Case: M/S SESHASAYEE STEELS P. LTD Vs. ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(2), CHENNAI

contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that 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 of a transferee for consideration who has no notice of the contract or of the part performance thereof. 13. In order that the provisions of Section 53A of the T.P. Act be attracted, first and foremost, the transferee must, in part performance of the contract, have taken possession of the property or any part thereof. Secondly, the transferee must have performed or be willing to perform his part of the agreement. It is only if these two important conditions, among others, are satisfied that the provisions of Section 53A can be said to be attracted on the facts of a given case. 14. On a reading of the agreement to sell dated 15.05.1998, what is clear is that both the parties are entitled to specific performance. (See Clause 14) 15. Clause 16 is crucial, and the expression used in Clause 16 is that the party of the first part hereby gives permission to the party of the second part to start construction on the land. 16. Clause 16 would, therefore, lead to the position that a license was given to another upon the land for the purpose of developing the land into flats and selling the same. Such license cannot be said to be possession within the meaning of Section 53A, which is a legal concept, and which denotes control over the land and not actual physical occupation of the land. This being the case, Section 53A of the T.P. Act cannot possibly be attracted to the facts of this case for this reason alone. 17. We now turn to the argument of the learned senior counsel appearing on behalf of the assessee based on Section 2(47)(vi) of the Income Tax Act. 18. This Court in Commissioner of Income Tax v. Balbir Singh Maini (2018) 12 SCC 354 adverted to the provisions of this sub-Section in the following terms: 24. However, the High Court has held that Section 2(47)(vi) will not apply for the reason that there was no change in membership of the society, as contemplated. We are afraid that we cannot agree with the High Court on this score. Under Section 2(47)(vi), any transaction which has the effect of transferring or enabling the enjoyment of any immovable property would come within its purview. The High Court has not adverted to the expression or in any other manner whatsoever in sub-clause (vi), which would show that it is not necessary that the transaction refers to the membership of a cooperative society. We have, therefore, to see whether the impugned transaction can fall within this provision. 25. The object of Section 2(47)(vi) appears to be to bring within the tax net a de facto transfer of any immovable property. The expression enabling the enjoyment of takes color from the earlier expression transferring, so that it is clear that any transaction which enables the enjoyment of immovable property must be enjoyment as a purported owner thereof. The idea is to bring within the tax net, transactions, where, though title may not be transferred in law, there is, in substance, a transfer of title in fact. 19. Given the test stated in paragraph 25 of the aforesaid judgment, it is clear that the expression enabling the enjoyment of must take colour from the earlier expression transferring, so that it can be stated on the facts of a case, that a de facto transfer of immovable property has, in fact, taken place making it clear that the de facto owners rights stand extinguished. It is clear that as on the date of the agreement to sell, the owners rights were completely intact both as to ownership and to possession even de facto, so that this Section equally, cannot be said to be attracted. 20. Coming to the third argument of the learned senior counsel on behalf of the appellant, what has to be seen is the compromise deed and as to which pigeonhole such deed can possibly be said to fall under Section 2(47) of the Income Tax Act. A perusal of the compromise deed shows that the agreement to sell and the Power of Attorney are confirmed, and a sum of Rs.50 lakhs is reduced from the total consideration of Rs.6.10 crores. Clause 3 of the said compromise deed confirms that the party of the first part, this is the appellant, has received a sum of Rs.4,68,25,644/- out of the agreed sale consideration. Clause 4 records that the balance Rs.1.05 crores towards full and final settlement in respect of the Agreement entered into would then be paid by 7 post-dated cheques. Clause 5 then states that the last two cheques will be presented only upon due receipt of the discharge certificate from one M/s. Pioneer Homes. 21. In this context, it is important to advert to a finding of the ITAT, which was that all the cheques mentioned in the compromise deed have, in fact, been encashed. 22. This being the case, it is clear that the assessees rights in the said immovable property were extinguished on the receipt of the last cheque, as also that the compromise deed could be stated to be a transaction which had the effect of transferring the immovable property in question. 23. The pigeonhole, therefore, that would support the orders under appeal would be Section 2(47)(ii) and (vi) of the I.T. Act in the facts of the present case.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]14. On a reading of the agreement to sell dated 15.05.1998, what is clear is that both the parties are entitled to specific performance.16. Clause 16 would, therefore, lead to the position that a license was given to another upon the land for the purpose of developing the land into flats and selling the same. Such license cannot be said to be possession within the meaning of Section 53A, which is a legal concept, and which denotes control over the land and not actual physical occupation of the land. This being the case, Section 53A of the T.P. Act cannot possibly be attracted to the facts of this case for this reason alone19. Given the test stated in paragraph 25 of the aforesaid judgment, it is clear that the expression enabling the enjoyment of must take colour from the earlier expression transferring, so that it can be stated on the facts of a case, that a de facto transfer of immovable property has, in fact, taken place making it clear that the de facto owners rights stand extinguished. It is clear that as on the date of the agreement to sell, the owners rights were completely intact both as to ownership and to possession even de facto, so that this Section equally, cannot be said to be attracted20. Coming to the third argument of the learned senior counsel on behalf of the appellant, what has to be seen is the compromise deed and as to which pigeonhole such deed can possibly be said to fall under Section 2(47) of the Income Tax Act. A perusal of the compromise deed shows that the agreement to sell and the Power of Attorney are confirmed, and a sum of Rs.50 lakhs is reduced from the total consideration of Rs.6.10 crores. Clause 3 of the said compromise deed confirms that the party of the first part, this is the appellant, has received a sum of Rs.4,68,25,644/- out of the agreed sale consideration. Clause 4 records that the balance Rs.1.05 crores towards full and final settlement in respect of the Agreement entered into would then be paid by 7 post-dated cheques. Clause 5 then states that the last two cheques will be presented only upon due receipt of the discharge certificate from one M/s. Pioneer Homes21. In this context, it is important to advert to a finding of the ITAT, which was that all the cheques mentioned in the compromise deed have, in fact, been encashed22. This being the case, it is clear that the assessees rights in the said immovable property were extinguished on the receipt of the last cheque, as also that the compromise deed could be stated to be a transaction which had the effect of transferring the immovable property in question23. The pigeonhole, therefore, that would support the orders under appeal would be Section 2(47)(ii) and (vi) of the I.T. Act in the facts of the present case.