Made by

Shivam Malhotra
B.Com LLB (Hons.)
A3221614089
8th Semester
Summary

SALE DEED: A sale deed is the most common document used

for transferring the ownership of a property from one person to
another. It is generally made after the execution of the
agreement to sell. Sale deed is the main document which
contains the details as to how the seller had got the title to the
property, for what consideration the seller is selling the
property to the buyer and assurance to the purchaser that the
property is free from all encumbrances and liabilities, etc. A
sale deed acts as an essential document for the further sale of
the property by the purchaser as it establishes the proof of
ownership of the property.

The registration of a sale deed is governed by ‘The Registration

Act, 1908’ and is the most important document of title for both
the buyer/transferee and the seller/ transferor. It is compulsory
to get a sale deed registered in the sub registrar office. An
unregistered sale deed has no value in the eyes of law and
does not pass any title to the buyer. A registered sale deed can
be used for transferring freehold flats, plots, builder floors,
bunglows, apartments, DDA flats, society flats, commercial
office, shops etc.

The leasehold properties can also be now sold through

registration of Agreement to Sell, GPA, Builder Buyer
Agreement, Apartment deed etc.

A registered sale deed can also be executed for transferring

the ownership of agricultural land, Leasehold properties
(Appendix 12). A tripartite sale deed having a confirming party
can also be registered.
The purchaser should get a Title Search done / obtain an
Encumbrance Certificate so as to check and verify the title
documents of the seller before getting the sale deed executed
and registered. In case, there is any charge or mortgage on the
property, it should be cleared by the seller before executing the
sale documents.

Important Clauses in a Sale Deed:

A sale deed is one of the most valuable legal documents in a

transaction involving the transfer of a property. A sale deed is
drafted by a legal draftsman on a non-judicial stamp paper of
the requisite value as prescribed by the Stamp act of the
particular state concerned. Some of the important clauses that
are included while preparing a sale deed are as follows:

Description of the Parties: A sale deed must start with clear

description of the parties. The sale deed must contain the
Party’s names, their Father/ Husband’s Name and their
complete addresses. .

Date and Place : A Sale Deed must mention the Date and
Place of execution of the Sale Deed by the Seller and the
Buyer.

Description of the Property: A valid sale deed must contain

the full description of the property which is the subject matter
of sale. It must mention whether the property under transfer
is a freehold or leasehold and the type i.e. Apartment, Floor,
Flat, Plot, Kothi, Bungalow, Shop, office etc. It must include
identification number, total plot area, construction details as
well as its location with its surrounding areas. A schedule of
the property must be included in the sale deed which will
define the exact location where the property is actually
situated.

Sale consideration : A sale deed must include the clause

stating the sale consideration/amount as agreed between the
seller and the buyer, and which has to be paid by the buyer to
the seller on the execution of the sale deed.

Passing of the title: A sale deed should contain the clause

specifying the time when the title of the property will pass to
the purchaser. Once the title of the immovable property is
transferred, all the rights will pass to the purchaser.

Indemnity provisions : A seller must clear all the statutory

charges i.e. property tax, electricity charges, water bills, cess,
society charges, maintenance charges and all other charges
relating to the property upto the date of execution of the sale
deed. In case there is any encumbrance on the property, the
seller needs to repay the loan amount. It is the duty of the
buyer to verify the encumbrance status by conducting a title
search and getting an Encumbrance
Certificate.
Execution: Once the Sale Deed is prepared all the parties to
the deed shall execute it by affixing their signatures and thumb
impressions. Each page should be signed by the seller as well
as the buyer. Any alteration, addition or deletion is to be
authenticated by signatures of both the parties.

Registration: According to Section 17 of ‘The Registration

Act, 1908’, the registration of an immovable property is
compulsory if the value of the rproperty exceeds Rs. 100/- and
it is the registration of the property which makes the sale valid.
For getting the registration done, both the parties must present
themselves in the sub-registrar office with the original
documents within four months from the date of execution. A
stamp duty and a registration fee has to be paid by the
purchaser to the sub-registrar for getting the registration done.

Witnesses: The executed sale deed should be witnessed by at

least two witnesses, one of whom should preferably be from
the seller’s side and the other one from the buyer’s side, giving
their full names, addresses and signatures.

Original documents: Once the property gets registered

under the Registration Act, all the original documents of the
property have to be handed over by the seller to the
purchaser.

Other important Clauses:

• Responsibilities and timeline for the procedures to be
completed
• All expenditures such as stamp duty, drafting and
registration fee and the distribution of these expenses
between the parties.
• Declaration by the seller that the property is not
subject to any government acquisition
• The nature of the title detained by the seller, including
any encumbrance such as lease, mortgage, or charge on
the property

Case: Rajiv Kumar vs Accessing Officer

Facts

In this appeal, on ground No. 1 the assesse challenged the

upholding of long term capital gain amounting to Rs.
5,23,23,470/- in the year under consideration i.e. 2007-08. On
ground Nos. 2 to 7, the assessee challenged the order of the
ld. CIT(Appeals) in denying exemption under section 54B and
54F of the Income Tax Act on different amounts. On ground
No. 8, assessee challenged the order of ld. CIT(Appeals) in not
allowing commission of Rs. 5,50,000/- paid by the assessee to
the brokers from the sale proceeds of agriculture land. On
ground No. 9, assessee challenged the order of ld.
CIT(Appeals) in upholding the fair market value of land taken
by Assessing Officer as on 01.04.1981. On ground No. 10,
assessee challenged the order of ld. CIT(Appeals) in rejecting
application of additional evidence filed under Rule 46A of the
IT Rules. On ground No. 11, assessee challenged the re-
opening of the assessment under section 147/148 of the
Income Tax Act which is not pressed by the ld. counsel for the
assessee. The same is, therefore, dismissed being not pressed.

The main issue have been raised on ground No. 1 above

upholding the long term capital gain in assessment year
under consideration i.e. 2007-08 amounting to Rs.
5,23,23,470/-.

The facts of the case are that the assessee filed return of
income on 03.03.2008 declaring income of Rs. 99,990/- +
agriculture income of Rs. 1,75,000/-. The Assessing Officer
issued notice under section 148 of the Income Tax Act and
also issued statutory notices. The assessee in reply thereto
submitted that return filed in original may be treated as filed
in response to notice under section 148 of the Act. The
Assessing Officer noted that assessee had sold the land for a
consideration of Rs. 5.50 Cr through a Registered Sale Deed
dated 20.03.2007. The sale consideration comprise of Rs.
8,50,000/- in cash, Rs. 41,50,000/- vide cheque dated
15.03.2007 and Rs. 5 Crore vide cheque No. 009643 undated
from M/s Link Infrastructure & Developers Pvt. Ltd., Delhi.
The proceeds of the aforesaid cheques were realized by
assessee in March, 2007 and 16.06.2008 respectively. The
assessee in reply to the notices offered sale consideration of
Rs. 50 lacs for tax during the year under consideration and
balance amount of Rs. 5 Crore for assessment year 2009- 10
on receipt basis.
The Assessing Officer issued show cause notice and after
considering assessee's reply, referred to the provisions of
Section 53A and 54 of Transfer of Property Act and Section 45
read with Section 2(47)(iv) of the Act as per para 7 of the
assessment order. The Assessing Officer noted from the Sale
Deed that the claim of assessee that sale of land measuring 80
Kanal for Rs. 5,50,00,000/- will take effect at two different
points of time when two different cheques for Rs. 41,50,000/-
and Rs. 5 Crore were encashed, was not in consonance with
existing law. The assessee himself offered for tax an amount of
Rs. 50 lacs during the year and for balance amount of Rs. 5
Crores, the assessee claimed that it will be offered for tax in
assessment year 2009-10, which was not in accordance with
law. The assessee
executed Sale Deed on 20.03.2007 and the sale consideration
was partly received and partly promised. The buyer issued
cheque for Rs. 5 Crores undated bearing No. 009643 to the
assessee and also contracted that the Sale Deed in question
shall automatically be stand cancelled in the event of dishonour
of post-dated cheque. The Assessing Officer framed the
following questions to arrive at the decision :

i) If the amount of cheque of Rs. 5 Crore was

realized, what will be the effective

date of

transfer ?

ii) If the amount of cheque of Rs. 5

Crores was not realized, what

will be the fate of Rs. 50 lacs

 already paid by the buyer to the

seller ?

The Assessing Officer further observed that as per

provisions of Section 54 of Transfer of Property Act, it is clear

that when price is partly paid and partly promised, the
immovable property is deemed to have been transferred on
execution and Registration of the Sale Deed if the possession
of property has been given to the buyer. The assessee deposed
before the Registering Authority that possession of land was
handed over to the vendee and nothing was due for payment.
Entries of Mutation would be made by the purchaser company
through its officers for which vendor will have no objection.
The assessee's claim that the possession of the property
remained with the seller till the encashment of undated cheque
and cultivation of land was being done by the seller was not
maintained in view of the information collected from the
Revenue Authority.

The Assessing Officer also observed that claim of assessee that

one Sale Deed dated
20.03.2007 will have two different effective dates of
transfer, were not according to law. The post-dated cheque,
as promised, has since been encashed by the assessee on
16.06.2008, therefore, effective date of transfer in this case
would be 20.03.2007 as per Registered Sale Deed. The
submission of the assessee that there would be two different
dates for the effective transfer, was held to be not tenable.
Moreover, this claim of assessee that possession of the
property in question remained with the assessee till
encashment of the post-dated cheque was found false. The
Tehsildar, Jagadhri has informed that Intakal had been
accepted before the year end on 31.03.2007 in the name of
M/s Link Infrastructure & Developers Pvt. Ltd., Delhi and
physical possession had been handed over to the buyer.
Accordingly, whole of the sale consideration of Rs. 5.50 Cr was
held to be taxable in financial year 2006-07 relevant to
assessment year 2007-08 under appeal. The assessee was
taking shelter of the intention of the parties while transferring
an asset to buyer. The assessee was trying to prove that
possession of the land till encashment of post-
dated cheque remained with the assessee. But, this
intention of the seller was not corroborated with any
circumstantial evidences and documents.

The Assessing Officer distinguished the case law relied upon

by the assessee and concluded that the entire sale
consideration of Rs. 5.50 Crore is taxable in assessment year
under appeal i.e. 2007-08 and accordingly, computed the long
term capital gain.

Judgement

In the instant case, the sale deed dated 20.03.2007 in question

mentioned the sale consideration of Rs. 5.50 Crores out of
which advance of Rs. 50 lacs have been given on the date of
execution of the sale deed. The substantial balance
consideration of Rs. 5 Crores was to be paid through undated
cheque No. 009643. Further, it is mentioned that due to
bouncing of the aforesaid cheque, sale deed will be cancelled.
Therefore, essential condition of the sale deed is transfer of the
property on full payment made by the purchaser. On the same
day, the buyer M/s Link Infrastructure & Developer P. Ltd.
through Shri Parveen Kumar executed an affidavit dated
20,.03.2007 duly attested by the Executive Magistrate,
Jagadhari. In this affidavit, the buyer has mentioned/affirmed
that though sale deed of the land has been registered but the
spot possession will be given at the time when total sale
consideration of the PDC cheque is given to the owner. Uptil
the amount of the cheque has not been paid, buyer company
cannot make discharge of any kind to the remaining persons
etc. The possession shall remain with the owner and in case of
cancellation/delay, the buyer company shall be responsible for
all the losses and expenses to the owner. Since the date of sale
deed dated 20.03.2007 and affidavit of the buyer dated
20.03.2007 are related to the alleged transfer of property,
therefore, contents of the affidavit would be relevant to
consider the entire facts and circumstances of the case
because it would support the contention of the assessee that
the sale deed was executed only with intention that buyer
company thereafter, can obtain land use change from the
revenue authority with permission to raise the development in
the agricultural land.

The facts of the case also clearly reveal that full payment on
account of sale consideration was essence of the contract not
satisfied by the buyer company at the time of execution of the
sale deed. There is no transfer of capital asset in assessment
year 2007-08. Thus, no income/amount accrued or received by
the assessee on account of transfer of capital asset or on
account of any capital gains till 16.06.2008. Therefore, no
capital gain arise in assessment year 2007-08.

The sale deed cannot be a final word in the matter. Capital

gain accrues only if there is a sale or transfer of capital asset.
The assessee is able to prove on face of sale deed, affidavit
executed by the buyer and the cogent evidence on record that
no sale took place on 20.03.2007 i.e. the day when sale deed
was registered. The documents/material produced on record
proved no sale transactions completed on 20.03.2007. The
material and evidence brought on record, thus, cannot be
ignored. The contents of sale deed, affidavit and undated
cheque of Rs. 5 Crores and orders of Hon'ble Punjab & Haryana
High Court clearly proved that the buyer company manipulated
the sale deed to dupe the assessee and other agriculturists.
Undated cheque of Rs. 5 crores shows no intention of the
buyer to pay any sale consideration in future to complete the
transaction. The undated cheque itself shows that buyer
company was not definite of the payment within the time-
bound period. The intention of the parties shall have to be
considered on the facts and circumstances of the case. The
registration is prima-facie proof of an intention to transfer but it
is no proof of an operative transfer if there is a condition
precedent as to the payment of consideration or delivery of the
deed or possession. The properties do not necessarily pass as
soon as the instrument is registered, the true test is the
intention of the parties. In the instant case, the sale of property
depends upon full payment and the buyer company obtaining
land use change permission and development permission etc.
The authorities below only considered the sale deed was final
but ignored the other material evidence on record. Accrual
would be right to receive the amount but no right accrued as
assessee was intentionally duped by the buyer. Since one of
the assessee Shri Tejinder Kumar & others have made
allegation against the developers/buyers conniving with the
Revenue Authorities and directions have been issued to take
action into the matter by forming a Special Investigation Team
also, therefore, the mutation done by the Revenue authorities
in favour of buyers as per registered Sale Deed would not be
significant to declare any capital gain accrued or arise in the
assessment year under appeal. The decisions relied upon by
the assessee clearly apply to the facts and circumstances of the
case. The decision in the case of Sanjeev Lal Vs CIT (supra)
relied upon by ld. DR is distinguishable on facts of the case and
would not support case of the revenue.
Considering the above discussion and material on record, we
are of the view there is no transfer of capital asset in
assessment year 2007-08. There is no accrual or receipt of any
income in favour of the assessee on account of capital gains in
assessment year 2007-08. Therefore, whole of the addition in
assessment year under appeal i.e. 2007-08 is unjustified. We,
accordingly, set aside the orders of the authorities below and
delete the entire addition on account of capital gains in
assessment year under appeal, however, revenue authorities
are at liberty to consider the issue of accrual or receipt of
capital gain in assessment year 2009-10 in accordance with
law, if so advised. In the result, ground No. 1 of appeal of the
assessee is allowed.

In view of the above findings, there is no need to decide the

remaining grounds of appeal with regard to claiming exemption
under section 54B and 54F alongwith deduction on account of
commission and considering fair market value of the property.
These grounds have become infructuous in view of the finding
above that no capital gain accrued or arises in assessment year
under appeal. These issues may be considered by both the
parties in the year when capital gain would arise. These
grounds, therefore, stand disposed off.

In the result, appeal of the assessee is allowed. ITA 18/2016

( Shri Banarsi Lal)
& ITA 19/2016 ( Shri Tejinder Kumar )

In both the appeals, issues are same as have been

consideration in ITA 17/2016. In ITA 18/2016, assessee
challenged the upholding of long term capital gain amounting
to Rs. 5,06,25,600/- and in ITA 19/2016, assessee challenged
upholding of long term capital gain amounting to Rs.
4,99,37,010/-. The issue is identical as have been considered in
ITA 17/2016. We, therefore, following the reasons for decision
in case of Rajiv Kumar (supra), set aside the orders of
authorities below and delete the entire additions on account of
long term capital gain in assessment year 2007-08. The
revenue authorities are at liberty to take up this issue in
assessment year 2009-10 if so advised in accordance with law.

In the result, ground No. 1 of these appeals are allowed and

remaining grounds of claim of deduction/exemption under
section 54B and 54F, commission and land value etc. stand
disposed off.

In the result, both the appeals in ITA 18/2016 and ITA 19/2016
are allowed.

In the result, all the appeals of the assessees are allowed.

Order pronounced in the Open Court.