IT: Date of agreement to sell cannot be treated as date of transfer of immovable property, it should be date on which delivery of possession is given and entire sale consideration is received
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[2013] 35 taxmann.com 46 (Punjab & Haryana)
HIGH COURT OF PUNJAB AND HARYANA
Smt. Shail Moti Lal
v.
Commissioner of Income-tax, Chandigarh*
HEMANT GUPTA AND MS. RITU BAHRI, JJ.
IT APPEAL NOS. 153 AND 154 OF 2012†
JANUARY 29, 2013
Section 54, read with section 2(47), of the Income-tax Act, 1961 - Capital gains - Profit on Sale of Property Used for Residence - Assessment year 2005-06 - Appellant entered into agreement to transfer rights in property 'A' on 27-12-2002 after receipt of earnest money of Rs. 15 lakhs - Sale deed was executed on 24-9-2004 when entire sale consideration of Rs. 1.32 crores as received - Appellant purchased property 'B' on 31-4-2003 and claimed deduction under section 54 - Whether since there was delivery of possession and receipt of entire sale consideration was on date of execution of sale deed on 24-9-2004, it was date of transfer of property A and date of agreement to sell on 27-12-2002 could not be treated as date of transfer of this property - Held, yes - Whether, resultantly, date of purchase of property B being prior to one year of transfer of right in property A, assessee was not entitled to deduction under section 54 - Held, yes [Paras 6 & 7] [In favour of revenue]
FACTS
| ■ | The appellant entered into an agreement to transfer rights in property A on 27-12-2002 after receipt of earnest money of Rs. 15 lakhs. In pursuant to the said agreement, the sale deed was executed on 24-9-2004 when the entire sale consideration amounting to Rs. 1.32 crores was received. | |
| ■ | The appellant purchased another property 'B' via sale deed dated 31-4-2003 and claimed deduction under section 54 from the levy of capital gain in respect of sale consideration received from the transfer of property 'A'. | |
| ■ | The Tribunal held that the appellant was not entitled to deduction under section 54 as the property was purchased on 30-4-2003, i.e., before one year of transfer of right in property 'A' on 24-9-2004. | |
| ■ | On Appeal: |
HELD
| ■ | The basic question is: as on what day, the assessee has transferred rights in property. The appellant has received only Rs. 15 lacs as the amount of earnest money out of total sale consideration of Rs. 1.32 crores. The balance payment was received only on 24-9-2004. A finding of fact has been recorded by the Tribunal that there was no delivery of possession prior to 24-9-2004 nor the entire sale consideration received prior to execution of the sale deed. [Para 6] | |
| ■ | In view of the said fact, the date of agreement to sell cannot be treated as date of transfer of immovable property. Even in terms of section 54 of Transfer of Property Act, 1882, an agreement to sell does not create any interest in the immovable property. With the execution of the agreement, it cannot be said that the appellant transferred any right in favour of the purchaser. [Para 7] |
Akshay Bhan for the Appellant. Ms. Urvashi Dhugga for the Respondent.
ORDER
Hemant Gupta, J. - This order will dispose of two appeals bearing I.T.A. No.153 of 2012 and I.T.A. No.154 of 2012. For the sake of convenience, the facts are being taken from I.T.A. No.153 of 2012.
2. The present appeal under Section 260-A of the Income Tax Act, 1961 (for short `the Act') arises out of an order passed by the Income Tax Appellate Tribunal, Chandigarh Bench `B', Chandigarh (for short 'the Tribunal') on 20.01.2012 pertaining to assessment year 2005-2006 holding that the appellant is not liable to deduction under Section 54 of the Act. The assessee has claimed that the following substantial questions of law arise for consideration by this Court:
| "(i) | Whether in facts and circumstances of the case, the action of the ld. authorities below in denying the deduction u/s 54 of the Act by ignoring the fact that it is date of transfer which is to be considered and not the date of registration of the sale deed for computing the time period for the purposes of allowability of deduction u/s 54 of the Act is legally unsustainable in the eyes of law? | |
| (ii) | Whether in fact and circumstances of the case, the action of the authorities below in acting on its own presumptions and ignoring the law laid down with respect to the date of registration being insignificant for the purposes of computation of capital gains and section 54 of the Act is legally unsustainable in the eyes of law? | |
| (iii) | Whether in facts and circumstances of the case, the action of the ld. Courts below in denying deduction on account of amount spent on construction of new asset despite the fact that the details of the payments made to various persons has been made available on record and by ignoring substantial documented evidence placed on record is legally unsustainable in the eyes of law? | |
| (iv) | Whether in fact and circumstances of the case, the action of the authorities below erred in ignoring the requirement of law that the assessee is required to construct a new house and not that the assessee should utilize the amount which he obtained by way of sale consideration for the purpose of meeting the cost of the new asset and is therefore legally unsustainable in the eyes of law? | |
| (v) | Whether in fact and circumstances of the case, the action of the authorities below, the impugned orders Annexure A-1 to A-3 are legally sustainable in the eyes of law?" |
3. The appellant entered into an agreement to transfer rights in property bearing House No.267, Sector 9-C, Chandigarh on 27.12.2002 after receipt of earnest money of Rs.15 lacs. In pursuance of the said agreement, the sale deed was executed on 24.09.2004 when the entire sale consideration amounting to Rs.1.32 crores was received.
4. The appellant purchased another property bearing House No.528, Sector 8, Chandigarh vide sale deed dated 31.04.2003 and claimed deduction from the levy of capital gain in respect of sale consideration received from the transfer of property in Sector 9, Chandigarh. The learned Tribunal held that the appellant is not entitled to deduction as the property was purchased on 30.04.2003 i.e. Before one year of transfer of right in the immovable property on 24.09.2004.
5. Learned counsel for the appellant relies upon Section 2(47) of the Act to contend that the transfer is effected when the possession of property is taken or retained in part performance of the contract. Therefore, the appellant is entitled to deduction from the capital gains as the appellant has transferred the property on the date of agreement i.e. 27.12.2012.
6. The basic question is; as on what day, the assesee has transferred rights in property. The appellant has received only Rs.15 lacs as the amount of earnest money out of total sale consideration of Rs.1.32 lacs. The balance payment was received only on 24.09.2004. A finding of fact has been recorded by the Tribunal that there was no delivery of possession prior to 24.09.2004 nor the entire sale consideration received prior to execution of the sale deed.
7. In view of the said fact, the date of agreement to sell cannot be treated as date of transfer of immovable property. Even in terms of Section 54 of Transfer of Property Act, 1882, an agreement to sell does not create any interest in the immovable property. With the execution of the agreement, it cannot be said that the appellant transferred any right in favour of the purchaser.
8. Consequently, we do not find that any substantial question of law arises in the present appeal.
Dismissed.
SBRegards
Prarthana Jalan
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