment year 1971-72. We have referred to this aspect incidentally to point out what stand the assessee has taken in his income-tax assessment. Whether or not the assessee admits, there is no doubt that no transfer of property took place before the execution of the first deed of conveyance which was executed on November 20, 1970. The decision f the Supreme Court in R. B. Jodha Mal Kuthiala v. CIT : [1971]82ITR570(SC) and the decision of the Allabhabd High Court in Addl. CIT v. U. P. State Agro Industrial Corporation Ltd. : [1981]127ITR97(All) , on which reliance was placed by the learned counsel for the assesses, were rendered in a different context and, therefore, we do not consider it necessary to deal with them. In the instant case, having regard to the clear legal and factual position, no other view is possible. The Tribunal was, therefore, right in holding to the effect that value of the property named Jay Mahal Place was liable to be included in the net welath of the assessee for the years under reference.
16. This takes us to the property known as Makarpura Place, situate at Baroda. By an order dated April 2, 1964, Maklapura Plac was requisitioned under s. 29(1) of the Defence of Indai Act, 1962, read with r. 3 of the Defence of India (Requisitioning and Acquisition of Immovable property) Rules, 1962. It was stated before us that possession of part of this property was handed over to the Union Government on December 7, 1963, even before the order requisitioning the property was passed. Possession of the rest of the property has handed over to the Union Government on april 7, 1964. Proceedings for acquisition of the property were initiated but before they were completed, an agreement dated August 24, 1964, was reached between the assessee and the Union Government under which the assessee agreed to sell the property to the Union Government. The assessee received compensation of Rs. 8,00,000 on August 27, 1964. It appears that the parties were not able to agree upon the sale price and the matter was referred to Mr. Justice K. T. Desai, a retired Chief Justice of this court, to settle the sale price. Mr. justice K. T. Desai made an award on Jaunary 13, 1966, fixing the sale price at Rs. 16,85,615. The sale deed was executed on April 21, 1966. Compensations of Rs. 8,00,000 received by the assessee as stated above wa adjusted towards the sale price of Rs. 16,85615. The balance of the sale price of Rs. 8,85,615 was paid to the assessee on April 25,1966. Thus, the entire consideration of Rs. 16,85,615 was paid to the assessee by April 25, 1966. It may be recalled that the relevant valuation date for the last assessment year under reference, i.e., 1966-67, is March 31, 1966. Therefore, admittedly, the sale deed in respect of Makapura Place was executed after the last valuation date. The agreement dated August 24, 1964, under which the assessee agreed to sell Makapura Place to the Union Government is not on record. Therefore, we do not know what were the terms of that agreement. However, as in the case of Jay Mahal Palace, the property in Makarpura Palace did not pass to the Union Government before the execution of the sale deed which was executed on april 21, 1966. the agreement for sale coupled with handing over possession of the property would not confer any title on the Union Government, nor did it divest the assessee of his legal title. Therefore, as in the case of Jay Mahal Palace, Makarpura Palace property continued to be of the ownership of the assessee on the relevant valuation dates. The Tribunal was, therefore, right in holding that the valuation of the property known as makarpura Palace wa liable to be included in the net welath of the assessee for the assessment years under reference.
17. In the light of the above discussion, question Nos. 2 and 3 referred to us at the instance of the assessee are answered in the affirmative and against the assessee.
18. Reference answered accordingly with no order as to costs.
19. The learned counsel for the assessee makes an oral application to grant certificate of fitness under s. 29(1) of the Act for appeal to the Supreme Court. In our opinion, this is not a case which is fit for appeal to the Supreme Court. We, therefore, reject the oral application made by the learned counsel.