JUDGMENT
N.N. Mathur J.
1. This reference application under Section 256(2) of the Income-tax Act, 1961, is at the instance of the assessee.
2. The facts giving rise to the instant reference application are that the asses-see filed a return for the assessment year 1973-74, showing total income at Rs. 25,700 from the interest and rent. During the course of the assessment proceedings, it was noticed that the assessee had sold certain immovable properties during the previous year relating to the assessment year in question but he had declared no capital gain on the sale of the said property. According to the assessee, no capital gains chargeable to tax had been earned by him on the sale of the said properties. The Assessing Officer by an assessment order dated September 6, 1984, made an addition of Rs. 3,33,735 on account of capital gain. The said addition was only with respect of one of the properties, namely, Shiv Nivas Palace. It is alleged that by an agreement to sell dated
June 27, 1971, the assessee in his capacity as karta of the Hindu undivided family agreed to transfer certain properties to Lake Palace Hotels and Motels (Pvt.) Ltd. As per the terms of the agreement for sale, Shiv Nivas Palace was to be sold to Lake Palace Hotels and Motels Pvt. Ltd., for Rs. 3,25,000. It was mentioned in the sale deed that the total consideration had already been received by the transferor and the possession of transferred property had been delivered to the transferee. On May 6, 1972, an entry with respect to the sale consideration was duly made in the account of Lake Palace Hotels and Motels Pvt. Ltd. in the books of the assessee. It was submitted on behalf of the Hindu undivided family-assessee that by a subsequent memorandum of undertaking, hereinafter referred to as “MoU”, dated January 12, 1973, the parties agreed and accepted that only the lower portion of the Shiv Nivas Palace was transferred for a consideration of Rs. 95,000 and the upper portion thereof was not transferred to the transferee. It was also submitted that subsequently the upper portion was sold out by the assessee to Lake Palace Hotels and Motels Pvt. Ltd. under a lease deed dated December 14, 1978. It was also submitted that the cancellation deed dated October 9, 1984, was also executed between the parties. It was contended that since the registered sale deed executed between the parties on June 16, 1972, was not acted upon and the entry made in the books was also reversed on March 31, 1973, no capital gain was chargeable on the transfer of the said property. The Assessing Officer rejected all the contentions and assessed the value of the property as on January 1, 1954, at Rs. 2,00,000. The assessee preferred an appeal which was rejected by the Commissioner of Income-tax (Appeals).
3. The assessee preferred further appeal before the Income-tax Appellate Tribunal and reiterated the contentions raised before the Assessing Officer. In the opinion of the Tribunal, the memorandum of undertaking dated January 12, 1973, the lease deed dated December 14, 1978, and the cancellation deed dated October 9, 1984, and the certificate dated March 15, 1989, could not change the legal position that the property in question had stood transferred to Lake Palace Hotels and Motels Pvt. Ltd. Further, in the opinion of the Tribunal, the documents referred to are self-serving documents and as such they cannot be acted upon being in violation of the provisions of the Transfer of Property Act, the Indian Registration Act and the Stamp Duty Act. In the opinion of the Tribunal, the case of the assessee with respect to non-transfer of the Shiv Nivas Palace during the subject assessment year was an afterthought. The Tribunal held that the property in question had been duly transferred for Rs. 3,25,000 on June 16, 1972. Accordingly, the Income-tax Appellate Tribunal rejected the appeal.
4. The assessee filed an application under Section 256(1) of the Income-tax Act seeking certain questions to be referred to this court for the opinion. The Tribunal found the questions formulated not worth reference as its findings
being essentially finding of fact recorded on appreciation of material on record.
5. It is submitted by Mr. Rajendra Mehta, learned counsel for the assessee, that a deed of cancellation of instrument dated May 10, 1972, in respect of the subject property known as the upper portion of Shiv Nivas Palace was executed between the assessee and Lake Palace Hotels and Motels Pvt. Ltd. on October 5, 1984. The parties stated in the said instrument that Lake Palace Hotels and Motels Pvt. Ltd. did not pay consideration for upper portion, that possession of the said portion was also not delivered to the company that the sale deed May 10, 1972, was void in respect of the upper portion. It was also stated that memorandum of undertaking dated January 12, 1973, was executed between the parties and the sale deed in respect of the upper portion was treated as ineffective and void. It was further submitted that the said memorandum of undertaking was not registered and, therefore, as per advice cancellation instrument was executed and registered in confirmation of memorandum of undertaking. It was specifically stipulated in the registered cancellation deed that the sale of the upper portion stands cancelled from the date of the execution of sale deed dated May 10, 1972, and consequently the sale deed was ineffective to that extent. It is submitted by Mr. Rajendra Mehta that the Tribunal has completely over looked the factual position With respect to the non-receipt of consideration regarding the upper portion and non-delivery of its possession to the transferee. It is urged that the Tribunal failed to consider the fact that the reversal accounting entries were made in the books of the transferee and in the balance-sheet of the very year the lower portion of Shiv Nivas Palace was shown as property of the assessee. Thus it is vehemently argued that the purported sale of the upper portion shown in the sale deed is wholly ineffective and void since inception. It is submitted by Mr. Mehta that the instant reference relates to the construction of documents of title or the interpretation of the clauses of certain documents which is purely a question of law. Learned counsel has referred to the decisions of the apex court in CIT v. Daulatram Rawatmull [1964] 53 ITR 574 ; G. Venkataswami Naidu and Co. v. CIT [1959] 35 ITR 594 and Oriental Investment Co, P. Ltd. v. CIT [1969] 72 ITR 408. It is consistently held that if the point raised in the reference relates to construction of document of title or interpretation or the relevant provision of a statute is a pure question of law.
6. On the other hand, it is submitted by Mr. Bhandawat that the finding of fact cannot be disturbed by the High Court on a reference except on the ground that there is no evidence to support it or it is perverse. Learned counsel has placed reliance on the decision of this court in CIT v. R. Y. Durlabhji [1995] 211 ITR 178. He also placed reliance on the decision of the apex court in CIT v. Sri Meenakshi Mills Ltd. [1967] 63 ITR 609 ; AIR 1967 SC 819. He has also placed reliance on the decision of the Punjab and Haryana High Court in
Om Parkash v. CIT [1986] 159 ITR 973. Learned counsel has read the relevant findings of the Tribunal and asserted that the said findings are purely findings of fact.
7. We have considered the rival contentions. The apex court in Oriental Investment Co. P. Ltd. v. CIT [1969] 72 ITR 408 has held that if the point raised on a reference relates to the construction of a document of title or the interpretation of the relevant provisions of a statute it is a pure question of law. The apex court further observed that in dealing with it, the High Court may have regard to the view taken by the Tribunal, but its decision would not be accepted as final. The same view has been taken in CIT v. Daulatram Rawat-mull [1964] 53 ITR 574 (SC).
8. In the instant case, the Tribunal has simply rejected the consideration of all the documents saying that they are self-serving and contrary to the provisions of the Transfer of Property Act, the Indian Registration Act and the Stamp Duty Act. Since, in the instant case, the capital gains accrued only if there was sale of the upper portion of Shiv Nivas Palace, the assessee is entitled to show that in fact no sale took place or the transaction was void from the inception or the sale was sham. If the assessee succeeds therein no capital gain will accrue.
9. Thus, in our opinion, the Tribunal has committed an error in refusing to refer the question of law as formulated by the assessee in his application for the opinion of this court.
10. For the aforesaid reason, we allow this reference application and direct the Income-tax Appellate Tribunal, Jaipur, to draw up the statement of facts and refer the following question of law for the opinion of this court :
“Whether the learned Tribunal had material and was right in law in holding, (i) memorandum of undertaking dated January 12, 1973 ; (ii) reversal of entry for Rs. 2,30,000 on March 31, 1973 ; (iii) letting out of upper portion of Lake Shore Palace Hotels Co. Pvt. Ltd. under lease deed dated December 14, 1978 ; (iv) execution of cancellation deed dated October 9, 1984 ; (v) assessment of lease income and value of impugned property in income-tax and wealth-tax assessments by the Revenue during various years ; (vi) certificate dated March 15, 1989, of Lake Palace Hotels and Motels Pvt. Ltd. are self-serving documents and the upper portion of Shiv Nivas Palace Stood transferred on June 16, 1972, making the appellant liable to capital gain under Section 45 of the Act ?”