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TMI Blog2015 (1) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... nstructed 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. - Decided in favor of assessee for statistical purposes. Cost of improvement disallowed - Held that:- Disallowance on the account that payments were not made by the assessee and these were made by the husband of the assessee is not a valid disallowance as the Assessing Officer has not otherwise doubted the payments. Cost of building as appearing as on 1.4.2006 as per paper book page 140 is ₹ 1,17,77,207/- and on receipt of compensation of ₹ 1,30,00,000/- the assessee reduced the total amount from building account in subsequent year , therefore, there is nothing wrong in it as when an asset is sold for an amount which exceeds the cost price, the only amount which can be reduced from the cost price is maximum up to cost price appearing in the balance sheet. Therefore, upholding of disallowance relying upon these findings is not correct. - Decided in favor of assessee. - I.T.A. No.1863/Del/2012 - - - Dated:- 31-1-2014 - SHRI RAJPAL YADAV AND ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 1,70,00,00/- from the sale consideration as being amounts paid to M/s Excalibur India P. Ltd. and M/s Texcon India P. Ltd. in lieu of the construction by above two parties on the land belonging to the assessee. The Assessing Officer pointed out to the assessee that compensation given to M/s Excalibur India P. Ltd. and M/s Texcon India P. Ltd. who were occupying a portion of assessee s land cannot be said to be in the nature of improvement and at best can be considered as cost of transfer and being in the nature of cost of transfer no indexing was allowable. The Assessing Officer further observed that out of ₹ 1.3 crores, ₹ 70 lakhs paid to M/s Excalibur India P. Ltd. was not paid from the bank account of the assessee rather it was from the bank account of Shri Narinder Malik, husband of assessee and he was a separate entity. Similarly, he observed that ₹ 40 lakhs paid to M/s Texcon India P. Ltd. was also paid by Shri Narinder Malik. Therefore, the Assessing Officer only allowed ₹ 60 lakhs as cost of transfer and disallowed the remaining amount of ₹ 1.10 crores. 4. The Assessing Officer also observed that in the computation of capital gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Balance Sheet of M/s. Texcon India Pvt. Ltd. produced, for the year ending 31.03.2004, does not show any building under the chart of fixed assets. The Balance Sheet of M/s. Concept International India Pvt. Ltd. as on 31.03.2005 shows a WDV of building' ₹ 63,43,785/-.The Balance Sheet of M/s. Excalibur India Pvt. Ltd. shows the WDV of building as on 31.03.2005 of ₹ 71,67324/-. The inevitable conclusion is that the appellant has no evidence regarding construction of the factory building of 48000 sq. feet, apart from the lease deeds, and the nominal rental income disclosed. Moreover, the appellant claims to have a liability amounting to ₹ 1,70,00,000/- payable to M/s. Excalibur India Pvt. Ltd. and M/s. Texcon India Pvt. Ltd. pertaining to the construction carried out by them. If the appellant's contention is accepted, it would amount to allowing cost of construction of a total amount of ₹ 3,86,00,000/-, i.e. the sum of ₹ 2,16,00,000/- incurred by the appellant in Financial Year 1994-95, and ₹ 1,70,00,000/- incurred by the tenants in Financial Year 2006-07. Considering that the appellant has been unable to produce any evidence regarding her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2006 816219 20,00,000/- 10.01.2007 820368 25,00,000/- Total 60,00,000/- Account number 17101078177 with ICICI Bank, Saket Branch, is in the name of Shri Narender Kumar Malik, and the appellant's name does not appear on the bank statement. The payments made are as under:- Date Cheque No. Amount Paid to 31.08.2006 810642 40,00,000/- Texcon 06.10.2006 816209 10,00,000/- Excalibur 06.10.2006 814081 10,00,000/- Excalibur Total 60,00,000/- Account No. 17101507273 with ICICI Bank, Saket, Branch, is also in the sole name of Shri Narender r 1alik, from which the following payments have been made to M/s. M/s. Excalibur India Pvt. Ltd.:- Date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the record. The payments made by Shri Narender Malik to M/s. Texcon India Pvt. Ltd. and M/s. Excalibur India Pvt. Ltd. are not proven to have any connection with the sale transaction of land. As payment of only ₹ 60,00,000/- has been made from the bank account of the appellant, as already allowed by the Assessing Officer, the appellant is not entitled to any further relief. The disallowance of ₹ 1,30,00,000/- is accordingly upheld. 11. The final issue for adjudication is the disallowance of claim of deduction of ₹ 1,94,80,000/- for payment of liability allegedly belonging to M/s. Concept International India Pvt. Ltd. In the computation of income filed with the return of income, the appellant had deducted the amount of ₹ 1,75,00,000/- from the sale consideration of ₹ 10,50,00,000/- on account of 'payment of liability attached to property directly from Concept. During the assessment proceedings, when required to explain the nature of this liability/ deduction, the appellant claimed that as against the sale consideration of ₹ 10,50,00,000/-, an amount of ₹ 8,55,20,000/- was actually received and the balance amount of ₹ 1,94,80,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the existence of the building. In this respect our attention was invited to paper book pages 178 to 183 where a copy of valuation report obtained by the assessee was placed and it was argued that since assessee had no evidence of amounts spent on construction of building, therefore, the report from the registered valuer was obtained and was filed with the Assessing Officer and the Assessing Officer did not consider the same. Our attention was also invited to paper book pages 1 to 37 where copies of returns along with Form No.16A issued in favour of assessee by various tenants companies was placed. On the strength of these documents it was submitted that assessee had been declaring the amount of rent received from the three companies i.e. M/s Concept International India P. Ltd., Excalibur India P. Ltd and M/s Texcon India P. Ltd. under the head income from house property. Particular reliance was placed on Form No.16A issued by the above said companies in support of the claim that assessee was receiving rent of building and therefore existence of building cannot be doubted. Our attention was also invited to paper book pages 156 to 161 where copies of lease agreements entered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. Arguing on second ground of appeal, the Ld AR submitted that Assessing Officer disallowed the claim of assessee simply on the basis that payments were not made from the bank account of the assessee. In this respect it was argued that since the assessee had to make payments to these companies for making the proper title of property available to buyer and she was not having sufficient funds, therefore, money was paid from the bank account of her husband. He further argued that the fact of having made payment from the bank account of her husband is not disputed. Therefore, he argued that the payments were necessarily made to make property fit for sale. 12. Regarding third ground of appeal, the Ld AR submitted that the payments were made for outstanding liabilities of M/s Concept India P. Ltd. as nobody will buy a company which is loaded with outstanding liabilities. Therefore, the expenditure was a necessary expenditure in connection with transfer of property. 13. The Ld DR, on the other hand, relied upon the order of the Assessing Officer and Ld CIT(A) and argued that Assessing Officer after going through all the facts of the case had rightly made the additions and Ld CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On the strength of these documents he pointed out that building was in existence. Her inability to quantify the cost of construction should not be considered as a sole criteria to exclude that cost of construction while computing the capital gain. The alternative of it is that cost of construction can be ascertained with the help of expert i.e. the Valuation Officer. No doubt, it would be an estimated figure but after applying the relevant factors, a correct figure can be achieved. The assessee has already taken a report from the Registered Valuer and calculated the cost of construction on that basis. As far as the objection of the Assessing Officer is concerned that building 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 Assessing Officer to deny the claim of assessee. Dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There is no value of building appearing in the balance sheet of Texcon further strengthens the fact that building was not constructed by Texcon. Further the lease deeds entered into by assessee also establishes the fact that assessee had partly built the buildings as she was getting rent and was declaring income under the head income from house property. Keeping in view all these facts, it can be concluded that building was physically there on the land and that too its construction was completed before 28.5.1997 as occupation certificate is dated 28.5.1997. Therefore even if sale deed did not mention about the existence of building, the fact remains that there was building on the above land. Now the question arises as to who had constructed the building. The assessee had no proof of funds to establish that building was constructed by her. The Ld CIT(A) has relied upon the balance sheets of M/s Concept India M/s Excalibur India to prove that since value of building was appearing in the balance sheet as on 31.3.2005, therefore, buildings were constructed by these companies. However, he had not considered the fact that part of building was constructed by these companies also which m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also constructed by tenants. The Ld CIT(A) also makes a finding that in the case of M/s Excalibur in the balance sheet as on 31.3.2008, a deduction of an amount of ₹ 1,77,77,207/- was made from the value of building. The Ld CIT(A) inferred it to be against the assessee as assessee was not able to reconcile the figure of ₹ 1,17,77,207/- with the amount of compensation of ₹ 1,30,00,000/- received by Excalibur. However, we find that cost of building as appearing as on 1.4.2006 as per paper book page 140 is ₹ 1,17,77,207/- and on receipt of compensation of ₹ 1,30,00,000/- the assessee reduced the total amount from building account in subsequent year as is apparent from paper book page 139. Therefore, there is nothing wrong in it as when an asset is sold for an amount which exceeds the cost price, the only amount which can be reduced from the cost price is maximum up to cost price appearing in the balance sheet. Therefore, upholding of disallowance relying upon these findings is not correct. 20. In view of these facts and circumstances we allow ground No.2. 21. Regarding third ground of appeal we find that no forceful arguments were advanced by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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