Mere Handing Over of Possession Without Registered Agreement Not to Result in Accrual of Capital Gain Mere Handing Over of Possession Without Registered Agreement Not to Result in Accrual of Capital Gain

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The Tax Publishers Mere Handing Over of Possession Without Registered Agreement Not to Result in Accrual of Capital Gain CA. Manoj Gupta Sub-clause (v) of Section 2(47) provides that any transaction involving the allowing of the 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 the Transfer of Property Act, 1882 shall be regarded as transfer. Recently in the case of Samag Developers (P) Ltd. v. Asstt. CIT ITA No. 3618/Del/2014, 3559/Del/2017 (Del-Trib), dt. 12-1-2018 [2018 TaxPub DT 610 (Del-Trib)] the issue was where the possession was handed over without registration of relevant agreement whether the Section 2(47)(v) triggers and comes into operation. The ITAT Delhi Bench held that no liability of tax can be fastened on the assessee merely on the basis that the possession of the land has been handed over by the assessee. Under the law, the assessee continues to be the owner of the land by invoking Section 53A of Transfer of Property Act. The learned author analyses the development. 1. The statutory provision Sub-clause (v) of Section 2(47) provides that any transaction involving the allowing of the 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 the Transfer of Property Act, 1882 shall be regarded as transfer. 2. Scope of the provisions in sub-clause (v) of Section 2(47) Provisions of sub-clause (v) of clause (47) of Section 2 of the Act are applicable to such transactions in immovable property which are of the nature referred to in Section 53A of the Transfer of Property Act, 1882. As such only those agreements to sell, where possession is given in part performance of a contract and to which Section 53A applies, are covered by Section 2(47)(v). Section 53A, besides agreement and possession, further requires that the transferee has performed or is willing to perform his part of the contract. Where the transferee fails to perform the terms falling to his part, Section 53A will not be applicable; as such, the compliance of such terms as laid down in the agreement to sell is also a must so as to make this sub-clause operative. Further, the phraseology used in the sub-clause 'a contract of the nature referred to in Section 53A of the Transfer of Property Act, 1882,' denotes that the transaction should be in the nature of Section 53A implying that it may not be fully covered by Section 53A but be of that nature. However, where there is a failure on the part of the transferee in respect of performance of his part, he is not competent to press Section 53A for action and accordingly it may be claimed that Section 53A is not attracted. Section 53A of Transfer of Property Act, 1882 reads as under :-- 'Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has in part performance of the contract taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Mere Handing Over of Possession Without Registered Agreement Not to Result in Accrual of Capital Gain

CA. Manoj Gupta

Sub-clause (v) of Section 2(47) provides that any transaction involving the allowing of the 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 the Transfer of Property Act, 1882 shall be regarded as transfer. Recently in the case of Samag Developers (P) Ltd. v. Asstt. CIT ITA No. 3618/Del/2014, 3559/Del/2017 (Del-Trib), dt. 12-1-2018 [2018 TaxPub DT 610 (Del-Trib)] the issue was where the possession was handed over without registration of relevant agreement whether the Section 2(47)(v) triggers and comes into operation. The ITAT Delhi Bench held that no liability of tax can be fastened on the assessee merely on the basis that the possession of the land has been handed over by the assessee. Under the law, the assessee continues to be the owner of the land by invoking Section 53A of Transfer of Property Act. The learned author analyses the development.

1. The statutory provision

2. Scope of the provisions in sub-clause (v) of Section 2(47)

Provisions of sub-clause (v) of clause (47) of Section 2 of the Act are applicable to such transactions in immovable property which are of the nature referred to in Section 53A of the Transfer of Property Act, 1882. As such only those agreements to sell, where possession is given in part performance of a contract and to which Section 53A applies, are covered by Section 2(47)(v). Section 53A, besides agreement and possession, further requires that the transferee has performed or is willing to perform his part of the contract. Where the transferee fails to perform the terms falling to his part, Section 53A will not be applicable; as such, the compliance of such terms as laid down in the agreement to sell is also a must so as to make this sub-clause operative. Further, the phraseology used in the sub-clause 'a contract of the nature referred to in Section 53A of the Transfer of Property Act, 1882,' denotes that the transaction should be in the nature of Section 53A implying that it may not be fully covered by Section 53A but be of that nature. However, where there is a failure on the part of the transferee in respect of performance of his part, he is not competent to press Section 53A for action and accordingly it may be claimed that Section 53A is not attracted.

Section 53A of Transfer of Property Act, 1882 reads as under :--

'Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty,

and the transferee has in part performance of the contract taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract,