TaxTMI 
TaxTMI 
2020 (6) TMI 534
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....e and development charge etc. iii) Whether on the facts and in circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made by the AO of Rs. 3,50,536/- on account of various expenses wrongly claimed by the assessee against the interest & remuneration received from various firms. iv) Whether on the facts and in circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made by the AO of Rs. 14,32,160/- on account of expenses wrongly claimed by the assessee u/s 57 of the Act for earning interest income." Grounds of assessee's appeal: "1. That the Ld. AO grossly erred in not accepting the value of wells, Baories, Roads & boundary wall and there by AO have not considered the index value of these things which are situated on the Land. And the Ld. CIT(A) also erred in not accepting the value of wells Baories, Roads as on 01.04.1981 & there by not allowed the cost of Rs. 27,50,000/- and proportionate indexed cost Rs. 1,25,19,756/- in calculation of LTCG on sale of Land & there by sustained the addition in Long Term Capital Gain on sale of Land by Rs. 1,25,19,856/-. 2. That the Ld. AO Grossly erred on law f....
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.... term CG on transfer of land 7,23,54,362/- Less: Investment in bonds u/s 54E 50,00,000/- Taxable Long term capital gains on transfer of land 6,73,54,362/- Less: LTCG declared by the assessee in ROI filed 2,51,85,149/- Additions on account of LTCG on Land 4,21,69,213/- 4. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) who accepted the revised return and the revised computation of income, and granted partial relief to the assessee whereby the transaction in respect of two invalid sale deeds were held not chargeable to capital gains tax and secondly, against the third transaction of sale of land, the relief was granted in respect of cost of boundary wall, development and legal expenses and the disallowance in respect of other matters as done by the AO were, however, sustained. Now, both the parties are in cross appeal before us against the said findings of the ld CIT(A). The Revenue is in appeal against the relief granted by the ld CIT(A) and the assessee is in appeal against the disallowances sustained by the ld CIT(A). 5. Firstly, coming to the dispute relating to two sale deeds executed between the assessee and S....
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....ing on every sales deed by the registrar of property transfer. Hence, as per provisions of section 50C of the I.T. Act, 1961, full value of consideration is of Rs. 22,37,80,189/- for all the three transfer deeds. As per provisions of section 45 etc, the expression, full value means the whole price without any deduction what so ever and it cannot refer to the adequacy or inadequacy of the price bargained for. Neither has it any reference to the market value of the capital asset which is the subject matter of transfer. Even if the full value of consideration agreed upon is received in installments in different years, the entire value of consideration has to be taken into account for computing the capital gain which become chargeable in the year of transfer. Thus, capital gains arise on accrual basis as held by the Hon'ble Chennai High Court in the case of T.V. Sundaram Iyengar & Sons Ltd. V/s CIT (1959) 37 ITR 26 (Madras). Hence, in the instant case of the assessee the full value of consideration on transfer of land is of 22,33,80,189/- and reduction deduction for not receiving any part of sales consideration in the future not acceptable under the provisions of ....
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....s still in the possession of appellant himself. Even more so, mere delivery of possession accompanied by realisation of sale consideration does not divest the vendor of the ownership of the property and, therefore, it continues to belong to the vendor and can be included in his net wealth (Nawab Sir Osman Ali Khan - 162 ITR 888 SC) (iv) The sale deeds itself were under litigation for cancellation due to breach of contract. (v) The appellant has filed a suit & obtained a stay from Rajasthan High Court for cancellation of the sale deed & registrations on transfer of land which would mean that no gain has arisen on the sale & such asset which is never parted with. The gain as per the document was not 'Real' because neither was the full consideration received by the seller, nor was the possession handed over to the purchaser." 9. Further, the ld. AR submitted that the appellant is an individual who has filed his return declaring income of Rs. 2,68,56,000/- including LTCG of Rs. 2,51,85,149/-. In course of assessment proceedings, the appellant informed to the A.O. that out of the said sale of 85 Bigha land & its periphery, the assessee has not received the p....
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....ed that under the scheme of taxation, the real gain is to be taxed, not the notional gain which has not been received or accrued to the assessee. This has been laid down by the Hon'ble Supreme Court of India in the case of K.P. Verghese vs. ITO 131 ITR 597 (SC). It was accordingly submitted that when full consideration has not been received or accrued, capital gain cannot be computed in the hands of the assessee. 13. It was submitted that the appellant revised his return of income during the course of assessment proceedings given that the amount of consideration has not been received and the sale deeds have become invalid sale deeds and stay has been granted by the Hon'ble Rajasthan High Court. It was submitted that it is a settled legal position that the legal claim can be taken at any stage of the proceedings as held in case of CIT Vs. Britannia Industries Ltd. 396 ITR 677 (Cal.). As such, revising of return, while at the time of proceedings before the A.O. is valid and, therefore, the claim made by the assessee has wrongly been disallowed by the AO which have however been appreciated by the ld CIT(A) and necessary relief granted by him. 14. Further, in support of his c....
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....ered sale deed. 18. Firstly, we refer to relevant provisions of the Act. Section 2(24) of the Act defines the word "income". The definition is inclusive and covers any "capital gains" chargeable under section 45. Section 4 is the charging section and it provides that income-tax shall be charged in respect of the total income of the previous year of every person. Section 5 of the Act defines the scope of "total income" by providing that the total income of the previous year of a person who is resident shall include all income from whatever source derived which is received or is deemed to be received in India in such year by him or on his behalf or accrues or arises or is deemed to accrue or arise to him in India during such year or accrues or arises to him outside India during such year. Section 45 provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to income-tax under the head "Capital gains" and shall be deemed to be the income of the previous year in which the transfer took place. Section 2(47) defines the term "transfer" in relation to transfer which list down various modes of transfer. The mode ....
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....hat the sale transaction was a sham transaction. It is, however, a different matter that the Tribunal may not feel convinced that the sale transaction was a sham transaction and refuse to rely on the material produced by the assessee for good reasons, but the said material had to be taken into consideration and could not be ignored. As already observed, the enquiry before the Tribunal was to be directed to find out whether there had been a sale and if the Tribunal comes to the conclusion that the sale had taken place, in that case, the capital gains tax would become payable. The matter can be viewed from another angle. It is a matter of daily happening that people, who want to avoid payment of tax, would sell the property by getting the sale deeds registered at an under-estimated value. If it is held that the sale deed is final, in that case, the Income-tax authorities will be debarred from looking into as to how much sale consideration passed under the transaction, which is not the law. The factum of sale and the sale proceeds are the real questions to be determined by the Income-tax authorities. From what has been stated above, it is clear that the Tribunal fell into an ....
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....n though the consideration has not been paid, title passes, that is, failure to pay the consideration for a conveyance does not defeat the conveyance except where there is an agreement that it should take effect only if the consideration is first paid." In the case of Panchoo Sahu v. Janki Mandar, reported in AIR 1952 Patna 263, it has been held that title does not pass on the mere execution and registration of the sale deed and the answer to the question regarding passing of the title lies in the intention of the parties, which is to be gathered from the sale deed itself. A similar view has been taken in the case of Shiva Narayan Sah v. Baidya Nath Prasad Tiwary, reported in AIR 1973 Patna 386. There is a catena of decisions of this court as well as of other High Courts taking a similar view. The relevant provisions under the Act for the present purpose are sections 45 and 2(47). Section 45, inter alia, provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall, subject to certain exceptions, be chargeable to income-tax under the head "Capital gains" and shall be deemed to be the income of the previous year in which....
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....rument. The Registration is no proof of an operative transfer and where the parties had intended that despite execution and registration of sale deed, transfer by way of sale will become effective only on payment of the entire consideration amount, then in such a scenario, the transfer will be effected only on payment and receipt of full sale consideration and not at the time of execution and registration of sale deed. 22. Applying the above legal proposition in the facts of the present case, we find that the first sale deed dated 24.12.2012 is for transfer of 3.71 hectares of land situated at village Rampura, Tehsil Ladpura, Kota district, Rajasthan for a sale consideration of Rs. 4.63 crores. The sale consideration has been stated to be discharged by issue of cheque no. 912806 for Rs. 63 lacs, cheque no. 912807 dated 2.01.2013 for Rs. 2 crores and cheque no. 912808 dated 2.01.2013 for Rs. 2 crores drawn on Punjab National Bank. The assessee received the first payment of Rs. 63 lacs through RTGS on 31.12.2012. However, the other two cheques were returned unpaid by the bank on 25.03.2013 stating that the payment has been stopped by the issuer of the cheque i.e, Shri Rajeev....
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....d for clearing by the assessee and returned unpaid by the bank on 25.03.2013 stating that the payment has been stopped by the issuer of the cheque i.e, Shri Rajeev Singh and basis his instructions of stop-payment, the cheques have not been cleared and returned unpaid to the assessee. What is therefore relevant to note is that out of total consideration of Rs. 3.40 crores as stated in the aforesaid sale deed, no payment has been actually made to or received by the assessee either prior to or at the time of execution of the sale deed. What has been apparently done at the time of execution of the sale deed is thus, the handing over the two cheques to the assessee which have been returned back unpaid by the bank on 25.03.2013. The intention of the parties which can therefore be gathered from the reading of the sale deed and the conduct of the parties is that the effective transfer of title in the land shall happen only on encashment and clearance of both the cheques and not at the time of execution and registration of the sale deed. Therefore, mere handing over the cheques which have been subsequently dishonored and returned unpaid to the assessee cannot be held to be discharge of full....
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....e the Hon'ble Supreme Court has reiterated the principle of real income in context of section 45 and 48 and has held as under:- "24. The matter can also be viewed from a slightly different angle. Shri Vohra is right when he has referred to Sections 45 and 48 of the Income Tax Act and has then argued that some real income must "arise" on the assumption that there is transfer of a capital asset. This income must have been received or have "accrued" under Section 48 as a result of the transfer of the capital asset. 25. This Court in E.D. Sassoon & Co. Ltd. v. CIT AIR 1954 SC 470 at 343 held: "It is clear therefore that income may accrue to an assessee without the actual receipt of the same. If the assessee acquires a right to receive the income, the income can be said to have accrued to him though it may be received later on its being ascertained. The basic conception is that he must have acquired a right to receive the income. There must be a debt owed to him by somebody. There must be as is otherwise expressed debitum in presenti, solvendum in futuro; See W.S. Try Ltd. v. Johnson (Inspector of Taxes) [(1946) 1 AER 532 at p. 539], and Webb v. Stenton, Garni....
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....also be accompanied by a corresponding liability of the other party to pay the amount. Only then can it be said that for the purposes of taxability that the income is not hypothetical and it has really accrued to the assessee. 18. Insofar as the present case is concerned, even if it is assumed that the assessee was entitled to the benefits under the advance licences as well as under the duty entitlement passbook, there was no corresponding liability on the Customs Authorities to pass on the benefit of duty-free imports to the assessee until the goods are actually imported and made available for clearance. The benefits represent, at best, a hypothetical income which may or may not materialise and its money value is, therefore, not the income of the assessee.' 27. In the facts of the present case, it is clear that the income from capital gain on a transaction which never materialized is, at best, a hypothetical income. It is admitted that, for want of permissions, the entire transaction of development envisaged in the JDA fell through. In point of fact, income did not result at all for the aforesaid reason. This being the case, it is clear that there is....
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....for the purported sale transaction. Though the case of purchasers was that they had entered into sale transaction with the understanding that the assessee would get no objection from the other co-owners and for this reason, sale deed was executed and the cheques were handed over. The claim of purchasers before the Civil Courts was that they were put in possession since they had handed over the cheques, however, the said cheques were stopped for payment by the purchasers only, as it is clear from the communication placed on record by the assessee. 10. The issue which arises in such circumstances is that in view of the dispute between the parties, can it be said that the assessee has completed sale transaction and hence is eligible for assessability of capital gains in his hands. 11. Section 2(47) of the Act lays down that transfer in relation to capital asset includes various modes of transfer in which under clause (v) it involves a transaction wherein allowing of possession of any immovable property is taken or retained in part performance of the contract of the nature referred to in section 53A of the Transfer of Property Act, 1882. Under section 53A of the Trans....
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....profit or gain which arises from the transfer of a capital asset, which could be brought to tax under Section 45 read with Section 48 of the Income Tax Act. 13. The assessee in the affidavit explaining the delay in filing the appeal late before the Tribunal has also mentioned the factual aspects and the legal dispute and has stated on oath that sellers had never parted with the possession of said land, for which litigation was pending before the Hon'ble High Court. In such circumstances, where the assessee has not received sale consideration and where the possession of land having not been transferred to the purchasers, provisions of section 45 of the Act are thus, not attracted. 14. Now, applying the ratio laid down by Apex Court to the facts of present case, wherein the initial contract was between the parties on the ground that the assessee would get permission of other co-owners numbering about 13 so as to transfer immovable asset to the purchasers. This was the basic condition of the said agreement between the parties. Admittedly, the said permission could not be obtained by the assessee and though sale deed was registered, transaction could not ....
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....ribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof." 28. In order that the provisions of Section 53A of the Transfer of Property Act are attracted, there are two essential conditions. Firstly, the transferee must, in part performance of the contract, have taken possession of the property or any part thereof. Secondly, the transferee must have performed or be willing to perform his part of the agreement. It is only if these two important conditions, among others, are satisfied that the provisions of Section 53A can be said to be attracted on the facts of a given case. In the instant case, as we have noted above, the ld CIT(A) has returned a finding that "possession of the said land was never handed over & lan....
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.... charges etc. including brokerage expenses of Rs. 8,45,000/- and response to show cause notice dated 04-02-2016 he filed a list of expenses for the month Jun, July, August, Sept. & Oct. 2012 etc. containing expenses of labour for levelling of land, stone supplying charges, JCB Charges, Sand supply changes, cement bags, gitti supply, cement plaster charges etc. said to have incurred for development using material, cement & other development charges. In the above list of expenses no any mention for brokerage charges hence the claim for brokerage expenses seems to be fictitious claim for transfer of land for which no evidences of paying such expenses with details of receiving persons tiled as narrated in above para. In respect of above mentioned other expenses of structures and development charges what and which type of construction work was done on the transferred land during the whole rainy season no any where mentioned and no any evidence of any construction work which was completed on the land and for what purposes, filed & produced. Merely claiming deductions for expenses by enlisting in the name of construction of any pucca work, do not prove the facts of cost or improvement of ....
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....elated expenses towards cost of improvement. Against the said findings, the Revenue is in appeal before us. 33. During the course of hearing, the ld. DR relied on the finding by the AO. 34. Per contra, the ld. AR submitted that necessary details have been duly submitted before the AO as well as the ld. CIT(A) and these expenses are in nature of development expenses which includes leveling, stone supply charges, machine charges, repairs of boundary walls and wells etc which were incurred within the said premises and were required before the sale of land as the property was required to be put in saleable condition. It was submitted that ld. CIT(A) has gone through the details submitted by the assessee and rightly appreciated the nature of the expenses as claimed. It was accordingly submitted that the findings of the ld. CIT(A) be confirmed. 35. We have heard the rival submissions and perused the material available on record. The DVO has acknowledged the existence of roads, wells, Baories and boundary walls on the impugned land and therefore, the factual position is that the land has been transferred along with these constructed structures. The claim of the assessee is toward....
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....at similar expenditure were claimed and allowed by the Department in earlier years namely A.Y 2010-11, 2011-12 and 2012-13 respectively. It was further submitted that in assessee's own case for A.Y 2010-11, the Co-ordinate Bench (in ITA No. 350/JP/2015 dated 22/07/2016) has held that such expenditure is wholly allowable. 41. We have heard the rival contentions and perused the material available on record. We find that the assessee has earned interest and remuneration from various partnership firms amounting to Rs. 5,88,407/- during the year under consideration and against the said receipts, he has claimed expenses totaling to Rs. 3,50,536/- and the net receipts of Rs. 2,37,871/- have been offered to tax as business income by the assessee while filing his return of income. It is the claim of the assessee that he had received such interest and remuneration in earlier years as well and against the same, had claimed various expenses incurred in respect of such business income and which have been allowed by the Revenue in earlier years. We find that the Coordinate Bench had an occasion to examine the same claim of the assessee in A.Y 2010-11 and the relevant finding of the Co-ordinat....
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....partner of the firm, being an assessee, is entitled to all the deductions allowable under the Act. In order to earn the income as a partner of a firm, a partner of a firm has to do some work and he has to incur certain expenses, e.g., holding consultation for the work of the firm at one's residence or acts done in order to facilitate or earn the income as a partner of the firm. Such expenditure was allowable. In view of these judgments, the act of the AO cannot be termed as erroneous. Therefore, on this ground invoking of provisions of section 263, in our considered view was not justified." 42. We find that the question before the Coordinate Bench was whether the AO erred in allowing the expenditure against the interest and remuneration earned by the assessee and relying on the decision of Hon'ble Jurisdictional High Court in the case of CIT vs. Jabarmal Dugar 84 ITR 452 and Hon'ble Calcutta High Court in the case of CIT vs. S.B. Ghose 124 ITR 674 (Cal.) held that the expenses are duly allowable. Though the decision of the Coordinate Bench was in the context of proceedings u/s 263, the Coordinate Bench has upheld the decision of the AO in allowing such expenditure followin....
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....d claimed were entered in such books of accounts which were duly examined by the AO and no discrepancy was pointed out. It was further submitted that none of the expenditure includes any personal expenditure which can be disallowed. These expenses were incurred for running regular office maintained for finance, bank, accounts and other related work and the expenses are in the nature of salary and wages to staff, postage and telephone expenses, car and conveyance expenses, bank charges, legal fees, other office expenses etc. It was further submitted that in the past such expenditure were fully allowed by the Revenue in A.Y 2011-12 and 2012-13 respectively and therefore, following principle of consistency, the expenses should be allowed for the year under consideration. It was further submitted that the Coordinate Bench in assessee's own case in ITA No. 305/JP/2015 dated 22/07/2016 has held that expenditure incurred on taxable income included in total income is allowable and the said decision has been accepted by the Department. It was accordingly submitted that the expenditure of Rs. 14,32,160/- is genuine expenditure incurred for earning the taxable income of Rs. 22,30,250/- and th....
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....maintained by the assessee with banks in Delhi and Kota, the periodicity of transactions and period of holding such deposits, current occupation and availability of the assessee to personally manage such funds and his desire and need to appoint a person with appropriate skill and functional knowledge of banking and allied areas who can handle and monitor the deployment of such funds on his behalf. A parallel may be drawn to family offices set up by HNI individuals where these individuals appoint a group of finance and accountancy professionals who are entrusted with managing the funds of these individuals. The assessee may be a conservative investor and may not have invested in mutual funds, stock market or private equity, however, the same cannot be held against him unless the considerations as stated above are examined in detail. Given that these considerations have not been taken into consideration and examined by the lower authorities, we deem it appropriate to remand the matter back to the file of the Assessing officer to examine the same afresh including the decision of the Coordinate Bench referred supra, after providing reasonable opportunity to the assessee. In the result,....
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....f acquisition as on 01.04.1981. Against the said findings, the assessee is in appeal before us. 54. During the course of hearing, the ld. AR submitted that the AO took the valuation of land as on 01.04.1981 and he ignored the value of roads, wells, Baories, boundary wall stating that nothing is mentioned in the registered sale deed about such construction. It was submitted that the said findings of the AO is not factually correct as it is very well mentioned in the site plan submitted to the AO, the valuation report given by the registered valuer and the draft valuation's report given by the DVO. It was submitted that in the sale deed, the description of item is never been given, even on the sale of house, the area of Land or in some cases construction area is mentioned, but what is there in the house is not mentioned, that in India if the base (Land) is sold than all the things on said Land is sold or transferred, the things which are attached with the Land are automatically transferred with the said Land, thus there is no reason or purpose to mention about these things in the sale deed. However, on valuing the sold property, the valuer has to consider all the things, there are....
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....of anything contrary on record, we allow the proportionate cost of these structures (after indexation) against the full value of consideration in terms of sale deed executed with Shri Neeraj Sawalka. In the result, the ground of appeal is allowed. 58. In Ground No. 2, the assessee has challenged the sustenance of disallowance of legal and other expenses amounting to Rs. 16,09,450/- which has been claimed by the assessee as expenses incurred in connection with transfer of the impugned land. 59. Briefly stated, facts of the case are that the assessee has claimed Rs. 2,83,680/- under the head legal expenses incurred for court, consultancy and advice, and other expenses and legal expenses for filing of two court cases in respect of invalid sale deeds amounting to Rs. 13,19,770/-. During the course of assessment proceedings, the matter was examined by the Assessing Officer and these expenses were found not deductible from the full value of consideration. The relevant finding of the AO reads as under:- "(b) The assessee also claimed Rs. 2,83,680 under the head litigation legal cases expenditure fee and court expenses and legal expenses for filing of court cases in respect ....
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....he Assessing Officer holding that the Assessing Officer has rightly denied the claim of deduction from the capital gains because first these expenses were incurred after the sale and secondly, they cannot be considered towards cost of purchase or improvement of the land. Against the said finding, the assessee is in appeal before us. 61. During the course of hearing, the ld. AR reiterated the submissions made before the lower authorities. It was submitted that the details of the legal expenses were duly submitted before the Assessing Officer as well as ld. CIT(A). It was submitted that in this case, the land dispute was going on since long. Further, stamp charges, consultancy to advocates have been incurred which are expenses directly incurred in connection with the transfer. It was accordingly submitted that the expenses have been incurred in connection with transfer of the land and the same should be deductible while working out the full value of consideration. 62. Per contra, the ld. DR relied on the findings of the lower authorities. 63. We have heard the rival submissions and perused the material available on record. We find that the assessee has claimed stamp duty,....