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CASE NO.: Appeal (civil)  665-666 of 2008

PETITIONER: AJAY KUMAR SHAH JAGATI

RESPONDENT: COMMNR. OF INCOME TAX

DATE OF JUDGMENT: 24/01/2008

BENCH: S.H. KAPADIA & B. SUDERSHAN REDDY

JUDGMENT: JUDGMENT

O R D E R        

                Leave granted.   

       In these civil appeals we are concerned with the scope of Sec.2(47)(v)  read with Sec.53A of the T.P.Act.         Assessee entered into an agreement to sell 7000 sq.ms. vacant land to  M/s. Kumaon Constructions Ltd., Nainital, for Rs.25.00 lacs.  The  agreement was registered with Sub-Registrar, Nainital, and Rs. 2.00 lacs  were received as advance.

       In the period relevant to Assessment Year 1989-90 assessee claims to  have transferred 24 plots to the nominees of M/s. Kumaon Construction  Ltd. for total consideration of Rs. 15,20,900/- inclusive of Rs. 2.00 lacs as  advance.

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       The Assessing Officer called upon the assessee to show cause why  capital gains should not be assessed with reference to total consideration  of Rs. 25.00 lacs fixed in the agreement for sale.  In his reply assessee  submitted that he has not given possession of the entire area of 7000  sq.ms. of vacant land; that he continues to be in possession of the land  not transferred and therefore Sec. 2(47)(v) was not applicable. The AO did  not agree with the contention of the assessee and accordingly worked out  capital gains liability on the entire consideration of Rs. 25.00 lacs   principally on the ground that major portion of total land has already been  sold and thus a part of contract was performed and accordingly the case  stood covered by Sec. 53A of the T.P. Act.  This view was confirmed by the  CIT (A).

       The assessee then preferred second appeal before the Tribunal which  was allowed by the Tribunal observing that the approach of Revenue was  erroneous.  According to the Tribunal the order of AO was based upon  mis-conception of legal principles.  According to the Tribunal in the period  relevant to the Assessment Year under consideration, assessee had  transferred 24 plots to different persons

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-3- (nominees of M/s. Kumaon Construction Ltd.) for total consideration of  Rs.15,20,900/- and therefore the assessee was not liable to return capital  gains on the sum of Rs.25.00 lacs.  This appears to be the reason given by  the Tribunal for upholding the  contention advanced on behalf of the  assessee.

       Aggrieved by the said decision, the Department carried the matter in  appeal under Sec. 260A to the Uttaranchal High Court which has upheld  the judgment of the Tribunal.  Hence these civil appeals.

       Unfortunately, in the present civil appeals the basic facts are not on the  record. It appears from the agreement dated 25.4.1988 that the assessee  had agreed to sell to M/s. Kumaon Construction Ltd., Nainital, land  admeasuring 7000 sq.ms.. That agreement is subsequently rescinded.   However, between 25.4.1988 and the date of rescisson (22.10.1990) the  plot admeasuring 7000 sq.ms. stood sub-divided.  The sub-divided 24  plots were conveyed by the assessee to the nominees of M/s. Kumaon  Construction Ltd.. None of the saledeeds have been produced by the  assessee before the Department.  In such cases it is very essential to look  into the recitals mentioned in the sale deeds.  

-4-          Briefly, it may be stated that in order that the case would fall under the  extended meaning of the word ‘transfer’, possession is essential element  to be considered.  That is the crux of the matter.

       In the present case no finding qua possession has been recorded by the  Tribunal.  It may also be noted that there is nothing on record to indicate  the name of the applicant who had applied for sub-division. No revenue or  municipal  records have been produced which could have indicated as to  whether the area admeasuring 7000 sq.ms. or a part thereof stood  conveyed and delivered to M/s. Kumaon Construction Ltd. at the relevant  time. It is not clear as to how many plots stood conveyed and how many  plots remained. In the absence of these basic facts which are primary  facts, we are of the view that the Tribunal could not have allowed the  appeal in favour of the assessee.  What is the indexed cost of each plot is  not mentioned.  Unfortunately, none of the above aspects have been  been  considered even by the High Court in its impugned judgment.

       For the aforesaid reasons, we remit the matters to the Tribunal for fresh  consideration in accordance with law.  We make it clear that the assessee  shall file all  

-5- relevant documents including conveyance(s) in favour of the nominees of  M/s. Kumaon Construction Ltd., the relevant plan indicating sub-division  of plots, copy of the application made to the competent authority for sub- division of the plots and lastly the Municipal and Revenue records in  which the relevant entries made regarding possession. Basically, the  question would be how many plots have been conveyed, how many are  retained, whether possession of the entire land was ever handed over to  Kumaon Construction and how was cost calculated by the assessee.

       For the aforestated reasons, the appeals stand allowed and the impugned  judgments of the High Court and the Tribunal are set aside. The matters  are remitted to the Tribunal for fresh consideration in accordance with  law.