M/S Seshasayee Steels P. Ltd vs Assistant Commissioner Of Income Tax, Company Circle Vi(2), Chennai

Sl. No.,Patta No.,Village,Area in Acres

4,117,Perungudi,2.52

1,117,Perungudi,1.66

320/1,469,Perungudi,1.44

,,,5.62

of law that were set out were all answered in favour of the Revenue and against the assessee.,,,

Shri R. V. Easwar, learned senior counsel appearing on behalf of the appellant, read to us in copious detail the three documents in question. His first",,,

argument was that Section 2(47)(v) of the I.T. Act was attracted on the facts of this case, on a reading of the agreement to sell together with the",,,

Power of Attorney. The alternative argument was that, assuming that this argument fails, in any case, this case would fall within Section 2(47)(vi), as",,,

on this date, there could be said to be a transaction which has the effect of “enabling the enjoyment of any immovably propertyâ€. The third",,,

submission made before us was that, in any event, what is relevant to bringing to tax the capital gain in Assessment Year 2004-2005 is whether the",,,

compromise deed of 19.07.2003, when read, could be said to fall within any of the clauses under Section 2(47). According to the learned senior",,,

counsel, this could not be said to be the case, as a result of which, in any event, there would be no transfer of a capital asset within the meaning of",,,

Section 2(47), so far as this Assessment Year is concerned.",,,

Shri K. Radhkrishnan, learned senior counsel appearing for the Revenue, took us through the Assessment Order, Order of the CIT (A) and the ITAT",,,

as well as the High Court’s judgment, and supported these judgments stating that clearly Section 2(47)(v) could not be made out on the facts of",,,

this case and, therefore, in any case, this appeal should be dismissed. No other point had been argued before the forums below, and need not therefore",,,

be entertained.,,,

Having heard learned counsel for both the parties, it is necessary to first set out the statutory provisions:",,,

Section 2(47) of the Income Tax Act, 1961:",,,

In this Act, unless the context otherwise requires,-",,,

…………………………………………………………………….,,,

…………………………………………………………………….,,,

(47) “transferâ€​, in relation to a capital asset, includes,-",,,

…………………………………………………………………….,,,

…………………………………………………………………….,,,

(v) 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 1 (4 of 1882 ); or",,,

(vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of",,,

persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the",,,

enjoyment of, any immovable property.",,,

Explanation 1.- For the purposes of sub- clauses (v) and (vi), ""immovable property"" shall have the same meaning as in clause (d) of section 269UA;]",,,

Explanation 2. - For the removal of doubts, it is hereby clarified that “transfer†includes and shall be deemed to have always included disposing of",,,

or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or",,,

conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that",,,

such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company,,,

registered or incorporated outside India;),,,

Section 53A of the Transfer of Property Act, 1882:",,,

53A. Part performance.â€" Where any person contracts to transfer for consideration any immoveable 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,",,,

and the transferee has performed or is willing to perform his part of the contract,",,,

then, notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the",,,

law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons",,,

claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly",,,

provided by the terms of the contract:,,,

Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part,,,

performance thereof.,,,

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. It is only if these two important conditions, among others, are satisfied that the provisions of Section 53A can be said to be attracted on the",,,

facts of a given case.,,,

On a reading of the agreement to sell dated 15.05.1998, what is clear is that both the parties are entitled to specific performance. (See Clause 14)",,,

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.,,,

We now turn to the argument of the learned senior counsel appearing on behalf of the assessee based on Section 2(47)(vi) of the Income Tax Act.,,,

This Court in Commissioner of Income Tax v. Balbir Singh Maini (2018) 12 SCC 354 adverted to the provisions of this sub-Section in the following,,,

terms:,,,

However, the High Court has held that Section 2(47)(vi) will not apply for the reason that there was no change in membership of the society, as",,,

contemplated. We are afraid that we cannot agree with the High Court on this score. Under Section 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 High Court has not adverted to the expression,,,

“or in any other manner whatsoever†in sub-clause (vi), which would show that it is not necessary that the transaction refers to the membership",,,

of a cooperative society. We have, therefore, to see whether the impugned transaction can fall within this provision.",,,

The object of Section 2(47)(vi) appears to be to bring within the tax net a de facto transfer of any immovable property. The expression,,,

“enabling the enjoyment of†takes color from the earlier expression “transferringâ€, so that it is clear that any transaction which enables the",,,

enjoyment of immovable property must be enjoyment as a purported owner thereof. The idea is to bring within the tax net, transactions, where, though",,,

title may not be transferred in law, there is, in substance, a transfer of title in fact.",,,

Given the test stated in paragraph 25 of the aforesaid judgment, it is clear that the expression “enabling the enjoyment of†must take colour from",,,

the earlier expression “transferringâ€, 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.,,,

Coming to the third argument of the learned senior counsel on behalf of the appellant, what has to be seen is the compromise deed and as to which",,,

pigeonhole such deed can possibly be said to fall under Section 2(47) of the Income Tax Act. A perusal of the compromise deed shows 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. Clause 5 then states that the last two cheques will be presented only upon due receipt of the discharge,,,

certificate from one M/s. Pioneer Homes.,,,

In this context, it is important to advert to a finding of the ITAT, which was that all the cheques mentioned in the compromise deed have, in fact, been",,,

encashed.,,,

This being the case, it is clear that 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 present",,,

case.,,,

This being the case, we dismiss this appeal but for the reasons stated by this judgment.",,,