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2015 (10) TMI 78 - ITAT HYDERABAD

2015 (10) TMI 78 - ITAT HYDERABAD - TMI - Disallowance of deduction on account of cost of acquisition and cost of improvement while computing long term capital gain (LTCG) - exemption u/s 54EC - assessee is a non-resident individual - Held that:- As can be seen from the terms of the deed of settlement, the property given by father of assessee to her was out of natural love and affection and without any monetary consideration. That being the case, it cannot be said that it is not a gift so as to .....

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of section 49 of the Act.

Even otherwise also, if we accept the contention of ld. DR that the property came to assessee by way of settlement since another of property belonging to assessee was sold by her father, then, also it cannot be said that devolution of property in favour of assessee is without any monetary consideration. As could be seen from the facts on record and as well as the recitals in the deed of settlement, part of the subject property was given to the daughter as th .....

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computation of capital gain provided u/s 48 of the Act, income chargeable under the head ‘capital gain’ shall be computed after deducting therefrom expenditure incurred wholly and exclusively in connection with such transfer of the asset and secondly, the cost of acquisition of the asset and cost of any improvement thereto. Therefore, unless there is cost of acquisition, computation provision as per section 48 will fail. In this context reliance can be placed on CIT Vs. B.C. Srinivasa Setty (19 .....

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d of settlement that scheduled property received by assessee from her father is built up area of 2000 sft. comprising of ground floor and 1st floor over a land of 300 sq.yds., whereas, as per the schedule of property, which forms part of the sale deed executed by assessee, property sold is 3000 sft. of built up area consisting of ground floor and 1st floor over 300 sq.yds. land. Thus, the aforesaid facts, to certain extent indicates that assessee’s claim that she has constructed some extra space .....

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to assessee. - Decided in favour of assessee for statistical purposes. - ITA No. 358/Hyd/2012 - Dated:- 4-9-2015 - SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER For The Assessee : Shri P. Murali Mohan Rao For The Revenue : Shri Ramakrishna Bandi ORDER PER SAKTIJIT DEY, J.M.: This appeal by assessee is directed against the order dated 11/01/2012 of ld. CIT(A) - V, Hyderabad for the AY 2007-08. 2. Though, assessee has raised in total 12 grounds, some of which are als .....

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on u/s 54EC of the Act for an amount of ₹ 90,00,000. During the assessment proceeding, it was noticed by AO that assessee in the relevant PY has sold a house property bearing house No. 8-2- 293/82/2/31A/A, MLA Colony, Road No. 12, Banjara Hills, Hyderabad, for a total consideration of ₹ 1,25,00,000. However, in the computation of total income filed along with the return of income, assessee has computed LTCG at ₹ 87,22,118 after claiming deduction towards cost of acquisition and .....

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netary consideration. She also submitted that as the property was received without any monetary consideration, the cost of acquisition would be the cost at which the original owner has acquired the property. She further claimed that after acquiring the property assessee had invested substantial amount in FY 1998-99 to 2003-04 on construction of the property, which has been claimed as cost of improvement. AO, however, was of the view that as there was no monetary consideration on settlement of pr .....

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nstructed in 300 sq.yds through settlement deed. Thereafter, she has not made any addition to the building. If at all any minor improvement/repairs were effected assessee is getting benefit of the same @ 30% of the rental income. He observed that assessee neither has maintained any account for construction claimed to have been made nor the bank account copies reflected any substantial withdrawal to match the claim of construction. Alleging that assessee failed to produce any evidence to substant .....

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ons contained u/s 47 of the Act, held that since the transfer of property from assessee s father was under a deed of settlement and not under gift or will or under irrevocable trust, provisions of section 47 will not be applicable. As assessee has not incurred any cost towards transfer of property in her name, the cost of acquisition has to be taken as Nil . As far as cost of construction is concerned, ld. CIT(A) observed that since assessee failed to produce any evidence to show incurring of an .....

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her out of natural love and affection gifted a part of the property belonging to him through deed of settlement. Ld. AR referring to the provision contained u/s 49 of the Act submitted, since the property devolved upon assessee on account of natural love and affection of father towards her, the cost of acquisition of the property has to be taken to be the cost for which her father acquired the property. As far as the cost of improvement is concerned, ld. AR referring to the deed of settlement da .....

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reas, she sold built up area of 3000 sft. indicates that assessee has constructed extra space for which cost of improvement has been claimed. 6. Ld. DR, on the other hand, supporting the view expressed by ld. CIT(A), submitted, as far as the cost of acquisition is concerned, assessee received the property by way of settlement from her father without any monetary consideration. He submitted, since devolution of the property on assessee was not by way of gift, will or irrevocable trust, the cost t .....

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red the submissions of the parties and perused the material on record as well as the orders of revenue authorities. The material facts which emerges from record are, assessee s grand father late M. Ramalinga Reddy by virtue of a will dated 10/07/97 had bequeathed a property at 54/B, Sukhdev Vihar, New Delhi in favour of assessee. However, as it transpires, assessee s father Mr. Madhusudhan Reddy without knowledge of assessee sold the property to third party. Subsequently, however, to maintain co .....

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of natural love and affection and without any monetary consideration. That being the case, it cannot be said that it is not a gift so as to come within the purview of section 49 of the Act. Though, the property might have been given to assessee under a document termed as deed of settlement, but, the recitals in the deed to the effect that property was given out of natural love and affection and without monetary consideration suggest that it is in the nature of gift by father to a daughter. That .....

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e facts on record and as well as the recitals in the deed of settlement, part of the subject property was given to the daughter as the property inherited by daughter from her grand father by virtue of a will was sold by her father without her knowledge. Thus, it is to be assumed that settlement of property in favour of assessee by her father was in exchange of property belonging to assessee at Delhi sold by her father without her knowledge. That being the case, it cannot be said that the transfe .....

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in provided u/s 48 of the Act, income chargeable under the head capital gain shall be computed after deducting therefrom expenditure incurred wholly and exclusively in connection with such transfer of the asset and secondly, the cost of acquisition of the asset and cost of any improvement thereto. Therefore, unless there is cost of acquisition, computation provision as per section 48 will fail. In this context reliance can be placed on CIT Vs. B.C. Srinivasa Setty (128 ITR 294). Though, section .....

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