2011 (12) TMI 725 - AT - Income Tax

Summary

Issues Involved:
1. Adoption of cost of acquisition of land as on 1.4.1981.
2. Claim of deduction under Section 54 of the Income Tax Act.
3. Adoption of the value of the land as on 1.4.1981.
4. Disallowance of commission and legal expenses.
5. Disallowance of compensation paid to tenants.

Issue-wise Detailed Analysis:

1. Adoption of Cost of Acquisition of Land as on 1.4.1981:
The Revenue contested the CIT (A)'s decision to adopt the cost of acquisition of the land at Rs. 175 per sft as on 1.4.1981 instead of Rs. 24 per sft determined by the AO. The CIT (A) observed that the AO mistakenly considered the asset as a vacant site and adopted Rs. 24 per sft based on a single sale instance from the Sub-Registrar's office. The CIT (A) instead adopted Rs. 175 per sft based on the Supreme Court guidelines in Chimanlal Hargovind Das v. Special L.A.O A.I.R. 1988 S.C. 1652, considering the land's potential and other factors. The Tribunal remitted the issue back to the AO for fresh consideration, emphasizing the need for thorough investigation and verification.

2. Claim of Deduction under Section 54 of the Income Tax Act:
The assessee claimed deduction under Section 54, which the AO denied, allowing deduction under Section 54F instead. The CIT (A) rejected the assessee's claim on the grounds that the assessee failed to purchase or construct a new residential house within the specified period. The Tribunal noted that the authorities did not consider the proviso to sub-section (2) of Section 54 and remitted the issue back to the AO for fresh consideration, directing the assessee to provide all relevant documents.

3. Adoption of the Value of the Land as on 1.4.1981:
The assessee argued that the CIT (A) should have directed the AO to adopt Rs. 480 per sft instead of Rs. 175 per sft. The Tribunal reiterated that the issue of adopting the value of the land as on 1.4.1981 had been remitted back to the AO for fresh consideration, thus this ground was also remitted back.

4. Disallowance of Commission and Legal Expenses:
The assessee claimed commission and legal expenses of Rs. 1,85,607, which the AO disallowed due to lack of substantiation. The CIT (A) upheld the disallowance based on precedents. The Tribunal observed that the expenses were incurred in connection with the sale of the property and remitted the issue back to the AO for detailed verification and appropriate action.

5. Disallowance of Compensation Paid to Tenants:
The assessee claimed compensation of Rs. 17,25,000 paid to tenants for evicting them, which the AO disallowed due to lack of proof. The CIT (A) upheld the disallowance. The Tribunal noted conflicting claims and remitted the issue back to the AO for detailed verification and appropriate action, directing the assessee to provide necessary evidence.

Conclusion:
The Tribunal allowed the Revenue's appeal for statistical purposes and partly allowed the assessee's appeal for statistical purposes, remitting various issues back to the AO for fresh consideration and detailed verification, ensuring compliance with the provisions of the Income Tax Act.