ACIT, New Delhi V. Shri. Pushkar Dutt Sharma, New Delhi

ITA 5402/DEL/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86730 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 05-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 01-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Assessee Lawyers: ANIL KUMAR GOEL
• Keywords: Capital asset; Cost of acquisition; Fair market value; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SMT.DIVA SINGH, JM ITA NO.5402/DEL/2010 ASSESSMENT YEAR : 2007-08 ACIT, CIRCLE 24(1), NEW DELHI. VS. PUSHKAR DUTT SHARMA, B-6/105, SAFDARJUNG ENCLAVE, NEW DELHI. PAN: ATVPS0546F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL KUMAR GOEL, CA DEPARTMENT BY : SHRI VIKRAM SAHAY, SR. DR ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 10.09.2010 IN RELATION TO THE ASSESSM ENT YEAR 2007-08. ITA NO.5402/DEL/2010 2 2. THE FIRST GROUND IS AGAINST THE DELETION OF ADDI TION OF RS. RS.12.5 LAC (SIC- 18 LAC) MADE BY THE ASSESSING OFFICER (AO ) ON ACCOUNT OF COST OF IMPROVEMENT. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE WAS THE ABSOLUTE OWNER OF 1/5 TH SHARE IN A PARTICULAR LAND. THIS LAND, PURCHASED BY THE ASSESSEE BY MEANS OF SIX SEPARATE REGISTERED DEEDS IN THE YEARS 1962/1963, WAS TRANSFERRED DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION TO M/S AARONE I NFRASTRUCTURE PVT. LTD., NEW DELHI BY MEANS OF A REGISTERED SALE DEED FOR A SALE CONSIDERATION OF RS.27 CRORE. A SUM OF RS.9.06 CRO RE WAS OFFERED AS LONG-TERM CAPITAL GAIN IN THE RETURN OF INCOME. DU RING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO TH AT THE ASSESSEE HAD CLAIMED A DEDUCTION FOR A SUM OF RS.25 LAC TOWARDS COST OF IMPROVEMENT. IN SUPPORT OF THIS CLAIM, THE ASSESSE E FILED A COPY OF COURT DECREE ISSUED IN A COMPROMISE SUIT BETWEEN TH E ASSESSEE AND ONE SHRI P.K. DHINGRA. THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH SH. DHINGRA IN THE YEAR 1994 FOR THE SALE OF THE ABOVE LAND. PURSUANT TO SUCH ITA NO.5402/DEL/2010 3 AGREEMENT, SH. DHINGRA PAID A SUM OF RS.5.50 LAC IN CASH AND RS.7 LAC THROUGH ACCOUNT PAYEE CHEQUE. THE DEAL FOR THE SAL E OF THE ABOVE LAND COULD NOT MATERIALIZE. AFTER A PROLONGED LITIGATION BETWEEN THE ASSESSEE AND SHRI DHINGRA, THE COURT PASSED A DECREE ON 7.8. 2006 SETTLING THE DISPUTE. THE ASSESSEE AGREED TO PAY A SUM OF RS.25 LAC TO SHRI DHINGRA UNDER THIS DECREE. IT IS THIS PAYMENT WHICH WAS TR EATED BY THE ASSESSEE AS COST OF IMPROVEMENT. THE AO OBSERVED THAT THE A SSESSEE HAD ALREADY RECEIVED A SUM OF RS.12.50 LAC FROM SHRI DHINGRA AN D, THUS, HE HAD TO INCUR EXTRA COST OF RS.12.50 LAC ALONE. WHEN CONFR ONTED, THE ASSESSEE CAME OUT WITH A REVISED COMPUTATION RESTRICTING THE COST OF IMPROVEMENT TO RS.18 LAC. RELYING ON CERTAIN DECISIONS, THE AO HELD THAT THE ASSESSEE WAS NOT ELIGIBLE FOR THE BENEFIT OF DEDUCTION OF RS .18 LAC CLAIMED AS COST OF IMPROVEMENT. THE LD. CIT(A) HELD THAT TH E AO WAS RIGHT IN ADOPTING THE AMOUNT AT RS.12.50 LAC AS AGAINST RS.1 8.00 LAC CLAIMED BY THE ASSESSEE. HOWEVER, HE AGREED WITH THE SUBMISSIO NS ADVANCED ON BEHALF OF THE ASSESSEE ON THE DEDUCTIBILITY OF THIS AMOUNT U/S 48(I) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED THE ACT). THE REVENUE IS AGGRIEVED AGAINST THE DELETION OF ADDITION. ITA NO.5402/DEL/2010 4 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE FIRST THING WHICH WE NEED T O ASCERTAIN IS THE AMOUNT PAID BY THE ASSESSEE TO SHRI P.K. DHINGRA, W HICH WOULD QUALIFY FOR CONSIDERATION AND DECISION AT OUR END. IT IS A N ADMITTED POSITION THAT WHEN ON THE EARLIER OCCASION THIS PROPERTY BECAME T HE SUBJECT MATTER OF SALE TO SH. DHINGRA, THE ASSESSEE RECEIVED A SUM OF RS.12.50 LAC IN TWO INSTALMENTS. IT IS FURTHER APPARENT THAT THE ASSESS EE HAD TO PAY A SUM OF RS.25.00 LAC TO SH. DHINGRA PURSUANT TO A COURT DEC REE. IT IS MANIFEST FROM PARA 4 OF THE IMPUGNED ORDER THAT THE LD. CIT( A) HAS UPHELD THE AOS FINDING ON THE ASSESSEE ACTUALLY RECEIVING A SUM OF RS.12.5 LAC FROM SHRI P.K. DHINGRA ON AN EARLIER OCCASION AND T HE RESULTANT NET PAYMENT STANDING ONLY AT RS.12.50 LAC. THERE IS NO CROSS APPEAL FROM THE SIDE OF THE ASSESSEE ASSAILING THIS FINDING OF THE LD. CIT(A). WE WILL, THEREFORE, PROCEED TO CONSIDER THE DEDUCTIBILITY OR OTHERWISE OF THE NET AMOUNT ACTUALLY PAID BY THE ASSESSEE TO SHRI P.K. D HINGRA AT RS.12.50 LAC. ITA NO.5402/DEL/2010 5 5. SECTION 48 OF THE ACT PROVIDES THE MODE OF CO MPUTATION OF INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS. T HIS SECTION PROVIDES FOR COMPUTING SUCH INCOME BY DEDUCTING FROM THE FUL L VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF T HE TRANSFER OF THE CAPITAL ASSET, THE FOLLOWING AMOUNTS, NAMELY, (I) E XPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRAN SFER; AND (II) THE COST OF ACQUISITION OF THE ASSET AND THE COST OF AN Y IMPROVEMENT THERETO. THE LD. CIT(A) HAS HELD THAT RS.12.50 LAC IS DEDUCT IBLE U/S 48(I) AND NOT U/S 48(II). AS SUCH, WE WILL CONFINE OURSELVES IN C ONSIDERING THE DEDUCTIBILITY OR OTHERWISE OF THIS AMOUNT UNDER CLA USE (I) OF SECTION 48. IT CAN BE SEEN FROM THE LANGUAGE OF THIS PROVISION THAT IT PROVIDES FOR DEDUCTING ANY EXPENDITURE INCURRED WHOLLY AND EXCLU SIVELY IN CONNECTION WITH SUCH TRANSFER . THE EXPRESSION IN CONNECTION WITH SUCH TRANSFER IS TO BE SEEN IN CONTRADISTINCTION TO THE EXPRESSION FOR THE TRANSFER. WHEREAS THE LATTER IS RELATIVELY NARROWE R SO AS TO EMBRACE ONLY SUCH EXPENSES WHICH ARE INCURRED FOR THE PURPOSES O F TRANSFER OF CAPITAL ASSET, THE FORMER IS QUITE WIDE IN ITS AMBIT AND AL SO ENCOMPASSES EXPENDITURE OF ANY NATURE WHICH IS CONNECTED WITH T HE TRANSFER OF ITA NO.5402/DEL/2010 6 PROPERTY. ANY EXPENDITURE WHICH HAS TO BE INCURRED TO EFFECTIVELY TRANSFER THE PROPERTY FALLS WITHIN ITS PURVIEW. NO T ONLY THE EXPENSES DIRECTLY CONNECTED WITH OR FOR THE IMMEDIATE PURPOS E OF THE TRANSFER OF CAPITAL ASSET, BUT ALSO ALL EXPENSES WHICH FACILITA TE THE TRANSFER OF THE CAPITAL ASSET, FALL WITHIN ITS SCOPE. IT WOULD ALSO INCLUDE THE EXPENSES INCURRED TO REMOVE THE IMPEDIMENTS OR ENCUMBRANCES IN THE WAY OF THE INSTANT TRANSFER OF CAPITAL ASSET. IT IMPLIES THAT, ANY AMOUNT PAID BY THE ASSESSEE FOR REMOVING ANY ENCUMBRANCE FALLS U/S 48( I) OF THE ACT. 6. THE HONBLE BOMBAY HIGH COURT IN CIT VS. ABRAR ALVI (2001) 247 ITR 312 (BOM) HAS UPHELD THE DEDUCTION OF THE AMOUNT PAID TO RES OLVE THE PROPERTY DISPUTE AND REMOVE THE ENCUMBRANCE THE REUPON U/S 48(I) OF THE ACT. SIMILAR VIEW WAS EARLIER TAKEN BY THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SHAKUNTALA KANTILAL (1991) 190 ITR 56 (BOM). THE HONBLE MADRAS HIGH COURT IN CIT VS. BRADFORD TRADING CO. P. LTD. (2003) 261 ITR 222 (MAD) HAS ALSO REITERATED THE SAME VIEW BY HOLDING THAT THAT ANY AMOUNT PAID FOR REMOVING E NCUMBRANCE AND ITA NO.5402/DEL/2010 7 SETTLEMENT OF CLAIM IS EXPENDITURE INCURRED IN CO NNECTION WITH TRANSFER OF A CAPITAL ASSET DEDUCTIBLE U/S 48(I). 7. IT CAN BE NOTICED THAT THE LD. CIT(A) HAS HELD THAT THE AMOUNT IS NOT DEDUCTIBLE U/S 48(II), BUT ONLY U/S 48(I). IT IS FO UND THAT THE HONBLE BOMBAY HIGH COURT IN CIT VS. MISS PIROJA C. PATEL (2000) 242 ITR 582 (BOM) HAS HELD THAT THE COMPENSATION PAID BY ASSESSEE T O THE HUTMENT DWELLERS FOR VACATING LAND BEFORE ITS SALE IS COST OF IMPROVEMENT DEDUCTIBLE U/S 48(II). BE THAT AS IT MAY, IN ANY CA SE, THE DEDUCTION IS CERTAINLY AVAILABLE U/S 48 IN RESPECT OF PAYMENT M ADE FOR REMOVING ANY ENCUMBRANCES ON THE PROPERTY TO BE TRANSFERRED. 8. ADVERTING TO THE FACTS OF THE INSTANT CASE, W E FIND THAT THE DISPUTE BETWEEN THE ASSESSEE AND SHRI P.K. DHINGRA IN CONNE CTION WITH THE TRANSFER OF THIS VERY PROPERTY, WHICH WAS EARLIER A GREED TO BE TRANSFERRED BUT THE DEAL COULD NOT FRUCTIFY, FINALLY GOT SETTLE D BY MEANS OF A COURT DECREE UNDER WHICH THE ASSESSEE WAS REQUIRED TO PAY A SUM OF RS.25.00 LAC. BUT FOR THIS PAYMENT, THE ASSESSEE COULD NOT H AVE TRANSFERRED THE PROPERTY TO THE VENDEE IN THE YEAR IN QUESTION WHIC H FETCHED THE INSTANT ITA NO.5402/DEL/2010 8 CAPITAL GAIN. SUCH NET EXPENDITURE OF RS.12.50 LAC , IN OUR CONSIDERED OPINION, RIGHTLY DESERVES TO BE DEDUCTED U/S 48(I) AS HAS BEEN HELD BY THE LD. CIT(A). 9. IF WE STRICTLY GO BY THE PROVISIONS, THEN THE SUM OF RS.12.50 LAC RECEIVED BY THE ASSESSEE EARLIER FROM SHRI DHINGRA IS IN THE NATURE OF ADVANCE MONEY RECEIVED. THIS AMOUNT IS CHARGEABLE T O TAX IN THE YEAR IN QUESTION IN TERMS OF SECTION 51, WHICH PROVIDES THA T : WHERE ANY CAPITAL ASSET WAS ON ANY PREVIOUS OCCASION THE SUBJECT OF N EGOTIATIONS FOR ITS TRANSFER, ANY ADVANCE OR OTHER MONEY RECEIVED AND R ETAINED BY THE ASSESSEE IN RESPECT OF SUCH NEGOTIATIONS SHALL BE D EDUCTED FROM THE COST FOR WHICH THE ASSET WAS ACQUIRED OR THE WRITTEN DOW N VALUE OR THE FAIR MARKET VALUE, AS THE CASE MAY BE, IN COMPUTING THE COST OF ACQUISITION.. SIMULTANEOUS WITH THE CHARGEABILITY OF RS.12.50 LAC , THE AMOUNT OF RS.25.00 LAC PAID BY THE ASSESSE TO SH. DINGRA IN T HE YEAR IN QUESTION IS DEDUCTIBLE U/S 48(I). NET RESULT REMAINS THE SAME , THAT IS, EITHER THERE IS AN INCOME OF RS.12.50 LAC U/S 51 AND ALSO DEDUCTION FOR RS.25.00 LAC U/S 48(I), OR THERE IS NET DEDUCTION OF RS.12.50 LAC U/ S 48(I). THE ASSESSEE IS ITA NO.5402/DEL/2010 9 ENTITLED TO RELIEF U/S 48(I) FOR A NET SUM OF RS.12 .50 LAC. THIS GROUND FAILS. 10. THE ONLY OTHER GROUND IS AGAINST THE DELETION O F ADDITION OF RS.38,76,181/- MADE BY THE AO ON ACCOUNT OF DIFFERE NCE IN THE COST OF ACQUISITION. THE FACTS APROPOS THIS ISSUE ARE THA T THE ASSESSEE, IN THE COMPUTATION OF INCOME FILED ALONG WITH THE RETURN, CONSIDERED INDEXED COST OF ACQUISITION AT RS.10.00 CRORE. THIS COST O F ACQUISITION WAS DETERMINED BY TAKING THE AREA OF LAND TRANSFERRED A T 43 BIGHAS AND 2 BISWAS (HEREINAFTER CALLED THE LESSER AREA). DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE CLAIMED THAT T HE CORRECT AMOUNT OF INDEXED COST OF ACQUISITION WAS RS.10.39 CRORE AND NOT RS.10.00 CRORE. THIS INCREASE IN THE INDEXED COST OF ACQUISITION WA S MADE BY CLAIMING THE AREA OF HIS LAND HOLDING AT 44 BIGHAS, 15 BISWA S AND 4 BISWANSI (HEREINAFTER CALLED THE HIGHER AREA). THE AO REF USED TO ACCEPT THE ASSESSEES CLAIM OF HIGHER AREA BY NOTICING THAT TH E ASSESSEES VALUATION REPORT ALSO INDICATED LESSER AREA. THE SAME LESSER AREA WAS FOUND TO BE APPEARING IN THE COURT DECREE AS WELL. HE, THEREFO RE, COMPUTED CAPITAL GAIN BY TAKING THE INDEXED COST OF ACQUISITION AT R S.10.00 CRORE FOR THE ITA NO.5402/DEL/2010 10 LESSER AREA. THE LD. CIT(A) ACCEPTED THE ASSESSEE S CLAIM OF HIGHER AREA AND ORDERED FOR THE ADOPTION OF THE INDEXED COST OF ACQUISITION AT RS.10.39 CRORE. THIS RESULTED INTO DELETION OF ADDI TION TO THE TUNE OF RS.38.76 LAC, AGAINST WHICH THE REVENUE HAS COME UP IN APPEAL BEFORE US. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THERE IS NO QUARREL ON THE FAC T THAT THE ASSESSEES REGISTERED VALUERS REPORT AND THE COURT DECREE MEN TION THE LESSER AREA. AT THIS JUNCTURE, IT IS PERTINENT TO NOTE THAT THE ASSESSEE WAS 1/5 TH OWNER OF THE TOTAL AGRICULTURAL LAND ADMEASURING 223 BIGH AS AND 16 BISWAS. THE CLAIM OF THE ASSESSEE FOR INCREASE IN THE SHARE IN AGRICULTURAL LAND TO THE HIGHER AREA STEMMED FROM THE FACT THAT THE DIFF ERENCE BETWEEN THE TWO WAS ON ACCOUNT OF HIS SHARE IN COMMON AREA MEAN T FOR USE BY ALL THE FIVE CO-OWNERS. THIS CAN BE SEEN FROM THE REGISTER ED SALE DEED EXECUTED BY THE ASSESSEE AS VENDOR IN FAVOUR OF M/S AARONE INFRASTRUCTURE PVT. LTD., A COPY OF WHICH IS AVAILA BLE ON PAGES 11 ONWARDS OF THE PAPER BOOK. PAGE 12 CATEGORICALLY ME NTIONS THAT THE ITA NO.5402/DEL/2010 11 VENDOR, NAMELY, THE ASSESSEE, IS THE ABSOLUTE OWNE R OF 1/5 TH SHARE BEARING DIFFERENT KHASRA NOS. PAGE 13 REITERATES T HAT THE ASSESSEES 1/5 TH SHARE OF AGRICULTURAL LAND MEASURING 223 BIGHAS AND 16 BISWAS IS APPROXIMATELY 44 BIGHAS, 15 BISWAS AND 5 BISWANS, T HAT IS, THE HIGHER AREA. IT FURTHER PROVIDES THAT : AT THE TIME OF THE EXECUTION OF THIS SALE DEED, THE VENDOR IS HOLDING ACTUAL PHYSICAL VACANT POSITION OF THE LAND MEASURING 43 BIGHAS AND 2 BISWAS, THAT IS, THE LESS ER AREA. WHEN WE TAKE A HOLISTIC VIEW OF THE MATTER BY READING THE R EGISTERED SALE DEED IN ENTIRETY, THE PICTURE WHICH EMERGES IS THAT THE ASS ESSEE WAS HOLDING 1/5 TH SHARE IN 223 BIGHAS AND 16 BISWAS. OUT OF SUCH HIG HER SHARE OF 44 BISWAS, 15 BISWAS AND 4 BISWANS, THE ACTUAL PHYSIC AL POSSESSION WITH THE ASSESSEE WAS FOR A LESSER AREA ADMEASURING 43 B IGHAS AND 2 BISWAS AND THE REMAINING PORTION OBVIOUSLY REPRESENTED A C OMMON AREA MEANT FOR USE BY ALL THE FIVE CO-OWNERS. ON THE TRANSFER OF HIS 1/5 TH SHARE IN THE TOTAL AREA OF LAND, WHAT THE ASSESSEE ACTUALLY TRAN SFERRED WAS NOT ONLY THE LESSER AREA UNDER HIS EXCLUSIVE OWNERSHIP, BUT ALSO THE COMMON AREA ON WHICH HE HAD JOINT OWNERSHIP RIGHTS. SALE CONSIDER ATION AMOUNTING TO RS.27 CRORE RECEIVED BY THE ASSESSEE IS IN RESPECT OF HIGHER AREA OF 44 ITA NO.5402/DEL/2010 12 BIGHAS, 15 BISWAS AND 4 BISWANS. IT IS NOT THE CAS E OF THE REVENUE THAT THE ASSESSEE TRANSFERRED HIS ENTIRE 1/5 TH SHARE IN THE AGRICULTURAL LAND AND RECEIVED RS.27 CRORE IN RESPECT OF LESSER AREA AND SOME OTHER AMOUNT OF CONSIDERATION FOR THE REMAINING AREA WHICH WAS COMM ONLY USED. WHEN THERE IS A SALE OF THE ASSESSEES 1/5 TH SHARE IN TOTAL LAND AREA COVERING BOTH THE EXCLUSIVE OWNERSHIP/POSSESSION AS WELL AS THE JOINT OWNERSHIP/POSSESSION, THE COST SHOULD ALSO BE TAKEN FOR THE BOTH, INCLUDING THAT OF JOINT OWNERSHIP. IT IS IMPERMISSI BLE TO TAKE FULL VALUE OF CONSIDERATION FOR THE HIGHER AREA AND COST OF ACQUI SITION FOR THE LESSER AREA. INSOFAR AS THE MENTION OF A LESSER AREA IN TH E REGISTERED VALUERS REPORT AND COURT DECREE IS CONCERNED, WE FIND THE R EGISTERED SALE DEED TO BE A MORE AUTHENTIC DOCUMENT EVIDENCING THE DETAILS OF THE PROPERTY TRANSFERRED WITH THE RELEVANT KHASRA NOS. ETC. WE, THEREFORE, PREFER TO GO WITH THE REGISTERED SALE DEED IN PREFERENCE TO THE OTHER DOCUMENTS IN SO FAR AS THE QUESTION OF DETERMINING THE ASSESSEES S HARE IN LAND IS CONCERNED. IF WE SO PROCEED BY TAKING THE HIGHER A REA OF THE LAND TRANSFERRED, THE ASSESSEES CLAIM FOR DEDUCTION FOR INCREASE IN THE ITA NO.5402/DEL/2010 13 INDEXED COST OF ACQUISITION BY A FURTHER SUM OF RS. 38.76 LAC MERITS ACCEPTANCE. WE COUNTENANCE THE IMPUGNED ORDER ON T HIS ISSUE. 12. IN THE RESULT, THE APPEAL IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 16.02.201 5. SD/- SD/- [DIVA SINGH] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 16 TH FEBRUARY, 2015. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.