1999 (8) TMI 120 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of entire addition of Rs. 46,08,000 under the head capital gains.
2. Ownership and percentage share of the property.
3. Recognition of partition under section 171 of the Income-tax Act.
4. Title and share of Shri B.N. Soi in the property.
5. Computation of capital gain based on the share of the property.
6. Exclusion of value of property provided to Shri B.N. Soi.
7. Rejection of cited judgment by the assessee.
8. Justification for levy of interest.

Detailed Analysis:

1. Deletion of Entire Addition of Rs. 46,08,000 under Capital Gains:
The assessee contended that the CIT(A) erred in not deleting the entire addition of Rs. 46,08,000 made by the DCIT under the head capital gains. The CIT(A) concluded that the assessee had a title over Rs. 96 lakhs of the sale proceeds of the property, and not Rs. 1,07,22,257 as assessed by the AO. The CIT(A) directed the AO to compute the capital gain on the basis that the assessee owned only 25% of the property, not 16.23%.

2. Ownership and Percentage Share of the Property:
The property at 22, Darya Ganj, New Delhi, was initially purchased by the assessee's grandmother and later became the sole property of the assessee through an arbitration award. The property was converted into HUF property, and a family settlement led to a division of shares. The CIT(A) concluded that the property was sold for Rs. 3.84 crores, and the assessee's share was 25% of the sale consideration.

3. Recognition of Partition under Section 171 of the Income-tax Act:
The AO initially rejected the partition claim under section 171 but was directed by the AAC to re-examine the matter. The CIT(A) noted that the partition claim was eventually accepted, but the specific order under section 171 was not available in the records. The CIT(A) observed that the partition was recognized, and the income was assessed in the hands of the individual members of the erstwhile HUF.

4. Title and Share of Shri B.N. Soi in the Property:
The CIT(A) found that Shri B.N. Soi had no title in the property at 22, Darya Ganj, New Delhi. The compensation agreed upon in the family settlement did not confer any legal title to Shri B.N. Soi. The CIT(A) concluded that the share of Shri B.N. Soi was a voluntary act by the assessee and not due to any legal obligation. The CIT(A) also noted that the payment to Shri B.N. Soi could not be treated as an expenditure incurred wholly and exclusively in connection with the transfer of the property.

5. Computation of Capital Gain Based on the Share of the Property:
The CIT(A) directed the AO to compute the capital gain based on the assessee's 25% share of the sale consideration. The CIT(A) held that the assessee was liable to pay tax on Rs. 96 lakhs, representing his 25% share of the total sale consideration of Rs. 3.84 crores.

6. Exclusion of Value of Property Provided to Shri B.N. Soi:
The assessee argued that the value of the property provided to Shri B.N. Soi should be excluded while computing the capital gain. The CIT(A) rejected this argument, stating that the payment to Shri B.N. Soi was a voluntary act and could not be excluded from the computation of capital gain.

7. Rejection of Cited Judgment by the Assessee:
The assessee cited a judgment reported in 150 ITR 80, which was brushed aside by the CIT(A). The CIT(A) did not find the cited judgment relevant to the facts of the case and held that the addition sustained to the declared capital gain was justified.

8. Justification for Levy of Interest:
The CIT(A) upheld the levy of interest, stating that the computation of interest under section 234B was to be checked by the AO. The CIT(A) directed the AO to verify the calculation of interest and make necessary adjustments as per law.

Conclusion:
The appeals by both the assessee and the Revenue were dismissed. The CIT(A)'s order was upheld, concluding that the assessee was liable to pay tax on his 25% share of the sale consideration amounting to Rs. 96 lakhs, and no deduction under section 48 was allowable for the payment made to Shri B.N. Soi. The levy of interest under section 234B was also upheld, with directions to the AO to verify the calculations.