TaxTMI 
TaxTMI 
2026 (1) TMI 1029
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.... order of the Learned AO. d. The Appellant contends that the Learned AO passed the order without properly considering the facts of the case. The disallowance is against the principles of natural justice and should be deleted. Ground No. 2: Non-Allowance of Deduction of Cost of Acquisition a. The Learned AO erred in not allowing the deduction of the cost of acquisition while computing income from capital gains. b. The Learned CIT(A) erred in upholding the order of the Learned AO. c. The Appellant contends that the property was received as a gift from her mother. As per the provisions of the Income Tax Act, the cost to the previous owner should be allowed as a deduction for the computation of capital gains. d. The order passed by the Learned AO is contrary to the principles of natural justice and should be quashed, with the addition being deleted. Ground No. 3: Credit worthiness of the Assessee a. The Learned AO failed to properly appreciate the facts of the case and incorrectly held that the Assessee lacked the creditworthiness to purchase the new flat. b. The Learned CIT(A) erred in upholding the order....
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....new residential property at Ganesh Smruti on 04.12.2015, i.e., within 12 months prior to the transfer. (Pg. 61-123 of Paper Book) 3. Accordingly, the Appellant was the legal and rightful owner of the Radha Mandir property as on 01.12.2016, and hence, was fully competent to enter into the sale transaction on that date. 4. The Appellant received consideration of Rs. 2,47,50,000 on 28.07.2016, well prior to registration, clearly evidencing part- performance and contractual enforcement. (Pg. 124 of Paper Book) Ground No. 1: Denial of Deduction Under Section 54 Our Submissions:- Proposition 1 :- Agreement for Sale dt. 01.12.2016 is to be construed as date of Transfer as right in personam has been created in favour of the purchaser and hence section 54 is to be allowed :- 5. Under Section 54(1) of the Income-tax Act, 1961: "... where the capital gain arises from the transfer of a long-term capital asset, being a residential house ... and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased... one residential house in India ..." 6. Further, as per S....
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....ile buying and claiming section 54 allowance i.e. agreement for sale cannot be treated as purchase for claiming exemption u/s 54 b. It does not decide anything on what is date transfer as per Section 2(47). Said is discussed in Apex Court Decision of Sanjeev Lal v. CIT (2014) 365 ITR 389 (SC). c. Our proposition is that transfer occurs when agreement for sale is entered as per section 2(47). Said proposition is discussed as well in Apex Court Decision of Sanjeev Lal v. CIT (2014) 365 ITR 389 (SC). Suraj Lamps case has not at considered such aspect as the issue was different as pointed out in point a. d. Decision of Suraj Lamps was decided in year 2011 and Sanjeev Lals Case was decided in year 2014 and facts of the case in case of Sanjeev Lals is squarely same as of the Appellant. Without prejudice, as per Apex Court decision of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192, view which is beneficial to the assessee has to be taken. 12. In our case, The Agreement for Sale dated 01.12.2016 created a legally enforceable right in favor of the purchaser, including: Receipt of substantial advance consideration of Rs. 2.47 crores. Ir....
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....ance of Deduction of Cost of Acquisition. The learned Assessing Officer has erred in computing the capital gains by adopting 'Nil' as the cost of acquisition in respect of the property transferred. The property in question was acquired by the Appellant through gift and inheritance, which falls under the scope of Section 49(1) of the Income- tax Act, 1961. The Appellant, in accordance with Section 55(2)(b)(ii), has opted to adopt the Fair Market Value (FMV) as on 01.04.2001 as the cost of acquisition, since the property became the asset of the previous owner prior to 01.04.2001. In support of this, a Registered Valuer's Report was obtained, which determined the FMV of the property as on 01.04.2001 at Rs. 38,94,000. (Pg. 140- 165 of Paper Book) As per the provisions of the Explanation to Section 48(iii), the Indexed Cost of Acquisition has been rightly computed by applying the Cost Inflation Index (CII) of 264 for AY 2020-21, resulting in an Indexed Cost of Rs. 1,02,80,160 (i.e., Rs. 38,94,000 x 289/100, where 289 is CII for AY 2020-21 and 100 is the base CII for 2001-02). Despite this, the AO has ignored the valuation and has mechanica....
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....ank account, in which the Appellant is the primary holder. These repayments are duly reflected in the bank statements and the said account has also been disclosed in the Appellant's Income Tax Return. (Pg. 131-136 of Paper Book) 3. The AO has not brought any contrary material on record to show that the loan was not availed or serviced by the Appellant. The mere perception of "low income" cannot override concrete documentary evidence such as: Loan sanction and disbursal documents. Consistent EMI payments from the Appellant's bank account. Disclosure of the loan and bank account in ITRs. 4. Further, the Appellant has declared income from house property in respect of Ganesh Smruti, and this has been assessed and taxed in her hands. This is conclusive evidence of ownership, affirming the Appellant's financial interest in and control over the property. (Pg. 137-139 & 192-198 of Paper Book) 5. In the absence of any adverse evidence or contradiction of documentation, merely alleging insufficiency of income is not a valid ground to deny the legitimacy of an acquisition or to question the Appellant's creditworthiness. 6. ....
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....banking channel, in respect of sale of residential flat at Radha Mandiri well prior to the registration, clearly evidencing part-performance and contractual enforcement. 10. Now the Question before us is as to whether the Agreement for Sale dated 01.12.2016 be construed as date of Transfer since the Right in Personam has been created in favour of the purchaser and in this way then the assessee will be eligible to claim benefit of section 54 of the Act. 11. It is thus necessary to firstly evaluate the provisions of Sec. 54 of the Income Tax Act, which reads as under: "... where the capital gain arises from the transfer of a long-term capital asset, being a residential house ... and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased ... one residential house in India ..." 12. As per Section 2(47)(ii) of the Act, the "transfer" includes any transaction which has the effect of transferring or extinguishing rights in a capital asset. 13. After having perused the terms of the Agreement for Sale, we are of the view that the Agreement for Sale creates a binding obligation on the seller, accompanied....
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....tial house/new asset had been purchased by the appellants on 30th April, 2003. It is also not in dispute that there was a litigation wherein the Will of late Shri Amrit Lal had been challenged by his son and the appellants had been restrained from dealing with the house in question by a judicial order and the said judicial order had been vacated only in the month of May, 2004 and therefore, the sale deed could not be executed before the said order was vacated though the agreement to sell had been executed on 27th September, 2002. 19. If one considers the date on which it was decided to sell the property, i.e. 27th December, 2002 as the date of transfer or sale, it cannot be disputed that the appellants would be entitled to the benefit under the provisions of Section 54 of the Act because long term capital gain earned by the appellants had been used for purchase of a new asset/residential house on 30th April, 2003 i.e. well within one year from the date of transfer of the house which resulted into long term capital gain. 20. The question to be considered by this Court is whether the agreement to sell which had been executed on 27th December 2002 can be considered a....
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....ants were restrained from dealing with the said residential house and a law-abiding citizen cannot be expected to violate the direction of a court by executing a sale deed in favour of a third party while being restrained from doing so. In the circumstances, for a justifiable reason, which was not within the control of the appellants, they could not execute the sale deed and the sale deed had been registered only on 24th September, 2004, after the suit filed by Shri Ranjeet Lal, challenging the validity of the Will, had been dismissed. In the light of the aforestated facts and in view of the definition of the term "transfer", one can come to a conclusion that some right in respect of the capital asset in question had been transferred in favour of the vendee and therefore, some right which the appellants had, in respect of the capital asset in question, had been extinguished because after execution of the agreement to sell it was not open to the appellants to sell the property to someone else in accordance with law. A right in personam had been created in favour of the vendee, in whose favour the agreement to sell had been executed and who had also paid Rs. 15 lakhs by way of earnes....
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.... Act. 23. Consequences of execution of the agreement to sell are also very clear and they are to the effect that the appellants could not have sold the property to someone else. In practical life, there are events when a person, even after executing an agreement to sell an immovable property in favour of one person, tries to sell the property to another. In our opinion, such an act would not be in accordance with law because once an agreement to sell is executed in favour of one person, the said person gets a right to get the property transferred in his favour by filing a suit for specific performance and therefore, without hesitation we can say that some right, in respect of the said property, belonging to the appellants had been extinguished and some right had been created in favour of the vendee/transferee, when the agreement to sell had been executed. 24. Thus, a right in respect of the capital asset, viz. the property in question had been transferred by the appellants in favour of the vendee/transferee on 27th December, 2002. The sale deed could not be executed for the reason that the appellants had been prevented from dealing with the residential house by an....