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Arundhati Balkrishna Vs. Commissioner of Income-tax, Gujarat - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberIncome-tax Reference Nos. 156 and 157 of 1978
Judge
Reported in(1982)29CTR(Guj)85; [1982]138ITR245(Guj)
ActsIncome Tax Act, 1961 - Sections 2(14), 45, 47, 54, 84 and 261
AppellantArundhati Balkrishna;balkrishna Harivallabhdas
RespondentCommissioner of Income-tax, Gujarat;commissioner of Income-tax, Gujarat
Appellant Advocate J.M. Thokore, Advocate-General
Respondent Advocate B.R. Shah, Adv.
Cases Referred and Hiralal Agrawal v. Rampadarath Singh
Excerpt:
direct taxation - capital asset - sections 2 (14), 45, 47, 54, 84 and 261 of income tax act, 1961 - assessee disclosed certain income in particular assessment year - during relevant assessment year assessee sold portion of land - whether tribunal justified in law in holding lands on date of transfer as agricultural lands - intention of owner to put land to any particular use - nature and character of land - development and location of land - prudent and reasonable man purchasing land in midst of highly developed residential area - land in dispute is agricultural land. - - whatever view is taken in regard to the three questions referred at the instance of the assessee, the assessee must in any case fail if the basic question as to whether or not the land concerned was agricultural.....thakkar, j.1. the assessee, smt. arundhati balkrishna of ahmedabad, whose main source of income is from interest on securities, income from dividends, and income from investment, etc., in her return of income filed in respect of the assessment year 1969-70 (sic) disclosed an income of rs. 2,25,000. it appears that during the course of the relevant period the assessee had sold her 1/2 share in a parcel of land admeasuring 8,578 sq. yds. (her share being 4,289 sq yds.) situated within the limits of the municipal corporation of ahmedabad. the lands fell within the purview of a draft town planning scheme. the sale transaction yielded a sum of rs. 2,34,063 (1/2 of rs. 4,68,125). the assessee assumed the posture that this land which had originally cost a petty sum of rs. 21,445 and which upon.....
Judgment:

Thakkar, J.

1. The assessee, Smt. Arundhati Balkrishna of Ahmedabad, whose main source of income is from interest on securities, income from dividends, and income from investment, etc., in her return of income filed in respect of the assessment year 1969-70 (sic) disclosed an income of Rs. 2,25,000. It appears that during the course of the relevant period the assessee had sold her 1/2 share in a parcel of land admeasuring 8,578 sq. yds. (her share being 4,289 sq yds.) situated within the limits of the Municipal Corporation of Ahmedabad. The lands fell within the purview of a draft town planning scheme. The sale transaction yielded a sum of Rs. 2,34,063 (1/2 of Rs. 4,68,125). The assessee assumed the posture that this land which had originally cost a petty sum of Rs. 21,445 and which upon being sold resulted in a profit equivalent to about ten times its cost price (i.e., Rs. 2,12,618) did not fall within the definition of 'capital asset' as defined by s. 2(14) of the I.T. Act of 1961, as it stood at the material time, mainly because of the following two factors, viz., (1) it was entered in revenue records as agricultural land and was assessed to assessment on that basis, (2) a crop which yielded a gross annual normal income of less than Rs. 200 (two hundred) was grown on the same during the relevant years. It was the case of the assessee that accordingly the profit of Rs. 2,12,618 derived by her from this transaction was not exigible to tax as capital gains under s. 45 of the Act. The ITO by his order as per annex. 'B' negatived the contention and included 45% of the amount of total capital gains accuring to her as her income for the relevant year. The appeal preferred by the assessee in so far as this question was concerned was dismissed by the AAC by his appellate order at annex. 'C'. The Income-tax Appellate Tribunal, Ahmedabad Bench `B', confirmed the order of assessment on a different ground. Thereupon three questions have been referred to us by the Tribunal at the instance of the assessee and one question has been referred to us at the instance of the Revenue.

2. It appears that the Tribunal partly upheld the contention of the assessee in the sense that on the mixed question of law and fact as to the character of the land in question, the Tribunal formed the opinion that it was agricultural land. The Tribunal, however, permitted the Revenue to raise a ground based on a legal aspect which was not urged before the ITO or the AAC. The said argument which ultimately found favour with the Tribunal was raised in the context of the following facts. Though the sale deeds in respect of the land in question were executed prior to March 1, 1970, the documents in question were not presented for registration till March 1, 1970, and registration was effected 'after' April 1, 1970. In view of these circumstances, recourse was made to the amendment introduced by the Finance Act of 1970, with effect from April 1, 1970, in respect of the definition of 'capital asset' contained in s. 2(14) read with s. 47(iii) of the Act read with s. 45 of the Act. Prior to the amendment which became operative with effect from April 1, 1970, the definition of 'capital assets' excluded agricultural land from its purview. With effect from April 1, 1970, the scope of the expression 'capital asset' has been enlarged. Certain categories of agricultural lands (excepting the excluded categories) are brought within the sweep of the expression 'capital asset'. Inter alia, lands within the municipal limits of a town having a population exceeding ten thousand according to the last preceding census falling within the description of s. 2(14)(iii)(c) are now included in the definition of 'capital asset'. Along with the amendment in s. 2(14), an amendment was also brought about in s. 47. Clause (viii) of s. 47 now provides that any transfer of agricultural land effected before 1st day of March, 1970, would not be treated as a transfer attracting exigibility to capital gains tax under s. 45 of the Act. In view of the alteration in law brought about in the aforesaid manner, even if the land in question was agricultural land, if a trnasfer of the said land was made on or after 1st March, 1970, the gains arising out of such a transfer would be exigible to tax as capital gains under s. 45 provided the land was situated within the limits of a municipal corporation. That is the reason why the question assumed importance before the Tribunal, the Tribunal having disagreed with the view taken by the ITO and the AAC that the land in question was not agricultural land and having taken the view that it was agricultural land. The question assumed importance because even if it was agricultural land, still the gains arising in the context of the transfer of such land would be exigible to tax as capital gains under s. 45 of the Act, in case the trnasfer of the land was effected on or after March 1, 1970. In the present case while the sale deed was executed in the sense that the assessee had appended her signature to the sale deed prior to March 1, 1970, the sale deed was presented for registration and was in fact registered 'after' March 1, 1970. It was in this background that the question arose whether the trnasfer of the land in question was before March 1, 1970, or after March 1, 1970. The Tribunal took the view that the transfer was effected after March 1, 1970, having regard to the fact that the transaction of sale was not complete till the document was presented for registration and was registered. As it was common ground that the document was presented for registration after March 1, 1970, the Tribunal formed the opinion that the transaction in question was not exempted under s, 47(viii) of the Act and the gains arising out of the transaction were exigible to tax as capital gains. As we indicated in the course of our discussion hereinbefore, this aspect was not realised by the ITO and the AAC and their decision was based solely on the finding on the mixed question of law and fact as to the character of the land which in their opinion was not agricultural land. The Tribunal disagreed with the finding on this aspect and took the view that it was 'agricultural land' but came to the conclusion that having regard to the amendment of the definition of 'capital asset' with effect from April, 1970, and the provision contained in s. 47(viii), the gains arising out of this trnasaction were exigible to tax as capital gains notwithstanding the fact that these were agricultural lands because the trnasfer was effected on or after March 1, 1970. Since this dimension of the matter was urged before the Tribunal for the first time by the Revenue, one of the questions that has arisen, and is referred to us, is whether the Tribunal was justified in permitting the department to raise this contention. The other question which has been referred to us is in the context of the finding as to the date on which the transaction was effected. It has assumed importance by reason of the fact that if the date of signing the sale deed is considered to be crucial, the transaction would not attract the provision of s. 45 read with s. 2(14) read with s. 47(viii). If on the other hand it is the date of the presentation for registration or the actual registration which is the crucial date for the purpose of determining the date on which the transaction is effected, the gains, arising out of the transaction would be exigible to tax as capital gains, even if the land is treated as agricultural land. And it was, in view of the stand taken by the assessee that the Tribunal was not justified in examining this dimension of the matter in the light of the amendment introduced by the Finance Act of 1970 which became effective from April 1, 1970, that the Revenue sought a reference on the question whether or not the finding recorded by the Tribunal on the mixed question of law and fact as to the character of the land was justified in the facts and circumstances of the case (the ITO and the AAC having taken the view that it was not agricultural land and the Tribunal having taken the view that the it was agricultural land). That is how three questions have come to be referred to us at the instance of the assessee and one question has come to be referred to us at the instance of the Revenue. We may incidentally mention for the purposes of record that one more question had been referred at the instance of the assessee but that question is not debated before us as it is concluded against the assessee by a decision of this High Court rendered in Smt. Padmavati Jaykrishna v. CIT : [1975]101ITR153(Guj) . Under the circumstances, the main questions which have been debated before us are the aforesaid three questions raised at the instance of the assessee and one question raised at the instance of the Revenue.

3. It is necessary to highlight one aspect of the matter. Whatever view is taken in regard to the three questions referred at the instance of the assessee, the assessee must in any case fail if the basic question as to whether or not the land concerned was agricultural land (referred to us at the instance of the Revenue) is decided against the assessee. Since we are of the opinion that the Revenue is entitled to succeed on this question if the principles evolved by us in our decision in I.T.R. No. 92 of 1976 (CIT v. Sarifabibi Mohamed Ibrahim : [1982]136ITR621(Guj) are applied to the facts of this case, we propose to deal with this dimension of the matter in the first instance. We may also mention that with regard to two out of the three questions referred to us at the instance of the assessee, for the reasons which will be indicated at the appropriate stage hereafter, we are of the opinion that the view taken by the Tribunal is unsustainable. In any view of the matter, however, ultimately the assessee cannot succeed. The first questions goes to the root of the matter and if we are right in our decision the remaining questions may become irrelevant. The assessee must in any case fail in that event. We, therefore, propose of discuss the said question at the outset. We will deal with the remaining three questions after we dispose of the aforesaid basic question.

4. The question referred to us at the instance of the Revenue is question No. 5 reading as under :

'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the lands in question were, on the date of their transfer, agricultural lands ?'

5. The questions whether the land involved in the transaction giving rise to the contraveserly was agricultural land as contended by the assessee or whether it was non-agricultural land as contended by the Revenue is a mixed question of law and fact which will have to be decided on the following facts which are not in dispute :

(1) The main source of income of the assessee, a resident of Ahmedabad, is from dividends, interest on deposits, interest on securities and investment business in shares (see assessment order, annex. 'B'). The income from other sources for 1971 was about Rs. 3,00,000.

(2) A large block of land admeasuring 10 acres 21 gunthas was purchased by the father-in-law of the assessee as the karta of an HUF comprising of himself and his three sons including the assessee's husband in the year 1945 for a total consideration of Rs. 2,67,321, which works out at about Rs. 5.25% per sq. yd.

(3) About 60% of the aforesaid block of the land, to be precise 6 acres 36 gunthas, was acquired, for a public purpose for the construction of houses of citizens falling within the low income group, by the Gujarat Housing Board as early as in 1962. Compensation was paid in respect of this acquisition at the rate ranging from Rs. 6.90 per sq. yd. to Rs. 9 per sq. yd. Meanwhile there was a partial partition and a portion of the aforesaid land came to the share of the smaller HUF headed by the assessee's husband in 1955. There was a further partial partition in 1963 in the HUF headed by the husband of the assessee as a result of which the assessee and her husband acquiring an undivided 1/2 share in the parcel of land admeasuring 8,578 sq. yds., which was the subject-matter of the transaction effected in 1970 giving rise to the present controversy. From 1963 to 1970 this land continued to be assessed to land revenue even though residential building had already been constructed on the surrounding land and even though a portion of the original block of land had already been acquired by the Housing Board and houses were coming up on the acquired portion.

(4) The gross agricultural income from this land during financial years 1966-67 & 1967-68 and for the period between 1-1-69 and 31-1-70 was Rs. 100, Rs. 178 and Rs. 182, respectively : (it needs to be emphasised that this was only the 'gross' annual income which does not take into account the expenses incurred for growing jowar during the relevant period).

(5) The lands in question were situated within the limits of the Municipal Corporation of Ahmedabad from August 13, 1958, onwards.

(6) On May 2, 1968, the assessee and her husband jointly entered into an agreement to sell the lands in question to a partnership firm carrying on business of construction of houses under the name and style of Poonam Construction Co. at the rate of Rs. 54 per sq. yd.

(7) Permission for sale of lands in question in favour of non-agriculturists, namely, the co-operative society formed for the construction of flats known as Manish flats Co-operative Housing Society ('Manish' hereafter), which was the nominee of Poonam Construction Co., in whose favour the agreement to sell was executed on May 2, 1968, under s. 63 of the Bombay Tenancy and Agricultural Lands Act, 1948, was applied for on 14th November, 1969, and was granted by an order dated January 5, 1970. No doubt it was applied for by Manish and not by the assessee. But the fact remains that it was granted. Thereafter, the assessee and her husband who jointly owned the parcel of land admeasuring 8,578 sq. yds. in equal shares executed 14 sale deeds in favour of Manish Flats Co-operative Housing Society. It may be stated that the land was not actually plotted out or parcelled out or divided in small parcels. The block of land remained intact. However, the sale was effected by 14 individual sale deeds each of which pertained to a plot of about 3,638.60 sq. yds. which was notionally carved out on paper.

(8) Though these sale deeds were signed by the vendors prior to March 1, 1970, they were presented for registration on March 20, 1970, and were registered in due course later on. In other words, they were presented for registration 'after' 1st March, 1970, which is the deadline prescribed by s. 47(viii) for claiming exemption in respect of transactions effected theretobefore.

6. In the backdrop of these facts the question has arisen whether the land was agricultural land as contended by the assessee or non-agricultural land as contended by the Revenue. The expression 'agricultural land' has not been defined by the I.T. Act. The question whether a particular parcel of land is agricultural land or non-agricultural land depends on the peculiar facts pertaining to each parcel of land and in order to answer the question correctly a number of tests have been evolved. We have examined this question at considerable length in I.T.R. No. 92/76 [CIT v. Sarifabibi Mohamed Ibrahim : [1982]136ITR621(Guj) and the allied references disposed of by us on April 17, 1981. Instead of repeating the same reasoning we will quote an extract from the said decision wherein we have referred to the judgments cited before us and evolved an appropriate test. We may say that the facts in that case were similar to the facts in the present case (in fact the fact-situation of the present case is much better from the standpoint of the proponent of the view that the land is non-agricultural land). After setting out the facts of the that case, we have formulated the tests in the course of the following passage extracted from the judgment (pp. 626-628) :

'All these facts and circumstances viewed in the light of the appropriate tests impel us to the conclusion that the lands are not agricultural lands in fact and truth (though they are labelled as such in the revenue records) for reasons which we will presently articulate. But before we do so we must advert to the propositions of law affirmed in the earliest decision of this court which have not undergone any change in the later decisions. The decision we have in mind in the sense rendered in Rasiklal Chimanlal Nagri v. CWT [1965] 56 ITR 608.

The following propositions emerge therefrom :

(1) The intention of the owner to put it to any particular user is one of the criterions though not the sole or exclusives criterion.

(2) The actual user may ordinarily furnish a prima facie evidence of the nature and character of the land. If it is lying idle, the question may assume more complexity.

(3) The development and situation of land in the adjoining area or surroundings would be an important factor for consideration.

(4) The physical characteristics may throw some light.

(5) Mere fact that the lands are assessed as agricultural lands under the Land Revenue Code or the said lands are not actually used for non-agricultural purposes does not necessarily mean that the lands are agricultural lands. Otherwise even building site lands can be considered as agricultural lands since it can always be said that they are capable of being used for agricultural purposes.

(6) A prudent and reasonable man would not purchase agricultural land (that is to say for agricultural purposes) in the midst of a highly developed residential area on an enormously high price of say Rs. 20 per sq. yd.

The aforesaid principles were invoked in Himatlal Govindji v. CWT : [1977]106ITR658(Guj) , and the land was held to be non-agricultural land. It was clarified that if the assessee had put the land to agricultural user by way of stop-gap arrangement till the assessee found a ready and willing buyer, it would negative the plea that it was agricultural land on that account. And that, the effect of the totality of the circumstances had to be considered. This view was reaffirmed in Yeshwant R. Bhatt v. CWT : [1978]114ITR318(Guj) . The validity of these decisions has never been doubted so far, though on the peculiar facts of some subsequent cases the lands concerned were held to be agricultural lands in Chhotalal Prabhudas v. CIT : [1979]116ITR631(Guj) , Gordhanbhai Kahandas Dalwadi v. CIT : [1981]127ITR664(Guj) and Ramprasad v. CIT (I.T. Ref. No. 90 of 1976 decided on : [1982]136ITR633(Guj) . In these three decisions (we repeat) the principles enunciated in the earlier judgments referred by us haves not been given a go-by (it could not have been done without referring the matters to a larger Bench). These are decisions rendered on the facts of the individual cases and make no departure from the principles settled earlier. On an analysis of these decisions and the decision rendered by the Supreme Court in CWT v. Officer-in-Charge (Court of Wards), Paigah, : [1976]10ITR133(SC) , the following tests can be formulated in order to determine whether or not the land in question is agricultural land, as claimed by the assessee, which is immune from provisions pertaining to tax on capital gains.

Circumstances which speak 'for' and 'against' the conclusion that the land is agricultural land.

For Against(1) That it is entered as (1) When land is situatedagricultural land in revenue in an urban area withinrecords and assessed as such municipal limits in theunder the Land Revenue Code. proximity of building andbuilding sites.[Subject to the rider that it isa rebuttable presumption and canbe destroyed by othercircumstances pointing to thecontrary conclusion. SeeCommissioner of Wealth-tax v.Officer-in-Charge (Court ofWards), Paigah : [1976]10ITR133(SC) .2) That agricultural operations (2) When land is sold towere carried on in the past a non-agriculturist foror are carried on currently. non-agricultural purposes.[Subject to the rider that itis not a decisive factorinasmuch as agricultural cropcan be raised even on buildingsite land (even on desert landas observed in : [1976]10ITR133(SC) .And sometimes, a crop is grownin order not to allow the landto remain idle awaiting salefor non-agricultural purposesto a non-agriculturist by wayof a stop-gap arrangement orin order to avoid payment ofrevenue at a higher rate orin order to avoid payment ofcapital gains tax) :See proposition No. 5 inRasiklal Nagri's case].(3) It is not converted to (3) When land is sold onnon-agricultural user. a per sq. yd. basis at aprice comparable to the[Subject to the same rider as fetched by buildingprice added to clause 2]. sites.(4) When price is suchthat no bona fide agriculturistwould purchase the same forgenuine agricultural operations.(See proposition No. 6 inRasiklal Nagri's case).(5) When price is suchthat no prudent ownerwould sell it at a priceworked out on thecapitalization method takinginto account its optimumyield in most favourablecircumstances.(See proposition No. 6 inRasiklal Nagri's case). We are of the opinion that the most vital test which cannot be lightly brushed aside is the test adverted to in proposition No. 6 of Rasiklal Nagri's case. (See tests at serial Nos. 3, 4 and 5 enumerated in the right side column hereinabove - p. 255 supra).'

7. In our opinion, the conclusion is inevitable that the land in question is agricultural land having regard to the facts and circumstances of the present case on the basis of the very same reasoning. In the present case there are additional circumstances which speak in favour of the proposition that the land in question is non-agricultural land. The gross income from the land in question was less than Rs. 200 during the last 3 years preceding the relevant period. What was grown was jowar. The assessee, a housewife, having an income of about Rs. 3 lakhs from investment in shares and dividend and interest income, was growing jowar on this land. Surely she herself did not go on the land to cultivate it. In any case she has not given evidence in this behalf. She must have employed some peasant to grow the jowar crop. We do not know what was paid to him by way of remuneration. We do not know what was spent for the purchase of the seeds. We do not know whether she owned any implements of agriculture at all. In any case the cost of growing the jowar must have far-exceeded the sum of Rs. 200 per annum. Even if a watchman was engaged he would haves charged about Rs. 2,400 per annum. Can it be seriously contended that she was putting the land to agricultural use in a bona fide manner and incurring losses from year to year It must be realised that the land in question was sold for a total consideration of Rs. 2,34,063 (1/2 of Rs. 4,68,126 fetched by the entire plot of 8,578 sq. yds. in which she had 1/2 share). It was sold at the rate of Rs. 56 per sq. yd. A part of the original block of land from which the assessee got the land in question by way of partition, in due course was acquired by the Gujarat Housing Board under the Land Acquisition Act for a public purpose, viz., in order to construct houses for the low income group citizens as early as in 1962. Thus, from 1962 onwards, the main block of land had changed its character and had become non-agricultural land. It was acquired valuation of Rs. 10 per sq. yd. Therefore, even if the valuation of Rs. 10 per sq. yd. in 1962 is taken into account, her land admeasuring 4, 289 sq. yds. was worth about Rs. 4,300 which would have yielded an income of Rs. 4,300 per annum even at the conservative rate or 10%. Even so she was growing a jowar crop on the same (land) which would bring a gross yield of Rs. 200. It would appear that in fact the operations must have resulted in a net loss to her. And it was this land she had agreed to sell to a housing society for construction of houses (not to an agriculturist for agriculture). The sale price agreed upon was Rs. 56 per sq. yd. which would have brought in Rs. 2,34,063 as the sale proceeds. This land would have brought an income of Rs. 23,460 per annum even at 10%. Even so she was growing jowar yielding Rs. 200 per annum, (gross) and incurring a loss. Was she treating this as agricultural land in a bona fide manner If the tests indicated hereinabove were to be applied, can it ever be said that any agriculturist would have sold this land on the basis of its income as agricultural land Could any bona fide agriculturist ever purchase this land for bona fide agricultural purposes taking into consideration its annual yield at this price Would he have paid Rs. 2,34,063 for land which would have yielded an income of barely Rs. 200 gross per annum To pose the question is to answer it. Besides, permission had in fact been obtained under s. 63 of the Tenancy Act to sell the land to a non-agriculturist for the purpose of constructing houses at a rate at which no agriculturist would purchase it for bona fide agricultural purposes. She had full knowledge that permission had been obtained to sell it to a housing society for building houses. This clearly shows that the character of the land had changed and she herself had considered this land to be non-agricultural land, in fact treated it as building site land. It is not in dispute that the land is situated in the midst of developed lands and there are buildings round about. The land was situated within the Corporation limits of Ahmedabad within Draft Town Planning Scheme No. 29 framed on March 3, 1967, which was sanctioned on November 21, 1968, and was eminently suitable for construction of houses. Such land cannot be characterized as agricultural land merely because it was entered in the revenue records as agricultural land and the assessee was paying land revenue assessment on the basis that it was agricultural land. As we have discussed hereinbefore, it suited the assessee not to apply for permission to convert it into non-agricultural land because the assessee would be required to pay wealth=tax on it and also to pay capital gains tax in case the land was sold. The mere fact that it stood in the records as agricultural land is of no importance. So also the fact that jowar was grown during these years which yielded a gross income of Rs. 200 cannot be considered as a circumstance pointing to the conclusion that it was agricultural land. It was an illusory user made either by way of stop-gap arrangement awaiting the sale of the land for non-agricultural purposes or awaiting the user of the land for non-agricultural purposes in order to be able to contend before the tax authorities that it was not liable to be included in the net wealth for the purposes of the wealth-tax return and to save the profits derived from the sale of such land (in the event of it being sold) from being taxed as capital gains. Taking a cumulative view of all the relevant circumstances we are of the opinion that the ITO and the AAC were right in holding that the land in question was non-agricultural land following the decision in Rasiklal Chimanlal Nagri v. CWT [1965] 56 ITR 608. The Income-tax Appellate Tribunal failed to apply the correct test and ignored the vital test indicated in the course of the discussion earlier and fell into an error by holding that the land was agricultural land on the basis of the finding recorded in some other case in the context of the facts pertaining to that particular case. We have, therefore, no hesitation in answering the aforesaid question, being question No. 5, in the negative and against the assessee.

8. In the view that we are taking, the assessee must fail whatever opinion we form in regard to the three questions referred to us at the instance of the assessee. All the same for the sake of completeness of judgment we will deal with these three questions. Question NO. 1 is as under :

'Whether, on the facts in the circumstances of the case, the Tribunal was justified in law in permitting the department to raise the additional ground, namely, that because of the registration of the instrument of transfer subsequent to February 28, 1970, the transfers in question were not transfers effected before March 1, 1970, as contemplated in section 47(viii) of the Income-tax Act, 1961 ?'

9. We have already set out in the earlier part of our judgment the circumstances in which this question has come to be referred to us. Briefly stated, the question has arisen because the Tribunal permitted the Revenue to advance an argument based on the amended law as it stood at the material time though such an argument was not advanced before the AAC. It is a pure question of law, the answer to which depends on facts which are not at all in dispute. The investigation of no further facts is necessary. It is an admitted position that while the sale deeds were signed by the vendors prior to March 1, 1970, the same were not presented for registration till March 1, 1970. The ITO and the AAC were not conscious of the fact that the definition of the expression 'capital asset' contained in s. 2(14) of the I.T. Act had undergone a change by the Finance Act of 1970 and that clause (viii) had been inserted in s. 47; and accordingly they did not examine this aspect. These changes were introduced with effect from April 1, 1970. Therefore, in respect of the assessment year 1970-71 if the land was a 'capital asset' within the meaning of s. 2(14) by virtue of the fact that it was such agricultural land in respect of which a transfer was effected 'after' March 1, 1970, the gains arising out of a transfer of such land would be exigible to tax as capital gains. This was the position as per the relevant provisions of the I.T. Act as they stood at the material time. The position is not in dispute that such was the legal position obtaining in the course of the relevant assessment year. It is unfortunate that the ITO and the AAC were not aware of this position. Perhaps it was because the alteration in the law had taken place recently that possibly the ITO and the AAC did not realise the implication of the amendment brought about by the Finance Act of 1970. Under the circumstances, they did not examine whether the assessee was liable to pay tax under the head of 'Capital gains' in respect of this transaction from this perspective. Moreover, the ITO and the AAC have taken the view that it was non-agricultural land and in any case the profit yielded by the transaction was exigible to tax as capital gains. But when the matter came to be argued before the Tribunal in the course of the appeal preferred by the assessee, the learned departmental representative rightly brought the position of law as obtaining at the material time to the notice of the Tribunal and urged that even assuming that the land was agricultural land as contended by the assessee, having regard to the law as it stood by virtue of the amendment introduced by the Finance Bill of 1970 the assessee could not escape the liability to pay tax on the gains arising out of the transaction in question. Since the ITO had assessed the profits to tax as capital gains and since the AAC had also confirmed the decision on this point, it was open to the department to support the decision that the income in question was exigible to tax under the head 'Capital gains' under s. 45 by any other reasoning based on the relevant provision of law particularly when it did not require any investigation of facts which were not on record. Counsel for the assessee had, however, contended that the Tribunal should not have permitted the departmental representative to raise this contention since the ITO had not based his decision on this reasoning and since no such argument was advanced before the AAC. It is under the circumstances argued by the learned counsel for the assessee that the Tribunal was not justified in law in permitting the department to raise this additional ground. Our attention is called to the Income-tax (Appellate Tribunal) Rules, 1963, which are found at p. 999 of Kanga and Palkhivala's The Law and Practice of Income-tax, 7th Edn., Vol. II. Two of the rules, viz., r. 11 and r. 27, have been placed in focus. These rules are in the following terms :

'11. The appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal, but the Tribunal, in deciding the appeal, shall not be confined to the grounds set forth in the memorandum of appeal or taken by leaves of the Tribunal under this rule :

Provided that the Tribunal shall not rest its decision on any other ground unless the party who may be affected thereby has had a sufficient opportunity of being heard on that ground.' '27. The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him.'

10. Now s. 33(4) of the 1922 Act reads as under :

'The Appellate Tribunal may, after giving both parties to the appeal and opportunity of being heard, pass such orders thereon as it thinks fit, and shall communicate any such orders to the assessee and to the Commissioner.'

11. It is argued that r. 27 confers a right on the respondent (in this case, the Revenue) to support the order under appeal on any of the grounds decided against the respondent, but if the decision giving rise to the appeal is one in which no such ground was urged, there can be no question of supporting the ultimate order on a ground decided against it. In other words, it is argued that the ground must be raised before the AAC and the AAC must have decided the ground against the respondent before the respondent can support the ultimate order on the basis of the said ground. It is contended that the argument based on the relevant provision as amended by the Finance Act of 1970 was not urged before the AAC. Since the argument was not addressed, there was no decision against the Revenue on that point. Since there was no decision against the Revenue on this point, the ultimate order could not be supported on this reasoning. Such is the submission urged on behalf of the assessee. We are afraid we cannot accede to this argument. The expression 'grounds' in the Rules has been used in the sense of 'subject-matter' or 'item' in dispute. It is not used in the sense of arguments. Rule 27 cannot be so interpreted as to preclude legal arguments open to a party merely because such legal arguments are not advanced before the AAC. Besides, r. 11 lends support to this construction. Rule 11 provides that it is open to the Tribunal to permit the appellant to raise grounds which are not set forth in the memorandum of appeal and that the Tribunal will not be confined to the grounds set forth therein provided that an opportunity is given to the other side to meet the grounds. A question regarding the jurisdiction of the Tribunal in the course of an appeal preferred to it first came up for consideration in Hukumchand Mills Ltd. v. CIT : [1967]63ITR232(SC) . The Act applicable at the material time was the Indian I.T. Act of 1922. The matter has, therefore, been decided in the context of s. 33(4) of the said Act which provides that the Appellate Tribunal, after giving both the parties to the appeal an opportunity of being heard may pass such order thereon as it thinks fit. We are governed by the I.T. Act of 1961. The corresponding section is s. 254(1). Both the provisions being in the same terms, the reasoning set out in Hukumchand Mills' case will apply with equal force in the context of s. 254(1) as well. In Hukumchand Mills' case it has been clearly laid down that the powers of the Appellate Tribunal in dealing with the appeals are expressed in s. 33(4) (which corresponds to s. 254(1) of the present Act) in the widest possible terms. The word 'thereon' used in the section restricts the jurisdiction of the Tribunal to the subject-matter of the appeal. The question in Hukumchand Mills' case : [1967]63ITR232(SC) arose in the context of the fact that though the provisions contained in para. 2 of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, were applicable at the relevant time a contention based on these provisions was not raised till the matter came before the Tribunal. The Tribunal permitted the contention to be raised by the department. Thereupon the assessee took an objection and argued that it was not open to the Tribunal to permit the department to raise such a contention for the first time. It was in that context that the Supreme Court had observed that the appellate powers of the Tribunal are embodied in s. 33(4) and that the Appellate Tribunal may after giving both the parties to the appeal an opportunity of being heard pass such orders thereon, as it thinks fit in exercise of those powers. The word 'thereon' merely restricts the jurisdiction of the Tribunal to the subject-matter' of the appeal. The Supreme Court observed that in the case before the court the subject-matter of the appeal before the Tribunal was the question as to what should be the proper written down value of the buildings, machinery, etc., of the assessee for calculating the depreciation allowance. Since this was the subject-matter it was open to the department, in the appeal filed by the assessee before the Tribunal, to support the finding of the AAC with regard to the written down value on any of the grounds decided against it. In substance the view taken is that so long as the subject-matter of the dispute before the Tribunal is the same as the subject-matter which was in dispute before AAC, even a new argument to support the ultimate conclusion of the AAC can be advanced by the Revenue. In that case the subject-matter was with regard to the written down value of the properties on which depreciation was claimed. Even though an argument in the context of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, had not been raised before the AAC, it was not considered to be a bar precluding the Revenue from urging this contention because the contention was urged in order to support the finding recorded by the ACC in regard to the identical subject-matter which was before the AAC, viz., the written down value of the properties in question. The ratio of the said decision is that it is the 'identity of the subject-matter' which matters and is decisive and not the 'identity of the arguments'. If the question regarding the written down value of the buildings, machinery, etc., was not before the AAC at all, the respondent could not have been permitted to raise a plea in respect of this subject-matter. Even if the decision in regard to the written down value was erroneous, so long as the subject-matter was the same, the respondent could support an ultimate conclusion in regard to the subjects-matter by recourse to any other reasoning regardless of whether it was advanced before the AAC or not. A similar question arose in CIT v. Mahalakshmi Textile Mills Ltd. : [1967]66ITR710(SC) . In that case the claim made by the assessee for development rebate on the introduction of a system known as 'Casablanca Conversion system' involving installation of new machinery was disallowed. Before the Appellate Tribunal the amount laid out was claimed under the head 'Current repairs' in the alternative. In the context of these facts the Supreme Court came to the conclusion that the power of the Appellate Tribunal in an appeal was wide enough to pass such order 'as it thinks fit' having regard to the language of s. 33(4). The observation is to the effect that there is nothing in the I.T. Act which restricts the Tribunal to the arguments urged or points raised before the departmental authorities. Whether the allowance was admissible under one head or another the subject-matter of the appeal remained the same and the claim of the assessee could be allowed under a head under which it was not claimed if in fact a deduction was claimed albeit on a different ground. The same reasoning will apply in the presents case where the subject-matter of the dispute was the exigibility to tax under the head of 'Capital gains' in respect of the gains arising out of the transaction of the sale of the land in question. No doubt the ITO had taken the view that the income was exigible to tax on the reasoning that it was not agricultural land. The fact, however, cannot be gainsaid that the subject-matter of the controversy remained the same, viz., whether the profit made on the transaction was exigible to tax. No doubt a new reasoning in the context of the amended provisions introduced by the Finance Act of 1970 was sought to be urged. All the same the subject-matter remained the same. In other words, though the reasoning called into aid was altogether different from the reasoning advanced before the AAC, the subject-matter of the controversy remained identical. Under the circumstances, the ratio of Mahalakshmi Textile Mills' case : [1967]66ITR710(SC) is attracted and the Tribunal was justified in permitting the assessee to raise this contention. In so far as CIT v. Karamchand Premchand P. Ltd. : [1969]74ITR254(Guj) is concerned, the assessee in that case had not questioned the decision of the ITO on a point decided against him in the course of the appeal before the AAC. It was in that context that the High Court took the view that the assessee could not be permitted to urge the said point under the guise so leave granted by the Tribunal under r. 11. As we have pointed out in the course of the discussion in the earlier part of our judgment, r. 11 cannot enlarge the scope of the appeal, and a point which is concluded, in the sense that it has not been appealed against, cannot be agitated under r. 11. A distinction has been drawn between the subject-matter or the issue decided against a party on the one hand and argument urged before the AAC on the other. The ratio of Karamchand Premchand's case : [1969]74ITR254(Guj) , is that where an issue has been decided against a party, unless it is questioned in appeal before the AAC, the question cannot be allowed to be raised before the Tribunal. An illustration by way of an analogy may be of some help. If a party to a civil suit accepts an adverse finding on a part of the claim and does not challenge it by way of an appeal before the first appellate court, the party will be precluded from reopening the issue which is thus closed in a higher court in the course of a further appeal. But where the adverse finding was in fact challenged, no bar can arise regardless of whether an argument not advanced earlier is sought to be pressed into services for the first time before the higher forum. In the present case,the issue in question was whether or not the income arising out of the transaction in question was exigible to tax. That question was very much before the AAC and the decision was very much in favour of the Revenue. It can, therefore, scarcely be contended that the decision on any point was adverse to the Revenue and that the Revenue had failed to question it by way of an appeal before the Tribunal. Since the AAC had

taken the view that the gains arising out of the transaction were exigible to tax, the Revenue could not have appealed against it. But the ultimate conclusion that it was so exigible to tax can certainly be supported by recourse to any legal argument based on facts not in dispute. We find support for this view from CIT v. Steel Cast Corporation : [1977]107ITR683(Guj) . B. J. Divan C.J., speaking for the Division Bench, has dealt with this question in the following passage (p. 695) :

'A fortiori, if a particular matter is not considered and decided by the Appellate Assistant Commissioner, and the decision on it does not form part of the order of the Appellate Assistant Commissioner, there can be no appeal against it. This much was not disputed, and indeed could not be disputed, by the learned advocate appearing on behalf of the assessee.'

12. Further onwards, it has been observed as under at p. 696 :

'If the matter had been the subject-matter of the appeal it would have been open to the Tribunal to allow the assessee to raise a new ground of appeal but it must be with reference to the same subject-matter of the appeal and not with reference to a different subject-matter.'

13. After considering all the relevant decisions the ultimate conclusion has been expressed at p. 700, to the effect that the subject-matter of the appeal before the Tribunal can only be the decision, express or implied, of the AAC and the jurisdiction of the Tribunal is restricted to the subject-matter of the appeal. It has further been held that once the subject-matter of the appeal has been determined, the Tribunal has very wide powers to deal with all questions of fact and law pertaining to that subject-matter of appeal and that, on the facts found, 'if a new aspect of law can be applied, it can allow it to be urged even though that aspect of the law was not urged either before the Income-tax Officer or the Appellate Assistant Commissioner'. Thus, the question is in a way concluded against the assessee by the aforesaid decision of this High Court. Counsel for the assessee, however, contended that Addl. CIT v. Gurjargravures P. Ltd. : [1978]111ITR1(SC) supported the proposition canvassed by him. In that case the assessee had not made any claim for relief under s. 84 before the ITO and had not placed on record any material in support thereof. Even so the Tribunal entertained the claim. It was in that context that the Supreme Court has expressed the opinion that the Tribunal had no competence to hold that the ITO should have entertained the question of relief or to direct the ITO to allow the relief. This decision has no application to the facts of the present case where the subject-matter of the controversy was very much before the AAC and the decision which was rendered by the AAC was sought to be supported by a new aspect of law by a party who has succeeded before the AAC. Under the circumstances, we are of the opinion that the Tribunal was perfectly justified in permitting the Revenue to raise this contention. The question is, therefore, answered in the affirmative and against the assessee.

14. The other two questions, viz., question Nos. (2) and (3), are in a way connected with each other and it will, therefore, be convenient to deal with these two questions together. The questions are :

'(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the transfers in question were not transfers effected before March 1, 1970, as contemplated in section 47(viii) of the Income-tax Act, 1961

(3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in not accepting the assessee's contention that in view of the provisions of section 47 of the Registration Act, the transfer was effected on the dates of execution of the sale deeds ?'

15. The material facts are not in dispute. The vendors had signed the sale deeds before March 1, 1970, but the sale deeds were not presented for registration before March 1, 1970. A great deal turns on the question whether or not the transaction of sale was effected 'prior' to March 1, 1970, or 'subsequent' to March 1, 1970. In view of the provisions contained in s. 47(viii) if the transaction was effected 'before' March 1, 1970, the assessee would be entitled to succeed in case the land in question was agricultural land, for the gains derived out of the transaction would be exempted from tax under the head of 'Capital gains'. That is why the question as to 'when' the transaction was 'effected' has assumed great significance in the present case. What we have to determine is whether a transaction of sale can be said to have been effected on the date on which the conveyance is 'signed' or whether it can be said to have been treated as having been effected only when it is 'registered'. Section 47(viii) provides that 'any transfer of agricultural land in India effected before the 1st day of March, 1970, shall not be treated as a transfer for the purpose of capital gains'. The expression placed under spotlight is 'transfer effected'. The date on which 'transfer was effected' can but mean only one thing, viz., the date on which the transfer became operative or complete or the date on which 'transfer was brought about.

16. A glance at s. 54 falling within Chap. III pertaining to sales of immovable property of the Transfer of Property Act, defines the expression 'sale' and deals with the question as to how the sale of an immovable property can be made. It is provided therein that in case of tangible immovable property of the value of one hundred rupees and upwards the sale can be made only by a registered instrument. We must, therefore, also take a glance at the relevant provisions of the Registration Act. Part X of the Registration Act deals with the topic of the effects of registration and non-registration. Section 47 calls for interpretation in the context of the point arising before us. The said provision requires to be quoted :

'47. A registered document shall operated from the time from which it would have commenced to operate if no registration thereof had been required or made, and not from the time of its registration.'

17. We will have to interpret the true effect of s. 47 in order to resolve the question as to whether a document of sale, when it is registered, would operate restrospectively from the time when it was signed and executed having regard to the provision contained in s. 47. Counsel for the assessee has contended that though a document of sale would not extinguish the right of the vendor and create a title in the vendee upon the vendor signing and executing the same so long as it is not registered, once it is registered, the transaction would become operative restrospectively from the date on which it was executed. The Revenue on the other hand contends that s. 47 has been enacted from altogether a different perspective. It has been enacted (so runs the argument) in order to deal with a situation where there are two competing sale deeds in the filed and the question arises as to which of the two documents would prevail. It is argued that it is only in such a situation that the retroactivity principle embodied in s. 47 would be attracted and that out of two or more documents in the field (in case all are registered) the document which was executed earlier would prevail notwithstanding the fact that it might have been registered later. The ratio of a number of decisions of the Supreme Court and Privy Council will have to be correctly understood in order to resolve the question of interpretation in the light of the rival contentions. We must first deal with the law laid down by the Supreme Court. In Ram Saran Lall v. Domini Kuer : [1962]2SCR474 , the question arose in the context of a right of pre-emption claimed under Muhammadan law. Under the Muhammadan law a demand to enforce the right of pre-emption called talab-i-mowasibat has to be made after the completion of the sale. The outcome of the matter depended on the determination of the date on which the transaction of sale became complete. The sale deed was executed on the transaction of sale became complete. The sale deed was executed on January 31, 1946. The deed was presented at the registration office on the same day. The person claiming the right of pre-emption made the demand in order to enforce the right immediately after the document was presented for registration. The document was copied out in the Registrar's books on February 9, 1946. In the context of these facts the question arose whether the person claiming the right of pre-emption was right in the contention that the demand was made 'after' the transaction was 'complete' having regard to the fact that the demand was made after the execution of the deed though before the document was copied in the Registrar's books. The High Court took the view that the transaction of sale became complete only upon the document being copied in the Registrar's books on February 9, 1946, and that under the circumstances the demand made by the person claiming the right of pre-emption before that date was not in accordance with law. The demand had to be made 'after' the transaction was complete and not 'before' the transaction was complete. It was in this context that the view was taken that the transaction was complete when the document was copied in the books of the Registrar. This view was confirmed by the Supreme Court in Ram Saran's case : [1962]2SCR474 . In para. 9 of the judgment, Sarkar J., speaking for the majority, has observed to the effect that a transaction which when completed had a retrospective operation cannot be said to have been completed on the date from which it had that operation. After discussing the effect of s. 47, Ayyangar J., who delivered the minority opinion and a dissenting judgment, took the view that under the provision contained in s. 47 of the Registration Act, any delay by the registering officer which might take place owing to the pressure of work in his office of for such other reason could not have any effect on the rights of the parties, quod their property or the time from when the deed operates, or as regards the effectiveness of the transaction, or the priority of transactions inter se (see para. 16 at p. 1751). Ayyangar J., proceeded to observe that it was not as if in regard to documents executed on different dates, the parties intending them to operate at different executed on different dates, the parties intending them to operate at different times, have their intentions modified, if not nullified, by the action or inaction of the registering officer, or any delay that might take place in his office. In K. J. Nathan v. S. V. Maruthi Rao : [1964]6SCR727 , the question as regards the effect f s. 47 again comes up for consideration before the Supreme Court. The question arose in the context of a memorandum recording the factum of an equitable mortgage created earlier. The document was executed on July 5, 1947, but it was registered on June 22, 1948. It appears that the mortgagor executed a deed of mortgage in favour of another party on October 10, 1947. It was in this context that the Supreme court observed as under (p. 439) :

'If the mortgage by deposit of title deeds was effected on May 10, 1947, or on July 5, 1947, the legal position would be the same, as the mortgage deed in favour of the 3rd defendant was executed only on October 10, 1947. Though Ex. A-19 was registered on June 22, 1948, under s. 47 of the Registration Act, the agreement would take effect from July 5, 1947.'

18. It must, however, be realised that the question before the Supreme Court had arisen in the context of two rival document which were in the field. In K. J. Nathan's case : [1964]6SCR727 , the decision rendered by the Supreme Court in the earlier case (Ram Saran Lall v,. Domini Kuer : [1962]2SCR474 was not considered because it does not appear to have been cited before the court. Later on, the same question came up before the Supreme Court in Hiralal Agrawal v. Rampadarath Singh : [1969]1SCR328 . The question arose in the context of s. 16 of the Bihar Land Reforms (Fixation of Ceiling Area and Acquisition of Surplus Land) Act. Sub-section (1) of s. 16 provides that there can be no transfer to a person who together with the land already held by him acquires land by transfer which in the aggregate makes the area in excess of the ceiling area. Sub-section (2) of s. 16 provides that no registering authority can register such a deed of sale had there can be no valid transfer unless the sale deed is registered. It appears that the sale deed in question was executed by the transferor and the transferee on October 9, 1964. The sale deed was registered on November 30, 1964. It was in the context of these facts that the question arose whether the sale had been completed on October 9, 1964, when the sale deed was executed or, on November 30, 1964, when it was registered. An argument built on s. 47 of the Registration Act was advanced before the Supreme Court and it was contended that, having regard to the effect of s. 47, once the document was registered, the title under the sale deed would relate back to the date of its execution and, therefore, though the registration was completed on November 30, 1964, the transferee's title under the sale deed would relate back to the date of its execution, i.e., on October 9, 1964 (see para. 11). The Supreme Court negatived this plea relying on the decision of Ram Saran : [1962]2SCR474 , which we have discussed a short while ago. It appears that an attempt was made to distinguish the said decision on the ground that the dispute in Ram Saran's case arose in the context of a right of pre-emption claimed under the Muhammadan law. The Supreme Court took the view that the decision was not based on any principle of Muhammadan law but on the basis of interpretation of s. 47 of the Registration Act and its effect. The Supreme Court, speaking through Shelat J., expressed the opinion that the majority decision in Ram Saran's case clearly laid down that the sale was completed only when the registration of the sale deed was completed as contemplated by s. 61 of the Registration Act. What needs to be clearly comprehended is that in none of these cases the Supreme Court was concerned with the vital question as regards the inter se rights of the vendor vis-a-vis the vendee in relation to the property sold by the vendor to the vendee. In other words, the question as to when the transaction of sale became complete as between the vendor and the vendee in the sense of extinguishment of the right of the vendor and the creation of the right of the vendee was never in issue. When did the vendor cease to be the owner and when did the vendee become the owner of the property On the date of the execution of the sale deed which was subsequently registered Or at some later date when it was presented for registration or was copied out in the registration book by the official concerned That, however, is the vital question from the standpoint of the I.T. Act and W.T. Act, because the date of transmission of title from the vendor to the vendee is extremely relevant for determining who is liable to bear the tax burden. Counsel for the assessee contended that the law on the subject was laid down in the two decision s of the Privy Council in Kalyanasundaram Pillai v. Karuppa Moopanar , and Venkat Subba Srinivas Hegde v. Subba Rama Hegde, AIR 1928 PC 86, and the ratio of these decisions was that the transaction of sale would become complete with effect from the date on which the document was executed having regard to the effect of s. 47 which gave retrospective effect to the transaction upon the document begin registered. In Kalyanasundaram's case , a trust deed was executed on September 9, 1891. It was, however, registered six days later, on September 15, 1891. Between these two dates the executant of the document adopted the appellant as his son and executed a deed of partition between himself and the guardian of the son. In the context of these facts the question arose whether the adoption had taken place 'before' or 'after' the gift became complete. It will be recalled that the deed was executed before the adoption but it was registered after the adoption. The Madras High Court had taken the view that, having regard to s. 47, the gift became complete before adoption. The view was taken that no subsequent alienation would defeat the title which on registration became an absolute title dating back from the date of the execution of the document having regard to s. 47. The Privy Council took the view that s. 123 of the Transfer of Property Act cannot be reconciled with s. 47 except upon the view that, while registration is a necessary solemnity it does not suspend the gift until registration actualy takes place. When the instrument of gift has been handed by the donor to the donee and accepted by him, the former has done everything in his power to complete the donation and to make it effective. Registration does not depend upon his consent, but is the act of an officer appointed by law for the purpose, who, if the deed is executed by or on behalf of the donor and is attested by at least two witness, must register it if it is presented by a person having the necessary interest within the prescribed period. Neither death, nor the express revocation by the donor, is a ground for refusing registration, if the other conditions are compiled with. The Privy Council, therefore, expressed its complete agreement with the judgment of the Full Bench of the Bombay High Court in Atmaram Sakharam Kalkye v. Vaman Janardhan Kashelikar AIR 1925 Bom 210, and took the view that the transaction of gift was complete on the date on which the document was executed and not on the date on which it was subsequently registered. A similar question arose in Venkat Subba Srinivas Hegde v. Subba Rama Hegde AIR 1928 PC 86. The point at issue was expressed by the High Court in the judgment which gave rise to the appeal before the Privy Council as under (p. 87) :

'Can a donor of immovable property, when the gift can only be effected by a registered document, resile from his action before the document had been registered, and if the donee refused to give back the document, can the donor obtain an injuction from the court restraining the donee from proceeding to register the document ?'

19. The Privy Council referred to its earlier decision in Kalyanasundaram's case , and reiterated the effect of registration in the following portion (p. 87) :

'Registration does not depend upon his (the donor's) consent, but is the act of an officer appointed by law for the purpose, who, if the deed is executed by or on behalf of the donor and is attested by at least two witnesses, must register it if it is presented by a person having the necessary interest within the prescribed period. Neither death, nor the express revocation by the donor, is a ground for refusing registration, if the other conditions are complied with.'

20. So far as this case is concerned, it does not directly deal with the effect of s. 47. The ratio of the decision is that the transaction of gift is complete if the other formalities are completed and the document of gift is executed and that the donor cannot resile from his action before the document is registered. The ratio of both the decision of the Privy Council is to the effect that a transaction of gift made by a document which is subsequently registered becomes operative from the date on which the document of gift was executed. No doubt a reference has been made to s. 47 but mainly the decisions are rested on the effect of registration and the basis of the reasoning that the Registrar merely carries out his duties under the Act and that he cannot refuse registration once the execution of the document is admitted. We may profitably advert to the opinion of Ayyangar J. in Ram Saran's case : [1962]2SCR474 . Ayyangar J., in his minority judgment, has identified the anomalies which would arise if the view was taken that it was the date on which the document was copied out in the books of the Registrar which was material. This discussion was made in the context of the circumstance that there is no time-limit for copying out the documents in the books of the Registrar under s. 61 of the Registration Act. A vigilant officer or an officer who has no other work may do it earlier. An officer who may have more work or who may be faced with a large burden of arrears may do it at latter date. It would depend upon the vagaries of the situation in the Registrar's office. It was in this context that Ayyangar J. has expressed the opinion that it would be incongruous to take the view that the transaction would become complete depending on the date on which it was copied out in the books of the the Registrar particularly when the intention of the parties was to give effect to it from the earlier date. However, in none of these decisions the question arose in the context of the date of the presentation of the document in the officer of the Registrar directly. So far as we are concerned, the question has arisen in the context of s. 45 of the I.T. Act of 1961, which provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to tax under the head 'Capital gains'. Therefore, in relation to every transaction of transfer of a capital asset, the question will have to be decided in which pervious year the transaction was 'effected'. In other words, the expression 'effected' in the context in which it is used would mean the previous year in which the transfer of a capital asset became complete or operative in the sense of the title of the transferor being extinguished and the title of the transferee being created. It must be realised that an anomalous situation would arise in the context of the W.T. Act, is a capital asset were to be treated as being of the ownership of the transferor at one point of time in one year whereas it is treated as the property of a transferee in a different year. The date on which the transaction is effected would be extremely relevant and would have critical significance for a very god reason. The same property cannot belong exclusively to 'A' as also exclusively to 'B' at any one point of time. Either 'A' owns it exclusively or 'B' owns it exclusively at any given point of time. But not both. If one were to take the view that a transaction is complete when the document is copied in the books of the Registrar, the date would remain uncertain. It may be copied after a very long time since no time-limit is provided by the Act. Neither the transferor nor the transferee would know whether a transfer has been effected. And he would not be able to compute his profits or gains or to include such profits or gains in the return under the head of 'Capital gains'. Nor would he be able to decide whether or not the asset in question should be treated as his property during the relevant period. If his title is not extinguished till the document is copied out in the books of the Registrar, he would have to treat the property in question as his capital asset notwithstanding the fact that he has executed the sale deed, admitted its execution before the Registrar, done everything within his power, received the consideration and parted with the possession. So also the vendee would not be able to include this property in the net wealth of his wealth-tax return not knowing whether he had become an owner in respect of that property, the transaction not having been copied out in the register and (not ?) having been thus completed. Thus, if this view were to be taken in the context of the I.T. Act and the W.T. Act or the E.D. Act, it would create a tremendous uncertainty and chaos in a very sensitive field. Both the transferor and the transferee must be in a position to know with certainty whether or not the ownership and the title has been transmitted on the date of filing of the return under the relevant taxing statute. Otherwise, they will be committing an infringement, inviting penalty, and even prosecution. The transferor must know on the date of the filing of the return whether his title is extinguished and he has to include the income yielded by the sale for being taxed as capital gains, and to exclude the property from his net wealth. The purchaser must be able to include the property in his net wealth. So also the transferor and transferee must know as to who is liable to include the rental income in his return and for what period. So also if the transferee did not include this property in his net wealth in the return under the W.T. Act, he would again expose himself to penal proceedings. The date on which the transfer of the capital asset takes place must be a certain date which is capable of being ascertained. It would be hazardous to accept an interpretation which would result in creating such a situation in the context of the provisions under the revenue laws like W.T. Act, I.T. Act and E.D. Act. And far reaching consequences would ensue depending on whether or not the officer under the Registration Act decides to copy out the document in his register at an earlier date or a later date. It may be mentioned that in the Registration Act there is a time-limit for the presentation of a document before the Registrar but there is no time-limit for copying out the document in the books of the Registrar. We are, therefore, of the opinion that in so far as the expression 'transfer of capital asset effected in the previous year' occurring in s. 45 of the I.T. Act is concerned, it is not possible to take the view that the transfer is effected on the date on which the document is copied out in the books of the Registrar. In other words, the ratio of the decisions in Ram Saran Lall v. Domini Kaur, : [1962]2SCR474 , K. J. Nathan v. S. V. Maruthi Rao, : [1964]6SCR727 , and Hiralal Agrawal v. Rampadarath Singh : [1969]1SCR328 , rendered in the context of the right of pre-emption claimed under the Muhammadan law and the dispute arising under the Tenancy Act and in the context of competing documents executed and registered on different dates, will not be attracted in so far as the provision contained in s. 45 of the Act is concerned. In interpreting the expression 'transfer of capital asset' it would not be possible to take the view that the transfer is effected on the date on which the document is copied. We are, therefore, of the opinion that s. 47 would be attracted even in respect of a transaction of sale when the question arises in the context of the decisive date for ascertaining the date on which the transfer of a capital asset becomes effective under s. 45 of the I.T. Act. Once we take this view, the transaction must be treated as having become effective from the date on which the document was executed in case its registration is subsequently admitted before the Registrar and eventually it is registered. On this point, therefore, we are of the opinion that the contention of the assessee is right. The Tribunal was in error in holding that the transaction in question was not effected before March 1, 1970. Though on this point we are upholding the view canvassed by the assessee and reversing the view taken by the Tribunal, in the ultimate result the assessee cannot succeed, having regard to our decision on the question referred to us at the instance of the Revenue, viz., as regards the true character of the land in question. Since we have recorded a finding to the effect that the Tribunal was not right in deciding the mixed question of law and facts as to the true character of the land in question and in holding that the land was agricultural land, in the ultimate result, the assessee cannot succeed. The questions referred to us are answered in the following manner :

Question referred at the instance of the assessee : Question Answer1. Whether, on the facts and in In the affirmative andthe circumstances of the case, against the assessee.the Tribunal was justified inlaw in permitting the departmentto raise the additional ground,namely, that because of theregistration of the instrumentof transfer subsequent toFebruary 28, 1970, the transfersin question were not transferseffected before March 1, 1970, ascontemplated in section 47(viii)of the Income-tax Act, 1961 ?2. Whether, on the facts and in In the negative andthe circumstances of the case, against the Revenue.the Tribunal was justified inholding that the transfers inquestion were not transferseffected before March 1, 1970,as contemplated in section47(viii) of the Income-tax Act,1961 ?3. Whether, on the facts and in In the negative andthe circumstances of the case, against the Revenue.the Tribunal was justified innot accepting the assessee'scontention that in view of theprovisions of section 47 of theRegistration Act, the transferwas effected on the dates ofexecution of the sale deeds ?Question referred at the instance of the Revenue.5. Whether, on the facts and in In the negative andthe circumstances of the case, against the assessee.the Tribunal was justified inlaw in holding that the landsin question were on the dateon their transfer agriculturallands

21. One question which was raised by way of a corrigenda and which has been numbered as question No. 4 as per the order of the Tribunal dated July 4, 1978, is covered against the assessee by a decision of the this High Court in Smt. Padmavati Jaykrishna v. CIT : [1975]101ITR153(Guj) . The said question is therefore, answered in the manner indicated hereunder :

Question Answer4. Whether, on the facts and in In the affirmative andthe circumstances of the case, against the assessee inthe Tribunal was right in view of Smt. Padmavatiholding that the interest deficit Jaykrishna v. CIT to the extent of Rs. 6,453 was not : [1975]101ITR153(Guj) .deductible while determining thetotal income ?Reference answered accordingly. There will be no orderregarding costs.

22. The learned counsel for the assessee applies for a certificate of fitness to appeal to the Supreme Court under s. 261 of the I.T. Act. We do not consider this to be a fit case for the grant of a certificate. The certificate is, therefore, refused.

I.T.R. No. 156/78.

23. For the same reasons the questions referred to us in the allied reference arising from the transaction of sale effected by the husband of the assessee in Income-tax Reference No. 157/78 must be answered in the same manner. We may mention that the land was held by the husband and wife in joint names and each of them had a one-half interest in the respective parcel of land. The lands were sold by identical sale deeds executed necessary to set out the facts pertaining to the transactions in question in detail. By and large the facts are similar and the identical reasoning unfolded in the earlier case applies to this case. The questions referred to us, therefore, are answered in the following manner :

Question referred at the instance of the assessee : Question Answer1. Whether, on the facts and in In the affirmative andthe circumstances of the case, against the assessee.the Tribunal was justified inlaw in permitting the departmentto raise the additional ground,namely, that because of theregistration of the instrumentof transfer subsequent toFebruary 28, 1970, the transfersin questions were not transferseffected before March 1, 1970,as contemplated in section47(viii) of the Income-tax Act,1961 ?2. Whether, on the facts and in In the negative andthe circumstances of the case, against the Revenue.the Tribunal was justified inholding that the transfers inquestion were not transferseffected before March 1, 1970,as contemplated in section47(viii) of the Income-tax Act,1961 ?3. Whether, on the facts and in In the affirmative andthe circumstances of the case, against the assessee inthe Tribunal was right in view of Smt. Padmavatiholding that the interest Jaykrishna v. CIT deficit to extent of Rs. 6,453 : [1975]101ITR153(Guj) .was not deductible whiledetermining the totalincome ?Question referred at the instance of the Revenue.Question Answer4. Whether, on the facts and in In the negative andthe circumstances of the case, against the assessee.the Tribunal was justified inlaw in holding that the lands inquestion were, on the date oftheir transfer, agriculturallands ?Reference answered accordingly. There will be no orderregarding costs.

24. The learned counsel for the assessee applies for a certificate of fitness to appeal to the Supreme Court under section 261 of the Income-tax Act. We do not consider this to be a fit case for the grant of a certificate. The certificate is, therefore, refused.


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