Sections 2(47)(v), 45, 54, — Receipt of full consideration coupled with handing over of possession without execution of a registered sale deed is good enough to treat a transaction as transfer. The amendment made in section 53A by which the requirement of registration has been indirectly brought on the statute need not apply while construing the meaning of the term ‘transfer’ with reference to the Income-tax Act.
Facts:
Each of the two assessees were 50% owners of a flat in a building known as Usha Kunj situated at Juhu, Mumbai which was stated to have been sold on 30-4-2004 for a total consideration of Rs.62,50,000 and share of each assessee was Rs.31,25,000. On this sale, capital gain of Rs.24,93,910 arose to each of the two assessees which capital gain was claimed to be exempt u/s.54 against the purchase of a new flat vide agreement dated 25-6-2003 which agreement was registered on 9-7-2003. The claim for exemption was made on the ground that the new flat was purchased within a period of one year before the date of transfer of the old flat which has been sold. In the course of assessment proceedings the assessee filed copy of agreement dated 23-4- 2004 which agreement was not registered. The AO made inquiry with the purchasers of this flat who filed agreement dated 26-8-2004 which agreement was registered on the same date. Upon inquiry with the society, it was found that the share certificate showed the date of transfer as 27-8-2004.
The assessee contended that simultaneous with the execution of the agreement dated 30-4-2004 the assessee received full consideration and handed over the possession of the flat to the purchasers along with all original documents including the share certificate and the application to the society for transfer of shares in favour of the transferee, application for transfer of electric meter to the name of the transferee and also NOC received from the society. The assessee submitted that there was delay on the part of the purchaser in getting the agreement stamped and subsequently when the agreement was presented for stamping the transferee was informed that some penalty was leviable for delay in presenting the same. The transferees, at this stage, requested the assessees to execute a fresh agreement and in these circumstances an agreement dated 26-8-2004 was executed which agreement was registered.
The AO denied exemption u/s.54 on the ground that after the amendment to section 53A of the Transfer of Property Act, the provisions of section 53A apply only to agreements which are registered. Since agreement dated 23-4-2004 was not registered, the date of transfer is not 23-4-2004 but 26-8-2004 and since the date of purchase of new flat is more than one year before 26-8-2004, the assessee was denied exemption u/s.54.
Aggrieved the assessee preferred an appeal to the CIT(A) who agreed with the AO and emphasised that since section 53A of the Transfer of Property Act has been amended, therefore, unless and until the agreement was registered, the same would not amount to transfer. He confirmed the action of the AO.
Aggrieved the assessee preferred an appeal to the Tribunal.
Held:
The Tribunal considered the amendment to section 53A of the Transfer of Property Act and held that even after the amendment, it has not been specifically provided that such instrument of transfer is necessarily to be registered. To ascertain the true meaning in the context of clause (v) of section 2(47) the Tribunal considered the Circular No. 495, dated 22-9-1987 explaining the purpose of introduction of clauses (v) and (vi) to section 2(47). Thereafter, it observed that clause (v) in section 2(47) does not lift the definition of part performance from section 53A of the Transfer of Property Act. Rather, it defines any transaction involving allowing of 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 TOPA. This means such transfer is not required to be exactly similar to the one defined u/s.53A of the TOPA, otherwise, the Legislature would have simply stated that transfer would include transactions defined in section 53A of TOPA. But the legislature in its wisdom has used the words ‘of a contract, of the nature referred to in section 53A’. Therefore, it is only the nature which has to be seen. The purpose of insertion of clause (v) was to tax those transactions where properties were being transferred by way of giving possession and receiving full consideration. Therefore, in a case where possession has been given and full consideration received, then such transaction needs to be construed as ‘transfer’. The amendment made in section 53A by which the requirement of registration has been indirectly brought on the statute will not alter the situation for holding the transaction to be a transfer u/s.2(47)(v) if all other ingredients have been satisfied.
Referring to the decisions of the Apex Court in the case of CIT v. Podar Cement P. Ltd., (226 ITR 625) (SC) and Mysore Minerals Ltd. v. CIT, (239 ITR 775) (SC) it held that for the purpose of the Act the ground reality has to be recognised and if all the ingredients of transfer have been completed, then such transfer has to be recognised. Merely because the particular instrument has not been registered will not alter the situation.
The Tribunal held that the transfer deed dated 30- 4-2004 transferred all the rights of the assessee to the transferees and, therefore, this deed should be considered as the deed of transfer. It held the date of transfer for old property has to be reckoned as 30-4-2004 which is well within one year from the date of acquisition of the new property on 25-6- 2003. It held that the assessees are entitled to claim exemption u/s.54 of the Act.
The Tribunal set aside the orders of the CIT(A) and directed the AO to allow exemption u/s.54. Appeals of both the assessees were allowed.
