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TMI Blog2020 (6) TMI 534X X X X Extracts X X X X X X X X Extracts X X X X ..... n circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made by the AO of Rs. 3,50,536/- on account of various expenses wrongly claimed by the assessee against the interest & remuneration received from various firms. iv) Whether on the facts and in circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made by the AO of Rs. 14,32,160/- on account of expenses wrongly claimed by the assessee u/s 57 of the Act for earning interest income." Grounds of assessee's appeal: "1. That the Ld. AO grossly erred in not accepting the value of wells, Baories, Roads & boundary wall and there by AO have not considered the index value of these things which are situated on the Land. And the Ld. CIT(A) also erred in not accepting the value of wells Baories, Roads as on 01.04.1981 & there by not allowed the cost of Rs. 27,50,000/- and proportionate indexed cost Rs. 1,25,19,756/- in calculation of LTCG on sale of Land & there by sustained the addition in Long Term Capital Gain on sale of Land by Rs. 1,25,19,856/-. 2. That the Ld. AO Grossly erred on law facts in not considering the genuinely incurred expenses amounting to Rs. 24,48,450 (8,45,000 + 2,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins on transfer of land 6,73,54,362/- Less: LTCG declared by the assessee in ROI filed 2,51,85,149/- Additions on account of LTCG on Land 4,21,69,213/- 4. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) who accepted the revised return and the revised computation of income, and granted partial relief to the assessee whereby the transaction in respect of two invalid sale deeds were held not chargeable to capital gains tax and secondly, against the third transaction of sale of land, the relief was granted in respect of cost of boundary wall, development and legal expenses and the disallowance in respect of other matters as done by the AO were, however, sustained. Now, both the parties are in cross appeal before us against the said findings of the ld CIT(A). The Revenue is in appeal against the relief granted by the ld CIT(A) and the assessee is in appeal against the disallowances sustained by the ld CIT(A). 5. Firstly, coming to the dispute relating to two sale deeds executed between the assessee and Shri Rajeev Singh which are claimed as invalid sale deeds by the assessee and the said claim been allowed by the ld CIT(A) whereby the said tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer deeds. As per provisions of section 45 etc, the expression, full value means the whole price without any deduction what so ever and it cannot refer to the adequacy or inadequacy of the price bargained for. Neither has it any reference to the market value of the capital asset which is the subject matter of transfer. Even if the full value of consideration agreed upon is received in installments in different years, the entire value of consideration has to be taken into account for computing the capital gain which become chargeable in the year of transfer. Thus, capital gains arise on accrual basis as held by the Hon'ble Chennai High Court in the case of T.V. Sundaram Iyengar & Sons Ltd. V/s CIT (1959) 37 ITR 26 (Madras). Hence, in the instant case of the assessee the full value of consideration on transfer of land is of 22,33,80,189/- and reduction deduction for not receiving any part of sales consideration in the future not acceptable under the provisions of the I.T. Act, 1961." 7. In light of aforesaid findings of the AO, the ld. DR submitted that where the transfer of land is duly supported by the registered sale deed, the said transfer of land is clearly chargeable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be included in his net wealth (Nawab Sir Osman Ali Khan - 162 ITR 888 SC) (iv) The sale deeds itself were under litigation for cancellation due to breach of contract. (v) The appellant has filed a suit & obtained a stay from Rajasthan High Court for cancellation of the sale deed & registrations on transfer of land which would mean that no gain has arisen on the sale & such asset which is never parted with. The gain as per the document was not 'Real' because neither was the full consideration received by the seller, nor was the possession handed over to the purchaser." 9. Further, the ld. AR submitted that the appellant is an individual who has filed his return declaring income of Rs. 2,68,56,000/- including LTCG of Rs. 2,51,85,149/-. In course of assessment proceedings, the appellant informed to the A.O. that out of the said sale of 85 Bigha land & its periphery, the assessee has not received the payment towards part of Land hence the said deal was cancelled & appraised the Ld. A.O. to treat the return revised to that extent but the Ld. A.O. instead of treating the return on factual basis did the assessment by theoretical basis & made various additions. 10. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly submitted that when full consideration has not been received or accrued, capital gain cannot be computed in the hands of the assessee. 13. It was submitted that the appellant revised his return of income during the course of assessment proceedings given that the amount of consideration has not been received and the sale deeds have become invalid sale deeds and stay has been granted by the Hon'ble Rajasthan High Court. It was submitted that it is a settled legal position that the legal claim can be taken at any stage of the proceedings as held in case of CIT Vs. Britannia Industries Ltd. 396 ITR 677 (Cal.). As such, revising of return, while at the time of proceedings before the A.O. is valid and, therefore, the claim made by the assessee has wrongly been disallowed by the AO which have however been appreciated by the ld CIT(A) and necessary relief granted by him. 14. Further, in support of his contentions, the ld AR has relied on the Co-ordinate Bench decision in case of ITO vs. Ajit Kumar Arya 25 ITD 37 (JP), the decision of authority for advance ruling in case of Jasbir Singh Sarkaria [2007] 294 ITR 196/164 Taxman 108 (AAR-New Delhi) and the decision of the Hon'ble Patna H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arged in respect of the total income of the previous year of every person. Section 5 of the Act defines the scope of "total income" by providing that the total income of the previous year of a person who is resident shall include all income from whatever source derived which is received or is deemed to be received in India in such year by him or on his behalf or accrues or arises or is deemed to accrue or arise to him in India during such year or accrues or arises to him outside India during such year. Section 45 provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to income-tax under the head "Capital gains" and shall be deemed to be the income of the previous year in which the transfer took place. Section 2(47) defines the term "transfer" in relation to transfer which list down various modes of transfer. The mode of computation of capital gains is laid down in section 48 of the Act which provides that the income chargeable under the head "Capital gains" shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset, two amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d could not be ignored. As already observed, the enquiry before the Tribunal was to be directed to find out whether there had been a sale and if the Tribunal comes to the conclusion that the sale had taken place, in that case, the capital gains tax would become payable. The matter can be viewed from another angle. It is a matter of daily happening that people, who want to avoid payment of tax, would sell the property by getting the sale deeds registered at an under-estimated value. If it is held that the sale deed is final, in that case, the Income-tax authorities will be debarred from looking into as to how much sale consideration passed under the transaction, which is not the law. The factum of sale and the sale proceeds are the real questions to be determined by the Income-tax authorities. From what has been stated above, it is clear that the Tribunal fell into an error in refusing to examine the material put forth by the assessee to prove that the sale was a sham transaction." 20. We refer to the decision of the Hon'ble Patna High Court in case of Smt. Raj Rani Devi Ramna vs CIT (Supra) where the questions framed for consideration before the Hon'ble High Court read as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not pass on the mere execution and registration of the sale deed and the answer to the question regarding passing of the title lies in the intention of the parties, which is to be gathered from the sale deed itself. A similar view has been taken in the case of Shiva Narayan Sah v. Baidya Nath Prasad Tiwary, reported in AIR 1973 Patna 386. There is a catena of decisions of this court as well as of other High Courts taking a similar view. The relevant provisions under the Act for the present purpose are sections 45 and 2(47). Section 45, inter alia, provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall, subject to certain exceptions, be chargeable to income-tax under the head "Capital gains" and shall be deemed to be the income of the previous year in which the transfer took place. The word "transfer" has been defined under section 2(47) of the Act which provides that, in relation to a capital asset, transfer includes the sale, exchange or relinquishment of the asset or the extinguishment of any rights therein or the compulsory acquisition thereof under any law. In the present case, we are concerned with the transfer o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and registration of sale deed. 22. Applying the above legal proposition in the facts of the present case, we find that the first sale deed dated 24.12.2012 is for transfer of 3.71 hectares of land situated at village Rampura, Tehsil Ladpura, Kota district, Rajasthan for a sale consideration of Rs. 4.63 crores. The sale consideration has been stated to be discharged by issue of cheque no. 912806 for Rs. 63 lacs, cheque no. 912807 dated 2.01.2013 for Rs. 2 crores and cheque no. 912808 dated 2.01.2013 for Rs. 2 crores drawn on Punjab National Bank. The assessee received the first payment of Rs. 63 lacs through RTGS on 31.12.2012. However, the other two cheques were returned unpaid by the bank on 25.03.2013 stating that the payment has been stopped by the issuer of the cheque i.e, Shri Rajeev Singh and basis his instructions of stopITA payment, the cheques have not been cleared and returned unpaid to the assessee. What is therefore relevant to note is that out of total consideration of Rs. 4.63 crores as stated in the aforesaid sale deed, no payment has been actually made to or received by the assessee either prior to or at the time of execution of the sale deed. What has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid sale deed, no payment has been actually made to or received by the assessee either prior to or at the time of execution of the sale deed. What has been apparently done at the time of execution of the sale deed is thus, the handing over the two cheques to the assessee which have been returned back unpaid by the bank on 25.03.2013. The intention of the parties which can therefore be gathered from the reading of the sale deed and the conduct of the parties is that the effective transfer of title in the land shall happen only on encashment and clearance of both the cheques and not at the time of execution and registration of the sale deed. Therefore, mere handing over the cheques which have been subsequently dishonored and returned unpaid to the assessee cannot be held to be discharge of full sale consideration at the time of execution of the sale deed and there is clearly a violation of the terms of sale deed by Shri Rajeev Singh where he has failed to discharge the full sale consideration so agreed and stated in the sale deed. Further, the matter has again been contested under the Negotiable Instruments Act for dishonor of cheques and separately before the Civil Court for cancell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me must have been received or have "accrued" under Section 48 as a result of the transfer of the capital asset. 25. This Court in E.D. Sassoon & Co. Ltd. v. CIT AIR 1954 SC 470 at 343 held: "It is clear therefore that income may accrue to an assessee without the actual receipt of the same. If the assessee acquires a right to receive the income, the income can be said to have accrued to him though it may be received later on its being ascertained. The basic conception is that he must have acquired a right to receive the income. There must be a debt owed to him by somebody. There must be as is otherwise expressed debitum in presenti, solvendum in futuro; See W.S. Try Ltd. v. Johnson (Inspector of Taxes) [(1946) 1 AER 532 at p. 539], and Webb v. Stenton, Garnishees [11 QBD 518 at p. 522 and 527]. Unless and until there is created in favour of the assessee a debt due by somebody it cannot be said that he has acquired a right to receive the income or that income has accrued to him." 26. This Court, in CIT v. Excel Industries [2013] 358 ITR 295/219 Taxman 379/38 taxmann.com 100 (SC) at 463-464 referred to various judgments on the expression "accrues", and then held: '14. Firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities to pass on the benefit of duty-free imports to the assessee until the goods are actually imported and made available for clearance. The benefits represent, at best, a hypothetical income which may or may not materialise and its money value is, therefore, not the income of the assessee.' 27. In the facts of the present case, it is clear that the income from capital gain on a transaction which never materialized is, at best, a hypothetical income. It is admitted that, for want of permissions, the entire transaction of development envisaged in the JDA fell through. In point of fact, income did not result at all for the aforesaid reason. This being the case, it is clear that there is no profit or gain which arises from the transfer of a capital asset, which could be brought to tax under Section 45 read with Section 48 of the Income Tax Act. 28. In the present case, the assessee did not acquire any right to receive income, inasmuch as such alleged right was dependent upon the necessary permissions being obtained. This being the case, in the circumstances, there was no debt owed to the assessees by the developers and therefore, the assessees have not acquired any right to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion placed on record by the assessee. 10. The issue which arises in such circumstances is that in view of the dispute between the parties, can it be said that the assessee has completed sale transaction and hence is eligible for assessability of capital gains in his hands. 11. Section 2(47) of the Act lays down that transfer in relation to capital asset includes various modes of transfer in which under clause (v) it involves a transaction wherein allowing of possession of any immovable property is taken or retained in part performance of the contract of the nature referred to in section 53A of the Transfer of Property Act, 1882. Under section 53A of the Transfer of Property Act, where any person contracts to transfer for consideration any immovable property in writing, from which the terms necessary to constitute the transfer can be ascertained and the transferee has in part performance of the contract, taken possession of the property or any part thereof, and the transferee has performed or is willing to perform his part of contract, then it is called 'Part Performance'. So, in part performance, there has to be willingness to perform his part of contract by the trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and where the possession of land having not been transferred to the purchasers, provisions of section 45 of the Act are thus, not attracted. 14. Now, applying the ratio laid down by Apex Court to the facts of present case, wherein the initial contract was between the parties on the ground that the assessee would get permission of other co-owners numbering about 13 so as to transfer immovable asset to the purchasers. This was the basic condition of the said agreement between the parties. Admittedly, the said permission could not be obtained by the assessee and though sale deed was registered, transaction could not be culminated. It is further evidenced by the fact that only sum of Rs. 15 lakhs was paid as against total consideration of Rs. 2,75,73,600/- settled between the parties. As per sale deed, sale consideration was to be paid as per Schedule A to the said agreement, for which postdated cheques were issued, which were to be encashed as per the conditions mentioned for encashment of cheques. As per clause 8 of the sale deed, the purchasers had given postdated cheques to sellers and it was their responsibility to see that the postdated cheques get cleared for payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Property Act are attracted, there are two essential conditions. Firstly, the transferee must, in part performance of the contract, have taken possession of the property or any part thereof. Secondly, the transferee must have performed or be willing to perform his part of the agreement. It is only if these two important conditions, among others, are satisfied that the provisions of Section 53A can be said to be attracted on the facts of a given case. In the instant case, as we have noted above, the ld CIT(A) has returned a finding that "possession of the said land was never handed over & land is still in the possession of appellant himself" and Hon'ble Rajasthan High Court in SB Civil First Appeal No. 72/2013 vide stay order dated 11.02.2013 has directed to maintain status quo as regards possession, transfer, alienation and sale of the suit property. Further, the Hon'ble Rajasthan High Court vide order dated 19.07.2013 has restricted any party from approaching UIT for conversion of the impugned property or issue of Patta. Thus, the transferee, Shri Rajeev Singh has not taken possession of the property. Secondly, he has not discharged the sale consideration nor there is any willingne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch no evidences of paying such expenses with details of receiving persons tiled as narrated in above para. In respect of above mentioned other expenses of structures and development charges what and which type of construction work was done on the transferred land during the whole rainy season no any where mentioned and no any evidence of any construction work which was completed on the land and for what purposes, filed & produced. Merely claiming deductions for expenses by enlisting in the name of construction of any pucca work, do not prove the facts of cost or improvement of the land property' transferred which is/are not existed on the land as per the transferred deed agreed and registered. Paras 1 to 8 of the sale deed mentioned as " यह की उक्त आराजी संचित है जा मुख्य सड़क पर स्थित नहीं है मुख्य सड़क से 500 मीटर से अध ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was submitted that ld. CIT(A) has gone through the details submitted by the assessee and rightly appreciated the nature of the expenses as claimed. It was accordingly submitted that the findings of the ld. CIT(A) be confirmed. 35. We have heard the rival submissions and perused the material available on record. The DVO has acknowledged the existence of roads, wells, Baories and boundary walls on the impugned land and therefore, the factual position is that the land has been transferred along with these constructed structures. The claim of the assessee is towards the development expenses in relation to these structures as well as leveling of land which has been examined by the ld CIT(A) and we donot see any infirmity in the said findings of the ld CIT(A) where he has allowed these expenses towards cost of improvement. In the result, the ground of appeal is dismissed. 36. In Ground No. 3, the Revenue has challenged the deletion of addition of Rs. 3,50,536/- on account of various expenses claimed by the assessee against the interest and remuneration received from various firms wherein the assessee is a partner. 37. Briefly stated, facts of the case are that the assessee has receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50,536/- and the net receipts of Rs. 2,37,871/- have been offered to tax as business income by the assessee while filing his return of income. It is the claim of the assessee that he had received such interest and remuneration in earlier years as well and against the same, had claimed various expenses incurred in respect of such business income and which have been allowed by the Revenue in earlier years. We find that the Coordinate Bench had an occasion to examine the same claim of the assessee in A.Y 2010-11 and the relevant finding of the Co-ordinate Bench are contained at Para 3.4 of its order which reads as under:- "3.4 We have heard rival contentions, perused the material available on record and gone through the orders of the authorities below. There is no dispute with regard to the position of law that powers conferred under section 263 can be invoked if the ld. CIT finds that the order passed by the AO is erroneous and prejudicial to the interests of the revenue. It is also settled position of law that absence of any of these conditions would make the order under section 263 as unjustified and illegal. In the case in hand, the first ground of invoking provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench was whether the AO erred in allowing the expenditure against the interest and remuneration earned by the assessee and relying on the decision of Hon'ble Jurisdictional High Court in the case of CIT vs. Jabarmal Dugar 84 ITR 452 and Hon'ble Calcutta High Court in the case of CIT vs. S.B. Ghose 124 ITR 674 (Cal.) held that the expenses are duly allowable. Though the decision of the Coordinate Bench was in the context of proceedings u/s 263, the Coordinate Bench has upheld the decision of the AO in allowing such expenditure following the aforesaid rulings, therefore, the ratio of the said decision continues to apply in the instant case. Given that there is no change in the facts and circumstances of the case and in absence of any contrary authority brought to our notice, following the rule of consistency, the action of the ld CIT(A) in allowing the expenditure is upheld. In the result, the ground of appeal is dismissed. 43. In Ground No.4, the Revenue has challenged the deletion of the addition amounting to Rs. 14,32,160/- on account of expenses claimed by the assessee u/s 57 of the Act for earning interest income. 44. Briefly stated facts of the case are that during the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, following principle of consistency, the expenses should be allowed for the year under consideration. It was further submitted that the Coordinate Bench in assessee's own case in ITA No. 305/JP/2015 dated 22/07/2016 has held that expenditure incurred on taxable income included in total income is allowable and the said decision has been accepted by the Department. It was accordingly submitted that the expenditure of Rs. 14,32,160/- is genuine expenditure incurred for earning the taxable income of Rs. 22,30,250/- and the same is fully allowable and rightly allowed by the ld. CIT(A) which should be confirmed. 48. We have heard the rival contentions and perused the material available on record. We find that the ld CIT(A) while allowing relief to the assessee was apparently guided by the fact that the assessee has incurred total expenses of Rs. 17,82,696/- and out of which, Rs. 3,50,536/- has been claimed under the head "business income" and remaining expenses of Rs. 14,32,160/- has been claimed under the head "Income from other sources" and relied on the order of the Coordinate Bench for A.Y 2010-11, as we have noted above, wherein the issue was related to allowability of expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invested in mutual funds, stock market or private equity, however, the same cannot be held against him unless the considerations as stated above are examined in detail. Given that these considerations have not been taken into consideration and examined by the lower authorities, we deem it appropriate to remand the matter back to the file of the Assessing officer to examine the same afresh including the decision of the Coordinate Bench referred supra, after providing reasonable opportunity to the assessee. In the result, the ground is allowed for statistical purposes. 50. In the result, the appeal of the Revenue is disposed off in light of aforesaid directions. ITA No. 152/JP/19 51. Now coming to assessee's appeal. In Ground No.1, the assessee has challenged the action of ld. CIT(A) in not accepting the value of wells, Baories and roads as on 01.04.1981 and thereby not allowing the cost of Rs. 27,50,000/- and corresponding indexed cost while computing the capital gains in respect of third transaction of sale of land measuring 7.36 hectare to Shri Neeraj Suwalka vide sale deed dated 02.01.2013 for consideration of Rs. 10.00 crores. 52. Briefly stated, the facts of case are that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , even on the sale of house, the area of Land or in some cases construction area is mentioned, but what is there in the house is not mentioned, that in India if the base (Land) is sold than all the things on said Land is sold or transferred, the things which are attached with the Land are automatically transferred with the said Land, thus there is no reason or purpose to mention about these things in the sale deed. However, on valuing the sold property, the valuer has to consider all the things, there are houses of poor construction, solid construction, light, Flooring, etc, hence the cost of respective Land or house may differ from others. In the present case, the land was transferred along with these structures and the assessee considered the value of wells, Baories, road, Boundary wall etc. as these were attached to the Land which has been transferred and the assessee has not retained any title or possession over such structures. 55. It was further submitted that ld. CIT(A) accepted the boundary wall but ignoring other items that too without any basis and submitted that existence of this item are beyond doubt, these are mentioned by the registered valuer, also stated in the si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r filing of two court cases in respect of invalid sale deeds amounting to Rs. 13,19,770/-. During the course of assessment proceedings, the matter was examined by the Assessing Officer and these expenses were found not deductible from the full value of consideration. The relevant finding of the AO reads as under:- "(b) The assessee also claimed Rs. 2,83,680 under the head litigation legal cases expenditure fee and court expenses and legal expenses for filing of court cases in respect of invalid sale of Rs. 13,19,770/- i.e. totaling of Rs. 16,03,450/- claimed as deductable expenses out of full value of consideration which have carefully considered and found not deductable (i) These expenses said to have incurred in the F.Y. 2013-14 (not in the P.Y. under consideration) and mostly about one year period later than the transfer of property had completed in the months of Dec. 2012 & Jan. 2013 i.e. while the transfer of property was completed which was in the F.Y. (P.Y.) 2012-13 but expenses,. said to have incurred in the F.Y. 2013-14 , in other words theses expenses said to have incurred after the due date of filing the ROI by the assessee for the F.Y. i.e. P.Y. 2012-13. The sale de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in connection with the transfer. It was accordingly submitted that the expenses have been incurred in connection with transfer of the land and the same should be deductible while working out the full value of consideration. 62. Per contra, the ld. DR relied on the findings of the lower authorities. 63. We have heard the rival submissions and perused the material available on record. We find that the assessee has claimed stamp duty, court fee and other charges in respect of two court cases namely Case No. 1./12-13 dated 10.12.2013 and Case No. 2/12-13 dated 10.12.2013. Further, consultancy charges have been paid to Sr. Advocate and advocates for filing of suits and other related legal and miscellaneous expenses. These court cases are apparently in respect of two sale deeds entered into with Shri Rajeev Singh which the assessee claimed to be invalid sale deeds. Given our aforesaid findings in context of these two sale deeds that these transactions are not subject to capital gains tax, the corresponding expenses cannot be allowed while computing capital gains in respect of other sale transaction which has been brought to tax. In the result, the ground of appeal is dismissed. 64. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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