ACIT, Ajmer V. REKHA SHARMA, Ajmer

ITA 945/JPR/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7595 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 29-05-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 01-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A S NEHRA ACIT
• Assessee Lawyers: C P KOTHARI
• Keywords: Capital asset; Cost of acquisition; Set aside

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,A JAIPUR JH JESK LH0 KEKZ] YS[KK LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH. C. SHARMA, AM & SHRI VIJAY PA L RAO, JM VK;DJ VIHY LA- @ ITA NO. 945/JP/2016 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2012-13 THE ACIT, CIRCLE-2, AJMER. CUKE VS. SMT. REKHA SHARMA, 113, ADARSH NAGAR, AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: BSWPS 1066 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI A.S. NEHRA (ACIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI SUNIL PORWAL (C.A.) & SHRI C.P. KOTHARI (C.A.) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 10/07/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 23/07/2019 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 31.08.2016 OF THE LD. CIT(A), AJMER FOR THE ASSESSM ENT YEAR 2012-13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- (1) WHETHER IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADDITIO N OF RS. 125 LAKHS MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF COST OF IMPROVEMENT U/S 48 (1)(II) . ITA NO. 945/JP/2016 ACIT VS. SMT. REKHA SHARMA 2 2. WHETHER IN VIEW OF THE FACTS AND CIRCUMSTANCES O F THE CASE, THE LD. CIT(A), AJMER IS JUSTIFIED IN IGNORING THE FACT THAT THE PAYMENT OF RS. 125 LAKHS WAS MADE TO HER SPOUSE IN LIEU OF DECREE OF DIVORCE AND THE WITHDRAWALS OF ALL THE CA SES BY THE FIRST PARTY COMPRISING OF ASSESSEES HUSBAND AND OTHERS F ILED AGAINST THE ASSESSEE. 3. THE APPELLANT CRAVES TO ADD, AMEND, ALTER, DELET E OR MODIFY THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HE ARING. 2. THE ASSESSEE IS AN INDIVIDUAL AND FILED HER RETU RN OF INCOME ON 31.03.2013 DECLARING TOTAL INCOME OF RS. 1,64,56,00 6/-. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE SOLD A PROPERTY B EARING NO. 135, SECTOR-6, PANCHKULA, CHANDIGARH FOR A CONSIDERATION OF RS. 4.57 CRORES. THE AO NOTED THAT WHILE COMPUTING THE CAPITAL GAIN ARISING FROM SALE OF THE SAID PROPERTY THE ASSESSEE HAS DEDUCTED A SUM O F RS. 1,26,56,118/- BEING INDEX COST OF RS. 1.25 CRORES PAID TO HER HU SBAND SHRI MAHESH CHAND SHARMA IN PURSUANT TO A SETTLEMENT BETWEEN T HE ASSESSEE AND HER HUSBAND UNDER WHICH BOTH THE PARTIES AGREE TO D ISSOLVE THEIR MARRIAGE BY DECREE OF DIVORCE . THE AO ASKED THE AS SESSEE AS TO WHY RS. 1,26,56,118/-GIVEN TO HER HUSBAND AND CLAIMED A S COST OF IMPROVEMENT SHOULD NOT BE DISALLOWED. IN REPLY THE ASSESSEE SUBMITTED THAT THE PLOT OF LAND WAS PURCHASED FROM THE FINANC IAL SOURCE OF THE ASSESSEE IN HER NAME AND SUBSEQUENTLY IT WAS CONSTR UCTED BY THE ITA NO. 945/JP/2016 ACIT VS. SMT. REKHA SHARMA 3 FATHER-IN-LAW OF THE ASSESSEE FROM THE COMMON FUNDS OUT OF HIS OWN FINANCIAL SOURCE, THE SOURCE OF THE ASSESSEES HUSB AND AS WELL AS THE ASSESSEE. SINCE, THE SAID HOUSE WAS CONSTRUCTED FO R THE FAMILY AND THE HUSBAND OF THE ASSESSEE WAS IN OCCUPATION THEREFORE , THE ASSESSEE CLAIMED THAT TO GET THE SAME VACATED THE ASSESSEE P AID THE SAID AMOUNT TO HER HUSBAND. THE ASSESSEE ALSO CLAIMED TH AT THE HUSBAND OF THE ASSESSEE WAS THE OWNER OF THE HOUSE AND THEREFO RE, THE SAID AMOUNT WAS PAID TOWARDS HIS SHARE. THE AO DID NOT A CCEPT THE SAID CONTENTION OF THE ASSESSEE AND DISALLOWED THE CLAIM BY HOLDING THAT SECTION 48 OF THE I.T. ACT ALLOW THE DEDUCTION FROM THE VALUE OF CONSIDERATION ONLY TOWARDS EXPENSES INCURRED WHOLL Y AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF CAPITAL ASSETS. THEREFORE, COMPROMISE AMOUNT DO NOT CONSTITUTE COST OF ACQUISITION. THUS, THE AO HAS REJECTED THE CLAIM OF THE ASSESSEE THAT THE AMOUNT WAS PAID TO HER HUSBAND TOWARDS THE COST OF IMPROVEMENT. THE ASSESSEE CHALL ENGED THE ACTION OF THE AO BEFORE THE LD. CIT(A) AND REITERATED ITS HER CONTENTION THAT THE AMOUNT WAS PAID TO HER HUSBAND TOWARDS COST OF IMPROVEMENT AND GETTING THE PROPERTY VACATED. THE LD. CIT(A) ACCEPT ED THE CLAIM OF THE ASSESSEE AND ALLOWED THE DEDUCTION CLAIMED BY ASSES SEE. ITA NO. 945/JP/2016 ACIT VS. SMT. REKHA SHARMA 4 3. BEFORE US, THE LD. DR HAS SUBMITTED THAT THE AM OUNT PAID TO HER HUSBAND UNDER THE SETTLEMENT IS NOT TOWARDS THE COS T OF IMPROVEMENT OR REMOVING ANY ENCUMBRANCE ON THE PROPERTY BUT AS PER SETTLEMENT DEED THE AMOUNT WAS PAID TO SETTLE VARIOUS ISSUE BE TWEEN THE PARTIES AND NOT ONLY FOR VACATING THE HOUSE. THEREFORE, THE PAYMENT MADE BY THE ASSESSEE IN PURSUANT TO THE SETTLEMENT AND FOR DISSOLVING THE MARRIAGE THROUGH DECREE OF DIVORCE CANNOT BE HELD A S DEDUCTABLE CLAIM U/S 48 OF THE ACT. HE HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER 4. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE HA S REFERRED TO THE COMPROMISE DEED AND SUBMITTED THAT SINCE SHRI MAHES H CHAND SHARMA WAS IN THE OCCUPATION OF THE HOUSE AND THEREFORE, T HE AMOUNT PAID TO HIM IS ALLOWABLE DEDUCTION U/S 48(II) OF THE ACT FO R COST OF IMPROVEMENT. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON TH E DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. ABRAR ALVI (20 01) 247 ITR 312. HE HAS ALSO RELIED UPON THE DECISION IN CASE OF CIT SHAKUNTALA KANTILAL 190 ITR 56 AS WELL AS THE DECISION OF HONBLE MADRA S HIGH COURT IN CASE OF CIT VS. BRADFORD TRADING CO. PVT. LTD. 261 ITR 2 22 AND SUBMITTED THAT THE HONBLE HIGH COURTS HAVE TAKEN A CONSISTEN T VIEW THAT THE AMOUNT PAID FOR REMOVING ENCUMBRANCE AND SETTLEMENT OF CLAIM IS EXPENDITURE INCURRED IN CONNECTION OF TRANSFER OF C APITAL ASSETS ITA NO. 945/JP/2016 ACIT VS. SMT. REKHA SHARMA 5 DEDUCTABLE U/S 48 OF THE ACT. HE HAS SUPPORTED THE ORDER OF THE LD. CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS CLAIMED A DEDU CTION OF RS. 1.25 CRORES AND INDEX AMOUNT OF RS. 1,26,56,118/- AS COS T OF IMPROVEMENT OF THE RESIDENTIAL HOUSE IN QUESTION SOLD BY THE AS SESSEE. THE ASSESSEE HAS EXPLAINED BEFORE THE AO AS WELL AS THE LD. CIT( A) THAT THE PLOT OF LAND IN QUESTION WAS PURCHASED BY THE ASSESSEE FROM HER OWN FUNDS HOWEVER, THE CONSTRUCTION OF THE HOUSE ON THE SAID PLOT OF LAND WAS MADE FROM THE FUNDS OF HER HUSBAND AND HER FATHER-I N-LAW AS WELL AS THE ASESSEE. THUS, THE PAYMENT TO THE HUSBAND WAS M ADE TOWARDS THE COST OF IMPROVEMENT BEING THE COST OF CONSTRUCTION OF THE HOUSE. THE ASSESSEE HAS ALSO REFERRED TO THE SETTLEMENT DEED B ETWEEN THE ASSESSEE AND HER HUSBAND WHILE DISSOLVING THEIR MAR RIAGE BY DECREE OF DIVORCE. IN THE SAID COMPROMISE DEED IT WAS AGREED UPON BETWEEN THE PARTIES THAT ON RECEIPT OF THE SAID AMOUNT OF RS. 1 .25 CRORES SHRI M.C. SHARMA AFTER QUASHING OF THE FIR NO. 319/09 AND GRA NT OF A DECREE OF DIVORCE BY WAY OF MUTUAL CONSENT, SHALL WITHDRAW AL L THE CASES FILED AGAINST THE ASSESSEE SMT. REKHA SHARMA IN RESPECT O F THE OWNERSHIP/POSSESSION OF THE HOUSE IN QUESTION. THER EFORE, THE SAID ITA NO. 945/JP/2016 ACIT VS. SMT. REKHA SHARMA 6 PAYMENT WAS MADE BY THE ASSESSEE TO RESOLVE VARIOUS DISPUTES BETWEEN THE PARTIES INCLUDING DISSOLVING THE MARRIA GE AS WELL AS QUASHING OF FIR AND OTHER CASES. THE ASSESSEE UNDI SPUTEDLY CLAIMED THE SAID PAYMENT TOWARDS THE COST OF IMPROVEMENT AN D THE SAID FACT WAS ALSO CONSIDERED THE LD. CIT(A) IN THE IMPUGNED ORDER IN PARA 4.3.I THAT WHILE COMPUTING THE CAPITAL GAIN ON SALE OF FL AT THE ASSESSEE HAS CLAIMED THE AMOUNT OF RS. 1.25 CRORES PAID TO HER H USBAND AS COST OF IMPROVEMENT. THE ASSESSEE IN THE SUBMISSIONS BEFORE THE AUTHORITIES BELOW EXPLAINED THAT SINCE THE CONSTRUCTION OF THE HOUSE WAS COMPLETED FROM THE FUND OF THE HUSBAND AS WELL AS FATHER-IN-L AW THEREFORE, THIS PAYMENT IS MADE TOWARDS THE COST OF IMPROVEMENT. WE FIND THAT IF THE PAYMENT IS MADE TOWARDS THE COST OF IMPROVEMENT/CON STRUCTION AS INCURRED BY THE HUSBAND THEN THE SAME IS AN ALLOWAB LE DEDUCTION FROM THE CONSIDERATION HOWEVER, IF THE ASSESSEE HAS ALRE ADY CLAIMED THE INDEXED OF CONSTRUCTION COST OF THE HOUSE WHILE COM PUTING THE CAPITAL GAIN THEN BY CLAIMING THIS AMOUNT OF RS. 1.25 CRORE S AND INDEX VALUE OF THE SAME AT RS. 1.26,56,118/- THE SAME WOULD BE A D OUBLE DEDUCTION TOWARDS THE COST OF CONSTRUCTION/IMPROVEMENT. THE P ARTIES UNDER THE COMPROMISE DEED HAVE SETTLED VARIOUS DISPUTES INCLU DING THE AMOUNT IN QUESTION WHICH MIGHT HAVE CLAIMED BY HER HUSBAND TO WARDS THE COST OF ITA NO. 945/JP/2016 ACIT VS. SMT. REKHA SHARMA 7 CONSTRUCTION OF THE HOUSE AND THEREFORE, THE SAID P AYMENT OF RS. 1.25 CRORES TO THE HUSBAND TOWARDS CONSTRUCTION OF THE H OUSE IS ALLOWABLE EITHER ACTUAL AMOUNT BEING THE COST INCURRED BY THE ASSESSEE AT THE TIME OF PAYMENT OR THE INDEX COST OF CONSTRUCTION O F THE HOUSE. IF THE ASSESSEE HAS ALREADY CLAIMED THE INDEX COST OF CONS TRUCTION OF THE HOUSE THEN THE CLAIM OF AMOUNT PAID TO HER HUSBAND TOWARDS THE COST OF CONSTRUCTION WOULD AMOUNT TO DOUBLE DEDUCTION OF THE COST OF CONSTRUCTION. ACCORDINGLY, WE SET ASIDE THIS ISSUE TO THE RECORD OF THE ASSESSING OFFICER TO VERIFY THE RELEVANT DETAILS WH ETHER WHILE COMPUTING THE CAPITAL GAIN THE ASSESSEE HAS ALSO CLAIMED THE INDEX COST OF CONSTRUCTION OF THE HOUSE OR NOT AND THEN DECIDE TH IS ISSUE AFTER GIVING AN OPPORTUNITY OF HEARING TO THE ASSESSEE IN THE LI GHT OF ABOVE OBSERVATION. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23/07/2019. SD/- SD/- JESK LH0 KEKZ FOT; IKY JKO (RAMESH. C. SHARMA) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 23/07/2019. ITA NO. 945/JP/2016 ACIT VS. SMT. REKHA SHARMA 8 * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE RESPONDENT- ACIT, CIRCLE-2, AJMER. 2. IZR;FKHZ@ THE RESPONDENT- SMT. REKHA SHARMA, AJMER. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 945/JP/2016} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR