[2001] 250 ITR 542 (GUJ.) (FB)

HIGH COURT OF GUJARAT

Commissioner of Income-tax

v.

Mormasji Mancharji Vaid

B.C. PATEL, A.R. DAVE AND P.B. MAJUMDAR, JJ.

IT REFERENCE NO. 116 OF 1982

JUNE 15, 2001

 

JUDGMENT

 

B.C. Patel J.—In view of the order made by the Division Bench of this court on September 21, 1995, referring the matter to a larger Bench and in view of the order made by the Chief Justice on March 29, 2000, this matter is placed before this larger Bench.

Before reverting to the question of law, in the instant case it would be most appropriate to refer to the facts of the case.

There was a transaction of lease-hold rights in the property in question and not a sale of ownership rights. A document dated August 3, 1968, purporting to create only leasehold rights was admitted to be of no value as the transaction was entered into without the written consent of the owner of the building, i.e., the original lessor. It seems that after some time, the consent of the owner of the property, i.e., the original lessor was obtained and the lessee (the assessee) executed a lease deed on October 13, 1973, transferring lease-hold rights in favour of the transferee. The Tribunal has recorded a finding that the accounting year of the assessee was Samvat year 2029 ending on October 26, 1973. The Income-tax Officer also dealt with the matter on the basis that the previous year of the assessee was Samvat year 2029. It seems that the document was presented before the Sub-Registrar of Documents at Daman on January 5, 1974, and the registration was completed on March 2, 1974. Thus, the document was executed during the Samvat year 2029 and the registration was completed in Samvat year 2030, assessment year being 1975-76.

The question before the court was, whether the transfer in question was effected in the accounting year (Samvat year 2029) relevant to the assessment year 1974-75, i.e., on October 13, 1973, when the document in question was executed or the transfer in question was effected in the accounting year (Samvat year 2030) relevant to the assessment year 1975-76, i.e., the year in which the document was presented for registration on January 5, 1974, or the registration of the document was completed on March 2, 1974. The court also raised a question whether the date of presenting the document for registration is the decisive date or whether the date of completion of registration of the document is the crucial date for the purpose of holding as to when the transfer of immovable property can be said to have taken place.

So far as the findings are concerned, the Tribunal held that the transfer took place when the registration of the deed was completed on March 2, 1974, in Samvat year 2030, the assessment year being 1975-76. According to the Tribunal, therefore, the question of capital gain did not arise during the previous year ending on October 26, 1973, relating to the assessment year 1974-75. The Assessing Officer was of the view that the capital gains would be payable on the amount of Rs. 1,25,000 being the amount of consideration for the assessment year 1974-75. The Commissioner of Income-tax (Appeals) set aside that finding.

The Income-tax Appellate Tribunal, Ahmedabad, referred the following questions for decision:

"(i) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal has been right in law in holding that the capital gains arising on account of transfer of house property at Nani Daman were not exigible to tax during the previous year relevant to the assessment year 1974-75 in question?

(ii) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal has been right in law in holding that since the registration was completed on March 2, 1974, the surplus arising on account of transfer of house property at Nani Daman cannot be brought to tax during the accounting period which ended on October 26, 1973?"

Learned counsel appearing for the Revenue before the Division Bench relied upon the provisions of section 54 of the Transfer of Property Act read with the provisions of section 47 of the Registration Act. The aforesaid sections are as under.

Section 54 of the Transfer of Property Act, 1882:

"54. 'Sale' defined.—'Sale' is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.

Sale how made.—Such transfer, in the case of tangible immovable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument.

In the case of tangible immovable property, of a value less than one lakh rupees, such transfer may be made either by a registered instrument or by delivery of the property.

Delivery of tangible immovable property takes place when the seller places the buyer, or such person as he directs, in possession of the property.

Contract for sale.—A contract for the sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties.

It does not, of itself, create any interest in or charge on such property".

Section 47 of the Registration Act, 1908:

"47. Time from which registered document operates.—A registered document shall operate 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". Before the Division Bench, it was argued that in view of the aforesaid statutory provisions coupled with the fact that the document in question was executed on October 13, 1973, transfer of the property in question was effected in Samvat year 2029 relevant to the assessment year 1974-75.

Learned counsel appearing for the Revenue drew the attention of the court to the decision of the Division Bench of this court in the case of Arundhati Balkrishna v. CIT [1982] 138 ITR 245, while counsel appearing for the assessee drew the attention of the Division Bench to a reported decision of the Division Bench in the case of Darbar Shivrajkumar v. CGT [1981] 131 ITR 647 (Guj). The Division Bench while referring the matter in para. 10 of the order pointed out that when the court decided the case of Arundhati Balkrishna [1982] 138 ITR 245 (Guj), the attention of the court was not drawn to the decision of the Division Bench in the case of Darbar Shivrajkumar [1981] 131 ITR 647 (Guj). No doubt, the case of Darbar Shivrajkumar [1981] 131 ITR 647 (Guj) was pertaining to the provisions contained in the Gift-tax Act while the case of Arundhati Balkrishna [1982] 138 ITR 245 (Guj), was pertaining to capital gains under the Income-tax Act. In the case of Arundhati Balkrishna [1982] 138 ITR 245 (Guj), the question that was posed was as under (page 264):

"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?"

The court considered section 45 of the Income-tax Act, section 54 of the Transfer of Property Act and section 47 of the Registration Act and after considering the decisions of the apex court, the Division Bench, in the case of Arundhati Balkrishna [1982] 138 ITR 245 (Guj), held that the transfer of capital asset becomes effective under section 45 of the Income-tax Act from the date on which the document was executed, in case its registration was subsequently admitted before the Registrar. Thus, the court came to the conclusion that the transfer was effected in the previous year in which the document was executed, even if the document was subsequently presented for registration and was registered in a subsequent year. While in the case of Darbar Shivrajkumar [1981] 131 ITR 647 (Guj), the court considered the question as to when the transfer of immovable property can be said to have taken place, under the Gift-tax Act. The court in the case of Darbar Shivrajkumar [1981] 131 ITR 647 (Guj), took a view that the transfer can be said to have been effected in the year in which the document was registered. The court considered the provisions of sections 122 and 123 of the Transfer of Property Act requiring that the transaction of gift can be brought about by executing a registered document, and, transfer of gift would be effected only upon registration of the document by which the gift was made. The Division Bench dealt with the contention based on the provisions of section 47 of the Registration Act as under (page 648):

"The true scope of section 47 has to be realised in order to comprehend its impact. A question pertaining to the scope of this provision arose before the Supreme Court in Ram Saran Lall v. Mst. Domini Kuer, AIR 1961 SC 1747. The Supreme Court observed that section 47 of the Registration Act does not say when a sale would be deemed to be complete. It only permits a document, when registered, to operate from a certain date which may be earlier than the date when it was registered. The pertinent observations as regards the scope and object of the section made therein are—

'The object of this section is to decide which of two or more registered instruments in respect of the same property is to have effect.'

The scope of section 47 of the Registration Act again came up for consideration before the Supreme Court in Hiralal Agrawal v. Rampadarath Singh, AIR 1969 SC 244. The point was canvassed before the Supreme Court that the title acquired under a document which is subsequently registered would relate back to the date of its execution. This argument was in terms repelled by the Supreme Court in para. 11 of its decision, wherein reliance has been placed on its earlier decision in Ram Saran's case, AIR 1961 SC 1747..".

It appears that the judgment of the Division Bench of this court in the case of Darbar Shivrajkumar [1981] 131 ITR 647 was not brought to the notice of the Bench when it decided the case of Arundhati Balkrishna [1982] 138 ITR 245 (Guj). Although the first case arose under the provisions of the Gift-tax Act and the second case arose under the provisions of the Income-tax Act, it can be said that both the cases were concerned with the same question, viz., when can a transfer of immovable property exceeding Rs. 100 in value be said to have been effected and both the cases involved interpretation of the true scope and effect of the provisions of section 47 of the Registration Act. In both the cases, the documents were executed in a previous year relevant to one assessment year whereas the registration of the documents was completed in the subsequent year. There can be no doubt that the view expressed in the case of Arundhati Balkrishna [1982] 138 ITR 245 (Guj), is just the opposite of the view expressed in the case of Darbar Shivrajkumar [1981] 131 ITR 647 (Guj), as observed by the Bench while referring the matter.

In the case of Arundhati Balkrishna [1982] 138 ITR 245 (Guj), before reaching the conclusion, the court referred to the decisions of the apex court in the cases of Ram Saran Lall v. Domini Kuer, AIR 1961 SC 1747, and K.J. Nathan v. S.V. Maruthi Rao, AIR 1965 SC 430. It is in view of the conflicting views expressed in the case of Arundhati Balkrishna [1982] 138 ITR 245 (Guj), that and in the case of Darbar Shivrajkumar [1981] 131 ITR 647 (Guj), that the Division Bench though it fit to refer the matter to a larger Bench to decide the question as to when the transfer of immovable property of the value exceeding Rs. 100 can be said to have been effected, i.e.,

(a) on the date of execution of the document;

or (b) on the date of presentation of the document for registration before the Sub-Registrar of Documents before whom the transferor admits its execution;

or (c) on the date on which the registration of the document is completed.

One should not forget that as pointed out by the apex court in the case of CIT v. Podar Cement Pvt. Ltd. [1997] 226 ITR 625 the settled position under the common law is that owner means a person who has got valid title legally conveyed to him after complying with the requirements of law such as the Transfer of Property Act, Registration Act, etc. But in the context of section 22 of the Income-tax Act, having regard to the ground realities and further having regard to the object of the Income-tax Act, namely, "to tax the income", the owner is a person who is entitled to receive income from the property in his own right. Thus, while interpreting the provisions contained in the taxing statute, the objectives differ and, therefore, one will have to look to the provisions contained in the Income-tax Act. Clauses (14) and (47) of section 2 of the Income-tax Act read as under:

"2. (14) 'capital asset' means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include—

(i) any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession;

(ii) personal effects, that is to say, movable property (including wearing apparel and furniture, but excluding jewellery) held for personal use by the assessee or any member of his family dependent on him.

Explanation.—

For the purposes of this sub-clause, 'jewellery' includes—

(a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel;

(b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel;

(iii) agricultural land in India, not being land situate—

(a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year;

or (b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette;

(iv) 6½ per cent. Gold Bonds, 1977, or 7 per cent. Gold Bonds, 1980, or National Defence Gold Bonds, 1980, issued by the Central Government;

2. (47) 'transfer' in relation to a capital asset, includes,—

(i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein; or (iii) the compulsory acquisition thereof under any law;"

Section 45 refers to capital gains. It reads as under:

"45. Capital gains.—(1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 53, 54, 54B, 54C and 54D be chargeable to income-tax unbder the head 'Capital gains', and shall be deemed to be the income of the previous year in which the transfer took place".

Thus, any profits or gains arising from the transfer of capital assets effected in the previous year as contemplated under section 45 are required to be taken into consideration and will be chargeable to income-tax under the head "Capital gains" and shall be deemed to be the income of the previous year in which the transfer took place "Capital assets" means property of any kind held by an assessee. When there is a transfer of capital asset, one will have to look to clause (47) of section 2. If the property is transferred, it would attract the provisions contained in section 45 read with clause (47) of section 2 and the person would be chargeable to income-tax indicated in section 45.

A larger Bench of five learned judges of the Bombay High Court in the case of Atmaram Sakharam Kalkye v. Vaman Janardhan Kashelikar, AIR 1925 Bom 210, at length considered the provisions contained in the Transfer of Property Act as also the provisions contained in the Registration Act. The plaintiff in that case executed a deed of gift in favour of defendant No. 1 on September 17, 1917. It seems that thereafter, there was some dispute between the parties and criminal proceedings were initiated. The deed was presented for registration by defendant No. 1 on September 26, 1917. Plaintiff No. 1 did not appear before the Sub-Registrar and the Sub-Registrar refused to register the deed. Defendant No. 1 appealed to the Registrar and during the course of hearing, plaintiff No. 1 appeared but resiled from his action and denied execution. The Registrar ordered it to be registered in November, 1917, and accordingly, it was registered on December 18, 1917. Thereafter a suit was filed to set aside the gift deed and for possession of the property described in the plaint. A preliminary issue was raised as under (page 210):

"Is the gift deed valid as its registration took place without the consent of the donor"? Before the Full Bench, there were two questions as under (page 213):

"(1) Was it competent to the donor to revoke the gift of immovable property before the instrument was in fact registered?

(2) If so, whether the subsequent registration of the document against the wish of the donor makes the revocation ineffective?"

There were contrary views and, therefore, the matter was referred to the Full Bench. The learned judges examined various provisions contained in the Transfer of Property Act, Registration Act, Indian Stamps Act and Indian Trusts Act and in view of the majority opinion, the answer to the first question was in the negative and there was no answer to the second question as being unnecessary. Thus, the court pointed out that the donor cannot revoke a gift of immovable property before the instrument was in fact registered.

Registration is not an act of the donor but the act of an officer appointed by law to register the documents. Reference was made to the question that though in case of sales and mortgages, documents were required to be registered, it was not suggested that the executants had power to revoke up to the time of actual registration. The learned Acting Chief Justice who was not in agreement with the opinion of the majority, also pointed out that the argument based on analogy does not, however, seem to be well founded. It is perfectly true to say, with regard to those documents, as with regard to a deed of gift that the sale is not complete or that the mortgage is not complete until the document is registered, just as a gift would not be complete until the document is registered. But the vendor who has agreed to sell the property and has executed a conveyance not registered or a mortgagor who has executed an instrument duly attested as required by law but not registered cannot be said to have the power to revoke the contract. Mr. Justice Marten pointed out as under (page 218):

"Now as regards transfers by sale or by mortgage under sections 54 and 59, it is not contended that a vendor or a mortgagor could revoke a conveyance or a mortgage at any time before registration. And there is one very good reason for that, viz., that the Indian Registration Act does not necessitate the consent of the transferor being obtained to the registration. Under Part 12 of the Indian Registration Act, the Registrar has power to register a document despite the refusal of the transferor, provided he is satisfied that it has been executed (see section 75(1)). It is only if he refuses to order registration that there is an appeal to the civil court under section 77.

Consequently, sections 54 and 59 of the Transfer of Property Act are construed as necessitating two things, viz., (a) transfer executed by the transferor, and (b) registration which may be effected by either of the parties, but which does not depend on the consent of the transferor".

It is further pointed out as under (page 218):

"It is, however, said that we ought to adopt different construction because the transfers referred to in sections 54 and 59 are for consideration, but section 123 refers to a transfer without consideration. I agree that in some cases this distinction may make a practical difference as to whether, quite apart from the validity of the transfer, you can obtain specific performance of any antecedent agreement for such transfer. But I entirely fail to see that it affects the validity of the transfer itself. The Act is here dealing with 'transfers' and not with contracts. It indeed expressly excludes contracts of sale in section 54 from creating any interest in or charge on land".

Pointing out section 47 of the Registration Act, it was pointed out that it operates from the time from which it would have commenced to operate, if no registration thereof had been required or made, (that is, the date of execution of the document) and not from the time of its registration. While negativing the contention that the registration is really analogous to execution or attestation and until all the three requisites are satisfied there is no complete document. It was pointed out that then the document ought to operate from the date of registration and not from the date of its execution.

Our attention was drawn to the decision in the case of CWT v. H.H. Maharaja F.P. Gaekwad [1983] 144 ITR 304 (Guj) wherein the assessee was assessed under the Wealth-tax Act. The assessee claimed that he had ceased to be the owner of the property known as Jay Mahal situated at Bombay. A large part of the sale price of more than Rs. 110 lakhs had remained unpaid and no sale deed had been executed in favour of the purchaser who had agreed to purchase the property. It was contended that the assessee had ceased to be the owner by virtue of an agreement read with section 53A of the Transfer of Property Act. The court considered the various factual aspects placed before it.

In the case of Arundhati Balkrishna [1982] 138 ITR 245 (Guj), it was the admitted position that the sale deeds were signed by the vendors prior to March 1, 1970, but the same were not presented for registration till March 1, 1970. In view of the amendment and in view of the provisions contained in section 47 if the transfer 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". The matter rested only on the question whether or not the transaction of sale was effected "prior" to March 1, 1970, or "subsequent" to March 1, 1970. The court was of the view that 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 important aspect to be considered was "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 the transfer was brought about. The court examined the provisions contained in the Transfer of Property Act and the Registration Act. Counsel for the assessee argued that upon the vendor executing a sale deed so long as it is not registered, it would not extinguish the right of the vendor and create a title in the vendee, but once it is registered, the transaction would become operative retrospectively from the date on which it was executed. The Revenue contended that section 47 will have to be considered in a situation where there are two competing sale deeds in the field and the question arises as to which of the two documents would prevail. It was contended that the document which was executed earlier would prevail notwithstanding the fact that it might have been registered later. The attention of the court was drawn to a decision in the case of Ram Saran Lall v. Mst. Domini Kuer, AIR 1961 SC 1747. The court considered the case of K.J. Nathan v. S.V. Maruthi Rao, AIR 1965 SC 430 where 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 in June, 1948. The mortgagor executed the deed of mortgage in favour of another party on October 10, 1947. The Supreme Court in the above case observed as under (see at page 439 of AIR 1965 (SC) and page 267 of 138 ITR):

"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 third defendant was executed only on October 10, 1947. Though exhibit A-19 was registered on June 22, 1948, under section 47 of the Registration Act, the agreement would take effect from July 5, 1947".

The Division Bench pointed out that in the case of K.J. Nathan, AIR 1965 SC 430, the decision rendered by the Supreme Court in the earlier case of Ram Saran Lall, AIR 1961 SC 1747 was not considered, because it does not seem to have been cited before the court. Later on, the same question came up before the Supreme Court in the case of Hiralal Agrawal v. Rampadarath Singh, AIR 1969 SC 244. The question arose in the context of section 16 of the Bihar Land Reforms (Fixation of Ceiling Area and Acquisition of Surplus Land) Act. Sub-section (1) of section 16 of the aforesaid Act 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 section 16 provides that no registering authority can register such a deed of sale and there can be no valid transfer unless the sale deed is registered. The sale deed in question was executed by the transferor and the transferee on October 9, 1964, and the sale deed was registered on November 30, 1964. It was in the context of these facts, 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 on section 47 of the Registration Act was advanced before the Supreme Court and it was contended that having regard to section 47, once a document was registered, 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 Lall, AIR 1961 SC 1747. The Division Bench pointed out that in none of these cases, the Supreme Court was concerned with the vital question as regards 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. The question was 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 on some later date when it was presented for registration or was copied out in the registration book? The court further pointed out that it is a vital question from the stand point of the Income-tax Act and Wealth-tax 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. The attention of the Division Bench was drawn to the decisions of the Privy Council in the case of Venkat Subba Srinivas Hegde v. Subba Rama Hegde, AIR 1928 PC 86, and the ratio of this decision was that the transaction of sale would become complete with effect from the date on which the document was executed having regard to section 47 which gave retrospective effect to the transaction upon the document being registered. The Privy Council expressed its complete agreement with the judgment of the Bombay High Court in the case of Atmaram Sakharam Kalkye v. Vaman Janardhan Kashelikar, AIR 1925 Bom 210 [FB] 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. The Privy Council pointed out as under (see page 87 of AIR 1928 PC and page 269 of 138 ITR):

"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".

The Division Bench pointed out that the question has arisen in the context of section 45 of the Income-tax Act, 1961, which provides that any profit or gain 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 a transfer of "capital asset", the question will have to be decided as to in which previous 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 the asset became complete or operative in the sense of the title of the transferor being "extinguished" and the title of the transferee being "created".

The court also pointed out that if one were to take a view that a transaction is complete when the document is copied in the book 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 the transfer has been effected and the vendor would not be able to calculate 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 Income-tax Act and the Wealth-tax Act, it would create tremendous uncertainty and chaos in the very sensitive field. Both the transferor and the transferee must be in a position to know with certainty whether or not ownership of 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 Division Bench pointed out that the date on which the transfer of the capital asset takes place must be a certain date which is capable of being ascertained. The court was of the view that it cannot be left with the registering authority and, therefore, the court expressed an opinion that in so far as the expression "transfer of capital asset effected in the previous year" occurring in section 45 of the Income-tax Act is concerned, it is not possible to take a 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 cases of Ram Saran Lall v. Mst. Domini Kuer, AIR 1961 SC 1747; K.J. Nathan v. S.V. Maruthi Rao, AIR 1965 SC 430 and in the case of Hiralal Agrawal v. Rampadarath Singh, AIR 1969 SC 244, decided in the context of pre-emption claimed under the Mohammedan law and the dispute arising under the Tenancy Act and in the context of a document executed and registered on or before dates, may not be attracted so far as the provision contained in section 45 of the Income-tax Act is concerned. In interpreting the expression "transfer of capital asset", it would not be possible to take a view that the transfer is effected on the date on which the document is copied. The Division Bench therefore opined that (page 272 of 138 ITR) "We are, therefore, of the opinion that section 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 section 45 of the Income-tax 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". The court held on this point that the assessee was right. Thus, in view of having certainty with regard to tax provisions in the case of Arundhati Balkrishna [1982] 138 ITR 245 (Guj), the court has, in our opinion rightly decided the issue. In our opinion, considering the definition of "capital asset", "transfer" and the provisions contained in section 45 for capital gains, the view taken by the Division Bench in the case of Arundhati Balkrishna [1982] 138 ITR 245 (Guj) is the correct view.

In the case of Thakur Kishan Singh v. Arvind Kumar, AIR 1995 SC 73, the land in dispute was leased to the plaintiff by the lamberdar and the deed was executed on December 5, 1949, which was registered on April 3, 1950. It was contended that the deed having been registered on April 3, 1950, was void under section 6 of the Madhya Pradesh Abolition of Proprietary Rights Act, 1950, as the land had been vested in the State on March 31, 1950. The court in para. 3 pointed out that section 47 of the Registration Act provides that a registered document shall operate from the time it would have commenced to operate if no registration thereof had been required or made and not from the time of its registration. It is well established that a document so long as it is not registered is not valid, yet once it is registered it takes effect from the date of its execution. (see Ram Saran Lall v. Mst. Domini Kuer, AIR 1961 SC 1747 (1749) and Nanda Ballabh Gurunani v. Smt. Maqbool Begum [1980] UJ (SC) 597). The court pointed out that since admittedly the lease deed was executed on December 5, 1949, the plaintiff after registration on April 3, 1950, became the owner by operation of law on the date when the deed was executed. Therefore, the land did not vest in the State.

In the case of Hamda Ammal v. Avadiappa Pathar [1991] 1 SCC 715, the court examined section 54 of the Transfer of Property Act and section 47 of the Registration Act. The court in para. 4 (page 718) pointed out as under:

"Now, if we read section 47 of the Registration Act, it clearly provides that a registered document shall operate 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. This provision makes it clear that after the registration it will relate back to the date of execution of the sale deed".

The court pointed out after considering section 53 of the Transfer of Property Act, 1882, that even an unregistered document can be received as evidence for the purposes mentioned in the proviso to section 49 of the Registration Act.

In the case of CIT v. Podar Cement P. Ltd. [1997] 226 ITR 625 (SC) the court was required to examine income derived by the assessee from flats in the building as taxable under the head "Income from other sources" under section 56 of the Income-tax Act and not "income from house property" under section 22 of the Income-tax Act, 1961. In that case, rental income of flats in the building known as "Silver Arch" situated on Napean Sea Road, Bombay, was the subject-matter. The assessee contended that:

(i) The rental income from the flats was assessable income as "income from other sources" under section 56 of the Income-tax Act inasmuch as the assessee-company was not the legal owner of the property in the flats. Such a claim was put forward before the Assessing Officer mainly on the ground that the title to the property had not been conveyed to the co-operative society which was formed by the purchasers of the flats and that so long as the ownership was not transferred in the name of the assessee, the rental income from the flats could not be assessed as "income from house property" (under section 22 of the Act).

(ii) The flats and the parking space were given on rent at Kailash Building, Curzon Road, New Delhi, and the assessee claimed that the said income of rent must be assessed as "income from house property". However, the Income-tax Officer took the view that the assessee only had tenancy rights and, therefore, the income should be assessed under the head "Income from other sources", namely, under section 56 of the Act.

(iii) The flats constructed in a building known as "Akash Deep" on a piece of land belonged to the Government but had been given on perpetual lease. The name of the original lessee was not known. However, the company known as Ansal and Sehgal Pvt. Ltd. entered into an agreement with the lessee and constructed a multi-storeyed building on the said piece of land. The assessee claimed and it was not disputed, that he has paid the entire price thereof and got possession of the three flats. It is also claimed by the appellant that he had absolute rights of disposal over them and that he had let out these flats to different tenants and he was deriving income from the flats and was paying the municipal taxes in respect thereof. The net income from these flats was indicated by way of rent to the tune of Rs. 18,403. The said net income was arrived at after deducting the municipal taxes as well as the statutory deduction of one-sixth of the annual value on account of repairs as provided in section 24 of the Act. The Income-tax Officer while accepting the return denied the deduction of the repairs claimed by the assessee on the ground that the income could be assessed under the head "Income from other sources" under section 56 of the Act. It was contended before the court that the word "owner" in section 22 of the Income-tax Act should be understood in its general sense. According to learned counsel, the word "owner" can only refer to the legal owner and none else as the concept of dual ownership is unknown in Indian jurisprudence.

(iv) It was contended that the Income-tax Act is a self-contained code exhaustive of all matters dealt with therein and its provisions show an intention to depart from the common rule.

The apex court in para. 29 pointed out as to how elaborately the case was dealt with by the High Court of Patna in Sahay Properties' case [1983] 144 ITR 357. In that case, the assessee-company acquired certain immovable property in February, 1962. The assessee paid the entire consideration and was in actual physical possession of the entire properties contracted to be sold. The assessee was empowered by the vendor to use the properties in whatsoever manner the assessee liked and to receive and enjoy the entire usufructs thereof, with the reservation that a formal deed of conveyance with registration in conformity with the Indian Registration Act would follow at the request of the assessee and once the request was made, it was incumbent upon the transferor to execute such a deed of conveyance and to get it registered. The assessee was assessed under section 22 in respect of the income from the property but the Tribunal held that the assessee was not the owner of the property and was not liable to be assessed as such. Considering the provisions of the Act, English decisions, Jodha Mal Kuthiala's case [1971] 82 ITR 570 (SC) and passages from the G.W. Paton on Jurisprudence, Dias on Jurisprudence, Stroud's Judicial Dictionary and Pollock on Jurisprudence, the court expressed the view and pointed out as under (page 642 of 226 ITR):

"The juristic principle from the view-point of each one is to determine the true connotation of the term 'owner' within the meaning of section 22 of the Act in its practical sense, leaving the husk of the legal title beyond the domain of ownership for the purpose of this statutory provision. The reason is obvious. After all, who is to be taxed or assessed to be taxed more accurately—a person in receipt of money having actual control over the property with no person having better right to defeat his claim of possession or a person in legal parlance who may remain a remainder man, say, at the end or extinction of the period of occupation after, again say, a thousand years?"

The question raised was (page 643): "Can it then be said that the recipient of the income being the assessee only having an absolute and exclusive control over the property without any let or hindrance on the part of the so-called vendor which, indeed, under law it was not entitled to do, as we shall presently show, shall be immune from the taxing provision in section 22 of the Act?" The court further pointed out as under (page 643):

"The answer in our view is clearly in the negative. The reason is simple. The consideration money has been paid in full. The assessee has been put in exclusive and absolute possession of the property. It has been empowered to deal with the income as it likes. It has been empowered to dispose of and even to alienate the property. Reference to section 54 or, for that matter, section 55 of the Transfer of Property Act by the Tribunal merely emphasises the fact that the legal title does not pass unless there is a deed of conveyance duly registered. The agreement is in writing and the value of the property is admittedly worth more than hundred rupees. Section 54 of the Transfer of Property Act would, therefore, exclude the conferment of absolute title by transfer to the assessee. That, however, would not take away the right of the assessee to remain in possession of the property, to realise and receive the rents and profits therefrom and to appropriate the entire income for its own use. The so-called vendor is not permitted in law to dispossess or to question the title of the assessee (the so-called vendee). It was for this very practical purpose that the doctrine of the equity of part performance was introduced in the Transfer of Property Act, 1882, by inserting section 53A therein. The section specifically allows the doctrine of part performance to be applied to the agreements which, though required to be registered, are not registered and to transfers not completed in the manner prescribed therefore by any law. The section is, therefore, applicable to cases where the transfer is not completed in a manner required by law unless such a non-compliance with the procedure results in the transfer being void. There is, however, a distinction between an agreement void as such and an agreement void in the absence of something which the vendor could do and had expressly or impliedly contracted to do, and where a vendor agrees to sell his share of property, including sir land, there is an implied term in the contract that he will apply for sanction to the revenue authorities necessary for such transfers and the court will direct him to do so. It cannot be said that such an agreement is void because no sanction has been obtained..". (emphasis supplied by us)

Another case with regard to section 22 of the Income-tax Act which has created charge on the income was considered by the Rajasthan High Court in the case of Maharani Yogeshwari Kumari v. CIT [1995] 213 ITR 541. The court posed a question "the question, therefore, arises is as to whether the words 'that the assessee is the owner' can be applicable only to a registered owner or also to such person in whose favour the registered sale deed has not been executed but the sale agreement has been executed, possession of the property has been given and consideration for sale has been paid".

Section 53A of the Transfer of Property Act contemplates as under:

"Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty,

and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract,

and the transferee has performed or is willing to perform his part of the contract,

then, notwithstanding that the contract, though required to be registered, has not been registered, or, where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefore by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: ..".

If the view that without there being registration, the transferor continues to be the owner is taken, still the question which arises is that the income has not been received by the owner and, therefore, whether the assessment of the transferee can be made by considering that there was diversion of income or the transferor has ceased to have any right to have income received? This section debars the transferor from enforcing his right to property. In the case of Rajputana Hotels (P.) Ltd. v. State of Rajasthan—CWP No. 511 of 1989, decided on May 27, 1992, while interpreting the provisions of the Rajasthan Land and Building Act, 1964, it was held that the person who is entitled to receive rent is assessable in respect of property even if it is not registered in his name.

In our view, considering the aforesaid decisions and the object of the Act, the definition given in the Act is required to be taken into consideration. When the document is executed and the property passes and merely because there is no registration certificate, the State coffers should not suffer. If the view is propounded that only on registration, the act of transfer will be complete then in that case, if the document is not registered, though the assessee will be enjoying the property, he will say that he is not liable to pay the tax. But that is not the intention of the Legislature. In our opinion, the word "transfer" as indicated in the Income-tax Act is required to be considered and not "sale" as indicated in the Transfer of Property Act. If the intention of the Legislature was different, then there would have been specific reference. The relevant provision of clause (47) of section 2 is as under.

"Unless the context otherwise requires, transfer is to be understood in the simple meaning as it is indicated which includes sale, exchange or relinquishment of the asset or the extinguishment of any rights therein or the compulsory acquisition thereof under any law".

If the words are defined in the Act itself then it is not proper to read the meaning of the similar word given in another statute unless otherwise expressly provided. In the Income-tax Act, wherever the Legislature has thought fit to have the meaning of the word provided in a different statute, specific provision has been made. In our opinion, therefore, "transfer" as defined in the Act is to be given simple meaning as indicated.

There are various methods by which there can be avoidance of tax. The tax evaders always keep faith in their counterparts. Even property is being transferred by merely executing special power of attorney on stamp paper of Rs. 20 and the transfer deed is not executed as contemplated under the law. The transferor puts the transferee in possession but in view of the document, namely, the power of attorney executed by the transferor, it is said that the transferee is not the owner of the property though for all practical purposes the transferee acts as the owner, in view of the irrevocable power of attorney. By this method tax evaders are securing double benefits, i.e., avoidance of income-tax and stamp duty. It seems that considering various devices which the tax evaders are applying, the Legislature therefore amended by inserting clauses in the definition of transfer by clause (47) of section 2 which is as under:

"2. (47) 'transfer', in relation to a capital asset, includes,—

(i) the sale, exchange or relinquishment of the asset; or

(ii) the extinguishment of any rights therein; or

(iii) the compulsory acquisition thereof under any law; or

(iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment; or

(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882); or

(vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property.

Explanation.—For the purposes of sub-clauses (v) and (vi), 'immovable property' shall have the same meaning as in clause (d) of section 269UA".

In case of ownership, there is a transfer of capital assets. This is a case of lease. The transferee was put in possession and was enjoying the property as a lease holder. There cannot be different criteria for transfer of capital asset. For the purpose of tax even if the document, i.e., conveyance, is not executed but the transferee exercises all the rights of the true owner, one cannot emphasise for taxation purposes that unless and until the deed of conveyance transferring the rights in property is executed, the transferee is not liable though he did everything which is required for acquiring a property. As pointed out, the vendor is not permitted in law to dispossess or question the title of the vendee.

Under the circumstances, our answer would be that transfer of immovable property of the value exceeding Rs. 100 can be said to have been effected on the date of execution of the document. In view of this answer, it is not necessary to answer further questions. Registry shall place the matter before the Chief Justice for placing it before appropriate court for final hearing.