Transfer of Property Act, 1882: s.53A – Applicability of – Essential ingredients – Held: In order that the provisions of s.53A be attracted, the transferee must, in part performance of the contract, have taken possession of the property or any part thereof and the transferee must have performed or be willing to perform his part of the agreement – In the instant case, as per agreement to sell, assessee gave permission to the builder company to start construction on the land – This showed that a license was given upon the land for the purpose of developing the land into flats and selling the same – Such license cannot be said to be ‘possession’ within the meaning of s.53A, which is a legal concept, and which denotes control over the land and not actual physical occupation of the land – That being the case, s.53A was not attracted to the facts of this case – Income Tax Act, 1961 – s.2(47)(vi). Income Tax Act, 1961: s.2(47)(vi) – Applicability of – Appellant assessee entered into an agreement to sell with a builder company and granted permission to the builder company to start construction on the land – Pursuant to the agreement to sell, a Power of Attorney was executed by which assessee appointed a director of the Builder company to execute the necessary sale agreements in respect of the schedule property after developing the same into flats – Subsequently, a memo of compromise was also entered into between them – Assessing officer treated entire sale consideration as a capital gain and brought to tax – Challenged by appellant-assessee – Held: Under s.2(47)(vi), any transaction which has the effect of transferring or enabling the enjoyment of any immovable property would come within its purview – The expression “enabling the enjoyment of” in s.2(47)(vi) must take colour from the earlier expression “transferring”, so that it can be stated on the facts of a case, that a de facto transfer of immovable property has, in fact, taken place making it clear that the de facto owner’s rights stand extinguished – In the instant case, as on the date of the agreement to sell, the owner’s rights were completely intact both as to ownership and to possession even de facto, so that this Section equally, cannot be said to be attracted – A perusal of the compromise deed however showed that the agreement to sell and the Power of Attorney were confirmed, and a sum of Rs.50 lakhs was reduced from the total consideration of Rs.6.10 crores – Clause 3 of the said compromise deed confirmed that the appellant, received a sum of Rs.4.68 crores out of the agreed sale consideration and the balance Rs.1.05 crores towards full and final settlement in respect of the Agreement entered into was then to be paid by 7 post-dated cheques – All the cheques mentioned in the compromise deed were, in fact, encashed – This being the case, assessee’s rights in the said immovable property were extinguished on the receipt of the last cheque, as also that the compromise deed could be stated to be a transaction which had the effect of transferring the immovable property in question – The pigeonhole, therefore, that would support the orders under appeal would be s.2(47)(ii) and (vi) of the I.T. Act in the facts of this case.
Dismissing the appeal, the Court
HELD: 1. In order that the provisions of Section 53A of the T.P. Act be attracted, first and foremost, the transferee must, in part performance of the contract, have taken possession of the property or any part thereof. Secondly, the transferee must have performed or be willing to perform his part of the agreement. A reading of agreement to sell dated 15.05.1998 showed that that both the parties were entitled to specific performance. Clause
16 is crucial, and the expression used in Clause 16 is that the party of the first part hereby gives ‘permission’ to the party of the second part to start construction on the land. Clause 16 would, therefore, lead to the position that a license was given to another upon the land for the purpose of developing the land into flats and selling the same. Such license cannot be said to be ‘possession’ within the meaning of Section 53A, which is a legal concept, and which denotes control over the land and not actual physical occupation of the land. This being the case, Section 53A of the T.P. Act cannot possibly be attracted to the facts of this case for this reason alone. [Paras 11-14][204-D-H]
2. The expression “enabling the enjoyment of” in Section 2(47)(vi) of the Income Tax Act must take colour from the earlier expression “transferring”, so that it can be stated on the facts of a case, that a de facto transfer of immovable property has, in fact, taken place making it clear that the de facto owner’s rights stand extinguished. It is clear that as on the date of the agreement to sell, the owner’s rights were completely intact both as to ownership and to possession even de facto, so that this Section equally, cannot be said to be attracted. [Para 17][205-F-G]
3. A perusal of the compromise deed showed that the agreement to sell and the Power of Attorney are confirmed, and a sum of Rs.50 lakhs is reduced from the total consideration of Rs.6.10 crores. Clause 3 of the said compromise deed confirms that the party of the first part, this is the appellant, has received a sum of Rs.4,68,25,644/- out of the agreed sale consideration. Clause 4 records that the balance Rs.1.05 crores towards full and final settlement in respect of the Agreement entered into would then be paid by 7 post-dated cheques. A finding of the ITAT was that all the cheques mentioned in the compromise deed have, in fact, been encashed. This being the case, the assessee’s rights in the said immovable property were extinguished on the receipt of the last cheque, as also that the compromise deed could be stated to be a transaction which had the effect of transferring the immovable property in question. The pigeonhole, therefore, that would support the orders under appeal would be Section 2(47)(ii) and (vi) of the I.T. Act in the facts of the instant case. [Paras 1821][206-A-E] Commissioner of Income Tax v. Balbir Singh Maini (2018) 12 SCC 354 : [2017] 10 SCR 1073 – relied on
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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