TaxTMI 
TaxTMI 
2013 (10) TMI 610
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....grossly erred in upholding the action of the Assessing Officer in not allowing the compensation for alternate accommodation paid to the tenants amounting to Rs.4,25,00,000/- as cost of improvement in computing the capital gains on sale of the land." In brief the facts of the case are that the assessee a partnership firm engaged in the real estate development filed its return of income showing loss of Rs.1,54,21,908 [ i.e. business loss of Rs.1,36,07,494 - long term capital loss of Rs.18,14,414]. During the assessment proceedings u/s. 143(3) of the I.T.Act, the AO noticed that the assessee while computing capital gains u/s. 45(2) of the Act, had claimed deduction of Rs.4,25,00,000/- towards cost of land i.e. compensation paid to the tenant for surrender of tenancy rights in the land. On being asked the assessee before the AO stated that the land in question, measuring 4875.80 sq.mt., was purchased by one Shri Narayan Dev Kunder in the year 1974 for a sum of Rs.2,27,280/-. The said Mr. Narayan Dev Kunder formed a partnership firm vide partnership deed dated 01.04.1984, Mr.Narayan Dev Kunder and one Mr. Harish Narayan Kunder, being partners of the firm namely M/.s Magnum Trading....
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....25,00,000/- on various reasons, which can be summed up in following paras: a. The copy of agreement dated 28.03.1994 entered into between the assessee firm and its tenants was defaced and not clear and it was not possible to ascertain its veracity and genuineness; b. The assessee failed to prove with cogent and convincing evidence about the tenancy rights of M/s. Magnum Ferrometal Pvt. Ltd.; c. No tenancy agreement was produced by the assessee; d. The alleged tenant was a closely related party/sister concern of the assessee. The alleged tenant was the manufacturing unit whereas the assessee firm was the trader of the other party; e. The assessee did not furnish proof of actual payment of compensation except the ledger entries; f. The rate of rent was claimed at Rs.48,000/- p.a., which was very low as compared to the compensation amount of Rs.4,25,00,000/-. Thus, there was mismatch between the potential of the property and the quantum of compensation; g. The transaction relating to the payment of compensation was not a transparent commercial transaction but an artificial a....
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.... the year 1994, which since then has never been disputed by the revenue till date. Moreover, the transaction had not only been supported with documentary evidence in the shape of agreement but the same was also acted upon being the payment and receipt thereof being entered into the accounts of both the parties to the agreement. Moreover, by admitting the receipt/transaction, the revenue also tried to tax the income. The Hon'ble Tribunal held the same as exempt and, since, the revenue did not prefer any appeal against the order of the Tribunal, the same became final. Now the revenue cannot depart or resile from its own stand. Thus, in view of our above observation, we do not find any reason to depart from the earlier settled factual position relating to the said transaction in question. However, it may be observed that the said amount of Rs.4,25,00,000/- was paid by the assessee for getting the entire land free from all types of encumbrances, which enabled the assessee to transfer the property as per agreement dated 28.03.1994. However, out of the entire property only 2/3rd of the same was transferred. Hence, the cost of acquisition is required to be calculated in proportion to t....
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....ok of the file. It would be pertinent to mention here that as per the prevalent law in force during which the transaction of sale/transfer was carried out by the assessee, Central Government was authorized to purchase the immovable property itself at an amount equal to the amount of apparent consideration mentioned in the agreement between the seller and the purchaser. A bare perusal of the provisions of Chapter XXC of the Act gives an impression that the basic object of introduction of the said provisions was to curb unaccounted money being exchanged in property transactions. Where, the Central Government or the appropriate authority appointed under the Act was of the view that the sale consideration mentioned in the agreement was not adequate or too low as compared to the market rate, Central Government had an option to purchase it in its own name. The assessee and the purchaser, in the case in hand, valued the consideration for the transfer, which was the estimated cost of construction/development of the remaining 1/3rd part of the land at Rs.6,60,14,520/- to the statutory authorities under the Act and the transaction was thus approved by the competent authorities. Now the asses....
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....here is another aspect of the case also. The assessee earlier in the year 1993 vide agreement dated 09.11.1993 had sought permission of the appropriate authority u/s. 269UC for the sale of property in question for a consideration of Rs.7,25,00,000/- to one M/s. Trimbak Holding Pvt. Ltd. However, the competent authority did not approve the said transaction being hit by the provisions of Urban Land [Ceiling & Regulation] Act, 1976. Hence, the permission was refused vide order dated 25.02.1994 by the appropriate authority. Thus, the assessee was well aware that the value of the property, which was Rs.7 crore in the year 1993, would have been much more at the time of transfer of 1/3rd of the same in the year 2001. The cost of development/construction can be well estimated in advance which can vary at the time of actual construction at the most to the extent of 10% to 15%, because the calculation is made with the assistance of technical persons in the field, taking into consideration the average market price as well as the expected rise or fall in prices. If expected cost of construction/development of the remaining 1/3rd portion of the land was about Rs.3 crore (against the valuation c....
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....hearing to the parties while adjudicating this ground. Subject to our above observations, this appeal of the assessee is partly allowed. ITA No.1860/Mum/2010 for A.Y. 2006-07 6. This appeal of the assessee is against the order of the CIT(A) dated 05.11.2009 relevant to A.Y.2006-07. Ground No.1 raised by the assessee read as under: "1. Re: Computation of Long Term Capital Gains Rs.1,99,93,685/- 1.1 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) (hereinafter referred to as Learned CIT(A)) grossly erred in upholding the action of the Assessing Officer in not allowing the compensation for alternate accommodation paid to the tenants amounting to Rs.4,25,00,000/- in computing the capital gains on sale of the land. 1.2 Without prejudice to the above, the cost of acquisition should be considered as the fair market value of the plot of land as on the date of introduction of the capital asset into the partnership firm by the erstwhile proprietor Mr. Narayan Kunder. 1.3 Without prejudice to the above, having regard to the provisions of s.45(2), the indexa....