ORDER
Anubhav Sharma, Judicial Member. – This appeal filed by the assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi, (for short, “CIT(A)”), dated 30/01/2025 passed under section 250 of the Income Tax Act, 1961 (for short, “Act”) which is emanating from the assessment order dated 30.04.2021 passed u/s. 143(3) r.w.s. 144B of the Act by the ITO, for the Assessment Year (AY) 2018-19.
2. On hearing both the sides, we find that the controversy involved in the appeal of the assessee is the addition made by Ld. Assessing Officer („in short AO’) invoking provisions of Section 269 UA(F) of the Act by considering the lease granted by the assessee to a partnership firm M/s Kisan Sampada Food Path Industries Ltd. of the agricultural land which the assessee has claimed was owned by assessee as the co – owner along with son Shri Piyush Sachani. Ld. CIT(A) has sustained the same by relying on various judicial decisions and considering the transaction to be a nature of sale and sustaining the invocation of Section 50C of the Act by Assessing Officer to take the stamp value of the property for consideration of the capital gain.
3. Ld. AR has primarily submitted that the nature of transaction was not a perpetual lease, but in a form of tenancy and submitted that rather invocation of provisions of Section 269 UA(F) of the Act itself is vitiated.
4. Ld. DR has heavily relied on the impugned orders.
5. After giving thoughtful consideration to the material on record and the submissions, we are of the considered view that when Department is invoking provisions of the Act wherein deeming income is taxed on the basis that the assessee had tried to evade the tax liability, the Ld. Tax Authorities should sufficiently establish on the basis of substantive evidences, the facts which give rise to such a presumption and in the case in hand, we find that the Assessing Officer had questioned the lease deed on the basis that as per Section 269 UA(f) of the Act, the transaction has to be considered as transfer of immovable property and thus the total income of the assessee arising out of the stamp value of the property be considered as a capital gain under Section 45 of the Act.
6. We find that the assessee’s case was selected for limited scrutiny assessment on the issue of investment in immovable property and capital gains/income on sale of property and while examining the issue under Section 56(2)(X) of the Act in para 4.1 onwards, the Assessing Officer had made relevant discussions.
7. Then as we appreciate the impugned order of Ld. CIT(A), we find that Ld. CIT(A) observes in para 9.1 that the impugned transaction does not fall in the scope of transfer of capital asset under Section 2(47)(v) of the Act and instead Ld. CIT(A) invoked provisions of Section 2(47)(vi) of the Act and concluded that as lease was for over a long period of 50 years, it should be considered to be a transfer of property for the purpose of Section 2(47)(vi) of the Act. Thereafter, in para 11.1 had observed that provisions of Section 53A of the Transfer of Property Act have been duly applied by the Assessing Officer. To support this in para 11.3, reliance has been placed on the decision of this Tribunal in K.V. Satish Babu [HUF] v. ITO 201 ITD 876 (Bangalore – Trib.), Chandrashekar Naganagouda Patil v. Dy. CIT 183 ITD 457 (Bangalore – Trib.) and Super Poly Fabriks Ltd. v. CCE (2008) 217 CTR 107 (SC), which are in regard to deemed transfer arising out of transactions in which Section 53A of the Act is applicable.
8. However, we are of the considered view that Ld. CIT(A) has erroneously relied provisions of Section 53A of the Transfer of Property Act 1882 which codifies the equitable doctrine of part performance wherein it protects a buyer in possession of an immovable property from being evicted by seller even if the formal sale deed is unregistered or incomplete. However, there should be an agreement, enforceable under law to sell the property.
9. What is relevant in the case in hand is that there was no agreement to sell property, but contract of lease, wherein as per Article 36 of the Maharashtra Stamp Act 1958, the valuation of the stamp duty has been done.
10. Ld. Counsel has drawn our attention to the relevant schedule-I of the Maharashtra Stamp Act, 1958, wherein as per Article 36, the stamp duty has to be ascertained in case of lease including under lease or sub lease or any agreement to let or sublet or any renewal of lease.
11. Thus, there appears to be erroneous presumption to consider the contract to lease to be an agreement to sell and thereby taking recourse to Section 53A of the Act to hold that the nature of transaction is one which falls in the scope of Section 2(47)(vi) of the Act.
12. Rather for such transactions referred to in Section 53A of the Transfer of Property Act, 1882. The Act provides for deemed transfer under sub-clause (v) to 2(47) of the Act which Ld. CIT(A) has himself found to be not applicable in para 9.1 of impugned order. If the intention was to consider the contract of lease to be an arrangement under Section 2(47)(vi) of the Act, then the valuation of the lease deed in terms of Article 36 of the Maharashtra Stamp Act, 1958 establish that it was merely a transfer of possession under lease hold rights, in lieu of lease rent. We are of considered view that only because the lease of the immovable property is for a long period, the same will not make the transaction an “agreement” or any “agreement” falling in the scope of transfer’ for the purpose of Section 2(47)(vi) of the Act. The deemed transfer provisions for the purpose of Section 2(47)(vi) of the Act can be applied on transaction of specific nature like lease or family settlement, memorandum of understanding, collaboration or joint venture, only if the facts and circumstances surrounding the transaction make the same look line an Arrangement’ or Agreement’ which intends to circumvent the capital gains.
13. In the case in hand what is material is that the impugned lease is executed by two lessors who are Shri Manoharlal Jeevandas Sachani and Shri Piyush Manoharlal Sachani, who is the son of assessee, they are both co-owners of the property which they had purchased jointly by sale deed dated 19th May, 2012. The copy of which is available at page 10-18. The lease deed is executed in favour of M/s. Kisan Sampada Food Park Industries, a registered partnership wherein one of the co-sharers Shri Piyush s/o Manoharlal Sachani is a partner along with one Shri Himanshu s/o Manoharlal Sachani and Smt. Jiya Piyush w/o Piyush Sachani as partners. The lease deed mentions that for the purpose of establishing a family business under partnership in which one of the lessors is also a partner, the lease deed was executed.
14. Now, these circumstances, in no way indicate that there was an intention to alienate the rights, title and interest in the land to a person outside the family perpetually and thus allege that this “agreement” or “arrangement” in the form of lease was in any way a transfer of capital asset for the purpose of further invoking provisions of Section 50C of the Act and to thereby consider the stamp value of the property as a capital gain earned by the assessee during the year.
15. Thus, regardless to the fact that Assessing Officer has merely relied Section 269 (U)(A)(f) of the Act to consider the lease deed to be a transfer and that Ld. CIT(A) has instead considered it to be an agreement or arrangement falling in the definition of transfer for the purpose of Section 2(47)(vi) of the Act, we are of considered view on facts as discussed above, the lease deed as executed does not fall in the definition of transfer u/s. (2)(47) of the Act and thereby the impugned capital gain as calculated is not sustainable under law. Accordingly, we sustain the ground.
16. The appeal is allowed. The impugned addition is deleted.
