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TMI Blog2023 (4) TMI 852X X X X Extracts X X X X X X X X Extracts X X X X ..... gains as per provisions of section 50C - HELD THAT:- As decided in case Maria Fernandes Cheryl vs ITO [ 2021 (1) TMI 620 - ITAT MUMBAI] amendment made in the scheme of section 50C(1), by inserting third proviso thereto and by enhancing tolerance band for variations between stated sale consideration vis- -vis stamp duty valuation from 5 percent to 10 percent are effective from the date on which section 50C, itself was introduced, i.e 1-4-2003. Thus we direct the AO to compute the capital gains after granting the benefit of the 3rd proviso to section 50C of the Act to the assessee. As a result, ground No. 4 is allowed for statistical purposes. - ITA no.54/Mum./2023, C.O. no.24/Mum./2023 (Arising out of ITA no.54/Mum./2023) - - - Dated:- 18-4-2023 - Shri Prashant Maharishi, Accountant Member And Shri Sandeep Singh Karhail, Judicial Member For the Assessee : Shri Madhur Agarwal a/w Shri Yazad D. Bajan For the Revenue : Shri Soumendu Kumar Dash ORDER PER SANDEEP SINGH KARHAIL, J.M. The present appeal by the Revenue and cross objection by the assessee have been filed challenging the impugned order dated 03/10/2022, passed under section 250 of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27th July, 1940 co-terminus with the Deed of Lease dated 30th July, 1910 wherein Mr Kaikhoshru Byramji Mehta was having 2/3 share whereas Mr. Ardesir Byramji Mehta was having 1/3 share in the property. (b) The share of the said Mr. Kaikhoshru Byramji Mehta was mortgaged by the Deed of Mortgage dated 30th March, 1922 to Mr Ardesir Byramji Mehta for a sum of Rs 50,000/- Out of the aforesaid amount a sum of Rs 30,000/- was outstanding, due and payable by Mr. Kaikhoshru Byramji Mehta to Mr Ardesir Byramji Mehta as on 22 September, 1931. (c) Mr Kaikhoshru Byramji Mehta who was having 2/3rd share in the said property settled his share in the said property subject to the mortgage claim for the benefit of the children and widow of his deceased brother, Mr Cawasha Byramji Mehta. (d) The said Mr. Kaikhoshru Byramji Mehta requested Mrs. Awanbai Cawasha Mehta, Mrs. Jehangir Edulji Spencer, Mr. Rustom Cawasha Mehta and Ms. Piroja Cawasha Mehta, the widow and children of the late Mr Cawasha Byramji Mehta, to act as trustees along with him in respect of the Trust created by him for their benefit by putting his 2/3rd share in the said property into the said Trust. (e) By a registered D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 25/05/2016, declaring a total income of Rs.14,95,25,550, which was later revised on 25/05/2016, declaring a total income of Rs.15,06,05,730. The revised return of income filed by the assessee was selected for limited scrutiny for the reason large long-term capital gain and receipt of large value of foreign remittance and accordingly statutory notices under section 143(2) as well as section 142(1) of the Act were issued and served on the assessee. In the revised return of income, the assessee computed the long-term capital gains of Rs.14,89,00,351 from the sale of assessee s share in the immovable property as under:- Sale of 15% share in property, i.e., Seaside Building at Colaba, Mumbai 400005 18,50,00,000 Sale value as per stamp duty u/s 50C 19,65,78,500 Less: Brokerage Solicitors Fees C.A s Fees 42,36,500 50,00,000 1,00,000 Valuation Fees to Architect 57,500 1,11,09,000 Amount paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Id. AO at the time of assessment proceedings. 3.3. During the assessment proceedings, the Id. AO raised a query as to whether the assessee was right in claiming the cost of his 15% undivided share in the said property as on 01/04/1981 and thereafter to apply for indexed cost of acquisition to ascertain the indexed cost of acquisition in December 2015, while computing capital gain for A.Y.2016-17, because the property was transferred to him vide agreement dated 08/07/2002 for nil consideration? The assessee replied to the said query vide letter dated 25/06/2018 alongwith all supporting documents before the Id. AO. The Id. AO agreed with the assessee that the cost of acquisition should be the cost in the hands of the previous owner which in the case of the assessee is cost of acquisition in the hands of Mr. Kaikhoshru Byramji Mehta as on 01/04/1981 i.e. Rs.33,82,900/-.The Id.AO however, did not agree with the plea of the assessee that assessee is entitled for indexation benefit from 01/04/1981. The main plea of the Id. AO is that the mother of the assessee died on 09/03/2008 and therefore, the assessee became entitled to share in the property through the will of the mother an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.10,00,000/ 4.1. The Id. AO observed in his assessment order that assessee has released his shares in the property to other co-owner of this property and there is no third party involvement in this transaction. Accordingly, the assessee's claim and brokerage expenses and solicitor's fees is not wholly and exclusively related to transfer of property. Similarly, there is no dispute in the property. Hence, the payment made to occupier for vacation of place is also not wholly and exclusively incurred for transfer of property. The Id. AO also observed that the claim for valuation fees to Architect and Chartered Accountant's fees is also not related wholly and exclusively for transfer of the property. Accordingly, the assessee was asked to furnish the justification for the aforesaid claim of expenses. The assessee vide letter dated 25/06/2018 submitted the receipts for brokerage, solicitor's fees, Chartered Accountant's fees, Architect's fees and receipts of the servants and occupier to whom the consideration was paid for vacating the premises. The Id. AO on verification of the same observed that assessee had paid brokerage of Rs.42 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eads to Rs.37,00,000/- being 2% of assessee's share of sale consideration. The Id. CIT(A) observed that the Id. AO having accepted the genuineness of expenses could not merely restrict the allowability of the same on the basis of excessiveness and accordingly, held that assessee would be entitled for complete deduction on account of brokerage and solicitor fees. With regard to payment of Rs.10,00,000/- paid to the tenant Shri Stefano Funari for vacating the premises and consequently early termination of leave and licence agreement, the Id. CIT(A) held that unless the tenant is vacated and the property is free for occupation, it could not be sold and hence, the compensation paid to the tenant would be construed as an expenditure incurred wholly and exclusively for the purpose of transfer of property and accordingly, allowable as deduction. Aggrieved by these three reliefs granted by the Id. CIT(A), the Revenue is in appeal before us. 4.4. We find that the Id. AO had granted deduction of Rs.37,00,000/- on an adhoc basis @2% towards all expenses incurred on transfer. The dispute before us is only with regard to allowability of brokerage, solicitor fees and amount paid to tena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Mr. Hirji N Nagarwala and other agents involved had arranged and coordinated the meetings with respective Attorneys of buyers and had also contributed effectively for negotiating final sale consideration of Rs.37,00,00,000/- for the subject mentioned property (out of this, assessee's share is 50% i.e. Rs.18.50 Crores). It is a fact on record that assessee is permanently residing in United States of America (USA) and had employed Mr. Hirji N Nagarwala as broker to negotiate on his behalf with the purchaser and to represent him in all the meetings with the Advocate, Chartered Accountant and all other persons for sale of subject mentioned property. Moreover, the subject mentioned property was released by assessee and his brother in favour of their relative Mr. Keiki R Mehta. It is not in dispute that assessee and his brother were at logger heads with Mr. Keiki R Mehta and certainly the assessee (having residing in USA) requires a representative in India to represent on his behalf before Mr. Keiki R Mehta. Similarly, the other co-owner Mr. Rustom Fali Mehta had also employed M/s. Noshil Estates for protecting his share of 15% of the property and had paid independent brokerage the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Preparing the inter se Agreement between Mr. Sorab Mehta and Dr. Rustom Mehta inter alia to the effect that the 30% undivided share in the leasehold land situate at Plot No.147, Middle Colaba, Mumbai 400 005 which includes two houses known as Sea Side and Beach House with land appurtenant thereto which originally comprised of the K. B. Mehta Trust properties and also the owner occupied tenancy of the flats on the 2nd and 3rd floors and four garages, servant quarters and a dental clinic on the ground floor and property known as Sea Side at Colaba (the said Colaba Property) be excluded from the direction contained in Clause 5 of the last Will and Testament of Mrs. Joan Mehta to sell her entire estate and Instead to transfer the said Colaba property into the joint names of Mr. Sorab F Mehta and Dr. Rustom F Mehta after obtaining Probate (c) Acting on your behalf in respect of the proposed sale of your undivided 30% share of the land and dwelling house of the property situate at 147 Middle Colaba Road, Mumbai 400 005 Perusing copies of the relevant. Trust Deeds and Title Deeds as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (j) Perusing the letter dated 30th November 2012 from Mr. Markand Gandhi in reply thereto and reporting to you. (k) Perusing two notices both dated 5th June 2013 from the District Collector of Mumbai wherein it was inter alia stated that the Lease dated 22nd July 1940 had expired on 21 July 2006 and as per the Government's recent Policy dated 12 December 2012, the Lessee had an option to apply for a fresh lease to become owners of the said property as stated therein. (l) Obtaining the Government Resolution dated 12 December 2012 and getting the two notices translated and thereafter considering the legal and financial Implications thereof and reporting to you as well as discussing the same with Mr. Markand Gandhi and carrying on correspondence with M/s. Markand Gandhi Co in connection with the options available under the said Government Policy dated 12th December 2012 and forwarding copies thereof and reporting to you. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Attending on your behalf with Mr Hirji Nagarwalla, carrying on correspondence with your Licensee Mr. Stefano Funari and taking the necessary steps for terminating the Leave and License Agreement prematurely and taking possession and charge of the Third Floor premises on your behalf on 8th December 2015. (v) Attending to over 900 emails as well as telephone calls, conference calls on Sundays, holidays and outside office hours and attending on you and conferring with you from time to time. (w) And generally advising you in the matter from time to time to bring the matter to a successful close on 30th December 2015. 1,00,00,000 4.7. From the perusal of the bill given by the Solicitor as reproduced supra, we find that items mentioned in (d), (e), (h), (i),(1), (p), (q), (t), (u) (w) alone could be construed as expenses incurred in relation to the transfer of the subject mentioned property. Hence, the payment of Rs.50 lakhs paid by the assessee to the said solicitor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acating premises in the sum of Rs.10,00,000/- as an allowable deduction while computing capital gains as against Rs.3,61,452/- allowed by the Id. AO. 4.9. To Sum-up the assessee would be entitled for deduction on account of expenses incurred in relation to transfer of the property as under:- (i) On account of Brokerage Rs.42,36,500/- (ii) On account of Solicitor fees Rs.18,07,258/- (iii) On account of compensation Paid to tenant Rs.10,00,000/- 5. The ground No.2 3 raised by the Revenue are partly allowed. 7. Since similar issues arising out of a similar factual matrix in the case of the brother of the assessee have already been decided by the coordinate bench of the Tribunal, therefore, respectfully following the aforesaid decision, ground No. 1 raised in Revenue s appeal is dismissed. While ground No. 2 and 3 raised in Revenue s appeal are partly allowed with similar directions as rendered in the aforesaid decision. ..... 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