2023 (4) TMI 852 - AT - Income Tax

Tribunal allows indexation of acquisition cost, grants relief on property transfer expenses

Income Tax Officer International Taxation Ward–3 (2) (1), Mumbai Versus Rustom Fali Mehta And (Vice-Versa)

Income Tax Officer International Taxation Ward–3 (2) (1), Mumbai Versus Rustom Fali Mehta And (Vice-Versa) - TMI Issues Involved:1. Indexation of cost of acquisition.2. Deduction of expenses incurred on transfer of property.3. Application of section 50C for computing capital gains.Summary:Issue 1: Indexation of cost of acquisitionThe Revenue challenged the CIT(A)'s decision to allow indexation from the financial year 1981-82 based on the Bombay High Court decision in CIT vs. Manjula J. Shah. The Tribunal upheld the CIT(A)'s decision, noting that the issue is covered by the High Court's ruling, which states that the indexed cost of acquisition should be computed with respect to the year in which the previous owner first held the asset. Consequently, the assessee is entitled to indexation from FY 1981-82.Issue 2: Deduction of expenses incurred on transfer of propertyThe Revenue contested the CIT(A)'s allowance of various expenses such as brokerage, solicitor's fees, and payments to the occupier. The Tribunal found that similar issues had been decided in favor of the assessee's brother in a previous case. Specifically:- Brokerage of Rs. 42,36,500/- was allowed in full as it was paid for services directly related to the sale.- Solicitor's fees of Rs. 50,00,000/- were partly allowed, with Rs. 18,07,258/- considered reasonable for services related to the transfer.- Payment of Rs. 10,00,000/- to the tenant for vacating the premises was allowed as it was necessary for the transfer.Issue 3: Application of section 50C for computing capital gainsThe assessee's cross objection included a plea to compute capital gains based on actual sale consideration rather than stamp duty value as per section 50C. The Tribunal directed the Assessing Officer to grant the benefit of the 3rd proviso to section 50C, following the decision in Maria Fernandes Cheryl vs ITO, which allows a tolerance band for variations between stated sale consideration and stamp duty valuation.Conclusion:The appeal by the Revenue was partly allowed, granting partial relief on the expenses incurred. The cross objection by the assessee was partly allowed for statistical purposes, directing the computation of capital gains with the benefit of the 3rd proviso to section 50C.