D KASTURI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE petitioner entered into an agreement on March 29, 1993, for the sale of her property which agreement, inter alia, provided for delivery of possession of the property to the proposed vendee on receipt of the consideration specified in the agreement. THE consideration so specified being a sum of Rs. 25 lakhs was received by the assessee/petitioner in August, 1993. She executed a power of attorney on August 17, 1993, in favour of the two partners of the firm with whom she had entered into an agreement of sale. THE power of attorney was executed after clearance had been obtained for the sale of property under Chapter XX-C of the Income-tax Act. THE property remained with the firm, Chettinad Investments, which had taken possession from the petitioner during the year 1993-94. THE firm did not choose to obtain a sale deed from the petitioner and have it registered. Instead, the partners of the firm who had obtained power of attorney proceeded to sell the portions of the property on and after March, 1995, to others and those sale deeds were executed by them describing themselves as the agents of the petitioner-assessee. THE petitioner in her return for the assessment year 1994-95 reported a capital gain from the sale of the property by treating the transfer of possession to the proposed vendees in August, 1993, as having resulted in a transfer for the purpose of section 2(47) of the Act which in clause (v) provides that any transaction involving the allowing of 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 (Act 4 of 1882), would amount to a transfer in relation to the capital asset. THE sum of Rs. 25 lakhs was shown as proceeds of the transfer and long-term capital gain was worked out at Rs. 19, 60, 500. After having filed that return, she subsequently filed a statement revising the net capital gain as Rs. 7, 05, 800 claiming that there was no transfer during the assessment year 1994-95 and that the actual transfers were made in the assessment year 1995-96 when persons to whom she had given power of attorney executed sale deeds in favour of others and registered those sale deeds in that year. That claim of the assessee was rejected by the Assessing Officer. A revision to the Commissioner under section 264 of the Act also having proved unsuccessful, the assessee has filed the writ petition challenging the order of the Commissioner. THE assessee has also challenged the levy of interest under sections 234A, 234B and 234C on the income that was added in her assessment for the year 1994-95 on the ground that no interest under those provisions can be levied on the income that was assessed and that the interest under those provisions can only be levied on the income declared.Mr. V. Ramachandran, learned senior counsel for the assessee, submitted that the Commissioner has misconstrued section 53A of the Transfer of Property Act, the essential ingredients of which as held by the Supreme Court in the case of Nathulal v. Phoolchand, are - (1) that the transferor has contracted to transfer for consideration any immovable 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; (2) that 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; (3) that the transferee has done some act in furtherance of the contract; and (4) that the transferee had performed or is willing to perform his part of the contract. Counsel submitted that section 53A of the Act contemplates an agreement for the sale of the property with a person whose identity remains unchanged even when the sale deed is executed. It is contended that the agreement in this case having been entered into with a firm, and the subsequent sale deeds having been executed by the persons to whom the assessee had given powers of attorney, in respect of some portions of the property and not the whole property, the essential requirement of section 53A are not satisfied. THE agreement dated March 29, 1993, between the petitioner and the firm, Chettinad Investments, was with reference to the whole of the property that was owned by the petitioner on the First Main Road, Raja Annamalaipuram, Madras. THE agreement required her to sell and the firm to buy the same at a price of Rs. 25 lakhs. THE agreement required her to deliver possession of the property on receipt of the consideration. THE obligation cast on the firm which had entered into an agreement was to pay the consideration. It performed the obligation in August, 1993, and secured delivery of possession. THE agreement was capable of being cancelled in the event of permission under Chapter XX-C of the Income-tax Act being refused. THE certificate sought was in fact granted and no occasion for cancelling the agreement arose. Every one of the ingredients of section 53A of the Transfer of Property Act was therefore satisfied when the firm was put in possession in August, 1993, at which time the assessee had also received the full consideration of Rs. 25 lakhs. THE subsequent act of the firm in selling portions of the property to other third parties, in the subsequent years and executing the sale deeds in favour of such vendees by utilising the powers of attorney granted to the partners by the assessee, does not in any manner militate against the operation of section 53A of the Transfer of Property Act. THE petitioner herself recognised this fact, when she made her return and reported the capital gain on the basis that she had effected transfer of property in August, 1993.After the assessee parted with possession of the property, such possession having been given only after payment of the agreed consideration for the sale, she could no longer assert possessory rights against the firm to which possession was given. THE fact that the firm chose to sell the property in portions to others does not in any manner affect the fact that the petitioner had transferred the property to the firm and the firm had become entitled to invoke section 53A as against the assessee. THE Commissioner was therefore right in rejecting the revision petition that was filed by the assessee. So far as the levy of interest of the amount that had not been returned as income is concerned, the interest levied under sections 234A, 234B and 234C is required to be set aside having regard to the decision of the Supreme Court in the case of CIT v. Ranchi Club Limited, which confirmed the decision of the Patna High Court in the case of Ranchi Club Limited v. CIT, which had held that interest under sections 234A, 234B and 234C can only be levied in respect of the income that had been returned and not in respect of the income assessed. In the result, the writ petition is allowed in part W.M.P. No. 5771 of 2000 is closed.