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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 ..... "where compensation paid to a party for surrendering its pre- existing rights in property in question was inextricably connected with transfer of property as one of the conditions for sale of such property, such compensation was deductible from the sale consideration." - Decided in favour of assessee Exemption under section 54 - investment from the sale proceeds of the property - joint ownership - Held that:- From the amended provision of section 54 which came into effect from April 1, 2015 held 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 in the case of CIT v. Khoobchand M. Makhija [2013 (12) TMI 1525 - KARNATAKA HIGH COURT ], Thus we are of the considered view that the assessee is entitled for exemption under section 54(1) of the Act qua two residential houses i.e. 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 of ₹ 86,70,991 and Flat No. 407, Tower-2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner of Income-tax (Appeals) has erred on facts and in law in disallowing the claim of the appellant of ₹ 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 ₹ 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 ₹ 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 ₹ 52,87,200 allowed by the Assessing Officer. 7. That in view of the facts and in the circumstances of the case, the Assessing Officer a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with a recital that the property is free from all encumbrances and as such, payment of ₹ 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 ₹ 4,00,00,000 Less : Cost of acquisition of building in the financial year 2006-07 ₹ 17,69,400 Indexation cost (17,69,400 x 785/519) ₹ 26,76,268 Long-term capital gain ₹ 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 ₹ 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) ₹ 86,70,991 3. Flat No. 407, Tower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght of the facts and circumstances of the case. Ground No. 1 7. Ground No. 1 is general in nature, hence needs no adjudication. Grounds Nos. 2, 3, 4, 8, 9, and 10 8. From the grounds of appeal, the order passed by the authorities below and the arguments addressed by the authorised representatives of the parties to the appeal, the sole issue arises to be determined in all the aforesaid grounds is : as to whether the sale consideration of the property in question transferred in favour of the assessee by her husband is to be taken at ₹ 4,00,00,000 or at ₹ 2,80,00,000 after deducting the share of Smt. Sheetal Girdhar, sister of the husband of the 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Suit No. 505 of 2009, copy of application by both the parties, copy of order in probate case No. 122 of 2008 passed by the Addl. District Judge, Delhi and the statement of the parties to the probate case No. 122 of 2008 and the certificate of Shri Sanjay Dhawan, advocate regarding compromise between the parties (copy of aforesaid all documents available at pages 126 to 283 of the paper book filed by the assessee). 13. From the bare perusal of aforesaid documents brought on record by the assessee, it is proved on record that the sale deed dated September 26, 2000 qua the property in question in favour of the assessee was a subject matter of Civil Suit No. 505 of 2009 dated September 26, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for surrendering its pre- existing rights in property in question was inextricably connected with transfer of property as one of the conditions for sale of such property, such compensation was deductible from the sale consideration. 18. Similarly, the hon'ble Bombay High Court in the case of CIT v. C. N. Patuck [1969] 71 ITR 713 (Bom) and CIT v. Nariman B. Bharucha and Sons [1981] 130 ITR 863 (Bom) (available at pages 1 to 20 of the paper book) held that in case of diversion of income by overriding title payment made to the mother of the partners under partnership agreement is deductible for determining the assessee's income. 19. Similarly, the hon'ble High Court of Gujarat in the case of CIT 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 sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital asset, not being a residential house, and the assessee within a period of one year before or two years after the date of transfer, purchases, or within a period of three years after the date of transfer constructs, a residential house then the portion of capital gains in the ratio of cost of new asset to the net consideration received on transfer is not chargeable to tax. The benefit was intended for investment in one residential house within India. Accordingly, it is proposed to amend the aforesaid sub- section (1) of section 54 so as to provide that the rollover relief under the said section is available if the investment is made in one residential house situated in India. It is further proposed to amend the aforesaid sub-section (1) of section 54F so as to provide that the exemption is available if the investment is made in one residential house situated in India. These amendments will take 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, we find that amendment has been brought in section54 to limit the exemption under section 54 to one residential unit, which is applicable from the assessment year 2015-16, therefore, for the year under consideration the assessee was entitled for exemption under section 54 in respect of more than one flat. In the result, assessee's appeal is allowed. 26. So, keeping in view the intended amendment in section 54(1) of the Act applicable for the assessment year 2015-16, not attracted in the case of the assessee which is qua the assessment year 2011-12, and in view of the decision rendered by the hon'ble High Court of Karnataka in the case of CIT v. Khoobchand M. Makhija (supra) and the decision rendered by the co-ordinate Bench in case of Laxman Singh Rawat v. Asst. CIT (supra), we are of the considered view that the assessee is entitled for exemption under section 54(1) of the Act qua two residential houses i.e. 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 of ₹ 86,70,991 and Flat No. 407, Tower-2, Sector-9, Vaishali Extn., Ghaziabad of ₹ 52,87,200. So, grounds Nos. 5 and 6 are d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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