High Court Of Kerala
CIT vs. C.C. Transport & Co.
Sections 2(47), 45
Asst. Year 1983-84
K.S. Radhakrishnan & V. Ramkumar, JJ.
IT Appeal No. 59 of 2001
29th June, 2006
Counsel Appeared
P.K.R. Menon & George K. George, for the Revenue : T.G. Rajendran, for the Assessee
JUDGMENT
V. Ramkumar, J. :
In this appeal filed under s. 260A of the IT Act, 1961 (‘the Act’ for short), the Revenue challenges the order dt. 23rd Oct., 2000 passed by the Tribunal, Cochin Bench in ITA No. 1007/Coch/1990 confirming the appellate order dt. 13th Aug., 1990 passed by the CIT(A), Calicut in ITA No. 108 : CIR : I-CLT : CIT : 1989-90.
2. While admitting this appeal, this Court ordered notice on the following questions of law :
“(i) Whether, on the facts and in the circumstances of the case, the capital gains had to be assessed in the hands of the assessee-firm or in the hands of (partner) Asokan ?
(ii) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in confirming the order of the CIT(A) reversing the assessment on the assessee-firm ?”
3. The facts leading to the impugned proceedings are the following : The assessment year concerned in these proceedings is 1983-84. The respondent/assessee is a partnership firm by name C.C. Transport Co., Calicut, consisting of three partners, namely, C. Prabhakaran, C. Gokulan and Sri Mohan. Earlier there was one more partner by name Asokan who retired from the partnership firm on 31st March, 1980. The assessment in the case of the above firm was originally completed on 21st March, 1986 under s. 144 of the Act. The total income taken for the purpose of the said assessment was Rs. 1,28,000 based on the income assessed for the asst. yr. 1980-81. This was due to the assessee’s failure to comply with the notice issued under ss. 139(2) and 142(1) of the Act. Against the said assessment, the assessee filed appeal before the CIT(A) who as per appellate order dt. 23rd April, 1987 set aside the assessment with the following directions : (i) The return of income declaring a loss of Rs. 3,13,558 filed by the assessee on 24th March, 1986 has to be examined.(ii) The assessee will file evidence before the ITO to substantiate the claim of loss made by it expeditiously.
The assessee filed a return on 24th March, 1986 declaring a loss of Rs. 3,13,558. During the previous year relevant to the asst. yr. 1983-84, the assessee had transferred to M/s Haji P.K. Moidu & Co. 56 cents of garden land called Patter Madom Paramba with the building situated thereon in Kalathikunnu Amsom and Desom in Kozhikode for a total consideration of Rs. 7,20,000 as per two registered documents bearing Nos. 1021/1982, dt. 13th Sept., 1982 and 1264/1982, dt. 27th Oct., 1982. The assessee had not disclosed this transaction in the return of income. The AO, namely, the ITO concerned proposed to assess the assessee to capital gains arising out of the above transaction. Denying the liability to capital gains the assessee contended that the property in question had been transferred earlier on 31st March, 1980 to one of its partners by name C. Asokan on his retirement from the firm and the said Asokan was in physical possession of the said property, that no deed of conveyance could be executed since the title deed was with the Chartered Bank as security for the loan taken and that since the property had become the asset of the said Asokan it was he who was liable to pay capital gains, if any. Overruling the contentions of the assessee, the AO, namely, the ITO concerned, as per Annex. A order, dt. 30th Oct., 1989 assessed the firm computing the income by way of capital gains arising out of the aforementioned transaction at Rs. 3,85,720 and demanded a total amount of Rs. 3,14,269 including interest, etc.
Aggrieved by the said order, the assessee filed an appeal before the CIT(A). The appellate authority as per Annex. B order, dt. 13th Aug., 1990 accepted the contention of the assessee-firm and deleted the capital gains of Rs. 6,17,260 from the assessment of the firm. Even though the Revenue challenged the appellate order of the CIT(A) by filing an appeal before the Tribunal, Cochin Bench, the Tribunal as per Annex. ‘C’ order dt. 23rd Oct., 2000 confirmed the appellate order of the CIT(A). Hence, this appeal by the Revenue.
4. The learned counsel appearing for the respondent-assessee made the following submissions before us in support of the impugned order of the Tribunal : The property in question had been sold to and was in the exclusive and physical possession of Asokan from 31st March, 1980 onwards while retiring from the partnership firm. It was due to the fact that the title deed pertaining to the property was in the custody of Chartered Bank for availing a loan that the firm could not execute a formal conveyance deed in favour of Asokan. But the fact remains that Asokan has been in exclusive possession and enjoyment of the property from 31st March, 1980 onwards in part performance of the agreement for sale. Any arrangement including part performance of an agreement enabling the enjoyment of immovable property amounts to “transfer” for the purpose of IT law in view of cl. (vi) of s. 2(47) r/w the Explanation thereto and cl. (f)(i) of s. 269UA of the Act. Clause (iiia) to s. 27 of the Act also takes in a person in possession in part performance of a contract. Hence the said Asokan should have been treated as the person, if any, liable to pay capital gains. In order to attract capital gains tax, there need not be transfer of a capital asset as required under the provisions of the Transfer of Property Act, 1882 or the Registration Act, 1908. The order passed by the Tribunal confirming the appellate order of the CIT (A) does not call for any interference.
We are afraid that we cannot agree with the above submissions made on behalf of the assessee or the conclusions reached by the appellate authorities below. There was absolutely no material to show that the assessee-firm had agreed to sell the property in question in favour of Asokan, one of the partners of the firm. Admittedly, there is no deed of conveyance or registration of the same. The assessee does not even have a case that a book entry to that effect was made in the books of account. Property of a firm includes all the rights and interests in the property originally brought into stock of the firm, or acquired by the firm by purchase or otherwise in the course of its business. Mere book entries in the account books of the firm do not transfer title to the properties unless the properties have been given by the partners as their contribution to the capital of the firm. Any other transfer can only be by way of a conveyance known to law and must be made by an instrument of transfer duly executed and registered if the value thereof is over Rs. 100. There cannot be any other mode of transfer of immovable property by a firm in favour of any of its partners or a third party during the subsistence of the partnership. Vide Ram Narain & Bros. vs. CIT (1969) 73 ITR 423 (All), CIT vs. Dadha & Co. (1983) 36 CTR (Mad) 287 : (1983) 142 ITR 792 (Mad), Abdul Kareemia & Bros. vs. CIT (1983) 36 CTR (AP) 263 : (1984) 145 ITR 442 (AP) and Jansons vs. CIT (1984) 41 CTR (Kar) 3 : (1985) 154 ITR 432 (Kar).
It is true that s. 2(47) of the Act has been couched in the widest possible terms so as to include within the meaning of “transfer” even any arrangement which has the effect of enabling the enjoyment of any immovable property. But then sub-cls. (v) and (vi) of s. 2(47) which give wider amplification to the concept of “transfer” under the IT law were introduced in the definition only by the Finance Act, 1987 only w.e.f. 1st April, 1988, i.e., long after the assessment year in question. Prior to the insertion of the above two sub-clauses, the expression “transfer” had a restricted meaning and the interpretation given to the expression “transfer” by the apex Court in Alapati Venkataramiah vs. CIT (1965) 57 ITR 185 (SC) was holding the field. As per the said interpretation, mere delivery of possession of immovable property could not by itself be treated as equivalent to conveyance of immovable property and title to immovable property could not pass to the transferee till a deed of conveyance was duly executed and registered. Similarly, in the case of “house property” falling under s. 22 of the Act, a person in possession under an agreement falling under s. 53A of the Transfer of Property Act may be an owner within the meaning of cl. (iiia) of s. 27 of the Act after the introduction of the said clause w.e.f. 1st April, 1988 by the Finance Act, 1987. But until the insertion of the said clause, owner could only be a person satisfying the requirements of an owner under the common law, that is, a person who has got valid title legally conveyed to him after due compliance with the requirements of the Transfer of Property Act, the Registration Act, etc. Vide CIT vs. Podar Cement (P) Ltd. (1997) 141 CTR (SC) 67 : (1997) 226 ITR 625 (SC).
7. Even assuming that the property in question was in the possession of Asokan, the individual partner, there was no evidence of any valid transfer of the property by the firm in favour of Asokan. Admittedly, Asokan had not filed any return for capital gains in respect of the alleged transaction. On the contrary, there is the unimpeachable and tangible material in the form of two sale deeds, dt. 13th Sept., 1982 and 27th Oct., 1982, respectively executed by the firm in favour of M/s Haji P.K. Moidu & Co. transferring the 56 cents of garden land with a building. If so, it was the assessee-firm which was liable to be taxed for capital gains as was rightly done by the AO. The view taken by the CIT(A) in appeal and Tribunal on further appeal cannot, therefore, be sustained. The orders of the said authorities are, accordingly, set aside and the order of the assessing authority is restored.
The questions of law are, accordingly, answered against the assessee and in favour of the Revenue. This appeal will, therefore, stand allowed as above.
[Citation : 292 ITR 663]
