INCOME TAX---

----Capital gains---Short-term or long-term capital gains---Agreement of sale executed by vendor on 1-5-1962, and possession of land delivered to assessee on same date---Document registered on 8-6-1979---Registration of document relates back to date on which agreement of sale was executed in favour of assessee---Assessee deemed to be owner of property with effect from 1-5-1962---Assessee held property for more than 36 months---Sale of land by assessee after converting it into plots ---Ganis from sale not to be assessed as short-term capital gains---Indian Income Tax Act, 1961, S.45.

The assessee entered into an agreement of sale, dated May 1, 1962, with the vendor and paid him a certain amount for the purchase of a land. The sale-deed was executed on June 8, 1979. The assessee contended before the Income-tax Officer that the land was purchased in the year 1962 itself and he was in possession of the land and on payment of the sale consideration he was the legal owner of the land and that after he became the full-fledged owner by registering the document on June 8, 1979, he sold that land after converting it into plots. The Income-tax Officer held that the land was registered in the name of the assessee on June 8, 1979, and, therefore, the capital gains derived by the assessee on the sale of the plots should be assessed as short-term capital gains. On appeal, the Appellate Assistant Commissioner confirmed the order of the Income-tax Officer. On further appeal, the Tribunal affirmed the order of the Appellate Assistant Commissioner. On a reference:

Held, that a perusal of the document made it clear that the agreement of sale was executed in 1962 and possession was delivered to the assessee on the same date and the sale consideration was also paid by the assessee to the vendor, though the document was registered on June 8, 1979. The registration of the document related back to the date on which the agreement of sale was executed in favour of the assessee by the vendor. Therefore, the assessee was deemed to be the owner of the property with effect from May 1, 1962. Therefore, the assessee had held that property for more than 36 months and the capital gains derived by the assessee on the sale of the plots could not be assessed as short-term capital

C. Kodanda Ram for the Assessee.

S. R. Ashok for the Commissioner.

JUDGMENT

MS. S. V. MARUTHI, J.---At the instance of the assessee, the following question is referred for-the opinion of this Court:

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the capital gains liable to be taxed in this case should be of short-term capital gains?"

The brief facts of the case are as follows:

The assessee entered into an agreement of sale, dated May 1, 1962, with Sri B. Vardha Reddy and paid him a sum of Rs.3,800 for the purchase of land admeaduring 3 acres, 37 guants, in Survey, Nos.37 and 38 situated at Malkajgiri village, Ranga Reddy district. The sale deed was executed on June 8; 1979. The assessee contended that the land was purchased by him in 1962 itself and he was in possession of the land and on payment of sale consideration he is the legal owner of the land. After he became full-fledged owner by registering the document on June 8, 1979, he sold the land by making it into plots. The Income-tax' Officer held that the land was registered in the name of the assessee individually on June 8, 1979. Therefore, the capital gain on the sale of the plots should be considered as a short-term capital gain. On appeal, the Appellate Assistant Commissioner of Income-tax confirmed the said finding. On further appeal to the Tribunal, the Tribunal held that it is a short-term capital gain. Hence, the assessee is before us in this reference case.

The question for consideration is whether the Tribunal is right in holding that the capital gains that arise are short-term capital gains. To consider whether the capital gain is a short term capital gain or a long term capital gain, it is necessary to refer to the document, which is registered on June 8, 1979. The document is produced before us reads as follows:

"Whether the vendor is the absolute owner of agricultural land in Survey Nos. 37' and 38 admeasuing 3 acres 37 guntas situated at Malkajgiri village by virtue of inheritance from his father."

Whereas the vendor had agreed with the said vendee by an agreement of sale in the year 1962 to sell absolutely to the vendee agricultural land admeasuring 3 acres, 37 guntas in Survey Nos. 37 and 38 described in the schedule for a price of Rs.3,800 (rupees three thousand and eight hundred only) and the vendee had agreed to purchase the said agricultural property for the aforesaid price free from all encumbrance, charges and demands whatsoever.

Now, this deed witnessed that in pursuance of the aforesaid agreement of sale and in consideration of Rs.3,800 (rupees three thousand and eight hundred only) having been fully and truly paid by the vendee to the vendor at the time of agreement of sale by way of cash the vendor does hereby admit, accept and acknowledge the receipt of full payment.

The vendor had already given possession of the agricultural land in Survey Nos. 37 and 38. admeasuring 3 acres, 37 guntas at the time of agreement of sale in the year 1962 to the vendee but no formal transfer of title was made by the vendor in favour of the vendee due to some unavoidable circumstances. -

A perusal of the document makes it clear that the agreement of sale was executed in 1962 and possession was delivered to the assessee on the said date and the sale consideration was also paid by the assessee to the owner of the property: However, the document was registered on June 8, 1979. The registration of the document relates back to the date on which the agreement of sale was executed in favour of the assessee by the owner. Therefore, the assessee is deemed to be the owner of the property with effect from May 1, 1962. If the assessee is the owner of the property with effect from May 1, 1962, the capital gains cannot be said to be short-term capital gains as the assessee has already held that property for more than thirty-six (36) months. In our view, therefore, the view expressed by the Tribunal that the capital gains are short-term capital gains is not

In the light of the above, we answer the question in the negative and in favour of the assessee. The referred case is accordingly answered. No costs.

M.B.A/3393/F.C ??????????????????????????????????????????????????????????????????????????????? Reference answered.