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TMI Blog2014 (10) TMI 736X X X X Extracts X X X X X X X X Extracts X X X X ..... ing has not been mentioned in the sale deed, according to the assessee the terms and conditions mentioned in the sale deed are negotiated terms and conditions between the vendor and vendee and does not carry the value equivalent to any statute - There may be a different object of the vendee for not mentioning the building and one of the relevant factors can be a lower payment of stamp duties - Thus non mention of building in the sale deed would not authorize the AO to deny the claim of assessee - During the course of hearing we had confronted to the assessee that the rental income can be an income from the land only - if it was an income simply from leasing out of the land then it would have been assessed as income from other sources and not income from house property. Relevant balance sheet for arriving at the conclusion that these companies constructed the buildings can only be examined from the balance sheet of 31.3.1997 - If the examination of these balance sheets as of this year reveals that there was no building appearing in the fixed assets, then the obvious conclusion is that initially building was constructed by assessee and further these tenant companies had made furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly. c) Disallowing the deduction of payment of Rs..1,94,80,000/- spent by the assessee to clear the dues of the Concepts India Pvt. Ltd. 2. The assessee craves leave to add, alter or amend the grounds of appeal at or before the hearing. 2. The brief facts of the case are that return declaring income at Rs..2,64,13,668/- was filed on 31.7.2008. The case of the assessee was selected for scrutiny. During assessment proceedings, the Assessing Officer observed that assessee had declared capital gains on sale of property measuring 8954 sq. yds. located at 422-B, Udyog Vihar, Gurgaon. The Assessing Officer further observed that from the sale consideration the assessee had reduced an amount of Rs..2,16,00,000/- alleged to have been spent on construction of factory on the said land. He further observed that assessee had indexed such cost of construction from financial year 1994-95. In this regard he observed that the assessee was issued permission for change of land use on 30.9.1994 and it was impossible to construct a factory measuring 48000 sq. ft. in a period of 7-8 months. The Assessing Officer also noted that the sale deed executed by the assessee did not mention about the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuted deductible amount because it was used to clear the debt from M/s Concept International India Pvt. Ltd. For any reason, it is held that the amount is not deductible against land sale then the amount spent to make company debt free will constitute a deductible expenses in the sale of share in case of debt/liability written of private limited company. 5. The Assessing Officer was not satisfied with the explanation as in his opinion no evidence or supporting documents in respect of such claimed payment for attached liability was furnished. Therefore, he disallowed the amount of Rs..1.75 crores and recomputed the capital gain after disallowing the above said deductions. 6. Aggrieved the assessee filed appeal before Ld CIT(A) and reiterated her submissions before Assessing Officer. The Ld CIT(A) after going through the submissions of Assessing Officer did not allow any relief to the assessee and decided the matter against the assessee by holding as under:- 8. A careful perusal of the various documents indicates that the appellant leased out built up area to the various tenants from about September, 1997 onwards. However, each of the tenants has also carried out considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curred. The action of the Assessing Officer in disallowing the claim of cost of construction of factory building of Rs..2,16,00,000/- is accordingly upheld. 9. The next grievance of the appellant relates to the disallowance of liability payable to M/s. Excalibur India Pvt. Ltd. and M/s. Texcon India Pvt. Ltd. of Rs..70,00,000/- and Rs..40,00,000/- respectively. It is the appellant's contention that liability of Rs.. 1,70,00,000/- was to be paid to the two above mentioned tenants as compensation for the cost of construction incurred by them on the said land. The Assessing Officer found that the payment amounting to Rs..1,30,00,000/- had been made not by the appellant, but by her husband Shri Narender Malik. The appellant submits that out of the total sale receipts of Rs..10,55,22,000/-, the amount of Rs..2,00,00,000/- was paid to Shri Narender Malik from which the payments were made on behalf of the appellant. It is also submitted that payments were made out of joint accounts, in which the account holders are both the appellant and her husband. 10. I have carefully perused the extracts of bank statements submitted by the appellant with the written submissions. Account numb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, no reason to presume that payments made to M/s. Texcon India Pvt. Ltd. and M/s. Excalibur India Pvt. Ltd. by Shri Narender Malik have emanated from the sale consideration taxable in the hands of the appellant. The appellant was allowed a number of opportunities to explain the treatment for tax purposes of the compensation received by M/s. Texcon India Pvt. Ltd. and M/s. Excalibur India Pvt. Ltd. in their returns of income. The appellant has stated that the compensation received has been reduced from the value of assets during the Financial Year 2007-08. The copy of Balance Sheet as on 31.03.2007 has been filed in the case of M/s. Excalibur India Pvt. Ltd. which shows WDV of building as on 31.03.2007 as Rs..58,90,553/-, and building under construction at Rs.. 1,39,69,237/-. The Balance Sheet as on 31.03.2008 shows opening WDV of Rs..2,57,66,000/-, and deduction during the year of Rs.. 1,17,77,207/-. The counsel for the appellant could not explain how these figures could be reconciled with the compensation of Rs.. 1,30,00,000/- received by M/s. Excalibur India Pvt. Ltd. in the Financial Year 2006-07. Moreover, it appears that the company has shown construction of the build ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered nor witnessed. While the agreement refers to clearing of the liabilities attached to the land, a complete reading would show that the liabilities are those pertaining to M/s. Texcon India Pvt. Ltd. and M/s. Excalibur India Pvt. Ltd. If there were specific liabilities or debts to be cleared before transfer of the ownership of the company and the land, the details and amounts thereof would have been enumerated in the agreement. No such details are found therein. Even at this stage, the appellant has not furnished any details of payments subsequently made of Rs..1,94,80,000/-, or even of Rs..1,75,00,000/-. The appellant's claim that she has received only Rs..8,55,20,000/- as against the receivable amount of Rs..10,50,00,000/- is also patently untrue as the registered sale deed dated 12.04.2007 shows complete details of payment amounting to Rs..10,50,00,000/- by bank draft/cheque between 15.05.2006 and 12.07.2006. I find no reason, therefore, to interfere with the action of the Assessing Officer in disallowing the claim of liability of Rs..1,75,00,000/- as per the return of income and of Rs..1,94,80,000/- as per subsequent claim. This ground of appeal is therefore dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s issued. Our attention was also invited to paper book page 185 186 where a copy of map in the form of bonded warehouse along with a letter of Assistant Commissioner, Central Excise was placed. In view of the above factual position, it was argued that Assessing Officer did not consider all these evidences and moreover the ld CIT(A) also did not consider these evidences and rather made a new case by relying upon the balance sheet of M/s Concept International for the year 2004-05. Our attention was also invited to paper book pages 93 to 97 where copies of electricity bills were placed and it was argued that without existence of building electric connection can never be given. 9. Regarding allegation of Assessing Officer that the building was not mentioned in the sale deed it was argued that sale deed cannot be considered as conclusive evidence if other evidence prove the contrary. Reliance in this respect was placed on the following judgments:- 1. Hira Lal Ram Dayal v., CIT 122 ITR 461 (P H). 2. CIT v. Intzar Ali in I.T.A. No. 162/2013 decided by Hon'ble Allahabad High Court. 38 Taxman.com. 103 3. Smt. Sarafa Bibi Mohd., Ibrahim v. CIT 204 ITR 631 (SC). 4. WTO v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 8954 sq. yds. of land has deducted the cost of construction of the building. The Ld Assessing Officer denied the assessee the claim of such cost of construction. On an analysis of the evidence, we find that case of the Assessing Officer is based mainly on two facts - a) That the assessee failed to produce details of expenditure including bank accounts, exhibiting the incurrence of expenses on construction. b) In the sale deed nowhere building has been mentioned as sold. 16. On the strength of these two facts he harbored the belief that assessee has not sold any building and therefore any cost of construction alleged by the assessee is not to be allowed as deduction while computing the capital gains. 17. On the other hand, the case of the assessee is that building was constructed in the year 1994-95. Her inability to produce details of expenditure cannot authorize the Assessing Officer to deny the expenditure in the year when assessee has sold the building. According to the assessee the factum of existence of building is not in dispute. For buttering her contention the assessee has pointed out that she has let out the building constructed on the plot of land. She had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) has upheld the disallowance holding that the balance sheet of M/s Concept International India P. Ltd. and that of M/s Excalibur India P. Ltd. contained the value of building, therefore the building must have been constructed by these companies and not by the assessee. In this respect we are of the view that Ld CIT(A) should have referred to the balance sheets for the period 31.3.1997 to arrive at the conclusion as to whether there was building appearing in the balance sheets of these companies or not. The ld CIT(A) s action of upholding of disallowance relying upon the balance sheet of year 2004-05 is not correct in view of the fact that value of buildings appearing in the balance sheets as on 31.3.2005 may be other buildings owned and constructed by the respective companies after taking over on lease from the assessee. The Ld CIT(A) himself observes that part of buildings was constructed by these companies. From the document such as occupancy certificate issued by the Town Planner one thing becomes apparent and that is that building was there on the said land. This fact is further strengthened by the report of registered valuer who had prepared the valuation report after physica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sheets as of this year reveals that there was no building appearing in the fixed assets, then the obvious conclusion is that initially building was constructed by assessee and further these tenant companies had made further additions, the value of which is represented in the balance sheets of these companies as on 31.3.2005. Therefore, for this verification we set aside the issue to the office of Assessing Officer with a direction to verify the balance sheets of these companies for the years 31.3.1997 and if there is no amount appearing with respect to buildings, then he should allow the benefit to the assessee as all other evidences are in favour of assessee. Regarding cost incurred, the Assessing Officer can get verified the valuation report for the purpose of rates taken by valuer as the constructed area matches with the occupancy certificate. Regarding indexation, the same can be given from financial year 1996-97 as the occupancy certificate dated 28.5.1997 establishes the completion of building before 28.5.1997. In view of the above, the ground No.1 is allowed for statistical purposes. 19. Regarding second issue we find that the Assessing Officer disallowed the payments onl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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