2015 (7) TMI 699

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....as cancelled by another agreement dated 31.7.2000. According to the ld. DR, the assessee claimed before the Assessing Officer that the property could not be developed as contemplated in terms of the agreement dated 22.7.1998, therefore, it was cancelled by another agreement dated 31.7.2000. Subsequently, the assessee entered into another agreement on 30.10.2000 with (i) Shri S. Yogarathnam, (ii) Shri S. Rajarathnam and (iii) Shri S. Selvarathnam, for sale of the very same property for Rs. 3,50,00,000/-. As per this agreement, a sum of Rs. 1 crore has to be paid by the proposed purchasers directly to the previous agreement holders namely Shri S.K.A. Mohamed Sheriff and Smt. M.Majeeda Begum. In the return of income the assessee claimed this payment of Rs. 1 crore to the earlier agreement holders as deduction while computing the capital gains. According to the ld. DR, the assessee has also claimed another sum of Rs. 50 lakhs which was said to be withheld by the purchasers and paid in the next financial year on the ground that immediately after receipt of the same it was deposited in the capital gains account. Referring to the assessment order, the ld. DR submitted that as per the agre....

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.... expenditure incurred in connection with transfer of property or improvement of the property u/s 48 of the Act. 3. The ld. DR further submitted that the agreement was cancelled since the purchaser could not pay the balance sale consideration within the time period. Therefore, the payment of Rs. 1 crore to the previous agreement holders is not for the purpose of cancelling the agreement. It is for the purpose of diverting the profit arising out of the transfer of the property. The ld. DR further submitted that as per the sale deed, the property was sold as is where is basis. Therefore, the expenditure, if any, incurred prior to the sale agreement cannot be considered as part of the sale consideration. According to the ld. DR, when there is a default by the previous agreement holders, the assessee could have appropriated the advance of Rs. 42 lakhs paid in pursuance to the agreement. The assessee not only refunded the advance of Rs. 42 lakhs but also claimed to have paid Rs. 1 crore. This shows that the existing building was not even attempted to be demolished by the previous agreement holders. Referring to the claim of the assessee that the payment of Rs. 1 crore was made for the....

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....r sale of property at 17, Ranganathan Street, T. Nagar, Chennai- 17, with Shri S.K.A. Mohamed Sheriff and Smt. M.Majeeda Begum on 22.7.1998. Though the assessee received part of the sale consideration as advance, the sale could not be completed and in pursuance to the Power of Attorney given to the proposed purchaser, he made efforts to vacate the existing tenants and also incurred expenditure for obtaining planning permission from the local authorities. Since the agreement could not be proceeded with further, the same was cancelled by another agreement dated 30.10.2000. According to the ld. Counsel, as per the original agreement dated 22.7.1998, the agreed sale consideration was Rs. 2 crores. After cancelling the agreement dated 22.7.1998, the assessee was able to enter into another agreement on 30.10.2000 for a sale consideration of Rs. 3,50,00,000/- in respect of the very same property. But for cancellation of this agreement, according to the ld. Counsel, the assessee could not have sold the property for Rs. 3,50,00,000/-. The ld. Counsel further submitted that since the assessee paid the money in respect of the improvements made by the agreement holders for getting the planning....

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....he first issue arises for consideration is payment of Rs. 1 crore to the previous agreement holders. It is not in dispute that the assessee entered into an agreement for sale of the property with Shri S.K.A. Mohamed Sheriff and Smt. M.Majeeda Begum on 22.7.1998 for sale of the property situated at Door No.17/2 Ranganathan Street, T. Nagar, Chennai. The assessee has filed the copies of the agreement for sale at page 30 of the paper book. In the agreement for sale, the addresses of the purchasers are shown as No.17, Ranganathan Street, T. Nagar. The agreement further says that the assessee offered to sell 97% of the undivided share of the land in Schedule A of the property for a total sale consideration of Rs. 2 crores. From the agreement dated 22.7.1998 and the agreement for cancellation of the same dated 31.7.2000 it is obvious that Shri S.K.A. Mohamed Sheriff and Smt. M.Majeeda Begum are occupying the very same property. It is not known in what capacity they are in possession of the property at 17 Ranganathan Street. Probably, they may be in occupation either as a tenant or as a mortgagee. However, in the assessment order, the Assessing Officer has referred the names of the tenant....

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....terial is available on record either to indicate that an application for planning permission was filed before the local authorities or permission was granted by the local authorities. There is no evidence available on record to suggest that the tenants apart from the assessee was evicted from the premises. In fact, the assessee could have filed a suit for specific purpose to enforce the agreement dated 22.7.1998. But instead of filing a suit for specific purpose, the assessee preferred to cancel the agreement . Now the question arises for consideration is whether the payment of Rs. 1 crore to the agreement holders is for the purpose of transfer of the property or towards cost of improvement. This Tribunal is of the considered opinion that in the absence of any material with regard to preparation of plan and other development as claimed by the assessee, we may not be able to say that the assessee has incurred any expenditure for development. However, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer by giving one more opportunity to the assessee to produce necessary material with regard to preparation of plan, obtaining of p....

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....e the date of execution of the sale deed. Therefore, it is not known how the purchaser was able to withhold the money on the basis of an indemnity bond. The CIT(A) has simply allowed the claim of the assessee on the ground that the payment of Rs. 50 lakhs and investment thereof was properly evidenced. Whether the payment of Rs. 50 lakhs is over and above the sale consideration disclosed in the sale deed or it was a part of the sale consideration disclosed in the sale deed has to be verified. Accordingly, the orders of the lower authorities are set aside and the issue with regard to claim of exemption u/s 54F is remitted back to the file of the Assessing Officer for re-examination. The Assessing Officer shall decide the issue afresh in accordance with law after giving opportunity of hearing to the assessee. 15. Now, coming to the claim of Rs. 50,000/- towards brokerage, as rightly submitted by the ld. DR, the details of the broker and evidence of payment are not available on record. The assessee claims that the Assessing Officer has not called for any details. Though the Revenue claims that the brokerage was to the extent of Rs. 50,000/- in the grounds of appeal, the assessee cla....