Shri Nilesh Dineshchandra Patel, HUF, Ahmedabad V. The Income Tax Officer, Ward-6(2), Ahmedabad

ITA 1166/AHD/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5831 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 05-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANTONY PARIATH
• Assessee Lawyers: B R POPAT
• Keywords: Cost of acquisition

Judgement Text

, . . , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD , , BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER 1. ./ I.T.A. NO.1165/AHD/2015 2. ./ I.T.A. NO.1166/AHD/2015 ( / ASSESSMENT YEAR : 2011-12) 1.KALPESH DINESHCHANDRA PATEL HUF, 14, MANICHANDRA SOC. PART-3 NR.SURDHARA CIRCLE THALTEJ, AHMEDABAD-54 PAN:AAHHK 8585R 2.NILESH DINESHCHANDRA PATEL HUF (ADDRESS SAME AS ABOVE) AHMEDABAD-380 054 PAN: AAFHN0633M / VS. 1. THE INCOME TAX OFFICER WARD-6(2) AHMEDABAD 2. THE INCOME TAX OFFICER WARD-6(2) AHMEDABAD ( #$ / APPELLANTS ) .. ( %#$ / RESPONDENTS ) #$& / APPELLANTS BY : SHRI B.R. POPAT, AR %#$'& / RESPONDENT BY : SHRI ANTONY PARIATH, SR.DR ()'* / DATE OF HEARING 07/03/2018 +,-.'* / DATE OF PRONOUNCEMENT 20 / 03 /2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: BOTH THE CAPTIONED APPEALS FILED BY DIFFERENT ASSE SSEES ARE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TA X(APPEALS)-13, AHMEDABAD, AHMEDABAD [CIT(A) IN SHORT] BOTH DATED 18/02/2015 ITA NOS.1165 & 1166/AHD/2015 KALPESH DINESHCHANDRA PATEL HUF & NILESH D.PATEL HUF VS. ITO ASST.YEAR 2011-12 - 2 - ARISING IN THE MATTER OF RESPECTIVE ASSESSMENT ORDERS PASS ED UNDER S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER R EFERRED TO AS 'THE ACT') RELEVANT TO ASSESSMENT YEAR (AY) 2011-12. 2. AT THE TIME OF HEARING, THE LD.AR FOR THE ASSES SEE SUBMITTED THAT THE ISSUE INVOLVED IN BOTH THE APPEALS ARE IDENTICA L AND THE ASSESSEE ARE ALSO CONNECTED TO EACH OTHER. ACCORDINGLY BOTH THE MATTERS WERE HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER. 3. TO BEGIN WITH WE SHALL ADDRESS THE APPEAL IN THE CASE OF KALPESH DINESHCHANDRA PATEL HUF IN ITA NO.1165/AHD/2015 FOR AY 2011-12. 3. THE SOLITARY ISSUE INVOLVED IN THE CAPTIONED A PPEAL IS MAINTAINABILITY OF CLAIM OF THE ASSESSEE TOWARDS EXPENSES INCURRED FOR REMOVAL OF THE DEFECT IN THE TITLE OF THE PROPERTY OF THE PREVIOUS OWNER WHILE COMPUTING THE CAPITAL GAINS ON SALE OF SUCH PROPERTY. IT IS THE CASE OF THE ASSESSEE THAT A CERTAIN IMMOVABLE PROPERTY WAS PURCHASED JOI NTLY WITH OTHER CO- OWNERS AT AN AGGREGATE PRICE OF RS.15 LAKHS VID E PURCHASE-DEED DATED 10/11/2008. THE PURCHASE COST OF RS.5 LAKHS WAS FO UND ATTRIBUTABLE TO ASSESSEE TOWARDS CO-OWNERSHIP SHARE IN THE AFORES AID PROPERTY. IT IS THE CLAIM OF THE ASSESSEE THAT ASSESSEE PURCHASED THE A FORESAID PROPERTY IN GOOD FAITH WITHOUT ANY KNOWLEDGE OF MORTGAGE CREAT ED BY PREVIOUS ITA NOS.1165 & 1166/AHD/2015 KALPESH DINESHCHANDRA PATEL HUF & NILESH D.PATEL HUF VS. ITO ASST.YEAR 2011-12 - 3 - OWNER ON THE PROPERTY AND HENCE PAID THE PRICE OF T HE PROPERTY AS MENTIONED IN THE PURCHASE-DEED ON THE PREMISE THAT PROPERTY IS FREE FROM ALL ENCUMBRANCES OR CHARGE THEREON. HOWEVER, SUBSE QUENT TO PURCHASE OF PROPERTY, THE ASSESSEE DETECTED ENCUMBRANCE IN THE FORM OF OUTSTANDING LOAN OF RS.30,58,322/- AGAINST THE PROPERTY OWING T O MORTGAGE CREATED BY THE PREVIOUS OWNER WITH THE BANK. THE ASSESSEE ALONG WITH OTHER CO- OWNERS WAS THUS COMPELLED TO CLEAR THE ENCUMBRANCES TO ENABLE IT TO DISPOSE OF THE PROPERTY. THE COST ATTRIBUTABLE TO REMOVAL OF SUCH ENCUMBRANCES INCURRED BY THE ASSESSEE WAS ADDED T O COST OF REQUISITION/COST OF IMPROVEMENT FOR THE PURPOSES OF QUANTIFICATION AND CAPITAL GAINS ON SALE THEREOF. THE AO DENIED THE A FORESAID PAYMENT INCURRED TOWARDS PERFECTION OF TITLE TO THE IMMOVAB LE PROPERTY WHILE COMPUTING THE COST OF ACQUISITION FOR THE PURPOSES OF ASSESSING THE CAPITAL GAINS. THE CIT(A) IN THE FIRST APPEAL ALSO REFUSED TO ENTERTAIN THE GRIEVANCE OF THE ASSESSEE. 5. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE LIMITED Q UESTION FOR ADJUDICATION IN THE PRESENT CASE IS ELIGIBILITY OF CLAIM OF THE ASSESSEE FOR INCLUSION OF COST OF REMOVAL OF ENCUMBRANCE AND TOWARDS THE PER FECTION OF THETITLE OF ITA NOS.1165 & 1166/AHD/2015 KALPESH DINESHCHANDRA PATEL HUF & NILESH D.PATEL HUF VS. ITO ASST.YEAR 2011-12 - 4 - PROPERTY UNDER SALE AS PART OF COST OF ACQUISITION OF SUCH PROPERTY. IN SHORT, WHILE THE COST TO ASSESSEE HAS INCREASED T O THE EXTENT OF SUBSEQUENT COSTS INCURRED TOWARDS REMOVAL OF ENCUMB RANCE OF PREVIOUS OWNER AND CLEARANCE OF TITLE AND CONSEQUENTIALLY L ED TO REDUCTION OF CAPITAL GAINS ARISING ON SALE OF PROPERTY, THE REVE NUE SEEKS TO DENY SUCH COSTS TO BE PART OF COST OF ACQUISITION AND CONSEQU ENTLY SEEKS TO INFLATE THE ASSESSED CAPITAL GAIN TO THIS EXTENT. TO ADDRE SS THE DISPUTE, WE FIND THAT THE FACTS ARE NOT IN DISPUTE. THE ASSESSEE H AS CONSISTENTLY TAKEN A STAND BEFORE THE LOWER AUTHORITIES THAT IT HAS INCU RRED CERTAIN ADDITIONAL COSTS FOR REMOVAL OF ENCUMBRANCE ALONG WITH OTHER C O-OWNERS AND ACCORDINGLY THE COST OF ACQUISITION STOOD INFLATED TO THE EXTENT OF SUCH COST OF ENCUMBRANCE. THE AFORESAID FACTS ARE ALSO CORROBORATED BY DOCUMENTARY EVIDENCES AS PLACED ON RECORD. THE COS TS TOWARDS ENCUMBRANCE WAS SATISFIED BY THE ASSESSEE IN FAVOUR OF THE LENDER BANK. THEREFORE, AS A NATURAL COROLLARY, SUCH COSTS FORM INTEGRAL PART OF THE COST OF ACQUISITION/COST OF IMPROVEMENT OF PROPERTY FOR THE PURPOSE COMPUTATION OF CHARGEABLE CAPITAL GAINS. THEREFORE , WE FIND CONSIDERABLE MERIT IN THE PLEA OF THE ASSESSEE FOR REVERSAL OF D ISALLOWANCE. WE ALSO FIND THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ROSHANBABU MOHAMMED HUSSEIN MERCHANT (005) 275 ITR 231 (BOM.) AS RELIED UPON BY THE ASSESSEE ALSO CLINCHES THE ISSUE. IT WAS HE LD THEREIN THAT EXPENDITURE INCURRED BY THE ASSESSEE TO BANK TOWARD S DISCHARGE OF ITA NOS.1165 & 1166/AHD/2015 KALPESH DINESHCHANDRA PATEL HUF & NILESH D.PATEL HUF VS. ITO ASST.YEAR 2011-12 - 5 - ENCUMBRANCE CREATED BY THE PREVIOUS OWNER IS DEDUC TIBLE UNDER S.48(1) OF THE ACT. THEREFORE, WE ARE DISPOSED TO HOLD THE ISSUE IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE. ACCORDINGLY, THE AO IS DIRECTED TO DELETE THE DISALLOWANCE MADE ON THIS SCORE WHILE CO MPUTING THE CAPITAL GAINS. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 1165/AHD/2015 FOR AY 2011-12 IS ALLOWED. 8. THE APPEAL IN ITA NO.1166/AHD/2015 FOR AY 2011-1 2 INVOLVES IDENTICAL ISSUE WHERE THE OWNER ASSESSEE NAMELY NIL ESH DINESHCHANDRA PATEL HUF IS ONE OF THE OTHER CO-OWNER OF THE SAME PROPERTY. THEREFORE, OBSERVATIONS MADE IN ITA NO.1165/AHD/2015 (SUPRA) S HALL APPLY MUTATIS MUTANDIS TO THIS APPEAL AS WELL. AS A RESULT, APPEAL OF THE ASSESSEE IN ITA NO.1166/AHD/2015 FOR AY 2011-12 IS ALLOWED . 9. IN THE RESULT, BOTH THE APPEALS OF THE TWO ASSES SEES STAND ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 20/ 03 /2018 SD/- SD/- ( ) ( ) ( MAHAVIR PRASAD ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 20/ 03 /2018 2 ..(,.(../ T.C. NAIR, SR. PS ITA NOS.1165 & 1166/AHD/2015 KALPESH DINESHCHANDRA PATEL HUF & NILESH D.PATEL HUF VS. ITO ASST.YEAR 2011-12 - 6 - !'#' / COPY OF THE ORDER FORWARDED TO : 1. #$ / THE APPELLANTS 2. %#$ / THE RESPONDENT. 3. 345* 6* / CONCERNED CIT 4. 6* ( ) / THE CIT(A)-13, AHMEDABAD 5. 789*(45 , 45. , 3 / DR, ITAT, AHMEDABAD 6. 9:) / GUARD FILE. / BY ORDER, %7 ** //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 7.3.18(DICTATION-PAD 14-PAG ES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 7.3.18 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.20.3.18 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 20.3.18 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER