COMMISSIONER OF INCOME TAX Vs. K. JEELANI BASHA

JUDGEMENT

(1.) THE interesting question of law on the backdrop of more interesting facts was referred to us.

(2.) THE question is, "whether on the facts and in circumstances of the case. Tribunal was right in law in its interpretation of the provisions of Sec. 2(47)(v) of the Income Tax Act and not upholding the assessment for the entire capital gains in the assessment for the assessment year 1992 -93.

(3.) FEW facts of the case are : The assessee is an individual. He held a large property. The relevant assessment year is 1992 -93 for which the relevant previous year ended on 31 -3 -1992. The assessee had entered into an agreement on 10 -11 -1990, with one M/s Reliance Developments, Coimbatore, for the sale of property at No. 13, VOC Road, Cantonment, Trichy The property was vacant land with a building within the municipal limits. Obviously, the whole idea was to develop the property. The total area of the property was about 36,837 sq. ft. and the total consideration agreed was Rs. 57 lakhs. The purchaser (hereinafter referred to as "developer") paid a sum of Rs. 2 lakhs as advance on the date of agreement and agreed to pay a sum of Rs. 15 lakhs within two months from the date of the agreement and further sum of Rs. 10 lakhs within a further period of six months. It seems that the developer could not keep up the schedule. Therefore, some modifications were effected with the mutual understanding in the terms of the agreement. As per the modified agreement, the assessee parted with the possession of approximately 1/3rd of the total property on or about 15 -6 -1991. He also agreed that he would purchase a residential apartment bearing the area of 4,400 sq. ft, which would be eventually put up on the sold property at the consideration of Rs. 15,47,000. He also agreed that the developer/purchaser would construct a separate building in an area of 5,600 sq. ft. at the cost of Rs. 8 lakhs and this sum of Rs. 15,40,000 plus Rs. 8 lakhs totalling to Rs. 23,40,000 was to be adjusted out of the total consideration. But this adjustment was to be from the last instalment of the consideration payable by the developer to the assessee. The assessee it seems received an amount of Rs. 22 lakhs out of the consideration on his having parted with approximately one -third of the total property. He also added in this Rs. 22 lakhs the cost of the building of 8 lakhs which the developer agreed to construct over an area of 5,600 sq. ft. Thus, the capital gains for 1992 -93 were initially calculated on the basis of this Rs. 30 lakhs. However, the assessing authority calculated the whole capital gains on the basis of the total consideration of the transaction and not on Rs. 22 lakhs received by him and after making the adjustments; the total capital gains were assessed at Rs. 4,74,765.