TMI Blog2018 (5) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... hers, etc. for the expenditure incurred towards cost of improvement. While executing the mortgage deed in favour of the bank as collateral security, the assessee should have furnished valuation of the property of land and building, against which the bank has sanctioned loan of ₹.1,75,00,000/- to MBPPL. Accordingly, in the absence of evidence for cost of improvement and the fact that cannot be ignored that without spending monies, the assessee could not have raised the building of 7,745 sq.ft., we direct the Assessing Officer to verify the valuation report as the assessee might have submitted at the time of executing the collateral security in favour of the bank and decide the issue afresh after allowing an opportunity of being heard to the assessee. Thus, the ground raised by the Revenue is allowed for statistical purposes. Disallowing the capital loss resulting out of sale of shares of MBPPL - Held that:- CIT(A) has not accepted the valuation adopted by the assessee. The assessee is one of the directors in M/s. Minbimbangal Productions Pvt. Ltd. along with his wife Smt. Geetha Kailasam. The beneficial owners of shares holding not less than 10% of the voting power during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Act, 1961 [ Act in short] were served on the assessee on 31.0-8.2007. 2.1 With regard to the issue of income from long term capital gain, the Assessing Officer noticed that the assessee sold the property at 17A, Karpagambal Nagar, Mylapore for a consideration of ₹.1,75,00,000/-, which was not admitted by the assessee in the return of income. When the details were called for, it was the submission of the assessee that the assessee has mortgaged the property owned by him at Karpagambal Nagar, Chennai for the loan granted by Indian Overseas Bank (IOB) to Min Bimbangal Productions Pvt. Ltd. [MBPPL] around the year 2001-02. As it was only as additional collateral security extended by the assessee, the assessee did not receive any consideration at that time of the mortgage of the property with IOB. Since the MBPPL failed to repay the loan availed from IOB, the IOB issued notice for disposal of the property for recovery of the loan extended to MBPPL and subsequently the property was sold and the entire consideration was recovered by the bank. The contention of the assessee that the assessee has not received a pie from the transfer and the entire sale proceeds realized o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee carried on abkari business. In the course of the financial year 1970-71 he mortgaged to the Excise Department of the State of Andhra Pradesh immovable property belonging to him at Waltair. He did so to provide security for the amounts of kist which were due by him to the State. The State, in the assessment year with which we are concerned, sold the immovable property by public auction, without the intervention of the court, to realise its dues. A sum of ₹ 5,62,980 was realised at the auction. Thereout, the State deducted the amount of ₹ 1,29,020 due to it towards kist and interest and paid over the balance to the assessee. 5. The Revenue contended that the assessee was liable to capital gains tax on capital gain in the sum of ₹ 3,70,970, having regard to the cost at which the said immovable property had been acquired by the assessee. According to the assessee, the sum of ₹ 1,29,020 due by him to the State on account of kist was required to be deducted from the amount of ₹ 5,57,980 realised at the auction before computing the capital gain. According to him, the capital gain was only ₹ 85,130. Neither the Income-tax Officer nor th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was relied upon by the Assessing Officer in his assessment order, while taking a different view. When the law laid down by the Hon ble Supreme Court and relied on by the Assessing Officer is very much available on the identical facts, the ld. CIT(A) should have distinguished it before taking a different view by following a different decision, which is not directly on the point. Otherwise also, availing loan itself is consideration and in this case, constructive benefit was very well accrued to the assessee when the loan was availed by MBPPL, which was owned partly by the assessee. Accordingly, we set aside the order of the ld. CIT(A) on this issue and restored that of the Assessing Officer. Thus, the ground raised by the Revenue is allowed. 6. The next ground raised in the appeal of the Revenue is that the ld. CIT(A) erred in holding that the assessee is eligible to claim cost of improvement amounting to ₹.24.11 lakhs for the purpose of computation of long term capital gains. The assessee acquired the said property vide settlement deed dated 19.07.1979. The cost of improvement had taken place during the year 1990-91. Details of improvement were called for during the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06, the assessee has executed the property of land of 3,759 sq.ft. and building measuring 7,745 sq.ft., whereas, the assessee has received only a vacant land of about 4,000 sq.ft. through settlement in the year 1979 through a settlement deed registered with SRO, Mylapore. Further, the ld. CIT(A) observed that the assessee must have spent monies for bringing the 7,745 sq.ft. of building from 1990 onwards and the fact and date of construction have been noted from the details of the plan approval. Since the assessee could not file any evidence for the claim of expenditure towards cost of improvement of ₹.24,11,842/-, the Assessing Officer rejected the claim. To admit any claim of expenditure, the assessee is required to furnish bills/ vouchers. However, the ld. Counsel for the assessee has submitted that due to passage of time, the assessee could not produce the bills/vouchers, etc. for the expenditure incurred towards cost of improvement. While executing the mortgage deed in favour of the bank as collateral security, the assessee should have furnished valuation of the property of land and building, against which the bank has sanctioned loan of ₹.1,75,00,000/- to MBPPL. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y was having substantial audio video equipment, video rights which were not appropriately valued. Therefore, the ld. CIT(A) has not accepted the valuation adopted by the assessee. The assessee is one of the directors in M/s. Minbimbangal Productions Pvt. Ltd. along with his wife Smt. Geetha Kailasam. The beneficial owners of shares holding not less than 10% of the voting power during the previous year relevant to the assessment year are Smt. Geetha Kailasam [58.13%], B. Prasanna, [brother 9.27%] and Pushpa Kandasamy, [sister 10.24%]. The company in which the assessee is a director, is a private limited company in which public are not substantially interested. The shareholders are only assessee s family members and more of a family concern. We find that the shares are not quoted, listed or sold through any authorized stock exchange. Thus, we are also of the same opinion that the sale of shares in the value of ₹.10/- as low as a price at ₹.0.10 per share is nothing but a transaction to avoid taxation of capital gain. In view of the facts and circumstances, the objection raised by the assessee stands dismissed. 9. In the result, the appeal filed by the Revenue is part ..... X X X X Extracts X X X X X X X X Extracts X X X X
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