MECCANE INDUSTRIES LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE extent to which the assessee should be held liable for the capital gain alleged to have been secured by it in the assessment year 1968-69 is the matter which the Tribunal considered. THE correctness of the consideration so made having been called into question, at the instance of the assessee four questions have been referred to us. In substance those questions are as to whether an agreement to sell accompanied by delivery of possession can amount to transfer ; as to whether when an agricultural land is sold for use as house sites, it can be regarded as non-agricultural, and as to whether the cost of acquisition should be the cost of acquiring the agricultural lands or the market value as on the date the agricultural land is converted for use as land meant for use as house sites.

(2.) THE assessee had purchased 6.76 acres of land together with a factory and godown buildings, that factory and godown building being located in an area of about less than an acre, the remaining extent being open area on which some agricultural operations were continued to be carried on. THE purchase was on February 11, 1959. Seven years later, the lands were sold after demarcating the open area from the area in which the factory and godown buildings were located. An agreement to sell was entered into on August 19, 1966, on which date the assessee received an advance of Rs. 50,000 and also delivered possession to the other party. THE agreement, inter alia, required the assessee to execute conveyance deeds in favour of the nominees of the other party to the agreement and to receive the balance of the amount agreed to be paid for the land in instalments one of which was payable on December 31, 1966, and the other two instalments on March 31, 1967, and June 30, 1967.

(3.) COUNSEL in this context relied on the decision of the Supreme Court in Alapati Venkataramiah v. CIT [1965] 57 ITR 185. That case arose under Section 12B of the Indian Income-tax Act, 1922, which used the word "transfer". In that decision, the court held that in the context in which it was used, "transfer" meant effective conveyance of the capital asset to the transferee and that delivery of possession of immovable property could not, by itself, be treated as equivalent to conveyance of the immovable property.