PRAKASH BHAILAL UNADKAT , Mumbai V. ITO 33(2)(5), Mumbai

ITA 2391/MUM/2022

AI Insights

The case involves Shri Prakash Bhailal Unadkat, the appellant, contesting the disallowance of certain deductions while computing capital gains on the sale of agricultural land for the assessment year 2012-13. The deductions in question included payments to four parties who were part of a tripartite agreement and expenses related to brokerage, legal, and survey services. The Income Tax Officer (ITO) initially disallowed these deductions, a decision upheld by the Commissioner of Income Tax (Appeals). The ITAT, however, allowed the deductions for legal, survey, and brokerage expenses but restored the issue of the Rs.16,00,000 payment to the four parties to the AO for further examination.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302548 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 13-02-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 19-09-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital Gains

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘SMC‘ BENCH MUMBAI BEFORE: SHRI M.BALAGANESH, ACCOUNTANT MEMBER & SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No.2391/Mum/2022 (Asse ssment Year :2012-13) Shri Prakash Bhailal Unadkat EMP. No.14, Flat No.802 Venus 14, Thakur village Kandivali (East) Mumbai – 400 101 Vs. ITO 33(2)(5), Mumbai Room No.851, 8 th Floor Kautilya Bhavan C-41 to C-43, G Block Bandra Kurla Complex, Bandra (East) Mumbai – 400 051 PAN/GIR No.AAHPU8639A (Appellant) .. (Respondent) Assessee by Ms. Aasifa Khan Revenue by Ms. Indira Adakil Date of Hearing 14/02/2023 Date of Pronouncement 27/02/2023 आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in ITA No.2391/Mum/2022 for A.Y.2012-13 arises out of the order by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) in appeal No.CIT(A)-45, Mumbai/10096/2019-20 dated 29/07/2022 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 10/12/2019 by the ld. Income Tax Officer-33(2)(5), Mumbai (hereinafter referred to as ld. AO). ITA No. 2391/Mum/2022 Prakash Bhailal Unadkat 2 2. The only effective issue to be decided in this appeal is as to whether the assessee is entitled for deduction of the following amounts while computing its capital gains in the facts and circumstances of the instant case :- (a) Amounts paid to four parties who had Acted as consenting parties - Rs. 16,00,000/- (b) Legal and survey expenses - Rs. 1,27,000/- (c) Brokerage - Rs. 52,020/- 3. We have heard rival submissions and perused the materials available on record. The ld. AR submitted before us that the assessee had purchased the Agricultural Land on 15th Oct 2010 with Agreement Value of 26,01,000/- and incurred additional cost like Brokerage, Legal and Documentation Charges alongwith Survey Expenses and other selling expenses. The Total Cost of the Land as per the record of the assessee was Rs.29,14,510/-. 3.1. Since the assessee did not get the possession of the said Land which was disputed and occupied by some other persons, therefore, the property was not marketable on demand. Since assessee wanted to get rid of disputed property, the future of which was not sure, therefore, he accepted the proposal of Tripartite Agreement for selling the landed property under consideration. 3.2. The Third Parties who agreed for Tripartite Agreement on the condition of sharing the Revenue to be generated on sale of the property were - 1) Sitabai Shankar Kadam, Rs.50,000/- Darckar Chawl, A-Ward, Bhangarwadi, Lonavala, Taluka Mawal 2) Muktabai Waghu Sawale, ITA No. 2391/Mum/2022 Prakash Bhailal Unadkat 3 Rs.50,000/- Kevre Vasahat, Taluka - Mawal, Dist. Pune 3) Narayan Ganpat Ambekar Rs. 7,50,000/- having PAN as AEQPA3285H and 4) Promod Narayan Ambekar Rs.7,50,000/- having PAN ALOPA1548N having address at Room No. D-2, Tulip, Gold Valley Road, Lonavala. These parties have become part of Tripartite Agreement and shared the selling price to the extent of Rs.16/- Lakhs in total. Point here to be noted is that these parties have directly taken the said consideration of Rs.16/- Lakhs out of total sale consideration of Rs.46/- Lakhs to be received from Purchaser through Account Payee cheques which is specifically mentioned in the Agreement of sale registered with the Joint Sub-Registrar, Lonavala. 3.3. The ld.AR further submitted that without the consent of above said four parties, the sale of property itself could not have taken place and assessee would have lost the entire money invested in the said plot of land. The ld. AR vehemently argued that by sharing the sale consideration with the consent of four parties to the tune of Rs.16,00,000/-, the assessee was able to recover the monies invested in the property. 3.4. With regard to brokerage of Rs.52,020/- and legal and survey expenses of Rs.1,27,000/-, the ld. AR drew our attention to the pages 40 & 41 of the paper book containing the receipts issued by the respective parties and argued that the same would be directly connected with the transfer of the land and hence allowable as deduction while computing capital gains. 3.5. Per contra, the ld. DR argued that the assessee had sold the land within 10 months from the date of its purchase. There is no mention about encroachments of land in the purchase deed. There is no encumbrance created in the said land. There is absolutely no evidence as to why these four parties were to be paid of Rs.16,00,000/- from the sale consideration. ITA No. 2391/Mum/2022 Prakash Bhailal Unadkat 4 The ld. DR referred the purchase deed by the assessee dated 15/10/2010 which is enclosed in pages 1-21 of the paper book. In the said purchase deed it has been categorically mentioned in page 6 of the paper book thereon that the said land has got no encumbrance at all and the seller has got complete ownership , claim , possession and interest in the said property. The alleged tripartite agreement stated to be entered by the assessee is not even mentioned in the final sale deed dated 20/08/2011. Hence, she vehemently argued that the assessee would not be entitled for deduction of Rs.16,00,000/- while computing capital gains. Accordingly, she argued that the ld. AO had rightly disallowed the same in the assessment which has been upheld by the ld. CIT(A). Moreover, she also submitted that the ld. CIT(A) was justified in stating that there is no provision in the Act to allow deduction of Rs.16,00,000/- while computing capital gains. 3.6. With regard to legal expenses, survey expenses and brokerage, the ld. DR stated that these evidences were not produced by the assessee before the lower authorities and hence, the same should not be deducted. 3.7. First we would like to address the allowability of deduction towards survey and legal expenses and brokerage. We find that assessee in pages 40 & 41 of the paper book had duly produced the receipts obtained from the recipients. This goes to prove that the parties had rendered the service to the assessee and had duly acknowledged the receipt of the money. From the index of the paper book duly certified by the assessee’s Counsel, we find that the receipts enclosed in pages 40 & 41 of the paper book were duly furnished by the assessee before the lower authorities. Hence, the plea of the ld. DR in this regard is dismissed as factually incorrect. Legal and survey expenses and brokerage become expenses directly incurred in connection with transfer of land. Hence, we hold that the same would be ITA No. 2391/Mum/2022 Prakash Bhailal Unadkat 5 allowable as deduction while computing capital gains of the assessee. Accordingly, the ground No.3 raised by the assessee is allowed. 3.8. With regard to payment made to four parties in the sum of Rs.16,00,000/- on account of compensation to get rid of the alleged encroachment in the land, we find that in the purchase deed of the assessee, vendor therein had categorically stated that there is absolutely no encroachment in the said land and he has got complete ownership, title and interest in the said land which has been subject matter of transfer to the assessee. However, in the translated copy of sale deed dated 20/08/2011 produced by the assessee in page 23 of the paper book dated 24/11/2022 filed before us, there is a mention that Mr. Narayan Ambekar and Mr. Pramod Ambekar had given approval for receipt of the compensation amount as they had already started development works on the subject mentioned land. The said translated version of the sale deed also states that the names of Mr. Narayan Ambekar and Mr. Pramod Ambekar together with other grantors has been entered in the 7/12 extracts in the Revenue records of the Government. Further, it is also stated that the assessee after negotiations with those four parties had agreed for a total compensation of Rs.16,00,000/- payable to them out of overall sale consideration of Rs.46 lakhs. The details of payments made to four consenting parties by account payee cheques and DD’s directly by the buyer are enclosed in pages 28-30 of the factual paper book dated 24/11/2022. However, assessee had stated that a tripartite agreement had been entered into for sharing the Revenue with the four consenting parties. The fact of Rs.16,00,000/- being paid to four consenting parties is not in dispute. The only dispute is whether such payment of Rs.16,00,000/- to the four consenting parties could be claimed as deduction by the assessee u/s.48 of the Act while computing capital gains on sale of the land. We find that the copy of the said tripartite agreement, if any, is not placed on ITA No. 2391/Mum/2022 Prakash Bhailal Unadkat 6 record before us. The copy of the encumbrance certificate on the date of purchase and on the date of sale was also not placed on record before us. These documents would conclusively prove the fact as to whether there were any encumbrances in the subject mentioned land. Hence, we deem it fit and appropriate, in the interest of justice and fair play, to restore this issue to the file of the ld. AO for denovo adjudication qua this issue in accordance with law and in the light of the above mentioned directions. The assessee is also at liberty to furnish fresh evidences, if any, in support of his contentions. Accordingly, the ground No. 1 & 2 raised by the assessee are allowed for statistical purposes. 4. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced on 27/02/2023 by way of proper mentioning in the notice board. Sd/- (SANDEEP SINGH KARHAIL) Sd/- (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 27/02/2023 KARUNA, sr.ps ITA No. 2391/Mum/2022 Prakash Bhailal Unadkat 7 Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy//