- (1.) FOLLOWING question has been referred for opinion of this Court by the Tribunal, Chandigarh Bench, Chandigarh, arising 1982 -83 : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amount received by the assessee -colonizer by way of advances or earnest money as a result of agreements to sell plots, did not constitute revenue receipts in its hands, as no sale deed had yet been executed -
(2.) FACTS noticed by the Tribunal are that the assessee M/s Dhir and Co. Colonisers (P) Ltd. is a private limited company. For the assessment years under reference, trading additions of Rs. 28,770, Rs. 98,700 and Rs. 1,93,084 were made by the learned ITO on the basis that these amounts represented income of the assessee from colonization business. The facts in regard to the same are not in dispute. The assessee had colonisation business. It had developed four colonies in Ludhiana, namely, Asha Puri (and its extension) Krishna Nagar, Ram Park and Sawan Park. The land was purchased from 1973 to 1975 from various persons. The land was registered in the name of the assessee. Thereafter, it was In the balance cases, registration could not be effected on account of the restrictions placed by the Urban Land (Ceiling and Regulation) Act, 1976. Though the plots were not registered, the learned ITO took the view that the possession having been handed over, the amounts received in respect of such plots represented trading receipts.
(3.) THE matters were thereafter taken in appeals by the assessee and the learned CIT(A) vacated the additions made by the learned ITO for all the years. The issue was thereafter, for all these years, brought by the Revenue before the Tribunal. The Bench dismissed the appeals with the following observations: "5. We have considered the rival submissions as also the decisions, referred to above. It is not under dispute that some representation and appeals to the authorities under the Urban Land (Ceiling and Regulation) Act, the assessee had succeeded in obtaining some sanctions and registration deeds were executed in favour of purchasers to the tune of Rs. It was also submitted that various refunds of earnest money received were also given to those purchasers in whose cases registered sale deeds could not be executed. The details of these cases were also furnished. In some cases, the assessee had also executed sale deeds notwithstanding the prohibition that they could not be registered. The assessee had entered into correspondence with the competent authority under the Urban Land Act. In some cases, some plots were sought to be sold in spite of prohibitions contained in the Punjab Regulation of Colonies Act and the assessee was prosecuted for the violation of the provisions of s. 8(1) thereof. It is clear from the provisions of the Transfer of Property Act and the Registration Act, that no immovable property can be transferred without the execution of a registration sale deed. To the same effect was the view expressed by the Supreme Court in the case of (Late) Nawab Sir Mir Usman Ali Khan (supra). Unless the title of the assessee was extinguished, the title of the purchaser in the plots in question could not arise and the land was to be treated to continue as the stock -in -trade of the assessee. The land could cease to be the assessee's stock -in -trade only when there was a valid and registered sale deed in respect thereof. It is not under dispute that the assessee -company could not and did not execute any registered sale deed in respect of the instances in question during the assessment years under appeals and, therefore, what it received in the form of advance or earnest money could not constitute a revenue receipt in its hands. We have already seen that in some cases refunds were made by the assessee. The facts in the case of Ashaland Corpn. (supra) were very much similar. In that case, the question arose before the Hon'ble Gujarat High Court whether any agreement to sell land could create any interest in favour of the purchaser and whether a transaction of sale could be said to be complete only with the transfer of title in hand. It was held that earnest money and part payments received could not partake the character of profit nor could they be assessed as trading receipts. All the factors which influenced the mind of the ITO in taxing the amounts in question were considered by the Gujarat High Court in that case and it was held that it was only on the completion of a transaction of purchase or sale culminating in the extinguishment of the title in vendor and simultaneous creation of the title in the vendee that the seller could earn profit or suffer a loss. The Court also considered the doctrine of part performance embodied in s. 53A of the Transfer of Property Act and came to the conclusion that it could also not come to the rescue is concerned, we find that the facts in that case were not identical with the facts obtaining in the present case. The 1987 in the case of Sh. Avtar Singh (supra) and now facts in the present case differed fundamentally from those facts. It is not necessary to repeat them. Therefore, on the basis of the authority of the Madras High Court in the case of L.G. Ramamurthi and Ors. (supra), the learned counsel for the assessee was right in pointing out that the decision in the case of Shri Avtar Singh (supra) could not come in the way of the assessee. The result is that we find no warrant or justification on facts in interfering with the orders of the CIT(A)." ;