TMI Blog2015 (3) TMI 979X X X X Extracts X X X X X X X X Extracts X X X X ..... red in removing encumbrances to transfer is deductible under section 48 of the Act. The court has observed that in so far as clause (i) of section 48 is concerned, the expression used by the Legislature in its wisdom is "the expenditure incurred wholly and exclusively in connection with such transfer". The expression "in connection with such transfer" is wider than the expression, "for the transfer". The High Court further observed that any amount the payment of which is absolutely necessary to effect the transfer will be an expenditure covered by this clause. Thus, the allowability of the claim of deduction is also supported by the judicial decision. Thus view of the learned Commissioner is also not correct because the Tribunal, Mumbai Bench, in Chemosyn Ltd. v. Asst. CIT [2012 (9) TMI 804 - ITAT MUMBAI] has allowed the expenditure incurred by the company towards purchase of its own shares at premium from minority group as per the directions of the Company Law Board as business expenditure because the order passed by the Company Law Board is always considered to be in the interest of company and not in the interest of shareholder/family members same as in the present case wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the assessment under section 143(3) was made vide order dated December 15, 2009. The assessee-company is engaged in the business of manufacturing and export of garment products and also exporting shoes. The assessee has returned income under the head income from house property , profits and gain of business and capital gain on sale of property . After thoroughly scrutinising the return of income, the Assessing Officer made disallowance under the following heads : Rs. 1. Lease rent receivable vis-a-vis interest-free deposit 4,31,298 2. Under the head Income from business-interest on loan to director 1,95,000 3. Travelling expenses 16,24,114 4. Personal expenditure 8,22,305 5. Administrative expenses 12,38,570 6. Long-term capital gains on sale of property accepted as per the statement 1,21,16,695 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t have been sold unless the shareholders have been paid off. Accordingly, to discharge the liability, Paville House was sold, hence, the payment to the shareholders was claimed as discharge of encumbrances. 7. The submissions of the assessee were considered by the learned Commissioner. The learned Commissioner was of the firm belief that the assessee has made a wrong computation of capital gain by claiming deduction actually not allowable as per law and the Assessing Officer passed the order by mechanically accepting the petition of the assessee while passing the order under section 143(3) of the Act resulting loss to the Revenue. The learned Commissioner was of the belief that the order is prejudicial to the interests of the Revenue. The order is also erroneous as it is a case of incorrect assumption of facts and incorrect application of law which has been passed without application of mind. On the claim of deduction of ₹ 31.05 crores, the learned Commissioner was of the firm belief that such payment cannot be considered as cost of encumbrances. The learned Commissioner finally concluded that the assessment order under consideration is erroneous insofar as the same is pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) The decision of the Madras High Court in CIT v. V. Indira [1979] 119 ITR 837 (Mad) ; (ii) The decision of the Bombay High Court in CIT v. Miss Piroja C. Patel [2000] 242 ITR 582 (Bom) ; (iii) The decision of the Bombay High Court in CIT v. Shakuntala Kantilal [1991] 190 ITR 56 (Bom). 9. Learned counsel finally concluded by saying that the assessment order is a well reasoned order passed after scrutiny of the return of income and cannot be said to be erroneous and prejudicial to the interests of the Revenue. 10. Per contra, relying upon the findings of the learned Commissioner, the learned Departmental representative relied upon the decision of the Madras High Court in Smt. S. Valliammai v. CIT [1981] 127 ITR 713 (Mad) [FB]. 11. We have carefully considered the rival contentions and perused the assessment order and the order of the learned Commissioner. The first thing which has to be considered is whether the learned Commissioner has rightly assumed the power under section 263 of the Act. The hon'ble Supreme Court in Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC), has laid down the following ratio (headnote) : A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such transfer . The expression in connection with such transfer is wider than the expression, for the transfer . The High Court further observed that any amount the payment of which is absolutely necessary to effect the transfer will be an expenditure covered by this clause. Thus, the allowability of the claim of deduction is also supported by the judicial decision. We find that the learned Commissioner, at page 7/paragraph 2 of its order has made the following observation : Accordingly in computing the capital gains arising from the impugned sale, the expenses incurred for payment to shareholders is not deductible as cost of improvement or for that matter in any other manner. 13. This view of the learned Commissioner is also not correct because the Tribunal, Mumbai Bench, in Chemosyn Ltd. v. Asst. CIT [2012] 19 ITR (Trib) 6 (Mum) has allowed the expenditure incurred by the company towards purchase of its own shares at premium from minority group as per the directions of the Company Law Board as business expenditure because the order passed by the Company Law Board is always considered to be in the interest of company and not in the interest of shareholder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60,20,476 WDV in books of account as on March 31, 2006 37,68,644 23,89,694 Add : Cost of land of Paville House (no depreciation claimed in any of the year) 5,09,144 5,09,144 Add: WDV of sprikler plant 26,189 7,359 Total WDV considered for PH 43,03,977 29,06,197 Add: Cost of improvement 31,05,00,000 Less : Reduction of share capital 7,50,000 30,97,50,000 30,97,50,000 Less : Brokerage 33,67,200 Legal and professional expenses 12,59,908 Legal and professional expenses 6,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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