2017 (6) TMI 250 - AT - Income Tax

Appeal granted for title expenses, Section 50C ground dismissed, new ground admitted

The Tribunal partially allowed the appeal, granting deductions for the expenditure incurred for perfecting the title and the payment made to the ... Denial of assessee’s claim for allowance of expenditure incurred for perfecting title and taking possession of the property sold - Held that:- In a related case viz., Smt. Farida Alladin Vs. ACIT [2014 (1) TMI 101 - ITAT HYDERABAD] on an identical issue allowed the claim of the assessee for similar allowance directing the A.O. to allow the deduction claimed by the assessee under section 48 on account of payment made for release of lease hold rights created by her ancestors/predecessors - Decided in favour of assessee. Denial of assessee's claim for allowance of consideration paid to confirming party as cost of acquisition - Held that:- It is clear from the records that the assessee along with the other family members allowed Mr. Karim Nawaz Alladin as party in the negotiation and be a assigning party. The relevant agreement is placed on record. It is fact that the assessee has shown the sale consideration and declared this payment as application on the sale consideration. The same was also confirmed by Mr. Karim Alladin. The same amount of sale consideration was declared by Mr. Karim in his return of income and sale consideration from Assignment right and declared as capital gains. The same was accepted by revenue. As far as revenue is concerned, the whole sale consideration was declared and charged for capital gains. There cannot be any revenue loss. Moreover, the same income cannot be charged to tax twice. Once the revenue accept the income offered by Mr. Karim as income under the head ‘income from capital gains’, the same has to be allowed as deduction in the hands of assessee. Accordingly, ground raised by the assessee is allowed. Issues Involved:1. Condonation of delay in filing the appeal.2. Allowance of expenditure for perfecting title and taking possession of the property as cost of acquisition.3. Allowance of consideration paid to confirming party as part of cost of acquisition.4. Application of Section 50C of the Income Tax Act for computing capital gains.5. Additional ground of appeal regarding the nature of the registered documents and their impact on the levy of capital gains.Issue-wise Detailed Analysis:1. Condonation of Delay:The assessee’s appeal was delayed by five days due to her residence in Singapore. She filed a petition and an affidavit explaining the delay. After considering the reasons and hearing both parties, the Tribunal found the delay reasonable and admitted the appeal.2. Expenditure for Perfecting Title and Taking Possession:The assessee claimed a deduction for the cost of acquisition, including compensation paid to M/s Voltas Ltd. for taking back possession of the property. The AO disallowed this, citing lack of evidence and relevant case laws. The CIT(A) upheld the AO's decision, referencing the Bombay High Court's decision in CIT Vs. R.M. Merchant Hussein and Fancy Corporation Ltd. The Tribunal, however, referred to its own decision in a related case (Smt. Farida Alladin Vs. ACIT) and the Supreme Court rulings in VSMR Jagadishchandran and R.N. Arunachalam, which allowed similar claims. Consequently, the Tribunal allowed the assessee’s claim for the expenditure as part of the cost of acquisition.3. Consideration Paid to Confirming Party:The assessee paid Rs. 1,50,00,000 to M/s Alladin Investments and Properties as a consenting party. The AO and CIT(A) disallowed this payment, questioning its necessity and evidence. The Tribunal noted that the payment was confirmed by the recipient and taxed in his hands. Referring to the Karnataka High Court decision in Asgar Jan vs CIT, the Tribunal held that once the income was taxed in the recipient’s hands, it should be allowed as a deduction in the assessee’s hands. Therefore, the Tribunal allowed the deduction.4. Application of Section 50C:The AO applied Section 50C, adopting the market value of Rs. 6,11,90,100 instead of the declared sale consideration of Rs. 4 crores. The assessee argued that the actual area received was less due to road widening, but failed to provide documentary evidence. The CIT(A) upheld the AO’s application of Section 50C. During the Tribunal hearing, the assessee chose not to press this ground. Hence, the Tribunal dismissed this ground as not pressed.5. Additional Ground of Appeal:The assessee raised an additional ground, arguing that the registered documents were agreements of sale cum irrevocable General Power of Attorney, not deeds of sale, and thus did not transfer the property. This ground was admitted by the Tribunal as it was relevant to the chargeability of capital gains. However, the detailed adjudication of this ground is not provided in the judgment summary.Conclusion:The Tribunal allowed the appeal partly, granting deductions for the expenditure incurred for perfecting the title and the payment made to the confirming party, while dismissing the ground related to Section 50C as not pressed. The additional ground regarding the nature of the registered documents was admitted for consideration.