INCOME TAX OFFICER v. M. SYAMALA RAO
[Citation -1985-LL-1022-1]

Citation 1985-LL-1022-1
Appellant Name INCOME TAX OFFICER
Respondent Name M. SYAMALA RAO
Court ITAT-Hyderabad
Relevant Act Income-tax
Date of Order 22/10/1985
Assessment Year 1980-81
Judgment View Judgment
Keyword Tags delivery of possession • registered sale deed • transfer of property • competent authority • adverse possession • immovable property • long-term capital • rural development • comparable case • returned value • estimated sale • sale price
Bot Summary: The ITO held the assessee liable for short-term capital gains on the ground that the assessee became full-fledged owner on 8-6- 1979 and he sold the land having formed plots thereon is this previous year ending with 31-3-1980, i.e., within three years after he got title to the land. The assessee came up in appeal before the AAC. Two contentions were put forward: the first is, that the assessee became the absolute owner of the land by virtue of adverse possession even prior to the date on which he obtained the regular registered sale deed i.e., on 8-6-1979. From the said order, a photostat copy of which is furnished to us, it would appear that the assessee, Shri Syamala Rao, appeared as objection petitioner before the Land Reforms Tribunal and claimed to have purchased an extent of three acres and 37 guntas from Smt. Rama Devi, wife of Shri B. Vardha Reddy, under sale deed dated 1-5-1962. Shri Madhava Rao, the learned counsel for the assessee, heavily relied upon this order to press the claim of the assessee that he became absolute owner of the land much prior to the date of his obtaining a registered sale deed on 8-6-1979. The question which is before us is when the assessee becomes the owner of this property We are not for a while considering whether the assessee can defend himself successfully against the true owner, a trespasser or a person without title. B. Vardha Reddy in the land where was the necessity for the assessee to obtain a regular registered sale deed frorm the same Shri. Now coming to the question of valuation which is the subject matter of the assessee's appeal we have already stated that the sale price accepted by the assessee is Rs. 15 per sq.


former is departmental appeal whereas latter is assessee's appeal directed against order of AAC, Hyderabad, dated 26-12-1983 and they relate to assessment year 1980-81. 2. assessee, who is individual, purchased three acres and 37 guntas in survey Nos. 37 and 38 of Malkajgiri village under agreement of sale dated 1-5-1962 for sum of Rs. 3,800 form Shri B. Vardha Reddy. assessee obtained regular registered sale deed form said Shri B. Vardha Reddy on 8-6-1979. It is claim of assessee that even under agreement which he obtained in 1962 he was given delivery of possession of land purchased. He divided land into 14 plots and sold them for value of Rs. 46,019. sale value of plot is taken at Rs. 10 per sq. yard. It is also claim of assessee that he paid Rs. 5 per sq. years as brokerage commission to Mrs. V. Sujatha, No. 5-31, Malkajgiri, Secunderabad. It is also claim of assessee that he became absolute owner of land even in 1962 as soon as he obtained agreement of sale on 1-5-1962. Therefore, only long-term capital gains are to be computed over sale of plots made by him. Each plot comprised of 3,068 sq. yards. Admittedly, assessee invested sum of Rs. 10,000 for purchase of Seven Year National Rural Development Bonds on 22-7-1980. 3. ITO did not accept contention of assessee that he is liable for long-term capital gains only. ITO held assessee liable for short-term capital gains on ground that assessee became full-fledged owner on 8-6- 1979 and he sold land having formed plots thereon is this previous year ending with 31-3-1980, i.e., within three years after he got title to land. ITO also did not accept returned value of sale price. He had taken into consideration comparable case where one Shri Shikari Mallaiah of Malkajgiri sold his plot at Rs. 30 per sq. yard but it was registered only at Rs. 10 per sq. yard. Therefore, he had taken sale value even in case of assessee to Rs. 30 per sq. yard. He had conceded Rs. 5 per sq. yard as brokerage commission to Smt. V. Sujatha. He had also deleted Rs. 10,000 towards purchase of rural bonds by assessee on 22-7-1980. Thus, he computed short-term capital gains resulting from out of sale of land converted into 14 plots at Rs. 62,900 in hands of assessee as per assessment order dated 19-3-1983. 4. assessee came up in appeal before AAC. Two contentions were put forward: first is, that assessee became absolute owner of land by virtue of adverse possession even prior to date on which he obtained regular registered sale deed i.e., on 8-6-1979. It is contention that Land Reforms Tribunal while deciding appeal of Shri B. Vardha Reddy held that assessee perfected his title over three acres 37 guntas in survey Nos. 37 and 38 of Malkajgiri village. AAC onwards and he had accepted contention put forward on behalf of assessee that he has perfected his title by adverse possession against Shri B. Vardha Reddy by remaining in possession of land in survey Nos. 37 and 38, Malkajgiri for continuous period of 12 years. As regards value of land he held that estimating sale price of each sq. yard at Rs. 30 is on high side. He felt that it is justificable t o reduce it to Rs. 25 per sq. yard an, accordingly, he directed ITO to compute long-term capital gains. 5. Now revenue having been aggrieved by finding that long-term capital gains result from sale filed IT Appeal No. 586 (Hyd.) of 1984 whereas assessee having been aggrieved by estimated sale price at Rs. 25 per sq. yard filed IT Appeal No. 508 (Hyd.) of 1984. We feel it convenient to club both these matters and dispose them of by common order as they arise out of common order of AAC. 6. We heard Shri G. S. Madhav Rao, learned counsel for assessee, n d Shri C. V. Padmanabhan, learned departmental representative. learned departmental representative contended that finding of AAC that assessee perfected his title being in possession of same right from 1962 i s finding which cannot be supported either on fact or in law. On other hand, Shri Madhava Rao, learned counsel for assessee, filed orders of Land Reforms Tribunal passed in case of Shri B. Vardha Reddy, son o f Ramkrishana Reddy, of Malkajgiri. From said order, photostat copy of which is furnished to us, it would appear that assessee, Shri Syamala Rao, appeared as objection petitioner before Land Reforms Tribunal and claimed to have purchased extent of three acres and 37 guntas from Smt. Rama Devi, wife of Shri B. Vardha Reddy, under sale deed dated 1-5-1962. assessee herein appeared to have filed before Land Reforms Tribunal copy of agreement which is marked as Ex. A15, Pawti book and 8 LR receipts which were marked as Ex. A14 and receipt having paid consideration which is marked as Ex. A13. assessee also appeared to have filed Pahanis for assessment years 1962-63 to 1974-75 with certificate of Tehsil office that Pahani for 1973-74 was not available. Having considered matter before it, Land Reforms Tribunal recorded finding that Shri Shyamala Rao had perfected is title over survey Nos. 37 and 38 measuring 3 acres and 37 guntas by being in continuous possession for 12 years and, therefore, he deleted said expenditure form holding of declarant. Shri Madhava Rao, learned counsel for assessee, heavily relied upon this order to press claim of assessee that he became absolute owner of land much prior to date of his obtaining registered sale deed on 8-6-1979. He, therefore, vehemently contended that finding of AAC is supportable by order of Land Reforms Tribunal which is competent authority to declare title over land and so impugned order of AAC is not liable to disturbed. 7. agreement dated 1-5-1962 is not filed before us. We do not know whether there was any recital therein about delivery of possession of land to vendee. All documents filed before Land Reforms Tribunal by assessee were not filed before us or before lower authorities. submission that Land Reforms Tribunal is competent to decide title to land is not acceptable to us. After going through order of Land Reforms Tribunal it can be seen that it was order given while determining ceiling limit of family of Shri B. Vardha Reddy. BY giving finding that assessee had perfected his title to 3 acres and 37 guntas situated in survey Nos. 37 and 38 of Malkajgiri village Land Reforms Tribunal ordered exclusion of same from family holding of Shri B. Vardha Reddy. This order of Land Reforms Tribunal operates only as judgment in person, that means order binds only parties to it. It may very well be used as binding over Shri B. Vardha Reddy who was declarant before Land Reforms Tribunal. But said order by no stretch of imagination can operate as judgment in rem. It does not create any right in assessee which can hold good against whole world. In our humble opinion, this order does not bind revenue, in this case which was not party before Land Reforms Tribunal. Further order is not binding against this Tribunal. According to us, finding in order that assessee perfected his title by adverse possession, by being in possession of property continuously for 12 years, is erroneous. Our reasons are as follows. 8. Admittedly assessee entered into agreement of sale with regard to these two survey numbers on 1-5-1962 that means he acknowledged title o f Shri B. Vardha Reddy in this land. right of assessee in this land is only equitable right to obtain regular registered sale deed from his vendor. Under clear provisions of section 54 of Transfer of Property Act, 1882, contract for sale of immovable property does not by itself create any interest in or charge on such property. Even assuming that assessee had got rights of part performance under section 53A of Transfer of Property Act, those rights can be successfully exercised only against Shri B. Vardha Reddy who is transferor or any person claiming under him. rights available to transferee under section 53A secures to him only to defend his possession in land. It is axiomatic that right under section 53A operates as shield and not as sword. protection provided to transferee had not got. transferee gets full title in property purchased only by obtaining regular registered sale deed from vendor or persons claiming under him after his death. equity of part performance is passive equity. right of transferee under that section does not confer right to enforce specific performance. 9. question which is before us is when assessee becomes owner of this property? We are not for while considering whether assessee can defend himself successfully against true owner, trespasser or person without title. In A. Krishnaswamy's Law of Adverse Possession, 1985, Tenth edn., learned author states as follows: "A possession which can be referred to lawful title cannot be considered adverse. When possession can be referred to right consistent with substance of ownership in it at its which contracts ownership. If possession was not adverse in its inception, it is presumed to continue as it began. It is now well settled that permissive possession cannot be converted into adverse possession unless it is proved that person in his possession asserted adverse title to property to knowledge of true owners, for period of 12 years or more." Now in this case, having admitted title of Shri B. Vardha Reddy assessee purchased lands from him, obtained agreement and claims to have entered into possession of land through him. Therefore, possession o f assessee is permissive possession and he always claims to be permissive possessor of Shri B. Vardha Reddy. Having, thus, obtained permissive possession from his is it available to assessee to claim adverse possession to Shri B. Vardha Reddy, his own vendor? Was there any material in this case to establish that assessee had set up any adverse title to property to Shri. B. Vardha Redd y? Did Land Reforms Tribunal consider any such material? If rea lly assessee had set up adverse title to Shri. B. Vardha Reddy in land where was necessity for assessee to obtain regular registered sale deed frorm same Shri. B. Vardha Reddy on 8-6-1979. In our considered opinion very fact that assessee obtained regular registered sale deed from Shri. B. Varda Reddy on 8-6-1979 would make theory of obtaining title to adverse possession hollow and make-believe. Therefore, argument of learned counsel that finding of th AAC that assessee became owner of property by adverse possession much before 1979 cannot be accepted as tenable. We hold that assessee become owner of property only through registered sale deed dated 8-6-1979 and sales having been made within 3 years from date of these scale deed resultent capitals gains can be only short-term capital gains but not long term capital gains. Thus revenue's appeal should succeed. 10. Now coming to question of valuation which is subject matter of assessee's appeal we have already stated that sale price accepted by assessee is Rs. 15 per sq. yard from which ITO conceded Rs. 5 per sq. y r d as brokerage commission. Having duly taken into consideration y r d as brokerage commission. Having duly taken into consideration comparable case he had determined sale price at Rs. 30 per sq. yard. AAC reduced it to 25 per sq. yard. It is claimed that assessee is only school teacher working ealsewhere and happened to sell land ultimately with help of broker. In all such cases we recognise that there is some sort of disadvantage. Taking into consideration attendant circumstances and disadvantages in situation in which assessee is placed, we feel that fixing sale price at Rs. 22.50 per sq. yard would be more appropriate. This is inclusive of brokerage commission allowed. We, therefore, direct ITO to compute short-term capital gains by following our above orders. In result, assessee's appeal is partly allowed whereas departmental appeal is allowed in full. *** INCOME TAX OFFICER v. M. SYAMALA RAO
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