Full Judgment Text
‘ REPORTABLE’
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 9209 OF 2019
(Arising out of SLP (C)No. 34815 of 2012)
M/S SESHASAYEE STEELS P. LTD. Appellant(s)
VERSUS
ASSISTANT COMMISSIONER OF INCOME TAX,
COMPANY CIRCLE VI(2),
CHENNAI Respondent(s)
J U D G M E N T
R. F. NARIMAN, J.
The appellant-assessee entered into an agreement to
sell, on 15.05.1998, with one Vijay Santhi Builders Limited
for a total sale consideration of Rs.5.5 crores.
The important clauses of the sale agreement are set
out hereinbelow:
“1. The consideration for the sale of the property
shall be Rs. 5,50,000/- (Rupees Five Lakhs Fifty
Thousand only) per ground. The total area of the
property to be sold is around 100 grounds and the
total sale consideration of Rs.5,50,00,000/-(Rupees
Five Crores Fifty Lakhs only) will be paid directly
by the nominees/members on behalf of PARTY OF THE
SECOND PART or by the PARTY OF THE SECOND PART,
whichever is earlier. The property shall be free
Signature Not Verified
Digitally signed by R
NATARAJAN
Date: 2019.12.13
17:45:33 IST
Reason:
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of all encumbrances at the time of registration.
2. It is agreed that the total extent of the
property is 100 grounds approximately including the
areas allotted for road and other amenities, plus
the actual extent available for flats.
12. THE PARTY OF THE FIRST PART has already handed
over to the PARTY OF THE SECOND PART Xerox copies
of all land documents of the schedule mentioned
property for their legal counsel’s scrutiny and
opinion. THE PARTY OF THE SECOND PART have also
satisfied themselves about the title deeds. The
PARTY OF THE FIRST PART agree to show the original
title deed which are kept with them to the nominees
of the second part as and when required after
fixing prior appointment.
14. Both the parties are entitled to specific
performance of this agreement.
16. THE PARTY OF THE FIRST PART hereby gives
permission to the PARTY OF THE SECOND PART to start
advertising, selling, construction on the land
herein mentioned. Advertisements, sales catalogues
and leaflets shall be approved by the PARTY OF THE
FIRST PART before publication or circulation.
SCHEDULE OF PROPERTY
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
Pursuant to this agreement to sell, a Power of
Attorney was executed on 27.11.1998, by which, the assessee
appointed one Chandan Kumar, Director of M/s. Vijay Santhi
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Builders Ltd. to execute and join in execution the necessary
number of sale agreements and/or sale deeds in respect of
the schedule mentioned property after developing the same
into flats. The Power of Attorney also enabled the Builder
to present before all the competent authorities such
documents as were necessary to enable development on the
property and sale thereof to persons.
The appellant did not file any Return for Assessment
Year 2004-2005. Apparently, it was detected later by the
Assessing Officer, that the agreement to Sell had been
entered into and that, subsequently, a Memo of Compromise
had also been entered into between the parties dated
19.07.2003. Based on the discovery of this fact, Notice
dated 04.11.2008 issued under Section 148 of the Income Tax
Act, 1961 (hereinafter referred to as ‘I.T. Act’ for
brevity) was served on the appellant. Even in response to
this notice, no Income Tax Return was filed. A notice dated
08.09.2009 was issued under Section 142(1) fixing the case
for hearing on 20.09.2009. Here again, the appellant did
not turn-up, as a result of which, another notice was issued
dated 23.10.2009, but this time again the assessee did not
turn-up, so a third letter was issued on 11.12.2009 fixing
the case for hearing on 22.12.2009. In response to the
aforesaid letter, the assessee, by letter dated 29.12.2009
stated as follows: -
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“I refer to your letter dated 11.12.2009. I request
you humbly and sincerely not to pass any order u/s
144 and to give me time for one month from today. I
shall positively submit all necessary statements and
documents within 30 days of today to your
satisfaction. I seek this time only because of my
very serious illness after an abdominal surgery.”
Since time bar was foremost in the mind of the
Assessing Officer, limitation falling on this transaction by
31.12.2009, a Best Judgment Assessment Order was then passed
under Section 144 of the I.T. Act dated 31.12.2009. Vide
this Order, the entire sale consideration was treated as a
capital gain and brought to tax.
An appeal was preferred against this Order. The
Commissioner of Income Tax (Appeals) (hereinafter referred
to as ‘CIT (A)’ for brevity) by Order dated 28.10.2010
examined the three documents in question and ultimately
dismissed the appeal. The Income Tax Appellate Tribunal
(hereinafter referred to as ‘ITAT’ for brevity) by Order
dated 24.06.2011 agreed with the CIT(A) and found that on or
about the date of the agreement to sell, the conditions
mentioned in Section 2(47)(v) of the I.T. Act could not be
stated to have been complied with, in that, the very fact
that the compromise deed was entered into on 19.07.2003
would show that the obligations under the agreement to sell
were not carried out in their true letter and spirit. As a
result of this, Section 53A of the Transfer of Property Act,
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1882, (hereinafter referred to as ‘T.P. Act’ for brevity)
could not possibly be said to be attracted. What was then
referred to was the Memo of Compromise dated 19.07.2003
under which various amounts had to be paid by the Builder to
the owner so that a complete extinguishment of the owner’s
rights in the property would then take place. The last two
payments under the compromise deed were contingent upon
M/s.Pioneer Homes also being paid off, which apparently was
done, as the Appellate Tribunal held:
“Further on the specific query from the Bench as to
whether all the cheques as mentioned in the
compromise deed have been encashed, the answer to
which was “Yes”. This further supports that the
transfer took place during the assessment year
2004-05 as the last cheque is dated 25.01.2004.”
The High Court, by the impugned judgment dated
25.01.2012, adverted to the concurrent findings of the
authorities, and stated that the three questions 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
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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 property”. 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:
2. In this Act, unless the context otherwise requires,-
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…………………………………………………………………….
…………………………………………………………………….
(47) “transfer”, 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.— Where any person contracts
to transfer for consideration any immoveable
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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
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entitled to specific performance. (See Clause 1 4 )
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:
24. 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
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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.
25. 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 “transferring”, 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
“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.
Coming to the third argument of the learned senior
counsel on behalf of the appellant, what has to be seen is
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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.
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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.
………………………………………………………………., J.
[ ROHINTON FALI NARIMAN ]
………………………………………………………………., J.
[ ANIRUDDHA BOSE ]
………………………………………………………………., J.
[ V. RAMASUBRAMANIAN ]
New Delhi;
December 04, 2019.
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ITEM NO.4 COURT NO.4 SECTION XII
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Petition(s) for Special Leave to Appeal (C) No. 34815/2012
(Arising out of impugned final judgment and order dated 25-01-2012
in TC No. 461/2011 passed by the High Court of Judicature at
Madras)
M/S SESHASAYEE STEELS P.LTD. Petitioner(s)
VERSUS
ASSTT.COMMR.OF I.T, CO. CIR-VI(2)CHENNAI Respondent(s)
Date : 04-12-2019 This petition was called on for hearing today.
CORAM : HON'BLE MR. JUSTICE ROHINTON FALI NARIMAN
HON'BLE MR. JUSTICE ANIRUDDHA BOSE
HON'BLE MR. JUSTICE V. RAMASUBRAMANIAN
For Petitioner(s) Mr. R. V. Easwar, Sr. Adv.
Mr. Rubal Bansal, Adv.
Mr. V. Ramasubramanian, AOR
Mr. P. Bala Senthil Kumar, Adv.
For Respondent(s) Mr. K. Radhakrishnan, Sr. Adv.
Ms. Seema Bengani, Adv.
Ms. Purnima Bhat Kak, Adv.
Mr. Prem Prakash, Adv.
Mr. Anas Zaidi, Adv.
Mrs. Anil Katiyar, AOR
UPON hearing the counsel the Court made the following
O R D E R
Leave granted.
The appeal stands dismissed in terms of the signed
reportable judgment.
(NIDHI AHUJA) (NISHA TRIPATHI)
COURT MASTER (SH) BRANCH OFFICER
[Signed reportable judgment is placed on the file.]
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