2015 (1) TMI 645 - AT - Income Tax

Long Term Capital Gain on Transfer of land - deduction in respect of payment made to his sister for allegedly settling the dispute in the property/land denied - Held that - Even if the assessee has made the payment to his sister Mrs. Aarti Sameer Nimgaonkar the said payment was not for removing any encumbrance. Moreover, as per the WILL and other documents the said Mrs. Aarti Sameer Nimgaonkar was not having any interest in title of any property. We, therefore, hold that the Assessing Officer has rightly denied ₹ 16,00,000/- to the assessee. Accordingly, Ground No. 1 is dismissed. - Decided against assessee. Index Cost of Acquisition - partly allowing the cost of trees standing in the property - Held that - As per the valuation report filed by assessee there were 169 mango trees and also other trees. The approved valuer is having the PHD in the Horticulture who has made the valuation of the trees as on 01-04-1981 at ₹ 11,60,000/-. It is also seen that the said property was given the name of Ambarai . When the assessee has filed the valuation report from the Govt. approved agricultural valuer then the matter should have been referred to the Govt. Valuer for valuation if the valuation report was not accepted. Nothing has been discussed by the Assessing Officer as well as the Ld. CIT(A) why the valuation made by the approved valuer is not correct. We, therefore, allow the Ground No. 2 and direct the Assessing Officer to accept the valuation of the trees as made by the approved valuer as on 01-04-1981 and accordingly worked out the capital gain. - Decided in favour of assessee

Issues Involved:
1. Deduction of Rs. 16,00,000/- paid to the assessee's sister from Long Term Capital Gain.
2. Index Cost of Acquisition of Rs. 22,70,000/- as against Rs. 63,91,600/-.
3. Deduction of cost of improvement of Rs. 5,50,000/- from Long Term Capital Gain.

Detailed Analysis:

1. Deduction of Rs. 16,00,000/- Paid to Assessee's Sister:
The assessee claimed a deduction of Rs. 16,00,000/- paid to his sister, Mrs. Aarti Nimgaonkar, for settling a dispute regarding the property sold to M/s. Suvidha Developers. The Assessing Officer (AO) disallowed this claim, stating that the payment was an application of income and lacked documentary evidence. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, reasoning that the expenditure did not qualify as being "wholly and exclusively in connection with the transfer" under Section 48 of the Income Tax Act. The CIT(A) distinguished this case from others where payments were made to remove encumbrances or perfect title, noting that the assessee was the absolute owner and no legal suit was filed by the sister disputing ownership. The Tribunal agreed with the lower authorities, emphasizing that the payment was not necessary for the transfer and dismissing the ground.

2. Index Cost of Acquisition of Rs. 22,70,000/-:
The AO reduced the Fair Market Value (FMV) of the property as on 01-04-1981 by Rs. 11,60,000/- due to lack of evidence supporting the existence and valuation of trees on the land. The CIT(A) partially allowed the claim, accepting a value of Rs. 4,11,980/- for the trees based on the valuer's report and other documents, but noted the absence of evidence about the yield and economic importance of the trees. The Tribunal found that the valuation report by a government-approved agricultural valuer should have been referred to a government valuer if disputed. The Tribunal directed the AO to accept the valuation of Rs. 11,60,000/- for the trees as on 01-04-1981, allowing the ground in favor of the assessee.

3. Deduction of Cost of Improvement of Rs. 5,50,000/-:
The AO disallowed the claim of Rs. 5,50,000/- for cost of improvement (fencing and civil construction) due to lack of supporting evidence. The assessee did not press this ground before the Tribunal, leading to its dismissal.

Revenue's Appeal:
The Revenue contested the CIT(A)'s partial allowance of the value of trees at Rs. 4,11,980/-. The Tribunal, having already directed the AO to accept the full valuation of Rs. 11,60,000/- for the trees, dismissed the Revenue's appeal.

Conclusion:
The assessee's appeal was partly allowed, specifically on the issue of the indexed cost of acquisition of trees. The Revenue's appeal was dismissed. The Tribunal's decision emphasized the importance of documentary evidence and proper valuation methods in determining allowable deductions for capital gains tax computation.

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