INCOME TAX ACT, 1961

Section 2(47)(v) Section 2(24) Sections 45/48

Capital gain - Chargeability - No transfer of possession due to non-payment of sale consideration as per registered sale deed -

There were two sale deeds which had been executed by the assessee with Shri Rajeev Singh which were under consideration before Tribunal. The question that arises for consideration was where the full value of consideration had not been discharged by the purchaser of the impguned land as per the sale deed and there was violation of terms of the sale deed, whether the impugned transaction would still qualify as transfer and liable for capital gains tax given that the same was evidenced by the registered sale deed. What was therefore relevant to examine was whether there was a transfer of a capital asset effected in the previous year in the instant case and any profits and gains had arisen from such transfer whereby the full value of the consideration received or accruing as a result of the transfer of the capital asset can be brought to tax.Held: Though the sale deed had been registered, given that the terms of the sale deed and the intention of the parties at the time of entering into the said sale deed had not be adhered to whereby full sale consideration had not been discharged, there was no transfer of the impugned land and no income accrues and consequently, no liability towards capital gains tax arises in the hands of the assessee. This brings Tribunal to the concept of real income which can only be brought to tax and there cannot be any levy of tax on hypothetical income which had neither accrued/arisen or received by the assessee. Sale transaction fell through in view of non-fulfillment of the terms of sale deed whereby cheques had been dishonored by Sh. R. Singh and he had failed to discharge the full sale consideration, there was no transfer and no income which had accrued or arisen to the assessee. There was no receipt of sale consideration, thus no real income in hand of the assessee and in absence thereof, the assessee was not exigible to capital gains tax. the transferee, Shri Rajeev Singh had not taken possession of the property. Secondly, he had not discharged the sale consideration nor there was any willingness on his part to discharge the sale consideration. Therefore, in the instant case, the transferee had not taken possession of the land and also, he had neither performed nor there was any willingness to perform his part of the sale deed and thus the provisions of section 55A of the Transfer of the Property Act cannot be attracted and there is no transfer even in terms of section 2(47)(v). Tribunal hereby affirm the findings of the CIT(A) and the matter was decided in favour of the assessee and against the revenue.

Relied:Smt. Raj Rani Devi Ramna v. CIT (1992) 201 ITR 1032 (Pat-HC) : 1993 TaxPub(DT) 441 (Pat-HC), Hira Lal Ram Dayal v. CIT (1980) 122 ITR 461 (P&H-HC) : 1980 TaxPub(DT) 733 (P&H-HC), CIT v. Shoorji Vallabhdas & Co. (1962) 46 ITR 144 (SC) : 1962 TaxPub(DT) 307 (SC), CIT v. Balbir Singh Maini (2017) 398 ITR 531(SC) : 2017 TaxPub(DT) 4346 (SC) and Appasaheb Baburao Lonkar v. ITO (2019) 176 ITD 115 (Pune-Trib) : 2019 TaxPub(DT) 993 (Pune-Trib).

REFERRED : K.P. Verghese v. ITO (1981) 131 ITR 597 (SC) : 1981 TaxPub(DT) 972 (SC), CIT v. Britannia Industries Ltd. (23017) 396 ITR 677 (Cal-HC) : 2017 TaxPub(DT0 1900 (Cal-HC), ITO v. Ajit Kumar Arya (1988) 25 ITD 37 (JP-Trib) : 1988 TaxPub(DT) 1019 (JP-Trib) and Jasbir Singh Sarkaria (2007) 294 ITR 196/164 Taxman 108 (AAR-New-Del) : 2007 TaxPub(DT) 1480 (AAR).

FAVOUR : In assessee's favour.

A.Y. :

INCOME TAX ACT, 1961

Section 48 Section 45

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