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2024 (11) TMI 1305 - AT - Income TaxGain on sale of property - LTCG or STCG - date of acquisition of the property - Entitlement to exemption us 54EC - HELD THAT - Original lands were owned by late husband of the assessee, in Kaushambi area of Ghaziabad. It is a fact on record that abovesaid lands were acquired by Ghaziabad Development Authority in the year 1984. It is also fact on record that because of acquisition of abovesaid lands, GDA was to grant equivalent piece of land in Kaushambi. The abovesaid order of 1996 was a subject matter of dispute and finally on 15.03.2002, late husband of the assessee was allotted land at Kaushambi which was 56% equivalent of the total lands acquired by the GDA. As per the abovesaid allotment letter, late husband of the assessee entitled to the land admeasuring 3474.74 sq. mtrs. In Kaushambi which was acknowledged by GDA gainst the payment of development fee and freehold charges. As assessee is not in a position to make such payment, accordingly a MOU was entered by the assessee with Meenal Housing Pvt. Ltd. and a consideration was fixed who paid the above charges to GDA directly on behalf of the assessee and also paid to the assessee an amount. Thus it is clear that assessee being the legal heir of late husband was holding a lien on the land owned by late Ram Prakash Goel and only because of the lien held by the assessee through her late husband, the GDA has allotted the land admeasuring 3475sq.mts. on payment of development fees, lease rent and freehold charges. The above facts are demonstrated by the assessee by filing the relevant letters and communications with the GDA in the form of paper book. It is clear that the assessee has owned lands which were acquired by the GDA in the year 1984. The GDA has merely acknowledged and finally transferred the title of the property only on 25.04.2014 and handed over the property title to the assessee on 25.11.2014. It does not mean that assessee has acquired the property only on 25.11.2014. It clearly shows that the assessee held the right of lien on the lands not physically but originally claimed with the GDA. Assessee held the right on the land from the date of original purchase date of the property which was acquired by the GDA in the year 1984. Therefore, the property was transferred by the assessee for development to M/s. Royce Developers Pvt. Ltd. during the current assessment year. Therefore, we hold that the lands transferred by the assessee are a long term assets. Cost of acquisition and cost of improvement - As the assessee having the rightful right over the property and the assessee was able to get the earmarked amount of lands sanctioned in the name of the assessee only on payment of development fees, lease rent and freehold charges to GDA and since assessee was not in a position to make such payments, Meenal Housing Pvt. Ltd. came into the picture by signing a MOU with the assessee and it is also a fact on record that Meenal Housing Pvt. Ltd. paid the above fees to GDA directly. Therefore, the assessee is eligible to claim indexed cost on cost of purchase as on 30.03.1987 and the payment of development fees etc. to GDA on 07.02.2013. Payment made to Meenal Housing Pvt. Ltd., the assessee has made compensation to clear the title from all encumbrances and the abovesaid payment is nothing but a charge on the property as a lien. Therefore, the abovesaid payment has to be allowed as cost directly connected to the sale of the above land and stamp duty borne by the assessee of Rs. 9,67,5000/-. Therefore, we direct the AO to allow the claim of the assessee to the extent of above cost of improvement and cost of expenditure directly linked to the sale of the property. Accordingly, grounds raised by the assessee are allowed. Exemption claimed by the assessee u/s 54EC - Since the issue under consideration is already addressed by ld. CIT (A) by remitting the issue back to the file of AO to verify the relevant bonds and allow the same after verification. Therefore, we do not see any reason to disturb the same. We direct AO accordingly. Disallowance claim of expenditure on transfer charges as assessee has not made any fresh submission by bringing any material to substantiate its claim.
Issues Involved:
1. Determination of the nature of capital gain (long-term vs. short-term). 2. Cost of acquisition and improvement for capital gains calculation. 3. Eligibility for exemption under Section 54EC of the Income-tax Act. 4. Deductibility of expenditure related to the cancellation of an MOU. 5. Claim of transfer charges as expenditure. Detailed Analysis: 1. Determination of the Nature of Capital Gain: The primary issue was whether the capital gain from the sale of the property should be treated as long-term or short-term. The Assessing Officer (AO) considered the date of acquisition as 25.11.2014, the date when the sale deed was executed, and thus treated the gain as short-term. The assessee argued that the right to the property was acquired on 15.03.2002, when a government order allotted the land, making it a long-term capital asset. The Tribunal found that the assessee held a lien on the land since the acquisition of the original lands by the Ghaziabad Development Authority (GDA) in 1984. Therefore, the Tribunal concluded that the property was a long-term asset, as the right over the property was held from the date of the original acquisition. 2. Cost of Acquisition and Improvement: The assessee claimed various amounts as the cost of acquisition and improvement, including the compensation amount of Rs. 20,83,903/-, development fees, lease rent, and freehold charges paid to GDA, and the amount paid to M/s Meenal Housing Pvt. Ltd. The Tribunal held that the compensation amount was a notional figure and should be indexed from 15.03.2002. The development fees and related charges paid to GDA were considered as the cost of improvement. The Tribunal also allowed the amount paid to M/s Meenal Housing Pvt. Ltd. as it was necessary to clear the title from encumbrances, thus directly related to the sale. 3. Eligibility for Exemption under Section 54EC: The assessee claimed an exemption under Section 54EC for investment in REC bonds. The CIT(A) had already remitted this issue back to the AO for verification of the bonds. The Tribunal upheld this decision, directing the AO to verify and allow the exemption as per the rules. 4. Deductibility of Expenditure Related to Cancellation of MOU: The assessee paid Rs. 4,61,43,000 to M/s Meenal Housing Pvt. Ltd. for the cancellation of an MOU, claiming it as a cost of improvement. The AO and CIT(A) rejected this claim, stating it was not related to the acquisition or improvement of the land. However, the Tribunal found this payment necessary to clear the title and facilitate the sale, thus allowing it as a cost directly connected to the sale. 5. Claim of Transfer Charges as Expenditure: The assessee claimed Rs. 15,00,000 as transfer charges. The AO and CIT(A) rejected this claim due to a lack of evidence and because the sale deed indicated these charges were borne by the vendee. The Tribunal upheld this decision, as the assessee failed to substantiate the claim with new evidence during the appeal. Conclusion: The Tribunal partly allowed the appeal, recognizing the property as a long-term asset, allowing certain costs as acquisition and improvement, and maintaining the remand for Section 54EC verification. However, the claim for transfer charges was dismissed due to insufficient evidence.
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