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TMI Blog2011 (12) TMI 725X X X X Extracts X X X X X X X X Extracts X X X X ..... in nature, they do not survive for adjudication. Ground No.6 is not maintainable as charging of interest u/s 234B of the Act is mandatory and consequential in nature and, thus, this ground is dismissed as not maintainable. In the remaining grounds, the essences of issues revolve that (i) that the CIT (A) ought to have accepted the assessee s contention that she had satisfied the conditions required for claiming deduction u/s 54 of the Act; (ii) that the CIT (A) ought to have appreciated that the subject land was located even in 1980 in a prime place and ought to have directed the AO to adopt the value of the land at ₹ 480/sft instead of ₹ 175/sft. 3.1. Subsequently, the assessee had also raised the following additional grounds: (i) the Ld. CIT (A) erred in upholding the disallowances of the following claims: (a) commission and legal expenses of ₹ 1,85,607/- (b)compensation paid to tenant ₹ 17,25,000/- - without prejudice, the CIT (A) ought to have allowed the compensation of ₹ 17.25 lakhs for which the AO had conceded in her remand report. 4. As the issues raised in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 10 lakhs with 10% less for forced sale. I do not adopt the third value because the assessing officer has given justified reason not to accept the value based on registered valuer s report in the remand report reproduced below: 5.1.1. Now before the CIT (A), the assessee had submitted a valuation report which has been forwarded for examination report. The valuer was summoned to examine on what basis the value of ₹ 350 per sft was adopted for valuing the land. The valuer, Sri Ramamurthy appeared on 12.11.2009 and deposed that since there were no comparables for that area Brigade road for that period, he had relied on the market information and trend and the real estate values of similar areas. The valuer admitted that there were no concrete material on the basis of which he could base his valuation; there being no comparables. Hence, it is concluded that the value arrived at by the valuer is an estimate based on inference and surmise and not on any concrete material. (The statement recorded from the valuer is placed on record). As against this, the assessing officer has based his valuation on the material extracted from the Sub-Registrar s office regarding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was, further, submitted that the CIT (A) was also not justified in adopting the cost of acquisition of the land at ₹ 175/sft without a scientific basis as against the value adopted by the AO on the basis of guideline rate fixed by the Government at ₹ 24/sft. It was, therefore, pleaded that the stand of the AO requires to be restored. 7.2. On the other hand, the Ld. AR s submission highlighting various issues, the substances of which, are summarized as under: (i) that as per the records of the Sub- Registrar at that relevant period, the sale transaction was almost nil except one sale transaction which appears to have been registered some time in 1981 in which the transaction was at an abnormally low rate and appears to be more a gift, but, for some small value mentioned only for the purpose of registering the sale deed which was ₹ 25/sft and that during that relevant period, there was no prescribed guideline value for registration of properties by the Government; (ii) that the present value of land on Brigade Road is ₹ 7000/sft and if the value is worked back by applying the cost of inflation index, it came to around ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was facing Brigade Road and also in a prime location. There is considerable force in the contention of the assessee which, of course, has been conveniently side-tracked by the AO. In fact, the AO should have dealt with the issue elaborately and recorded his reasons for rejecting the assessee s claim on this score. However, there was no trace of any such worth discussion; instead, the assessee s contention was brushed aside as vague. 8.2. As highlighted by the Ld. CIT (A), the AO got mistaken by the fact that the original asset was only a vacant site which attributed, perhaps, to come to a conclusion to adopt the value at ₹ 24/sft whereas the assessee s claim was that the property consisted of a main building and also an adjoined building resided by some tenants. The AO, in her remand report, had fairly conceded that the assessee had referred a case law Pushpa Sofat (2002) 81 ITD 1 (Chd) (SMV) in support of her claim that the cost of indexation should be considered from the year of acquisition by the previous owner and not the date on which the property devolved on the assessee and as the assessee had not furnished a copy of the said order on which she had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue at ₹ 325/sft and the Registered Valuer s report furnished before the CIT (A), the value was adopted at ₹ 350/sft for the site and the building value at ₹ 10 lakhs with 10% less for forced sale. The AO, in her remand report, submitted that the Registered Valuer deposed during the remand proceedings that as there were no comparable instances in the vicinity of Brigade Road, he had relied on market information and trend and the real estate values of similar areas which, in our considered view, have no sanctity; (v) the CIT (A), on his part, estimated the value of land at ₹ 175/sft and taking into account the building cost of ₹ 5 lakhs which has again only on estimation; (vi) At the remand proceedings, the AO has been deprived of perusing the order in the case of Pushpa Sofat (2002) 81 ITD 1 (Chd) (SMV) to consider the assessee s contentions as the assessee s A R had failed to furnish the same; (vii) the issue has not properly been dealt with at the assessment proceedings by the AO and the assessee, on her part, had not furnished the required documentary evidences to substantiate her claim. 8.4. Accordingly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ft, resulting in, allowing the claim of capital gains u/s 54F of the Act. During the appellate proceedings, copies of gift deed as well as the valuation report were furnished, according to which, the property consisted of a main building and also an adjoined building resided by some tenants and also some by the owners. It was, therefore, contended that the original asset being a residential house, deduction u/s 54 of the Act should have been allowed to the assessee. 9.3. After analyzing the provisions of s.54 of the Act, the Ld. CIT (A) had rejected the assessee s claim on the following ground: (i) the assessee had failed to fulfill the condition No.iv, namely, the assessee has, within the specified period, purchased/constructed another residential house(s). To illustrate further the assessee had purchased a vacant site measuring 219 sqm for ₹ 39.60 lakhs located at 407, 1st Stage, 2nd Page 13 of 19 ITA Nos.425 562/Bang/20113 0 Block, HBR Layout, Bangalore as per Purchase Deed dated 20.6.2005 and not a residential house and the ITI s report also corroborates that the land was still a vacant site as on 27.10.2009 i.e., even after 4 years from the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase/construction and unless timely investment is made, purchase/ construction may not be possible. Therefore, giving emphasis to one of them at the cost of another would be unjustified. However, the discussion was on purchase and construction of a residential house the words used in 54F (1)/54 is purchased/constructed i.e., past tense of words purchase/construct which itself demonstrate that such purchase and construction must have been completed within the time specified for the purpose of purchase/construction or otherwise the benefit of exemption u/s 54F/54 of I.T. Act would not be available to the assessee. The above inference has been drawn from the analogy of the elucidation of word used in s.32(1) of I.T. Act in the decision of jurisdictional High Court in Dy.CIT v. Yellamma Dasappa Hospital (2007) 290 ITR 353 (Kar) to hold that Tribunal was not correct in holding that the assessee was entitled for the claim of depreciation when the machineries were kept ready for use, although not used during the relevant accounting year. Applying this legal exposition to the facts of the case, the impugned land located in HBR Layout can in no uncertain terms be called a residential h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 17,25,000/- without prejudice, the CIT (A) ought to have allowed the compensation of ₹ 17.25 lakhs for which the AO had conceded in her remand report. 14.1. It was contended that the expenses incurred were exclusively in connection with the sale of property and, accordingly, liable to be allowed as deduction u/s 48(ii) of the Act. With regard to the compensation of ₹ 17.25 lakhs paid to the tenants, it was submitted that the compensation was paid to the tenants to have the subject property free from all encumbrance and, therefore, pleaded that the same requires to be allowed. 15. We have considered the assessee s submission and also perused the remand report of the AO. The relevant observations of the AO are extracted as under: Legal fee and commission paid: 3.1 From the perusal of records and the submissions of the assessee, it is seen that the sale of the property was not free from hassle. It was submitted that the property was negotiated to be sold to a certain Farah Builders which did not materialize and, hence, sold to M/s.Frontline Buildcom. Hence, certain legal expenses could have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assertions of the alleged tenants, in our considered view, requires further investigation to ascertain as to whether this has any reference to handing over of the vacant possession of the subject property. However, the assessee s A R during the course of remand proceedings submitted the declaration on stamp papers of two persons alleged to have been tenants of the said property which amounted to only (assessee s share) ₹ 2.5 lakhs only as against the assessee s claim of ₹ 17.25 lakhs. 15.3. In view of the conflicting claim of the assessee, this issue requires a detailed verification/investigation. To facilitate the AO to conduct further verification, the issue is remanded back on the file of the AO with a specific direction to look into all these aspects and to take appropriate action in accordance with the provisions of the Act, of course, after affording a reasonable opportunity to the assessee of being heard. It is ordered accordingly. 16. In the result: (1) The Revenue s appeal is treated as allowed for statistical purposes; and (2) the assessee s appeal is treated as partly allowed for statistical purposes. Order pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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