TaxTMI 
TaxTMI 
2023 (4) TMI 852
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat 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 course of assessment proceedings." 3. With regard to the aforesaid grounds r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 December, 2015 wherein Mr. Cyrus Soli Nallaseth was referred to as the First Releasor and Dr. Sorab Fali Mehta and Dr. Rustom Falı Mehta w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-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 acquisition claimed by the assessee in the sum of Rs.33,82,900/- was supported by the valuation report obtained from a registered party as on 01/04/1981 which was placed on record before the Id. AO at the t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ty 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 involvement in this transaction. Accordingly, the assessee's claim and brokerage expenses and solicitor's fees is not wholly and exclusively related to transfer of property. Similarly, there is no dispute in the property. Hence, the payment made to occupier ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 of the same on the basis of excessiveness and accordingly, held that assessee would be entitled for complete deduction on account of brokerage and solicitor fees. With regard to payment of Rs.10,00,000/- paid to the tenant Shri Stefano Funari for vacating the premises and con....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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. Keiki R Mehta. Similarly, the other co-owner Mr. Rustom Fali Mehta had also employed M/s. Noshil Estates for protecting his share of 15% of the property and had paid independent brokerage thereon. It is not in dispute that the brokerage amount of Rs.42,36,500/- has been paid by the assessee by cross account payee cheque to Mr. Hirji N Nagarwalla. The assessee has also submitted a confirmation from Mr. Hirji N....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed 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 well as the various agreements and correspondence pertaining to the said property and advising you thereon and in terms of the agreement dated 9th September 1994 between the late Dr. Fali Mehta and Dr. Keiki Mehta (d) Addressing a friendly communication dated 4th June 2012 on your behalf to Dr. Keiki R. Mehta informing him that you were desirous of selling your 30% undivided share in the Colaba property alongwith the various portions in your occup....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arkand 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. (o) Drafting and finalizing the Power of Attorney from Dr. Rustom Mehta to Mr. Subodh Choksi. (p) Addressing letter dated 21st January 2014 to the office of the Collector of Mumbai in connection with the lease renewal/occupancy right option and putting them on notice that the application for exercising the option to convert Markand Gandhi to jointly discuss and negotiate the proposed sale of your share to Dr Keiki Mehta on your behalf and reporting to you thereafter and obtaining further Instructions from....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ow 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 three years with a lock in period of 12 months. Since the subject mentioned property was decided to be sold to Mr. Keiki R Mehta to whom obviously the vacant position was to be given, the assessee and his brother through broker Mr. Hiraj N Nagarwalla negotiated with the licensee Mr. Stefano Funari for cancellation of the leave and license agreement before the lock in period of 12 months. Pursuant to the aforesaid negotiation, Mr. Hiraj N Nagarwalla on behalf of the assessee and his brother, agreed to pay lumpsum compensation of Rs.20,00,000/- (out of which assessee's share is Rs.10,00,000) to the l....