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TMI Blog2011 (8) TMI 453X X X X Extracts X X X X X X X X Extracts X X X X ..... - 1730 (MUM.) OF 2009 - - - Dated:- 30-8-2011 - D. MANMOHAN, T.R. SOOD, JJ. Jayesh Dadia for the Appellant. A.K. Nayar for the Respondent. ORDER D. Manmohan, Vice-President. This appeal by the assessee is directed against the Order of the CIT (A)-14, Mumbai and it pertains to the assessment year 2004-05. Following grounds were raised before us. 1. "The learned CIT(A) erred in assuming and presuming that proper, reasonable and proper opportunity was provided to the appellant. 2. The learned CIT(A) as well as the A.O. failed to appreciate the fact that section 51 was not at all applicable to the appellant's case. 3. The learned CIT(A) as well as the A.O. ought to have allowed Indexation of Cost as claimed by the appellant. 4. The learned CIT(A) as well as the A.O. were not justified in disallowing genuine expenditure incurred and claimed against income from capital gains". 2. Facts necessary for the disposal of the appeal are stated in brief. Assessee is an individual. His income consisted of capital gains, commission and rents on house property. In respect of the previous year relevant to the assessment year 2004-2005 it declared tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave to be worked out accordingly. In his opinion, any cost incurred on improvement has to be added to the cost of the asset, for applying indexation cost, from the date of improvement and not from the date of acquisition of the asset. On the same lines, payment received in advance has to be reduced from cost of capital asset while computing LTCG. Assessing Officer accordingly worked out the cost of acquisition and thereafter computed capital gains. 5. Aggrieved, assessee contended that the possession of the land was never parted until the sale deed was executed and hence transfer has taken place only in the year 2003. It was thus contended that indexation cost applicable to the assessment year 2004-2005 should be applied in the instant case without reducing the advance money from the cost of acquisition i.e., in the instant case as on 1-4-1981. It was also contended that assessee cannot be considered to be the owner of the amount till the completion of sale. Under the circumstances application of section 51 of the Act is not in accordance with law. 6. Learned CIT(A) observed that the Assessing Officer had given sufficient opportunity to the assessee before applying section 51 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepted by the Assessing Officer by processing the return under section 143(1) of the Act and no action has been taken by the Revenue to reopen the case. In otherwords, the contention of the learned Counsel is that with reference to the same transfer, the Revenue having accepted the case of a co-owner there is no equity in challenging the method followed by the assessee in computing the capital gains. 9. It was further contended that section 51 comes into play only in the event of transactions which was negotiated on a previous occasion and in the event of canceling of such transaction if the vendor has a right to forfeit the amount or retain the amount by virtue of the agreement, advance so received and retained has to be reduced from the cost of acquisition, whereas in the instant case there was neither cancellation nor forfeiture of any deposit and hence section 51 has no application. He has also sought to take support from the decision of the Apex Court in the case of Travancore Rubber Tea Co. Ltd. v. CIT [2000] 243 ITR 158/109 Taxman 250 wherein the Supreme Court has very clearly held that under section 51 retention of any money by the assessee is not taxable at all and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t took place" should be taken as the basis. Section 51 of the Act is a special provision for reduction of the advance received by an assessee from the cost of acquisition. In the case of Travancore Rubber Tea Co. Ltd. (supra), the Hon'ble Supreme Court held that any advance received and forfeited by an assessee has to be treated as a capital receipt in the hands of the seller and the same has to be reduced from the cost of acquisition by applying section 51 of the Act. 12. In the case of CIT v. Sterling Investment Corpn. Ltd. [1980] 123 ITR 441/[1979] 1 Taxman 396 the Bombay High Court had an occasion to consider the plea of a purchaser wherein payment by way of earnest money was claimed as a capital loss on the ground that it was forfeited by the vendor. The Hon'ble High Court held that it is not allowable as deduction and it cannot even be treated as capital loss. As could be noticed from the aforecited two decisions, the expression "previous occasion" refers to an aborted sale of a capital asset and it does not apply to a transfer of capital asset as per the agreed terms. 13. In the light of decision of the Apex Court in the case of Travancore Rubber Tea Co. Ltd. (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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