M/S. SESHASAYEE STEELS P. LTD. versus ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(2), CHENNAI (04/12/2019) — Supreme Court headnote

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Summary

The Court upheld capital-gains taxation in assessment year 2004–05 on reasons based on the later compromise and completed payments. The earlier agreement and power of attorney merely licensed development and did not transfer possession under Section 53A or confer enjoyment as an owner. Under the compromise, encashment of the final cheque extinguished the assessee’s rights and effected a transfer within Section 2(47)(ii) and (vi).

Issues

Whether the 1998 development permission and power of attorney constituted an earlier taxable transfer.
Whether the 2003 compromise and completed payments supported transfer in assessment year 2004–05.

Provisions considered

Section 2(47)(v) and (vi), Income-tax Act, 1961The earlier licence did not confer qualifying possession or owner-like enjoyment; the later compromise effected transfer within clause (vi). (¶¶ 10, 11, 12, 13, 14, 16, 17, 18, 19, 20, 21)
Section 53A, Transfer of Property Act, 1882Permission to enter and develop the land was a licence, not the possession and control required for part performance. (¶¶ 10, 11, 12, 13, 14)

Held

Section 53A required possession in part performance and performance or willingness to perform the transferee’s obligations, among other conditions. Permission under clause 16 to develop and sell flats did not confer legal possession denoting control. (¶¶ 10, 11, 12, 13, 14)
Enjoyment under Section 2(47)(vi) meant enjoyment as a purported owner, involving a substantive de facto transfer. The owner’s rights and possession remained intact at the earlier agreement stage. (¶¶ 15, 16, 17)
The later compromise confirmed the agreement and power of attorney and arranged final settlement payments. All cheques had been encashed, and receipt of the last cheque extinguished the assessee’s property rights. Clauses (ii) and (vi) supported the assessment on these facts. (¶¶ 18, 19, 20, 21)

Result

Appeal dismissed for the reasons stated by the Court, sustaining the assessment on the transfer effected through the compromise and completed payments.