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TMI Blog2020 (10) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the agreement of sale with possession. Whether such a right can be considered as a capital asset under the Income Tax Act is the question before us. Meaning of the property of any kind - the AO has brought out the assessment order, the decision of the Hon'ble Court wherein even the right in the property has been held to be a capital asset u/s 2(14) - AO treating the sum of ₹ 60.00 lakhs as received for transfer of right in the capital asset cannot be faulted. Computation of capital gains - AO has allowed indexation of only cost of acquisition which is the sum incurred by the assessee for excavation work - litigation between the assessee and the vendors before the City Civil Court, Secunderabad is not in dispute. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Later on, to verify the taxability of ₹ 60.00 lakhs received by the assessee company under post decretal agreement from M/s. Modi Estates in connection with land settlement, the AO reopened the assessment u/s 147 of the I.T. Act by issuance of a notice dated 1/3/2011. The assessee, vide a letter dated 7.4.2011, submitted that the return originally filed on 3.5.2006 be treated as a return filed in response to the notice u/s 148 of the Act. 3. During the reassessment proceedings, the AO noticed that the assessee company was incorporated on 28/07/1992 with the main object of carrying on business in construction activity and that the assessee company had entered into an agreement of sale for purchase of land admeasuring 2,331 sq. yard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure incurred by the assessee in excavation work and other developmental work and also towards legal expenses and the expenses incurred towards watch and ward of the property for a period of ten years. Therefore, the assessee had explained that the sum of ₹ 60 lakhs is only reimbursement of the expenditure incurred by the assessee towards that property and is not compensation received and that since there was no asset accrued in favour of the assessee, it cannot be treated as capital gain and further that there was no capital gain arisen to the assessee therefrom. 5. However, the AO was not convinced with the assessee s contention that the assessee had not acquired any right in the property. He held that after the judgement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. Ground No.2 is accordingly rejected as not pressed. 7. As regards Grounds No.3 and 4, the learned Counsel for the assessee reiterated the submissions made by the assessee before the authorities below and submitted that the assessee had only entered into an agreement of sale but had not become the owner of the property nor has any right accrued to him thereon and therefore, there was no capital asset owned by the assessee which has been transferred resulting in capital gains. Further, he also submitted that the sum of ₹ 60.00 lakhs received by the assessee is nothing but reimbursement of the expenditure incurred by the assessee towards the advances paid, excavation work, legal expenses and the watch and ward expenses over a per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any kind, the AO has brought out the assessment order, the decision of the Hon'ble Court wherein even the right in the property has been held to be a capital asset u/s 2(14) of the I.T. Act. Therefore, the AO treating the sum of ₹ 60.00 lakhs as received for transfer of right in the capital asset cannot be faulted. As regard the computation of capital gains, we find that the AO has allowed indexation of only cost of acquisition of ₹ 12.00 lakhs and also ₹ 6.00 lakhs which is the sum incurred by the assessee for excavation work. However, the litigation between the assessee and the vendors before the City Civil Court, Secunderabad is not in dispute. Therefore, assessee s claim of legal expenses ought to have been allow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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