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TMI Blog2016 (10) TMI 803X X X X Extracts X X X X X X X X Extracts X X X X ..... V. Raghavendra Rao, AR For The Revenue : Shri J. Siri Kumar, CIT-DR ORDER PER B. RAMAKOTAIAH, A.M. : This is an appeal by assessee against the order of the Principal Commissioner of Income Tax-7, Hyderabad, dated 23-02-2015 invoking the provisions of Section 263 of the Income Tax Act [Act] to set aside the order of the Assessing Officer (AO). 2. In the course of present appeal, assessee has raised additional grounds of appeal stating that the proceedings initiated u/s. 147 which resulted in an order u/s. 143(3) r.w.s. 147 dt. 21-01-2013 being itself bad in law, CIT could not invoke the provisions of Section 263. Assessee has raised five additional grounds of appeal on the above issue and on production of necessary evidence for reopening of assessment and approval as per the authorities by the DR, the Ld. Counsel withdrew the grounds. Therefore, the additional grounds so raised are considered as withdrawn . 3. The regular grounds of appeal are with reference to proceedings u/s. 263 and all the eight grounds pertain to the same issue. 4. Briefly stated, assessee, an individual had filed her return of income admitting an income of ₹ 40,640/- besides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 32,000 Add: Stamp duty other charges 8,531 Total cost ₹ 40,531 Indexed cost of acquisition (Rs. 40,531 X 497/172) ₹ 1,17,116 Add: Cost of improvement worked out as per the annexure enclosed (Rs. 50,68,132 X 6171 X 7764) 40,28,264 41,45,380 Proportionate cost of 57% of transferred land ₹ 23,62,867 (b) Sale consideration As the assessee transferred only 57% of the Ac 1.11 gts of land for development purpose, the sale consideration of the same is worked out as under by adopting the market value as on the date of transfer i.e. ₹ 2,200/- Sale consideration (57% of 6171 X ₹ 2,200) ₹ 77,38,434 Thus, the long term capital gains works out to ₹ 53,75,567/- 4.1. On examining the record, the CIT was of the opinion t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01.2006 in fvour of M/s. Vertex Homes Pvt Ltd in respect of property at Hydernagar Village. The assessee also executed another development agreement with M/s. Vertex Homes Pvt Ltd on 15.02.2006 in respect of another property at Hydernagar Village. While calculating the Short Term Capital Gains and Long Term Capital Gains, the AO allowed cost of improvements of ₹ 10,39,868/- and ₹ 40,28,264/- respectively. 'Cost of improvements' includes i) Cancellation of development agreement with GPR Divya Sai Constructions dated 28.05.2003 ₹ 10,00,000/- ii) Expenses paid to look after the property ₹ 11,20,155/- iii) Amount paid to K. Krishna K Gnaneswar for land compromise on 04.01.2006 Rs, 29,47,977/- . 6.1 As per the provisions of section 55(1)(b)(2)(ii) of the I.T.Act, cost of improvements means all expenditure of a capital nature incurred in making any additions or alternations to the capital asset itself by the assessee. But improving the owner's title to the asset is different from improving the asset itself. Therefore, the amount paid as and by way of settlement of a claim to the person who disputed the title of the assessee cannot be said to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure was examined by the AO and allowed. Therefore, the observation of the CIT that AO has not verified all the details cannot be sustained. Moreover, we are unable to understand the view of CIT that the expenditures are not allowable under the provisions of Section 55(1)(b)(2) of the Act. As far as cancellation of development agreement with M/s. GPR Divya Sai Constructions is concerned, Ld. CIT s observation that it is a capital loss and cannot be allowed is surprising. If it is a capital loss, then while computing the capital gains, such loss is certainly allowable and so, no prejudice is caused to the Revenue. As submitted before the authorities, assessee had entered into an earlier agreement and by virtue of agreement dt. 28-05-2013, the development agreement with earlier builder was cancelled, for which there was a cost, which was proportionately apportioned to assessee as per the table extracted above. This expenditure was part of the transaction for new development and certainly takes the nature of improvement to the asset. Likewise, land vacation expenses paid to Sri V.V.S. Murthy, V.V. Subba Rama Sastry and Sri M. V. Rama Raju are also similarly allowable, as various co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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