ITA No. 188/Chd/2013, (Assessment Year: 2008-09). Case: Raj Partap Singh Vs I.T.O.. ITAT (Income Tax Appellate Tribunal)
| Case Number | ITA No. 188/Chd/2013, (Assessment Year: 2008-09) |
| Counsel | For Appellant: Shri Tej Mohan Singh and For Respondents: Shri J.S. Nagar |
| Judges | T.R. Sood, Member (A) and Sushma Chowla, Member (J) |
| Issue | Companies Act, 1956 - Section 205; Constitution of India - Article 286; Income Tax Act, 1961 - Sections 115J, 2(22)(e), 2(47), 2(47)(iii), 2(47)(v), 22, 23, 23(1)(a), 23(1)(c), 234A, 234B, 234C, 264, 269UA, 269UA(d), 27, 44AD, 45, 48, 54, 54B, 54D, 54E, 54EA, 54EB, 54EC, 54F, 54G, 54H; Indian Easements Act, 1882 - Section 52; Transfer of ... |
| Judgement Date | September 06, 2013 |
| Court | ITAT (Income Tax Appellate Tribunal) |
Order:
T.R. Sood, Member (A), (ITAT Chandigarh 'A' Bench)
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This appeal is directed against the order dated 20.10.2011 of the ld. CIT(A)-II, Ludhiana. In this appeal various grounds have been taken but at the time of hearing the ld. counsel of the assessee submitted that only following disputes are involved:
(i) Reopening of assessment
(ii) Charging of capital gain tax
(iii) Deduction u/s. 54/54F
(iv) charging of interest u/s. 234A, 234B and 234C of IT Act.
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Issue No. 1,2 & 3 regarding reopening of assessment was not pressed before us, therefore, the same is dismissed.
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Second issue from ground No. 4 to 11 is regarding charging of capita gain.
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After hearing both the parties we find that the assessee is a Member of The Defence Services Coop House Building Society Ltd. The Society has transferred the land through Joint Development Agreement to Tata Housing Ltd./Hash Builders. The assessee was holding a plot measuring 500 sq.yd. for which the assessee was entitled to monetary consideration of Rs. 80 lakhs and one furnished flats measuring 2250 sq.ft. which has been valued at Rs. 4500 per sq.ft. Whole of the consideration amounting to Rs. 1,81,25,000/- has been subjected to charge of capital gain by the Assessing Officer and confirmed by the ld. CIT(A).. This issue has been considered by us in detail in case of Shri Charanjit Singh Atwal (supra).
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Both the parties made identical arguments which were made in case of Shri Charanjit Singh Atwal and others in ITAs No. 448/Chd/2011 and others.
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After considering the rival submissions we find that this issue has been decided by us in case of Shri Charanjit Singh Atwal and others in ITAs No. 448/Chd/2011 and others vide para 27 to 110 which are as under:
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We have considered the rival submissions and carefully gone through the written submissions filed by both the parties in the light of material on record, paper books and various judgments cited by the parties. The main issue is whether assessee is liable to capital gain tax in the year under consideration i.e. assessment year 2007-08 in view of the JDA. For charging capital gains, the charging section is 45 and the relevant portion is as under:--
Section 45. [(1)] Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections [54, 54B, [[54D, [54E, [54EA, 54EB,] 54F [54G and 54H], be chargeable to income-tax under the head "Capital gains", and shall be deemed to be the income of the previous year in which the transfer took place.
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The plain reading of the above provision would show that charging an item of income under the head 'Capital gains" require three ingredients i.e. (i) there should be some profit. (ii) Such profit must be arising on account of transfer and (iii) there should be capital asset which has been transferred. There is no dispute that a capital asset was involved and there was some profit also i.e. why assessee has himself returned income under the head 'capital gains;. The dispute is mainly on account of transfer and that too whether the transfer could be covered under clauses (ii), (v) & (vi) of section 2(47) so as to bring into picture the whole of consideration arising on transfer of such assets. We shall deal with each of the aspect in detail at appropriate time.
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Apart from charging provisions u/s. 45 another important provision is section 48 which deals with the mode of computation and relevant portion reads as under:--
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The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely:--
(i) expenditure incurred wholly and exclusively in connection with such transfer;
(ii) the cost of acquisition of the asset and the cost of any improvement thereto:
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Again plain reading would show that capital gain would be computed by considering the full value of consideration whether received or accruing as a result of the transfer. Therefore, it is not only the consideration received which is relevant but the consideration which has accrued is also relevant.
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The expression 'transfer' has been defined u/s. 2(47) of the Act which reads as under:--
2(47) ["transfer", in relation to a capital asset, includes,--
(i) the sale, exchange or relinquishment of the asset; or
(ii) the extinguishment of any rights therein; or (iii) the compulsory acquisition thereof under any law; or
(iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment;] [or]
[(iva) the maturity or redemption of a zero coupon bond; or]
[(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882); or
(vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property.
Explanation.--For the purposes of sub-clauses (v) and (vi), "immovable property" shall have the same meaning as in clause (d) of section 269UA;]
Clauses (v) & (vi) to section 2(47) of the Act have been inserted by Finance Act, 1987 w.e.f. 1.4.1988. The purpose of this insertion has been explained by CBDT in Circular No. 495 dated 22.9.1987. The relevant part 11.1 and 11.2 of the circular reads as under:--
11.1 The existing definition of the word "transfer" in section 2(47) does not include transfer of certain rights accruing to a purchaser, by way of becoming a member or acquiring shares in a co-operative society, company, or as way of any agreement or any arrangement whereby such any building which is either being constructed or which is to be constructed. Transactions of the nature referred to above are not required to be registered under the Registration Act, 1908. Such arrangements confer the privileges of ownership without transfer of title in the building and are a common mode of acquiring flats particularly in multi-storeyed constructions in big cites. The definition also does not cover cases where possession is allowed to be taken or retained in part performance of a contract, of the nature referred to in section 53A of Transfer of Property Act, 1882. New sub-clauses (v) & (vi) have been inserted in section 2(47) to prevent avoidance of capital gains liability by recourse to transfer of rights in the manner referred to above.
11.2 The newly inserted sub-clause (vi) of section 2(47) has brought in to the ambit of transfer", the practice of enjoyment of property rights through what is commonly known as Power of Attorney arrangements. The practice in such cases is adopted normally where transfer of ownership is legally not permitted. A person holding the power of attorney is authorized the powers of owner, including that of making construction. The legal ownership in such cases continues to be with the transferor.
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Before insertion of the clause (v) & (vi) to section 2(47) of the Act, the position of law was that unless and until a sale deed was executed for transfer of immovable property, the same could not be construed as transfer for the purpose of charging capital gain tax. This was particularly so in the light of various judgments particularly the judgment of Hon'ble Apex Court in the case of Alapati Venkatramiah v. CIT 57 ITR 185 (SC). In this case it was held that in the context of transfer for the purpose of capital gain tax, what is meant by transfer is the effective conveyance of the capital asset by a transfer or to the transferee. Delivery of possession and agreement to sell by itself could not constitute conveyance of the immovable property. In the meantime apart from this decision a practice came into vogue by which certain properties were being transferred without executing the proper sale deeds. This was being done because there was restriction on sale of properties in various towns e.g. in case of lease hold plots and flats in Delhi if the same were to be transferred, permission was required to be taken from the Government/DDA and transferor was required to pay 50% of the market value - cost (i.e. unearned increase) to the Government. To avoid such payments and/or also to avoid the payment of stamp duty or cumbersome procedure of obtaining permission, some properties were being sold by way of sale agreement and also execution of General Power Of Attorney and possession was given on receipt of full consideration without executing the proper sale deeds etc. which as mentioned earlier was not even permissible in some cases. These transactions are popularly called "power of attorney" transactions. To avoid these and to stop the leakage of Revenue, the Parliament has inserted clauses (v) & (vi) to section 2(47) so as such type of transactions are also be brought in to taxation net. However, interpretations of these clauses has led to lot of litigation and the main point of litigation was that at what point of time the possession can be said to have been given. In the present case, the Revenue has mainly relied on two decisions namely (i) Chaturbhuj Dwarkadas Kapadia v. CIT 260 ITR 491 (Bom.) and; (ii) Authority for Advance Ruling (AAR) New Delhi in the case of Jasbir Singh Sarkaria 294 ITR 196.
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In the case of Chaturbhuj Dwarkadas Kapadia v. CIT (supra), the facts before the Hon'ble Bombay High Court were that assessee who was an individual had 44/192 undivided share in an immovable property in Greater Bombay which consisted of various lands and buildings. By Agreement dated August 18, 1994, the assessee agreed to sell to Floreat Investment Ltd., (herein ref erred...
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