TaxTMI 
TaxTMI 
2017 (6) TMI 250
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....s on account of reasonable cause, therefore, we admit the appeal and proceed to dispose of the appeal on merits. 3. Briefly the facts of the case are that assessee had filed her return of income for the AY 2007-08 on 27/06/2008 declaring the taxable income at Rs. 1,70,53,650/-. During the survey conducted on 11/03/2010 in the case of Sri Karim Nawaz Alladin and M/s Alladin Investments and Properties, however, it was noticed that the market value of the property sold by the assessee was more than the actual consideration recorded in the registered sale deeds. Since the assessee had not offered capital gains on the basis of sale consideration as per the registered sale deeds, there was escapement of income in terms of the provisions of section 50C of the Act. Accordingly, the assessment was reopened by way of a notice u/s 148 served on 11/05/2010 and the reassessment order was passed by making certain additions. 3.1 During the reassessment proceedings, the AO asked the assessee vide letter dtd. 23.11.2010, to furnish the details along with necessary documentary evidence for the cost of acquisition claimed by the assessee at Rs. 79,36,350/- while working out the Long Term capita....
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....diture was claimed as incidental to the transfer of property. 3.4 On an examination of this issue, however, the Assessing Officer opined that the expenses incurred for getting the lease rights cancelled were not allowable expenditure, as the encumbrance has been created by the assessee or her ancestors. In this regard he relied on the decision in the case of CIT Vs. Ranga Setty (159 ITR 797) (Ker.), holding that' "payment made by the landlord to the tenant in regard to surrender of tenancy rights cannot be considered as an expenditure incurred in connection with the transfer of capital asset". Reliance was also placed on the decision in the case of CIT Vs. Roshan Babu Mohammad Hussein Merchant (275 ITR 231) (Bom) opining that an assessee is not entitled to deduction of expenditure incurred to remove the encumbrance created by himself. The Assessing Officer noticed that in the instant case also the land belonged to the ancestors and the encumbrance has also been created by them. Accordingly, it has to be construed that the encumbrance had been created by the assessee ancestors. Besides, he noticed that the assessee had not produced the bank accounts statement to prove the fac....
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....s under: "6. I have gone through the facts of the case and the submissions of the assessee. It is an established position of law that in order to determine the capital gains arising from the sale of any property received on succession, the cost of acquisition thereof has to be taken as the cost in the hands of the previous owner. It is clear that the encumbrance on the properties received by the assessee in the instant case had been created, by his ancestors. In the light of the decision of the Hon'ble Bombay High Court in the case of CIT Vs. R M Merchant Hussein and Fancy Corporation Vs. DCIT (275 ITR 231) wherein the decision in the case of Arunachalam Vs. CIT (227 ITR 222)(S.C) and Jagadishchandran (VSMR) (227 ITR 222)(S.C) also was referred to, the encumbrance created by the earlier owner was clearly not a part of such of cost of acquisition. Since the assessee acquired the property only on account of succession, the cost of acquisition would get restricted only to that in the hands of his ancestors, which indeed excludes the cost of any encumbrance created by them. Accordingly, even if the assessee had to discharge the liability on this account by making any payment to M/s.....
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.... the property which was claimed as not being available with the assessee was transferred to the purchasers through the sale deeds. The Assessing Officer also noticed that while both the market value and the actual consideration had been mentioned at Rs. 3 crores in the document No. 1106/2007, the encumbrance certificate reflected the market value at Rs. 4,30,66,600/ -, though actual consideration shown was Rs. 3 crores only. In view of the huge variation, therefore, a reference was made to the SRO, SR Nagar Hyderabad, who informed that the market value was Rs. 4,30,66,600/- only. After providing a copy of the letter received from the SRO, the market value of the property in document No. 1106/2007 was considered at Rs. 4,30,66,600/- and adopting the total market value at Rs. 6,11,90,100/ -, as against Rs. 4 crores admitted by the assessee, Long Term capital gains were computed. 8. During the course of appellate proceedings, the representative of the assessee reiterated that the property actually received back by the assessee from Voltas Ltd. was 2853 sq. yards only, as against the area shown in the document at 3353 sq. yards. He submitted that this had happened due to road wideni....
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....at she has not received any sale consideration on sale of the immovable properties, that the entire sale consideration was received by her brother Sri Karim Nawaz Alladin and that the sale deeds include her name as vendor at the instance of the buyer to avoid further legal disputes from the family. The A.O. did not accept her contention and brought to tax 1/3 share of Capital Gain. The C.I.T(A) confirmed the assessment. The assessee is in appeal before the Hon'ble Income Tax Appellate Tribunal (ITAT) seeking relief from the levy of tax charged on the aforesaid capital gain. 2. Subsequent to the date of filing of appeal before the Hon'ble ITAT, a decree has been passed on 06-03-2015 in 0.A NO.844 of 2007 in which the assessee is one of the plaintiffs, along with Sri Karim Nawaz Alladin and Smt.Maniza Jumabhoy, the vendors in the sale deeds which gave rise to the capital gains. In the said suit, the court decreed that the assessee and other plaintiffs have failed to establish their claim for title to the property, in respect of which long term capital gain has been computed by the AO. 3. The assessee submits that the registered documents Nos.1814/2007 and 1815/2007 whic....
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.... cost claimed 79,36,350 The AO allowed only Rs. 10,44,747/- as the cost of acquisition, which was upheld by the CIT(A). 12.1 The Ld. AR of the assessee submitted that the decision of the CIT(Appeals) is patently incorrect in law. In this connection the ld. AR brought to the notice of the Bench, its decision in a related case viz., Smt. Farida Alladin Vs. ACIT in ITA No. 954/Hyd/2012 Dt:12-06-2015 wherein on an identical issue the coordinate bench held that the reliance placed by the C.I.T(A) on the decision of the Bombay High Court in the case of R.M Merchant Hussain and fancy corporation ltd (supra) was misplaced and following the Supreme Court's decision in the cases of Jagadishchandran VSMR (supra) and Arunachalam vs CIT (supra) allowed the claim of the assessee for similar allowance. A copy of the order of the coordinate bench is submitted (Pages 52 to 59 of the paper book). The ld. AR relied on the said decision of the coordinate bench and prays for allowance of the sum of Rs. 68,91,603 as part of cost of acquisition in computing capital gain in assessee's case. 13. The ld. DR, on the other hand relied on the orders of revenue authorities. 14. Cons....
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....ase hold rights. We are unable to accept this contention of the learned D.R. In our opinion, the proposition propounded by the Hon'ble Supreme Court in the case of VSMR Jagadish chandran (Decd) by L.Rs. vs. CIT (supra) as well as R.N. Arunachalam vs. CIT (supra) would be applicable in the case of any encumbrance created by the predecessor which has been removed by the successor to the property by making payment of compensation. 11. In his impugned order, the Ld. CIT(A) has relied on the decision of Hon'ble Bombay High Court in the case of CIT vs. R.M. Merchant Hussein and Fancy Corporation Ltd., 275 ITR 231 while confirming the disallowance made by the A.O. on this issue. A perusal of the judgment of the Hon'ble Bombay High Court in the said case however shows that the same is distinguishable on facts inasmuch as the property in the said case was acquired by the assessee free from encumbrances and since expenditure was incurred by the assessee to remove the encumbrance which was created by himself, the Hon'ble Bombay High Court held that the same was not deductible under section 48 of the Act. In our opinion, the reliance of the Ld. CIT(A) on the decision of Hon'ble Bombay High ....
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....was a necessary outgo in the hands of the assessee. In this connection the ld. AR relied on the decision of the Karnataka High Court in the case of Asgar Jan vs CIT 298 ITR 60 KAR, In the said case, the amount of commission paid was reflected by the recipient of commission in his I.T return and accepted by the Department. The claim for deduction of such commission in computation of capital gain in the hands of the seller was held acceptable. 15.2 Ld. AR submitted that the said amount of Rs. 1,50,00,000/- has been offered to tax by Sri Karim Nawaz Alladin and brought to tax in his I.T assessment for the Asst. Year 2007-08 as amount received from the assessee. A copy of the assessment order in the case of Sri Karim Nawaz Alladin is submitted at pages 31 to 43 of the paper book. In the light of the facts and the evidence placed on record, ld. AR prayed that the claim of allowance of the sum of Rs. l,50,00,000/- u/s.48 may kindly be directed to be allowed. 16. Ld. DR relied on the orders of revenue authorities. 17. Considered the rival submissions and perused the material facts on record. It is clear from the records that the assessee along with the other family members allowe....