Cheera Yadagiri , Hyderabad V. Income Tax Officer, Ward-9(3), Hyderabad

ITA 475/Hyd/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9936 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 19-03-2019
• Assessment Year: 2007-2008
• Appeal Filed On: 07-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A C ROUT
• Assessee Lawyers: A V RAGHURAM
• Keywords: Fair market value
• Section: 143(3); 133(6); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A - SMC , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO .475 /HYD/ 2018 ASSESSMENT YEAR: 20 07 - 08 CHEERA YADAGIRI, HYDERABAD. PAN: ACVPC 3915 D VS. ITO, WARD - 9 ( 3 ), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI A.V. RAGHURAM REVENUE BY: SRI A.C. ROUT, DR DATE OF HEARING: 19/03/2019 DATE OF PRONOUNCEMENT: 29 /03/2019 ORDER PER SMT. P. MADHAVI DEVI, J.M.: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) - 7, HYDERABAD DATED 14/12/2017 FOR THE ASSESSMENT YEAR 2007 - 08. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDIVIDUAL, DERIVE D INCOME FROM TRADING IN SHARES, INCOME FROM HOUSE PROPERTY AND CAPITAL GAINS AND FILED HIS RETURN OF INCOME FOR THE A.Y. 2007 - 08, ADMITTING TOTAL INCOME OF RS. 6,02,517/ - , WHICH WAS INITIALLY PROCESSED U/S 143(1) ON 28/08/2008. SUBSEQUENTLY, THE CASE WAS CONVERTED INTO SCRUTINY UNDER CASS AND DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE ASSESSEE ADMITTED INCOME FROM CAPITAL GAINS IN RESPECT OF THE 2 LAND SOLD AT SAIDABAD, HYDERABAD AND IN WHICH HE REPORTED THAT HE WAS HAVING 25% OF THE RIGHTS ON THE PROPERTY SINCE IT IS JOINTLY HELD ALONG WITH HIS BROTHERS HAVING INHERITED THE SAME FROM HIS FATHER. DURING THE ASSESSMENT PROCEEDINGS, INFORMATION WAS OBTAINED U/S 133(6) OF THE ACT FROM THE SRO, AZAMPURA WITH REGARD TO THE MARKET VALUE OF THE PR OPERTY AS ON 29/03/2006. THE SRO, AZAMPURA HAS REPORTED THE MARKET VALUE AS ON 01/04/1981 AT RS. 15/ - PER SQ YD AND AS ON 29/03/2006 AT RS. 6,000/ - PER SQ YD. A.O. OBSERVED THAT THE ASSESSEE HAD ADMITTED THE FAIR MARKET VALUE OF THE LAND AS ON 01/04/1981 AT RS. 45/ - AND THE SALE CONSIDERATION AT RS. 5,935/ - PER SQ YD. SINCE THE ASSESSEE HAS NOT ADOPTED THE FAIR MARKET VALUE AS ON 01/04/1981 CORRECTLY, THE A.O. ARRIVED AT THE FAIR MARKET VALUE WHICH IS REPORTED BY THE SRO I.E., RS. 15/ - PER SQ YD AND ACCOR DINGLY INDEXED THE COST OF LAND AT RS. 4,67,100/ - . AS REGARDS THE SALE CONSIDERATION ALSO, THE A.O. OBSERVED THAT THE ASSESSEE ADMITTED THE SUM OF RS. 3,56,10,000/ - AS AGAINST THE SRO VALUE WHICH WORKED OUT TO RS. 3,60,00,000/ - . HE THEREFORE ADOPTED THE SUM OF RS. 3,60,00,000/ - AS SALE CONSIDERATION IN THE COMPUTATION OF CAPITAL GAINS. WHILE CALCULATING THE CAPITAL GAINS, THE ASSESSEE HAD CLAIMED DEDUCTION TOWARDS ULC FEE PAID TO HUDA FOR RS. 39,50,000/ - . WHEN THE ASSESSEE WAS ASKED TO FURNISH THE EVIDE NCE IN RESPECT OF ULC PAID AS WELL AS IT SOURCE, THE ASSESSEE SUBMITTED A LETTER DATED 14/12/2009 STATING THAT AS PER THE AGREEMENT WITH THE BUYERS, THE ASSESSEE WAS REQUIRED TO CLEAR THE LAND FROM ULC AFTER 3 PAYING THE REQUISITE FEES TO THE LOCAL AUTHORITI ES AND THAT A SUM OF RS. 39,50,000/ - WAS PAID DIRECTLY BY THE BUYERS AND THE SAME WAS DEDUCTED FROM THE SALE CONSIDERATION TO BE PAID TO THE ASSESSEE . IN SUPPORT OF THE PAYMENT OF ULC FEES, COPIES OF THE RECEIPTS WERE ENCLOSED AND IT WAS SUBMITTED THAT LA ND WAS REGISTERED IN FAVOUR OF THE BUYERS ONLY AFTER CLEARANCE FROM ULC . THE ASSESSING OFFICER OBSERVED THAT THERE WERE NINE BANKER CHEQUES SUBMITTED BY THE ASSESSEE TOWARDS ULC FEE AND THEY WERE OBTAINED BY (I) SRI N. NARSI REDDY (BUYER) AND (II) SRI S. RANGA REDDY (BUYER) AND ALSO THE ASSESSEE (SELLER). OBSERVING THAT THE ASSESSEES NAME IS ALSO INCLUDED IN REMITTANCE OF PAYMENT OF ULC IN RESPECT OF THREE COPIES OF PAY ORDERS AND THE NAMES OF THE REMITTERS WERE SCORED OFF , T HE A.O. WAS NOT CONVINCED THAT THE ASSESSEE HAS MADE THE PAYMENT. THEREFORE, THE A.O. CONCLUDED THAT SINCE THE BUYERS MADE THE PAYMENT OF ULC, THE ASSESSEE IS NOT ELIGIBLE FOR ANY DEDUCTION IN RESPECT OF THE SAME WHILE COMPUTING THE CAPITAL GAINS. 3. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO CONFIRMED THE ORDER OF THE A.O. AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US BY RAISING THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AND UNSUSTAINABLE ON FACTS AND IN LAW. 2. THE LD. CIT(A) ERRED IN SUSTAINING THE ACTION OF THE A.O. IN NOT CONSIDERING THE FEE OF RS. 39,50,000/ - PAID TO THE URBAN LAND CEILING AUTHORITIES AS COST INCURRED FOR PERFECTING THE TITLE OF THE PROPER I N QUESTION. 4 3. THE CIT(A) FAILED TO APPRECIATE THE SUBMISSIONS MADE BY THE APPELLANT. 4. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THE LAND WAS SUBJECT TO URBAN LAND CEILING ACT AND THEREFORE, ONE OF THE CONDITIONS OF THE AGREEMENT OF SALE IS THAT THE SALE DEED WOULD BE EXECUTED ONLY AFTER THE ASSESSEE IS HAVING CLEAR TITLE AND IT OBTAINED PERMISSION FROM ULC AND HUDA BEFORE THE SALE OF LAND . A CCORDINGLY , THE BUYER HAD MADE THE PAYMENT OF BEHALF OF THE ASSESSEE TO THE ULC AND ACCORD INGLY AFTER OBTAINI NG HUDA PERMISSION ONLY, THE REGISTRATION OF THE SALE DEED HAD TAKEN PLACE. HE SUBMITTED THAT THE SALE CONSIDERATION WAS REDUCED BY THE SAID PAYMENT TOWARDS ULC BY THE BUYER AND THEREFORE, IT IS THE EXPENDITURE OF THE ASSESSEE AND IT SHOULD BE ALLOWED AS SUCH. 5. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND ON PERUSAL OF THE MATERIAL AVAILABLE ON RECORD, I FIND THAT THE ASSESSEE HAS ENTERED INTO SALE AGREEMENT WITH THE BUYERS IN AUGUST 2005 WHEREAS THE REGISTRATION HAS TAKEN PLACE ON 23/09/2006. THEREFORE, THE ASSESSEES CONTENTION THAT IT IS ONLY AFTER OBTAINING THE CLEARANCE FROM THE ULC AND ALSO HUDA, THAT THE ASSESSEE HAS REGISTERED THE PROPERTY IN THE NAME OF THE BUYERS SEEMS REASONABLE AND ACCEPTABLE . THOUGH THE PAYMENTS WERE MADE BY THE BUYERS AND THE DEMAND DRAFTS ARE IN THEIR NAME S , THE ASSESSEES CONTENTION THAT THE SAME WAS REDUCED FROM HIS 5 SALE CONSIDERATION ALSO CANNOT BE BRUSHED ASIDE. EVERY BUYER EXPECTS THE SELLER TO PERFECT THE TITLE BEFORE SELLING THE PROPERTY. THEREFORE, THE RESPONSIBILITY OF PERFECTING THE TITLE IS ON THE SELLER AND NOT ON THE BUYER AND THE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS SUCH CLEARANCES IS THE LIABILITY OF THE ASSESSEE. THEREFORE, I AM INCLINED TO ACCEPT THE ASSESSEES CONTENTION THAT THE ULC FEE PAID IS AN EXPENDITURE TO THE ASSESSEE AND SHOULD BE ALLOWED WHILE COMPUTING THE CAPITAL GAINS. THUS, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 29 TH MARCH, 2019 . SD/ - (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED: 29 TH MARCH , 2019 OKK COPY TO: - 1) K.VASANTKUMAR, A.V. RAGHURAM, P. VINOD & M. NEELIMA DEVI, ADVOCATES, 610, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD - 1. 2) INCOME TAX OFFICER, WARD - 9(3) , I.T. TOWERS, A.C. GUARDS, HYDERABAD. 3) THE CIT(A) - 7 , HYDERABAD 4) THE PR. CIT - 7 , HYDERABAD 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE