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TMI Blog2021 (7) TMI 619X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid leasehold land to freehold. Chargeability of interest income on NHAI bonds which assessee claimed that the same was offered for taxation on receipt basis - AO brought to tax said income on accrual basis in the year under consideration - HELD THAT:- The assessee has raised this ground specifically before ld. CIT(A) and the learned CIT(A) refers to this issue being raised by the assessee but while adjudicating appeal, the learned CIT(A) did not adjudicate this issue. Thus, keeping in view facts and circumstances of the case and in the interest of justice , this issue is restored to the file of ld. CIT(A) for fresh adjudication on merits in accordance with law. The ld. CIT(A) shall give proper and adequate opportunity of being heard to the assessee while adjudicating this issue. Thus, ground of appeal number 3 raised by assessee before tribunal is allowed for statistical purposes. - ITA No. 143/ALLD/2017 - - - Dated:- 9-7-2021 - SHRI.VIJAY PAL RAO, JUDICIAL MEMBER And AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER Appellant by : Shri Ashish Bansal, Advocate Respondent by : Shri A.K. Singh, Sr. DR ORDER PER SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER: This app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidering the fact that the appellant being an individual having salary and interest as only sources of income included, the said interest as income on receipt basis in the A.Y. 2014 -15 and paid income tax accordingly. 4. Because the Ld. Commissioner of Income Tax (Appeals) erred in charging interest u/s 234A, 234 B 234 C of the Income Tax Act. 5.Because the order of Ld. C.I.T. (Appeals), Allahabad was bad in law and facts. The Appellant prays for adducing further or other grounds of Appeal before or at the time of hearing the appeal. 3. The brief facts of the case are that the assessee is an individual and assessment was framed by AO u/s 143(3) of the 1961 Act in the case of assessee, vide assessment order dated 21.01.2016 , wherein, inter-alia, the AO brought to income-tax for ay: 2013-14 , income from Long Term Capital Gain which has arisen on account of sale by assessee of his 25% share in immovable property situated at leasehold Nazul Plot no. 6 , Rajapur Bhandawa, Allahabad, U.P. along with house no. 9 and 9/2 New No. 10 and 41 respectively at Minto Road, Allahabad including 3 out houses bearing numbers 42/9/1 , 39/9/3 38/9/4 which stood over Nazul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 2012-13. However , while adjudicating the appeal filed by assessee for ay: 2013-14 , the learned CIT(A) also directed that no benefit should be given on account of cost of improvement on account of conversion of aforesaid property from leasehold to freehold , while computing income from long term capital gains for ay: 2012-13 on sale by assessee of his share(25%) in the aforesaid property . The assessee is aggrieved by the aforesaid direction given by ld.CIT(A) and has now filed an appeal before the tribunal, while it is not shown by ld DR that Revenue has filed any appeal with tribunal challenging the appellate order passed by ld. CIT(A). 5. This appeal is heard on 6th July 2021 by the Division Bench of Allahabad tribunal through video conferencing mode through Virtual Court ,with the consent of both the parties. The ld. counsel for the assessee produced before the Bench ,the appellate order dated 28.01.2021 passed by Division Bench of the tribunal in I.T. A. No. 68/Alld/2018 ( Both of us were part of the DB who pronounced the order on 28.01.2021 in ITA No. 68/Alld/2018) for ay: 2012-13 in the case of brother of the assessee namely Mr. Sanjay Majumdar, who was also one of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chever is higher. Less: Indexed cost of Acquisition as on 01.04.1981, which shall be computed as under: Land: As rightly pointed out by the A.O. that the valuer, while, estimating the value of land, has failed togive any instances of sale. Thus, the A.O s action in taking the then prevailing Circle rate of the land is most scientific reasonable method. Accordingly, such action of the A.O is hereby confirmed. Building: The A.O will take the value of the building as on 01.04.1981 at ₹ 1,84,800/- (which is the value adopted by the valuer) and then give indexation from 01.04.1981. 4.1 As regards, the payment of ₹ 1,43,62,000/- as fees and charges for converting the said land from leasehold to freehold, the same is merely a reimbursement of expenditure to the seller by the buyer and is not to be considered as cost of acquisition/ or cost of improvement in the hands of the assessee since such payment has been incurred by the sellers (i.e. the assessee) on behalf of the buyers , which is evident from the Agreement of Sale (dated 15.07.2011) wherein it has mentioned that ₹ 1,43,62,000/- is being paid for the purposes of freehold conve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uisition or the cost of improvement) to the assessee and therefore no deduction for the same is to be allowed. The A.O will not allow the same (or any portion thereof) while computing the capital gain of the assessee for the A.Y. 2012-13. Since, the capital gain is now to be computed for A.Y. 2012-13 the A.O will give benefit of the investment made u/s 54EC as per the law. This disposes of the other grounds of appeal as filed by the assessee. It was also submitted by ld. counsel for the assessee that the tribunal while passing appellate order dated 28.01.2021 in ITA no. 68/Alld/2018 for ay: 2012-13 in the case of the brother of the assessee namely Mr. Sanjay Majumdar who was also one of the co-owners of the aforesaid property with 25% share, has held that the benefit of deduction towards cost of improvement for amount paid for conversion of aforesaid property from leasehold to freehold is to be allowed as deduction u/s 48 of the 1961 Act and prayers were made by ld. Counsel for the assessee that the A.O. be directed to follow the aforesaid tribunal order while framing assessment in the case of the assessee for ay:2012-13, as the issue before tribunal in this appeal is same as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. We have carefully gone through agreement to sell dated 15.07.2011, copy of deed of freehold dated 13.03.2012 and sale deed dated 25.04.2012 , which are all placed in paper book filed by assessee with tribunal. 6.2 Briefly stated that the assessee has sold his share(25%] in property namely leasehold Nazul Plot No. 6, RajapurBhandawa, Allahabad,U.P. along with HouseNo. 9 and 9/2 New No. 10 and 41 respectively at Minto Road, Allahabad including 3 out houses bearing Nos. 42/9/1, 39/9/3 38/9/4 which stood over Nazul Plot No. 6 Rajapur, Bandhwa, Allahabad. The total area of land was 2593.58 sq. meter. Shri Narain Das Majumdar was the lessee of the Nazul Plot No. 6, RajapurBandhawa, Allahabad by virtue of lease deed dated 18.10.1937 executed by the then Collector of Allahabad on behalf of Secretary of State in Council. The said lease deed was registered at Book No. 1, Jild No. 706/708 at Page Nos. 178/111-114 , document number 1912 at Sub-Registrar Chayal, District Allahabad , on 01.12.1937. The aforesaid lease was valid with effect from 23.11.1935 for a term of thirty years and further period of 30 years and 30 years, so that total period of lease was 90 years. Shri Nar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per lease deed mentioned aforesaid and as such the parties hereto have agreed to execute this deed of agreement and agree to abide by the terms and conditions enumerated hereunder: As could be seen above , the sale consideration of ₹ 4,53,62,000/-, which amount included freehold premium, freehold conversion stamp duty etc. The agreement also provided that execution of transfer deed and its registration shall he done after the aforesaid Nazul land is converted into freehold land. 6.4 The agreement to sell dated 15.07.2011 further provided that the buyer namely Amity Infra Developers Private Limited have advanced a sum of ₹ 2,37,29,000/- to the sellers , which amount of advance , inter-alia, also included cheque of ₹ 37,29,000/- in favour of one of the 'Shri Sudeb Majumdar' towards making of freehold application with State Government. The sellers were obligated under the agreement to sell dated 15.07.2011 to make application with State Government. The relevant clause as are recorded in agreement to sell dated 15.07.2011 , are reproduced hereunder: 1. That the first party agrees to sell the aforesaid property comprising of House No.9 and 9/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Nawab etc.. There is a Uttar Pradesh Nazul Manual, 1949 which governed the Nazul lands in U.P. .Under the Nazul Manual, the Nazul land can be leased out. Under the provisions of Rule 22 of Nazul Manual, lease for Nazul land shall not ordinarily be for a period shorter than 30 years in the first instance and shall , in all cases , provide for renewal after expiry of first and subsequent terms upto a maximum period of 90 years. The granting of lease in perpetuity in respect of any Nazul land on any term is prohibited. Rule 67 of Nazul Manual read with Rule 22 , prohibits granting of lease in perpetuity of Nazul land. Under the provisions , the nazul land let out on lease for stipulated period is required to be evacuated as and when the concerned lease terminates. Under the new Nazul Policy 1998 ,Nazul land can be disposed off by way of sale. If the sale deed is executed, then cost of land is to be recovered on the basis of market rate and stamp duty is to be paid on conveyance. If any Nazul land is transferred by way of sale or lease etc., execution of deed isrequired and stamp duty is chargeable as conveyance as laid down in Indian Stamp Act, 1899. There are mention of several o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntire of the total sale consideration due, to the Seller First Party forthwith. Thereafter, the First Party shall execute the transfer / sale deeds in favour of the second party or his nominee/s. The Second Party or his nominee/s shall be given peaceful possession of the aforesaid property on the date of such registration. Thus, land in question was 'Nazul Land' which was leased to father of the assessee by then Collector of Allahabad in 1935 for a period of thirty years( with further extensions of thirty years and thirty years) and transfer of this leased 'Nazul Land' was possible only when it is converted into freehold. The buyer has agreed to provide advance to sellers , out of total agreed consideration for getting the aforesaid leased 'Nazul Land' converted into freehold land so that the same could be transferred to buyers , and agreed sale consideration of ₹ 4,53,62,000/- included amount of freehold charges, stamp duty for freehold etc. which was estimated in this agreement to sell to be ₹ 1,43,62,000/-. The sellers were the co-owners/ inheritor of aforesaid leasehold 'Nazul land' and they were required to file application wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et the transfer/sale deed registered , the buyers can after making full payment of sale consideration to the buyers shall have the right to get the transfer/sale deed executed and registered through the court of law. The relevant clause in agreement to sell, dated 15.07.2011 is reproduced hereunder: 9. That if the First Party fails to execute and get the transfer/ sale deed registered as provided herein and after receipt of the full sole consideration, etc. from the Second Party, the Second Party shall have the right to get the transfer/sale deed executed and registered through court of law. 6.8 It is further provided in the agreement to sell, dated 15.07.2011 that the buyers will be fully responsible for conversion of aforesaid Nazul land to freehold and shall get the necessary paper work completed and filed before the concerned authorities of the Government and persue the matter for expeditious conversion of the land to freehold so that the land becomes freehold within a period of thirty five months from the date of the agreement to sell and the sellers shall extend full co-operation and sign every lawful paper required for the same. The relevant clause in agreement t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... First Party shall hand over possession of the property to the Second Party immediately thereafter. Further, on such an eventuality, the Second Party shall have the option , within the period of validity of this agreement to sell, of getting the transfer/sale deed executed in its favour by the First Party in respect of the aforesaid property on an as is where is basis without the land being converted to freehold . However, the balance amount of the sale consideration of ₹ 1,06,33,000/- ( Rupees one crore six lakhs and thirty three thousand only) which is the balance of the freehold conversion charges, etc., shall be paid by the Second Party to the FirstParty only when demand is raised by the State Government during the period of validity of this agreement to sell. 16. The entire stamp duty, registration charges, etc. in respect of the transfer/sale deed, whenever executed by the First Party as provided herein , shall be paid by the Second Party. Further, in case there occurs any increase in the freehold premium, freehold conversion charges stamp duty, etc. which is demanded / required by the Government more than what has been provided hereinabove, the same will be paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g improvement in title of the property on being converted from leasehold Nazul land to freehold property , as property is bundle of rights and getting property converted from leasehold to freehold will certainly improve the title and marketability of the property and also it is a Nazul land , getting the property freehold will grant perfect ownership rights/title in favour of the existing lessee's , who will then be in a position to transfer/sell the property. 6.10 We have also carefully gone through the Freehold deed dated 13.03.2012, which is placed in paper book. The said freehold deed was executed in the name of His Excellency Governor of Uttar Pradesh as seller of the land and is executed/granted in favour of Mr. Sudip Kumar Majumdar, Shri Sudeb Majumdar, Shri Sujit Majumdar and Shri Sanjay Majumdar, wherein freehold rights with respect to this property granted by State of U.P. in favour of above parties. The entire description of the property and leaseholder/inheritor, from the date of grant of lease rights of the NazuJ land in 1935 till the date of execution of freehold deed are found mentioned in the deed. Thus, the freehold conversion of the property was done by S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration of the said property was ₹ 6,02,01,000/- , while agreed sale consideration (including freehold conversion charges, stamp duty etc. ) was to the tune of ₹ 4,53,62,000/- . It is observed thatwhile computing income from capital gains, the assessee has adopted his share of full value of consideration of ₹ 6,02,01,000/- and not the agreed sale consideration of ₹ 4,53,62,000/- which is in consonance with provisions of Section 50C of the 1961 Act and in our considered view there should not be any grievance to Revenue to that effect, as the assessee computed income from capital gains by adoption of hisshare of full value of consideration of ₹ 6,02,01,000/- and not the sale consideration of ₹ 4,53,62,000/- as found mentioned in agreement to sell. There could be a legitimate grievance that the sellers got the aforesaid Nazul property converted into freehold from U.P.State Government without disclosing that an agreement to sell is already entered into by them with the buyers, but firstly there is no material on record to that effect which conclusively prove that this fact was concealed from Government and secondly we are concerned with proceedings u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gains. Similar, error crept in while indexing the cost of acquisition of the property by applying cost inflation index of 852 instead of 785. Thus, to this extent the reassessment passed by AO was erroneous so far as prejudicial to the interest of Revenue which requires to be revised by AO and proceedings u/s 263 of the 1961 Act are upheld to this extent, as the aforesaid error in adopting cost inflation index of 852 instead of 785 is certainly an error which has caused prejudice to the Revenue, which now need to be rectified for which directions are hereby issued. Thus, in nut-shell ,we partly allow the appeal of the assessee and only to the limited extent of making correction in the base rate of cost inflation index for fy:2011-12(ay:2012-13) which was erroneously taken at 852 , instead of correct figure of 785 , while computing income chargeable to tax under the head 'Income from capital gains'. We order accordingly. Our observations in the aforesaid appellate order in ITA no. 68/Alld/2018 dated 28.01.2021 passed in the case of brother of the assessee namely Mr. Sanjay Majumdar who is also one of the co-owners of the aforesaid property , shall be applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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