SUPREME COURT OF INDIA

Ajay Kumar Shah Jagati

v.

Commissioner of Income-tax

S.H. Kapadia and B. Sudershan Reddy, JJ.

Civil Appeal Nos. 665-666 of 2008

January 24, 2008

Section 2(47) of the Income-tax Act, 1961 - Capital gains - Transfer - Assessment year 1989-90 - Assessee entered into an agreement to sell certain land to 'K' for Rs. 25 lakh - Subsequently, said land was divided into plots and 24 subdivided plots were transferred by assessee to nominees of 'K' for consideration of Rs. 15.2 lakh in relevant assessment year - Assessing Officer worked out capital gain on entire consideration of Rs. 25 lakh rejecting assessee's contention that since he had not given possession of entire area of land and continued to be in possession of land not transferred, section 2(47) was not applicable - Order of Assessing Officer was upheld by Commissioner (Appeals), but Tribunal allowed assessee's appeal - Whether since no revenue or municipal records had been produced which could have indicated as to whether entire land or a part thereof stood conveyed and delivered to 'K' at relevant time and on facts, it was not clear as to how many plots stood conveyed and how many plots remained Tribunal could not have allowed appeal in favour of assessee - Held, yes - Whether, therefore, matter was to be remitted to Tribunal for fresh consideration in accordance with law after considering relevant documents - Held, yes

Facts

The assessee had agreed to sell certain land, to ‘K’ for Rs. 25 lakh. Subsequently, said land was sub-divided and 24 sub-divided plots which were conveyed by the assessee to the nominees of ‘K’ for a consideration of Rs. 15,20,900. The Assessing Officer sought to assess capital gains with reference to total consideration of Rs. 25 lakh fixed in the agreement for sale. The assessee contended that since he had not given possession of the entire area of land and he continued to be in possession of the land not transferred, section 2(47) was not applicable. The Assessing Officer, however, rejected the contention of the assessee and worked out capital gains on the entire consider­ation of Rs. 25 lakh on the ground that major portion of total land had already been sold and, thus, the case stood covered under section 53A of the Transfer of Property Act, 1882. On appeal, the Commissioner (Appeals) confirmed the order of the Assessing Officer. However, on second appeal, the Tribunal held that the assessee was not liable to pay capital gain on the sum of Rs. 25 lakh. On revenue’s appeal under section 260A, the High Court upheld the order of the Tribunal.

On revenue’s appeal to the Supreme Court :

Held

In order that the case would fall under the extended meaning of the word ‘transfer’, possession is essential element to be con­sidered. [Para 9]

In the instant case, no finding qua possession had been recorded by the Tribunal. There was nothing on record to indicate the name of the applicant who had applied for sub-division. No revenue or municipal records had been produced which could have indicated as to whether the land or a part thereof stood conveyed and deliv­ered to ‘K’ at the relevant time. It was not clear as to how many plots stood conveyed and how many plots remained. In the absence of these basic facts which were primary facts, the Tribunal could not have allowed the appeal in favour of the assessee. What was the indexed cost of each plot was not mentioned. Unfortunately, none of the above aspects had been considered even by the High Court in its impugned judgment. [Para 10]

Therefore, the matter was to be remitted to the Tribunal for fresh consideration in accordance with law. The assessee was to be directed to file the relevant documents. [Para 11]

Thus, the impugned orders of the High Court and the Tribunal were to be set aside. [Para 12]