ITAT, NAGPUR BENCH Allowability of exemption under section 54EC of IT Act, 1961

Allowability of exemption under section 54EC of IT Act, 1961

When there is no bar to take possession by an agreement and transfer can be treated to have taken place on the basis of an agreement and advance payments deposited in specified bonds as required under section 54EC, simply because the sale deed was executed later on, the assessee cannot be charged with default of violation of the provision of section 54EC.



ITAT, NAGPUR BENCH, NAGPUR

Bhikulal Chandak (HUF)

v.

ITO

ITA No. 81/Nag/2009

June 17, 2009



RELEVANT EXTRACTS:



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6.2 Section 53 A of the Transfer of Property Act. 1982 reads as follows:

“Whether any person contracts to transfer for consideration am 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. ' and the transfer 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 pan performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract.

then, notwithstanding that the contract, though required to be registered, has not been registered, or. where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract:

Provided that nothing in this section shall affect the rights oi' a transferee for consideration who has no notice of the contract or of the part performance thereof."

6.3 Therefore, if by way of a part performance of a contract as contemplated in section 53A of the Transfer of Property Act (i.e. agreement to sale) the assessee has received advance payments and deposited the same in specified bonds, he cannot be charged of defrauding the law. Holding this view of the matter, we emphatically hold that when there is no bar to take possession by an agreement and transfer can be treated to have taken place on the basis of an agreement and advance payments. Simply because the sale deed was executed later on the assessee cannot be charged with default of violation of the provision of section 54EC in this particular case.

6.4 Even with regard to ownership of house property, the
Hon’ ble Apex Court in the case of CIT vs. Podar Cement Pvt. Ltd.
reported in 226 IT R 625 has held that under the common law
"ownership” means a person who has got valid title legally conveyed to him after complying with the requirements o[ law such as the Transfer of Property Act. the Registration Act etc., in the context of section 22 of the Income-tax Act. 1961. Having regard to the ground realities and further having regard to the object of the Income-tax Act. Namely, to tax the income, "owner*" is a person who is entitled to receive income from the property in his own right. The requirement of registration of the sale deed in the context of section 22 is not warranted.

7. Even without going to all the strict interpretation, even otherwise on receipt of advance as per the agreement, if the assessee deposited the amount as required us 541-C. he cannot be treated as a defaulter for the same.

8. With the aforesaid analytical observation on both the factual aspect as well as the aspect on legal interpretation, we decline to agree with the CIT for invoking section 263 in this particular case. As per the provision of section 263, neither by the conduct of the assessee there is loss to Revenue nor the conduct of the assessee is prejudicial to the interests of the Revenue; rather the assessee was fair enough to deposit the amount immediately after receipt of the same as advance payments on the basis of the agreement to sale. Therefore, invoking of section 263 is totally unjustified and accordingly the same is quashed.

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