Laxmansingh T.Bhosale (HUF), Nagpur V. Asstt.Commissioner of Income-Tax,Circle-6, Nagpur

ITA 8/NAG/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9630 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 24-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR MILIND BHUSARI
• Assessee Lawyers: S C THAKAR; C J THAKAR
• Keywords: Capital asset; Gift; Depreciation; Cost of acquisition; Valuation report; Assessment record
• Section: 54F

Judgement Text

- 1 - ITA 08 & 25/NAG/2011 IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI P. K. BAN SAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 08/NAG /20 11 (ASST. YEAR: 2005 - 06 ) LAXMANSINGH T BHONSALE (HUF) APPELLANT JUNIOR BHONSLA PALACE, MAHAL NAGPUR. PAN : AAAHL1234M VS ACIT, CIRCLE - 6, RESPONDENT NAGPUR. & ITA NO. 25/NAG /20 11 (ASST. YEAR: 2005 - 06 ) ACIT, CIRCLE - 6, APPELLANT NAGPUR VS LAXMANSINGH T BHONSALE (HUF) RESPONDENT JUNIOR BHONSLA PALACE, MAHAL NAGPUR. PAN : AAAHL1234M APPELLANT BY : SHRI C J THAKAR & SC THAKAR (ADV ) RESPONDE NT BY : SHRI DR. MILIND BHUSARI (D R ) DATE OF HEARING: 18/10 /2012 DATE OF ORDER : 09/11 /2012 O R D E R PER D. T. GARASIA JM THESE CROSS APPEALS ARE FILED BY THE PARTIES AGAINST THE ORDER CIT (A), NAGPUR DT. 22.11.2010. - 2 - ITA 08 & 25/NAG/2011 THE FOLLOWING ARE THE GROUNDS RAISED IN ASSESSEES APPEAL WHICH READS AS UNDER: - 1. LD. CIT (A) ERRED IN HOLDING THE COST OF LAND AS ON 01.04.1981 AT RS 80/ - PER SQ.FT. AS AGAINST THE COST CLAIM ED BY THE ASSESSEE AT RS. 125/ - PER SQ. FT. AS ON 01.04.1981. 2. LD. CIT (A) ERRED IN HOLDING THAT THERE WAS ONLY A TEMPORARY STRUCTURE ON THE LAND AS AGAINST THE SUBSTANTIAL DOCUMENTARY EVIDENCE POINTING OUT THAT THERE EXISTED A U SHAPE BUILDING ON THE SA ID PROPERTY. 3. RELYING ON CERTIFIED COPY OF AKHIV PATRIKA OF 2002 SHOWING U SHAPE BUILDING ON THE SAID LAND, CIT (A) ERRED IN HOLDING THAT THE STRUCTURE EXISTED FROM 2002 ONLY, THAT IT WAS TEMPORARY STRUCTURE AND ITS VALUE WAS ONLY RS. ONE LAC. ALL SUCH F INDINGS ARE CONTRARY TO EVIDENCE AND MATERIAL ON RECORD. 4. LD. CIT (A) FAILED TO SEE THAT CERTIFIED COPY OF AKHIV PATRIKA OBTAINED IN 2002 RELATED TO ASSESSEES FATHER TEJSHINGHRAO BHOSLE AND IT CONTAINED HIS NAME AND THUS THE U SHAPE HOUSE PROPERTY ON TH E SAID LAND EXISTED EVEN DURING THE LIFE TIME OF ASSESSEES FATHER. 5. LD. CIT (A) ERRED IN ASSUMING THAT THE U SHAPE STRUCTURE ON THE LAND SHOWN IN AKHIV PATRIKA WAS A TEMPORARY STRUCTURE. THIS IS CONTRARY TO EVIDENCE AND MATERIAL ON RECORD WHICH SHOWED T HAT THERE WERE FOUR ROOMS AND TWO HALLS AND THE SAME WAS USED AS GUEST HOUSE. 6. LD. CIT (A) ERRED IN ESTIMATING THE COST OF THE SAID HOUSE PROPERTY AT RUPEES ONE LAC ONLY. LEARNED CIT (A) SHOULD HAVE ACCEPTED THE COST THEREOF AS CLAIMED AND ALLOWED INDEXA TION OF IT FROM 01/04/1981 AND NOT ONLY FROM 2002. 7. LD. CIT (A) ERRED IN NOT ALLOWING DEDUCTION OF COST OF IMPROVEMENT AMOUNTING TO RS. 6,68,587/ - , ONLY ON THE GROUND THAT THE COST WAS INCURRED BY LICENCEE. LEARNED CIT (A) FAILED TO SEE THAT THOUGH THE C OST OF IMPROVEMENT WAS INCURRED BY LICENCEE THE SAME BELONGED TO THE ASSESSEE AND FURTHER THE SAID IMPROVEMENT THOUGH MAY BE BUSINESS ASSET IN THE HANDS OF THE LICENCEE IT WAS A CAPITAL ASSET IN THE HANDS OF - 3 - ITA 08 & 25/NAG/2011 THE ASSESSEE AND HENCE THE INDEXED COST THEREOF SHOULD HAVE BEEN ALLOWED AS DEDUCTION. 8. ON THE FACTS AND CIRCUMSTANCE OF THE CASE THE LEARNED CIT (A) ERRED IN NOT ALLOWING DEDUCTION U/S 54 AT RS. 23,06,520/ - . THE U SHAPE STRUCTURE ON THE LAND CONSTITUTED A RESIDENTIAL HOUSE AND ON SALE THEREOF THE ASS ESSEE HAVING PURCHASED FLAT WAS ENTITLED TO DEDUCTION U/S 54. THE FOLLOWING ARE THE GROUNDS RAISED BY THE DEPARTMENT: - 1. ON THE FACTS AND THE CIRCUMSTANCE OF THE CASE AND IN LAW THE LD. CIT (A) II ERRED IN ADOPTING THE COST OF THE PROPERTY AT RS. 80/ - PER SQ. FT. WITHOUT APPRECIATING THAT THE COMPARABLE INSTANCES CONSIDERED IN THIS REGARD RELATE TO SALE OF LAND ALONG WITH CONSTRUCTED AREA AND ARE LOCATED IN COMMERCIAL ARE OF MOUZA GHADGA. 2. THE LD. CIT (A) II ERRED IN GIVING BENEFIT OF COST INFLATION INDEX W.E.F. 01/04/1981, INSTEAD OF W.E.F. 1995 - 96. 3. THE LD. CIT (A) II ERRED IN ESTIMATING THE COST OF STRUCTURE AT RS. 1,00,000/ - IN THE ABSENCE OF ANY CONCRETE EVIDENCE IN SUPPORT OF ITS EXIS TENCE. 4. THE LD. CIT (A) II ERRED IN ACCEPTING THE EXPENSE ON BOUNDARY WALLS AND ITS INDEXATION AS CLAIMED BY THE ASSESSEE. 2. GROUND NO. 1 OF THE ASSESSEES APPEAL AND GROUND NO. 1 OF DEPARTMENTS ARE RELATING TO THE SAME ISSUE THEREFORE IT IS DECIDED T OGETHER. BRIEF FACTS IN THIS APPEAL THE DISPUTE RELATES TO COMPUT ATION OF LONG TERM CAPITAL GAIN ARISING ON SALE OF PROPERTY BY ASSESSEE BY SALEDEED DT.11.11.2004 FOR A CONSIDERATION OF RS.2,58,00,000/ - TO SHRI PRAKASH UTTAMCHAND WADHWANI AND OTHERS. ASSES SEES FATHER OWNED A PROPERTY ADMEASURING 6319.7 SQ.MT. I.E. ABOUT 68018 SQ.FT. WITH STRUCTURES THEREON BEARING CITY SURVEY NO.10, WARD NO.66, MOUZA GADGA, BEARING HOUSE 240, CIVIL LINES, NAGPUR. ASSESSEES FATHER - 4 - ITA 08 & 25/NAG/2011 SHRI TEJSINGHRAO WHO HAD EXECUTED A WILL O N 16.04.1995 JUST A FEW DAYS BEFORE HIS DEATH DT.26.04.1995 AMONGST OTHER PROPERTIES BEQUEATHED 55% SHARE ON NORTHERN SIDE OF THE SAID PROPERTY TO THE ASSESSEE AND 45% SHARE ON SOUTHERN SIDE TO ASSESSEES YOUNGER BROTHER SHRI MANSINGHRAO BHONSALE. THUS ASS ESSEE BECAME OWNER OF 37410 SQ.FT. OF LAND WITH STRUCTURES THEREON WHILE SHRI MANSINGH BECAME OWNER OF 30608 SQ.FT. OF LAND WITH MAIN BUNGLOW THEREON. PORTION WHICH CAME TO THE SHARE OF ASSESSEE WAS NUMBERED AS CITY SURVEY NO.10/1 AND PORTION THAT WENT TO THE SHARE OF SHRI MANSINGH WAS NUMBERED AS CITY SURVEY NO.10/2. AKHIV PATRIKA I.E. RECORD OR RIGHT WITH MAP TO SCALE OF THE SAID PROPERTY IS PLACED ON PAGES 37,38 AND 39 OF THE PAPERBOOK. PORTION THAT CAME TO ASSESSEE VIZ. CITY SURVEY NO.10/1 IN ON PAGE 39 . IT IS OUT OF THIS PORTION ADMEASURING 37410 SQ.FT. THE ASSESSEE SOLD THE NORTHERN PORTION 17200 SQ.FT. BEARING HOUSE NO.240 - A TO SHRI PRAKASHCHANDRA WADHWANI AND OTHER BY SALEDEED DT. 11.11.2004 FOR A CONSIDERATION OF RS. 2,58,00,000/ - . THE COST OF L AND FOR PURPOSE OF WORKING OUT LONG TERM CAPITAL GAIN BEING PROPERTY INHERITED BY WILL FROM HIS LATE FATHER TEJENDRA SINGH BHONSLE CLAIMED AT RS. 125 PER SQ. FT. THE ASSESSEE FILED VALUATION REPORT DT. 25/11/2005 FROM BEDI CONSULTANT TO SUPPORT HIS CLAIM. THE AO REJECTED THE VALUATION REPORT OF REGISTER VALUER ON THE GROUND THAT APPENDIX A IN WHICH ALLEGED SALE INSTANCES WERE ENUMERATED AND BASED ON WHICH THE AVERAGE BASIS OF LAND VALUE IN THE LOCALITY WAS TO BE 100 TO 125 SQ. FT WAS ANNEXED WITH THE VALUAT ION REPORT. THE AO THEREFORE, OBTAINED THE PREVALENT VALUE OF PROPERTY IN THE CIVIL LINES LOCALITY FROM SUB REGISTRAR AND BASED ON PREVALENT VALUE OF THE PROPERTY IN NEARBY KHASRAS IN THE SAME MOUZA ADOPTED THE VALUE OF PROPERTY AT RS. 15/ - PER SQ. FT. - 5 - ITA 08 & 25/NAG/2011 3 . MATTER CARRIED TO CIT (A) AND CIT (A) HAS TAKEN THE COST OF LAND AT RS. 80/ - PER SQ. FT BY OBSERVING AS UNDER: - 4.1 I HAVE CONSIDERED THE FACTS OF THE CASE, THE ISSUES OF DISPUTE, THE ASSESSMENT RECORDS, VARIOUS SUBMISSIONS FURNISHED BY THE APPELLANT A ND THE REMAND REPORT SUBMITTED BY THE AO. AO HAS ADOPTED THE VALU OF RS. 15 PER SQ.FT MAINLY FOR TWO REASONS; FIRSTLY THE APPENDIX - A OF THE VALUERS REPORT, WHICH WOULD DEAL WITH THE COMPARABLE INSTANCES WAS NOT FURNISHED, SECONDLY, THE RATES OBTAINED FROM THE SUB REGISTRAR SHOWED PREVALENT VALUES OF PROPERTY IN THE VICINITY OF WHERE ASSESSEES PROPERTY WAS LOCATED AND COULD THEREFORE, BE ADOPTED. IN THIS CONNECTION, IT IS NECESSARY TO NOTE THAT THE CHART RELIED UPON BY THE AO GIVING VALUES OF THE PROPERTIE S DURING THE PERIOD 1981 - 82 RANGING TO RS. 15/ - TO RS. 83/ - . THE AO HAS ADOPTED THE VALUE OF RS. 15/ - PER SQ.FT. WITHOUT DISCUSSING WHY THIS IS MOST APPROPRIATE IN THE CIRCUMSTANCES. AS POINTED OUT BY THE AR. IN THE WRITTEN SUBMISSIONS, THE VALUE OF RS. 15 PER SQ.FT. REFERS TO THE GIFT DEED, THIS MAY NOT BE THE MOST APPROPRIATE IN DETERMINING THE VALUE OF THE ASSESSEES PROPERTY. ALTHOUGH AR HAS RAISED VARIOUS OBJECTIONS AND POINTED OUT INSTANCES OF ERRORS IN THE CHART RELIED UPON BY THE AO I AM OF THE OPIN ION THAT THESE ERRORS DO NOT VITIATE THE ACTION OF THE AO IN RELYING UPON THE VALUES OBTAINED FROM THE SUB REGISTRA, CIVIL LINES. I THEREFORE, HOLD THAT THE INFORMATION OBTAINED BY THE AO CAN BE RELIED UPON THE ASCERTAIN COST AS ON 01.04.1981. THIS INFORMA TION APPEARS RELEVANT WHEN COMPARED TO THE REPORT OF THE REGISTERED VALUER. THE REGISTERED VALUER HAS RELIED ON TWO SALE INSTANCES IN THE SAME MOUZA GADGA WHICH ARE VALUE RS. 81/ - AND RS. 85/ - . THE ANNEXURE A TO THE VALUATION REPORT WAS NOT FURNISHED TO THE AO INSPITE OF BEING GIVEN SEVERAL OPPORTUNITIES. THE OTHER SALE INSTANCES AS PER APPENDIX A ARE NOT IN THE VICINITY OF THE - 6 - ITA 08 & 25/NAG/2011 ASSESSEES PROPERTY I.E. MOUZA GADGA. THE SALE INSTANCE OF RS. 100/ - RELIED UPON BY REGISTERED VALUER IN APPENDIX A IS IN ANO THER MOUZA JARIPATKA, IT IS THEREFORE, NOT COMPARABLE. I AM THEREFORE UNABLE TO UPHOLD THE APPELLANTS CONTENTION THAT BASED ON THE REGISTERED VALUERS REPORT COST OF RS. 125/ - IS TO BE ADOPTED. 4.2 HOWEVER, CONSIDERING THE NATURE AND EXTENT OF THE APPELLANTS PROPERTY AND GIVING DUE ALLOWANCE TO THE SUPERIOR LOCATION OF THE PROPERTY IT WOULD BE APPROPRIATE TO ADOPT THE RATE OF RS. 80/ - PER SQ.FT. IN ARRIVING AT SUCH A CONCLUSION I HAVE TAKEN NO TE OF THE FACT THAT THE INSTANCES OF SALE ARE AVAILABLE FROM THE DETAILS OBTAINED FROM THE SUB REGISTRAR FOR THE MOUZA GADGA FOR A.Y.R. 1981 - 82 RANGE FROM RS. 15/ - TO RS. 83/ - . THE RANGE OF VALUES FOR MOUZA GADGA IN THE REPORT OF THE REGISTERED VALUER AS P ER APPENDIX A IS BETWEEN RS. 81/ - TO RS. 85/ - . THE VALUE OF RS. 80/ - PER SQ.FT. WOULD LIE IN THE MID RANGE OF VALUES CONSIDERING THE SEPARATE SET OF PROPERTY VALUES RELIED UPON BY THE AO AND THE APPELLANT AO IS DIRECTED TO ADOPT COST AT RS. 80 PER SQ. FT . AS AGAINST RS. 15/ - ADOPTED IN THE ASSESSMENT ORDER. THIS GROUND IS THEREFORE, PARTLY ALLOWED. 4. LD. AR ARGUED BEFORE US AS WELL AS FILED THE WRITTEN SUBMISSION ASSESSEES SUBMISSIONS ARE AS UNDER: - WITH REGARD TO THE COST OF LAND AS ON 01.04.1981 IT IS SUBMITTED THAT THE A.O. RELIED ON SALE INSTANCES OF WARD NO.70 AND 71 ON TEMPLE ROAD ON MOUZA GADGA. WHILE THE ASSESSEES PROPERTY IN QUESTION IS IN WARD NO.66 IN MOUZA GADGA AND ON MAIN V.I.P. ROAD. THUS THE SALE INSTANCES CITED BY THE A.O. ARE NO T COMPARABLE. EVEN IN RESPECT OF SUCH SALE INSTANCES THE SAME ARE AT RS.83/ - PER SQ.FT. WHILE ASSESSEES LOCATION - 7 - ITA 08 & 25/NAG/2011 IF FAR MORE SUPERIOR, ON MAIN ROAD AND AT STRATEGIC LOCATION. THUS THE VALUE OF SUCH LAND HAS TO BE FAR MORE THAN THE SALE INSTANCES CITED BY A.O. AS STATED EARLIER THE LAND IN QUESTION AND SURROUNDING LANDS AND BUNGLOWS BELONGED TO ARISTOCRATIC PEOPLE AND THEY NEVER NEEDED TO SELL THEM AND HENCE THERE ARE NO SALE INSTANCES OF NEARABOUT PLOT OR BUNGLOW IN 1981 WHICH CAN BE SAID TO BE COMPARABLE. HENCE THE VALUER FIRST CONSIDERED THE VALUE OF SALE INSTANCES OF INFERIOR LOCATION AND LITTLE FAR AWAY BUT IN MOUZA GADGA ITSELF. VALUATION OF SUCH PROPERTY VARIED BETWEEN RS.81.42, RS,85 AND RS.88/ - PER SQ.FT. THEN SINCE THERE WERE NO COMPARABLE SALE INS TANCES OF NEAR BY PLOTS HE CONSIDERED THE VALUE OF NEARBY MOUZA WHERE THE VALUE WAS OF RS.100/ - PER SQ.FT. IN 1981. THEN HE CONSIDERED THE MERITS OF THE LAND IN QUESTION AS COMPARED TO SAID SALE INSTANCES OF DIFFERENT LANDS CITED BY HIM. HE POINTED OUT THA T THE LAND IN QUESTION WAS ON MAIN VIP ROAD WHICH IS ONE OF THE BEST LOCATION OF THE CITY. THE AREA IS OCCUPIED BY ARISTOCRATIC PEOPLE OF THE CITY. NEARABOUT THE SAID LAND THERE ARE GOVT. OFFICES AND PUBLIC SECTOR OFFICES. THE VIP ROAD IS WIDE AND THE AREA IS CONSIDERED SAFE. THUS CONSIDERING THE STRATEGIC LOCATION OF THE PROPERTY AND CONSIDERING THE VALUE OF DISTANT OR INFERIOR LOCATION WHICH VARIED UPTO RS.100/ - PER SQ.FT., THE VALUER ADOPTED THE VALUE OF LAND IN QUESTION AT RS.125/ - PER SQ.F T. WHICH IS MOST REASONABLE. HENCE C.I.T.(A) SHOULD HAVE ACCEPTED THE SAME. THERE WAS NO INFIRMITY IN THE SAID VALUATION REPORT. ASSESSEE FURTHER POINTED OUT THAT TOWN PLANNING AUTHORITY VALUED THE PROPERTY OF THE AREA FOR THE PURPOSE OF STAMP DUTY IN THE YEAR 1989 AT RS.190/ - PER SQ.FT. THUS CONSIDERING THE INCREASE IN PRICES BETWEEN 1981 TO 1989 AT NORMAL RATE OF INFLATION THE VALUE OF PLOT IN QUESTION COMES TO RS.118/ - PER SQ.FT. IN 1981. THIS WILL SHOW THAT THE VALUATION OF PROPERTY AT RS.125/ - AS CLAIM ED - 8 - ITA 08 & 25/NAG/2011 BY THE ASSESSEE WAS MOST REASONABLE AND HENCE THE LEARNED C.I.T.(A) SHOULD HAVE ACCEPTED THE SAME AT RS.125/ - PER SQ.FT. AS CLAIMED BY THE ASSESSEE. IT IS SUBMITTED THAT THE VALUE OF THE PLOT AS ON 01.04.1981 BE KINDLY ACCEPTED AT RS.125/ - PER SQ.FT. AS CLAIMED BY THE ASSESSEE. 5. ON THE OTHER HAND LD. DR RELIED UPON THE ORDER OF ASSESSING OFFICER. 6. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT CIT (A) HAS RELIED UPON THE SALE IN STANCES AND GIFT INSTANCES ON THE TEMPLE ROAD OF WARD NO. 70 & 71OF MOUZA GADGA WHEREIN VALUE OF LAND IN 1981VARIED BETWEEN RS. 15/ - PER SQ. FT. TO RS. 83/ - PER SQ.FT. THE CIT (A) APPEAL HAS RELIED UPON THE VALUATION REPORT AND SALE INSTANCES OF MOUZA GADG A IS ALSO DISTANCE PLACES FROM LAND IN QUESTION WHICH VARIED BETWEEN RS. 81 TO 85/ - PER SQ.FT. THE ASSESSEES LAND IS ON MAIN VIP ROAD AND AREA WAS IN OCCUPATION OF ARISTOCRATS OF NAGPUR AND THERE WERE NO SALE INSTANCE IN 1981 IN RESPECT OF SAID LAND. WE F IND THAT LAND OF STRATEGIC VALUE OF NEARBY MOUZA GADGA WHICH WAS AT RS. 100/ - PER SQ.FT. KEEPING IN VIEW THE FACT THAT ASSESSEES LAND WAS ON ONE OF THE BEST AREA OF NAGPUR AND ON THE MAIN ROAD. WE HAVE ALSO GONE THROUGH THE REPORT OF VALUATION OF PROPERTY GIVEN BY BEDI CONSULTANTS. HE HAS SEARCHED THE DOCUMENTS FOR 1980 81 AND 82 PARTICULARLY FOR MOUZA GADGA AND THAT TO ADJACENT TO THIS PARTICULAR PROPERTY BUT THERE IS NO RECORD OF SALE PURCHASE AVAILABLE WITHIN PERIPHERAL AREA OF 1 KM AS THE PROPERTY BE LONG TO VERY RICH AND SUPER CLASS PERSONALITIES. THE SALE INSTANCES SHOWS THAT ASSESSEES LAND WAS EVEN MUCH SUPERIOR TO THE SALE INSTANCES OF RS. 100/ - PER SQ.FT CITED BY VALUER. IN THIS CIRCUMSTANCES RELYING UPON THE SALE INSTANCES CITED BY BEDI CONSULTA NTS HAS TO ADOPTED BUT WE ARE OF THE VIEW THAT BEDI CONSULTANT HAS VALUE THE PLOT OF LAND AT RS. 25 PER SQ.FT AS ON 1.04.1981 WITHOUT ANY SALE INSTANCES. - 9 - ITA 08 & 25/NAG/2011 THEREFORE, LOOKING TO THE AREA AND SALE INSTANCES COLLECTED BY BEDI CONSULTANT WE DIRECT TO ADOPT THE VALUE AT RS. 110/ - AS AGAINST RS. 80/ - ADOPTED BY CIT (A). 7. IN THE RESULT ASSESSEES GROUND NO. 1 IS PARTLY ALLOWED AND DEPARTMENTAL GROUND NO. 1 IS DISMISSED. 8. GROUND NO. 2 TO 6 OF ASSESSEES APPEAL AND GROUND NO. 3 AND 4 OF THE DEPARTMENTS APPEAL AR E RELATES TO THE NATURE OF STRUCTURE HOUSE AND ITS VALUE AND INDEXATION, THEREFORE IT IS TAKEN UP TOGETHER. 9. THE SHORT FACTS OF THE CASE ARE AS UNDER: - THE AO HAS EXAMINED THE NATURE AND STRUCTURE OF 1150 SQ.FT MENTIONED IN SALE DEED AND HE HAS DETERM INED THE COST OF THE STRUCTURE AT NIL. THE AO WAS OF VIEW THAT RECITAL OF SALE DEED MENTIONS EXISTENCE OF TEMPORARY STRUCTURE OF 1150 SQ.FT , THE MAP ANNEX TO THE SALE DEED DOES NOT MENTION ANY STRUCTURE, THEREFORE, HE HAS TAKEN COST AT NIL, THEREFORE, HE DID NOT ALLOWED ANY DEDUCTION OF COST FOR TEMPORARY STRUCTURE. 10. MATTER CARRIED TO CIT (A) AND CIT (A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: - 6.5 IT IS THUS THAT CLEAR THAT ONLY THE FOLLOWING FACTS CAN BE ACCEPTED INDISPUTABLY. WHEN THE LAND WAS INHERITED BY WILL FROM HIS FATHER, THE WILL CLEARLY STATES THAT WHAT IS BEQUEATHED IS A PLOT OF LAND ON WHICH THERE IS NO CONSTRUCTION. THE AO HAS RIGHTLY PLACED RELIANCE ON THE RECITAL IN THE WILL. FURTHER IN THE SALE DEED THERE IS A DESCRIPTION OF A TEM PORARY STRUCTURE. THE ATTEMPTS OF THE ASSESSEE TO CHANGE THIS DESCRIPTION HAVE BEEN RECORDED IN THE ASSESSMENT ORDER AND CAN ONLY BE TAKEN TO HAVE BEEN MADE FOR THE PURPOSE OF OBTAINING AN UNDUE BENEFIT. THEREFORE I AM UNABLE TO FIND ANY MERIT IN THE SUBMI SSION OF THE AR THAT - 10 - ITA 08 & 25/NAG/2011 IT SHOULD BE ACCEPTED THAT THERE EXISTED AN OLD BUNGALOW ON THE LAND SOLD AND THAT THIS PROPERTY SHOULD BE ASSIGNED A VALUE OF RS. 3 LAC AND INDEXATION ALLOWED FROM 1981. THE EVIDENCE FURNISHED BEING MUNICIPAL TAX RECEIPTS FOR 2004 - 05 AND THE AKHIV PATRA DT. 31/07/2002 ALSO DOES NOT SUPPORT THE CONTENTION OF THE ASSESSEE THAT HE INHERITED AN OLD BUNGALOW FROM HIS FATHER. THE PROPERTY IS STATED TO BE A TEMPORARY STRUCTURE AS PER THE SALE DEED THE VALUE ASSIGNED TO THIS IS STATED TO BE R S. 1,500/ - PER SQ.FT. CONSIDERING THE ISSUE FROM ALL ANGLES, I AM OF THE VIEW THAT THE COST OF THIS STRUCTURE CAN ONLY BE ESTIMATED APPROXIMATELY AND ADOPTED AT RS. 1 LAC. SINCE THERE IS NO EVIDENCE FURNISHED OF THE EXISTENCE OF THIS STR UCTURE PRIOR 31.07. 2002 I.E. TH E DATE OF THE AKHIV PATRA THE INDEXATION IS ALLOWED ONLY W.E.F. F. Y R. 2002 - 03. THIS IS, THEREFORE, PARTLY ALLOWED. 11. LD. AR ARGUED AND SUBMITTED AS UNDER: - SECOND ISSUE IS REGARDING THE NATURE OF STRUCTURE AND ITS VALUE. ASSESSEE POINTE D OUT THAT THERE EXISTED A HOUSE PROPERTY BEARING HOUSE NO.240 - A ON THE SAID PLOT AND THIS WAS SUPPORTED BY HOUSE TAX RECEIPT OF 2004 - 05 WHEREIN WATER RATE, CONSERVANCY TAX ETC. WAS CHARGED IN RESPECT OF THE SAID HOUSE APART FROM PROPERTY TAX. ASSESSEE ALS O HAD FILED AKHIV PATRIKA OF THE PROPERTY INHERITED BY HIM FROM HIS FATHER. HE OBTAINED CERTIFIED COPY OF AKHIV PATRIKA IN 2002 AND HAD FILED IT BEFORE A.O. WHICH CLEARLY SHOWED U SHAPE HOUSE PROPERTY EXISTING ON THE SAID LAND. AKHIV PATRIKA WAS THE MOST A UTHENTIC DOCUMENT WHICH PROVED THE EXISTENCE OF A HOUSE. ASSESSEE IN HIS STATEMENT HAD ALSO GIVEN THE FULL DESCRIPTION OF THE PROPERTY AS CONTAINING TWO HALLS, FOUR ROOMS ETC. AS BEING USED AS A GUEST HOUSE. EVEN ELECTRIC BILL IN SUPPORT THE HOUSE AND ITS USE FOR - 11 - ITA 08 & 25/NAG/2011 RESIDENCE WAS FILED. ALL THESE PROVED BEYOND DOUBT THE EXISTENCE OF A HOUSE PROPERTY. LEARNED A.O. RELIED ON THE WILL DT.16.04.1995 WHICH WAS EXECUTED IN A HURRY WHEN ASSESSEES FATHER WAS ON DEATH BEAD. HE DIED ON 26.04.1995. IN THE SAID WILL THERE WERE BEQUEST OF VARIOUS PROPERTIES. IN RESPECT OF THE PROPERTY IN QUESTION IT WAS STATED THAT 45% OF THE PROPERTY WHERE THERE IS A BUNGLOW IS GIVEN TO MANSINGH AND REST OF 55% OF LAND WHERE THERE IS NO CONSTRUCTION IS GIVEN TO LAXMANSINGH ASSESSEE . IT WAS EXPLAINED THAT ON THE PORTION ALLOTTED TO MANSINGH THERE WAS A BIG BUNGLOW WHICH WAS LET OUT TO LABOUR COMMISSIONERS OFFICE WHILE ON THE PORTION ALLOTTED TO ASSESSEE THE HOUSE WAS USED AS GUEST HOUSE AND WAS NOT LET OUT TO ANY ONE. HENCE THE REAL DISTINCTION WHICH WAS INTENDED WAS THAT ON ONE PORTION THERE WAS A BUNGLOW WHICH WAS LET OUT WHILE ON OTHER PORTION THERE WAS A SMALLER STRUCTURE WHICH WAS NOT LET OUT. THUS THE REAL DISTINCTION BETWEEN THE TWO PORTION WAS THAT ON PORTION WAS LET OUT WHIL E OTHER PORTION WAS NOT LET OUT. REAL DISTINCTION WAS NOT ABOUT ONE PORTION HAVING A STRUCTURE AND ONE PORTION HAVING NO STRUCTURE. REAL DISTINCTION WAS THAT ONE PORTION WAS LET OUT AND STRUCTURE ON OTHER PORTION WAS NOT LET OUT. IT WAS POINTED OUT THAT SU CH NARRATION OR INADVERTENT DESCRIPTION HAD NO IMPACT ON THE ACTUAL BEQUEST. AREA ALLOTTED TO MANSINGH WAS 45% OF PROPERTY ON SOUTHERN SIDE AND 55% AREA ALLOTTED TO ASSESSEE WAS ON NORTHERN SIDE. INNER DESCRIPTION OF WHAT STRUCTURE EXISTED ON WHAT AREA AND HOW MUCH ETC. WAS NOT RELEVANT AND HENCE A.O. AND C.I.T.(A) WERE NOT JUSTIFIED IN GIVING UNDUE IMPORTANCE TO THE SAID INADVERTENT DESCRIPTION IN THE WILL WHICH HAD NO IMPACT ON ACTUAL BEQUEST. THE FACT OF EXISTENCE OF U SHAPE HOUSE PROPERTY WAS EVIDENCED BY MOST AUTHENTIC DOCUMENT VIZ. AKHIV PATRIKA. AKHIV PATRIKA HAD GIVEN DESCRIPTION OF PLOT WITH ALL STRUCTURES THEREON - 12 - ITA 08 & 25/NAG/2011 ALONG WITH MAP WHICH WAS AS PER SCALES. LEARNED C.I.T.(A) ALSO HELD IN PARA 6.4 OF HER ORDER THAT AKHIV PATRIKA DT.31.07.2002 CAN BE TAKE N AS EVIDENCE THAT STRUCTURE EXISTED. HOWEVER SHE ASSUMED THE STRUCTURE TO BE TEMPORARY. THERE WAS NEITHER ANY BASIS OR MATERIAL FOR ASSUMING ONLY A TEMPORARY STRUCTURE. IN FACT THE SAME WAS CONTRARY TO EVIDENCE AND MATERIAL ON RECORD. HOUSE TAX R ECEIPT FOR HOUSE NO.240 - A PROVED EXISTENCE OF HOUSE ON THE SAID PLOT WHEREIN CONSERVANCY TAX AND WATER RATE TAX WERE ALSO CHARGED (P.41). SIMILARLY ELECTRICITY BILL ALSO SHOWED CONSUMPTION OF ELECTRICITY (SEE P.42). ASSESSEE IN HIS STATEMENT RECORDED BY A. O. POINTED OUT THAT THE HOUSE EXISTING ON THE SAID PLOT CONTAINED TWO HALLS, FOUR ROOMS ETC. AND THAT THE SAME WAS BEING USED AS A GUEST HOUSE. THUS THE EXISTENCE OF A PUCCA U SHAPE HOUSE WAS PROVED BEYOND DOUBT BY (I) AKHIV PATRIKA, (II) HOUSE TAX RECEIP T, (III) ELECTRICITY BILL AND (IV) STATEMENT OF THE ASSESSEE. LEARNED C.I.T.(A) UNNECESSARILY TWISTED THE FACTS AND SAID THAT AKHIV PATRIKA WAS DT.31.07.2002 AND MUNICIPAL TAX RECEIPT WAS OF 2004 - 05 AND HENCE THESE DOCUMENTS DO NOT SUPPORT THE FACT THAT TH E PROPERTY INHERITED BY ASSESSEE IN 1995 CONTAINED A BUNGLOW. IT IS NOBODYS CASE THAT AFTER THE PROPERTY WAS INHERITED IN 1995 ASSESSEE MADE ANY NEW STRUCTURE. CERTIFIED COPY OF AKHIV PATRIKA THOUGH OBTAINED ON 31.07.2002 ,IT WAS THE CERTIFIED COPY OF AKH IV PATRIKA OF PROPERTY AS EXISTING FROM FATHERS TIME. THUS C.I.T.(A) CANNOT ASSUME THAT STRUCTURE CAME INTO EXISTENCE ON AND AFTER 31.07.2002 AND THAT TOO A TEMPORARY STRUCTURE. SIMILARLY THE HOUSE TAX RECEIPT OF 2004 - 05 WAS FILED BY WAY OF SAMPLE. HOUSE PROPERTIES BEARING NO.240 AND 240 - A EXISTED FROM FATHERS TIME. HENCE THE ASSESSEE FILED TAX RECEIPT OF BOTH THE HOUSES VIZ. HOUSE NO.240 ALLOTED TO MANSINGH AND HOUSE NO.240 - A THAT COME TO THE SHARE OF THE ASSESSEE. THERE ARE TAX RECEIPTS OF EARLIER YEARS - 13 - ITA 08 & 25/NAG/2011 RIGHT FROM BEGINNING. THUS THE EXISTENCE OF HOUSES ON 240 ON PORTION OF MANSINGH AND HOUSE NO.240 - A ON PORTION OF THE ASSESSEE IS PROVED BEYOND DOUBT. FURTHER IN THE STATEMENT OF THE ASSESSEE HE HAS CLEARLY POINTED OUT THE EXISTENCE OF HOUSE HAVING TWO HALLS, FOUR ROOMS ETC. AND THE SAME WAS BEING USED AS GUEST HOUSE. THERE WAS NO REBUTTAL TO THE SAID FACT. THUS WHAT EXISTED ON THE PLOT WAS A PUCCA HOUSE USED AS GUEST HOUSE AND WHICH WAS BEARING HOUSE NO.240 - A. EVEN THE SALEDEED DESCRIBES THE PROPERTY A S BEARING HOUSE NO.240 - A. IT WAS ALREADY EXPLAINED THAT MERE STATEMENT IN SALEDEED AS TEMPORARY STRUCTURE WAS CONTRARY TO AKHIV PATRIKA, HOUSETAX RECEIPT, ELECTRIC BILL, STATEMENT OF ASSESSEE AND DESCRIPTION IN THE SALEDEED ITSELF AS HOUSE NO.240 - A. SALEDE ED WAS GOT DRAFTED BY THE PURCHASER WHO IS A BUILDER AND IT WAS IN HIS INTEREST TO DESCRIBE IT AS TEMPORARY STRUCTURE SO THAT IT ATTRACTS LESSER STAMP DUTY WHILE IT MADE NO DIFFERENCE TO THE ASSESSEE SELLER WHATEVER WAY THE SAID STRUCTURE WAS DESCRIBED. ALL THESE ASPECTS HAVE BEEN DEALT WITH BY ASSESSEE IN HIS WRITTEN STATEMENT DT.13.11.2010 BEFORE C.I.T.(A) PAGES 98 TO 116. RELEVANT PARA 6 TO PARA 8 PAGE 106 TO 113 . THE SAID ENTIRE MATERIAL VIEWED AS A WHOLE CLEARLY PROVE THAT (I) THERE EXISTED A PUCCA H OUSE HAVING 2 HALLS AND FOUR ROOMS (II) ITS AREA WAS APPROXIMATELY 2500 (SEE PAGE 112 OF PAPERBOOK) (III) IT WAS USED AS A GUEST HOUSE AND (IV) THE VALUE THEREOF AT RS.170/ - PER SQ.FT. FOR 2500 SQ.FT. WOULD BE RS.4,25,000/ - AND CONSIDERING ITS AGE IT CANNO T BE LESS THAN RS.3,00,000/ - . THUS LEARNED C.I.T.(A) SHOULD HAVE HELD THAT THERE EXISTED AS PUCCA RESIDENTIAL HOUSE ON THE AID LAND HAVING AN APPROXIMATE VALUE OF RS.3,00,000/ - . THIS WOULD HAVE BEEN MOST JUST AND FAIR. THUS THE FINDING OF LEARNED C.I.T.(A) IN PARA 6.5 ON PAGE 11 BOTTOM - 14 - ITA 08 & 25/NAG/2011 AND PAGE 12 THAT THE STRUCTURE WAS TEMPORAR Y AND ITS VALUE WAS RS. ONE LAKH S NEEDS TO BE SET ASIDE AND CANC ELLED AND BE MODIFIED AS ABOVE. 12. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES LOOKING TO THE FACTS AND CIRCUMSTANCES, WE FIND THAT CIT (A) HAS HELD THAT LAND WAS INHERITED BY WILL FROM HIS FATHER AND WILL CLEARLY STATES THAT THERE IS A PLOT OF LAND ON WHICH THERE IS NO CONSTRUCTION. THE CIT (A) HAS RIGHTLY HELD THAT THERE IS A DESCRIPTION OF TEMPORARY STRUC TURE. WE FIND THAT CIT (A) HAS HELD THAT AKHIV PATRIKA WHICH STATES THAT THE STRUCTURE EXISTED ON THE LAND. THE CIT (A) IS NOT JUSTIFIED IN HOLDING THAT ASSESSEE IS ENTITLE FOR INDEXATION W.E.F. F.Y. 2002 - 03. WE FIND THAT THE HOUSE TAX RECEIPT FOR HOUSE NO . 240 A PROVED EXISTENCE OF HOUSE ON THE SAID PLOT WHEREIN CONVERSANCY TAX AND WATER RATE TAX HAS BEEN CHARGED. SIMILARLY ELECTRICITY BILL SHOWS CONSUMPTION OF ELECTRICITY. WE FIND THAT ASSESSEES STATEMENT WAS RECORDED BY AO WHEREIN HE HAS POINTED OUT THA T HOUSE EXISTED ON THE SAID PLOT CONTAINS TWO HALL FOUR ROOMS AND SAME BEING USED AS GUEST HOUSE. THUS, WE ARE OF THE VIEW THAT THERE IS EXISTENCE PAKKA U SHAPE HOUSE WHICH IS PROVED BY AKHIV PATRIKA, HOUSE TAX RECEIPT, ELECTRICITY BILL AND STATEMENT OF TH E ASSESSEE. WE FIND THAT AKHIV PATRIKA SHOWS THAT THE PROPERTY WAS EXISTING FROM ASSESSEES FATHERS TIME, THEREFORE, WE ARE OF THE VIEW THAT ASSESSEE IS ENTITLED FOR INDEXATION FROM 01/04/1981 AND CIT (A) IS NOT JUSTIFIED IN ALLOWING INDEXATION FROM F.Y 2 002 - 03. IN RESPECT OF THE VALUE OF THE STRUCTURE THE CIT (A) HAS TAKEN THE VALUE AT RS. 1 LAC ON ESTIMATED BASIS AND ASSESSEE IS NOT HAVING ANY DOCUMENTARY EVIDENCE TO SHOW THAT THE VALUE OF THE PROPERTY IS 3 LAKHS, ONE HAS TO ESTIMATE THE VALUE OF THE STR UCTURE THEREFORE WE ESTIMATE THE VALUE OF STRUCTURE AT RS. 2,00000/ - . ASSESSEE IS ENTITLED FOR INDEXATION FROM 01/04/1981. - 15 - ITA 08 & 25/NAG/2011 13. IN THE RESULT ASSESSEES GROUNDS OF APPEAL ARE PARTLY ALLOWED AND DEPARTMENTS GROUND IS DISMISSED. 14. GROUND NO. 7 OF ASSESSEE S APPEAL: - THE SHORT FACTS OF THE CASE ARE AS UNDER: - ASSESSEE CLAIMED TO HAVE MADE AN ADDITION TO PROPERTY IN THE YEAR 2001 - 02 AT COST OF RS. 668587/ - AND DEDUCTED INDEX COST THERE OF RS. 753337/ - AGAINST THE SALE CONSIDERATION. IN SUPPORT OF THE CLA IM ASSESSEE ATTACHED A COPY OF BALANCE SHEET OF M/S MAHARAJA LAWNS. THIS BALANCE SHEET FOR THE YEAR ENDING 31 ST MARCH 2002 SHOWS ADDITION OF RS. 668587/ - . THE AO FOUND THAT BALANCE SHEETS RELATES TO M/S MAHARAJA LAWNS OF WHICH MRS INDRARAJE L BHONSLE WAS P ROPRIETOR THEREFORE AO HAS NOT ALLOWED THE DEDUCTION. 15. MATTER CARRIED TO CIT (A) AND CIT (A) HAS PARTLY ALLOWED THE CLAIM. 16. LD. AR SUBMITTED AS UNDER: - WITH REGARD TO ADDITION OF RS.6,68,587/ - BEING ADDITIONAL COST OR IMPROVEMEN T TO THE PROPERTY AND CLAIMED AS DEDUCTION BY THE ASSESSEE IN COMPUTING CAPITAL GAIN THE LEARNED A.O. AND C.I.T.(A) DISALLOWED THE SAME ON THE GROUND THAT THE SAID COST WAS NOT INCURRED BY THE ASSESSEE. ASSESSEE HAD GIVEN THE SAID PROPERTY ON LICENCE T O HIS WIFE SMT. INDIRARAJE FOR DOING THE BUSINESS OF MARRIAGE LAWN UNDER THE NAME OF MAHARAJA LAWNS. ASSESSEES WIFE WAS MAINTAINING REGULAR BOOKS FOR HER SAID BUSINESS. BALANCESHEET OF SAID MAHARAJA LAWNS (PAGE 69 OF PAPERBOOK) SHOWED RS.6,68,587/ - AS CON STRUCTION DURING THE YEAR I.E. Y.E.31.03.2002. THERE WAS AN OPENING BALANCE OF RS.4,89,371/ - . ADDITION OF RS.6,68,587/ - . TOTAL BEING RS.11,57,959/ - . DEPRECIATION THEREON WAS RS.82,366/ - FOR Y.E.31.03.2002. WHEN THE LICENCE CAME TO - 16 - ITA 08 & 25/NAG/2011 AN AND THE SAID PLOT OF L AND WITH SAID ADDITIONAL STRUCTURE REVERTED BACK TO THE ASSESSEE AND HE WAS THE OWNER OF THE SAID STRUCTURE. THUS ACCORDING TO THE ASSESSEE THE COST OF STRUCTURE INCREASED OR IMPROVED BY RS.6,68,587/ - AND HENCE HE WAS ENTITLED TO THE DEDUCTION OF THE SAME AS COST OR AS IMPROVEMENT WHILE COMPUTING THE CAPITAL GAIN. C.I.T.(A) DISALLOWED THE CLAIM (PARA 7.1 PAGE 13 OF HER ORDER) STATING THAT WHEN THE COST OF IMPROVEMENT HAS NOT BEEN INCURRED BY THE ASSESSEE AND WHEN THE STRUCTURE HAS NOT COME BY WAY OF INHERIT ANCE, THE ASSESSEE IS NOT ENTITLED TO DEDUCTION. IT IS SUBMITTED THAT THE FACT THAT THERE WAS AN ADDITION TO THE STRUCTURE BY RS.6,68,587/ - IN THE YEAR 2001 - 02 IS NOT IN DISPUTE. HOWEVER IT IS TRUE THAT SUCH COST WAS INCURRED BY THE LICNECEE AND SHE ALSO G OT DEPRECIATION ON THE SAME. BUT THE FACT REMAINS THAT WHEN THE LICNECEE CAME TO AN END THE PLOT OF LAND WITH STRUCTURE REVERTED BACK TO THE ASSESSEE AS OWNER AND THAT TOO WITH IMPROVED VALUE. MERELY BECAUSE LICNECEE INCURRED THE EXPENDITURE IS NOT MATERIA L. AS FAR AS THE ASSESSEE IS CONCERNED HIS CAPITAL ASSET GOT IMPROVED BY RS.6,68,587/ - AND HENCE WHILE COMPUTING THE CAPITAL GAIN THE ASSESSEE WAS ENTITLED THE DEDUCTION OF THE SAID AMOUNT. COST OF HIS CAPITAL ASSET GOT INCREASED OR IT GOT IMPROVED BY RS. 6,68,587/ - AND HENCE THE SAME IS ALLOWABLE AS COST AND/OR COST OF IMPROVEMENT WHILE COMPUTING CAPITAL GAIN. 17. LD. DR RELIED UPON ORDER OF REVENUE AUTHORITIES. 18. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE P ARTIES LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT ADDITIONAL COST OF IMPROVEMENT TO THE PROPERTY HAS BEEN INCURRED BY ASSESSEES WIFE. THE ASSESSEE HAS GIVEN LICENCE TO HIS WIFE FOR DOING THE BUSINESS OF MARRIAGE LAWNS - 17 - ITA 08 & 25/NAG/2011 UNDER THE NAME O F MAHARAJA LAWNS. ASSESSEES WIFE WAS MAINTAINING REGULAR BOOKS FOR THE SAID BUSINESS. WHEN THE LICENCE COME TO END THE SAID PLOT OF LAND WITH ADDITIONAL STRUCTURE REVERTED BACK TO THE ASSESSEE. IN VIEW OF THE DEFINITION OF COST OF IMPROVEMENT GIVEN U/S 55 (2)(II), THE EXPENDITURE FOR ADDITIONS/ ALTERATIONS MUST BE INCURRED BY ASSESSEE. THIS EXPENDITURE HAS NOT BEEN INCURRED BY ASSESSEE THEREFORE; ASSESSEE IS NOT ENTITLED FOR DEDUCTION FOR THE SAME AS COST WHILE COMPUTING THE CAPITAL GAIN. THUS THIS GROUND O F ASSESSEES APPEAL IS DISMISSED. 19. GROUND NO. 8 OF ASSESSEES APPEAL: - THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 54F ON THE COST OF FLAT PURCHASED AT RS. 2306520/ - . THE AO HELD THAT ASSESSEE HAS NOT SHOWED RESIDENTIAL PROPERTY THEREFORE HE IS NOT ENTITLED FOR DEDUCTION U/S 54F OF I.T. ACT. 20. MATTER CARRIED TO CIT (A) AND CIT (A) DISMISSED THIS GROUND OF THE ASSESSEE. 21. THE LD. AR SUBMITTED AS UNDER: - LEARNED C.I.T.(A) DID NOT ALLOW DEDUCTION TO THE ASSESSEE U/S.54 IN RESPECT OF ANOTHER HOUSE PURCHASED WITHIN THE STIPULATED TIME FOR RS.23,06,520/ - WHILE COMPUTING THE CAPITAL GAIN MERELY ON THE GROUND THAT WHAT THE ASSESSEE SOLD WAS A TEMPORARY STRUCTURE AND NOT A RESIDENTIAL HOUSE AND HENCE HE WAS NOT ENTITLED TO DEDUCTION U/S. 54. ASSESSEE HAS ESTABLISHED THAT WHAT THE ASSESSEE SOLD WAS A PUCCA HOUSE BEARING HOUSE NO.240 - A HAVING 2 HALLS AND 4 ROOMS HAVING APPROXIMATE AREA OF 2500 SQ.FT. AND WHICH WAS USED AS A GUEST HOUSE. AND HENCE THE ASSESSEE WAS ENTITLED TO DEDUCTION OF RS. 23,06,250/ - U/S.54 WHILE - 18 - ITA 08 & 25/NAG/2011 COMPUTING THE CAPITAL GAIN. IT IS SUBMITTED THAT THE ASSESSEE FULFILLS ALL THE CONDITIONS OF SECTION 54. PLEASE ALSO SEE W.S. AT PARA 10(III) PAGES 115 AND 116 OF WRITTEN STATEMENT DT.13.11.2010. LD. DR RELIED UPON ORDER OF REVEN UE AUTHORITIES. 22. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE HAS PURCHASED A FLAT AT COST OF RS. 2306520/ - WITHIN SPECIFIED PERIOD FROM THE DATE OF SALE U/S 54F OF THE I. T. ACT. WE FIND THAT THE AO HAS DISALLOWED THE CLAIM ON THE GROUND THAT THERE WAS MERELY TEMPORARY STRUCTURE ON THE LAND AND IT WAS NOT A RESIDENTIAL PROPERTY. THE ASSESSEE HAS PRODUCED THE MUNICIPAL TAX RECEIPT, GENERAL TAX RECEIPT AND VALUATION RE PORT SHOWS THAT THERE WAS HOUSE PROPERTY ON THE LAND AND THERE WAS PAKKA HOUSE ON THE LAND. THERE WAS A RESIDENTIAL BUNGALOW ITS AREA ON GROUND FLOOR, MAZANINE FLOOR AND BALCONY ABOUT 2500 SQ.FT AND MUNICIPAL HOUSE NUMBER WAS 240A AND ASSESSEE HAS PAID MUN ICIPAL TAXES WATER CHARGES WHICH SHOWS THAT THERE WAS RESIDENTIAL BUNGALOW ON THE PLOT OF LAND SOLD. THUS, ASSESSEE HAVING SOLD RESIDENTIAL PREMISES ASSESSEE ENTITLED TO THE CLAIM OF DEDUCTION OF RS. 2306520/ - BEING THE COST OF FLAT PURCHASED BY THE ASSESS EE WITHIN STIPULATED TIME FROM THE DATE OF SALE DEED AND ASSESSEE IS ENTITLED TO DEDUCTION U/S 54/54F. IN THE RESULT THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED. 23. GROUND NO. 2 OF DEPARTMENTS APPEAL: - THE SHORT FACTS OF THE CASE ARE AS UNDER: - THE A SSESSEE HAS CLAIMED INDEXATION FROM THE YEAR HE BECAME THE OWNER OF THE ASSET. AO HELD THAT ASSESSEE ASSUMES THE OWNERSHIP IN F.Y. 1983 - 84 BUT HE BECOMES THE OWNER OF ASSETS ONLY IN F.Y. 1995 - 96. THE ASSESSEE IS ENTITLED FOR INDEXATION FROM THE - 19 - ITA 08 & 25/NAG/2011 DATE OF POS SESSION OF THE ASSETS THEREFORE AO ALLOWED THE INDEXATION FROM THE DATE OF POSSESSION OF THE PROPERTY. MATTER CARRIED TO CIT (A) AND CIT (A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: - THE PROVISIONS OF THIS SECTION ARE CATEGORICAL THAT THE PERIODS OF HOLDING IN THE HANDS OF THE PREVIOUS OWNER ARE TO BE INCLUDED WHEN PROPERTY HAS COME INTO THE HANDS OF THE ASSESSEE THROUGH CERTAIN MODES OF ACQUISITION. WHEN PROPERTY IS THEREFORE CONSIDERED TO BE HELD FROM A PARTICULAR DATE IT STANDS TO REASON THAT THE CORRECT COST CAN BE DETERMINED ONLY IF INDEXATION IS ALLOWED FOR THE CORRESPONDING PERIOD. THEREFORE, I FIND MERIT IN THE CONTENTION OF THE AR THAT INDEXATION IS TO BE ALLOWED FROM 01/04/1981. THIS VIEW IS SUPPORTED BY THE DECISION IN THE CASE OF DCIT VS M ANJULAL SHAH [2010] 35 SOT 105 (MUM)(SB), HONBLE SPECIAL BENCH OF THE I.T.A.T., BOMBAY, WHEREIN IT HAS BEEN HELD AS FOLLOWS: WE ARE OF THE VIEW THAT FOR THE PURPOSE OF COMPUTING LONG TERM CAPITAL GAIN ARISING FROM THE TRANSFER OF A CAPITAL ASSET WHICH HAD BECOME PROPERTY OF THE ASSESSEE UNDER GIFT, ;THE FIRST YEAR IN WHICH THE CAPITAL ASSETS WAS HELD BY THE ASSESSEE HAS TO BE D ETERMINED TO WORK OU THE INDEXED COST OF ACQUISITION AS ENVISAGED IN EXPLANATION (III) TO SECTION 48 AFTER TAKING INTO ACCOUNT THE PERIOD FOR WHICH THE SAID CAPITAL ASSET WAS HELD BY THE PREVIOUS OWNER. IN THAT VIEW OF THE MATTER, WE HOLD THAT THE INDEXED COST OF ACQUISITION OF SUCH CAPITAL ASSET HAS TO BE COMPUTED WITH REFERENCE TO THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSET. THIS IS SO ALSO BECAUSE WHEN THE COST OF ACQUISITION TO THE PREVIOUS OWNER AS ON THE DATE OF ACQUISITION OF THE CAPITA L ASSET BY HIM IS TO BE - 20 - ITA 08 & 25/NAG/2011 ADOPTED AS COST OF ACQUISITION TO THE ASSESSEE EVEN FOR THE PURPOSE OF WORKING OUT THE INDEXED COST OF ACQUISITION AS PER THE MEANING GIVEN IN EXPLANATION (III) TO SECTION 48, IT DOES NOT SOUND LOGICAL TO ADOPT THE COST INFLATION IN DEX FOR THE YEAR IN WHICH THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE AND NOT THAT FOR THE YEAR IN WHICH THE ASSET WAS ACQUIRED BY THE PREVIOUS OWNER. IN OUR OPINION, WHEN THE COST OF ACQUISITION OF THE PREVIOUS OWNER AS ON THE DATE OF ACQUISITIO N OF THE CAPITAL ASSET BY HIM IS TO BE TAKEN FOR WORKING OUT THE INDEXED COST OF ACQUISITION, THE ONLY CONCLUSION WHICH LOGICALLY AND REASONABLY FOLLOW IS TO ADOPT THE COST INFLATION INDEX CORRESPONDING TO THAT DATE FOR APPROPRIATELY DETERMINING THE INDEXE D COST OF ACQUISITION. 24. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES; WE FIND THAT ISSUE IN CONTROVERSY IS COVERED BY THE DECISION OF DCIT VS MANJULAL SHAH [2010] 35 SOT 105 (MUM)(SB), HONBLE SPECIAL BENCH OF THE I.T.A.T., BOMBAY. DURING THE COURSE OF HEARING NO CONTRARY DECISION BROUGHT BEFORE US. IN THE RESULT THIS REVENUES GROUND OF APPEAL STAND DISMISSED. 25. THE NEXT ISSUE IS RELATES TO ASSESSEES CLAIM FOR DEDUCTION OF COST OF BOUNDARY WALL OF RS. 320194/ - CONSTRUCTED IN 1987 SHOULD BE ALLOWED. THE ASSESSEE ATTACHED THE COPY OF BILL DT. 19/01/1987 ISSUED BY DINESH CONSTRUCTION. THE WILL IS ISSUED IN ASSESSEES NAME. THE ASSESSEE WAS NOT OWNER OF THE PROPERTY IN 1987 THEREFORE AO HAS DISALLOWED THE CLAIM. 26. MATTER CARRIED TO CIT (A) AN D CIT (A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: - F ROM THE FACTS OF THE CASE, I FIND THAT THE EXISTENCE OF THE BOUNDARY WALL HAS NOT BEEN TAKEN INTO CONSIDERATION, THE ONLY GROUND ON - 21 - ITA 08 & 25/NAG/2011 WHICH THE AO HAS REJECTD THE ASSESSEES CLAIM IS THAT THE BILL DT . 19/01/1987 FURNISHED BY THE ASSESSEE WAS IN THE ASSESSEES NAME WHEN THE ASSESSEE WAS NOT THE OWNER OF THE PROPERTY. WHAT IS MATERIAL TO THE FACTS OF THE CASE IS THAT WHETHER THE BOUNDARY WALL IN QUESTION EXISTED OR NOT. AO HAS SOLELY BASED THIS DECISION OF THE FACTS THAT IT IS NOT POSSIBLE FOR THE ASSESSEE TO BUILD A BOUNDARY WALL IN THE PROPERTY BELONGING TO HIS FATHER IN THE YEAR 1987. THIS ASSUMPTION IS WITHOUT ANY BASIS. WHAT IS TO BE CONSIDERED IS THAT WHEN THE ASSESSEE INHERITED THE PROPERTY THERE EXISTED A BOUNDARY WALL AROUND THE PROPERTY AND IF CERTAIN COST IS SAID TO BE ATTRIBUTABLE TO IT , THE SAME IS TO BE CONSIDERED. THE COST OF CONSTRUCTION OF A BOUNDARY WALL WOULD BE AN IMPROVEMENT TO THE PROPERTY. THE BILL DT. 19/01/1987 ISSUED BY DINESH C ONSTRUCTION CANNOT BE DISCARDED MERELY BECAUSE IT IS IN THE NAME OF THE ASSESSEE AND RELATED TO A PERIOD WHEN HE WAS NOT THE OWNER OF THE PROPERTY. I AM THEREFORE, OF THE VIEW THAT THE COST OF BOUNDARY WALL OF RS. 93,930/ - SHOULD BE INDEXED W.E.F. 1987 AND ALLOWED TO BE DEDUCTED FROM THE SALE CONSIDERATION RECEIVED. 27. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES WE FIND THAT CIT (A) HAS HELD THAT THE BOUNDARY WALL IN QUESTION WAS IN EXISTENCE IN 1987. CIT (A) HAS RELIED UPON THE BILL DT. 19/0 1/9187 FURNISHED BY THE ASSESSEE. THE CIT (A) HAS CONSIDERING THIS FACT HE HAS TAKEN THE COST OF BOUNDARY WALL AT RS. 93,930/ - AND ALLOWED THE INDEXATION W.E.F. FROM 1987 AND ALLOWED THE DEDUCTION FROM SALE CONSIDERATION RECEIVED. AGAINST THIS FINDING REVE NUE HAS NOT BROUGHT ANY CONTRARY FACTS THEREFORE WE HAVE NO ALTERNATIVE EXCEPT TO ENDORSE THE ACTION OF CIT (A). IN THE RESULT DEPARTMENT APPEAL IS DISMISSED ON THIS GROUND. - 22 - ITA 08 & 25/NAG/2011 28. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOWED AND THAT OF THE DEPARTMENTS APPEAL IS DISMISSED. JUDGMENT PRONOUNCED IN OPEN COURT ON 09/11/2 012 . SD/ - SD/ - (P. K. BANSAL) (D. T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER NAGPUR DATED: - 09.11 .2012 *NANU * COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT, NAGPUR 4. CIT(A), NAGPUR 5. D.R 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR I.T.A.T., NAGPUR BENCH, NAGPUR.