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TMI Blog2017 (8) TMI 403X X X X Extracts X X X X X X X X Extracts X X X X ..... r the decree of the court. 3. That the Assessing Officer and the Commissioner of Income-tax (Appeals) has erred on facts and in law in disallowing the claim of the appellant of Rs. 1,20,00,000 as the claim is based on the decree of civil court. The Income-tax authorities cannot adjudicate in respect of the claim of sister in law since it is in the exclusive domain of the civil court. 4. That without prejudice, the Assessing Officer and the Commissioner of Income-tax (Appeals) has failed to appreciate that the said amount of Rs. 1,20,00,000 belong to the sister in law of the appellant and due to an overriding title it is diverted at the source itself and never reached the appellant as her income. 5. That in view of the facts and in the circumstances of the case the Commissioner of Income-tax (Appeals) has erred in facts and in law in disallowing the deduction of Rs. 52,87,200 invested in the residential house, Ghaziabad. 6. That the Commissioner of Income-tax (Appeals) has erred on facts and in law and exceeded its jurisdiction in disallowing the benefit of deduction of Rs. 52,87,200 allowed by the Assessing Officer. 7. That in view of the facts and in the circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a recital that the property is free from all encumbrances and as such, payment of Rs. 1,20,00,000 cannot be treated as part of the acquisition and thereby added the same to the income of the assessee under the head "long-term capital gain" calculated as under : Total sale consideration Rs. 4,00,00,000 Less : Cost of acquisition of building in the financial year 2006-07 Rs. 17,69,400 Indexation cost (17,69,400 x 785/519) Rs. 26,76,268 Long-term capital gain Rs. 3,73,23,740 3. The assessee has further claimed exemption under section 54 of the Act as invested from the aforesaid sale proceeds stated to have been invested in the properties as under : 1. Vacant residential plot No. B-73, Kaushambi, Ghaziabad Rs. 3,73,23,740 2. Residential built up plot No. 59, Block A, Sector 52, Noida (jointly in the name of Smt. Rama Vohra, Sh. Ajit Vohra and Sh. Punit Vohra) Rs. 86,70,991 3. Flat No. 407, Tower 2, Sector 9, Vaishali Extn., Ghaziabad. Rs. 52,87,200 Rs. 2,74,47,305 4. The Assessing Officer, however, proceeded to conclude that the assessee is entitled to claim exemption under section 54 of the Act in respect of only one residential property of his choice. So, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, for the purpose of computing the income from capital gain ?" 9. Undisputedly, the property in question was originally owned, by Shri O. P. Vohra. Shri Ajit Vohra, husband of the assessee inherited the property in question form his father, namely, Shri O. P. Vohra by virtue of the will dated September 6, 2000. It is also not in dispute that one of the sisters of Shri Ajit Vohra, beneficiary of the will dated September 6, 2000 executed her relinquishment deed in his (Ajit Vohra) favour. It is also not in dispute that one of the sisters of Shri Ajit Vohra challenged the will in question dated September 6, 2000 by setting up another will dated February 1, 2002 in her (Sheetal Girdhar) favour. 10. The Assessing Officer as well as the Commissioner of Income-tax (Appeals) have proceeded to take the sale consideration of property in question at Rs. 4,00,00,000 on the sole premise that when the property in question was inherited by Ajit Vohra from his father, there was no dispute and he has transferred the same to the assessee being free from all encumbrances. 11. No doubt in the sale deed dated September 26, 2006 executed by Shri Ajit Kumar in favour of the assessee, recital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009 and probate case No. 122/2008 of August 21, 2008 filed by Smt. Sheetal Girdhar by challenging the sale deed dated September 26, 2006 and will dated September 6, 2000 in favour of Ajit Vohra and by setting up a will dated February 1, 2002 in her (Sheetal Girdhar) favour and in favour of her sister (Indu) by disinheriting Ajit Vohra from the property in question. 14. In the aforesaid Civil Suit No. 505/2009 and probate case No. 122/2008, Ajit Vohra, the husband of assessee and the assessee entered into a compromise under Order 23, rule 3 of the Code of Civil Procedure with Sheetal Girdhar and thereby agreed to transfer 30 per cent. share of the property in question to Sheetal Girdhar, value of which was assessed at Rs. 1,20,00,000 after considering the stamp duty etc. 15. When the assessee along with her husband Ajit Vohra who had executed sale deed dated September 26, 2009 have paid 30 per cent. of the sale proceeds to Sheetal Girdhar qua the property in question, the cost of acquisition of the property is to be taken as Rs. 2,80,00,000. Because the assessee by virtue of the sale deed dated September 26, 2009 is to step into the shoes of her vendor, namely, Ajit Vohra for al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Daksha Ramanlal [1992] 197 ITR 123 (Guj) ; [1992] 65 Taxman 83 (Guj) (available at pages 26 to 30 of the paper book) while dealing with the identical issue also held that "or purpose of calculating the capital gains, deduction of amount paid by the assessee to the mortgagee is to be treated as cost of acquisition of interest of mortgagee and therefore form part of the total cost of acquisition of the property and the assessee is entitled for deduction of the said amount while computing the capital gains." 20. In view of what has been discussed above, grounds Nos. 2, 3, 4, 8, 9, and 10 are determined in favour of the assessee. Grounds Nos. 5 and 6 21. The assessee claimed exemption under section 54 of the Act being investment from the sale proceeds of the property in question in the following properties : 1. Vacant residential plot No. B-73, Kaushambi, Ghaziabad. Rs. 3,73,23,740 2. Residential built up plot No. 59, Block A, Sector 52, Noida (jointly in the name of Smt. Rama Vohra, Sh. Ajit Vohra and Sh. Punit Vohra) Rs. 86,70,991 3. Flat No. 407, Tower 2, Sector.9, Vaishali Extn., Ghaziabad. Rs. 52,87,200 Rs. 2,74,47,305 However, the learned Commissioner of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect from 1st April, 2015 and will accordingly apply in relation to the assessment year 2015-16 and subsequent assessment years." 24. Bare perusal of the aforesaid amendment shows that roll over relief under section 54(1) is available if the investment is made in "one residential house" situated in India and earlier the expression used was "a residential house". The amended provisions contained under section 54(1) of the Act have been interpreted in favour of the assessee by the hon'ble High Court of Karnataka in the case of CIT v. Khoobchand M. Makhija [2014] 43 taxmann.com 143 (Karn) (available at pages 45 to 52 of the paper book), operative part of which is reproduced as under : "17. It is clear that the assessee was not attempting to evade tax. In fact, after purchasing two residential houses, still there remained unutilised capital gain, which he has offered for tax. Therefore, as held in the aforesaid Rukminiamma's case, the context in which the expression 'a residential house' is used in section 54 makes it clear that it was not the intention of the Legislature to convey the meaning that it refers to a single residential house. The letter 'a' in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p plot No. 59, Block-A, Sector-52, Noida, jointly in the name of Smt. Rama Vohra, Sh. Ajit Vohra and Sh. Punit Vohra of Rs. 86,70,991 and Flat No. 407, Tower-2, Sector-9, Vaishali Extn., Ghaziabad of Rs. 52,87,200. So, grounds Nos. 5 and 6 are determined in favour of the assessee. Ground No.7 27. The assessee claimed exemption qua vacant residential plot No. B-73, Kaushambi, Ghaziabad purchased for the purpose of constructing a residential house to the tune of Rs. 1,34,89,114 which was disallowed by the Assessing Officer. The Commissioner of Income-tax (Appeals) confirmed the disallowance made by the Assessing Officer on the ground that the assessee has failed to produce any evidence of his intention to construct a house on a plot of land. 28. The learned authorised representative for the assessee contended that the assessee has invested all the entire sale proceeds of Rs. 2,80,00,000 but due to change in policy could not construct the house and further contended that if at all the capital gain is to be made taxable, it will be taxable only at the end of three years from the date of transfer of the original asset. The learned authorised representative for the assessee relied upo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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