GHODAWAT HOTELS PVT.LTD., Jaipur V. DCIT(HQ), Jaipur

ITA 886/JPR/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5596 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 26-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P BHATEJA DHK
• Assessee Lawyers: O P AGRWAL
• Keywords: Capital asset; Depreciation; Business expenditure; Opportunity of being heard; Cost of acquisition

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES , JAIPUR JH HKKXPUN] YS[KK LNL; ,O JH DQY HKKJR] U;KF;D L NL; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHAR AT, JM VK;DJ VIHY LA-@ ITA NO. 886 AND 887/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 AND 2008-09 M/S. GHODAWAT HOTELS (P) LTD. C-18, BHAGWAN DAS ROAD JAIPUR CUKE VS. THE DCIT (HQ) CIRCLE- 6 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAACG 8745 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY:SHRI MANISH AGARWAL & O.P. AGRWAL, CA JKTLO DH VKSJ LS@ REVENUE BY :SHRI O.P. BHATEJA, LQUOKBZ DH RKJH[K@ DATE OF HEARING : 06/01/2017 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 09 /02/2017 VKNS'K@ ORDER PER BHAGCHAND, AM BOTH THESE APPEALS HAVE BEEN FILED BY THE ASSESSE E AGAINST TWO SEPARATE ORDERS OF THE LD. CIT(A)-II, JAIPUR DAT ED 17-10-2014 FOR THE ASSESSMENT YEARS 2006-07 AND 2008-09 RESPECTIVELY R AISING THEREIN FOLLOWING GROUNDS OF APPEAL. ITA NO. 886/JP/2014 A.Y. 2006-07 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE ADDIT ION OF RS. 49,63,278/- MADE BY THE AO BY ENHANCING THE CAPITAL GAIN ITA NO. 886/JP/2014 M/S. GHODAWAT HOTELS (P) LTD. VS. DCIT (HQ), CIRCL E- 6, JAIPUR . 2 DECLARED BY THE ASSESSEE AT RS. 1,39,80,454/- WITHO UT ANY BASIS AND WITHOUT POINTING OUT ANY SPECIFIC DEFECT IN THE CAPITAL GAIN COMPUTED BY THE ASSESSEE, THUS THE CON SEQUENT ADDITION SO UPHELD DESERVES TO BE DELETED. 1.1 THE LD. CIT(A) HAS FURTHER ERRED IN FAILING TO APPRECIATE THAT THE AO HAS MISCOMPUTED THE CAPITAL GAIN BY WRONGLY CALCULATING THE INDEXED COST OF ACQUISITION INASMUCH AS HE HAS NOT APPLIED THE PRESCRIBED FORMULA FOR CA LCULATING THE INDEXED COST OF ACQUISITION BUT HAS CONSIDERED IMAGINARY FIGURES FOR ARRIVING AT THE REDUCED INDEXED COST OF ACQUISITION AND THUS ENHANCING THE CAPITAL GAIN. THEREFORE, THE ADDITION SO MADE DESERVES TO BE DELETED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE DISA LLOWANCE OF CONST./EXPENSES OF RS. 1,01,97,208/- CLAIMED U/S 48(1) OF THE I.T. ACT, 1961 ARBITRARILY, WITHOUT APPRECIATIN G THE NATURE OF EXPENSES, INCURRED VIS-A-VIS THE CONTRACTUAL OBL IGATION AND SPECIAL CIRCUMSTANCES ATTACHED TO THE ASSET SOLD, T HUS THE DISALLOWANCE SO MADE AND UPHELD DESERVES TO BE DELE TED. 2.1 THAT THE LD. CIT(A) HAS FURTHER ERRED IN IGNORI NG THE FACT THAT THE AMOUNTS WERE PAID FOR TAKING OVER POS SESSION OF THE ASSET SOLD AND REMOVAL OF ENCUMBRANCES CREATED THEREON, THUS THE PAYMENTS BEING MADE FOR REMOVING THE ENCUMBRANCE OVER THE ASSET SOLD WITHOUT WHICH THE S ALE OF THE ASSETS WAS IMPOSSIBLE, HENCE THE AMOUNT SO PAID IS ELIGIBLE FOR DEDUCTION U/S 4(1) OF THE I.T. ACT, 19 61. ITA NO. 887/JP/2014 A.Y. 2008-09 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE ADDIT ION OF RS. 4,76,203/- MADE BY THE AO BY ENHANCING THE CAPITAL GAIN DECLARED BY THE ASSESSEE AT RS. 23,88,095/- WITHOUT ANY BASIS AND WITHOUT POINTING OUT ANY SPECIFIC DEFECT IN THE CAPITAL GAIN COMPUTED BY THE ASSESSEE, THUS THE CONSEQUENT ADDITION SO UPHELD DESERVES TO BE DELETED. ITA NO. 886/JP/2014 M/S. GHODAWAT HOTELS (P) LTD. VS. DCIT (HQ), CIRCL E- 6, JAIPUR . 3 1.1 THE LD. CIT(A) HAS FURTHER ERRED IN FAILING TO APPRECIATE THAT THE AO HAS MISCOMPUTED THE CAPITAL GAIN BY WRONGLY CALCULATING THE INDEXED COST OF ACQUISITION INASMUCH AS HE HAS NOT APPLIED THE PRESCRIBED FORMULA FOR CA LCULATING THE INDEXED COST OF ACQUISITION BUT HAS CONSIDERED IMAGINARY FIGURES FOR ARRIVING AT THE REDUCED INDEXED COST OF ACQUISITION AND THUS ENHANCING THE CAPITAL GAIN. THEREFORE, THE ADDITION SO MADE DESERVES TO BE DELETED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE DISA LLOWANCE OF CONST./EXPENSES OF RS. 1,01,97,208/- CLAIMED U/S 48(1) OF THE I.T. ACT, 1961 ARBITRARILY, WITHOUT APPRECIATIN G THE NATURE OF EXPENSES, INCURRED VIS-A-VIS THE CONTRACTUAL OBL IGATION AND SPECIAL CIRCUMSTANCES ATTACHED TO THE ASSET SOLD, T HUS THE DISALLOWANCE SO MADE AND UPHELD DESERVES TO BE DELE TED. 2.1 THAT THE LD. CIT(A) HAS FURTHER ERRED IN IGNORI NG THE FACT THAT THE AMOUNTS WERE PAID FOR TAKING OVER POS SESSION OF THE ASSET SOLD AND REMOVAL OF ENCUMBRANCES CREATED THEREON, THUS THE PAYMENTS BEING MADE FOR REMOVING THE ENCUMBRANCE OVER THE ASSET SOLD WITHOUT WHICH THE S ALE OF THE ASSETS WAS IMPOSSIBLE, HENCE THE AMOUNT SO PAID IS ELIGIBLE FOR DEDUCTION U/S 4(1) OF THE I.T. ACT, 19 61. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN UPHOLDING AN ADDITION OF RS . 2,30,671/- MADE ON ACCOUNT OF DISALLOWANCE OF GENU INE EXPENSES CLAIMED BY THE ON ACCOUNT OF CAR EXPENSES , DEPRECIATION ON CAR AND INTEREST PAID ON CAR LOAN W ITHOUT APPRECIATING THAT THE CLAIM OF DEPRECIATION IS A ST ATUTORY DEDUCTION AVAILABLE TO ASSESSEE AND OTHER EXPENSES CLAIMED WERE EXCLUSIVELY INCURRED FOR BUSINESS EXPENSES. TH US THE DISALLOWANCE SO SUSTAINED DESERVES TO BE DELETED. ITA NO. 886/JP/2014 M/S. GHODAWAT HOTELS (P) LTD. VS. DCIT (HQ), CIRCL E- 6, JAIPUR . 4 2.1 FIRST OF ALL, WE TAKE UP THE GROUNDS OF APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07 WHICH HAS BEEN DISMISSE D BY THE LD. CIT(A) BY OBSERVING AS UNDER:- 2.5 I HAVE PERUSED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLA NT. IN THIS CASE, THE APPELLANT HAS PURCHASED A NEW BUILDING (AT C96 ) WHICH HAS BEEN GIVEN ON A 99 YEARS LEASE TO TENANT (RFC) FOR A LEASE RENT OF RS. 2,500/- PER ANNUM. HOWEVER, THE OWNERSHIP RIGHT S OF THE NEW PROPERTY STILL VEST WITH THE APPELLANT. IN THE CASE LAWS CITED BY THE APPELLANT, MONEY WAS PAID TO THE TENANT (CASE OF EA GLE THEATERS, SUPRA) OR COMPENSATION WAS PAID TO THE HUTMENT DWEL LERS (CASE OF PIROJA PATEL, SUPRA) TO VACATE THE PREMISES BEING T RANSFERRED. IN ALL THESE CASES, THE ASSESSEE PARTED WITH THE PROPERTY (MONEY) WHICH WAS GIVEN TO TENANTS OR HUTMENT DWELLERS. IN THE IN STANT CASE, THE OWNERSHIP RIGHTS OF THIS PROPERTY REMAIN VESTED WIT H THE APPELLANT. BY GIVING A 99 YEARS LEASE AND OTHER TERMS AND COND ITIONS OF THE LEASE AGREEMENT ENUMERATED BY THE APPELLANT, IT HAS TRANSFERRED SOME RIGHTS IN THE NEW PROPERTY TO RFC BUT NOT THE OWNERSHIP RIGHTS. THEREFORE, IT MY VIEW THE COST OF ACQUISITI ON OF THE NEW PROPERTY CANNOT BE ALLOWED AS COST OF IMPROVEMENT O F THE PROPERTY TRANSFERRED OR EXPENDITURE INCURRED IN CONNECTION W ITH THE TRANSFER OF PROPERTY. THEREFORE, THE ADDITION MADE BY THE AO IS SUSTAINED. THE ABOVE GROUNDS ARE DISMISSED. 2.2 DURING THE COURSE OF HEARING THE LD. AR OF THE ASSESSEE FILED THE FOLLOWING WRITTEN SUBMISSION PRAYING THEREIN TO DEL ETE BOTH THE ADDITIONS AS MADE IN GROUND NO. 1 AND 1.1 & 2 AND 2.1. GROUND OF APPEAL NO.1 TO 1.1: IN ALL THESE GROUNDS OF APPEAL, ASSESSEE HAS CHAL LENGED THE ACTION OF LD. CIT(A) IN UPHOLDING THE ADDITION OF RS.12,91,49 9/- MADE BY LD. AO BY NOT ALLOWING THE CREDIT OF EXPENSES TO THE TUNE OF RS.2 ,16,932/- AND RS.9,84,333/- INCURRED IN F.Y.1998-99 AND 2003-04 RESPECTIVELY RE SULTING INTO LESSOR ALLOWANCE OF INDEXED COST OF ACQUISITION TO THE EXT ENT OF 12,91,499/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS NECESSARY DETA ILS OF ALL THE EXPENSES ITA NO. 886/JP/2014 M/S. GHODAWAT HOTELS (P) LTD. VS. DCIT (HQ), CIRCL E- 6, JAIPUR . 5 INCURRED WERE SUBMITTED INCLUDING THE AFORESAID EXP ENSES ( APB 62), HOWEVER,THE SAME WERE NOT ALLOWED FOR THE REASON BE ST KNOWN TO THE LD. AO WHO AS STATED ABOVE HAS WRONGLY OBSERVED THAT ASSES SEE FILED REVISED CALCULATION OF CAPITAL GAINS WHICH IN FACT WAS FILE D BY ASSESSEE ON THE DIRECTION OF LD. AO. YOUR HONOUR, WOULD APPRECIATE THAT BEFOR E MAKING ANY ADDITION/DISALLOWANCE, LD. ASSESSING OFFICER HAS TO SATISFY HIMSELF ON WHAT BASIS A LEGAL CLAIM OF ASSESSEE IS TO BE TREATED AS INCOR RECT AND THIS HAS TO BE DONE BY PASSING A SPEAKING ORDER AND NOT IN CASUAL MANNER W ITHOUT EVEN MADE ANY DISCUSSION OF THE ISSUE. FURTHER, MODE OF COMPUTATI ON OF CAPITAL GAIN HAS BEEN SPECIFIED U/S 48 OF THE INCOME TAX ACT, ACCORDING T O WHICH ENTIRE COST OF ACQUISITION INCURRED IN RESPECT OF PROPERTY SOLD HA S TO BE REDUCED FROM SALE CONSIDERATION, WHEREAS LD. AO WITHOUT ANY REASON HA S DENIED THE CLAIM OF INDEXED COST OF ACQUISITION TO THE TUNE OF RS.12,01 ,265/- RESULTING INTO INFLATED CAPITAL GAIN. ALL THE EXPENSES WERE DULY RECORDED I N THE BOOKS OF ACCOUNTS AND SUCH BOOKS WERE NOT REJECTED BY LD. AO. THUS, THE A DDITION MADE BY LD. AO DOES NOT HOLD GOOD ON FACTS AS WELL AS ON LAW AND T HE SAME DESERVES TO ALLOW THE ASSESSEE AS CLAIMED. GROUNDS OF APPEAL NO. 2 AND 2.1 IN THESE GROUNDS OF APPEAL, ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN CONFIRMING THE DENIAL OF COST OF RS.1,01, 97,208/- OF THE PROPERTY LEASED OUT TO RFC IN LIEU OF GETTING PHYSICAL POSSE SSION OF THE PROPERTY C-18, BHAGWAN DAS ROAD, JAIPUR, WHICH WAS DEVELOPED AND P ART OF THE AREA HAS BEEN SOLD AND RESULTANT CAPITAL GAIN ON WHICH WAS D ECLARED BY THE ASSESSEEIN THE RETURN OF INCOME FILED FOR THE YEAR UNDER CONSI DERATION AFTER CLAIMING SUCH COST. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT ASSES SEE COMPANY WAS IN POSSESSION OF A PROPERTY SURYA NIWASLOCATED AT C- 18, BHAGWAN DAS ROAD, NEAR RAJ MANDIR CINEMA, C-SCHEME, JAIPUR, WHICH WAS PURCHASED BY IT IN TERMS OF PURCHASE DEED DATED 19.02.1996. AT THE TIM E OF PURCHASE, THE SAID PROPERTY WAS OCCUPIED BY RAJASTHAN FINANCE CORPORAT ION (RFC) A STATE FINANCIAL INSTITUTION AS TENANTWHO WAS TENANT SINCE 1972, I.E. MORE THAN 28 YEARS.THE SAID BUILDING WAS AROUND 40-45 YEARS OLD AND DUE TO THE FACT OF BEING OCCUPIED BY GOVERNMENT DEPARTMENT, WAS UNDER HEAVY WEAR AND TEAR, THEREFORE, THE ASSESSEE DECIDED TO REBUILT THE PROP ERTY IN THE SHAPE OF A COMMERCIAL COMPLEX AND ACCORDINGLY IT HAD APPROACHE D TO RFC TO VACATE THE PROPERTY WHICH REQUEST OF VACATE THE PROPERTY WAS T URNED DOWN BY RFC. THEREAFTER A NOTICE DATED 01.09.1999 WAS GIVEN TO C HAIRMAN AND MANAGING DIRECTOR, RFC GIVING A PROPOSAL THAT RFC SHIFT ITS OFFICE TO SOME ALTERNATIVE ACCOMMODATION AND ONCE THE CONSTRUCTION OF PROPERTY IS OVER (I.E. IN AROUND 2- 3 YEARS) , RFC WOULD BE PROVIDED WITH AROUND 1800-2 000 SQ. FEET AREA, I.E. EQUIVALENT TO EXISTING SITTING AREA IN THE NEW BUIL DING. SUBSEQUENTLY, VIDE LETTER DATED 23.12.1999, ASSESSEE ALTERNATIVELY OFF ERED THE RFC A COMPENSATION OF RS.15 LACS FOR VACATING THE PREMISES WITHOUT EXC HANGE OFFER AS MADE VIDE LETTER DATED 01.09.1999. AGAIN, VIDE NOTICE DATED 1 8.01.2000, ASSESSEE MADE A NEW PROPOSAL THAT RFC MAY SHIFT TO NEW PREMISES IN NEARBY AREA FOR 3-4 YEARS ITA NO. 886/JP/2014 M/S. GHODAWAT HOTELS (P) LTD. VS. DCIT (HQ), CIRCL E- 6, JAIPUR . 6 ON RENT AND FURTHER OFFERED THAT THE RENT IN EXCESS OF EXISTING RENT SHALL BE PAID BY ASSESSEE AND AFTER COMPLETION OF NEW BUILDING, R FC COULD EITHER OPT FOR TAKING EQUIVALENT SPACE IN NEW BUILDING OR RS.15 LA CS AS LUMPSUM COMPENSATION. IT WAS ALSO INTIMATED TO THE CMD OF R FC THAT ASSESSEE HAS SUBMITTED THE PLAN FOR CONSTRUCTION OF PROPOSED NEW BUILDING TO NAGAR NIGAM, JAIPUR AND ALSO EXPRESSED ITS DESIRE TO COMMENCE CO NSTRUCTION AT THE EARLIEST. SUBSEQUENTLY, PURSUANT TO MULTIPLE ROUNDS OF MEETIN GS AND DISCUSSIONS HELD BETWEEN DIRECTORS OF ASSESSEE COMPANY AND RFC OFFIC IALS AND FOLLOWING PROPOSAL WAS REACHED VIDE LETTER DATED 16.03.2000: (I) THE BRANCH OFFICE OCCUPIED BY RFC BE SHIFTED TO NEW PREMISES IN NEARBY AREA FOR A PERIOD OF 3-4 YEARS. (II) THE EXCESS OF LEASE RENT SHALL BE PAID BY THE PETIT IONER. (III) A TOTAL AREA OF 4070 SQ. FT. WHICH INCLUDES T HE AREA OF SITTING WITH COMMON FACILITIES WILL BE PROVIDED TO RFC IN T HE NEW BUILDING. THE RENT OF SUCH AREA OF 4070 SQ. FT. WILL BE 30% O F THE THEN PREVAILING MARKET RATE. THUS, ASSESSEE SEARCHED OUT CERTAIN PROPERTIES TO A CCOMMODATE RFC WHICH WERE REFERRED TO IT VIDE LETTER DATED 24.06.2 000 AND AFTER PHYSICAL INSPECTION AND CONSIDERING THE VARIOUS ASPECTS OF T HE MATTER, RFC AGREED TO SHIFT THEIR OFFICE TO FOLLOWING TWO PREMISES:- (I) 67, GOPALBARI, AJMER ROAD, JAIPUR, AND (II) D-13, MEERA MARG, BANI PARK, JAIPUR ALL THE FORMALITIES, I.E. FIXING THE RENT, DRAFTING THE LEASE DEED ETC. WERE DONE AND IN FACT ADVANCE PAYMENT OF RENT WAS MADE.R FC FURTHER DESIRED THAT A BANK GUARANTEE SHOULD BE GIVEN IN FAVOUR OF IT FOR DUE PERFORMANCE OF THE AGREEMENT, WHICH WAS ALSO EXECUTED. HOWEVER, SUBSEQ UENTLY ON 12.09.2000, ASSESSEE WAS INTIMATED THAT BOARD OF RFC DID NOT AP PROVE THE AGREEMENT AND THUS DENIED TO VACATE THE PROPERTY. SINCE, RFC COMM ITTED THE BREACH OF AGREEMENT, ASSESSEE FILED THE WRIT PETITION ( APB 21-32) BEFORE HONBLE RAJASTHAN HIGH COURT IN THE YEAR 2000 REQUESTING TO DIRECT RFC TO VACATE THE PREMISES. ALL THE FACTS AS NARRATED ABOVE ARE DULY BORNE OUT OF IN THE SAID WRIT PETITION FILED BY ASSESSEE, COPY OF WHICH WAS DULY FILED BEFORE THE LOWER AUTHORITIES. DURING THE PENDENCY OF WRIT BEFORE THE HONBLE HIGH COURT, RFC IN ACCORDANCE WITH EARLIER PROPOSAL OF ASSESSEE, AGREE D TO VACATE PROPERTY IN LIEU OF ANOTHER PROPERTY SITUATED AT PLOT NO.C-96, JAGAN PATH, CHOMU HOUSE, JAIPURON IRREVOCABLE LEASE OF 99 YEARS WHICH COULD BE FURTHER EXTENDED FOR 99 ITA NO. 886/JP/2014 M/S. GHODAWAT HOTELS (P) LTD. VS. DCIT (HQ), CIRCL E- 6, JAIPUR . 7 YEARS OR MORE AND DURING THE LEASE PERIOD ASSESSEE COULD NOT GET LOAN OVER THE SAID PROPERTY NOR ALLOWED TO HYPOTHECATED THE SAME. THEREAFTER THE POSSESSION OF NEW PREMISES WAS HANDED OVER TO RFC AND ASSESSEE GOT POSSESSION OF OLD PROPERTYVIDE LEASE DEED DATED 13.03.2003 (APB 6-17) . ACCORDINGLY, RFC AGREED TO WITHDRAW REVISION PETITION NO.927/2001 AN D ASSESSEE FILED APPLICATION UNDER ARTICLE 326 OF CONSTITUTION TO WI THDRAW WRIT PETITION ( APB 46-47) . THE NEW PROPERTY WHICH IS GIVEN TO RFC ON LEASE IS LOCATED AT C-96, CHOMU HOUSE, JAIPUR AND WAS ACQUIRED BY ASSESSEE FO R A TOTAL CONSIDERATION OF RS.1,01,97,208/- IN TERMS OF PURCHASES DEED DT. 5.8 .2002. AS PER LEASE DEED DATED 15.03.2003,( APB 6-17 ) SAID PROPERTY WAS GIVEN TO RFC ON A LEASE RENT OF RS.2500 PER ANNUM ( CLAUSE 4, APB-11 ). FURTHER, THE SAID LEASE WAS PERPETUAL AND IRREVOCABLE FOR A PERIOD OF 99 YEARS AND FURTHER EXTENDABLE TO 99 YEARS OR MORE ( CLAUSE 2, APB-10) . FURTHER AS PER CLAUSE 3 OF LEASE DEED, LESSEE HAD EVEN RIGHT TO SUBLET THE PROPERTY( APB-10 ). IT WAS ALSO PROVIDED IN CLAUSE IN 6 & 8 THAT RFC CAN CARRY OUT ANY ALTERATI ONS, IMPROVEMENTS, DEVELOPMENTS AND FURTHER CONSTRUCTION IN THE SAID P REMISES AND IT HAD TO BEAR ALL THE OBLIGATIONS RELATED TO HOUSE TAX, MUNICIPAL TAXES ETC. IN FUTURE ( APB- 11-12 ). ALL THE ABOVE TERMS ON WHICH PROPERTY WAS LEASED OU T TO RFC, MAKE IT AMPLY CLEAR THAT ASSESSEE PRACTICALLY PARTED WITH A LL THE RIGHTS IN RESPECT OF THE SUBJECT PROPERTY FOR A PERIOD OF 99 YEARS THROUGH A N IRREVOCABLE LEASE DEED WITH THE LIBERTY TO LESSEE I.E. RFC TO FURTHER EXTE ND IT FOR A PERIOD OF 99 YEARS OR MORE. IN THIS MANNER THOUGH THE LEGAL TITLE REMA INED IN FAVOUR OF ASSESSEE BUT ACTUAL OWNERSHIP IS ENJOYED BY THE LESSEE WHO H AS RIGHT TO MODIFY, CONSTRUCT, SUB-LET THE LEASED PREMISES AS PER ITS CONVENIENCE AND THE OWNER I.E. THE ASSESSEE EVEN COULDNOT HAVE RIGHT TO MORTGAGE O R TAKE LOAN OVER THE SAID PROPERTY MEANING THEREBY THAT THE ASSESSEE HAS HAND ED OVER THE PROPERTY TO RFC WITH ALL RIGHTS TO ENJOY IT FOR INDEFINITE PERI OD OF TIME IN LIEU OF GETTING POSSESSION OVER THE PROPERTY AT C-18, BHAGWAN DAS R OAD, JAIPUR. ON VACATION OF PROPERTY AT C-18, BHAGWAN DAS ROAD B Y RFC, ASSESSEE ON 31.10.2003 ENTERED INTO A DEVELOPMENT AGREEMENT WITH M/S SILVER SANDS BUILDERS PRIVATE LIMITED TO DEVELOP THE SAID PLOT O F LAND, AND ACCORDINGLY CONSTRUCTION OF NEW COMMERCIAL COMPLEX WAS COMPLETE D IN THE YEAR UNDER CONSIDERATION. DURING THE YEAR UNDER CONSIDERATION ,ASSESSEE SOLD TOTAL BUILT UP AREA ADMEASURING TO 22860.09 SQ.FT. AND OFFERED CAP ITAL GAIN OF RS.1,39,80,454/- (APB 56) ON THE SAME. WHILE COMPUTING CAPITAL GAIN, ASSESSEE CLAIMED THE DEDUCTION TOWARDS THE COST OF PROPERTY LEASED TO RFC (C- 96, CHOMU HOUSE) I.E. RS.1,01,97,208/- U/S 48(1) OF THE INCOME TAX ACT, 1961 BEING INCIDENTAL AND UNAVOIDABLE EXPENSES WITHOUT W HICH AS STATED ABOVE, ASSESSEE COULD NOT GET THE PHYSICAL POSSESSION OVER THE PREMISES SOLD DURING THE YEAR. HOWEVER, LD. AO REJECTED THE CLAIM OF ASS ESSEE. ALSO, LD. AO DENIED TO GIVE BENEFIT OF COST INCURRED ON ACCOUNT OF FOLLOWING:- ITA NO. 886/JP/2014 M/S. GHODAWAT HOTELS (P) LTD. VS. DCIT (HQ), CIRCL E- 6, JAIPUR . 8 (I) EXPENSES ON BUILDING RS.2,16,932/- INCURRED I N 31.03.1999 (II) REDUCED EXPENSES INCURRED FOR THE YEAR ENDED 31.03. 2004 BY RS.9,84,333/- DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE LD. AO DIRECTED THE ASSESSEE TO FURNISH THE REVISED CALCULATION OF CAPI TAL GAIN BY REDUCING THE COST OF ACQUISITION TO THE EXTENT STATED ABOVE, IN RESPO NSE TO WHICH ASSESSEE PROVIDED THE DETAILS OF REVISED CAPITAL GAIN ( APB62-67 ). AFTER RECEIVING THIS SUBMISSION, LD. AO COMPLETED THE ASSESSMENT AFTER M AKING ADDITION OF RS.49,63,278/- AND FURTHER WRONGLY OBSERVED IN PARA 2 AT PAGE 4 OF THE ORDER THAT ASSESSEE HAS AGREED AND FILED THE REVISED COST OF A CQUISITION/ INDEXED COST OF ACQUISITION OF THE PROPERTY. THISOBSERVATION OF THE LD. AO IS NOT CORRECT AT ALL RATHER CONTRARY TO THE FACTS OF THE CASE AND THE BONAFIDE MADE COMPLIANCE BY THE ASSESSEE OF AOS DIRECTION WAS US ED AGAINST IT WITHOUT THEIR BEING ANY ADMISSION OF ANY KIND MADE BY ASSESSEE. W HEN THESE FACTS WERE BROUGHT BEFORE THE LD. CIT(A) AND CONTENTION WAS RA ISED, HE PROCEEDED TO DECIDE THE ISSUE ON MERITS AND DEPARTMENT HAS NOT P REFERRED ANY APPEAL BEFORE THE HONBLE BENCH AGAINST SUCH ACTION OF THE LD. CI T(A). AS STATED ABOVE, WHILE COMPUTING CAPITAL GAIN, COST OF THE PROPERTY GIVEN TO RFC IN LIEU OF VACATION OF PRESENT PROPERT Y, I.E. RS.1,01,97,208/- WAS CLAIMED AS EXPENSE U/W 48(1) WHICH WAS DISALLOWED B Y LD. AO WITHOUT ANY SPECIFIC REASON MERELY STATING THAT ASSESSEE HAS FI LED THE REVISED COMPUTATION OF CAPITAL GAINS, WHICH IS FACTUALLY INCORRECT. THE LD. CIT(A) THOUGH APPRECIATED THIS FACT THAT NO SUCH REVISION WAS MAD E BY ASSESSEE HOWEVER, UPHELD THE ORDER OF LD. AO ON THE PREMISE THAT EXPE NSES OF RS.1,01,97,208/- ARE NOT ALLOWABLE IN VIEW OF FACT THAT ASSESSEE HAS NOT PARTED WITH THE OWNERSHIP RIGHTS IN THEPROPERTY LEASED TO RFC BY GR OSSLY IGNORING THE FACTS AND CIRCUMSTANCES UNDER WHICH THE PREMISES WAS GIVE N ON PERPETUAL LEASE OF 99 YEARS TO RFC WITH THE LIBERTY TO FURTHER EXTEND IT FOR A PERIOD OF 99 YEARS OR MORE.. IN THIS REGARD, IT IS HUMBLY SUBMITTED THAT SECTION 48 PROVIDES THE MODE OF COMPUTATION OF CAPITAL GAIN, WHICH READS AS UNDER: 48. THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS SHALL BE COMPUTED BY DEDUCTING FROM THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET THE FOLLOWING AMOUNTS, NAMELY: (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH SUCH TRANSFER , (II) THE COST OF ACQUISITION OF THE ASSET AND COST OF ANY IMPROVEMENT THERETO: ITA NO. 886/JP/2014 M/S. GHODAWAT HOTELS (P) LTD. VS. DCIT (HQ), CIRCL E- 6, JAIPUR . 9 FROM THE ENTIRE SET OF FACTS NARRATED ABOVE, IT IS EVIDENT THAT THE NEW PROPERTY WAS LEASED OUT TO RFC SOLELY FOR THE PURPOSE OF GETTING VACATIONANDPHYSICAL POSSESSION OF ANOTHER PROPERTY WHICH LATER ON STOOD DEVELOPED AND SOLD BY THE ASSESSEE. THUS EXPENSE TO WARDS THE COST OF NEW PROPERTY PROVIDED ON LEASE TO RFC ARE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH TRANSFER AND DESERVE TO BE ALLOWED IN VIEW OF SPECIFIC PROVISIONS OF CLAUSE (I)OF SECTION 48(1). HOWEVER, NEITHER LD. AO NOR LD. CIT(A) ALLOWED THE DEDUCTION TOWARDS THE COST OF NEW PROPERTY AS EXPENSES FROM T HE SALE CONSIDERATION WHILE WORKING OUT THE CAPITAL GAINS FOR THE SOLE RE ASON THAT ASSESSEE HAD THE OWNERSHIP TITLE OVER THE SAID PROPERTY THOUGH NO DOUBTS WHATSOEVER WAS RAISED TO THE FACTS THAT THE SUBJECT PROPERTY GIVEN TO RFCON IRREVOCABLE LEASE OF 99 YEARS FOR THE GETTING POSSESSION OF OTH ER PROPERTY. IN THIS REGARD RELIANCE IS PLACED ON VARIOUS JUDGEM ENTS WHEREIN IT HAS BEEN HELD THAT EXPENSES INCURRED FOR GETTING PROPERTY VACATED FOR ITS FURTHER DEVELOPMENT AND SALE ARE TO BE TREATED AS EXPENSES WHOLLY AND EXCLUSIVELY IN CONNECTION WITH TRANSFER AND THUS TO BE ALLOWED AGAINST CAPITAL GAIN. 1.147 TAXMAN 629 (CAL)GOPEE NATH PAUL & SONS VS. DC IT, (PAGES 1- 7) SECTION 48 OF THE INCOME TAX ACT, 1961 CAPITAL G AINS COMPUTATION OF ASSESSMENT YEAR 1992-93 WHETHER IF WITHOUT REMO VING ANY ENCUMBRANCE, SALE OR TRANSFER COULD NOT BE EFFECTED, AMOUNT PAID FOR REMOVING THAT ENCUMBRANCE WILL FALL UNDER CLAUSE (I) OF SECTION 4 8(1) HELD, YES. 2. CIT VS. EAGLE THEATRES (DEL) ITA 1287/2011 (PAGE S 8-12) 3.242 ITR 582 (BOM) CIT VS. MISS PIROJA C. PATEL (P AGES 13-14 4. 218 ITR 598 (BOM) HARDIALLIA CHEMICALS LTD. VS. CIT (PAGES 15- 20) 5.161 ITD 211 (ITAT, AHD.) NANUBHAI KESHAVLAL CHOKSHI HUF VS. ITO (PAGES 21-26) AS REGARDS OBSERVATION OF LD. CIT(A) THAT ASSESSEE HAS NOT PARTED WITH THE ASSET, KIND ATTENTION OF HONBLE BENCH IS INVITED T O VARIOUS CLAUSES OF LEASE DEED, (APB 8-17) WHICH PROVIDES THAT LEASEIS IRREVOCABLE FOR 99 YEARS. ON PERUSAL OF LEASE DEED FOLLOWING IMPORTANT FACTS EME RGE: (I) CLAUSE 2 OF: LESSEE WILL HAVE FULL RIGHT OF ENJOYMENT USE O F THIS PREMISES DURING THE TENURE AND CONTINUATION OF THIS LEASE WITH THE OPTION OF RFC TO FURTHER EXTEND THE LEASE FOR A PERIOD OF 99 YEAR S AND MORE AT THE OPTION OF LESSEE. (APB-10) (II) CLAUSE 3 : LESSEE WILL USE THE PREMISES AS PER ITS REQUIREME NT AND WILL HAVE RIGHT TO SUBLET THE SAME. ( APB-10) . ITA NO. 886/JP/2014 M/S. GHODAWAT HOTELS (P) LTD. VS. DCIT (HQ), CIRCL E- 6, JAIPUR . 10 (IIII) CLAUSE 4: LEASE RENT FIXED ATA TOKEN AMOUNT OF RS.2500/-PA. (APB-11) (IV) CLAUSE 8 : LESSEE SHALL BE FREE TO MAKE IMPROVEMENTS, DEVELO PMENT IN THE PROPERTY AS PER CONVENIENCE.(APB-12) (V) CLAUSE 13 : LESSOR SHALL NOT BE ENTITLED TO RAISE ANY LOAN AGAINST THE LAND AND BUILDING. (APB-13) ON PERUSAL OF ABOVE CLAUSES OF LEASE DEED, IT IS EV IDENT THAT EVEN THOUGH THE ASSESSEE WOULD CONTINUE TO BE OWNER OF PROPERTY HOWEVER, FOR ALL PRACTICAL PURPOSES THE RIGHTS STANDS TRANSFERRED IN FAVOUR OF RFC WHO IS ENTITLED TO ENJOY THE PROPERTY AS PER ITS SWEET WILL. FURTHER, YOUR HONOURS WOULD APPRECIATE THE FACT THA T EVEN RIICO, RAJASTHAN HOUSING BOARD AND JAIPUR DEVELOPMENT AUTH ORITY ALLOTTED THE PROPERTIES TO ALLOTTEES ON LEASE FOR A TENURE OF 99 YEARS WITHOUT TRANSFERRING THE OWNERSHIP HOWEVER, FOR ALL PRACTICAL PURPOSES, ALLO TTEE IS TREATED AS OWNER OF THE PROPERTY AND AFTER THE TERM OF 99 YEARS, LESSEE BY PAYING LEASE MONEY GETS THE LEASE RENEWED. IN FACT, THE SAME HAPPENED IN THE CA SE OF ASSESSEE AS CLAUSE 2 OF LEASE DEED, PROVIDES THAT LEASE TENURE CAN BE EXTEN DED FOR A FURTHER PERIOD OF 99 YEARS OR MORE AT THE OPTION OF LESSEE AND LEASE MON EY IS PAYABLE ANNUALLY WITH THE STIPULATION THAT LESSEE WILL NOT VACATE THE PROPERT Y. ALSO, LOOKING TO THE PAST EXPERIENCE WITH RFC AT TH E TIME OF GETTING PROPERTY VACATED, IT IS FOR SURE THAT THE PROPERTY WOULD NOT BE VACATED BY RFC EVER. FURTHER, IT IS TO BE NOTED THAT HAD THE PROPE RTY BE LIKE ANY OTHER RENTED PROPERTY, THE SAME WOULD NOT BE LEASED AT SUCH A NO MINAL RENT, WHICH IS NOT AT ALL IN COMMENSURATE WITH THE MARKET RATES AND ALSO ON T HE CONDITIONS WHICH ALL ARE AGAINST THE RIGHTS OF A OWNER. FURTHER RECENTLY CBD T VIDE CIRCULAR NO. 35/2016 ( PAGES 27-28) HAS HELD THAT THE LAND ALLOTTED BY THE STATE INSTIT UTIONS FOR A LONG TERM LEASE WOULD CHARACTER AS DEEMED SALE AND THUS NO TDS COULD BE DEDUCTED ON THE LEASE CHARGES PAID FOR IT. WITH THIS IT CAN BE SAID THAT IN THE PRESENT CASE WHEN THE ASSESSEE LEASED OUT THE PROPERTY TO THE RFC FOR MINIMUM PERIOD OF 99 YEARS, IT IS DEEMED SALE I.E. THE OWNERSHIP RIGHT WOULD BE TR ANSFERRED TO RFC. IN OTHER WORDS, IF THE COST OF PROPERTY IS NOT ALLO WED AS DEDUCTION IN ACCORDANCE WITH SECTION 48(1)(I), IT WOULD AMOUNT T O UNDUE HARDSHIP TO ASSESSEE AS IT HAS PURCHASED A PROPERTY, WHICH CAN :- (I) NOT BE USED BY IT IN THE MANNER IT WISHES, (II) NOT BE LET OUT AT A RENT AT MARKET RATES, (III) NOT BE MORTGAGED FOR RAISING FINANCE, AND FURTHER, CHANCES OF GETTING IT BACK AFTER COMPL ETION OF LEASE TERM ARE NEGLIGIBLE. THUS, THE PROPERTY LEASED CANNOT BE TR EATED AT PAR WITH OTHER LEASED PROPERTIES, WHEREIN LESSOR:- ITA NO. 886/JP/2014 M/S. GHODAWAT HOTELS (P) LTD. VS. DCIT (HQ), CIRCL E- 6, JAIPUR . 11 (I) GETS A HANDSOME AMOUNT AS DOWN PAYMENT, (II) CHARGES LEASE RENT IN ACCORDANCE WITH MARKET RATES, (III) AND STILL OPTION OF EXTENSION OF LEASE COMPLETELY L IES AT THE WILL OF LESSOR. IN VIEW OF ABOVE FACTS, IT IS SUBMITTED BEFORE YOUR HONOUR THAT PROPERTY GIVEN TO RFC WAS LEASED UNDER COMPULSION FOR VACATION OF PROPERTY WITHOUT WHICH DEVELOPMENT/ SALE OF SUBJECT PROPERTY WAS NOT POSSI BLE AND SINCE THE SAME BEING INCURRED WHOLLY AND EXCLUSIVELY IN RELATION TO SALE , HAS BEEN CLAIMED AS EXPENDITURE U/S 48(1) BEING INCIDENTAL AND UNAVOIDABLE EXPENSES . THUS COST OF PROPERTY LEASED OUT TO RFC FOR GETTING VACANT POSSESSION OF PROPERTY SO LD DURING THE YEAR DESERVES TO BE HOLD AS EXPENSES IN CONNECTION WITH TRANSFER AND CONSEQUENT COST DESERVES TO BE ALLOWED AS DEDUCTION AGAINST THE SALE CONSIDERATION FOR THE PURPOSE OF COMPUTING THE CAPITAL GAINS. 2.3 DURING THE COURSE OF HEARING, THE LD. DR RELIED ON THE ORDERS OF THE LD. CIT(A). 2.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AS REGARDS GROUND OF APPEAL NO . 1 TO 1.1, WE HAVE ALSO CONSIDERED THE FACTS OF THE CASE WITH REFERENC E TO THE ORDERS OF THE LOWER AUTHORITIES. IT IS SEEN THAT ASSESSEE IN THE COMPUTATION OF INCOME HAS CLAIMED CERTAIN COST TOWARDS THE COST INCURRED IN VARIOUS YEARS AND CLAIMED THE INDEXED COST OF EXPENSE OUT OF THE SALE CONSIDERATION. THIS CLAIM OF THE ASSESSEE WAS NOT ALLOWED BY THE AO WIT HOUT GIVING ANY REASONS FOR THAT. IN FIRST APPEAL ALSO, THIS ISSUE REMAINED UNADDRESSED BY LD. CIT(A). THE ASSESSEE IS A PRIVATE LIMITED COMPA NY AND ACCOUNTS ARE AUDITED. THE CLAIM OF ASSESSEE COULD BE VERY WELL G OT VERIFIED FROM THE AUDITED ACCOUNTS. UNDER THESE CIRCUMSTANCES, WE SE T ASIDE THIS ISSUE TO THE FILE OF THE AO WITH A DIRECTION THAT THE CLAIM OF THE ASSESSEE BE EXAMINED AFTER TAKING THE NECESSARY EVIDENCE ON REC ORD AND FURTHER AFTER ITA NO. 886/JP/2014 M/S. GHODAWAT HOTELS (P) LTD. VS. DCIT (HQ), CIRCL E- 6, JAIPUR . 12 PROVIDING A REASONABLE OPPORTUNITY OF BEING HEARD T O THE ASSESSEE. THUS GROUND NO. 1 AND 1.1 OF THE ASSESSEE ARE ALLOWED FO R STATISTICAL PURPOSES. 2.4.1 AS REGARDS GROUND OF APPEAL NO. 2 TO 2.1, WE HAVE ALSO CONSIDERED THE FACTS OF THE CASE AND CASE LAWS RELIED ON BY BO TH THE SIDES. BRIEF FACTS AS GATHERED FROM THE RECORDS ARE THAT THE ASSESSEE HAD PURCHASED A PROPERTY AT C-18, BHAGWAN DAS ROAD, JAIPUR ON 19.02 .1996 WHICH WAS OCCUPIED BY RAJASTHAN FINANCIAL CORPORATION (IN SHO RT RFC) SINCE PAST SEVERAL YEARS. ASSESSEE IN ORDER TO DEVELOP A COMME RCIAL COMPLEX ON THE SAID PROPERTY REQUESTED THE RFC TO VACATE THE PROPE RTY HOWEVER RFC DENIED FOR THE SAME AND ON REPEATED PERSUASION REQU IRED A HEAVY CONSIDERATION OF VACATION HAD ASKED FOR AN ALTERNAT IVE ACCOMMODATION AT THE COST OF THE ASSESSEE. THEREAFTER DISPUTES CONTI NUED BETWEEN THE ASSESSEE AND RFC AND THE MATTER WENT UP TO THE HON BLE RAJASTHAN HIGH COURT. DURING THE PENDENCY OF THE WRIT BEFORE THE H ONBLE HIGH COURT, A SETTLEMENT WAS REACHED BETWEEN THE PARTIES AND ACCO RDINGLY IT WAS DECIDED THAT THE ASSESSEE WOULD PROVIDE A NEW PROPE RTY TO RFC ON 99 YEARS LEASE AGAINST THE VACATION OF PROPERTY I.E. C -18, BHAGWAN DAS ROAD, JAIPUR OCCUPIED BY RFC. ACCORDINGLY ASSESSEE OFFERE D ANOTHER PROPERTY OWNED BY IT WHICH IS SITUATED AT C-96, CHOMU HOUSE, JAIPUR PURCHASED BY THE ASSESSEE ON 05.08.2002 FOR THE TOTAL COST AT RS . 1,01,97,208/-. ITA NO. 886/JP/2014 M/S. GHODAWAT HOTELS (P) LTD. VS. DCIT (HQ), CIRCL E- 6, JAIPUR . 13 THEREAFTER A LEASE AGREEMENT WAS ENTERED INTO BETWE EN THE ASSESSEE AND RFC ON 15.03.2003, COPY OF WHICH IS AVAILABLE IN TH E PAPER BOOK FILED BY THE ASSESSEE. AS PER THIS LEASE DEED, ASSESSEE HAS PROVIDED NEWLY PURCHASED PROPERTY TO RFC FOR AN ANNUAL LEASE RENT OF RS. 2,500/- FOR A PERIOD OF 99 YEARS WHICH IS FURTHER EXTENDABLE ON T HE OPTION OF THE RFC FOR ANOTHER 99 YEARS OR MORE ON THE CHOICE OF RFC. IT WAS ALSO DECIDED BETWEEN THE PARTIES THAT THIS LEASE WOULD BE IRREVO CABLE AND ALSO CONTAINED CERTAIN TERMS AND CONDITIONS ACCORDING TO WHICH EXCEPT THE LEGAL TITLE, RFC WOULD ENJOY ALL RIGHTS AND EASEMEN TS OVER THE SAID PROPERTY INCLUDING ALTERATION, IMPROVEMENT, DEVELOP MENT AND FURTHER CONSTRUCTION AND ALSO WOULD BE HAVING A RIGHT TO SU B-LET THE LEASED PROPERTY. ASSESSEE IN LIEU OF THIS LEASED PREMISES TO RFC, GOT THE VACANT POSSESSION OF THE RFC OCCUPIED PROPERTY SITUATED AT BHAGWAN DAS ROAD, JAIPUR IN WHICH PROPERTY AFTER GETTING VACANT POSSE SSION FROM RFC, ASSESSEE CONSTRUCTED A COMMERCIAL COMPLEX AND DURIN G THE YEAR UNDER APPEAL HAD DECLARED LONG TERM CAPITAL GAIN FROM THE SALE OF THE NEWLY CONSTRUCTED SPACE IN THE COMMERCIAL COMPLEX AND CLA IMED DEDUCTION OF THE COST INCURRED ON ACQUISITION OF NEW PROPERTY GI VEN TO THE RFC ON LEASE RENTAL BASIS AS COST OF IMPROVEMENT U/S 48(2) OF THE INCOME TAX ACT, 1961. FROM THE ABOVE FACTS, IT IS CLEAR THAT T HE RFC WAS IN THE ITA NO. 886/JP/2014 M/S. GHODAWAT HOTELS (P) LTD. VS. DCIT (HQ), CIRCL E- 6, JAIPUR . 14 POSSESSION OF THE PROPERTY OWNED BY THE ASSESSEE AS A TENANT AND FOR THE VACATION OF THE SAME, ASSESSEE WAS FORCED TO PROVID E A NEW PROPERTY TO RFC THUS THE COST INCURRED TOWARDS THE ACQUISITION OF THE NEW PROPERTY HAD A DIRECT LINK WITH THE SALE OF PROPERTY ( I.E. THE VACATED PROPERTY) FROM WHICH CAPITAL GAIN IS DECLARED IN THE YEAR UNDER AP PEAL WHICH HAD ONLY BEEN POSSIBLE WHEN THE SAID PROPERTY WAS VACATED BY THE RFC ON BEING SHIFTED TO THE ANOTHER PREMISES OWNED AND PROVIDED BY THE ASSESSEE ON IRREVOCABLE EXTENDABLE LEASE OF 99 YEARS OR MORE ON A MEAGRE ANNUAL LEASE RENT OF RS.2,500/-. THEREFORE, THE PRICE PAID FOR NEW ASSET WOULD CERTAINLY AMOUNT TO COST OF IMPROVEMENT AND IS AN A LLOWABLE EXPENDITURE WITHIN THE MEANING OF SECTION 48(2) OF THE I.T. ACT , 1961. THIS VIEW IS SUPPORTED BY THE DECISION OF HONBLE DELHI HIGH COU RT IN THE CASE OF CIT VS. EAGLE THEATRES WHEREIN VIDE ORDERS DATED 21.12. 2011 IN ITA NO. 1287/2011, IT HAS BEEN HELD BY THE HONBLE COURT AS UNDER: 10. IN THE PRESENT CASE, AS PER THE FACTS FOUND BY THE TRIBUNAL AND THE CIT (APPEALS), THERE WAS A CANTEEN / REFRESHMEN T STALL IN THE CINEMA HALL WHICH WAS IN OCCUPATION OF A TENANT / LICENSEE SINC E 1971. THE PROPERTY WAS TO BE SOLD. IN ORDER TO PROCURE AND GET PROPER VALUE A ND EFFECTUATE THE SALE, THE RESPONDENT ASSESSEE PAID RS. 1.48 CRORES TO THE TEN ANT / LICENSEE TO VACATE THE PROPERTY. THESE ARE THE FACTUAL FINDINGS RECORDED B Y THE TRIBUNAL AND HAVE BEEN NOTICED ABOVE. WE FAIL TO UNDERSTAND WHY THE S AID SUM CANNOT BE SET OF FROM THE SALE CONSIDERATION AS IT WAS INCURRED SOLE LY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER. WE, THEREFORE, NEED N OT EXAMINE AND GO INTO THE QUESTION WHETHER THE AMOUNT PAID WAS TOWARDS COST OF IMPROVEMENT. THE SAID AMOUNT HAS TO BE ALLOWED BECAUSE IT WAS INCURR ED IN VIEW OF FACTS FOUND, WHOLLY AND EXCLUSIVELY CONNECTED AND LINKED WITH TR ANSFER / SALE. IN SIMILAR CIRCUMSTANCES, THE ANDHRA HIGH COURT IN NAOZAR CHEN OY VS. COMMISSIONER OF INCOME TAX [1998] 234 ITR 95 (AP) HAS OBSERVED AS U NDER: ITA NO. 886/JP/2014 M/S. GHODAWAT HOTELS (P) LTD. VS. DCIT (HQ), CIRCL E- 6, JAIPUR . 15 AS REGARDS THE EXPENDITURE INCURRED BY THE ASSESS EE TOWARDS PAYMENT OF THE AMOUNT TO THE TENANTS FOR VACATING THE PREMI SES, WHICH IS THE SUBJECT MATTER OF THE SALE TRANSACTION, WE ARE OF T HE VIEW THAT IT HAS NEXUS WITH THE TRANSACTION AS WITHOUT THE TENANTS V ACATING THE PREMISES, THE BUILDING CANNOT BE SOLD. THEREFORE WE ARE OF THE VIEW THAT THE SAID EXPENDITURE WAS INCURRED FOR EFFECTIN G THE TRANSACTION AND THEREFORE HE IS ENTITLED FOR DEDUCTION OF THE AMOUN TS INCURRED TOWARDS VACATION OF THE TENANTS, IN COMPUTING THE CAPITAL G AIN OF THE BUILDING SOLD. THE STAND OF THE REVENUE CANNOT BE ACCEPTED ON THE SECOND CONTENTION. FURTHER HONBLE MUMBAI HIGH COURT IN THE CASE OF CI T VS. PIROJA C. PATEL REPORTED IN 242 ITR 582 HAS ALSO EXPRESSED TH E SAME VIEW AND HELD THAT PAYMENT MADE TO HUTMENT DWELLERS FOR VACATION OF PROPERTY AMOUNTED TO COST OF IMPROVEMENT AND ACCORDINGLY ALL OWABLE AS EXPENDITURE WITHIN THE MEANING OF SECTION 48 R.W.S. 55 OF THE I.T. ACT, 1961. IN VIEW OF THE ABOVE AND RESPECTFULLY FOLLOWI NG THE JUDICIAL PRONOUNCEMENTS AS DISCUSSED ABOVE AND RELIED UPON B Y THE ASSESSEE, WE ARE OF THE CONSIDERED VIEW THAT THE COST OF THE NEW ASSET WHICH IS PROVIDED TO RFC ON LONG TERM IRREVOCABLE LEASE AGAI NST THE VACATION OF ASSESSEES PROPERTY FROM ITS POSSESSION HAS A DIREC T NEXUS WITH THE PROPERTY SOLD DURING THE YEAR AND THEREFORE THE COS T OF RS. 1,01,97,208/- PAID BY THE ASSESSEE FOR THE ACQUISITION OF NEW PRO PERTY IS THE COST OF IMPROVEMENT ELIGIBLE FOR DEDUCTION U/S 48(2) OF THE ACT OUT OF THE TOTAL SALE CONSIDERATION FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN. ITA NO. 886/JP/2014 M/S. GHODAWAT HOTELS (P) LTD. VS. DCIT (HQ), CIRCL E- 6, JAIPUR . 16 ACCORDINGLY THE GROUND NO. 2 AND 2.1 OF THIS APP EAL IS ALLOWED IN FAVOUR OF ASSESSEE. 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO. 886/JP/2014 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 4.1 NOW WE TAKE UP THE APPEAL OF THE ASSESSEE IN IT A NO. 887/JP/2014 FOR THE ASSESSMENT YEAR 2008-09 WHEREIN GROUND NO. 1 AND 1.1 & 2 AND 2.1 RAISED BY THE ASSESSEE ARE SIMILAR. IT IS NOTE D THAT THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE GIVING SIMILAR FINDINGS AS GIVEN IN THE ASSESSMENT YEAR 2006-07. TAKING INTO CONSIDERAT ION OF THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2008-09, WE FI ND THAT SIMILAR ISSUE HAS BEEN DECIDED IN THE CASE OF THE ASSESSEE FOR TH E ASSESSMENT YEAR 2006- 07 (SUPRA) AND THEREFORE, THE DECISION TAKEN THEREI N IN BOTH THE ISSUES WILL APPLY MUTATIS MUTANDIS IN BOTH THE GROUNDS OF APPEA L OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2008-09. THUS GROUND NO. 1 AND 1.1 OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES & GROUND NO. 2 AND 2.1 OF THE ASSESSEE IS ALLOWED. 5.0 IT IS FURTHER NOTED THAT THE ASSESSEE HAS RAISE D THE GROUND NO. 3 IN THIS APPEAL FOR THE ASSESSMENT YEAR 2008-09 PRAYING THEREIN THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING AN ADDITION OF RS. 2, 30,671/-MADE ON ACCOUNT OF DISALLOWANCE OF GENUINE EXPENSES CLAIME D BY THE ASSESSEE ON ITA NO. 886/JP/2014 M/S. GHODAWAT HOTELS (P) LTD. VS. DCIT (HQ), CIRCL E- 6, JAIPUR . 17 ACCOUNT OF CAR EXPENSES, DEPRECIATION ON CAR AND I NTEREST PAID ON CAR ON LOAN WITHOUT APPRECIATING THAT THE CLAIM OF DEPRECI ATION IS A STATUTORY DEDUCTION AVAILABLE TO THE ASSESSEE. WE FIND THAT T HIS ISSUE IS NOT RAISED BEFORE THE LD. CIT(A) BY THE ASSESSEE DURING FIRST APPEAL. HENCE, WE FIND NO REASON TO ENTERTAIN THIS GROUND NO. 3 OF THE ASS ESSEE. THEREFORE, THE GROUND NO. 3 OF THE ASSESSEE IS DISMISSED. 6.0 IN THE RESULT, BOTH THE APPEALS OF THE ASSESSE E ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AS INDICATED ABOVE. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 09 -02-2017. SD/- SD/- DQY HKKJR HKKXPUN (KUL BHARAT) ( BHAGCHAND) U;KF;D LNL; / JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 09 /02/ 2017 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. GHODAWAT HOTELS (P) LTD., JAIP UR 2. IZR;FKHZ@ THE RESPONDENT- THE DCIT (HQ), CIRCLE- 6, JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 886/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR