P.N. Khanna, J.
(1) The following question of law along with the statement of the case was referred to this Court under Section 66 (1) of the Indian Income Tax Act 1922, herein called the Act, by the Income-Tax Appellate Tribunal Delhi Bench B, at the instance of the Commissioner of income Tax, Delhi, Central & Rajasthan, Delhi
'WHETHER on the facts and in the circumstances of the case the assessed company was entitled to the deductions of the loss of Rs. 3,58,/83.00 under section 10(2) (vii) of the Income Tax Act, 1922. The Division Bench, when this matter first came up for hearing, before it, referred the question, in circumstances mentioned hereinafter. The referred question reads as follows: 'Whether on the facts and the circumstances of the case, the assessed-company nad sold the Crown Flour Mills to Hindustan Cold Stores and Refrigeration Limited within the meaning of Section 10(2) (vii) of the Income-tax Act 1922, and entitled to the deductions of the loss of Rs. 3,58,783.00under that Section?'
(2) The matter relates to the assessment year 1957-58, the relevant accounting year ending on September, 30, 1957. The assessed-company, Meattels Private Limited had been carrying on two distinct businesses, viz (1) the business of speculation in shares and the other commodities and (2) business of Flour Milling in the factory known as Crown Flour Mills. Since a number of years, the loses in its speculation business were wiping out the profits earned in the milling bussiness. The assessed-company, thereforee, decided to transfer the Crown Flour Mills to its subsidiary company, The Hindustan Cold Stores and Refrigeration Limited. A resolution was passed by the assessed-company on February 1, 1957, approving two drafts agreements relating to the sale of the Crown Flour Mills and its stock in trade etc. to the said subsidiary company in consideration of Rs. 8,75,000.00 and Rs. 3,75,063-12-10 respectively. The consideration for the sale of the Mills was received to have been accepted in equity shares of the subsidiary company of the face value of Rs. 8,75,000.00. Rs. 3,75,063-12-10 the consideration for the sale of stock in trade and other assets and liabilites was to be treated as loan to subsidiary company repayable at interest at the rate of 5 per cent per annum.
(3) The subsidiary company on its part had passed a resolution dated December, 29, 1956 for the purpose of starting negotiations for acquiring the Crown Flour Mills. Resolution was passed by the subsidiary company on February, 1957 approving the aforesaid draft agreements for the purchase of the Crown Flour Mills and its stock in Trade and other assets and liabilites. In February, 1, 1957 two separate agreements were executed between the two companies in pursuance of the above resolutions. The first agreement related to the sale of Crown Flour Mills for Rs. 8,75,000.00 on the terms and conditions set out there-in and was executed on a stamp paper of Rs- 1/8.00. The agreement provided for immediate delivery and possession of Mills to the subsidiary company, allotment of fully paid up equity shares of the suusidiary-company of the value of Rs. 8,75,000.00 to the assessed company within three months from the date of the agreement and execution of a proper sale deed by the assessed company at the expense of the subsidiary company within three months from the date of the receipt of fully paid up shares. The subsidiary company was made liable to pay all taxes and outgoings relating to the Crown Flour Mills with effect from the date of the agreement. A second agreement was also executed between the two companies relating to the sale of stock in trade and other moveable properties for Rs. 3,75,063-12-10; but the present reference is not concerned with this agreement.
(4) The subsidiary company actually took possession of the Crown Flour Mills as also the stock in trade and other articles transferred to it under the aforesaid agreements, on February, 1, 1957 and started running the Mills with effect from that date. Necessary intimation regarding the change of proprietorship of the Mills was given to the authorites and the Government Departments. On April, 3, 1957, the subsidiary company allotted equity shares of the face value of Rs. 8,75,000.00 to the assessed company as consideration for transfer of the mills. Necessary intimation to the allotment of the shares was given to the Registrar of Companies on the same date. The date of the execution of the sale deed was put off by the subsidiary company as it was not in a position at that time to provide money for the purchase of the necessary stamp paper for the sale deed, the stamp duty having risen from Rs. 15,000.00 to Rs. 75,000.00 in the meanwhile. The sale deed, however, was not executed till September 9, 1963 the date of decision of the Income Tax Tribunal.
(5) The sale of the Crown Flour Mills by the assessed company was at Rs. 3,58,783.00below its written down value. Allowance in respect of this loss was claimed to the extent of the said amount under section 10(2) (vii) of the Act. This claim was disallowed by the Income Tax Officer on the ground that the business of the Crown Flour Mills was still to be considered the business of the assessed company as before, as no registered sale-deed had been executed. The assessed company had not disclosed any income from the Crown Flour Mills in the assessment year 1957-58 on the ground that it had sold the Mills to the Subsidiary Company, which had actually earned the income there from. The subsidiary company had shown an income of Rs. 94.023.00 from the Crown Flour Mills in its return. This income was treated by the Income Tax Officer as income of the assessed company for the reason that the sale-deed in respect of the said Mills had not been executed and registered as was required by Section 54 of the Transfer of Property Act and the title to the property had not been passed to the subsidiary company and still remained vested in the assessed company.
(6) In appeal the Appellate Assistant Commissioner held that the property in the Mills and the stock in the trade and other articles did not pass to the subsidiary company for want of registered sale deed. The rejection of the assessed Company's Claim for loss of Rs. 3,58,783.00 under section 10(2) (vii) of the Act was upheld. The income of Rs. 94,000.00 however, was treated as the income of the subsidiary company.
(7) In appeal, the Tribunal was of the view, that the term 'sale' in section 10(2) (vii) being neither defined under the Act nor under the General Clauses Act, was to be interpreted in its normal and grammatical sense. It was held that the passing of the property was not essential for the completion of 'sale' in the popular and commercial sense of the term. It was, thereforee, held that the 'sale' in the present case possessed a1l the requisite elements of sale as understood in the popular and commercial sense and that the mere fact that the legal ritual of registration had not been complied with, did not stand in the way of treating it to be sale in the normal sense. The assessed company was accordingly held entitled to deduction of the loss of Rs. 3,58,783.00 under section 10 (2)(vii) of the Act.
(8) The Commissioner then applied to the Tribunal to submit the question of law arising from its order and the statement of the case to this Court. When the draft statement of the case was examined by the parties, a suggestion was made on behalf of the Revenue that a separate additional question be framed regarding the correct meaning of the term 'sale' as used in section 10(2) (vii). The Tribunal, however, expressed the view that the question as framed was wide enough to include this question and there was no need to add a sparate question.
(9) When the matter came up for the first time before the Division Bench of this Court, it was suggested on behalf of the Revenue that the question as referred be re-framed so as to include the question whether the Crown Flour Mills had been sold. On behalf of the assessed it was contested that this would amount to adding a new and different question which was not within the jurisdiction of this Court. The view of the Tribunal was about the inclusive nature of the question was also assailed and was said to be not binding on this court. The request for reference of the question was, thereforee, opposed. The power of this Court to reframe a question and to call for a supplementary case, if necessary, cannot be doubted; although a new and different question may not be added. The Bench was of the opinion that true scope of the reference waste determine whether or not the Crown Flour Mills was sold by the assessed company and this question of sale was well within the framework of the question as referred. The question was, thereforee, re-framed, as mentioned earlier, in the words already reproduced.
(10) It is, thereforee, necessary first to find out, what is meant by the word 'Sold' as occurring in section 10(2) (vii) of the Act, which reads as follows:-
'10(2)(vii) in respect of any such building machinery or plant which has been sold or discarded or demolished or destroyed, as the case may be, the amount by which the written down value thereof exceeds the amount for which the building, machinery or plant, as the case may be, is actually sold or its scrap value; Provided The words 'sold' 'sell' or 'sale' having the same connotation have not been defined in the Act. Mr. Karkhanis appearing on behalf of the assessed contended that the transaction in question was a 'sale' as understood in its popular or commercial sense,; and in this sense passing of property was not necessary to complete a sale. It was this interpretation which, according to him was rightly given to the word 'sale' by the Tribunal. Mr. Kirpal, appearing on behalf of the Revenue, submitted, on the other hand, that the word has to be assigned its accepted legal sense. The argument of Mr. Karkhanis cannot be accepted. The word 'sale' has to be interpreted in the sense it has acquired in law. In State of Madras, vs . Gannon Dunkerley & Co (Madras) Ltd. : 1SCR379 , the Supreme Court observed (para 33) : 'The ratio of the rule of interpretation that words of legal import occurring in a Statute should b& construed in their legal sense, is that these words have, in law, acquired a definite and and precise sense and that accordingly, the legislature must be taken to have intended that they should be understood in that sense.'
(11) The Supreme Court, while making the above observation did not restrict it to the interpretation of a Constitutional enactment, as was said by the Tribunal, while discussing this authority. On the other hand, the observation was of general character dealing with 'a Statute', not necessarily a Constitution Act, which according to the Supreme Court has to be interpreted not in restricted but broad sense. Even while considering in such a broad sense, the word 'sale' in the Constitution Act, in respect of a topic relating to taxation, the Supreme Court interpreted it in its legal sense and not in its popular sense, as according to it that word was a 'nomen juris', having a precise legal import. There is, thereforee, no justification to assign to the word 'sale' or 'sold', as occurring in Section 10(2) (vii), a popular or commercial sense.
(12) In order, thereforee, to understand the word 'sale' we have to ascertain the precise connotation, it possesses in law. And the Supreme Court while considering the implication of the word 'sale', in the same case : 1SCR379 was of the opinion that there could be sale only when it resulted in the passing of property.
(13) Sale under Section 54 of the Transfer of Property Act 1882 is a transfer of ownership, in exchange for a price paid or promised or part paid or part promised. Such transfer in the case of tangible immoveable property of the value of one hundred rupees and upward can be made only by a registered instrument. The contract of sale of immovable property, it has been specifically provided in that section, does not of itself create any interest in or charge on said property. Now the Transfer of Property Act has been on the Statute Book since 1882; and the word 'sale' in respect of immovable property of the value of rupees one hundred and upwards, has come to convey the idea of transfer of ownership for a price by means of a registered instrument. The word 'sale' thereforee, had become a word of well recognised legal import at the time when it was introduced in the Act; and in that sense, sale could be made only by a registered instrument, in the case of immovable property of the value of one hundred rupees and upwards. It is, thereforee, not possible to give it any other meaning. Although agreement of sale was executed in the present case and possession was handed over to the subsidiary company, it cannot be said that it was a sale of the Mills, as the registered sale deed had not yet been executed.
(14) Mr. Karkhanis referred to the doctrine of part performance of the contract, as governed by section 53-A of the Transfer of Property Act and submitted that apart from the agreement to sell between the parties in this case, possession of the Mills was given over to the Subsidiary company, which had already paid to the assessed company the entire consideration for the sale; and had actually been running the Mills. In these circumstances, notwithstanding that the sale-deed reouired to be registered has not been registered, the assessed-company contended the learned counsel, is debarred from enforcing against the subsidiary company any right in respect of the said property. But this argument overlooks the proviso to Section 53-A, which clearly provides, that the said section, does not affect the rights of a transferee for consideration, who has no notice of the contract of sale or the part performance thereof. If, thereforee, the assessed company at this stage conveys to a third party who had no notice of the contract of sale or of the part performance thereof, the position of such party may be safe and mere may be no bar to such party claiming rights as a bonafide transferee for consideration. The contract of sale with the subsidiary company, may under such circumstances, not mature into a sale; and for this reason cannot be treated at par with 'sale'. The doctrine of part performance, thereforee, will render no assistance to the argument of Mr. Karkhanis.
(15) The language of section 10 (2) (vii) further supports the view that the expression sold was used in the sense where it was intended to convey that the property has ceased to exist, so far as the assessed was concerned, or the assessed has completely divested himself of all interests and rights in the property concerned. The words used are 'sold' or discarded or demolished or destroyed'. This shows that the assessed in order to claim allowance under this subjection was required to show that he had severed all connections between himself and the property concerned which was either discarded altogether or had been demolished or destroyed or sold. And so far as sale is concerned, it could not be said to have been effected unless a registered sale deed was executed.
(16) The word 'sale' as occurring in Section 12-B of the Act, came up for consideration before a Bench of the Calcutta High Court, consisting of G. K. Mitter and A. N. Ray JJ' as their Lordships then were, in Halt and Andersen (Private) Ltd., v. Commissioner of Income Tax : 47ITR790(Cal) . It was observed in that case :-
'A Salready pointed out the word 'sale' has not been defined in the Indian Income-Tax Act and in order, thereforee, to find out the legal implication of a sale we must resort to the Transfer of Property Act, in the case of immovable property and to the Sale of Goods Act for sale of movable property. So far as the fixtures are concerned the position is covered by Section 8 of the Transfer of Property Act. Even though the assessed has parted with the immovable property to all intents and purposes as from December 1, 1966, in law, the ownership continued in it till February 26, 1949.'
(17) The sale of immovable property was held in that case, to have been effected on February 26, 1949, when the sale deed was executed. In Rajindra Minding Syndicate v. Commissioner of Income Tax Andhra Pradesh. : 43ITR460(AP) ; a Bench of the Andhra Pradesh High Court was of the view that the agreement to sell the leasehold rights in the mines which the assessed transferred, did not by itself effect any sale. It was only when the deed of sale was executed and registered that the transfer of capital assets was effected. In K. C. Pal Chaudhary v. Commissioner of Income-Tax, (1962) 46 I.T.R. l delivery of possession pursuant to the agreement for sale before the actual conveyance was not held to transfer the title to the colliery to the purchaser for the purposes of section 12-B of the Act, The title passed only on the date of execution of the sale deed; and the capital gains from the transaction were held not assessable till then.
(18) In Commissioner of Income Tax v. Bhurangya Coal Company : 34ITR802(SC) the Supreme Court was considering the word 'sale' Section 12-B of the Act. It was held that the title to immovable property conveyed would pass to the transferee only on the date when the sale deed was executed and the firm would be liable .for tax only in respect of the profits made with reference to the immovable properties covered by the said sale deed.
(19) In Alapati Venkataramiah v. Commissioner of Income Tax Hyderabad : 57ITR185(SC) the Supreme Court was considering the words 'sale or transfer' as occurred in Section 12-B of the Act. The Supreme Court held, that in order to attract section 12-B of the Act, title must pass by any of the modes mentioned in the section, i.e., sale, exchange or transfer. Delivery of possession of immovable property could not by itself be treated as equivalent to conveyance of the immovable property. Even the entries' in the account books of the appellant and the vendee company were considered irrelevant for the purpose of determining the date, when the 'sale' or transfer took place. Title to the land and buildings and the plant and machinery and electrical fittings permanently embedded thereon, it was held, could not pass to the Company, till the conveyance was executed and registered and till then no sale or transfer could have been effected. No capital gains, thereforee, was considered to have arisen in the relevant previous year.
(20) Mr. Karkhanis contended that the aforesaid judgments interpreted the word 'sale' as occurring in section 12-A of the Act. But he was unable to point out if the said word 'sale' could be said to carry any differnt connotation on section 10(2) (vii) of the Act. Reliance was placed by Mr. Karkhanis on Calcutta Electric Supply Corporation Ltd. Commissioner of income Tax (1951) 19 LT.R. 406. But that case has no relevance for the present purpose, as that was a case of Government requisitioning a plant. The transaction was held not a sale which ordinarily meant a transaction entered into voluntarily between two persons. The learned counsel then relied on Associated Clothiers Ltd- v. Commissioner Income Tax, (1967) I.T.R. 224, where the appellant company had sold the property for a stated consideration, which was in excess of the original cost. The difference was held to be profit within the meaning of the second proviso to section 10(2) (vii) of the Act. No deed of conveyance was executed. But the Supreme Court accepted the statement made by the Tribunal in the statment of case, when there was a clear recital that all the assets and liabilities of the appellant company were transferred to the other company. At what stage and how this transfer took place, is not clear from the report. This case, thereforee, affords no assistance to Mr. Karkhanis
(21) In the result, it cannot be said that the assessed company has sold the Crown Flour Mills to the Subsidiary Company within the meaning of Section 10(2) (vii) of the Act. It was, thereforee, not entitled to claim under that section the deduction of the loss of Rs. 3,58,783.00 from its income. Answer to the question as re-framed, thereforee, must be in the negative in favor of the revenue and against the assessed. There shall) however, be no order as to costs.