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2019 (1) TMI 1523 - AT - Income TaxDetermination of the full value of consideration in computation of long term capital gain - sale consideration adoption - transfer of flat - occupancy rights settled by allotting new flat in new building - litigation between the assessee and Sh, Shinde - Section 50C applicability - Held that:- Assessee received a sum of ₹ 11,000/- through cheque no. 99308 on 09-04-2001, which is prior to the date of agreement to sell, that is, 31.5.2002. This evidences that the assessee genuinely entered into an agreement to sell with the Developer on 31-05-2002 and received a sum of ₹ 11,000/-, which constitutes receipt of a ‘part’ of consideration before the date of agreement. Not only that, the assessee received further sums of ₹ 2 lakh on 23-10-2002; ₹ 5 lakh on 16-04-2003 and ₹ 7 lakh before 11-01-2007. All these receipts were through banking channel. A factual finding recorded by the ld. CIT(A) in the impugned order to this extent has not been controverted on behalf of the Revenue. When we conjointly read the two provisos to section 50C(1), it emerges that the assessee entered into an agreement to sell on 31-05-2002; received part payments; and finally executed registered conveyance deed on 28-07-2010. Having satisfied the mandate of second proviso and further going by the first proviso to section 50C(1), the stamp value for the purpose of computation of capital gain at the time of sale in the year 2010 should be considered with reference to the date of agreement, namely, 31- 05-2002 The sale consideration is one 495 sq.ft. flat in the new building plus monetary consideration of ₹ 51 lakh, the Revenue has considered the value of two flats of 405 sq. ft. and 495 sq ft. plus ₹ 51.00 lac as the full value of consideration. We have seen the entire gamut of the factual panorama above, from which it transpired that Shri Shinde was having some occupancy rights in flat no. 5A of ‘Sai Chhaya’ and eventually his claim was settled by allotting him a 405 sq. ft. flat in the new building. It is in this light of the facts that we need to decide whether the assessee transferred flat no. 5 and 5A in ‘Sai Chhaya’ or only flat no. 5. Whereas the assessee is contending that he transferred only one flat, the Department has opined that he transferred both the flats. We find from the nature of litigation between the assessee and Sh, Shinde that the latter was having only occupancy right in respect of flat no. 5A. The ownership right in it vested only in the assessee. No material has been brought on record to establish the ownership right of Sh, Shinde in flat no.5A. As such, it is held that as the assessee was legal owner of both the flats, 5 and 5A, in ‘Sai Chhaya’, it was he alone who transferred both the flats admeasuring 898.48 sq.ft. area to the Developer. Thus the stamp value as well as the actual sale consideration has to be worked out accordingly. Allowing deduction to the assessee on account of the value of one flat of 405 sq.ft. to be allotted to Sh. Shinde in the new developed building - Held that:- When we conjointly read the two provisos to section 50C(1), it emerges that the assessee entered into an agreement to sell on 31-05-2002; received part payments; and finally executed registered conveyance deed on 28-07-2010. Having satisfied the mandate of second proviso and further going by the first proviso to section 50C(1), the stamp value for the purpose of computation of capital gain at the time of sale in the year 2010 should be considered with reference to the date of agreement, namely, 31- 05-2002. We order accordingly. The Hon’ble Bombay High Court in CIT Vs. Abrar Alvi [2000 (3) TMI 20 - BOMBAY HIGH COURT] has held that a payment for removal of encumbrances is deductible u/s.48(1) as expenses incurred wholly and exclusively in connection with transfer. Where this is not possible, without discharge of liability, payment towards such liability should be considered as ‘in connection with transfer’, which expression is wide than that of the ‘transfer’. Also in CIT Vs. M/s. Bradford Trading Company (P) Ltd. [2002 (9) TMI 33 - MADRAS HIGH COURT] holding that the amount paid for removing encumbrances and settlement of claim is expenditure incurred in connection with transfer of a capital asset deductible u/s.48(1) of the Act. In the light of the above, it is held that the value of flat of 405 sq.ft. to be allotted in the new building should be accordingly reduced from the full value of consideration u/s 48(i).
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