INCOME TAX ACT, 1961

Section 2(14) Section 2(47) Section 14

Head of income - Capital gains or income from other sources - Consideration received on giving up of right of specific performance to get conveyance of immovable property -

Assessee entered into an agreement dt. 9-2-2005 to purchase property being vacant site. The consideration agreed between assessee and Mr. 'C', owner of the property was a sum of Rs. 27,60,000. Assessee paid an advance of Rs. 2,75,000 and agreed to pay remaining sum at the time of registration of sale deed. Vendor of property was required to make out a marketable title to the property. Assessee under the agreement had fight to enforce terms by way of specific performance. On 08-12-2011 as vendor and assessee as confirming party sold the property to a third party for a consideration of Rs. 82,80,000. As per the preamble to sale deed it had been mentioned that assessee had been added as a confirming party as he was agreement holder who had a right to obtain conveyance of property from the owner. The preamble further recites that the conforming party nominated purchaser to purchase property and that out of sale consideration of Rs. 1200 agreed between parties as sale consideration, a sum of Rs. 500 per sq.ft was to be paid as sale consideration to the vendor and Rs. 700 was to be paid to assessee who was a confirming party to sale deed. Asesssee declared sum received under sale deed as giving rise to capital gain and claimed deduction under section 54F. AO took the view that under agreement for sale assessee did not have any right over the property except a right to get refund of advance paid under the agreement dt. 09-05-2005 and there was no question of relinquishing or surrendering of such right and receipt under sale deed had to be taken under the head 'income from other sources'. Consequently deduction under section 54F was also denied to assessee. Held: Right to obtain a conveyance of immovable property falls within the expression 'property of any kind' used in section 2(14) and consequently it is a capital asset. It is because the expression 'property of any kind' is of wide import and when this expression is read along with the expression defined in section 2(47)(ii) i.e., 'extinguishment of any rights therein. Giving up of a right of specific performance by assessee to get conveyance of immovable property in lieu of receiving consideration, resulted in extinguishment of right in property, thereby attacting rigor of section 2(14) read with section 2(47) and there was a transfer of capital asset within the meaning of Act and income from relinquishing rights under an agreement was to be assessed under the head income from capital gains, however, AO had not examined claim of assessee under the head 'capital gain' in accordance with the provisions of section 48 and also claim for deduction under section 54F, therefore matter was remanded.

Supported by:CIT & Anr. v. H. Anil Kumar (2011) 242 CTR 537 (Kar) : 2011 TaxPub(DT) 1517 (Karn-HC). Distinguished:CIT v. Balbir Singh Maini, CS Atwal (2017) 398 ITR 531 (SC) : 2017 TaxPub(DT) 4346 (SC).

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2012-13

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