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When a party is entitled to get long term capital gains even though no sale deed

Started by bpagrawal, July 09, 2015, 09:35:13 AM

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When a party is entitled to get long term capital gains even though no sale deed took place?

In addition to the fact that the term "transfer" has been
defined under Section 2(47) of the Act, even if looked at the
provisions of Section 54 of the Act which gives relief to a person
who has transferred his one residential house and is purchasing
another residential house either before one year of the transfer or
even two years after the transfer, the intention of the Legislature is to
give him relief in the matter of payment of tax on the long term
capital gain.
If a person, who gets some excess amount upon
transfer of his old residential premises and thereafter purchases or
constructs a new premises within the time stipulated under Section
54 of the Act, the Legislature does not want him to be burdened with
tax on the long term capital gain and therefore, relief has been given
to him in respect of paying income tax on the long term capital gain.
The intention of the Legislature or the purpose with which the said
provision has been incorporated in the Act, is also very clear that

the assessee should be given some relief. Though it has been very
often said that common sense is a stranger and an incompatible
partner to the Income Tax Act and it is also said that equity and tax
are strangers to each other, still this Court has often observed that
purposive interpretation should be given to the provisions of the Act.
In the case of Oxford University Press v. Commissioner of Income
Tax [(2001) 3 SCC 359] this Court has observed that a purposive
interpretation of the provisions of the Act should be given while
considering a claim for exemption from tax. It has also been said
that harmonious construction of the provisions which subserve the
object and purpose should also be made while construing any of the
provisions of the Act and more particularly when one is concerned
with exemption from payment of tax. Considering the aforestated
observations and the principles with regard to the interpretation of
Statute pertaining to the tax laws, one can very well interpret the
provisions of Section 54 read with Section 2(47) of the Act, i.e.
definition of "transfer", which would enable the appellants to get the
benefit under Section 54 of the Act.
Consequences of execution of the agreement to sell are also
very clear and they are to the effect that the appellants could not
have sold the property to someone else. In practical life, there are
events when a person, even after executing an agreement to sell an

immoveable property in favour of one person, tries to sell the
property to another. In our opinion, such an act would not be in
accordance with law because once an agreement to sell is executed
in favour of one person, the said person gets a right to get the
property transferred in his favour by filing a suit for specific
performance and therefore, without hesitation we can say that some
right, in respect of the said property, belonging to the appellants had
been extinguished and some right had been created in favour of the
vendee/transferee, when the agreement to sell had been executed.

Thus, a right in respect of the capital asset, viz. the property
in question had been transferred by the appellants in favour of the
vendee/transferee on 27th December, 2002. The sale deed could not
be executed for the reason that the appellants had been prevented
from dealing with the residential house by an order of a competent
court, which they could not have violated.
In view of the aforestated peculiar facts of the case and
looking at the definition of the term 'transfer" as defined under
Section 2(47) of the Act, we are of the view that the appellants were
entitled to relief under Section 54 of the Act in respect of the long
term capital gain which they had earned in pursuance of transfer of
their residential property being House No. 267, Sector 9-C, situated

in Chandigarh and used for purchase of a new asset/residential

CIVIL APPEAL Nos.5899-5900 OF 2014
(Arising out of SLP (c) Nos.16958-59 of 2013)
Sh. Sanjeev Lal Etc. Etc.
Commissioner of Income Tax, Chandigarh & Anr. Respondents

Citation;(2015)5 SCC775