9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (4) TMI 339 - AT - Income TaxAllowable deduction in computing the capital gains - Expenditure wholly and exclusively in connection with the transfer of the property - DR submitted that expenditure incurred in connection with encumbrance/mortgage is not an allowable expenditure u/s.48(l)(i) - whether e interest paid for mortgage is not eligible expenditure u/s.48(l)(i) - assessee claimed deduction towards sales expenses related to Cancellation of JDA, Cancellation of purchase agreement and Cancellation of purchase agreement - HELD THAT - The sale consideration received by assessee is only with regard to sale of land. It is not relating to the sale of any building thereon. The building cost of acquisition claimed by assessee has not at all transferred by assessee vide sale deed dated 23.1.2014. The assessee all along claiming the cost of building, which is not at all transferred by assessee as such the cost of such building cannot be allowed out of the sale consideration of the land as a deduction. The claim of assessee that the building is already existing in the said land and it has been let out to M/s. Edutech NTTF Pvt. Ltd and the rental income of said building has been offered for taxation from year to year. On this basis assessee is claiming cost of building as a deduction out of the sale consideration received from M/s. Titan Company Ltd. The assessee ought to have claimed this deduction only if the sale consideration received by the assessee includes the sale value of the said building in the total sale consideration received by the assessee. In the absence of such and there was no transfer of building to M/s. Titan Company Ltd., said deduction could not be allowed. As in the present case on hand, there was no iota of evidence shown by the assessee with regard to the transfer of the building in the sale deed entered by the assessee with M/s. Titan Company Ltd. and also the balance sheet of the assessee as on 31.3.2013 have no reference of building and it shows only the land-electronic city. There was no mentioning of any value of the building in the schedule of the fixed assets and now assessee again says that sale of land also includes the sale of building so as to claim deduction towards cost of building from the sale value of the land, actually it was not so. Accordingly, this ground of appeal of revenue is allowed.
Issues Involved:
1. Allowability of Sales Expenses. 2. Disallowance of Indexed Cost of Improvement. Summary of Judgment: Issue 1: Allowability of Sales Expenses Facts and Claims: The assessee sold property for Rs. 51,43,40,778/- and claimed sales expenses of Rs. 9,86,52,619/-. The Assessing Officer (AO) disallowed Rs. 7,00,00,000/- of these expenses, which were compensation payments for the cancellation of a Joint Development Agreement (JDA) and two purchase agreements. AO's Findings: The AO found that the JDA and purchase agreements did not provide for compensation payments and only mentioned interest payments at 15% on outstanding amounts in the event of cancellation. Therefore, the AO disallowed the compensation payments as they were not incurred wholly and exclusively in connection with the transfer of the property under Section 48 of the Income Tax Act. CIT(A)'s Decision: The CIT(A) allowed the deduction of Rs. 7,00,00,000/- as sales expenses, reasoning that the compensation was necessary to clear encumbrances and perfect the title for the sale to M/s Titan Company Ltd. The CIT(A) observed that the payments were made through banking channels and TDS was deducted, thus validating the genuineness of the transactions. Tribunal's Findings: The Tribunal held that the compensation payments were necessary for the transfer of the property and thus allowable under Section 48. However, it directed the AO to verify that the compensation payments were related to the property sold to M/s Titan Company Ltd. and not other properties. The AO was instructed to grant proportionate deduction accordingly. Issue 2: Disallowance of Indexed Cost of Improvement Facts and Claims: The assessee claimed an indexed cost of improvement of Rs. 26,52,22,757/- for a building on the sold land. The AO disallowed this claim, arguing that the sale deed did not mention any building and the consideration was solely for the land. AO's Findings: The AO noted that the sale deed and related agreements only referred to the land, not the building. The AO cited a Madras High Court decision to support the view that the building had no value at the time of sale. CIT(A)'s Decision: The CIT(A) allowed the indexed cost of improvement, reasoning that the building was transferred along with the land, even if not explicitly mentioned in the sale deed. The CIT(A) relied on judicial precedents that supported the inclusion of building costs in the sale consideration for capital gains computation. Tribunal's Findings: The Tribunal disagreed with the CIT(A), noting that the sale consideration was only for the land and there was no evidence of the building being transferred. The Tribunal found that the assessee's balance sheet did not reflect the building as an asset. Consequently, the Tribunal allowed the revenue's appeal, disallowing the indexed cost of improvement for the building. Conclusion: The Tribunal partly allowed the revenue's appeal, directing the AO to verify the proportionate deduction of sales expenses related to the property sold and disallowing the indexed cost of improvement for the building.
|
