TaxTMI 
TaxTMI 
2011 (8) TMI 453
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....the A.O. failed to appreciate the fact that section 51 was not at all applicable to the appellant's case. 3. The learned CIT(A) as well as the A.O. ought to have allowed Indexation of Cost as claimed by the appellant. 4. The learned CIT(A) as well as the A.O. were not justified in disallowing genuine expenditure incurred and claimed against income from capital gains". 2. Facts necessary for the disposal of the appeal are stated in brief. Assessee is an individual. His income consisted of capital gains, commission and rents on house property. In respect of the previous year relevant to the assessment year 2004-2005 it declared total income of Rs. 92,840 whereas the assessment was completed on a ....
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....ken place only in the year under consideration. Deed of Conveyance dated 16th June, 2003 as well as the sale agreement dated 25-11-94 does not indicate that possession of the property was given to the developer on the date of agreement and presumably on account of the said fact neither the Assessing Officer nor the parties claimed it as a transfer in the preceding years. On the contrary, the Assessing Officer as well as the assessee admitted that the transfer took place in the year under consideration as otherwise there would not have been any liability to pay capital gains tax in this year. 4. However, the case of the Assessing Officer was that under section 51 of the I.T. Act any advance received in connection with the transfer of an a....
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.... on various dates was not disputed by the assessee and there is also no dispute that the assessee agreed to sell the property in the year 1994 and received part consideration as advance and further installments were received thereafter. As against the total consideration of Rs. 1.30 crores assessee's share was Rs. 65 lakhs. Sale was completed and executed during the previous year relevant to the assessment year 2004-2005. Having regard to the factual matrix, in the opinion of the learned CIT(A), advances received and retained by the assessee has to be deducted from the value as on 1-4-1981, in computing the cost of acquisition. Section 51 uses the expression "shall be deducted from the cost for which the asset was acquired or written down v....
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....nder section 143(1) of the Act and no action has been taken by the Revenue to reopen the case. In otherwords, the contention of the learned Counsel is that with reference to the same transfer, the Revenue having accepted the case of a co-owner there is no equity in challenging the method followed by the assessee in computing the capital gains. 9. It was further contended that section 51 comes into play only in the event of transactions which was negotiated on a previous occasion and in the event of canceling of such transaction if the vendor has a right to forfeit the amount or retain the amount by virtue of the agreement, advance so received and retained has to be reduced from the cost of acquisition, whereas in the instant case there w....
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....ail. In every transaction, there is a chance of receiving advance money and before a transaction is finalized it would be subject matter of negotiation and hence the expression "on any previous occasion the subject matter of negotiation for its transfer" has to be read in the said context, in which event advance received has to be reduced from the cost of acquisition. 11. We have carefully considered the rival submissions and perused the record. There is no dispute in the instant case that the transfer had taken place during the previous year relevant to the assessment year under consideration. Explanation (iii) to section 48 of the I.T. Act clearly specifies that cost inflation index for the year in which the asset is transferred has to....
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....previous occasion" refers to an aborted sale of a capital asset and it does not apply to a transfer of capital asset as per the agreed terms. 13. In the light of decision of the Apex Court in the case of Travancore Rubber & Tea Co. Ltd. (supra) an advance received, upon cancellation of a sale of capital asset, should be treated as a capital receipt and by applying specific provisions of section 51 of the I.T. Act, 1961 the same has to be reduced from the cost of acquisition in the event of a subsequent sale. For example, if an asset is purchased in 1990 for a sum of Rs. 1 lakh and in the year 2000 if the assessee enters into an agreement of sale and receives an advance amount of Rs. 60,000 and thereafter the amount is forfeited on accoun....