Case summary, Income Tax

Date of execution of sale deed vs date of agreement to sale: Relevant date for the determination of transfer of land under section 2(47) of the Act read with section 53A of the Transfer of Property Act, 1882

Case: ITO vs Shri Nareshbhai Ranchhodbhai Tandel, Surat ITAT

Outcome: Assessee

Facts

  • The land was transferred on 24.07.2007 in performance to the agreement to the sale between the Assessee (vendors – Assessee, and his brother) and M/s.Polycab Wires Pvt Ltd.(Purchaser).
  • According to the Assessing Officer, since the sale deed was registered before the Sub-Registrar, Daman on 07.10.2008, consequent to the conversion of agricultural land the non-agricultural on 01.04.2008 and therefore, the transfer took place in the assessment year 2009-10.
  • Hence, he proceeded to assume the transfer of the land from the assessment year 2009-10 for the purpose of computation of capital gains.

Key Points

  • ‘Transfer’ presumes both the existence of the asset and of the transferee to whom it is transferred. As per section 2(47)(v) of the Act, the transfer of a capital asset, which is immovable property, is complete on granting of possession pursuant to a written agreement and subject to the transferee being willing to fulfil its obligations. It is by amending section 2(47) of the Act introducing sub-clause (v) that a transaction falling within the provisions of that section 53A has been treated as a transfer in relation to a capital asset. Section 53A of the Transfer of Property Act deals with the doctrine of part performance. This section does not confer any title on the transferee in possession but merely imposes a statutory bar on the transferor. The doctrine of part performance is defence. It is a shield, not a sword. It is a right to protect the transferee’s possession any challenge to it by the transferor contrary to the terms of the contract.
  • Further, these issues were already dealt with while deciding the appeal of Assessee’s brother i.e. Shri Sureshbhai R. Tandel for Assessment Year 2009-2010. While considering the entire facts and circumstances, it was held that the agricultural land in question was a ‘capital asset’ within the meaning of provisions under section 45 of the Act.
  • Therefore following the same, the transfer of agricultural land i.e. ‘capital asset’ was during the assessment year 2008-09 as envisaged in the provisions of Section 2(47) read with section 53A of Transfer of Property Act.

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