ORDER
M. A. Bakshi, J.M.
1. The only dispute in this appeal of the assessee, for asst. yr. 1989-90, is relating to assessment of capital gains in respect of sale of bungalow at Bangalore. Rival contentions have been heard and records perused.
2. The relevant facts, in this case, are that the assessee had entered into an agreement for sale in regard to a bungalow at Bangalore on 9th of June, 1988. As per the agreement the assessee agreed to sell the aforementioned immovable property in consideration of Rs. 9,60,000 which was to be received as per the schedule of payments given in cl. 2 of the agreement reproduced hereunder :
“2. The schedule of payment of the sale consideration by the purchaser to the vendor shall be detailed hereunder, namely :
(a) Rs. 1,25,000 is paid along with the agreement;
(b) Rs. 1,75,000 will be paid before 31st August, 1988;
(c) Rs. 2,50,000 will be paid before 30th November, 1988;
(d) Rs. 1,25,000 will be paid before 31st January, 1989;
(e) Rs. 1,60,000 will be paid before 30th June, 1989; and
(f) Final payment of Rs. 1,25,000 before the registration of the full property”.
3. The purchaser of the property is a builder. The bungalow was to be demolished and a new building constructed. As per cl. 3 of the sale agreement the assessee had undertaken to execute the deeds of sale in the name of the purchaser or his nominee or nominees and to admit execution of document/s for purposes of registration of the document/s by their duty authorized agent only. In other words, the registration of the conveyance had not taken place in the previous year relevant to asst. yr. 1989-90. The assessee had received a sum of Rs. 6,75,000 in the previous year relevant to assessment year under appeal, leaving a balance of Rs. 2,85,000 which was paid, in the subsequent year.
4. It is evident from the facts stated above that the legal title of the property had not been transferred in favour of the purchaser during the previous year relevant to the year under appeal. However, the AO has invoked s. 2(47)(v) inserted w.e.f. 1st April, 1988. The said section reads as under :
“2(47) ‘transfer’ in relation to a capital asset, includes :
(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part-performance of a contract of the nature referred to in s. 53A of the Transfer of Property Act, 1882 (4 of 1882)”.
Thus, the crucial question for our determination is as to whether the purchaser had taken the possession of property during the year under appeal as part-performance of the sale agreement. The AO has relied upon various factors such as a substantial portion of the sale consideration had been received by the assessee and that the bungalow had been allowed to be demolished during the year under appeal. The assessee had also allowed the builder to receive advances from the prospective buyers of flats to be constructed on the land sold by the assessee. The assessee, on the other hand, has relied upon a letter, dt. 27th March, 1989 addressed by the appellant to the builder giving consent for possession. Another letter, dt. 7th April, 1989, from the purchaser builder to the appellant stating that they will take possession of the property on 10th April, 1989, is also relied upon in support of the claim that possession of the property was handed over in the subsequent assessment year. The assessee has also relied upon the letter, dt. 17th November, 1989, from the purchaser requesting the appellant to execute fresh power of attorney in their favour. Reliance has been placed on the sale deed of undivided interest execution on 9th February, 1990.
5. Reliance has also been placed on the following decisions in support of the contention that the capital gain cannot be assessed where only an agreement to sell has been executed subject to fulfilment of certain conditions :
(1) Taherbhai H. Rupawalla vs. WTO in WTA No. 1259/Bom/1995, asst. yr. 1991-92, order dt. 10th December, 1996;
(2) CWT vs. Taherbhai H. Rupawalla in R.A. No. 219/Mum/1998, asst. yr. 1990-91, was rejected vide order, dt. 26th October, 1998;
(3) Uttam B. Joshi vs. Asstt. CIT in ITA No. 3955/Bom/1993, asst. yr. 1989-90, order dt. 27th January, 1999;
(4) B.K. Jhala & Associates vs. Asstt. CIT in ITA No. 1575/Pn/1991, asst. yr. 1989-90, order dt. 3rd June, 1999;
(5) Ajai Kumar Sah Jagati vs. ITO (1995) 55 ITD 348 (Del); and
(6) Asstt. CIT vs. Harish Jain (1998) 60 TTJ (Del) 669 : (1997) 61 ITD 494 (Del).
6. The learned Departmental Representative, on the other hand, contended that the assessee had executed a sale deed and has also given a power of attorney to the vendees. The vendees had taken possession of the property as part-performance within the meaning of s. 53A. The vendees were allowed to demolish the bungalow during the previous year relevant to the assessment year under appeal. The vendees had undertaken to pay all outgoing in respect of the scheduled property and the building that was to be constructed thereon (cl. 7 of the power of attorney). The vendees had also been authorized to apply for water connection, electricity supply and other incidental requirements, which may be required for the purpose of constructing such building. It was further contended that the letters exchanged between the assessee and the builder have no evidentiary value as the facts and circumstances establish that the possession of the property was handed over to the vendees in the year under appeal. It was also contended that substantial amount of money received by the assessee and the possession of the property had also been given to the vendees and, therefore, the capital gain was rightly assessed to tax in the year under appeal.
7. We have given our careful consideration to the rival contentions. In this case the limited issue is as to whether the property was sold in the year under appeal and if not as to whether the possession of the property was handed over within the meaning of s. 53A of the Transfer of Property Act. The facts have been elaborately given in the preceding paras. The assessee had executed an agreement to sell on 9th of June, 1988. A power of attorney was also executed in favour of the vendees on the same date. The said power of attorney was however not registered. The various factors which are relevant for deciding the issue as per the agreement and the power of attorney are as under :
The assessee had agreed to sell land and bungalow to the vendees in consideration of Rs. 9,60,000. The amount of consideration was to be received in a phased manner as specified in the agreement. The assessee had received a sum of Rs. 6,75,000 out of the total consideration of Rs. 9,60,000 as on the end of the previous year. The assessee had granted general power of attorney to the purchasers for obtaining licence from Government authorities (cl. 6 of the agreement). The purchasers had also been granted liberty to advertise for sale, negotiations and collection of money for the proposed flats to be constructed on demolition of the bungalow. In the case of breach of the terms and conditions of the agreement, the assessee was having a right to forfeit the money paid by the purchaser. The assessee had undertaken to execute sale deeds in the name of purchasers or the nominees of purchasers and admit execution of documents for purposes of registration of the documents. In the absence of any clause in the agreement for possession of the property, we are left with no alternative but to consider the circumstantial evidence in order to arrive at a fair conclusion.
The Department is relying upon the power of attorney, which authorizes the purchasers to approach the Government for obtaining licences in connection with the construction of the building. The vendees had also given the liberty to advertise for sale and collect money from the prospective buyers. The assessee had allowed the demolition of the bungalow for allowing the construction of the new building before the end of the previous year. The assessee, on the other hand, has relied upon the fact that she had undertaken to execute the sale deeds in favour of the purchasers or their nominees. This part of the agreement was not performed in the previous year. Reliance has also been placed on the letter dt. 27th March, 1989, indicating the willingness of handing over the possession of the property and also another letter written by the builder to the assessee which is, dt. 7th of April, 1989, confirming the taking over of the possession of the property.
8. In our view, whereas each fact taken in isolation may not be sufficient to take one view or the other, but the totality of the facts and circumstances taken into account do establish that the possession of the property was handed over to the vendees before 31st of March, 1989. The fact that the vendees had been authorized to apply for seeking permission from the municipal authorities for construction of the house property may not be conclusive, as the vendees had been authorized to apply to the authorities only on behalf of the vendor. Therefore, any permission granted by the authorities would be in the name of the vendor and as such the permission would have saved sometime for the vendee in starting the construction of the property. This fact may not have the effect of transfer of property. But an important factor that has been taken note of by the CIT(A) is the demolition of the bungalow. The CIT(A) in his order has recorded that the fact of demolition of bungalow in the year under appeal has not been disputed. If it is stated that the possession of the property was not handed over to the vendees, how could it be possible for them to demolish the building ? It was contended before us that allowing the demolition of the building should be taken as a licence from the vendor to the vendees to do so and not as an act of handing over possession to them. This contention advanced on behalf of the assessee is not well founded. As per the sale agreement the vendor had sold land and bungalow to the vendees. Therefore, the demolition of the bungalow could be on behalf of the vendees and not on behalf of the vendor. If the bungalow is demolished at the behest of the vendor then the bungalow cannot be transferred to the vendees. Since the sale deed is in respect of the land and bungalow, the act of demolishing the bungalow cannot but be on behalf of the vendees. Therefore, the fact of demolition of the bungalow in the previous year strongly supports the claim of the Revenue that the assessee had handed over the effective possession of the scheduled property to the vendees. The exchange of letters between the vendor and vendees may be afterthought as the vendees are established to have taken over the possession of the property much before the letters are stated to have been exchanged. It is also pertinent to mention that handing over of the possession of the property as per the sale agreement was not to be postponed till substantial part of the payments were paid by the vendees. The assessee had completed all the formalities that were required to be completed so as to give full control of the property to the vendees. The power of attorney was also executed in favour of the vendees. The fact that the vendee required the power of attorney to be registered as they faced some difficulty with some authorities is not a factor to establish that the possession of the property had not been handed over to the vendees in the previous year relevant to the year under appeal. The fact that the assessee had agreed to execute sale deeds in the name of the purchasers or their nominees after the completion of the construction of flats is a facility provided to the builders. But for this facility the sale deed would have been registered in the name of the builder for which the stamp duty and registration charges would be payable by the builder. The builder or his purchasers would be required again to pay stamp duty and registration charges when the builder would transfer the property in the name of the purchasers. The assessee by agreeing to execute the sale deeds in the name of the builder or his nominees has the effect of saving of stamp duty and registration charges and this factor does not support the claim that the possession of the property was not handed over to the vendees.
9. Taking into account the totality of the facts and circumstances of the case we are of the view that the Revenue was justified in assessing the capital gain by invoking Expln. to s. 2(47) of the IT Act, 1961. No other ground of appeal has been argued before us.
10. In the result, the appeal of the assessee is dismissed.