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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 ..... d 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 Therefore, the additional grounds so raised are considered as withdrawn. 3.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 Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale consideration of the same is worked out as under by adopting the market value as on the date of transfer i.e. Rs. 2,200/-. Sale consideration (57% of 1593 X Rs. 2,200) = Rs. 19,97,622/- Thus, the Short Term Capital Gains works out to Rs. 13,98,205/- 3.2.2. Computation of long term capital gains from the transfer of landed property admeasuring Ac 1.11 gts located in survey 77/B, Hydernagar Village, Balanagar Mandal. (a) Cost of acquisition as on 15.02.2006 Sale consideration Rs. 32,000 Add: Stamp duty & other charges 8,531 Total cost Rs. 40,531 Indexed cost of acquisition (Rs. 40,531 X 497/172) Rs. 1,17,116 Add: Cost of improvement worked out as per the annexure enclosed (Rs. 50,68,132 X 6171 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total Cost of Exp. a) Cancellation of Dev. Agreement with DPR Divya Sai Constructions agr. Dated 28-5-2003 (20-10) (2003-04) 10,00,000 20,00,000 b) Land Vacation expenses paid to VVS Murthy on 17-01-2006 (2005-06) 82,974 3,00,000 c) Land Vacation expenses paid to VV Subba Rama Sastry (2005-06) 5,53,161 20,00,000 d) Land Vacation expenses paid to MV Rama Raju (2005-06) MV Rama Raju (2006-07) 3,22,677 1,61,343 11,66,667 5,83,350 e) Amount paid to K Krishna and K Gnaneshwar for land comprise on 04- 01-2006 (2005-06) 29,47,977 1,00,00,000 Total 50,68,133 1,60,50,017 6. Ld. CIT, however, did not agree and by observing as under, set aside the assessment order with the direction to re-do the assessment as per the observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as such. In the present, case, the assesse along with the co-owners entered memoranc.um of compromise on 04.01.2006 with K Krishna and K Gnaneswar (who file suit in the court) and paid Rs. 29,47,977/-. Regarding land vacation expenses, the assessee paid Rs. 11,20,155/- to the dwellers to look after the property and the dwellers themselves vacated the premises but not due to owner's pressure. The expenses of Rs. 10,00,000/- incurred towards cancellation of deed is a capital loss and not an improvement to the asset. Hence, the expenses claimed by the assessee under "cost of improvements" needs to be examined in its allowability under the law. Without appreciating the nature of expenses claimed, the AO proceeded to allow the same from capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cost of improvement and the proportionate expenditure 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 ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... others [137 ITR 846] (Mad] has considered the payment made to tenants to obtain vacant possession, as an expenditure incurred wholly and exclusively in connection with the agreement of sale as it preceded the transfer and in fulfillment of a condition of sale. Therefore, the amount paid was deductible as an expenditure u/s. 48(i). The Hon'ble Madras High Court followed the principles laid down by the Hon'ble Supreme Court in the case of K.P. Varghese Vs. ITO [131 ITR 597] (SC). Thus, the expenditure incurred for removal of encroachment/lessees are to be allowed as a deduction, which the Ld.AO has allowed after due examination. Therefore, the opinion of the CIT on this issue cannot be sustained. 9.1. Coming to the issue of compensat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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