Order
1. Leave granted. In these civil appeals we are concerned with the scope of Section 2(47)(v) read with Section 53-A of the Transfer of Property Act, 1882.
2. The assessee entered into an agreement to sell 7000 sq m vacant land to M/s Kumaon Construction Ltd., Nainital, for Rs 25 lakhs. The agreement was registered with the Sub-Registrar, Nainital, and Rs 2 lakhs were received as advance.
3. In the period relevant to Assessment Year 1989-1990 the assessee claims to have transferred 24 plots to the nominees of M/s Kumaon Construction Ltd. for total consideration of Rs 15,20,900 inclusive of Rs 2 lakhs as advance.
4. The assessing officer called upon the assessee to show cause why capital gains should not be assessed with reference to total consideration of Rs 25 lakhs fixed in the agreement for sale. In his reply the assessee submitted that he has not given possession of the entire area of 7000 sq m of vacant land; that he continues to be in possession of the land not transferred and therefore Section 2(47)(v) was not applicable.
5. The AO did not agree with the contention of the assessee and accordingly worked out capital gains liability on the entire consideration of Rs 25 lakhs principally on the ground that a major portion of total land has already been sold and thus a part of contract was performed and accordingly the case stood covered by Section 53-A of the Transfer of Property Act. This view was confirmed by CIT (A).
6. The assessee then preferred second appeal before the Tribunal which was allowed by the Tribunal observing that the approach of the Revenue was erroneous. According to the Tribunal the order of the AO was based upon misconception of legal principles. According to the Tribunal in the period relevant to the assessment year under consideration, the assessee had transferred 24 plots to different persons (nominees of M/s Kumaon Construction Ltd.) for total consideration of Rs 15,20,900 and therefore the assessee was not liable to return capital gains on the sum of Rs 25 lakhs. This appears to be the reason given by the Tribunal for upholding the contention advanced on behalf of the assessee.
7. Aggrieved by the said decision, the Department carried the matter in appeal under Section 260-A of the Income Tax Act, 1961 to the Uttaranchal High Court which has upheld the judgment of the Tribunal. Hence these civil appeals.
8. Unfortunately, in the present civil appeals the basic facts are not on the record. It appears from the agreement dated 25-4-1988 that the assessee had agreed to sell to M/s Kumaon Construction Ltd., Nainital, land admeasuring 7000 sq m. That agreement is subsequently rescinded. However, between 25-4-1988 and the date of rescission (22-10-1990) the plot admeasuring 7000 sq m stood sub-divided. The sub-divided 24 plots were conveyed by the assessee to the nominees of M/s Kumaon Construction Ltd. None of the sale deeds have been produced by the assessee before the Department. In such cases it is very essential to look into the recitals mentioned in the sale deeds.
9. Briefly, it may be stated that in order that the case would fall under the extended meaning of the word “transfer”, possession is an essential element to be considered. That is the crux of the matter.
10. In the present case no finding qua possession has been recorded by the Tribunal. It may also be noted that there is nothing on record to indicate the name of the applicant who had applied for sub-division. No revenue or municipal records have been produced which could have indicated as to whether the area admeasuring 7000 sq m or a part thereof stood conveyed and delivered to M/s Kumaon Construction Ltd. at the relevant time. It is not clear as to how many plots stood conveyed and how many plots remained. In the absence of these basic facts which are primary facts, we are of the view that the Tribunal could not have allowed the appeal in favour of the assessee. What is the indexed cost of each plot is not mentioned. Unfortunately, none of the above aspects have been considered even by the High Court in its impugned judgment.
11. For the aforesaid reasons, we remit the matters to the Tribunal for fresh consideration in accordance with law. We make it clear that the assessee shall file all relevant documents including conveyance(s) in favour of the nominees of M/s Kumaon Construction Ltd., the relevant plan indicating sub-division of plots, copy of the application made to the competent authority for sub-division of the plots, and lastly, the municipal and revenue records in which the relevant entries are made regarding possession. Basically, the question would be how many plots have been conveyed, how many are retained, whether possession of the entire land was ever handed over to Kumaon Construction and how was cost calculated by the assessee.
12. For the aforestated reasons, the appeals stand allowed and the impugned judgments of the High Court and the Tribunal are set aside. The matters are remitted to the Tribunal for fresh consideration in accordance with law.