TaxTMI 
TaxTMI 
2024 (7) TMI 1725
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....,87,500 Less: Deduction u/s 48 - 13,56,87,500 Net Sale Consideration (I) 5,00,00,000 Acquisition Cost Fair Market Value on 01-04-2001 Rs 10,400/- x 3647.80 sq m 3,79,37,120 Less: 60% reduction in FMV due to encroachment 2,27,62,272 1,51,74,848 Indexed Cost 1,51,74,848 x [289/100] 4,38,55,311 Cost of Acquisition (II) 4,38,55,311 Long Term Capital Gains: (I) - (II) 61,44,689 Agreement value 13,31,87,500+ TDR The assessee had provided the break up of consideration as follows; Receipt by Vendor - Yogesh Patel (the assessee) 5,00,00,000 Receipt by Confirming Parties to agreement 5,25,00,000 Receipt value by way of Occupant TDR of 2750 sq m 8,31,87,500 18,56,87,500 3. The rationale behind sale consideration and its components, as per assessee is that on the principles of taxation of real income, the amount not received by assessee but paid to the third party cannot form part of the full value of consideration for computing the capital gains. It was submitted that this amount paid to third parties is disclosed in computation of long-term c....
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....ition Rs. 4,38,55,311/- 4 Long term capital gain Rs. 14,18,32,189/- 5 Long term capital gain declared in ITR 61,44,689/- 6 Addition 13,56,87,500/- 6.1 The DRP decided the objections with following findings in para 5.3 and 5.4 as follows: 5.3 Regarding the expenses to tune of Rs. 13,56,87,500/-, assessee has only furnished an agreement regarding the above expenses but hasn't furnished any detail as to how the expenditure has been incurred backed up by copy of relevant Bank Statement narration of expenditure and other relevant documents. Assessee has stated that the expense of Rs 13,56,87,500 (which) is directly paid to the parties identified by the buyer as per the registered sale agreement. The issue was also remanded back to the assessing officer. The AO has since furnished the remand report which has also been shared with the assessee. According to the remand report the assessee has still not furnished any cogent document to substantiate its claim. The operative part of the remand report is also placed below: "2. The assessee has filed ROI on 30.12.2020 declaring income of Rs. 66,80,060/- claiming refund of Rs. 1,07,88,660/ -....
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.... of property sold during the year by Overlooking the fact that a. The buyer had made payments directly to the Confirming parties and the Occupant and therefore the said payments cannot appear in the bank statement of the Appellant. b. The Fair Market Value as on 01-04-2001 was based on Stamp Duty Valuation available with Ready Reckoner to that effect which was rejected without pointing out any defect in standard rate available to all c. Wrongly referring the matter to DVO by overlooking the observation of the DRP in Para No. 6.1 of the Order of the DRP d. The Registered document containing payment made to confirming party cannot be brushed aside as per section 35 of Evidence Act and ratio of various case laws of Supreme Court cited. 3. In the facts and the circumstances of the case and in law, the learned AO Int. Tax, Delhi erred in making the High Pitched addition of alleged unverifiable long term capital gain of Rs 13,56,87,500/- in respect of property sold during the year by Overlooking the fact that a. The AO did not issue notice u/s. 133(6) or summon u/s. 131 to the confirming parties and the occupant or to the buyer ....
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....st of the Purchasers all the owners of the said property joining this present." 7.2 Further, it is narrated in sub-clause (o) to clause 1 as follows: "0) The Vendors are well and sufficiently entitled to the Property free from all the encumbrances and has a clear and marketable title to the Property and no other entity/person has any right, title or interest into and upon the Property or any part thereof." 7.3 The sale-deed mentions in sub-clauses (q) and (s) to clause 1 as follows: "q) The Vendors nor anyone on their behalf has otherwise created any adverse rights in respect of the Property or any part thereof." "s) The Vendors confirm and declare that there are no mortgages, collateral security, personal guarantee, easement, trust, gift, lien, charges, rights or any other encumbrances, adverse rights or impediments created on the Property or any part thereof." 7.4 Further, in sub-clause (u) to clause 1 it is provided as follows: "u The Vendors agree and confirm that in an event any claim is raised by any third party in respect of the said Property and/or any part thereof, in that event the same shall be settled by Vendors at their own ....
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....ed herein. cc) The Vendors say & declare that save except whatever recited herein above as per clause No. 2, the title of the Vendors in respect of the said Property with benefits attached to it is absolutely clear and marketable, free from all encumbrances and reasonable doubts including arrangements, understanding. Agreement, Agreement for sale, transfer or assignment, conveyance, release, relinquishment, surrender, gift, exchange, lease, monthly tenancy, leave and licence, charge, mortgage or any other encumbrances, any debts or dues of private creditors or notice/order of any public authority or any attachment or forfeiture or recovery proceeding whatsoever on account of any matters including the matters of any public levies (including income-tax, property tax, revenue, rates or cess, assignment, duties, stamp duties, registration, registration charges or other charges/fees/amount and/or other levies (by whatever name called or known) under any law/s heretofore or now or hereafter to be in force retrospectively either with or without penalty or interest and/or debts, dues, loans or finances from any person or persons ... ." 7.8 Based upon aforesaid recitals, the ven....
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....der article 25(b) of the BSA 1958 on the Instrument accordingly with legal right to have and call for all relevant deeds, documents, papers and writings from the Vendors and the concerned parties contemplated by law as hereinafter mentioned in these presents with otherwise clear & marketable title free from all encumbrances and reasonable doubts. " 7.9 As with regard to the consideration and its mode of payment the deed provides as follows: AND THIS DEED FURTHER WITNESSETH THAT the consideration amount of Rs. 10,04,00,000/- (Rupees Ten Crores and Four Lakhs Only) paid to be paid by the Purchasers to the Vendors and/or its Confirming Party in the manner following. It is agreed between the Parties that Purchasers shall pay the following amounts, subject to deduction of TDS as applicable: A) At the express instructions of Vendor Nos. 1, 2 & 4 Rs. 4,79,00,000/- (Rupees Four Crores Seventy-nine Lakhs Only) [Rupees 5,00,00,000/- less Rs. 21,00,000/- already paid by the confirming parties to the vendors) to be paid to the Vendor No.1 3 by the Purchasers in the manner as stated herein below, i) Upon execution hereof, Purchasers has paid a sum of Rs. 4,79,00,00....
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....o the purchaser, rather it is a composite contract wherein not only title but rights and interest other than title which were held by the 'confirming parties' or the 'occupant' were also transferred by them respectively under the sale-deed. 9. The consideration, in terms of money, fixed for sale of property was not merely the one paid to the vendor in lieu of relinquishment of title and to the confirming parties, for their interest arising out of a prior agreement in their favour. But the consideration was also in the form of the area of 2750 sq. meters RERA carpet which was supposed to be allotted to 'occupant' out of the construction to be raised by the purchaser. 10. These clauses show that the 'vendor' had ensured a marketable title to the property, free from encumbrance of any sort including ease mentary rights. The same made the 'confirming party' and 'occupant' bound by this covenant as they had together agreed to sell, transfer and assign the property to the purchaser. Thus, the vendor, confirming parties and occupant, though had different and distinct rights but collectively they transferred to the purchaser a title cle....
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....d on the decisions in Kaushalya Devi v. CIT [2018] 92 taxmann.com 335/255 Taxman 417/404 ITR 136 (Delhi) and Honda Motor Co. Ltd., [2018] 90 taxmann.com 180/253 (AAR - New Delhi). 14. Expenditure used in clause (i) in section 48 of the Act, would primarily connote and has the meaning of spending or paying out. In a given case, it may also cover the amount of loss, which has gone out of the assessee's pocket. Like in case in hand, the assessee has lost substantial part of the value of his property by way of payment to confirming parties or property right given to occupant. Such, settlement of a claim and payment made can amount to expenditure, as they are indispensable to make property free of legal encumbrances. We are of the view that any amount the payment of which is absolutely necessary to effect the transfer will be an expenditure covered by this clause. We place reliance for this on the judgment of Hon'ble Bombay High Court in case of Commissioner Of Income- Tax vs Shakuntala Kantilal [1991]190ITR56(BOM). In other words, if, without removing any encumbrance including the encumbrance of the type involved in this case, sale or transfer could not be effected, then if ....