2013 (2) TMI 578 - AT - Income Tax

Addition u/s 50C - area is 13,500 sqy or 15,311 sqy - Held that - Admittedly, in this case the assessee made a rectification deed correcting the area mentioned therein in the sale deed. The assessee also explained the reasons for delay in executing the rectification deed that the assessee is an old lady of 86 years old and she is not aware of the income-tax law. On behalf of the assessee, assessee s son has been appearing before the Revenue authorities. The mistake mentioned in the area in the sale deed was found at a later stage and on this count rectification deed was executed on 11.12.2009 and registered on 16.12.2009. Thus seen from the contents of the Remand Report, AO confirmed that the area transferred is 13,500 sqy instead of 15,311 sqy. The only reason for not accepting the area transferred at 13,500 sqy by the CIT(A) is that the rectification deed was belatedly executed. Thus as the assessee explained the reasons for executing the Rectification Deed belatedly the area transferred is only 13500 sqy. Being so considering the area at 13,500 sqy as per Rectification Deed which is duly registered with the Sub-Registrar and in the circumstances the value mentioned by the assessee for transferring of 13500 sqy is not less as compared to the value adopted by the State authorities for stamp duty valuation, the addition cannot be sustained on this count. Accordingly, this addition is deleted. Addition towards indexed cost of acquisition - AO took the SRO value as on 1.4.1981 at Rs. 25 per sqy and on the other hand, the assessee submitted that a valuation report from a private valuer stating that the cost of land as on 1.4.1981 was Rs. 300 per sqy - Held that - The value is to be considered at Rs. 300 per sqy which is based on the Registered Valuer report which is very reasonable as compared to the value of the property as on the date of sale at Rs. 11,000 per sqy. Considering the Registered Valuer report and by applying the reverse indexation method, the value is to be considered at Rs. 300 per sqy as on 1.4.1981 is very reasonable, thus agreeing with the assessee. Addition towards compensation paid with whom agreement for sale was entered into by the assessee in the year 1993 which was not honoured - Held that - AO has no grievance for allowability of Rs. 1.72 crores and the only objection is with regard to Rs. 64 lakhs out of Rs. 2.36 crores. Accordingly this payment is genuine to the extent incurred by the assessee in relation to the transfer of property. Accordingly, this ground is partly allowed. Addition towards compensation paid to Sri B. Rajendra Prasad - Held that - AO accepted the payment of Rs. 15 lakhs as genuinely incurred for the purpose of transfer of property. However, he has not accepted payment of Rs. 13 lakhs. Thus when the AO himself accepted the payment of Rs. 15 lakhs as genuine, there is no reason to disallow the same and the same is accepted and allowed. This ground is partly allowed. Municipal taxes paid by the assessee on yearly basis cannot be considered as a cost of acquisition or cost of improvement allowed while determining the capital gain. On the other hand, if it is incurred as a betterment/development charges which is a onetime payment, that is to be considered as part of cost of acquisition of the capital asset and the same has to be considered while computing the capital gain. This issue is remitted back to the file of the Assessing Officer to decide the same accordingly.

Summary

Issues Involved:
1. Sustaining addition made by invoking provisions of Section 50C of the Income-tax Act, 1961.
2. Sustaining addition towards indexed cost of acquisition.
3. Sustaining addition towards compensation paid to various individuals.
4. Sustaining disallowance of municipal taxes.

Issue-wise Detailed Analysis:

1. Addition under Section 50C of the Income-tax Act, 1961:
The assessee contested the addition of Rs. 1,81,10,000 made under Section 50C, arguing that only 13,500 sq. yards were transferred, not 15,311 sq. yards as claimed by the Assessing Officer. The assessee provided a Rectification Deed dated 11.12.2009, reducing the land area to 13,500 sq. yards. The Tribunal considered the rectification deed and the remand report confirming the actual area transferred was 13,500 sq. yards. Consequently, the Tribunal deleted the addition, reasoning that the Rectification Deed, being duly registered, should be considered correct unless proven otherwise by the Department.

2. Indexed Cost of Acquisition:
The Assessing Officer had taken the SRO value as on 1.4.1981 at Rs. 25 per sq. yard, whereas the assessee claimed Rs. 300 per sq. yard based on a private valuer's report. The Tribunal agreed with the assessee, noting that the value of Rs. 300 per sq. yard was reasonable given the location and the reverse indexation method. The Tribunal allowed the ground, accepting the valuation of Rs. 300 per sq. yard as on 1.4.1981.

3. Compensation Paid to Various Individuals:
The assessee claimed compensation payments of Rs. 2,36,00,000 to five individuals and Rs. 28,00,000 to Mr. B. Rajendra Prasad. The Assessing Officer disallowed these claims due to lack of confirmations and evidence. However, during appellate proceedings, the assessee provided confirmations and evidence of payments. The Tribunal, considering the remand report, accepted payments totaling Rs. 1.72 crores as genuine. For the Rs. 28 lakhs paid to Mr. B. Rajendra Prasad, the Tribunal accepted Rs. 15 lakhs as genuine based on corroborative evidence but disallowed the remaining Rs. 13 lakhs. Thus, the Tribunal partly allowed this ground.

4. Disallowance of Municipal Taxes:
The assessee claimed municipal taxes paid as part of the cost of acquisition. The Tribunal noted that annual municipal taxes could not be considered as cost of acquisition or improvement unless they were betterment/development charges. The issue was remitted back to the Assessing Officer to determine if the taxes constituted betterment/development charges and decide accordingly.

Conclusion:
The Tribunal partly allowed the assessee's appeal, providing relief on several grounds while remitting the issue of municipal taxes back to the Assessing Officer for further consideration. The judgment emphasized the importance of proper documentation and evidence in substantiating claims related to property transactions and compensation payments.