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TMI Blog2018 (4) TMI 1121X X X X Extracts X X X X X X X X Extracts X X X X ..... eement and is bound to transfer the leaseholds rights in favour of M/s J.K. Cements whenever the same are renewed by the Government. Hence, this agreement dated 10.06.2010 has definitely transfer a right in favour of the M/s J.K. Cements and relinquished right on the part of the assessee as he cannot transfer these leasehold mining rights in favour of any other persons then M/s J.K. Cements. The amount of ₹ 25 lacs received by the assessee for execution of the said agreement would be the income of the assessee. This consideration was received in relation to the rights in a capital asset therefore, the said amount is liable to be assessed as capital gain as considered by AO. Direct the AO to assess the capital gain in the hand of the assessee Shri Sunil Agarwal by considering ₹ 25 lacs as a consideration subject to allowable other deductions being cost of acquisition which we will deal with in the Cross Objection of the assessee. Disallowance of expenses u/s 57 - Held that:- AO as well as ld. CIT(A) decided this issue for want of any documentary evidence in support of the claim that the expenditure was incurred for earning the income from other sources. Nothing has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cross Objection Ground 1 Under the facts and circumstances, Ld. CIT(A) has erred by sustaining the initiations of proceedings u/s 147 of the Income Tax act, 1961. The initiation of proceeding is illegal and unjustified. 2. Under the facts and circumstances of the case and in law, Ld. CIT(A) has erred in not deciding the following grounds while Ld. A.O. has erred in:- ( i) alleging that transaction entered is transfer within the meaning assigned to in section 2(47) of the Income Tax Act, 1961 ( ii) not considering that the agreement under consideration has already been cancelled. ( i) not considering the submission made during the course of assessment proceedings in right prospective and drawing inferences based on incorrect assumption of facts 3. Under the facts and circumstances of the case and in law, Ld. CIT(A) has erred in not deciding the following grounds while Ld. A.O. has erred in:- (i) not taking cost of acquisition of the asset under consideration correctly i.e. fair market value as on 01.04.1981 and also erred by not providing indexation accordingly . (ii) alleging that no cost was paid for acquisition of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of ₹ 3,31,00,000/- out of which an advance of ₹ 25,00,000/- was received at the time of agreement and a sum of ₹ 1,03,000/- was also received, subsequently. Accordingly, the AO held that the transaction of transfer of mining lease completed within the meaning and purview of Section 2(47) of the Act read with explanation to section 2(47) of the Act. Accordingly, the AO made an addition of ₹ 1,10, 33,333/- being 1/3 share of each assessee. On appeal, the ld. CIT(A) held that the ownership of the mining lease vested with Shri Sunil Agarwal and therefore, no addition can be made in the hands of the other two brothers. As in the case of the Shri Sunil Agarwal the ld. CIT(A) further held that the sale agreement was executed without possession and therefore, no title or ownership whatsoever was conveyed in favour of M/s J.K. Cements Ltd. Further, M/s J.K. Cements Ltd. also sent a letter for cancellation hence, there was no transferred within the meaning of section 2(47) of the Act. Accordingly, the ld. CIT(A) deleted the addition made by the AO. 3. Before us, the ld. DR has submitted that as per agreement dated 10.06.2010 Shir Sanjay Mangal, Shri Vijay Manga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh Chand Mangal in the Mining Department. Thereafter, upon death of Shri Kailash Chand Mangal, the mine was transferred to his legal heir i.e. his three sons namely : Shri Sanjay Mangal, Shri Vijay Mangal and Shri Ajay Mangal vide order dated 2.5.2006. On 11.6.2010, Assessee alongwith his two brothers enter into agreement with J.K. Cement Limited. The agreement was registered with Sub-Registrar. Th said agreement was without possession and accordingly, Stamp Duty was also paid, applicable to an agreement without possession. In clause No. 4 of this agreement, it is specifically mentioned that actually the mine under consideration is of Shri Sunil Agarwal and accordingly, he received the advance. Assessee and his brothers signed the agreement only due to pending change in name due to Mining Policies. He has strongly supported the order of the ld. CIT(A) on the point that there was no transfer within the meaning of section 2(47) of the Act as the transfer was subject to various conditions including the renewal of lease hold rights. Therefore, the consideration was payable only on the renewal of the lease holds rights by the Department of mining. Since, the mining Department did not re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal heirs of late Shri Kailash Chand Mangal who was father of the assessee namely Sanjay Mangal, Shri Vijay Mangal and uncle of the assessee namely Shri Sunil Agarwal. Though the leasehold rights of the mines in question were vested to Shri Kailash Chand Mangal however, as per the family arrangement as well as will the ownership of the mining rights were given to Shri Sunil Agarwal. The AO though assessed the capital gain in the hands of the three brothers who are sons of Shri Kailash Chand Mangal and protective assessment in the hand of Shri Sunil Agarwal however, all these assessee have contended before the AO as well as ld. CIT(A) that the actual owner of the mining right is Shri Sunil Agarwal who has also accepted this fact that he is the real owner of the mining rights in question. The ld. CIT(A) has considered this issue of ownership of the mining rights in case of Sanjay Mangal and Vijay Mangal as well as in case of Shri Sunil Agarwal and held that Shri Sunil Agarwal is the owner of the mining rights and if any capital gain is liable to the assessed on transfer of mining rights it has to be in the hand of Shri Sunil Agarwal. The finding of the ld. CIT(A) in case of Shri Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are to be assessed as income of the assessee. In view of the admitted position by all the assessees that the real owner the mining rights is Shri Sunil Agarwal and the Revenue has not challenged that finding of the ld. CIT(A) in case of Shri Sunil Agarwal we do not find any substance or merits in the appeals of the Revenue in case of Shri Sanjay Managal and Shri Vijay Mangal. ITAT No. 277/JP/2017 7. As regards the issue of capital gain arising from transfer of the mining lease vide agreement dated 10.06.2010 we finds that though by virtue of the said agreement the assessee transferred his right in the mining lease as on the date of agreement subject to the transfer of the rights to be vested with the assessee on renewal of lease by the government which was pending with the authorities. Therefore, the consideration of ₹ 3,31,00,000/- was agreed upon between the parties for transfer of lease rights including the rights after renewal of lease by the government. Hence, so far as the total consideration as agreed between the parties as per the agreement dated 10.06.2010 the same cannot be considered as full value consideration until and unless the lease of the mines i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ewal. It is not a case of transfer of immovable property but it is only mining rights under lease were agreed to be transferred for a consideration to M/s J.K. Cements had secured the right to get the mining leasehold rights transferred in its favour by way of this agreement dated 10.06.2010 and also paid a sum of ₹ 25 lacs to secure the said right. Thus, though prior to the renewal of the lease by the government there cannot be any real transfer of the mining rights however, the rights to get such lease transfer in its favour was secured by the M/s J.K. Cements vide this agreement dated 10.06.2010 and against a consideration of ₹ 25 lacs which is not refundable. The relevant clause of the agreement is clause no. 10 reads as under:- Thus, it is clear that case in the parties subsequently decide not to proceed further for transfer of mining right under lease the said payment of ₹ 25 lacs is not refundable. Hence, we are of the view, that though the mining rights per se are not transferred being subject to the renewal of the lease however, by virtue of the agreement dated 10.06.2010 the assessee has transferred and surrendered his rights in the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he income from other sources. The assessee has not furnished any details as well as bills and vouchers in respect of other expense of ₹ 24,000/-. The assessee has not furnished any evidence with regard to the legal fee and purpose for which legal fees was paid. So far as the interest expenses are concerned the assessee has not furnished any co-relation with regard to the interest expenses incurred against the fund which were utilized for giving loans and advances for which interest has been received. As such the assessee 's claim of expenses of ₹ 1,98,759/- is without any justification and also not supported with any documentary evidences. The assessee has not discharged his onus proving justification with the documentary evidences as well justification of the expenses claimed and according a sum, of ₹ 1,98,759/- is disallowed and added to the total income of the assessee. Either during the course of assessment proceedings or appellate proceedings, the appellant has not been able to prove with the help of documentary evidences that the expenses of ₹ 1,98,759/- claimed by him u/s 57 were incurred wholly and exclusively for the purpose of making or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.04.1981. 15. We have heard the ld. AR as well as ld. DR and considered the relevant material on record. There is no dispute that the leasehold rights were acquired by the predecessor of the assessee in the year 1969 and further, the assessee has inherited property which fall in the category of transfer of capital asset as per section 49(1)(i)(iii)(a) of the Act. Once the capital asset in question becomes the property of the assessee as per section 49(1)(i)or(iii) and the previous owner had acquired the property prior to 01.04.1981 then, the cost of acquisition of the capital asset for the purpose of section 48/49 shall be the cost of acquisition of the asset to the previous owner or the fair market value of the asset as on 01.04.1981 at the option of the assessee as provided u/s 55(2)(ii)(b) of the Income Tax Act. For ready reference we quote section 55(2)(a)(b) as well as section 55(3) as under:- ( 2)[For the purposes of sections 48 and 49, cost of acquisition 25,- 26[(a) in relation to a capital asset, being goodwill25 of a business 27[or a trade mark or brand name associated with a business] 28[or 25a right to manufacture, produce or process any article or thin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), shall be the cost of acquisition of his original membership of the exchange:] 36[Provided that the cost of a capital asset, being trading or clearing rights of the recognised stock exchange acquired by a shareholder who has been allotted equity share or shares under such scheme of demutualisation or corporatisation, shall be deemed to be nil;] (b) in relation to any other capital asset,-] (i) where the capital asset became the property of the assessee37 before the 38[1st day of April, 39[39a[1981]]], means the cost of acquisition of the asset to the assessee or the fair40 market value of the asset on the 41[1st day of April, 42[42a[1981]]], at the option of the assessee ; (ii) where the capital asset became the property of the assessee43 by any of the modes specified in 44[subsection (1) of] section 49, and the capital asset became the property of the previous owner before the 45[1st day of April, 46[46a[1981]]], means the cost of the capital asset to the previous owner or the fair47 market value of the asset on the 45[1st day of April, 46[46a[1981]]], at the option of the assessee ; ..... 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