TaxTMI 
TaxTMI 
2023 (4) TMI 852
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.... ITR 474), Wherein the department had filed SLP in that case which was dismissed without discussing the issue on merit as the tax effect involved in the said case was below Rs. 1 Crore. 2. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the following expenses incurred by the assessee on transfer of his 15% share in the property on the ground that the assessee had incurred these expenses wholly and exclusively for the transfer of his property, whereas no documentary evidences has been provided by the assessee during the course of assessment proceedings. i) Brokerage Rs. 42,36,500/- ii) Solicitor's fee Rs. 50,00,000/- iii) Amounts paid to Occupier Rs. 10,00,000/- 3. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in allowing payment of Rs.20 lakhs made to the tenant, Shri Stefano Funari, for early termination of Leave and Licence, even though the assessee failed to furnish the Leave and Licence agreement and also failed prove that the payment made to Mr. Funari was wholly and exclusively for the purpose of transfer of immovable property during the....
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....ed his 30% undivided right, title and interest in the said property to his wife, Mrs. Joan Fali Mehta absolutely. The said Will and Codicil were probated by the High Court at Bombay under T & I. J. Petition No.96 of 2007, as a consequence of which the said Mrs. Joan Fali Mehta became entitled to the said 30% undivided right, title and interest of the said Dr. Fali S. Mehta in the said property subject to the occupation of interest of the said Dr. Fali S. Mehta in the said property subject to the occupation of the tenants. (g) The said Mrs. Joan Fali Mehta died on 9th March, 2008 leaving behind her Last Will and Testament dated 31st August, 2007 where under she bequeathed her entire estate to her two sons, namely, Dr. Sorab (Sohrab) Fali Mehta and Dr. Rustom Fali Mehta. The Will of Mrs. Joan Fali Mehta contained a provision that the executor, namely, Mr. Cyrus Soli Nallaseth should sell the said 30% undivided right, title and interest in the said property and divide the sale proceeds equally between her two sons. (h) In compliance of the aforesaid direction in the Will of Mrs. Joan Fali Mehta, Mr. Cyrus Soli Nallaseth executed the Deed of Release dated 30th Decembe....
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....vailable only from the financial year 2007-08 instead of the financial year 1981-82 as claimed by the assessee. Further, the Assessing Officer granted the deduction of Rs.37,00,000 on an ad-hoc basis @2% towards all expenses incurred on transfer by the assessee. The learned CIT(A) vide impugned order granted partial relief to the assessee. Being aggrieved, the Revenue is in appeal before us, while the assessee has filed a cross objection on certain issues which are decided against him by the learned CIT(A). 6. With the assistance of both parties, we find that in the case of the brother of the assessee, i.e. Mr. Sohrab Fali Mehta, being the joint holder of the undivided right, title, and interest in 30% of the immovable property, exactly similar computation of long-term capital gains was offered and the Revenue also made similar additions/disallowances. We further find that on similar issues, as raised in the present appeal, the coordinate bench of the Tribunal in ITO vs Sohrab Fali Mehta, in ITA No. 55/Mum./2013, vide order dated 15/03/2023, for the assessment year 2016-17 partly allowed the appeal filed by the Revenue, by observing as under:- "3.2. The cost of acquisit....
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....tled for indexed cost of acquisition benefit from F.Y.1981-82 on the cost of Rs.33,82,900/-. Accordingly, the ground No.1 raised by the Revenue is dismissed. 4. The next issue to be decided is with regard to eligibility of the assessee to claim deduction of brokerage, solicitor's fees and amounts paid to occupier while computing capital gains on transfer of above-mentioned property. As reflected in the computation of long term capital gains supra, it could be seen that assessee had claimed the following expenses as expenses incurred wholly in connection with the transfer of property u/s.48 of the Act as deduction:- (a) Brokerage Expenses - Rs.42,36,500/- (b) Solicitor's fee - Rs.50,00,000/- (c) Chartered Accountant fees - Rs.1,00,000/- (d) Valuation fees paid to Architect - Rs.57,500 (e) Amount paid to servant towards Arrears of salary - Rs.7,15,000/- (f) Amount paid to occupier for Vacating occupied place - Rs.10,00,000/- 4.1. The Id. AO observed in his assessment order that assessee has released his shares in the property to other co-owner of this property and there is no third party inv....
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.... 4.3. However, the Id. AO observed that the normal prevailing brokerage, legal fees and other incidental expenses on transfer of the property prevailing in the market is 2% and accordingly, allowed expenses on transfer of Rs.37,00,000/- i.e 2% of assessee's share of sale consideration on adhoc basis (18,50,00,000* 2%). The Id. AO categorically held that payment of Rs.1,00,000/- paid to Chartered Accountant; payment of Rs.57,500/- paid for valuation report and payment of Rs.7,15,000/- towards arrears of salary to servant could no way be connected as expenditure incurred wholly and exclusively for the purpose of transfer of the property and hence, disallowed these expenses in entirety. As against the total brokerage of Rs.42,36,500/-; Solicitor fees of Rs.50,00,000/- and amount paid to tenant for vacating premises of Rs.10,00,000/- claimed by the assessee as deduction while computing capital gains, the Id. AO restricted the allowability of expenses on transfer against these heads to Rs.37,00,000/- being 2% of assessee's share of sale consideration. The Id. CIT(A) observed that the Id. AO having accepted the genuineness of expenses could not merely restrict the allowability....
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....la. It is not in dispute that the said brokerage has been paid to Mr. Hirji N Nagarwala only in connection with the sale of this subject mentioned property. The assessee had submitted that Mr. Hirji N Nagarwala and other agents involved had arranged and coordinated the meetings with respective Attorneys of buyers and had also contributed effectively for negotiating final sale consideration of Rs.37,00,00,000/- for the subject mentioned property (out of this, assessee's share is 50% i.e. Rs.18.50 Crores). It is a fact on record that assessee is permanently residing in United States of America (USA) and had employed Mr. Hirji N Nagarwala as broker to negotiate on his behalf with the purchaser and to represent him in all the meetings with the Advocate, Chartered Accountant and all other persons for sale of subject mentioned property. Moreover, the subject mentioned property was released by assessee and his brother in favour of their relative Mr. Keiki R Mehta. It is not in dispute that assessee and his brother were at logger heads with Mr. Keiki R Mehta and certainly the assessee (having residing in USA) requires a representative in India to represent on his behalf before Mr. Keik....
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....vising you on the legal implications thereof. (b) Preparing the inter se Agreement between Mr. Sorab Mehta and Dr. Rustom Mehta inter alia to the effect that the 30% undivided share in the leasehold land situate at Plot No.147, Middle Colaba, Mumbai 400 005 which includes two houses known as "Sea Side" and "Beach House" with land appurtenant thereto which originally comprised of the K. B. Mehta Trust properties and also the owner occupied tenancy of the flats on the 2nd and 3rd floors and four garages, servant quarters and a dental clinic on the ground floor and property known as "Sea Side" at Colaba (the said Colaba Property) be excluded from the direction contained in Clause 5 of the last Will and Testament of Mrs. Joan Mehta to sell her entire estate and Instead to transfer the said Colaba property into the joint names of Mr. Sorab F Mehta and Dr. Rustom F Mehta after obtaining Probate (c) Acting on your behalf in respect of the proposed sale of your undivided 30% share of the land and dwelling house of the property situate at 147 Middle Colaba Road, Mumbai 400 005 Perusing copies of the relevant. Trust Deeds and Title Deeds as....
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.... had expired on 21 July 2006 and as per the Government's recent Policy dated 12 December 2012, the Lessee had an option to apply for a fresh lease to become owners of the said property as stated therein. (l) Obtaining the Government Resolution dated 12 December 2012 and getting the two notices translated and thereafter considering the legal and financial Implications thereof and reporting to you as well as discussing the same with Mr. Markand Gandhi and carrying on correspondence with M/s. Markand Gandhi & Co in connection with the options available under the said Government Policy dated 12th December 2012 and forwarding copies thereof and reporting to you. (m) Carrying on voluminous correspondence with M/s. Markand Gandhi in connection with the renewal option of the lease and reporting to you from time to time. (n) Drafting and finalizing the Leave and License Agreement in respect of the premises on the ground floor between Dr. Rustom Fali Mehta as the Licensor and IB Hospitality Pvt. Ltd. as the Licensee and for that purpose attending on your brokers from time to time till finalization. ....
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....elation to the transfer of the subject mentioned property. Hence, the payment of Rs.50 lakhs paid by the assessee to the said solicitor is to be bifurcated towards items allowable in respect of the aforesaid items and items not connected with the transfer of the property. In this regard, we find that the Id. AO had already allowed a sum of Rs.18,07,258/- on account of Solicitor fees, which in our considered opinion, is very reasonable, considering the fact that invoice raised by the solicitor for professional services rendered from the years 2008 to 30/12/2015. Hence, we direct the Id. AO to allow only a sum of Rs.18,07,258/- on account of solicitor fees as deduction while computing capital gains. We hold that the other works carried out by the solicitor firm for which bill has been raised by them on the assessee, cannot be construed as expenditure incurred wholly and exclusively in relation to the transfer of the subject mentioned property. 4.8. With regard to payments made to tenant for vacating the property, we find that assessee and his brother had executed leave and license agreement on 13/04/2013 for premises on the third floor of building "Sea side" for a period of ....
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....y allowed. C.O. No. 24/Mum./2023 Assessee's Cross Objection-A.Y. 2016-17 9. In his cross objection, the assessee has raised the following grounds:- "The CIT(A) erred in upholding the disallowance of Chartered Accountant's Fees of Rs.1,00,000/- on the ground that the said expenditure cannot be treated as wholly and exclusively for the purpose of transfer of property. 2. The CIT(A) erred in upholding the disallowance of fees for valuation of property amounting to Rs.57,500/- on the ground that the said expenditure cannot be treated as wholly and exclusively for the purpose of transfer of property. 3. The CIT(A) erred in upholding the disallowance of payment made to servant and occupier amounting to Rs.7,15,000/- on the ground that the said expenditure cannot be treated as wholly and exclusively for the purpose of transfer of property. 4. The CIT(A) erred in dismissing the additional ground of computing capital gain on actual sale consideration and not on stamp duty value as per section 50C of the Income Tax Act, 1961. 5. The Appellant craves leave to add, alter and/or amend all/any foregoing Grounds of Appeal." 10. Grounds ....