TaxTMI 
TaxTMI 
2023 (4) TMI 328
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....reciating the judgment of the Hon'ble Supreme Court rendered in the case of CIT vs. B.C.Srinivasa Shetty (128 ITR 294) in right perspective. 3. That the ld. CIT (A) erred on facts in not allowing the benefit of a sum of Rs. 70,00,000/- paid for acquiring title in the land sold resulting into charging of capital gains at very high figure. 4. The appellant craves leave to add, amend or alter any of the grounds of appeal before hearing." 2. The co-ordinate bench has disposed off this appeal vide order dated 30-01-2014 read with corrigendum dated 31-01-2014 where in the coordinate bench has decided the appeal of the assessee on ground no. 2. Thus, the other ground becomes academic therefore. On 24-11-2016 revenue filed a miscellaneous application (MA) in ITA no. 59/JP/2013 praying for recalling of the order contending that the Hon'ble Punjab & Haryana High Court has decided the issue while considering the judgement of the Hon'ble Supreme Court in the case of B. C. Srinivasa Setty. The co-ordinate bench vide order dated 29-06-2017 recalled the order dated 30-01-2014 to be decided on merits in the light of judgment relied upon by the revenue. 3. The fact as culled out from the reco....
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....4 Investment in new asset Rs. 32,09,810/- (Purchase consideration & registry charges) Long term capital gain Rs. 33,65,628/- 4. Income from other sources as shown Rs. 73,906/- Gross total income Rs. 35,31,258/- Less: Deduction under chapter VIA Rs. 20,000/- Total income Rs. 35,11,258/- R/o Rs. 35,11,260/- 4. Being aggrieved, the assessee carried the matter in appeal before the ld CIT(A) challenging the computation of capital gain. The assessee did not find any favour, carried the matter before this tribunal and the same was in the earlier order decided on technical ground but based on the revenue's MA the same was recalled to be decided on merits of the case. 5. Before us the ld. AR of the assessee thus has supported his argument for ground no. 1 & 3 only and ground no. 2 is not pressed by him. The ld. AR appearing on behalf of the assessee has placed their written submission which is extracted in below; The appellant`s father Late Shri Kishan Singh took possession of land situated at Near Sohan Service Station, Ajmer Road, Jaipur in the year 19....
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....sp; Investment in House property : 38,29,810 Purchase consideration as per Registry 30,00,000 Add : Registry Charges 2,09,810 Add : Spent for construction work 6,20,000 ------------- It is pertinent to note that in the cost of acquisition the appellant had adopted only the cost of construction and not the purchase price/ market value of land. However later on the value was enhanced by the registering authority at Rs. 5,76,54,492 which was questioned by the buyer before the Hon`ble Revenue Board and finally the value was assessed at Rs. 1,94,19,827 and hence the ld. AO assessed the LTCG as under :- Sale Consideration of Residential House 77,67,931 (40% of 19419,827) Less : Transfer Expenses : 9,53,640 Paid to JDA for issue of Patta & Registry etc. (Paid th. Ch. No. 744572 dated 23/06/2008) Less : FMV as at 01/04/1981 @ Rs. 100/- per sq. sq. mtr 2,38,853 (40% of Rs. 1,02,600 i.e. Rs 41,040 ) (Indexed cost : 41,040 * 582/100) -------------- Taxable Capital Gains 65,75,438 Less :....
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....ant, his mother, his brother, the buyer, Mayor, Jaipur Nagar Nigam, Secretary JDA, Deputy Commissioner Zone 2 of JDA and the Registrar were made parties and allegations were made that the appellant with the collusion of JDA, JMC and Registering authorities obtained lease deed and executed a registered sale deed in favour of the buyer and following requests were made by above named Jai Mahal Hotels P Ltd in the suit :- 1. To declare the proceedings for transposing name of the appellant in house tax records by Jaipur Nagar Nigam as null and void (APB 33 - Para 14). 2. To declare the registered sale deed executed in favour of the buyer as null and void (APB 35 - Para 16). 3. To stay the construction activities started by the buyer in the disputed land (APB 36 - Para 17). 4. To bind Jaipur Nagar Nigam, JDA not to grant permission to the buyer for construction and if constructed to demolish the same (APB 36-37 - Para 18) 5. To levy cost on sellers and the buyer @ Rs. 1,00,000 per month for their wrong doings (APB 37 - Para 19) 6. To bind the Registrar not to accept any document or register the same on request of any party other than Jai Mahal Hotels P Ltd. (APB 37 - 38 - Par....
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....n the sale deed that they had clear title in the land and there is no encumbrance on the property being sold and also held that in absence of any clear finding given by the Hon`ble Court on the title of the land, claim of the appellant could not have been entertained. Hence she did not accept the contention of the appellant that said sum of Rs. 70,00,000 had been paid by the buyer to M/s. Jai Mahal Hotels P Ltd. for buying title. In this connection it is submitted that the ld. CIT (A) seems to had not gone through the contentions of the above named M/s. Jai Mahal Hotels P Ltd. raised in the suit filed for cancellation of the sale deed executed by the appellant, his mother and brother. It is absolutely apparent from the contentions raised by M/s. Jai Mahal Hotels P Ltd. in the suit that the appellant, his mother and brother had obtained the lease deed in collusion with the JDA officers and the said land in fact belonged to it as per history provided in the suit. Further in the compromise deed it is clearly mentioned that this compromise deed relates to suit filed for land having municipal number 117, Santosh Nagar, Ajmer Road, Jaipur and covered by lease deed dated 28.06.2008 issu....
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....n first floor. The appellant had executed an agreement with the contractor (APB 60-61) dated 03.06.2009 for doing this work and obtained receipt evidencing payment of Rs. 6,20,000 on various dates (APB 62) The AO disallowed the claim on the ground that his ward inspector reported that no person of the name Lalit (Contractor) was residing on the address mentioned in the Agreement and further the signatures of the contractor were different on Agreement and the receipt issued. Such view was upheld by the ld. CIT (A) also. Both of them also stated that the appellant also could not produce the contractor for confirmation. The appellant has submitted following documents in support of genuineness of payment made for further construction work :- 1. Agreement of the appellant with the contractor dated 03.06.2009 (APB 60-61) 2. Receipt of payments made by appellant to Contractor (APB 62) 3. Bank passbook of the appellant showing source of payments made to the contractor (APB 63) It is very clear from the Registered Purchase deed of new residential house purchased by the appellant (APB 51-59) that the appellant had purchased the land along with construction admeasuring 1500 sq. ft o....
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....n argument submitted as above, further submitted that the father of the assessee in 1974-75 was in possession of the land without any title. Even though the father of the assessee or the assessee is not legal owner of the property assessee and his other legal heirs offered the capital gain which is not disputed by the revenue. 6.1 As regards the ground no. 1 the ld. AR of the assessee stated that the revenue has also not disputed that the assessee is holding the construction on the property, assessee placed on record the proof of payment of the expenses incurred for a sum of Rs. 6,20,000/- (assessee's paper book (APB) page 62), this receipt is in accordance with agreement executed on stamp paper with a terms and conditions of construction (APB-60&61), the source of payment for this expenditure is also supported by the bank account withdrawal (APB-63) and was having the electric connection on the disputed property (APB page 26). The ld. AR of the assessee based on these evidences further submitted that the name of the contractor is also appearing in the bank statement which categorically proves the identity of the person to whom the construction expenses were paid. As regards the n....
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....f Rs. 70,00,000/- not made by the assessee and in that case how the claim of that payment be adjusted while working out the capital gain and for that matter he relied on the detailed finding of the ld. CIT(A) where in a detailed finding is given stating the reasons as to why the claim of the assessee cannot be considered while working out the capital gains. The relevant finding of the ld. CIT(A) on both the issue is reproduced here in below: Ld. CIT(A) finding on claim of Rs. 6,20,000/- "5.3 I have carefully perused the order of the AO, the submissions of the AR and the paper book filed, and do not concur with the submissions of the AR on the following grounds: 1. On perusal of the Ikrarnama and the so called bill/receipt it is seen that the signatures on the Ikrarnama and bill are indeed different. 2. On perusal of the bank pass book of the appellant in the Bank of Rajasthan Ltd. and the bill/receipt allegedly given by Shri Lalit Saini (the contractor) there appear to be discrepancies in the submissions. For example, as the payment of Rs.2,00,000/- was shown to have been received on 20/04/2009 by Lalit Saini whereas as per the details of the bank a/c of the appellant it is ....
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....her and mother had acquired the title of the land by way of lease deed as per the records of the JDA vide its order dated 28/06/2008. That is why they too were signatories of the Settlement -Document. On the face of it, the entire argument is absurd because first of all unauthorized possession of somebody else's property was taken thereafter fraudulently the lease deed was transferred to the names of himself and his brother and mother in the revenue records. The property was sold for profit through a Registered Sale Deed and now complete exemption on profits accruing from capital gains on this transfer is being claimed by stating that he did not have a title in this land. In the sale deed itself it has clearly been mentioned as follows: Therefore, as per the sale deed the assessee had a title to this land which was transferred to M/s Sukh Shanti Estates Pvt. Ltd. In the Compromise/Settlement Document also nowhere has any finding been given regarding the title of the said land or whether the appellant and his relatives were authorized to transfer the impugned land or not. It has merely been mentioned that Rs.70,00,000/- was being transferred from M/s Sukh Shanti Estates Pvt.....
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.... revenue is replacing the stamp valuation against the actual consideration received by the assessee. As against this replacement assessee is asking for deduction of cost of improvement paid for a sum of Rs. 70,00,000/- to clear the defect in the title. As regards the disallowance of Rs. 6,20,000/- the only reason that the ld. DR reiterating that the AO while verifying the claim sent the inspector on the address not found the person and therefore, the claim was not considered. Against this claim the ld. AR of the assessee submitted proof of payment of the expenses incurred for a sum of Rs. 6,20,000/- (assessee's paper book (APB) page 62) which is the receipt. This receipt is for the payment to be made which is in accordance with agreement executed on stamp paper with a terms and conditions of construction (APB-60&61). The source of payment for this expenditure is also supported by the bank account withdrawal (APB-63), the name of the contractor is also appearing in the bank statement at page 63 in the paper book. We have gone through the contentions of the assessee and revenue based on the evidences placed before us. We believe that once the name of the payee is appearing in the ban....
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....an amount of Rs. 6,20,000/- cannot be disbelieved and thus, we hold that the revenue has erred in not allowing the claim of the assessee and therefore, we direct the ld. AO to allow the claim of the assessee to the extent of the share of the assessee in this payment. In the light of these observations, we allow the Ground no. 1 raised by the assessee. 8.2 As per the written submission the ld. AR of the assessee has not pressed the ground no. 2 & 4 and therefore, the same is dismissed. 8.3 The ground no. 3 raised by the assessee is not allowing the benefit of a sum of Rs. 70,00,000/- paid for acquiring title in the land sold resulting into charging of capital gain at very high figure i.e. the substitution of stamp duty valuation at Rs. 1,94,19,827/-. Before us the ld. AR of the assessee in its fairness agreed though the assessee has no legal title on the property sold the property at distress value and the same was at Rs. 1,20,00,000/- where in the share of the assessee is 40%. The stamp duty authority in the first instance valued that property at Rs. 5,76,54,492/- and thereafter, the same was reduced to Rs. 1,94,19,827/- vide order dated 15-06- 2009. As per provision of section 5....
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.... placed before us so far lower authority has not disputed that there was a settlement of dispute which was before the competent court and the dispute was related to this property where in the assessee was also one of the parties to the disputes. So, once the revenue is substituting the sale price with the stamp duty valuation the contention of the assessee in the appellate proceeding based on the additional evidence placed an alternative argument that if the amount is reconsideration based on the stamp valuation the relevant receipt of the disputed amount falls due and the same is required to considered as paid to settle the same property disputed and the deduction under section 48 is claimed by the assessee to the extent of his share @ 40%. To understand the claim of the assessee in the light of the provision of section 48, the relevant provision is reiterated here in below; Mode of computation. 48. The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :- (i) expenditure incurred wholly and exclusively in ....
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....ath Paul & Sons and Gobindo Sheet Metal Works & Foundry between the partners of the respective two firms i.e.: the parties who were common. In the latter suit, there was a compromise in which both the firms stood dissolved from the date agreed in the terms of settlement and the Receiver was appointed in terms thereof for the purpose of selling these two firms as going concerns. From the subsequent orders, it appears that those firms could not be sold as going concerns on account of the liability of Gobindo Sheet Metal towards the Allahabad Bank. 4.1 After having passed several orders, by an order dated 27-4-1989, the Court directed deposit of Rs. 25,00,000 with the Registrar of this Court to be kept in fixed deposit with the Allahabad Bank free from lien and all attachments until further orders of this Court. This was done in order to effectuate the transfer of the assets of these two firms after securing payment of the liability towards the Allahabad Bank in respect of one of the firms. It appears that there was but one sale comprising of the assets of both the firms and the bid of one Ganesh Prasad at Rs. 3,51,00,000 was accepted as the highest bid and that the payment towards ....
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.... sale consideration receivable by the assessee was less the liability of the Allahabad Bank. Thus, meeting this liability of one of the firms, when the entire assets were being sold, was an absolute necessity to effect the transfer. In other words, it was an encumbrance without removing which the sale or transfer could not be effected and the amount spent for removing this encumbrance would definitely attract clause (i) of section 48(1). 5.2 From the Assessment Order (page 37 of the paper book), it appears that earlier the assessee used to conduct its business under the name and style of Gobindo Sheet Metal Works & Foundry. CIT (Appeals) at pages 43-44 of the paper book have found that the short-term capital gain arising out of the sale of the assets pertaining to the erstwhile business of the appellant in the name and style of Gobindo Sheet Metal Works & Foundry and on the sale of the factory and assets of the erstwhile business through public auction, the total consideration received was Rs. 3,66,24,005. From the details of the expenses and liabilities claimed, it was seen that an amount of Rs. 27,85,523 had been shown as payable to the Allahabad Bank. However, the CIT (Appeals....
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....pplication in the present case in view of the fact that the amount was spent in that case after the receipt of the consideration by the liquidator to discharge the liability of the assessee in respect of finance received from the Kerala Finance Corporation on the security of the property which was created after acquisition in course of a winding up proceeding. There was nothing from which it could be held that such payment was absolutely necessary. On the other hand, the learned Counsel for the assessee in that case had conceded that section 48 of the Act had no application to the facts of the said case. However, the alternative argument of the assessee was that the corporation had overriding title over the property. The amount paid was clearly relatable to title. Thus, it appears that there was no claim that the payment of that amount was an expenditure incurred wholly and exclusively in connection with the transfer. There is another distinguishing feature so far as the present case is concerned. Here the entire assets of the business of the two firms as ongoing concern were sought to be sold but could not be sold without removing the liability towards the Allahabad Bank. The asse....