2018 (4) TMI 1121

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....f mining lease and holding the assessee not to be owner jof such capital asset." (ii) The Appellant craves its rights to add, amend or alter any of the grounds on or before the hearing." Cross Objection Ground "1 Under the facts and circumstances, Ld. CIT(A) has erred by sustaining the initiations of proceedings u/s 147 of the Income Tax act, 1961. The initiation of proceeding is illegal and unjustified. 2. Under the facts and circumstances of the case and in law, Ld. CIT(A) has erred in not deciding the following grounds while Ld. A.O. has erred in:- (i) alleging that transaction entered is 'transfer' within the meaning assigned to in section 2(47) of the Income Tax Act, 1961 (ii) not considering that the agreement under consideration has already been cancelled. (i) not considering the submission made during the course of assessment proceedings in right prospective and drawing inferences based on incorrect assumption of facts 3. Under the facts and circumstances of the case and in law, Ld. CIT(A) has erred in not deciding the following grounds while Ld. A.O. has erred in:- (i) not taking cost of acquisition....

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....d by M/s J.K. Cements under the sale agreement. The AO concluded that in view of the fact that the assessee has transferred the mining lease vide sale agreement dated 10.06.2010 for a consideration of Rs. 3,31,00,000/- out of which an advance of Rs. 25,00,000/- was received at the time of agreement and a sum of Rs. 1,03,000/- was also received, subsequently. Accordingly, the AO held that the transaction of transfer of mining lease completed within the meaning and purview of Section 2(47) of the Act read with explanation to section 2(47) of the Act. Accordingly, the AO made an addition of Rs. 1,10, 33,333/- being 1/3 share of each assessee. On appeal, the ld. CIT(A) held that the ownership of the mining lease vested with Shri Sunil Agarwal and therefore, no addition can be made in the hands of the other two brothers. As in the case of the Shri Sunil Agarwal the ld. CIT(A) further held that the sale agreement was executed without possession and therefore, no title or ownership whatsoever was conveyed in favour of M/s J.K. Cements Ltd. Further, M/s J.K. Cements Ltd. also sent a letter for cancellation hence, there was no transferred within the meaning of section 2(47) of the Act. Acco....

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....essment proceedings has also filed an affidavit conforming that he is the owner of the Mining Lease Right under consideration. The said mine was in the name of Shri Kailash Chand Mangal in the Mining Department. Thereafter, upon death of Shri Kailash Chand Mangal, the mine was transferred to his legal heir i.e. his three sons namely : Shri Sanjay Mangal, Shri Vijay Mangal and Shri Ajay Mangal vide order dated 2.5.2006. On 11.6.2010, Assessee alongwith his two brothers enter into agreement with J.K. Cement Limited. The agreement was registered with Sub-Registrar. Th said agreement was without possession and accordingly, Stamp Duty was also paid, applicable to an agreement without possession. In clause No. 4 of this agreement, it is specifically mentioned that actually the mine under consideration is of Shri Sunil Agarwal and accordingly, he received the advance. Assessee and his brothers signed the agreement only due to pending change in name due to Mining Policies. He has strongly supported the order of the ld. CIT(A) on the point that there was no transfer within the meaning of section 2(47) of the Act as the transfer was subject to various conditions including the renewal of leas....

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.... apart from other important conditions as stated in the agreement. 6. We have considered the rival submissions as well as relevant material on record. The assessees are legal heirs of late Shri Kailash Chand Mangal who was father of the assessee namely Sanjay Mangal, Shri Vijay Mangal and uncle of the assessee namely Shri Sunil Agarwal. Though the leasehold rights of the mines in question were vested to Shri Kailash Chand Mangal however, as per the family arrangement as well as will the ownership of the mining rights were given to Shri Sunil Agarwal. The AO though assessed the capital gain in the hands of the three brothers who are sons of Shri Kailash Chand Mangal and protective assessment in the hand of Shri Sunil Agarwal however, all these assessee have contended before the AO as well as ld. CIT(A) that the actual owner of the mining right is Shri Sunil Agarwal who has also accepted this fact that he is the real owner of the mining rights in question. The ld. CIT(A) has considered this issue of ownership of the mining rights in case of Sanjay Mangal and Vijay Mangal as well as in case of Shri Sunil Agarwal and held that Shri Sunil Agarwal is the owner of the mining rights and....

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....e Revenue is regarding the amount of Rs. 25,00,000/- paid as per the agreement as well as monthly payments which were paid by M/s J.K. Cements Ltd. to the assessee are to be assessed as income of the assessee. In view of the admitted position by all the assessees that the real owner the mining rights is Shri Sunil Agarwal and the Revenue has not challenged that finding of the ld. CIT(A) in case of Shri Sunil Agarwal we do not find any substance or merits in the appeals of the Revenue in case of Shri Sanjay Managal and Shri Vijay Mangal. ITAT No. 277/JP/2017 7. As regards the issue of capital gain arising from transfer of the mining lease vide agreement dated 10.06.2010 we finds that though by virtue of the said agreement the assessee transferred his right in the mining lease as on the date of agreement subject to the transfer of the rights to be vested with the assessee on renewal of lease by the government which was pending with the authorities. Therefore, the consideration of Rs. 3,31,00,000/- was agreed upon between the parties for transfer of lease rights including the rights after renewal of lease by the government. Hence, so far as the total consideration as agreed betw....

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....the authorities however, by way of this agreement M/s J.K. Cements had acquired a right to get the mining lease rights to be transferred in its favour on renewal. It is not a case of transfer of immovable property but it is only mining rights under lease were agreed to be transferred for a consideration to M/s J.K. Cements had secured the right to get the mining leasehold rights transferred in its favour by way of this agreement dated 10.06.2010 and also paid a sum of Rs. 25 lacs to secure the said right. Thus, though prior to the renewal of the lease by the government there cannot be any real transfer of the mining rights however, the rights to get such lease transfer in its favour was secured by the M/s J.K. Cements vide this agreement dated 10.06.2010 and against a consideration of Rs. 25 lacs which is not refundable. The relevant clause of the agreement is clause no. 10 reads as under:- Thus, it is clear that case in the parties subsequently decide not to proceed further for transfer of mining right under lease the said payment of Rs. 25 lacs is not refundable. Hence, we are of the view, that though the mining rights per se are not transferred being subject to the renewal of....

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....to the fixed assets on which depreciation has been claimed and also further more the use of assets for the purpose of earning the income from other sources. The assessee has not furnished any details as well as bills and vouchers in respect of other expense of Rs. 24,000/-. The assessee has not furnished any evidence with regard to the legal fee and purpose for which legal fees was paid. So far as the interest expenses are concerned the assessee has not furnished any co-relation with regard to the interest expenses incurred against the fund which were utilized for giving loans and advances for which interest has been received. As such the assessee 's claim of expenses of Rs. 1,98,759/- is without any justification and also not supported with any documentary evidences. The assessee has not discharged his onus proving justification with the documentary evidences as well justification of the expenses claimed and according a sum, of Rs. 1,98,759/- is disallowed and added to the total income of the assessee." Either during the course of assessment proceedings or appellate proceedings, the appellant has not been able to prove with the help of documentary evidences that the e....

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....ssue raised in the CO is regarding the cost of acquisition of the capital asset being the Fair Market Value (FMV) as on 01.04.1981. 15. We have heard the ld. AR as well as ld. DR and considered the relevant material on record. There is no dispute that the leasehold rights were acquired by the predecessor of the assessee in the year 1969 and further, the assessee has inherited property which fall in the category of transfer of capital asset as per section 49(1)(i)(iii)(a) of the Act. Once the capital asset in question becomes the property of the assessee as per section 49(1)(i)or(iii) and the previous owner had acquired the property prior to 01.04.1981 then, the cost of acquisition of the capital asset for the purpose of section 48/49 shall be the cost of acquisition of the asset to the previous owner or the fair market value of the asset as on 01.04.1981 at the option of the assessee as provided u/s 55(2)(ii)(b) of the Income Tax Act. For ready reference we quote section 55(2)(a)(b) as well as section 55(3) as under:- "(2)[For the purposes of sections 48 and 49, "cost of acquisition"25,- 26[(a) in relation to a capital asset, being goodwill25 of a business 27[o....

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....ted to a shareholder of a recognised stock exchange in India under a scheme for 36[demutualisation or] corporatisation approved by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), shall be the cost of acquisition of his original membership of the exchange:] 36[Provided that the cost of a capital asset, being trading or clearing rights of the recognised stock exchange acquired by a shareholder who has been allotted equity share or shares under such scheme of demutualisation or corporatisation, shall be deemed to be nil;] (b) in relation to any other capital asset,-] (i) where the capital asset became the property of the assessee37 before the 38[1st day of April, 39[39a[1981]]], means the cost of acquisition of the asset to the assessee or the fair40 market value of the asset on the 41[1st day of April, 42[42a[1981]]], at the option of the assessee ; (ii) where the capital asset became the property of the assessee43 by any of the modes specified in 44[subsection (1) of] section 49, and the capital asset became the property of the previous owner before the 45....

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....in in the year under consideration, the same will not be allowed at the time of transfer of the leasehold rights on renewal by the government. In the result, the appeal of the Revenues in ITA No. 276 &278/JP2017 and CO of the assessee in CO No. 12 & 13/JP/2017 are dismissed. The appeal of the Revenue in ITA No. 277/JP2017 and CO of the assessee in CO No. 11/JP/2017 are partly allowed. Order pronounced in the open court on 18/04/2018. ============= Document 1 10. कि हम प्रथम पक्ष अपने लीज होल्ड राईटस आप द्वितीय पक्ष को हस्तान्तरित करना चाहते हैं और क्योंकि अभी खान एवं भूविज्ञान विभाग में हमारे प्à....

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....ं पक्षों ने मिल बैठकर 3,31,00,000/- ( तीन करोड़ इगतीस लाख) रूपया तय की गई है जब तक पूरी कार्यवाही हमारे पक्ष में नही होती तब तक आपके और हमारे बीच वार्ता हुई उसके आधार पर हमने आप द्वितीय पक्ष से 25,00,000/- (पच्चीस लाख) रूपया अग्रिम जो कि हमने माईन्स को सà¤....

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....‡à¤‚ रूचि नहीं है तो प्रथम पक्ष द्वारा प्रप्त अग्रिम रूप से 25,00,000/- (पच्चीस लाख) रूपया वापस प्राप्त नहीं कर Document 2 सकेंगे। दोनों पक्षों के बीच तयशुदा राशि भुगतान द्वितीय पक्ष श्री सुनील अग्रवाल को करेंगे जैसा कि पेरा चार में उल्लेखित है कि à....