2023 (4) TMI 328 - AT - Income Tax

Tribunal grants deductions under Sections 54 and 48, dismisses other grounds.

Shri Lal Singh Naderia Versus ITO Ward-2 (3), Jaipur

Shri Lal Singh Naderia Versus ITO Ward-2 (3), Jaipur - TMI Issues Involved:1. Disallowance of relief claimed under Section 54 of the Income Tax Act for a sum of Rs. 4,11,790.2. Non-appreciation of the Supreme Court judgment in CIT vs. B.C. Srinivasa Shetty.3. Non-allowance of a sum of Rs. 70,00,000 paid for acquiring title in the land sold.4. Residual ground to add, amend, or alter grounds of appeal.Issue-wise Detailed Analysis:1. Disallowance of Relief Claimed Under Section 54:The assessee claimed a deduction under Section 54 by investing Rs. 38,29,810 in a new residential property, which included Rs. 6,20,000 paid to a contractor for constructing the first floor. The AO disallowed this claim based on discrepancies in the contractor's identity and the inability to trace the contractor. The CIT(A) upheld this disallowance, citing differences in signatures and untraceability of the contractor.Upon appeal, the tribunal examined the evidence, including the agreement with the contractor, receipts, and bank statements showing payments. The tribunal concluded that the identity of the contractor was established through bank statements and other documents. Therefore, the tribunal directed the AO to allow the claim of Rs. 6,20,000 as part of the deduction under Section 54.2. Non-appreciation of Supreme Court Judgment in CIT vs. B.C. Srinivasa Shetty:This ground was not pressed by the assessee during the hearing and was subsequently dismissed.3. Non-allowance of Sum Paid for Acquiring Title:The assessee's father had taken possession of the land without legal title, which was later sold. The sale consideration was initially assessed at Rs. 1,20,00,000, but the stamp duty authority valued it at Rs. 1,94,19,827. The assessee argued that Rs. 70,00,000 paid to M/s. Jai Mahal Hotels Pvt. Ltd. to cure the title defect should be considered as part of the cost of acquisition.The tribunal noted that the payment of Rs. 70,00,000 was made to settle a dispute regarding the title of the property and was necessary to effectuate the transfer. The tribunal referred to judicial precedents, including the case of Gopee Nath Paul & Sons vs. DCIT, which held that expenditures necessary to remove encumbrances and effectuate transfer are deductible under Section 48. The tribunal concluded that the payment of Rs. 70,00,000 was incurred wholly and exclusively in connection with the transfer and should be allowed as a deduction while computing capital gains.4. Residual Ground:This ground was not pressed by the assessee and was dismissed.Conclusion:The tribunal allowed the appeal partly, directing the AO to allow the claim of Rs. 6,20,000 under Section 54 and the deduction of Rs. 70,00,000 as part of the cost of acquisition under Section 48. The tribunal dismissed the grounds related to the Supreme Court judgment and the residual ground as they were not pressed by the assessee. The order was pronounced on 08/02/2023.