2015 (10) TMI 1082 - AT - Income Tax

Computation of sales consideration - determination of capital gain - expenditure incurred towards the transfer of property - settlement of claims of tenants/occupants u/s. 48 - Held that - This is a well settled law that while determining capital gains both additions as well as deduction from the apparent value have to be given effect. In the present case the assessee has not placed any document on record to substantiate the expenditure incurred towards the transfer of property in question. So far as 1.25 Crores allegedly utilized for payment to tenants/occupants of building is concerned no evidence whatsoever has been furnished by assessee except self serving affidavits and Deed of Rectification. Moreover a perusal of Development agreement and Sale Deed would show that the liability to settle the claim of the tenants/occupants of building is of the developer/purchaser and not that of the assessee or the other co-owners. - Decided in favour of revenue. Claim of exemption u/s. 54 denied - Revenue has assailed the findings of Commissioner of Income Tax (Appeals) in allowing exemption u/s. 54 in respect of two residential houses - AR of the assessee has stated that expression a residential house does not mean one residential house - Held that - The Tribunal has been consistently taking a view that a residential house does not mean one residential house. The expression a residential house used in the section 54 does not restrict the exemption for investment in one residential house. This issue has been decided by the Co-ordinate Bench of Tribunal in the case of Shri Narsing Gopal Patil Vs. Asst. Commissioner of Income (2013 (5) TMI 837 - ITAT PUNE). In this view of the matter we do not find any justification on the part of the Revenue to deny exemption under Section 54F of the Act merely on the ground that the residential building constructed by the assessee consisted of several independent residential units. Assessee is eligible to claim benefit of section 54 on both the flats in the same building.- Decided against revenue.

Summary

Issues Involved:
1. Acceptance of reduced sale consideration of building.
2. Allowance of expenditure towards settlement of claims of tenants/occupants.
3. Allowance of exemption under Section 54 of the Income Tax Act for two residential houses.

Issue-wise Detailed Analysis:

1. Acceptance of Reduced Sale Consideration of Building:
The Revenue challenged the Commissioner of Income Tax (Appeals) for accepting the reduced sale consideration of Rs. 1.50 Crores from the original Rs. 2.75 Crores as per the registered sale deed. The reduction was formalized through a registered Deed of Rectification. The Tribunal examined the sequence of events, including the development agreement and sale deed, which initially fixed the consideration at Rs. 2.75 Crores. The Tribunal noted that the responsibility of dealing with tenants/occupants was already factored into the original sale consideration. The Tribunal found the execution of the Rectification Deed and subsequent affidavits as dubious and an afterthought to reduce tax liability. The Tribunal held that the reduction in sale consideration was not substantiated by any evidence of actual payment to tenants/occupants. Thus, the Tribunal allowed the Revenue's appeal on this ground.

2. Allowance of Expenditure Towards Settlement of Claims of Tenants/Occupants:
The Tribunal scrutinized the claim of Rs. 1.25 Crores paid towards settling claims of tenants/occupants, which was allowed by the Commissioner of Income Tax (Appeals). The Tribunal found no cogent evidence of such payments, and the affidavits and Rectification Deed were deemed self-serving documents. The Tribunal emphasized that the initial agreements already considered the encumbrances and the responsibility to vacate the premises was on the developer. The Tribunal concluded that the reduction in sale consideration was a method to evade tax liability, and thus, the Revenue's appeal on this ground was allowed.

3. Allowance of Exemption Under Section 54 for Two Residential Houses:
The Tribunal addressed the Revenue's contention that the exemption under Section 54 should be limited to one residential house. The Tribunal referred to case laws, including decisions by the Hon'ble High Courts and other Tribunal Benches, which interpreted "a residential house" to include multiple units within the same building. The Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision to allow exemption for both flats purchased by the assessee in the same building, rejecting the Revenue's appeal on this ground.

Conclusion:
The Tribunal partly allowed the Revenue's appeal, upholding the reduction of sale consideration and the allowance of expenditure towards tenant settlements as dubious and unsupported by evidence. However, the Tribunal rejected the Revenue's contention regarding the exemption under Section 54, allowing the benefit for both residential flats purchased by the assessee.