1. These three appeals are directed to be disposed of by a common order.
2. In the assessee's appeal in ITA No.2950(Del)/1998, the ground raised are as under; 1. 'The on the facts and circumstances of the case, the learned CIT(A), has erred in upholding the action of the AO that transfer in respect of property No.3, Bhagwan Dass Road, New Delhi took place in AY 1986-87 and hence Capital Gain was liable to be taxed in this assessment year'.
2. 'That on the facts and circumstances of the case, the learned CIT(A), has erred in holding that amendment to section2(47) was clause(v) of the said section 2(47) of the IT Act'., 3. 'That on the facts and circumstances of the case, the learned the CIT(A), has erred in holding that market value of land beneath property at 3, Bhagwan Dass Road, New Delhi as on 01.01.1964 at Rs.150/- per sq. yard as against Rs.250/- per sq. yard adopted by the approved valuation officer'.
4. 'That on the facts and circumstances of the case, the learned CIT (A), has erred in allowing market value of property at No.3, Bhagwan Dass road, New Delhi as on 01.01.1964 at Rs.27.59 lacs as against Rs.45 lacs as returned and claimed by the appellant'.
3. The assessee's counsel Shri Pradeep Dinodia through his written submission as well as orally stated before us the facts of his case and made the contentions as under; contained in paragraph 32.34.
"That the assessee company entered into a builders agreement with M/s Aditya Estates Pvt. Ltd., (hereinafter called as Builder) on 09.01.1985 for development of the leasehold property owned by the assessee at 3 Bhagwan Dass Road, New Delhi. The fact in support of builder's agreement is duly borne out from various clauses of the agreement as under; AND WHEREAS the Company is desirous of getting developed and constructed on the said property multi-storeyed building and/or buildings of other types as may be permitted by law and to sell the space or spaces, flat/flats or apartments, terrace or car parking...
AND WHEREAS the builders interested in the development construction and dealings in their property offers their services to the company to develop and construct multi-storeyed building or buildings and other types of units as aforesaid on the said property and also to act as agents of the company for sale or otherwise '"AND WHEREAS the Company is desirous of getting developed and constructed on the said property multistoreyed building and/or buildings of other types as may be permitted by law and to sell the space or spaces, flat or flats, or apartments, terraces, car parking, basement space or spaces to be constructed on the said property or on part thereof.
1(i) That the company hereby irrevocably allows the builders to develop and construct on the said property multi-storeyed building and or building or other types as may be permitted under the law on behalf of the company as and when found convenient or expedient by the Builders.
I(v)(a) The builders shall be solely entitled to for and on behalf of the and in the name of the company apply to all proper authorities as may be concerned, for the requisite permissions, sanctions, clearances, approvals, etc. to demoslish the existing building and/or construct on the said property the multistoreyed building and/or buildings of other types as aforesaid in prescribed by the Delhi Master Plan, Zonal Recommendations, for the time being in force, and that the Company shall promptly and without demur give all such authorizations for making application as aforesaid and that the Company communicates and/or deliver/as the case may be, all correspondence, informations, permissions, sanctions, clearances and approvals, if any received by the Company to the builders forthwith upon receipt of such information of papers, etc. as aforesaid.
II(i) That the company hereby irrevocably appoint the builders as its agent to sell or otherwise dispose off the whole or any part of the proposed construction in bulk or in part and amount so to be realized or received by the Builders shall be retained and appropriated by the Builders without any lien or any other right of the Company.' 4. As per the agreement the consideration for the grant of the rights under the Agreement in favour of the builders was fixed at Rs.1.5 Cr payable as under; 5. The builders defaulted in making payments due on 9.1.1986 & 9.1.1987. These payments were made on 4.9.1987 and 29.9.1987 with delay of 20 and 9 months respectively. This fact is un-controverted and is also mentioned in the Sale Deed executed.
6. The builder was to provide Bank Gurantee for the payments agreed to be made in instalments and in case of non-furnishing of bank guarantee the assessee company was to have lien and other rights on the said property. Relevant clauses are reproduces as under; III (ii) The Builders may furnish bank gurantee for the payments agreed to be made in instalments as aforesaid and on every payment of the instalment the company will deliver the Bank Guarantee duly discharged to the builders.' (ii) In view of the part payment being made and balance payment if secured by the company by furnishing bank guarantee by the builders, the Company shall have no lien or any other rights on the said property and or building to be constructed thereon or on any part thereof for the consideration partly paid by the builders as aforesaid and that the Builders would always be entitled to receive all rents, issues and profits of the said property as also hereinbefore stated. However, wherever payments of the consideration mentioned in clause (i) above remains outstanding the lien in respect of the amount so outstanding shall remain with the company." 7. The builders paid Rs.15 lacs i.e. only 10% of the agreed amount at the time of execution of agreement. They did not provide any Bank Guarantee and has also defaulted in timely payment of the first two instalments as stated above. They have, thus, not completed their part of the obligations as provided in the agreement.
- The property in question was under the possession of the five tenants who have been occupying the property for the last 30-40 years. The builders is not a tenant nor occupying the property before the date of agreement. NO physical possession was given to the builders as the property was fully tenanted. Till date, no development work of the property has started in view of the litigation etc., going on with the tenants etc., - Power of attorney was provided to the builders to carry out the work of the development, construction etc., as provided in the agreement - The assessee company has shown the amounts received from the builders as a liability in its books of accounts till the year 1993, when the sale deed was executed pursuant to the direction of the Hon'ble Delhi High Court. Books of accounts have duly been accepted all through and the Income-tax assessments for all these years have been completed u/s 143(3) of the IT Act. The status of the amount shown as a liability in accounts of the different years are; 8. Income-tax Department has taxed the rental income, as owner of the property, in respect of the property 3, Bhagwan Dass Road, New "Delhi in the hands of the assessee for the AY 1986-87 (for full year) i.e.
the year in which the agreement was entered into and also in the subsequent assessment year 1987-88. Copies of relevant assessment orders are at Pages 73 to 79 and 80 to 85 of the Paper Book for the two years respectively. These assessments have been completed u/s 143(3) of the IT Act after examining all the facts.
9. Further the AO has assessed to Wealth-tax, as owner of the property and levied wealth tax in respect of this property for the AY 1986-87 i.e. the year of agreement and also for the subsequent AY 1987-88. In the assessments framed he has discussed in detail the Builder's Agreement entered into with M/s Aditya Estates Pvt. Ltd., and has levied the wealth tax working out the value of this property at Rs.97.82 lacs and Rs. 107.33 lacs for the two years respectively based on present net value (NPV) of the consideration of Rs.1.5 Cr. Copies of the assessment orders for the two years are on Page 86 to 92 and 93 to 97 of the paper book.
10. The assessee company has filed a Scheme of Arrangement u/s 391/394 of the Companies Act in the year 1990 in the Hon'ble Delhi High Court.
In the meeting of the Creditor held pursuant to the direction of the Hon'ble Delhi High Court, M/s. Aditya Estates Pvt. Ltd., the builders in their capacity as a creditor, raised objections as to the Scheme of Arrangement. The Hon'ble Delhi High Court vide its orders dated 2.11.1992 read with orders dated 6.5.1993, 26.5.1993 and 30.7.1993 directed the assessee to execute the Sale Deed and also give Power of Attorney to a person appointed by the Court. Copies of the the orders of the Hon'ble Delhi High Court are on Pages 35.36 and 45 to 47 of the Paper Book.
11. The property in question is a leasehold property and as per the terms of the lease, property cannot be transferred without seeking the permission of the lessor i.e. L&DO and payment of unearned increase.
12. The Income-tax Department initiated acquisition proceedings u/s 269AB of the IT Act, which were dropped in March 1999. Further no objection u/s 269UL of the IT Act was issued to the assessee on 20.02.1989 (See Sale Deed at Pages 51 of the Paper Book) 13. The Income-tax Department issued certificate in Form No.34A as per the provisions of sec.230A of the IT Act only on 9.10.1992 (See Deed at Pages 52 of the Paper Book) In the assessment framed the AO took the view that the transaction is covered under clauses (ii) (i.e. extinguishment of the right) to sec. 2 (47) besides also under (v) which was held by him as clarificatory and retorspective in nature. clause (v) had been inserted vide Finance Act 1987 w.e.f. 1.4.1988 15. The above action of the AO was challenged by the assessee before the learned CIT(A), who has confirmed the action of the AO by holding that the transaction attract clause (v) to Sec.2(47) and which he has held as retrospective in application (para 2.9 of the order) which reads as under; 'In the circumstances it is clear that it was a transaction which was covered by the clause (v) of sec.2(47) of the IT Act 1961. The only question now to be decided is whether this clause which was introduced in the Income-tax Act with effect from 1.4.1988 as a retrospective effect or not".
The action of the CIT(A), in not treating the transaction covered under clause (ii) has been accepted by the Department and not disputed before the Hon'ble ITAT as no appeal has been filed by the Department against the order of the learned CIT(A), on this issue.
17. Now the only issue before the Hon'ble Bench of the ITAT is the exigibility of capital gain tax in the light of 'transfer' having been effectuated under clause (v) to sec. 2 (47) of the IT Act. In this regard, we have to submit as under; With regard to the applicability of Sec. 2 (47) of the IT Act, as applied by the learned CIT(A), in the case of the assessee, it is submitted that clause (v) has been inserted in section2(47) vide Finance Act No.1987 w.e.f. 1.4.1988. The clause reads as under; 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 sec.53A of the Transfer of Property Act, 1982(4 of 19882).
18. As per section 2(47) of the IT Act as existed at the relevant time, the settled law by various decisions of the Supreme Court was that sale of an immovable property is complete only on execution and registration of the sale deed. A few of the cases relied upon by the assessee are given hereunder in the case of assessee, in the year under appeal, no sale deed was executed much less than the registration and as such no transfer has taken place making the assessee liable to capital gain tax in the AY 1986-87.
" The assessee who owned certain lands and the buildings, plant & machinery thereof, and carried on the manufacture of titles and bricks, entered into an agreement on March 17, 1948, with one V to sell those assets including the stock and goodwill of the business for a sum of Rs.2 lacs to to a company. Option was reserved for the company to adopt the agreement. ON March 17, 1948, the assessee handed over the possession of the land and buildings and machinery to the company. On March 20, 1948 the company credited the sum of Rs.2 lacs in its accounts in favour of the assessee and the assessee also made appropriate entries in his owned account books. The Sale Deed in respect of the land was executed in favour of the Company on Now. 22, 1948. The Agreement was approved by the Board of Directors of the Company only on March 16, 1949, and by the shareholders of the company at a general meeting on April 10, 1949. The question was whether capital gains arose from the sale in the previous year ending March 31, 1948, relevant to the AY 1948-49.
Held, (i) that before sec. 12-B of the Indian Income-tax Act, 1922, could be attracted, little must passed by any of the most mentioned in sec. 12B, i.e. sale, exchange or transfer. In the contract 'transfer' meant effective conveyance of the capital asset to the transferee. Delivery of possession of immovable property could not by itself be treated as equivalent to conveyance of the immovable property.
(ii) That the entries in the accounts books of the assessee and of the company on March, 20, 1948 were irrelevant for the purpose of determining the date when the sale or transfer took place.
(iii) that title to the land & buildings and the plant & machinery and electrical fittings permanently embedded thereon could not pass to the company till the conveyance was executed and registered and as the sale deed was executed and registered only on Nov.22, 1948, no sale or transfer of these assets took place before April 1, 1948 and no capital gains arose in the relevant previous year.'Addl. CIT v. Mercury General Corporation Pvt. Ltd., (133 ITR 525). AA building consisting of 12 units, all in the possession of tenants was purchased by the assessee company in 1963. In May and June, 1976, the assessee agreed with some its shareholders who had credit balance top sell to them 9 of the units. The Agreement provided that the sale deed would be registered before Dec.31, 1967, and also recited that possession of the respective units was being given over to the intending purchasers and that they were to be entitled to realize rent from the tenants from July 1, 1967. The accounts of the shareholders were debited with the amounts of the consideration. No regular sale deeds were executed and the Tribunal found that there was no question of actual delivery since the units were occupied by the tenants and the assessee itself was not in possession and that there was no constructive delivery of the possession since the tenant had not attorned to the intending purchasers; and held that there was no relinquishment of extinguishment of the right in the property by the assessee within the meaning of sec.2(47) of the IT Act, 1961, and no capital gains arose during the previous year ended June 30, 1968, relevant to the AY 1969-70. On a reference; Held, affirming the decision of the Tribunal (i) that no sale was affected during the previous year because there could be no sale without a duly registered document.
19. The above prove beyond doubt that agreement entered into with M/s Aditya Estates Pvt. Ltd., was for development/construction of the property for and on behalf of the assessee. The assessee was to execute the sale deed in favour of the builders/nominees after receipt of various permissions and builders comply with the terms and conditions of the agreement and obtaining various permissions including under the Urban Ceiling Act.
20. Thus keeping in view the facts of the case and the law as existed at the relevant time, no transfer of immovable property within the meaning of sec.2(47) of the IT Act, as existed at the relevant time has taken place during the previous year in Dec.31, 1985 relevant for the AY 1986-87. The sale deed has ben executed pursuant to the directions of the Hon'ble Delhi High Court on 25.5.1993 and the assessee company has duly offered capital gain tax in the previous year ended March 1994 relevant for AY 1994-95. The capital gain has also duly been assessed for the AY 1994-95 by the AO vide order dated 17.3.1997.
21. It may please be appreciated that clause v to section 2 (47) of the IT Act cover transactions to which, provision of sec.53A of the Transfer of Property Act(TPA) are applicable and sec.53A of TPA provide shield against dispossession of the transferee by the transferor. If the transferee does not fulfill his part of obligation, provision of sec.53A cannot be applied because it's a trite law that one cannot take benefit of one's own fault. Without prejudice to the contention that this provisions of sec.2(47) of the IT Act has been made effective from 1.4.1988, much after the execution of the impugned agreement and as such not applicable to the transaction, it is submitted that even otherwise provisions of sec.53A of the TPA are not applicable on the facts and circumstances of our case. The builder has defaulted in all respect and not completed any part of its obligations as per the agreement which is one of the condition to apply sec.53A. The defaults committed are: (iii) Non obtaining various relevant statutory permissions to effectuate transfer.
22. In this regard attention is invited to page 20 internal page 3, item 1 (ii) of the Paper Book, which reads as under; 'That the builders for and on behalf of the company undertake to obtain all requisite permissions, clearances and approval from all concerned authorities including New Delhi Municipal Committee (NDMC), Urban Land (Ceiling & Regulation) Act 1976 (ULCR), Delhi Administration, Delhi Urban Act commission, Land & Development Office (L&DO), Government of India etc., for demolition of the existing building and or construction of multistoreyed buildings and or other dwelling or other type of units on the said property." 23. It has not been shown by the Revenue and it is a matter of record that the builders has not fulfilled any part of his obligation and obtained no permission from the NDMC, Urban Land Ceiling Act 1976, Delhi Administration, Delhi Urban Art Commission, Land & Development Officer, Government of India. Even the permission as required under the Income-tax Act including under the acquisition proceedings having been obtained much later as mentioned in preceding paragraphs i.e. on 20th of February 1989 and u/s 230A of the IT Act in Form 34A on 9th October 1992. In the wake of this it is clear that as the transferor is concerned, he has completed all his obligations as per the contract.
But as far as the transferee is concerned he has not completed any part of the obligations cast upon him by the agreement. Therefore, the transferee is not entitled to protection available to him u/s 53A of the Transfer of Property Act.
24. As held in the judgments of Bombay High Court/Bombay Tribunal in the case of Zuari Estate Dev. & Investment Co., Pvt. Ltd. v. DCIT and J.C. Malhotra (HUF) v. DCIT (2002) 83 ITR 296 (Mum.) Following three conditions to be fulfilled before the provisions of 53A can be invoked.
These are; (2) The transferee in part performance of the contract taken possession of the property or any part thereof.
(3) The transferee has performed or is willing to perform his part of the contract. Section 53A as per the Transfer of Property Act is reproduced as under; "Part performance 53A, where any person contracts to transfer for consideration any immovable property by writing singned 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 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." Mullah on the Transfer of Property Act on page 281 has clarified the positions with regard to the 3rd condition wherein he has stated; -(16) Has performed or is willing to perform - The section confers no rights on a party who was not willing to perform his part of the contract. A prospective vendee who had taken possession could not resist dispossession, if he were not willing to pay the price agreed upon (t) - So also a person who falsely pleads that he has paid the full consideration for the transfer, and is found not to have paid a part of the consideration is not entitled to the benefits of the section(u), It is, however, not necessary that the willingness to perform the terms must be expressly pleaded in the pleadings(v).
- In judging willingness to perform the court must consider the obligations of the parties and the sequence in which they were to be performed. So a buyer could not be said to be not willing if he was to pay the balance of the purchase money after the revenue records were rectified and did not do so because they were not rectified (w).
- This is also the position in English Law, based on the maxim, "He who seeks equity must do equity.' So, where a person in possession under an agreement to lease, has failed to perform a condition precedent to the agreement, he was not allowed to raise the equity of Walsh V Lonsdale (x).
25. From the above, it is clear that this case, as the transferee has not performed during this financial year any part of the obligations case upon him under the agreement, he cannot be afforded the protection of sec.53A of the Transfer of Property Act. The Revenue has not before the Hon'ble Bench stated any facts contrary to the aforesaid accepted position on record. The second condition has also not been fulfilled as the property was already in possession of the tenants and the entire income from the tenants received or receivable on notional basis has been taxed in the company's hands not only for the entire previous year relevant to assessment year 1986-87 but also in the subsequent year. No physical possession was given to the builder either as a consequence of this agreement nor was he in possession prior to this agreement.
Therefore, the second condition of sec. 53A also does not stand fulfilled. It is, therefore, submitted that even if for the sake of argument, the amendment to sec.2(47) sub-section (v) is taken as retrospective, which it is not, even then as the case is not covered u/s 53A of the Transfer of Properties Act, transfer cannot be deemed to have taken place in the relevant year i.e. the assessment year under appeal.
26. The Delhi High Court in the case of Reliance international Coprn.
211 ITR 666 (Del) has also reiterated this purpose and has laid down two things: 27. Firstly, sec.53A of the Transfer of Property Act confers no title on the transferee in possession but is a defence against his eviction and reproduced therefrom;- "Section 53A of the Transfer of Property Act, 1882, deals with the doctrine of part performance. That section does not confer any title on the transferee in possession but merely imposes a statutory bar on the transferor. The doctrine of part performance is a defence. It is a shield and not a sword. It is a right to protect the transferee's possession against any challenge to it by the transferor contrary to the terms of the contract." 28. Secondly, this amendment to sec 2(47) is prospective and not retrospective for two reasons: (a) This is an amendment to substantive law, and (b) this is amendment in deeming provision and not to normal provisions and we reproduce relevant part hereunder;- "(ii) that the amendment of 1988 introducing sub-clause (v) in the definition of 'transfer'' in section (47) of the IT Act was prospective and applied to the assessment year 1988-89 and subsequent years, and no question regarding part performance by allowing possession to be retained could arise from the order of the Tribunal; and without sub-clause(v) the agreement to sell to the tenant in possession was not a 'transfer' within the meaning of the unamended section 2(47)." 29. We submit that this being the position stated by the Hon'ble jurisdictional High Court, the application of judgment of any other High Court is really of no consequence and the jurisdictional High Court's judgment has to be preferred over any judgment or any other High Court before your honour.
30. Kind attention is also invited to the Bombay ITAT judgment in the case of J.C. Malhotra (HUF) v. ACIT (2002) 83 ITYD 296. The Hon'ble ITAT after discussing the Supreme Court decisions in the case of Poddar Cement and Mysore Minerals has held that the amendment to section 2(47) of the IT Act (v) is prospective. The Hon'ble ITAT in para 12 of the order has held: "Therefore, its eventuality cannot be governed by clause (v) of sec.2 (47) which was introduced subsequent to this event i.e. w.e.f.
1.4.1988.
Under these circumstances, the transaction has to be governed by the general meaning of the word 'transfer' which is very much there in the statute book.' In any case, we submit that judgment of 250 ITR 542 (Guj.) in CIT v. Mormasji Mancharji Vaid cited by the Revenue on this point of law is different. On page 543, the question has been set up which is reproduced here under, "The question before the court was, whether the transfer in question was, whether the transfer in question was effected in the accounting year (Samvat year 2029) relevant to the assessment 1974-75 i.e. on October 13, 1973, when the document in question was executed or the transfer in question was effected in the accounting year (Samvat year 2030) relevant to the assessment year 1975-76 i.e. the year in which the document was presented for registration on January 5, 1974, or the registration of the document was completed on March 2, 1974. The court also raised a question whether the date of presenting the document for registration is the decisive date or whether the date of completion of registration of the document is the crucial date for the purpose of holding as to when the transfer of immovable property can be said to have taken place." "under the circumstances, our answer would be that transfer of immovable property of the value exceeding Rs.100 can be said to have been effected on the date of execution of the document." 31. Therefore, the question before the Hon'ble Gujarat High Court was quite different than the question before the Hon'ble Tribunal.
Secondly, even on the second issue while discussing clause (v) and (vi) of section 2 (47) on page 560, the Gujarat Full Bench held: "Until the deed of conveyance transferring the rights in property is executed, the transferee is not liable tough he did everything which is required for acquiring a property. As pointed out, the vendor is not permitted in law to dispossess or question the title of the vendee." 32. Your honour would be pleased to find that here again it is only the question of affording protection to the transferee who is already in possession and has done everything, which he is required to do for acquiring the property. In our case, these two elements are completely missing. The transferee is not in possession and has not fulfilled any part of his obligations as per the agreement. Therefore, the protection u/s 53A cannot be afforded to him. Therefore,e on facts this judgment also has no application in the matter before your honour.
33. We, therefore, submit that the appeal of the assessee for assessment year 1986-87 be accepted and it may please be held that no transfer within the meaning of Income-tax act took place during this year and the company was not liable for any tax at all. In view of the said submissions, no submissions are being submitted on the question of valuation of property as on 1.1.1964.
34. Thus, the transactions does not fall u/s 53A of the Transfer of Property Act and as such even the amended provisions of sec.2(47)(v) of the Act are not applicable.
35. The Ld. Departmental Representative strongly relying on the orders of the authorities below and opposing the contentions raised by the Ld counsel for the assessee vehemently argued that through the agreement dated 9.1.1985 the assessee transferred the ownership of the entire property to M/s Aditya estates (P) Ltd. Quotations from the deed have been cleverly extracted to obfuscate the real intent and purpose of the deed which is actually transfer of the entire property in question while the sale deed remained a mere formality. In the impugned order in appeal before Tribunal in ITA No. 2950/Del/98 the Ld CIT(A) at para 2.4. of his order noticed the finding reached by Ld Assessing Officer that the purchaser of the property got all the rights to the property and although it was camouflaged as agreement, it was in fact a sale. He also brought out the implications of clause (xi) which said that the purchaser would remain in full possession and control of the property and that the appellant would not interfere with or dispossess or object to use of the said property by the purchaser in any manner whatsoever.
The Assessing Officer was of the view that the appellant's valuable rights in the said property had extinguished and thus there was a transfer within the meaning of sub clause (ii) of section 2(47) of the Act and since possession also was transferred to the purchaser, there was a transfer which by insertion of such clause (v) of section 2 (47) dealing with part performance of the contract under section 53 A of Transfer of Property Act w.e.f. 1.4. 1988 only puts the matter beyond doubt. The Ld CIT (A) however being of the view that a definitive judgment of the Supreme Court on the issue of retrospective effect of the amendment to Income Tax Act on the point of ownership with regard to registration or its absence has now been available in the case of Poddar Cement Pvt. Ltd & Others 226 ITR 625 and held that amendment to section 2(47) is retrospective.
36. It was further pointed out that the Ld CIT(A) reached a finding that in the present case the appellant has not only agreed to sell the property, it has not only transferred possession of the property to the transferee, but it has also given an irrevocable power of attorney to the transferee to deal with or dispose of the property in any manner whatsoever. As for as the appellant was concerned, it had divested itself of all the rights in the property in return for the right to receive the sale proceeds. It also had given away irrevocably its right to reenter the property in any situation whatsoever. The Ld CIT(A) therefore reached a conclusion that the transfer was complete in the previous year relevant to assessment year 1986-87 and capital gain chargeable to tax under section 45 accrued to the appellant. Further it was contended that the appellant vendor was not able to question the rights of the vendee and as such transfer in so far as the present case is considered has become final qua the appellant. Reference was made to the full Bench decision of Gujarat High Court in the case of CIT v.Mormasji Mancharji Vaid 250 ITR (Guj). (FB) 559, 560 37. We have heard the parties with reference to the material on record, written submissions of both the parties and precedents referred. The appellant entered into agreement with M/s Aditya Estates (P) Ltd. on 3.1.1985 in respect of the property situated at 3-Bhagwan Dass Road, New Delhi having an approximate area of leasehold land admeasuring 3.4 acres, together with residential buildings, out houses, staircases, compound walls, trees and other appurtenances thereto described in Annexure A to the agreement. Careful perusal of facts and various terms contained in the agreement, we do not find any justification in the decision to hold that the appellant has not only agreed to sell its property, it has not only transferred possession of the property but it has divested itself of all the rights in the property in return for the right to receive the sale proceeds. There is also no justification to hold that it was camouflaged as agreement but in fact it was a sale. In fact, the appellant being desirous of getting developed and constructed on the said property multi-storeyed building as may be permitted by law and to sell the spaces or flats etc. agreed to execute the sale deed in favour of the builders/nominees after the builders have performed their act or obligations including payment of agreed consideration in terms of the schedule mentioned in the agreement, eviction of tenants, obtaining various permissions including from the lessors and also under the Urban Land Ceiling Act for which acts a power of attorney was also executed in favour of the builders. The builders after paying Rs.15 lacs equivalent to 10% of the agreed consideration did not perform their part of obligation and have defaulted in making the payment as scheduled, did not furnish any bank guarantee, nor did they obtain various relevant statutory permission to effectuate the construction or development of property or the transfer. The authority to receive the rent as their income from the tenants had also not been exercised. The assessee treated the builder merely a creditor in his books of account and in a petition filed under section 391/934 of the Companies act against the appellant, they represented themselves as creditors. The rent in respect of this property from the tenants who were occupying any were in fact in actual possession of the property has been assessed as Income from house property of the appellant for this year as well as for assessment year 1987-88 by treating the appellant as owner in scrutiny assessments of both these years. In the wealth tax assessment also for these two years, the property has been assessed as a wealth of the appellant. If the AO treated the appellant as owner and assessed the rental income as income of appellant from house property, giving of certain rights in the agreement to develop and construct the property by receiving merely the earnest money of 10% in the year under consideration could not by itself be treated as equivalent to conveyance of the immovable property and cannot be treated as a transaction of sale. There could thus be no possession of the property with the builder in the year under consideration and section 53A of Transfer of Property Act shall also have no application under the peculiar facts when the appellant has been treated as owner by the Assessing Officer himself.
38. We have therefore, to see whether the transaction can be termed as transfer within the meaning of section 2 (47) of the Income Tax Act.
Section 2(47) as it stands after the amendment by the Finance Act, 1987 is as follows.
(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 (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, 1883 (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.
Explanation. - For the purposes of sub-clauses (v) and (vi), 'immovable property' shall have the same meaning as in clause (d) of section 269UA." 39. It would be immediately noticed from the above that clause (v) and (vi) were inserted by the Finance Act of 1987 with effect from 1.4.1988. As the agreement is dated 9.1.1985, which falls within the assessment year 1986.87, with which we are concerned, it clearly falls prior to the insertion of above clauses (v) and (vi). The A.O. has held that there was an extinguishment under the said agreement of the assessee's right in the said property and therefore it was a transfer within the meaning of unamended provisions of section 2 (47) of the Act. In the alternate, the A.O. also held that the transfer took place on 9.1.1985 due to the amendment in the section by insertion of clause (v). According to him these amendments are clarificatory in nature and would apply retrospectively. The CIT (Appeals) dealing with these issues actually did not concur with the A.O's view insofar as there was a transfer of property under unamended section 2(47) of the Income Tax Act. He discussed at length the A.O's contention in this matter in para 2.4 of his order.
40. After perusal of the order of the Ld A.O. and the Ld. CIT(Appeals) on this aspect. We are of the view that before amendment to law, the transfer within the meaning of section 2(47) of the Act of an immovable property could only take place by a registered instrument if the value of the property was more than Rs.100. This proposition of law is well settled and needs no further deliberation. We, therefore, uphold the contention of the assessee on this issue that a transfer of immovable property or any rights thereunder could take place by a registered instrument on the date of execution of the sale deed when a transfer of immoveable property takes place, both under the Transfer of Property Act, Indian Registration Act as well as under the Indian Income Tax Act and this view is well settled by the following authorities:-Addl. CIT v. Mercury General Corporation P. Ltd. 133 ITR 525 (Del).
41. The Hon'ble Delhi High Court in 133 ITR 525 have also held that even though full price has been received, possession has been given, yet till the date of registration of the Sale Deed, there is no relinquishment or extinguishment of the right in the property within the meaning of section 2(47) of the Income Tax Act, 1961. The four judgments given by the Sr. D.R. in his comments on the assessee's submissions, i.e. 155 ITR 277 (Kar.), 154 ITR 478 (Del), 170 ITR 566 (Raj) and 117 ITR 849 (Guj.) are on the transfer of property by compulsory acquisition of agricultural land by the State which is actually covered by section 2(47), sub-clause (iii). It is not the case of the Department, nor is borne out by facts that this is a case of compulsory acquisition. Aditya Builders is a private party and it has entered into a contract for purchase of the land and building and paid 10% of the price of the said property in advance, and therefore the law of the land on compulsory acquisition under the Indian Acquisition Act has no bearing on the issue at hand. In compulsory acquisition, for transfer of land, the registration is not envisaged at all the acquisition is by notification by the Government and taking over of possession by payment of compensation. Therefore, all the four cases cited by the Sr. D.R. have no application to the facts of the present case.
42. Now the next issue to be dealt with is whether the amendment to section 2(47) by insertion of clause (v) by the Finance Act of 1987 with effect from 1.4.1988 can be made applicable to the case of the appellant in assessment year 1986-87. The Ld CIT (Appeals) and the Sr.
D.R. have relied upon the judgment of the Supreme Court in the case of Podar Cement Pvt. Ltd. 226 ITR 625. The facts before the Supreme Court were that a multistory building had been built in a building called "Silver Arch" on Nepean Sea Road, Bombay. The builders completed the building and after receiving full payment of the consideration gave possession of the flats to the buyers. After having received possession of the flats and after paying full consideration, these flats were let out to various persons. The Assessing Officer treated the income received from the flats as 'income from other sources' as the assessee was held not the owner of the flats whereas the assessee claimed that he was assessable u/s 22 of the Income Tax Act as he has paid full consideration and was in possession of the property. The Tribunal in these cases held that the income from the flats should be taxed under the head 'income from other sources' and not under the head 'income from house property' u/s 22 of the Act and therefore denied statutory deduction u/s 24 of the Act. The Supreme Court has dealt with the provisions of section 22 which taxed income per se. Income is to be taxed under the various heads under the Income Tax Act. One of the head being 'income from house property' and the residuary head being 'income from other sources'. The Supreme Court was concerned with the classification of the income but liability to tax of such income was not under dispute. The Apex Court is thus found to have held on page 653 as follows: "From the circumstances narrated above and from the Memorandum explaining the Finance Bill, 1987 (see 1987 165 ITR (St.) 161), it is crystal clear that the amendment was intended to supply an obvious omission or to clear up doubts as to the meaning of the word "owner" in section 22 of the Act. We do not think that in the light of the clear exposition of the position of a declaratory/clarificatory Act, it is necessary to multiply the authorities on this point. We, have, therefore, no hesitation to hold that the amendment introduced by the Finance Bill, 1987 no hesitation to hold that the amendment introduced by the Finance Bill, 1987 was declaratory/clarificatory in nature so far as it relates to section 27 (iii) (iiia) and (iiib). Consequently these provisions are retrospective in operation. If so the view taken by the High Courts of Patna, Rajasthan and Calcutta as noticed above, gets added support and consequently the contrary view taken by the Delhi, Bombay and Andhra Pradesh High Courts is not good law." "We are conscious of the settled position that under the common law, "owner" means a person who has got valid title conveyed to him after complying with the requirements of law such as the Transfer of Property Act, Registration Act, etc. But, in the context of section 22 of the Income-tax Act, having regard to the ground realities and further having regard to the object of the Income-tax Act, namely, "To tax the income", we are of the view, "owner" is a person who is entitled to receive income from the property in his own right." "Assuming that there are two possible interpretations on section 22 of the Act, which is akin to a charging section, it is well settled, that the one which is favourable to the assessee has to be preferred. Even on that principle the view taken by the High Courts of Patna, Punjab and Haryana, etc., has to be preferred rather than the contrary view taken by the High Courts of Delhi and Andhra Pradesh." 43. While coming to the conclusion what the Supreme Court did, it took a view under a specific section of the Income Tax Act by holding that the amendment was intended to supply an obvious omission and that the amendment introduced by the Finance Bill 1987 was declaratory or clarificatory in nature in so far as it relates to section 27(iii), (iiia) and (iiib) of the Act. It was also taking a view which was beneficial to the taxpayer as it has reiterated the principle where two possible interpretations are possible, then the one favourable to the assessee has to be take. In the present case in appeal before us we have already reached a finding of fact that the revenue has itself treated the appellant as owner of the property under consideration. The treatment so given to the appellant by the assessing authority is not divorced from the principle laid down by the apex court in the case of Podar Cement Pvt. Ltd. supra and as such the assessment on this issue was not held as erroneous and prejudicial to interest of revenue and stands accepted by the revenue authorities in this year as well as in the subsequent year. The Ld. CIT(A) in the impugned order has himself found from the Memorandum explaining the finance Bill 1987 that the amendment explaining the meaning of the word "owner" in section 22 is clarificatory and has retrospective application and by the same corollary vide para IV of the clarification similar amendment has also been made in section 2(47) of the Act. Therefore, assessee having been held as owner of the property transfer thereof cannot be assumed simultaneously to pay tax from the retrospective date. In fiscal laws, there has to be a certainty of liability. Therefore, this judgment of the Supreme Court relied upon by the CIT (Appeals) and the Sr. D.R.does not advance the case of the Department as far as the transfer of property within meaning of section 2(47) of the act is also concerned.
Shri Pradeep Dinodia, A.R. of the assessee, has also pointed out that we are dealing with the deemed income. Capital gains is not a normal income but a receipt which is a capital receipt normally not liable to tax. It has been brought into the statute by enlarging the definition of 'income' under the Income Tax Act. It has also been canvassed that when an amendment to Act is made to fix a new obligation on the subject, unless the statute clearly states so, retrospectivity cannot be read into a new provision so as to fix the liability to tax on the basis of a particular event which was hitherto not in the statute It is an amendment in substantive provision of the Act and not procedural provision of the Act. In the Podar Cement case, there was no dispute between the Department of the Act. In the Podar Cement Case, there was no dispute between the Department and the assessee that the income received by the assessee was liable to tax. It was merely to tax the income whether under a particular head i.e. 'income from house property' or under the head 'income from other sources'. Therefore, in our humble opinion also and having regard to the peculiar facts of the case at hand retrospectively so held in Podar Cement (P) Ltd. cannot be enlarged to fix a new liability to tax on the appellant, when we also find a principal laid by the Apex Court on such a proposition in the case of Gobind Dass v ITO 103 ITR 123 (SC) wherein aforesaid principal on page 124 reads as under: "It is a well-settled rule of interpretation that unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to taken away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. If the amendment is expressly in language which is fairly capable of either interpretation, it ought to be construed as prospective only." 44. The Sr. D.R. has during the course of hearing and also in his written comments relied upon the judgment of the Gujarat High Court in the case of CIT v. Mormasji Mancharji Vaid 250 ITR 542. On a careful consideration of this judgment we find that the facts before the Hon'ble Gujarat High Court were that a sale deed had been executed on 13th October 1973 whereas it was registered on 2nd of March 1974. On these facts, the question before the court was whether the transfer was effected when the document in question was executed or when the registration of the document was completed. The Gujarat High Court held that the transfer of immovable property can be said to have been effected on the date of execution of the document. Therefore, this judgment does not advance the case of the Revenue when the question before the Gujarat High Court was completely different.
45. In the case cited by the appellant-assessee before the CIT (Appeals) and also reiterated before us. i.e. CIT v. Reliance International Corporation Pvt. Ltd. (1995) 211 ITR 666, the Court of judicature at Delhi took a note that the Central Board of Direct Taxes in its Circular No.495 dated September 22, 1987 since reported in (1987) 168 ITR (St.) 87,92 had also clarified that the said amendment shall come into force with effect from April, 1st, 1988 and will accordingly apply to assessment year 1988-89 and subsequent year by holding that the amendment of 1988 introducing sub-clause (v) in the definition of "transfer" in section 2(47) was prospective and applied to the assessment year 1988-89 and subsequent years, and no question regarding part performance by allowing possession to be retained could arise from the order of the Tribunal; and without sub-clause (v) the agreement to sell to the tenant in possession was not a "transfer" within the meaning of the un-amended section 2(47).
46. Under the peculiar facts and findings and as per the law as it stood in the assessment year 1986-87, there was no 'transfer' within the meaning of section 2(47) of the Income Tax Act and therefore this agreement to sell dated 9.1.1985 did not give rise to capital gains chargeable to tax in assessment year 1986-87. The Ld CIT(A) has also erred in enlarging the scope of applicability of amendment made by the Finance Bill 1987 w.e.f. 1.4.1988 to the assessment year 1986-87 under consideration by treating the transaction as a transfer in that year.
Before we part, we consider it proper to record that the said property stands registered in the name of M/s Aditya Builders by the court order in assessment year 1994-95 and that is the year in which factually and in law also transfer has taken place. The assessee also offered this transaction for tax in assessment year 1994-95 and the capital gains arising on transfer of this property has not escaped assessment. We, therefore, allow the ground raised by the assessee in its appeal by holding that it is not liable for capital gains tax in assessment year 1986-87 on this transaction. We, therefore, delete the addition made by the AO for Rs.1,28,83,073/-.
47. Ground No.2 in assessee's appeal and ground No.1 in revenue's appeal in ITA No. 3224/Del/98 are on question of valuation of the cost of property as on 01.01.1964. As we have already held that the transaction is not liable to tax in the year under consideration, this ground becomes academic in nature and therefore, needs no adjudication.
Accordingly, we dismiss the same in both the appeals.
48. Ground No.2 in revenue's appeal for assessment year 1986-87 against deletion of interest of Rs.2,55,738 on account of non-charging of interest on advances given by it to M/s. Ansal Properties & Industries Ltd. by following earlier year orders for assessment year 1991-92 which have not been accepted by the Department. The Tribunal in ITA Nos.5938 to 5940/Del/95 vide their order dated 18.10.2002, a copy of which has been placed on record by the assessee has upheld the border of Ld CIT(A) by rejecting the revenue's ground. Facts being identical, respectfully following the order of the Tribunal, this ground of appeal is also rejected and the action of the Ld. CIT (Appeals) thus stands confirmed.
49. Ground No.3 relates to deletion of disallowance of Rs.1,57,983, out of interest paid on account of advancing interest free loans to M/s Mohan Ram Associates P. Ltd. by following earlier order for A.Y.1991-92 which has not been accepted by the Department. This ground is also covered in favour of the assessee by the order of the Tribunal in ITA No.7433/Del/92 and 8091/Del/92 relating to assessment year 1989-90 dated 30th June 1998 and accordingly for parity of reasons ground raised by revenue stands rejected.
50. ITA No.5806/Del/97 relates to assessment year 1994-95. Ground No.1 raised by the Department is that on the facts and in the circumstances of the case, the Ld CIT(A) erred both on the facts and in law in directing the A.O. to exclude the capital gains income from A.Y. 94-95 despite the fact that the assessee had himself offered the same as its income for assessment year 1994-95. We have already held in ITA No.2950/Del/98 for assessment year 1986-87 that the transfer took place in financial year 1993-94 relevant to Assessment Year 1994-95 and consequently the same has rightly been included for tax in Assessment.
Year 1994-95. The protective assessment made shall thus become substantive. We, therefore, allow this ground in this appeal.
54. In the result, appeal in ITA No.2950/Del/98 of the assessee is partly allowed, the appeal by the Department in ITA No. 3224/Del/98 is dismissed and appeal by the Department in ITA No.5806/Del/97 stand fully allowed.