Commissioner Of Income-Tax vs Reliance International Corporation P. ...

1. The Revenue seeks to have the following question, stated to be a question of law, referred to this court for its opinion :

"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal, Delhi Bench, New Delhi, was correct in upholding the order of the Commissioner of Income-tax (Appeals) and confirming the directions to give effect to the application under Section 154 moved by the assessed and whether there has been any mistake apparent from the record which could be rectified ?"

2. The assessed is a private limited company. For the assessment year 1978-79 (accounting year ending May 31, 1977), the assessed filed its return of income on June 30, 1978, disclosing an income of Rs. 96,280. Assessment was completed by the Income-tax Officer assessing the income at Rs. 2,93,339. He brought to tax an amount of Rs. 1,91,718 under the head "Capital gains". It so happened that the assessed on June 7, 1976, purchased two flats bearing Nos. 204 and 205 in Madhuban building, Nehru Place, New Delhi, from Ansal Properties and Industries (P.) Ltd. for an amount of Rs. 2,24,682 These flats were already with Sehgal Papers Ltd., New Delhi, as tenants. Under an agreement dated October 30, 1976, for an amount of Rs. 4,16,400 the assessed agreed to sell these flats to the Sehgal Papers Ltd. Possession of the flats was already with the Sehgal Papers Ltd. as tenants. On this basis, the Income-tax Officer assessed a sum of Rs. 1,91,718 being the difference between the cost price and agreed sale price as profit by sale of these flats as short-term capital gains in his assessment order. We may also note that subsequently Ansal Properties and Industries (P.) Ltd. refused to register the flats in favor of Sehgal Papers Ltd. and the deal, therefore, could not materialise and the assessed refunded the amount of sale consideration which was agreed to by Sehgal Papers Ltd. The assessment order of the Income-tax Officer is dated April 10, 1981. The assessed filed an application under Section 154 of the Income-tax Act, 1961 (for short "the Act"), on October 16, 1982, as he said there was a mistake apparent from the record inasmuch as the agreement to sell had not materialised and no title in the flats had passed from the assessed (to the transferee) and there was no transfer of the capital assets within the meaning of Clause (47) of Section 2 of the Act. At the relevant time this clause read as under :--

"'transfer', in relation to a capital asset, includes the sale, exchange or relinquishment of the asset or the extinguishment of any rights therein or the compulsory acquisition thereof under any law."

3. Subsequently, this clause was amended twice--once with effect from April 1, 1985, and again with effect from April 1, 1988. After April 1, 1988, Sub-clause (v) was added, and earlier from April 1, 1985, the word "transfer" had been redefined with reference to Sub-clauses (i), (ii), (iii) and (iv). Now, this clause after two amendments reads as under :

"(47) 'transfer', in relation to a capital asset, includes,--

(i) the sale, exchange or relinquishment of the asset ; or

(ii) the extinguishment of any rights therein ; or

(iii) the compulsory acquisition thereof under any law ; or

(iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment ; or

(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 Section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or ...

Explanation.--For the purposes of Sub-clauses (v) and (vi) immovable property shall have the same meaning as in Clause (d) of Section 269UA."

4. The Income-tax Officer rejected the application of the assessed who filed an appeal against that order before the Commissioner of Income-tax (Appeals). The appeal was also rejected by order dated March 19, 1983. The assessed went in further appeal to the Income-tax Appellate Tribunal who by order dated September 14, 1984, held that there was a mistake apparent on record and that the application under Section 154 was maintainable, and a direction was, therefore, issued to the Assessing Officer to decide the assessability of the capital gains in the light of the documents produced before him. The orders of the Income-tax Officer as well as of the Commissioner of Income-tax (Appeals) were accordingly set aside and the matter was restored to the file of the Income-tax Officer. This order of the Tribunal attained finality inasmuch as it is stated that no reference application against the said order was made by the Revenue.

5. Then started the second round. The Assessing Officer by order dated March 27, 1987, again held that the income arising out of the transaction in question was assessable in the hands of the assessed "because if not immovable properties as such at least right in the immovable properties has been transferred". The assessed filed an appeal before the Commissioner of Income-tax (Appeals) wherein he succeeded and the order in appeal is dated December 1, 1988. The Commissioner of Income-tax (Appeals) found that there was no transfer within the meaning of Section 2(47) of the Act. He recorded the submission of the assessed that it had refunded the consideration received and that it had charged rent from Sehgal Papers Ltd. and also had taken back possession from them on June 1, 1982, and again rented out the two flats to Hindustan Fertilisers Corporation, and that the assessed had shown rental income from these two flats for the assessment year 1978-79 and had paid taxes on that, and had also claimed depreciation on the flats in the income-tax returns all through. Against the order of the Commissioner of Income-tax (Appeals), the Revenue went to the Income-tax Appellate Tribunal who by order dated May 29, 1992 dismissed the appeal of the Revenue. The Tribunal held that in view of the fact that there had been no transfer at all, the order of the Commissioner of Income-tax (Appeals) was correct and the concluding paragraph of the order of the Appellate Tribunal is as under ;

"However, in view of there being no transfer at all we uphold the order of the Commissioner of Income-tax (Appeals) and confirm his action or direction to give effect to the application under Section 154 moved by the assessed.

In the result, the appeal filed by the Revenue is accordingly dismissed."

6. From the aforesaid observations, Mr. Gupta, learned counsel for the Revenue, submits that a question of law, as proposed above, does arise. Mr. Gupta also said that the amendment made in section 2(47) of the Act subsequently with effect from April 1, 1985, and April 1, 1988, was merely clarificatory in nature and the agreement to sell in the present case, though executed in the previous year relevant to the assessment year 1978-79, amounted to transfer within the meaning of Section 2(47) as it originally existed. We do not agree. The order of the Tribunal dated September 14, 1984, having become final, wherein the Appellate Tribunal held that there was a mistake apparent on the record and that the application under Section 154 of the Act was maintainable, the issue regarding the applicability of Section 154 of the Act, now sought to be raised in the proposed question, does not survive. As regards the amendments in Section 2 of the Act, these are substantive in nature, and further if what Mr. Gupta said was correct there was no need for the Legislature to mention that these amendments would be effective from particular dates. We may also note that the Central Board of Direct Taxes, in its Circular No. 495 dated September 22, 1987, since reported in [1987] 168 ITR (St.) 87, 92, had also clarified that the said amendment shall come into force with effect from April 1, 1988, and will accordingly apply to the assessment year 1988-89 and subsequent years. For one thing, the question proposed does not arise out of the order of the Tribunal dated May 29, 1992, and, two, the answer is self-evident.

7. Mr. Gupta also said that Section 53A of the Transfer of Property Act is on the statute book for over half a century and any transaction falling within the scope of that section amounted to transfer. This again is wrong. Section 53A of the Transfer of Property Act deals with the doctrine of part performance. It is an equitable doctrine of part performance in vogue in England and was partially imported into this country by enacting Section 53A. This section does not confer any title on the transferee in possession but merely imposes a statutory bar on the transferor. The doctrine of part performance is a defense. It is a shield and not a sword. It is a right to protect the transferee's possession against any challenge to it by the transferor contrary to the terms of the contract. It is now by amending Section 2(47) of the Act introducing Sub-clause (v) that a transaction falling ' within the provisions of Section 53A of the Transfer of Property Act has been treated as transfer in relation to capital assets. Such a definition of transfer cannot be applied when we look at Section 53A of the Transfer of Property Act independently of the word "transfer" as defined in Section 2(47) of the Act.

8. No referable question of law, as formulated, arises for consideration. Accordingly, this petition fails and is dismissed.